A recent USA Today story, “Attorneys’ Fees Criticized in NFL Concussion Settlement,” reports that the NFL has agreed to pay $112.5 million to the attorneys who sued the league over player concussions, according to the proposed settlement between the league and its former players. By negotiating attorneys’ fees before the settlement has been approved by a judge, former NFL player Sean Morey told USA Today Sports that he believes the attorneys for the players became “business partners” with the NFL instead of legal opponents.
In Morey’s view, the agreement on legal fees gave attorneys more of an incentive to reach a deal and not hold out for a better benefits package on behalf of their clients. “By essentially enticing them to become their business partner, (the ex-players’ attorneys) gave away leverage,” said Morey, who last month filed an objection to the settlement along with six other former players.
The fee award is subject to court review. A fairness hearing on the proposed settlement is scheduled for Nov. 19. In their objection to the settlement, the critics noted the courts have a duty to look for “subtle signs that class counsel have allowed pursuit of their own self-interests…to infect negotiations.” In a reply to the critics, the plaintiffs’ attorneys said the fees were not negotiated until after the terms of compensation for class members were resolved.”
For more on this settlement, visit www.nflconcussionsettlement.com
A recent Texas Lawyer story, “BP Oil Spill Litigation: How Much Has BP Paid Plaintiffs Lawyers So Far?,” reports that the BP oil spill litigation remains far from resolved and final, and the same is true of the plaintiffs lawyers’ fees, despite earlier expectations for a $600 million fee award. So far, the plaintiffs steering committee (PSC) counsel and other lawyers representing the class have “sought and received” less than 6 percent of the $600 million maximum in fees previously agreed upon, according to an Aug. 13 email from Geoff Morrell, a senior vice president for BP’s U.S.-based subsidiary. Specifically, Morrell’s statement said that the lawyers have been paid nearly $30 million and have made an additional fee request for $1.8 million.
More than two years ago, on April 18, 2012, BP and the PSC stated in a joint memorandum filed in the multidistrict litigation that “class counsel would seek an interim fee award of $75 million. Additional interim payments equivalent to 6 percent of class claims would be paid quarterly, and the fee award would not exceed a total of $600 million under any circumstances.”
But since then, BP has appealed the proposed settlement. Most recently, on Aug. 1, it filed a petition for writ of certiorari with the U.S. Supreme Court. With that petition, BP seeks a hearing to overturn a U.S. Court of Appeals for the Fifth Circuit ruling approving the settlement. In its petition, BP argues that the settlement is “inappropriate,” since “many members of the class have not been injured by the defendant.”
For their part, two members of the executive committee of the PSC, Stephen Herman and James Roy stated in emails that they had not yet received any scheduled payments. Asked about the potential consequences to their fees as a result of BP’s cert petition, Herman, a partner in New Orleans’ Herman Herman & Katz, and Roy, a senior partner in Lafayette, Louisiana’s Domengeaux Wright Roy & Edwards, wrote: “All we are focused on right now is getting claimants what they are owed under the settlement.”
A recent The Recorder story, “Unilever Wants Fees Slashed in Suave Case,” reports that Unilever PLC is asking a judge to slash $2 million from $3.4 million bill for plaintiffs’ attorneys’ fees in a $10 million Suave hair products class action settlement, highlighting what the company called unacceptable charges, such as $875 for “waiting around for brief” and $22,000 for communicating with the media.
Branding the attorney fee request a “wholly unwarranted” windfall, Unilever states it has found at least $2 million in unacceptable charges by attorneys representing class members in Reid v. Unilever, originally filed in August 2012 in U.S. District Court for the Northern District of Illinois.
Deciphering a heavily redacted account of legal charges supplied by the plaintiffs and using the lodestar method for divining fees, Unilever calculated $1.1 million in justifiable charges. The final legal tab Unilever will pay will be in addition to the $10.2 million it has agreed to shell out to the consumers with eligible claims.
The class action was brought by consumers who alleged they lost hair or suffered scalp injury after using the Suave Professionals Keratin Infusion 30-Day Smoothing Kit, which was recalled in May 2012. The plaintiffs alleged the product contained a chemical that caused the injuries, and that Unilever made false statements about the product’s safety and failed to inform consumers about how to use the treatment properly.
In its line-by-line dissection of the plaintiffs’ fee request, Unilever alleges that submitted time records claiming nearly $500,000 were so heavily redacted that the category of work allegedly done could not be discerned. Allegedly duplicative billing and inflated rates were common. More than 90 percent of the hours claimed allegedly were billed at law firm partners’ and principals’ rates, Unilever claims. What essentially were small errands allegedly carried excessive costs, Unilever’s motion states. For instance, a staffer at one plaintiffs’ firms charged $550 for two hours of work “shipping box to Chicago,” the company alleges.
In comparison to the plaintiffs’ overall litigation bill of $3.4 million. Unilever spent just $1.1 million in fees to defend itself in the same case, the company’s motion states. For more on this case, visit http://suave30daysmoothingkitlawsuit.com/.
A recent The Recorder story, “Judge Slashes Plaintiffs’ Fee Request in Derivative Suit,” reports that plaintiffs’ attorneys netted less than half of what they hoped for in fees and costs Monday after settling a shareholder derivative suit against a maker of blood analysis technology. U.S. District Judge Yvonne Gonzalez Rogers awarded the attorneys with Kessler Topaz Meltzer & Check and Saxena White $543,000 in fees and $36,400 in costs, a far cry from the $1.6 million in fees and $51,200 in costs requested.
“The court finds that the results achieved by plaintiff upheld important principles of corporate governance.” Gonzalez Rogers wrote. “On the other hand, the court does not find that the case involved extraordinary risk, complexity, or effort on the part of plaintiffs counsel.” The judge arrived at her calculation by reducing the attorneys’ hourly billing rates to fall in line with average prices charged by Bay Area law firms of corresponding sizes. Gonzalez Rogers then reduced the 2.83 lodestar multiplier proposed by plaintiffs attorneys, ruling the work they put in justified to no more than a 1.5 multiplier.
The 2012 complaint accused officers of Abaxis Inc., which provides medical and veterinary diagnostic services, of making millions in profits from ill-gotten stock options. A 2005 shareholder-approved policy prohibited the board from granting more than 500,000 stock units to officers and other employees. In violation of that policy, directors handed out 960,000 shares, according to the complaint.
In the settlement reached in January, Abaxis agreed to strengthen oversight of its equity compensation policy. The company had also agreed to disclose additional information to shareholders before its 2012 annual meeting.
Gonzalez Rogers commended the Kessler Topaz and Saxena White attorneys for acting swiftly to get more information to shareholders before the company’s 2012 proxy vote. However, most of the plaintiffs attorneys’ achievements were won at the preliminary injunction stage, she wrote. And as the defense pointed out, plaintiffs took no discovery.
A recent Texas Lawyer story, “Trend in Texas Practice: Increased Prospect of Recovering Attorney Fees,” reports that business owners have long assumed they cannot recover attorney fees in connection with defending or prosecuting tort claims in Texas courts. Until a relatively recent trend, they would have been correct.
Texas law, however, is changing, eroding this long held assumption and supplanting it with a new opportunity to recover attorney fees in civil actions. The change reflects a significant departure from the norm in most states and traditional common law, where litigants are traditionally responsible for their own attorney fees. Many civil law jurisdictions have long held that the “loser” at the courthouse pays both side’s attorney fees. Texas is quickly moving towards this civil law standard.
The trend in Texas is for more flexibility in allowing for the recovery of attorney fees. For example, the state passed House Bill 274 (pdf), which became effective September 1, 2011. HB 274 amends the Texas Civil Practice & Remedies Code with regard to recovery of attorney fees, as well as sections of the Texas Government Code, to allow the prevailing party to recover attorney fees from the losing party in certain actions.
This legislation represents a distinct change from decades of Texas law clinging to the long-held common law standard where each litigant paid their own fees. The legislation made this change to promote a better legal climate for businesses in Texas by giving potential plaintiffs a downside—the possibility of paying attorney fees if they lose. While it is likely too soon to determine, HB 274 may significantly reduce the number of some actions in the state.
However, HB 274 is not the only potential game changer. A more significant vehicle for the potential recovery of attorney fees may be an older tool in a litigator’s tool chest, the Texas Declaratory Judgment Act, which was substantially revised in 1985 and is trending toward broader use.
Under the TDJA, a court has the power to declare rights, status and other legal relations as to whether parties may claim relief. The court may then award attorney fees to a claimant represented by counsel as if finds appropriate. One increasingly popular practice involves parties filing a declaratory judgment action, often in conjunction with other claims where attorney fees traditionally are not recoverable. Courts are becoming less reluctant to allow the practice given the trend toward a “loser pays” rule.
The addition of a request for declaratory judgment, where proper, provides one avenue for the potential recovery of attorney fees, and the courts seem to allowing a more liberal application of the TDJA to allow the recovery of attorney fees.
Another crack in the foundation of the traditional common law rule is potential recovery of litigation costs through an offer of settlement pursuant to Chapter 42 of the Texas Civil Practice & Remedies Code. Using this method, a defendant may make a declaration that this procedure is available and an offer of settlement may be made.
If the settlement offer is rejected and the judgment is “significantly less favorable” to the rejecting party, then the offering party can potentially recover litigation costs from the rejecting party or be entitled to a potential offset against a claimant’s recovery. This again invokes a “loser pays” mentality that we have not been accustomed to in Texas in the past.
What does this mean for litigants and businesses in Texas? A potential recovery of attorney fees may make business disputes, and some tort claims, a more viable business strategy. Moreover, the existence of these remedies may also make Texas courts both more favorable and at the same time dangerous for litigation. As the possibility of either recovering or paying an opposing party's attorney fees becomes the "new normal," litigants will inevitably have to adjust their strategies.
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