(Article from Insurance Law Alert, October 2018)
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The Third Circuit ruled that a district court did not abuse its discretion in denying an attorneys' fee award in a policyholder’s successful statutory bad faith action where the fee petition was severely deficient. Clemens v. N.Y. Cent. Mut. Fire Ins. Co., 903 F.3d 396 (3d Cir. 2018).
In an action against an automobile insurer, a jury awarded the policyholder $100,000 in punitive damages under Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat. § 8371. Thereafter, the policyholder petitioned for over $900,000 in attorneys’ fees. A Pennsylvania district court, employing the lodestar approach, determined that the fee should be reduced by 87% and then denied the petition in its entirety. The Third Circuit affirmed.
Ruling on this matter of first impression, the Third Circuit adopted the view endorsed by other circuits – that where a fee-shifting statute gives a district court discretion to award attorneys’ fees, such discretion includes the ability to deny a request altogether if an “outrageously excessive” amount is requested. The Third Circuit upheld application of this standard because counsel failed to keep contemporaneous time records, time records were reconstructed after the fact, the entries submitted were vague and in some instances, excessive, and the fee petition failed to establish that the hourly rates were reasonable in light of prevailing community rates.