Free Reply to Response to Motion - District Court of Arizona - Arizona

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Steven C. Dawson, 006674 Anita Rosenthal, 006199 DAWSON & ROSENTHAL, P.C. 6586 Highway 179, Suite B-2 Sedona, Arizona 86351 [email protected] (602) 494-3800 Gregg H. Temple, 009866 GREGG H. TEMPLE, P.C. 4835 East Cactus Road, Suite 225 Scottsdale, Arizona 85254 [email protected] (602) 808-0508 Thomas L. Hudson, 014485 Danielle D. Janitch, 021838 Mark P. Hummels, 023283 OSBORN MALEDON, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, Arizona 85012-2794 [email protected] [email protected] [email protected] (602) 640-9000 Attorneys for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA (1) Brett D. Leavey, ) ) Plaintiff, ) ) vs. ) ) (2) UNUM/Provident Corporation, a ) foreign corporation, and (3) Provident Life ) and Accident Insurance Company, a ) foreign corporation, ) ) Defendants. ) ) )
Document 273

No. CIV-02-2281 PHX SMM

PLAINTIFF'S REPLY IN SUPPORT OF MOTION FOR ATTORNEYS' FEES AND RELATED NON-TAXABLE EXPENSES (Oral Argument Requested)

Case 2:02-cv-02281-SMM

Filed 02/17/2006

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Plaintiff files this reply in support of his request for attorneys' fees and related non-taxable expenses. Plaintiff should be awarded attorneys' fees in the amount of $1,000,000. I. ELIGIBILITY

Defendants do not dispute that, as the successful party, Dr. Leavey is eligible for an award of attorneys' fees under A.R.S. § 12-341.01. They argue, however, that fees can be awarded only as to the work of Dawson & Rosenthal, P.C. because plaintiff has not provided a fee agreement as to the work of Gregg H. Temple, P.C. and Osborn Maledon, P.A. As established by the Declaration of Mr. Dawson, the contingency fee agreement establishes the fee for the representation. The agreement also provides that "Associate counsel may be employed at the expense of ATTORNEYS." Exhibit B to plaintiff's Motion for Attorney's Fees and Related Non-Taxable Costs. All attorneys involved in the representation of Dr. Leavey are compensated under the contingency fee agreement. If Dr. Leavey had a separate fee agreement with either Gregg H. Temple, P.C. or Osborn Maledon, P.A. that required him to pay more than the contingency fee, it would have been made a part of the motion for fees because it would have increased the amount of fees for which he is eligible under A.R.S. § 12-341.01. Defendants' several page argument on this issue illustrates the fundamental flaw in their analysis of awarding attorneys' fees under the Arizona statute. The express purpose of allowing an award of fees in contract cases is to mitigate the burden to the client of the expense of litigation. A.R.S. § 12341.01(B); Sparks v. Republic National Life Ins. Co., 132 Ariz. 529, 545 647 P.2d 1127, 1143 (1982). Dr. Leavey pays the fees specified by the contingency fee agreement and receives in mitigation of that expense whatever fees are awarded by this Court. Counsel do not receive the fees award by the Court. For purposes of determining what fees should be awarded to Leavey, it is immaterial whether Temple and Osborn Maledon are working pro bono, receive $15,000 per hour from Dawson & Rosenthal, or, as is the case, share in the contingency fee. The only issue
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is how much of the contingency fee defendants should pay to mitigate the cost to Dr. Leavey of pursuing his lawsuit against them. II. ENTITLEMENT.

Defendants do not address the criteria identified by the Arizona Supreme Court and discussed in plaintiff's motion, pages 3-5. Dr. Leavey is entitled to an award of fees. III. REASONABLENESS OF REQUESTED AWARD

A. Calculating a Reasonable Fee Award in Contingency Cases Dr. Leavey is eligible for reimbursement of the entire contingency fee under A.R.S. § 12-341.01. Sparks v. Republic National Life Ins. Co., 132 Ariz. 529, 545, 647 P.2d 1127, 1143 (1982); Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184 (1985); Continental Townhouses East Limit One Association v. Brockbank, 152 Ariz. 537, 545-46, 733 P.2d 1120, 1128-29 (App. 1986)("the court ... may award up to 40% of the verdict as attorneys' fees."). Defendants assert that "the Court is obligated to apply a reasonable hourly rate to the reasonable number of hours submitted by the plaintiff's counsel, and enter a correspondingly reasonable fee award." Defendant's Response, page 2 and pages 28. That is simply not a correct statement of the applicable Arizona law, which allows an award of the full contingency fee.1 The federal lodestar approach has been fairly criticized as unfair when contingency fees are involved: Furthermore, on many occasions awarding counsel fees that reflect the full market value of their time will require paying more than their customary hourly rates. Most attorneys paid an hourly rate expect to be paid promptly and without regard to success or failure. Customary rates reflect those expectations. Attorneys who take
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Under federal fee shifting statutes, a Court can award more than the contingency fee. Blanchard v. Bergeron, 489 U.S. 87, 96 (1989) ("The attorney's fee 28 provided for in a contingent-fee agreement is not a ceiling upon the fees recoverable under § 1988."). Case 2:02-cv-02281-SMM Document 273 3 Filed 02/17/2006 Page 3 of 9
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cases on contingency, thus deferring payment of their fees until the case has ended and taking upon themselves the risk that they will receive no payment at all, generally receive far more in winning cases than they would if they charged an hourly rate. The difference, however, reflects the time-value of money and the risk of nonrecovery usually borne by clients in cases where lawyers are paid an hourly rate. Courts applying § 1988 must also take account of the time-value of money and the fact that attorneys can never be 100% certain they will win even the best case. Hensley v. Eckerhart, 461 U.S. 424, 448-49 (1983)(Justices Brennan, Marshall, Blackmun, and Stevens concurring in part and dissenting in part). Defendants' proposed lodestar analysis does not work because there is no standard hourly rate in the Arizona legal community that attorneys charge plaintiffs in insurance bad faith lawsuits. As established by Mr. Dawson's declaration, which is not disputed by defendants, insurance bad faith lawsuits in Arizona are handled under contingency fees agreements. Counsel for plaintiff are unaware of any insurance bad faith claim in Arizona in which the plaintiff has paid counsel an hourly fee. Defendants have presented the declaration of Ms. Andrews attesting to the "rates generally charged by lawyers and paralegals at Lewis and Roca." Dr. Leavey could not possibly have paid those hourly rates to pursue his lawsuit, and, if counsel had not taken his case on a contingency, he would be without the benefits to which he is entitled under his contract and without the compensation that the jury found to be just, reasonable, and necessary. And defendants would not be punished and deterred by the punitive damage award that the jury found to be just, reasonable, and necessary. Applying Ms. Andrews' suggested billing rates, the base amount of fees is $755,247.50: Dawson, Rosenthal, Temple: 1580.6 x $400= 632,240.00
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Leslie Parkes Hudson Janitch Hummels Kemp Bonomolo Wood Brown TOTAL

10.7 x $170= 154.3 x $130 124 x $410= 106 x $235= 58.5 x $175= 7.9 x $170= 11.8 x $170= 58.4 x 170= 12.9 x 130=

1,819.00 20,059.00 50,840.00 25,098.00 10,237.50 1,343.00 2,006.00 9,928.00 1,677.00 755,247.50

Even under the federal fee shifting statues relied upon by defendants, the Court has every right to apply a multiplier to the base amount in light of Dr. Leavey's success at trial. Hensley v. Eckerhart, 461 U.S. 424, 435 (1983) ("The product of reasonable hours time a reasonable rate does not end the inquiry. There remain other considerations that may lead the district court to adjust the fee upward or downward, including the important factor of the `results obtained.'"); Guam Soc. Of Obstetricians & Gynecologists v. Ada, 100 F.3d 691, 697 (9th Cir.1996) (loadstar fees doubled); Barnes v. City of Cincinnati, 401 F.3d 729, 746 (6th Cir. 2005) (1.75 multiplier approved). With a 1.33 multiplier, the fee award based on Ms. Andrews' recommended rates under the federal loadstar system would be $1,004,479.18. Dr. Leavey does not seek to have defendants compensate him for the full contingency fee, even though he is eligible for that amount under Arizona law. In order to determine a reasonable amount that defendants should pay to mitigate the cost of the lawsuit, Dr. Leavey has looked to other recent bad faith lawsuits in the District of Arizona in which fees have been awarded against defendants or their affiliated companies. Judge Bolton awarded the full contingent fee amount as applied to the compensatory damage award in Greenberg v. Paul Revere, et al., CV99-0154-PHX-SRB. That would justify an award here of nearly $2,000,000. In
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Ceimo v. General American, et al., CV 00-1386-PHX-FJM, Judge Martone awarded $600,000 in fees based on an estimate of approximately 1200 hours of work by attorneys and legal assistants. Dr. Ceimo did not argue, and Judge Martone did not state, that $500 per hour was a reasonable average hourly rate for the work done. He concluded only that $600,000 was a reasonable fee award for the work done. Dr. Leavey bases his request on Judge Martone's award in Ceimo because many of the same attorneys and legal assistants involved in Ceimo are also involved in this case. If $600,000 was a reasonable fee award in Ceimo, $1,000,000 is a reasonable fee award in this case. B. Local Rule 54.2(c)(3) Criteria a. Time and Labor Required of Counsel:

Defendants assert that the reconstructed time provided by Dawson, Rosenthal, and Temple are not accurate because they did not keep contemporaneous time records. They do not, however, contest that approximately 2000 hours is a reasonable amount of time for this case. Defendants do not indicate the number of hours they were billed for the unsuccessful defense. b. The Novelty and Difficulty of the Questions Presented:

Defendants argue that "[t]he thrust of Leavey's case at trial was the alleged institutional bad faith, which is nothing new." Response, page 9. This callous attitude goes far to explain the jury's punitive damage award. The operation of the scheme to deprive insureds of their disability benefits at a time when they are most vulnerable may be old news to defendants but it was devastating to Dr. Leavey. The case was unique and novel as to defendants' application of their claims denial goals to Dr. Leavey's claim. This lawsuit was also unique in that defendants asserted a new defense, that Dr. Leavey did not receive appropriate care and should have changed his treatment modalities, even though everyone involved in the claim admitted that his care was appropriate and that it would be bad faith to condition benefits on a new treatment regime. This novel issue had to be addressed in summary judgment
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briefing, motions in limine, and jury instructions. The Court will recall that defendants presented three physicians and two psychologists to testify on appropriate care at trial. c. The Skill Requisite to Perform the Legal Service Properly

Defendants do not dispute that the litigation of this lawsuit required substantial experience and skill. d. The Preclusion of Other Employment by Counsel Because of the

Acceptance of the Action Defendants do not dispute that trial counsel had to decline other clients in order to litigate this matter through trial. e. The Customary Fee Charged:

Defendants do not dispute that insurance bad faith cases are handled on a contingency fee basis, that forty percent is the customary fee, or that Dr. Leavey could not have pursued his claim if he had to pay an attorney an hourly fee. f. Whether the Fee Contracted Between the Attorney and Client is Fixed

or Contingent. The fee was contingent. g. Any Time Limitations Imposed.

There were no unusual time limitations. h. The Amount of Money, or the Value of the Rights Involved, and the

Results Obtained. Defendants do not dispute that significant rights were involved in this litigation, as confirmed by the jury's verdict.

i.

The Experience, Reputation and Ability of Counsel.

Defendants do not dispute that all of the attorneys that represent Dr. Leavey in this case are experienced, reputable, and able. j. The "Undesirability" of the Case.
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Defendants agree that Dr. Leavey and his counsel had to invest a great deal of time and money in pursuing this case with no guarantee of success. Defendants and their attorneys mounted a vigorous defense by attacking Dr Leavey and his health care providers, presumably with the expectation that they might prevail at trial. k. The Nature and Length of the Professional Relationship.

The professional relationship between plaintiff's counsel and Dr. Leavey is limited to his dispute with defendants. l. Awards in Similar Actions.

Defendants do not offer any examples of awards in similar actions. Both defendants or their affiliates were involved in the Greenberg and Ciemo cases discussed above. They do not assert here that either Judge Bolton or Judge Martone awarded unreasonable amounts to mitigate the costs of the litigation in those cases. CONCLUSION Defendants should mitigate Dr. Leavey's cost of litigating his claim against them. Based on previous awards in similar cases in the District of Arizona, $1,000,000 is a reasonable amount. Plaintiff withdraws his request for non-taxable expenses in the amount of $92,407.64. Respectfully submitted February 17, 2006. //Gregg H. Temple// GREGG H. TEMPLE, P.C. 4835 East Cactus Road, Suite 225 Scottsdale, Arizona 85254 [email protected] (602) 808-0508

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I certify that on February 17, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Stephen M. Bressler Ann-Martha Andrews Scott Michael Bennett Lewis and Roca, LLP 40 North Central Avenue Phoenix, Arizona 85004-4429 [email protected] [email protected] [email protected] Attorneys for Defendants s/Gregg H. Temple

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