Cori Rigsby v. State Farm Fire & Casualty C

Case: 17-60720 Document: 00514535699 Page: 1 Date Filed: 06/29/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 17-60720 June 29, 2018
Lyle W. Cayce
Clerk
United States of America, ex rel, CORI RIGSBY; KERRI RIGSBY,
Plaintiffs - Appellees
v.
STATE FARM FIRE & CASUALTY COMPANY; ET AL.
Defendants
v.
GILBERT, L.L.P.,
Appellant
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:06-CV-433
Before SMITH, WIENER, and WILLETT, Circuit Judges.
WIENER, Circuit Judge:*
Relator-Appellees Cori and Kerri Rigsby (“Relators”) filed a False Claims
Act action against State Farm. Appellant Gilbert LLP (“Gilbert”), a law firm,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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had represented Relators before being replaced by a new firm co-founded by
August Matteis, a former Gilbert attorney. Relators prevailed at trial and
asked Gilbert to participate in their fee petition. Gilbert provided an unedited
spreadsheet of its fees and expenses, but declined to attest to their
reasonableness or to state whether it had exercised billing judgment. Relators
submitted that spreadsheet to the district court, which awarded some, but not
all, of the listed fees and expenses. After Relators’ award was upheld on appeal
four years later, they moved to extinguish Gilbert’s attorney lien. Gilbert
responded that Relators owed it nearly $2 million more than the district court
had allocated, but significantly less than the remainder from the spreadsheet.
This time, Gilbert exercised billing judgment and provided supporting details.
The district court extinguished Gilbert’s lien, and Gilbert appeals. We affirm.
I. FACTS AND PROCEEDINGS
In 2006, Relators filed this action against State Farm pursuant to the
False Claims Act, 31 U.S.C. § 3729, et seq. 1 Their complaint alleged that State
Farm “submitted false claims to the United States government for payment on
flood policies arising out of damage caused by Hurricane Katrina.” 2
In 2008, Relators retained Gilbert as primary counsel and Heidelberg PA
(“Heidelberg”) as local counsel. 3 Gilbert’s engagement letter with Relators
provided for a contingent fee. That letter also contained the following
termination provision:
In the event that this representation is terminated prior to the
conclusion of this matter, you agree to reimburse [Gilbert] for costs
1 The suit also named other defendants, but appears to have proceeded only on claims
against State Farm. See United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d
457, 462 (5th Cir. 2015), aff’d sub nom. State Farm Fire & Cas. Co. v. United States ex rel.
Rigsby, 137 S. Ct. 436 (2016).
2 Rigsby, 794 F.3d at 462.
3 Gilbert and Heidelberg apparently underwent several name changes over the course
of the litigation. For consistency and simplicity, we refer to them as “Gilbert” and
“Heidelberg.”
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and expenses as provided above . . . . In addition, [Gilbert] will be
entitled to receive payment of its attorneys’ fees out of any ultimate
award or settlement that you receive . . . . Such payment will be
made on the basis of its customary hourly rates rather than on a
contingency-fee basis. However, if [Gilbert’s] representation is
terminated by you, and you eventually recover proceeds . . . ,
[Gilbert] reserves the right to seek a partial contingency fee award
from the court, if appropriate.
In 2011, two of the Gilbert attorneys who represented Relators, including
the lead attorney, Matteis, left Gilbert to co-found Weisbrod Matteis & Copley
PLLC (“WMC”). Relators wanted to keep Matteis as their lead counsel, so they
terminated Gilbert’s representation and retained WMC. In January 2013,
Gilbert filed a lien notice on Relators’ potential recovery.
The district court limited discovery in the underlying litigation to two
instances of alleged misconduct (known as the “McIntosh claim”). 4 That claim
went to trial a few months after Gilbert filed its lien, and Relators prevailed.
Shortly thereafter, in April 2013, WMC requested that Gilbert submit a fee
petition to the court in connection with Relators’ own fee petition for WMC’s
fees. Gilbert responded that it had “concluded that it [would] not [be]
appropriate” to do so, because the statute provided for only a relator, not a
former attorney, to petition for fees. Gilbert did, however, offer to send Relators
its “time and expense records” following a “clerical clean-up” of those records.
Matteis responded, “I think it would be a mistake not to put this in front
of the Court at this time” because “I have no interest in seeing you waive your
opportunity to request fees in this matter.” But, Matteis added, “it is our view
that the lien [Gilbert] filed establishes adversity between [Gilbert] and
4 See Rigsby, 794 F.3d at 464–66 (explaining that the court sought to “strike a balance
between the Relators’ interest in identifying . . . other allegedly false claims and the
defendants’ interest in preventing a far ranging and expensive discovery process” (omission
in original)).
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[Relators].” Matteis then explained to Gilbert that he would submit that firm’s
billing information, but would give no opinion whether that information was
reasonable. 5 He did suggest to Gilbert that it submit a declaration attesting to
the reasonableness of its own fees.
Gilbert sent Matteis a spreadsheet “reflecting [Gilbert’s] reasonable fees
and expenses,” but did not send a reasonableness declaration. 6 Several days
later, in May 2013, Relators filed a motion for an award of fees and expenses
for work performed by WMC, Heidelberg, and Gilbert. Relators submitted
invoices and attested to the reasonableness of the fees and expenses for
Heidelberg and WMC, and included Gilbert’s spreadsheet. 7 Relators requested
$1,232,735.06 in fees and expenses for WMC, and $287,346.34 for Heidelberg.
Relators added:
Relators’ former counsel, Gilbert LLP, has presented a fee petition
in the amount of $4,575,460.00 in fees, and $649,843.67 in
expenses and costs, which is included here. In light of the adversity
between Gilbert LLP and Relators, as evidenced by the lien that
Gilbert LLP filed . . . , Relators ask the Court to award all fees and
expenses for Gilbert LLP that the Court deems reasonable after
affording Gilbert LLP an opportunity to be heard regarding the
reasonableness of Gilbert’s proffered fees and costs.
In its February 2014 ruling on that motion, the district court found
several problems with Gilbert’s spreadsheet. It identified timekeepers by
initials only, so the court could not determine the positions or level of
5 A Relator may only recover reasonable fees. See 31 U.S.C. § 3730(d)(2).
6 On receipt, Matteis wrote to Gilbert, noting “[a]t first glance, I noticed that the first
page has some entries from another matter,” and asking Gilbert to “take another look.” It is
unclear whether Gilbert sent an updated spreadsheet.
7 Before Gilbert’s representation was terminated, it had paid Heidelberg’s fees
directly. As a result, Heidelberg’s fees from the time before Gilbert was terminated were
included in the spreadsheet as part of Gilbert’s expenses. Conversely, Relators supporting
materials for Heidelberg’s fees in the fee petition pertained only to the period after Gilbert’s
representation was terminated.
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experience of the billing attorneys, except for Matteis and the other attorney
who had transferred from Gilbert to WMC. The court thus was unable to
determine the reasonableness of Gilbert’s fees, so it did not award fees for any
entries except those of Matteis and the other attorney who had moved from
Gilbert to WMC. The court also reduced the hourly rates claimed for those two
attorneys. 8 The court awarded Relators $1,501,938.80 for Gilbert’s fees,
$838,573.80 for WHC’s fees, and $269,637.20 for Heidelberg’s fees.
As for expenses, the court stated that Gilbert’s spreadsheet contained
“sparse detail,” which was “insufficient to inform the Court whether some of
the expenses were reasonable or even related to this case.” The court awarded
Relators $180,756.78 for Gilbert’s expenses, $117,071.38 for WMC’s expenses,
and $5,250.73 for Heidelberg’s expenses. The court also awarded $758,250 to
the United States Government, and 30% of that amount to Relators, pursuant
to 31 U.S.C. § 3730(d)(2).
State Farm appealed the verdict, and we affirmed. 9 We did, however,
reverse the district court’s refusal to permit post-trial discovery on the
allegations of additional false claims beyond the McIntosh claim. 10 The
litigation on the broader scheme thus remains ongoing.
The Supreme Court affirmed this court’s ruling in December 2016. 11
State Farm then tendered payment of Relators’ award.
One month after the Supreme Court’s decision, in January 2017, Gilbert
wrote to Matteis, stating that the district court’s 2014 fee award order “is not
8 The court also removed one time entry.
9 Rigsby, 794 F.3d at 481.
10 See id. at 465–70.
11 See State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, 137 S. Ct. 436, 445
(2016). The Supreme Court granted certiorari on an issue unrelated to this appeal. See id. at
439–40.
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a determination of Gilbert’s rights in [Relators’] recovery under the [lien].”
Gilbert claimed that Relators owed Gilbert $5,225,303.67, the entire amount
from its spreadsheet. 12 Gilbert acknowledged that Relators’ total award,
including all fees and expenses, was $3,140,703.69 13 and wrote “[w]e trust that
neither [WMC] nor [Relators] will take any steps that would divert monies
subject to Gilbert’s lien.” Later that month, Gilbert offered to accept payment
of $1,688,449.52, the amount that the court had allocated to Gilbert in its
award, 14 as partial satisfaction of the lien, and to accept the balance from any
future recovery in the ongoing litigation. Gilbert added that if the parties could
not resolve the issue, it would sue Relators.
Days later, Relators paid Gilbert $1,688,449.52, and moved to extinguish
Gilbert’s lien. Gilbert countered by moving to set the remaining value of its
lien at $1,901,968.53, considerably less than the remainder that the court did
not award from Gilbert’s 2013 spreadsheet. 15 Gilbert explained that the 2014
spreadsheet was “largely unedited,” but it had now applied billing discretion
to remove several entries and reduce the billing rates. 16 The court extinguished
the lien, ruling that Gilbert had unclean hands and had slept on its rights.
Gilbert appealed.
12 $4,575,460.00 for fees and $649,843.67 for expenses.
13 $227,475.00 as 30% of the government’s recovery plus $2,913,228.69 in total
attorney fees and expenses.
14 $1,682,695.58, plus post-judgment interest.
15 Gilbert asserted that the remaining value of its lien related to fees was
$1,467,464.00, and the value related to expenses was $434,504.53. In contrast, the amounts
from the 2013 spreadsheet that the court declined to award in its fee petition order were
$3,073,521.20 ($4,575,460.00 – $1,501,938.80) and $469,086.89 ($649,843.67 – $180,756.78),
respectively.
16 For example, Gilbert deleted entries that represented time incurred by summer
associates and its IT department.
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II. ANALYSIS
The parties agree that Gilbert’s fee request is based on quantum meruit.
“Where the recovery is based in quantum meruit, the amount of recovery is
‘limited to the monetary equivalent of the reasonable value of the services . . .’
for which payment has not been tendered.” 17 The Mississippi Supreme Court
has laid out factors for determining the amount of attorney fees that are
reasonable in quantum meruit. 18
But a quantum meruit claim is subject to equitable defenses, one of
which provides that “equity aids the vigilant and not those who slumber on
their rights.” 19 If one party’s delay causes “a serious injustice” to the other
party, this maxim can prevent the delaying party’s recovery. 20 Mississippi
courts have applied it to bar a delaying party’s recovery. 21 The district court
found that Gilbert perpetrated such a delay, which had prevented the Relators
from seeking Gilbert’s fees from State Farm. The district court concluded that
17 Poole v. Gwin, Lewis & Punches, LLP, 792 So. 2d 987, 991 (Miss. 2001) (quoting In
re Estate of Stewart, 732 So. 2d 255, 259 (Miss. 1999)); see also In re Estate of Gillies, 830 So.
2d 640, 645–46 (Miss. 2002) (discussing quantum meruit attorney fee awards).
18 See Gillies, 830 So. 2d at 645–46.
19 Reeves v. Meridian S. Ry., LLC, 61 So. 3d 964, 967 (Miss. Ct. App. 2011) (quoting In
re Estate of Davis, 510 So. 2d 798, 800 (Miss. 1987)); cf. Poole, 792 So. 2d at 991 (Under
Mississippi law, “quantum meruit claims are equitable in nature[.]”). But see Webb v. B.C.
Rogers Poultry, Inc., 174 F.3d 697, 704 (5th Cir. 1999) (“Despite its equitable nature, however,
quantum meruit is an action at law.”) (applying Texas law).
20 Osborne v. Vince, 129 So. 2d 345, 348 (Miss. 1961) (internal quotation marks and
citation omitted); see Nunnery v. Nunnery, 195 So. 3d 747, 753 (Miss. 2016) (upholding the
application of the maxim and noting “the deleterious effect [of the delay] on the parties”).
21 See In re Last Will & Testament of Winding v. Estate of Winding, 783 So. 2d 707,
711 (Miss. 2001) (applying the maxim when the party waited over three years to contest a
will, despite knowing about the probate proceedings); Davis, 510 So. 2d at 800 (barring a
party’s attempt to contest a will when they had failed to file suit for nineteen months, despite
knowing of the potential claim).
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Gilbert’s decision to sleep on its rights barred its recovery. 22 We review
application of this equitable defense for abuse of discretion. 23
Gilbert characterizes this argument as a “Hail Mary,” but does not
dispute Relators’ contention that Gilbert could have moved to value its lien at
the time of the 2013 fee petition rather than waiting four years. Although the
lien could not attach until the district court entered a judgment in favor of
Relators against State Farm, 24 Gilbert had filed notice of the lien’s existence
long before there were proceeds to which the lien could attach. 25 Gilbert
22 Gilbert disputes that the district court ruled that it slept on its rights as a basis for
extinguishing the lien. But the district court clearly stated that Gilbert “sat on its rights,”
after noting that “Gilbert asks the Court to repeat the [fee petition] exercise again, through
a different vehicle.” It is, however, unclear whether the district court incorporated this issue
into its unclean-hands finding or considered it a separate issue. Mississippi courts generally
consider the maxim “equity aids the vigilant and not those who slumber on their rights” to
be distinct from “he who comes into equity must come with clean hands.” See JAMES W.
SHELSON, MISSISSIPPI CHANCERY PRACTICE §§ 2:26, 2:27 (2018 ed.). Ultimately, either
equitable defense will bar recovery when the party seeking recovery committed some wrong
that harmed the other party. See id. Moreover, we may affirm on any grounds presented in
the record. See Sobranes Recovery Pool I, LLC v. Todd & Hughes Const. Corp., 509 F.3d 216,
221 (5th Cir. 2007).
23 See United States v. U.S. Steel Corp., 548 F.2d 1232, 1235–36 (5th Cir. 1977) (stating
that district court did not abuse its discretion finding that party’s action was untimely when
party had “slept on its rights”); Laitram Corp. v. Deepsouth Packing Co., 443 F.2d 928, 936
(5th Cir. 1971) (finding no abuse of discretion in court’s rejection of equitable defense); see
also St. Paul Fire & Marine Ins. v. State Volunteer Mut. Ins. Co., 212 F.3d 595, at *3 (5th Cir.
2000) (unpublished) (reviewing application of waiver, estoppel, and laches for abuse of
discretion).
24 See Bar-Til, Inc. v. Superior Asphalt, Inc., 219 So. 3d 553, 556 (Miss. Ct. App. 2017)
(explaining that a charging lien attaches on a final judgment); see also Estate of Stevens v.
Wetzel, No. 96-CA-00343COA, 1999 WL 58566, at ¶14 (Miss. Ct. App. Feb. 9, 1999), aff’d in
part, rev’d in part on other grounds, 762 So. 2d 293 (Miss. 2000) (concluding that a former
attorney may have a charging lien on a recovery). But see Tyson v. Moore, 613 So. 2d 817, 826
(Miss. 1992) (“[T]he charging lien only applies to funds already in the attorney’s possession.”
(citations omitted)).
25 That liens can exist before attachment is generally clear in jurisdictions where
attorney liens are governed by statute. See, e.g., Clark v. Jones Gledhill Fuhrman Gourley,
P.A., 409 P.3d 795, 802 (Idaho 2017), reh’g denied (Feb. 2, 2018). But cf. City of Oronoco v.
Fitzpatrick Real Estate, LLC, 869 N.W.2d 332, 337–38 (Minn. Ct. App. 2015), aff’d, 883
N.W.2d 592 (Minn. 2016) (stating that statute provides that lien attaches when cause of
action commences). But Mississippi has no such statute. Bar-Til, 219 So. 3d at 557.
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primarily contends that it could not have taken any action in 2013 because, as
a non-party, it could not participate in the fee petition. 26 Yet Gilbert could have
moved to value its lien without participating in the fee petition. Simply put,
Gilbert delayed moving to value its lien for four years. 27 Had it done so in 2013,
the district court could have determined the value of the lien, independent of
the fee petition, and Relators could have includes that amount in their fee
petition.
Gilbert presents no reason for its nearly four-year delay, and it is
unlikely that it could do so: It had access to the same information during that
entire time. Because Gilbert’s representation of Relators was terminated, its
fee was hourly and thus determinable independent of the amount of the
judgment. 28 More importantly, Gilbert knew that Relators were seeking fees
from State Farm at that time and that Relators wanted to include Gilbert’s
fees in that petition.
26 Much of Gilbert’s argument concerns the alleged inappropriateness of its
participation in Relators’ fee petition. For example, Gilbert contends that requiring it to
participate in the 2013 fee petition would have been tantamount to requiring it to provide
legal services to Relators because Gilbert would have had to exercise judgment on Relators’
behalf. We need not reach this argument because Gilbert’s deficiency was not that it should
have participated in the fee petition, but that it should have moved to value its lien four years
earlier. Gilbert could have avoided its four-year delay without actually participating in the
fee petition. The fact that it is a client’s responsibility to petition the court for fees does not
remove the responsibility of the former attorney (or any type of service provider, for that
matter) to present the client with a timely and accurate bill if failing to do so would cause a
serious injustice to the client, as it did here.
27 Cf. RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 43 cmt. h (AM. LAW.
INST. 2000) (“The lawyer [seeking to enforce a lien] must not unreasonably delay resolution
of disputes concerning the lien and claimed fee. . . . [A] lawyer’s inability to attend a prompt
hearing on the fee . . . would be a circumstance in which the tribunal could release the lien.”).
28 Cf. Denham Law Firm, PLLC v. Simmons, 207 So. 3d 670, 673, 680 (Miss. Ct. App.
2017); id. at 682 (Griffis, P.J., specially concurring) (describing declaratory judgment action
by former clients seeking to value former attorney’s contractual attorney’s lien, which
provided for a contingent fee); Tyson, 613 So. 2d at 825–26 (noting that contingency fee had
“ripened” after judgment, but amount of fee was not yet determined).
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Filing the same motion four years earlier would have imposed no
additional burden on Gilbert, but its failure to do so significantly harmed
Relators. They were responsible for paying Gilbert’s fees and expenses under
the engagement letter, but they had a limited window to seek reimbursement
of their attorney fees, including those owed to Gilbert, from State Farm. 29
Because of Gilbert’s inexplicable delay, Relators were deprived of the
information necessary to obtain Gilbert’s fees from State Farm. This wrought
“a serious injustice” on Relators. 30
As we understand it, Gilbert contends that Relators were not harmed
because there was effectively no delay: By giving Relators its spreadsheet in
2013, Gilbert had told Relators the amount that it believed it was owed. But
this is belied by the fact that, four years later, Gilbert told the district court
that it was owed $1.5 million less. Gilbert cannot escape the conclusion that
the more than $5 million that it had claimed in 2013 via the spreadsheet was
substantially less than accurate. 31
Gilbert also contends that, even if it did sit on its rights, Relators could
have avoided much of the resulting harm. Gilbert claims that Matteis and
others at WMC could have provided further detail to the court on some of the
time entries listed in Gilbert’s spreadsheet and that Relators could have
29 A prevailing plaintiff may move for attorney fees “no later than 14 days after the
entry of judgment.” FED. R. CIV. P. 54(d)(2)(B)(i). Relators moved for fees after the jury verdict
but before the court had entered the judgment.
30 See Osborne, 129 So. 2d at 348 (internal quotation marks omitted). We need not
address whether Gilbert violated the Mississippi Rule of Professional Conduct, which
requires a former attorney to take “reasonably practicable” steps to protect a former client’s
interest. See MISS. R. PROF’L CONDUCT 1.16(d). The scope of Gilbert’s conduct falls into the
equitable realm of sitting on rights and does not require us to examine the specific
requirements of a former attorney.
31 Gilbert told Relators that its spreadsheet reflected “reasonable” fees and expenses,
even though it told the district court, four years later, that its significantly-reduced lien value
also reflected “reasonable” fees and expenses.
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obtained the supporting materials for Heidelberg’s fees (which were included
in Gilbert’s expenses) directly from Heidelberg. Perhaps Relators could have
obtained some of this mitigating information, but clearly not all of it. Without
access to Gilbert’s billing system, Matteis and WMC had no personal
knowledge that Gilbert’s spreadsheet reflected the work actually performed
years earlier. 32 We will not engage in a line-drawing exercise to attempt to say
how much of Gilbert’s delay Relators should be expected to compensate for, and
how much effort they should expend in doing so. Neither can we say, given the
deferential standard of review, that the district court abused its discretion in
holding that Gilbert slept on its rights.
We AFFIRM the district court’s extinguishment of Gilbert’s lien for its
fees and expenses.
32Cf. FED. R. EVID. 602 (requiring a witness to have personal knowledge). Although
an expert on attorney fees may have been able to attest to the reasonableness of hourly rates,
an expert also likely would not have this personal knowledge.
11