The Worcester Superior Court issued a ruling earlier this month awarding Commerce Insurance Company (“Commerce”) $123,000 or 13.5 % of its $910,000 request for attorney fees and costs in its prolonged dispute with Big Wheel Truck Sales, Inc. Agency Checklists’ December 19, 2023 article, “Beyond The Invoice: Commerce Awarded $24k, Seeks $910k In Fees From Tow Company,” describes this ten-year-long lawsuit by Commerce.
The judge’s decision offers a primer on the legal complexities of fee awards allowed to successful litigants under Massachusetts General Laws (“M.G.L.”), Chapter 93A, for partial victories involving unfair and deceptive business practices.
Background: A Ten-Year Legal Battle
As stated in Agency Checklists’ prior article, this case originated in 2014 when Commerce filed a lawsuit against Big Wheel, a heavy-duty towing company, alleging predatory billing practices. Commerce claimed that Big Wheel’s charges for unregulated towing services, equipment usage, and administrative fees—totaling $309,968.33 across 16 insured claims from 2011 to 2018—were unfair and inflated.
After a five-month, jury-waived trial that concluded in June 2023, the Court found that while Big Wheel engaged in questionable business practices, the Court found Commerce had failed to provide sufficient expert testimony to prove its central allegation of systematic overbilling for unnecessary equipment. However, the Court did rule that Big Wheel’s routine 10% “administrative fee” violated M.G.L. c. 93A, the state’s consumer protection statute, deeming it unfair and deceptive.
The Significance of the Chapter 93A Violation
The Court’s finding that Big Wheel violated Chapter 93A by charging an arbitrary and excessive administrative fee allowed Commerce, contrary to the so-called American Rule where each party to a lawsuit bears its own costs and legal fees, to recover from Big Wheel, its reasonable attorney fees, expert fees, and expenses. This violation, even on a relatively small portion of the overall claim, triggered the statute’s mandatory award of reasonable attorneys’ fees and costs to Commerce as the prevailing party. This aspect of Chapter 93A is a powerful incentive for consumers and businesses to bring valid claims against unfair practices, even when the potential damages might be nominal. An example of this is Hanover Insurance Company v. Sutton where “The judge awarded Hanover $1.00 in nominal damages [under Chapter 93A] and $168,154.04 in attorneys’ fees and costs.
However, the Big Wheel case also highlights the challenges in proving complex allegations of unfair practices that require expert testimony. The Court’s rejection of both parties’ expert witnesses on the central issue of equipment charges underscored the importance of presenting credible, objective expert testimony in such cases.
Comparing the Fee Request to the Award
Commerce’s December 6, 2023, fee application sought $910,708.42 in legal fees, expert fees, and litigation costs for a lawsuit garnering a $26,000 award. This request included:
1. $529,082.88 in attorneys’ fees and $31,631.46 in expenses for Commerce’s lead law firm McGovern & Ganem
2. $134,692.35 in fees/costs for additional firm Smith & Brink
3. Expert witness fees totaling $206,639.23
4. $16,690.50 in trial transcript costs
The Court’s final award was $123,168.37—just 13.5% of the requested amount. This significant reduction reflects the Court’s careful application of legal principles governing fee awards, particularly in cases of partial success.
The Judge’s Reasoning: Exclusions, Reductions, and the Lodestar Method
Judge Valerie A. Yarashus’s decision illustrates the courts’ nuanced approach to fee awards in complex litigation. The judge employed the lodestar method, which involves multiplying the number of hours reasonably spent on the case by an hourly rate for the attorneys involved based on their experience, ability, and market rate, with potential adjustments based on the results obtained.
Key aspects of the judge’s analysis included:
1. Exclusions: The Court excluded $89,585.96 in fees and expenses unrelated to the claims on which Commerce prevailed or involved unsuccessful litigation strategies. These reductions included time spent on dismissed cases, unrelated matters, and unsuccessful motions.
2. Partial Success Reduction: After exclusions, the Court reduced the remaining $821,122.46 to just 15% ($123,168.37) to account for Commerce’s limited success. The judge explicitly stated that the 15% figure was determined “after reviewing the evidence for the prevailing and non-prevailing portions of the 93A claim.”
3. Reasonableness of Rates and Time: The Court found the hourly rates and the overall time spent reasonable, given the case’s complexity and duration.
4. Interrelated Claims: The judge acknowledged that some work was interrelated between the successful and unsuccessful claims, justifying a reduction rather than a complete exclusion of these fees.
Strategies for Insurers Moving Forward with Chapter 93A Actions
In light of this decision, insurers should consider the following strategies in contemplating a 93A action similar to the Big Wheel case, where the damages recoverable are minimal, and the possibility of recovering attorney fees is a material factor:
1. Careful Case Evaluation: Thoroughly assess the strength of each claim and the quality of available expert testimony before pursuing lengthy, complex litigation.
2. Strategic Use of Chapter 93A: While Chapter 93A provides a powerful tool for addressing unfair practices, insurers should be prepared for rigorous scrutiny of fee requests, especially in cases of partial success.
3. Meticulous Record-Keeping: Implement stringent billing practices that clearly delineate work related to different claims or theories of the case.
4. Expert Witness Selection: Invest in finding and preparing credible, objective expert witnesses who can withstand judicial scrutiny.
5. Settlement Considerations: Given the unpredictability of fee awards in partial victory cases, consider the potential for early settlement more seriously.
6. Cost-Benefit Analysis: Carefully weigh the potential benefits of prolonged litigation against the costs, considering the possibility of reduced fee awards in cases of partial success.
7. Detailed Billing Practices: Maintain clear, detailed billing records that can withstand judicial scrutiny, as courts may conduct line-by-line analyses of fee requests.
8. Anticipate Partial Success: When pursuing multiple claims or theories, be prepared for the possibility of succeeding on only some aspects and how this might affect fee recovery.
In conclusion, the Commerce Insurance vs. Big Wheel Truck Sales fee award decision reminds us of the complexities and potential pitfalls of pursuing lengthy, multi-faceted litigation. While it reaffirms the power of Chapter 93A in addressing unfair business practices, it also underscores that courts are parsimonious in ensuring that fee awards reflect the actual success achieved.
For a copy of the Court’s Fee award decision, click HERE
