Attorney Fees

‘Perfect Storm’ of Arbitrator Actions

A federal appeals court has ruled an arbitration panel ignored the law when it ordered a lawyer to return his contingency fee to an age bias plaintiff and awarded fees virtually identical to the contingency.

The 2nd U.S. Circuit Court of Appeals vacated the order and the panel’s attorney fee award, saying the panel’s refusal to explain its decision and a prior refusal to award any fees at all created troubling questions. “These circumstances create, if not the perfect storm, then a disturbance ample enough to give us pause,” the court said in its Aug. 7 opinion (PDF).

The appeals court ruled in a second appeal of the fee award, the New York Law Journal reports. On the first go-round, the arbitration panel not only failed to award attorney fees but also assessed the plaintiff nearly $14,000 in arbitration costs. The Southern District of New York noted the law requires attorney fees and ordered the court to award them.

On remand, lawyer Michael O’Donnell, submitted detailed billing records to support his request for about $262,000 in fees and costs, which included his costs of handling the appeal. But the panel awarded only $83,500 in fee and costs, and ordered O’Donnell to return nearly $83,000 he had already been paid in a contingency fee.

O’Donnell represented Bernhard Porzig, had been awarded more than $200,000 for his age discrimination claim against for a subsidiary of Dresdner Bank, which had fired him from his job as vice president of bank sales.

The New York City-based appeals court said the panel failed to explain why it awarded only $83,500 and noted its similarity to the contingency fee. The defendant had argued the fee should be capped by the contingency agreement, a “problematic argument” that is contrary to Supreme Court precedent, according to the appeals court. The court said the failure to explain suggested the panel was swayed by the improper argument.

Nor did the panel have the authority to order a return of the contingency fee, since there was no dispute about it before the panel, the court said.

In a footnote, the court also criticized the defendant’s suggestions that the fee could be reduced because O’Donnell is a solo.

“We also find troubling Dresdner’s repeated insinuations to the panel, as well as this court, that attorney O’Donnell’s hourly fee rate should be reduced because he is a solo practitioner. While it is true that courts and arbitral panels deciding reasonable fees can and should take into consideration many aspects of an attorney’s practice to ensure a reasonable hourly rate, … it is long established that ‘courts should not automatically reduce the reasonable hourly rate based solely on an attorney’s status as a solo practitioner.’ ”

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