Fee Bill Dispute Case Shows Importance of Focus on Attorney Compliance with the Rules of Prof. Conduct

My candidate for the worst appeals court decision ever in a fee billing dispute case involving an insurer and an insured has to be Thomson Inc. v. Ins. Co. of N. Am., 11 N.E.3d 982 (Ind. Ct. App. 2014) trans. denied (May 15, 2015). Thompson was an environmental coverage case and one of the main issues was whether the insurers owed more than $5 Million in defense costs (which were awarded to the insured).

I believe the Thompson opinion is flawed for several reasons. It is so flawed in fact that I think the opinion should be considered as an outlier. But despite the opinion’s flaws, I think the case is nevertheless instructive for insurers and their attorneys and fee bill experts for what the court had to say about expert qualifications and what a expert opinion on fee billing should address.

In a lengthy discourse on the expert opinions filed in the case, the court criticized the insurer’s expert’s opinion on several points including the fact that the expert cited to only one Indiana case in his opinion (which the court found inapplicable). Most importantly, though, the court noted that the insurer expert “did not apply Rule 1.5 as the standard” and that in fact the expert’s “written report expressly rejects it.” Also the court commented on the insurer expert’s qualifications and noted that the expert “never litigated or managed a toxic-tort, class action.”

Taking the qualifications issue first, should it matter that an expert in a fee bill dispute case has ever “litigated or managed” similar litigation? Of course, I would concede that it might be helpful in some situations, but it should not be a determining factor in all situations.

Using myself as an example, I had an environmental and toxic tort legal background before coming to work in-house in the insurance industry as a director of environmental and toxic tort claims for two major insurers. While this experience might be helpful when opining on the reasonableness of fee bills in an environmental or toxic tort case, there is another qualification that should be used as the primary and sole determining factor of my qualifications.

In my judgment, the real issue in determining a fee billing expert’s qualifications is whether or not the putative expert can be qualified as an expert in interpreting the Rules of Prof. Conduct (RPC). The reason is that a court’s main task in a fee bill dispute case is to make a decision on whether the attorney fee bills are “reasonable” pursuant to the RPC. See, e.g., City of Hammond v. Marina Entertainment Complex, Inc., 681 N.E.2d 1139 (Ind. App. 1997).  So if this is the basis for a court’s opinion, then an opinion of an expert who has experience in the subject matter litigation but cannot be not qualified as an expert on interpreting the RPC should be of no value to a court.

Moreover, it should be remembered that opining on the subject of compliance with the RPC may involve more than just opining on compliance with RPC 1.5 Fees. It may also be appropriate for an expert to opine on compliance with other RPC in a fee billing dispute case. See ABA Standing Comm. On Ethics and Prof. Resp., Formal Op. 93-379 (1993) “Billing for Professional Fees, Disbursements and Other Costs,” beginning at p. 4 for a discussion of the various RPCs that may be implicated in fee billing including RPCs 1.5, 1.4, 7.1, 1.1, and 3.2.

Again, using myself as an example, I do not always have a background in the type of litigation in the underlying matter in a fee bill dispute case. Yet, I have never been challenged as an expert on the issue of an attorney’s compliance with the RPC in fee bill cases (or in non-fee bill cases). On the other hand, I have seen experts who have extensive experience in the type of underlying litigation challenged on the issue of their competence to opine on whether or not an attorney’s conduct in the matter complied with the RPC.

Very importantly, in preparing an opinion, I am always careful to focus my analysis from the perspective of whether or not an attorney has complied with the RPC in terms of billing “reasonable” fees and costs.  Fee bill experts who do not similarly focus their opinions risk having their opinions ripped apart as the court did in Thompson.

Unfortunately, the upshot of Thompson for the insurance industry is that it is now stuck with some very bad case law on paying defense costs not only in toxic tort cases, but in all other types of cases as well. Could this have been prevented?

At the risk of biting the hands of people who sometimes feed me, I will simply state that were I asked to render an expert opinion in a similar case, I would follow a different approach. The approach I would follow would be more in line with what I believe courts look for in an expert’s opinion in a fee billing case. And I would also make sure to cite to more than one (applicable) case from the venue state.

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