Gilbert LLP v. Tire Engineering & Distribution, LLC
689 F. App'x 197
| 4th Cir. | 2017Background
- Alpha retained Gilbert LLP on a 40% contingency-fee engagement in 2009 to pursue IP claims; the engagement allowed an hourly fee if Alpha terminated representation.
- Gilbert obtained a $26 million jury verdict in 2010; before appeals/recovery completed, two Gilbert attorneys left and formed WMC, which Alpha then retained to prosecute appeals and collection.
- Gilbert filed an attorney’s lien under Va. Code § 54.1-3932 and sought about $4.5M in fees and $1.8M in costs; the district court declined the contract fee and applied quantum meruit, awarding $1,237,720 in fees and later $1,732,568.67 in costs.
- This Court remanded (Outsidewall I) instructing the district court to apply the nine County of Campbell factors, emphasizing the contingency nature of the fee and the result secured.
- On remand the district court again awarded $1,237,720 in fees; the Fourth Circuit reversed, finding the district court abused its discretion by (1) failing to give proper weight to the contingency factor and (2) understating the value of the result secured.
- The Fourth Circuit awarded fees directly: 6,763.6 hours at an average hourly rate of $461.09, totaling $3,118,595, and remanded with instructions to enter that award.
Issues
| Issue | Gilbert's Argument | Alpha's Argument | Held |
|---|---|---|---|
| Whether quantum meruit governs fee valuation after discharge from a contingent-fee contract and recovery by successor counsel | Quantum meruit applies and should account for contingency risk and customary rates | District court may use lodestar or reduced rates because the engagement contemplated hourly fees upon termination | Held quantum meruit governs (per Heinzman); fee should reflect contingent nature and reasonable customary rates, not the district court’s reduced lodestar |
| Weight to give the contingency nature of the original fee agreement | Contingency risk warrants applying Gilbert’s customary rates (and possibly a multiplier), not cutting them | The engagement’s termination clause and lack of rate disclosure justify reduced hourly rates | Held contingency factor was pivotal; district court erred in failing to increase rates to reflect risk; award should use Gilbert’s customary average rate ($461.09) without multiplier |
| Consideration of the “result secured” (the $26M judgment) in assessing reasonable fee | The substantial $26M judgment shows high objective value and efficiency of Gilbert’s services and supports a larger fee | District court argued result more relevant after recovery and used it to justify large hour reductions | Held district court gave insufficient weight to the result; substantial judgment supports higher hours and rates in quantum meruit |
| Reasonableness of hours and reductions applied by district court | Gilbert reduced its hours on remand to 6,763.6 (from ~10,955) and argued that number is reasonable given work performed | District court reduced hours to 3,834.25 based on vague entries, duplications, travel, and post-trial work done by successor counsel | Held 6,763.6 hours are reasonable; district court’s 66% cut was excessive and an abuse of discretion |
Key Cases Cited
- County of Campbell v. Howard, 112 S.E. 876 (Va. 1922) (sets nine-factor quantum meruit framework including contingency and result secured)
- Heinzman v. Fine, Fine, Legum & Fine, 234 S.E.2d 282 (Va. 1977) (quantum meruit due where attorney discharged without cause from contingent-fee contract)
- In re Abrams & Abrams, P.A., 605 F.3d 238 (4th Cir. 2010) (contingency risk must be given weight; fixing a lodestar in contingency context can be error)
- Tire Eng’g & Distrib., LLC v. Shandong Linglong Rubber Co., Ltd., 682 F.3d 292 (4th Cir. 2012) (underlying appellate opinion addressing merits of the underlying litigation)
- In re Outsidewall Tire Litig., [citation="636 F. App'x 166"] (4th Cir. 2016) (prior panel remand instructing district court to apply County of Campbell factors)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (reasonableness inquiry and reduction of hours must account for good-faith exclusion of excessive entries)
- Lyle v. Food Lion, Inc., 954 F.2d 984 (4th Cir. 1992) (caution against enhancing lodestar when doing so effectively grants the original contingency fee)