Attorney time is ‘actual outlay’ of cost

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Working on a contingency fee basis is no bar to collecting attorney fees if the defendant unreasonably removes the case to federal court.

Of course, that doesn’t resolve how to calculate reasonable hourly fees for an attorney who works exclusively on a contingency basis.

In 2007, Brad Simenz filed a putative class action in Milwaukee County Circuit Court on behalf of himself and others who, within the previous six years, had purchased a mortgage from Amerihome Mortgage Co., LLC, and had been charged a fee allegedly in violation of Wisconsin law.

Amerihome removed the action to federal court under the Class Action Fairness Act of 2005 (CAFA), but U.S. District Court Judge Lynn Adelman remanded it back to state court.

Simenz then sought attorney fees pursuant to 28 U.S.C. 1147(c).

Pursuant to Lott v. Pfizer, 492 F.3d 789, 792 (7th Cir. 2007), removal is unreasonable if foreclosed by law clearly established at the time of removal.

Judge Adelman agreed with Simenz that removal was unreasonable under CAFA: more than 2/3 of the class members and the only defendant were citizens of Wisconsin; and it was not clear that more than $5 million was in controversy.

Turning to the remedy, Adelman held that Simenz was entitled to reasonable attorney fees, although none had been incurred, and depending on the ultimate result in state court, none may ever be paid.

At issue was whether the attorneys’ time constituted “actual outlays,” within the meaning of the statute, and the Seventh Circuit’s opinion in Wisconsin v. Hotline Indus., Inc., 236 F.3d 363 (7th Cir. 2000).

In Hotline Indus., the Seventh Circuit limited attorney fees to the proportional share of the salaries of the attorneys handling the removal issue, where the plaintiff used in-house counsel to contest the removal.

Adelman concluded that this decision supports awarding attorney fees, treating the hours spent by the attorneys as actual outlays, because the removal issue prevented the attorneys from spending their time on other cases.

Adelman reasoned, “there have been ‘actual outlays’; plaintiff’s attorneys in-curred costs associated with litigating in federal court, including the cost of forgoing other paying work.”

After determining the attorneys’ market rate, Adelman ordered that the defendant pay roughly $19,000 as actual outlays incurred by the plaintiff as a result of the removal to federal court.