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Sanctions: Lawyer, client ordered to pay other party’s fees

A Fairfax County circuit judge has ordered both a lawyer and his real estate broker client to pay $272,000 in attorneys’ fees and costs, finding they pursued “vindictive” litigation all the way to trial without any possible chance of success. In a 13-page opinion, Circuit Judge Jonathan C. Thacher approved most of the defendants’ requested fees, holding the use of “block billing” entries was generally reasonable.

The case is Northern Virginia Real Estate, Inc. v. Martins (VLW 010-8-121).

The plaintiffs, real estate broker Lauren Kivlighan and her company, filed suit when she lost out on the $730,000 sale of a Northern Virginia home. According to Thacher’s opinion, she sought a lawyer who offered a “grab bag of remedies,” rather than one who would simply pursue an action for breach of contract.

The lawyer she selected, Forrest Walpole of Alexandria, sued the sellers and the real estate broker involved in a later sale of the property. He alleged business conspiracy, interference with contract expectancy and defamation.

Walpole failed to respond to a request for a reply contained in the responsive pleadings of the new broker, based on Rule 3:11 of the Rules of Court. From that omission, in a pretrial ruling, the court deemed it was admitted that Kivlighan never had a contract to sell the property or even a contract expectancy that could support a claim of tortious interference.

Despite the “rather damaging admission,” Thacher said, the plaintiffs insisted on proceeding with a jury trial. After two days of evidence from the plaintiffs, while the judge was considering a motion to strike, the plaintiffs moved for a nonsuit. Thacher put the nonsuit motion on hold to consider the sanctions issue.

After a hearing last year, Thacher concluded the plaintiffs’ action was “a combination of frivolous claims supported by wild speculation and virulently prosecuted even after any legitimate prospect of success had vanished.” Moreover, Thacher found “the action was filed out of a vindictive and malevolent desire to injure and intimidate a business competitor.”

Having found a basis to sanction Kivlighan and Walpole, Thacher heard evidence on whether the defendants’ claimed expenses were reasonable and related to the plaintiffs’ violations. Both sides brought experts. Kivlighan and her real estate company brought a new lawyer.

Kivlighan’s counsel argued she should not be subject to sanctions at all, claiming it was Walpole who called the shots in the ill-fated litigation. Thacher found otherwise. “Plaintiffs are as culpable as their lawyer in this case,” he wrote.

Thacher said Kivlighan shopped for a lawyer who would sue for more than a basic breach of contract claim. He cited her efforts to make out a claim for an expected future commission from a speculative resale of the property. The judge found Kivlighan was frequently nonresponsive to questions from defense counsel at deposition and at trial.

Furthermore, he said, “There is no safe harbor for parties who act improperly, even upon the advice of their lawyers. Here, as in other areas of law, ignorance of the law is not an excuse.”

As to the amount of damages, Thacher disallowed only a portion of the fees claimed by the Alexandria firm of Brincefield Harnett P.C., which represented the defendant sellers. He expressly found the use of “block billing” practices by defense lawyers to be reasonable, rejecting the contention of the plaintiffs’ expert that block billing is per se unreasonable.

Block billing is the practice of listing several attorney activities in a single block of time for billing purposes. In this case, apparently, defense lawyers and staff would enter the total daily time spent on working on the case. The practice is disfavored by some corporate and insurance clients.

Thacher found the challenge to block billing a matter of first impression in Virginia. He said the issue creates a “tension between a common, accepted, and often efficient billing practice used by many Virginia law practices and the burden of the party seeking attorney’s fees to make a prima facie case of reasonableness.”

Thacher determined to disapprove only those entries where it appeared “the delta between the possible time spent on specific tasks was so vast as to be reasonable on one end and manifestly unreasonable on the other.”

Thacher’s found the Brincefield firm’s entries would permit an inference that the firm spent between 30 and 130 hours on preparing jury instructions. He set a figure of $19,638 as reasonable attorneys’ fees for all entries that included preparation of jury instructions.

Thacher cut additional amounts from the Brincefield bills, noting several instances of “duplicative and excessive billings.”

The judge found the defendant sellers, represented by the Brincefield firm, incurred $145,566 in reasonable attorneys’ fees and $12,752.40 in costs. Thacher found the defendant real estate broker and her company, represented by Mikhael D. Charnoff of Sands Anderson’s McLean office, incurred $97,295 in reasonable attorney’s fees and $16,483.06 in costs.

Attorney Michael W. Tompkins, formerly of the Brincefield firm, said it was his recollection the firms’ bill was just over $200,000 as submitted to the court. He couldn’t be more precise, he said, because all the case documents were in boxes due to a recent move to the new Alexandria firm of Rich Rosenthal Brincefield Manitta Dzubin & Kroeger LLP.

Charnoff said the Sands Anderson bill was cut by less than 5 percent, possibly because of a few instances of what the judge termed “excessive or duplicate billing” relating to the joint representation of defendant broker Karen Martins and her company by both Sands Anderson and her general counsel, Barbara P. Beach of Alexandria.

“We both worked on the case together. We tried the case together,” Charnoff said.

Charnoff noted his firm does not use block billing, but “many firms still do that,” he said.

Tompkins defended his firm’s block billing practice as a money-saver for the client. He said making separate, rounded billing entries for each separate task results in billing of more time than actually worked. “It actually results in higher costs to the client,” he said.

Opposing the award of sanctions, the plaintiffs offered a “mitigation of damages” argument. They contended the case could have been resolved more quickly if the defendants had moved for summary judgment instead of waiting until just before trial to “play the ace” of the deemed admissions.

Thacher declined to second guess the defendants’ battle plan. “Such decisions are tactical choices to be made by lawyers in consultation with their clients. The Court will not use the benefit of hindsight to judge litigation strategy after the fact.”

Counsel for Kivlighan and Walpole did not immediately return calls for comment. Kivlighan and her company, Northern Virginia Real Estate, Inc., were represented by Steven M. Garver of Reston.

Walpole was represented by Sean McDonough of Alexandria.

Tompkins said he expects an appeal. Charnoff said he expects the plaintiffs to file at least a notice of appeal. “Whether they pursue it is another matter,” he said.

Another matter also is whether the Supreme Court of Virginia would grant a writ to consider the appeal. Charnoff said the high court declined the invitation to review a similar award of sanctions in Fairfax County ten years ago.

Charnoff noted this was an uncommon case. “Sanctions should not be ordinary,” he said. “They really should be reserved for egregious cases.”

Tompkins said lawyers are always reluctant to ask for sanctions. “Sometimes you simply have no choice,” he said. “It’s a shame.”

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