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Judge Reduces Fees, Offers Primer on Legal Billing

September 13, 2017

A recent New York Law Journal story by Jason Grant, “Judge Slashes Fees, Offers Primer on Billing, in Cookbook Case,” reports that a New York federal judge has more than halved attorney fees due to an Ethiopian cookbook author who was wrongly sued for copyright infringement, finding that her defense counsel billed "excessive" hours for often straightforward work.

In July, U.S. District Judge Brian Cogan of the Eastern District of New York lambasted the plaintiff, author of a different Ethiopian cookbook, for bringing "unreasonable" claims in Schleifer v. Berns, 17-cv-1649. And he awarded an as-yet-undetermined amount of attorney fees to the defendant.

Cogan turned his sights to the defendant's counsel.  He criticized Berns' lawyers at Kushnirsky Gerber, calling their requested fees "excessive" and at times "redundant," and he chopped their itemized request for $29,365 in attorney fees down to $13,055 in attorney fees (plus $316.15 in costs).  He went through the categories and tasks billed, point by point, while explaining why the hours were often too high.  Underlying his reasoning was the notion—as explained in the July dismissal decision—that the plaintiff had brought a particularly flimsy action.

"The number of hours expended [by Kushnirsky Gerber]—83.9 hours—is too many in light of the weakness of plaintiff's case and counsel's experience with copyright cases," Cogan wrote before analyzing the amounts billed.  He also said, "the court continues to be guided by the overarching purposes of the Copyright Act, that is, compensation and deterrence," and noted that "the test is whether the plaintiff 'spen[t] the minimum necessary to litigate the case effectively,'" quoting Simmons v. N.Y. City Transit Auth., 575 F.3d 170, 174 (2d Cir. 2009).

Cogan wrote that, "First, it seems inherently excessive and redundant that defendant [counsel at Kushnirsky Gerber] expended 6.5 hours drafting the pre-motion conference letter in anticipation of the motion to dismiss, 33.7 hours on the motion to dismiss itself, and then 19 hours on the reply brief, for a total of 59.2 hours."

"The minimum necessary hours to have effectively litigated the motion to dismiss in this case cannot be nearly 60 hours when the case was so patently deficient," he continued, then added, "The research necessary to draft the pre-motion conference letter should certainly have transferred to the motion to dismiss and reply.  With much of the legwork already done ... the motion itself should not have taken more than 10 to 15 hours."

Continuing his breakdown, Cogan also wrote that "even though plaintiff filed an amended complaint after defendant filed her motion to dismiss, the changes to the amended complaint were so minimal that the court in fact saw no need to reinitiate motion practice.  Accordingly, the application for 19 collective hours on the reply is excessive."  In the end, Cogan ruled that "no more than 25 hours" total should be allotted to time spent on the pre-motion conference letter, motion to dismiss and reply.

He also wrote that "it is similarly unreasonable that counsel spent 3.5 hours conducting a 'Preliminary Case and Pleadings Review,'" when the complaint was only seven pages.  "Nor is it clear from the itemization which portions of time were preliminary 'case review' and which were 'pleadings review.'  Because the itemization fails to apprise the court properly … the court will not allow fees for this task," Cogan continued, adding, "Nor will the court permit fees for 1.2 hours of 'court correspondence,' as the only court correspondence on the docket (apart from the pre-motion conference letters) is a barely one-page letter asking the court to adjourn the initial status conference."

Cogan concluded by writing that Kushnirsky Gerber's final category of billing, 12 hours for preparing its fees application to him, was also too many.  "Half of the application is a general recitation of counsel's qualifications and a description of their firm and cases, and counsel's declarations … The remainder of the fee request includes the printouts of the itemizations and billing records, counsel's resumes, defendant's own declaration and her documented expenses, all of which would have (or certainly should have) been collated and put together by support staff," he wrote.

Class Action Fee Awards Shaped by Circuits and Benchmarks

September 12, 2017

A recent NLJ article by Amanda Bronstad, “Class Action Fees Shaped by Circuit, Benchmark,” reports on attorney fee awards in class action litigation.  The article reads:

When it comes to attorney fees in class actions, it pays to be in the U.S. Court of Appeals for the Seventh Circuit — and it's tough to get what you want in the Second and Ninth circuits.  That's according to two leading academic research reports that federal judges increasingly cite in determining how much in fees to award plaintiffs attorneys who work on contingency.

New York University School of Law professor Geoffrey Miller and the late Theodore Eisenberg, a professor at Cornell Law School, authored one of the studies.  The second is a 2010 study conducted by Brian Fitzpatrick, a professor at Vanderbilt University Law School.

Both reports found that federal judges tend to determine a percentage of the settlement amount, then crosscheck it against the hours that plaintiffs attorneys spent multiplied by a reasonable hourly rate — called the lodestar.  They also found that as the size of the settlement goes up, the percentage of fees that judges award to plaintiffs attorneys goes down.  That's particularly true when it comes to the largest class action settlements.

But a lot depends on what circuit of the U.S. court of appeals the case ends up.  Here are some key points from the studies:

Fee awards aren't evenly spread out: The vast majority of class action fee awards come in the Second, Ninth, First and Seventh circuits, Fitzpatrick said.  He attributed much of that to the larger cities in those circuits — Boston, New York, Chicago, San Francisco and Los Angeles.  "The lawyers are there, the defendants are often there, and I think judges with a lot of experience are often there, so that attracts these cases," he said.

Benchmarks might matter: The Ninth Circuit is one of the few circuits with a benchmark that judges cite in determining fees — 25 percent based on its 2011 holding in In re Bluetooth Headset Products Liability Litigation.  Fitzpatrick said "that really limits the number of times a court would award more than 25 percent.  It's working as a ceiling in the Ninth Circuit." Miller said having a benchmark didn't seem to matter when it comes to lower fee awards — his report found the Ninth Circuit stuck to 25 percent for the most part.

The Second Circuit has experience: The Second Circuit handled nearly a third of all the cases, according to the Eisenberg/Miller report.  Many are securities class actions.  The circuit doesn't have a benchmark, but it did set forth six factors for judges to consider in a 2000 ruling called Goldberger v. Integrated Resources.  It's the circuit in which a judge is most likely to reject the original fee request made by lawyers.  "It's a hard road to convince a district judge in the Second Circuit that your fee request ought to be accepted without question," Miller said.

One of the most generous circuits is the Seventh: That's due in large part to a 2001 decision in In re Synthroid Marketing Litigation, in which the Seventh Circuit downplayed the significance of using the percentage of the settlement fund by directing judges to look at market rates when assessing the lodestar component of an attorney fee request.  "They have said clearly you should not lower the percentage over the entire amount of the settlement," Fitzpatrick said.  "You should do it on a marginal basis.  I see more district courts doing it in the Seventh Circuit than anywhere else because of those admonitions."

National Law Journal Cites NALFA Program

September 11, 2017

A recent NLJ article by Amanda Bronstad, “Judges Look to Profs in Awarding Lower Percentage Fees in Biggest Class Actions,” quotes NALFA’s CLE program, “View From the Bench: Awarding Attorney Fees in Federal Litigation” in an article on class action fee awards.  The full article reads:

After reaching a $101 million class action settlement to resolve lawsuits brought over a chemical spill that contaminated a West Virginia river, the plaintiffs lawyers asked a federal judge to grant them 30 percent of the fund as contingency fees.

The judge praised their work but found that fee request to be just too high.  "Even without accounting for fund size, the empirical literature clearly demonstrates that a 30 percent fee is higher than that awarded in the vast majority of class actions," U.S. District Judge John Copenhaver of the Southern District of West Virginia wrote in a July order.  "Courts have found through empirical analysis that larger common funds typically have smaller percentage fees."

The empirical analysis Copenhaver referred to came from the findings of two leading academic reports — both cited in the opinion — that federal judges across the country have used for the past decade to guide them in decisions about attorney fees in some of the nation's largest class action settlements.

New York University School of Law professor Geoffrey Miller and the late Theodore Eisenberg, a professor at Cornell Law School, wrote one of the studies, an updated version of which is set to be published this year.  The second is a 2010 study conducted by Brian Fitzpatrick, a professor at Vanderbilt University Law School.

Both studies have provided critical assistance for federal judges, particularly when it comes to class action settlements of $100 million or more.  The concern for those on the bench is how to award plaintiffs lawyers for their work without granting them excessive fees and leaving class members in the lurch.

"Judges do take the role seriously," said William Rubenstein, a professor at Harvard Law School whose highly regarded "Newberg on Class Actions" has cited the Eisenberg/Miller and Fitzpatrick studies in his 11-volume treatise, alongside data he has used from a former publication called Class Action Attorney Fee Digest.  "And they understand they're a bulwark against excessive fees from the class members' money."

How to determine the exact amount has often been more art than science.  In a webinar earlier this year hosted by the National Association of Legal Fee Analysis, U.S. District Judge David Herndon of the Southern District of Illinois, who has handled several of the nation's largest mass torts and class actions, said a lot depends on the amount of recovery to the class.

"It just depends … on the case and what the benefit is that the lawyers have achieved by their work," he said at the webinar, called "View from the Bench: Awarding Attorney Fees in Federal Litigation."  "If it's reasonable, then you can approve the contingency, but if it's pretty far out of whack maybe you've got to have the lawyers justify the difference or perhaps go with the lodestar.  There are a lot of things to look at."

And there are outside concerns as well.  Judges have increasing scrutiny from appeals courts, which often take up the petitions of objectors to class action settlements, Rubenstein said.  "Public policy generally cautions against awarding too high a fee," Copenhaver wrote in the West Virginia water case.  "The court's challenge is to award a fee that both compensates the attorneys with a risk premium on their skill and labor and avoids a windfall."

Last month, plaintiffs lawyers in the case submitted a renewed motion for settlement approval that lowered their fee request to 25 percent — more in line with what Copenhaver had found was reasonable.

Judges often look to previous case decisions, or their own experience, to determine what amount is appropriate to award lawyers in class actions.  They also get a list of cases from the lawyers — but those often come with vested interests.  For a long time, there was limited statistical data on what other judges had done.  That's where Fitzpatrick said he and the Eisenberg-Miller team tried to give judges a starting point.

"We tried to give the judges the full data instead of just leaving them at the whim of the cherry-picked cases the lawyers give them," he said.  "The judges don't have to replicate what other courts have done, but they have the opportunity to stick within the mainstream of what their colleagues have done if they want it now that they have the power of empirical studies."

Miller said he came up with the idea while serving as an expert witness in cases.  When his first report with Eisenberg published in 2004, one year before the U.S. Class Action Fairness Act passed, the political atmosphere was rife with criticism about attorney fees in class actions.  At the time, only one group had looked at the data — but it wasn't really a controlled study.

"On the issue of fees, the data was there but hadn't been developed," he said.  Eisenberg wasn't an expert on class actions, Miller said, "but he was the leading person probably in the world who was doing empirical studies of legal material."  Their report looked at published data of class action settlements from 1993 to 2002.

By the time of their second report in 2009, which expanded the data through 2008, Miller and Eisenberg had some competition.  Fitzpatrick thought that their report, like those before it, relied too much on "ad hoc" data that focused primarily on bigger, published decisions.  "I really endeavored to find every last one to have the complete and representative picture," he said.

He came up with a wider range of class action settlements within a shorter period of time — just 2006 and 2007.  Combined, both reports have been cited by judges more than 100 times, Miller said.  And they often involve the biggest settlements in dollar amount, he said.  "The issue is that there aren't as many cases," he said.  "There's less data. And that puts an additional premium on getting what data there is, so that's one reason judges look to this research in big cases."

Another came in 2012, he said, when U.S. District Judge Lee Rosenthal of the Southern District of Texas, the former chairwoman of the Judicial Conference Committee on Rules of Practice and Procedure, endorsed both studies in a case called In re Heartland Payment Systems Customer Data Security Breach Litigation: "District courts increasingly consider empirical studies analyzing class-action-settlement fee awards to set the appropriate percentage benchmark or to test the reasonableness of a given benchmark," she wrote.  "Using these studies alleviates the concern that the number selected is arbitrary."

Economies of Scale

Both studies have come out with slight differences in their specific findings.  But they came to the same conclusions: The vast majority of judges award fees based on a percentage of the total settlement amount — then cross-check that amount against the total number of hours the lawyers billed multiplied by the hourly rate, referred to as the lodestar.  There's a good reason for that trend.

"It's economies of scale," Miller said.  "Judges understand that to get a $1 billion settlement is not 1,000 times harder for an attorney to get a $1 million settlement.  It's a lot harder, but not 1,000 times harder."

Herndon, in the webinar, said that's just common sense.

"If they got a third of $1 billion, and compared to their lodestar, it would be an astronomical per hour figure," he said.  "There's some common sense in doing something like that, and I don't really have a particular feeling one way or the other, but I think there's certainly authority in the law for doing it."

In fact, many judges who cite the Eisenberg-Miller and Fitzpatrick reports look specifically to the data as it pertains to the size of the settlement in front of them and what the case is about.

But Fitzpatrick questioned whether judges were doing the right thing in lowering the percentages as the settlements get bigger.  "I think the judges are responding to perception when they do that and they're not responding to good economic policy analysis," he said.  "Because why would we want to punish lawyers with lower percentages for getting their clients more money?"

Not all judges agree with the conclusions made by the professors, who sometimes go up against each other as paid experts in individual cases.  In a $415 million settlement of "no poach" claims involving high-tech workers, U.S. District Judge Lucy Koh of the Northern District of California weighed Fitzpatrick's report against the Eisenberg/Miller study in awarding $40 million in fees.  In that case, Fitzpatrick was a paid expert for the lead plaintiffs attorneys, while Rubenstein cited the Eisenberg-Miller report in a declaration filed on behalf of one of the lead firms that had submitted a separate fee request.

"The court finds the Eisenberg & Miller study more persuasive than the Fitzpatrick study," Koh wrote in a 2015 order, concluding that the "length and large sample size of the Eisenberg & Miller study suggest that its results are entitled to greater weight."

Fitzpatrick said he's working on an updated report, likely to be drafted next year.  "Whenever I hear from these judges, they say the same thing: We love your study but we need more recent data," Fitzpatrick said.  "So that's what I'm trying to give them."  But gathering the data takes a lot of time and money, he said.  He's hired research assistants to code all the data.

The latest Eisenberg-Miller report, co-authored with research scholar Roy Germano at NYU's law school, uses data through 2013.  Without Eisenberg, who died in 2014, Miller said he's not certain he'll keep publishing the report.  "I don't think I'll do it anymore," he said. "It is a lot of work."

$925M in Fees in Madoff-Related Matter

September 10, 2017

A recent American Lawyer story by Roy Strom, “Madoff-Related Fees Grow to $925M for Baker & Hostetler,” reports that last month, a federal judge approved a nearly $36 million payment for four months of work by the firm, bringing Baker & Hostetler’s total fees for the matter to just shy of $925 million.

This week, Picard also reached the largest settlement related to the dissolution of Bernard L. Madoff Investment Securities LLC (BLMIS) since 2011—a $687 million payout from an Irish investment firm that will bring the total recovery for Madoff victims to about $12.7 billion, or about 72 percent of the $17.5 billion that Picard states that Madoff’s investors lost.

The settlement this week with Thema International Fund PLC amounts to 100 percent of the money the Dublin-based fund received from BLMIS for six years prior to the New York fraudster’s collapse, Picard said in a court filing.  It will raise the fund for victims by 5.7 percent.

Meanwhile, the Madoff matter has managed to bolster Baker & Hostetler’s finances for years.  The firm’s gross revenue has grown 15 percent since fiscal 2008, the year before the start of its Madoff work.  Profits per partner at the Cleveland-based Am Law 100 firm rose to $965,000 last year, up 42 percent from 2008.  And revenue per lawyer, at $700,000 last year, is up 22 percent since 2008.

Compared to its Am Law 100 peers, Baker & Hostetler has risen to No. 78 from No. 98 in revenue per lawyer for fiscal 2008.  The firm’s profits per partner ranking last year was No. 76, up from No. 96 almost a decade ago.  Baker & Hostetler’s partner profit numbers are somewhat difficult to compare over that timeframe, however.

Last year the firm restructured its partnership to provide some equity to all partners, which resulted in a slight uptick in the profits per partner metric by lowering the number of “equity partners” under The American Lawyer’s definition.  An equity partner is someone who receives 100 percent of compensation from shares in a law firm.

The latest payment to Baker & Hostetler in the BLMIS matter is for 68,341.3 hours worked by its lawyers, including 24,539.7 by partners and of counsel and 43,801.6 by associates.  The team bills at a blended rate of $515.81, with the highest hourly rates being the $998 earned by Picard and partners David Sheehan and David Rivkin.  Those rates, along with all others, are then discounted 10 percent.

Picard and Baker & Hostetler are not paid from the Madoff victims’ fund, but rather from the Securities Investor Protection Corp. In June, Picard’s team reached two other settlements totaling about $370 million, bringing the total recovery for victims in the past four months to over $1 billion.

“The Thema International settlement is the latest in a series of highly successful negotiations and mediations,” said a statement by Baker & Hostetler partner Oren Warshavsky, who along with Sheehan joined the firm’s New York office in 2008 from Troutman Sanders.

Sheehan’s hire, as previously noted by The American Lawyer, proved to be a critical factor in Baker & Hostetler getting the call for its Madoff work.  Sheehan had previously worked with Picard at another firm, and when Picard was appointed liquidation trustee for BLMIS in late 2008, he called on Sheehan to advise.  Baker & Hostetler hired Picard from New Jersey’s Gibbons shortly thereafter.

Insurer’s Fee Request Challenged by Film Producer

September 8, 2017

A recent Law 360 story by Rick Archer, “Producer Fights Insurer’s $1.9M Fee Bid in Film Accident Row,” reports that the producer of an Allman Brothers biopic objected to a demand it pay $1.9 million in attorneys’ fees for its unsuccessful attempt to win more insurance coverage for a fatal filming accident, saying it had done nothing worthy of sanction.

Film Allman LLC denied accusations by New York Marine and General Insurance Co. Inc. that the producer’s suit seeking additional coverage for the 2014 accident had been filed in bad faith, saying it had good-faith arguments for all its claims it was owed more coverage than New York Marine provided and should not be expected to pay the insurer’s claimed legal fees.

“Film Allman has a good faith belief in each of its claims, and there is evidence to support them.  Moreover, even if New York Marine is unhappy about some of the results, there is absolutely no evidence that Film Allman did anything for an improper purpose such as harass New York Marine or to cause undue delay or cost,” it said.

An Occupational Safety and Health Administration investigation showed Film Allman didn’t warn crew members working on the film “Midnight Rider” in February 2014 that they were filming on live train tracks or that CSX had denied a filming permit for the tracks prior to an accident on the first day of shooting that killed 27-year-old Sarah Jones and seriously injured several other workers.

In March 2015, the film’s director, assistant director and executive producer, respectively, pled guilty to, was found guilty of and entered an Alford plea to charges of involuntary manslaughter and criminal trespass.  A defendant entering an Alford plea acknowledges that the prosecution has the evidence necessary to prove guilt beyond a reasonable doubt, but nevertheless maintains that he is innocent.  New York Marine provided a defense to Film Allman, paid $5 million of a $6.5 million settlement to Jones' family, and then bowed out because policy limits were exhausted.

Film Allman filed suit against New York Marine in September 2014.  In May U.S. District Judge Otis Wright II ruled New York Marine was entitled to bow out under the terms of the commercial general policy, despite the fact that there are other suits remaining.  In December he had found coverage under a separate motion picture producers policy was barred by a criminal acts exclusion.  In August, New York Marine moved for more than $1.9 million in attorneys’ fees, claiming that as there was no dispute of either the criminal convictions or the policy limits, Film Allman had brought the suit in bad faith.

“As reflected by the record in this case, including in the court’s summary judgment rulings, Film Allman’s claims were fundamentally lacking any legal or evidentiary support and were, instead, based on assertions that it knew were false,” New York Marine said.

Film Allman, however, argued it did have good-faith arguments that Jones’ death did not trigger the exclusion because it had evidence there was genuine confusion over whether permission had been granted to film on the tracks and the death was not directly caused by an intentional criminal act.  It said it also had good-faith arguments that California insurance law required New York Marine to defend it from all of the suits arising from the accident, regardless of the policy limit.

“New York Marine asserts that if Film Allman had only accepted the fact that there was no coverage, it could have saved New York Marine all of its exorbitant litigation expenses.  But the same could be true of any policyholder seeking defense or coverage that an insurer denies,” it said.

The case is Film Allman LLC v. New York Marine and General Insurance Co. Inc., case number 2:14-cv-07069, in the U.S. District Court for the Central District of California.

$32M More in Fees in Madoff Bankruptcy

September 4, 2017

A recent Law 360 story by Ryan Boysen, “Baker Hostetler Gets $32M More in Fees in Madoff Bankruptcy,” reports that BakerHostetler will receive $32 million for four months of work managing the...

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