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Insurer Seeks to Dodge Attorneys Fees in Overbilling Matter

January 14, 2021

A recent Law 360 story by Kevin Penton, “Insurer Seeks to Dodge Mass. Firm’s Overbilling Probe Fees” reports that an insurance company asked a Massachusetts federal court to declare that it is not responsible for paying attorney fees incurred by Thornton Law Firm LLP when the firm faced an investigation over alleged overbilling in a $300 million State Street Corp. settlement.

Continental Casualty Co. should not be obligated to pay Thornton Law the unspecified amount of fees the firm paid to its legal counsel for representation throughout the investigation, along with the unspecified amount the court ordered to be deducted from the firm's fee award to help cover the investigation's costs, according to Thursday's complaint in the District of Massachusetts.

Continental argues that Thornton Law did not take out insurance that would require the insurer to defend or indemnify the firm in the investigation. The company noted that the investigation was not a claim triggered by an "act or omission in the performance of legal services" by Thornton Law, nor does it leave open the possibility of covered damages, according to the complaint.

The investigation's findings — that Thornton Law and Labaton Sucharow LLP repeatedly violated the rules of professional conduct in part by overbilling — meant that the insurance policy's "intentional acts exclusion" is also triggered, according to the complaint.

"The acts or omissions at issue in the special master fee investigation are not services performed by Thornton as a lawyer," the complaint reads. "To the contrary, the special master fee investigation arose from the insured's false and misleading submission regarding its billing rates and business practices in a declaration to the court."

The underlying suit, filed in 2011, alleged that State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade.

The class action resulted in a $300 million settlement between State Street and investors, and U.S. District Judge Mark L. Wolf approved $75 million in attorney fees for Thornton Law, Labaton Sucharow and Lieff Cabraser Heimann & Bernstein LLP in 2016.

The billing issues first came to light later that year in a Boston Globe report. The firms later acknowledged they overstated their billing, but claimed the $75 million fee was still proper.

Following the investigation by a special master, Judge Wolf in February reduced the firms' fees to $60 million. Judge Wolf noted at the time that Thornton Law managing partner Garrett Bradley also signed a false fee declaration, which Bradley lamented as a "stupid mistake" when testifying in one of the case's hearings.

"The United States has a proud history of honorable, trustworthy lawyers," Judge Wolf wrote. "However, this case demonstrates that not all lawyers can be trusted when they are seeking millions of dollars in attorneys' fees and face no real risk that the usual adversary process will expose misrepresentations that they make."

Allstate Accused of Purposely Driving Up Litigation Costs

January 13, 2021

A recent Texas Lawyer story by Angela Morris, “Allstate Accused of Purposely Driving Up Litigation Costs,” reports that a Houston law firm wants to form a class action with other Texas personal injury plaintiffs firms in new lawsuit against a major car insurance company that allegedly puts up unqualified expert witnesses just to drive up litigation costs.  It’s a case that might interest any plaintiffs firm that represents people hurt in auto accidents.  Why?

If they’ve gone up against Allstate Fire and Casualty Insurance Co. in the past four years, firms could be eligible for a piece of the pie if the lawsuit ever gets to verdict or reaches a settlement.  The plaintiff, The Estes Law Firm, estimated in its complaint that the class could include more than 10,000 Texas law firms.

Plaintiff lawyers who oppose Allstate are forced to spend their time and resources responding to improper affidavits by three other defendants that Allstate uses as expert witnesses, Marc Chapman of Austin and Dallas residents Rhonda Guitreau and Jana Schieber said the original complaint in Estes Law Firm v. Allstate Fire and Casualty Insurance Co.  Attorneys at Rusty Hardin & Associates in Houston are representing the putative class.

Partner Ryan Higgins said the Hardin firm has a case where Allstate used one of the three experts and was doing research to prepare a motion to strike the expert. He and the other two expert witnesses had been struck by courts over and over again.”

“Clearly it is a strategy to increase the costs for the case to be prosecuted,” said Higgins. “If I spend an additional 20 hours dealing with an affidavit that is going to be struck, it is time away from plaintiffs counsel. It doesn’t ultimately impact the client himself. What it does–it is part of strategy, we believe–is to make it difficult to litigate cases against Allstate.”

The litigation alleged Allstate has been retaining the witnesses “in an effort to improperly harass and defraud plaintiffs and all other members of the class.” When Allstate uses one of the three witnesses, it forces a plaintiffs attorney to incur time and expenses to file motions to strike them. When that fails, plaintiffs lawyers must do depositions of their own experts or bring them to trial so they can counter the improper affidavits.

The complaint explained that Texas Civil Practices and Remedies Code Ch. 18 lays out the procedure for a plaintiff to recover medical expenses in litigation. In an affidavit they list the doctor, how much expenses they incurred and how much they’ve paid already. The court uses the form to prove up medical bills and expenses. This allows a plaintiff to avoid bringing his doctor to court to testify about medical bills.

The law also gives a defendant the chance to file a counter-affidavit that means they intend to controvert a medical expenses claim. A qualified expert witness, with experience in the relevant medical field, must prepare the counter-affidavit.

“Allstate, in an effort to harass, delay, and bully plaintiffs and their lawyer, intentionally ignore the requirements of Chapter 18 and hire unqualified people to prepare so-called controverting affidavits in areas they have no knowledge, skill, training, education or experience,” said the complaint.

Chapman isn’t a doctor. He’s a consultant who used to be a hospital reimbursement manager who sent out its bills. The complaint alleged he has zero qualifications to offer opinions about whether a medical bill is reasonable. But Allstate keeps hiring him to write affidavits saying bills are too expensive for surgeons, doctors, chiropractors, radiologists and other providers, the complaint alleged. It added that Allstate knows he’s not qualified.

“Chapman’s affidavits and opinions have been struck by almost every court in Texas,” the complaint said. “It is easier to list the courts where Chapman has not been struck than to identify every case and court striking Chapman.”

Similarly, the complaint alleged that Schieber—a nurse in the 1990s—isn’t qualified to talk about billing rates for most medical providers and courts have struck her repeatedly. She may only be a qualified witness if talking about a nursing bill from the 1990s, the complaint said. It added that Guitreau—also struck by most Texas courts as an expert—only has experience in hospital administration where she sent out bills for hospitals.

The Estes Law Firm is suing the defendants for fraud and civil conspiracy and trying to recover actual damages, attorney fees and court costs and punitive damages for itself and the whole class of Texas plaintiffs law firms that have dealt with Allstate.

$41M Fee Request in $155M Snap Securities Settlement

January 12, 2021

A recent Law 360 story by Rachel O’Brien, “Attys for Snap Investors Seek $41M From $155M Deal” reports that investors of Snap Inc. asked a California federal judge to approve $41.1 million in attorney fees and expenses for Kessler Topaz Meltzer & Check LLP, as they seek final approval of a nearly $155 million settlement over the social media giant's initial public offering.  The deal, a preliminary version of which was announced in March, ends claims that Snap, the company behind the popular Snapchat messaging app, hid problematic growth metrics leading up to its initial public offering.

The $41.1 million ask includes $38.7 million — 25% of the settlement fund — for attorney fees and $2.4 million in litigation expenses, as lead counsel at Kessler Topaz "vigorously pursued this action from its outset and was actively preparing for trial when the settlement was reached," the filing said.  The attorneys "directed a far-ranging investigation" including filing two complaints, starting document discovery, subpoenaing 20 parties and twice moving to compel Snap to produce documents, among other things, the filing said.

The investors' attorneys collected and reviewed almost 2 million pages of documents and helped prepare five reports from experts, including those in the internet advertising industry, and took or defended five expert depositions, the investors said in the filing seeking a final OK of the agreement.  The attorneys said the settlement class members were informed that their counsel would seek up to 25% of the fund and litigation expenses up to $3.25 million, and while they can object until Jan. 25, no objections to the figures have been filed to date.

Kessler Topaz said its attorneys and professional support staff alone spent more than 50,000 hours working on the case, originally filed in May 2017.  The "requested fee award is reasonable, justified, and well within the range of what courts in this Circuit regularly award in class actions," the filing said.

The March preliminary settlement came only two months before the case was set to go to trial and with a summary judgment motion and class certification appeal still pending.  The deal stipulated that $154.7 million would be paid to close out the federal class action.  Also part of the deal was a separate $32.8 million payment to settle a California state court case over the same alleged misconduct.

Judge to Decide on Access to Skadden Billing Records

January 11, 2021

A recent Legal Intelligencer story by Ellen Bardash, “Dela.’s TransPerfect Saga Reassigned to Pa. Fed Court as Bouchard Takes Step Toward Opening Skadden Billing Records” reports that Chancellor Andre Bouchard of the Delaware Court of Chancery has asked lawyers in the TransPerfect custodianship case whether billing records need to remain sealed.   If custodian Robert Pincus and attorneys with Skadden, Arps, Slate, Meagher & Flom consent to the records being opened, a complaint TransPerfect and CEO Phil Shawe filed against Bouchard demanding those documents Dec. 24 could become moot.

The move came the day after the long-running legal saga was transferred from a federal court in Delaware to the U.S. District Court for the Eastern District of Pennsylvania.  Bouchard’s letter to counsel in the original Court of Chancery case gave Pincus and his counsel with Skadden a Jan. 11 deadline to respond.

He said he wanted the lawyers to provide any reason that nine billing records need to remain sealed, or if they plan to file any additional fee petitions under seal.  As of the end of business Thursday, no response had been filed, and three Skadden attorneys working with Pincus in the custodianship did not respond for comment on whether they have objections to the documents being unsealed.

Based on his review of those documents in the previous few days, Bouchard wrote the billing documents didn’t appear to contain specific names or other information Pincus previously categorized as privileged. With the bulk of those sealed records consisting of “billing minutiae” that wouldn’t fall under the court’s definition of confidential information and with the documents in question set to be discussed at a February motions hearing along with other loose ends in the custodianship case, Bouchard wrote he questions whether there’s a need to keep them sealed.

Martin Russo, an attorney for Shawe and TransPerfect, expressed concern Thursday that such a review of the documents hadn’t been done earlier.  “It’s a shame that we had to resort to suing the judge in federal court to get him to look at the documents that he should have looked at in the first instance, before he put a restraint on speech,” Russo said.

On Dec. 30, TransPerfect’s case was assigned to the District of Delaware’s Judge Leonard P. Stark, but on Wednesday, U.S. Court of Appeals for the Third Circuit Judge D. Brooks Smith reassigned the case to Judge Mark A. Kearney of the Eastern District of Pennsylvania.

TransPerfect and Shawe allege not being allowed to see or publicize the sealed billing records constituted First and 14th Amendment violations by not allowing them to both view and share information they say is key for the public to understand how the Court of Chancery operates. Between August 2015 and May 2018, Bouchard ordered TransPerfect to pay almost $44.5 million to Pincus and his advisers.

By mandating the parties sign a gag order in order to view the sealed records, the complaint states, the court has made Shawe decide between being able to talk publicly about the records and being able to know exactly what those records say. Not being allowed to view billing details behind fee petitions approved by the court is also a violation of due process rights, the complaint states.  Shawe and TransPerfect have asked for a declaratory judgment against Bouchard and an injunction requiring him to open the records if that declaration is ignored.

$1.9M Fee Award in $7.5M Google Data Breach Settlement

January 8, 2021

A recent Law 360 story by Dorothy Atkins, “Google’s $7.8M Data Breach Deal OK’d. Attys Get $1.8M” reports that a California federal judge overruled 761 objections and approved Google's $7.5 million deal resolving a proposed class action over a years-long data breach that exposed millions of accounts on the now-defunct Google+ social media platform, with class counsel getting $1.875 million in fees and $69,000 in costs.

During a hearing held via Zoom, U.S. District Judge Edward Davila approved the fee request, which represents 25% of the total settlement fund, along with a $1,500 incentive award to each class representative, but he asked counsel to give a breakdown of their lodestar.  Class counsel, John A. Yanchunis of Morgan & Morgan, said their lodestar estimate is roughly $995,000, making the requested fees subject to a 1.88 multiplier.

Before approving the deal, Judge Davila noted there have been a little less than 50,000 opt-outs and 761 objectors, with a total pool of about 1.8 million individuals who opted in who will receive an estimated $3 each.  The judge overruled the objections to the settlement and notice provisions, saying "the potential for the breach was large.  It was great.  It was significant," but the settlement reached was an arm's-length resolution that was fair, reasonable and adequate.  The judge didn't address any of the objections further.  Two objectors appeared during the hearing, but submitted their objections on their papers.

The complaint alleges Google learned of the initial breach in March 2018, but made the "calculated decision" not to tell its users until months later.  It also alleges that the number of those impacted is likely "much higher" than the 500,000 users Google cited in its announcement, pointing to the fact the API logs are only built to keep historical data for two weeks.  The suit, which claims the users' data is highly valuable on the dark web, accused Google and Alphabet of unfair and unlawful business practices, negligence, invasion of privacy, and violating California's Customer Records Act.