The Laffey Matrix (pdf) is used as a guideline for attorney fees in courts in the Washington, D.C.-Baltimore area. This fee schedule is also used by some other courts as well. The fee schedule is prepared by the Civil Division of the U.S. Attorney’s Office of the District of Columbia. The matrix is intended to be used in cases which a fee-shifting statute permits the prevailing party to recover reasonable attorney fees. The matrix does not apply in cases in which the hourly rate is limited by statute. See 28 U.S.C. § 2412(d).
The matrix is based on the hourly rates allowed by the District Court inLaffey v. Northwest Airlines, Inc. The column headed “Experience” refers to the years following the attorney’s graduation from law school. The various “backets” are intended to correspond to “junior associate” (1-3 years after law school graduation), “senior associates” (4-7 years), “experienced federal court litigators” (8-10 and 11-19 years), and “very experienced federal court litigators” (20 years or more). See Laffey, 572 F. Supp. at 371.
The hourly rates approved by the District Court in Laffey were work done principally in 1981-82. The Matrix begins with those rates. See Laffey, 572 F. Supp. at 371 (attorney rates) & 386 n. 74 (paralegal and law clerk rate). The rates for subsequent yearly periods were determined by adding the change in the cost of living for the Washington, DC area to the applicable rate for the prior year, then rounding to the nearest multiple of $5 (up if within $3 of the next multiple of $5). The result is subject to adjustment if appropriate to ensure that the relationship between the highest rate and the lower rates remains reasonably constant. Changes in the cost of living are measured by the Consumer Price Index for All Urban Consumers (CPI-U) for Washington-Baltimore, DC-MD-VA-WV, as announced by the Bureau of Labor Statistics for May of each year.
Use of an updated Laffey Matrix was implicitly endorsed by the Court of Appeals in Save Our Cumberland Mountains v. Hodel, 857 F.2d 1516, 1525 (D.C. Cir. 1988) (en banc). The Court of Appeals subsequently stated that parties may rely on the updated Laffey Matrix prepared by the United States Attorney's Office as evidence of prevailing market rates for litigation counsel in the Washington, DC area. See Covington v. District of Columbia, 57 F.3 1101 &n. 14,1109 (D.C. Cir. 1995), cert. denied, 516 U.S. 1115 (1996).
Lower federal courts in the District of Columbia have used this updated Laffey Matrix when determining whether fee awards under fee-shifting statutes are reasonable. See e.g., Blackman v. District of Columbia, 59 F. Supp. 2d 37, 43 (D.D.C. 1999); Jefferson v. Milvets System Technology, Inc., 986 F. Supp. 6, 11 (D.D.C. 1997); Ralph Hoar & Associates v. Nat'l Highway Transportation Safety Admin., 985 F. Supp. 1, 9-10 n.3 (D.D.C. 1997); Martini v. Fed. Nat'l Mtg Ass'n, 977 F. Supp. 482, 485 n.2 (D.D.C. 1997); Park v. Howard University, 881 F. Supp. 653, 654 (D.D.C. 1995).
Nokia Corp. and its lawyers at Alston & Bird are seeking compensation of roughly $1.2 million from Quinn Emanuel for the lapse that resulted in confidential terms of an Apple-Nokia licensing deal being shared with Samsung executives. The discovery breach occurred in March 2012 when a Quinn Emanuel associate failed to redact confidential licensing terms from a length expert report.
U.S. Magistrate Judge Paul Grewal of the Northern District of California ordered Quinn Emanuel, which represents Samsung Electronics Co., to pay attorney fees and costs that Apple Inc., Nokia and their lawyers incurred litigating the sanctions motion. The dispute arose in a patent fight between Apple and Samsung.
Alston & Bird partners Randall Allen and Ryan Koppelman in Menlo Park and Patrick Flinn and B. Parker Miller in Atlanta submitted their request for $1,114,288 in attorney fees and $82,274 in costs. The request does not include the work of Nokia’s in-house lawyers, they said, and amounts to “a fraction of what Quinn Emanuel and Samsung have represented to the Court they have spent relating to their protective order violations.”
Nokia’s filings includes a detailed accounting, including 1,341 entries with times, billing rates and descriptions of each task performed in the case. Alston & Bird charged Nokia discounted hourly rates ranging from $256 to $720, according to the filing. The average hourly rate charged by partners was roughly $558 and the average for associates was about $328.
“The partners on this matter worked at a rate, on average, below the median rate for partners in the San Francisco area, as did the associates compared to their respective median,” the Alston lawyers stated, citing a billing survey conducted by the American Intellectual Property Law Association.
According to Allen, Alston & Bird attorneys shared their time sheets and conferred with Quinn Emanuel lawyers on Feb. 14, but were unable to reach accord. Among other objections, Samsung argued that Nokia’s fees were unreasonable because they exceed those sought by Apple, the Alston lawyers recounted.
Nokia noted that Samsung’s lawyers at Quinn Emanuel stayed at the same hotels and used comparable technologies in depositions. Quinn has represented that its attorney time and expenditures associated with the discovery breach top $9 million. It is not surprising that Nokia’s fees exceed Apple’s, because the disclosures threatened its core patent licensing business, Nokia’s lawyers stated.
U.S. District Judge Deborah K. Chasanow approved a $3.6 million settlement in a stock-drop suit against Coventry Health Care Inc. The class action claimed Coventry executives breached their Employee Retirement Income Security Act-imposed fiduciary duties by offering Coventry stock as a plan investment option at a time when the company was allegedly making misrepresentations about its business condition. The case, Boyd v. Coventry Health Care Inc., was in U.S. District Court for the District of Maryland.
Chasanow awarded class counsel $1 million in attorney fees, which represents about 28 percent of the recovery, and $137,316 in expenses. Class counsel requested fees of $1.2 million—or 33 percent of the recovery—but Chasanow reduced that amount after considering fee awards in similar cases. Last year, the U.S. District Court for the Eastern District of Michigan awarded class counsel fees of $900,000, representing 30 percent of the $3 million recovery they obtained in similar stock-drop action.
Although the court found that counsel’s obtainment of a $3.6 million recovery was “commendable” given the challenges posed by stock-drop litigation, it nevertheless found that a 33 percent fee award wasn’t warranted. The court said that attorney fee awards in complex litigation generally vary between 25 percent and 30 percent of the total recovery.
Looking specifically at four similar cases decided within the Fourth Circuit since 2001, the court said that attorneys’ fees ranged from 25 percent to 28 percent of the total recovery. Further, the court said, fee awards in comparable ERISA cases throughout the country ranged between 19 percent and 45 percent, but typically fell between 30 and 33 percent of the total recovery.
“Striking the balance between the percentage awarded in cases in this circuit for an award of this magnitude and those given in cases of this type across the nation, $1 million---approximately 28 percent—would appear to be an appropriate number,” the court concluded. Further, the court said that the $1 million award took into account both the complexity and duration of the case, because while the litigation was “protracted and complex,” discovery in the case was “relatively straightforward.”
The U.S. Supreme Court heard oral arguments in two cases involving the attorney fee provision of 35 U.S.C. § 285. That statute provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” The cases relate to when a federal judge can order a plaintiff to pay the defendant’s attorney’s fees.
In the two cases, Highmark Inc. v. Allcare Management Sys., Inc. and Octane Fitness v. Icon Health and Fitness, the Court heard arguments over arcane, decades-old patent law, their arguments hinged on the semantic difference between “meritless,” “baseless,” and “objective unreasonable” and who should pay the attorney fees in such cases. What does "exceptional" really mean? There has never been a clear, uniform standard since the language was adopted in the Patent Act of 1952.
Many in the business community want the Court to relax the high fee-shifting standard which would make it easier for a federal judge to order that a plaintiff pay the attorney fees of a winning defendant. Those suits can sometimes cost millions of dollars to fight off, and under the current law, attorney fees are rarely shifted—a reality that encourages “patent trolling.”
“Patent trolling” is a term used to describe companies that purchase cheap patents with the sole intention of using them to threaten questionable infringement suits against others in hopes of leveraging their claims into lucrative settlements. These companies are known as “non-practicing entities” (NPEs) or “patent assertion entities” (PAEs).
Patent litigaiton costs have grown from $7 billion in 2005 to $29 billion in 2011, when 8,842 lawsuits were initiated by PAEs against 2,150 companies, an official at tech company EMC Corp told a congessional panel in October. Major tech firms, including Apple, Google, IBM, and Microsoft, are following the intonations of the Court closely, as all have large financial interests in how the judiciary and Congress may reshape the attorney fee award structure in patent litigation.
Pat Gallagher is a member of NALFA's Attorney Fee Practice Group. Mr. Gallagher is a qualifed national attorney fee expert. He has provided expert opinion testimony as to the reasonableness of attorney fees in various litigation matters, including commerical loan enforcement, employment disputes, negligence and estate adminstration.
He has served as an expert for fee claimants, fee respondents, fiduciaries and attorneys. Pat has helped companies develop policies for counsel counsel retention and billing guidelines. Pat also mediates and arbitrates attorney fee disputes and is a facilitative mediator authorized by more than 32 District, Civil and Probate Courts. The following are cases where Pat has served as an expert witness:
Bank v. Borrower (Ingham County, Michigan Circuit Court) Expert opinion on behalf of Bank (testified by affidavit) regarding reasonable attorney fees owed to Bank by Borrower pursuant to contract provisions contained in documents associated with a $9,300,000 loan. The Court accepted Gallagher’s opinion that Bank was owed attorney fees in the reasonable amount of $247,121.50.
Estate of Deceased (Eaton County, Michigan Probate Court) - Expert Opinion testimony on behalf of personal representative of decedent’s estate at an evidentiary hearing re the reasonableness of personal representative’s fiduciary fees and the reasonableness of attorney fees incurred by counsel retained by the personal representative. The Court accepted Gallagher’s opinion as to the reasonableness of both (1) attorney fees in the amount of $20,965.63 and (2) personal representative’s fiduciary fees in the amount of $14,557.66.
Plaintiff v. Township - (Ingham County, Michigan Circuit Court) - Expert opinion testimony on behalf of Township at an evidentiary hearing re reasonableness attorney fee owed to Plaintiff pursuant to an MCR 2.403 case evaluation award. Plaintiff claimed attorney fees of $207,805. Court accepted Gallagher’s opinion as to a reduction in hours and also reduced hourly rates claimed by attorneys for Plaintiff. This resulted in reduction of $109,485 in attorney fees claimed by Plaintiff to $98,320.
Plaintiff v University (Michigan Circuit Court) – Expert opinion testimony at evidentiary hearing re the reasonableness of $254,251.81 in attorney fees claimed to be owed by a law firm pursuant to the Court’s order sanctioning the law firm (MCR 2.114) for filing a frivolous pleading in employment litigation. The Court found that Gallagher was an expert.
Husband v Wife (Circuit Court of the Nineteenth Judicial Circuit Lake County, Illinois) – Expert opinion (by Affidavit) on behalf of Plaintiff husband supporting Motion for Reconsideration to Order Granting Defendant wife’s Motion for Attorney Fees and Costs in the amount of $583,401.
Attorney v Client (Circuit Court of Cook County, Illinois County Department, Law Division) – Expert opinion at trial on behalf of Client re reasonableness of $103,012.27 in attorney fees claimed by the Law Firm against Client in fee dispute litigation. The Court found that Gallagher was an expert.
A recent The Recorder story, “Second District Casts Aside Fee Award in Party City Case,” reports that a $350,000 attorney fee award divided among six law firms in a consumer class action has been thrown out because the defendant never got a chance to see the billing records. Class counsel recovered $300,000 in merchandise certificates from Party City after accusing the retailer of violating the Song-Beverly Credit Card Act by requiring customer zip codes to process credit card transactions.
In the underlying action, no formal discovery was taken, and all of the cases settled following a one-day mediation before Edward Infante of JAMS. But when class counsel moved for fees, Party City complained that the various law firms had duplicated each others’ work, and were asking for more in aggregate than the face value of the recovery. An award of $137,000—the amount billed by Party City’s counsel at Fox Rothschild and equal to about 40 percent of the recovery—would be more appropriate, the retailer argued.
Los Angeles Superior Court Judge Kenneth Freeman said while the hourly rates being claimed were reasonable, the 720 hours billed “seems to be very high.” Moreover, block billing entries, which didn’t specify hours spent on individual tasks, didn’t make clear whether all the work was necessary, Freeman said.
Class counsel led by Gene Stonebarger of Stonebarger Law—who helped win the Supreme Court case—offered to make individual billing records available for review in camera. After accepting the offer, Freeman stated that “everything is in order” and signed off on the award.
Although failing to object at trial, Party City argued on appeal that it should have had an opportunity to challenge the billing records. A Second District panel led by Justice Dennis Perluss agreed. “Under our adversarial system of justice, once class counsel presented evidence to support their fee request, Party City was entitled to see and respond to it and to present its own arguments as to why it failed to justify the fees requested,” Perluss wrote in Concepcion v. Amscan Holdings.
Class counsel argued the billing records contained privileged material, but Perluss was skeptical. Freeman made no such finding, and the records could have been redacted to maintain confidentiality, he wrote. “To the extent class counsel made the judgment they needed to offer their full, unredacted billing records to support their request for fees, they may well have impliedly waived any privilege that otherwise protected them,” Perluss added.
UC Hastings law professor Morris Ratner, a former partner at Lieff Cabraser, said in camera inspection of billing records happens from time to time, but is not common, and that privilege issues are usually handled by redaction. “Courts do not normally need to go beyond materials submitted with the fee petition to spot and correct for inefficiency, or to know if time was spent in a way that did not benefit the class members,” he said.
A recent The Recorder story, “Samsung Fights Apple’s $15.7 Million Fee Request,” reports that Apple won’t get to cap off the first round of its patent battle with Samsung with an award of attorney fees if the South Korean company has anything to say about it. In papers filed, Samsung slammed Apple’s fee request for $15.7 million to cover a portion of its bill to Morrison & Foerster.
With the case headed for an appeal, Samsung’s lawyers at Quinn Emanuel insisted that it is too soon for U.S. District Judge Lucy Koh to dole out attorney fees. Moreover, Quinn Emanuel argued, Apple’s claims fall far short of the standard set by the Lanham Act, which allows companies that prevail on trademark and trade dress claims to recoup attorney fees in “exceptional cases.”
“None of the evidence Apple relies on reflects the type of deliberate, intentional deception, bad faith, or malicious conduct necessary to support a finding of exceptional circumstances,” Quinn Emanuel partner Victoria Maroulis wrote in Samsung’s opposition.
Moving for attorney fees in December, MoFo partner Rachel Krevans wrote that Samsung must pay up because it systematically copied the iPhone and a 2012 jury deemed the infringement willful. Quinn Emanuel stressed that the jury’s findings of willfulness was not enough to meet the high bar for attorney fees set by the Lanham Act.
All told, Apple shelled out more than $60 million in legal fees to bring its claims against Samsung, Krevans wrote. The attorney fees sought by Apple represent a third of the $47 million MoFo billed on the case until March 1, when the firm began preparing for the parties’ damage retrial.
Krevans described the fee request as “eminently reasonable.” But Samsung stressed that the proposal must be considered in light of Apple’s track record on its claims under the Lanham Act, which are the basis for the attorney fee request. After dropping many of its trademark and trade dress claims before trial, Apple prevailed on just 14 of the 573 liability cases, Samsung argued.
Without billing records or summaries of attorney hours, Apple’s motion contained far too little documentation to justify a hefty award of attorney fees, Samsung argued. Scrutinizing a declaration submitted by MoFo partner Michael Jacobs, Maroulis claimed the firm did not even document which attorney actually defended depositions. “Apple’s supporting declarations demonstrate why courts are not allowed to award hundreds, much less millions, of dollars in attorneys’ fees just based on the moving party’s say so,” Maroulis wrote.
A recent NLJ story, “Plaintiff on Hook for Patent Office’s Attorney Fees,”reports that an “odd” federal law requires plaintiffs who bring lawsuits challenging the U.S. Patent and Trademark Office’s trademark rulings to pay all of the agency’s expenses including attorney fees, no matter which side wins, a Virginia federal judge has ruled.
Eastern District of Virginia U.S. Judge T.S. Ellis III issued the ruling in Shammas v. Focarino. He ordered plaintiff Milo Shammas to pay nearly $33,000 to cover salaries of agency attorneys who worked on the case and additional money for paralegal salaries and expenses.
Noting that the question was of first impression, Ellis held that the statute in question requires a plaintiff to pay all of the patent office’s expenses for a district court review of a trademark appeal board ruling, win, lose or draw. That includes the salaries of patent office attorneys and paralegals for their case work.
Ellis ordered Shammas to pay another $2,280 in agency attorney fees for work on a motion to strike new evidence that the plaintiff filed after a discovery deadline. Ellis cut that request down from more than $11,000. He noted that Shammas did not dispute the agency’s “entitlement to reasonable attorney’s fees” for work related to that discovery violation.
In a footnote, Ellis called the statute “odd for several reasons,” including that it could encourage forum-shopping. He also noted that the statute’s contradictory incentives for plaintiffs—to hold back evidence from the trademark board in order to seek district court review and, conversely, to avoid district court review because of the fee language. Still, he wrote, the statute’s meaning is clear.
“When the work ‘expenses’ is prefaced with the word ‘all,’ it is pellucidly clear Congress intended that the plaintiff in such an action pay for all the resources expended by the [patent office] during the litigation, including attorney’s fees,” Ellis wrote.
A recent NLJ story, “Attorney Fees Mount in Medicaid Litigation,” reports that attorney fees continue to mount in a decade a decades-old class action against the District of Columbia over the provision of health care services to children in low-income households. Judge Gladys Kessler of the U.S. District Court for the District of Columbia ordered the city to pay an estimated $623,000 in attorney fees and expenses to plaintiffs’ lawyers for their work between 2010 and 2012. The fees were in addition to more than $476,000 Kessler previously ordered for the same time period that was uncontested by lawyers for the city.
The case, Salazar v. D.C., was filed in 1993. The plaintiffs accused the city of failing to meet the requirements of the federal Medicaid Act to provide screening and treatment services to eligible children. The city agreed to a consent decree in 1999, which included an obligation to pay the plaintiffs’ legal fees and expenses.
Lawyers for the plaintiffs, led by Bruce Terris of Washington’s Terris, Pravlik & Millian, sought $1.3 million for their expenses and fees from 2010 to 2012, but later reduced the request to $1.2 million. Kessler, in an opinion, sided with the District and cut some, but not all of the requested fees and expenses.
Both sides were still calculating how much money the city owed overall for the plaintiffs legal work from 2010 to 2012, but the Office of the Attorney General estimated it would be around $1.1 million. Kessler found the plaintiffs’ lawyers billing rates were for the most part reasonable, but agreed to reduce rates in certain instances in which she found plaintiffs counsel billed “excessive” hours or overstaffed. She rejected the city’s request for an “across-the board” reduction of 20 percent.
Terris said there were two ways the city could stop paying fees; reach a settlement with the plaintiffs or comply with the consent decree’s requirements to improve how the city provides health services to Medicaid eligible children. Ending the litigation “benefits the children of the District, and they stop paying attorney fees to lawyers, which they obviously don’t like doing,” he said.
A recent San Jose Mercury News story, “Oracle Seeks $20M in Legal Fees from Insurer,” reports that attorneys for Oracle are asking a Delaware judge to order an insurer to pay $20 million to cover attorney fees related to the proposed settlement of a shareholder lawsuit. The shareholder attorneys are seeking $19.9 million from Oracle officer and directors as part of the settlement, but an insurer covering the officers and directors has balked at paying.
The lawsuit challenged Oracle’s 2011 acquisition of Pillar Data Systems, a company majority-owned by Oracle CEO Larry Ellison. Shareholders alleged that the deal improperly benefited Ellison at the expense of the other Oracle stockholders. Ellison agreed to forego virtually all the payments he stood to receive, based on Pillar’s future performance, to settle the case. Those payments initially were estimated at upward of $500 million but more recently valued at zero.
The Ninth Circuit held that the district court incorrectly applied federal law instead of state law to determine the amount of recoverable attorneys’ fees. The district court should have used California’s lodestar method (reasonable hours times reasonable rate) and not the federal percentage of recovery method (25 percent benchmark).
In the case, the plaintiffs’ attorneys asked the federal district court to award them attorneys’ fees in a class action settlement using California’s lodestar method. They claimed to have worked 6,881 hours on the lawsuit. They requested an award of $4.7 million based on hours worked, times rate, times a requested multiplier of 1.5. The district court rejected the plaintiffs’ request and instead applied the percentage method. The district court noted the class recovery at $3.83 million and determined 20 percent of this an appropriate fee award (slightly below the 25 percent benchmark because the case was not complex). The district court rejected the plaintiffs’ request for $4.7 million in attorneys’ fees and instead awarded only $766,000.
The Ninth Circuit held that the district court incorrectly applied the percentage method instead of the lodestar method. The plaintiffs sought fees under California’s private attorney general statute, which awards fees to plaintiffs’ lawyers whose class action results in the significant enforcement of an “important right affecting the public interest.” Cal Code Civ. Proc. § 1021.5 (2013). Under this law, plaintiffs’ attorneys’ fees are calculated using the lodestar method. The Ninth Circuit held that because it had jurisdiction based on diversity, state law applied to both the right to recover attorneys’ fees and the method for determining the amount of those fees.
Shannon Petersen is a partner at Sheppard Mullin in San Diego and James Hill is an association at Sheppard Mullin in Los Angeles. This article was re-printed with permission.
The National Association of Legal Fee Analysis (NALFA) is 501(c)(6) non-profit professional association for the legal fee analysis field. Our members provide a range of services on attorney fee and legal billing matters.
Members of NALFA’s Attorney Fee Practice Group are qualified attorney fee experts, fee dispute mediators, and legal bill auditors. Our fee experts are retained by some of the nation’s top law firms and corporations to provide expert reports and opinions on the reasonableness of attorney fees. Our fee dispute mediators help resolve high-stakes fee disputes between parties.
Courts and clients turn to NALFA for expertise on attorney fee and legal billing matters. We recommend qualified attorney fee experts, fee dispute mediators, and legal bill auditors to law firms and corporations.
NALFA’s Organizational CV
NALFA is an approved 501(c)(6) federal tax-exempt organization under the IRS Code.
NALFA is an A.M. Best Recommended Expert Service Provider (2008-2014).
NALFA has recommended qualified attorney fees experts on legal fee and billing dispute cases ranging from $150,000-$4.3 million.
NALFA’s qualified attorney fee experts are retained by fee-seeking and fee-challenging clients (law firms and corporations) throughout the U.S.
NALFA members are certified in the Attorney Fee Dispute Practice Area.
NALFA hosts CLE programs and conferences on attorney fee and legal billing.
NALFA has introduced Best Practices for the Attorney Fee Dispute Practice Area.
NALFA’s Attorney Fees Blog reports on attorney fee requests, fee awards, fee disputes, and fee jurisprudence throughout the U.S.
NALFA works with U.S. District Courts and the MDL Judicial Panel to provide attorney fee statistics in MDL cases.
NALFA filed Amicus Curiae Briefs in Worley v. Storage USA, Pipefitters v. Oakley, in California appellate courts and in the landmark ADA case, Covington v. McNeese State University, in the Louisiana Supreme Court.
NALFA has been cited by several media outlets including, The Wall Street Journal, The American Lawyer, The Chicago Tribune, CNBC, Thomson Reuters, and The Daily Journal.
A recent American Lawyer story, “Jones Day Earns $17 Million in Detroit Bankruptcy So Far,” reports that the city has paid out $17.3 million in attorney fees to Jones Day to date in the Chapter 9 case. Nearly $2 million more in outstanding invoices submitted by Jones Day have yet to be paid.
Other law firms playing roles in the Detroit bankruptcy (and the fees they have earned so far) include labor and employment counsel Butzel Long ($292,833); Foley & Lardner ($340,174); conflicts counsel Pepper Hamilton ($594,633); and retiree committee counsel Dentons ($3.2 million).
The city has paid out nearly $42 million in professional fees so far. The list of those being paid includes 41 advisers, 10 of them law firms, that are in line to ultimately earn a collective total of more than $89.3 million under their existing contacts. Court appointed fee examiner Robert Fishman is monitoring the fees associated with the Detroit bankruptcy.
A recent post in Baker Hostetler’s Employment Class Action Blog, “California District Court Rejects FLSA Settlement Due to 78% Fee Award,” written by Greg Mersol, reflects on the fee decision in Villa v. United Sites Services of California Inc. In that case, the parties settled state and federal wage and hour claims involving claimed missed rest periods for a total of just short of $350,000. The plaintiffs’ attorney fees were $220,000, and they had an additional $50,000 or so in expenses, leaving the class with only about $80,000, or 22 percent of the settlement fund.
But, setting percentages aside, did the plaintiffs’ attorneys earn a $220,000 fee? OK, it is a large percentage to be sure, but $220,000 also does not seem unreasonable given the work and successes by the plaintiffs’ attorneys. And, what if the $80,000 for the class was a fair estimate of the amounts they might have recovered had the case proceeded to trial?
This is one of the problems of using percentages as a yardstick for attorneys’ fees in class action litigation. At one extreme; litigated cases with relatively small amounts in dispute per claimant and complex issues in which set percentage may not be enough. At the other; larger cases with greater amounts that settle quickly that may result in a windfall. Of course, few courts analyze the reasons why a defendant might settle – including the ever-increasing cost of litigation holds, e-discovery, and its own attorney fees, but when a court refuses to approve a settlement on a percentage basis, both sets of parties become hostage to the litigation.
Class actions can be complicated things. So, too, their settlements. It’s easy to scoff at an award such as that in Villa (I did, too, before I started delving into the facts), but the real issue is whether, under the circumstances, the fee is reasonable. Percentages are easy, but they are a rough yardstick at best, particularly at the extremes.
This blog post was written by Greg Mersol, Partner at Baker Hostetler in Cleveland. This artice was re-printed with permission.
A federal judge approved a $5.7 billion class action settlement between merchants and Visa Inc., Mastercard Inc., and a number of banks over credit card swipe fees. The settlement is believed to be the largest private antitrust settlement in U.S. history. The judge also approved $544.8 million in attorney fees and $27.04 million in expenses to plaintiffs’ attorneys. That amounts to about 9.56 percent of the settlement fund. The judge denied incentive payments to class counsel.
Merchants first sued Visa and Mastercard in 2005, accusing the two companies of fixing the fees charged to merchants each time their customers used their credit or debit cards. The settlement provides for cash payments to merchants nationwide and lets them begin charging customers an extra fee when they use Visa or Mastercard credit cards. The settlement has been opposed by many of the largest players in the retail industry.
In his order (pdf), U.S. District Judge John Gleeson of the Eastern District of New York, wrote, “Although every case is unique, this case stands out in size, duration, complexity, and in the nature of the relief afforded to both injunctive relief and damages classes. Class Counsel took on serious risk in prosecuting the case.”
“Even with the aid of the Goldberger factors, I have struggled to find a strong normative basis by which to evaluate the requested fee or to generate my own figure. The law sets only minimal constraints on fee awards. Within the boundaries of those constraints, it offers no concrete guideposts. And this case is so large and complex that it has few comparators to guide my own judgment,” Gleeson wrote.
Gleeson adopted the following graduated fee schedule:
“In my view, a guidepost is sorely needed. We know from other contexts that the conferral of broad discretion on district judges without providing sufficient guidance for the exercise of that discretion produces unwarranted disparities in outcomes, which undermine justice and the appearance of justice. Broad discretion in this context is certainly appropriate; as Goldberger acknowledges, each case is unique, and district judges should be empowered to set a fee that recognizes those unique circumstances,” Gleeson wrote.
The NFL may pay as much as $112.5 million in attorney fees to class counsel in the proposed NFL concussion settlement. The attorney fees and expenses will not come out of the $765 million settlement fund announced in August. This brings the total NFL liability to around $900 million.
The legal fees are actually less than reports at the time of the settlement announcement, which pegged the legal fees at over $200 million. The attorney fees represent about 6.8 percent of the settlement fund.
NALFA was formed in 2008. Since then, NALFA and its members have been leaders in advancing the attorney fee dispute practice area in the U.S. Here is a list of some of NALFA's accomplishments in 2013:
28 law firm clients (fee-seeking or fee-challenging) contacted NALFA on fee dispute cases ranging from $150,000-$4.3 million. Cases were referred to NALFA members.
NALFA filed an Amicus Curiae Brief in the Louisiana Supreme Court in the landmark ADA case, Covington v. McNeese State University.
NALFA Introduces Best Practices for the Attorney Fee Practice Area.
NALFA’s Attorney Fees Blog reported on important fee requests, fee awards, fee disputes, and fee jurisprudence throughout the U.S.
NALFA identifies 18 Attorney Fee Award Factors.
NALFA starts pilot project on attorney fee statistics in MDL cases.
Several media outlets (The American Lawyer, Star Tribune, National Law Journal, Minneapolis-St. Paul Business Journal, Thomson Reuters, and Law 360) relied on NALFA for information on large fee requests and fee awards.
NALFA hosted all-day Attorney Fees Conference with 20 panelists, including 3 judges, in San Francisco. Thomson Reuters and The Daily Journal covered the conference.
A recent The Recorder story, “Prosecutors: Nosal Should Foot O’Melveny’s $1 Million Bill,”reports that the federal prosecutors say David Nosal, the former executive recruiter convicted of computer crimes and stealing trade secrets, should have to cover his ex-employer’s legal bills—a request that has stirred fierce opposition from Nosal’s defense team. The government is seeking nearly $1 million in attorney fees billed to Korn/Ferry International by O’Melveny & Myers.
Nosal, who tapped into Korn/Ferry’s database after he left to start his own recruiting firm, was convicted on charges of conspiracy, stealing trade secrets and violating the Computer Fraud and Abuse Act in April. Prosecutors have asked for a 27 month sentence in prison.
Federal prosecutors argue the legal expenditure to investigate Nosal’s activity, aid prosecutors, and monitor the criminal case qualifies for restitution under the Mandatory Victim Restitution Act (MVRA). They are seeking $948,703 in attorney fees and $443,795 in legal expenses from Nosal.
But Nosal lawyer Dennis Riordan of Riordan & Horgan argued that the restitution law was meant to protect individuals rather than corporations. He pointed out that the provision, which was initially enacted as part of the Violence Against Women Act, holds that defendants must reimburse victims for “lost income and necessary child care,” among other expenses. “These attorneys’ fees are plainly not covered by the MVRA,” Riordan wrote. “They were not a direct result of the offense. They were not a foreseeable result of the offense.”
NALFA’s Attorney Fees Blog reports on attorney fee matters from across the U.S., including attorney fee awards. The following are the largest fee awards in 2013. The following does not include bankruptcy cases.
Largest Attorney Fees Awards in 2013
$310 Million Fee Award in Flat Panel Antitrust MDL
$200 Million Fee Award in Toyota Economic Loss MDL
$181 Million Fee Award in Janssen Pharmaceutical Litigation
$152 Million Fee Award in Bank of America Securities MDL
$90 Million Fee Award in Black Farmers Class Action
A recent NLJ story, “Circuit Tosses Attorney Fee Award in Prius Litigation,” reports that the U.S. Court of Appeals for the Ninth Circuit has again struck down an award of attorney fees in a class action settlement, this time over allegedly defective headlights in Toyota Prius vehicles. Plaintiffs firms had petitioned the court to reverse a federal district judge’s rejection of their proposed $4.7 million in attorney fees.
U.S. District Judge Manuel Real had called the fee request “highly unreasonable” for such a simple case and awarded $760,000 which he said represented 20 percent of the settlement’s estimated $3.8 million value. The Ninth Circuit panel found that Real had abused his discretion in calculating fees based on a percentage of the settlement, rather than the lodestar method, which is the actual amount billed.
In its Ninth Circuit brief Eric Gibbs, a partner at San Francisco’s Girard Gibbs had argued that Real should not have applied the percentage method in the cases brought under California law. Real also failed to take into account the lodestar calculation, wrote Gibbs, who estimated the firm billed $1.25 million. Three additional plaintiffs firm—Wasserman, Comden, Casselman & Esensten of Tarzana, Calif.; Cohen Milstein Sellers & Toll in Washington; and Los Angeles-based Arias Ozzello & Gignac—joined in the appeal. A fifth firm, Initiative Legal Group of Los Angeles, filed a separate brief.
The case draws parallels to the In re Bluetooth Headset Products Liability Litigation opinion in 2011, in which the Ninth Circuit found that U.S. District Judge Dale Fischer had failed to cross-check the lodestar amount against what plaintiffs attorneys would have received on a percentage basis when determining the fairness of a $800,000 fee request in a class settlement.
But in the Prius litigation, the Ninth Circuit grappled with whether California statutes—rather than federal case law—defined the fees calculation. “To some degree what CAFA has done has introduced some uncertainly into where the state law applies and where it doesn’t,” Gibbs said, referring to the U.S. Class Action Fairness Act. “Here, the Ninth Circuit clarified that in this instance it’s the underlying state law that governs rather than the federal standard.”
A recent The Recorder story, “In Walmart Fee Fight, Ninth Circuit Balks at ‘Non-Appealable’ Arbitration,” reports that two Bay Area plaintiff lawyers have won an arbitration battle but lost a bitter $28 million fee allocation dispute. The U.S. Court of Appeals for the Ninth Circuit ruled that Carolyn Burton and Robert Mills may challenge the allocation of attorney fees in multidistrict litigation against Walmart, even though they had previously agreed to “non-appealable” arbitration.
“Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text” of the Federal Arbitration Act, Judge Milan Smith Jr. wrote in In re Wal-Mart, “but would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.”
But exercising that judicial review, the Ninth Circuit rejected the attorneys’ fiercely contested claims that arbitrator Layn Phillips colluded with Fredrick Furth and another plaintiffs attorney to get more Walmart mediation work, and then stiffed Burton and Mills on fees to punish them for refusing to play ball.
Burton, Mills, and co-counsel Carol LaPlant will receive about $6.7 million in fees, while New Hampshire attorney Robert Bonsignore will keep $11 million. The remainder of the $28 million goes to some 40 state and local counsel who helped negotiate an $85 million settlement of wage-and-hour claims in multidistrict litigation across 30 states. Mills and Burton claim Phillips punished them by allocating the lion’s share of the MDL fees to Bonsignore.
Bad blood in the case dates back to 2007, when Burton left the Furth Firm, accusing the famed attorney of cheating her out of bonuses and selling the MDL to get a better settlement of his California state court case. The federal litigation settled in 2008 for $85 million, and Phillips was chosen to arbitrate the division of the $28 million in attorney fees.
The Ninth Circuit rejected all of the bias claims. Instead, Judge seemed more interested in a provision of the MDL settlement agreement that provided arbitration would be binding and non-appealable. “This appeal presents a question of first impression in this circuit: Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under Section 10 of the FAA, enforceable?” he wrote. “We conclude it is not.”
A recent The Legal Intelligencer story, “Flawed Notice of Contingency Terms Cuts Attorney Fees,” reports that the Pennsylvania Superior Court has ruled that a law firm’s contingency fee agreement was ambiguous because it failed to expressly state whether the fee would be calculated based on the gross proceeds from the settlement or on the net proceeds after the litigation costs and medical expenses were deducted.
In an unreported opinion in Nguyen v. O’Neill, a three-judge panel of the court unanimously upheld a Philadelphia trial judge’s ruling reduced Philadelphia-based personal injury firm Simon & Simon’s cut of an $86,300 settlement in a motor vehicle accident case from about $32,000 to just under $20,000.
Writing for the court, Senior Judge William Platt agreed with Philadelphia Court of Common Pleas Judge Annette Rizzo that Simon & Simon’s fee agreement was unclear as to how the attorney fees would be calculated was therefore in violation of Rule 1.5(c) of the Rules of Professional Conduct. Rule 1.5(c) requires fee agreements to “state the method by which the fee is to be determined, including…litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingency fee is calculated.”
“After review, we agree with the trial court’s determination that the contingent fee agreement is ambiguous, and that appellant’s failure to specify whether it would deduct litigation and medical expenses from the recovery before calculating its attorney fee is in contravention of the clear directive set forth in Rule 1.5(c),” Senior Judge William Platt said. “This ambiguity in the contingent fee agreement must be construed against appellate as contract drafter, and the court correctly determined that the attorney fee must be calculated based on the net settlement recovery, after deduction of expenses.”
When the NFL announced the concussion settlement in August, the former players assured the league that no part of the $765 million settlement was for lawyers. Plaintiffs’ lawyers were to be paid from a separate fund, to cover attorney fees and expenses. But, according to documents and emails obtained by ESPN’s “Outside the Lines,” some plaintiffs’ lawyers have separate fee arrangements with former players.
Lead plaintiffs’ lawyer, Christopher Seeger of Seeger Weiss in New York, tried to arrange an agreement to receive a 10 percent cut of any money awarded to a 79-year-old former NFL player, Billy Kinard. Seeger quickly withdrew the proposal after the player’s attorney challenged it by calling the fee agreement “most troubling.”
In a statement provided to “Outside the Lines,” Seeger wrote: “Seeger Weiss is not representing any new plaintiffs, from when the settlement was announced on Aug. 29, on a fee arrangement. A small number of plaintiffs were mistakenly offered a retainer agreement after approaching Seeger Weiss for representation post-announcement. After learning of this error, we notified these plaintiffs and agreed to continue representing them for no fee.”
It is unclear how many lawyers could be engaged in “double-dipping” and how many former players might have a separate fee arrangement. In some cases, those fee agreements call for the players to pay as much as one-third of any money they recover to their attorneys.
In response to this double-dipping, U.S. District Judge Anita Brody has appointed special fee master Perry Golkin to assist her in evaluating the “financial aspects” of the proposed settlement. She said the “appointment is warranted by the expected financial complexity of the proposed settlement.”
A recent Corporate Counsel story, “Senate Weighs Fee Shifting in Anti-Patent Troll Bills,” reports that business leaders urged the Senate Judiciary Committee to include fee shifting in legislation it’s debating to combat abusive litigation from patent trolls. Speaking at a hearing the panel held on patent lawsuit reform, representatives of the Credit Union National Association, Printing Industries of America and Adobe Systems Inc. said provisions that called for the loser patent litigation to pay for court expenses are necessary to effectively fight patent trolls.
Dana Rao, Adobe’s vice president and associate general counsel for intellectual property litigation, said the Senate measure doesn’t properly address patent troll abuses without tools that include fee shifting. “In order to disrupt the patent troll problem that we have today, we have to look at the economics,” Rao said, “and the economics are: They face no risk from bringing these lawsuits.”
Not all witnesses at the hearing thought Congress must legislate on fee shifting, however. Phillip Johnson, Johnson & Johnson Services Inc.’s senior vice president and chief intellectual property counsel, said he supports fee shifting as a tool to combat trolls. But he said Congress might want to wait until the U.S. Supreme Court in February takes up patent cases Octane Fitness LLC v. ICON Health & Fitness Inc. and Highmark Inc. v.Allcare Health Management Systems, both of which concern fee shifting. “By waiting for the Supreme Court to act, you’ll be able to decide whether the way that they’ve acted is a bitter way to go forward than whatever legislation you may wish to write,” Johnson said.
The Senate’s version of the patent reform legislation is called the Patent Transparency and Improvements Act. The House passed its version, the Innovation Act, which has a fee shifting provision.
A recent NLJ story, “After Supreme Court Win, Voting Rights Act Challengers Seek Fees,” reports that following a bitter legal battle before the U.S. Supreme Court over the scope of the Voting Rights Act, the challengers are again fighting the federal government – this time over legal fees. In June, a divided Supreme Court sided with Shelby County, Ala., in striking down a key section of the voting rights law. Shelby County’s lawyers from Wiley Rein want a federal trial judge to order the government to pay more than $2 million in attorney fees and expenses.
The Supreme Court, in a 5-4 decision, struck down Section 4 of the Voting Rights Act. The provision laid out the formula for determining which jurisdictions were required to seek approval from the DOJ or federal court before changing how they ran elections. Under the voting rights law, a party who sued to enforce the “voting guarantees” of the fourteenth or fifteenth amendments could seek attorney fees if they won.
The DOJ opposes the fee request. In papers filed on Dec. 6, lawyers for the government argued the government was immune to a fee award – and even if it wasn’t, Shelby County’s lawsuit didn’t include the type of claims that would trigger the voting rights law’s fee-shifting provision.
DOJ lawyers argued in court papers that Shelby County – despite prevailing in the high court – is not entitled to fees. The federal government is immune to fee awards unless a statute says otherwise, they said, and the Voting Rights Act didn’t include language waiving that immunity. The DOJ went on to say that parties that prevail in challenging the enforcement of protected voting rights could collect fees only if they proved the government’s position was “frivolous, vexatious, or harassing in nature.”
The fate of a $9 million class action settlement involving Naked Juice products rests on whether or not lawyers representing the plaintiffs can prove how many hours they spent working on the case. U.S. District Judge Kronstadt told Class Counsel on Dec. 2 that he’s “inclined to grant” final approval to the Naked Juice settlement as long as they can identify what work they did and the hours/costs they accrued related to the “GMO claims” in the case.
Plaintiffs in the class action lawsuit accused Naked Juice Co. of deceptively advertising its juice products as “all natural” and “non-GMO” when they allegedly contained processed and synthetic ingredients, as well as ingredients from genetically modified crops. The company denies these allegations but agreed to refund consumers through a $9 million class action settlement to resolve the litigation.
The lead plaintiffs in the case and Class Counsel are seeking a total of $2.6 million in attorneys’ fees, which represents 25 percent of the total settlement value, and $81,525 in expenses. The case is Natalie Pappas v. Naked Juice Co. of Glendora Inc. in the U.S. District Court for the Central District of California.
A divided Ninth Circuit panel has rejected the United Parcel Service’s challenge to a nearly $700,000 attorney fee award in a gender discrimination case that resulted in a jury verdict of just $27,280. U.S. District Chief Judge Claudia Wilken of the Northern District of California had awarded about 36 percent of the $1.95 million in attorney fees sought by lawyers at Kerr & Wagstaffe and The Jaffe Law Firm in San Francisco. But the attorneys for UPS at Paul Hastings argued that the fee award should be chopped further because plaintiff Kim Muniz recovered comparatively little in damages and had not prevailed on most of her claims.
In Muniz v. UPS, Muniz sued UPS in 2009 alleging retaliation as well as age and gender discrimination after she was demoted from a management position. A three-judge panel in the U.S. Court of Appeals for the Ninth Circuit ruled that Wilken had acted within the considerable discretion that California law allowed her.
Kerr & Wagstaffe partner Michael von Loewenfedt, who represented in the appeal, said the panel’s verdict is an important victory for low-wage workers. The law’s flexible standard for attorney fees ensures that employee of limited means are able to secure representation in costly discrimination suits, he said. He added that Wilken had already given the fee award a “pretty severe haircut.” Wilken reduced the hourly rates requested by plaintiffs lawyers as well as the total number of hours they could claim due to insufficient recordkeeping, according to the ruling. She then reduced that figure by another 10 percent because Muniz’s claims for age discrimination and retaliation did not pan out.
UPS said that discount fell far short but did not attempt to calculate how many hours Muniz’s lawyers had spent working on the failed claims. After finding the fee request was inflated, Wilken had the authority to hack it severely or decline to award attorney fees altogether, the judges noted. But they found she could not be faulted for leaving considerable fees intact. Wilken “concluded that a total denial of fees or limited the award to a nominal amount would be too severe a sanction,” Singleton wrote.
A recent BLT blog post, “Judge Approves $153 Million Settlement in Fannie Mae Securities Class Action,” reports that a Washington federal trial judge today approved a $153 million settlement between Fannie Mae and shareholders who sued the mortgage giant for securities fraud. U.S. District Judge Richard Leon found the settlement and plan for distributing it among the more than one million class members was “fair, reasonable and adequate.” The case is the largest securities class action settlement in the D.C. federal courts since modern securities litigation law went into effect in 1996.
Under the terms of the settlement, plaintiff lawyers will receive 22 percent of the settlement fund in attorney fees—approximately $29.1 million, after certain costs and expenses were subtracted-plus an additional $15 million in expense reimbursements. Markovits, Stock & DeMarco in Cinncinnati served as lead class counsel, along with Bernstein Liebhard and Cohen Millstein Sellers & Toll.
This ends nearly a decade of litigation against Fannie Mae and its auditor, KPMG LLP. The class members led by the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, accused Fannie Mae and KPMG of defrauding shareholders by manipulating earning and violating guidelines known as generally accepted principles.
The 22 percent award of attorney fees, Leon said, was appropriate. “In the Court’s view…the lawyering in this case has been, by any standard, exceptional,” he wrote. “Plaintiffs’ counsel wrestled with highly complex accounting issues and Fannie Mae’s placement into conservatorship, as well as initiated a parallel proceeding challenging an FHFA rule that compounded their risks by potentially cutting off any recovery even in the event they succeeded at trial—all while facing off against skilled defense lawyers,” he wrote. “In the Court’s view, this case was extraordinary in many respects and merits a substantial fee award.”
Apple is asking U.S. District Judge Lucy Koh to order Samsung to pay $15.7 million in attorney fees and $6.2 million in expenses for litigating their feud over iPhone and iPad technology. That’s approximately a third of the $60 million that Apple says it owes its lawyers in the patent infringement case. Apple is entitled to recover attorney fees against Samsung under the Lanham Act, a fee-shifting statute.
A federal jury in August 2012 found Samsung had violated Apple’s patent rights and trademark protections by copying iPhone and iPad technology in its older products. That jury, and another in a separate damages retrial last month, calculated $930 million in combined damages against Samsung. Samsung has vowed to appeal the damages to the U.S. Federal Circuit Court of Appeals, which hears all patent appeals.
Apple indicated that the legal fees extended through only last March and do not include the cost of pressing the recent damages retrial. The specific charges and billing were filed under seal, blocking out of the detail of what was paid to the two main law firms representing Apple, Morrison & Foerster and Wilmer Hale. According to court documents, Apple charged only for lawyers who billed more than $100,000 for work on the patent case against Samsung.
Judge Koh is expected to consider the fee request in January. The case in U.S. District Court, Northern District of California is Apple Inc v. Samsung Electronics Co Ltd.
A recent NLJ story, “Patton Boggs Issues Flurry of Fee Suits,” reports that Patton Boggs is putting a tighter on clients to pay their legal bills on time as the firm continues cost-cutting measures and entertains a potential merger. At the same time, the law firm is suing to collect unpaid legal bills, filing the latest lawsuit this month in a series of fee disputes in Washington-area courts.
Big law firms don’t often take fee fights to courts. But since June, Patton Boggs has filed four suits in District of Columbia and Virginia courts seeking nearly $2 million. The firm’s general counsel, Charles Talisman, acknowledge it was rare for a law firm to sue a client. “The ethical rules require that we exhaust all other possibilities before we bring a case against a client,” Talisman said. “We do our best to follow that.”
Separate from the litigation, Talisman said Patton Boggs was tightening up its billing practices after a “poor collection year” in 2012. For example, most new clients were paying bills within 45 days – a quick turnaround, he said. “We’ve made conscious efforts to get our bills out more quickly, to be a bit more conscientious about following up with clients if they’re late in paying.”
Patton Boggs, Talisman said, was “more focused now on making sure our clients pay their bills than perhaps we were in the past.” However, he said, the recent spate of litigation did not reflect a change in the firm’s policies on when to sue clients over alleged unpaid invoices.
The nearly $2 million at stake in the suits filed this year is relatively small compared with the firm’s bottom line, representing less than 1 percent of the $317.5 million in gross revenue earned during 2012, according to NLJ affiliate The American Lawyer. Patton Boggs has struggled financially in recent years. Gross revenue dropped by 6.5 percent between 2011 and 2012, according to The American Lawyer.
Posted:Tuesday, December 03, 2013
Categories: NALFA News
A recent NLJ story, “Under Fire, Two BP Objectors’ Lawyers Withdraw,” reports that professional fee objectors Ted Frank and Darrell Palmer have withdrawn their appeals of two settlements with BP over the Deepwater Horizon oil spill after plaintiffs lawyers moved to dismiss the challenge on the ground that the objectors weren’t actually class members. Frank and Palmer were fired by several of their former clients due to their “unauthorized and unapproved actions and conduct.”
Plaintiffs’ lawyers who obtained two settlements with BP PLC over the Deepwater Horizon oil spill have accused Frank and Palmer of filing appeals on behalf of plaintiffs who aren’t legitimate class members. Discovery revealed the objectors weren’t class members of the $9.6 billion settlement either because their properties fell outside the geographic scope of the deal, class counsel wrote in their Oct. 31 motion with the Fifth Circuit.
“It appears that professional fee objectors tried to leach onto the $9.6 billion BP settlement fund by trolling for class members that weren’t actually class members. This is just another example that professional fee objectors don’t work for class members,” said Terry Jesse, Executive Director of NALFA.
A federal judge awarded less than half the requested attorneys’ fees (pdf) in a class action accusing Acer of making and selling computers that lack the memory to run the pre-installed operating system. Hisfinal order (pdf) reduced fees down from the requested $2.5 million to $943,000. In explaining his significant cuts, U.S. District Judge Jeffrey White of the Northern District of California found that three law firms representing consumers in a suit against computer maker Acer America Corp. had billed too many hours, charged too much and overstated the complexity of the class action case.
In cutting the attorneys’ fees, Judge Jeffrey White found that the three law firms representing the plaintiffs were not efficient and spent excessive amounts of time on the tasks listed. He noted that the law firms spent an “exorbitant” 547 hours on attorney meetings and 184 hours on court appearances, “despite the fact that the court vacated all hearings,” except for the hearing on final settlement approval and attorney fees. He also noted that there was significant duplication of work between the three law firms in concluding that only 1,750 hours of the 4,633 hours tallied by plaintiffs’ attorneys—a reduction of 62 percent—was reasonable under the circumstances.
Judge White also discounted the hourly rates sought by the three law firms. He found that while the supporting affidavits submitted by the law firms provided hourly billing rates of lawyers in Los Angeles, Ohio, Washington, DC and elsewhere, none provided relevant market rates in Northern California. Consequently, he set the rates for paralegals, associates, partners and senior partners at $175, $350, $500 and $550, respectively.
Judge White then further reduced the fees sought by employing a negative multiplier of 0.75 to ensure “the fee award [was] within the range of fees freely negotiated in the legal marketplace in comparable litigation.”
Lawyers from the three law firms argued the attorney fees sought were justified because the technical complexity of the case. Judge White disagreed. He explained: “The Court notes that while the facts underlying the plaintiffs’ claims were technically complicated, the legal analysis regarding their warranty and misrepresentation claims was not complex.”
A recent BLT blog post,“JP Morgan Settles Securities Claims for $4.5 Billion,” reports that JP Morgan Chase has reached a $4.5 billion deal to settle claims by 21 institutional investors, agreeing to repurchase faulty residential mortgage-back securities (RMBS). The investors, which include Black Rock Financial Management, Goldman Sachs Asset Management and the Prudential Insurance Co. of America, alleged that some of the mortgages included in the pools did not meet underwriting standards.
Houston-based Gibbs & Burns was lead counsel for the investors. Its attorney fees will be in addition to the settlement amount, according to the law firm. The 32-lawyer firm also represented investors in an $8.5 billion settlement with Bank of America and Countrywide in 2011, receiving $85 million in attorney fees. Lawyers who worked on the JP Morgan deal include Kathy Patrick (dubbed “The Woman Wall Street Fears Most” by Forbes), Scott Humphries, Robert Madden, and David Sheeren, according to the law firm’s new release.
The trustees of 330 mortgage-backed securities issued by JP Morgan have until Jan. 15 to accept the settlement offer. The investors “support the agreement and have asked the Trustees to accept it,” according to Gibbs & Burns.
The claims stem from the representations and warranties of the securities, which the bank agreed to buy back the loans of they didn’t meet the standards described. The deal also includes claims related to mortgage servicing. The $4.5 billion settlement is not part of a larger deal that that the bank is negotiating with the government. On Oct. 25, JP Morgan resolved some claims, agreeing to pay Fannie Mae and Freddie Mac $5.1 billion for similar repurchase obligations.
A recent NLJ story, “Legal Fees in Barbri Class Action Back Before Ninth Circuit,” reports that the U.S. Court of Appeals for the Ninth Circuit is expected once again to take up a long-running antitrust case involving Barbri—this time, hearing whether fee objectors who successfully unraveled a key portion of the $49 million settlement should recover additional legal fees. The fee request before the Ninth Circuit amounts to 20 percent on the nearly $9 million the fee objectors “saved” for the class by reducing McGuireWoods’ fees.
Five fee objectors seek close to $1.8 million in fees for objecting to the fees granted to McGuireWoods, class counsel in the settlement with West Publishing Corp. and Kaplan Inc., publishers of the Barbri bar exam review course. U.S. District Judge Manuel Real granted $236,000 in fees and $1,700 in costs to Kendrick & Nutley.
Class counsel filed an opposition brief, noting that Kenkrick & Nutley did nothing to generate the settlement to which the fee request is based. “Like ‘Monday Morning Quarterbacks’ who contributed absolutely nothing to the underlying contentions litigation and the $49 million hard-fought settlement … Appellants seek compensation as if they generated for the Class the fee originally awarded to McGuireWoods. They did not,” wrote Sidney Kanazwa, a Los Angeles partner at McGuire Woods.
NALFA hosted The Attorney Fees Conference – 2013 at the San Francisco Bar Association on October 25, 2013. The program had a morning session that focused on attorney fee disputes and an afternoon session that addressed attorney fee awards. The conference featured 20 panelists, including 3 judges. The program was a major success. Below is an article on the Attorney Fees Conference by Josh Sebold of the Daily Journal. The story ran in the community news section on November 1, 2013.
Experts discuss fee trends at annual conference in San Francisco
Attorneys gathered at the Bar Association of San Francisco on Oct. 25 for the annual Attorney Fees Conference, put on by the National Association of Legal Fee Analysis, to hear panelists discuss the nuances of awarding attorney fees in contingency fee cases that result in massive awards. William F. Downes, a neutral at JAMS, said defense lawyers often argue that contingency fees should be limited in civil cases when the Department of Justice has already prosecuted the defendants or others in a related criminal matter, the logic being that having the Justice Department go first makes a case easier for plaintiffs. He said the reality is that having the government go first can often harm a case, because attorneys can argue that their client wasn't one of the people targeted by the Justice Department or that they've already been punished. Downes said a civil case also has a different burden of proof. "They have to prove causation and damages - no small task," he said. Downes added that the Justice Department doesn't always share its evidence with plaintiffs in civil cases. - Joshua Sebold
A recent BLT blog post, “Lawyers in Circus Litigation Seek $25M in Fees,” reports that lawyers for the producer of the Ringling Bros. and Barnum & Bailey Circus want the animal rights group that unsuccessfully sued the circus to pay more than $25 million in legal fees. It’s been more than a decade since the animal rights group brought claims against Feld Entertainment Inc., accusing the circus of abusing its Asian elephants. U.S. District Judge Emmet Sullivan entered a judgment against the animal rights group in 2009 and granted Feld’s request to recoup its legal fees in March.
In court filings, Feld said it was seeking fee for nearly 50,000 hours its lawyers spent working on the case from 2000 through March 2013. Feld’s lead counsel at Norton Rose Fulbright, formerly Fulbright & Jaworski, reported billing more than 41,000 hours since late 2005 valued at $22.6 million. Partner John Simpson, Feld’s lead attorney, said that the requested fees were appropriate given the complexity of the case and the number of years the parties had spent litigating. “It’s lasted for 13 years, and is still ongoing,” he said. “This is what it costs to defend something like that.”
Feld wants the plaintiffs and their former lead counsel Katherine Meyer of Meyer Glitzenstein & Crystal to pay the fees. Meyer’s lawyer, Stephen Braga, a solo practitioner in Woodbridge, Va., said they would challenge Feld’s fee request. “Everything about the fee petition seems to be over-the-top, from the overblown length of the pleadings, to its slanted description of the litigation, to the excessive number of hours worked and on the unprecedented amount of its total fee request,” Braga said in an email.
Beside Norton Rose Fulbright, three other law firms—Covington & Burling, Troutman Sanders, and Hughes Hubbard & Reed—worked on Feld’s defense. For its work on the case from 2000 to 2006, Covington billed nearly 6,000 hours valued at $2.3 million. Troutman billed approximately 1,300 hours valued at more than $273,000 for work in 2008 and 2009, and Hughes Hubbard billed 17.5 hours valued at around $11,700 for work in 2007 and 2008.
Feld argued in its fee request that the hourly rates claimed by its attorneys were in line with what other Washington law firms charged. The rates for Fulbright lawyers ranged from an associate charging $340 per hour to Simpson’s $825 hourly rate. Covington’s hourly rates ranged from $240 for a senior staff attorney to $915 for partner Eugene Gulland.
Fulbright and Covington both billed at discounted rates, according to Feld’s filings. Fulbright discounted its hourly rates on average by 11.16 percent, and then made additional cuts averaging 3.93 percent. The firm billed at the previous year’s rates—for work in 2013, for example, Simpson billed at his 2012 hourly rate of $825, as opposed to his current rate of $850. Beginning in late 2004, Covington agreed to give Feld a 5 percent discount on all hourly rates.
NALFA hosted The Attorney Fees Conference – 2013 at the San Francisco Bar Association on October 25, 2013. The program had a morning session that focused on attorney fee disputes and an afternoon session that addressed attorney fee awards. The conference featured 20 panelists, including 3 judges. The program was a major success. Two reporters covered the event.
Our course book is available for purchase. CLICK HERE for course book order form or call us at (312) 907-7275 to order by phone.
NALFA hosted The Attorney Fees Conference – 2013 at the San Francisco Bar Association on October 25, 2013. The program had a morning session that focused on attorney fee disputes and an afternoon session that addressed attorney fee awards. The conference featured 20 panelists, including 3 judges. The program was a major success. Two reporters were there covering the event. Andrew Longstreth, a reporter from Reuters Legal, wrote the following news story:
Consensus forming in awarding of class action fee awards
By Andrew Longstreth
SAN FRANCISCO (Reuters) - In approving class action fee awards, U.S. judges now are taking extra steps to make sure plaintiffs' lawyers are not excessively compensated, say experts who appeared on a panel at the San Francisco Bar Association on Friday.
Most courts award fees based on a percentage of a fund obtained for the class, said Francis Scarpulla of Zelle Hofmann Voelbel & Mason, who specializes in antitrust class actions.
But he said judges now make sure the percentage is only a modest multiple of an attorney's lodestar, which is a calculation of a reasonable hourly rate times hours spent on the case.
The main guiding principle of judges who evaluate fee requests, he said, is to make sure lawyers do not receive "windfall profits."
"Nobody is going to get 10 to 20 times their (lodestar)," Scarpulla said.
Scarpulla was speaking on a panel at a conference on attorneys' fees hosted by the National Association of Legal Fee Analysis.
Without the promise of a large fee award, plaintiffs' lawyers argue that important cases for society would never be brought.
Complex class actions can cost millions of dollars to litigate and plaintiffs' lawyers have to front those costs with no guarantee they will recoup them. Often, plaintiffs' lawyers working on contingency must spend years on a case without getting paid.
An award equaling 25 percent of a fund is used as a benchmark in some jurisdictions, but ultimately, it is within the judge's discretion to award more or less, Scarpulla said. Among the factors the judge can consider are the results achieved and the risk involved in taking the case on contingency.
Scarpulla cited a decision issued in August by the 7th U.S. Circuit Court of Appeals, written by then-Chief Judge Frank Easterbrook, upholding a fee award amounting to 27.5 percent of a $200 million settlement.
"You have to look at what the lawyers did and what the lawyers accomplished," Scarpulla said. "If it turns out to be 27 percent, so be it. It's the judge's discretion."
116 AWARDED $310 MILLION
Scarpulla's law firm was among 116 that were awarded $310 million earlier this year for their work in obtaining more than $1 billion in a price-fixing case against makers of display panels used in consumer electronics.
The fees in that case were scrutinized by a court-appointed special master, Martin Quinn, who joined Scarpulla on the panel.
Quinn said he sought declarations from all the law firms detailing the time spent on the case. But he told them not to send him detailed billing statements. If something looked "screwy," he said he asked for more information.
"Nobody is going to go through hundreds of thousands of bills," he said.
Another panelist, William Downes, a former federal district judge in Wyoming who is now an arbitrator, recalled approving a fee request for $10.5 million in a securities class action. The request equaled 25 percent of the entire fund for the class.
"For this country boy from Wyoming, that was a breathtaking amount of money," he said.
After Downes checked the lodestar of the attorneys who worked on the case, he concluded the fee would be a multiplier of 2.78. Ultimately, he considered the request reasonable given the risks involved and the skill that was needed to obtain the settlement.
Downes said that recent decisions by the Supreme Court, including Comcast v. Behrend, that have made it harder to bring class actions may justify larger fees given the obstacles plaintiffs' lawyers face.
"The Supreme Court is making certifying a class and keeping a class certified very difficult," he said. "That might argue in favor of giving a premium to a law firm serving as lead counsel above 25 percent."
The cert petition in Highmark v. Allcare Health Management Systems asks the court to decide whether the U.S. Court of Appeals for the Federal Circuit must give deference to a judge’s determination that a patent claim is objectively baseless. Under the test used to identify exceptional cases, cases must be objectively baseless and be brought in bad faith.
“This petition arises from a patent-infringement case of the sort—in the district court’s own words—‘that gives the term “patent troll” its negative connotation,’” the cert petition says. The petition characterizes the health-management patent claim by Allcare as “vague” and says the company exists only to license the patent through the threat of litigation.
Highmark argues the Federal Circuit wrongly used de novo review. “The issue presented also has tremendous practical importance,” the cert petition says. “Litigation by patent assertion entities sometimes called ‘patent trolls,’ now accounts for a majority of all patent cases. The threat of an exceptional-case finding is a crucial deterrent to meritless suits designed to extort licensing fees.”
The second case, Octane Fitness v. Icon Health and Fitness, stems from a routine, unpublished decision over the standard for determining exceptional cases meriting attorney fees. Octane’s cert petition alleges that Icon “hatched a plan to extort royalties out of Octane with a weak patent case” concerning the rails on an elliptical training machine. Though Octane won the infringement suit on summary judgment, the company was unable to recover $1.3 million it spent defending itself.
Octane argues the difficult two-part test to obtain attorney fees is not justified by statute or precedent, and it encourages spurious patent cases. The standard “has strayed from the statutory ‘exceptional case’ mandate, resulting in a standard that is near-impossible to meet, and serves no deterrent,” the cert petition says.
A recent NLJ story, “Bankruptcy Court Can’t Weigh Lawyer’s Risk in Awarding Fee,” reports that a federal appellate court overturned a bankruptcy judge’s $350,000 fee award on an attorney and ruled that case law and the bankruptcy code didn’t allow the judge to weigh the lawyer’s risks in taking the case. The U.S. Court of Appeals for the Tenth Circuit threw out the fee granted to Barak Lurie and his firm Lurie & Associates of Los Angeles. The fee award covered about 44 hours of work.
The court in Market Center East Retail Property Inc. v. Lurie reversed a March 2012 ruling by Tenth Circuit’s bankruptcy appellate panel, which had affirmed District of New Mexico bankruptcy judge James Starzynski’s March 2011 fee award to Lurie. The panel remanded for recalculation of the fees.
Market Center hired Lurie in February 2009 to sue Lowe’s Companies Inc. for reneging on a deal to buy an Albuquerque retail shopping center for $13.5 million. Lurie and his client settled on a fee of $200 per hour, plus a contingency component. In June, Market Center filed a bankruptcy court application to hire Lurie on the same terms to continue its case against Lowe’s. That November, the bankruptcy court authorized Lowe’s purchase of the shopping center for $9.75 million. After that sale, Market Center tried to withdraw its application to employ Lurie.
Lurie asked for $1.47 million in attorney fees, plus more than $9,000 to fight Market Center’s motion to withdraw its application to hire him. Market Center claimed Lurie should get $17,500 for his efforts. The bankruptcy court credited Lurie’s strategy of suing Lowe’s and seeking early discovery as a major factor in Market Center’s favorable sales price.
“Lurie did not take a “big risk” in representing Market Center. Lurie spent only about forty hours working on the case, and Lurie did not face the risk that it would not be paid for its work,” Chief Judge Mary Beck Briscoe wrote. Briscoe concluded that “a bankruptcy court has discretion in determining how much weight to assign each factor and in determining the reasonableness of a fee, but this discretion does not extend to disregarding factors prescribed by statute.” She noted that bankruptcy code’s language on professional fees and Tenth Circuit case law does not permit a bankruptcy court to weigh any risk an attorney might assume.
A recent Legal Intelligencer story, “Judge Bumps Up Lodestar by 50 Percent in Awarding Fees,” reports that a federal judge had sweeping praise for a million-dollar settlement, a third of which went to attorney fees, in a Fair Labor Standards Act (FLSA) suit that was based on an unusual and complex employment contract. U.S. District Judge Robert D. Mariani of the Middle District of Pennsylvania approved the settlement between a class of service technicians and their employer, Benco Dental Supply, and gave class counsel more than 50 percent increase to its lodestar billing rate.
“Plaintiffs brought a claim in a complex and little-litigated area of law, where prospects of victory at a jury trial and on appeal remained unclear, and still managed to settle at an amount close to the limits of defendant’s liability,” Mariani said. “Given the many risks of litigation – including all the imponderable twists and turns that might not become apparent until months or years into the case – this settlement represents a more than reasonable outcome for plaintiffs,” he said in Creed v. Benco Dental Supply.
Nearly 70 technicians are included in the suit, led by Douglas Creed, alleging that they were denied overtime pay under their contracts in violation of the FLSA. The company had signed Belo agreements with its workers, under which they were paid a flat amount for 60 hours per week, regardless of the number of hours they actually worked, according to the opinion.
A Belo contract is designed to govern the compensation of employees who work irregular hours and provides an exception from some requirements of the FLSA, according to the U.S. Department of Labor. “Because Belo agreements are rarely used, the central issue in this case – whether the agreements were correctly administered to provide for proper overtime pay – would be difficult to address and would require a significant amount of motion practice, extensive discovery, and would ultimately culminate in a jury trial,” Mariani said.
The judge praised the plaintiffs’ lawyer, Rowdy Meeks, who has a practice in Leawood Kan., as being “skilled and efficient.” “He has navigated an unclear area of law to produce an award for the class that comes close to the full extent of Benco’s liability and that led to the creation of better employment contracts for all of Benco’s service technicians, whether they opt into the class or not,” Mariani said. Also, Meeks took on a significant risk by handling the case on a contingency-fee basis, which could have resulted in little-to-no return for him, the judge said.
Meeks had submitted a lodestar billing rate of $625 an hour for himself and $175 an hour for his paralegal. He worked 311.7 hours on the case and 39.2 in paralegal hours. “This would amount to a total bill of $201,672, meaning that the settlement agreement gives counsel 1.65 times the lodestar amount,” Mariani said. However, given the nature, complexity, and potential duration of the case, the court does not believe that a 1.65 multiplier is unreasonable. He added in a footnote that his decision here should not be taken as an endorsement of that level of legal fees.
The Supreme Court has stated that a reasonable hourly rate is generally equated to the prevailing market rate for attorneys providing comparable services. The fact that a client is willing to pay rates in excess of market rates does not necessarily make the higher rates unreasonable or appropriate, particularly where the charges will be passed on to third parties who may have a contractual obligation to indemnify.
There are several reputable billing rate surveys available:
“Law Firm Billing Rates and Practices” and “Survey of Law Firm Economics” by ALM Legal Intelligence
“Real Rate Report” by CT TyMetrix
The Laffey Matrix
“Law Firm Billing Survey” by The National Law Journal
“Report of the Economic Survey” by the American Intellectual Property Law Association (AIPLA)
State rate surveys, such as the Oregon State Bar Hourly Rate Survey
As attorney’s reasonable hourly rate is generally equated to the prevailing market rate for attorneys providing comparable services. By using numerous resources available, it is possible to review the billing rates of individual lawyers in a particular matter and determine what a reasonable billing rate may be. In addition, in-house counsel should factor in the background of individual lawyers and the nature of the work performed before assigning the lawyer an adjusting billing rate that is appropriate based on the nature of her practice and the length of experience in comparison to lawyers providing similar services.
Sometimes this information can be used to negotiate a reasonable billing rate prior to legal work being performed. In other circumstances, determining a reasonable billing rate may assist in reviewing the legal fees for reasonableness.
A recent ABA Journal story, “How Much Has Weil Gotshal earned in Lehman Brothers’ Bankruptcy?,” reports that professional fees paid to lawyers and other bankruptcy professionals tops $2 billion since Lehman Brothers Holdings filed for Chapter 11 bankruptcy in 2008. Almost $500 million in attorney fees has been paid to Lehman counsel Weil Gotshal & Manges. This is the largest bankruptcy in U.S. history.
Lehman creditors are set to get 18 cents on the dollar by 2016. Under a 2011 liquidation plan, the value of the Lehman estate was estimated to be $65 billion. Lehman listed $613 billion in debts when it filed for bankruptcy protection. A $14 billion distribution is scheduled to pay out in October, and after that, the estate’s distributions in total will be $43 billion.
Robert Lawless, a bankruptcy professor at the University of Illinois College of Law said the fees are appropriate. “It’s easy to be outraged and say it shouldn’t happen, but is this emblematic of a system that’s broken and isn’t working?” he asks. “I can’t look at $2 billion in fees in a $639 billion case and say that.”
Harvey Miller, the Weil lawyer who represents Lehman, said the recovery may rise to 22 cents on the dollar as the value of the estate’s assets are expected to increase to approximately $80 billion over the next three years. Miller expects that the case will continue for three to five more years, as large lawsuits go on and the reorganization is carried out.
A recent Metropolitan News story, “C.A. Court Upholds Attorney Fee Award Six Times Damages,” reports that the Second District Court of Appeals in California—citing the “strong public policy” in favor of facilitating lawsuits based on sexual harassment—has upheld a $143,861 attorney fee award in favor of a woman who lost on most of her causes of action and garnered a judgment for only $22,625. The decision, written by Division Eight Justice Elizabeth Grimes, affirmed the fee award by Los Angeles Superior Court Judge Charles F. Palmer in favor of Neenah Tran, a former employee of Beyond Blue, Inc.
In her 2006 complaint, Tran had sought economic damages “in excess of $150,000.” Tran’s action has based on misconduct by Beyond Blue’s president Harry Haralambus, who was named as a defendant along with the company, and represent himself on appeal. Tran’s lawyer, throughout the seven years of litigation, was Marina Del Rey attorney R. Jeffery Ward.
Tran won a cause of action under the Fair Employment and Housing Act (FEHA), which authorizes an award of attorney fees to a prevailing employee/plaintiff. Under FEHA, an unlimited jurisdiction court, such as that Palmer presides over, may deny attorney fees where the award is less than the court’s jurisdiction minimum of $25,000. The opinion quotes Palmer as explaining why he was granting fees:
“[T]he court finds that the strong public policy in favor of access to judicial remedies for employees seeking enforcement of rights created under FEHA, and with respect to sexual harassment in particular, and that the nature of conduct which the court found to have occurred in this case cause the court to exercise its own discretion to award attorney’s fees to plaintiff Neenah Tran.” Grimes found no abuse of discretion.
A recent The Recorder story, “9th Circuit OKs NVIDIA Class Settlement,” reports that the U.S. Court of Appeals for the Ninth Circuit signed off on a first-of-its-kind class action settlement, including a $13 million fee award for class counsel led by Milberg, arising from defective NVIDIA computer chips. The defects related to the solder on the chips, known as bumps.
“Although the award is large, it is proportional to the time spent by counsel under the lodestar method that the district court used,” the court stated in an unpublished per curiam opinion. The amount also reflected“ the vigor and length of litigation, the complexity of issues, the risk that plaintiffs would have recovered less or nothing through further litigation, [and] the significant benefits to class members.”
NVIDIA Corp. announced problems with laptops and notebook computer chips in 2008. The company, led by counsel at Orrick, Herrington & Sutcliffe, worked out a deal through Apple, Dell and Hewlett-Packard to repair or replace all of the affected computers. It was said to be the first time an upstream computer component maker had reached through retailers to settle consumer claims.
Plaintiffs’ lawyers and defense counsel use different billing models. Defense lawyers typically bill by the hour with their fees paid by a corporate client. Typically, plaintiffs’ lawyers do not bill by the hour. Their fee recovery is based on success in a particular case. Plaintiff and defense lawyers can learn from each other's billing models.
The NFL has reached a $765 million settlement with 4,500 retired football players in the consolidated concussion-related litigation. U.S. District Judge Anita Brody will still have to approve the settlement after reviewing it, but the recommendation comes from the mediator, Judge Layn Phillips. According to Judge Brody’s order, this “settlement holds the prospect of avoiding lengthy, expensive and uncertain litigation, and of enhancing the game of football.”
The plaintiffs' attorney fees and expenses are to be determined. The attorney fees and expenses will be paid from a separate fund. According to the terms of the settlement, “legal fees and litigation expenses to the plaintiffs’ counsel, which amounts will be set by the District Court.” The court, though, is not bound by the plaintiff attorney contingency fee agreements.
California Governor Jerry Brown signed Senate Bill 462 into law, making it harder for employers to obtain attorney’s fees in certain employment wage claim cases. Prior to the passage of SB 462, section 218.5 of the California Labor Code required a court in any action brought for the nonpayment of wages, fringe benefits, or health and welfare pension fund contributions, to award reasonable attorney’s fees and costs to the prevailing party who requests such fees and costs at the outset of the case, regardless of whether the prevailing party was the employer or the employee.
SB 462 changed that, providing instead that an employer cannot obtain attorney’s fees under section 218.5 just by prevailing – it must also establish that the employee brought the court action “in bad faith.” By contrast, an employee can still obtain attorney’s fees and costs where he or she prevails, without having to prove “bad faith.”
The bill is a response to the California Supreme Court’s decision in Kirby v. Immoos Fire Protection, Inc, which, while denying section 218.5 attorney’s fees in the case before it, affirmed that section 218.5 “awards fees to the prevailing party whether it is the employee or the employer; it is a two-way fee-shifting provision.” Following the Court’s issuance of that opinion, plaintiffs’ attorneys have been seeking to change fee shifting provisions of section 218.5, claiming that a two-way fee-shifting provision has a chilling effect on contractual wage claims.
A recent Bloomberg story, “U.S. Bank Legal Bills Exceed $100 Billion,” reports that since the financial crisis the six biggest U.S. banks, led by JP Morgan Chase & Co. and Bank of America Corp. have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years. That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgage and foreclosure, according to data compiled by Bloomberg.
About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning the tally may surge as regulators, prosecutors and investors press new claims. JP Morgan and Bank of America bore about 75 percent of the total costs, according to the figures compiled from company reports. JP Morgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserve for mortgage buybacks, filing show.
The data were compiled from quarterly reports from the Federal Reserve, the SEC and investors covering January 2008 through June 2013. Some of the banks distinguished between litigation costs and legal fees, which could include routine expenses of running a business, such as drawing up contracts, rather than lawsuits. Still, most outlays at JP Morgan, Bank of America and Citigroup were tied specifically to litigation, the filings show.
A recent BLT Blog post, “Fannie Mae Securities Class Action Lawyers Seek $44M,” reports that the plaintiffs’ lawyers are seeking 22 percent of the $153 million settlement fund – about $29.1 million in attorney fees and about $15.2 million for expenses. Fannie Mae and its former auditor, KPMG LLP, reached the settlement in the securities fraud class action earlier this year.
Former Fannie Mae investors, led by the Ohio attorney general’s office on behalf of state pension plans, sued Fannie Mae and its auditor, KPMG, in 2004. The class accused the mortgage giant of violating federal securities laws by manipulating earnings and violating guidelines known as generally accepted accounting principles.
The quest for attorney fees has been smooth so far. No class members have filed an objection to the settlement, which included notice that their lawyers would be seeking the maximum of 22 percent of the settlement in fees and up to $17 million in expenses. Class members have until September 30 to file objections.
In their motion for fees, the plaintiffs’ lawyers said they earned the fees after nine years of complex litigation. The settlement – which they described as the largest securities class action recovery in Washington—“did not come without a massive investment of resources, both time and treasure.” The plaintiffs’ lawyers spend nearly 300,000 hours on the case, which they handled on a contingency fee basis, according to the motion. The lodestar calculation of the fees came out to about $94 million.
“A risk of non-payment generally counsels in favor of increasing the fee award to attorneys who secure a recovery for their client,” they argued. “Courts are aware that without such incentive, plaintiffs’ lawyers might be less willing to take on cases that involve either unsettled legal issues or clients who might otherwise go unrepresented.”
The risks facing plaintiffs’ counsel escalated in the months leading up to the settlement. U.S. District Judge Richard Leon and dismissed several former Fannie Mae executives as individual defendants in the case, finding the plaintiffs didn’t produce enough evidence that they acted with intent to deceive, and he was weighting the defendants’ joint motion to dismiss.
A recent The Recorder story, “Court Approves Facebook Class Settlement, Shaves Attorney Fees,” reports that a federal judge gave final approval to a $20 million settlement but took an axe to the $7.5 million in fees requested by plaintiffs’ attorneys. Fraley v. Facebook was filed in March 2011 on behalf of some 150 million social network users whose names and likenesses were used to promote products and services through Facebook’s “Sponsored Stories” advertising feature.
The settlement approved by U.S. District Judge Richard Seeborg provides for each Facebook user who submitted a valid claim to receive $15, with remaining funds disbursed to 14 organizations focused on consumer protection, privacy and other issues raised in the suit. Facebook Inc. is also required to improve its disclosure practices, giving users more control over when and how their names and photos will be used. The company must also create special controls for minors.
Seeborg granted the plaintiffs’ motion for attorney fees, costs and incentive awards, but reduced some amounts. The class had moved to recoup $7.5 million in attorney fees, which marked 37.5 percent of the settlement fund. Though above the typical 25 percent benchmark, plaintiffs’ lawyers argued their fees should reflect the value of the injunctive relief secured for the class. Seeborg rejected that approach, finding “nothing to suggest…that any class member will see a single dollar more in his or her pocket as a result of any of the injunctive provisions.”
Instead, he awarded plaintiffs’ lawyers 25 percent of the settlement fund after the deduction of administrative expenses, incentive awards and costs. Those payments are expected to total roughly $1.1 million, making the fee award approximately $4.7 million.
A recent New York Times story, “Wall Street Debates Who Should Pay Legal Bills,” by Andrew Ross Sorkin reports that the debate about who should foot the legal bill is an increasingly common question within legal circles amid the current spate of prominent Wall Street white-collar cases with bills ballooning, by the hour, into the tens of millions of dollars, if not more.
Goldman Sachs paid several millions of dollars to defend, unsuccessfully, its former trader, Fabrice Tourre, in his civil fraud case. He was found liable on six counts of civil securities fraud. Even though he lost, the firm is not seeking reimbursement from Mr. Tourre, according to the people involved in the matter. In fact, the firm plans to pay for his appeal and has privately indicated it might even pay whatever money he could ultimately be fined, these people said.
In contrast, Goldman, after spending more than $35 million on the legal fees for one of its directors, Rajat Gupta, who was convicted in criminal court of insider trading, is seeking to be repaid; Mr. Gupta may not have the money.
Steven A. Cohen’s hedge fund, SAC Capital Advisors, is picking up the tab for some of its traders ensnared in the continuing criminal insider trading investigation into the firm, but not others. Despite firing one of its traders, Mathew Martoma, the fund is now covering the bills for his defense against securities fraud and conspiracy charges. The firm is also paying legal bills for Michael Steinberg, who remains on the firm’s payroll and has also been accused of insider trading. On the other hand, SAC did not pay the legal bills for another former employee, Richard S. Lee, who is cooperating with the government in it investigation and pleaded guilty to insider trading.
The implication of who is – or who is not – paying legal fees could have a large effect on the defense’s strategies for defendants. But in addition to that, it is increasingly raising questions in the industry. “It’s a more significant issue today than it’s ever been,” said Kevin H. Marino, a partner at Marino, Tortorella & Boyle. In this era, positions on Wall Street are fraught with all sorts of perils and more individuals are finding themselves ensnared in lawsuits and investigations.”
There is no absolute rule or law that says a company must pay defense fees for its employees, but Delaware law – where most companies are incorporated – allows legal fees to be paid and in certain cases has required it on the theory that it is good public policy to protect employees from lawsuits that result from work that advances the interests of the employer. Depending on a corporation’s bylaws, directors, officers and, in some cases, employees are often indemnified. Most companies by insurance to pay the fees. In almost all cases, employees must repay the legal fees and often other restitution if they are found guilty.
A recent academic paper, “Do Class Action Lawyers Make Too Little?” (pdf), by Vanderbilt Law Professor Brian T. Fitzpatrick, published in the University of Pennsylvania Law Review, explores the economics of attorney fee awards in class action litigation. The paper concludes:
Judges have been given the discretion to award a significant portion of all the contingency fee lawyers in the United States collect when they set attorneys’ fees in a few hundred class action judgments every year. Judges currently appear to award these fees largely in the absence of any normative theory and, instead, on the basis of intuition. As a result, judges tend to award lower fee percentage in class action cases than those negotiated in the competitive market for individual litigation.
Although lower percentages might be justified in large-stakes class actions, current compensation practices underpay class counsel in the small-stakes actions that may comprise most of the class action docket in state and federal court. To maximize social welfare, it is often thought that litigation should both deter defendants from causing harm and insure plaintiffs against those harms when they are not deterred. But small-stakes class actions serve no insurance function; they are only about deterrence. As such, there is little reason as a theoretical matter not to fully incentivize class action lawyers to bring these suits by awarding them the entire class recovery. Although political and perhaps even legal constraints might prevent judges from setting fee percentages at 100% in small-stakes cases, deterrence-insurance theory nonetheless suggest that judges ought to give class counsel as much as they can, which, by any measure, is more than the 25% they usually give now.
Posted:Wednesday, August 21, 2013
Categories: Fee Request
A recent AM Law Litigation Daily story, “Judge OKs $730 Million Citi Bondholders Deal,” reports that U.S. District Judge Sidney Stein approved a $730 million settlement in the Citigroup litigation with bondholders who claimed the bank misled them about the condition during the financial crisis. The ruling does not address the lingering question of whether plaintiffs’ counsel at Bernstein Litowitz Berger & Grossmann will get $146 million they’ve requested in attorneys fees. Berstein Lowitz’s total recovery in post-financial crisis investor class actions is now hovering above the $5 billion historic mark.
In a 13-page decision, Stein called the settlement fair and reasonable, even as he noted that Bernstein Lowitz’s own expert witness pegged damages at roughly $3 billion. Plaintiffs’ counsel would have faced several obstacles at trial. Stein wrote, like establishing liability under Fait v. Regions Financial Corp., a 2011 decision by the U.S. Court of Appeals for the Second Circuit that made it extremely difficult to build a securities class action based on a bank’s statements about its goodwill and loan loss reserves.
Stein has not yet ruled on the firm’s $146 million attorney fee request, which it filed in June. The firm plans to give part of the money to co-counsel at Kessler Topaz Meltzer & Check and Pomerantz Grossman Hufford Dahlstrom & Gross. By way of comparison, Bernstein Litowitz and its co-counsel asked for $150 million when it negotiated a historic $2.4 billion class action settlement with Bank of America Corp. last September.
A recent Metropolitan News story, “Attorney with Disbelieved Time Records to Receive No Fee,” reports that an attorney who sought nearly $25 million in attorney fees based on her successful representation of plaintiffs in class action was properly awarded nothing, a California Court of Appeal held. In a published opinion (pdf) by Justice Jeffrey Johnson said that Los Angeles Superior Court Judge Anthony J. Mohr also was correct in imposing $165,000 in discovery sanctions on the attorney, Lori J. Sklar.
Sklar was lead counsel in an action against Toshiba America Information Systems, which culminated in a 2006 settlement, finally approved by the court the following year. Nearly one million consumers who had purchased a model Toshiba’s laptop computer—which, based on a defective cover, tended to shut down and lose date—received allowances with a value totaling about $99 million.
Mohr was skeptical of Sklar’s claim as to the hours she put in. Toshiba balked that it showed that she worked on the case “nearly all day (sometimes as much as 16.75 hours) every day, seven days a week, including holidays, for some 22 months.”
The lawyer resisted Toshiba’s discovery attempts in connection with the fee request. It wanted the original records from her computer to see how they matched up with her hard-copy compilations, but it turned out Sklar had wiped them from her computer. Mohr ordered that she permit an expert from Toshiba to try and pull the erased files from her hard drive, but she refused access.
Johnson said that Sklar’s conduct “amply supports the sanctions award.” He rejected her contention that the court had no right to order an inspection of her hard drive, declaring: “[T]he sizable nature of Sklar’s fee request and her resistance to the court’s inquiries regarding her seemingly excessive rates made the court’s inspection orders reasonable and necessary.”
In connection with the lawyer’s bid for fees, Johnson pointed to this finding by Mohr: “Sklar’s billing records are, for purposes of calculating the lodestar, unusable. They contain troubling inconsistencies and omissions. There are numerous instances of what appear to be inaccurate and even contradictory billing entries. Moreover, the total number of hours claimed is excessive. The only conclusion that this court can reach is that the attorney’s records of the time actually spent cannot be fairly relied upon.”
Although Mohr is quoted as saying in his order that Sklar had “relinquished her entitlement to a fee” by virtue of her conduct, Johnson later in the opinion dismissed Sklar’s contention that the denial of attorney fees was a form of a sanction. Johnson responded: “To the contrary, the fee order as described above shows the trial court’s careful consideration of the evidence…” Mohr did award $179,600 for work done by Sklar’s staff, valued at $100 an hour. The Court of Appeal affirmed, except as to $2,400 of that amount based on a calculation error, and remanded for a recomputation.
The case is Ellis v. Toshiba American Information Services, Inc.
A recent Detroit Free Press story, “Judge Appoints $600/Hour Attorney to Monitor Excessive Fees in Detroit Bankruptcy,” reports that U.S. Bankruptcy Judge Steven Rhodes appointed a fee examiner to monitor legal fees in Detroit’s Chapter 9 bankruptcy. Rhodes named Robert M. Fishman of the Chicago-based law firm Shaw Fishman Glantz & Towbin to ensure the city’s legal fees and consulting bills don’t become exorbitant. Fishman will also be charged with making sure the attorney fees are public information. Experts have estimated Detroit’s legal fees could top $100 million if the case drags out.
The move was widely expected after the city agreed to pay for the fee examiner’s costs. Attorneys and staff members at Fishman’s law firm will provide assistance. Fishman can also contract Fort Lauderdale, Fla-based accounting firm Soneet R. Kapila and Kapila & Company to help monitor attorney fees.
Fishman’s typical hourly rate is $675. He is discounting his hourly rate to $600 for Detroit. Rhodes capped the average rate of Fishman attorneys and staff who will work on Detroit’s case at $430 per hour. He capped the average rate of Kapila associates who will work on the Detroit case at $300 per hour.
NALFA member Pat Gallagher was quoted in the Detroit Free Press story. "All of the people involved in disputes at this level are paid at the top scale," said Lansing attorney Byron (Pat) Gallagher Jr., who has served as an expert witness in disputes over legal fees. "As a percentage of what's involved in any of these cases, the fees will be a small part of the dispute."
Rhodes scheduled a Sept. 10 hearing on a proposed order requiring attorneys and consultants to file monthly invoices with the fee examiner, who would be required to file a report on his findings at least once every three months. If he believes fee are too high, Fishman could recommend a hearing at which Rhodes would consider action.
The city’s main bankruptcy firm, Jones Day, has already written off millions in bills it does not expect to be paid, officials said. Hourly fees for Jones Day bankruptcy attorneys range from about $425 to more than $1,000 according to the law firm’s contract with the city.
In California, attorney Stephen Siringoringo was ordered by the State Bar Court to stop practicing law after accepting up-front payments from mortgage modification clients. The state law has banned such fees since 2009.
In Florida, attorney Eric Mader of the Mader Law Group and another individual are accused of charging up-front fees in national foreclosure-rescue operations, providing misleading information to clients and charging for services that weren’t rendered in a complaint filed by Florida Attorney General Pam Bondi.
In Colorado, the state attorney general’s office is investigating a half-dozen law firms over concerns that they are charging unreasonable markups on legal expenses associated with mortgage foreclosure cases while representing lenders.
“At NALFA, our position is that these alleged billing abuses are much worse than the alleged overbilling at DLA Piper that was reported on earlier this year,” said Terry Jesse, NALFA Executive Director. "These alleged billing abuses appear to be systematic, widespread, and in the Colorado case, there's evidence of collusion," Jesse concluded. NALFA also reported on this story in “Colorado AG Investigates Billing Practices of Foreclosure Lawyers”
A recent Corporate Counsel story, “In-House Counsel Seeing Increase in Litigation,” reports that more than one-third of general counsel in a recent survey, “Litigation &Corporate Compliance Survey (pdf),” said the number of legal disputes their companies have been involved in increased during the past 12 months and only 7 percent said they saw a decrease. The study was conducted by business consultant AlixPartners. The study is based on a survey of more than 100 general counsel at companies of $250 million or more, primarily in the U.S.
And with an increase in litigation comes higher legal costs reported by most companies in the AlixPartners survey. One in 10 companies said they were involved in a “bet-the-company” lawsuit in the past year. The good news for in-house lawyers is that some 27 percent of companies said they are increasing the size of their legal departments to help deal with the disputes.
In other findings, the report said:
A whopping 84 percent of corporate legal departments are trying several ways to lower legal costs, including keeping more in-house, using alternative fee arrangements, and resorting to alternative dispute resolution.
Contract and intellectual property disputes were the most common types of legal actions.
Some 55 percent of respondents said alternative fee arrangements are important.
Many companies were considering enhanced compliance programs as well as better tools to mitigate risks.
Some 25 percent of respondents have increased use of outside counsel, especially for mergers and acquisitions and internal investigations.
A recent NLJ story, “Fight Continues Over Attorney Fees in BAR/BRI Lawsuit,” reports that fee objectors to two settlements involving antitrust claims against the makers of the BAR/BRI bar review preparatory course materials have moved to recover their attorney fees, claiming they were instrumental in unraveling the original deals in favor of new agreements that better benefit class members.
In one settlement, for $9.5 million, fee objector George Richard Baker seeks $578,750 in fees for his “remarkably vital role” in raising red flags over an earlier deal that involved coupons; the coupons were later replaced with cash. Baker also objected to $1.9 million in fees sought by Harris & Ruble of Los Angeles, class counsel in the case.
Meanwhile, a law firm for five fee objectors who successfully challenged class counsel’s fees in an earlier $49 million settlement is expected to file an opening brief this month before the U.S. Court of Appeals for the Ninth Circuit challenging $236,000 in attorney fees and $1,700 costs awarded on January 14. Kendrick & Nutley of Pasadena, Calif., claims its lawyers are entitled to nearly $1.8 million.
The underlying class actions both allege that law school students paid too much for BAR/BRI bar review materials after West Publishing Corp. and Kaplan Inc. conspired to establish a monopoly in violation of the Sherman Act, the federal antitrust law. The $49 million settlement resolved claims involving purchases made during the nine years after August 1, 1997. The case, filed in 2005, involved a class of 300,000 students who claimed they were overcharged by about $1,000 for the course.
Both cases are before U.S. District Judge Manuel Real in Los Angeles. In an August 5 filing to Baker’s claim, Harris & Ruble argue that Baker was not responsible for the revised deal. He added that Baker’s firm worked fewer than 70 hours on the case and his clients, whose concerns about the coupons mirrored that of more than 200 other objectors, lack standing to object since they hadn’t submitted claims by the July 8 deadline.
A recent Courthouse News Service, “Huge Fee Award OK’d for Lawyers in Motorola Suit,” reports that the U.S. Court of Appeals for the Seventh Circuit affirmed a $55 million (27.5 percent) fee award in the $200 million Motorola Solutions settlement in a class action securities case. Chief Judge Frank Easterbrook wrote the nine-page opinion (pdf). Easterbrook has been the author of all the court’s major recent opinions on legal fees.
Fee objector Edward Falkner argued that fee schedules should be set at the start of litigation, preferably in an auction in which the judge picks the lowest bidder among law firms competing to represent the class. But the court rejected this argument.
While the Seventh Circuit agreed that attorneys’ fee in class actions should approximate the market rate between willing buyers and willing sellers of legal services, it found that “solvent litigants do not select their own lawyers by holding auctions, because auctions do not work well unless a standard unit of quality can be defined and its delivery verified. There is no ‘standard quality’ of legal services and verification is difficult if not impossible.”
The court emphasized the factor of risk in the upholding the attorney fees. Easterbrook relied on the attorney fee expert declaration (pdf) of law professor Charles Silver who wrote that, “this suit was unusually risky. Defendants prevailed outright in many securities suits. This one took more than four years, and more than $5 million in out-of-pocket expenses by counsel to conduct discovery and engage experts, before reaching the summary-judgment stage.”
Indeed, Motorola had been primed to prevail on its summary judgment motion until class counsel uncovered some unanticipated facts during discovery. Motorola was only willing to settle for a substantial sum after its motion was denied.
In addition, no other law firm wanted to take on the case in the beginning. “Lack of competition not only implies a higher fee but also suggests that most members of the securities bar saw this litigation as too risky for their practices,” Easterbrook wrote. “The district court did not abuse her discretion in concluding that the risks of this suit justified a substantial award, even though compensation in most other suits has been lower.”
Investor would certainly reap more from the settlement if the court reined in the fees, but Easterbrook highlighted the lack of protest from the pension funds, university endowments and other large institutional investors that hold claim to more than 70 percent of the settlement fund.
“The difference between 27.5 percent of $200 million and a smaller award (say, one averaging 20 percent) could be a tidy sum for institutional investors (including this suit’s lead plaintiff, a pension fund), one worth a complaint to the district judge if the lawyers’ cut seems too high,” he wrote. “Yet none of the institutional investors has protested – either by filing a motion seeking the judge to reduce the fees or by supporting Falkner’s position in this court.
The ruling also notes data about attorneys’ fees in other class actions settlements. Empirical studies, Attorney Fees in Class Action Settlements: An Empirical Study by Theodore Eisenberg and Geoffrey P. Miller and An Empirical Study of Class Action Settlements and Their Fee Award by Brian T. Fitzpatrick and Attorney Fees and Expenses in Class Action Settlements: 1993-2008 by Theodore Eisenberg and Geoffrey P. Miller were referenced by the court. The studies found that the mean award from settlements that range from $100 to $250 million is 12 percent, and the median is 10.2 percent. Courts usually award counsel a declining percentage as the size of the settlement fund increases.
A recent BLT Blog post, “Judge Awards $434K in Fees in Iranian Dairy Dispute,” reports that a Washington federal judge approved $434,000 in attorney fees to Winston & Strawn for its work in the past year in a decade-long legal fight over interests in an Iranian dairy. The fees aren’t a sure thing yet, though. Iran said it plans to appeal.
Plaintiff McKesson Corp. sued the Islamic Republic of Iranian in 1982, claiming that it had expropriated McKesson's equity interest in an Iranian dairy after the 1979 revolution and failed to pay its dividends. The case has gone up to the U.S. Court of Appeals for the D.C. Circuit as least half a dozen times, and is pending again before the appeals court following a March judgment against Iran for $40.5 million.
Iran appealed that order, which included $10 million in attorney fees for work performed by McKesson’s lawyers from 2000 to 2012. The order from U.S. District Judge Richard Leon covered McKesson’s legal fees from mid-2012 through April of this year. “Iran is planning to appeal the latest order, just as it appealed the prior fee awards,” Iran’s attorney, Christopher Wright of Wiltshire & Grannis, said in an email.
According to the order, Winston charged for 716 hours of lawyer time and 32 hours of paralegal time spent on the case from July 2012 through April 2013. Associate Eric Goldstein billed the most time on the case during that period, according to information (pdf) the firm submitted to the court: 386 hours. His hourly rate went up from $460 in 2012 to $525 this year.
Iran has challenged McKesson’s claims for attorney fees in the past, arguing the court didn’t have jurisdiction to issue them and questioning the reasonableness of the rates charged by Winston and Morgan, Lewis & Bockius, which is also involved. From 2000 to 2012, McKesson said its lawyers billed more than 18,500 hours.
Leon previously found that Iranian law allowed for the award of attorney fees, and that the rates charged by McKesson’s lawyers were reasonable. In his opinion, he found the rates were reasonable given the lawyers’ experience and skill level, “the tasks performed were appropriate and necessary, and the case was efficiently staffed,” Leon also awarded $17,000 in costs.
A recent Inside Counsel story, “Pampers Settlement Thrown Out Over Excessive Attorney Fees,” reports that the Sixth Circuit Court of Appeals threw out a class action settlement plaintiffs reached with Proctor & Gamble Co. (P&G), saying the attorneys who brought the action were receiving too high a share.
In 2011, P&G agreed to a $3 million settlement after a few dozen plaintiffs had claimed that Pampers Dry Max diapers caused rashes on babies. The attorneys that brought the suit were to receive $2.73 in attorney fees and each class member would receive $1,000. The settlement was approved by US District Judge Timothy S. Black in Cincinnati.
“The settlement in this case is not fair,” Judge Raymond Kethledge wrote for the appeals court. “And the district court abused its discretion in finding the contrary. “The signs are not particularly subtle here,” Kethledge wrote in the 2-1 majority opinion. “The settlement agreement awards a fee of $2.73 million—this, in a case where the lawyers did not take a single deposition, serve a single request for written discovery, or even file a response to P&G’s motion to dismiss.”
In a dissenting opinion, Judge R. Guy Cole Jr. of the appeals court wrote that he considered the settlement fair – and that the district court judge hadn’t abused his discretion. Cole also cast doubt on the claims against P&G. “Although the relief offered to the unnamed class members may not be worth much, their claims appear to be worth even less,” Cole wrote. “Nobody disputes that the class’s claims in this case had little to no merit. In the absence of this settlement, class members would have almost certainly gotten nothing.”
The Pampers "Dry Max" Class Action is Daniel Greenberg v. Procter & Gamble Company et al, Case No. 11-4156 in the U.S. Court of Appeals for the Sixth Circuit.
Please Note: The above represents the largest attorney fee awards in Private Securities Litigation Reform Act (PSLRA) settlements in U.S history. The following data does not included settlements that occurred in 2013.
1: Nortel I provided for $438,667,428 and 314,333,875 shares of (pre-consolidation) Nortel stock. 3% of each was awarded to counsel, resulting in $13,160,022 in cash and 9,430,016 shares of common stock.
2: Nortel II provided for $370,157,428 and 314,333,875 shares of Nortel common stock valued at $2.24 per share. 8% of each was awarded to counsel, resulting in $29,612,594 in cash and 25,146,710 shares of common stock.
3: In McKesson HBOC, there were separate settlements with different defendants in 2007, 2008 and 2012. Much of the fee data concerning these settlements is not publicly available. The fee data indicated herein is just against McKesson defendants, which accounts for more than 92% of the total settlement amount.
4: There were several different settlements in HealthSouth against various over the course of 3 years: $445 million in 2008, $109 million in 2009, $117 million in 2010, and $133.5 million in 2010 for the Bonds case. Attorneys’ fees of $77,875,000 of $445 million, or 17.5%, was approved in 2008, $20,154,100 of $109 million, or 18.49%, was approved in 2009, $22,815,000 of $117 million, or 19.5%, was approved in 2010 and $17,355,000 of $133.5 million, or 13%, was approved in 2010 for the Bonds case. The fee percentage and lodestar information here represent the aggregate of all the settlements.
5: There were several different settlements in Lucent Techs. for various classes: $517 million (made up of cash, stock and warrants) for common shareholders class, $69 million for the ERISA class, $4.6 million for an individual plaintiff, $3.75 million for debt security holders, and $14 million for the derivative plaintiffs. Attorneys’ fees were $87.89 million (or 17%), $10.35 million (or 15%), $920,000 (or 20%), $937,500 (or 25%) and $2.38 million (or 17%) for each respective class. The fee percentage and lodestar information here represent the aggregate of all the settlements.
6: There were two settlements in BankAmerica for different plaintiff classes: $156.8 million for BankAmerica plaintiffs and $333.2 million for the NationsBank plaintiffs. Attorneys’ fees were $27.58 million and $58.83 million respectively. The fee percentage and lodestar information here represent the aggregate of both of the settlements.
7: In Dynegy, the settlement was $406.05 million in cash and 17,578,781 shares worth $68 million of Dynegy stock. The court awarded 8.7257% of both, which amounts to $35,151,482 in cash and 1,533,872 shares of Dynegy common stock worth $5.93 million, for a total fee of $41.08 million.
8: There were two settlements in Raytheon against multiple defendants: $210 million in cash and $200 million worth of settlement warrants with certain defendants, and $50 million with PricewaterhouseCoopers. The fee percentage and lodestar information here represent the aggregate of both of the settlements.
9: There were several different settlements in Global Crossing against various defendants: $245 million with Global Crossing Officers and Directors (“D&O”) on March 19, 2004, with $75 million with Citigroup on March 8, 2005, $25 million with Arthur Andersen LLP on July 7, 2005, $99 million with various financial institutions on July 25, 2006 and $3.8 million with Microsoft Corp. and Softbank Corp. on May 30, 2007. Attorneys’ fees were $38.4 million (approximately 16%), $13.3 million (or 17%), $4.5 million (or 17%), $15.95 million (or 16%) and $570,000 million (or 15%) from each respective settlement. The fee percentage and lodestar information here represent the aggregate of all the settlements.
10: There were two settlements in Qwest: $400 million with certain defendants in 2006 and $45 million with other defendants in 2009. Attorneys’ fees were $60 million (or 15%) and $6.75 million (or 15%) respectively. The fee percentage and lodestar information here represent the aggregate of both of the settlements.
A recent ABA Journal story, “Slashing $26M in Legal Fees from Citigroup Case, Judge Cites $550/hr Charge for $15/hr Contract Work” reports that a federal judge has slashed by 27 percent the attorney fees awarded to the winning lawyers in a $590 million settlement of a Citigroup Inc. securities class action because of “waste and inefficiency” and billable hourly rates that were “significantly inflated.” “Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial,” wrote U.S. District Judge Sidney Stein in a 48-page opinion (pdf).
The settlement resolves claims by shareholders who purchased Citigroup shares from February 2007 to April 2008 that the New York based bank misrepresented its exposure to securities known as collateralized debt obligations that were tied to mortgage investments. Citigroup lost $27.68 billion in 2008. The lawsuit cited the plunge in the company’s stock price from $47.89 at the start of the fourth quarter of 2007 to $2.80 by January 2009.
The lead plaintiffs’ lawyers will receive $73.6 million instead of the $100.2 million they had requested. Stein also approved $2.8 million in expenses. While Stein said the lawyers “undoubted secured an impressive recovery” for Citigroup investors, their fee request was based on “significantly overstated” metrics.
In particular, the rates of contract attorneys drew a lot of hand-wringing from fee objectors. Serial fee objector Ted Frank bemoaned the hourly rates of contact attorneys. Frank, who was hired by no one, sought to have the contract lawyers billed as an expense. The Court rejected that idea, saying case law supports paying a markup for the work of licensed attorneys as opposed to say legal secretaries or outside experts. "Frank is cherry-picking," Stein wrote in his ruling. "To the extend that Frank purports to offer his own views as an expert on billing practices, the Court finds that he is not qualified to do so," the court wrote. In the end, Stein approved a maximum rate of $200 per hour for contact attorneys.
“At NALFA, our take away from this case is that almost all class action fee objectors are not qualified attorney fee experts because they hold a bias; they have an agenda. Almost all class action fee objectors are not fee experts because they are not independent; they are not objective,” said Terry Jesse, Executive Director. “What is more, fee objectors are not hired by anyone; they are self-appointed gadflies who seek to feast off the hard work of others,” Jesse concluded.
A recent Litigation Management Blog post, “Courts Must Show Their Work When CalculatingAttorney Fees,” by David McMahon, reports on a recent decision by the Ninth Circuit. In Barnard v. Theobald the Ninth Circuit Court of Appeals ruled that the district court abused its discretion when it reduced the amount of attorney’s fees by 40 percent without explaining why a 40 percent reduction is appropriate.
This case arose from a civil rights action, in which the plaintiff sued several police officers for their alleged use of excessive force. After seven days of trial, the jury found in favor of the plaintiff and awarded him over $2 million in compensatory damages.
After the verdict, the plaintiff filed a motion for $315,505 in attorney’s fees and $61,408 in expenses. The district court granted the plaintiff the full amount of the costs, but reduced the attorney’s fees by 40 percent, reasoning that the damages sought were excessive. The court noted that the case was not overly complicated and discovery was already closed when the lawyer took on the case.
The Ninth Circuit opined that while the district court explained why it thought the award was excessive, it failed to justify why a 40 percent reduction is appropriate. The Ninth Circuit has long held that district court must show their work when calculating attorney’s fee. Padgett v. Loventhal (9th Cir, 2013). Thus, the court concluded that it must vacate the fee award and remand the case back to the trial court for more complete explanation.
A recent law.com story, “$1.6 Billion Toyota Settlement Win Final Approval,” reports that U.S. District Judge James Selna in Santa Ana, Calif. approved a $1.6 billion settlement between Toyota Motor Corp. and consumers of its vehicles who alleged they suffered economic losses because of the sudden acceleration recalls. Selna also approved $200 million in attorney fees and $27 million in expenses for 31 plaintiffs’ firms. The payouts amount to 12.3 percent of the settlement value.
The Toyota deal aims to resolve claims by consumers that their cars lost value following the highly publicized recalls of nearly 10 million vehicles for floor mat and accelerator pedal defects associated with sudden acceleration. In particular, the settlement covers class members who own or lease 16 models of Toyota, including the Camry and the Corolla, nine Lexus models and three Scion models. The model years range from 1998 to 2010.
In June, Selna found the settlement to be “fair, adequate and reasonable” but held off approving it due to concerns about how anticipated excess cash would be allocated. At issue were two cash funds worth $250 million in each. One fund would be earmarked for class members whose vehicles lost value due to the recalls, while the other would pay class members whose vehicles are ineligible for installation of a brake override system.
“This settlement is extraordinary in that every single dollar of the class funds will go to class members,” Selna said. That is not always true in class action settlements, and this case was a “complex undertaking,” he said.
Posted:Thursday, July 18, 2013
Categories: NALFA News
1. Dickie Scruggs’ Judicial Bribery Scandal: Richard “Dickie” Scruggs of Scruggs Law Firm in Oxford, Mississippi was one of the most successful trial lawyers in U.S. history. Scruggs was a successful plaintiffs’ attorney who amassed hundreds of millions of dollars in asbestos and tobacco litigation. Worth an estimated $1 billion, Scruggs gave back to the community. He donated to charities, Ole Miss University, and to political candidates and causes. But in a fee dispute with former partner Johnny Jones, Scruggs crossed the ethical line. He attempted to bribe a state judge Henry Lackey with $40,000 in exchange for a judicial order sending the fee dispute case, Jones v. Scruggs, to arbitration.
2. Kentucky’s Fen-Phen Lawyers: Kentucky’s Fen-Phen lawyers took nearly $94 million from their client’s settlement funds. William J. Gallion and Shirley A. Cunningham, Jr. did not tell their clients about a $200 million settlement in the Fen-Phen class action litigation. In addition, they convinced each plaintiff to accept a low value for their claim by withholding facts about the settlement and threatened imprisonment to plaintiffs who revealed their individual settlement amount to others.
3.Milberg Weiss’ Class Action Plaintiff Kickback Scandal: For over two decades,securities class action powerhouse Milberg Weiss, LLP participated in a scheme whereby the firm paid out over $11.3 million in kickbacks to clients who agreed to serve as plaintiffs in class action lawsuits. Prompting its own clients to file the first lawsuit in a class action meant that the firm would control the litigation as lead counsel, a position that guaranteed it the highest percentage of attorney fees from a settlement or judgment.
4.Scott Rothstein’s Ponzi Scheme: Unbeknownst to others in his law firm, Scott Rothstein of Rothstein Rosenfeldt & Adler (RRA) in Fort Lauderdale operated a $1.2 billion Ponzi scheme. Rothstein's investment scheme involved purchasing fabricated "structured settlements," in which Rothstein sold large settlements in legal cases to wealthy investors for lump sums of cash.
5.Marc Dreier’s Ponzi Scheme: Marc Dreier was the sole equity partner of Dreier, LLP in New York. He defrauded investors of nearly $400 million in a Ponzi scheme, where he successfully convinced hedge funds to invest in a company belonging to his former client, Sheldon Solow. His former client, Sheldon Solow and members of his own law firm had no idea what Dreier was doing.
A recent BLT Blog post, “Fee Fight Emerges in Landmark Indian Trust Case,” reports that a nonprofit that said it gave millions of dollars in grants to support the massive Indian trust litigation in Washington federal court is suing for $4.5 million of the $99 million awarded in attorney fees. The Lannan Foundation, a New Mexico-based charitable organization, claimed that when it gave more than $6 million in grants to support the class action, the lead attorney for the plaintiffs agreed to repay those grants using money recovered from the government. Since receiving a $99 million fee award—part of a $3.4 billion settlement the foundation said plaintiffs’ lawyers had refused to pay $4.54 million they owed.
The foundation filed the action in U.S. District Court for the District of Columbia against solo practitioner Dennis Gingold and the law firm Kilpatrick Townsend & Stockton. In a statement, foundation President J. Patrick Lannan said the plaintiffs’ lawyers had “chosen to disregard their promises to repay the Foundation.” The foundation is being represented by Mayer Brown litigation partner Reginald Goeke.
In the mid-1990s, a class of Native Americans sued the U.S. Department of the Interior, accusing officials of mismanaging Native American trust accounts. As the class action picked up, the Lannan Foundation, according to the complaint, agreed to provide financial support to the plaintiffs. Between 1998 and 2009, the foundation said it gave 11 grants totaling $7.825 million to Blackfeet Reservation Development Fund, a nonprofit created by the lead plaintiff in the trust litigation, Elouise Cobell.
Lannan Foundation regrets that it is necessary to bring this suit against the attorneys of the plaintiffs to recover the unpaid balance of the refundable grants-up to $4 million of which the Foundation intends to dedicate to a scholarship endowment in honor of Elouise Cobell,” Lannan said, adding that the amount the group was seeking was less than five percent of the overall fee award.
A recent NLJ story, “Orrick Settles Fee Fight With Doll Maker; Terms Secret,” reports that Orrick Herrington & Sutcliffe has settled a fee dispute with former client MGA Entertainment Inc. over work associated with a copyright lawsuit against Mattel Inc. over the Bratz doll. No dollar amount was placed on the settlement, which was disclosed to U.S. District Judge David Carter, who is overseeing MGA’s case against Mattel, maker of the Bratz doll line. In a January 25 filing, Orrick has indicted that an arbitrator had granted a partial award earlier that month of $23 million, which amounted to a lien on the judgment.
The fee dispute settlement came as Carter deliberated over whether MGA was entitled to amend its complaint against Mattel to include allegations that that it stole trade secrets by having masquerading employees show up at trade fairs. In 2011, a federal jury awarded MGA $88.5 million on those allegations. Carter later increased the award to $310 million, including a corrected verdict of $85 million plus an additional $85 million in exemplary damages and $140 million in attorney fees and costs.
Carter also is deliberating about who gets access to $137 million in attorney fees and costs upheld by the Ninth Circuit. Most of those fees dealt with MGA’s defense against Mattel’s failed claims of copyright infringement. On remand, MGA, its insurers, and Orrick renewed their over fees. Mattel brought a motion to enjoin those parties from enforcing the judgment and collecting on a $315 million bond it had posted pending its appeal. Mattel insisted that it could pay the fee award upheld by the Ninth Circuit but feared the multiple parties could force it to pay more than the $137 million.
During a February 26 hearing, Carter asked both sides to submit additional briefing on whether the money should be placed in an equitable constructive trust set up by the court in light of the dispute. Supporting the trust were Mattel and MGA’s insurers, which argued in June 12 briefs that the entire $137 million fee award should be set aside in the trust. They argued that, including Orrick’s $23 million partial award, the total amount MGA owes third parties is $161 million – more than the actual fee award. MGA opposed the trust.
In MGA’s case against Orrick, MGA attorney Edmond Connor of Connor Fletcher & Williams, had challenged the firm’s initial arbitration award in court documents in Orange County. Orrick sought to confirm the arbitration award. On April 23, Orange County Superior Court Judge William Monroe dismissed Orrick’s petition to confirm the partial award “because the Panel has not determined any, much less all, the issues that are necessary to the resolution of the essential dispute between MGA Petitioners and Respondent Orrick.”
A recent Denver Post story, “Colorado Foreclosure Lawyers Target of Probe into Billing Practices,” reports that the Colorado attorney general is investigating whether law firms specializing in foreclosures regularly inflate expenses that homeowners must reimburse. Lawyers handling foreclosures can be reimbursed for certain expenses, such as running public notices in newspapers advising homeowners of their rights. Investigators say that sometimes lawyers inflated these expenses by as much as 10 times.
In two cases, the law firms hired companies, known as process servers, owned by family and friends, investigators say. The expenses are allowed by law but are limited to the amount a lawyer actually paid or was billed for services or expense such as mailing costs, property inspections, title searches and court docketing charges. The charges are tacked on to the overall cost of a foreclosure and the unpaid mortgage amount, then paid by the homeowner facing foreclosure, the foreclosing bank or investors who buy the property at public auction.
In the worst-case scenario, the amount law firms overcharged taxpayers and homeowners statewide in the past decade would reach into the tens of millions of dollars. The lawsuits seek a judge’s order forcing the lawyers to comply with investigative subpoenas. In one case, a Colorado judge ordered a high-volume foreclosure lawyer to turn over documents to state investigators for review. The newspaper also reported interest from “a handful of foreclosure lawyers listening intently from the back of the courtroom.”
A recent Corporate Counsel story, “Comparing Firm Billing Rates by Practice, City, Size,” reports that New York tops a list of 12 cities with the highest average partner rates for 2012. The survey, from TyMetrix Legal Analytics and Corporate Executive Board shows that law firms charged the most for finance and securities work last year, and that partner rates in New York outpaced those in any other U.S. or Canadian city by more than $100 an hour.
The 2013 Real Rate Report Snapshot draws on $9.5 billion worth of invoices submitted to 83 corporate clients from 2008 to 2012. The dataset encompasses more than 4,800 law firms and 29.1 million hours billed by partners, associates, and paralegals. Here are the top cities with the highest partner hourly rates (on average):
A recent Corporate Counsel story, “GCs Not Satisfied With Outside Counsel Rates,” reports that the Consero Group’s new 2013 Spring General Counsel Survey (pdf), which addresses areas of concern to in-house counsel at U.S. companies, has found that 61 percent of Fortune 1000 general counsel are not satisfied with the rates they pay their outside counsel – a sign that economic pressures are forcing alternative fee arrangements to again become an important issue in corporate board rooms.
The survey, compiled by the executive events organizer Consero Group in partnership with Applied Discovery, also found that 61 percent of the GCs surveyed already use alternative fee arrangement for outside counsel, but 60 percent said they plan to further increase their use of such arrangements.
“Alternative fee arrangements are reining in costs of outside counsel are not new topics, but the appetite for alternative arrangements and for efficient counsel hasn’t decreased,” Consero’s Chief Executive Officer Paul Mandell said. “In fact, there has been a lull in this discussion in recent years but it appears to again be gaining stream.” Mandell said there is an opportunity now for law firms to cater to this increase in order to increase business.
A recent BLT Blog post, “Judge Awards $90.8M in Fees in Black Farmers Class Action,” reports that a federal judge in Washington has awarded $90.8 million in attorney fees to the plaintiff lawyers involved in the high-profile black farmers’ discrimination litigation. U.S. District Judge Paul Friedman concluded the plaintiffs’ attorney should receive the maximum amount – 7.4 percent – under the terms of a historic settlement with the U.S. Justice Department. The deal set out a fee range between 4.1 percent and 7.4 percent.
The fee award is the latest chapter in a long-running dispute in which African American farmers alleged the U.S. Department of Agriculture discriminated against them in the loan application process. In a consent decree, the USDA acknowledged its practice of discriminating against African Americans in providing farm loans, subsidies and other benefits. Friedman signed off on a $1.25 billion common fund from which to compensate eligible class members and their lawyers. DOJ lawyers argued that plaintiffs’ attorneys were not entitled to 7.4 percent.
In the opinion, Friedman said numerous law firms incurred millions of dollars in expenses while not knowing whether they would ultimately be reimbursed. He said that the Law Offices of James Scott Farrin and Morgan & Morgan collectively incurred out-of-pocket expenses in excess of $18 million.
The distribution of the legal fees and expenses will be handled by lead class counsel Andrew Marks of Coffey Burlington, Henry Sanders of Chestnut Sanders Sanders & Pettaway and Gregorio Francis of Morgan & Morgan. Friedman said the prosecution of the case “entailed a diverse array of challenges.” Class counsel, the judge said, successfully coordinated among more than 20 law firms issues that included class certification.
“Class counsel have undertaken the immense challenge presented by this action with the utmost professionalism and integrity, exhibiting skill, diligence, and efficiency in all aspects of their duties,” Friedman wrote. “As noted earlier, they also have committed themselves to devoting “whatever additional time and effort is necessary going forward to being the claims and payment process to a successful conclusion.”
A recent Detroit Free Press story, “Detroit’s Legal Fees Could Top $100 Million for a Chapter 9 Bankruptcy,” reports that the City of Detroit has been billed nearly $1.4 million in legal fees by Jones Day for the first six weeks on the job. The restructuring could result in the largest municipal bankruptcy in U.S. history. The Chapter 9 case could cost more than $100 million, said Douglas Bernstein, partner with Plunkett Cooney in Birmingham. “It is certainly one of the reasons that you want to get a resolution more quickly, because the longer it goes, the more money gets burned by paying professionals,” Bernstein said.
Though no city as large as Detroit has ever declared bankruptcy, some comparisons exist, such as Orange County, Calif., which accumulated $86 million in bills during its 18-month stay in bankruptcy that ended in 1996, according to reports. Jefferson County, Ala., which is still in bankruptcy, has spent nearly $20 million in legal fees since August 2011, according to reports.
In the bidding process, Jones Day prevailed over 13 other law firms. Among them were Detroit-based Dykema, Butzel Long, Jaffee Rait, and Plunkett Cooney. Jones Day, in its 209-page bid (pdf), gave the city a discount price; the pre-bankruptcy work would normally cost at least $5 million but is capped at $3.35 million, plus a maximum of $575,000 per month if the city enters bankruptcy, according to its bid. Detroit’s emergency manager, Kevyn Orr, is a former Jones Day partner.
A federal judge in New York approved a hotly disputed fee request for lawyers who negotiated a $217 million settlement with Madoff “feeder funds.” In a 43-page opinion, U.S. District Court Judge Colleen McMahon rejected the New York Attorney General’s objection to a $40.7 million fee request from lawyers led by Lowey Dannenberg who obtained the settlement from Ivy Asset Management on behalf of pension funds that lost money in Bernie Madoff’s Ponzi scheme.
The NYAG argued the fee was excessive because the state had already reached a tentative $140 million settlement and the lawyers didn’t deserve to reap a fee for the AG’s work. Judge McMahon rejected the state’s argument, however, noting that the AG did little to pursue the settlement further after Ivy demanded a release from related civil suits. “I will not allow the NYAG to take credit for the settlement that, for whatever reason, it did not obtain,” she wrote. “Once the prospect of a settlement disappeared, so did the Attorney General.”
Judge McMahon was critical of the thousands of hours Lowey Dannenberg and other firms including Bernstein Liebhard and Cohen Milstein spent reviewing documents. The private effort required 110 lawyers and more than 67 staff and paralegals, the NYAG said, compared with three lawyers and support staff who combed through the identical set of documents and negotiated a $140 million settlement.
In March, Judge McMahon required the lawyers to hand over their billing records so she could determine whether the hours were justified. In May, she praised the work of the private lawyers but said she regretted not setting firm ground rules on document review. She ordered the law firms to cut their hours submitted for document review by 25%, which will reduce the fee below the suggested $40.7 million by an undetermined amount. Even at the higher level, she noted, it is below the 22% Lowey Dannenberg negotiated with its clients and well below prevailing fee awards in class actions in New York.
A recent NLJ story, “Judge Approves $17 Million in Fees for Dewey Advisers,” reports that a U.S. bankruptcy court judge in New York approved $17 million in fees and expenses for advisers working on Dewey & LeBoeuf’s Chapter 11 case, but not before a few minutes were spent celebrating how swiftly the Dewey proceedings have moved along compared to the bankruptcies of other failed firms. U.S. bankruptcy court judge Martin Glenn called the proceedings “very well done.”
Dewey filed for bankruptcy on May 28, 2011, and won approval of its Chapter 11 liquidation plan nine months later—a fact that lead Dewey bankruptcy lawyer Al Togut was quick to note. In addressing the court, Togut also highlighted the record amount of secured debt at issue in the case, approximately $230 million, versus the sums at stake in other law firm bankruptcies, and the quickness with which the firm filed for bankruptcy protection after disbanding as among the other challenges that made the pending fee applications worthy of approval.
All told, Glenn signed off on nine pending fee applications, including for law firms Togut, Segal & Segal ($8.8 million); Brown Rudnick, which advised the bankruptcy’s unsecured creditors committee ($3.4 million); special benefits counsel Keightley & Ashner ($164,000); and Kasowitz, Benson, Torres & Friedman, which worked for an official committee of former Dewey partners ($1.35 million). Fee applications for German wind down counsel Thierhoff Muller & Partner ($592,000) and Goldin Associates, which provided financial analysis ($1.3 million) were also among those approved.
Lawyers with the U.S. Department of Justice’s trustee program—which monitors the bankruptcy process and recently proposed fee guidelines aimed at ensuring that attorneys’ fees in Chapter 11 cases are comparable to what firms charge in other practice areas—had previously trimmed less than $13,000 apiece off the fee applications submitted by Brown Rudick, Keightley, and Togut, in part for time spent by the firms preparing and reviewing bills.
A recent NJ Today story, “State Comptroller Finds Local Governments are Wasting Money on Improper Legal Fees,” reports that the New Jersey Office of the State Comptroller (OSC) review of five local governments found repeated waste of taxpayer dollars on excessive or improper payment for legal services, including one town that paid a salary for an attorney with no job duties at all. The findings are part of a 38-page report (pdf) that highlights a series of deficiencies in the local governments’ oversight of the lawyers they hire.
For example, OSC found that two of the local governments paid their legal counsel at hourly rates for routine clerical and administrative work that should have been free of charge under the attorney’s contract. Another local government paid 30 different attorneys from the same law firm to provide legal services in a single year. OSC’s review of the legal invoices, meanwhile, identified a series of billing errors that cost taxpayers thousands of dollars. Several of the local governments acknowledged that they had not been conducting a substantive review of the legal bills they received and paid.
OSC’s report – which focused on legal services provided to North Bergen Township, West New York, Medford Township, the Freehold Regional High School District and the Plainfield Public Schools – also includes an extensive checklist of best practices for local governments to follow when engaging and managing legal counsel. The checklist, which was sent to every local municipality and school district in the state, was developed after research of prevailing party billing practices and review of a wide variety of published authorities.
“We took this project to develop guidance that local governments could consult when contracting with outside counsel and managing their legal departments,” State Comptroller Matthew Boxer said. “What we found were repeated failures to review legal bills and manage legal contracts in a way that looks out for taxpayers. Public officials need to scrutinize their legal bills as if they were paying for them out of their own pocket, otherwise taxpayers are going to get ripped off.”
A recent NLJ story, “Judge: Massive Toyota Settlement Needs to Cook Longer,” reports that U.S. District Judge James Selna in Santa Ana, Calif. put a hold on the proposed $1.6 billion settlement between Toyota and consumers asserting economic damages tied to sudden acceleration defects. The judge concluded in a tentative order that the deal was “fair, adequate, and reasonable,” but said that “certain difficulties in the plan of allocation of the settlement funds precluded the Court’s final approval of the proposed settlement at this time.”
He also denied the plaintiffs’ steering committee’s proposed $200 million in attorney fees and $27 million in expenses for 31 law firms. The payouts, amounting to 12.3 percent of the settlement value, appeared to be “fair, reasonable, and adequate,” he wrote. But he declined to complete his analysis until the proposed settlement is approved. “By any measure, the results achieved by class counsel are exceptional,” he wrote. Selna notes that Toyota, under the settlement agreement, has agreed to pay plaintiffs’ class counsel separately from the settlement funds.
The settlement aims to resolve claims that certain Toyota vehicles lost value due to recalls. In particular the settlement covers class members who own or lease 16 models of Toyota, including the Camry and the Corolla, nine Lexus models and three Scion models. The model years range from 1998 to 2010.
The settlement carries a total estimated value of $1.63 billion, according to plaintiffs’ attorneys. Among its provision are two cash funds worth $250 million each. One fund would be earmarked for class members whose vehicles lost value due to the recalls, while the other would pay class members whose vehicles are ineligible for installation of a brake override system.
A recent Legal Intelligencer story, “Judge OKs $150M Settlement in Flonase Class Action,” reports that a federal judge has approved a $150 million settlement by GlaxoSmithKline (GSK) of a 33-member direct purchaser class action over allegations the drugmaker monopolized the market for its nasal spray Flonase. U.S. District Senior Judge Anita B. Brody of the Eastern District of Pennsylvania also approved the payment of $50 million in attorney fees and $2.1 million in expenses for plaintiffs’ class counsel. Thomas Sobol of Hagens Berman Sobol Shapiro and Joseph Meltzer of Kessler Topaz Meltzer & Check are co-lead counsel for the direct purchasers in the case.
The plaintiffs argued GSK delayed the entry of generic Flonase into the market, which led to direct purchasers being overcharged; according to court papers. The plaintiffs also argued that “this allowed GSK to unlawfully maintain monopoly power in the American [Flonase] market; maintain the price of Flonase at above-competitive levels; and overcharge the direct purchasers millions of dollars by blocking unrestricted competition and access to less expensive generic versions,” Brody said.
Class counsel reported they spent more than 41,000 hours litigating this case over almost five years, Brody said in her opinion. The average billable rate is $407 per hour, according to the judge’s opinion, The lodestar multiplier is calculated by dividing the attorney fees of $50 million by the total amount of hours devoted to the litigation times the $16.75 million in class counsel’s hourly rates. There is a multiplier of 2.99 in the case under the calculation, Brody said, and it is within the “generally acceptable range and provides additional support for approving the attorneys’ fee request.
A recent AM Law Daily story, “DOJ Bankruptcy Watchdog Unleashes Tough New Fee Rules,” reports that attorneys in big bankruptcy cases will soon have to make an array of disclosures on how they bill clients under new fee guidelines finalized by the DOJ. Lawyers will have to justify any increases in their hourly rates of more than 10 percent and will be asked to provide rough budgets. This is the first overhaul of the bankruptcy billing system in 17 years.
The new fee guidelines, to go into effect Nov. 1, will apply to bankruptcy cases for companies with more than $50 million in assets and $50 million in liabilities, a category that includes roughly 180 cases per year, primarily in New York and Delaware. The guidelines do not apply to single-asset real estate cases. Courts are not legally obligated to implement them, but in general, most courts follow guidelines laid out by the DOJ. Among the new guidelines are disclosures requiring lawyers to reveal the methodology they use to come up with certain rates, and explain and justify rate increases.
The fee guidelines reflect a desire on the government’s part to bring bankruptcy-related fees in line with recession-driven changes to client expectations and law firm billing practices that are affecting other types of legal work. “We know that private industry has been demanding—for attorneys outside bankruptcy—discounts and other cost-containment mechanisms that haven’t been prevalent in bankruptcy,” says Clifford White III, director of the U.S. Trustee Program. “We want to ensure that those market-driven approaches are in bankruptcy cases as the code requires.”
Lawyers were torn on the potential impact of the fee guidelines. Bernstein Shur’s Robert Keach, a fee expert who serves as a fee examiner in ARM Corp’s Chapter 11, said the fee guidelines merely institutionalize what is already done in many large bankruptcy cases. “I wouldn’t characterize this as overly burdensome or unhelpful,” Keach said. But bankruptcy lawyer John Penn of Haynes & Boone said the guidelines are unnecessary because the market already keeps hourly rates competitive. “You have seen the downturn in big cases,” he said. “Well when supply exceeds demand, rates fall.”
The U.S. Trustee will seek to bolster the use of fee examiners or committees to oversee attorney fees in big cases. Keach is serving in such a capacity in AMR’s case, and says most large, complex cases already utilize fee examiners. “In cases of this size, even the most diligent judge cannot do this alone,” Keach said. An uptick in fee examiners would pose an added cost to bankruptcy estates but would theoretically save money by regulating and supervising fees.
A recent Thomson Reuters story, “Plaintiffs’ Lawyers Seek $146M in Fees in Citi Case,” reports that lawyers who secured a $730 million class action settlement for Citigroup Inc investors have asked a federal judge to approve $146 in attorney fees and $7.29 million in expenses. The fees, requested by Bernstein Litowitz Berger & Grossmann, would be the tenth largest ever to lawyers in a federal securities class action, according to NERA Economic Consulting. The fee request amounts to 20 percent of the settlement.
The award, if approved, would be the largest payout for Berstein Litowitz in a case stemming from the financial crisis, after a federal judge in April approved $160.5 million in fees and expenses for the law firms and two others in a $2.43 billion settlement with Bank of America. The settlement resolves claims by investors in Citigroup bonds and preferred stock. The investors accused the bank of misstating the value of its collateralized debt obligations and understanding its loss revenues by tens of billions of dollars between 2006 and mid-November 2008.
Bernstein Litowitz called the $730 million settlement “an outstanding result” for its clients, representing a “substantial percentage” of the investors’ likely recoverable damages. The settlement ranked as the second largest in a class action by debt holders and the third largest in a case that did not involve a financial restatement, Bernstein Litowitz said. It is also among the 15 largest securities class action settlement in U.S. history, the firm said in its fee motion.
The settlement on behalf of bondholders is separate from a $590 million accord reached by Citi shareholders stemming from similar claims. In that case, Stein is weighing a $100 million fee request by Kirby McInerney. The case is In re Citigroup Inc Bond Litigation, U.S. District Court, Southern District of New York. For more information, visit http://www.blbglaw.com/cases/00121.
A recent Legal Intelligencer story, “Third Circuit Sets New Precedent on Attorney Fees,” reports that setting new precedent on attorney fee recovery in the Third Circuit, the appeals court has ruled offers of judgment in fee disputes that would preclude some recovery in certain circumstances are valid in environmental suits brought by citizens. In so ruling, the court endorsed the Legal Services Index (LSI) adjusted Laffey Matrix for calculating appropriate rates for Washington, D.C. area lawyers practicing in the circuit.
In the underlying case, Interfaith Community Organization v. Honeywell International Inc., Honeywell was ordered to conduct an extensive cleanup of industrial waste that had been left by a now-defunct company that had occupied a plant on the Hackensack River in Jersey City after neighborhood residents brought a suit under the federal Resource Conservation and Recovery Act (RCRA).
The fees at issue in this action top $3 million and are related to Honeywell’s agreement to pay reasonable future fees and expenses for the monitoring of its cleanup. Honeywell has paid more than $5 million in attorney fees for work leading up to the resolution of the case. Beginning in 2009, Honeywell began to dispute the fee requests for the monitoring work and ultimately issued a Rule 68 offer of judgment to resolve the fee issue. Rule 68 specifies that if a plaintiff rejects an offer of judgment made under the rule and the case goes to trial, resulting in an outcome less favorable to the plaintiff, he or she has to pay the costs from the time the offer was made.
The U.S. Court of Appeals for the Third Circuit remanded the case after it issued an opinion reversing the U.S. District Court for the District of New Jersey on that court’s holding that offers of judgment made under the Rule 68 of the Federal Rules of Civil Procedure are null and void in the context of citizens’ RCRA suits. The appeals court, however, agreed with the district court’s application of the LSI-updated Laffey Matrix for calculating the plaintiffs’ attorney fees.
The Third Circuit read the law plainly and likened the difficulty faced by plaintiffs weighting Rule 68 offers to the typically difficult decision about settlement in any case. “Settlements offers often present difficult choices for a plaintiff, but that fact neither abridges nor modifies the substantive rights at issue,” Third Circuit Judge Thomas Vanaskie said. “Speculation as to the potential ‘chilling’ effect of allowing Rule 68 offers of judgment in citizen suits under RCRA, advanced in Struthers-Dunn and embraced by the District Court in this case, is simply irrelevant to the pertinent inquiry: whether the rules of decision are altered by the offer of judgment,” he said, referring to the 1988 opinion from the New Jersey District Court in Public Interest Research Group of New Jersey v. Struthers-Dunn.
Vanaskie summed up the effect on the decision this way: “The only impact that Rule 68 has on the ultimate outcome of the attorney’s fee dispute is to require appellees to bear their own post-offer cost, including counsel fees, if the fee award is less favorable than the offer of judgment.” The Third Circuit emphasized Rule 68’s merit in encouraging settlement, especially meritorious with regard to settling attorney fee disputes, Vanaskie said.
The Third Circuit also decided that the district court has been correct to allow the public interest law firm of Terris Pravlik Millian, based in Washington, DC, to be paid according to DC rates, rather than New Jersey rates, as Honeywell had advocated. More importantly, it agreed that the district had chosen the correct method for determining what those rates are. The district court wasn’t persuaded by Honeywell’s argument that it should apply an updated version of the Laffey Matrix, named for the 1983 case in which it was first used for determining the hourly rates of DC lawyers, that would be pegged to the Consumer Price Index. Rather, it chose to update the Laffey Matrix with the LSI.
The two methods resulted in vastly different rates. The choice favored by Honeywell would mean that DC lawyers with 20 years or more experience would be paid only $475 per hour, while the method favored by the plaintiffs would pay the same lawyers $709 per hour. The Third Circuit agreed that the LSI-adjusted Laffey Matrix is the best option. “The district court, recognizing that ‘our circuit has yet to specifically approve either version of updating the Laffey Matrix,’ was persuaded by the methodology in Salazar,” Vanaskie said, referring to the U.S. District Court for the District of Columbia decision in 2011 in Salazar v. District of Columbia.
A recent NLJ story, “Use of Contingent Fees Challenged in Robo-Signing Case,” reports that the Nevada Supreme Court is expected to take up arguments in a high-profile robo-signing case in which a mortgage processing firm is challenging the legal authority of the state’s attorney general to hire Cohen Milstein Sellers & Toll on a contingency fee basis. In its brief, Lender Processing Services Inc. argues that the attorney general’s office violated the state law in hiring Cohen Milstein on a contingency fee basis and that granted the outside law firm considerable authority in the case. The U.S. Chamber of Commerce and the American Tort Reform Association filed an amicus brief in the case.
LPS has petitioned the state’s high court to overturn a ruling that allowed Cohen Milstein’s Betsy Miller to be associated as counsel to Nevada Attorney General Catherine Cortez Masto. Masto has a pending complaint alleging that Lender’s robo-signing operation contributed to the state’s economic recession.
“We have a long tradition of the private attorney general doctrine in American Jurisprudence, where private lawyers work on important public interest litigation” said Terry Jesse, executive director of NALFA. “This is a partisan effort by the tort reform lobby to weaken that doctrine. Of course state AGs should be allowed to hire contingency fee lawyers. In fact, it makes economic sense to only hire contingency fee lawyers because it aligns the state’s interests with outside counsel’s interests -- win the case,” Jesse concluded.
A recent ABA Journal story, “New Mini-Wheats Settlement Get Preliminary OK; Deal Value Dropped, But Not Attorney Fees,” reports that U.S. District Judge Irma Gonzalez gave preliminary approval to a new settlement in a suit claiming Kellogg’s made false advertising claims about Frosted Mini-Wheats. Gonzalez, however, raised concerns over the fee request. ”How is it that the value to the class dropped approximately 75 percent, while requesting attorneys’ fee appear nearly constant?” she wrote.
The plaintiffs had disputed claims that Frosted Mini-Wheats cereal was clinically shown to improve attentiveness by 20 percent. The original deal, valued at about $8.5 million to the class, provided about $2 million in attorney fees and money for claims administration. The Ninth U.S. Circuit Court of Appeals had nixed the original deal last year because of cy pres provisions calling for $5.5 million in food donations to feed the needy. The original deal reimbursed class members $5 for each future box of cereal they buy, with a cap of $15. Attorney fees amounted to $2,100 an hour, according to the Ninth Circuit, which expressed concern about the level.
The new deal pays $1.5 million to $2 million for attorney fees and claims administration, leaving $2 million to $2.5 million for the class, Gonzalez said. Consumers will get up to $15 for cereal purchases, but the amount will increase up to $45 per person if the money remains in the settlement fund, according to the proposed settlement (pdf). Any money left over will go to three groups: Consumer Watchdog, Consumer Union and the Center for Science in the Public Interest.
A recent Thomson Reuters story, “Judge: Kentucky AG Can Use Contingency Fee Lawyers in Case vs Merck,” reports that U.S. District Judge Danny Reeves ruled, in a 33-page opinion (pdf),that Kentucky Attorney General Jack Conway can use contingency fee lawyers in a case related to Merck’s marketing of the pain reliever Vioxx. Reeves rejected arguments from Merck’s counsel Skadden Arps that contingency fee lawyers, Garmer & Prather, should not be permitted to represent the AG.
The tort reform lobby has sought to limit the use of outside contingency fee lawyers state by state. Their lobby is pushing hard to enact laws placing limits on what attorneys can earn, regulating the attorney-client relationship, and limiting the right to contract with a lawyer. Law professor Amy Widman of Northern Illinois University, who specializes in AGs enforcement of consumer protection laws, has testified before Congress that state lawyers need to be able to tap the resources of the private bar or else consumer law will go unenforced by resource-strapped AGs.
“As long as the AG’s office is reviewing the contingency-fee counsel’s work before adopting or approving it – and Merck has cited no evidence in the record to convince the court that it is not – the AG has retained and exercised his decisional authority,” Reeve wrote. “The court will not second-guess the AG’s decision to grant a certain amount of ‘room for the outside attorneys to…exercise their professional skills in putting a lot of (the litigation) together.’”
“The tort reform lobby doesn’t like our contingency fee system and they certainly don’t like winning contingency fee lawyers,” said Terry Jesse, executive director of NALFA. “The tort reform lobby wants to end mass tort litigation by eliminating the economic incentive to undertake the litigation.” At NALFA, we oppose these legislative efforts. By removing the incentive to pursue important public interest litigation, the state has undermined the consumers of their state and emboldened corporate wrongdoers,” Jesse concluded.
A California appeals court has upheld an attorney fee award of nearly $3 million against RJ Reynolds Tobacco Company in an action for the historic 1998 multi-state tobacco settlement. The court held that San Diego Superior Court Judge Ronald Prager did not abuse his discretion in ruling that the attorney general was the prevailing party in the enforcement litigation, despite the denial of injunctive relief. The court also held that the amount of the fee award was not excessive under the circumstances.
In November 1998, RJ Reynolds and the nation’s other largest tobacco companies entered into the master settlement agreement (MSA) with 46 states and the District of Columbia to resolve claims against the companies relating to public health and the marketing of tobacco products to minors. In California, the State and RJ Reynolds signed the Consent Decree, under which the San Diego County Superior Court approved the MSA and retained exclusive jurisdiction over its implementation and enforcement. The MSA prohibited the use of “cartoons” in the advertising.
In 2006, RJ Reynolds launched an advertising campaign called “Farm Rocks,” designed to sell cigarettes to fans of rock music. Then-Attorney General Jerry Brown filed suit seeking injunctive relief, declaring RJ Reynolds violated the cartoon ban “thousands of times in 2006 and 2007…” In 2009 Prager declined to order injunctive relief, noting the company terminated the campaign shortly after the ad ran. The Court of Appeals affirmed, and the judge subsequently awarded the state $700,000 in attorney fees.
Both sides appealed, with RJ Reynolds arguing that because the MSA was a contact, Prager should have applied California Civil Code Sec. 1717 and denied fees because the state did not win “the greater relief.” The state argued that the judge should have based the fee award on the rates normally charged by private counsel, rather than on how much the state paid its lawyers.
The Court of Appeals agreed with RJ Reynolds that Sec. 1717 applied, and sent the case back to the trial judge to determine whether the state was still the prevailing party and if it was the prevailing party, the fee award should be recalculated to reflect the rates charged by private lawyers of similar skill and experience. On remand, Prager found the state obtained the greater relief. The judge further found that hourly rates of between $500 and $625 per hour were appropriate, based on fees customarily charged in the San Francisco Bay Area, because the litigation was primarily handled out of the attorney general’s Oakland office.
In the now published decision, In re Tobacco Cases I (pdf), Presiding Justice Judith McConnell ruled that both of these determinations were within the trail judge’s discretion. She noted that RJ Reynolds spent more on attorney fees than what the state was awarded, and credited the testimony of the state’s expert, who described RJ Reynolds as “one of the wealthiest, most intransigent and unrelenting defendants that any litigant can face,” and said its “attorneys fought this case tooth and nail, contesting almost every issue.”
McConnell also concluded that Prager was reasonable in accepting the state’s proposal that the lodestar be discounted by 15 percent in recognition that the state had not prevailed on all issues. The same factors that were relied on in determining that the state was the prevailing party overall were properly considered in rejecting Reynolds’ suggestion that a larger discount be applied, she said.
The U.S. Supreme Court ruled that lawyers who file claims on behalf of clients alleging injury from a vaccine may recover their legal fees even if the claim is untimely. In Sebelius v. Cloer (pdf),the high court found Dr. Melissa Cloer, who developed MS from three type hepatitis-B vaccinations, can seek attorneys’ fees under the National Vaccine Injury Compensation Program, even though a special master found the petition untimely and denied plaintiffs’ request for $119,000 in attorney fees.
Congress established the National Vaccine Injury Compensation Program in 1986 in an effort to provide a cost-effective process for resolving vaccine injury claims outside of tort litigation and to ensure a stable market supply of vaccines. Successful claims are paid out of a federal trust fund that comes from a tax levied on every dose of vaccine.
The chief special master in the U.S. Court of Federal Claims dismissed Cloer’s petition, finding that she had waited too long to file her claim since her first symptoms appeared in 1997. The National Childhood Vaccine Injury Act, which created the program, requires petitions to be filed within 36 months of the initial symptoms.
Even though Cloer missed the deadline, she asked the Federal Circuit to allow her to seek $119,000 from the program to cover her lawyers’ fees. The Federal Circuit found that Cloer could recover the fees, provided her claim was brought in good faith and with a reasonable basis, and the Supreme Court agreed.
“If Congress had intended to limit fee awards to timely petitions, it could easily have done so,” Justice Sonia Sotomayor wrote for the court. Instead, the law allows courts to award attorneys’ fees for unsuccessful petitions “bought in good faith and for which there was a reasonable basis,” she wrote.
In opposing Cloer’s request for fees, the Justice Department argued that allowing fees for unsuccessful claims would trigger a flood of untimely lawsuits, as lawyers would take on cases after the expiration of the 36-month window in the hope of recovering fees. The high court found the government’s fear “exaggerated.”
Robert Fishman of Ridley McGreevy & Winocur in Denver, who represented Cloer, said the decision will make it easier for people injured by vaccines to find a lawyer to represent them and is unlikely to trigger a flood of frivolous claims under the vaccine act. “I wouldn’t really expect to see much more than a marginal increase,” he said.
In Alabama, The Transparency in Private Attorneys Contract Act (TiPAC), seeks to regulate contingency fee contracts and cap attorney fees for private attorneys hired by the state of Alabama. The legislation would place a statutory cap on contingency fees and regulate the attorney-client relationship.
Contingency fees will be limited to 22 percent of the first $10 million; plus 20 percent of the next $15 million; plus 16 percent of the next $25 million; plus 12 percent of the next $25 million; plus 8 percent of the next $25 million; plus 7.1 percent of any recovery exceeding $100 million. Total fees are capped at $75 million per action. In addition, contingency fee attorneys must keep detailed records of expenses and time spent on a case, which would be available to the state for inspection.
What is more, the legislation mandates that the AG attorney retains complete control over the litigation. The AG attorney has supervisory authority, retains veto power over any decision by private attorneys, may be contacted directly by defendants, must attend all settlement conferences, and has exclusive over settlement decisions.
"At NALFA, we oppose this legislation," said Terry Jesse, executive director. "Judges should determine reasonable fee awards, not politicians. This is a tort reform and ALEC-backed initiative that puts corporate interests above the people of Alabama. No qualified litigator would work on a case under these conditions and as a result, the people of Alabama will lose out on qualified representation in important civil litigation," Jesse concluded.
A recent Thomson Reuters story, “Courts Voids HP Printer Settlement, Cites Legal Fees,”reports that a divided federal appeals court voided a class action settlement between Hewlett-Packard Co. and millions of consumers who brought its inkjet printers over nearly a decade, saying the fee award was too high. In the HP case, Ninth Circuit Judge Milan Smith wrote for a 2-1 majority that fees should take into account the value of coupons actually being redeemed, not the total coupon relief offered.
The settlement was intended to resolve claims that consumers who brought HP printers between September 2001 and September 2010 were misled into spending too much on or misusing ink cartridges. HP agreed to provide up to $5 million of coupons, known as “e-credits,” for future printers and printer supplies on its website, and improve disclosure. The district court awarded plaintiffs’ counsel $1.5 million in fees and $597,000 in costs.
Ted Frank, serial fee objector and tort reformer, said the settlement was the product of collusion between lawyers for HP and consumers, and violated portions of the federal Class Action Fairness Act that governs attorney fees in class action settlements. “By trying attorney compensation to the actual value of the coupon relief, Congress aimed to prevent class counsel from walking away from a case with a windfall, while class members walk away with nothing,” Smith wrote, in an opinion joined by Circuit Judge Ronald Gould.
Circuit Judge Marsha Berzon dissented. She said the majority erred in demanding that a court “must award fees as a percentage of the coupon actually redeemed,” rather than taking into account the time reasonably spent by lawyers on the matter.”
Legal bill auditors are hired by insurance carries, law firms, corporations, government agencies, and municipalities to review legal invoices in underlying litigation and transactional matters. No two legal auditing programs are the same. So, in order to ensure the most accurate and reliable legal audit results, clients should ask the following questions:
Is your legal audit program certified by NALFA?
Do you abide by NALFA's Industry Best Practices?
Is your legal bill review process manual or computerized?
Do you do quantitative or qualitative analysis?
Do your legal bill auditors attend professional development programs?
What is your turn around time?
Will you back up your legal audit report with expert testimony, if needed?
Do you look at the legal invoices alone or the work product as well?
Who reviews the bills (i.e. attorneys, paralegals, accountants)?
Do your legal auditors keep up with the latest attorney fee jurisprudence?
A recent NLJ story, “Objections Mount to $1.6 Billion Toyota Settlement,” reports that potential class members in the sudden acceleration litigation against Toyota Motor Corp. have filed objections to the proposed $1.6 billion settlement. More than a dozen fee objectors raised various problems with the deal, including a proposed $30 million cy pres award for automotive accident research; the $200 million in attorney fees sought; and the potential release of claims in companion over anti-lock braking system defects in Prius vehicles.
The settlement, announced on December 26, has a total estimated economic value of $1.63 billion. It includes $757 million in cash, of which $250 million would go to consumers whose vehicles lost value and $250 million to consumers whose vehicles are not eligible for installation of a brake override system, intended to correct potential sudden acceleration problems.
“These are excellent recoveries in any litigation and a truly exceptional recovery in a class action fraught with as much risk as this one,” Steve Berman, managing partner of Seattle’s Hagens Berman Sobol Shaprio, and Marc Seltzer, of Susman Godfrey in Los Angeles, co-lead counsel of the economic loss cases on the plaintiffs steering committee, wrote in the final approval motion.
Berman and Seltzer argued that the fee request represents 12.3 percent of the estimated economic value of the settlement. The leading firms, whose attorneys billed $150 to $950 per hour, spent more than $100 million litigating the case.
The class action, they underscored, was “fraught with risk.” The U.S. National Highway Traffic Safety Administration, for example, had identified no electronic defect in Toyota vehicles, and plaintiffs’ software experts had been unable to replicate a sudden acceleration incident. Furthermore, had plaintiffs lost two interlocutory appeals before the Ninth Circuit, the case would have been “gutted,” they wrote.
NALFA welcomes John D. O’Connor to the Attorney Fee Practice Group. John O’Connor is the principal of O’Connor & Associates in San Francisco, specializing in attorney fee disputes. Mr. O’Connor and his team have more than 35 years of experience dealing with complex attorney fee disputes and have served numerous clients as both litigator and expert consultant.
As a former Federal Prosecutor, Mr. O’Connor has successfully represented high-profile clients including the FDIC, R.J. Reynolds Tobacco Company, the California Attorney General, and Golden State Warriors Head Coach Don Nelson. He has analyzed numerous legal audits and expert fee opinions in attorney fee disputes throughout the country, and frequently serves as an expert witness on a range of attorney fee and billing matters.
In published opinions in two recent cases, the Court specifically referred to Mr. O’Connor’s expert opinions as the basis for discrediting auditor criticisms. One opinion supported a $19.8 million fee award, employing a 2.0 multiplier, in a wage and hour case; another, a $3.1 million fee award, with a 1.5 multiplier, in a wrongful termination case.
His seventy trials and forty years of litigating complex cases enables him to draw on a vast pool of experience. Mr. O’Connor and his team offer a broad range of services including disputes over the appropriate billing rates, litigation efficiency, task assignments, and staffing, litigation success and prevailing party determination, and litigation skill. Their work in this area has been widely lauded by clients, lawyers, courts, and arbitrators.
Meanwhile, Steven Donziger of Donziger & Associates in New York can’t afford to pay his own counsel as Chevron continues its bruising counterattack in the U.S. Chevron has retained 60 law firms to discredit Donziger on bribery and fraud charges. Donziger’s lawyer, John Keker of Keker & Van Nest in San Francisco, is seeking to withdraw from the civil racketeering and fraud case, citing Chervon’s “scorched-earth” litigation strategy. Dozinger is now proceeding as a pro se litigant against Chevron.
The litigation over the Amazon pollution began in New York in 1993, when dozens of rainforest aborigines sued Texaco in U.S. district court, claiming that the oil company left behind an environmental and public health crisis in a region home to 30,000 people. The suit argued Texaco Inc. dumped chemical-laden wastewater in the Amazon basin from 1964 to 1992. Chevron acquired Texaco in 2001.
Chervon convinced the New York court to let the case play out in Ecuador, where the drilling occurred. The case in Largo Agrio went through several judges amid allegations of corruption and scandal, until the final judge ordered Chevron to pay $8.6 billion and $9 billion in punitive damages.
Environmental hero Pablo Fajardo, the lead lawyer in Ecuador, said his clients are going to focus on the $18 billion Ecuadorian judgment in other countries. Chevron does not have significant assets in Ecuador, but does in other countries including, but not limited to, the U.S. Suits have recently been filed in Argentina, Brazil and Canada, in an effort to collect on the judgment.
The case is Maria Aguinda v. Chevron, 002-2003 Superior Court of Nueva Loja, Largo Agrio, Ecuador. For more on this case, visit http://chevrontoxico.com/
A recent The Recorder story, “In Netflix Captioning Case, an Unexpected Fee Fight,” reports that both sides are claiming victory in a disability rights class action against Netflix Inc., resulting in a prevailing party fee dispute. In dueling briefs in San Jose federal court, lawyers for plaintiff Donald Cullen and for Netflix argue they technically prevailed in the discrimination case and should recover attorney fees. The dispute centers on the result of a 2012 California Supreme Court decision mandating attorney fees for prevailing parties in disability access suits brought under state law.
Cullen sued Netflix in March 2011, claiming discrimination under the ADA and California’s Disabled Persons and Unruh Civil Rights Acts and also accusing Netflix of false advertising in statements about the availability of close captioning. Cullen, a deaf college student represented by San Diego-based Gregory Weston of the Weston Firm, is seeking fees of $262,641. Meanwhile, Netflix says it should receive $165,000 from Cullen to pay lawyers from the Los Angeles law firm of Morrison & Foerster. Both sides cite Jankey v. Lee to support their bid.
In June 2011 the National Association for the Deaf (NAD) filed a similar action against Netflix under the ADA in Massachusetts and obtained a consent decree requiring full captioning for all streaming video content by September 2014. Netflix also agreed to pay the NAD’s attorney fees of $775,000. Prior to the settlement, Cullen dropped his ADA claims and refiled under state laws. Despite Cullen’s state claims being dismissed in July 2012, Cullen’s lawyers contend he should be the prevailing party because the suit achieved its main objective – “to caption its entire streaming video library,” Weston wrote.
Attorneys for Netflix take a different view, insisting Cullen and his lawyers should receive no credit for the settlement, which resulted from negotiations with NAD that began prior to Cullen filing. David McDowell, a MoFo partner, wrote in a brief opposing Cullen’s fee request, “His action was not a ‘catalyst’ and does not entitle him to recover fees.”
State law provides mandatory fee shifting for certain claims under California’s Disabled Persons Act. The provision states the prevailing party “shall be entitled to recover reasonable attorney’s fees.” In Jankey, the California Supreme Court held the language applies to defendants just as to plaintiffs, even in cases that simultaneously pursue remedies under the ADA. Cullen’s lawyers contend the mandatory fee-shifting provision does not apply to class action cases.
Posted:Friday, May 03, 2013
Categories: Fee Award
A recent Thomson Reuters story, “Funder Sues Plaintiffs’ Lawyer for $28M in LCD Class Action Fees,” reports that the law firm lender LFG National Capital filed a suit in federal district court in San Francisco against antitrust lawyer Joseph Alioto and his law firms, The Alioto Law Firm. The breach-of-contract suit claims that under a lending agreement (pdf), Alioto owes LFG $28 million of the $49 million he has been awarded as co-lead counsel to a class of the Flat Panel MDL. LFG asserts that it holds a lien on all of the Alioto firm’s fees and receivables via an $18.3 million credit facility extended by the lender.
LFG does not contend that the lending agreement specifically entitles it to attorney fees from the Flat Panel MDL, which hadn’t even begun at the time Alioto signed the loan deal in 2004. Alioto reached the agreement with an LFG National affiliate called the LawFinance Group, which assigned rights to the loan to the parent company in 2005. The funder did not extend Alioto credit in order to litigate the class action. The loan was for Alioto’s firm, with Alioto providing personal guarantee. According to Alioto, his loan was no different from the credit lines that smooth operations for most law firms.
“The idea was that as receivables came in, portions of the fees would be used to pay the loan,” Alioto said. He was supposed to repay LFG based on a sliding percentage of the fee depending on the size of the settlements he obtained. LFG’s claim to $28 million in Flat Panel MDL fees is not based on a percentage of Alioto’s fees in the class action but on how much the Alioto firm has borrowed.
A recent Thomson Reuters story, “Plaintiffs’ Lawyers Can Seek Fees from State Lawyers in Vioxx MDL,” reports that a federal judge has ruled that lawyers for individuals who sued Merck & Co. Inc. over the painkiller Vioxx may be entitled to some of the legal fees Pennsylvania’s outside counsel received in a settlement with Merck in January. While lawyers for individuals, known as the plaintiffs’ steering committee (PSC), often ask courts for so-called “common benefit” fees from other plaintiffs who recover money in MDLs, it is unusual for the committee to seek fees from the lawyers for the state.
Merck received approval from the FDA in 1999 to sell Vioxx to treat pain. In 2004, Merck withdrew the drug from the market after data showed that Vioxx carried increased risk of heart attack and stroke. Thousands of individual lawsuits and numerous class actions were filed against Merck in state and federal court alleging various product liability and tort claims.
In addition, numerous state and local governments, including Pennsylvania, sued Merck under consumer protection statutes to recover money their citizens paid for Vioxx prescriptions. All the suits were consolidated to the MDL proceeding in the Eastern District of Louisiana. The states involved in the MDL agreed by contract to pay the PSC, which includes about a dozen law firms, a common-benefit fee of 6.5 percent of the recovery. Pennsylvania was the only state not to sign the contract.
Lawyers on the PSC argued that Pennsylvania’s outside counsel had benefited from their work. Pennsylvania’s lawyers argued that the request was actually a claim for damages against the state, and therefore was barred by the doctrine of sovereign immunity, which prevents states from being sued. But U.S. District Judge Eldon Fallon of the Eastern District of Louisiana ruled that the claim was not covered by Pennsylvania’s immunity as a state and did not interfere with its ability to choose its own lawyers. A factual dispute still remains over whether the PSC work actually benefited Pennsylvania’s lawyers. Fallon referred that fee allocation dispute to a special fee master.
A recent Corporate Counsel story, “In M&A Litigation, Attorneys’ Fees Under Attack?,” reports that three court decisions last month have taken aim at plaintiffs’ attorney fees. The rulings, two in Delaware and on in Texas, “suggest a trend toward greater judicial scrutiny of ‘disclosure-only’ merger litigation settlements and, in particular, attorneys’ fee awards in such settlements,” according to the latest Morrision & Foerster newsletter (pdf), written by Joel C. Haims and James J. Beha. The three cases are In Re Transatlantic Holdings Inc. Shareholders Litigation, In Re PAETEC Holdings Corp. Shareholders Litigation, and Kazman v. Frontier Oil Corp. Haims and Beha write:
“Delaware is, of course, the most popular state of incorporation and its Chancery Court is the most popular forum for merger litigation. The decisions in In re Transatlantic and In re PAETEC Holdings show the plaintiffs’ bar that the Chancery Court will not rubber stamp fee awards in merger litigation. Plaintiffs’ attorneys often attempt to escape such scrutiny by bringing suit in other jurisdictions, most often the state where the defendant corporation’s headquarters are located.
But it appears that Kazman effectively precludes merger litigation in Texas, the country’s second-most populous state and home to the second-most Fortune 500 companies. As a result, taken together, these cases should cause the plaintiffs’ bar to evaluate more carefully the basis of merger suits and the relief to shareholders that such suits are meant to secure.”
A recent Legal Intelligencer story, “Client Identities, Legal Bills Can Be Disclosed, Court Rules,” reports that the disclosure of client identities is only protected by the attorney-client privilege when other information about the scope of the representation is in the public domain and revealing the identity would essentially reveal attorney-client communications, the Pennsylvania Supreme Court has ruled.
The case stems from a Right to Know Law (RTKL) request by Associate Press reporter Marc Levy for legal bills related to the Senate’s hiring of attorneys to represent former state Senator Robert J. Mellow and other Democratic caucus employees. The Senate had argued the name of clients and the descriptions for the services the attorneys provided them were protected by the attorney-client privilege.
In the majority opinion, written by Justice Max Baer, addressed the issue of whether descriptions of legal services are privileged. Baer said at the outset of his opinion that general descriptions of legal services included in attorney invoices are not privileged, while specific descriptions that would reveal attorney-client communications are protected.
Later in his opinion, Baer dismissed the Senate’s argument that the Commonwealth Court had issued a bright-line rule finding legal descriptions were not protected. Rather, Baer said, the court and special master did a line-by-line analysis of the legal invoices and redacted those descriptions it felt were privileged. The relevant question, Baer said, was whether the descriptions would result in disclosure of information otherwise protected by attorney-client privilege.
“For example, descriptions of legal services that address the client’s motive for seeking counsel, legal advice, strategy or other confidential communications are undeniably protected under the attorney-client privilege,” Baer said. In contrast, an entry that generically states that counsel made a telephone call for a specific amount of time to the client is not information protected by the attorney-client privilege, but, instead, is subject to disclosure under specific provision of the RTKL.”
1) Choose the Correct Lawyer or Law Firm: Overbilling is not limited to large firms. However, there is little question that the realities of the economics of a large firm create added incentives for attorneys at these firms to pad their bills, pressures that do not exist at smaller firms. These include incentives for partners to maximize profits that now average over $1.4 million per partner at the largest firms; and on associates to meet minimum billing requirements, which can be as high as 2,400 hours per year.
There are some large and complex matters that require the capacity and infrastructure that can only be provided by a large firm. However, these matters are rare. Experienced and skilled attorneys practicing at medium-sized and small firms can handle the great majority of legal matters—including large and complex ones. In my experience, attorneys at smaller firms often provide superior and more attentive service, obtain better results, and do so more efficiently and at a fraction of the cost of a larger firm. This is especially true for individual clients, or small or medium-sized businesses, who are unlikely to be a priority for larger firms.
2) Ensure that the Matter is Not Overstaffed: The surest way to run up excessive fees is by overstaffing a matter with too many attorneys. Logic dictates that the more attorneys on a matter, the higher the bill. Staffing too many attorneys on a matter creates inefficiencies, results in a duplication of effort, and inevitably leads to numerous unnecessary and expensive internal meetings and communications.
While there may be some matters that are so large that they require numerous attorneys to properly handle, the overwhelming majority of matters can be handled by two or three attorneys with the assistance of a paralegal or secretary. Clients should demand to know exactly who is working on their matter, what it is those attorneys are doing, and why those attorneys are necessary to the representation.
3) Limit the Use of Inexperienced Attorneys: Young and inexperienced attorneys at large firms are often given little training and are expected to learn on the job. Even though summer associates and first- and second-year associates at the largest firms can bill upwards of $400 to $500 per hour, these attorneys are the ones most likely to work inefficiently, make the most mistakes, and provide the least value to the client. These attorneys are also likely to be performing administrative tasks that are more properly performed by a secretary or paralegal, or performing tasks that are completely unnecessary, such as carrying the bags of a more senior attorney.
While there are some basic tasks that inexperienced attorneys can be reasonably expected to competently perform, such as research, clients should greatly limit the amount of time billed by these associates and should be leery of paying firms high hourly rates to essentially train their least experienced associates.
4) Limit the Number of Open Matters: This is a corollary to the rule in paragraph 2 above—the more open matters, the higher the bill. For bookkeeping purposes, clients will often have a firm bill to numerous different matters. However, having too many open matters can result in excessive bills.
For example, in one case I represented a former client of a top-20 global law firm that had over 10 matters open at one point. By analyzing the time entries, we uncovered the fact that a senior partner at the firm was routinely billing the minimal billing increment of 0.25 hours—or 15 minutes—to each of those matters per day. This resulted in roughly 2.5 hours of daily billable time to the client even though we estimated that the actual amount of work that partner had performed was 30 minutes or less per day. When a client is being billed for numerous different matters, it should be sure to look at the cumulative totals being billed to it by each attorney.
5) Scrutinize the Bill: Reviewing and scrutinizing the firm’s invoice is the most important way that a client can protect itself. Law firms should invoice clients promptly at the end of each month. Bills should detail all of the work performed by any attorney working on that matter that particular month. In scrutinizing the bills, clients should be sure to evaluate the work performed against the time billed for reasonableness.
For example, if a client is billed for an internal legal memo prepared by the firm, the client should total up the amount of time spent preparing that memo. If the memo has not already been provided by the firm, the client should demand a copy of the memo or other work product for which it has been billed. The client should then determine whether the amount of time billed was warranted by the end result. This is true for all major tasks, such as preparing pleadings, internal or external correspondence, or document review.
There are other indicia of overbilling that clients should be aware of. (These patterns were reported by the California Bar’s Committee on Mandatory Fee Arbitration, Arbitration Advisory 03-01, “Detecting Attorney Bill Padding” [PDF], dated January 29, 2003.) Patterns in invoices that suggest padding include:
Formula billing: Billing separately for each task even if that takes a short time, i.e. billing 0.1 each for the review of 10 emails, for a total of one hour, even though less than one minute was spent on each email.
High minimum increments: The standard billing increment is 0.1, or six minutes. Higher minimum billing increments should not be accepted.
Time estimates: Numerous entries such as 8.0 or 10.0 hours are likely estimates rather than actual time billed and should be investigated.
Block billing: If one amount of time is shown for working on more than one discrete matter, this is known as “block billing” or “lumping.” This practice is generally not accepted by federal courts and warrants closer scrutiny, especially for larger blocks.
Standardized work descriptions: Repeated use of the exact same phrases in bills, i.e. “document review” or “prepare for deposition,” suggests padding.
Lack of detail: Lack of specificity in work descriptions, i.e., “Attention to file” or “Discovery,” suggests padding.
Mistakes: Bills often contain mistakes. For example, if a client is billed two hours for a hearing that only lasted one hour. Clients should carefully review bills for errors.
6) Challenge the Bill: If any evidence of overbilling is found, clients should discuss the matter with the law firm. There are many reasons why a client may be reluctant to do so. However, any law firm should be receptive to complaints from its clients about billing, provide answers to clients’ questions, and adjust their bills accordingly when confronted with evidence of overbilling. If not, the client should look to take their business elsewhere.
Steven Barentzen is the principal of the Law Offices of Steven Barentzen in Washington, DC. The firm focuses on complex and sophisticated commercial civil litigation including professional malpractice and overbilling matters. For more information, visit http://www.barentzenlaw.com
Class counsel are seeking attorney fees of $720 million and $27 million in expenses in the Visa/MasterCard Merchant Antitrust MDL. The fee request represents 10 percent of the estimated value of the cash value of the settlement. The attorneys, representing a class of more than 7 million merchants, filed court documents seeking final approval of the accord from U.S. District Judge John Gleeson in New York.
The settlement, valued at $7.25 billion, is the largest antitrust settlement in U.S. history. In fact, that figure is more than double the recovery in any previous private antitrust action. According to the memorandum in support of fees (pdf),filed by Robins Kaplan Miller & Ciresi, Berger & Montague, and Robbins Geller Rudman & Dowd, the lead plaintiff firms, wrote, “The settlement will affect as great a segment of the United States economy as any previous antitrust class action.” In addition, the injunctive relief rule changes in the case will likely translate into billions of dollars beyond the settlement.
Over 60 law firms worked on the litigation over an eight year period, investing nearly 500,000 hours in the action. Class counsel complied, reviewed, and organized a massive discovery record, which included 65 million pages of documents, produced by the 19 defendants. In the trial preparation phase, class counsel produced five expert reports, while defendants responded with 12 expert reports, which in turn produced six expert rebuttal reports, creating Daubert challenges from both sides.
In addition, plaintiffs’ counsel assisted in securing legislation regulating interchange fees by passing the Durbin Amendment in the Dodd-Frank Act. As a result of this amendment, class members saved an estimated $9 billion per year in debit-card fees. What is more, this action also prompted the DOJ and several states’ Attorneys General to investigate anti-steering rules, resulting in a consent judgment against Visa and MasterCard, limiting several of Visa and MasterCard rules, the very rule changes the underlying action sought.
“Indeed, the settlement secured by class counsel is unprecedented in the history of antitrust law,” said Terry Jesse, executive director of NALFA. “The fact that the litigation produced beneficial legislative and executive action, relying primarily on the discovery record developed in the MDL, in the plaintiffs’ favor, may be reason alone to justify the 10 percent fee request,” Jesse concluded.
Setting aside the fees generated by the $206 billion tobacco industry settlement in 1998, a $720 million fee award would be the largest ever in a class action. By way of comparison, Enron's landmark $7.2 billion deal with investors netted plaintiffs lawyers $688 million in fees. A $3 billion settlement that Visa and MasterCard reached over debit card fees in 2003--then the largest-ever antitrust class action settlement--produced a $220 million fee award. Judge Gleeson also oversaw that case. (The National Association of Legal Fee Analysis (NALFA) has a handy chart detailing top class action fee awards.)
The story went on to say:
Terry Jesse, the executive director of NALFA, told us that Friday's fee request may be a reasonable one, given the costs that came with the interchange fee litigation. "Antitrust cases are very complex and require tremendous work," he said.
NALFA is hosting The Attorney Fees Conference - 2013 at the Bar Association of San Francisco on October 25, 2013. The conference is widely regarded as the nation’s largest and most comprehensive program on attorney fees and legal billing. Thought leaders from across the legal fee analysis profession participate as sponsors, panelists, and attendees. Panelists include:
The Honorable Richard A. Kramer is a San Francisco County Superior Court Judge in the Complex Civil Litigation Division. Prior to joining the bench in 1996, Judge Kramer worked as a civil litigator representing the banking industry.
The Honorable William F. Downes is a former U.S. District Court Judge of Wyoming, 12 years of which he was the Chief Judge. Judge Downes served 17 years on the bench where he presided over hundreds of jury and bench trials. Prior to serving on the federal bench, Judge Downes was an accomplished trial lawyer in Wyoming, handling cases ranging from tort and real estate matters to medical malpractice and personal injury disputes. Judge Downes currently serves as a full-time JAMS mediator and arbitrator where he handles complex civil disputes throughout the U.S.
The Honorable Cruz Reynoso is a former Associate Justice of the Supreme Court of California and Associate Justice for the Third District Court of Appeals of California. Justice Reynoso is currently Professor of Law Emeritus at UC Davis School of Law. He is a nationally recognized leader in civil rights, immigration, and the administration of justice. Justice Reynoso also serves as an expert witness on a range of attorney fee matters.
Bruce R. Meckler serves as Co-Chair of Meckler Bulger Tilson Marick & Pearson in Chicago. In addition to his nationwide litigation practice, focused on complex commercial litigation, insurance and reinsurance disputes, white collar criminal matters and professional liability litigation, Mr. Meckler is a nationally preeminent attorney fee expert who frequently testifies on the reasonableness of legal fees in court and arbitration. Mr. Meckler has conducted or supervised hundreds of legal bill reviews involving billions of dollars in legal fees.
Philip R. Strauss is the Associate General Counsel of E-Bates / Performance Marketing Brands, an Internet loyalty shopping company in San Francisco. Mr. Strauss has over 20 years experience in corporate executive leadership and corporate law department management, including being General Counsel for two publicly traded Silicon Valley software companies and being in private practice for two top-tier national law firms. Mr. Strauss has also been a consultant in the advisory practice of a Big Four audit firm and served as a two-term President of the Association of Corporate Counsel’s San Francisco Bay Area Chapter and founded the ACC’s Corporate Counsel University.
John D. O’Connor is the principal of O’Connor & Associates in San Francisco. Mr. O’Connor has tried over 70 cases in federal and state venues throughout the country. A former Federal Prosecutor, Mr. O’Connor has successfully represented high-profile clients including the FDIC, RJ Reynolds, the former California Attorney General and Golden State Warriors Head Coach Don Nelson. In two recent cases, the Court specifically referred to Mr. O'Connor's expert opinions. One opinion supported a $19.8 million fee award, employing a 2.0 multiplier in a wage and hour case; another, a $3.1 million fee award, with a 1.5 multiplier, in a wrongful termination case.
Gary A. Greenfield, a former litigator and trial lawyer, founded Litigation Cost Management in 1991 to consult exclusively on attorney fee issues related to litigation management and analysis of legal fees. Mr. Greenfield acts as an expert witness in matters on legal fee-related issues and and has conducted numerous analyses related to legal and expert witness fees in matters ranging up to several hundred million dollars in fees. His work has been both on behalf of parties seeking and parties opposing recoveries of fees in state and federal courts. He has also been a Special Master on fee-related issues and conducts trainings and classes on legal bill analysis and auditing and other legal fee-related issues.
Steven A. Tasher is the CEO and Managing Director of Wyatt Partners LLC. He is a former Deputy Attorney General of New Jersey, partner at Donovan, Leisure, Newton & Irvine and Willkie, Farr & Gallagher and Vice President and Associate General Counsel of Wyeth. His firm specializes in litigation budgeting, legal billing practices, and effective litigation management. As experts in attorneys' fees cases, Wyatt Partners provides comprehensive and detailed analysis concerning the reasonableness of attorneys' fees and expenses in complex litigation matters throughout the U.S.
Scott Wirtz is the Controller at Loeb & Loeb, LLP in Los Angeles and sits on the Legal Electronic Data Exchange System (LEDES) Oversight Committee (LOC) Board of Directors which oversees E-Billing standards and the Uniform Task Based Management System (UTBMS). Mr. Wirtz has over 20 years of law firm finance experience in the legal profession. He has written articles published in Law Technology News and Metropolitan Corporate Counsel.
Kenneth E. Bacon is Counsel at Mastagni, Holstedt, Amick, Miller & Johnson in Sacramento. Mr. Bacon is the Presiding Arbitrator at the State Bar of California’s Mandatory Fee Arbitration Program. He has trained fee dispute arbitrators and mediators throughout the state of California and has presided over hundreds of attorney-client fee disputes.
Malcolm Sher is a full-time mediator and arbitrator specializing in high emotional, cross-cultural disputes. Mr. Sher is a member of the State Bar of California’s Mandatory Fee Arbitration Executive Committee and Chair of the Contra Costa Bar Association’s Mandatory Fee Arbitration Committee. He has arbitrated and mediated hundreds of fee disputes and lectured widely on the subject of fee arbitration and mediation.
William Gwire is the principal of Gwire Law Offices in San Francisco. Mr. Gwire was identified in California Lawyer as one of only a handful of “go to” plaintiff’s legal malpractice lawyers in California. He tried to judgment one of the largest legal fee disputes in history, the $100 million fee dispute between Dow Corning and a consortium of insurance companies arising out of breast implant litigation. Mr. Gwire achieved a $13.7 million deduction in the attorney fee claim.
Martin Quinn is a full-time JAMS arbitrator and mediator who settles, arbitrates, and manages complex legal disputes. Mr. Quinn served as the court-appointed Special Fee Master in the MDL, In re TFT-LCD (Flat Panel) Antitrust Litigation, issuing an expert report and recommendation on the $310 million fee allocation dispute in the MDL.
Richard M. Pearl is the author of California Attorney Fee Awards, 3d Ed., published by California's Countinuing Education of the Bar. Mr. Pearl has litigated some of the key attorneys’ fees cases in California, including Graham v. DaimlerChrysler Corp., Flannery v. Prentice, and Maria P. v. Riles. He also has served as an expert witness on attorneys' fees, and his opinions have been cited by numerous courts. He also has served as an Adjunct Professor of Law at Hasting Law School.
Aashish Y. Desai is the Managing Partner of Desai Law Firm in Costa Mesa. Mr. Desai is an experienced advocate for clients and enjoys a reputation of integrity, intelligence, and professionalism among his peers. Mr. Deasi has recovered millions of dollars for class members on a range of mass torts and has earned record-setting attorney fee awards.
Eric H. Gibbs is a Partner at Girard Gibbs LLP in San Francisco. Mr. Gibbs represents plaintiffs in a broad range of cases, including employment, pharmaceutical and medical device litigation, as well as consumer class actions. Mr. Gibbs has achieved significant recoveries on behalf of class members including record-setting settlements in Providian Credit Card Cases and Mitchell v. American Fair Credit Association and Mitchell v. Bankfirst.
Francis O. Scarpulla is a Senior Partner at Zelle Hofmann in San Francisco. Mr. Scarpulla specializes in complex federal antitrust class actions, representing plaintiffs in many federal antitrust class actions including Pharmaceutical Antitrust Litigation, Microsoft Monopolization Antitrust Litigation, and DeBeers Diamond Antitrust Litigation. Most recently, Mr. Scarpulla achieved a record-breaking $1.082 billion settlement in the MDL, In re TFT-LCD (Flat Panel) Antitrust Litigation, earning a $310 million attorney fee award.
Lindsay H. Tasher is the Managing Director of Wyatt Partners LLC. Prior to her work with Wyatt, Lindsay was in private practice in two major law firms -- one in New York and one in New Jersey. She handled all types of civil litigation, including aviation mass-tort law and wrongful death/personal injury, products liability defense work, and securities law. Her company specializes in litigation budgeting, legal billing practices, and effective litigation management. As experts in attorneys' fees cases, Wyatt Partners provides comprehensive and detailed analysis concerning the reasonableness of attorneys' fees and expenses in complex litigation matters throughout the U.S.
Doug Ventola is the President of Sky Analytics, an innovative Boston-based company and leading provider of legal spend analytics for coporate law departments. Mr. Ventola has over 20 years experience as a business and financial executive. Prior to joining Sky Analytics, he was Senior Vice President for NASDAQ OMX, where he launched and headed their Global Corporate Services Division.
James E. King is the principal of King Law Corporation in San Diego where he maintains a nationwide practice as a consulting attorneys' fees expert. Over 90% of Mr. King's practice today is as a testifying expert witness. Before focusing his practice on expert consulting, Mr. King handled more than 50 fee dispute arbitrations as a lawyer. In addition, Mr. King has served as an arbitrator (or supervising chairperson) for over ten years where he issued or approved over 250 awards in fee dispute arbitration.
A recent New York Law Journal story, “U.S. Judge Approves $115M Settlement in AIG Class Action,” reports that a federal judge in Manhattan yesterday approved a $115 million settlement reached by former American International Group Inc. CEO Maurice “Hank” Greenberg and other former AIG executives to resolve a shareholder class action.
Southern District Judge Deborah Batts ruled from the bench in In re American International Group Securities Litigation, that the settlement was “fair, reasonable and adequate,” overruling the sole objection by an investor, which did not appear in court.
Batts also approved awarding 13.25 percent of the settlement, or $15.24 million, as attorney fee to plaintiffs’ lawyers led by the law firms Labaton Sucharow and Hahn Loeser & Parks.
The underlying case was brought by three Ohio public employee retirement funds, alleged that AIG misled investors with sham accounting. When the company eventually had to restate several years of finances in 2005, investors lost money. Greenberg left shortly thereafter.
A recent NLJ story, “Split Outcome to Contract Beef Means No One Gets Attorney Fees,” reports that a federal appeals court nixed competing $2.7 million and $1.3 million in attorney fees and cost requests in a contract dispute between beverage companies that generate just more than $1 million in judgments. In Southern Wine and Spirits v. Mountain Valley Spring Valley Co., the U.S. Court of Appeals for the Eight Circuit affirmed Western District of Arkansas Judge Jimm Larry Hendren’s March 2012 denial of attorney fees to either side. The Eight Circuit agreed with Hendren that the case produced no “prevailing party” because each side won “sizable jury awards by prevailing on significant issues.”
The underlying case was a contract dispute between bottled water company Mountain Valley and regional distributor. Southern won a $819,000 judgment against Mountain Valley for breach of contract and breach of an implied covenant of good faith and fair dealing, plus an extra $42,000 for Mountain Valley’s failure to pay an account. Mountain Valley won an $183,000 judgment against Southern on its breach of an implied covenant of good faith and fair dealing counterclaim.
Southern sought $2.7 million in fees and costs for its lawyers at Texarkana’s Haltom & Doan and its of-counsel firm, Los Angeles-based Korshak, Kracoff, Kong & Sugano. Mountain Valley’s lawyers at the Rose Law Firm in Little Rock, Ark., countered with a request for $1.3 million in fees and costs if the court awarded fees to Southern.
The Eight Circuit wrote that, “where the district court declined to find even that Southern was a prevailing party, Southern asserts no facts to support its contention that it merited an award of attorney’s fees.” The ruling went on to conclude: “Because we affirm the denial of attorney’s fees to Southern, we need not discuss Mountain Valley’s protective claim for its own attorney’s fees.”
A recent Reuters story, “Judge Singles out Ohio Firm in Trimming Fee Award in BofA Case,” reports that the judge who gave his blessing to Bank of America’s $2.43 billion MDL settlement with investors trimmed the total legal fees awarded in the case after challenging the fee request of a small Ohio firm that never appeared before him. Judge Kevin Castel of U.S. District Court in Manhattan last week cut the proposed $158 million in plaintiffs’ lawyers fees to $152.4 million, after rejecting a fee award sought by Flanagan Lieberman Hoffman & Swaim of Dayton, Ohio.
The three lead plaintiffs’ firms, Bernstein Litowitz Berger & Grossman and Kaplan Fox & Kilsheimer, both of New York, and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania, all had supported Flanagan Lieberman’s fee request. But Castel said the firm, which served as an additional counsel for two Ohio pension funds that were plaintiffs in the case, should seek its fees from the state of Ohio, not the class.
In the unerlying case, Bank of America had agreed to buy Merrill in an all-stock deal initially valued at $50 billion on Sept. 15, 2008, the same day that Lehman Brothers Holdings Inc. went bankrupt. But Merill ended up losing $15.84 billion in that year's fourth quarter, even as it awarded $3.62 billion of bonuses to employees. Bank of America ultimately obtained a federal bailout, since repaid, to absorb Merrill. Shareholders said Merrill's mounting losses and bonus plans should have been disclosed before investors voted on the merger in December 2008.
Flanagan Lieberman had sought $3.4 million, plus a multiplier that would have made its net payment $6 million. In a declaration filed with the court, the firm had said it regularly consulted with the pension plans, reviewed pleadings and helped with discovery requests, among other duties. But the firm’s role in the case was news to Castel. It never entered a notice of appearance with the court and was not mentioned in briefs, the judge said at a hearing.
Judges have broad discretion in awarding legal fees in class action cases. But they don’t typically single out a firm in deciding not to award the amount requested, especially when there were no objections to the fee request, said Brian Fitzpatrick, a professor of law at Vanderbilt Law School who has researched class action litigation.
Though Castel did not accuse Flanagan Lieberman of wrongdoing, he suggested it was a “hanger-onner,” trying to profit off the class at the last minute. Castel ultimately told Lieberman his firm should petition the state of Ohio for its fees. He also ruled that the lead plaintiffs’ firms could not share any portion of their fees with any other law firm without a court order.
The $2.43 billion MDL settlement is one of the largest investor settlements stemming from the recent global financial crisis. The case is In re Bank of America Corp Securities Derivative and Employee Retirement Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York. For more on this case, visit http://www.boasecuritieslitigation.com/.
The National Association of Legal Fee Analysis (NALFA) has launched a new pilot project that focuses on attorney fees in MDLs. Our objective is to work with courts to publish attorney fee award statistics in MDL cases. “Our goal is to work with the U.S. Judicial Panel on Multidistrict Litigation (JPML) and U.S. District Courts to publish statistics on attorney fee awards in MDL cases. These statistics would provide real-time attorney fee metrics on pending MDLs throughout the U.S.,” said Terry Jesse, executive director of NALFA. “Compiling these MDL case statistics would provide a valuable tool for fee-requesting lawyers and fee-awarding judges,” Jesse said.
In addition, NALFA has created a new Special Fee Master Program to address attorney fee issues in complex federal litigation. Attorney fee and legal billing issues can often arise in the MDL process. From pretrial time keeping practices to post-settlement fee allocation disputes, our fee experts have the skills and expertise to resolve fee issues in an efficient manner and in line with FJC’s Manual for Complex Litigation, Fourth Edition § 14.231 (2004) and FJC’s Awarding Attorney Fees and Managing Fee Litigation, Second Edition § 4(D)(3) (2005).
A recent Thomson Reuters story, “Court Awards $310M in Attorneys’ Fees in LCD Case,” reports that dozens of law firms that obtained more than $1 billion in settlements in a long-running price-fixing case over display panels used in electronics have received court approval for $310 in attorneys’ fees. U.S. District Judge Susan Illston in San Francisco awarded the fees and approved a plan to allocate the money among 116 law firms that contributed to the litigation. The top two recipients were co-lead firms in the case: Zelle Hofmann Voelbel & Mason, which was allocated $75 million, and the Alioto Law Firm, which was allocated $49 million.
The law firms represented a nationwide class of retail purchasers who bought products containing thin-film liquid-crystal display panels used in a range of electronic products, including laptops and TVs. Defendants that made the panels, including Samsung Electronics Co Ltd and Hitachi Ltd, agreed to settlements totaling about $1.08 billion.
Illston’s ruling was the latest development in a contentious process over fees. Last August, she appointed a special fee master to prepare reports and issue recommendations on attorneys’ fees. The special fee master’s findings contained in reports issued November and December, prompted several objections from law firms in line to receive fees.
Among the objectors was co-lead counsel in the case, Joseph Alioto of the Alioto Law Firm. Alioto claimed he had come to an agreement with his co-lead counsel in the case, Francis Scarpulla of Zella Hofmann, divide the work and their fees equally between the “Alioto team” and the “Zelle Hofmann team.”
But the special fee master found that Alioto had not carried his burden of proof to show that such an agreement existed. In her order, Illston agreed with the special fee master’s conclusion and found that even if an agreement had existed, it likely would be unenforceable. Fee agreements among attorneys at different firms, she noted must be “in writing and signed by the clients” under federal law and California law.
A recent Thomson Reuters story, “Attorneys Defend $53M in Fees Sought in Dairy Antitrust Settlement,” reports that attorneys for a class of dairy farmers are seeking final court approval of a $158.6 million settlement, with about a third going to plaintiffs’ counsel. Since the settlement, two class members wrote letters to the court in Greenville, Tenn., asking for a reduction in the attorneys’ fees. One of the members called the fees “obscenely excessive.”
Lawyers at Baker & Hostetler, which served as lead counsel for the class, countered that the letters offered no legal basis for the reduction in attorney fees. They also noted that their side had invested $53 million in attorney time plus $8 million in out-of-pocket expenses, “with no guaranty of any recovery much less a return.”
The underlying case involves control of the milk market in the American Southeast. The suit alleged that the defendants conspired to control the milk market in 14 states in the Southeast by excluding competition from independent milk farmers and cooperative. Defendants in the case include the Dairy Farmers of America and former CEO Gary Hanman, National Dairy Holdings, LP, Dairy Marketing Services LLC and Mid-Am Capital LLC. The total obtained from all the defendants, $303.6 million, represents the largest antitrust settlement in the Eastern District of Tennessee.
Even if the court approves the fees, there is some uncertainly about the allocation of those fees. That is because when the case started more than six years ago, Robert Abrams of Baker & Hostetler, the lead attorney for the plaintiffs, was a partner at Howrey, the defunct law firm that filed for bankruptcy in 2011. Allan Diamond, the Howrey trustee of Diamond McCarthy, who is seeking to recover assets for the estate, has indicted in court papers that he considers the fee recovered by Abrams in the dairy litigation as significant assets belonging to the estate.
A recent BLT blog post, “Judge Cuts Fees for Plaintiffs’ Lawyers in LivingSocial Settlement,” reports that, citing inefficient staffing and high hourly rates, U.S. District Judge Ellen Segal Huvelle slashed attorney fees in half for plaintiffs’ lawyers in multi-district litigation against daily deal company LivingSocial. In her opinion (pdf) approving a settlement between consumers and LivingSocial over expired deals, Huvelle awarded $1.35 million in fees to the 12 law firms that represented the plaintiffs, instead of the $3 million they asked for as part of the settlement.
Washington-based LivingSocial was hit with a series of class actions beginning in 2011 over expired deals that consumers bought through the company’s website. The plaintiffs claimed the vouchers’ limited expiration violated the federal Credit Card Accountability Responsibility and Disclosure Act, as well as state laws regulating gift certificates. LivingSocial denied its vouchers were gift certificates and argued that even if they were, the expiration dates did comply with state and federal laws.
The cases from across the U.S. were consolidated as an MDL in D.C. in August 2011 and settlement talks started soon after, according to court filings. Under the settlement, LivingSocial agreed to establish a $4.5 million fund reimburse class members whose deal expired before they were used. The class included about 10.9 million consumers who bought deals between 2009 and late 2012. Any remaining funds would go to the Consumer Union and National Consumers League as cy pres awards.
Plaintiffs’ lawyers asked for $3 million in fees, an amount that LivingSocial agreed not to contest. Huvelle wrote that although the four formal fee objections to the settlement agreement were “largely meritless,” she agreed with complaints about the size of the fee request. Huvelle criticized how the plaintiffs’ legal team staffed the case, noting that 46 lawyers, at the 12 firms involved in the case, billed time. “At a minimum, this is a highly inefficient was of doing business,” she wrote.
Plaintiffs’ lawyers billed more than 4,000 attorney and paralegal hours, a number that Huvelle called “excessive” given that there were only three depositions taken and two briefed motions. She said she was unwilling to accept the high hourly rates charged by some attorneys working on the case, citing the $600 rate charged by Cuneo Gilbert partner Charles La Duca as exceeding the established Laffey Matrix.
Huvelle rejected the argument that plaintiffs’ counsel should be paid based on a percentage of the estimated value of the settlement and its injunctive relief, which the plaintiffs’ lawyers pegged at $62 million. She instead awarded 18 percent of the settlement fund, which was estimated at $7.5 million. “A modest percentage is appropriate in this case given the limited value of the direct benefits to the class members, the small number of class members who will benefit, the proportionally large cy pres distributions…and the somewhat dubious value of the injunctive relief,” Huvelle wrote.
In Viveros v. Donahoe, CV, 2013 WL 1224848 (C.D. Cal. Mar. 27, 2013) plaintiff, after prevailing in a pregnancy discrimination case, sought a fee award of $440,570 under 42 U.S.C. § 2000e-5(k). Plaintiff sought a rate of $500 per hour for its lead attorney (“Yun”) and sought compensation for a total of 1235.6 hours.
Making its own independent inquiry and relying on NALFA Attorney Fee Practice Group member Jim King’s expert opinion, the Court found that plaintiff’s time entries evidenced “a pattern of billing more hours than reasonably necessary to complete the tasks described.” The court reduced the total number of chargeable hours by 40 percent. Viveros v. Donahoe, 2013 WL 1224848 at *6. The court also reduced the requested $500 hourly rate for plaintiff’s lead attorney to $350 per hour:
Because plaintiff has not adduced adequate evidence to corroborate the hourly rate requested for Yun, and because defendant’s evidence and the published data indicate that the prevailing rate in the community for similar work performed by attorney of comparable skill, experience, and reputation is lower than $500, the court will award fees to plaintiff for Yun’s services at the hourly rate of $350. Based on the case law cited above, the evidence adduced by defendant, the published data, and the court’s own experience and knowledge of rates in the community, the court finds that this hourly rate more accurately represents prevailing market rates for comparable services. Viveros v. Donahoe, 2013 WL 1224848 at *5.
DLA Piper has issued a memo (pdf) is response to The New York Times story, “Suit Offers a Peek at the Practice of Inflating a Legal Bill” and in response to the suit, DLA Piper v. Victor. In that suit, former client Adam Victor says court exhibits show DLA attorneys discussing deliberate overbilling on his bankruptcy case. In one 2010 email, a then-DLA attorney refers to a “churn that bill, baby!” approach and says “that bill shall know no limits.”
The law firm in a public statement said: “We hold ourselves to the highest legal and ethical standards. The behavior as described is unacceptable to DLA Piper and our clients. The emails were in fact an offensive and inexcusable effort at humor, but in no way reflect actual excessive billing.”
Roger Meltzer, DLA Piper United States co-chair, said in an interview that DLA attorneys were answering calls from clients yesterday and others reached out to in-house counsel on their own. Meltzer said no clients have cut off ties as a result of the exposure of the emails and he believed the firm would not suffer a loss of revenue or client relationship. Clients have been “enormously supportive,” and know the emails are not related to the firm’s standards, performance or billing practices, he said.
Victor’s suit was in response to a fee collection action initiated by DLA to collect $675,000 in unpaid legal fees. In the Victor case, the firm believes it provided legal services that ought to be paid for. He said DLA wouldn’t sue a client “if we were not confident in the appropriateness of a bill.” The memo went on to say, “our bills and billing practices undergo the most sophisticated reviews and audits by clients who employ such techniques as a standard practice in connection with outside counsel billings.”
“There’s been a little overreaction to this story from some on the corporate side,” said Terry Jesse, executive director of NALFA. "Some are using this story to claim overbilling is widespread at DLA and other law firms. But it’s important to keep in mind that law firms are not monolithic. There are internal practice groups within law firms that manage cases. If the emails were more than inappropriate humor, it could be the case that this bankruptcy case was inefficiently managed by a practice group within DLA,” Jesse concluded.
Attorney fee experts are often hired in cases when underlying legal fees are at issue. Attorney fee experts are retained to support or challenge the reasonableness of attorney fees at trial or in arbitration. Fee experts can provide expert reports and opinions on the factors that related to the reasonableness of attorney fees. Here are some tips when hiring an attorney fee expert on a fee matter:
Retain an attorney fee expert on large, complex fee matters It is considered a litigation best practice to retain a fee expert on large, complex fee matters of one million dollars or more.
Hire a qualified attorney fee expert Hiring an experienced, qualified fee expert will add credibility to a fee claim and their expert report and testimony will stand up under cross-examination.
Hire a fee expert early in the process Retain a fee expert early in the process because the work required can take several weeks and even months.
The Attorney Fee Practice Area is a new, highly specialized practice area that covers a range of matters where attorney fees are at issue.
NALFA has created a new on-line Submit-A-Case form for clients who have attorney fee or legal billing issues. Now, clients such as law firms, courts, and corporations with attorney fee or legal billing issues from across the U.S. can submit their case on-line.
Whether clients are seeking to recover attorney fees or save on fees, parties will have the opportunity to talk with a member of NALFA's Attorney Fee Practice Group about their fee matter.
NALFA’s Attorney Fee Practice Group is the first-of-its-kind national practice group specifically devoted to attorney fee issues. Members of NALFA’s Attorney Fee Practice Group are qualified attorney fee experts, fee dispute mediators, and legal bill auditors. Members of NALFA's Attorney Fee Practice Group adhere to Industry Best Practices.
“Our issue with fee objectors is that they usually have an axe to grind, says Terry Jesse, executive director of the National Association of Legal Fee Analysis, in Chicago. This is not the first time Ted Frank has objected to fees, and he has a very tangential connection to the case.”
Jesse tells ACEDS that the solution is for courts to appoint special fee masters, who can assess bills independently and objectively.
A recent New York Law Journal story, “DLA Piper Emails Reveal Firm Overbilled, Former Client Says,” reports that a former DLA Piper client who is challenging the firm over attorney fees has filed with the court what he claims are internal emails by DLA attorneys (pdf) who discuss deliberate overbilling, with on attorney allegedly writing about another’s “churn that bill, baby!” approach. Attorneys for the former client, energy executive Adam Victor, say in court papers that the emails “shock the conscience.”
“Until now, there probably has never been a written admission where members of a law firm have flatly acknowledged they have engaged in such a reprehensible and damning conduct,” Larry Hutcher and Josh Krakowsky write in DLA Piper v. Victor, in Manhattan Supreme Court. Victor is requesting punitive damages of $22.47 million, which he says is 1 percent of DLA’s reported revenue for 2012.
The new allegations arise from a lawsuit brought against Victor in February 2012 for $678,763 in past due legal bills. DLA was hired in April 2010 by Project Orange Associates (POA), which is owed by Victor, to handle its bankruptcy before being disqualified due to a conflict. In court papers, Victor claimed the firm acted as his company’s “ghost counsel” after being ordered to withdraw and continue to bill him. He alleged a “sweeping practice of over-billing.” In the most recent filings, Victor and his attorneys argued that they now have proof of that allegation.
In one exhibit from an email dated May 20, 2010, then-DLA attorney Erich Eisenegger writes to attorneys Christopher Thomson and Jeremy Johnson, “I hear we are already 200K over our estimate—that’s Team DLA Piper!” According to court papers, Thomson replied to Eisenegger and Johnson: “What was our estimate? But Tim [Walsh] brought Vince [Roldan] [two other DLA Piper attorneys working on POA] in to work on the objection for whatever reason, and now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode. That bill shall know no limits.”
A federal judge has referred a dispute over millions of dollars of attorneys’ fees related to the $3.4 billion settlement of the Cobell class action lawsuit to a special magistrate for mediation. The Cobell suit was filed in 1996 and challenged the federal government’s mismanagement of billions of dollars of funds it held in trust for more than half million American Indians. Although the suit was settled in 2009, a bitter dispute over divvying up the almost $100 million in legal fees lingers on.
The Cobell settlement called for $99.1 million to be paid to all lawyers involved in the case. The firm Kilpatrick, Kilpatrick Townsend & Stockton and solo practitioner Dennis Gingold have reportedly been paid $85.3 million, although it is not clear how the payment was split between the two parties. The remaining $13.6 million is claimed for legal services rendered by the Native American Rights Fund (NARF), which seeks $8.1 million, and attorney Mark Brown, who seeks $5,500,000, according to court documents. But Kilpatrick Townsend and Gingold argue that NARF left the case in 2006 and had a conflict of interest and that Brown abandoned the case in 2007 and therefore should not get paid.
On March 18, Judge Thomas Hogan of the U.S. District Court for the District of Columbia said the fee dispute ultimately may have to go to trial for resolution, but in order to spare the expense of a trial, he ordered the fee dispute to go before a special magistrate in hope that it will be settled in mediation. “This is an historic case. A lot of good was done for people who deserve it. It’s a shame it’s somewhat degenerated into fighting over lawyers’ fees,” Hogan said.
A recent NLJ story, “Judge Grants Final Approval of $25.5M Settlement in Shareholder Case,” reports that U.S. District Judge Dale Fischer in Los Angeles has granted final approval of a $25.5 million settlement that resolves shareholder claims against Toyota over alleged misstatements regarding its 2010 recalls because of sudden acceleration defects. At a March 11 hearing Judge Fischer planned to approve the deal, which includes nearly $4.25 million in attorney fees and expenses. She has not issued a final written order.
In court filings, lead plaintiff counsel Blair Nicholas, of Bernstein Litowitz Berger & Grossman in San Diego wrote that the settlement’s benefits—more than 20 percent of an estimated $124 million in potentially recoverable damages—significantly outweighed the risks.
The settlement, plus interest, was deposited into an escrow account on January 15. Nicholas estimated that his firm obtained 6 million pages of documents, took 10 depositions and expended more than 17,000 hours on the case—a total cost of more than $6.5 million in fees and $1.35 million in expenses.
The nearly $2.9 million in requested fee constitutes 12 percent of the settlement fund, Nicholas wrote. His firm also is asking for $1.35 million in expenses, plus interest, and $85,900 in reimbursement costs for his client.
A recent New York Law Journal story, “A.G. Blasts Fee Request From Counsel Madoff Investors,” reports that Attorney General Eric Schneiderman has blasted as unreasonable and “wildly excessive” a $42 million feerequest (pdf) from plaintiffs lawyers representing investors in a settlement related to Bernard Madoff’s Ponzi scheme run as Bernard L. Madoff Investment Securities LLC.
Schneiderman’s office, the U.S. Labor Department and 13 plaintiffs firms brought separate actions on behalf of investors against Ivy Asset Management, a subsidiary of Bank of New York Mellon, accusing it of advising clients to invest with Madoff in spite of red flags about Madoff’s operations. In November 2012 the parties reached a proposed $219 million settlement, which awaits approval by U.S. District Judge Colleen McMahon of New York. The bulk of the settlement funds would come from Ivy Asset.
Plaintiffs lawyers then requested $40.8 million in attorney fees, about 20 percent, and $1.2 million in expenses as part of the settlement. The attorney general shot back with a fee objection (pdf) that sharply criticized the total proposed award and number of hour, 118,000, the attorneys say they devoted to the case. “118,000 is an astounding number to develop the same body of evidence that the Attorney General developed in 6,000 hours,” the state’s motion said, claiming the number of hours reflects “substantial non-efficiencies, waste and duplication.”
One of the firms is Lowey Dannenberg Cohen & Hart in White Plains, lead counsel and co-liaison counsel with the U.S. Labor Department. The firm would receive $14.3 million if a 20 percent fee is awarded, Lowey partner Barbara Hart said in court papers. In their motion for a fee award, plaintiffs counsel defended the fee request by explaining that in a beauty contest Lowey was retained as lead counsel after agreeing to a cap on fees lower than all the other qualified bidders.
The attorneys also claimed that lead plaintiffs and other class representatives have agreed the request is fair, and supported under the factors set forth under the Second Circuit’s 2000 ruling in Goldberger v. Integrated Res., such as time and labor expended and the risks of the litigation. “It took tremendous skill and perseverance to achieve a settlement at this level in these coordinated actions,” the attorneys said. With few exceptions, they added, they have not been compensated for any time or expenses since the suits began.
But Schneiderman’s office said that before the mediation that resulted in the $219 million settlement, Ivy Asset offered the office $140 million to settle substantially identical claims. Accordingly, the efforts of private counsel provided a benefit to clients of no more than $79 million, the state said in a brief signed by Roger Waldman, senior counsel in the investor protection bureau. The fee request would consume 53 percent of the additional $79 million benefit they achieved.
Waldman also claimed that after the attorney general’s office filed its suit, class counsel filed an amended complaint that “wholly adopted the facts and theory” of the government’s complaint. Waldman said any fee award to private counsel must be based on a contribution of securing $79 million, not $219 million. At 20 percent, that would calculate to less than $16 million, he wrote.
But in their fee reply (pdf), plaintiffs attorney argued that over the last year, the attorney general “came to rely heavily on private counsel” and noted that the NYAG “sat idly through the post-settlement fee mediation, offering commentary but were unprepared.” “The NYAG’s assertion about the comparative worth of the withdrawn 2010 offer and the current Settlement, and how little value Private Counsel conferred, are grossly inaccurate. Billions in Bankruptcy Trustee recoveries sharply reduced recoverable damages and there were major flaws in the 2010 offer,” plaintiffs lawyers said.
In a civil rights case, Padgett v. Loventhal, the U.S. Court of Appeals for the Ninth Circuit overruled a decision of a trial court, and remanded the case for further consideration. U.S. District Court Judge James Ware reduced attorney fees from $3.2 million to $500,000 and reduced costs from $900,000 to $100,000 without detailed explanation or computation of the reasons for reducing the attorney fee claim. The appeals panel was critical of the reduction as the district judge slashed the fees and costs without detailed description or supporting calculations for the reductions ordered.
The Ninth Circuit reversed the decision of the trial judge, noting that district courts must give reasons for declining to award costs and for reducing costs based on a partial victory. “While it identified the correct rules, it provided no explanation for how it applied those rules in calculating the costs and attorney’s fees. Therefore, we vacate the district court’s award of costs and fees and remand to the district court for an explanation of how it used the lodestar method Padgett’s fees and how it calculated Padgett’s reduced costs,” the Ninth Circuit wrote in its decision (pdf).
A recent Thomson Reuters Legal story, “Plaintiff can Recoup Fees after State Voluntarily Concedes,” reports that a New York appeals court held that the state’s Equal Access of Justice Act permits litigants to recoup fees even in the absence of a ruling in their favor if the state voluntarily grants the relief they sought. The court’s 4-1 ruling is a departure from U.S. Supreme Court precedent, as well as its own.
The underlying case, Matter of Solla v. Berlin, involved a disabled woman, Luz Solla, whose public assistance benefits were reduced by $200 a month by New York City in 2010. She challenged the cut, and the state Office of Temporary and Disability Assistance ordered the city to restore her benefits. When the city failed to comply, Solla filed a motion seeking to enforce the order. The city then complied and moved to dismiss the action as moot.
After Manhattan Supreme Court Justice Alexander Hunter dismissed the petition, Solla made a motion to recover attorney’s fees under the EAJA. The act, which is intended to make it easier for poor litigants to challenge state action, permits a “prevailing party” that brought a civil action against the state to collect fees unless the state can show that its position was “substantially justified.” Solla argued that she was entitled to fees under the “catalyst theory,” which holds that a party whose litigation prompts state action should receive fees because he or she was the “catalyst” for the state’s decision.
Hunter denied the motion, citing the appeal court’s 2001 ruling in Matter of Auguste v. Hammons, where the court found that the catalyst theory was invalid. That ruling was based on a U.S. Supreme Court decision that same year, Buckhannon Board & Care Home v. West Virginia Department of Health and Human Resources. In Buckhannon, the Supreme Court found only a court order could allow a prevailing party to collect fees. That decision meant that parties who sued under the federal EAJA cannot collect fees even when the state changes its position as a result of the lawsuit, unless a court order is involved. Since the state EAJA was modeled on the federal statute, the appeals court ruled in Auguste that the catalyst theory also could not be applied under state law.
However, the appeals court reversed its position, noting that the state EAJA was intended to be similar, not identical, to the federal statute. Without the ability to collect fees in “catalyst” cases, wrote Justice Angela Mazzarelli, the EAJA would fail in its goal of encouraging litigants with scarce resources to challenge the state. “If anything, preservation of the catalyst theory is critical to achieving the legislative purpose behind the State EAJA,” she wrote.
A recent Legal Intelligencer story, “Second Mile Insurer Off the Hook for Sandusky’s Legal Bills,” reports that an insurer of the charity started by convicted serial child molester Jerry Sandusky does not have to cover the former Penn State assistant football coach’s legal bills, a federal judge has ruled. U.S. District Chief Judge Yvette Kane of the Middle District of Pennsylvania ruled that Federal Insurance Co., The Second Mile’s insurer, was not obligated to cover Sandusky’s legal cost.
“Applying the facts set forth in the criminal and civil claims against defendants Sandusky to the language of the insurance policy leads to the clear conclusion that defendant Sandusky’s offenses against children – whether proven or merely alleged – were not conducted in his capacity as an employee or executive of The Second Mile,” Kane said in an 18-page opinion in Federal Insurance v. Sandusky.
According to Kane, about a month after his arrest, Sandusky filed a claim for coverage under the policy for criminal charges he was facing along with the civil claim in Doe A v. The Second Mile. Kane said Federal Insurance provided Sandusky’s criminal defense attorney with $125,000, subject to is reservation of rights. However, Federal followed with the underlying federal lawsuit against Sandusky, asking the court for a declaratory judgment that it was not required to provide insurance coverage to the embattled former coach for both the civil and criminal claims he was facing.
Last year, Citigroup Inc. agreed to pay $590 million to settle the securities class action suit, In reCitigroup Inc. Securities Litigation, brought by plaintiffs firm Kirby McInerney over the subprime/mortgage crisis. The suit alleged that Citigroup materially misrepresented its exposure to collateralized debt obligations (CDOs), as well as the value of those CDOs. Kirby McInerney litigated this case for over four years and engaged in extensive motion practice and discovery to achieve the result for shareholders. The settlement, however, grinded to a halt when perpetual fee objector Ted Frank objected to the plaintiffs’ $100 million fee request.
“At NALFA, we think this sets a bad precedent and goes too far. Now, law firm wages and salary is fair game for fee objectors to comb through as they prolong and derail the class action settlement process,” said NALFA Executive Director Terry Jesse.
A recent Legal Intelligencer story, “Justices Rule Peer Review Precludes Attorney Fee Award,” reports that the Pennsylvania Supreme Court has ruled that an insurer cannot be ordered to pay a medical provider’s attorney fees when the insurer properly employed the peer review process before denying coverage because it deemed the medical care unnecessary. In Herd Chiropractic Clinic v. State Farm Mutual Automobile Insurance, the justices ruled 4-2 to reverse a Superior Court decision that unanimously affirmed a Dauphin County trial court’s ruling awarding $24,047 in attorney fees to plaintiff Herd Chiropractic and against State Farm.
Justice Thomas G. Saylor, writing for the majority, said Section 1797(b)(4) of the Motor Vehicle Financial Responsibility Law (MVFRL) only allows providers to appeal insurers’ coverage refusals, “the reasonableness or necessity of which the insurer has not challenged a [peer review organization].” Section 1797(b)(6), meanwhile, only allows for courts to award attorney fee “pursuant to paragraph (b)(4),” Saylor said. “There is, as insurer emphasizes, simply no express statutory authorization for fee shifting on provider challenges to peer-review determinations,” Saylor said.
State Farm submitted the bills to a peer review organization pursuant to Section 1797 of the MVFRL. State Farm ultimately refused to pay for certain treatments Herd Chiropractic provided and the medical provider sued the insurer, seeking unpaid medical expenses, attorney fees and damages, according to court documents. The trial court determined that the medical care was reasonable, granting $1,380 in unpaid medical expenses, but denied treble damages and attorney fees. Herd Chiropractic filed a motion for reconsideration, which the trial court granted, and was awarded attorney fees of $24,047.
A recent New Jersey Star-Ledger story, “Toys R Us Antitrust Settlement Tossed Over $14 million in Attorney Fees,” reports that a federal appeals court held up a $35.5 million consumers’ class action settlement with baby products companies, citing concerns about the distribution of funds and attorneys’ fees. The U.S. Third Circuit Court of Appeals in Philadelphia reversed a district court judge’s approval of a settlement to resolve claims that retailer Toys R Us Inc., along with baby product manufacturers, conspired to set a price floor for certain products, hurting consumers.
The three-judge panel of the appeals court found that of the $35.5 million, only $3 million was expected to make it to class plaintiffs while $14 million would go to pay attorneys’ fees and expenses. The rest of the fund – roughly $18.5 million minus administrative expenses – would be reserved for one or more charities designated by the parties. The appeals court found that when U.S. District Judge Anita Brody in Philadelphia approved the settlement, she was unaware that so much money would be going to charities instead of to class members.
The appeals court’s decision (pdf) focuses on a doctrine known as cy pres, which derives from a French expression meaning “as near as possible.” Under the doctrine, parties can designate funds that are not claimed in a settlement to charities that promote the interests of class members. In its decision, the Third Circuit panel did not adopt a bright line rule prohibiting cy pres awards in class action settlements. But it noted they “should generally represent a small percentage of total settlement funds.”
The appeals court also ruled that courts should consider the total cy pres awards compared to recoveries for class members when determining the amount of attorneys’ fees awarded to class counsel. The court remanded the case, In Re Baby Products Antitrust Litigation, to the district court judge to reevaluate the fairness of the settlement and the attorneys’ fees.
A recent The Montana Standard story, “Attorneys in Asbestos Settlement Seek $4M in Fees,” reports that attorneys for asbestos victims in a Montana mining town are seeking more than $4 million in attorney fees and expenses out of a legal settlement with chemical company W.R. Grace. State District Judge James Wheelis has ordered a March 1 fairness hearing on the fee request, recently submitted by a group of lawyers who said they spend more than 16,000 hours of work into the case that lasted over 11 years.
Last year’s settlement followed decades of asbestos exposure from a Grace mine outside the town on Libby that so far has killed an estimated 400 people and sickened more than 2,000. In documents submitted to the court, the plaintiffs’ attorneys described their fee request as reasonable given the time and effort they put into suits filed against Grace. It equals about 20 percent of the $19.6 million that Grace last year agreed to put into a trust fund set up to help Libby residents cover medical expenses.
Total costs and fees requested topped $5 million, but almost $1 million of that amount would be returned for the benefit of the victims, according to documents filed by the attorneys. The attorneys said they were entitled to up to 40 percent of their client’s share of the settlement under their retainer contracts, but opted for a lesser percentage that would come from all qualifying victims and not just the attorneys’ clients.
The medical trust fund set up with the Grace settlement funds has enough money to last about five years, said trust administrator and Missoula attorney Nancy Gibson. The trust money is being used to cover the victims’ premiums for Medicare or comparable private insurance policies, said Gibson. Gibson said that the fee request was not out of line given the time and effort the attorneys put into the case. She added the attorneys have been working unpaid to persuade Medicare administrators to forgive money owed to the government by some victims.
A recent The Legal Intelligencer story, “Distribution of $144 Mil. in Avandia Legal Fees Approved by Judge,” reports that the judge presiding over the entire Avandia MDL has approved the distribution of nearly $144 million in Avandia attorney fees and costs undertaken for the common benefit of the entire litigation in the wake of attorneys setting objections to how the funds were divided.
U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania previously gave approval to the overall amount to be paid for common benefit work regarding lawsuits of people who used the diabetes drug. When fee objections were raised to how the funds were to be distributed, Rufe appointed special fee master Bruce P. Merenstein of Schnader Harrison Segal & Lewis to mediate the dispute.
Merenstein said in a report to the court that nine firms had their allocations of the common benefit fund adjusted following the mediation. As a result, Merenstein recommended that the potential recovery be approved for 58 firms. At least six firms are looking at potential fees in excess of $10 million each, according to Merenstein’s recommendations.
The common benefit fund was seeded by a 7 percent assessment levied on all Avandia claims settled with the MDL or in state-court cases in which plaintiffs lawyers chose to receive the benefit of the discovery and other work product undertaken within the MDL. During the hearing Rufe held on approving the common benefit attorney fees, The Legal reported that the individual plaintiffs steering committee members were carrying costs of $750,000 to $1 million. The collective fee amount initially approved by Rufe makes up to 6.25 percent of the estimated aggregate value of the settlements in the litigation.
Dianne M. Nast, Vance R. Andrus, Bryan Aylstock, Thomas P. Cartmell, Stephen Corr, Paul R. Kiesel, Bill Robins III and Joseph J. Zonies were members of the PSC that developed the plan for the fee allocation of the common benefit fund. The highest amounts will go to a dozen firms:
$22.6 million based upon a lodestar of $8.1 million and 18,232 hours of work by Reilly Pozner of Denver.
$17.2 million based upon a lodestar of $4.6 million and 8,407 hours of work by Aylstock Witkin Kreis & Overholtz of Pensacola, Fla.
$17.2 million based upon a lodestar of $5.8 million and 12,424 hours of work by Wagstaff & Cartmell.
$14.7 million based upon a lodestar of $3.5 million and 6,397 hours of work by Andrus Hood & Wagstaff of Denver.
“Contingency fee attorneys are outcome-focused, not time focused,” notes CJ&D. “Their interest is to work hard and achieve the best possible results from their clients in timely efficient manner.” There are three main societal functions of the contingency fee system:
Contingency Fees Provide Everyday People With Access to the Courts;
Contingency Fees Screen out Meritless Cases; and
Contingency Fees Align Attorney-Client Interests and Promote Efficiency of Judicial Resources.
The study directly counters the tort reform lobby who seek government-imposed wage and price controls, interfering directly with the right of citizens to contract in a private contingency fee relationship and turn a free-market approach to providing legal representation into a botched system of government regulation that harms injured victims’ quest for justice.
“There are legislative efforts underway from the tort reform lobby to undermine our contingency fee system,” said Terry Jesse, Executive Director of NALFA. “At NALFA, we are committed to strengthening our long-standing contingency fee system and oppose efforts to place statutory limits on contingency fees. We look forward to working with other like-minded groups to ensure a strong contingency fee system,” Jesse concluded.
A recent Thomson Reuter story, “Qualcomm Awarded $12.4M in Attorneys’ Fees in Patent Case,”reports that San Diego-based Qualcomm Inc. can recover its legal fees, $12.4 million, from a company whose claims of patent infringement and stolen trade secrets were thrown out. U.S. District Judge Anthony Battaglia of San Diego ordered Gabriel Technologies Corp, which owes a portfolio of patents, must pay nearly all attorneys’ fees that Qualcomm incurred in the case.
In the underlying case, Gabriel Technologies Corp v. Qualcomm Inc, Gabriel Technologies sued Qualcomm, the world’s leading supplier of chips for cellphones, in October 2008 over patents related to global positioning system tracking devices. Gabriel sought $1 billion in damages. Gabriel’s claims were entirely baseless and it could not have expected to succeed on any of them, the judge said in a written order. “Several emails between Gabriel’s employees and former employees…suggest that plaintiffs knew they lacked the requisite evidence and opted to pursue their claims nonetheless,” Battaglia wrote.
In its fee petition, Qualcomm also asked that Gabriel’s local counsel, Wang Hartman Gibbs & Cauley, be forced to contribute to any fee award. The court ordered Wang Hartman to pay $64,000, the amount it billed Gabriel in the case. That amount “should deter local counsel from filing documents without performing a reasonable inquiry under the circumstances,” the judge said.
A recent story in Canada’s Global and Mail story, “From $100 Emails to $300,000 for Photocopies and Meals, How Nortel Racked up $755 Million Tab,” reports that Nortel’s bondholders, pensioners and other creditors have engaged in an expensive fight over the $9 billion left over from the piecemeal sale of the company. So far, the defunct former telecommunications giant has been charged a total of $755 million worldwide in “professional fees,” $630 million of it in Canada and the U.S., since it went into insolvency proceedings in both countries in 2009.
According to court documents, Nortel’s main U.S. firm, Cleary Gottlieb Steen & Hamilton LLP, charged Nortel $1.25 million in legal fees and another $300,000 in expenses such as photocopying and meals in November 2012. It also charged the company $40,000 to produce a 180-page document to submit to U.S. Bankruptcy Court in Delaware detailing all its charges and fees, declaring that it took 80 hours of staff work.
There is no question the massive, complex case requires top-flight legal talent. Other huge bankruptcies have run up hundreds of millions of dollars in costs. But some question the size of Nortel’s legal bill. Diane Urquhart, a financial consultant working with a group of disabled former Nortel employees who has tallied up the professional fees, says the $755 million total is shocking. In Canada alone, professional fees charged to Nortel amount to $244 million, but court documents here do not provide the details filed in U.S. courts.
A recent NERA Economic Consulting report, “Recent Trends in Securities Class Action Litigation: 2012 Full-Year Review (pdf),” reports that settlements are up and attorneys’ fees are down in 2012 in federal court. According to the study, plaintiffs firms that handle securities class actions last year collected attorney fees and expenses amounting to $653 million, a 4 percent increase from 2011, but reflects an overall decline from the period of 1996 to 2009.
Last year’s largest attorney fee award stemmed from a 2004 case against American International Group (AIG) that resulted in two partial settlements totaling $822.5 million. In that case, the court awarded more than $100 million in fees to plaintiffs firm led by Labaton Sucharow and Hahn Loeser & Parks. Some other top attorney fee awards in 2012 include:
$55M in Fees from a $200M Settlement with Motorola Inc.
$53M in Fees from a $315M Settlement with Bank of America
$35M in Fees from a $295M Settlement with Bearn Stearns
Nonetheless, NERA’s report says the median proportion of fees to settlements has been declining. Settlements recovering $100 million to $500 million resulted in fees that were 18.2 percent of that recovery from 2010 to 2012; from 1996 to 2009, that number was 24.2 percent. The exception was cases with settlements in which more than $1 billion was recovered; in those cases, 12.6 percent of the recovery went to fees from 2010 to 2012, compared with 8.3 percent from 1996 to 2009.
A recent AP story, “Arkansas Judge Affirms $181 Million in Legal Fees,”reports that an Arkansas judge says Johnson & Johnson must pay $181 million in attorney fees to attorneys who successfully argued that the pharmaceutical company committed Medicaid fraud in the marketing of its antipsychotic drug Risperdal. The case was brought by Attorney General Dustin McDaniel through outside lawyers, Houston-based law firm Bailey Perrin Bailey.
Pulaski County Judge Tim Fox ruled Thursday that Arkansas taxpayers should not foot the bill in the lawsuit filed last year by the state’s attorney general. Last year, a jury found that Johnson & Johnson, through its Janssen Pharmaceuticals subsidiary, had committed Medicaid fraud and violated the state’s deceptive trade practice act. Assessing a $5,000 fine for each Risperdal presciption added up to a $1.2 billion verdict. The attorney fees are a 15 percent contingency fee that Attorney General Dustin agreed to pay the law firm.
Johnson & Johnson had argued that legal fees of $2.2 million to $3.8 million would be appropriate. A Janssen spokeswoman tells the Arkansas Democrat-Gazette that company maintains it did not violate the state’s Medicaid fraud law and that no legal fees should have been ordered.
With a federal judge set to approve $308 million in attorney fees in one of the LCD price-fixing class actions, two prominent San Francisco antitrust lawyers are in a feud over their share of the fees. What is more, Joseph M. Alioto of Alioto Law Firm and Francis Scarpulla of Zelle Hofmann Voelbel & Mason aren’t just co-lead counsel turned rivals, they’re also cousins. Each attorney insists he deserves more credit for achieving the massive $1.1 billion settlement.
In the underlying case, In re: TFT-LCD (Flat Panel) Antitrust Litigation, the lead plaintiffs’ attorneys, Alioto and Scarpulla, filed suit concerning alleged conspiracy to fix prices of TFT-LCD display panels and products resulting in overcharges to purchasers. The $1.1 billion settlement is the largest collection ever in a consumer antitrust class action.
The fee allocation dispute is now before U.S. District Judge Susan Illston in San Francisco. Court appointed special fee master Martin Quinn’s report (pdf) recommended payment of $75 million to Scarpulla’s firm and $47 million to Alioto’s firm. Minami Tamaki, law firm of liaison counsel Jack Lee, stands to receive $20 million. The more than 100 other plaintiffs firms were allocated amount ranging from $700 to $18 million.
Quinn determined the allocations for individual firms by looking for each firm’s lodestar – a figure representing the number of hours spent on the case multiplied by applicable rates. Not surprisingly, Scarpulla endorses Quinn’s report. “The special master got it right, regardless of what Joe says,” Scarpulla said. Alioto says using each firm’s lodestar was the wrong approach. “This is a corrupt practice in my view,” he said. “It rewards time spent rather than results achieved.”
At a hearing last week, Illston said she would likely approve total fees of $308 million, 28.5 percent of the settlement fund. For more information, visit https://tftlcdclassaction.com/
Posted:Wednesday, January 30, 2013
Categories: Fee Award
A recent The Record story, “After Long Fight, Bratz Case Ends in Zero Damages,” reports that the long-running IP war between Mattel Inc. and MGA Entertainment Inc. over the Bratz line of dolls has ended – for now – with zero damages. The U.S. Court of Appeals for the Ninth Circuit laid waste to Bratz maker MGA’s $170 million trade secret award – an award procured on retrial after the appeals court wiped out Barbie marker Mattel’s $100 million copyright verdict and constructive trust.
The Ninth Circuit left untouched $137 million in attorney fees and costs award to MGA for defending against Mattel’s copyright claims. Chief Judge Alex Kozinski wrote trial Judge David Carter had not abused his discretion in awarding them under the Copyright Act, and that it didn’t matter whether Mattel’s claims were brought in good faith. “At one point, copyright defendant had to show that the plaintiff’s claim was frivolous or made in bad faith in order to be entitled to fees; but no longer,” Kozinski wrote.
The MGA is the largest attorney fee award in a copyright infringement case in U.S. history.
A recent BLT Blog post, “Lawyers in LivingSocial Class Action Seek $3M in Fees,” reports that lawyers behind a class action against LivingSocial are hoping to collect $3 million in attorney fees, the maximum amount that the two sides agreed to in a settlement. The fees are on top of the $4.5 million that LivingSocial agreed to pay to settle claims that its deal voucher expiration dates and other restriction violated federal and state laws.
The fee arrangement was spelled out in an agreement that U.S. District Judge Ellen Segal Huvelle gave preliminary approval to in October. Under the agreement, LivingSocial said it wouldn’t contest a request for attorney fees up to $3 million. On January 18, the plaintiffs filed a motion for attorney fees, asking Huvelle to order the fee award.
Plaintiffs filed class action in early 2011 against LivingSocial, alleging violations of the federal Credit Card Accountability Responsibility and Disclosure Act and state laws. The cases were consolidated into a single MDL in D.C. federal court. The plaintiffs claimed that LivingSocial’s daily deals should be considered the same as gift certificates or gift cards, which can’t have an expiration date of less than five years under federal law. They accused the company of selling deals with illegally short expiration dates with the knowledge that consumers wouldn’t use them.
In settling, LivingSocial agreed to pay $4.5 million to reimburse consumers with expired deals. Any leftover funds would go to two nonprofits that work on consumer protection issues, the National Consumers League and the Consumer Union. The company also agreed to split and specify the expiration dates for the promotional value of a deal -- $10 for $20 of services, for instances – and the actual paid value expired in compliance with federal law of state law (whichever was longer).
In the motion for attorney fees, plaintiffs’ lawyers said that $3 million was reasonable because of the time they put into the case and its complexity, claiming that the figure represented less than five percent of the value of the settlement: the $4.5 million case payment, the estimated $80,000 that LivingSocial spent on administrative costs, and the estimated $54 million in savings for consumers, in light of the policy changes LivingSocial made as part of the settlement.
A recent Forbes story, “Citigroup Plaintiff Lawyers Fire Back at Fee Objectors,” reports that lawyers seeking nearly $100 million in attorney fees for negotiating a $500 million settlement with Citigroup fired back at critics who accused them of unreasonably marking up the services of temporary attorneys.
Kirby McInerney defends the fee request, saying that’s what lawyers at equivalent firms make (after courts tack an extra multiple to reflect the risk of earning nothing it the contingency-fee case fails). “Project-specific personnel were performing highly complicated, highly important work – work that, absent extensive training, almost no one else could do,” said Kirby McInerney partners Ira Press and Peter Linden in their 61-page response.
The detailed response is aimed mostly at perennial fee objector and class action foe Ted Frank. In the fling Kirby McInerney says it rejected 75 percent of the lawyers it considered hiring on a temporary basis and sought out graduates of prestigious schools with specialized training in the collateralized debt obligations at the core of the litigation. The final team included two graduates of Columbia Law School, five from NYU, and four from Georgetown, as well as a Chartered Financial Analyst and two MBAs.
“Almost all fee objectors are not qualified fee experts. Perennial fee objectors are not qualifed fee experts because they are not hired or appointed by anyone; they appoint themselves to these cases to advance their political agenda. The fact is that using highly-skilled, experienced temporary attorneys are a very cost effective model for law firms in large, complex cases. The alternative, training-up young associates on these highly complex issues, would have actually been more costly for Citigroup,” said Terry Jesse, Executive Director of NALFA.
Posted:Thursday, January 24, 2013
Categories: Fee Dispute
A recent Thomson Reuters News story, “Fee Dispute Over $1.5B Abbott Laboratories Settlement,” reports New York law firm Wolf Haldenstein Adler Freeman & Herz has sued Delaware plaintiffs’ firm Grant & Eisenhofer over legal fees generated by a $1.5 billion settlement between Abbott Laboratories and government authorities. In a lawsuit filed Friday in New York Supreme Court, Wolf Haldenstein claimed that Grant Eisenhofer had failed to pay Wolf Haldenstein its fair share, or at least $150,000, of the settlement’s legal fees.
The federal whistle-blower suit concerned alleged off-label promotion by Abbott Laboratories of Depakote to treat dementia and schizophrenia, for which the prescription drug had not been approved by the U.S. Food and Drug Administration. In May 2012, Abbott agreed to a $1.5 billion settlement with federal and state governments, the third-largest payment by a pharmaceutical company in a lawsuit.
According to Wolf Haldenstein, former partner Reuben Guttman originated the lawsuit, but left Wolf Haldenstein in July 2007 to join Grant Eisenhofer, bringing the litigation with him. Wolf Haldenstein claimed its lawyers and support staff were responsible for 267 hours of legal work associated with drafting the lawsuit. The work included analyzing thousands of pages of Abbott’s documents and emails obtained through a whistle-blower, researching legal issues and developing claims theories of liability, according to the suit. Wolf Haldenstein claimed it is owed at least $150,000 out of the “millions of dollars” in legal fees Grant Eisenhofer earned in the settlement.
Most personal injury attorneys, including those who handle medical negligence cases, charge a contingency fee based on what a case is worth. You pay nothing up front, but at the end of your case, you share a percentage or portion of what you get at trial (or in settlement) with your attorney. For most personal injury cases, the contingency fee is around 33 percent, but it can be less in specific cases. If you lose your contingency case, there is no fee.
In Illinois, there is a law that puts a cap on contingency fee in medical malpractice lawsuits. This is not the case in all types of injury cases. The law is changing, but there will still be a limit on attorney fees in this area. Up until now, Illinois law said that attorneys in medical malpractice lawsuits could charge 33 percent of the first $150,000 of an award, 25 percent of the next $850,000, and 20 percent of anything above $1 million. The law has included an exception allowing attorneys to petition the court for higher fees in certain situations. Basically, a lawyer could argue that a particular case warranted a higher fee, a request that was then left up to the judge.
A new Illinois law will simplify the limit on attorney fees and eliminate the exception. The new law says that attorneys in medical malpractice cases can charge a contingency fee up to 33 percent. There is not a varied fee schedule as there was before. The new law essentially raises the limit but does not include a provision allowing attorneys to petition the court for higher fees in certain situations. So it would appear that 33 percent is the true cap in this new law. The Illinois senate and house have approved the law, and it is expected to be signed by Gov. Quinn.
Today, the National Association of Legal Fee Analysis (NALFA) filed an amicus brief in the Supreme Court of Louisiana. NALFA filed the Motion for Leave (pdf) and Amicus Curiae Brief (pdf) in support of plaintiffs’ request for $5.2 million in attorney fees in an historic ADA case. The landmark ADA case was reported in National Law Journal and USA Today about Seth Hopkins, a Houston lawyer who spent more than a decade in a bitter battle against Louisiana’s attorney general over the lack of handicapped accessible restrooms at a public university.
In the underlying case, Covington v. McNeese State University (pdf), McNeese State University student Collette Covington, who suffered from epilepsy and uses a wheelchair, urinated on herself after she was unable to use the restrooms at the student union. Hopkins helped Covington obtain summary judgment in her 2001 federal civil rights case against McNeese State University.
Hopkin’s litigation spurred the a U.S. Department of Justice federal investigation and compliance order (pdf) and resulted in the State of Louisiana appropriating $13.8 million for ADA upgrades at McNeese and made systemic policy changes at eight more universities. In addition, the client received a landmark injunction, six year scholarship, and $400,000 cash in one of the largest single-client Title II ADA successes in U.S. history.
“The work and results obtained in this case are historic,” said Terry Jesse, Executive Director of NALFA. “At NALFA, we have a professional obligation to help fee-seeking lawyers in their fee applications and assist courts in calculating and rendering fee awards. We look forward to working on other amicus brief projects to help fee-seeking lawyers and shape the growing body of attorney fee jurisprudence in fee awarded litigation,” Jesse concluded.
A recent Bloomberg News story, “Glaxo Accord Said to Spur Lawyer Fight Over Fees,” reports that nine law firms are challenging a bid by lead attorneys for almost three-quarters of a $143 million attorney fee fund, including one seeking about $2,700 per hour, according to two people familiar with the matter. Six law firms on the fee committee asked for 71 percent of the fund set aside by U.S. District Judge Cynthia Rufe for the Avandia cases before her. The committee lawyers put the most time and money into efforts to collect evidence that Glaxo allegedly mishandled warnings about Avandia’s risk, Dianne Nast, a lawyer who led the group, said in an interview.
“These were the folks who were the most active in working on the case, so it’s only natural they are in line for a larger share of the fees,” Nast said. The fee fund, between 6 and 7 percent of the total settlement, according to the people, means the total accord may be worth more than $2 billion. As a result, the average payout for the 40,000 users of Avandia involved in the litigation would be about $50,000 – before legal fees.
Joseph Zonies, a Denver-based attorney who served as one of the lead lawyer in the Avandia cases before Rufe, is slated to collect more than $24.4 million, the highest recommended fee. Zonies put in more than 18,000 hours of work on the case. Plaintiffs’ lawyers in product liability cases work on a contingency fee basis. While per-hour calculations may be much higher than attorneys who regularly work at an hourly rate, lawyers who work on contingency are often forced to spend millions of dollars of their own money to pursue a case and aren’t guaranteed payment in the end, unless they win or settle.
Lawyers who use MDL-collected evidence to help achieve a settlement in their cases are required to hand over a percentage of their fee, said Howard Erichson, a Fordham University law professor. Those monies are used to compensate MDL attorneys for work on the case that benefits everyone in the litigation, Erichson said. “MDL cases can involve an enormous amounts of work and the benefits to all claimants of that work can be enormous, Erichson said in an interview. That’s why MDL fee funds can run into the hundreds of millions of dollars, he added.
A recent AM Law Daily story, “The Bankruptcy Files: Sidley Tops $100 Million Mark in Tribune Case,” reports that as of November 30, 2012, Sidley Austin has billed the Tribune Company almost $105 million in legal fees and expenses for its work guiding the Chicago-based media giant through multiple bankruptcy battles in Delaware, according to court filings.
Roughly 100 Sidley lawyers worked on the case, according to a quarterly fee application filed last summer by the firm, with corporate partners Larry Barden and Michael Hyatte, restructuring partner Bryan Krakauer, and bankruptcy corporate reorganization co-chair James Conlan and Larry Nyhan all billing Tribune $1,000 an hour for their services.
While legal fees in most large corporate bankruptcies are usually equal to 3 to 4 percent of the company’s total value, in Tribune’s case the figure was double that at more than $500 million due to the long-running nature of the litigation and the company’s sliding valuation, according to a report last week by the Chicago Tribune.
Big though they may be, legal fees amassed by Tribune still pale in comparison to what Lehman Brothers racked up during its nearly four years in Chapter 11. Weil Gotshal & Manges – hired as lead bankruptcy counsel to the now defunct investment bank in that case, which drew to a close last year – reaped roughly $442 million in legal fees and expenses.
The National Association of Legal Fee Analysis (NALFA) has introduced industry best practices for the legal fee analysis profession. These industry best practices are the generally accepted principles of the legal fee analysis profession. In observing these generally accepted principles, members of NALFA’s Attorney Fee Practice Group can assure clients that they will receive proven and reliable results. Here are NALFA's Industry Best Practices:
Each member agrees to adhere to the proper standard of reasonableness.
Each member agrees to observe proven and reliable methodologies.
Each member agrees to stay updated on attorney fee and legal billing jurisprudence.
Each member agrees that they will not advertise false or intentionally misleading information.
Posted:Thursday, January 10, 2013
Categories: Fee Award
A recent Legal Intelligencer story, “Class Action Against Rite Aid Settles for $ 20.9 Mil.,” reports that a federal judge in the Middle District of Pennsylvania has approved a $20.9 million settlement in a wage-and-hour class and collective action against Rite Aid Corp. U.S. District Judge John E. Jones III’s final approval in the consolidated cases of Craig v. Rite Aid settles 14 class and collective actions brought across the country against Rite Aid over allegations the drugstore chain improperly designated assistant store managers and co-managers as exempt employees not eligible for overtime pay.
Out of the 14 consolidated class and collective actions, which touched upon 4,700 Rite Aid stores and created a 7,426-member class across 31 states, about 4,000 of the potential class members have filed claims against the settlement fund, according to lead plaintiffs’ counsel Seth Lesser of Klafter Olsen & Lesser in Rye Brook, N.Y. The class members will get paid out of the settlement based on the amount of hours worked during the applicable period. They are expected to get, on average, $1,845 per class member, Jones said in his opinion.
Plaintiffs counsel will share in about $6.7 million in attorney fees and nearly $275,000 in expenses. There were 12 law firms that worked on the case for a total of more than 14,000 hours since the case was filed in 2008. Klafter Olsen spent the most hours at 3,877, followed by Winebrake & Santillo, who billed 2,396 hours. The overall attorney fee request, which was about $1 million more than the lodestar calculation of the hours worked times the hourly rates, represents 32 percent of the settlement less the expenses, Jones noted.
In approving the attorney fees and costs, Jones noted class members stood to benefit from a $20.9 million settlement and no one objected to the fee award. The “incredible time commitment alone” of 14,000 hours weight in favor of the award as well, Jones said. So too did the fact that the case took four years and ran the gamut of litigation activities, he said.
A recent NLJ story, “Appeals Court Revives Lawsuit Against Minneapolis Firm,” reports that a former client of Fredrikson & Byron has won an appeal that revives a lawsuit claiming that it padded its attorney fees in a construction dispute. The Minnesota Court of Appeals on December 24 reversed a lower court that granted summary judgment to the Minneapolis law firm in an action filed by developer Mark Saliterman.
Saliterman claims the firm’s $2.6 million fee was unreasonably high due to excessive hourly charges and overstaffing. Saliterman filed the action in 2010 after the firm sued him and his company for unpaid legal fees allegedly incurred in a dispute over the development of 66 condominiums in Stillwater, Minn.
The three-judge panel found that the engagement letter between the firm and Saliterman was vague as to whether he would be personally liable for the legal fees. The panel also determined that the lower court erred when it found that Saliterman’s lawsuit was a malpractice action, instead of a breach-of-contract action, and that he had failed to properly present an expert witness as required in a malpractice case.
Toyota Motor Corp. has agreed to pay more than $1 billion to settle litigation over claims that its vehicles suddenly and unintentionally accelerated, according to court filings made public. Toyota has recalled more than 14 million vehicles worldwide due to acceleration problems in several models and brake defects with the Prius hybrid.
The settlement, pending approval from U.S. District Judge James V. Selna, is valued between $1.2 and $1.4 billion, which includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles. The total value of the settlement amounts to the largest settlement of this type in U.S. history in terms of dollars paid out and number of vehicles involved.
Toyota will pay no more than $200 million in attorney fees and $27 million in expenses to plaintiffs’ lawyers, pending final court approval. The total will be paid out to 25 law firms and about 85 attorneys.
The case is In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, U.S. District Court, Central District of California (Santa Ana).
A recent Thomson Reuters Legal story, “Should State AGs be Allowed to Use Contingency Fee Lawyers?” reported on the relationship between state AGs and outside counsel in public interest litigation. The article cites “tort reform” sources (i.e. U.S. Chamber of Commerce) who think this is a huge problem and are challenging the use of contingency fee lawyers in court. In fact, the tort reform lobby is even considering federal legislation to regulate states’ ability to hire contingency fee lawyers.
In a report, “Contingency Fee Plaintiffs’ Counsel and the Public Good? (pdf),” published by Husch Blackwell, reports that 10 states have passed legislation addressing AGs’ use of contingency fee lawyers – and six of them (Texas, Wyoming, Arkansas, Kansas, North Dakota and Alabama) have imposed limits on the use of contingency fee counsel. And judges in the half-dozen cases in which defendants challenged state governments’ use of outside counsel have overwhelmingly rejected arguments that defendants’ due process rights violated by such arrangements.
But the tort reform lobby is challenging the use of outside contingency fee lawyers in court. In Kentucky, tort reform advocates are challenging Democratic Kentucky Attorney General Jack Conway’s authority to hire contingency fee lawyers in Commonwealth of Kentucky ex rel. Conway v. Merck & Co., Inc. In that case, Kentucky had entered into a contract (pdf) with Garmer & Prather to investigate and litigate any Vioxx-related claims the state might have against Merck under its consumer protection act. Merck claimed the AG violated his duty to serve the public interest by ceding control of the case to private lawyers incentivized to maximize the recovery against Merck. As a result, Merck claimed its due process rights were compromised. Merck is represented by John Beisner of Skadden Arps, a noted tort reform advocate.
"The private attorney general doctrine is a fundamental principle in American jurisprudence. We need the plaintiffs' bar to take on these important public interest cases. This is a pure partisan effort to weaken the doctrine and serve corporate interests. Of course state AGs should be allowed to use outside contingency fee lawyers. In fact, with state budgets stretched thin it makes economic sense to only hire outside lawyers who work on a contingency fee basis,” said Terry Jesse, Executive Director of NALFA. “Working on a contingency fee basis saves taxpayers millions of dollars and ensures the people are protected against corporate wrongdoers,” Jesse concluded.
A recent New Jersey Law Journal story, “Venable’s Fees Slashed in FTC Suit Settled Without Liability Admission” reports that a judge who balked at $2 million Federal Trade Commission settlement that included no admission of wrongdoing by the defendant, and then approved it with unusual conditions, has ordered that some of the money go to defense counsel Venable for fees. But U.S. District Judge Renee Bumb slashed the fee request by almost half, finding misplaced the firm’s reliance on a National Law Journal survey of billing rates to show its fees were reasonable, rather than submitting affidavits from lawyers practicing in the relevant market: southern New Jersey.
“[T]his court affords no value to that value to the survey because it (1) is unsworn and based on self-reported figures by firms; (2) provides only a broad range of attorney’s fees, without regard to the nature of the work performed or experience or skill of those performing it; and (3) contains no information as to reasonable rates for non-attorney personnel,” Bumb said in a decision handed down Monday. She held Venable was entitled to $129,095 in fees, a bit more than half the $250,077 it sought, on top of the $150,000 in retainer fees already paid.
The case, FTC v, Circa Direct, accused Circa Direct and its principal, Andrew Davidson, of using fake online news sites to market acai berry diet products. The sites, with addresses like onlinenews6.com, were designed to resemble legitimate news portals, featuring purportedly objective reports by fictional reporters and commentators about dramatic weight loss achieved using acai berry.
In February, the FTC asked Bumb to approve a settlement that would make an injunction permanent and impose an $11.5 million judgment, which would be suspended if the defendants provided honest information about their financial condition and turned over assets valued at more than $2 million. The settlement said it was without admission or finding of wrongdoing or liability. Although judges routinely approve settlements where no one admits doing anything wrong, Bumb balked.
On Sept 11, Bumb approved the Circa Direct settlement, swayed by the FTC’s argument that otherwise it would have to spend a lot of time and money trying the case. But she conditioned approval on the FTC creating a web page by Oct. 12 that would put the allegations “before the public for evaluation and discussion.” The settlement said a portion of the client funds Venable was then holding in escrow could be used to pay its “fees and costs reasonably incurred” for work in the case, contingent on FTC approval or court order.
The fee request included charges for Edwin Larkin, who typically bills at $800 per hour, fellow partner Thomas Cohn, $650, and associate Heather Maly, $416, all of them in New York. Venable discounted those rates to $600 for partners and $300 for associates, but they were still too high for Bumb. Saying she was exercising her discretion, she set rates of $400 an hour for Larkin and Cohn, $375 for a less-experienced partner, and $275 for Maly and another fourth-year associate.
She called those rates reasonable in light of other fee applications granted in the district and what the FTC conceded was reasonable in declarations it submitted opposing Venable’s fee request. She concluded that Venable was entitled to a total of $279,095, $150,000 of which had already been paid, resulting in the $129,095 award.
Posted:Monday, December 17, 2012
Categories: Fee Award
A recent Penn Record story, “Judge Awards $7.5 Million in Lawyers’ Fees in Processed Egg Products Antitrust MDL,” reports that the federal judge in Philadelphia who is overseeing the Processed Egg Products Antitrust Litigation has granted a plaintiffs’ motion seeking $7.5 million in lawyers’ fees and nearly a half-million dollars in costs and expenses tied to the multi-litigation, class action litigation. In a Nov. 9 memorandum and order, U.S. District Judge Gene E. K. Pratter, sitting in the Eastern District of Pennsylvania, awarded counsel representing the direct purchaser plaintiffs in the case $7.5 million along with accrued interest, and also awarded reimbursement of expenses in the amount of $443,944, along with accrued interest.
The plaintiffs in the litigation, director purchasers such as grocery stores, commercial food manufactures, restaurants and other food service providers, alleged a conspiracy among egg producers and trade groups to manipulate the supply of egg producers, thereby affecting the domestic prices of those goods. The attorneys’ fees represent 30 percent of the common fund created by the settlement agreement between the direct purchaser and defendants Moark, LLC, Norco Ranch Inc. and Land O’ Lakes Inc.
Final approval of the settlement was given by the court about four months later, with the agreement providing $25 million in monetary relief to the class members, and obligating Moark to cooperate with the plaintiffs’ preparation for and prosecution of their case, the judicial memorandum states.
The judicial ruling states that the antitrust litigation has been exceedingly complex, expensive and lengthy. The memorandum states that the court determined that lawyers with 35 different firms spent a collective 22,772.81 hours working on the litigation through Fed. 28, 2011, which was the day the court held a final fairness hearing on the Moark settlement.
“Given the complexity that necessarily accompanies consolidated antitrust litigation and the duration of the case, the Court finds that this factor favors granting the motion,” for attorneys’ fees, the judge wrote. “The amount of time spent on this case prior to final approval of the settlement most likely reflects the complexity of Plaintiffs’ claims, not the inefficiency of their counsel. “Presumably, the thousands of hours counsel spent working on this matter prevented those individuals from litigating other cases.” The judge continued. “This factor thus strongly favors granting the motion for attorneys’ fees.”
A recent BLT Blog post “Jones Day Sues Former Client Vizio for $6 Million in Fees” reports that Jones Day is suing former client Vizio Inc. in Washington federal court, claiming that the consumer electronics corporation owes the law firm more than $6 million in attorney fees. According to a complaint filed in U.S. District Court for the District of Columbia, Jones Day did intellectual property work for Vizio from May 2008 to October 2012. The firm alleged that Vizio, proportedly unhappy with how a patent prosecution had played out, refused to pay invoices from June through November of this year.
Jones Day is seeking $6,725,981 in fees, plus interest. According to the suit, about $1.7 million of those fees were for work unrelated to the patent matters. According to the complaint, Vizio hired Jones Day in May 2011 to bring complaints for patent violations against nine entities before the International Trade Commission. After filing the ITC action, some respondents settled with Vizio, but others did not. Two respondents filed a countersuit against Vizio; Jones Day said in the complaint that firm lawyers warned Vizio of the possibility of a countersuit.
Before Vizio’s case and the countersuit were suppose to go to trial, Jones Day said that it negotiated a settlement that would pay $4 million Renesas Electronics Corporation and Renesas Electronics America, which had pursued the countersuit. Vizio was unhappy about having to pay Renesas and argued that Jones Day should have to cover the cost of the settlement. Jones Day says that Vizio claimed they were never told that Renesas would be named in the original complaint, an allegation that Jones Day denied.
“This excuse for not paying has no basis in fact. Jones Day lawyers who worked on the ITC action and the Renesas countersuit recall clearly and specifically informing Vizio management on more than one occasion who would be named as respondents in the ITC action and why,” the firm claimed in its suit.
The U.S. Supreme Court has agreed to decide whether a party whose petition under the National Vaccine Injury Compensation Program was dismissed as untimely may recover an award of attorney fees and costs from the government.
In the underlying case, the plaintiff claimed she developed multiple sclerosis after receiving a series of Hepatitis-B vaccinations. In 2005 she filed a claim under the Act, but the claim was dismissed because it was filed more than 36 months after the first symptoms of MS occurred in 1997. She appealed to the Federal Circuit, which reversed the district court and ruled that her claim was not time barred because at the time her symptoms began the medical community at large did not recognize the link between vaccines and her injury.
On en banc review, the court held that the Act’s statute of limitation is not jurisdictional and that some claims brought under the Vaccine Act are subject to equitable tolling. However it concluded that the plaintiff’s claim did not meet the equitable tolling criteria and reversed again, dismissing her petition as untimely.
The plaintiff then sought an award of attorney fees and costs, arguing that although she did not untimely prevail on the merits of her claim her appeal led to a precedential ruling that potentially opens the door for others who would have been precluded from seeking redress under the Act.
The Federal Circuit agreed, holding that “a petitioner who asserts an unsuccessful but non-frivolous limitations argument should be eligible for a determination of whether reasonable attorneys’ fees and costs incurred in proceedings related to the petition should be awarded,” and remanded the case. The Supreme Court granted the government’s petition for certiorari and will hear the case later this term.
Sebelius v. Cloer, No. 12-236. Certiorari granted: November 20, 2012. Ruling below: 675 F.3d 1358 (Fed. Cir. 2012).
NALFA would like to welcome Steven Tasher, Co-CEO and Managing Director of Wyatt Partners, LLC as the newest member of the Attorney Fee Practice Group.
Wyatt Partners’ primary focus is its program aimed at the evaluation and control of legal fees and costs. In the field of Legal Fee Expert Analysis, Wyatt has the expertise and credentials to testify as an expert and provide opinions on law firm’s/law firm’s clients’ behalf in areas including, but not limited to:
Overall reasonableness of legal fees and costs;
Detailed analysis of legal fees and expenses;
Law firm billing rates;
Issues regarding law firm retention/selection processes; and
Wyatt Partners’ expertise also encompasses a program to review and audit corporate legal fees in complex litigation – a program that has been highly successful in cost savings and cost avoidance. Additionally, the company has developed a litigation budget and support program that has a proven track record of dramatically reducing litigation spend. Wyatt Partners offers a comprehensive, focused, and structured program to control litigation costs and includes:
Comprehensive evaluation of the current litigation process and costs;
Creating fee agreements and guidelines which incorporate cost saving and methodologies;
Establishment of a litigation planning process and monitoring system;
Creating a dedicated Budget Group to track and trend legal spend;
Implementing a Budget Charter committed to cost savings;
Utilizing appropriate cost-effective technology solutions; and
Establishing programs to review and control the cost of third party vendors.
Federal courts routinely determine fee petitions for prevailing parties in various fee-shifting cases. A recent opinion from Magistrate Judge Denise LaRue illustrates guiding principles here. In M.T. v. Accounts Recovery Bureau Inc., LaRue issued a report and recommendations on fees in a Fair Debt Collection Practices Act (FDCPA) case. Plaintiff was a prevailing party based on accepting defendant’s offer of judgment, and sought fees and costs pursuant to the act totaling $3,230. Over objections challenging the claimed hourly rate of $250 and the reasonableness of some of the work, LaRue determined and recommended that the total award be $2,710. That much is unremarkable, but the 13-page opinion provides a good current summary of this area of federal practice and some useful insights for plaintiff and defense alike.
First, the court explained the general standards, writing “The Supreme Court has recognized that the lodestar method – the product of a reasonable hourly rate and the number of hours reasonably expended on the litigation – yields a fee amount that is presumptively reasonable. The Court may exercise flexibility to ‘adjust that figure to reflect various factors including the complexity of the legal issues involved, the degree of success obtained, the public interest advanced by litigation.’ The party seeking the fee award bears the burden of proving the reasonableness of the hours worked and the hourly rates claimed.” LaRue also noted that the “Seventh Circuit recognizes that fee awards should include time that attorneys reasonably spend on fee disputes.”
Second, as the reasonableness of hourly rates, LaRue observed, “Generally, a reasonable hourly rate for an attorney is based on what the attorney charges and receives in the market from paying clients for the same type of work. Plaintiff bears the burden of producing satisfactory evidence that the hourly rate is reasonable and in line with those prevailing in the community. If plaintiff satisfies this burden, the opposing party must offer evidence setting forth ‘a good reason why a lower rate is essential.’”
Third, as to the reasonableness of the hours spent on the matter, LaRue went through each aspect of defense objections and recommended:
The time charged for preparation of the form complaint and for undefined “research” should be reduced;
The time charged for secretarial or clerical tasks should not be charged as attorney or paralegal time; and
The time spent in creating billing records after the fact to support a fee award is not compensable.
Finally, and notably for those on the defense side who confront this issue with insurers or corporate clients, LaRue determined that while filing matters in court is administrative time that was not compensable, e-filing is another matter. She explained, “However, the Court views the filing of electronic documents differently. Plaintiff points out that electronic filing requires court training and is not available to everyone.”
This article was written by John R. Maley of Barnes & Thornburg, LLP.
A recent Metropolitan News story, “Appeals Court Finds That ‘Legal Expense’ Connotes Attorney Fees,” reports that a contract providing that in the event of a dispute, the prevailing party would receive recompense for its “legal…expenses” is sufficiently certain as to require an award of attorney fees to the victor, the Court of Appeals for Division Two held. Justice Judith Ashmann-Gerst wrote the opinion.
In Dickerson Associates v. ShinYoung 3670, the appellate, Donald F. Dickerson Associates, Inc, successfully sued ShinYoung 3670, LLC, for unpaid fees incurred in connection with a construction project, but Los Angeles Superior Court Judge John A. Kronstadt declined to award attorney fees. He ruled that the fee-shifting provision in the parties’ contract would not support such an order.
Wording of Contract
The contract read: “In the event of legal of collection expenses in connection with this agreement, [defendant] agrees to pay such expenses.” Kronstadt relied on the wording of California Civil Code 1717(a) which provides:
“(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the prevailing party on the contract, whether he or she is the party specified on the contract or not, shall be entitled to reasonable attorneys’ fees in addition to other costs.”
The jurist noted that the contract does not “specifically” provide for an award of attorney fees.
Explaining the reversal, Ashmann-Gerst wrote: “We cannot imagine what the phrase ‘legal…expense[s]’ would include if not attorney fees. At the hearing on plaintiff’s motion, defendant’s counsel suggested that ‘[l]egal expense’ could be limited to litigation costs, but we are not convinced. Litigation costs are recoverable by a prevailing party as a matter of right…Thus, a contractual provision allowing solely for the recovery of costs would be unnecessary, rendering this paragraph ineffectual and superfluous…
In Evanston Ins. Co. v. MGA Entertainment Inc., the Central District of California dismissed Evanston Insurance Company’s subrogation claim against Mattel in the long-running trade secrets dispute between Mattel and Evanston’s insured, MGA Entertainment Inc., concluding that because an insurer stands in the shoes of its insured with respect to subrogation, Evanston was bound by the 14-day time limit on seeking attorney fees prescribed by Federal Rule of Civil Procedure 54(d)(2)(B). In so holding, the court rejected Evanston’s argument that it’s insured regarding payment of attorney fees.
MGA tendered defense of the underlying litigation to Evanston in October 2007. Following the April 21, 2011 jury verdict in the underlying litigation, the court ordered the parties to file any motions seeking attorney fees by May 5, 2011. MGA did so, and ultimately was awarded attorney fees and costs.
Following the February 2012 decision, in March 2012 Evanston and MGA entered into a settlement agreement to resolve Evanston’s obligations to its insured for attorney fees and costs. Later 2012, Evanston filed a complaint against Mattel seeking attorney fees, seeking a declaration that it was entitled to fees, and seeking a declaration that Mattel should be required to pay into court or into escrow a fee award.
The court dismissed Evanston’s claim for fees in light of the plain language of Rule 54(d)(2) (B). In particular, the rule requires a party seeking fees to file a motion for fees within fourteen (14) days of entry of judgment, in the absence of a statute or order providing otherwise. Because Evanston stood in the shoes of its insured MGA, and MGA was required to have filed any motion for fees by May 5, 2011, Evanston was required to do the same.
The court rejected Evanston’s argument that its cause of action for fees did not accrue until its March 2012 settlement agreement with MGA, an argument it seemed to find disingenuous. In particular, the court noted that Evanston had deliberately refused to pay its insured until after it was twice held to owe a duty to defend. Moreover, Evanston’s position would undermine the reasonable expectations of insureds and, as the court explained, would have the undesirable consequence of incentivizing insurers to defend their insureds until the insurer is confident that it can recover its expenses from the insured’s opponent in the underlying litigation.
A recent New York Law Journal story, “U.S. Trustee Program Narrows Proposal for Disclosure of Law Firm Bankruptcy Fees,” reports that the U.S. Trustee Program announced that its proposals extensive disclosure related to law firm fee requests would apply only to very large Chapter 11 bankruptcies. In narrowing the scope of cases to which the proposals would apply—to those with $50 million or more in assets and $50 million or more in liabilities as opposed to cases with a combined $50 million in assets and liabilities—the agency was responding to intense criticism from firms calling “burdensome” and “ethically unacceptable” the agency’s new recommendations for attorneys’ fee applications.
The trustee program has modified proposed guidelines (pdf) for disclosure of rates in non-bankruptcy practices, and said it would continue to seek budgets and staffing plans, either by consent of the parties or court order. Unchanged from the originally proposed guidelines, firms would still have to submit in their fee applications the number of rate increases since the inception of the case and disclose the effect of any rate increases on the total compensation a firm is seeking.
Some significant updates to the proposed rules are:
The increase in the asset and liability threshold. The agency also said that single asset real estate cases should be excluded, an exception not specified in the original guidelines.
Elimination of the proposal that firms disclose high, average and low rates and rates billed by other practices within the firm. That has been replaced by disclosure of group blended rates, and blended rates for non-bankruptcy matters, based on time billed or revenue collected.
Budget and staffing plans would be used only by consent of the parties or a court order and would not be mandatory.
The agency is encouraging the use of co-counsel for better staffing and fee efficiency. “These arrangements include using less expensive co-counsel for certain routine, commoditized, or discrete matters to avoid duplication, overlap, and inefficiencies.” It said.
As lawyers often advise their clients, any litigation involves some element of risk, and “there is no such thing as a slam dunk.” A recent California case illustrates that when attorney fees are on the line, the stakes are increased and litigants—and their counsel—need to evaluate carefully the risks before going all-in.
In Nemecek & Cole v. Horn (pdf), the California Second District Court of Appeals affirmed an attorney fees award, concluding a string of cases that started with a lot boundary line dispute between neighbors. By the end, the attorney at the center of these cases was more than $600,000 in debt after being ordered to pay attorney fees three separate times—once by an arbitrator and twice by two different trial court judges.
Attorneys Pursuing Unpaid Fees Risk More Than Just Losing the Case
Attorney Steven Horn was initially retained to represent a couple in a lot line dispute against their neighbors. Horn’s clients lost and failed to pay Horn’s invoice. Horn than sued his clients for unpaid fees. They counterclaimed for fraud.
“It’s almost universally the case that when attorney sue clients over fees, the clients think of something they didn’t like that their attorneys did, and they counterclaim,” observes Betsy P. Collins, Mobile, AL, co-chair of the ABA Section of Litigation’s Pretrial Practice and Discovery Committee. “Then you have a malpractice claim instead of just a fee claim,” adds Collins.
“Many attorneys and law firms are reticent to enter into fee disputes because of the danger of their reputations—if not their financial well being—from counterclaims,” notes Thomas J. Donlon, Stamford, co-chair of the Section of Litigation’s Appellate Practice Committee. “Even if the counterclaim is unsuccessful, the negative publicity that arises from allegations of fraud, malpractice, or malfeasance is more damaging than the amount recovered,” explains Donlon.
Horn retained Nemecek & Cole to represent him in litigation against his former clients. The case resulted in Horn being awarded $42,282.56 on his fee claim and a matching award for his former clients on their fraud counterclaim. These awards offset, resulting in a net judgment of zero dollars. Horn’s former clients, however, sought and were ultimately awarded $380,000 in attorney fees because “they were the prevailing defendants on the complaint.” Horn settled the case for $250,000 while it was on appeal.
Know When to Fold When Attorney Fees Are in Play
Horn, undeterred by his loss to his former clients or the hefty fee award, made another litigation gamble. This time Horn initiated arbitration against his former counsel, Nemecek, asserting that the firm’s negligence was the cause of the “disastrous results” in the litigation with his former clients. Nemecek counterclaimed for unpaid attorney fees that Horn owed to the firm.
“Having lost that first case so substantially, to then turn around and sue his next lawyer, really indicates that he didn’t analyze his situation very closely,” concludes Donlon. “When professionals are going to sue over fees, they better decide carefully what their risk is,” Collins warns. “When you’re not prevailing in a variety of forums, you are usually better off finding a different battle to spend your time on,” adds Bruce A. Rubin, Portland, OR, co-chair of the Section’s Alternative Dispute Resolution Committee.
Horn and Nemeck were awarded nothing on their respective claims asserted in the arbitration. The arbitrator, however, found that Nemeck was entitled to $289,028.95 in attorney fees and denied any offset claim by Horn, finding that “Nemeck was the prevailing party since they were granted virtually all the relief they sought on Horn’s claim.”
Know When to Run From a Fee Dispute
Horn, still determined despite his mounting loss, pressed on and filed a petition to vacate the arbitration award and to oppose Nemeck’s confirmation petition. The arbitration award was confirmed and, for the third time, Horn was ordered to pay fees. This time, he was required to pay his opponent’s “reasonable attorneys’ fees” in connection with the confirmation proceedings in the amount of $42,207.31.
After losing at arbitration and in the confirmation case, Horn played his last card and appealed the confirmation decision. He argued that the trial court abused its discretion because the fee award from the confirmation proceedings “was more than double the amount actually incurred” and the fee award should have been capped at the amount actually incurred. The appellate court disagreed, affirmed the trial court’s judgment, and permitted Nemeck to recover its costs for the appeal from Horn, which made Horn a four-time loser in litigation that all began with a lot boundary line dispute between neighbors.
While this case is exceptional, it teaches litigants fundamental lessons to keep in mind when attorney fees are on the table. “You need to talk to your client whether you’re on the plaintiff’s side or the defense side about the risks of being exposed to an attorney fee award to the other side. That’s a discussion that I’m not sure happens as often as it should,” says Edward A. Salanga, Phoenix, co-chair of the Section’s Expert Witness Committee.
“It’s not as simple as, well if we don’t win, my client doesn’t recover anything and maybe I don’t get paid it I’m on a contingency fee agreement. In some cases, there is an additional ramification actually exposing your client to a fee award,” explains Salanga. When attorney fees are in play, recognize, evaluate, and know the risks before gambling on litigation.
A recent Legal Intelligencer story, “Judge Approves Nearly $144 Mil. in Avandia MDL Attorney Fees,” reports that the federal judge presiding over the diabetes drug Avandia MDL has approved the dispersal of up to $143.75 million in attorney fees. The fees make up to 6.25 percent of the estimated aggregate value of the settlements in the litigation. U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania also authorized that $10.1 million be held in reserve for the payment of future administrative fees and expenses.
Over 150 lawyers from over 50 plaintiffs law firms sought approval of the dispersal of attorney fees and costs undertaken for the common benefit of the entire mass tort litigation, including cataloging more than 30 million pages of documents, taking or defending 220 depositions, working with more than 20 expert witnesses, and “becoming educated on, and adept at addressing, complex medical and scientific issues,” Rufe said.
Between October 16, 2007 and February 14, 2012, “common benefit counsel and other members of their firms spent more than 134,000 hours preparing and litigating this case for the common benefit of all claimants,” Rufe said. “The time that common benefit counsel devoted to this case supports the reasonableness of the requested attorneys’ fees, as shown by a comparison to the hours spent in other super-mega-fund cases in which requests for attorneys’ fees have been approved.”
The judge conducted a cross-check of the lodestar of $55.3 million, which was calculated by multiplying the number of hours worked on the case by counsel’s reasonable hourly rates. The plaintiffs counsel billed $185 an hour for paralegals and rates for attorneys starting at $225 an hour and ranging up through $285, $380, $475 and $595 an hour, according to the 23-page opinion (pdf). Rufe said the plaintiffs counsel’s fees were reasonable in comparison to billable hourly rates in the Philadelphia market.
Rufe said the fee is reasonable when measured under any of the possible frameworks that the U.S. Court of Appeals for the Third Circuit would use to judge the fees. Rufe looked at the common fund analysis under Gunter v. Ridgewood Energy and In re Prudential Insurance Co. of America Sales Practices Litigation, which involved weighting factors such as the skill and efficiency of the attorney involved and the complexity and duration of the litigation; the Third Circuit’s common benefit attorney fees may be awarded if substantial benefit was conferred on every claimant and the fees were proportional; the managerial powers doctrine under which the federal judiciary has the power to manage docket and fashion a way to compensate attorneys who provide “class-wide services” and which also was discussed by the Third Circuit in Diet Drugs.
One way that the plaintiffs common benefit work was of substantial benefit was that the Food and Drug Administration’s “actions did not secure the payment of damages by [Avandia drugmaker GlaxoSmithKline] to injured claimants,” Rufe said. “Rather, payment was secured by the independent efforts of common benefit counsel, and only after a hard-fought battle with a well-represented opponent.” It was also reported that the individual plaintiffs steering committee members were each carrying costs of $750,000 to $1 million.
Posted:Friday, November 09, 2012
Categories: Fees Reduced
A recent The Recorder story, “Grewal Takes Red Pen to Legal Bills in Apple-Samsung Feud,” reports that U.S. Magistrate Judge Paul Grewal ordered Samsung Electronics Co. to pay $21,554 to Apple Inc. and Apple to pay $160,069 to Samsung as sanctions for separate discovery violations in their epic patent suit, Apple v. Samsung. To arrive at his sums, the San Jose magistrate slashed the hourly rates sought by Samsung’s lawyers at Quinn Emanuel Urquhart & Sullivan, which exceeded the rates requested by Apple’s lawyers at Morrison & Foerster.
It was clear from his 21-page-order (pdf) that Grewal, a former IP litigator, also had a sharp eye on sloppy billing practices. “Unfortunately, despite two opportunities to submit detailed and accurate supporting invoices, the parties have left the court to parse through bare descriptions of their attorney activities,” Grewal scolded. The magistrate appointed in 2010, specifically took issue with block billing that failed to detail how attorneys spent the hours they worked and with apparent overstaffing.
Grewal noted that one Quinn Emanuel associate, Curran Walker, billed 93.5 hours for “substantial assistance with all aspects of the preparation” of pleadings from Samsung. “How were those hours divided among the various tasks?” Grewal wrote. “Is it reasonable that Walker spent nearly two work weeks on a motion for sanctions when two partners, three other associates and innumerable contract attorneys were also staffed on the motion? The court can only guess at the answers to those questions because Samsung offers only the barest description of Walker’s activities.
Grewal also scrutinized 50 hours of work billed at $1,035 an hour by London-based Quinn Emanuel partner Marc Becker. “The court tends to find it unreasonable that a partner with almost 25 years of experience needed 50 hours to draft a 14-page motion and to review a 15-page reply, especially when five associates also billed 85.8 hours for the same motion,” Grewal wrote. Becker’s hourly rate fee settled at $800, after Grewal deflated his firm’s rates based on an annual survey from the American Intellectual Property Law Association. The highest hourly rate from a Quinn Emanuel associate was reduced from $620 to $470.
A recent New Jersey Law Journal story, “J&J Shareholders’ Suit Settles; $10M in Fees, Costs Expected,” reports that Johnson & Johnson has agreed to ramp up oversight of subsidiaries and to pay up to $10.5 million in attorney fees and costs to settle a shareholders’ fraud and misconduct suit. The evaluative factors “strongly suggest that the proposed settlement is fair, reasonable and adequate,” U.S. District Judge Freda Wolfson said in approving the deal, In Re Johnson & Johnson Derivative Litigation on Oct.26.
In the underlying case, shareholder plaintiffs claimed the board of directors ignored red flags such as criminal investigations, civil suits, subpoenas and Food and Drug Administrative warnings over product recalls and alleged off-label drug marketing, kickback schemes and flouted manufacturing standards. The parties reached a settlement. Among other changes, J&J will have to centralize its compliance oversight and assign ultimate authority to its chief quality officer, rather than leave those functions to the subsidiaries.
Wolfson noted that judges have approved fee awards close to and, sometimes exceeding, $10 million in corporate governance cases. But she made no determination on the reasonableness of the fee request, instead appointing a special master to make a recommendation. As for the settlement, Wolfson said the factors in Girsch v. Jepson (3d Cir. 1975) – the goals of cutting down on time-consuming and expensive litigation – favor approval.
Plaintiff lawyers from six firms claimed more than 10,000 hours, and requested a total of $6.61 million in fees and $452,017 in costs. They are Carella, Byrne, Cecchi, Olstein, Brody & Agnello, with an $841,769 request; Robbins Geller Rudman & Dowd, $659,066; Kantrowitz Goldhamer & Graifman, $511,635; Bernstein Litowitz Berger & Grossmann, $1.15 million; Morris and Morris, $2.26 million; and Abraham Fruchter & Twersky, $1.65 million. The lawyers also asked the court to apply a multiplier of 1.5 to the lodestar, bringing the total fee request to $10 million.
A recent New York Law Journal story, “Civil Rights Firms Accused of Failing to Honor Fee Agreement,” reports that two prominent civil rights firms in New York are accused by a Washington, D.C. firm of cheating it out of a significant fee as part of a $3.75 million settlement in a wrongful death case. Catalano & Plache claims that Neufeld Scheck & Brustin and Emery Celli Brinckerhoff & Abady submitted court documents on settlement terms without naming Catalano as a participating firm.
The Catalano firm said it was asked to represent the estate of Emil Mann in a civil rights, negligence and wrongful death claim on behalf of his estate. The three firms signed a joint retainer letter, along with Mann’s son, who was the executor of his estate, according to the complaint. A retainer letter (pdf) attached to the complaint, dated May 23, 2006, provides that the client agrees “that any attorneys’ fees will be divided among the Firms,” which it named as Cochran Neufeld, Emery Celli and Catalano & Plache.
Specifically, the retainer agreement, on Emery Celli’s letterhead, provides that Catalano & Plache would receive 16.65 percent of the 33.3 percent attorney fees on the first $500,000 recovered; 15 percent of the 30 percent of the fees on the next $500,000; 12.5 percent on the 25 percent of fees on the next $500,000; and 10 percent of the 20 percent of fees recovered in the next $500,000.
In the wrongful death case, the parties agreed to about $2.37 million for compensatory damages; $1.19 million for legal fees; and $185,359 for attorney disbursements, for a total settlement of $3.75 million, according to court documents. But the Catalano firm alleges the New York firms claimed it was not entitled to a share of fees. Neufeld Scheck and Emery Celli filed documents in support of the settlement in Orange County, NY, Surrogate’s Court, and the New Jersey court “that failed to name Catalano & Plache LLC as counsel to the estate,” Catalano argues.
In June 2012, the U.S. District Court for the Northern District of Illinois entered partial judgment in favor of an insured against its insurer for unpaid defense expenses in Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co. Among the defenses raised by the insurer in response to the insured’s motion for judgment was the unreasonableness of the defense expenses, and that the insured’s defense attorney had not complied with the insurer’s billing guidelines.
The court rejected the insurer’s argument regarding billing guidelines, observing that the insurer “provides no support for its indication that later-provided conditions can govern the amount to which an insured is entitled when those guidelines were not part of the original insurance contract” and, therefore, “any noncompliance with the billing guidelines does not render the fees legally unreasonable and does not otherwise affect the amount that [the insurer] owes.”
In ruling that the defense expenses were not unreasonable, the Philadelphia Indemnity court followed the reasoning of the court in Taco Bell Corp. v. Continental Cas. Co., and held that close review of the invoices was unnecessary because at the time the insurer incurred the defense expenses, it was “vigorously” denying that they had a duty to defend, thereby “providing a significant market incentive [for the insured] to minimize defense costs.”
In what the Philadelphia Indemnity court described as a “similar situation,” the Taco Bell court had held that when an insured incurs defense costs at a time when the insurer is contesting its duty to defend, the “resulting uncertainty about reimbursement” provides the insured with “an incentive to minimize its legal expense (for it might not be able to shift them); and where there are market incentives to economize, there is not occasion for painstaking judicial review.” The Philadelphia Indemnity court also awarded prejudgment interest on unpaid defense invoices.
A recent Connecticut Law Tribune story, “Firms Grow Bolder About Suing Clients for Unpaid Legal Fees,” reports that suing clients for unpaid legal fees could become routine as firms are growing more assertive about collecting overdue bills. “There was a time when a lot of firms would feel it was unseemly to bring an action against a client” regardless of the amount owed, said Martin Wasser, a partner at Phillips Nizer. “Firms are more aggressive in following up with bills than they’ve ever been,” said Wasser, whose firm is among the many that have filed suit to collect fees from former clients this year.
The New York Law Journal reviewed law firm collection suits against former clients filed in the past two months in Manhattan Supreme Court. Each week, between three and seven such suits were filed during the period. Several attorneys said lawsuits are a last resort and that whether to sue a client is decided on a case-by-case basis depending on factors such as amount owed, the length of the relationship, risk of counter malpractice suit, and whether the client can afford to pay.
Not all fee disputes wind up in court. The number of cases closed in arbitration and mediation programs overseen by the state court’s Attorney-Client Fee Dispute Resolution Program increased to 1,179 last year from 579 in 2004. The figures don’t capture disputes going to private ADR providers. Generally, attorneys can’t file suit against clients who have chosen to use the ADR program. The amount in dispute must be between $1,000 and $50,000, although it could be more if the attorney and client consent to arbitration.
Howard Koh of Meister Seelig & Fein which has sued clients for fees in the last year, said that before initiating litigation, the firm considers the client’s ability to pay, what the firm considers to be the value of its work and the client’s expectations of cost. “If we honestly and genuinely believe we had” not served the client well, “we would not bring suit,” Koh said. “When we bring a lawsuit we have made a decision that despite what the client may say after the fact, no malpractice occurred.”
Koh drafts and oversees collections suits at his firm in addition to his commercial litigation practice. “It’s not the most glamorous but it’s the straw I drew,” Koh said. Time spent on these cases, he recognized, is “time that could be spent billing existing clients and generating revenue that way.”
A recent Los Angeles Times story, “JP Morgan Sets Aside an Additional $684 Million for Lawsuits,” reports that JP Morgan Chase & Co., bracing for higher legal costs, set aside an additional $684 million in the third quarter for litigation expenses. Jamie Dimon, the bank’s chairman and chief executive declined to specify what led the bank to up its litigation reserves. “Obviously we’re in a litigious society,” Dimon said in a conference call with reporters Friday morning. “We’ve got a lot of mortgage suits coming, and others.” “We expect some litigation expenses going forward but hopefully it’ll come down over time,” he added.
The disclosure of the pre-tax expense, reported as the bank posted a 34% jump in third-quarter profits Friday, comes a week after New York Attorney General Eric Schneiderman hit JP Morgan with a lawsuit. The suit, brought as the first major action by a federal task force aimed at mortgage fraud and its role in the financial crisis relates to mortgage bonds sold by Bear Sterns, the investment bank JP Morgan purchased when it ran into trouble during the financial crisis.
Facts: Defendants retained Plaintiff attorneys in an underlying residential construction matter. Upon the submission of summary judgment motions in the underlying matter, defendants instructed their attorney to cease all legal work. The attorneys advised of the need to prepare for upcoming court events and trial.
Prior to trial, however, the underlying litigation was dismissed upon entry of a mutual release, which included the parties’ agreement to satisfy their respective counsel fees and costs. Despite this agreement, defendants paid only half of the outstanding legal fees and costs. In response to Plaintiff’s efforts to collect the remainder of their fees, Defendants filed an action for malpractice. Specifically, Defendants disputed the reasonableness of certain time entries, cited to alleged billing irregularities, and asserted that the fees charged were excessive for the work performed.
The lower court dismissed the malpractice claim for failure to obtain an expert report. Defendants appealed.
Issue: Is the reasonableness of attorney’s fees an issue of “common knowledge” or is an expert opinion necessary?
Ruling: An expert opinion is necessary:
Expert testimony is required of professional malpractice where the matter to be address is so esoteric that the average juror could not form a valid judgment as to whether the conduct of the professional was reasonable. This is because the duties a lawyer owes to his client are not known by the average juror.
The court concluded that Defendants’ alleged dissatisfaction with the amount of legal fees charged, supported only by their personal experience in paying other attorneys was not a sufficient factual basis for their malpractice claim. The court also rejected Defendants’ argument that the jury ought to disallow all contested charges, unless Plaintiff provides sufficient justification.
Lesson: An expert opinion is necessary to successfully dispute the reasonableness of attorney’s fees.
A recent Thomson Reuters story, “Plaintiffs’ Firms Plan for $150M in Fees in BofA Case,” reports that plaintiffs’ law firms at the center of the $2.43 billion class action settlement with Bank of America Corp are expected to apply for $150 million in attorney fees, a spokesman for the Ohio attorney general said Friday. The sum, while hefty, only amounts to 6 percent of the settlement, a relatively modest contingency fee rate for what is the largest recovery in a securities class action arising out of the financial crisis.
The firms have yet to file a formal fee request, which like the settlement, would be subject to approval by U.S. District Judge Kevin Castel in Manhattan. The law firms include Bernstein Litowitz Berger & Grossman, Kessler Topaz Meltzer & Check, and Kaplan Fox & Kilsheimer. The firms are expected to split the fees.
The litigation itself centered on allegations that Bank of America made false statements and omitted facts related to its 2008 acquisition of Merrill Lynch, subsequent losses it suffered and plan to award $5.8 billion in bonuses. Bank of America’s stock subsequently fell when facts about the merger emerged, the action claimed. Bank of America denied the allegations.
Attorney fee experts said the expected fee, while large was within the range of past massive class action settlements, if not smaller percentage-wise. The fee, if approved, works out to 6 percent of the settlement fund. The percentage is lower than the median in securities class action settlement of more than $500 million, or 11.1 percent, according to Renzo Comolli, a senior consultant with NERA Economic Consulting.
The case is In re Bank of America Corp Securities, Derivative, and Employee Retirement Income Securities Act (ERISA) Litigation.
A recent The New York Times story, “Adding Up the Government’s Legal Bills for Fannie and Freddie,” reports that the legal bills from former executives at Fannie Mae and Freddie Mac continue to pile up for the government. A decision last week by Judge Richard J. Leon of the U.S. District Court for the District of Columbia to dismiss a shareholder lawsuit against former Fannie Mae CEO Franklin D. Raines may provide a bit of relief from the legal bills. But more recent cases will require the government to pay to defend executive accused of misleading investors about subprime mortgages on the companies’ books that all likelihood will take years to resolve.
Like most public companies, Frannie Mae had a broad indemnification policy requiring it to advance the legal fees for executives accused of misconduct based on their work for it. When the government took over the company in September 2008, it affirmed that position and has continued to pay for the lawyers.
A report (pdf) issued in February by the inspector general of the Federal Housing Finance Administration, which oversees Fannie Mae and Freddie Mac, estimated that the legal fees paid on behalf of Mr. Raines and other executives totaled $97 million to that point, of which the government had paid approximately $37 million. Judge Leon has not yet decided whether to dismiss the case against the two other Frannie Mae executives. In addition, plaintiffs can appeal his decision on Mr. Raines, so the legal bills can certainly continue to add up.
A recent WSJ Law Blog post, “Ex-Goldman Programmer Seeks Legal Fees from Investment Bank,” reports that a one-time Goldman Sachs computer programmer, Sergey Aleynikov, sued his former employer for attorney fees and expenses. Aleynikov was charged in August with two felony counts by the Manhattan district attorney’s office related to his taking of the proprietary codes. His conviction was later overturned by a federal appeals court in February.
The suit, filed in New Jersey federal court against Goldman, seeks $2.38 million in attorneys’ fees and expenses for his prior criminal case and the advancement of legal fees for his current case. In the lawsuit, Kevin Marino, Mr. Aleynikov’s lawyer, said his client is entitled to have legal fees paid by Goldman because he was an officer of the company at the time of the alleged incident.
“Aleynikov exhausted his financial resources prior to his trial on the federal charges and owes a substantial sum of legal fees and expenses he incurred in his successful defense of those charges in the Southern District of New York and the Second Circuit Court of Appeals,” Mr. Mario said in complaint. “Thus, unless the court orders Goldman Sachs to honor its legal obligation to advance his legal fees and expenses to defend the State Charges, Aleynikov’s ability to defend those charges will be irreparably harmed.”
Posted:Tuesday, September 25, 2012
Categories: Fee Dispute
A recent BLT blog post, “Lawyers in Black Farmers Case Renew Request for $90M in Fees,” reports that the attorneys who secured a $1.25 billion settlement for black farmers in a high-profile discrimination case in Washington renewed their fee request for $90.8 million in legal fees, the highest amount allowed under the deal. The lead class counsel filed an updated fee request (pdf) in Washington’s federal court, arguing that the amount constitutes “fair and appropriate compensation for the enormous amount of work class counsel have performed” and for the results achieved in the deal.
The settlement, which Congress approved and the president signed, provides money to tens of thousands of black farmers who missed out on an earlier deal with the U.S. Department of Agriculture over claims of discrimination in loan processing. “The complexity of the settlement agreement that was reached demonstrates the skill level required by counsel to establish terms that would ensure that the claims of class members are resolved fairly, efficiently and with integrity,” the plaintiffs’ lawyers wrote in their fee petition.
The Justice Department has said in court papers in the litigation that the government opposes an award of $90.8 million in fees. In the updated fee petition, the plaintiffs’ lawyers said they conducted 380 group meetings in 66 cities during the claim process. The petition said class counsel have reported more than 80,000 attorney hours in litigation and in the implementation of the claims process.
U.S. District Judge Paul Friedman last year approved the settlement, kicking off the claims process. The settlement set the fee award between 4.1 percent and 7.4 percent. The law firms and solo practitioners in the case have a separate fee allocation agreement (pdf) to divide up any fee award. The lead class counsel firm, Crowell & Moring is in the group that would keep and divide 75 percent up of any fee award.
Criticism over these big fee awards fluctuates between the work and the results of winning plaintiffs’ counsel. When winning plaintiffs’ lawyers obtain favorable non-monetary judgments, they criticize the results, not the work. When winning plaintiffs’ lawyers obtain big monetary judgments, they criticize the work, not the results. The reality is, these relatively "big" fee awards are determined by a whole range of factors, which include, among other things, the work AND the results.
Criticism of Moody's $4.5 million fee award focused on the lack of monetary judgment and all-but-ignored the over 28,000 hours of work by plaintiffs' counsel. Not all class actions are about obtaining cash judgments. You can’t always calculate the economic dollar value of public benefits that extent well beyond class members. In these types of class actions, plaintiffs’ counsel act as private attorneys general for important public interest matters. Winning plaintiffs' lawyers in these cases shouldn't be penalized by not being fairly compensated. In fact, there's empirical research that class counsel don't make enough money in these cases. See: "Do Class Action Lawyers Make Too Little?"
Criticism of Southern Copper's $305 million fee award focused on the plaintiffs' counsel work of $35,000 per hour and all-but-ignored the $2 billion judgment obtained for class members. When winning plaintiffs’ counsel obtains large settlements in class actions, they ought not be penalized for working efficiently. When class actions drag on year after year, it is often the result of a high-priced, work-churning defense. Just because large settlements can happen quickly, doesn’t mean winning plaintiffs’ counsel should be penalized by not being fully compensated.
“Whether big or small, attorney fee awards are determined by a range of factors,” said Terry Jesse, Executive Director of NALFA. "Work and results are but just two factors we've considered here. But judges and qualified attorney fee experts look at the other range of factors and they are in the best position to judge these fee awards because they do the in-depth forensic analysis that’s required in underlying cases,” Jesse said.
Posted:Friday, September 21, 2012
Categories: Fee Award
A recent Reuters story, “Delaware Supreme Court Won’t Revisit Record $305 Million Attorneys’ Fee,” reports that the Delaware Supreme Court declined to consider a challenge to the $305 million fee award, believed to be the biggest ever fee award by the Delaware’s Court Chancery. It is also one of the largest attorney fees awarded in securities class actions nationwide. The fee award was awarded in December for plaintiffs’ attorneys who brought a shareholder lawsuit on behalf of Southern Cooper Corp.
The court’s chief judge, Leo Strine, calculated the fee as 15 percent of the $2 billion judgment to be paid to Southern Cooper. Strine said at the time that the fee was meant as an incentive for lawyers to achieve good outcomes for their clients. The judgment and fee award were affirmed by the Delaware Supreme Court in August. Strine ruled that defendant Grupo Mexico could satisfy the judgment by returning to Southern Cooper an equivalent value of the Southern Cooper shares it held, but that the fee award had to be paid out of the judgment in cash.
The defendants asked the Delaware Supreme Court to change its ruling on the fee because the high court did not consider the limited impact of the judgment on minority shareholders. The defendants argued the minority shareholders will get just $386 million of actual benefits. On that basis, they argued the fee award was not 15 percent, but 79 percent. An appeal to the U.S. Supreme Court is possible, but unlikely. The judgment is increasing by $212,000 a day due to interest costs, according to court records.
The judgment is due immediately, said plaintiffs’ attorney Ronald Brown of Pickett Jones. He said after 20 days of the judgment is not paid, it can be satisfied by cancelling shares of Southern Cooper stock held by Grupo Mexico. Brown said a bond for the attorneys’ fee had been posted by Grupo Mexico. If the company did not pay the plaintiffs’ attorneys next week the bond would be used to cover the payment.
A recent The Legal Intelligencer story, “Avandia Plaintiff Counsel Seek Approval of Nearly $144 Mil. in Fees,” reports that as the federal Avandia MDL draws to a close after 65,000 claims have been winnowed down to between 500 to 600 cases, over 150 lawyers from over 50 plaintiffs law firms are seeking court approval of the dispersal of up to $143.75 million in attorney fees as well as costs undertaken for the common benefit of the entire mass tort litigation. The attorney fee request is estimated to be 6.25 percent of the settlements reached in the litigation. The five-year-old litigation is over the diabetes drug Avandia, made by drugmaker GlaxoSmithKline (GSK).
Joseph J. Zonies, a Denver plaintiffs attorney with Reilly Pozner who was part of the Plaintiffs Steering Committee (PSC), testified that the work undertaken in the Avandia litigation meets the requirements under Gunter v. Ridgewood Energy of a fee that is appropriate to the risk of the undertaking, to the quality of the lawyers involved, to the quality of the work involved, and to the benefit conferred upon the mass tort claimants. Another Gunter factor is the risk of nonpayment, Zonies said.
The individual PSC members were each “carrying costs” of $750,000 to $1 million, Zonies said. The plaintiffs also formed a virtual law firm in order to handle the litigation. Over 30 million documents were produced by GSK, which were all online and accessed by lawyers around the country through a secure portal, Zonies said. Close to 147,000 hours were submitted for common benefit work, and over 134,000 work hours were approved by the forensic account retained by the plaintiffs counsel.
As an example of the in-depth work required in the litigation, Zonies described the PSC visiting defense counsel Pepper Hamilton’s law office to go through 400 dusty boxes of GSK documents related to its initial new drug application for Avandia to the federal Food and Drug Administration. Trips were taken to take depositions at GSK’s London offices, Zonies said, and multiple experts in the fields of biostatistics, cardiology, epidemiology, endocrinology, federal regulations and marketing were worked with around the country and even aboard.
A recent New York Law Journal story, “Judge Slashes Kramer Levin’s ‘Breathtaking’ Request for Fees,” reports that a federal judge has rejected a “breathtaking” $3.1 million fee request submitted by Kramer Levin Naftalis & Frankel, awarding the firm only a fraction of the money sough for winning a fight over a down payment on a luxury apartment co-operative. Southern District Judge William Pauley said he conducted a “mind-numbing review” of Kramer Levin’s billing records in Campbell v. Mark Hotel Sponsor (pdf), but declined “to recapitulate that review” in his opinion to “avoid undue embarrassment to a fine law firm like Kramer Levin” in his opinion.
Kramer Levin represented defendant Mark Hotel Sponsor LLP in the effort of Roberta Campbell to recover a $4.68 million down payment she made on an $18.75 million co-op apartment at the Mark Hotel on East 77th Street between Madison and Fifth avenues. Pauley conducted a bench trial and, on Aug 20, issued an opinion finding that the parties’ contract entitled Mark Hotel Sponsor to keep the down payment and recover its reasonable legal fees and expenses.
“Astonishingly, Kramer Levin attorneys, paralegals, and staff amassed 5,536.4 billable hours on this matter, employing four partners, three special counsel, ten associates, eight paralegals and a summer associate,” he said, with partners billing range of $680 per hour to $1025 per hour, associates from $440 per hour to $745 per hour, paralegals from $250 per hour to $295 per hour, and “last but not least,” a summer associate for $335 per hour. On Sept. 13, Pauley allowed only a total award of $475,000 in legal fees and expenses.
In a recent Thomson Reuters story, “Lawyers Under Fire for Boosting Fees on Bankrupt Companies,” reports that in June, members of the U.S. Trustee Program (USTP) met to discuss proposed guidelines that would increase government oversight of Chapter 11 filings. The USTP is an arm of the Department of Justice that oversees how companies spend money during a court-supervised liquidation or restructuring. The proposed guidelines (pdf) would require law firms working on bankruptcy cases to disclose their billing rates and fee applications, stop rounding up billable hours and work within budgets.
The government claims the new disclosure rules are necessary because bankruptcy lawyers’ ever-rising fees, which frequently top $1,000 per hour, unfairly target companies when they are financially fragile. The government also says bankruptcy lawyer’s fees are rising disproportionately to other lawyers’ fees.
The new disclosure rules will require law firms to notify their clients of rate increases, calculate how much clients’ bill will rise and supply the Trustee’s office with statements from clients saying they agreed to the higher fees. With any luck, the changes will curb rising legal costs among floundering companies that are routinely paying fees of hundreds of millions of dollars in large bankruptcy cases. For example, the liquidation of Lehman Brothers Holdings, which is the largest Chapter 11 case in U.S. history, has netted $1.6 billion in fees, so far.
More than 100 law firms, including Foley & Lardner and Weil Gotshal, are against the Trustee’s office’s new rules, saying they are too burdensome and could increase costs even more.
A recent NLJ story, “First Circuit Finds Appeal of Fees Timely, Deepening Circuit Split,” reports that the U.S. Court of Appeals for the First Circuit has deepened the circuit split on the deadline for filing civil appeals involving attorney fees. On September 12, in a case involving a collective bargaining dispute at a landscape supply company, a unanimous panel ruled that an appeal was timely. The ruling resolved an issue of first impression in the circuit.
The First Circuit revived the union’s appeal, which was filed on August 15, 2001, less than 30 days after the court’s ruling on attorney fees due the plaintiffs for prevailing on a collective bargaining contract. The defendants claimed the appeal was invalid because it was filed more than 30 days after the District of Massachusetts ruled on the underlying claim, on June 17, 2011.
Ray Haluch Gravel argued that a 1988 Supreme Court case, Budinich v. Becton Dickinson & Co., meant that International Union’s appeal was untimely. The plaintiff in Budinich sought attorney fees under a state fee-shifting statute after prevailing on an employment claim. The court rejected the appeal of fees because it was filed more than 30 days after the judgment in the case.
“We do not believe that Budinich should be read mechanically to apply to all claims for attorneys’ fees, whatever their genesis,” Selya wrote. “This acknowledgement unmistakably signals that, although the Budinich Court determined that attorneys’ fees generally should be considered a collateral matter, they may sometimes be considered as part of the merits,” Selya wrote.
Selya observed that International Union brought suit at least partly to enforce the collective bargaining agreement, which provided for attorney fees as part of damages for contract breach. “Viewed through this prism, the attorneys’ fees must be considered an element of the plaintiffs’ contractual damages.”
In a recent Courthouse New Services story, “Nice Try, But Attorneys’ Fees are for Counsel Only,” reports that a man who held Chicago police liable for excessive force cannot keep 60 percent of the amount meant for his attorneys, the seventh circuit ruled. In a February 2006 complaint against Chicago and several officers, Morad Elusta claimed that police used excessive force while searching his home and falsely arresting him. The city offered to settle Elusta’s claim for $100,000, but Elusta refused the offer because he was unwilling to award his attorneys, David Cerda and John DeLeon, a 40 percent share.
Eventually, Elusta hired new counsel – Zane Smith and Shelia Genson – who took the case to trial before a jury that awarded him $40,000. The court later awarded Smith and Genson $83,000 in fees and ruled that Elusta owed his former lawyers, Cerda and DeLeon, $15,000 for their services. Elusta then moved to have Chicago pay Cerda and DeLeon, but give him 60 percent of the amount. He also said Smith and Genson should turn over 60 percent of their fee award to him.
A federal judge denied Elusta’s motion, and the seventh circuit affirmed last week, poking fun at Elusta’s interpretation of his agreement with his second set of lawyers. “Elusta argues that the phrase ‘the attorney’s fees’ does not clearly cover all of the attorney’s fees,” Judge Diane Wood wrote for a three-member panel.
“We agree with the district court that this argument ‘defies logic,” Wood wrote. “The court awarded $15,000 to Cerda and DeLeon precisely because it concluded that it would be unjust for Elusta to keep that money after he had received the benefits of Cerda and DeLeon’s services. Elusta is thus, by definition, not entitled to keep any of it.”
Today, NALFA Executive Director, Terry Jesse met with U.S. Trustee, Patrick S. Layng of the DOJ’s U.S. Trustee Program in Chicago. Mr. Layng is the U.S. Trustee who oversees Region 11 which includes U.S. Bankruptcy Courts in the Northern District of Illinois, the Western District of Wisconsin, and the Southern District of Wisconsin.
The U.S. Trustee Program (USTP) is a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101, et seq. Part of the responsibilities of the USTP is to ensure attorney fees paid in underlying bankruptcy cases are reasonable. The USTP seeks to improve efficiency when reviewing attorney fees for reasonableness. When the USTP reviews attorney fees, they are looking for block billing, overstaffing, and other litigation inefficiencies, that can quickly add up.
“It was great to visit with the U.S. Trustee, meet with the staff, and get a better understanding of the work they do,” said Jesse. “We talked about our mutual interests in reviewing attorney fees for reasonableness and ways to improve that process. I look forward to working with them in the future,” Jesse concluded.
Posted:Tuesday, September 11, 2012
Categories: Fees Reduced
A recent New York Law Journal story, “Fee Request Found ‘Grossly Inflated’ Denied in Entirety,” reports that four law firms that submitted a “grossly inflated” $2.7 million fee request after winning $12,500 for their client should go away empty-handed, a federal judge ruled. Eastern District Judge Joanna Seybert, sitting in Central Islip, NY, condemned the fee application submitted by real estate investor Robert Toussie’s attorneys, including $2.65 million for Chadbourne & Parke, as “outrageously excessive” and done in “bad faith.”
“Counsel have so grossly inflated their fee application to a figure more than 200 times Toussie’s recovery—by ignoring prior directive of [Magistrate Judge Arlene] Lindsay, seeking fees related to claims on which Plaintiffs obviously did not prevail, misrepresenting the total number of hours billed, and providing extraordinary vague descriptions of billable hours in block time entries such that the Court cannot even begin to determine how many hours were actually spent on Toussie’s successful claims—in the hopes that the Court would award a small fraction of that.
In their request for legal fees, Toussie’s attorneys submitted more than 400 pages of billing records. They maintained the case was “extremely complex in all aspects,” and further complicated by the case’s “vast record.” They argued Toussie had won more than nominal damages and his constitutional rights had been vindicated.
But Suffolk County claimed Toussie’s attorneys were not entitled to fees because the jury award was “de minimus” and the request was “so unreasonable and grossly excessive.” At most, the county said, Toussie’s attorneys should get $25,000, representing twice the amount of the jury award. The judge observed the sought-after hourly rates ranged from $375 to $905, but those “greatly exceed” the rates now being awarded in the Eastern and Southern districts. She also faulted the attorneys for not breaking out travel time and asking 100 percent compensation though Lindsay previously ordered that travel time was compensable at 50 percent.
Posted:Monday, September 10, 2012
Categories: Fee Award
A recent NLJ story, “Texas Lawyer Wins Hard-Fought Fees in Bitter Disability Case,” reports that a Louisiana appeals court has awarded $2 million in fees and costs to a Houston lawyer who has spent more than a decade in a bitter battle against Louisiana’s attorney general over the lack of handicapped-accessible restrooms at a public university. The Louisiana Third Circuit Court of Appeal on September 5 entered the fee award for Seth Hopkins in a case he brought on behalf of Collette Covington, a student at McNeese State University. Hopkins helped Covington obtain summary judgment in her 2001 federal civil rights case against the Lake Charles, La., college after she was unable to use the restrooms at the student union.
Covington, who suffers from epilepsy and uses a wheelchair, urinated on herself while unsuccessfully trying to enter the restroom in January 2001 as an undergraduate. In its September 5 decision, the appeals panel issued scathing criticism against the Louisiana attorney general’s office and outside counsel who defended Covington’s American with Disabilities Act claim. They had appealed an earlier award of fees to Hopkins, a solo practitioner. The trial court granted Hopkins and four other attorneys representing Covington a rate of $240 per hour. The appeals court rejected the challenge and raised the rate to $265 per hour.
“This has been an emotional case,” Hopkins said. “Our intention has always been to make the campus and community better.” The fee award included $265 per hour for 5,490 billable hours, at an interest rate of 9.5 percent beginning on Feb. 24, 2011. The court also awarded Hopkins about $89,700 in appeals fees. It assessed $57,250 in appeals costs against the university.
The settlement, reached last year, resolved claims that Kellogg Co. misled a nationwide class of consumers into believing that children who ate its Frosted Mini-Wheats cereal for breakfast improved their attentiveness by 20 percent. The settlement, valued by the parties at $10.64 million, included a $2.75 million fund to provide class members with $5 to $15 off future cereal purchases. It provided at least another $5.5 million in donations under the cy pres doctrine, which allows donations to charities of money unclaimed from legal settlements.
In both opinions, the Ninth Circuit questioned the $5.5 million figure given for the cy pres, since it was unclear how the food donation was being valued. Senior Judge Stephen Trott wrote: “Not only does the settlement fail to identify the cy pres recipients of the unclaimed money and food, but it is unacceptably vague and possibly misleading in other areas as well.” In the revised opinion, he added: “This deficiency raises in turn serious issues about the alleged dollar value of the product cy pres award, an important number used to measure the appropriateness of attorneys’ fees.” Subtracting the $5.5 million in food donations from the total settlement, the court conclude that the $2 million fee award would represent 38.9 percent of the settlement fund.
In its original opinion, the Ninth Circuit called such an award “extremely generous” given the number of hours and amount of money spent by plaintiffs’ counsel – going as far as calculating a billing rate of $2,100 per hour. In his petition for rehearing, Timothy Blood of Blood, Hurst & O’Reardon in San Diego, the lead plaintiffs’ attorney, disputed the $2,100 figure, which he said was an average that excluded additional billings for work spent seeking final approval of the settlement, the appeal and hours spent handling the claims process.
He also argued the Ninth Circuit did not have to analyze law firm billings to determine whether the attorney fee request was reasonable, particularly when basing it on a settlement amount different from the one that was approved. “Attorneys’ fees in a class action suit cannot be evaluated in a vacuum, but he panel nonetheless did so,” wrote Blood. “Having vacated and remanded the panel should have left it to the parties to litigate or renegotiate a settlement, including attorneys’ fee provisions.”
A recent Thomson Reuters story, “J&J Faces Settlement Objection From Ted Frank,” reports that Ted Frank, a professional fee objector and tort reform lobbyist, who frequently seeks to knock down attorney fees in class action settlements, has now inserted himself into the middle of a shareholder derivative lawsuit. Frank is asking a federal court in New Jersey to dismiss an entire action brought against Johnson & Johnson board members and executives, arguing that the settlement, in which the plaintiffs’ attorneys could receive $10 million, provides no benefit for shareholders and should have never been filed.
In July of this year, Johnson & Johnson, represented by attorneys at Sidley Austin, and members of its board and other company leaders, represented by Patterson Belknap Webb & Tyler, agreed to settle multiple derivative actions filed in 2010 and 2011. The plaintiffs alleged that the individual defendants breached their fiduciary duties and caused the company regulatory and legal problems relating to drug marketing and medical product and device quality control.
The proposed settlement agreement, submitted to U.S. District Judge Freda Wolfson in Trenton, New Jersey, requires the defendant to adopt certain governance reforms, to spend the funds necessary to carry out the reforms, and to maintain the provisions of the agreement for five years from the effective date. The settlement agreement states that the company has agreed to pay plaintiffs’ attorney, led by Carella, Byrne, Checchi, Olstein, Brody & Angello and Bernstein Litowitz Berger & Grossman, “not more than $10 million for their fees and $450,000 for their expenses, subject to court approval.”
“Not all professional fee objectors are actual qualified attorney fee experts, because they don’t do the expert work required for each case,” said Terry Jesse, Executive Director of NALFA. “The work of a fee expert requires in-depth analysis that considers a range of factors that determine reasonable attorney fees. Our fee experts are independent experts that rely on underlying billing statements and work product. Most class action fee objectors don’t put in the time to do the in-depth analysis required in cases, instead they only file general, boilerplate fee objections that cherry pick data and case law that suits their agenda,” Jesse concluded.
A recent ABA Journal story, “Ex-Client Sues Firm re ‘Massive Overbilling,’ Partner Says ‘Meritless’ Suit a Bill Dispute Tactic,” reports that a former client has sued a New York-based law firm in federal court for malpractice, accusing Wilk Auslander of “massive overbilling for needless work” while defending several securities. In the suit (pdf), which was filed in the Central District of California, ex-client Westport Capital Inc. and two individual plaintiffs also accuse the law firm of revealing confidential information related to the representation and harming the defense of the cases by attaching unredacted copies of law firm billing statements to a New York state court suit filed last month.
The Westport Capital plaintiffs say they were not told by Wilk Auslander of the automatic discovery stay that applies to securities class actions. Instead, they contend, the law firm “pursued at full throttle overblown discovery,” racking up substantial costs even as its clients sought to keep a lid on costs and have the firm perform only reasonably necessary work.
However, name partner Jay Auslander told the ABA Journal in a telephone interview that the law firm and its attorneys had done nothing wrong, had informed its client of the stay and had looked into the facts of a complex securities matter in order to understand the litigation, the appropriate defenses that could be pursued and its settlement value, if any. “We sued them, and this is surely a tactical response to that litigation,” he said, adding that the $200,000 amount at issue in the New York state court legal bill dispute is very reasonable for this type of representation.
The nine-member federal court jury setting in San Jose rendered a verdict of $1.05 billion against Samsung after just two-and-a-half days of deliberations. The four-week trial featured attorneys from Morrison & Foerster and Wilmer Culter Pickering Hale and Dorr for Apple, and Quinn Emanuel Urquhart & Sullivan for Samsung.
Court documents show that some Morrison Foerster partners and of counsel billed a median rate of $582 an hour for work on portions of the case, while some Quinn Emanuel partners billed on average $821 per hour. Money well spent, give the stakes. “This is big, high-stakes litigation,” said Donald R. Dunner, a patent law expert and senior partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. “They’ve got the best lawyers they could find, and they charged fees that are commensurate with their talent.”
A recent ABA Journal story, “Top Del. Court OKs Record $300M Attorney Fee Award,” reports that, in an en banc decision Monday, the Delaware Supreme Court upheld a record $300 million attorney fee award in a shareholder derivative suit. In a 4-1 opinion (pdf) written by Justice Randy Holland, backed Chancellor Leo E. Stine’s (who serves as chief judge of the state’s highly regarded chancery court) judgment. “The challenge of quantifying fee awards is entrusted to the trial judge and will not be disturbed on appeal in the absence of capriciousness or factual findings that are clearly wrong,” the opinion states.
The attorney fee award in the Southern Peru Copper Co. case reportedly is the largest amount ever approved in a shareholder derivative action. The case concerned a claimed deal by the company’s biggest shareholder to sell one of its own holdings to Southern Peru Cooper in exchange for company stock that had risen significantly in value by the time the transaction concluded.
Strine said at a December hearing that corporate lawyers, like investment bankers, sometimes deserve a big payday. “There’s an idea that when a lawyer or law firms are going to get a big payment, that there’s something somehow wrong about that, just because it’s a lawyer. I’m sorry, but investment banks have hit it big, a lot of the bigger plaintiffs’ lawyer firms have hit it big. They’ve hit it big many times,” said Strine. “And to me, envy is not an appropriate motivation to take into account when you set an attorney fee. It’s not.”
Multidistrict litigation (MDL) functions similar to class action lawsuits, with several key differences, including how courts address attorneys’ fees. However, as more mass tort cases are being directed toward MDL instead of class action lawsuits, courts are encouraging that attorneys’ fees in MDL should be handled in a quasi-class action manner. According to Jeremy Hays, in his article, “The Quasi-Class Action Model for Limiting Attorneys’ Fees in MDL Litigation,” despite some drawbacks in using the quasi-class action approach in determining attorneys’ fees in aggregate multidistrict tort litigation, the quasi-class action approach might be the best option for courts at this time.
Courts are favoring MDL over class action litigation as a way to resolve mass tort cases. Courts have held that the interests and injuries of the potential members of a class make certification inappropriate, and the class action lawsuits may result in a limited fund for reimbursing victims of the torts, which means class action litigation is not the superior vehicle for achieving a just outcome for the parties. Also, changes to Rule 23 of the Federal Rules of Civil Procedure have made class certification more difficult in mass tort cases.
However, unlike in class action lawsuits, courts do not have control over attorneys’ fees in MDL. Attorneys take the cases in a contingency basis, but the plaintiffs often have to do much of the paperwork for the case. In contrast, Rule 23(h) allows the courts to award “reasonable” attorneys’ fees in class action litigation. Because the attorneys’ fee issues create inefficiencies in MDL, the quasi-class action lawsuit was created.
Instead of discarding the idea of quasi-class actions, courts should allow the quasi-class action model to evolve. The quasi-class action was proposed principally to bring the protections of Rule 23(h) into the MDL context. The quasi-class action, which is still developing, will present a more efficient approach for dealing with attorneys’ fees, but the quasi-class action may not be accepted by all courts as it continues its development.
A recent BLT Blog story, “Appeals Court Sets Guidelines for Attorney Fees in FOIA Cases,” reports that for the first time since the District of Columbia adopted its Freedom of Information Act (FOIA) in 1976, the D.C. Court of Appeals has spelled out when prevailing parties in FOIA cases can recover attorney fees and how judges should weight those fee requests. In an opinion (pdf), a three-judge panel explained that while the city’s FOIA law is different from the federal FOIA statute, local trial judges should use the four-factor test that federal judges rely on to decide whether to award attorney fees.
The ruling is a loss for the city’s police union, which appealed a D.C. Superior Court judge’s decision denying attorney fees after the union prevailed in a FOIA case against the city. The appeals court found that Judge Anita Josey-Herring correctly used the four-factor test and upheld her finding that the union failed to satisfy enough of the criteria. The court also rejected the union’s argument that prevailing parties should be automatically entitled to fees.
The four-factor test asks judges to consider any public benefit from the FOIA case, commercial benefit from the plaintiffs, the plaintiff’s interest in the case and the government agency’s reasonableness in withholding the information requested. Under the four-factor test, Josey-Herring found that there wasn’t a strong public benefit in the union’s request and that the fee request was very much in the union’s own interest. Writing for the appeals panel, Judge Catherine Easterly, wrote, “…we presume that the trial court found that the lack of public benefit simply outweighed the unreasonableness of the government’s behavior in this case.”
A recent NLJ story, “Fee Enhancement Limits Don’t Extend to Bankruptcy, Fifth Circuit Rules,” reports that a recent appellate holding that bankruptcy cases aren’t governed by a U.S. Supreme Court ruling limiting district courts’ fee enhancement power will help lawyers seek bonus fees when they get good results for creditors, according to practitioners who reviewed the opinion. The U.S. Court of Appeals for the Fifth Circuit on Aug. 10 affirmed a Northern District of Texas Bankruptcy Judge Russell Nelms April 2011 award of a $1 million fee enhancement to turnaround consulting firm CRG Partners Group.
CRG sought $5.98 million in attorney fees, plus a $1 million fee enhancement recommended by the debtors’ board of directors. That April, the bankruptcy court awarded CRG the fee enhancement but certified its order for direct appeal to the Fifth Circuit. The U.S. trustee argued that the Supreme Court’s 2010 ruling in Perdue v. Kenny A. sharply curtailed the bankruptcy court’s discretion to grant fee enhancements.
Circuit Judge Jennifer Walker Elrod wrote the opinion (pdf) in CRG Partners Group LLC v.Neary. Elrod analyzed numerous Fifth Circuit rulings and concluded that “we have consistently held that bankruptcy courts have broad discretion to adjust the lodestar upwards or downwards when awarding reasonable compensation to professionals employed by the estate.” While the courts’ “discretion is far from limitless,” she wrote, upward adjustments are permissible in rare and exceptional circumstances when “the applicants had provided superior services that produced outstanding results – that are supported by detailed findings from the bankruptcy court and specific evidence in the record.”
Additionally, because bankruptcy courts have the discretion to enhance fees for professionals’ superior performance, “we affirm fee awards that would have been proscribed under Perdue,” she wrote. Bankruptcy cases are unlike section 1988 cases, in which taxpayers foot the bill for any fee enhancements, she added. “The Debtors are the only party whose bottom-line was reduced by the enhancement and, because their own board of directors recommended paying the enhancement, we can hardly compare the Debtors’ situation to that of the non-consenting taxpayers.”
A recent Thomson Reuters story, “Plaintiffs’ Lawyers to Receive all the Cash in Moody’s Derivative Settlement,” reports that plaintiffs’ firms asked U.S. District Judge George Daniels of Manhattan to grant final approval to the settlement and fee award in the consolidated shareholder derivative litigation against Moody’s. Moody’s agreed to settle the case last month, in a deal that requires the rating agency to institute corporate governance reforms. If approved, the $4.95 million may well be the only cash Moody’s shells out in any of the shareholder litigation accusing the agency of misrepresenting its role in rating subprime mortgage-related securities.
Moody’s settlement of five derivative suits would provide for governance provisions aimed principally at promoting “independence, rigor, professional skepticism, and credit judgment” in the agency’s credit rating processes, according to the motion to approve the accord filed in court. Plaintiffs’ lawyers argued that the reforms would address core claim in their suit that Moody’s failed to properly manage the quality and independence of its ratings because issuers of mortgage-backed securities paid the agency to rate their offerings.
Co-lead plaintiffs’ lawyer Richard Greenfield of Greenfield & Goodman said the settlement was notable, given the tough standards derivative plaintiffs have to meet in litigation, in addition to the difficulty of pursuing claims against rating agencies, which have largely avoided liability in the financial crisis. Greenfield said the corporate governance reforms Moody’s agreed to adopt are worth a lot to shareholders and justify the fee request. “The nature of the relief is of substantial value,” he said.
The plaintiffs’ firm asserted in their fee request (pdf) that they would have earned $15.8 million had they billed by the hour. They argued that $4.95 million is a “modest fraction” of those hourly billings, so the fee award is “presumptively reasonable.” The plaintiffs’ lawyers cited at least four derivative cases in which larger fee requests have been approved, including a 2008 case against Home Depot in which a Georgia state court awarded $14.5 million to Robbins Geller Rudman & Dowd.
If the research by Espirito Santo Investment Bank proves to be correct, private law firms could wind up losing a substantial amount of the approximately 5 billion pounds in legal fees that the insurance industry currently antes up each year, Legal Week reports. Those legal fees amount to about $7.84 billion in U.S. dollars at the current exchange rate. Law firms that do continue to get such work could face increased pressure to cut their own costs as insurers look for law firms willing to agree to fixed-rate fees.
“The problem many insurers are facing is the massive number of personal injury claims and so an attempt to bring some of this in-house or look for other ways of managing it would make sense,” an unidentified managing partner in a London insurance firm tells the legal publication. However, specialist law firms in London likely will not be as much effected by the potential change as those doing high-volume elsewhere, he continued, saying that it will take time for insurers to develop alternatives to provide representation at the same level.
A recent The Recorder story, “Whyte Takes a Bite out of Attorney Fees in Apple Settlement,” reports that a class action Apple Inc., claiming that faulty antennas in the iPhone 4 caused bad cellular reception, has settled. But plaintiffs’ attorneys aren’t getting everything in their fee request. U.S. District Senior Judge Ronald Whyte approved a settlement that gives consumers some cash and a device to attach to the phone. He slashed by about half of plaintiffs’ attorney fees, citing a low number of claims by class members and an oversized group of lawyers.
Plaintiffs in In Re Apple iPhone 4 Products Liability Litigation had moved, unopposed by Apple’s counsel at Morrision & Foerster, for $5.9 million in fees. That was more than double the plaintiffs’ documented lodestar, or fees for time worked. Whyte, in cutting the fees to $2.2 million, wrote that the lodestar calculation was already “very generous,” and that it included the time of more attorneys than necessary to efficiently handle the case. Whyte also noted that the plaintiffs’ attorneys billed at “high-end rates” based upon “liberally kept time records.”
Co-lead counsel Ira Rothken of the Rothken Law Firm in Novato, called the judge’s ruling “fair.” He and other co-lead counsel, including lawyers from Gardy & Notis in New Jersey, Robbins Geller Rudman & Dowd in Florida and Kirkland & Packard in El Segundo,“understand and respect the decision not to award a multiplier,” he said.
Certain states, including Louisiana, have explicitly sought to curb the filing of such lawsuits by enacting anti-SLAPP statutes. If Commissioner Goodell is able to prove that the claims asserted against him arose from an act in furtherance of the exercise of his right of petition or free speech under Louisiana or the U.S. Constitution in connection with the alleged bounty scheme (certainly considered a public issue) and Vilma is not capable of demonstrating a probability of success on the merits of his defamation action, then Commissioner Goodell shall be awarded reasonable attorney fees and costs.
It would be fair to say that Goodell has hired attorneys who bill at a very high hourly rate and do not skimp on the amount of time they appropriate to their research and drafting. However, if Vilma is able to defeat Commissioner’s Goodell’s motion to dismiss based on Louisiana’s Anti-SLAPP statute, Vilma could be entitled to recoup his own attorney fees and costs.
Posted:Thursday, August 09, 2012
Congressman Peter Defazio (D-OR) recently introduced H.R. 6245 (pdf). The working title of the house bill is the “Saving High-Tech Innovators Egregious Legal Dispute Act of 2012” also known as the SHIELD Act. The bill would permit the award of attorney fees to successful defendants (but not successful plaintiffs) accused of infringing a computer hardware or software patent if the action “did not have a reasonable likelihood of succeeding.” Currently attorney fees are only awarded in “exceptional cases” under 35 U.S.C. 285 or as a sanction for violation of Fed. R. Civ. Pro. R. 11.
The statute would read:
(a) In General – Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.
Most jurisdictions around the world follow a loser-pays rule in civil litigation. In theory (and with certain assumptions) a loser pays rule results in more meritorious claims and fewer non-meritorious claims. The system (again in theory) allows a legally vindicated party to walk away without direct financial loss due to litigation. A major difference between those systems and that proposed here is that the normal loser-pays system is a two-way while this bill proposes a one-way system that only injures patentees. The stated purpose of the legislation is to reduce the amount of patent litigation brought by “patent trolls.”
Posted:Tuesday, August 07, 2012
Categories: Fee Award
A recent NLJ story, “Prius Plaintiffs Attorneys ask Ninth Circuit to Rescue Their Fee Award,” reports that five plaintiffs firms that obtained a class action settlement over alleged headlight defects in the Toyota Prius have petitioned a federal appeals court to overturn a trial judge’s rejection of $4.7 million in attorney fees as “highly unreasonable.” Girard Gibbs, which took the lead in the case, told the U.S. Court of Appeals for the Ninth Circuit in a brief that U.S. District Judge Manuel Real had abused his discretion in arbitrarily cutting the fees in the case, resolved claims by consumers against Toyota Motor Corp.
Real approved the Prius settlement on Oct. 17. In determining attorney fees, however, he repeatedly noted the simplicity of the case, concluding that the legal work amounted to “just a few short months of discovery, settlement negotiations, and a one day mediation.” He noted that the National Highway Traffic Safety Administration has dropped its investigation into potential headlight defects in Prius automobiles, giving Toyota a distinct advantage in the case, and that the records of that investigation were public.
Real, in determining that the fee request should be reduced, referred to the plaintiffs attorneys as “negotiation agents,” who typically takes a 20 percent cut for their work. As a result, he calculated the fees at about $760,000, or 20 percent of the total value of the settlement, which he estimated at $3.8 million. He awarded 65 percent of that amount to Girard Gibbs, which was to distribute the remaining 35 percent to the other firms.
In his brief, partner Eric Gibbs argued the value of the settlement was “hypothetical” and that, at any rate, Real should have at least considered the lodestar amount in double checking his fee calculation. Gibbs noted that his firm spent 2,900 hours on the case for a lodestar of $1.25 million. Furthermore, Gibbs wrote, because the case involved the California Consumer Legal Remedies Act and the state’s private attorney general statute, Real should have relied on more than a percentage analysis of the fees.
He disagreed with Real’s valuation of the settlement and the percentage assessed against the fees. “The percentage paid to sports and entertainment agents is not an appropriate consideration for an award of attorney fees in a class action case,” he wrote. He also took issue with Real’s characterization of the case as a “simple breach of warranty” action based on “boilerplate class action complaint” that relied on NHTSA’s investigation. “Where NHTSA was unable or unwilling to act, Plaintiffs achieved a settlement that addressed a problem that had bemused and alarmed thousands of Prius owners,” Gibbs wrote.
Posted:Monday, August 06, 2012
Categories: Fee Award
A recent Thomson Reuters story, “Attorney Fees in Air Cargo Case Near $93 Million,” reports that a Brooklyn federal judge has awarded $54.4 million to plaintiffs’ counsel in a class action over air cargo shipping rates, bringing the fee awarded in the antitrust case to $92.9 million. The fee award, the third in the ongoing case was approved by U.S. District Judge John Gleeson. Unlike some class actions, in which plaintiffs’ counsel submit fee applications when the case is nearing a final resolution, the attorney fees the air cargo case have been processed in a piecemeal manner.
The fee award will be paid to 73 firms involved in the litigation and allocated by four lead plaintiff firms – Kaplan Fox & Kilsheimer; Labaton Sucharow; Hausfeld and Levin Fishbein Sedran & Berman. Between December 2006 and December 2011, the 73 firms spent 199,510 hours litigating the antitrust action, according to court filings.
The class action was brought in 2006 on behalf of companies that purchased air cargo freight shipping services from dozens of airlines. The plaintiffs accused the airlines of participating in a global conspiracy to artificially inflate shipping prices. Gleeson approved $224.4 million in new settlement payments, which included the $54.4 million fee award. That brings the total to be paid by 17 airlines to $485 million.
The case remains ongoing against 11 other airlines. Depending on the outcome, plaintiffs and their lawyers could see the settlement funds and accompanying fee awards increase. Gleeson cautioned plaintiffs’ firms that if the settlement fund balloons, they may need to revisit their method for computing fees in relation to the size of the settlement fund. “In megafund cases such as this one, courts typically decrease the percentage of the fee as the size of the fund increases to avoid an unjust windfall,” Gleeson wrote.
The case is In re Air Cargo Shipping Services Antitrust Litigation, U.S. District Court for the Eastern District of New York, No. 06-1775.
A recent NLJ story, “First Circuit Tosses $30 Million Fee Award Volkswagen Case,” reports that a federal appeals court threw out a Boston federal judge’s $30 million attorney fee award for plaintiffs’ lawyers in multidistrict litigation over oil-sludge damage to Volkswagen cars. In a unanimous ruling on July 27, the U.S. District Court of Appeals for the First Circuit vacated U.S. District Judge Joseph Tauro’s March 2011 fee award, plus nearly $1.2 million in costs. The First Circuit panel ruled that Tauro erroneously based the fee award on federal law. The court remanded Volkswagen Group of America Inc. v. Petel J. McNulty LawFirm (pdf) so that the fees could be calculated based on Massachusetts law.
The underlying lawsuit claimed that defects caused the 1.8-liter turbo engines in some Volkswagen Passet and Audi Cabriolet model were susceptible to damaging engine sludge. The settlement provided for free oil changes and extended warranties. A special master valued the deal at about $223 million for a potential class of about 480,000 car owners. On appeal, Volkswagen argued that the plaintiffs’ attorney fees should have been about $7.7 million. The class counsel sought $37.5 million in fees and about $1.8 million in costs.
The First Circuit ruling cited U.S. Supreme Court precedents to conclude that state law governs the interpretation of settlement agreements. Chief Judge Sandra Lynch wrote the opinion. “The basis for the award here is the agreement itself, a contract under state law, and not federal law. The fact that attorneys’ fees are provided for by the settlement agreement is one of several reasons why there is no basis to resort to these federal equitable doctrines,” Lynch wrote.
Under Massachusetts law, Lynch continued, a trial can use either the lodestar approach or a multifactor analysis. The latter weights factors including the attorney’s ability and reputation; the matter’s importance; the time spent; fees usually charged for similar services by other lawyers in the area; the value of the property affected; and the results. If the lower court opts for the lodestar approach, it should adopt $7.7 million as the bases figure “given the absence of any direct challenge to the number,” Lynch wrote. That number does not include work by plaintiffs’ attorneys who were not class counsel, work performed after the district court’s fee award and any possible contingency enhancement.
A recent Thomson Reuters Legal story, “Lawyers’ Fees Cut in FedEx Wage-and-Hour Case: Is this a Trend,” reports that in a recent case against FedEx, a federal judge in Los Angeles cut fees for class counsel, in what may be the beginning of a movement toward stricter scrutiny of contingency deals in wage-and-hour cases. Earlier this month, Federal Express agreed to pay $8.25 million to settle a 2010 class action in which employees alleged that information in their pay stubs wasn’t properly displayed.
Plaintiffs’ lawyers at Jackson Hanson in San Diego had signed retainer agreements with FedEx employees that would give them 33 percent of the settlement. But in an order (pdf) approving the deal, U.S. District Judge Gary Feess awarded Jackson Hanson 25 percent, or just over $2 million, rather than the $2.75 million the plaintiffs’ attorneys said they were entitled to. Feess found no reason to elevate beyond 25 percent, which he said is an established benchmark for class action fees in cases in the Ninth Circuit.
The plaintiffs’ lawyers argued that they’d taken a risk and achieved a positive result, but the judge said that wage-and-hour litigation “is not as legally complex as other types of litigation that often generate a common fund.” He noted that the fees were still an improvement over hourly rates: Class counsel projected that their total hours on the case would be around $1,050 to $1,100, and market rates are $550 to $600 an hour. If they were paid by the hour, the judge said, plaintiffs’ lawyers would have brought in approximately $640,000.
Gregory Mersol of Baker Hostetler, who wrote about the case for the firm’s Employment Class Action blog and is currently defending about half a dozen wage-and-hour cases in California, said Feess’s order reflects an “evolutionary trend.” Judges, he said, are taking a closer look at settlements in garden variety wage-and-hour cases and balking at fee awards that would permit plaintiffs’ attorneys to walk away with over-the-top hourly rates. Stricter scrutiny of fees, both in wage-and-hour and other common fund cases, is not yet rountine, Mersol said, but judges are beginning to resist rubber-stamping fee requests even when the defendants don’t object to them.
A recent NLJ story, “Arguments Swirl Over Fairness of Ticketmaster Settlement,” reports that eight lawyers representing more than a dozen of the nearly 100 fee objectors to a consumer class action settlement with Ticketmaster urged a Los Angeles judge on July 24 to reject the deal, which they called the latest example of paying cash to the lawyers while the class members make do with coupons.
Addressing Los Angeles Superior Court Judge Kenneth Freeman, the lawyers took turns during a fairness hearing to argue against final approval of the deal, which would grant $16.5 million in fees and costs to plaintiffs attorneys and discounts off the future ticket purchases to the nationwide class of consumers.
Under the deal, each class member would receive an e-mail discount code worth $1.50 against each future ticket purchase and a $5 discount code for each UPS delivery fee – both capped at 17 transactions. The estimated class encompasses customers who bought tickets from Oct. 21, 1999 through Oct. 19, 2011.
Under the deal, plaintiffs’ attorneys would receive $15 million in attorney fees and about $1.5 million in costs. W. Michael Hensley, a shareholder in the Santa Ana, Calif., office of AlvaradoSmith, a plaintiffs firm in the case, said attorneys has laid out their costs and fees in “excruciating detail.” “We have not asked for all the fees that we have actually generated,” he said, noting that the lodestar amount came to $6.5 million. He said that this case, unlike others cited by the fee objectors, took nearly nine years to litigate.
Google wants $4 million from Oracle to cover the legal costs it incurred during the infringement litigation over the Android mobile operating system. In a brief (pdf) of Google’s Bill of Costs filed in federal court, Google lead counsel Robert Van Nest of Keker & Van Nest, LLP in San Francisco argued that Oracle is required to pay Google’s legal costs because the judge and jury ruled in favor of Google on almost every claim during the six-week trial. The $4 million figure includes only the legal (i.e. administrative costs) expenses of the litigation and not the attorney fees (i.e. billable hours) associated with the case.
“Google prevailed on a substantial part of the litigation,” read Google’s brief. “[Oracle] recovered none of the relief it sought in this litigation. Accordingly, Google is the prevailing party and is entitled to recover costs.” Google has not publicly revealed an itemized list of its expenses, but the total bill included $2.9 million spent copying and organizing documents. According to the brief, the company juggled 97 million documents during the case.
In the underlying litigation, Oracle lost an infringement case against Google concerning various Java APIs and the way they were utilized in the Android operating system. The judge decided that the structure, sequence, and order of these APIs wasn’t covered by existing copyright law and threw out the majority of the claims against Google.
A recent NLJ story, “Ninth Circuit Rejects Mini-Wheat Settlement of Attorney Fees, Cy Pres Award,” reports that a federal appeals court has rejected a class action settlement over alleged false advertising of a breakfast cereal, ruling that a plan to contribute some of the payout to charity bore no relation to the case and that the plaintiffs attorneys’ fee award was excessively generous.
The U.S. Court of Appeals for the Ninth Circuit on July 13 reversed the trial judge who’d approved the settlement between Kellogg Co. and a nationwide class of consumers who alleged false advertising of its Frosted Mini-Wheats cereal. Citing its 2011 decision in In re Bluethooth Headsets Litigation, the three-judge panel ruled that the settlement did not survive the heightened scrutiny that should be applied to class action settlements.
The ruling in Dennis v. Kellogg Co. (pdf) was the latest in which the Ninth Circuit has struck down a class action settlement based on excessive attorney fees or fear of collusion between counsel who crafted the deal. “There is a lot of case law on attorney fees out there: Bluetooth, and now this case, are certainly adding to that body of case law,” said plaintiffs counsel Timothy Blood, managing partner of Blood, Hurst & O’Reardon in San Diego.
The court cited its Bluetooth decision in finding the fee request unreasonable, particularly given the number of hours and amount of money spent by plaintiffs counsel in light of what class members would receive. “The settlement yields little for the plaintiff class,” wrote Senior Judge Stephen Trott. “In comparison, the $2 million award is extremely generous to counsel – even if we were to accept their assertion that the value of the common fund is $10.64 million.
Had the case been litigated on an hourly basis, the fees would have totaled $459,203, Trott wrote, so a $2 million fee award would translate to $2,100 per hour. “Not even the most highly sought after attorneys charge such rates to their clients,” he wrote.
A recent BLT Blog post, “Mayer Brown Sues Pacific Seafood Group for $5M in Fees,” reports that Mayer Brown filed a breach of contract lawsuit (pdf) in D.C. Superior Court against former client Pacific Seafood Group, claiming unpaid attorney fees in excess of $5 million. The firm represented Pacific, a global seafood processing and distribution company based in Clackamas, Ore., against a series of antitrust claims, including a class action in U.S. District Court for the District of Oregon. According to the claimant, the firm stopped representing the company in February because of nonpayment of fees.
Mayer Brown claims Pacific paid part, but not all of the fees it owed. The firm is suing for more than $5 million, which includes $3.8 million in fees, an additional $1.3 million for a discount the firm has originally provided, and interest. According to the claimant, Pacific hired Mayer Brown attorneys from the Washington office in July 2010. From the fall of 2010 through the summer of 2011, Pacific never fully paid invoices sent the firm. The company “requested that Mayer Brown be patient and continue rendering professional services,” the firm said in its complaint.
Mayer Brown reached a breaking point early this year and told Pacific it would be ending its representation, according to the complaint. “Mayer Brown is now informed and believes that Pacific intentionally misled Mayer Brown and caused it to provide legal services, while intending not to pay for such services and informed Mayer Brown of its intent,” the firm wrote in the complaint.
The largest single attorneys' fee award to date was $688 million, doled out in 2008 in the Enron case. In second and third place was $492 million in fees resulting from Tyco litigation and about $336 million in fees in the WorldCom case.
Attorney fee disputes are often a result of a breakdown in the attorney-client relationship. Mediation is the quickest, simplest, and most cost effective way to resolve attorney fee disputes. NALFA offers a mediation program specifically designed for attorney fee disputes of all sizes.
Our fee dispute mediators are uniquely qualified to sit down with both parties and settle a fee dispute in a cost effective and confidential manner. Our fee dispute mediators are trained to handle simple attorney-client fee disputes and larger, more complex multi-party fee disputes. Our fee dispute mediators are trained neutrals who understand the underlying issues in fee dispute cases. They include former judges, seasoned litigators, and in-house counsel. NALFA uses a customized approach for each fee dispute case.
“Attorneys don’t want to be in the business of suing clients over unpaid fees. So before filing a suit in court, attorneys should attempt fee dispute mediation. In fact, participating in fee dispute mediation, in good faith, can only strengthen your legal action in court, if the case is not resolved in mediation,” said Terry Jesse, Executive Director of NALFA.
Posted:Friday, July 06, 2012
Categories: Unpaid Fees
A recent FindLaw.com post, “5 Ways to Collect Unpaid Fees From Clients” by Andrew Lu of Top Floor Legal reports that a recent survey found that most attorneys only get paid for a fraction of the hours they work during the day. The reason weren’t given as to why the attorneys don’t get clients to pay up. So, what can attorneys do to collect unpaid legal fees from clients?
Here are five steps from Top Floor Legal that attorneys can take when looking to get paid:
Ask the Client to Pay: Passive aggressiveness does not work. Let your client know that he or she owes you money. Oftentimes, your client may not know or may have forgotten that they owe you.
Have Someone Call the Client: If you are not comfortable with confrontation over money, you can hire a third party bill collector to call the client. Outside pressure may convince your client to pay up, and can signal to your client that you’re serious.
Understand Your Client’s Situation: Talk to your client and understand why he or she cannot pay. If there is a momentary financial crisis, you may forebear from collecting for a few weeks or agree upon a partial payment plan.
Draft a Formal Demand Letter: If you can’t get a hold of the client of if the client is not willing to work with you, you may want to draft a formal demand letter asking for payment. This can be the basis of any legal action.
File a Lawsuit: You don’t want to be in the business of suing your clients, so this is definitely a last resort. But if your client owes you a significant sum and refuses to pay, you may be left with no resort but to seek legal action.
A recent Madison Record story, “Tillery Seeks at Least $18K in Fees From Third Party to Litigation – University of Chicago” reports that an attorney who will share close to $35 million in attorney fees by way of a recent class action settlement in federal court, is seeking at least $18,000 in fees from the University of Chicago in related state court litigation. Stephen Tillery filed a motion for reimbursement of costs and attorney fees in an eight-year-old Madison County, Illinois class action against Syngenta Crop Protection involving the weed killer atazine.
The University of Chicago and its scientist Don Coursey, who was hired as an expert by Syngenta, were brought into the litigation as third parties. For years, they fought Tillery’s discovery requests. In a motion, Tillery chided the University for being “uncooperative” by delaying production of subpoenaed documents. He seeks reimbursement on grounds that the University repeatedly filed motions without substantial justification and for its “significant” delay in conducting a search and compiling responsive documents.
“But for the University’s lack of cooperation and unjustified habitual defiance, it would not have undertaken seven months to compile 952 documents,” Tillery’s motion states. “[P]laintiffs should not be forced to pay thousands of dollars to cover the University’s irresponsible inaction and delay,” Tillery wrote. A footnote to the $18,050 in fees Tillery seeks from the University, states that the figure does not include “Mr. Steve Tillery’s time, nor does it include paralegal time.”
According to a May 22, 2012 article in Corporate Counsel Magazine, “…as the next generation of general counsel takes charge, evaluations of outside counsel will rely more and more on metrics assessing efficiency and productivity.”
Whenever NALFA member and attorney fee expert Ken Moscaret, Esq. opines in support of the efficiency of multimillion-dollar legal fees billed by major law firms in large, complex litigation, he customarily focuses on five court-tested factors:
Concentration of workflow in the hands of a core team of attorneys
Appropriate mix of attorneys by skill, experience, and ability
Delegation of workflow to less-expensive but competent timekeepers
Case staffing continuity
Exercise of billing judgment
As one example, in the Enron litigation in 2008, the presiding federal judge cited and relied in part on Mr. Moscaret’s “efficiency factors” to support her record-setting $700 million fee award in that case to a large, well-known California law firm, as follows:
“[Mr.] Moscaret also examines the fee request for “efficient” case staffing, i.e., using as few attorneys as necessary doing as much of the legal work on a case as possible. In large complex cases like this one, he looks for a ‘tight compact litigation team of attorneys doing the majority of the work on the case,’ i.e., ‘core’ attorneys billing at least 75% of the hours on the case… He also identifies and discusses in detail other indicia demonstrating reasonableness and efficiency of overall staffing in this litigation, including an appropriate mix of attorneys for the demands of a complex litigation, reasonable delegation of work flow, continuity of case staffing,…” 586 F.Supp.2d at 785.
Posted:Friday, June 22, 2012
Categories: NALFA News
NALFA’s Law’s Top Civil Litigators is a new membership category for a select group of plaintiffs’ lawyers who’ve achieved record settlements and verdicts in areas of tort litigation: consumer, personal injury, environmental, employment, and securities. Nomination is based on results obtained for the client and the community. Our motto is “Winning for the Client and the Community.”
Law’s Top Civil Litigators will be among the first to put their lawyering stats on a baseball card. Members will be able to choose from 4 different baseball card style formats. On the front, lawyers will be pictured “in action” or a simple head shot with name, firm name and logo, along with position in the firm.
On the back, lawyers can display lawyering stats such as year, case name, type of case, court, and settlement and/or verdict amount. Like baseball cards, we’ll also include other biographical information such as law school, court admissions, and contact information. And because this is a “virtual” baseball card, users will be able to click on the stats to learn more case details.
This new app, (for online, ipad, iphone, and android users), is an effective way for plaintiffs' lawyers to promote their record of success in a familar format. “This new app is a simple, fun, and familar way for trial lawyers to share their winning record with potential clients, the media, and others in the legal profession,” said Terry Jesse, Executive Director of NALFA.
Beyond this new app, Law’s Top Civil Litigators is also a pro-plaintiffs’ advocacy group that seeks to combat the efforts of the tort reform lobby. “There are scores of positive stories from the plaintiffs' bar. We want to promote these positive cases at a national level and correct much of the misinformation from the tort reform lobby,” said Jesse.
For more information, please call Terry Jesse at 312.854.7158 (direct) or e-mail firstname.lastname@example.org.
Disclaimer: NALFA owes the creative concept, proprietary rights, and all technology associated with this app.
Posted:Wednesday, June 20, 2012
Categories: Fee Dispute
A recent Corporate Counsel story, “Fee Fight the Next Battle in Oracle and Google’s Smartphone War?,” reports that while nothing has been filed in court, observers say the next battle in Oracle v. Google could be over attorney fees. A fight over legal bills would offer tantalizing details of the fee arrangement between Google and its legal team, and put a public price tag on what it can cost to engage in complex, high-stakes IP cases.
Oracle Corp. took Google Inc. to court on a quest for eye-popping damages in the first of the smartphone wars to go to jury trial. Oracle lost on almost every claim and can only get a fraction of the billions it once sought. So observers say they expect Google to try to recoup the small fortune it surely paid Keker & Van Nest and two other firms to do battle with the likes of David Boies and top Morrision & Foerster IP litigators.
Google would likely petition for fees after U.S. District Judge William Alsup issues a final order in the case, which could come some time after a hearing held today. If Oracle makes its own bid to pursue attorney fees, which observes said isn’t entirely out of the question since it prevailed on two small claims, it could expose hourly rates and fee arrangements to famed litigator David Boies and other top litigators at Morrision & Foerster.
The fee petition would come under a provision of the Copyright Act. Unlike in other areas of civil litigation, either the prevailing defendants or plaintiff can seek reimbursement for reasonable attorney fees in copyright cases.
“The suit serves no goal other than to move money from the corporate treasury to the attorneys’ coffers, while depriving Sears of directors whom its investors freely elected,” wrote Chief Judge Frank Easterbrook in a three-judge panel’s unanimous opinion (pdf).
The plaintiffs in this suit contented that antitrust law was violated by having two directors sit on competing boards of other companies following the 2005 merger of Sears, Roebuck & Co. with Kmart Corp. However, as Sears pointed out to the district court in a motion to dismiss, “Delaware usually allows investors to sue derivatively only if, after a demand for action, the board cannot make a disinterested decision.” The plaintiffs made no such demand prior to suit, the Seventh Circuit says, although they argued it would have been futile to do so.
Antitrust suits are notoriously expensive and Sears was willing to settle for $925,000 in attorney’s fees to opposing counsel rather than likely pay over $1 million in defense costs. But Easterbrook says, shareholders would derive no benefit from this and neither the Department of Justice not the Federal Trade Commission, which ordinarily enforce antitrust violations, have shown any interest in pursuing enforcement action here.
A Lexis Nexus Law Firm Billable Hours Survey, (pdf) out on Friday looked at billing efficiency among firms of one to 50 lawyers. The report, from legal technology company, LexisNexis, is based on responses from 499 law firms and law departments polled in May.
On average, respondents worked nine hours a day but only billed six hours, it found. That’s a 33% gap, which LexisNexis chalked up to general lawyerly inefficiency or not using staff to cover non-billable functions. Other factors: hours attorneys spend networking or cozying up to prospective clients, plus some intentional discounting of hours worked to keep existing clients happy.
Bigger law firm often have armies of support staff and sophisticated billing systems that boost efficiency and let “attorneys be attorneys,” said Loretta Ruppert, senior director of community management for LexisNexis Legal and Professional. “But at the smaller end of law, they typically wear multiple hats.”
Among the subset of smaller firms, billing efficiency is all over the place. For example, lawyers in Delaware (at least those who responded to the survey) lead the pack, billing 94% of hours worked. Other states in the top quadrant included New York, Colorado, Utah, Louisiana, and Mississippi. Less distinguished were respondents in Oregon, who billed a scant 40% of hours worked.
A recent Reuters story, “Judge Limits Attorneys’ Fees in BP Oil Spill Case,” reports that a federal judge overseeing the massive litigation stemming from the 2010 Gulf of Mexico oil spill issued an order on Friday capping the amount attorneys can charge plaintiffs who participate in a settlement with BP. U.S. District Judge Carl Barbier in New Orleans gave preliminary approval last month to an estimated $7.8 billion settlement BP reached to resolve more than 100,000 claims by individuals and businesses affected by the oil spill.
In his order, Barbier ruled that attorneys for plaintiffs who settle claims through the settlement must limit their contingency fee arrangements to 25 percent of any recovery a plaintiff receives plus “reasonable costs.” Barbier stressed that the 25 percent figure was a ceiling and that attorneys were free to charge less.
“In many cases, a reasonable fee may be less than 25 percent, particularly for a relatively simple claim by an individual,” he wrote. “This Order is not intended to allow or encourage attorneys to charge more than a reasonable fee under any circumstance.”
A group of attorneys who negotiated the settlement with BP, known as the Plaintiffs’ Steering Committee, are seeking $600 million for their work. Those fees, which would be paid by BP under the terms of the settlement, must be approved by Barbier.
A recent WSJ story, “Panel Rules Investors Must Pay Goldman $500K in Legal Fees,” reports that two investors must pay $500,000 in legal fees to a Goldman Sachs unit after losing an arbitration case against the firm involving a options trading strategy, an arbitration panel has ruled. Eric Snyder, a former real estate investment trust executive, and his wife Barbara, filed “clearly erroneous” claims against Goldman Sachs, according to a Financial Industry Regulatory Authority (FINRA) arbitration award.
The Snyders originally sought $10 million for allegedly recommending unsuitable investments, misrepresenting information and breaching the duty of fair dealing to them, among the misdeeds. The FINRA panel not only rejected those claims, but ordered the Snyders to pay $500,000 to cover Goldman’s legal fees and costs. A law in Tennessee, where the Snyders lived at the time of the dispute, authorized the panel to award legal fees to Goldman.
The outcome in the case is a rare instance in which an arbitration panel has ordered investors who lost the case to pay a brokerage firm’s legal fees, say lawyers. “It’s a head turner,” said Andrew Stoltmann, a Chicago-based lawyer who represents investors in arbitration cases.
A recent BLT Blog post, “D.C. Appeals Court Hears Fee Dispute in TV Writers’ Discrimination Case,” reports that the D.C. Court of Appeals heard arguments in a fee dispute between attorneys who worked on the same side of a decade-long class action on behalf of older television writers. Local solo practitioners Daniel Wolf and Maia Caplan content that an arbitrator hired to divide up more than $23 million in fees awarded to class counsel based his decision on issues that were outside his authority. The class counsel had agreed that the fee petition submitted to the court wouldn’t be binding on arbitration, they argued, but the arbitrator nonetheless rejected the idea that the parties could object to the petition and claim different fees in arbitration.
Wolf and Caplan represented a group of television writers who sued studios, network and talent agencies for age discrimination in Los Angeles County Superior Court. Their co-counsel included attorneys from Sprenger + Lang and Kator, Parks & Weiser, both in Washington, DC. The writers reached a $70 million settlement with a balk of the defendants in 2010. The court awarded the class counsel one-third of the settlement.
The parties agreed to bring any fee dispute to mediation and arbitration to avoid a public scene that might delay or jeopardize the settlement. The parties went to mediation, and when that failed, to arbitration. The arbitrator issued a decision in late 2010. Wolf and Caplan sued in D.C. Superior Court to vacate the award, and Judge Michael Rankin denied their motions, prompting the appeal.
Wolf’s attorney, William Stein of Hughes Hubbard & Reed, argued that the problem is that the arbitrator never made a finding about the reasonableness of the attorney fees, instead finding that he was bound to use the fee petition because of language in the contracts signed by co-counsel. Wolf and Caplan’s former co-counsel argued that the arbitrator had no legal authority to base his decision on his reading of the original co-counsel agreement. Contract provisions gave him the right to base his decision on the fee petition submitted to the court, even if the parties disagreed.
A recent Insurance Journal story, “Judge to Insurer: Pay Legal Fees in Pending Insider Trading Fraud Case” reports that a federal judge in New York order an insurance company to keep paying the attorney fees of several former hedge fund managers and traders caught up in an insider trading investigation. U.S. District Court Judge Paul Engelmayer said irreparable harm could be done to the employees of Global Investors, if XL Specialty Insurance did not keep paying attorney fees for their defense. But the judge said he would give XL enough time to appeal his decision of the insurer wanted.
In March, XL sued Level Global, claiming if did not have to pay the attorney fees for employees implicated in the insider trading ring because a former analyst for the now-closed hedge fund had been secretly cooperating with federal authorities. XL is arguing that since the cooperating witness, Spyridon Adondakis, knew he had committed fraud at the time the insurance policy was signed, any changes stemming from or related to his crime aren’t covered by the policy.
Level Global lawyers argue that the fund’s general counsel, who signed the policy application, didn’t know about the crime and did not learn of it after making a reasonable inquiry among Level Global’s employees into possible facts or circumstances that could lead to charges. They also argue that since the attorney fees XL has been paying are not for Adondakis himself, and only Adondakis is actually a convicted criminal, the exemption shouldn’t apply.
As part of its policy, XL agreed to cover $10 million in claims for Level Global. It has paid out all but $2.7 million in claims so far, and Level Global spent an amount equivalent to the remaining balance before it received word of XL’s suit. The case is XL Specialty Insurance Company v. Level Global Investors.
Last Friday, the Republican controlled U.S. House held hearings on cy pres awards in class action litigation. Cy pres awards are final surplus funds left over from class action cases. The tort reform lobby seeks to repeal cy pres awards under the Class Action Fairness Act of 2005 (CAFA).
During a hearing by the U.S. House Subcommittee on the Constitution, Northwestern Law Professor Martin Redish testified about the problems with such awards, saying class members are unaware of the lawsuit or can’t be found, or the award is so small that it doesn’t make sense for them to seek payment.
According to the U.S. Chamber of Commerce’s Institute for Legal Reform, cy pres awards in class actions help pump up attorney fees for plaintiffs’ lawyers. Testifying last week from the Institute’s viewpoint was John Beisner of Skadden Arps. Beisner said cy pres awards help inflate the size of the award and justify higher attorney fees.
"At NALFA, we oppose the repeal of cy pres awards under the Class Action Fairness Act. Unclaimed funds in class actions are better served with charities and non-profits than returned to the defendants, the very individuals who just conceded wrongdoing. This is like allowing a bank robber to keep some of the stolen money after he's been found guilty," said Terry Jesse, Executive Director of NALFA.
A recent Reuters Legal story, “Preview: Lawyers to Defend Fee Award by Delaware Judge,” reports that a team of plaintiffs’ attorneys will defend their $304 million attorney fee award before Delaware’s Supreme Court in a case that put the spotlight on the new chief judge on the state’s high-profile business court. The attorney fees stems from a $2.03 billion judgment awarded by Delaware Chancery Court Judge Leo Strine in October in a case brought by shareholders of Southern Copper Corp, who accused the company of overpaying in a takeover.
The two law firms, Kessler Topaz Meltzer & Check and Prickett Jones & Elliott, logged 8,597 hours on the case, which was spread among 45 lawyers and paralegals, according to court records. The attorney fees, if award by the lodestar calculation, instead of the percentage of fund (POF) method, would amount to $35,000 per hour. By comparison, the plaintiffs’ legal team that recovered $3.2 billion for Tyco shareholders spent 488,000 hours on the case, according to a brief on Southern Copper, receiving $1,010 per hour.
Judge Leo Strine amended his original judgment a few days after awarding the fees, and as a result the fee award was increased to $304 million from $285 million. Stine said the payment was based on the size of the recovery and was meant to encourage entrepreneurial plaintiffs’ attorneys. The judgment and the fees were stayed pending appeal, although the judgment will accrue interest.
“The message I think he is sending is that if you have a meritorious case and your lawyers add true value to the shareholders you will be appropriately rewarded,” said John Coffey, a former plaintiff’s lawyer who is a managing director with BlackRobe Capital Partners, which advises investors in legal claims. “I would be surprised if the Supreme Court disagreed with his basic premise,” Coffey said, though he said the fees could be trimmed on appeal.
The DOJ’s United States Trustee Program (USTP), which monitors bankruptcy proceedings, has been pressing for new rules and guidelines on attorney fees in Chapter 11 bankruptcies. On Monday, members of the agency’s U.S. Trustee Program convened a public meeting to discuss proposed guidelines that would increase government oversight of Chapter 11 filings by companies with more than $50 million in assets.
Under new rules, law firms working these cases would have to disclose their Chapter 11 billing rates and fee applications, stop rounding up billable hours and work within present budgets. Clifford J. White III, director of the U.S. Trustee Program, said in an email statement that the proposed changes to the 16-year-old fee guidelines would help “add transparency to the bankruptcy ststem.”
Government officials contend that bankruptcy lawyers charge higher attorney fees than other attorneys—sometimes in excess of $1000 an hour—because their clients are less apt to negotiate discounts. The DOJ also examined whether law firms justify exorbitant rates by devoting unnecessary hours and personnel to bankruptcy cases.
Law firms and other professional groups argue the proposed changes would actually increase the already high price tag for Chapter 11 cases and create unnecessary work for professionals at a time when their clients are in crisis. More detailed rate disclosures would be especially tough for law firms, which can be secretive about hourly rates.
A recent Reuters story, “MF Global Trustee’s Law Firm Bills $17 Million So Far,” reports that the legal team unwinding MF Global Holdings’ broker-dealer billed more than $17 million in attorney fees in the first four months of the bankruptcy. The team from the law firm Hughes Hubbard & Reed, led by trustee James Giddens, has been paid from the estate of MF Global Inc., according to court documents filed on Monday in U.S. Bankruptcy Court in Manhattan.
Giddens’ team has billed for roughly $20.1 million for the four-month period, but is withholding 15 percent of the total under an agreement with the Securities Investor Protection Corp (SIPC), an insurance fund for securities customers that taps trustees like Giddens to liquidate failed brokers. Giddens’ own rate is about $894 an hour, which incorporates a 10 percent reduction from his normal rate under the agreement with SIPC, according to the filing. Giddens billed 424 total hours in the four months.
Some of the key partners on Giddens’ team have billed more hours. James Kobak, who charged the same rate as Giddens, put in 749 hours, while bankruptcy partner Christopher Kiplok logged about 675 hours at $691 per hour. The full team, which includes nearly 130 lawyers and another 28 paralegals, has racked up more than 43,000 hours, according to the fee submission.
A recent NLJ story, “Mattel Argues Huge Bratz Award was Built Upon Errors,” reports that the $310 million judgment against Mattel, Inc. in its long-running litigation against Bratz doll maker MGA Entertainment Inc. should be revered because it was based on inaccurate damages calculations and erroneous billing invoices from 11 law firms, Mattel argued in its latest appellate filing.
The judgment includes nearly $140 million in attorney fees and costs, all but $2.5 million of which were related to MGA’s defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer. Mattel’s reply, filed with the U.S. Court of Appeals for the Ninth Circuit sets the stage for oral arguments on whether the $310 million judgment issued by U.S. District Judge David Carter in Santa Ana should be reversed or remanded for a new trial.
MGA, in opposing Mattel’s brief, said the award was justified against “one of the largest and most aggressively litigated cases ever tried in this Circuit.” “Mattel launched litigation warfare to obliterate upstart MGA and seize MGA’s competing Bratz brand,” wrote attorney Clifford Sloan, a partner in the Washington office of Skadden Arps. Sloan argued that the attorney fees and costs paled in comparison to the more than $400 million that Mattel reportedly spent on the litigation, which began in 2004.
In its reply, Mattel challenged the attorney fees, even after Carter subtracted $24 million from a total of $129 million that MGA purportedly spent on defending Mattel’s copyright claims. “The district court’s mistaken assumption that MGA spent all $129 million on defensive fees infects it entire award,” wrote Kathleen Sullivan, a New York partner at Los Angeles-based Quinn Emanuel Urquhart & Sullivan. She cited tens of millions in duplicative billings, discounts and work contracted out to other firms. At a minimum, the fee award should be remanded for recalculation, with Mattel given the chance to review invoices that so far have been redacted, Sullivan wrote.
In her article, Peg takes issue with a handful of shareholder suits filed in Delaware’s Court of Chancery. She asks weather plaintiffs’ lawyers representing shareholders deserve “hefty fees” for filing suits that resulted in quick changes to company bylaws.
“Attorney fee awards are determined, in part, by the results they achieve. Is it any surprise that winning big settlements (and/or verdicts) earn big attorney fees? Of course not, it's simple economics. Because a settlement was achieved quickly only adds to the value of the case,” said Terry Jesse, Executive Director of NALFA. “The efficient work of the plaintiffs’ lawyers resulted in benefits to shareholders; that should earn them significant compensation," Jesse concluded.
The Republican controlled Michigan House of Representatives introduced legislation that would limit attorney fee compensation in civil litigation. The proposed law would restrict any attorney from contracting with a client on a contingency fee basis, if his/her fees exceed $1 million.
The 2-page legislation, House Bill No. 5702 (pdf), would cap attorney fees at $1 million for all personal injury and wrongful death cases. The proposed legislation reads: “the attorney shall not receive, retain, or share a fee that is more than $1,000,000, regardless of the percentage of the amount recovered involved.”
"At NALFA, we are opposed to this legislation. Two private citizens should be able to contract without government interference. The right to contract is not only one of the principles of our free market economy, but it is one of the hallmarks of the attorney-client relationship," said Terry Jesse, Executive Director of NALFA.
A recent Jurist story, “Supreme Court to Consider Challenge to Attorney’s Fees,” reports that the U.S. Supreme Court granted certiorari in Marx v. General Revenue Corp. to determine whether a defendant may be awarded attorney’s fees in a Fair Debt Collection Practice Act (FDCPA) [15 USC § 1692] where the plaintiff brought the lawsuit in good faith.
The FDCPA allows a court to award attorney’s fees “[o]n a finding by the court that [the] action…was brought in bad faith and for the purpose of harassment,” while the Federal Rules of Civil Procedure (FRCP) allow such an award “[u]nless a federal statute…provides otherwise.” The U.S. Court of Appeals for the Tenth Circuit upheld the fee award, holding it was justified under the FDCPA and the FRCP. CLICK HERE (pdf) to read the Tenth Circuit ruling.
Plaintiffs’ counsel, who negotiated a $3.2 billion settlement of securities claims against Tyco International, Ltd. in 2007 were awarded $464 million in attorney fees (or 14.5% of the settlement fund) and $28.9 million expenses from a federal court in New Hampshire.
After extensive discovery and litigation, the class reached a historic settlement with Tyco for $2.975 billion, the single largest payment from any corporate defendant in the history of securities class action litigation. Plaintiffs’ class counsel include Grant & Eisenhofer, P.A., Milberg, LLP and Barroway, Topaz, Kessler, Meltzer & Check, LLP.
A recent Reuters Legal story, “Comments Oppose OCA Proposal on Fee Dispute Program” reports that the state Office of Court Administration (OCA) proposed preventing disbarred or suspended attorneys from participating in fee dispute programs. Under the proposal, resolution of fee disputes involving attorneys facing disciplinary action would be delayed until the disciplinary proceedings were complete. But a number of attorneys say the proposed rule change could harm clients and clog small claim courts with new cases.
The fee dispute program was created as an inexpensive and efficient to litigation for clients who feel they’ve been overcharged for legal services. A number of attorneys, some of who arbitrate fee disputes, wrote in public comments that the proposal could block clients with legitimate cases from using the program and that an attorney’s misconduct is irrelevant unless it is directly related to a client’s fee dispute.
Louis Kash, Rochester attorney and chair of Monroe County Bar Association’s fee dispute program, said the proposal could steer some attorney-client fee dispute cases into the courts, which would undermine the purpose of the arbitration program. Others took issue with the provision that would bar attorneys who are the subjects of open complaints from participating in the fee dispute programs. Claims of professional misconduct are kept confidential until an attorney is formally disciplined, but the fee dispute rule, several people said, could force attorneys to out themselves as the subjects of complaints.
“The mere fact of a complaint is hardly compelling evidence that the lawyer actually engaged in misconduct,” wrote Richard Supple, the chair of the New York City Bar Association’s Professional Discipline Committee. NYCBA opposes the proposed rule. Under the current program, arbitrators are allowed to determine only whether a fee was reasonable and are barred by state regulations from considering “claims involving substantial legal questions, including professional malpractice or misconduct.”
“Arbitrators understand that they cannot resolve issues of malpractice or other legal questions,” wrote Malvina Nathanson, an arbitrator with the New York County Lawyers’ Association’s fee dispute program. “However, whether the fees were reasonable in terms of the services rendered can be determined without regard to malpractice.”
Posted:Thursday, May 24, 2012
Categories: NALFA News
A recent Sun Herald story, “High Court: Legal Fees are Public Funds,” reports that the Mississippi Supreme Court ruled last today in two cases that legal fees paid to private lawyers to represent the state are public funds. Justices said because the money belongs to the public, it should’ve been paid out to lawyers from the attorney general’s contingent fund or from other money appropriated to the attorney general.
In 2010, a Hinds County judge ruled the $14 million in attorney fees paid to two attorneys for handling a state lawsuit against telecommunications giant MCI was properly handled. Another Hinds County judge ruled the same case in 2010 involving $10 million in attorney fees paid to lawyers for handling a state lawsuit against computer software maker Microsoft.
The Supreme Court rejected arguments from Mississippi Attorney General Jim Hood and the attorneys involved in the cases that the attorney fees were property of the lawyers, not the state. The Supreme Court said the settlement funds paid by MCI and Microsoft belong to the state. The court said state law clearly “mandates that outside retained by the attorney general can be paid only from the attorney general’s ‘contingent fund’ or from funds appropriated to the attorney general by the Legislature.”
“That is where it must be paid – and distributed,” wrote Presiding Justice Jess Dickinson. “The statute does not allow direct payment of attorney fees.” But Justice Jim Kitchens said the law firms had a valid contract with the state and were entitled to their fees being paid from the settlement. Kitchen said a better approach would have been to submit all of the settlement proceeds to the attorney general, have him deposit them into his contingency account and then write a check to the law firms.
Hood said the private attorneys’ fees are part of the settlement of the lawsuit and should not be counted in the money the state receives. Hood enters into contracts with private attorneys when his office does not have the expertise, resources, or staff to pursue the litigation.
CLICK HERE to read the Miss. Supreme Court decision
Today, Republican Governor Phil Bryant signed into law restrictions on the state’s use of outside, contingency fee lawyers. The “sunshine”law would require all outside counsel representing the state to keep detailed time and expense records and limit contingency fee lawyers to a total fee of $50 million.
The law imposes hourly rates not exceed “recognized bar rates” (whatever that means). The bill imposes strict limits on contingency fee awards. Attorney fees are limited to 25% of a $10 million recovery, 20% for amounts between $10 million and $15 million, and only 5% for amounts over $25 million with a cap of $50 million. The state will also establish an Outside Counsel Oversight Commission to review contingency fee contacts and require those contracts to be posted on the AG’s website.
Mississippi Attorney General Jim Hood’s office is considering challenging the constitutionality of the new law in court. In a statement (pdf) Hood’s office projects the bill will cost the State about $11 million a year because the average private lawyer is paid $145 per hour and the AG only charges $65 per hour for the same services and that difference will be paid for by Mississippi taxpayers. The current system works. Over the past 7 years Jim Hood’s office has recovered over $500 billion for the taxpayers of the state and it did not cost the taxpayers a single dime. In addition, the law of the state already allows state agencies to file suit should the attorney general decline, or file suit even if the attorney general opposes such.
“Mississippi Attorney General Jim Hood is one of the most successful attorneys general in U.S. history. He was one of the first AGs to bring a suit against the tobacco companies. Throughout his career, he has taken on powerful industries such as insurance companies, big tobacco, and drug companies. Hood has tallied up record settlements against a host of corporate wrongdoers including Entergy, State Farm, MCI/World Com, and BP, thus securing hundreds of millions of dollars for Mississippians,” said Terry Jesse, Executive Director of NALFA.
A recent AM Law Daily story, “Tallying Up the TARP-Related Legal Fees Racked Up By AM Law Firms,” reports that the U.S. Department of Treasury’s Troubled Asset Relief Program (TARP) may have expired, but some of the initiatives that grew out of that massive federal effort to bail out ailing banks and cope with other financial crisis fallout live on.
Several AM Law 100 firms have amassed significant legal tabs over the past four years. Treasury has a breakdown on those firms and the “obligated value” of their TARP contracts, which extend for various time periods between 2008 and 2015, through the procurement section of its FinancialStability.gov website.
Posted:Friday, May 18, 2012
Categories: Fee Expert
A recent New Jersey Law Journal story, “Firm Wins $2.3M in Fees in Suit Over Insurance Coverage of Eating Disorders,” reports that Nagel Rice, LLP was awarded $2.3 million in attorney fees and expense for its work toward a $1.18 million settlement over insurance coverage for eating disorder treatments. U.S. District Judge Faith Hochberg in Newark made the award to Nagel Rice based the recommendation of attorney fee expert Douglas Wolfson, who arrived at an adjusted lodestar of $1.57 million and an allowance of $112,505 for expenses.
That sum was reached after the deduction of $73,405 from records submitted by Nagel Rice for work that it admitted was excludable or what Wolfson found duplicative or related to its dispute with Mazie, Slater, Katz & Freeman. Nagel Rice requested a lodestar multiplier of 1.4, citing the case’s complexity and amount of relief obtained, and Hochberg granted it, bringing the fee award to $2,196,580. With expenses, the total comes to $2,309,086.
Fee expert Wolfson praised Nagel Rice’s efforts to pursue the litigation in an efficient manner, noting that of 32 depositions, only one was attended by two attorneys from the firm. “Counsel’s avoidance of an excessive presence at depositions is in keeping with the best interests of the profession,” Wolfson said. He gave careful attention to many instances when the firm’s attorneys conferred with each other. But he concluded that such entries “simply reflected the fact that the suit was complicated, involving many complex issues…necessitating constant oversight by senior attorneys.”
The settlement, in Drazin v. Horizon Blue Cross Blue Shield of New Jersey, represents the spoils of a battle Nagel Rice waged with Mazie Slater. The firms are the remnants of the former Nagel Rice & Mazie, which broke into two in a partnership dispute in 2006. The firms each brought a series of nearly identical class actions against insurers over restrictions on eating disorder coverage, and hostility between the firms prevented consolidation of the cases. The Drazin settlement provides $1.2 million in reimbursements from past denied claims, allows future claims to receive parity with treatment for biologically based mental disorders.
Hochberg instructed Wolfson to deduct time for fees or expenses that were incurred as part of the conflict between the firms and that did not confer a benefit on the class. Mazie Slater sought 50 percent of the fees from the settlement, but Hochberg ruled the firm was not entitled to attorney fees. She said it played no role in the recovery obtained for the class. Mazie Slater has appealed that decision to the U.S. Court of Appeals for the Third Circuit.
A recent New Jersey Law Journal story, “Philips/Magnavox Settles Class Action Over Malfunctioning TVs for $4 Million,” reports that a federal court has given final approval to $4 million class action settlement that resolves consumer fraud claims against Philips/Magnavox over overheating plasma and liquid crystal display flat-screen televisions. U.S. District Judge Claire Cecchi in Newark signed off Monday on the deal, which in addition to the cash gives class members an uncapped number of vouchers. It also provides $1.575 million for the plaintiffs’ attorney fees and expenses.
The $1.575 million approved for attorney fees and expenses is based on a $2,101,955 lodestar, with a multiplier of 0.75. Cecchi, noting that the sum did not include fees for the fairness hearing, said there was no reason to reduce the lodestar given the degree of risk and high quality representation and thus concluded that the $1.575 million fee request was reasonable. It also pass muster under the percentage of recovery cross-check, given that the fees comprised 39 percent of the cash portion alone, that class counsel spent nearly 4,000 hours over three years working on a contingent basis and that it fit within the range of fee awards in comparable cases.
The consolidated complaint, In re Philips/Magnavox Television Litigation, was filed in Dec. 2009, on behalf of 14 plaintiffs from New Jersey, California, Texas, Florida and elsewhere who paid as much as $5,100 for a 50-inch model. The action alleged that Philips Electronics North America Corp. knowingly sold Philips and Magnavox TVs with defective power boards.
Class counsel were Andrew Friedman of Cohen Milstein Sellers & Toll in Washington, DC, Michael Schwartz of Horwitz Horwitz & Paradis in New York and Steven Schwartz of Chimicles & Tikellis in Haverford, Pa.
A recent AM Law Daily report, “Facebook Lists $2.6 Million in Legal Fees Ahead of Friday IPO,” reports that when Facebook lists legal fees and expenses related to its hotly anticipated IPO at $2.6 million, according to a company filing with the SEC on Tuesday. The estimated fees are a rough approximation and not a precise tabulation of invoices related to the myriad legal costs in bringing a company public.
Fenwick & West chairman Gordon Davidson and securities group co-chair Jeffrey Vetter are leading a team from the firm representing Facebook, while Simpson Thacher & Bartlett corporate partners William Hinman Jr. and Daniel Webb in Palo Alto are advising underwriters on the IPO led by Morgan Stanley, Goldman Sachs, Bank of America/Merrill Lynch, Barclays Capital, and JPMorgan Chase.
Fenwick represented the company on its April acquisition of photo-sharing service Instagram for $1 billion, as well as on its $550 million purchase of what had been AOL patent portfolio from Microsoft late last month. In previous years, Fenwick also handled Facebook’s purchase of London-based mobile application developer Snaptu and a $200 million investment in Facebook by Russia’s Digital Sky Technologies.
A recent NLJ story, “Volkswagen Challenges Fee Award Method in MDL Settlement,” reports that an award of $30 million in attorney fees and nearly $1.2 million in costs to plaintiffs’ lawyers who worked on multidistrict litigation came under fire at the U.S. Court of Appeals for the First Circuit on May 10. Volkswagen claimed that the district court should have used the lodestar method. Instead, the court used the percentage-of-the fund method. Volkswagen said if the lodestar method was used, the plaintiffs’ fee award would have been $7.7 million.
The underlying litigation concerned oil-sludge damage to Volkswagen cars. A special master settlement specialist estimated the value of settlement at about $223 million for a potential class of about $480,000 cars. The settlement included oil changes and extended warranties. Three firms were leading plaintiffs class counsel and parties to the appeal, Volkswagen Group of America Inc. v. Peter J. McNulty Law Firm. They were the McNulty Firm, Denver’s Irwin & Boesen and Philadelphia’s Berger & Montague.
Volkswagen claimed that the New Jersey fee-shifting statute, which state’s courts have said requires use of the lodestar method, should have applied. New Jersey state law governs the attorney fee calculations because the case centers on alleged violations of the New Jersey Consumer Fraud Act. Volkswagen also noted that the agreement does not language that would create an entitlement to fees independent of the fee-shifting statute. The agreement stated that the fee calculation “shall not…be derived” from the benefits awarded to the class, so applying the percentage method was inappropriate, Volkswagen claims.
The McNulty firm argued that, under well-settled principles of class action law, courts have discretion when awarding attorney fees. The firm also disputed that it fees were awarded under New Jersey’s Consumer Fraud Act. Instead, its brief stated, fees “were asserted on numerous theories, including breach of contract, breach of implied warranty of merchantability, unjust enrichment, declaratory judgment under federal law, and violations of the consumer fraud statutes of several states.” The court “properly used lodestar methodology solely as a cross check of the reasonableness of its award,” stated the McNulty firm in its brief.
The McNulty firm further claimed that Volkswagen’s agreement to pay fees was part of the settlement and “memorialized in the class notice.” Class counsel agreed in a lower court hearing not to seek more than $37.5 million in fees and about $1.8 million in costs.
Posted:Thursday, May 10, 2012
Categories: Fee Dispute
A recent New York Law Journal story, “Judge Backs Firm’s Demand for $414,000 in Fee Dispute,” reports that Manhattan Supreme Court Justice Joan Madden has ruled that Emery Celli Brinkerhoff & Adaby is due more than $414,000 in attorney fees from a disgruntled client who contended the law firm mishandled the accounting of a stock transfer transaction and other matters in what became an acrimonious attorney-client relationship. She ruled that the “account stated rule,” in which a client pays part of a bill is generally deemed to have accepted the entire billing as valid.
In Emery Celli Brinckerhoff & Adaby v. Michael Rose, Madden said she agreed with Emery Celli’s contention that the account stated rule makes Rose liable for the outstanding legal bills. She ruled that Rose cannot invoke legal malpractice as a defense against account stated in this matter because he failed to show how Emery Celli had actually committed malpractice.
Rose hired Emery Celli for an initial retainer of $50,000 and the law firm agreed to bill the real estate company for the hourly service of its attorneys thereafter. Emery Celli said it represented Rose or Broadside Realty in three subsequent suits stemming from Rose’s efforts to gain control of the company. In April 2008, Emery Celli negotiated a settlement with the other shareholders under which Rose would get back all outstanding stock for $12 million. Emery Celli alleged that Rose, after some sporadic payments to the law firm, stopped payments altogether in 2009.
Richard Emery said yesterday in an interview that the ruling is “especially appropriate in light of the fact that we achieved success for our client, who then decided not to pay us.”
A recent AM Law Daily story, “Court Slashes Baker & Hostetler Fees in Maine Redistricting Litigation,” reports that a three-judge panel has ruled that the attorney fees by lawyers for plaintiffs in a suit that forced the redrawing of Maine’s two congressional district lines should be cut by about 53 percent, from roughly $150,000 to about $70,400. The lawyers in question – Timothy Woodcock of Eaton Peabody and four Baker & Hostetler attorneys, including election law counsel E. Mark Braden—represented William Desena and Sandra Dunham who sued the state of Maine, Governor Paul LePage, three other state officials, and the state’s Bureau of Corporations, Election and Commissions in March 2011.
The plaintiffs and defendants agreed on the constitutionality issue at the heart of the suit, but the question of what legal fees and expenses the plaintiff and their counsel could recover as the lawsuit’s prevailing party was much more contentious. Plaintiffs counsel asked for about $150,000 in fees and expenses, broken down as follows: about $41,200 for Woodcock and his paralegal, $6,200 for data analyst Clark Bensen, and approximately $103,000 for Baker and Hostetler attorneys, including about $25,000 for redistricting litigation veteran Braden.
The defendants balked at the fee request, claiming the request was excessive and constituted overstaffing and redundancies. The defendants argued that the associates only deserved to get $175 an hour, the prevailing rate in Maine for a similarly credentialed attorney. Taking all their objections into account, the defendants asked the court to reduce the plaintiffs’ request for fees and costs from about $150,000 to $47,200. In the end, the three-judge panel didn’t cut quite that much. In their March 21 order, the judges ruled the plaintiffs’ lawyers were entitled to only $70,400 of the requested amount, because the “plaintiffs’ overall staffing pattern was excessive, resulting in the billing of duplicative and unproductive hours.”
A recent NLJ story, “$7.8 Billion BP Settlement Wins Judge’s Preliminary OK,” reports that a federal judge gave preliminary approval to a settlement between BP PLC and individuals and businesses that suffered economic harm or medical costs associated with the Deepwater Horizon oil spill – and clarified that BP, and not the claimants themselves, would pay the lawyers who spearheaded the litigation. In approving the deal, estimated to be worth $7.8 billion, U.S. District Judge Carl Barbier rejected nearly a dozen objections by parties including Halliburton Energy Services Inc., which is a remaining defendant in the MDL over the spill, and the states of Mississippi and Florida.
“The Court preliminarily and conditionally finds, for settlement purposes only, that the terms of the Proposed Settlement are sufficiently fair, reasonable, adequate, and consistent with governing law,” Barbier wrote. “At this stage, the Settlement Agreement appears fair, has no obvious deficiencies, doe not improperly grant preferential treatment to the Class Representatives or to segments of the Class, and does not grant excessive compensation to attorneys.”
He noted some unusual terms in the deal – primarily, that claims be paid ahead of final settlement approval and that BP, not the class members, would be responsible for paying the plaintiffs steering committee’s attorneys fees and costs, referred to as “hold back” fees. In a subsequent order on May 3, Barbier clarified that no “hold back” fees would be deducted from settlement payments. Plaintiffs would still be responsible for paying their individual attorneys.
A recent article by Adam Freed of Los Angeles-based Proskauer Rose, “California Supreme Court Denies Fee-Shifting on Meal and Rest Period Claim,” reports that the California Supreme Court issued its decision in Kirby v. Immoos Fire Protection, Inc. (pdf), holding that attorney fees may not be awarded under California Labor Code § 218.5 to a party that prevails on a claim for meal and rest break violations. Section 218.5 provides that attorney’s fees are to be awarded to the prevailing party “[i]n any action brought for the nonpayment of wages…” (thus, a two-way fee-shifting statute, awarding fees whether one is the plaintiff or defendant). However, the statute exempts from its scope any action for which attorney’s fees are recoverable under Labor Code § 1194, which entitles prevailing employees to attorney’s fees in an action for any unpaid “legal minimum wage or…legal overtime compensation.”
Here, the defendant moved for attorney’s fees under section 218.5 upon plaintiffs’ dismissal of their meal and rest break causes of action. Thus, the Court set out to determine two questions: (i) whether meal and rest break claims fall within the ambit of section 1194 and are thereby excluded from section 218.5 attorney’s fees and, if not (ii) whether section 218.5 authorizes an award for meal and rest break claims. Justice Liu, writing for a unanimous Court, held that while section 1194 does not apply to meal and rest break claims, such claims are not authorized by section 218.5. As such, the Court reversed the Court of Appeal’s decision affirming attorney’s fees for the defendant.
The Court first determined that neither the text nor the history of section 1194 indicated that the statute is meant to refer to anything other than “ordinary minimum wage and overtime obligations,” which do not encompass meal and rest break claims. Second, the Court found that an employer’s alleged failure to provide meal and rest periods does not constitute an “action brought for the nonpayment of wages” within the meaning of 218.5. While the Court acknowledged defendant’s argument that the remedy for meal and rest has been interpreted to constitute “wages,” the Court held that section 218.5 envisions an action on account of the nonpayment of wages, not an action for which the remedy is a wage.
The $310 million judgment included an $85 million verdict, $85 million in exemplary damages, and nearly $140 million in attorney fees and expenses, most of which related to MGA’s successful defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer. Mattel, in petitioning the U.S. Court of Appeals for the Ninth Circuit, called the judgment “the largest copyright fee award in history.”
Clifford Sloan, a partner in the Washington office of Skadden Arps noted that U.S. District Judge David Carter actually excluded $24 million before awarding the attorney fees and costs related to the copyright claim. “The amount that the district court awarded, $105.6 million in attorney’s fees and $31.6 million in costs, is a small fraction of what was at stake for MGA in this suit and what the litigation has cost, and it pales in comparison to the more than $400 million that Mattel reportedly spent on its prolonged litigation warfare against MGA,” he wrote.
Posted:Thursday, April 26, 2012
Categories: Fee Dispute
A recent Texas Lawyer story, “Firm at War Over $10 Million Contingency Fee in Patent Suit,” reports that The Matthews Firm has sued Laminack, Pirtle & Martines and two clients they jointly represented, alleging Laminack, Pirtle and the clients refused to recognize The Matthews Firm’s interest in a contingency fee arising from a nearly $50 million judgment. Fred Hagans, who represents the plaintiff in The Matthews Firm v. Laminack, Pirtle & Martines, et al., says his client is entitled to about $10 million.
The plaintiff, a Houston firm that handles intellectual property work, brings breach of contract and quantum meruit causes of action against the defendants and seeks a declaratory judgment that it is entitled to a 22.5 percent fee in the underlying case. But Rick Laminack, a partner in Houston’s Laminack, Pirtle, says he’s surprised The Matthews Firm sued his firm and its client over the contingent fee, since the underlying suit, Wellogix Inc. v. Accenture, is on appeal before the 5th U.S. Circuit Court of Appeals.
In February 2009, The Matthews Firm alleges, Wellogix hired Laminack, Pirtle to pursue litigation against specific parties related to alleged improper use of some software. Wellogix’s contract with Laminack, Pirtle calls for 40 percent of any settlement or recovery made after litigation is filed against alleged improper users, and 45 percent if a notice of appeal is filed in the suits.
A Washington, DC-based tort reform lobby group, American Tort Reform Association (ATRA), wrote legislation that would limit Mississippi Attorney General Jim Hood’s power to hire outside lawyers. The legislation, H.B. 211 (pdf), would allow state agency heads to hire private attorneys instead of relying on the AG’s office to represent their interests, as well as requiring attorneys who bill the state for more than $100,000 to have those amounts published. The bill also requires outside counsel to keep detailed records of the time spent working on cases and expense reports.
“Mississippi Attorney General Jim Hood is one of the most successful attorneys general in U.S. history. He was one of the first AGs to bring a suit against the tobacco companies. Throughout his career, he has taken on powerful industries such as insurance companies, big tobacco, and drug companies. Hood has tallied up record settlements against a host of corporate wrongdoers including Entergy, State Farm, MCI/World Com, and BP, thus securing hundreds of millions of dollars for Mississippians,” said Terry Jesse, Executive Director of NALFA.
In a statement (pdf), Hood’s office said the bill is unconstitutional. Hood’s office projects the bill will cost the State about $11 million a year because the average private lawyer is paid $145 per hour and the AG only charges $65 per hour for the same services and that difference will be paid for by Mississippi taxpayers. The current system works. Over the past 7 years Jim Hood’s office has recovered over $500 billion for the taxpayers of the state and it did not cost the taxpayers a single dime. In addition, the law of the state already allows state agencies to file suit should the attorney general decline, or file suit even if the attorney general opposes such.
A recent AM Law Daily story, “As Lehman Exits Bankruptcy, Weil’s Tab Stands at Nearly $383 Million,” reports that Weil, Gotshal & Mange’s business finance and restructuring group has been busy the past three years with Chapter 11 cases for fallen financial service giants Lehman Brothers and Washington Mutual. In March, Lehman Brothers emerged from bankruptcy more than three years after the abrupt collapse of the New York-based investment banking giant in Sept. 2008 forced Weil to help one of the biggest clients quickly put together the largest Chapter 11 case in U.S. history.
A monthly operating report filed by the Lehman estate with the SEC shows that its total bankruptcy bill for outside lawyers, accountants, and other restructuring professionals reached almost $1.6 billion, not too far off the $1.4 billion that Bloomberg estimated it would pay external advisers three years ago. Of that amount Weil has been paid nearly $383 million in fees and expenses through January—the firm billed another $7.4 million that month—for its work as lead debtor’s counsel.
Milbank, Tweed, Hadley & McCloy, lead counsel to Lehman creditors, has received almost $133.7 million in fees and expenses for its work. Lehman’s special litigation counsel Jones Day ($61.2 million). Conflicts counsel Curtis Mallet-Prevost, Colt & Mosle ($42.5 million), and special tax counsel Bingham McCutchen ($21 million) have also reaped the rewards of landing roles in the Chapter 11 case, which has seen more than 30 law firms bill the bankruptcy estate.
Posted:Friday, April 20, 2012
Categories: NALFA News
A recent AM Law Daily story, “When It Comes to Billing, Latest Rate Report Shows the Rich Keep Getting Richer,” reports that hourly rates just keep rising—and the best paid lawyers are rising their rates faster than everyone else. Those are two key findings contained in the2012 Real Rate Report, an analysis of $7.6 billion in legal bills paid by corporations over a five-year period ending in December 2011. The report, released Monday, is the second such collaboration between TyMetrix, a company that manages and audits legal bills for corporate legal departments and the Corporate Executive Board.
Many of the new rate report’s findings echo those contained in the 2010 study, including the fact that rates keep going up, almost across the board, and that the cost of a given matter can very dramatically depending on a law firm’s size and location and its relationship with a particular client. At the same time, this year’s study shows the legal sector is becoming increasing bifurcated, with top law firms rising rates faster than those at the bottom of the market and large firms changing a premium price based purely on their size.
“It’s no surprise that defense fees have ticked up,” said Terry Jesse, Executive Director of NALFA. “The rates are keeping in-line with the demand, especially for the very best in the field. Generally speaking, I would expect rates to rise less rapidly and/or and increase in alternative fee arrangements in both transactional and litigation matters when demand levels off,” Jesse concluded.
A recent Texas Lawyer story, “Firm Vows Appeal After $4 Million Judgment in Fen-Phen Fee Fight,” reports that a battle between plaintiffs firms over fen-phen attorney fees wrapped up on March 23 in a state district court in Houston. Dan Barton, The Barton Law Firm and The Johnson-Barton Joint Venture secured a nearly $4 million judgment in a breach of contract suit against Fleming, Nolan & Jez. G. Sean Jez, a partner in Fleming Nolan in Houston says, “We will be filing an appeal.”
The breach of contract suit stems from a dispute over attorney fees some fen-phen cases the plaintiffs had referred to what was then Fleming & Associates under a 2002 litigation contract. The underlying fen-phen suits settled by 2006. The plaintiffs filed the petition in Daniel P. Barton, et al. v. George Fleming et al. in August 2009. The plaintiffs alleged Fleming & Associates and George Fleming had breached a contract by deducting expenses, not specifically listed in the 2002 contract, from their share of fees. In the petition, the plaintiffs brought breach of contract and promissory estoppels causes of action and sought damages as well as attorneys’ fees.
District Judge Sylvia Matthews granted the plaintiffs summary judgment on the breach of contract claim. Because of that ruling, plaintiffs’ attorney Fred Hagan says, the plaintiffs subsequently dropped the promissory estoppels cause of action. According to the March 23 judgment, the following took place in the litigation before the trial: On Sept. 6, 2011, Matthews granted in part a summary judgment motion ordering Fleming & Associates to pay $2.6 million in damages to the plaintiffs. On Dec. 29, 2011, she granted another summary judgment motion and ordered Fleming & Associates to pay the plaintiffs $305,000 in certain reimbursements expenses and attorneys’ fees.
A trial began on Feb. 27. On March 1, a jury issued a verdict awarding the plaintiffs $790,000 in attorneys’ fees for litigation of the Barton suit and a possible additional $130,000 for appeals. Hagans, a partner in Houston’s Hagan Burdine Montgomery & Rustay who represents the plaintiffs in Barton, says the fen-phen clients the plaintiffs referred to Fleming & Associates constituted about 2,000 of the 8,000 clients whose suits Fleming & Associates handled.
A recent Metropolitan News story, “C.A. Tosses Ruling Allowing Client to Cut Lawyer Out of Fee Award,” reports that an attorney who represents the prevailing plaintiff in a wage-and-hour case is entitled to have fees awarded to the lawyer personally, rather than the client, unless the parties’ fee agreement is to the contrary, the Court of Appeals ruled. Div. Three overturned Los Angeles Superior Court Judge Mary H. Strobel’s denial of a motion to allow attorney Henry M. Lee to personally enforce the $300,000 fee award he received for representing Ok Song Chang in a suit against A-Ju Tours, Inc. The court ordered the trial judge to determine whether the fee agreement between Lee and Chang bars Chang from enforcing the award in his own name.
The plaintiff was awarded $62,000 in unpaid wages and penalties. The fee award was added on motion filed by Lee, but before a writ of execution could be enforced, the defendant obtained an ex parte stay and a hearing was scheduled in order to determine whether the undertaking filed by defendant was sufficient to stay the fee award. The plaintiff fired Lee, and substituted herself in propria persona, apparently in order to settle with A-Ju directly. Lee then moved to amend the judgment to provide that attorney fees were awarded to, and could be enforced by, him personally. The judge denied the motion and Lee appealed the ruling.
Justice Walter Croskey wrote for the court, which rejected arguments that Lee lacked standing and that the case was inappropriate for writ relief. “Lee’s claim that the fee award should be made payable to him rather than Chang must be resolved before the appeal from the fee order proceeds any further so that he may have an opportunity to participate as a respondent in that appeal if he is successful on his claim,” the justice said.
“Construing Labor Code sections 1194, subsection (a) and 226, subsection (e) as requiring the payment of a statutory attorney fee award to the litigant rather than to the attorney, absent a contract providing for a different disposition of an attorney fee award, would diminish the certainty that attorneys who undertake such litigation will be fully compensated, contrary to the legislative intent of encouraging counsel to prosecute such litigation,” the justice said.
A recent WSJ Law Blog story, “First Circuit Lifts Ban on ‘Attorney Fee-Only’ Bankruptcy Plans” reports that the paradox in personal bankruptcy is that you need a lawyer to help you through it, in many cases. Lawyers have to get paid, but sometimes debtors don’t have the cash up front, and the Supreme Court has said that attorneys’ fees are not payable from estate funds in Chapter 7 proceedings, except in very limited circumstances.
In recent years, lawyers have come up with a workaround: Chapter 13 proceedings. If Chapter 7 is the conventional, and often speedy, course when an individual has debts that dwarf his income and assets, Chapter 13 is the road less traveled. It’s longer (a minimum of 36 months) and allows a debtor to discharge debts over time, as long as the court approves his plan for satisfying some of his creditors.
In a case before the Boston-based U.S. Court of Appeals for the First Circuit, a debtor couldn’t afford to pay his attorney up front for Chapter 7 proceedings, so the attorney suggested his client apply for Chapter 13 protection. Under the proposed plan, the debtor would pay into the bankruptcy estate $100 per month for 36 months. Of that, only about $300 (or about 2% of the roughly $15,000 owed) would be available to general creditors. The attorney would get the lion’s share ($2,900), while the rest would cover the trustee’s fees.
It’s known as a “fee-only” plan, and the bankruptcy court rejected it. So did the federal district court, ruling that such arrangements were verboten. The First Circuit, the first federal appellate court to weigh the issue, said that an outright ban on “fee-only” plans was wrong as a matter of law. The First Circuit panel was adamant that the plans should only be used in exceptional circumstances, noting that they may be “vulnerable to abuse by attorneys seeking to advance their own interests without due regard for the interests of debtors.”
A recent Texas Lawyer story, “Patton Boggs Alleges It’s Unpaid By Upaid,” reports that Patton Boggs has filed a breach of suit against former client Upaid Systems Ltd., alleging the British Virgin Island company owes it more than $3.1 million in unpaid legal fees and expenses, a 15 percent share of the settlement of a patent infringement suit and interest. According to the complaint (pdf) filed in the Eastern District of Texas, “Upaid has materially and repeatedly breached its obligations under the Engagement Agreement by failing to pay the Patton Boggs invoices for agreed monthly fees, costs and expenses, by failing to pay the contingency fee due upon the settlement moneys, and by failing to pay interest on the unpaid amounts as agreed.”
John Ward Jr., a partner at Ward & Smith who represents Patton Boggs said, “It’s an unusual set of circumstances. It’s unusual that clients stiff their lawyers after a good result.” In its complaint in Patton Boggs LLP v. Upaid Systems Ltd., the firm alleges the following: Upaid retained Patton Boggs lawyers in May 2007 to represent Upaid in a fraud and patent infringement suit it had filed in the Eastern District of Texas against Satyam Computer Services Ltd.
As alleged, the firm’s engagement agreement with Upaid called for the partners to reduce their billing rates by 40 percent and for Upaid to pay a “success fee” of 15 percent of the gross of “any damages award or settlement payment.” The agreement also specified that invoices should be paid in full within 30 days of receipt to avoid a 1 percent per month late charge. In February 2009, Patton Boggs alleges, Upaid paid only a portion of an invoice and “made no payments thereafter.” The firm alleged the Upaid “induced” it to continue working on the litigation by “promise of payment.”
Patton Boggs alleges that while Upaid had been delinquent in paying invoices since mid-2009, it subsequently used t he firm for legal services from time to time, and delinquent billings now total $3.1 million. In addition to damages for breach of contract, Patton Boggs seeks a declaratory judgment that it is entitled to the “full amount” of its contingency fee, including 15 percent of any future settlement money paid to Upaid from Satyam. It also seeks attorneys’ fees and costs.
A recent NLJ story, “MLB wants Dodgers to Cover League’s Legal Costs in Team’s Bankruptcy” reports that the settlement between Major League Baseball and Los Angeles Dodgers owner Frank McCourt didn’t resolve all their difference: Baseball Commissioner Bud Selig now wants the league’s $7.6 million in legal bills and costs paid for by the team before it emerges from bankruptcy. The Dodgers filed for Chapter 11 protection last year.
On March 20, Dodgers counsel Donald Bowman, an attorney at Young Conaway Stargatt & Taylor in Wilmington, Del., filed a notice declaring that the team owes no money on contracts, leases or other agreements with Major League Baseball that the Dodgers must assume under the reorganization plan. Attorneys for the league filed an objection, saying that under the Major League Constitution, the Dodgers are liable for all “fees, costs and expenses incurred by [the league] associated with disputes and litigation between [the team] and [the league] including, without limitation, those arising from enforcement of the Baseball Agreements.”
The league cited $115,110 in legal fees, costs and expenses charged in anticipation of the team’s bankruptcy filing. Of that, White & Case, the league’s lead counsel in the bankruptcy, charged nearly $3700. Proskauer Rose, which served as general counsel to the league before the filing, handling labor and employment matters including collective bargaining agreements, charged $111,437. After the filing, the league racked up another $7.78 million in professional fees and expenses. Of that, $7.5 million was for legal fees and costs.
“As is made clear in its previous filing on this matter, the debtor does not owe MLB the fees in question,” insisted Robert Siegfried, spokesman for the Dodgers, in a prepared statement. The Dodgers are expected to file their response to the league’s filing. Of the legal fees associated with the bankruptcy proceedings, White & Case charged more than $6.15 million and Proskauer Rose charged nearly $888,000. Longtime league counsel Paul Weiss charged almost $235,000 to review bidder application and other agreements, and Fox Rothschild, the league’s Delaware counsel, billed $231,200. The fee dispute now goes before retired U.S. District Judge Joseph Farnan, the mediator in the case.
On March 22, 2012, the U.S. House passed a measure to limit attorney fees in medical malpractice cases. The legislation, H.R. 5 (pdf), passed on a largely partisan 223-181 vote. In addition to limiting contingency fees for lawyers, the legislation would cap awards in medical malpractice claims for pain and suffering at $250,000 in most states.
“Republicans say they support our free enterprise system, yet they want to limit what attorneys can earn in medical tort cases,” says Terry Jesse, Executive Director of NALFA. “We are opposed to legislative efforts to cap attorney fee awards in tort cases. In our civil justice system, judges should determine reasonable fee awards, not politicians,” Jesse concluded.
A recent AM Law Daily story, “Sidley, Chadbourne Claim Crown as Tribune Bankruptcy’s Biggest Billers” reports that, according to court filings, two of the more than 20 law firms paid by the Tribune estate since the company’s Chapter 11 case began in December 2008 have racked up a combined total of roughly $111 million in fees and expenses in that time. Lead debtor’s counsel Sidley Austin has been paid almost $69 million, while Chadbourne & Parke, lead counsel to the company’s creditors’ committee, has received $42.2 million.
The amount paid to the two law firms is roughly half the $233.3 million paid by the Chicago-based media company – which was purchased in an ill-fated $8 billion leveraged buyout in 2007 – to outside lawyers, accountants, and other professional advisers after entering bankruptcy. A service list for the Tribune bankruptcy shows that attorneys from nearly 100 firms are representing clients in the case. Stuart Maue, who court records show has been paid $1.9 million for its work on the case, has been appointed as fee examiner in the proceedings.
Other firms receiving payments from Tribune include:
Zuckerman Spaeder, Special Litigation Counsel: $11.8 Million
McDermott Will & Emery, Special Counsel: $10 Million
Landis Rath & Cobb, Delaware Counsel to Creditors’ Committee: $5.5 Million
Dow Lohnes, Special Regulatory Counsel: $4.1 Million
A recent Atlanta Journal-Constitution story, “Legal Fees Add Up as Water Litigation Stretches On and On” reports that the State of Georgia and the Atlanta Regional Commission (ARC) have spent about $18.7 million in outside legal fees in a two decades long tri-state water wars negotiating and litigating to preserve metro Atlanta’s access to drinking water from Lake Lanier. This spending is viewed as critical to protecting the area’s economic viability, as a shortage of drinking water, by some estimates, would cost the local economy billions annually.
The balk of the $8.5 million in fees Georgia has paid to outside attorneys has gone to the Atlanta firm of McKenna Long & Aldridge. The balk of the $10.3 million in legal fees ARC and five water agencies joining it in the suit have paid in legal fees has gone to Atlanta’s firm King & Spalding. The state and the ARC have split the $1.3 million paid lead attorney, Seth Waxman, and his Washington, DC firm, WilmerHale, since they joined the case in 2009. Of that, Georgia paid about $680,000, and the ARC and six metro water authorities paid about $600,000.
In the underlying litigation, the 11th Circuit overturned a decision by U.S. District Judge Paul Magnuson that would have cut off metro Atlanta’s access to Lanier’s water supply. That ruling said the U.S. Army Corp of Engineers, which manages the lake, doesn’t have the authority to manage it as a water supply. The three-judge panel ruled unanimously that the Army Corp of Engineers has authority to allocate additional water from Lake Lanier. Florida and Alabama appealed that ruling to the U.S. Supreme Court.
Now, with the meters running, ARC attorneys are preparing a brief to argue against theat appeal. Patricia Barmeyer, King & Spalding’s lead attorney said, who has been on the case since 1999, said the state has no choice but to defend itself after Alabama fired the first shot filing a federal lawsuit against Georgia in 1990. Years of litigation lie ahead with too many legal issues remain unresolved.
A recent Thomson Reuters story, “Legal Fees Take Mound in Madoff-Mets Case” reports that in a trial over whether owners of the New York Mets turned a blind eye to Bernard Madoff’s Ponzi scheme, jurors are expected to hear about fabulous fortunes. But Irving Picard, the court-appointed trust, has sought an order to exclude any evidence concerning the more than $275 million in fees that the army of lawyers at his firm, Baker & Hostetler, racked up in their effort to recoup money for Madoff’s victims.
In his request, Picard anticipates that lawyers for the Mets owners will raise the legal fee issue. He argues that the fees are irrelevant to the trial and could unfairly prejudice the jury against him. U.S. District Judge Jed Rakoff, who will oversee the trial has yet to rule on the order. Picard is seeking more than $300 million in principle the Mets’ owners invested and recouped in the two years before Madoff’s 2008 arrest. In addition, Picard also is seeking to claw back $83.3 million in “fictitious profits” that the Mets earned in their accounts as a result of Madoff’s scheme.
Since bankruptcy-related cases are rarely heard by juries, the fees made by the trustee are not often an issue of contention before trial, according to legal experts. The Mets case could be a rare case in which a jury learns just how lucrative trusteeship work can be. In its most recent fee application made to the bankruptcy court overseeing the Madoff case – which covered the period from June 1, 2011, through Sept. 30, 2011 – Picard and Baker & Hostetler sought nearly $48 million.
According to the fee application, Picard billed 674.7 hours at an hourly rate of $850 for a total of $573,495. David Sheehan, another Baker & Hostetler partner and the lead attorney for Picard, billed 877.9 hours, also at $850 an hour, for a total of $746,215. It’s not known how much Picard has personally received for his work on the Madoff case. The federal court case is Picard v. Katz, U.S. District Court, Southern District of New York.
A recent NLJ story, “Despite Quibbles, Plaintiffs’ Firms Like Estimate of Bluetooth Fees” reports that plaintiffs’ attorneys in the Motorola Bluetooth headset litigation, whose fees a federal appeals court last year deemed potentially excessive, have agreed to a revised calculation submitted by defense attorneys that actually boosts the original award. The original settlement called for $800,000 in attorney fees. But the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. District Judge Dale Fischer had failed to adequately test whether the fees were excessive. On Feb. 22, defendants, reviewing the bills of seven plaintiff firms at Fischer’s request, estimated that attorneys had performed more than $1.3 million in justifiable work.
Under the original settlement, the plaintiffs’ attorneys had estimated their fees at $1.6 million and cut that figure in half. The defendants’ latest figure would represent a discount on the actual work done of 40 percent. The revised calculation represents an estimate of reasonable fees but not a new award for the plaintiffs’ firms. Fischer has not ruled on the effect such a lodestar would have on the settlement.
In reviewing the plaintiffs-side fees, the defense slashed $333,667 for what it deemed inappropriate “block billing” and unreasonable amounts of time or numbers of people devoted to certain work. In total, the defense concluded that the plaintiffs’ firms billed $1,330,185 in reasonable fees between April 1, 2006 and July 31, 2009.
“We are accepting defendants’ number,” said Daniel Warshaw, a partner at Sherman Oaks, Calif.-based Pearson, Simons, Warshaw & Penny, who filed the plaintiffs’ response. “Because class counsel’s lodestar substantially exceeds the fee award, Plaintiffs do not ask the Court to conduct an accounting and check every dollar Defendants propose cutting,” Warshaw wrote. “In any litigation involving coordinated proceedings, class counsel acknowledges that inefficiencies exist.
At the same time, Warshaw pointed to what he described as numerous “errors” in the defense calculation. For example, the defense concluded that the Wyly-Rommel of Texarkana, Texas hadn’t provided descriptions of the tasks performed by its attorneys, and therefore argued for cutting 30 percent across the board from its fee request. In fact, Warshaw wrote, the firm’s declaration included 61 pages of detailed time entries.
Posted:Thursday, March 15, 2012
Categories: NALFA News
In today’s litigation practice, the economics of attorney fees has never been more important. Attorney fee litigation is at unprecedented levels. More and more law firms are suing former clients to collect unpaid legal bills and more clients are suing law firms for overbilling claims than ever before. That, added with the rise of “loser pays” fee-shifting litigation, the growing body of court awarded attorney fee jurisprudence, attorney fees themselves have become a highly specialized practice area.
NALFA announces a first-of-its-kind practice group specifically devoted to attorney fee issues, The Attorney Fee Practice Group. The Attorney Fee Practice Group is a highly specialized, niche practice area within the legal profession dedicated to attorney fee and legal billing matters. Members of the Attorney Fee Practice Group are retained by law firms and clients when attorney fees are at issue. Members of NALFA’s Attorney Fee Practice Group are qualified attorney fee experts, fee dispute arbitrators, and legal bill auditors.
Our attorney fee experts are retained by some of the nation’s top law firms to provide expert reports, opinions, and testimony on the reasonableness of attorney fees in large, complex underlying litigation and transactional matters. Our fee experts are retained by attorneys to both support or challenge fee requests in court. As fact-finders, trial judges have relied on, and often cite our fee experts favorably in their fee award rulings. Our fee experts can provide fee-seeking lawyers the prevailing market knowledge to succeed in court, including, but not limited to:
Reasonable, Prevailing Market Rates Reasonableness of Hours Billed Customary Law Firm Billing Practices Billing Judgment Amount at Stake in Underlying Case vs. Amount of Legal Fees Spent Novel, Complex, or Unusual Legal Issues in Underlying Case Successful Results Obtained for the Client Skill, Experience and Reputation of Law Firm Efficient Litigation Management Practices
A recent The Recorder story, “Justice Grapple with Attorney Fee Awards in Rest Break Suit,” reports that after wading into the latest wage-and-hour suit, the state Supreme Court sounded wary of allowing the winning side to recover attorney fees in suits over missed breaks. In Kirby v. Immoos Fire Protection, a Sacramento Superior Court judge awarded fees to the defendant after the plaintiffs failed to win class certification and dropped the suit over rest breaks against Immoos Fire Protection. The Third District upheld the award.
The plaintiffs argued in court Tuesday that rest breaks suits like the one they brought should be governed by the Labor Code Section 1194, which concerns suits for overtime and minimum wage violations and only allows plaintiffs to recover attorney fees. Mark Peters, a partner at plaintiffs firm Duckworth, Peters, Lebowitz, Olivier LLP in San Francisco, said the court might end up “splitting the baby” by ruling that payments for lost benefits like meal and rest breaks aren’t wages and therefore neither party is eligible for fees under the labor codes at issue in Immoos.
George Abele, a Los Angeles-based Paul Hasting partner arguing for amicus California Employment Law Council, said payments for lost breaks should fall under a miscellaneous category of “all other wages,” governed by Section 218.5, which awards fees to the prevailing party. Defense attorneys opened with a dramatic appeal to the court. Robert Rediger of Sacramento’s Rediger, McHugh & Owensby, who represents Immoos, told justices that treating lost breaks as wages would open wage-and-hour suits up to “gamesmanship” by plaintiffs attorneys seeking to “insulate” themselves against defense fee awards.
A recent Reuters news story, “Legal Fees in Gulf Oil Spill Deal Stir Conflict,” reports that the estimated $7.8 billion settlement reached between BP and attorneys for victims of the Gulf of Mexico oil spill left many details unresolved, including the attorney fees. At the moment, there’s nothing yet to battle over. It’s unknown how many plaintiffs will participate in the deal and what their claims are worth. But with the pot for lawyers likely to reach into the hundreds of millions of dollars, one set of attorneys who negotiated the deal with BP are seeking to allay fears that the fees will come out of the pocket of claimants. Meanwhile, another set of attorneys are concerned the money will go to lawyers who don’t deserve it.
As is typical in such cases, the presiding judge, U.S. District Judge Carl Barbier, appointed a Plaintiffs’ Steering Committee (PSC) of about two dozen lawyers to gather evidence and prepare witnesses on behalf of the plaintiffs. Given the lucrative nature of mass tort litigation – attorneys in leadership positions can collect between around 5 percent and 30 percent of a settlement’s value – there was fierce jockeying for the seats on the PSC. PSC lawyers Stephen Herman and James Roy sought to position the committee as not taking fees “out of the claimant’s pocket” and stated that BP has agreed to pay their legal fees on top of what is paid to victims.
But lawyers who had been pursuing their clients’ claims with Kenneth Feinberg, administer of the Gulf Coast Claims Facility, and were not part of the settlement discussions with BP, worried that PSC attorneys will receive fees that don’t belong to them. “We have clients who have offers on the table that have either been accepted or are probably going to accept,” said non-PSC attorney Tony Buzbee, who said he has settled about $150 million worth of claims. “If we accept these offers, lawyers who had nothing to do with it will claim they’re entitled to some of the money.”
Finally, last year, the court case lawyers asked Judge Barbier to hold back 6 percent of Feinberg’s settlements for “common benefit fees” to be paid to the PSC. The PSC argued it deserved the fees because its work had benefited fund claimants. Barbier initially granted the PSC request, but amended his order in January to exempt settlements to fund claimants who never had or didn’t currently have claims pending in the mass tort.
A recent New Jersey Law Journal story, “Merck Shareholders’ Suit Over Vytorin Settles for No Damages, $5.1M in Fees,” reports that settlement of a shareholders derivative suit over Merck & Co.’s alleged suppression of an unfavorable clinical study of its cholesterol drug Vytorin has won a federal judge’s approval. No shareholder objected to the deal and District Judge Dennis Cavanaugh in Newark signed off on it after a hearing, finding it “fair, adequate, reasonable and proper, and in the best interests of the class and the shareholders.”
The settlement pays no money damages but Merck agrees to adopt reforms valued at $50 to $75 million and to pay $5.1 million in legal fees and costs for the four-year litigation to plaintiffs’ lawyers Scott & Scott, of Colchester, Conn. The suit, Plymouth County Contributory Retirement System v. Hassen, concerned the results of a Vytorin clinical trial that was completed by Schering Plough Corp., the drug’s original maker, which merged with Merck in 2008. The action included claims of breach of fiduciary duty, gross mismanagement, waste of corporate assets and unjust enrichment.
Cavanaugh gave the settlement preliminary approval in January. After notice to shareholders produced no objections, he granted final approval, finding most of the factors set out in Girsh v. Jepson (3d Cir. 1975) – including complexity, expense and duration of the case, class reaction and risk of litigation – weighed in favor of the settlement and none weighed against it. The motion for $5.1 million in fees, filed Feb 21, was also granted based on factors like the skill of the lawyers, the time spent and fee awards in similar cases. The request was less than the $6.1 million lodestar and thus “presumptively reasonable,” said Cavanaugh.
The efforts expended by Scott & Scott included reviewing more than 7 million pages of documents and taking or attending about 40 depositions.
A recent NLJ story, “Mattel Attacks $310 Million Bratz Copyright Award on Appeal” reports that Mattel Inc. has asked a federal appeals court to reverse the $310 million judgment against it in a long-running legal battle over Bratz dolls, maintaining that its failed infringement allegations didn’t justify “the largest copyright fee award in history.” In its opening brief before the U.S. Court of Appeals for the Ninth Circuit, Mattel challenged U.S. District Judge David Carter’s entire judgment. Carter ordered Mattel to pay $85 million in compensatory damages, $85 million in exemplary damages, $107.9 million in attorney fees and $32 million in costs to MGA Entertainment, Inc., maker of the Bratz doll.
Mattel counsel Kathleen Sullivan, a partner in the New York office of Quinn Emanuel, wrote that the attorney fees were unjustified because many were not related to MGA’s defense of Mattel’s copyright claims and, according to MGA’s own accounts, were “improper, bloated, excessive, unreasonable or even false” and “unnecessary.” In its brief, Mattel did not challenge the jury’s finding of non-infringement on its copyright. But the fact that another jury in 2008 awarded $100 million on those same claims, the first time the dispute went to trial, evidenced the reasonableness of pursuing them a second time, Sullivan wrote.
As a result, MGA did not deserve such “jaw-dropping” attorney fees, all but $2.5 million of which were associated with MGA’s copyright defense. Furthermore, she wrote, the award was based on 7,000 pages of attorney invoices filed under seal and gave MGA “a windfall for amounts it would never pay its own lawyers.” Sullivan noted that Carter based his award on MGA’s estimate of $129.6 million in fees billed by 11 firms – including Skadden Arps and Keller Rackauckas. “But the assumption that every dollar of Skadden and Keller’s bills were for defensive work unrelated to any of MGA’s claims is unfounded,” Sullivan wrote.
Moreover, Carter did not account for “duplicative or wasteful sums” in those bills, she wrote. “The court ignored the fact that MGA had called its own former lawyers’ fees ‘improper, bloated, excessive, unreasonable or even false’ and ‘unnecessary.’ The district court also erred in failing to reduce MGA’s claimed fees even though MGA has not and will not ever pay a large portion of those fees to its lawyers.”
MGA initially sought $161 million, including the $129.6 million in fees and $32 million in costs. In a recent ruling against its insurers, MGA upped its estimate of fees and costs to $175 million.
A recent NLJ story, “Dispute Bluetooth Settlement Actually Underpays Plaintiffs’ Team, Defense Says” reports that plaintiffs’ attorneys in the Motorola Bluetooth headset litigation – in which a federal appeals court rejected a settlement last year on the grounds that the $800,000 award might be excessive – performed more than $1.3 million in justifiable work, according to a document filed by the defense. A defense team led by Ann Tria of McBreen & Senior in Los Angeles reviewed the plaintiffs’ billing at the request of U.S. District Judge Dale Fischer after the U.S. Court of Appeals for the Ninth Circuit tossed out the deal. A three judge panel said that Fischer had failed to adequately test whether the attorney fees were excessive.
Both sides filed briefs on Feb. 13 defending the fees. As part of their argument, the defendants detailed a proposed “lodestar” figure, calculated by multiplying the number of hours reasonably spent on the case by a reasonable hourly rate. After conducting that analysis, the defense didn’t accept all the $1.7 million in fees billed by plaintiffs’ counsel, attributing more than $333,000 to inappropriate “block billing” and unreasonable amounts of time or numbers of people devoted to certain work.
The filing took issue with other fees and expenses, however, recommending cutting $79,794 in work it said should have been done at lower rates. Pearson Simon raised billing rates “several times” for two partners, from $500 to $750 per hour, the document said. The document proposed slashing another $11,805 in legal fees charged for “clerical and administrative tasks” – of the 58.8 hours billed for that work, 51 involved a Segal MeCambridge associate inserting comments into a Power Point presentation. Segal McCambridge charged $13,600 for unnecessary travel time, it said.
The team also said it found $77,193 in “block billing,” the practice of lumping multiple tasks into a single billing entry. All but one firm participated in a total of 586.6 hours of block-billed time entries. It proposed reducing $33,679 billed for preparing motions and declarations concerning attorney fees, noting that the firms “presumably had little more to do than recycle standard forms.”
Still, the plaintiffs’ team was pleased. “After the audit by defense counsel, the lodestar they requested still substantially exceeded the $800,000 fee we requested by $500,000,” said Daniel Warshaw, a partner at Pearson, Simons, Warshaw & Penny in Sherman Oaks, Calif. At the time, Fischer concluded that the lodestar amount would “substantially” exceed $800,000. The defense fee analysis appeared to support that conclusion. It found seven plaintiffs’ firms billed $1,330,185 in reasonable attorney fees between April 1, 2006, and July 31, 2009.
A recent NLJ story, “MGA’s Insurer on the Hook for Bratz Litigation Cost” reports that a federal judge has ordered Evanston Insurance Co., one of MGA Entertainment Inc.’s insurers, to pay $8.5 million to the insurance companies that covered the Bratz doll manufacturer’s defense fees and costs during its drawn out litigation with Mattel Inc. U.S. District Judge David Carter refused to trim the amount that Evanston could end up owing MGA, which it balked at defending during the litigation.
Carter’s ruling revealed that MGA is seeking about $175 million in attorney fees and costs from its insurers – far in excess of the $141 million in fees and costs awarded under the $310 million final judgment. Mattel has appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. Carter’s rulings set the stage for a trial over whether Evanston, which provided two general liability policies in 2001 and 2002, acted in bad faith when it denied coverage to MGA.
Evanston is one of three insurance companies that provided primary general liability coverage to MGA during the periods in which Mattel alleged its rival stole the copyright for the Bratz doll. Crum & Forster Specialty Insurance Co., which also refused to defend MGA. In a motion, Evanston sought a number of discounts to reduce the amount it owes MGA should it be found liable. MGA has estimated that Evanston is responsible for as much as $96 million of the $175 million in fees and costs in the Bratz doll litigation. Of that, Evanston has paid $16 million but owes $80 million.
Evanston argued that MGA’s calculation was off because it involved numerous instances of incorrect costs, including a $13.2 million difference between the amount billed by Skadden Arps and what MGA actually paid the law firm, and at least $3.5 million that MGA has refused to by Orrick Herrington. Evanston also challenged fees that MGA paid to defend individuals and entities that weren’t insured under its policies, including Carter Bryant, the designer of the Bratz doll. Carter granted some of the deductions, including the Skadden bills, but rejected most of them.
A recent New York Times story, “Legal Fees Mount at Fannie and Freddie,” reports that taxpayers have advanced almost $50 million in legal payments to defend former executives of Fannie Mae and Freddie Mac in three years since the government rescued the giant mortgage companies, a regulatory analysis has found. In that time, $37 million has gone to three former Fannie Mae executives accused of securities fraud, according to the analysis by the inspector general of the Federal Housing Finance Agency (FHFA), which oversees both companies. The FHFA report is entitled “Evaluation of FHFA’s Management of Legal Fees for Indemnified Executives” (pdf).
Although the legal costs for the former executives are a small fraction of the companies’ mortgage losses, it is imperative that the housing agency move to limit these fees, said Steve A. Linick, inspector general of the agency. “FHFA and Fannie Mae believe that their options are limited in paying current legal fees for former officers and directors,” Mr. Linick said in a statement. But he called for greater oversight. The legal costs are the responsibility of taxpayers because of contracts struck by the companies before they collapsed. Those agreements, which are typical in corporate America, state that legal fees incurred by executives against lawsuits will be advanced by the companies. If a court or jury rules that the officials breached their duties or acted in bad faith, the officials will have to pay the advances.
There were no recommendations in a plan submitted to Congress (pdf) regarding the rising legal bills for former executives. They were the subject of heated Congressional hearings in February 2011. Since then Fannie Mae and Freddie Mac have moved to control the legal fees, the report noted. For instance, the companies have set up policies to avoid duplicated legal representation and to monitor legal expenses to determine if they are reasonable. But the efforts are uneven. Fannie Mae, for example, questions legal bills for depositions if more than one lawyer attends representing former officials; Freddie Mac does not, the report noted. More significant, the housing agency has not independently validated the processes used by Fannie and Freddie to monitor the legal services provided to their former executives or the amount of the legal bills that are paid.
A recent BLT Blog post, “Landmark D.C. Gun Case Heads To Appeals Court Over Legal Fees,” reports that Alan Gura, of Alexandria’s Gura & Possessky is taking the District of Columbia’s big Second Amendment case back to the federal appeals court, where the dispute this time is over legal fees and not gun ownership rights. Gura and Clark Neily III of the Institute for Justice today filed a notice of appeal in the U.S. District Court for the District of Columbia, announcing his intent to ask for a second opinion about how much he contends he is owed for his work securing the right to own a handgun in the District.
Last December, U.S. District Judge Emmet Sullivan said Gura is entitled to $1.7 million in attorney fees and nearly $4,900 in expenses. Sullivan rejected Gura’s request for more than $3.12 million in fees and expenses. “Sensitive to the fact that the fees in this case will be paid by the taxpayers, this Court is left with the difficult task of closely scrutinizing plaintiff’s fee petition to determine what is fair, reasonable, and just compensation for the legal services of plaintiff’s attorneys,” Sullivan said in his fee ruling (pdf).
A recent The Legal Intelligencer story, “Penn State Sues Insurer for Defense Costs, Asks for Jury,” reports that Penn State University has sued its insurance company following the insurer’s own legal action to limit its coverage in a lawsuit against the university stemming from the Jerry Sandusky sex abuse scandal. According to reports, as of December 31, Penn State has paid a total of nearly $3.2 million to outside lawyers, consultants, and public relations advisers hired to address the sex abuse scandal.
In a 12-page complaint filed in Centre County Common Pleas Court, Penn State argued three counts of breach of contract and one bad faith county against Pennsylvania Manufacturers’ Association Insurance Co (PMA). Namely, the school said the insurer breached its contract with the university by refusing to cover Penn State’s defense of Doe A v. Second Mile and refusing liability coverage for any damages in that suit.
“PSU has been damaged by PMA’s breach by, among other things, being denied the benefits of the insurance coverage for which it contracted, that are required by law, and for which PMA collected substantial premiums, and PSU has been forced to incur the substantial burden and expense of bringing and pursuing this action,” the complaint said.
Last week, the Missouri Legislature introduced a bill that would implement the so-called “loser pays” English Rule and undo centuries of jurisprudence under the American Rule in civil litigation. But the one-page “loser pays” bill is no English Rule at all. The bill is a one-way fee-shifting rule that applies only one party, not both parties.
The legislation, H.B. 1342 (pdf),would only apply to non-prevailing (i.e. losing) plaintiffs, not to non-prevailing (i.e. losing) defendants. In other words, only plaintiffs would be forced to pay the attorney fees of defendants, if they don’t prevail in underlying civil litigation. The bill would not require losing defendants to pay the attorney fees of prevailing plaintiffs. “It’s not fair to implement a one-way fee-shifting provision to apply only to one party,” said Terry Jesse, Executive Director of NALFA
A recent Courthouse News story, “Oil Spill Attorneys’ Fees Upheld” reports that the 5th Circuit upheld a federal judge’s order giving 6 percent of all Deepwater Horizon settlements or awards to 18 court-appointed plaintiff attorneys. Attorneys who are not members of the Plaintiffs' Steering Committee (PSC) in the oil spill litigation had asked the 5th Circuit to overturn U.S. District Judge Carl Barbier’s order on the 6 percent fees.
BP established a claims payment process through the Gulf Coast Claims Facility (GCCF), establishing a $20 billion fund in August 2010, after the April 20, 2010 oil spill that killed 11 and set off the worst environmental disaster in U.S. history. In October 2010, the court-appointed PSC was created to coordinate the more than 100,000 oil spill litigants whose consolidated lawsuits are being overseen by Judge Barbier in New Orleans Federal Court.
Attorneys who are not on the PSC argued that because BP stepped up as the party responsible for the oil spill and set up a $20 billion fund to pay victims before the PSC was created, it is unreasonable for the steering committee to claim that it had anything to do with BP’s claims payment process.
Anthony Buzbee, a Houston-based attorney not on the PSC, was among the attorneys who appealed Barbier’s ruling to the 5th Circuit. In his writ of mandamus, Buzbee writes, “The PSC conferred no benefit to petitioner, and thus has not even attempted to do so…Indeed, the PSC has, at times, intentionally or not, worked against the interests of many claimants and their counsel outside this litigation.”
The first oil spill trial will focus on the Deepwater Horizon explosion. Trial begins Feb. 27 and is expected to last 3 months.
The article discusses three judicially created exceptions under California law to the American Rule: The “tort of another” doctrine, Brandt recovery, and damage recovery in malicious prosecution/false imprisonment cases. Where these exceptions apply, prevailing parties can be made whole by being compensated for attorney’s fees – but the relief, rather than being treated as fees, per se, is given as an item of damages.
Marc Alexander and William (Mike) Hensley are shareholders at Alvarado Smith in Santa Ana. They run California Attorney’s Fees Blog located at www.calattorneysfees.com
A recent NLJ story, “Bluetooth Litigants Defend Settlement Against 9th Circuit Qualms” reports that lawyers on both sides of a settlement over hearing loss claims involving Motorola’s Bluetooth headsets are insisting the attorney fees were not inflated, despite concerns voiced by the federal appeals court that rejected the deal last year. The U.S. Court of Appeals for the 9th Circuit tossed out the settlement, concluding that U.S. District Judge Dale Fischer failed to adequately test whether the attorney fees were excessive.
The settlement provided $100,000 in cy pres awards – gifts to various charitable organizations – and $800,000 to the plaintiffs’ lawyers. The potential class members received no money, except $12,000 for nine named representatives. Plaintiffs’ attorney Daniel Warshaw, a partner at Pearson, Simon, Warshaw & Penny in Sherman Oaks, Calif., wrote that the 9th Circuit failed to account for the value of the injunctive relief, which included the posting of warning labels on product packaging. He estimated the injunctive value at about $878 million, meaning that an $800,000 attorney fee award would represent less than 1% of the settlement.
The 9th Circuit stopped short of calling the settlement unfair or unreasonable, but said that Fischer had ignored numerous “red flags” in approving the deal, including a “clear sailing agreement” by which defendants agreed not to object to attorney fees, and a “kicker” providing that fees not awarded would revert to the defendants rather than to a cy pres fund or the class. The panel also found that Fischer failed to explicitly calculate the attorney fees other than to deduce that they were less than $1.6 million. She also failed to compare what attorneys would have received had they based their fees on a percentage of the settlement – in this case, about $240,500, given a 25 percent benchmark.
A recent law.com story, “News Corp. Financials Show Phone-Hacking Legal Bills Nearing $200 Million” reports that News Corp. has paid our nearly $200 million in legal costs over the phone hacking scandal to date, according to the company’s latest financial results. The company said it could not forecast what its expenditure would be on legal fees and external advisers working on the hacking scandal for a full year.
The figures, contained within the company’s results for the last three months on 2011, show the media giant paid out $87 million in legal fees and investigations into phone-hacking at its now defunct newspaper News of the World during the period up to Dec. 31 last year. The costs come in addition to a total of $108 million News Corp. spent during the previous quarter, $17 million of which had not been previously disclosed. The costs principally went toward restructuring its U.K. newspaper business after the closure of News of the World.
Around 85 percent of the costs were attributed to “fees to outside lawyers and advisers working on various investigations and committee hearings in the UK,” with the remaining 15 percent relating to legal settlements, largely paid to phone-hacking victims, amounting to around $15 million. The legal bill was substantially higher than News Corp. had expected, and the company said that it could not forecast what its expenditure would be on legal fees and external advisers on the hacking scandal for the full year.
On February 2, 2012 the U.S. House of Representatives Judiciary Subcommittee on the Constitution held a hearing on “Contingency Fees and Conflicts of Interest in State AG Enforcement of Federal Law.” At the hearing, three people testify: Bill McCollum, a partner of SNR Denton’s Public Policy and Regulation Practice Group, Amy Widman, Assistant Professor of Northern Illinois University Collage of Law, and James R. Copland, Director and Senior Fellow of Manhattan Institute for Policy Research.
"The 'tort reform' lobby (i.e. U.S. Chamber of Commerce) is targeting this for one reason; it’s working. Private lawyers have been effective in helping states reach huge settlements on behalf of their citizens," said Terry Jesse, Executive Director of NALFA. “It makes sense for underfunded and understaffed AG offices to contract with outside law firms to represent citizens of their state against large-scale consumer abuses. Working on a contingency fee basis actually protects taxpayers and ensures the people of their state are well represented against well-funded industries,” Jesse concluded.
There’s been no legislation produced from this hearing, but in his testimony, Copland said that Congress should take a “modest step” and codify Executive Order 13433 (pdf). Executive Order 13433 was signed by President George W. Bush and prohibits federal agencies from entering into contingency fee agreements with outside counsel. In other words, Copland would have the federal government dictate to all state attorneys general what type of fee arrangement they may enter into with outside counsel.
A recent VTDigger.org story, “Entergy Seeks $4.6 Million in Legal Fees From State of Vermont” reports that Entergy Corp. filed a motion with the U.S. District Court on Friday to recover $4.6 million in legal fees for its suit against the state. The Louisiana company prevailed in federal court then Judge J. Garvan Murtha struck down two state laws that require Entergy to seek approval from the Legislature to continue operating Vermont Yankee Nuclear Power Plant past its 40-year anniversary and to store high level nuclear waste and the plant site.
Entergy filed its motion for attorney’s fees (pdf), claiming it prevailed on its claim under the Commerce Clause. Chanel Lagarde, spokesman for Entergy, said that “the law allows for the prevailing party to seek recovery of attorney’s fees. We believe this is the appropriate next step for our company in this case where we were compelled to challenge several Vermont state laws that we believe were unconstitutional and were in fact found to be unconstitutional,” Lagarde said.
Vermont Attorney General Bill Sorrell said he expected the request for attorneys’ fees. Sorrell said “they threw a lot of legal horsepower at us, they went into the record extensively and they charged New York City rates.” Entergy hired Kathleen Sullivan, the dean of Stanford Law School to litigate the case. Sullivan was on the short list of candidates for Obama’s recent Supreme Court appointment and she has been described as one of the most trusted advocates before the U.S. Supreme Court.
The state can challenge the amount of the fee, Sorrell said. “This is a long way from over,” he said. Sorrell said his office can question whether the lawyers’ hourly rates and the amount of time they spent on the case was reasonable. It’s not unusual for litigants to go through a mediation process and retain fee experts to review attorneys’ fees on a case of this magnitude, according to Sorrell.
Posted:Friday, February 03, 2012
A recent Star Tribune story, “House Approves Changes to Laws on Lawsuits” reports that Republicans in the Minnesota House pushed through a series of so-called “tort reform” legislation. The measures passed largely on a party-line vote. One bill, SF 429/HF 747 (pdf), places limits or caps on court award attorney fees for over 300 statutes. This would include important civil cases such as wrongful termination and sexual harassment.
“We are opposed to caps on attorney fee awards in civil litigation,” said Terry Jesse Executive Director of NALFA. “Judges should determine reasonable fee awards, not politicians,” Jesse added.
A recent Am Law Daily story, “Super Bowl Special: A Look at the Legal Fees Racked Up by NFL Player Ahead of the Lockout” reports that the National Football League Players Association (NFLPA), like all labor unions, must file annual LM-2 forms with the U.S. Department of Labor. The union’s most recent filings detailing its finances is for the period between March 1, 2010 and February 2011. Included in those disclosures are payments made to outside accounting, financial, law, and lobbying firms, as well as to other external vendors. By far, a new collective bargaining agreement (CBA) consumed the bulk of the NFLPA’s outside legal and lobbying expenditures. Top billing law firms included:
Latham & Watkins: $3.1 million (CBA and public policy)
Dewey & LeBoeuf: $2.9 million (CBA matters/legal services)
Patton Boggs: $948,983 (CBA and public policy matters)
Gibson Dunn: $294,843 (Antitrust/CBA matters)
Weil Gotshal: $274,075 (CBA matters)
One interesting conclusion that can immediately be drawn by reviewing the NFLPA’s financial statements is that since DeMaurice Smith, a former Latham and Patton Boggs partner became the union’s executive director three years ago, those firms have encroached on the outside legal turf traditionally owned by Dewey and Weil. The filings also shows salaries and bonuses paid to the NFLPA’s in-house counsel. The union’s longtime outside counsel Jeffrey Kessler, chair of Dewey’s global litigation department received more than $1.5 million in compensation for the union’s 2010 fiscal year.
A trio of Smith’s former colleagues from Patton Boggs that left the firm to join him at the NFLPA also appear on the union’s in-house legal payroll. Longtime Patton Boggs partner and chief operating officer Ira Fishman received $606,300 in his new role as managing director of the NFLPA. Payments to associate general counsel Heather McPhee and vice president of legal affairs Ahmad Nessar, both of whom are former Patton Boggs associates, totaled $310,020 and $287,324, respectively. Tuaranna “Teri” Patterson, a former Latham associate now serving as deputy managing director and special counsel to Smith, was paid $178,554.
A NLJ story, “Insurers Fail to Slip the Hook for MGA’s Bratz Litigation Costs” reports that a federal judge has sided with MGA Entertainment Inc, against insurance companies that balked at paying its legal costs for the past two years of its battle against Mattel Inc. over copyrights to the Bratz doll. In a pair of rulings on Jan. 27, U.S. District Judge David Carter in Santa Ana, Calif., rejected motions by Evanston Insurance Co. and its parent corporation, Markel Corp., to toss MGA’s attempts to force them to pay up.
The insurers claimed that their duty to defend MGA ended April 12, 2010, when Mattel, maker of Barbie, filed its fourth amended counterclaim. They argued that Mattel dropped allegations of trade libel and failed to assert sufficient “advertising injury” against MGA, both of which were predicated for MGA’s insurance coverage. Carter wrote that the companies failed to show that Mattel’s counterclaim “extinguished all potential that MGA’s use of Mattel’s advertising strategies and plans took the form of MGA’s advertising.”
Last year, the four insurers attempted to intervene in MGA’s case against Mattel in a bid to obtain a share of the $141 million in attorney fees and costs awarded as part of a final judgment in that case. The insurers sought about $80 million, but Carter denied their motion on Sept. 27. They have appealed his ruling to the U.S. Court of Appeals for the 9th Circuit, which has scheduled opening briefs for April.
A New Jersey Law Journal story, “Court Upholds Rendine Fee Shifting, Declining to Follow U.S. High Court” reports that the New Jersey Supreme Court reaffirmed its nearly two decade old commitment to a doctrine that permits trial judges to enhance counsel fees in cases that might never be filed if not for the ability to shift fees. In a consolidated ruling in two cases, the unanimous Court overturned two appellate rulings that followed the U.S. Supreme Court’s holding, in Perdue v. Kenny A., that trial judges may award fee enhancements only in rare and extraordinary circumstances.
Justice Helen Hoens said the justices saw no reason to abandon the fee-shifting principles it established in Rendine v. Pantzer. In a unanimous ruling (pdf), the court held the mechanism for awarding attorneys’ fees, including contingency enhancements, adopted in Rendine remain in full force and effect as the governing principles for fee awards made pursuant to New Jersey fee-shifting statutes. The court rejected the Perdue analysis, saying that Perdue breaks no new ground; rather it reiterates the framework that applies to fee awards in federal courts arising from federal statutes.
A Texas Lawyer story, “BAM! Counsel Win $21 Million in Fees From Clients Who Wouldn’t Pay” reports that three Dallas plaintiffs lawyers and their firms won a judgment ordering wealthy former clients to pay more than $21 million in legal fees. But the attorneys didn’t win the full amount they sought. The Jan. 10 judgment in Campbell Harris & Dagley, et al. v. Albert G. Hill, et al. arises from a lengthy and complicated fee dispute. The lawyers and firms that wanted to be paid were Lisa Blue of Baron and Blue; and Charla G. Aldous of the Aldous Law Firm; and Stephen F. Malouf of the Law Offices of Stephen F. Malouf – collectively known as BAM in the judgment.
BAM had represented Albert G. Hill, Erin Nance Hill and their minor children (collectively Hill III) in the 2010 settlement of Hill v. Hunt, et al. But Hill III refused to pay BAM. Hill III alleged BAM wanted millions “in attorney fees for no more than six months work.” The court severed the attorneys’ fee dispute from Hunt after Hill challenged the validity of the contingent fee agreements with BAM and the amount owed. Both parties agreed to have U.S. Magistrate Judge Renee Harris Toliver hear the case.
Toliver entered findings of fact and conclusion of law that BAM’s fee agreement with Hill III was valid and binding and that Hill III had breached the agreement. Toliver also wrote that the fair market value of Hill III’s “gross affirmative recovery” in the Hunt settlement was $113,357,232, of which BAM was entitled to a 30 percent contingency fee totaling $33,707,232. Both sides objected to Toliver’s conclusions. U.S. Distrcit Judge Reed O’Connor reduced the attorneys’ fees recovery to $21,942,961 after sustaining some of Hill III’s objections regarding the contingent fee.
In his Jan. 10 judgment (pdf)O’Connor gave Hill III 30 days to either pay BAM 30 percent of the fair market value of their gross affirmative recovery in the trust dispute settlement in Hunt or pay BAM 30 percent of the amounts that Hill III receives from the Hunt settlement as Hill III receives them. Alan Loewinsohn, representing BAM explains that the Hill III defendants likely are better off choosing O’Connor’s first payment option “because there was a determination as to the current fair market value to the settlement [Hill III] obtained."
Brower asked about the process that led to the retention of the firm of Watts, Tieder, Hoffar & Fitzgerald to handle the case beginning in 2008. He also asked why a Nevada firm was not retained, and what controls are in place to monitor the fee being incurred. “Those two issues raised red flags with me, and so I thought it made sense to just ask a few questions of the attorney general’s office and ask her to clarify exactly, as I set forth in the letter, why the state has hired this out-of-state firm as opposed to an in-state firm or doing the litigation in the AG’s office,” Brower said.
Scott Magruder, a spokesman for NDOT, said today the agency actually retained the firm, which is one of the leading construction litigation firms in the nation. The firm has an office in Las Vegas. The agency wanted quality representation because of the size of the claim, he said.
Gov. Brian Sandoval first raised concerns about the amount of legal fees at a meeting of the Broad of Directors of the Department of Transportation earlier this month. “Because even at those rates, $6 million, I haven’t seen that before,” Sandoval said at the Jan. 9 meeting. “I mean this just gets us to the mediation, as you say, and then we don’t know what the outcome of the mediation is going to be after that.” The rates charged by the law firm’s attorneys are as high as $340 an hour for a senior partner, but members of the board were told the rates are not excessive and have not charged since the dispute first began.
A Daily Business Review story, “$89,000 Legal Fee Approved Despite $500 Award” reports that a women who sued the management of a Brooklyn housing development alleging that one of its private police officers used excessive force in arresting her is entitled to close to $89,000 in legal fees and expenses even though she won a judgment of only $500, a federal judge has ruled. U.S. District Court for the Eastern District Judge Jack B. Weinstein ruled on Jan. 9 in Brown v. Starrett City Associates, that the plaintiff, Annette Brown, was entitled to more than $80,600 in fees and over $8,600 in litigation expenses.
At trial, the jurors were instructed that if they found that Ms. Brown’s rights had been violated but suffered “no physical, emotional or financial injury” as a result, they could award her $1 in nominal damages. He said if they found she had been injured, they could award her compensatory damages. The jury found in favor of Starrett City on the wrongful arrest claim, but in favor of Ms. Brown on the excessive force claim and awarded her $500 in compensatory damages.
Following the judgment, the judge held that Ms. Brown was entitled to attorney fees under the Civil Rights Attorney’s Fee Award Act. Her attorney, Michael P. Mangan submitted an application seeking over $82,700 in attorney fees and $11,000 in expenses. Starrett City argued that the fee award was too large compared to the judgment. Magistrate Judge Roanne L. Mann rejected that argument in her October report and recommendation (pdf).
“Although the success of the party in pursuing his or her claim, and the quality of the attorney’s performance, are relevant to the determination of a reasonable hourly rate, the case law is clear that a court may not reduce an attorney’s fee award simply because the fee award would be disproportionate to the damages in the underlying case,” the magistrate judge wrote.
Magistrate Judge Mann said that Mr. Mangan’s hourly rate of $300 was in line with the rate awarded to other civil rights attorneys in the Eastern District. She said that rate was justified because Mr. Mangan had performed well in the case, even though it did not result in a large damage award. She said that he had dealt with an unusual legal issue: the “vicarious liability” of a private corporation when its employees violated someone’s constitutional rights. She also noted that Judge Weinstein had said on the record at the end of the trial that Mr. Mangan was “an excellent attorney.”
A recent Insurance Journal story, “Florida Supreme Court Rules Guaranty Fund Not Responsible for Legal Fees” reports that Florida’s high court has ruled that the state fund charged with paying claims from insolvent insurers is not responsible for paying a claimant’s legal fees on a pre-insolvent claim unless they are specifically covered under the terms of the policy. In Petty v. Florida Insurance Guaranty Association the Florida Supreme Court resolved a conflict between two lower court rulings that addressed the guaranty association’s liability for paying claimant’s attorney fees based on the definition of a “covered claim.”
The case is from 2004 when Diane Petty’s home sustained damage from Hurricane Charley. At the time, her property was covered through Florida Preferred Property Insurance Co., which initially made a partial payment to Petty. Afterwards, Petty later demanded an appraisal to resolve a dispute over monetary value of her loss. Although the insurer paid Petty more money, it went bankrupt before the court could decide whether the insurer owed her any legal fees.
Since Florida Preferred’s policies were assumed by FIGA, Petty sued the guaranty fund seeking to collect the legal fees. Petty’s lawyers argued that under the Third District Court of Appeals case, Florida Insurance Guaranty Association v. Soto, was owed the legal fees based on a state law that grants policyholders’ legal fees when there is a disputed claim and the policyholder prevails.
Supreme Court Justice J. Polston, however, agreed with the decision by the Second District Court of Appeals in another case. “In order to recover from FIGA, Petty’s claim for fees must also be within the coverage of her underlying insurance policy,” wrote Polston. “Her underlying insurance policy does not expressly provide coverage for her fee award.” By way of an example, Polston noted that the state’s workers’ compensation law includes a specific statutory provision that requires claimants attorneys to be paid if they prevail in court based on a contingency fee schedule.
Posted:Tuesday, January 17, 2012
Categories: NALFA News
In today's litigation practice, the economics of attorney fees has never been more important. Attorney fee litigation is at unprecedented levels. More and more law firms are suing clients to collect unpaid legal bills and more clients are suing law firms for over billing claims than ever before. That, added with the rise in "loser pay" fee-shifting litigation, and the growing body of court awarded attorney fee jurisprudence, attorney fees themselves have become a highly specialized practice area.
Join the first-of-its-kind practice group specifically devoted to attorney fee issues, the Attorney Fee Practice Group. The Attorney Fee Practice Group is a highly specialized, niche practice area within the legal profession dedicated to attorney fee and legal billing matters. Members of the practice group are retained by law firms when attorney fees are at issue in underlying litigation. Members of the Attorney Fee Practice Group are qualified attorney fee experts, fee dispute arbitrators, and legal bill auditors.
At NALFA, we project the attorney fee practice area to not only continue to grow, but expand in new areas. Secure your place in the Attorney Fee Practice Group. Benefits include:
Member-to Member Referral Program: Members of our Attorney Fee Practice Group can turn to one another when a conflict arises. Our members can exchange attorney fee and legal billing cases with one another and refer clients to one another when an ethical, business, or scheduling conflict arises.
Certificate of Qualification: Upon membership, members of our Attorney Fee Practice Group will receive a professional certificate that bears their name (or company’s name) for display purposes. This certificate of qualification shows that they are a member in good standing and have met the standards of excellence for selection in their respective member category. This professional certificate is individualized, printed in full-color and on high-quality stock paper.
Updates on Attorney Fee & Legal Billing Jurisprudence: All NALFA members will receive periodic e-mail updates on the latest developments on important attorney fee and legal billing jurisprudence. These e-mail updates summarize attorney fee and legal billing cases in both state and federal courts from across the U.S. and include both published and unpublished court decisions.
Customized Profile Page in On-Line Membership Directory: NALFA members will be provided their own profile page in our on-line membership directory to list their professional qualifications and experience on attorney fee and legal billing matters. Members can customize their profile to include hyperlinks, white papers, articles, and news. This on-line directory also allows potential clients to contact you directly on attorney fee and legal billing matters.
Promote News in Attorney Fees Blog: NALFA members can promote news on our Attorney Fees Blog. Members can take advantage of reaching a national audience by posting news, articles, and announcements in NALFA’s Attorney Fees Blog, a heavily trafficked site and a great source for attorney fee and legal billing news.
Professional Development: Our CLE programs are the perfect opportunity to build on your knowledge of attorney fee and legal billing issues. By attending our CLE programs, members benefit professionally with the very latest case law and developments on attorney fee and legal billing jurisprudence.
Speaking & Publishing Opportunities: Members are invited to participate in our CLE programs as sponsors and panelists. By participating in our CLE programs, members not only help develop program content, but also help shape the growing body of attorney fee and legal billing jurisprudence.
Networking Opportunities: Our members build lasting relationships with fellow members, colleagues, peers, and clients by networking at our events. Networking with other fee and billing experts, consultants, and clients is an excellent way to build new lines of business and expand your area of expertise.
Marketing Project Opportunities: NALFA can work directly with members on marketing projects. We can market your practice and promote your area of expertise. Through our e-mail database, members can reach a desired audience to promote news or to make special announcements. NALFA charges a separate marketing fee for this service.
If you are interested in joining, please contact us at 312-907-7275.
A recent The Legal Intelligencer story, “GSK Seeks to Limit Contingency Fees in Avandia MDL” reports that drugmaker GlaxoSmithKline has asked a judge overseeing the federal multidistrict litigation over the diabetes drug Avandia to limit the contingency fees of attorneys representing individual plaintiffs to 25 percent of client account or awards. The motion is still pending before U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania.
In litigation in which many plaintiffs have already settled, the court should limit “individual plaintiffs’ attorneys’ fees where, as here, the attorneys did not perform a substantial portion of the work, but rather benefited from coordinated discovery and other work performed by plaintiffs’ steering committee,” GSK said in court papers. District courts capped contingency fees from 20 percent to 35 percent in pharmaceutical and medical device MDLs involving Medtronic, Vioxx, Guidant and Zyprexa, GSK said in their motion.
In response, one of the plaintiffs’ law firms with individual cases said that while it was not one of the firms involved in the litigation earlier and did not participate in the plaintiffs’ steering committee, it has and will continue to conduct “extensive work” on behalf of its clients and deserves to be compensated according to the contingency fee agreements it has with its clients. Weitz & Luxenberg said the case law cited by GSK involved cases in which the parties had already entered into global settlement agreements and that there are hundreds of MDL litigations beyond the five cited by GSK that did not involve such judicial intervention on the issue of attorney fees.
In a motion filed by Paul J. Pennock and Jaime M. Farrell, Weitz & Luxenberg said the firm is already dealing with reduced fees. Under the Avandia common benefit fund set up to compensate and reimburse attorneys for services performed and expenses incurred in prosecuting the MDL, the plaintiffs will be assessed 7 percent of their gross monetary recovery, of which 4 percent will be deducted from attorney fees, Weitz & Luxenberg said in court papers. The firm would ordinarily receive 33.3 percent in contingency fees, but because of the common benefit fund, the firm will receive 29.3 percent, according to court documents.
A recent Thomson Reuter story, “Record $285M Fee Award is Strine’s Message to Plaintiffs’ Bar” reports that in a footnote at the end of his October 14 ruling granting Southern Peru shareholders $1.3 billion from majority stockholder Grupo Mexico, Delaware Chancery Court Chancellor Leo Strine Jr. had cautionary words for the plaintiffs’ firms that won the recovery. Prickett, Jones & Elliott and Kessler Topaz Meltzer & Check, the judge said, had been too slow to prosecute the derivate suit when it was filed back in 2005. He instructed the firms to confer with defense counsel from Milbank Tweed (for Grupo Mexico) and Ashby & Geddes (for Southern Peru, now Southern Cooper) to see if they could agree on a “reasonable” fee request, “with the plaintiffs’ counsel taking into account the reality [that] their delays affected the remedy and are a basis for conservatism in any fee award.”
Kessler Topaz and Prickett Jones had originally asked for 22.5 percent of the recovery they obtained. In a Oct. 28 brief that liberally quoted Strine’s own words from previous cases, the plaintiffs’ firms argued that they should be rewarded for the “huge risk” of hard-fought derivative litigation. The firm said they’d kept Strine’s admonition in mind, which is why they were asking for 22.5 percent instead of the customary 33 percent. But they asserted that if the chancellor refused to award a big percentage just because it amounted to hundreds of millions of dollars, he would encourage plaintiffs’ firms to settle quickly rather than fight for the best possible recovery.
“Limiting fee awards in large cases would create a strong disincentive to take the huge risk of trying large cases,” the brief said. “For example, how would lawyers be incentivized to take a potential billion dollar case to trial it they know that they win a billion dollar they will get the same fee award as they would have if they settled the case for $200 million? It is clear that such a declining percentage approach would misalign the interests of the lawyers and those they represent.”
So why did Strine agree to grant such a large fee award? Because he was sending a message not just to lawyers in the Southern Cooper case, but to the entire securities class action bar. The chancellor spoke about rewarding plaintiffs’ lawyers for taking risks – and chided defense lawyers for being envious when those risks pay for in big fee awards. If lawyers are willing to litigate big cases through discovery and trial, he suggested, we’ll make sure they’re compensated for their efforts.
A recent Courthouse News Service story, “Foreign Attorney Sue for Share of $100M Fee” reports that Argentinean attorneys claim a Miami law firm stiffed them for a 23 percent consulting fee from a $410 million consumer class action settlement “and one of the largest attorney’s fee awards in such a case, over $100 million.” Raponi & Hunter Abogados claim Jeremy Alters of Alters Morelli Ranter “sold off or assigned interests in the recovery from the class action lawsuits to fund his law firm and lavish lifestyle.”
The underlying class action involved U.S. banks’ chronologically rearranging debit transactions from largest to smallest, to generate “billions of additional overdraft fees.” According to the Argentinean partners, Osvaldo Raponi and Jaime Hunter, In August 2008, Raponi, and expert in banking law, and Hunter, bought to Alters and his firm the most significant case in Alters’ legal career. This was the first consumer banking class action in which Alters or his firm were involved. Raponi and his firm were the architects of the claims bought by Alters, which resulted in one of the largest consumer class action settlements in history, $410 million and one of the largest fee awards in such a case, $100 million.
Alters acknowledges that Raponi consulted in the overdraft case in a “meaningful way that deserves compensation for his work and that he has done work, a lot of it.” In exchange for originating the case and providing his assistance, Alters agreed that Raponi and Hunter would receive 23 percent of his firms’ fee from the litigation. Years later, after the Bank of America case settled, Alters betrayed Raponi and Hunter and misrepresented that the fee agreement was unenforceable and that they could receive a mere fraction of the agreed upon fee as “consultants,” not as foreign lawyers, or they would receive nothing at all.
A recent NLJ story, “Federal Circuit Upholds $4.7M Fee Award to Cordis Over MarcTec’s Litigation Misconduct” reports that the U.S. Court of Appeals for the Federal Circuit has upheld a lower court’s award of nearly $4.7 million in attorney and expert fees to patent defendant and Johnson & Johnson subsidiary Cordis Corp. for its opponent’s litigation. On Jan. 3, a unanimous panel in MarcTec LLC v. Johnson & Johnson affirmed rulings by Chief Judge David Herndon of the Southern District of Illinois.
Herndon granted Cordis’ motion to declare the case exceptional under the U.S. Patent Code and award Cordis $3.8 million for attorney fees and expenses and $809,000 for expert fees and expenses. Judge Kathleen O’Malley, who authored the ruling, wrote that the trial court did not err in finding the case exceptional and did not abuse its discretion by awarding expert witness fees.
In the underlying case, MarcTec filed suit in 2007 claiming Cordis’ Cypher stent infringed two of MarcTec patents for “heat bondable material” that is “bonded” to a surgical device or implant. The district court granted Cordis’ motion for summary judgment. Cordis then asked the court to declare MarcTec’s suit exceptional and to award Cordis its attorney and expert witness fees. The trial court found that MarcTec’s infringement allegations were “baseless” and “frivolous” and that it acted in “bad faith”.
On appeal, the federal appeal panel found that MarcTec filed an “objectively baseless lawsuit in bad faith.” The panel also supported the lower court’s expert witness fee award because Cordis was forced to incur expert witness expenses “to rebut MarcTec’s unreliable and irrelevant expert testimony,” and it’s spending wasn’t recoverable under the section of the Patent Code that allows the recovery of attorney fees in exceptional cases.
A recent BLT Blog post, “Heller Attorney Awarded $1.1M in Fees, One-Third of Their Request” reports that after 3 years of the Supreme Court’s landmark decision in District of Columbia v. Heller and a length fight with the District of Columbia, the attorneys for Dick Heller have been awarded their attorney fees. In a ruling, U.S. District Judge Emmet Sullivan in Washington awarded Heller’s attorneys, led by Alan Gura of Alexandria, Va.’s Gura & Possessky, just over $1.1 million – about one-third of what they had requested.
Gura and his team had requested about $3.1 million in attorney fees. By contrast, the District of Columbia had argued that Heller’s attorneys merited just over $840,000. Sullivan said determining the lawyers’ hourly rate alone was difficult, as three of the six attorneys on the case – Clark Neily III of the Institute for Justice, and Robert Levy and Gene Healy with the Cato Institute – work for nonprofit groups. And the other three, including Gura, Laura Possessky and Thomas Huff, do not have standard fixed hourly rates, in part because they charge lower rates to clients who otherwise couldn’t afford them.
Both side argued to Sullivan that various matrixes and formulas should be used to determine the correct hourly rate. The plaintiffs’ team concluded that the rates should be $589 per hour for all the attorneys except Huff, who had less experience. They argued Huff should be compensated $361 per hour. Sullivan called those rates “extraordinary” and not appropriate for this case. “[T]he Court is unwilling to award the high rates requested by plaintiff absent specific evidence that those are, indeed, the prevailing market rates for attorneys engaged in complex federal litigation outside the District of Columbia’s largest law firms,” Sullivan wrote.
In a joint statement said they “respectfully” disagreed with Sullivan’s determination of the hourly rates calculated in this case, which they submitted was based on an outdated U.S. Attorney’s Office Fee Matrix. “As has become increasing apparent in recent years, that matrix bears little if any relationship to prevailing hourly rates for complex litigation in the Washington, D.C. market,” the attorneys wrote. “nor do we believe the rates provided in the USAO matrix accurately reflect the exceptional quality of the legal work performed by Plaintiff’s counsel in securing this historic win.”
Posted:Monday, January 02, 2012
Categories: NALFA News
A recent The Wall Street Journal blog story, “How Much is $300 Million in Attorneys’ Fees?”, recognizes NALFA as the industry source for attorney fee and legal billing matters. The Wall Street Journal is one of the nation’s most respected newspapers and an authoritative news source on business and financial information.
The Wall Street Journal turned to NALFA for information on the largest class action attorney fee awards in U.S. history. This is not the first time NALFA has been cited by the national press. In September 2011, NALFA was quoted in a Thomson-Reuters story, "Cuomo Considering Law Change on Class Action Attorneys' Fees".
“We are pleased to be recognized by the WSJ as the industry source on attorney fee and legal billing issues,” said Terry Jesse, spokesman for NALFA. “We were happy to provide the WSJ with the information and look forward to working with other media outlets in the future,” Jesse concluded.
Posted:Thursday, December 22, 2011
Categories: NALFA News
The National Association of Legal Fee Analysis (NALFA) is working to establish a professional certification program for the attorney fee and legal billing community in 2012.
“As a 501(c)(6) professional organization, it’s important to establish a certification program for the attorney fee and legal billing community. This will ensure creditability and reliability in the field. As a 501(c)(6) professional association, we have a professional obligation to ensure attorney fee experts, fee dispute arbitrators, and legal bill auditors are qualified in their respective field,” said Terry Jesse, Executive Director of NALFA.
"Certification programs are not implemented overnight and are not done without the input and cooperation of professionals within the field. We look forward to working with members to identify standards for certification,” Jesse concluded.
A recent Thomson Reuters story, “Plaintiffs Atty in So. Copper Case get $285M Fee” reports that plaintiffs’ attorneys in a shareholder suit involving Southern Copper Corp. won a blockbuster $285 million fee award from Delaware’s Chancery Court on Monday. It is believed to be the biggest fee award ever by the court, one of the busiest venues in the United States for commercial litigation.
Leo Strine, the chief judge of the Chancery Court approved the fee award for two law firms, Kessler Topaz Meltzer & Check, LLP and Prickett Jones & Elliott. The firms had requested $428.2 million in fees. The defense attorneys for Southern Cooper and its board of directors had suggested a fee of less than $14 million. Strine said he expected the defense to appeal the award to Delaware’s Supreme Court.
The fee award ranks among the largest in securities litigation. Plaintiffs’ attorneys in lawsuits involving the collapse of Enron Corp. got $688 million in fees, while lawyers in Tyco International Ltd. litigation were awarded $492 million.
Some plaintiffs’ attorneys view Delaware as stingy in awarding attorney fees compared with some other states. At a law conference last month in New York, Strine hit back that charge, telling the gathering that good cases will be awarded by the Chancery Court.
The case is In re Southern Peru Copper Corp. Shareholders Derivative Litigation.
A recently NLJ story, “IP Boutique Sues Former Client for More than $561K in Fees, Expenses”, reports that Lando & Anastasi, an intellectual property boutique, has sued former client Innovention Toys LLC for more than $560,000 in unpaid legal bills. The Cambridge, Mass.-based firm filed the suit, Lando v. Innovention Toys LLC, in the District of Massachusetts. The firm claims Innovention owes $561,439, including $528.985 in legal fees and $32,453 in expenses.
Innovention generally paid its legal bills from 2006 through 2009, but stopped paying in September 2009, according to the complaint. Lando’s legal claims are breach of contract and quantum meruit. The firm asks the court to award monetary damages, costs and interest. Lando represented Innovention in an Eastern District of Louisiana case filed in 2007, Innovention Toys LLC v. MGA Entertainment Inc. Wal-Mart Stores Inc. and Toys “R” Us Inc. are also plaintiffs on the ongoing case.
A recent NLJ story, “Defense Counsel May Not Pull out of Patent Case Despite Client’s Nonpayment” reports that a federal magistrate judge has denied a bid by a Minneapolis firm Leffert Jay & Polglaze to withdrawal from a patent case despite the fact that its client hasn’t paid nearly $278,000 in legal bills. Magistrate Judge Jeanne Graham of the District of Minnesota denied Leffert’s motion to withdraw from representing Quest Optical Inc. in a case against it brought by Walman Optical Co.
In the underlying case, Walman sued Quest for infringing its patent for an abrasion-resistant coating for eyeglasses. District Judge Patrick Schilitz entered a judgment in August, finding, finding that Quest infringed Walman’s patent and that Walman’s patent is valid and enforceable. The injunction bars Quest from making, using, importing, offering to sell or selling in the U.S. any product that infringe Walman’s patent.
According to court documents, Leffert claimed that Quest owes it $277,749 in legal fees. Walman Optical opposed the motion to withdrawal on the ground that it would be prejudiced by Laffert’s withdrawal if Quest Optical fails to move forward with the discovery ordered by Schilitz.
Withdrawal of counsel without substitution requires “good cause,” or nonpayment of fees plus an additional aggravating circumstance such as showing that the client doesn’t want that lawyer’s representation, Graham wrote. Graham added that the court is sympathetic to Laffert’s position that there’s a significant amount of money at stake, particularly since the firm only has seven lawyers. “The case is so near completion, however, that the Court finds that continued representation by [Leffert] does not constitute an ‘unreasonable burden,’” Graham wrote.
A recent The Legal Intelligencer story, “Pa. Judges Uphold $5.6 Mil. Brake Class Action Against Kia” reports that the Supreme Court of Pennsylvania upheld a Philadelphia court class action verdict awarding $5.6 million to owners of Kia sedans with faulty braking systems, but class counsel lost on the attorney fee risk multiplier issue. Philadelphia Common Pleas Court Judge Mark I. Bernstein had awarded a risk multiplier of 1.375 times the $3 million lodestar, for a total of $4.125 million.
Chief Justice Ronald D. Castille wrote the federal statute under which the class won its verdict – the Magnuson-Moss Warranty Act – explicitly states that attorney fees are to be based on actual time expended and does not “provide for discretionary fee enhancement.”
“Pennsylvania generally adheres to the ‘American Rule,’ under which ‘a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties or some other established exception,’” Castille said.
Class co-counsel include James A. Francis of Francis & Mailman and Alan M. Feldman of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig. Even with the fee reduction, Feldman said the attorney fees award would probably be close to the original award because of interest and the appellate work done by plaintiffs counsel.
Arguing on behalf of appellee, Michael D. Donovan of Donovan Axler said because the U.S. Supreme Court has ruled against multipliers in a class action case, the state Supreme Court’s ruling makes it unlikely that Kia could challenge the attorney fees because of a multiplier.
Posted:Thursday, December 08, 2011
Republican Governor Scott Walker signed a bill Wednesday designed to limit attorney compensation. The law, 2011 Wisconsin Act 92 (pdf), would require judges to award attorney fees to no more than three times damages. Plaintiffs’ attorneys point out that fee awards and monetary damages are often disproportional for good reason, especially in small tort cases. According to the Wisconsin Association for Justice, Wisconsin will be the only state in the country that imposes factors judges must use when awarding attorney fees as well as creating a presumption that fee awards more than three times damages are unreasonble in fee-shifting cases.
"There is absolutely nothing wrong or unreasonable with fee awards being three times, four times, or even eight times that of monetary damages," explains Terry Jesse, Executive Director of NALFA. "Caps on attorney fees is a solution to a problem that does not exist. Plaintiffs' attorneys should be proud of earning big fee awards and proud when fees are several times that of damages, because that means they worked hard and did a great job on the case," Jesse conclued.
"Judges have been given the discretion to award a significant portion of all the contingency fees lawyers in the United States collect when they set attorneys’ fees in a few hundred class action judgments every year. Judges current appear to award these fees largely in the absence of any normative theory and, instead on the basis of intuition. As a result, judges tend to award lower fee percentages in class action cases than those negotiated in the competitive market for individual litigation.
Although lower percentage might be justified in large-stakes class actions, current compensation practices underpay class counsel in small-stakes actions that may comprise most of the class action docket in state and federal court. To maximize social welfare, it is often thought that litigation should both deter defendants from causing harm and insure plaintiffs against those harms when they are not deterred.
But small-stakes class actions serve no insurance function; they are only about deterrence. As such, there is little reason as a theoretical matter not to fully incentivize class action lawyers to bring these suits by awarding them to the entire class recovery. Although political and perhaps even legal constraints might prevent judges from setting fee percentages at 100% in small-stakes cases, deterrence-insurance theory nonetheless suggests that judges ought to give class counsel as much as they can, which, by any measure is more than the 25% they usually give now."
A recent New York Times story, “Plaintiffs’ Lawyers in a Bitter Dispute Over Fees in Gulf Oil Spill Cases” reports that plaintiffs' lawyers are seeking a reserve fund to help cover litigation costs in the BP multidistrict litigation. In early November, the Plaintiffs’ Steering Committee (PSC) filed a motion in court asking U.S. District Court Judge Carl Barbier to require defendants to set aside 6 percent of any settlements, judgments or “other payments” – meaning Kenneth Feinberg’s Gulf Coast Claims Facility – to create a reserve fund to reimburse the committee of plaintiff attorneys for their expenses in waging the case.
The PSC notes that since the case began, over 300 attorneys from 90 law firms have invested over 230,000 hours of time and spent $11.54 million of their own money on the case. The PSC left it to Judge Barbier to say how the money would be extracted, whether by requiring BP to pay an additional amount equivalent to 6 percent of settlements to the fund, which would give plaintiffs their full recovery, or have it come out of the settlement.
Ed Sherman, a Tulane law professor who studies multidistrict litigation said that it’s not unusual for plaintiff committees to begin talking with the court about how to get costs covered before the case is wrapped up, because waging massive liability cases are expensive, time-intensive propositions. “In order to keep putting that time in, they need the confidence that a fund will be there,” Sherman said. The difference here, Sherman said, is that there is another avenue for people to have claims addressed, and the people in the claims process and outside lawyers not on the steering committee are opposed to the reserve fund.
Posted:Monday, December 05, 2011
Categories: NALFA News
In today's litigation practice, the economics of attorney fees has never been more important. With the rise in attorney fee-shifting litigation, to the growing body of attorney fee law, attorney fees have become a highly specialized practice area.
Packed with over 100 pages of substantive material on attorney fee and legal billing jurisprudence, The Attorney Fees Conference Course Book provides useful and practical information on the economics of attorney fees in complex cases. Topics include:
Court Awarded Attorney Fees in Prevailing Party Litigation Class Action Litigation & Attorney Fee Awards Attorney Fee Issues in Chapter 11 Bankruptcy Proceedings Insurance Coverage Litigation: Who Pays the Legal Bills? Reviewing Legal Bills for Reasonableness Dispute Over Legal Fees: Litigation vs. Arbitration
A recent The Recorder story “Linear Technology on the Hook for $8.4 Million in Attorney Fees” reports that a California court of appeals upheld a defense judgment in favor of Novellus System Inc. and Tokyo Electron Corp. in a protracted contract fight over semiconductor processing equipment. The decision left plaintiff Linear Technology Corp., a semiconductor manufacturer, on the hook for $8.4 million in attorney fees in the breach of contract case.
After eight years of litigation by Linear Technology, a jury in 2010 rendered a verdict for the defense. Texas Instruments Inc., in multiple lawsuits in federal court alleged that the equipment Linear used infringed on TI’s patents. Linear agreed to pay TI $70 million. The firm then turned around and sued Novellus and Tokyo Electron, who had supplied the equipment in 2002. After the jury decided there was no breach of contract, Linear moved for judgment notwithstanding the verdict. The company argued it had proved its case as a matter of law.
The trial court awarded $5.2 million to Novellus and $3.2 to Tokyo Electron Corp. in attorney fees. The appellate panel affirmed that attorney fee award because Linear would have been entitled to fees if it had prevailed.
A recent Legal Intelligencer story, “Western District Judge Slashes Attorney Fees in Patent Case” reports that a federal judge awarded less than half of the requested attorney fees for the defendant in an infringement case, despite repeated failures by the plaintiff to comply with local patent rules. U.S. District Court Judge Terrence F. McVerry of the Western District of Pennsylvania awarded Accuray Inc. $43,134 in attorney fees for work done by lawyers in Pittsburgh, New York, and California. The award was less than half of the more than $107,000 in fees the company was seeking and reduced the partners’ rates by more than $150 an hour.
Three lawyers and a paralegal submitted their fees. Madison Jellins is based in California and began her representation of Accuray in this case while she was a partner at Alston & Bird, where she charged $625 an hour. She has since moved to Helix IP, where she charges $550 an hour. She has 21 years’ experience. Janice Christensen is a senior associate at Alston & Bird New York with eight years’ experience and bills $525 an hour. In total, the attorneys and paralegals sought reimbursement of more than $107,000 for more than 211 hours worked.
In his legal analysis, McVerry relied on the court’s 2011 decision in NFL Properties LLC v. Wohlfarth, in which he had articulated the standards for fee petitions in the circuit. The analysis includes a lodestar calculation of reasonable rates in the relevant legal community multiplied by reasonable hours. As the hourly rate goes up, he said there should be a corresponding decrease in the amount of time required to accomplish a task because the attorney’s experience and expertise.
When it came to determining the reasonable hourly rate in Pittsburgh, McVerry said Accuray failed to submit evidence to prove the rates from the attorneys in all the locations are reasonable. He dismissed a belated submission by Accuray of an affidavit filed in a separate, unrelated case before the court – Air Vent Inc. v. Vent Right Corp. – in which an attorney said $350 an hour was a reasonable rate for experienced patent litigators in Pittsburgh.
Because Accuray failed to meet its burden of proof, McVerry said the court was left to determine a reasonable rate. He gave Jellins and Rydstrom a rate of $400 an hour, Christensen a rate of $250 an hour. “These rates are comparable to the rates used in NFL Properties for an associate attorney and paralegal with similar years of experience and well within the market range identified by" the attorney in Air Vent, said McVerry.
The following is a brief synopsis of the 42-page paper:
"This article is a comprehensive empirical study of class action settlements in federal court. Although there have been prior empirical studies of federal class action settlements, these studies have either been confined to securities cases or have been based on samples of cases that were not intended to be representative of the whole (such as those settlements approved in published opinions). By contrast, in this article, I attempt to study every federal class action settlement from the years 2006 and 2007. As far as I am aware, this study is the first attempt to collect a complete set of federal class action settlements for any given year.
I find that district court judges approved 688 class action settlements over this two-year period, involving nearly $33 billion. Of this $33 billion, roughly $5 billion was awarded to class action lawyers, or about 15% of the total. Most judges chose to award fees by using the highly discretionary percentage-of-the-settlement method, and the fees awarded according to this method varied over a broad range, with the mean and median around 25%. Fee percentages were strongly and inversely associated with the size of the settlement. The age of the case at settlement was positively associated with fee percentages. There was some variation in fee percentages depending on the subject matter of the litigation and the geographic circuit in which the district court was located, with lower percentages in securities cases and in settlements from the Second and Ninth Circuits. There was no evidence that fee percentage were associated with whether the class action was certified as a settlement class of with the political affiliation of the judge who made the award."
Posted:Monday, November 28, 2011
Categories: NALFA News
On November 17, 2011, NALFA hosted The Attorney Fees Conference at Loyola Law School in Los Angeles. The conference featured 3 sitting judges, top trial lawyers, and attorney fee experts covering a range of complex issues on attorney fee and legal billing matters in a number of litigation areas.
A recent Boston.com story, “Jackson Doctor’s Legal Bills Issue in Texas Court” reports that an insurer for the doctor charged in Michael Jackson’s death has asked a judge to rule it is not responsible for the physician’s legal bills. Medicus Insurance Co. argues that Dr. Conrad Murray’s medical malpractice policy doesn’t cover his defense costs because the case stems from alleged criminal wrongdoing, according to documents filed in state court in Houston. Murray’s policy, which was purchased roughly a month before Jackson’s death in June 2009, did not cover incidents involving general anesthesia, the company argues.
Medicus, which is based in Austin, claims it is not required to defend Murray’s medical license in three states. The insurer argues that scrutiny by Texas and California officials came as a result of allegations of wrongdoing in Jackson’s death, and that Nevada attempted to suspend Murray’s medical license because he was behind on child support payments, not for his medical work.
The court filings do not indicate how much Murray’s defense in the various cases may cost. The company’s lawsuit states that Murray’s policy only covers the doctor’s actions in Texas. Medicus filed its case after Murray asked the insurers to pay for his defense in the California court case and medical board hearings in other states, according to the suit.
Posted:Thursday, November 17, 2011
Categories: NALFA News
In today's litigation practice, the economics of attorney fees has never been more important. With the rise in fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area. Whether you're seeking to recover fees in court or to adjudicate a fee dispute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence. In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.
This seminar provides useful and practical information on the economics of attorney fees in complex cases. From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues, the Attorney Fee Conference 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas. This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees. The program includes a course book with over 100 pages of substantive material on attorney fees matters.
You will hear from top attorney fee experts, trial lawyers, and sitting judges on:
Court Awarded Attorney Fees in Prevailing Party Litigation
Class Action Litigation & Attorney Fee Awards
Attorney Fee Issues in Chapter 11 Bankruptcy Proceedings
Insurance Coverage Litigation: Who Pays the Legal Bills?
Reviewing Legal Bills for Reasonableness
Disputes Over Legal Fees: Litigation vs. Arbitration
In today's litigation practice, the economics of attorney fees has never been more important. With the rise of fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area. Whether you're seeking to recover fees in court, or adjudicate a fee dispute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence. In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.
This seminar provides useful and practical information on the economics of attorney fees in complex cases. From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues. The Attorney Fees Conference - 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas. This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees. This program includes a course book with over 100 pages of substantive material on attorney fees.
A recent BLT Blog post, “Prosecutors: Clemens’ Defense Team Not Entitled to Legal Fees” reports that the prosecutors in the Roger Clemens perjury case said today the former baseball pitcher’s defense team is not entitled to attorney fees from the government as a sanction for the botched prosecution. Clemens’ lawyers, including Houston’s Russell Hardin Jr., want Judge Reggie Walton of Washington federal district court to order the government to pay thousands of dollars in legal fees following the mistrial in July.
Walton terminated the trial after prosecutors presented evidence to jurors that the judge had previously restricted. Assistant U.S. Attorney Steven Durham said, “The government regrets this. This mistake does not entitle defendant to attorney fees and costs.” The prosecutors went on to say that “no trial is perfect” and that allowing the imposition of fees for errors “would mire the federal courts in collateral litigation about the ‘costs’ of mistakes.”
The prosecutors said Clemens’ legal team cannot invoke the Hyde Amendment, which provides some recourse for defendants in criminal cases, to recoup fees. Durham said Clemens was not the prevailing party and be cannot show the prosecution was “vexatious, frivolous, or bad faith government misconduct.”
Walton said in court he did not know whether he has the authority to order the government to pay Clemens’ defense team. “I think fundamental fairness obviously would require that he be reimbursed for those expenses, but sometimes fundamental fairness doesn’t bear out when it comes to legal issues that a court has to resolve,” Walton said.
A recent The Legal Intelligencer story, “Judge: Losing Plaintiff Must Pay $6.5 Mil in Attorney Fees, Costs” reports that a federal judge has ordered the losing plaintiff in a patent infringement case to pay the two defendants a total of $6.5 million in attorney fees and costs. U.S. District Judge Petrese B. Tucker in Pennsylvania rejected all but one of the plaintiff Checkpoint Systems’ objection to the fees and costs submitted by defendants Sensormatic Electronics Corp. and All-Tag Security. Checkpoint didn’t contest the reasonableness of the rates the defense lawyers charged or the time they spent on the case, but rather focused on what tasks the company should be forced to reimburse the defendants.
The defendants submitted their bills after Tucker found the case to be “exceptional” under Section 285 of the U.S. Code, which provides for the award of attorney fees in bad faith litigation. Checkpoint was ordered to pay All-Tag’s attorney fees and costs of $2.43 million. The company was represented by attorneys at Breiner & Breiner in Virginia and Reed Smith in Philadelphia. The award includes about $1.61 million in attorney fees, more than $191,000 in expenses, nearly $634,000 in prejudgment interest and $35.98 a day in post-judgment interest, according to the opinion.
Checkpoint was ordered to pay Sensormatic $4.15 million on top of the $91,000 it had already paid the company. The sum includes slightly more than $3 million in legal fees generated by Morgan & Finnegan and Pepper Hamilton, nearly $337,000 in expenses, about $806,000 in prejudgment interest and $55.63 a day in post-judgment interest. The award does not include a $50,000 litigation success fee owed by Pepper Hamilton under the firm’s fee arrangement with Sensormatic. Tucker concluded, “requiring plaintiff to pay the litigation bonus does not align with the purpose of the exceptional case finding, which is designed to compensate a party for money it was required to spend to litigate the case.”
Checkpoint also sought the exclusion of nearly $1.1 million of the combined attorney fees and costs from the two defendants because they were racked up on pieces of the litigation the defendants lost. Tucker said other courts have expressly rejected that argument, ruling the defendant would not have had incur any legal fees if the plaintiff had not engaged in “inequitable conduct.” Checkpoint also sought the exclusion of almost $8,000 in fees Sensormatic incurred related to the case but prior to the case filing, and more than $424,000 in fees and costs the company was billed without descriptions of the work performed. Tucker said other courts have found expenses for preparing for litigation to be included in these awards. She also pointed out that Sensormatic updated its filings regarding the $424,000 to reflect what work was done for those charges.
A recent New York Law Journal story, “Circuit Pares Emery Firm’s Fee in Favor of Plaintiffs’ Committee” reports that the long-running dispute over the allocation of attorney fees for attorneys who represented the families of those killed in the 1988 bombing of a plane over Lockerbie, Scotland, has been brought to an end by the U.S. Court of Appeals for the Second Circuit. The Second Circuit upheld a lower court’s decision directing Emery Celli Brinckerhoff & Abady to pay 20 percent of its fee from the settlement of the litigation against Libya, which was accused of orchestrating the bombing, to the plaintiffs’ committee.
Judge Thomas C. Platt in 2009 had rejected the argument of Richard Emery, the lead plaintiffs’ attorney, that the firm should not have to contribute that amount because several non-lead attorneys played no role in a decisive event that led to the settlement—the successful lobbying effort that led Congress to write a terrorism exception into the Foreign Sovereign Immunities Act (FSIA). But the Second Circuit in Emery Celli Brinckerhoff & Abady v. Plaintiffs’ Committee, said “We cannot conclude on this record that the district court abused its discretion in deciding that Emery’s work did not play a ‘substantially instrumental’ role in the FSIA’s amendment or the Libya settlement itself.”
Judge Platt originally dismissed the suit brought in 1995 by two survivors of victims against Libya and two Libyan officials, but the suit was reinstated after Congress changed FSIA to include terrorism exception, promoting a wave of suits that were settled when Libya offered to pay each of 269 decedents $10 million each. In the fee allocation dispute, Judge Platt first directed Emery Celli to pay 21.3 percent, or $1.44 million, of the contingency fee, to the plaintiffs’ committee, a portion equal to 3 percent of its clients’ settlement award. Emery appealed. The Second Circuit reversed saying Platt improperly relied on a settlement proposal in resolving the fee dispute.
On remand, Platt ordered the firm to pay 20 percent of its fee and Mr. Emery appealed again, but this time the circuit upheld Judge Platt. The court said “the question is whether the evidence that Emery’s lobbying conferred a substantial benefit on the class so much greater than that attributable to the other non-committee counsel, or so significant in relation to the efforts of the Committee, as to compel the conclusion that Emery is entitled to be excused, in whole or part, from the same ‘tax’ fairly imposed on other non-Committee counsel to compensate the Committee for its efforts.” And while the Emery firm stated that it had spent “2900 plus” hours prosecuting the case, “it offered no evidence, despite available billing records, regarding how much of that time was spent on lobbying activities.”
Mr. Emery said the 20 percent figure now comes to roughly $1.7 million.
A recent ABA Journal post, “Judge Orders Ogletree Deakins to Turn Over Records in Billing Dispute, But Protects Privileged Info” reports that an Arizona judge order Ogletree, Deakins, Nash, Smoak & Stewart to open its billing records in a legal fee dispute with Maricopa County. Judge John Buttrick ruled Friday that the county had a right to audit Ogletree Deakins billing records, but the law firm did not have to turn over privileged information. The lawyer who represented the law firm, John Doran, said the judge will have to appoint a special master to determine what information is privileged. The county attorney, Julie Pace, said that wouldn’t be necessary, however.
Ogletree Deakins billed the county for $5 million in legal work over several years for the sheriff’s office and former County Attorney Andrew Thomas. The county has refused to pay $1.1 million of the amount, and has alleged that the law firm improperly expanded its assignments. Ogletree Deakins had balked at turning over its billing records. The law firm had maintained the county may be trying to get confidential information about Thomas and Sheriff Joe Arpaio for federal and bar investigations.
Posted:Tuesday, November 01, 2011
Categories: NALFA News
In today's litigation practice, the economics of attorney fees has never been more important. With the rise in fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area. Whether you're seeking to recover fees in court or adjudicate a fee dipsute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence. In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.
This seminar provides useful and practical information on the economics of attorney fees in complex cases. From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues, The Attorney Fees Conference - 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas. This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees. The program includes a course book with over 100 pages of substantive material on attorney fee matters.
A recent NLJ story, “MGA’s Insurers Attempt End-Run Around Ruling Thwarting Bid for Fees” reports that four insurance companies have appealed a judge’s order that frustrated their attempt to snag a portion of the $141 million in attorney fees and costs awarded to Bratz doll maker MGA Entertainment Inc. in its fight against Mattel Inc. The insurers – National Union Fire Insurance Co. of Pittsburgh, Lexington Insurance Co., Chartis Specialty Insurance Co. and Crum & Forster Insurance Co. – paid legal costs for MGA, which obtained a $310 million judgment following a jury trial against Mattel over the copyright to the Bratz doll. The insurers seek reimbursement for MGA’s defense fees and costs, which they estimate at about $80 million.
U.S. District Judge David Carter in Santa Ana, Calif., denied the insurers’ motion to intervene in the Mattel case, finding the move “untimely” and “futile,” since “the insurers can no longer attempt to step into MGA’s shoes and directly recover reasonable attorneys’ fees from Mattel. And any claim for reimbursement of those fees from MGA would unduly prolong this litigation, which has been administratively closed and is now on appeal.” Furthermore, he said intervening would do nothing to ensure that MGA paid its insurers.
A recent BLT Blog post, “Rogers Clemens’ Lawyers Seek Fees After Mistrial” reports that the government should be forced to pay fees and costs associated with the botched obstruction and perjury trial of Roger Clemens, the defense attorneys for the former baseball pitcher told a judge in Washington. The attorneys, including Houston’s Russell Hardin Jr., said in an entitlement request (pdf) filed in Washington federal district court that trial judges have the inherent authority “to sanction conduct that abuses the judicial process.”
U.S. District Judge Reggie Walton declared a mistrial in July after prosecutors presented evidence to jurors the judge had previously restricted. Hardin and co-counsel Michael Attanasio of Cooley did not specify the amount they are seeking. The lawyers said they would submit a fee petition to the court documenting attorney fees and expenses incurred between June 25 and July 14. At a hearing in September, Walton said jury selection and several days of the trial itself “obviously cost Mr. Clemens a lot of money.”
Walton said in court last month he was unsure whether he has the authority to order the government to reimburse Clemens. “I think fundamental fairness obviously would require that he be reimbursed for those expenses, but sometimes fundamental fairness doesn’t bear out when it comes to legal issues that a court has to resolve,” Walton said.
A recent New Jersey Law Journal post, “N.J. High Court Mulls Federal Fee-Shifting Rule That Could Spell Doom for Rendine” reports that the New Jersey Supreme Court on Tuesday took up whether to adopt a U.S. Supreme Court ruling that sharply curtails trial judges’ power to enhance attorney fees in cases that might have never been filed but for fee-shifting rules. In two cases, Walker v. Giuffre and Humphries v. Powder Mill Shopping Center, the Appellate Division slashed enhanced fees under Perdue v. Kenny A. (pdf),which held that a trial judge may award such fees only in rare and extraordinary circumstances and not “on an impressionistic basis.” If those ruling stand, they would eviscerate the doctrine of Rendine v. Pantzer, which allows judges to enhance fees if it is demonstrated that the attorney worked on a contingency-fee basis, there was a financial risk absorbed by the attorney, and there was some question about the relative likelihood of success.
In Walker, a consumer fraud case, the plaintiff’s lawyer asked the Court to reinstate a $99,000 legal fee on the plaintiff’s $650 recovery. The appellate panel said Middlesex County Superior Court Judge Alexander Waugh failed to provide a sufficient analysis for his decision to enhance the plaintiffs counsel’s lodestar by 45 percent. In that case, plaintiff Mary Walker purchased a new car at Route 22 Nissan in 2001. The sales contract included a $140 vehicle registration fee that was $51.50 more than the Motor Vehicle Commission charges. Waugh ruled for the plaintiff, awarding damages of $654.50. Waugh rejected Nissan’s argument that no fees should be awarded to Walker’s attorneys since the case was over the same alleged practices in Cerbo v. Ford of Englewood and covered the same work.
In Humphries, a disability discrimination case, wheel-chair bound Bobbie Humphries alleged the parking lot did not have enough handicap parking spaces. In a partial settlement, Power Mill agreed to fix the ramps and improve striping and signage for handicap spots and pay Humphries $2,500. The parties left it up to the judge to decide the attorney fees for her lawyer, Edward Kopelson. Judge Deanne Wilson held Humphries was a prevailing party and awarded $62,235 in fees plus an additional $12,448, a 20 percent enhancement of the lodestar.
Walker’s lawyer on the Supreme Court appeal, Bruce Greenberg of Newark’s Lite DePalma Greenberg said the fee enhancement should be reinstated. Greenberg told the justices they were faced with a stark decision. “If Rendine is still good law, then Perdue is incompatible,” he said. Greenberg said it would be wrong to dismiss Rendine because it is an incentive for attorneys to take on matters that are risky at the outset. “Humphries is a good example of why enhancement is necessary. Architectural relief is equitable. Damages are rarely more than minimal, and plaintiffs are rarely able to afford counsel.”
A recent law.com story, “Firms Defend Their Work in Dodgers Bankruptcy Against Trustee’s Attack” reports that the U.S. Trustee overseeing the bankruptcy case of the Los Angeles Dodgers has objected to about $350,000 in legal fees and expenses, arguing that work billed by attorneys to obtain financing over the summer was “not reasonably likely to benefit” the baseball team. The Dodgers’ lawyers at Dewey & LeBoeuf (D&L) and Young Conaway, Stargatt & Taylor (YCST), in a response defended their actions, which they insisted ended up benefitting the Dodgers.
U.S. Trustee Roberta A. DeAngelis in Wilmington, Del. has objected to the fee request. The trustee has taken issue with a portion of the fees tied to a proposed financing arrangement designed to meet the team’s payroll. D&L submitted its fee application, seeking more than $1.7 million in compensation and about $32,000 in expenses. Of that, more than 2,000 hours, and $1.1 million, were spent on attempts to obtain immediate financing. In its fee application, YCST sought more than $267,000 in compensation and $41,000 in expenses. The proposed financing deal accounted for more than $104,000 or 256 hours.
Mark Kenney, trial attorney in the trustee’s office argued that D&L compensation should be reduced by $312,000 and YCST by about $41,000, “on account of services rendered that were not necessary to the administration of these cases.” He added that the work provided no benefit to the team.
Under the proposed financing arrangement, the Dodgers sought court approval for a $150 million deal from Highbridge Principal Strategies, a hedge fund. Under the terms of the deal, the Dodgers would have paid a $5.25 million closing commitment fee and $4.5 million deferred commitment fee. Major League Baseball countered with a competing offer that excluded such fees, the Dodgers attorneys continued to negotiate for the Highbridge deal, according to Kenney.
A recent NLJ story, “Teva Must Pay Pfizer $378K in Attorney Fees for Pursuing ‘Frivolous’ Claim in Case Over Viagra Patent” reports that a Virginia federal judge has slapped Teva Pharmaceuticals USA Inc. with an order to pay $378,285 of Pfizer Inc’s attorney fees for its litigation conduct during Pfizer’s case claiming Teva infringed its patent that underpins Viagra. Pfizer asked for, and U.S. District Court Judge Rebecca Beach Smith of the Eastern District of Virginia awarded fees based on the recent seminal ruling by the U.S. Court of Appeals for the Federal Circuit, Therasense Inc. v. Becton Dickinson & Co.
Pfizer sued Teva in March 2010 for infringing its patent for an erectile dysfunctrion treatment that is the basis for Viagra. In two different court filings, Teva claimed Pfizer committed inequitable conduct because its attorneys persuaded the U.S. Patent and Trademark Office to issue overbroad claims related to the treatment of erectile dysfunction in a “male animal,” even though it “disclaimed nearly identical subject matter in a related counterpart Canadian patent” in November 2002, just 17 days after the U.S. patent issued.
Although Pfizer would not be able to collect attorney fees if Teva prevails in its Federal Circuit appeal of the patent case, “this court is not persuaded that it should delay ruling on Pfizer’s motion,” Smith wrote in her opinion. Smith wrote that “Teva must have known that its inequitable conduct claim, far from being even remotely supported by clear and convincing evidence, was objectively baseless. Smith also found that “Teva’s continued litigation of its claim for inequitable conduct after the Federal Circuit’s decision in Therasense was “frivolous” and an exceptional case that warranted an award of attorney fees.
A recent NLJ story, “Judge Allows Orrick to Fire MGA Over Unpaid Legal Bills” reports that a federal judge has granted Orrick, Herrington & Sutcliffe’s motion to withdraw from representing MGA Entertainment Inc., maker of the Bratz doll, in its copyright dispute with Mattel Inc. On Sept. 23, Orrick moved to withdraw from representing MGA and its chief executive, Isaac Larian, citing $3.85 million in unpaid legal fees and other compensation associated with the Mattel case.
According to the motion, MGA had agreed to pay a monthly fixed amount of $550,000 beginning in December 2010 and turn over its insurance payouts to cover legal fees, costs and expenses. Instead, the motion said MGA has paid Orrick’s fees only twice – in January and March – and has not turned over insurance proceeds since May 2011. In addition, MGA owes at least $287,000 for outstanding costs and expenses, the motion said.
According to Orrick’s motion, the agreement between Orrick and MGA required that all unpaid fees and costs become due 60 days following the judgment, which would have been Oct. 3. MGA had no plans to pay the unpaid amounts to Orrick and has filed an arbitration action against the firm for more than $10 million, rendering a relationship impossible, the motion said.
The Equal Access to Justice Act (EAJA) is a fee-shifting statute that applies in litigation and certain adversary administrative proceedings against the federal government when no other fee-shifting statute applies. It is used mainly in social security and veterans disability cases and administrative law cases under the Administrative Procedure Act. It is used by small businesses as well, such as in government contract disputes.
As with most fee-shifting statutes, the fee applicant may receive an award when it has prevailed in the case. But EAJA is less generous than most fee-shifting statutes for a number of reasons, the most important of which are (1) that the government can avoid a fee request, even if it has lost, if it can show that its position on the merits was reasonable, and (2) fees are awarded at well below market rates.
Enter H.R. 1996. It would make EAJA a dead letter in many cases. First of all, it would make EAJA inapplicable unless the plaintiff is seeking monetary relief in the case. So, no EAJA fees for cases seeking to enjoin or otherwise alter government regulations or conduct. Second, under H.R. 1996, no fee would be awarded where the legal services were provided pro bono -- well that's most litigation filed by non-profits groups and lots of cases brought on behalf of people claiming that they were wrongfully denied government benefits.
That's not all. To learn about all of H.R. 1996's problems, read this testimony I gave today before a House Judiciary subcomittee. It's interesting how times change. The last time I testified on EAJA in 1994, it was thought that Congress might make EAJA better by making it more like other fee-shifting statutes. Now, the effort is to save it.