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Contingency Fee Percentages in Megafund Class Actions

August 21, 2020

Quinn Emanuel relies mostly on recent attorney fee scholarship and attorney fee jurisprudence in their recent $185M attorney fee request in the ACA class action.  Their fee request reads: 

In one recent case, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 991 F. Supp. 2d 437 (EDNY 2014), the Court conducted a survey of so-called “megafund’ cases and provided its thoughts on a graduated scale for attorneys’ fees.  The scale set forth in Interchange Fee suggests a marginal fee percentage at various levels if recover; as recoveries go higher, the marginal fee percentage decreases. Id. at 445.  Using that matrix, which is set forth below, the Interchange Fee Court awarded class counsel $544.8 million in fees out of a $5.7 billion settlement fund, representing a contingent fee of 9.56%.

$77M in Attorney Fees in $386M Bond Price Fixing Settlement

August 13, 2020

Recently a federal district court in New York granted final approval of a $386.5 million settlement, including over $77 million in attorneys’ fees, in a class action brought by investors alleging that various banks engaged in a conspiracy to fix prices of bonds issued by Fannie Mae and Freddie Mac.  Investors claimed that the banks were artificially inflating the value of new bonds, overcharging buyers and underpaying sellers.  The final order approves five settlements in the case. 

In ruling, the court considered the plaintiffs’ request for attorneys’ fees.  The court awarded over $77 million in attorneys’ fees from the settlement fund to plaintiffs’ attorneys for engaging in roughly 30,200 hours of work.  Attorneys also received approximately $1.7 million in expenses, plus interest on the fee and expense awards.  The attorneys’ fees represent 20% of the total settlement amount of $386.5 million.  In addition to attorneys’ fees, the court also approved $400,000 in service awards to the class representatives, with the lead plaintiff receiving $300,000.

Sixth Circuit Tosses Hourly Rates Citing ‘Community Market Rule’

August 12, 2020

A recent Law 360 story by Emily Field, “6th Circ. Wipes Out Atty Fee Award in Vita-Mix Blender Deal” reports that the Sixth Circuit vacated a nearly $4 million attorney fees award in a class action settlement over plastic flecks in Vita-Mix Corp. blenders, finding that a lower court used the wrong billing rates to determine the award.  The appeals panel said that in its circuit, a "community market rule" is used to calculate a reasonable billing rate.  Under that rule, the billing rate should not be more than what than what competent lawyers in the relevant community charge.  However, the lower court departed from Cincinnati rates, saying that the practice of law is increasingly more national, according to the opinion.

Attorneys have to show why they deserve to recover fees equivalent to those charged by out-of-town specialists, the panel said.  "And here class counsel would be hard-pressed to make such a showing since they are very much in-town attorneys," the panel said.  "Local lawyers litigating a case in a local courthouse should receive local billing rates.  The district court erred when it concluded otherwise."

The rates used by the lower court were based on both local rates and rates requested by the class counsel, attorneys from Markovits Stock DeMarco LLC, Finney Law Firm LLC and Goldenberg Schneider LPA, according to the opinion.  "As a result, a majority of the attorneys received rates of around $500 per hour and the most senior attorneys received rates exceeding $600 per hour," the panel said.

The appeals court also noted that class counsel attorneys with similar experience levels often requested very different billing rates, with some attorneys with less experience reporting significantly higher rates.  "An attorney with twelve years of experience reported a billing rate $450 per hour, while an attorney from the same law firm with nine years of experience reported a billing rate of $530 per hour," the panel said.  "Neither class counsel nor the district court explained these discrepancies — i.e., by unique expertise or the like."  The panel directed the lower court to recalculate the billing rates.

Federal Circuit Backs Cap on Attorney Fees in IDEA Cases

August 11, 2020

A recent Law 360 story by Andrew Karpan, “DC Circ. Backs Atty Fee Cap in Civil Rights Row” reports that the D.C. Circuit rejected the efforts of attorneys representing hundreds of parents in a civil rights case to collect over $5 million in fees from Washington, D.C., and ruled that a congressional cap that strictly limited the amount they could collect in those cases was perfectly valid.

The opinion, authored by U.S. Circuit Judge Gregory Katsas, found that an appropriations rider Congress passed in 2009 did not violate the Takings Clause of the Fifth Amendment nor was it an illegal intervention into the court's power to award fees.  The rider expressly forbade Washington from paying more than $4,000 in attorney fees in any single civil rights case filed under the Individuals with Disabilities Education Act, which mandates special education services for kids.

Crucially, Judge Katsas wrote, Congress started limiting the city's ability to pay out legal fees in IDEA cases in 1999, which was before the parents in these cases filed suit.  "The fee cap does not interfere with any reasonable expectations, for each of the awards at issue was entered at a time when Congress had already limited the District's ability to pay IDEA fee awards," the judge said.  The ruling covered eleven separate IDEA cases, all of which preceded 2009 and all of which successfully alleged that Washington didn't provide a special needs education to students who qualified for one.

Back in 2015, a magistrate judge calculated the city's tab in those cases at about $3.7 million, along with another $1.3 million in interest, according to Tuesday's ruling.  Two years later, a D.C. federal judge used the cap to trim the fee award to $220,000 but left the interest, which had notched up to $1.4 million by then.  Both the parents and the city challenged that ruling.

Congress, which provides funding to public schools in Washington through the District of Columbia Appropriations Act, had every reason to be concerned about using that budget to pay lawyers in IDEA cases, Judge Katsas observed.

The city's "long struggle" to comply with IDEA was costing it $10 million a year by the time Congress began limiting how much of that funding could be spent on fee payments in those cases, the ruling noted.  An appropriations rider passed in 2009 had instituted the permanent $4,000 cap on the awards.

The parents argued, in part, that the rider violated their rights to fees that a court had awarded them but the panel said shaving a fee award isn't "a per se taking."  Deciding to trim an award that had already been issued didn't misappropriate the powers of Congress either, the panel added.  Lawyers for the parents should also have known they wouldn't be able to collect more than $4,000 a case because the initial rider dated to 1999, Judge Katsas added.

But in addition to ruling that the cap was perfectly legal, the D.C. Circuit also scratched the $1.4 million in interest the parents had won.  "This principle is as old as the Republic," Judge Katsas mused on this point, citing a ruling the Supreme Court made in 1789, in Hoare v. Allen, and in which the court similarly scratched the interest on debts owed to a British creditor during the Revolutionary War, as the Constitutional Congress had expressly banned paying debts to British subjects.

Similarly, Judge Katsas wrote, Congress had banned Washington from paying lawyers in IDEA cases fees above a certain amount: interest couldn't be collected on fees above that amount either.  The panel sent the award back to a lower court to recalculate using the capped award instead.  The D.C. Circuit ruled on an IDEA fee bid in a different case just last year, when a panel initially rejected a nearly $7 million fee award in a class action suit leveled under that law, ruling in that case that a lower court had used an invalid matrix for calculating fees.

NALFA Releases 3 Models of Growth for Litigation Hourly Rates

August 10, 2020

NALFA conducts custom hourly rate surveys for law firms, corporate legal departments, and government agencies.  Our hourly rate surveys provide our clients with the most current and accurate hourly rates within a given geography and practice area.  Starting this year, 2020, NALFA is conducting hourly rate surveys in 5 key practice areas.  These billing rate surveys show the current average hourly rate range for both plaintiffs' and defense counsel at partner and associate levels.

NALFA has released 3 different models of growth (linear, logarithmic, and logistic) for hourly rate ranges in litigation.  These growth curves are based on the universally accepted principle that hourly rates increase with experience (i.e. partner rates are greater than associate rates).  Linear growth is consistent straight-line growth.  Generally, logarithmic growth rises sharply then levels off.  Generally, logistic (S-shaped) growth starts slowly, rises sharply, then levels off.  We did not use exponential (J-shaped) growth because an ever-increasing, very steep curve does not fit hourly rate billing economics.

“These growth models do not account for the factors that effect hourly rates such as geography, practice area, party to litigation, complexity of case, size of law firm, and economics that our surveys do,” said Terry Jesse, Executive Director of NALFA.  "Those variables were not a part of this purely mathematical exercise," Jesse emphasized.

From these growth curves, we learn 2 key concepts:

1.  Logarithmic growth seems to represent the economics of hourly rates and the career span of litigators the best.  Generally, the growth starts rapidly, then increases slower, then eventually levels off.  Here, the highest rate of billing growth takes place in early-career.

2.  Logistic growth is another model that has some appeal to the economics of hourly rates and the career span of litigators.  Generally, the growth starts slowly, then increases rapidly, then eventually levels off.  Here, the highest rate of billing growth takes place in mid-career.



The parameters of these models include the number of years continuously practicing litigation (12 data points), plotted along the x axis and hourly rate ranges (20 data points) along the y axis.  The litigation experience data sets range (less than 2 Years-35+ years) has a variance of 1 year to 5 years.  The hourly rate ranges (less than $200-over $1,200) include a variance of $50 and $100.