Court Opinion

ID: 4311798
Source: CourtListenerOpinion
Date Created: 2018-09-12 17:00:20.779145+00
Date Added: 2024-06-11T14:44:25.590799
License: Public Domain

PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT
              _____________

                  No. 17-3150
                 _____________

               BERNIE CLEMENS;
               NICOLE CLEMENS,
                         Appellants

                        v.

     NEW YORK CENTRAL MUTUAL FIRE
          INSURANCE COMPANY,
        And/Or NYCM Insurance Group
         And/Or NYCM Holdings, Inc.
              ______________

    Appeal from the United States District Court
       for the Middle District of Pennsylvania
        (D.C. Civ. Action No. 3-13-cv-02447)
   District Judge: Honorable Malachy E. Mannion
                   ______________

   Submitted Under Third Circuit L.A.R. 34.1(a)
                 June 18, 2018
               ______________

Before: GREENAWAY, JR., RESTREPO, and BIBAS,
               Circuit Judges.
            (Opinion Filed: September 12, 2018)

James C. Haggerty
Haggerty Goldberg Schleifer & Kupersmith
1835 Market Street, Suite 2700
Philadelphia, PA 19103

Michael R. Mey
Mey & Sulla
1144 East Drinker Street
Dunmore, PA 18512

Michael J. Pisanchyn
Pisanchyn Law Firm
524 Spruce Street
Scranton, PA 18503
              Counsel for Appellants

Charles E. Haddick, Jr.
Dickie McCamey & Chilcote
425 North 21st Street
Plaza 21, Suite 302
Camp Hill, PA 17011
              Counsel for Appellee

                     ______________

                        OPINION
                     ______________

                             2
GREENAWAY, JR., Circuit Judge.

       After a jury awarded him $100,000 in punitive damages
under the Pennsylvania Bad Faith Statute, 42 Pa. Cons. Stat.
§ 8371, Appellant Bernie Clemens submitted a petition for
over $900,000 in attorney’s fees from Appellee New York
Central Mutual Fire Insurance Company (“NYCM”). The
District Court denied this petition in its entirety, reasoning that
it was not adequately supported and that the requested amount
was grossly excessive given the nature of the case. Finding no
abuse of discretion, we will affirm and, in doing so, take the
opportunity to formally endorse a view already adopted by
several other circuits—that is, where a fee-shifting statute
provides a court discretion to award attorney’s fees, such
discretion includes the ability to deny a fee request altogether
when, under the circumstances, the amount requested is
“outrageously excessive.” Brown v. Stackler, 612 F.2d 1057,
1059 (7th Cir. 1980); see also, e.g., Envtl. Def. Fund, Inc. v.
Reilly, 1 F.3d 1254, 1258–60 (D.C. Cir. 1993); Fair Hous.
Council of Greater Wash. v. Landow, 999 F.2d 92, 97 (4th Cir.
1993); Lewis v. Kendrick, 944 F.2d 949, 956–58 (1st Cir.
1991).

                      I. BACKGROUND

        Dissatisfied with NYCM’s handling of his insurance
claim related to a serious car accident, Clemens filed suit
against the company in the Court of Common Pleas of Monroe
County, asserting a contractual underinsured motorist (“UIM”)
claim and a claim under the Bad Faith Statute, 42 Pa. Cons.
Stat. § 8371. After NYCM removed the case to federal court,
the parties settled the UIM claim for $25,000. The bad faith
claim, meanwhile, proceeded to a week-long trial, at the

                                3
conclusion of which a jury found that NYCM had acted in bad
faith in its handling of the insurance claim and awarded
Clemens $100,000 in punitive damages.

        As the prevailing party under the Bad Faith Statute,
Clemens then submitted a petition for attorney’s fees, in which
he requested an award of $946,526.43 in fees and costs. 1 The
District Court denied this request in its entirety, however. In a
thorough and well-reasoned one-hundred-page opinion, the
court reviewed every time entry submitted, performed a
traditional lodestar analysis, and concluded that eighty-seven
percent of the hours billed had to be disallowed as vague,
duplicative, unnecessary, or inadequately supported by
documentary evidence. In light of that substantial reduction,
the District Court deemed Clemens’s request “outrageously
excessive” and exercised its discretion to award no fee
whatsoever. App. 649. Represented by new counsel, Clemens
now appeals. 2

       1
        Clemens’s petition also sought $175,630 in interest on
his claims. The District Court concluded that the Bad Faith
Statute allowed Clemens to recover interest on only the
$25,000 in UIM damages, though. The court therefore
awarded interest in the amount of $4,986.58. Clemens does
not appeal that determination.
       2
        Alone on the brief for Clemens in this Court is James
C. Haggerty. He did not enter an appearance in the District
Court, and the record reveals no involvement on his part below.
Lead counsel for Clemens in the District Court was Michael J.
Pisanchyn of the Pisanchyn Law Firm.

                               4
                     II. JURISDICTION

      The District Court had jurisdiction under 28 U.S.C.
§ 1332(a), and we have jurisdiction under 28 U.S.C. § 1291.

                      III. DISCUSSION

       The Pennsylvania Bad Faith Statute provides that

       [i]n an action arising under an insurance policy,
       if the court finds that the insurer has acted in bad
       faith toward the insured, the court may take all of
       the following actions:

       (1) Award interest on the amount of the claim
       from the date the claim was made by the insured
       in an amount equal to the prime rate of interest
       plus 3%.

       (2) Award punitive damages against the insurer.

       (3) Assess court costs and attorney fees against
       the insurer.

42 Pa. Cons. Stat. § 8371. Because the statute uses the word
“may,” the decision to award attorney’s fees and costs “upon a
finding of bad faith is wholly within the discretion of the trial
court.” Polselli v. Nationwide Mut. Fire Ins. Co., 126 F.3d
524, 534 (3d Cir. 1997). We will not disturb that decision
absent an abuse of discretion. Id. at 534 & n.13. 3

       3
         Clemens argues that, because the Bad Faith Statute
says that the court “may take all of the following actions,”
rather than “may take any,” the award of attorney’s fees is

                                5
       In exercising their discretion under the statute, courts
are guided by Pennsylvania Rule of Civil Procedure 1717,
which provides that the relevant considerations include “the
time and effort reasonably expended;” “the quality of the
services rendered;” “the results achieved and benefits
conferred upon the class or upon the public;” “the magnitude,
complexity and uniqueness of the litigation;” and “whether the
receipt of a fee was contingent on success.” See Polselli, 126
F.3d at 532 (discussing Pennsylvania Rule of Civil Procedure
1716, which was subsequently renumbered as Rule 1717).

       Like with federal fee-shifting statutes, the calculation of
an attorney’s fee award under Rule 1717 begins with the
lodestar method: the multiplication of the actual number of
hours spent in pursuing the claim by a reasonable rate. 4 Birth

mandatory whenever punitive damages are awarded. Even if
we were to find this interpretation compelling, as it is a matter
of state law, we look first to the Pennsylvania Supreme Court,
which has rejected the argument, see Rancosky v. Wash. Nat’l
Ins. Co., 170 A.3d 364, 376 (Pa. 2017).
       4
         Because the calculation of a fee award involves the
lodestar method under both Rule 1717 and federal fee-shifting
statutes, many of the decisions cited in the impending
discussion involve federal fee-shifting statutes that, like the
Pennsylvania Bad Faith Statute, leave the decision to award
attorney’s fees and costs to the discretion of the trial court.
Although the Bad Faith Statute differs from some of those
federal statutes in that it does not expressly provide that the fee
award must be “reasonable,” compare 42 Pa. Cons. Stat.
§ 8371 with, e.g., 42 U.S.C. § 1988(b) and 5 U.S.C.
§ 552(a)(4)(E), Rule 1717 effectively incorporates a
reasonableness standard into the Bad Faith Statute by stating

                                6
Ctr. v. St. Paul Cos., Inc., 727 A.2d 1144, 1160–61 (Pa. Super.
1999), abrogated on other grounds by Mishoe v. Erie Ins. Co.,
824 A.2d 1153, 1156–57 & n.3 (Pa. 2003); City of Burlington
v. Dague, 505 U.S. 557, 562 (1992) (“The ‘lodestar’ figure has,
as its name suggests, become the guiding light of our fee-
shifting jurisprudence.”).

        Under the lodestar method, “[t]he party seeking
attorney’s fees has the burden to prove that its request . . . is
reasonable.” Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d
Cir. 1990). “When the applicant for a fee has carried [its]
burden of showing that the claimed rates and number of hours
are reasonable, the resulting product is presumed to be the
reasonable fee to which counsel is entitled.” Maldonado v.
Houstoun, 256 F.3d 181, 184 (3d Cir. 2001) (quoting
Pennsylvania v. Del. Valley Citizens’ Council for Clean Air,
478 U.S. 546, 564 (1986)). But courts “have a positive and
affirmative function in the fee fixing process, not merely a
passive role.” Id. “In calculating the hours reasonably
expended, a court should ‘review the time charged, decide
whether the hours set out were reasonably expended for each
of the particular purposes described and then exclude those that
are “excessive, redundant, or otherwise unnecessary.”’” Id.
(quoting Pub. Interest Research Grp. of N.J., Inc. v. Windall,
51 F.3d 1179, 1188 (3d Cir. 1995)).

that “the time and effort reasonably expended” is a relevant
consideration. Thus, absent any indication that the standards
guiding courts’ discretion are markedly different in the context
of the Bad Faith Statute, we think decisions involving similar
federal statutes are germane to our analysis.

                               7
       As noted above, the District Court’s lodestar calculation
here reduced Clemens’s requested fee by eighty-seven percent.
After making that reduction, the court then decided to award
no fee at all in light of the excessive nature of the request.

       Although it was unusual, we cannot say that this
decision was an abuse of discretion. Review of the record and
the District Court’s comprehensive opinion makes clear that
denial of a fee award was entirely appropriate under the
circumstances of this case. Counsel’s success at trial
notwithstanding, the fee petition was severely deficient in
numerous ways.

       As a starting point, counsel did not maintain
contemporaneous time records for most of the litigation.
Instead, by their own admission, counsel “recreate[d]” all of
the records provided as part of the fee petition, using an
electronic case management system that did not keep track of
the amount of time expended on particular tasks. App. 503.
Even worse, the responsibility of reconstructing the time
records was left to a single attorney, who retrospectively
estimated not only the length of time she herself had spent on
each individual task, but also the amount of time others had
spent on particular tasks, including colleagues who could not
be consulted because they had left the firm by the time the fee
petition was filed. 5 We have never strictly required that fee

       5
         Astonishingly, counsel then attempted to recover
attorney’s fees in the amount of $27,090 for the 64.5 hours it
supposedly took to reconstruct the time records. See App. 41,
51. The District Court did not abuse its discretion in
disallowing those 64.5 hours altogether, as it is not NYCM’s

                               8
petitions be supported by contemporaneous records, but they
have long been “the preferred practice.” Keenan v. City of
Phila., 983 F.2d 459, 472 (3d Cir. 1992) (quoting Webb v. Bd.
of Educ. of Dyer Cty., 471 U.S. 234, 238 n.6 (1985)). Thus,
although reconstructed records in and of themselves do not
justify complete disallowance of a fee award, they may warrant
“more exacting scrutiny than we would bring to
contemporaneous and detailed records.” Grendel’s Den, Inc.
v. Larkin, 749 F.2d 945, 952 (1st Cir. 1984).

       Here, it does not even require added scrutiny to discover
further problems with the fee petition. For one, many of the
time entries submitted were so vague that there is no way to
discern whether the hours billed were reasonable. Counsel’s
time records included, for instance, entries billing for attorney
services described as “Other,” “Communicate,” or
“Communicate-other.” E.g., App. 327, 329, 336, 338, 342–43.
Similarly, the fee petition included a number of entries for
“Attorney review,” “Analysis/Strategy,” or “Review/analyze”
with no additional explanation regarding the subject or
necessity of the review. E.g., App. 300–07, 331, 334–35, 338,
347. We are mindful of confidentiality obligations, but time
entries still must “be specific enough to allow the district court
to determine if the hours claimed are unreasonable for the work
performed.” Washington v. Phila. Cty. Ct. of Com. Pl., 89 F.3d
1031, 1037 (3d Cir. 1996) (internal quotation marks omitted)
(quoting Keenan, 983 F.2d at 472). These entries, as well as
many others, were nowhere near specific enough.

responsibility to pay for the consequences of counsel’s own
neglect.

                                9
        In addition to the vague entries, some entries were, on
their face, unnecessary or excessive. For example, over the
course of one week, and at the same time counsel were billing
for trial preparation, counsel billed a total of sixty-four hours
for “Transcripts/clips.” See App. 360. Whatever this means,
we are confident that it was not necessary to spend sixty-four
hours on it given the straightforward nature of the case. Of a
similar vein are the frequent entries that requested attorney
rates for “File maintenance,” “File management,” and
“Document management,” e.g., App. 330–34, 336, 338–42,
some of which were for as long as seven hours in a single day.
App. 333, 336. Without more information, these tasks appear
“purely clerical” in nature and should not be billed at a
lawyer’s rate—nor for many hours at a time. Missouri v.
Jenkins ex rel. Agyei, 491 U.S. 274, 288 n.10 (1989).

        Then there are the staggering 562 hours that counsel
billed for “Trial prep” or “Trial preparation” with no further
description of the nature of the work performed. See App.
358–63. We agree with the District Court that this is an
“outrageous” number under the circumstances. App. 630. As
the District Court put it, “[i]f counsel did nothing else for eight
hours a day, every day, [562 hours] would mean that counsel
spent approximately 70 days doing nothing but preparing for
trial in this matter.” App. 630. Yet the trial consisted of only
four days of substantive testimony, and involved a total of only
five witnesses for both sides. The sole issue was whether
NYCM had acted in bad faith in its handling of Clemens’s UIM
claim. Counsel certainly have an obligation to be prepared, but
we simply cannot fathom how they could have reasonably
spent such an astronomical amount of time preparing for trial
in this case, and we highly doubt they would have billed their
own client for all of the hours claimed, see Maldonado, 256

                                10
F.3d at 184 (“Hours that would not generally be billed to one’s
own client are not properly billed to an adversary.” (quoting
Pub. Interest Research Grp., 51 F.3d at 1188)).

       All the more troubling is the fact that counsel’s
(supposedly) hard work did not appear to pay off at trial. As
the District Court explained, counsel had “to be repeatedly
admonished for not being prepared because he was obviously
unfamiliar with the Federal Rules of Evidence, the Federal
Rules of Civil Procedure and the rulings of th[e] court.” App.
630 (emphasis omitted). Given counsel’s subpar performance
and the vagueness and excessiveness of the time entries, the
District Court did not abuse its discretion in disallowing all 562
hours.

        Aside from the problems with the hours billed for
individual tasks, counsel also neglected their burden of
showing that their requested hourly rates were reasonable in
light of the prevailing rates “in the community for similar
services by lawyers of reasonably comparable skill,
experience, and reputation.” Maldonado, 256 F.3d at 184
(quoting Rode, 892 F.2d at 1183). Indeed, counsel bore “the
burden of establishing by way of satisfactory evidence, in
addition to [their] own affidavits, . . . that the requested hourly
rates [met] this standard.” Id. (omission in original) (internal
quotation marks omitted) (quoting Washington, 89 F.3d at
1035). Here, the five billing attorneys did not even submit their
own affidavits identifying their usual billing rates or describing
their levels of experience. And only one of the five attorneys
testified at the hearing on the fee petition about her background
and experience. Thus, for four of the five billing lawyers,
including lead trial counsel, the District Court was provided no
information whatsoever on which it could make a

                                11
determination as to whether the requested hourly rate was
reasonable.

        The District Court would have liked to disallow any
hours billed by those four lawyers, see App. 646–47, and it
would have been within the court’s discretion to do so. But the
court was not able to because the fee petition did not indicate
which attorney performed each particular task. The District
Court therefore disallowed all hours billed prior to the one
testifying lawyer’s arrival at the firm, those billed for multiple
attorney “roundtables,” and all trial hours billed by more than
one lawyer. App. 647 n.62. Other than those hours, however,
the court gave counsel the “benefit of the doubt” and assumed
that the one testifying lawyer had performed all of the hours
billed after she had joined the firm that had not already been
disallowed for some other independent reason. App. 646.

       As a result, the District Court’s lodestar calculation, if
anything, overestimated the amount of hours to which counsel
were entitled. And still, the court concluded—based on the
disallowances described above, as well as other reductions—
that counsel were entitled to only thirteen percent of the fees
they requested. The court thus found the request “outrageously
excessive” and exercised its discretion to award no fee at all.
App. 649.

        Although we have never had the opportunity to formally
endorse such an approach, other circuits have, holding that
district courts have the discretion to deny a fee request in its
entirety when the requested amount is “outrageously
excessive” under the circumstances. Brown v. Stackler, 612
F.2d 1057, 1059 (7th Cir. 1980); see also, e.g., Scham v.
District Courts Trying Criminal Cases, 148 F.3d 554, 556–59
(5th Cir. 1998), abrogated on other grounds as recognized in

                               12
Bailey v. Mississippi, 407 F.3d 684, 686–87 (5th Cir. 2005);
Envtl. Def. Fund, Inc. v. Reilly, 1 F.3d 1254, 1258–60 (D.C.
Cir. 1993); Fair Hous. Council of Greater Wash. v. Landow,
999 F.2d 92, 97 (4th Cir. 1993); Lewis v. Kendrick, 944 F.2d
949, 956–58 (1st Cir. 1991). 6

         Underlying these decisions is the idea that if courts did
not possess this kind of discretion, “claimants would be
encouraged to make unreasonable demands, knowing that the
only unfavorable consequence of such conduct would be
reduction of their fee to what they should have asked for in the
first place.” Landow, 999 F.2d at 96 (quoting Stackler, 612
F.2d at 1059). We find this rationale persuasive. When a party
submits a fee petition, it is not the “opening bid in the quest for
an award.” Id. at 97 (citing Kendrick, 944 F.2d at 98). Rather,
it is the duty of the requesting party to “make a good faith effort
to exclude . . . hours that are excessive, redundant, or otherwise
unnecessary, just as a lawyer in private practice ethically is
obligated to exclude such hours from his fee submission.”
Hensley v. Eckerhart, 461 U.S. 424, 434 (1983).

       Here, the District Court provided a thorough
explanation of how counsel failed to fulfill their duty to the
court. This failure, coupled with the other deficiencies in the
petition and counsel’s substandard performance, justified the
District Court’s decision to deny the fee request in its entirety.
That decision was not an abuse of discretion.

       6
         These decisions involve federal fee-shifting statutes,
but for the reasons provided above, see supra note 4, we think
their reasoning applies with equal force here.

                                13
                    IV. CONCLUSION

       For the foregoing reasons, we will affirm the order of
the District Court.

                             14