In re: Outsidewall Tire
Filing
UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 1:09-cv-01217-TSE-IDD Copies to all parties and the district court/agency. [999733154].. [14-2192]
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2192
In Re: OUTSIDEWALL TIRE LITIGATION
---------------------------------GILBERT LLP,
Appellant,
v.
TIRE ENGINEERING AND DISTRIBUTION, LLC, d/b/a Alpha Tyre
Systems, d/b/a Alpha Mining Systems, a Florida Limited
Liability Corporation; JORDAN FISHMAN, an individual;
BEARCAT TIRE ARL, LLC, d/b/a Alpha Tire Systems, d/b/a
Alpha Mining Systems, a Florida Limited Liability Company;
BCATCO A.R.L., INCORPORATED, a Jersey Channels Islands
Corporation,
Plaintiffs – Appellees,
and
SHANDONG LINGLONG RUBBER COMPANY, LTD., a foreign company;
SHANDONG LINGLONG TIRE COMPANY, LTD., f/k/a Zhaoyuan Leo
Rubber Products Company, Ltd., a foreign company; AL
DOBOWI, LTD., a foreign limited liability company; AL
DOBOWI TYRE COMPANY, LLC, a foreign limited liability
company; AL DOBOWI GROUP, a foreign corporation; TYREX
INTERNATIONAL, LTD., a foreign limited liability company
based in Dubai; TYREX INTERNATIONAL RUBBER COMPANY, LTD., a
foreign corporation; QINGDAO TYREX TRADING COMPANY, LTD., a
foreign corporation; SURENDER S. KANDHARI, an individual,
Defendants.
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Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
T. S. Ellis, III, Senior
District Judge. (1:09-cv-01217-TSE-IDD)
Argued:
December 8, 2015
Decided:
January 11, 2016
Before GREGORY, DUNCAN, and FLOYD, Circuit Judges.
Vacated and remanded by unpublished per curiam opinion.
ARGUED: Richard Daniel Shore, GILBERT LLP, Washington, D.C., for
Appellant. William Edgar Copley, III, WEISBROD MATTEIS & COPLEY
PLLC, Washington, D.C., for Appellees.
ON BRIEF: James C.
Liddell,
GILBERT
LLP,
Washington,
D.C.,
for
Appellant.
August J. Matteis, Jr., WEISBROD MATTEIS & COPLEY PLLC,
Washington, D.C., for Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
This
appeal
concerns
a
fee
dispute
between
a
law
firm,
Gilbert LLP (“Gilbert” or “the Firm”), and its former client,
Alpha. 1
Gilbert represented Alpha under a contingency agreement.
After Alpha obtained a $26 million judgment in the underlying
suit, the company terminated Gilbert and retained new counsel to
defend the judgment on appeal and initiate recovery actions.
Gilbert asserted an attorney’s lien against any future recovery
on the judgment.
determining
the
Gilbert now appeals the district court’s order
value
of
that
lien.
For
the
reasons
that
follow, we vacate the judgment of the district court and remand
for further proceedings consistent with this opinion.
I.
The background of the underlying civil action is set forth
in
our
suit.
previous
See
Tire
opinion
Eng’g
addressing
&
Distrib.,
the
LLC
jury
v.
verdict
Shandong
Rubber Co., Ltd., 682 F.3d 292 (4th Cir. 2012).
in
that
Linglong
The following
facts are relevant to this appeal, which concerns only the fee
dispute arising from Gilbert’s lien.
1
“Alpha” collectively refers to Jordan Fishman; Tire
Engineering and Distribution, LLC; Bearcat Tire A.R.L., LLC; and
Bcatco A.R.L., Inc. The three entities are owned by Fishman and
do business under the names “Alpha Tire Systems” and “Alpha
Mining Systems.”
3
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In
2009,
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Jordan
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Fishman,
Alpha’s
founder
and
chief
executive officer, retained Gilbert to represent the company in
connection
secrets
by
with
the
former
appropriation
employees
and
of
its
other
designs
third
and
trade
parties.
In
August 2009, Fishman signed an engagement letter with Gilbert
that memorialized the arrangement between Alpha and the firm.
The “Fees and Expenses” section of the letter, composed of two
subsections, details the compensation arrangement.
The first subsection, titled “Costs and Expenses,” provides
that Gilbert will advance “all costs and expenses related to
this matter.”
J.A. 2 at 358.
Alpha
in
prevails
this
The agreement states that “[i]f
matter
and
receives
payment”
from
a
judgment or settlement, Alpha will “reimburse the Firm for all
costs and expenses” that Gilbert advanced.
Id.
The letter
specifies that
[s]uch costs and expenses may include photocopying
charges, courier and overnight delivery charges,
travel expenses (including mileage, parking, airfare,
lodging, meals, translation services, security, and
ground transportation), costs incurred in computerized
research, litigation support services, filing fees,
witness fees, and the costs of any consultants,
experts, investigators, court reporters, or other
third parties who [Gilbert] deem[s] necessary to
successfully pursue Alpha’s claim.
2
Citations to the “J.A.” refer to the Joint Appendix the
parties filed in this appeal.
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Id.
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The second subsection, titled “Attorneys’ Fees,” sets forth
the following contingency arrangement:
If Alpha recovers money through judgment, settlement
or other means as the result of any work done by
[Gilbert] on this matter, then, in addition to
reimbursing the Firm for costs and expenses as
described above, Alpha will pay the Firm a contingency
fee equal to forty percent (40%) of the gross amount
of any sum that Alpha recovers (calculated prior to
the deduction of any costs and expenses enumerated
above).
Id.
The
engagement
provision.
elects
to
letter
contains
a
separate
termination
Under that provision, “[i]n the event that Alpha
terminate
our
representation,
[Gilbert]
will
be
entitled to a fee based upon the hours expended by the Firm on
this representation at the hourly rates normally charged by the
involved personnel for the type of work rendered.”
Id.
In the
alternative, the letter permits Gilbert to seek its contingency
fee
if
Gilbert.
Alpha
The
recovers
letter
within
further
twelve
provides
months
that
of
“[i]n
terminating
any
event,
Alpha will reimburse the Firm for all out-of-pocket expenses and
disbursements incurred by the Firm” in connection with Gilbert’s
representation of Alpha.
Id.
Gilbert represented Alpha from 2009 to 2011.
During that
time, Gilbert initiated suit on Alpha’s behalf and ultimately
won a jury award of $26 million.
After winning the case in the
district court, the Gilbert attorneys representing Alpha left
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the
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Firm
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and
formed
their
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own
practice.
Alpha
terminated
Gilbert and hired the new firm to defend the judgment on appeal
and
initiate
Gilbert
judgment
asserted
an
recovery
actions.
attorney’s
lien
Shortly
in
the
thereafter,
district
court
against any future recovery, pursuant to Va. Code § 54.1-3932.
Represented by the new firm, Alpha obtained over $15.5 million
in recovery on the judgment, largely by negotiating settlements.
Alpha filed a motion to determine the value of Gilbert’s
lien.
seek
Gilbert sought to recover its expenses, but it did not
its
authorizing
contingency
it
was
fee,
not
conceding
enforceable
that
under
the
provision
Virginia
law,
and
therefore the Firm could only recover the value of its services
in quantum meruit.
However, Gilbert sought to recover more than
just its hourly fees, arguing that its significant contribution
towards Alpha’s success in the litigation merited an increased
award of attorney’s fees.
Gilbert therefore sought $4.5 million
in hourly fees, $1.8 million in costs, and a portion of the
contingency
arguments
fee.
and
ruled
The
that
district
Gilbert
court
was
rejected
entitled
Gilbert’s
to
recover
$1,237,720.00 in attorney’s fees and $720,621.67 in costs.
II.
Gilbert raises two arguments on appeal.
The Firm first
contends that the district court failed to properly consider the
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factors for quantum meruit fee awards set forth by the Supreme
Court of Virginia in County of Campbell v. Howard, 112 S.E. 876
(Va.
1922).
Second,
Gilbert
argues
that
the
district
court
erroneously applied a quantum meruit analysis to the cost issue
instead
of
letter.
enforcing
the
cost
provision
of
the
engagement
We consider each argument in turn, reviewing de novo
the principles of state law upon which the district court based
its valuation of Gilbert’s lien.
Cities/ABC,
Inc.,
194
F.3d
505,
See Food Lion, Inc. v. Capital
512
(4th
Cir.
1999)
(citing
Salve Regina College v. Russell, 499 U.S. 225, 231 (1991)).
A.
The
parties
agree
that
Virginia
law
governs
Gilbert’s
recovery from its former client, and that Virginia law prohibits
Gilbert from enforcing its contingency fee agreement with Alpha.
Under Virginia law, “when, as here, an attorney employed under a
contingent fee contract is discharged without just cause and the
client
employs
discharged
another
attorney
is
attorney
who
entitled
to
effects
a
fee
a
based
recovery,
upon
the
quantum
meruit” for work performed before the attorney was terminated.
Heinzman v. Fine, Fine, Legum & Fine, 234 S.E.2d 282, 285 (Va.
1977)(footnote omitted).
In
Virginia
County
set
of
forth
Campbell
the
v.
factors
7
Howard,
a
the
court
Supreme
must
Court
consider
of
when
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awarding attorney’s fees in quantum meruit.
112 S.E. at 885.
Those factors are
the amount and character of the services rendered, the
responsibility imposed; the labor, time and trouble
involved; the character and importance of the matter
in which the services are rendered; the amount of the
money or the value of the property to be affected; the
professional skill and experience called for; the
character and standing in their profession of the
attorneys; and whether or not the fee is absolute or
contingent, it being a recognized rule that an
attorney may properly charge a much larger fee where
it is to be contingent than where it is not so.
The
result secured by the services of the attorney may
likewise be considered; but merely as bearing upon the
consideration of the efficiency with which they were
rendered, and, in that way, upon their value on a
quantum meruit, not from the standpoint of their value
to the client.
Id.
The Supreme Court of Virginia has twice reaffirmed that
County
meruit.
of
Campbell
governs
an
assessment
of
fees
in
quantum
See Hughes v. Cole, 465 S.E.2d 820, 834 (Va. 1996);
Heinzman, 234 S.E.2d at 286 n.4.
Here,
meruit
the
district
principles
court
governed
the
correctly
fee
noted
award,
analyze the County of Campbell factors.
but
that
it
quantum
failed
to
Although the district
court correctly cited Hughes, Heinzman, and County of Campbell
as
the
governing
“lodestar”
3
authorities,
analysis 3
to
the
determine
district
an
court
appropriate
employed
fee
a
award.
A court calculates a “lodestar” figure by “multiplying the
number of reasonable hours expended times a reasonable rate.”
Jones v. Southpeak Interactive Corp., 777 F.3d 658, 675-76 (4th
(Continued)
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After reducing both the hours and rates Gilbert requested (based
upon inflated and vague billing), the district court awarded the
lodestar
figure
and
stated
in
a
footnote:
“No
further
adjustment, upward or downward, is warranted by application of
the
County
of
Campbell
factors.”
J.A.
at 459
n.23.
The
district court did not explain this conclusion, and the opinion
neither lists the relevant factors nor expressly analyzes them.
As far as we can tell, the district court calculated a lodestar
figure and ended its analysis there.
Because the district court did not explain its reasoning
with respect to the County of Campbell factors, it is impossible
for us to review the district court’s analysis for an abuse of
discretion.
This
is
troubling,
given
that
the
particular
circumstances of this case--where Gilbert represented Alpha from
initial pleadings to a $26 million judgment--suggest that the
contingent
nature
of
the
fee
arrangement
should
significant factor in a quantum meruit analysis.
have
been
a
See Lowe v.
Mid-Atlantic Coca-Cola Bottling Co., 33 Va. Cir. 361, 363 (Va.
Cir. Ct. 1994) (“Every hour spent in performance of a contingent
fee
contract
is
an
hour
spent
against
the
risk
of
no
Cir. 2015)(quoting McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir.
2013)).
A lodestar analysis is the first in a three-step
process for calculating attorney’s fees under federal law. Id.
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compensation at all.
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When, without fault of the attorney, it
becomes necessary to evaluate a quantum meruit charge for such
time, that a charge ‘much larger’ than normal may properly be
charged
is
a
‘recognized
112 S.E. at 885)).
rule.’”
(quoting
a
findings
as
analyze
district
to
relevant
of
Campbell,
The district court also failed to consider
the “result secured” in this case:
Although
Cty.
each
court
need
and
factors
every
in
not
a $26 million judgment.
recite
factor,
detail
its
and
make
failure
sufficient
to
express
here
allow
to
for
meaningful appellate review constitutes legal error.
Accordingly,
we
vacate
the
district
court’s
award
of
attorney’s fees and remand with instructions to consider the
County of Campbell factors. 4
4
Gilbert asks us to instruct the district court, on remand,
to award Gilbert a prorated share of its contingency fee. It is
well established that a district court enjoys broad discretion
to award attorney’s fees based on its first-hand knowledge of
the case.
See Robinson v. Equifax Info. Servs., LLC, 560 F.3d
235, 243 (4th Cir. 2009); see also Hughes, 465 S.E.2d at 834
(noting that an award of fees in quantum meruit is a
determination committed to “the sound judicial discretion of the
trial judge”).
Thus, we decline to issue instructions for the
district court’s exercise of its broad discretion.
Gilbert also contends that the district court erred when it
awarded fees to Gilbert, a Washington, D.C., law firm, based on
the lower prevailing rates in the Eastern District of Virginia.
We do not decide the propriety of the rates requested by Gilbert
or those awarded by the district court. We do, however, remind
the district court that this is not a fee-shifting case (like
those cited in its opinion) and that under County of Campbell it
must consider the ‘skill and experience called for’ and the
(Continued)
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B.
We now turn to Gilbert’s argument that the district court
was required to enforce the cost provision of the agreement and
failed to do so.
Upon review of the engagement letter, we
conclude that the district court overlooked the cost provision,
and failed to consider whether that provision is severable from
the contingency fee arrangement.
It appears that the district court assumed, after correctly
determining that the contingency fee provision was unenforceable
under
Heinzman,
unenforceable.
that
the
entire
engagement
letter
was
Based on that assumption, the district court
applied precedent from fee-shifting cases and analyzed, under a
quantum-meruit
“reasonable.”
theory,
whether
Gilbert’s
expenditures
were
This was erroneous, because there is no precedent
that extends Heinzman, which addresses attorney’s fees, to cost
agreements.
In other words, the rule of Heinzman is limited to
attorney’s fees, and there was no basis for concluding that the
entire engagement agreement automatically became void when Alpha
terminated
Gilbert.
To
the
contrary,
courts
have
held
that
attorneys’ ‘standing in their profession.’
112 S.E. at 885.
These factors suggest that when a litigant selects a firm with
higher rates, that firm may be entitled to a larger fee in
quantum meruit (depending, of course, on the balance of all the
factors).
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other provisions of an engagement agreement may be enforceable,
notwithstanding Virginia’s rules regarding the unenforceability
of a contingency provision by a terminated attorney.
See, e.g.,
Morris Law Office, P.C. v. Tatum, 388 F. Supp. 2d 689, 693 n.2
(W.D. Va. 2005) (“Note that the court only finds that [the fee
provision] of the contract is void, but agrees . . . that other
separate
provisions
Therefore,
[the
of
law
the
firm]
contract
is
still
are
enforceable.
entitled
to
.
.
recover
.
its
expenses under paragraph 3.0 of the contract.”).
Here, Alpha and Gilbert entered into an agreement regarding
costs.
Alpha
will
The engagement letter provides that “[i]n the event that
elects
to
reimburse
terminate
the
Firm
our
for
representation, . . . .
all
out-of-pocket
disbursements incurred by the Firm . . . .”
have
noted,
the
agreement
particular detail.
expenditures
in
lists
expenses
J.A. at 358.
recoverable
the
and
As we
expenses
with
The district court did not analyze Gilbert’s
the
context
of
this
provision,
and
employed a “reasonableness” inquiry to award costs.
example,
Alpha
district
court
held
that
Gilbert’s
instead
In a key
request
for
expert fees and overhead costs was unreasonable, stating: “[i]t
is
well-settled
that
attorneys
‘are
clearly
not
entitled
to
reimbursement of expenses where the request is for an amount
which
is
specific
excessive
agreement
or
otherwise
to
the
noncompensable.’
contrary,
12
overhead
Absent
expenses
a
are
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typically neither taxable nor recoverable costs.”
J.A. at 460-
61
a
“specific
to
reimburse
(internal
agreement,”
citation
under
omitted).
which
Alpha
But
expressly
such
agreed
Gilbert for expert fees and several types of overhead costs, did
exist.
The district court did not analyze whether the cost
provision was enforceable, and its failure to consider the cost
provision was reversible error.
In
sum,
Gilbert’s
entitlement
to
costs
and
expenses
is
governed by a contract, and the district court’s analysis, which
overlooked
Therefore,
the
we
terms
vacate
of
the
the
award
agreement,
of
costs
was
and
erroneous.
remand
with
instructions to recalculate the cost award after considering the
“costs
and
expenses”
and
“termination”
provisions
of
the
engagement agreement.
III.
For the foregoing reasons, the judgment of the district
court is
VACATED AND REMANDED.
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