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BERKELEY v. HOME INS. CO.

May 21, 1997

ARNOLD D. BERKELEY, Plaintiff,
v.
HOME INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: OBERDORFER

 This matter is here on remand for the resolution of one outstanding issue pertaining to plaintiff Arnold Berkeley's claim for reimbursement from his insurance carrier. See Berkeley v. Home Insurance Co., 314 U.S. App. D.C. 358, 68 F.3d 1409 (D.C. Cir. 1995). Berkeley is an attorney practicing in Arizona, who brought suit against his legal malpractice insurer, defendant Home Insurance Co. ("Home"), for alleged breach of contract. His claim arose when Home refused to defend Berkeley against one of his former clients, Arizona Electric Power Cooperative, Inc. ("AEPCO"). AEPCO had brought a malpractice claim against Berkeley during an arbitrated fee proceeding. Berkeley independently retained the services of Steptoe & Johnson ("Steptoe") and substantially prevailed at arbitration. His award was subsequently affirmed by the United States District Court for the District of Arizona and the United States Court of Appeals for the Ninth Circuit. See Arizona Electric Power Cooperative, Inc. v. Berkeley, 59 F.3d 988 (9th Cir. 1995).

 In this case, Berkeley seeks indemnification from Home for his costs incurred in retaining Steptoe out of his own pocket. On January 26, 1994, a Memorandum and Order granted summary judgment against Home, finding that the insurance company had a duty to reimburse Berkeley. The D.C. Circuit subsequently affirmed that ruling, see Berkeley v. Home Insurance Co., 68 F.3d at 1420, but remanded for an assessment of Berkeley's costs incurred in defending his arbitration award in federal court.

 I.

 The payment method by which Berkeley compensated Steptoe for its legal services is somewhat complicated. Berkeley originally hired Steptoe in 1992 during the AEPCO arbitration. Berkeley had initiated the arbitration in order to recover unpaid attorneys' fees; however, AEPCO soon counterclaimed, alleging legal malpractice. After Home declined to represent Berkeley, he retained Steptoe pursuant to a "combination" fee arrangement that included an hourly rate provision and a contingency fee component. Steptoe agreed to charge a reduced hourly rate that would be subject to a cap on total fees, in exchange for a percentage of the recovered attorneys' fees.

 After the arbitration proceedings resulted in a substantial award to Berkeley, AEPCO brought suit in federal court, seeking to vacate the award. Thereupon, Berkeley and Steptoe entered into a second fee arrangement regarding the defense of the arbitration award in federal court. Pursuant to a Letter Agreement dated January 26, 1993, Berkeley agreed to pay Steptoe at a discounted hourly rate, with a total cap on fees not to exceed $ 100,000. Berkeley also agreed to be responsible for any out-of-pocket expenses incurred by Steptoe. Most importantly, for the purposes of this remand, the Letter Agreement specifically stated that "the fees described in this section shall not be subject to the 'incentive contingency fee' provision of our [prior] agreement." In total, Berkeley paid to Steptoe $ 155,463.46 (consisting of $ 100,000 in fees and $ 55,463.46 in expenses) for representing him in the District of Arizona and the Ninth Circuit.

 After the arbitration award was upheld in the Ninth Circuit, AEPCO indicated that it would seek a writ of certiorari from the United States Supreme Court. Before a petition for certiorari was filed, however, Berkeley agreed to pay $ 100,000 to AEPCO in order to forgo the expense and risk of any Supreme Court litigation. Berkeley eventually paid $ 82,750 to AEPCO, while Steptoe paid the remaining $ 17,250.

 II.

 On remand, Berkeley seeks the recovery of over $ 1 million in attorneys' fees allegedly paid to Steptoe. His proposed order requests reimbursement in the amount $ 1,041,613.58. That sum consists of four separate components: (1) $ 404,260.23 -- the amount paid to Steptoe for its work during the arbitration and reflected in the Order dated July 15, 1994, later affirmed by the Court of Appeals; (2) $ 465,318.46 -- the amount Berkeley contends he would have paid to Steptoe if the law firm had charged its standard hourly rate for defending the arbitration award in federal court; (3) $ 82,750 -- the amount paid to AEPCO to induce its forgoing a petition for a writ of certiorari from the Supreme Court; and (4) pre- and post-judgment interest on the above three amounts. Each of those four components will be considered separately.

 A.

 First, Berkeley seeks to incorporate in this judgment an amount reflecting the original award for fees and expenses incurred during arbitration. He has already obtained a ruling in his favor, however, against Home for $ 404,260.23 plus pre-judgment interest. That amount represents the fees paid by Berkeley to Steptoe during the underlying arbitration proceedings. The Court of Appeals has affirmed that ruling. Post-judgment interest is now accruing at a rate of 5.49 percent per year. Any subsequent judgment incorporating that prior assessment would be cumulative. Accordingly, the first claim asserted by Berkeley will be denied.

 B.

 Second, Berkeley seeks to recover any fees and expenses incurred in defending his arbitration award in federal court. This remand was directed specifically towards an assessment of those costs. See Berkeley v. Home Insurance Co., 68 F.3d at 1420. Berkeley now argues that he should be entitled to over $ 460,000 in fees paid to Steptoe. It is undisputed, however, that his actual payments totaled only $ 155,463.46.

 In order to justify this claimed entitlement to a $ 300,000 windfall, Berkeley contends that he should be compensated for the projected fees that he would have paid to Steptoe if the law firm had billed him at its standard hourly rate. Berkeley contends that he was able to negotiate a lower hourly rate only because he had originally entered into a partial contingency fee arrangement with Steptoe for its work during the arbitration proceeding. Thus, when he was negotiating the second fee arrangement, he could rely on the fact that Steptoe had its own ...


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