RFR Fights Fee Award Based On “Sham” Indemnity

Posted on | June 5, 2008 | No Comments

2008-1399 RFR Indus. v. Rex-Hide Indus.
ND/TX 3:02-cv-1444
Judge Ed Kinkeade

Plaintiff RFR appeals from the order and judgment of Judge Ed Kinkeade awarding attorney’s fees and costs to third-party defendant Century Steps. 

This award is made on remand from the Federal Circuit decision in 2005-1587, in which it affirmed the district court’s decision that RFR could not pursue infringement claims against Rex-Hide because of "circular indemnity"–RFR owed indemnity to Century as a result of an earlier patent settlement, and Century owed contractual indemnity to Rex-Hide.  Thus, RFR would be liable to itself for Rex-Hide’s infringement, thereby extinguishing its claim for damages.

However, the Federal Circuit did vacate an injunction against RFR (limiting its ability to file future actions) and reversed-and-remanded the first award of attorney’s fees because it included the fees incurred in establishing a right to indemnification because such fees are not recoverable under Texas law. 

On remand, Rex-Hide and Century resubmitted their respective requests for attorney’s fees, costs and expenses, by removing charges related to establishing indemnification.  The court awarded Rex-Hide $160,000 against Century, and Century $70,000 against RFR for its own fees plus an additional $160,000 as pass through to RFR.

RFR opposed the applications for fees, raising various objections to certain time entries, excessive billing for items, etc.  However, its major argument centers around its belief that the indemnification between Century and Rex-Hide was a sham, contrived and collusive, and that the court should consider such in evaluating the amount of fees.  To support this allegation, RFR claims:

• Century initially opposed indemnity to Rex-Hide but suddenly reversed its position and actively helped Rex-Hide.  Further, the courts’ previous rulings on such indemnification was based mostly on Century and Rex-Hide stipulating to indemnification rather than applying contract law;

• Rex-Hide’s counsel, Todd Hoeffner, was indicted by a federal grand jury in June 2007 (SD/TX 4:07-cr-00263-1) for conspiracy, conspiracy to money laundering, and wire and mail fraud in connection with an alleged scheme to settle cases with The Hartford Insurance Company by secretly paying kickbacks to the Hartford agents that would recommend the settlements (see DOJ press release on indictment here).  Hoeffner’s criminal trial is currently scheduled to begin 1 October 2008.  According to RFR, Hoeffner was the attorney that entered into the indemnification agreement between Rex-Hide and Century.  RFR suggests that he might have employed similar tactics in getting Century to reverse its position on indemnification;

• the bills submitted for Hoeffner were not sworn to, nor did any attest that such charges were reasonable, necessary, etc.; and

• during the RFR matter, Hoeffner held himself out as a partner in Hoeffner & Bilek–however, Bilek has since stated that the firm dissolved many years ago but they continued to appear as a single firm for the sake of "consistency."

Counsel:

RFR: Oake Law, Allen, TX (Robert Oake)
Rex-Hide: Hoeffner Law, Houston, TX (Todd Hoeffner); Bilek Law, Houston TX (Thomas Bilek)
Century: Haynes & Boone, Dallas, TX (John Emerson)

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