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Archive: 2017

US Airways Defends $122M Fee Request in Sabre Antitrust Case

April 20, 2017

A recent Law 360 story by Rick Archer, “US Airways Defends $122M Fee Bid in Sabre Antitrust Suit” reports that US Airways defended its request for $122 million in attorneys' fees for its $15 million victory against trip-planning giant Sabre Inc. in a suit over a contract giving booking access to all of the airline's seats, saying the fees are reasonable and in line with Sabre’s own legal costs.

Refuting Sabre’s argument that the fee request should be trimmed by nearly 90 percent because of unnecessary expenses, failure to get the full award sought and the dismissal of three-fourths of its claims, US Airways said the recommendation would make its fee award $40 million less than Sabre’s own reported defense costs.

“Although Sabre begrudgingly concedes that US Airways is entitled to some of what it incurred in this lengthy and aggressively defended case, reading Sabre’s opposition, one would think that Sabre — not US Airways — had won,” US Airways said.

The airline won a $5 million verdict, automatically tripled to $15 million, late last year in its case accusing Sabre — which controls 58 percent of the ticket distribution market — of restraining trade by forcing unfavorable terms on US Airways in a 2011 contract that required the airline to give Sabre access to all of its seats in order to reach the large cadre of travel agents that use the Sabre system.

US Airways has requested $122 million in attorneys’ fees and costs, arguing last month that the lengthy and complex nature of litigation justified fees that are more than eight times the amount of damages.  Sabre had argued US Airways should receive only $13 million in fees, noting three of its four original claims were rejected and the award was less than US Airways had asked for, and claiming a number of specific decisions in the airline’s legal strategy had generated unnecessary fees.

US Airways replied that the claim it ultimately won on was always the focus of their efforts, saying two of the claims were dismissed at the beginning of the case when minimal work had been done and the third had required only a fraction of the work.  “The Clayton Act does not require a plaintiff to prevail on all motions and claims in order to be entitled to a full recovery, particularly where it wins what it set out to achieve,” the airline said.

The airline said the reasonableness of the fees was justified by Sabre’s own $53 million in reported attorneys' fees, and argued this number was deceptively low because defense counsel Bartlit Beck Herman Palenchar & Scott LLP agreed to work at a discount in exchange for a success fee.

“Sabre refused our request to see Bartlit’s success-fee rate, but it appears to be nearly 50 percent based on the bonus Sabre paid for defeating declaratory relief,” it said.  “Even a 30 percent bonus would have increased Sabre’s fees to roughly $70 million had it, not US Airways, won.  That approximates US Airways’ roughly $85 million in attorneys’ fees.”

The case is US Airways Inc. v. Sabre Holdings Corp. et al., case number 1:11-cv-02725, in the U.S. District Court for the Southern District of New York.

Question: When Is a $3 Million Attorney Fee Award Painful?

April 19, 2017

Answer:  When your fee request was $25 million higher.

And so it was in In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, pending in federal court in San Francisco.  The case arose, in the court’s words, from VW’s “deliberate use of a defeat device – software designed to cheat emissions tests and deceive federal and state regulators – in nearly 600,000 Volkswagens- and Audi-branded turbocharged direct injection diesel engine vehicles sold in the United States.” 

Here’s how the software worked, per the court:  the “defeat device” would sense when the vehicles were being tested and would then produce regulation-compliant results.  But when the vehicles were driven under normal circumstances, they’d use a less effective emissions control system.  “Only by installing the defeat device on its vehicles was Volkswagen able to obtain” the requisite governmental approvals “for its 2.0- and 3.0-liter diesel engine vehicles,” even though those vehicles actually emitted “nitrogen oxides at a factor of up to 40 times over the permitted limit.”

Franchise dealers of VW-branded vehicles sued VW, claiming they were damaged by this “emissions scandal.”  Class certification was sought, and a settlement was reached, encompassing a nationwide class consisting of “all authorized Volkswagen dealers in the United States who, on September 18, 2015, operated a Volkswagen branded dealership pursuant to a valid Volkswagen Dealer Agreement.”  Under the settlement, VW was required to pay $1.19 billion in cash and provide various non-cash benefits to the class.

All told, a good deal for the class.  As the court noted, the settlement “had multiple cash and non-cash components, and … ultimately will provide franchise dealer class members with a recovery of nearly all of their losses attributable to Volkswagen’s disclosure of its use of a defeat device.” 

High fives in plaintiffs’ camp!  Crack open the Veuve Clicquot! 

Class counsel then moved for attorneys’ fees, stating in their motion that their “intense negotiations with Volkswagen led to the second largest class action settlement in automotive case history … and likely one of the top 20 largest class settlements in history in any arena.  In fact, the over $2.1 million average payment to Franchise Dealer Class Members may be the highest average payment to members of a class in any class action settlement.” 

They asked the court to award them “$28.56 million in attorneys’ fees, inclusive of costs.”  And they described their request – which represented, they said, “a fee of 2.0% of the constructive settlement fund of $1.39 billion” – as a “historically miniscule fee” which was “unquestionably fair, reasonable and appropriate compensation in relation to the exceptional results achieved for the” class.  “This remarkably small request,” they declared, “is likely the second-smallest fee amount ever requested in a large common fund case.”

So why did the district court cut their requested fee by nearly ninety percent? 

Because it found that under “the unique circumstances leading to the Settlement,” the “lodestar method, as opposed to the percentage method, is the appropriate method for determining fees,” and the lodestar amount was far lower than the amount they’d requested in their fee application. 

Under the “lodestar method,” fees are calculated by multiplying the number of hours reasonably expended by reasonable hourly rates.  Computing fees by this method tends to yield lower fee awards than does the percentage method, especially in cases like this one where the settlement fund is large.

The court found that using the percentage method in this case “would overcompensate” class counsel “for its work.”  Class counsel, it reasoned, “did not expend significant additional time procuring the Settlement, nor did it undertake significant additional risk, given Volkswagen’s incentive to settle quickly.”

What does that mean, “significant additional time” and “significant additional risk?”  And why did VW have an “incentive to settle quickly?”

Well, as it happens, before settling the franchise dealer case, VW had settled another emissions-related case; that one between VW, on one hand, and consumers, dealers, securities plaintiffs and government agencies, on the other.  That case settled for $10.033 billion, and class counsel in that one were awarded $167 million in fees. 

That case, in other words, was the main event.  Given that the franchise dealer settlement followed on the heels of that larger settlement, the court reasoned that the former “flowed naturally and necessarily” from the latter.  It calculated class counsels’ lodestar sum in the franchise dealer case as being “only $1.48 million,” meaning that their requested $28.56 million fee “would be a 19x lodestar multiple.”  That didn’t fly.  But a 2x multiplier did, given the risks class counsel assumed in the litigation, and so class counsel were awarded $2,954,455 in fees for work performed relating to that settlement, plus $87,538 in costs. 

And so class counsels’ fee request was mightily reduced by the court.  But they could still take solace in the praise their efforts elicited from the court.  Class counsel “achieved a great result for the franchise dealer class members, even in the face of uncertain risk and litigation length.” “The result” they “achieved is excellent.”  Words like those endure long after the fees have evaporated.

Wouldn’t you say?

The case is In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, United States District Court, Northern District of California, MDL No. 2672 CRB (JSC), and the decision was rendered on April 12, 2017.

This article, “Question: When Is a $3 Million Attorney Fee Award Painful?”, was written by Jeremy Gilman, a partner at Benesch based in Cleveland.  He has been litigating complex business cases for both plaintiffs and defendants nationwide for the past 34 years.  He is a prolific writer on legal topics, and his fiction has been nominated for a national literary prize.  He is also a musician whose first album is due out this summer.

SCOTUS Rules Fee Awards from Bad Faith Must Be Compensatory, Not Punitive

April 18, 2017

A recent The Recorder by Ross Todd, “At Odds With 9th Circuit, SCOTUS Nixes $2.7M in Discovery Sanctions,” reports that the U.S. Supreme Court held on Tuesday that attorney fee awards resulting from acts of bad faith in litigation must be causally linked to the underlying misconduct.

In a unanimous 13-page opinion (pdf), Justice Elena Kagan reversed a $2.7 million fee award against the Goodyear Tire & Rubber Co. finding that sanctions in civil cases “must be compensatory rather than punitive in nature.”  The upper end of fee award sanctions, Kagan wrote, should be “limited to the fees the innocent party incurred solely because of the misconduct—or put another way, to the fees that party would not have incurred but for the bad faith.”

Goodyear’s case drew amicus support from the American Bar Association and the National Association of Manufacturers.  Both warned that failure to require a direct causal link between penalties and a litigant’s discovery abuses could lead to outsized and abusive sanctions awards.

Tuesday’s decision reverses a 2015 ruling from the U.S. Court of Appeals for the Ninth Circuit that put Goodyear on the hook for all $2.7 million in legal fees incurred by Leroy, Donna, Barry, and Suzanne Haeger after an alleged discovery violation in their personal injury case.  The Haegers claimed that faulty Goodyear tires caused a 2003 accident involving their motor home in which they all suffered serious injuries.

For years with the case pending at the trial court, the Haegers’ lawyer had asked the company to hand over all test results for the tire model in question.  But only after the case settled pretrial in 2010 for an undisclosed sum did the Haegers’ lawyer learn from a newspaper article that Goodyear had disclosed test results in separate litigation that he’d never seen.

In response to a motion for sanctions U.S. District Judge Roslyn Silver in Phoenix issued an order in 2012 forcing Goodyear to pay its opponents legal fees and costs from the moment when she found Goodyear made its first dishonest discovery response.  Although the judge acknowledged that sanctions are limited to fees caused by the misconduct in the “usual” case, she wrote that Goodyear’s sanctionable conduct rose “to a truly egregious level.”

A divided Ninth Circuit panel affirmed Silver’s finding that she could grant attorney’s fees incurred “during the time when” Goodyear was acting in bad faith.  But in dissent, Circuit Judge Paul Watford wrote that his colleagues had mistakenly pointed to “a temporal limitation, not a causal one” to justify the sanction.  “A sanctioning court must determine which fees were incurred because of, and solely because of, the misconduct at issue (however serious, or concurrent with a lawyer’s work, it might have been),” wrote Watford, in a section quoted by Kagan.

Justice Neil Gorsuch did not take part in Tuesday’s decision.

NALFA Podcast with Bankruptcy Fee Examiner Robert M. Fishman

April 17, 2017

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who’ve helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, judges, law professors, in-house counsel, and others on a range of attorney fee and legal billing issues.

NALFA’s third podcast features an interview with NALFA member and bankruptcy fee examiner Robert M. Fishman.  Robert Fishman is a partner at Shaw Fishman in Chicago.  The NALFA podcast with Robert Fishman focused on his background and his work in bankruptcy cases.  Robert Fishman has represented a range of clients and stakeholders in bankruptcy proceedings.

Fishman discusses the role of the bankruptcy fee examiner, the stakeholders in bankruptcy cases, and his work as a fee examiner in the large City of Detroit Chapter 9 bankruptcy case.  Fishman also discusses the effectiveness of bankruptcy mediation and shares his thoughts on the U.S. Trustee Program and their billing guidelines.

“These podcasts are the perfect broadcast format to discuss attorney fee and legal billing issues,” said Terry Jesse, Executive Director of NALFA.  “In addition to his work, Robert Fishman also shares his philosophy of examining fees and expenses in large Chapter 11 Cases,” concluded Jesse.  Click on the link below to listen to the NALFA podcast:

https://soundcloud.com/thenalfa/nalfa-podcast-with-bankruptcy-fee-examiner-robert-m-fishman

Law Firms Seek Share of Fees From $680M Fund in BP MDL

April 14, 2017

A recent NOLA.com story by Katherine Sayre, “BP Oil Spill: Two Louisiana Firms To Receive $87 Million Each in Attorney Fees,” reports that two law firms in New Orleans and Lafayette that led the massive BP oil spill litigation are set to receive $87.8 million each under a proposed division of about $680 million in class action attorney fees, according to a court filing this week.

The complex case over the 2010 Deepwater Horizon drilling rig explosion and ensuing oil spill in the Gulf of Mexico involved a two-phase trial with expert testimony and settlement negotiations over several years.  The case consolidated individual economic and medical claims and state government claims from across the country to U.S. District Court in New Orleans.

BP, owner of the failed Macondo well, Transocean, owner of the Deepwater Horizon rig, and Halliburton, which was in charge of pouring cement at the well, have agreed to pay the plaintiffs' attorney fees.

A proposed split of about $680 million -- not including reimbursed expenses -- was filed in U.S. District Court in New Orleans this week.  The two firms getting the biggest chunk of the award are Herman, Herman & Katz of New Orleans and Domengeaux, Wright, Roy & Edwards of Lafayette with $87.8 million each.  Cunningham Bounds of Mobile, Alabama, and Weitz & Luxenberg of New York are set to receive about $42 million each.  Nearly two dozen firms based in New Orleans are proposed to get a combined $243 million.

The fee committee, made up of six of the plaintiffs' attorneys, reviewed requests from the dozens of law firms involved in the case and conducted 74 interviews over 12 days before making their recommendation, according to the proposal filing.  "The fee committee felt confident that a minimum of 518,250 hours were reasonably expended through the end of 2015 for the common benefit of class members and others affected by the Deepwater Horizon incident," the filing says.  BP agreed to pay about $555 million in attorneys fees; Transocean and Halliburton agreed to about $124 million.

For Domengeaux Wright Roy & Edwards of Lafayette, the case "required full-time devotion and pre-occupation with substantial personal and professional sacrifice (among other things effectively relocating to New Orleans for approximately three years)," the proposed allocation says.

In October, U.S. District Judge Carl Barbier, who has overseen the seven-year-old case, wrote that the multi-district litigation "would appear to be one of the largest, if not the largest, MDL in history."  "Over 130,000 individual civil actions and/or claims-in-limitation were filed by private businesses, individuals, and local governments," Barbier wrote.  "Yet even greater than its sheer size was the MDL's complexity."  The proposed allocation must be reviewed by John Perry, appointed special master over fees for the case, and Barbier.

In April 2016, Barbier approved a $20 billion settlement for BP to pay out to state and local government claims and Clean Water Act violation fines.  BP is expected to pay an estimated $13 billion in economic and medical claims to individuals and businesses.

Five Tips for Fee Agreement ADR Clauses

April 4, 2017

A recent The Recorder article by Randy Evans and Shari Klevens, “5 Tips for Fee Agreement ADR Clauses,” address ADR clauses in fee agreements.  This article was posted with permission.  The...

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