A recent New Jersey Law Journal story, “Courts Won’t Upset Settlement or Fees in Dentists’ Suit Against Horizon,” reports that the New Jersey Supreme Court will not disturb a class action settlement between Horizon Blue Cross Blue Shield of New Jersey and about 17,000 dentists alleging improper claims processing and violations of state prompt payment laws. Nor will the court consider a request to enhance counsel fees, which leaves plaintiffs’ law firm, Mazie Slater Katz & Freeman, about $190,000 short of what it was seeking.
The court’s April 8 decision, declining to hear appeals in Kirsch v. Horizon, leaves intact the 2012 agreement by which Horizon sets aside $2.85 million and makes maximum payments of $167 to each class member. The company also agrees to adopt business initiatives designed to increase transparency in claims payments, reducing the dentists’ administrative office overhead and improve customer relations.
The settlement was reached after seven years of litigation. As part of the agreement, Horizon also agreed to set aside a maximum of $2.5 million for counsel fees. Essex County Superior Court Judge Paul Vichness approved Mazie Slater’s application for 3,035 hours at $600 per hour, totaling $1.821 million. He added another $488,713 in costs, bringing the total to $2,309,713.
Mazie Slater then sought a 25 percent enhancement amounting to $455,250, of its base fee, meaning that the $2.5 million set aside by Horizon for counsel fees and costs would have been exhausted. Vichness approved the enhancement but objectors appealed.
But the appeals court overturned the fee enhancement. Citing the Supreme Court’s ruling in Rendine v. Pantzer and Walker v. Giuffre, the judges said contingency enhancements are “only available in those cases that our Legislature has selected for statutory fee-shifting so as to achieve its broader public purposes of attracting counsel to socially beneficial litigation.” This was not such a case, they said.
A recent The Recorder story, “Judge Awards Fees in Apple Warranty Litigation,” reports that lawyers who sued Apple Inc. for denying warranty coverage will receive $13.25 million in attorney fees, a federal judge ordered Monday, rejecting Apple’s arguments that they deserve far less. Plaintiffs’ counsel had asked for $15.9 million, or 30 percent of the $53 million settlement. But on Monday, U.S. District Judge Richard Seeborg awarded the standard 25 percent used as a benchmark by the Ninth Circuit.
Apple Inc. called the original fee request breathtaking, and argued plaintiffs’ lawyers shouldn’t receive more than $8.78 million. “Apple will pay the same amount into the fund no matter how much plaintiffs are awarded but cannot sit on the sidelines and tacitly endorse such an excessive request.” Wrote Morrison & Foerster partner Penelope Preovolos and George Harris in Apple’s brief. “Apple prefer that the settlement fund be spent on compensating the class members, not creating a windfall to the lawyers.”
The case was filed on behalf of iPhone and iPod purchasers alleging they were improperly denied warranty coverage because of what plaintiffs contended was faulty liquid submersion indicator. The two sides reached a settlement in April of last year, before the filing of any dispositive motions and just five depositions—facts Apple’s lawyers pointed to in arguing for lower fees.
But plaintiff lawyers said the settlement is extraordinary and deserving a five percent bump up from the 25 percent. Class members will receive an average of $211 per device—slightly more than the average value of replacing the devices. “You don’t see that very often,” said Jeffrey Fazio of Fazio Micheletti in San Ramon, one of the plaintiffs’ lawyers in the case. “We essentially recovered more than what they could have recovered with 100 percent victory at trial.”
In theory, the goal of a class action objector is to obtain a greater monetary benefit to class members. This can be done in one of two ways: (1) increase the overall amount of the settlement; or (2) decrease the amount of attorney fees portion of the settlement. But professional objectors almost never try to increase the size of the overall settlement and almost always try to decrease plaintiffs' attorney fees. Why is that?
The current class action objector model is broken. At NALFA, we’re advancing the following 10 reasons to oppose class action objectors:
- Professional Objectors Troll for Cases: No one hires professional objectors. They decide themselves what cases they want to appoint themselves to. They seek out these cases by trolling the internet for class action cases and class members.
- Professional Objectors Are Not Qualified Experts: Professional fee objectors are not judicially qualified experts. They are not qualified attorney fee experts or experts on class action settlements. Professional objectors are not qualified experts on the reasonableness of attorney fees or on class action settlements. They have no expert witness or special master qualifications or credentials.
- Professional Objectors Are Bias: Professional objectors are anti-class action. They are critics of class action litigation and cy pres awards. They hold a bias against the very nature of class actions. With such a bias against class actions from the outset, class action settlement objectors cannot be viewed as independent or objective in their settlement analysis. With such an axe to grind against class actions, professional objectors rarely work in good faith.
- Professional Objectors Lack Complex Mass Tort Experience: Professional objectors lack experience in large, complex class action cases. Professional objectors have not negotiated a large class action settlement for the plaintiffs’ or defense bar. In short, their objections are not peer review driven. Having someone object to a class action settlement, without sufficient settlement experience themselves, is like having a pre-med student criticizing a heart surgeon.
- Professional Objectors Do Low-Quality Work: Dozens of courts have referred to the work of professional objectors as “meritless,” “frivolous” and “wasteful.” Professional objectors file very general, low-grade, canned or boilerplate objections. Indeed, broad statements about the impermissibility of excessive class counsel fees supported by citations to a few cases can be pasted into nearly any brief challenging a settlement. Objector briefs are often cobbled together from stock parts. They create their arguments out of whole cloth. Indeed, professional objectors often resort to personal attacks against class counsel. They cherry-pick their information and reason outside the mainstream of class action jurisprudence.
- Professional Objectors Interfere in the Settlement Process: Professional objectors interfere with private parties negotiating a class action settlement in good faith. Their interference in the settlement process clog the courts and delay payments to class members.
- Professional Objectors Hide Behind Non-Profit Groups: You know you’re a professional objector if you’ve established a non-profit group to provide you with a greater sense of creditability in class actions. These groups provide objectors with a thin veil of legitimacy. These non-profits groups help shield their private interests. Examples of these groups include Center for Class Action Fairness, Class Action Fairness Group and Class Action Watch.
- Professional Objectors Demand A Payoff: Professional objectors make money by holding up class action settlements. Call it blackmail, extortion or a shakedown, professional objectors demand a payoff to withdraw their objections and appeals. Professional objectors hijack the settlement process by strategically gaming the class action system not for the benefit of class members, but for their own financial gain.
- Professional Objectors Are Driven By Personal Interests: Aside from money, professional objectors are driven by media attention and/or a political cause. Professional objectors are driven by their own personal interests, not the interests of class members. With very little work, professional objectors get their name attached to large, successful class action cases. These self-promotional objectors enjoy the media attention that these cases bring and take credit for settlements they had nothing to do with. One would expect an objector who seeks to provide a greater monetary benefit to class members to have ties to consumer interest groups. In fact, it’s just the opposite. Professional objectors have ties and affiliations to the tort reform lobby and corporate interest groups.
- Professional Objectors Ignore Principles of Our Free Market Economy: Professional objectors ignore basic principles of our free market economy. Risk is the most fundamental principle of our free market economy and no professional takes on the contingency fee risk than a plaintiffs’ lawyer. Professional objectors bemoan “self-dealing” plaintiffs’ lawyers who seek “exorbitant fees,” but need to be reminded that’s part of our free market economy. There’s absolutely nothing wrong with lawyers making a lot of money in class actions. That’s what our free market economy is all about. There’s a trace of professional envy in these types of objector arguments.
Well-known class actions objectors include Ted Frank of Center for Class Action Fairness, John Pentz of Class Action Fairness Group and Lawrence Schonbrun of Class Action Watch, Edward Siegel of Law Offices of Edward Siegel and Eduardo Cochran of Law Offices of Eduardo Cochran.
The U.S. Court of Appeals for the Third Circuit in the case of John M. Dewey et al. v. Volkswagen of America Inc. et al. upheld a $9.2 million attorney fee award in a class action against Volkswagen over leaky sunroofs, finding that the federal magistrate judge correctly utilized the percentage of recovery method instead of lodestar to calculate attorney fees.
The settlement was valued at $69,277,430. Judge Patty Schwartz awarded $9,207, 248 in attorney fees. She arrived at this figure by applying a 15.83 percentage of the recovery rate to the settlement amount, which amounted to $10,967,773. She next applied a lodestar “cross-check” to compare her determination using the percentage of recovery method to calculations of other federal courts in the Circuit using the lodestar method and arrived at a lodestar of 2.38. However, after finding that the case was not sufficiently extraordinary to warrant such a multiplier, she reduced the lodestar multiplier to 2.0, which in turn reduced the fee award to $9,207,248—13.3 percent.
On appeal, fee objectors argued Judge Schwartz improperly relied on federal law when calculating and approving the attorney fee award. The fee objectors argued that Judge Schwartz should have relied on New Jersey state law which limits the amount that lodestar amounts can be multiplied. The fee objectors relied on Rendine v. Pantzer for the proposition that New Jersey courts must apply the lodestar analysis, not the percentage of the fund analysis when calculating attorney fees in common fund class action settlements.
In its ruling (pdf), the three judge Circuit panel disagreed finding nowhere in Rendine did the New Jersey Supreme Court prohibits the percentage of fund analysis. As such, Judge Schwartz did not abuse her discretion in using federal law to apply the percentage of recovery rate to the settlement valuation and applied a lodestar “cross-check” to compare her determination using the percentage of recovery method to calculations of other federal courts in the Third Circuit using the lodestar method.
A recent Legal Times story, “Animal Rights Group Opposes $25M Fee Request in Circus Litigation,” reports that lawyers for animal rights group that unsuccessfully sued the producer of the Ringling Bros. and Barnum & Bailey Circus called the producer’s petition for $25 million in legal fees “ridiculous” and “unconscionable” in court papers this week. The fee request is one of the largest ever in the U.S. District Court for the District of Columbia, according to the petition filed in October by circus producer Feld Entertainment Inc. Feld’s lawyers, led by John Simpson of Norton Rose Fulbright, said the money was justified given the length and complexity of the case.
This week, lawyers for the animal rights group accused Feld’s legal team of inflating bills, failing to “exercise sound billing judgment,” and overstaffing. They bristled at the number of lawyers and nonlawyers professionals who worked on the case for Feld, including more than 100 from Norton Rose alone (lawyers in the case were Fulbright & Jaworski, which merged with Norton Rose last year.)
“Counterintuitively, while [Feld’s] counsel managed to employ a staggering number of timekeepers on this case, they also failed to delegate work from the most expensive senior attorneys to cheaper associates and nonlawyer staff,” the animal rights groups said. The animal rights groups also contend that the $25 million fee award would be financially devastating.
Animal rights organization brought claims against Feld more than a decade ago alleging abuses of the circus’ Asian elephants. U.S. District Judge Emmet Sullivan entered a judgment against the animal rights groups in 2009 and granted Feld’s request for legal fees last year. Lawyers for the animal rights group argued a fee award of less than $2 million would accomplish the goal of the fee-shifting law in these types of cases—to deter frivolous claims—without “ruinous consequences.”
Simpson defended the fee request. ‘This case was staffed and billed appropriately given the Court’s findings that the case was frivolous, unreasonable and vexatious from inception,” he said in an email. “This kind of abuse of the system can be very expensive.”
Norton Rose reported billing more than 41,000 hours of litigation since late 2005 valued at $22.6 million. Three other law firms worked on Feld’s defense. Covington & Burling, Troutman Sanders and Hughes Hubbard & Reed. Covington billed nearly 6,000 hours valued at $2.3 million for work from 2000 to 2006. 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.
NALFA also reported on this case in “Defense Lawyers Seek $25M in Fees in Circus Litigation”
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