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In re Oil Spill By Oil RIG "Deepwater Horizon" In Gulf of Mexico on April 20

United States District Court, E.D. Louisiana

May 22, 2017

IN RE: OIL SPILL BY THE OIL RIG “DEEPWATER HORIZON” IN THE GULF OF MEXICO ON APRIL 20, 2010 THIS DOCUMENT RELATES ONLY TO: Civil Action Nos. 13-1971; 10-8888 Doc No. 133248; 10-9999 Doc. No. 401 & 14-1525

         SECTION “J”

          BARBIER, JUDGE



         Plaintiff, the Edward Wisner Donation (the “Donation”), hired the Joint Venture Attorneys (the “Joint Venture”)[1] to represent it in its claims against BP Exploration & Production, Inc. (“BP”) for damages resulting from the Deepwater Horizon oil spill. The Joint Venture filed a Motion for Fees Pursuant to Contingency Fee Contract, seeking an award of attorney's fees from the Donation's settlement with BP. Record Doc. No. 22267.[2] Mark E. Peneguy, Edward W. Peneguy, Jr., Richard A. Peneguy, Jr. and Wendell H. Cook, Jr., who are some of Edward Wisner's heirs and some of the Donation's beneficiaries (the “Heirs”), filed a memorandum in partial opposition to the motion. Record Doc. No. 22378. The Joint Venture received leave to file a reply memorandum, Record Doc. Nos. 22392, 22443, 22447, and the Heirs received leave to file a surreply. Record Doc. Nos. 22451, 22469, 22471.

         Having considered the complaint, the record, the submissions of the parties and the applicable law, and for the following reasons, IT IS ORDERED that the motion is GRANTED IN PART AND DENIED IN PART as follows.

         I. BACKGROUND

         Waltzer, Wiygul & Garside, LLC (formerly Waltzer & Wiygul) (“Waltzer Wiygul”) represented the Donation in its claims against BP, pursuant to a written Retainer/Contingent Fee Agreement, for two years until the Donation discharged Waltzer Wiygul without cause and hired the Joint Venture. The Joint Venture's Retainer/ Contingent Fee Agreement, Dated: October 17, 2012, was based on and contains many terms identical to the Donation's prior contract with Waltzer Wiygul, including a fee calculation based on reducing the settlement amount to its present value.

         The City of New Orleans (the “City”) is a major beneficiary of and the Trustee of the Donation. When the Donation hired the Joint Venture, the Joint Venture also represented the City in its damages claims against BP. The Donation's contract with the Joint Venture incorporates the City's separate contingency fee contract with the Joint Venture as an alternate method for calculating the contingent fee. The Donation's contract provides that it will pay the Joint Venture the lesser of the fees calculated under the two methods.

         In May 2016, the Donation settled with BP for $30, 000, 000 payable in defined installments over 21 years. BP paid the first $5, 000, 000 installment on October 1, 2016, from which $2, 160, 011.92 was placed into the registry of this court because of a dispute about allocation of contingent fees between the two sets of attorneys. That amount included potential contingency fees, the Joint Venture's unreimbursed costs and some attorney's fees that BP had paid directly to the Joint Venture.

         In January 2017, the court awarded contingent fees of $883, 571.00 to Waltzer Wiygul, which had intervened in this action to seek its unpaid attorney's fees. Record Doc. Nos. 193, 200, 201 in C.A. No. 14-1525. After entry of judgment in Waltzer Wiygul's favor, the funds in the court's registry were withdrawn and distributed in the amounts of $883, 571.00 to Waltzer Wiygul; $909, 024.49 in agreed-upon litigation costs to the Joint Venture; and the remaining $18, 148.63 to the Donation. Record Doc. No. 22234. After the parties finished briefing the instant motion, the Joint Venture audited its costs and filed a Notice of Correction that (1) reduced the amount of its reimbursable costs from $909, 024.49 to $881, 137.22; (2) advised that it had refunded the difference to the Donation; and (3) increased from $17, 161.20 to $18, 144.93 (a difference of only $983.73) the amount of attorney's fees that BP had paid directly to the Joint Venture. Record Doc. No. 22754.


         Some issues relevant to the instant motion were resolved by my prior decision regarding Waltzer Wiygul's intervention, which involved a dispute between Waltzer Wiygul and the Joint Venture over the allocation between them of the single contingent fee owed by the Donation. Record Doc. Nos. 200, 201 in C.A. No. 14-1525; see Saucier v. Hayes Dairy Prod., Inc., 373 So.2d 102, 118 (La. 1978), on reh'g (1979) (The client should pay “only one contingency fee . . ., the amount of the fee to be determined according to the highest ethical contingency percentage to which the client contractually agreed in any of the contingency fee contracts which he executed. . . . [The] fee should . . . be allocated between or among the various attorneys involved in handling the claim on the basis of” the factors in the opinion). When the Joint Venture began representing the Donation, its contingency fee contract was largely based on the Donation's previous contract with Waltzer Wiygul, in many respects copying the Waltzer Wiygul contract verbatim. Thus, evidence in the record regarding the Waltzer Wiygul contract and some of the court's prior rulings with respect to that contract are relevant to the current motion. Ultimately, I awarded fees to Waltzer Wiygul based on the factors set forth in Saucier, 373 So.2d at 116, which governs fee allocation disputes, rather than on the express terms of Waltzer Wiygul's contract with the Donation. My decision regarding the fee due to Waltzer Wiygul did not resolve how to calculate the contingent fee owed to the Joint Venture by the Donation under the contract between them. That question is now before the court.

         The Joint Venture and the Donation changed some terms from the Waltzer Wiygul contract. One such term is the first sentence of paragraph 4, which in the Joint Venture's contract provides that “the Donation will pay Attorneys as a fee for Attorneys['] services pursuant to the LESSER OF two methodologies.” Retainer/Contingent Fee Agreement, Record Doc. No. 21922-9 at p. 2, ¶ 4.

         The first method is set out in paragraphs 4(a), (b) and (c) in the Joint Venture's contract, which are identical to the same paragraphs in the Waltzer Wiygul contract. Paragraph 4(a) concerns “legal services reimbursed by BP as part of a claim for oil spill removal/ response costs, ” for which the Donation agreed to pay its attorneys at hourly rates, after BP reimbursed the Donation for the fees. Paragraph 4(b) addresses attorneys' “services associated with obtaining interim or partial payments of oil spill damages other than response/removal costs, ” for which the Donation would pay its attorneys as fees ten percent of the interim damages received from BP. Paragraphs 4(a) and 4(b) provide respectively that fees paid under those provisions “will be credited as an offset against any contingent fee awarded and payable under paragraph 4(c)” and “will be deducted from any contingency fee under paragraph 4(c).” Id. at p. 2, ¶ 4(a) and p. 3, ¶ 4(b).

         In addition to those fixed rate fees, paragraph 4(c) defines the contingency fee:

For services rendered in connection with physical damages and restoration costs, as well as final economic loss damages, the Donation will pay Attorneys a contingency fee based on the gross present value of benefits received by the Donation pursuant to a judgment or agreement involving any defendant . . . in the following percentages:
For benefits received, up to $10, 000, 000:
(ii) 18% - if the matter is resolved after suit but prior to a signed Order setting the case for trial;
(iii) 25% - if the matter is resolved after the first Order is signed setting the case for trial.
For benefits received between $10, 000, 000 and $50, 000, 000:
(ii) 12% - if the matter is resolved after suit but prior to a signed Order setting the case for trial;
(iii) 18% - if the matter is resolved after the first Order is signed setting the case for trial.

Id. at p. 3, ¶ 4(c) (emphasis added).

         I held in connection with Waltzer Wiygul's intervention that an order “setting the case for trial' was entered in Civil Action No. 14-1525 before a settlement was reached. Thus, as both the Joint Venture and the Heirs acknowledge, the contingent fee under Waltzer Wiygul's and the Joint Venture's identical paragraph 4(c) is 25 percent of the first $10, 000, 000 of the settlement and 18 percent of the remaining $20, 000, 000.

         Paragraph 8 of the Joint Venture's contract (identical to paragraph 7 in the Waltzer Wiygul contract) describes how “any amounts received in settlement . . . will be distributed.” Id. at p. 4, ¶ 8. The funds “will be distributed in this order: From the gross total amount, Attorneys will deduct case costs and common pro rata litigation related expenses which have not been paid by Attorneys, then attorneys fees, then all direct and pro rata expenses paid by Attorneys.” Id.

         Paragraph 8 provides an “example of how attorneys fees would be calculated under this Paragraph and Paragraph 4.” Id. The example makes five assumptions in subparagraphs 8(a) through 8(e). (a) The Donation “expends $500, 000 on costs related to the spill”; (b) BP paid the Donation's attorneys “removal/recovery attorney's fees totaling $100, 000” under paragraph 4(a); (c) BP paid the Donation interim damages of $400, 000, for which the Donation paid its attorneys[3] $40, 000 in fees under paragraph 4(b); (d) BP settled with the Donation for “damages and restoration expenses with a net present value of $5, 500, 000;” and (e) an order setting the case for trial had not been entered, so the contingent fee rate is 18 percent under paragraph 4(c)(ii). Id.

On these assumptions, the fee would be calculated as follows: The contingent fee under 4(c) is calculated on gross value of the settlement less expenses paid by Donation ($5.5M [i.e., the “net present value” from ¶¶ 8(d) and 4(c)] [minus] $.5M [i.e., the costs from ¶ 8(a)] = $5.0M). From the gross contingency fee ($5M x .18 = $900K), fees already paid are deducted, totaling $760, 000 ($900K [minus] $100K [i.e., the legal fees from ¶¶ 8(b) and 4(a)] [minus] $40K [i.e., the legal fees from ¶¶ 8(c) and 4(b)]).

Id. (bracketed material inserted).

         Paragraph 5 of the Joint Venture's contract with the Donation provides an alternate contingent fee method that was not in Waltzer Wiygul's contract. Paragraph 5 incorporates the Joint Venture's contract with the City, which is attached to the Donation's contract. The City contract provides for a contingency fee of 17.5 percent “on any recovery collected as part of a ‘global settlement' or other negotiations after January 1, 2013, net of litigation costs or expenses, ” or a 20 percent contingency fee, “net of litigation costs or expenses, on any recovery ...

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