Attorney fees awarded in TheraMatrix lawsuit against Blues

There’s been another development in Pontiac-based TheraMatrix winning a $4.5 million lawsuit against Blue Cross Blue Shield of Michigan for breach of contract and tortious interference with economic and business relationships (“Their (Blue) Cross to bear,” Aug. 23, 2010).

Oakland County Circuit Court Judge Edward Avadenka awarded case evaluation sanctions, including attorney fees, against Blue Cross on Nov. 15.

But the way he came up the $625-per-hour rate is interesting.

According to Sara K. MacWilliams and Rodger D. Young, counsel for TheraMatrix:

[Avadenka] explained that the case was “most contentious” and that trial “was like a fencing match — thrust and parry by both sides, endlessly,” and therefore, substantial attorney hours were properly included in the fee award.

But, they continued:

Judge Avadenka’s opinion is of special note, because it examined what the proper source of evidence is to determine attorney fees in a Southeastern Michigan commercial litigation. Courts determining fee awards sometimes rely on the 2007 State Bar Survey of attorney rates.

However, as Michigan Lawyers Weekly recently reported, the survey is actually poor evidence of fees, both because it is now outdated, and because the survey has a very low response rate. Judge Avadenka recognized this, writing that the 2007 State Bar Survey is not “indicative of the true hourly rate in Southeastern Michigan for the attorneys who actually tried this case. There are over 35,000 attorneys in the State of Michigan, and the 2007 State Bar Survey reflects a questionnaire return rate of only 20-30 percent.”

Judge Avadenka, through his research, determined a more reasonable alternative, writing, “A truer representation of a reasonably hourly rate for the attorneys involved in the instant case is set forth in the National Law Survey (2008), which lists various rates by firm.”

Judge Avadenka also relied on “the Michigan Benchmark” as another source of evidence for determining fee awards. Using this evidence, Judge Avadenka set a reasonable billing rate of plaintiff’s lead counsel, Rodger Young, at $625 per hour during the applicable period, and adjusted at least one attorney’s billing rate up.

Judge Avadenka’s Nov. 15, 2010, Order and Opinion, which carefully sets forth the Smith v. Khouri guidelines for setting attorney fee awards, may prove to offer useful guidance for attorneys involved in fee award disputes, including fees owed under MCR 2.403.

As we wrote last week, a USA Today story that also appears in the Detroit Free Press (both papers are owned by Gannett) also covered the TheraMatrix case. The Freep also published a story that talks about a recently filed U.S. Justice Department lawsuit against the Blues.

SBM director waxes on effects of ‘beyond bad’ state of state at annual meeting

In her report to attendees of the 2010 Solo & Small Firm Institute — as part of the 2010 State Bar of Michigan annual meeting in Grand Rapids — Janet Welch, executive director of the State Bar of Michigan, was upfront about having bad news and good news.

First, the bad, which is the “beyond bad” state of the state, something that affects the court system and, in turn, lawyers.

The state’s per average capital income is the best way to measure how things stand in Michigan, she said, but there are grim numbers involved. In 1970, Michigan was 13th in the nation, but in 2000 it dropped to 19th, and in 2008, sank to 38th.

And citing the House Fiscal Agency’s ranking of Michigan in income growth, “We’re not only dead last, but we’re so far beyond 49th, we can’t even see 49th.”

For that, she turned to the SBM’s Judicial Crossroads Taskforce, a 13-month-old initiative to study and recommend ways for the court system to be saved and advanced in the wake of declining state revenues.

Though the task force’s final meeting isn’t for another few weeks, and the report’s results aren’t public yet, Welch weighed in on what could be recommended.

“In broadest terms, I think their report will call for a court system that’s simpler, more flexible, and more based on evidence-based results,” she said. “It will recognize that in some areas of the states we have more judges than needed, and in other areas, we don’t have enough. And it will say that we will need to measure that by an objective, evidence-based measure.”

One question the task force has asked is whether there’s something the court system can do to handle business disputes that can be perceived as friendly to the business community to help them feel better about staying in Michigan and, in effect, encourage other businesses to come here.

For that, she said, one committee in the task force is recommended a three-year private business docket in three of the biggest Michigan counties, where two or three judges would handle all business cases. She noted that other states that have tried such a program have had great results.

Finally, she said that the task force believes cost savings can only happen with better information systems in court, particularly via statewide e-filing in all state courts.

“The tools exist right now to make the court system more convenient, more accessible, more efficient … . We’re wasting money by not spending money to make that happen,” she said.

So, wasn’t there something mentioned about good news?

Well, Welch did say that the state of the SBM is “good — truly good.”

Given the reserves that SBM has built up by managing the way it delivers services to its members, and based on the current rate of consumption, she said that the SBM won’t have to raise dues for another eight more years.

That’s relief for a state where more and more lawyers are struggling professionally, but where dues are in the bottom percentage compared to other states. Welch pointed to that the fact there is no mandatory continuing legal education requirements as another advantage of practicing in Michigan.

She said the secret is being tech savvy, thus saving administrative costs where they count, and SBM members’ volunteer time helping offset things. An example of the latter, she added, is the launch of the Master Lawyer Section, which will replace the Senior Lawyers Section, and will allow the more experienced members of the bar to participate in pro bono programs and mentoring for younger attorneys.

Also, something she said that’s of “critical” importance is the upcoming triennial economics of law practice survey, which will be sent to bar members in October via e-mail and the SBM website.

Welch pointed to the Michigan Supreme Court’s 2008 Smith v. Khouri attorney fee ruling, for which the Court said the SBM’s previous survey was the most important resource in determining award of attorney fees.

But the Court also cited limitations within the survey, so Welch said the SBM has streamlined the new survey, which will be tailored in two different forms — one for private practice members, the other for all other members. The results will be published in early 2011, and there will be drawings and giveaways to help bolster participation.

Check back on our blog for more from the 2010 State Bar meeting.