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UBS Balks at $3.2M in Attorney Fees in Whistleblower Action

December 12, 2018

A recent Law 360 story by John Petrick, “UBS Balks at Whistleblower Case’s $3.2M in Attys’ Fees,” reports that UBS Securities asked a New York federal judge to reject a “jaw-dropping” and “excessive” $3.2 million in attorneys' fees requested by a former analyst who won a $1 million verdict in his whistleblower trial under representation by Herbst Law PLLC and Broach & Stulberg LLP.  Attorneys for the bank argue that while the Sarbanes-Oxley Act allows for a winning party to recoup “reasonable” fees, this request is overstuffed with billable hours spent on claims that were lost at former analyst Trevor Murray's trial, duplication of work and extra time needed to make up for the attorneys’ own mistakes.

“The court should significantly reduce the amount of fees and costs that Murray’s counsel requests in order to prevent Murray’s counsel from reaping a windfall from their own limited success and inefficient, excessive work,” attorneys for UBS said in the motion.  Murray won only a “fraction” of what he sought at trial and his attorneys went after unreachable claims that a reasonable attorney would never have pursued, which prolonged the case needlessly, UBS attorneys said in the motion.

Murray won a nearly seven-year fight with the bank after he alleged he was fired in 2012 for complaining his superiors were pressuring him to falsely report better market conditions to boost UBS’ revenue numbers and impress investors.  The former analyst filed the lawsuit in February 2014, claiming UBS pressured him to skew his research to support the bank’s commercial mortgage-backed securities trading and loan origination activities, and to report better conditions in the market because that line of securities was a significant revenue source.

Murray allegedly told the bank’s head CMBS trader he was concerned certain CMBS bonds were overvalued, according to the suit.  But Murray was told not to publish anything negative about the bonds because they had been purchased by the UBS trading desk, he claimed.  He was fired shortly thereafter, just a month after receiving what he said was an excellent performance review.  UBS argued Murray was laid off as part of a mass downsizing sparked by the global financial downturn in 2011.

A jury in Manhattan awarded Murray nearly $1 million following a three-week trial, deciding he was fired for refusing to skew his research to impress investors, according to filings in the case.  The jury disagreed, however, on how long Murray would have remained at the firm, and awarded him much less than the amount of damages he was seeking.

Petitions filed last month asked for $638,950 to cover Herbst's attorneys’ fees and another $1,160.55 plus interest in costs, and $2.6 million to cover Broach & Stulberg's work in the case.  While Broach & Stulberg started out as lone counsel during several rounds of pretrial motions, Herbst “parachuted” into the case just a month before trial, applying to become lead counsel because it said it had more trial experience, according to the motion.

UBS attorneys maintained in their opposition motion that though a judge said Herbst could only assist in the case and not take over as lead counsel, for all intents and purposes, Herbst performed as if its attorneys were in fact lead counsel for the remainder of the case.

Herbst told Law360 his billable hours were reasonable and that he expects the court to think so, too.  "All of our firm’s time was spent on the Sarbanes-Oxley claim on which Mr. Murray prevailed and obtained what the jury decided was the full measure of his economic loss, special damages and compensatory damages," he said.  "Accordingly, based on UBS’s opposition, which does not attack our hourly rates and only presents picayune opposition to the hours we expended, our firm should hopefully receive a full lodestar recovery."

The case is Trevor Murray v. UBS Securities LLC et al, case number 1:14-cv-00927, in the U.S. District Court for the Southern District of New York.

Judge Remands Denial of $30M in Attorney Fees in Tribune Bankruptcy

December 11, 2018

A recent Law 360 story by Rose Krebs, “Denial of $30M Attorneys’ Fee Claim in Tribune Ch. 11 Tossed,” reports that a Delaware federal judge overturned a 2015 bankruptcy court order denying Wilmington Trust Co.’s $30 million unsecured claim for post-petition attorneys’ fees in the Tribune Media Co. Chapter 11 that was confirmed in 2012.  In a memorandum order, Judge Richard G. Andrews remanded the matter back to the Delaware bankruptcy court for further consideration, ruling that post-petition attorneys’ fees can be an allowable unsecured claim.

“I agree with the position adopted by every court of appeals faced with this question; [the bankruptcy code] does not limit the allowability of unsecured claims for contractual post-petition attorneys' fees,” Judge Andrews wrote.  Appeals courts have “have unanimously rejected [Tribune Media’s] position and have allowed unsecured claims for contractual attorneys' fees that accrued post-filing of the bankruptcy petition,” the decision said.

In November 2015, U.S. Bankruptcy Judge Kevin J. Carey allowed Tribune to reject Wilmington Trust’s claim, which Tribune had argued was unreasonable given how many of the activities were duplication of work other creditors performed.  The issue stemmed from an unsecured claim Wilmington Trust, as indenture trustee for a group of unsecured bondholders, lodged in the Tribune case seeking $30.3 million in post-petition attorneys' fees and litigation costs.

Wilmington Trust maintained that its fees should be paid because the indenture agreement provided for payment of reasonable fees and expense reimbursement.  “We think that the district court has made a decision that is consistent with the majority of courts that have addressed the issue,” Wilmington Trust’s attorney, James W. Stoll of Brown Rudnick LLP, told Law360.

In his order, Judge Andrews noted that there have been some cases in bankruptcy and district courts that have disallowed attorneys’ fees as unsecured claims, but that he had “nothing new to add to this debate.”  “I merely note that I cannot conclude that [the bankruptcy code] ‘expressly’ disallows the claims at issue here,” the order said.

Tribune — owner of its namesake newspaper in Chicago, as well as the Los Angeles Times and a host of other newspapers and television stations — filed for Chapter 11 protection in 2008 following a disastrous leveraged buyout a year earlier that saddled the media conglomerate with roughly $13 billion in debt.  Tribune's Chapter 11 plan was confirmed in July 2012 and the company exited bankruptcy in December of that year.

The appellate case is In re: Tribune Co. et al., case number 1:15-cv-01116, in the U.S. District Court for the District of Delaware.  The bankruptcy case is In re: Tribune Co. et al., case number 1:08-bk-13141, in the U.S  Bankruptcy Court for the District of Delaware.

$503M in Attorney Fees in Syngenta GMO Corn Settlement

December 10, 2018

A recent Law 360 story by Bonnie Eslinger, “Attys Get $503M in Fees for Syngenta GMO Corn Settlement,” reports that a Kansas federal judge gave final approval to Syngenta AG’s $1.5 billion deal to resolve claims filed on behalf of 650,000 corn producers over the agricultural giant's genetically modified corn seed, a deal that handed class counsel a $503 million cut.  The order from U.S. District Judge John W. Lungstrum noted that the case was "hotly contested," with the merits of the corn producer claims "thoroughly vetted through litigation" in multiple jurisdictions.  That litigation included one multiweek class action trial in his court and extensive preparation for other trials.

"This is not a situation in which the parties proceeded quickly to settlement without serious litigation of the claims on their merits, such that there might be reason to suspect that the settlement was not fairly negotiated," the judge wrote.  "Indeed, the protracted negotiation process and the vigor with which the parties litigated the merits of the claims provide additional assurance that this agreement was fairly and honestly negotiated."

The litigation winds back to 2014, when corn farmers and others in the corn industry began filing lawsuits, including class actions, against Syngenta over the company's marketing of two insect-resistant GMO corn seed products, Viptera and Duracade, without securing approval from China, according to the court's order.

"The plaintiffs alleged that Syngenta's commercialization of its products caused the genetically-modified corn to be commingled throughout the corn supply in the United States; that China rejected imports of all corn from the United States ... [and] that such rejection caused corn prices to drop in the United States; and that corn farmers and others in the industry were harmed by that market effect," the judge noted.

Hundreds of suits were brought together in the multidistrict litigation heard in Judge Lungstrum's courtroom.  The nationwide settlement class is generally divided into four subclasses: corn producers who did not purchase Viptera or Duracade; corn producers who did purchase one of those products; grain handling facilities; and ethanol producers.  Of the 650,000 class members, 52 percent have submitted claims and only 17 members properly exercised their right to opt out, and just nine objections by 15 members were submitted in the end, the judge said.

"The fact that the class members have reacted so overwhelmingly in favor of the settlement further supports a finding that the settlement is fair and reasonable and adequate," he said, adding that the court found the objections filed in opposition to the settlement to "lack merit."  The judge also said that the immediate payout that the settlement offers — even after the award of one-third of that amount for attorneys' fees — had more value than the "mere possibility of a more favorable outcome after further litigation."

The first trial in the MDL, which won class certification in September 2016, tested the negligence claims of four Kansas farmers representing 7,000 others who believed that Syngenta rushed Viptera seed to market in 2010, willfully ignoring the importance of Chinese regulatory approvals.

The Kansas farmers alleged that varieties of harvested corn were mixed together indiscriminately on their export journey.  When China discovered the rogue strain in November 2013, they alleged, it immediately rejected American corn cargo, shutting down the Chinese market for U.S. corn and costing the domestic U.S. industry more than $1 billion.  The jury sided with the farmers, finding Syngenta negligent and awarding the class of corn producers $217.7 million in compensatory damages. Syngenta said it planned to appeal.

In July, Judge Lungstrum further consolidated the seven remaining separate state class actions in Arkansas, Illinois, Iowa, Missouri, Nebraska, Ohio and South Dakota.  Syngenta then urged the court to certify the $217.7 million verdict as a final judgment, telling Judge Lungstrum in September that it was necessary to prevent needless delay of the company's appeal since it knew the farmers planned to dispute the finality of the verdict.  The farmers shot back in October by asking the judge not to sign off on the verdict because the outcomes of other classes could influence the appropriateness of the jury's decision.

The case is In re: Syngenta AG MIR162 Corn Litigation, case number 2:14-md-02591, in the U.S. District Court for the District of Kansas.

U.S. Trustee Seeks More Attorney Fee Info in Sears Bankruptcy

December 7, 2018

A recent Law 360 story by Rick Archer, “US Trustee Faults Fee Info in Sears’ Request for IP Law Firm,” reports that the U.S. Trustee’s Office has asked a New York bankruptcy court to reject Sears Holding Corp.'s request to retain boutique law firm McAndrew Held & Malloy Ltd. to handle intellectual property matters unless it gets more information on what the firm will be paid.  In an objection, U.S. Trustee William Harrington said that, among other inadequacies, Sears’ request states McAndrews would receive a range of flat fees for a list of IP-related services but fails to assign specific payments to specific services.  “Accordingly, without more specific disclosure regarding the flat fee and the flat fee services, it is impossible to determine if the retention of McAndrews is reasonable,” he said.

Once one of the nation's largest retailers, Illinois-based Sears entered bankruptcy in October to reshape its physical footprint and reduce a debt load of more than $11 billion created by years of consecutive net revenue losses, store closings and unsuccessful efforts to adapt to a changing retail world.  After closing 142 of the 700 Sears and Kmart stores still in business, the company said it hopes to sell about 400 earnings-positive stores along with other potentially viable sites and assets including intellectual property while under Chapter 11 protection.

Two weeks ago, Sears applied to retain McAndrews, a Chicago-based IP firm, to handle trademark, copyright, patent and domain name issues.  The application said McAndrews has been Sears’ IP counsel for more than six years.  “By virtue of such prior engagement, McAndrews is intimately familiar with the facts and history of the company’s IP assets and coordinates the filing of IP applications in foreign jurisdictions.  The compensation proposed by McAndrews is at or below comparable rates in the IP market,” it said.

The application said Sears was proposing to pay a fixed fee of $43,750 a month, a flat fee of between $750 and $11,000 for a list of specific IP-related services, such as trademark and copyright registration, and an hourly rate for any other services.  The company also asked for permission to put $130,000 in retainers in trust to be paid to McAndrews in the event that it fails to pay any future invoices from the firm.

In his filing, Harrington said he was objecting on the grounds the application only gives the range of flat fees and does not give a specific fee for each of the specified services.  He also said the application “inexplicably” asks McAndrews be allowed to waive the requirement to file time records in six-minute increments for the fixed and flat fee services and that McAndrews had not shown why it should have a retainer in trust.

The case is In re: Sears Holding Corp, case number 7:18-bk-23538, in the U.S. Bankruptcy Court for the Southern District of New York.

Firms Must Evenly Split $11.3M in Fees in Century 21 Class Action

December 6, 2018

A recent Law 360 story by Bill Wichert, “3 Firms Must Evenly Split $11.3M Fees in Century 21 Suit,” reports that three law firms representing Century 21 Real Estate Corp. franchisees in a class action against the company and its former parent must evenly split roughly $11.3 million in attorneys’ fees awarded in connection with a settlement in the case, a New Jersey appeals court ruled in nixing one firm’s bid for a larger share.

A three-judge appellate panel upheld a trial court order that confirmed an arbitration award dividing the money equally between Zwerling Schachter & Zwerling LLP, Keefe Law Firm and Kopelowitz Ostrow PA, rejecting Zwerling Schachter’s argument that it deserved more than a third of the fees due to its work and responsibility in the litigation.  The arbitrator, a former federal judge, correctly found that representation agreements between the firms and franchisees required the firms to equally share the attorneys’ fees even if they did not share the work and responsibility in the class action equally, according to the panel.

The class action, which was initially filed in 2002, alleged that Century 21’s then-parent, Cendant Corp., breached a contract by diverting Century 21 advertising funds to competitors.  The franchisees claimed that Cendant, which also owned Coldwell Banker and ERA Real Estate, misappropriated funds to try to sink Century 21 and build up its other units.  In 2002 and 2004, Zwerling Schachter, Kopelowitz Ostrow and McElroy Deutsch & Mulvaney LLP entered into "attorneys-class representative agreements" with plaintiffs in the case, according to the appellate opinion.

Those agreements said that each firm would receive “33⅓ percent” of any attorneys’ fees awarded in the case and that “each of the law firms named herein shall share the fee which is in accordance with their anticipated division of work and responsibility in this matter,” the opinion said.  McElroy Deutsch withdrew from the matter in 2004, and the firm that ultimately became Keefe Law Firm joined the case, the opinion said.  The parties have agreed that Keefe, Zwerling Schachter and Kopelowitz Ostrow have a right to share in the attorneys’ fees, with McElroy Deutsch to receive its fees out of Keefe’s share, according to the opinion.  After the class action settled in 2012, the three firms could not agree on how to split up the attorneys’ fees, the opinion said.

Zwerling Schachter said the apportionment should be based on the hours worked and the responsibility assumed during the case, while Keefe and Kopelowitz Ostrow said the attorneys-class representative agreements required the firms to divide the money equally.  Keefe and Kopelowitz Ostrow in 2013 made an offer of judgment to Zwerling Schachter, under which that firm would have received $600,000 more than if the firms split the fees equally, but Zwerling Schachter rejected the offer, the opinion said.

The firms agreed in 2014 to submit their fee dispute to arbitration.  In 2016, the arbitrator found that “the attorneys-class representative agreements ‘require[d] the parties to share the attorneys' fee award in equal thirds, even if the parties did not share the work and responsibility in the underlying class action equally,’” the opinion said.

The trial court in June 2016 entered orders confirming the arbitration award and denying Zwerling Schachter’s motion to vacate the award.  In November 2016, the court denied a motion from Keefe and Kopelowitz Ostrow seeking to recoup the attorneys’ fees and costs they incurred after Zwerling Schachter rejected their offer of judgment, the opinion said.  On Zwerling Schachter’s appeal of the June 2016 orders, the appellate panel affirmed those decisions by citing in part the attorneys-class representative agreements, saying the panel agreed with the arbitrator that the first sentence of those agreements “is clear in providing that each of the three firms was to receive one-third of a fee award."

“We also agree with the arbitrator that the key phrase in the second sentence is ‘anticipated division of work and responsibility,’” the panel said.  “Finally, we agree with the arbitrator's reasoning that the second sentence did not undercut or modify the clearer first sentence.”  The panel also noted the arbitrator’s findings that there was no evidence that “any of the firms had ‘failed to contribute at all toward earning the fee award,’” and that “the evidence showed ‘each party contributed thousands of hours to the class litigation.’”

“In short, the plain language of the attorneys-class representative agreements and the extrinsic evidence supports an equal apportionment of the fee award,” the panel said.  Keefe and Kopelowitz Ostrow appealed the November 2016 order, but the panel affirmed that ruling as well, saying “the amount of the arbitration award was not sufficient to trigger the shifting of fees and costs under Rule 4:58, the offer of judgment rule.”

The case is Frank K. Cooper Real Estate #1 Inc. et al. v. Cendant Corp. et al., case numbers A-1482-16T3 and A-1579-16T3, in the Superior Court of New Jersey, Appellate Division.