Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Archive: 2018

Judge Wants Detailed Billing Records in Anthem Data Breach Class Action

June 15, 2018

A recent The Recorder story by Ross Todd, “Judge Again Says She’s ‘Disappointed’ in Plaintffs Lawyers in Anthem Data Breach Case ,” reports that the federal judge overseeing litigation targeting Anthem Inc. with data breach claims on Thursday continued her grilling of plaintiffs lawyers who represent the health insurer’s customers about the number of firms who worked on the case.

U.S. District Judge Lucy Koh asked lead plaintiffs counsel, Eve Cervantez of Altshuler Berzon and Andrew Friedman of Cohen Milstein Sellers & Toll, a string of detailed questions about which lawyers submitted bills on work settling the litigation, who defended depositions of name plaintiffs and who handled basic discovery tasks. Koh previously grilled the lead plaintiffs for having 49 other firms beyond those on the four-firm plaintiff steering committee she appointed.

After Cervantez said that 27 firms had worked on the “crisis” of getting through millions of pages of discovery, Koh stopped the plaintiffs lawyer.

“Is that how you run most of your cases? You have 27 firms doing document review?” the judge said.

Cervantez said it didn’t matter who did the work or the firm where they practiced, but “were the hours expended reasonable.”

“How is that consistent with the conversation that I had with you and Mr. Friedman at the selection of counsel hearing?” asked Koh, who initially trimmed the lead plaintiffs proposed six-member steering committee to two firms.

Plaintiffs struck a $115 million settlement deal with Anthem last June, which included a proposed $38 million in attorney fees, or 33 percent of the total settlement. The deal provided two years of credit monitoring and identity protection services to Anthem customers whose personal data was compromised in the 2015 breach, and creates a $15 million fund to reimburse customers for things such as falsified tax returns.

The Competitive Enterprise Institute’s Center for Class Action Fairness filed an objection last year on behalf of Adam Schulman, an attorney at the Washington, D.C., organization, partially because of the fee request. Schulman claimed fees should be closer to $13.8 million and questioned why 49 other firms not appointed by the court stood to earn a total of $13.6 million in fees as part of the settlement.

Koh told plaintiffs counsel that she was “deeply disappointed” about the number of firms brought on to handle the case at a hearing in February.  At Schulman’s request, she appointed a special master, retired Santa Clara County Superior Court Judge James Kleinberg, to comb over the fee request.

Kleinberg, who is now a mediator and arbitrator at JAMS, pointed to duplicate efforts and excessive billing rates for contract lawyers in suggesting in April that the fee award be trimmed to $28.59 million. 

Koh didn’t tip her hand on where she will ultimately come out on the fee request Thursday, but she did indicate that she’ll rule on final approval of the deal by late July. She asked the plaintiffs to hand over detailed records about document review, depositions and post-settlement work.

“I would like to be able to see who did what work when at what hourly rate and for how many hours,” she said.  “I think I’ve already indicated that I’m disappointed, but it is what it is.”

Class Counsel Earn $1.3M in Fees in Pipe Price Fixing Class Action

June 14, 2018

A recent Law 360 story by Bill Wichert, “Attys Awarded $1.3M Fees in Pipe Price Fixing Class Action,” reports that counsel for indirect purchasers of ductile iron pipe fittings have won a New Jersey federal judge's approval for roughly $1.3 million in attorneys' fees in a consolidated class action against three suppliers over price-fixing claims, representing one-third of the combined settlements with the companies.

U.S. District Judge Anne E. Thompson on Wednesday approved the fees request from those plaintiffs' lawyers, citing the attorneys' "vigorous and effective pursuit" of the claims against Sigma Corp., Star Pipe Products Ltd. and McWane Inc.

By granting the request, the judge said she considered "the complexity and duration of the litigation" and "the amount of time devoted to the case by [the indirect purchaser plaintiffs'] counsel," among other factors.

"The court finds that the requested fee of one-third of the total amount of the Star, Sigma and McWane settlements is fair and reasonable and within the range of fees ordinarily awarded in this district and throughout the Third Circuit," Judge Thompson said in her order.

In addition to the $1.36 million in attorneys' fees, the judge approved the lawyers' requests for reimbursement of $87,270.35 in litigation expenses and service awards of $15,000 each for eight class representatives, including Yates Construction Co. in North Carolina and the city of Hallandale Beach, Florida.

Judge Thompson found that the litigation expenses were "necessary, reasonable and proper in the pursuit of this litigation."

In granting the service awards, the judge said, "The proposed class representatives were extensively involved in this case and devoted substantial time and energy to their duties, including working with counsel to understand the workings of the [ductile iron pipe fitting] market, collecting relevant documents, responding to interrogatories and preparing and sitting for depositions."

The attorneys' fees, litigation expenses and service awards will be paid from the total settlement funds of $4.07 million in the case, court documents state.

The attorneys for the indirect purchasers include interim co-lead counsel at Kirby McInerney LLP, Kohn Swift & Graf PC and Weinstein Kitchenoff & Asher LLC, and interim liaison counsel at Schnader Harrison Segal & Lewis LLP.

The indirect purchaser plaintiffs, who initially filed the lawsuits in 2012, have alleged that Sigma, Star Pipe and McWane took part in an unlawful scheme to raise and fix prices for ductile iron pipe fittings that were sold throughout the U.S., alleging antitrust violations under state and federal law, including the Sherman and Clayton acts.

The indirect purchasers accused the three manufacturers of conspiring to keep prices high for ductile iron pipe fittings used in municipal drinking water and wastewater systems.

In June 2015, the indirect purchaser plaintiffs reached settlements with Sigma and Star Pipe for $2.01 million and $641,250, respectively, court documents state. About a year later, Judge Thompson certified the settlement classes and granted final approval of those deals.

The indirect purchaser plaintiffs and McWane reached a $1.43 million settlement last year, court documents state. On Wednesday, Judge Thompson certified the settlement class and granted final approval of that settlement.

As part of their attorneys' fees bid, the interim co-lead counsel argued last month in a brief that they and other law firms working under their oversight "have devoted 9,414.70 hours developing and advancing the plaintiffs' claims."

Those efforts included investigating the ductile iron pipe fittings industry, working with class representatives to draft and file complaints, submitting briefs and presenting arguments on motions, preparing for and defending depositions and negotiating separate settlements with the defendants, according to the brief.

"Plaintiffs' counsel's fee request is reasonable and consistent with fee awards in this circuit, particularly in light of the length and complexity of this case, the nature and extent of plaintiffs' counsel's efforts in litigating the case and, in the end, negotiating substantial settlements, and the litigation risks assumed," the brief states.

Robert S. Kitchenoff of Weinstein Kitchenoff & Asher LLC, an attorney representing the indirect purchasers, told Law360 on Thursday in a statement, "Class counsel and the named class representatives aggressively and effectively represented the interests of the members of the class, and are gratified by the court’s recognition of those efforts."

The case is In Re Ductile Iron Pipe Fittings Indirect Purchaser Antitrust Litigation, case number 3:12-cv-00169, in the U.S. District Court for the District of New Jersey.

Fees Awarded to Insurer in Dispute Among Conservative Activist Schlafly’s Family, Followers

June 13, 2018

A recent New Jersey Law Journal story by Charles Toutant, “Fees Awarded to Insurer in Dispute Among Conservative Activist Schlafly’s Family, Followers,reports that a Newark federal judge has awarded legal fees to John Hancock Insurance Co. and to Lincoln National Life Insurance Co. in connection with a battle over a $3.4 million payout from life insurance policies taken out on the late conservative activist and attorney Phyllis Schlafly. But the underlying dispute between her children and followers appears far from resolution.

Schlafly, known for her opposition to the Equal Rights Amendment, died at age 92 in 2016. Since then, a battle has been waged for control of the organization she founded, Eagle Forum, which is listed as beneficiary on the policies.

Her son Andrew, a Far Hills resident, sued the two insurance companies in Morris County Superior Court in March 2017, seeking an injunction against the distribution of policy proceeds to “anyone other than proper representatives acting in the interests of and under the direct instructions of the members of Eagle Forum.”

Other suits concerning the control of the assets of Eagle Forum are pending in federal courts in Illinois and Missouri, and in a state court in Missouri.

In the New Jersey case, Andrew Schlafly, who is pro se, claims that since his mother’s death, Eagle Forum lacks a properly functioning board of directors. He claims that the people purporting to control Eagle Forum have dissipated its assets and “are attempting to take Eagle Forum in a direction other than its mission,” U.S. Magistrate Judge Steven Mannion wrote in his May 21 report and recommendations.

U.S. District Judge Esther Salas on Wednesday issued an order adopting Mannion’s recommendations and awarding the fees.

The insurance companies brought Eagle Forum into the case as a third-party defendant, and the organization opposed the award of fees to the insurance companies, claiming that determining the beneficiary of a policy is part of an insurer’s routine course of business.

But, Mannion said, the cases that Eagle Forum provided to support its position were from other jurisdictions, and not binding in the District of New Jersey. Courts in the District of New Jersey have rejected the notion that insurance companies are never permitted to recoup attorney fees, and routinely make such awards, Mannion said.

Eagle Forum argued that the insurers’ failure to pay out the policy proceeds is a “vexatious refusal to pay,” according to Mannion, but that argument ignores the case’s “tortured procedural history,” he said. The insurers had a legitimate fear of paying the wrong person, officer or entity at Eagle Forum, Mannion said.

Mannion awarded Lincoln’s request of $41,229, finding it not excessive or redundant—and, at roughly 2 percent of the policy proceeds of $2 million, it would not seriously deplete those funds, he said. He made the same finding in connection with the $109,176 fee application for John Hancock, which came to roughly 8 percent of the $1.42 million award.

Schlafly said the insurance company fee application was a routine matter, and that resolution of the underlying dispute in the New Jersey case was “proceeding in a timely way.” He said that the Illinois and Missouri cases were still pending, but declined to comment on them otherwise.

Media reports about the dispute indicate that the rift among Phyllis Schlafly’s supporters concerned her endorsement of Donald Trump for the 2016 Republican presidential nomination before her death, with some in Eagle Forum instead favoring the candidacy of U.S. Sen. Ted Cruz. Schlafly confirmed that such is the nature of the dispute.

Edward Butkovitz of Kleinbard in Philadelphia. who represents the Eagle Forum, did not return a call about the case.

Valerie Pennacchio of Saul Ewing in Newark, who represented Lincoln National, and Darren Goldstein of Flaster/Greenberg in Cherry Hill, who represent John Hancock, also did not return calls about the case.

Attorneys Defend $16M Fee Request in Securities Class Action

June 12, 2018

A recent Law 360 story by Bonnie Eslinger, “Attys Defend $16M LendingClub Fee Bid That ‘Shocked’ Judge,” reports that attorneys seeking $16 million for representing LendingClub Corp. investors in securities class actions against the peer-to-peer lending company defended their fee bid Monday to a California federal judge who previously said the amount “shocked” him, saying their work produced an “outstanding result under any measure.”

The 28-page motion filed by attorneys for Robbins Geller Rudman & Dowd LLP, lead counsel for the lead plaintiff, argues that the requested 13.1 percent cut of the $125 million settlement is reasonable in light of the results achieved, the risks of the litigation, the skill required to tackle the case, the financial burden carried by counsel in the contingency matter, the work performed in a related state action, the positive support of the class and the hours spent prosecuting the litigation.

“An undeniable reality of the legal industry’s evolution (or regression) is that few legal teams pose a credible threat to take large complex cases to trial on a contingent basis — and win. The prosecution team for lead counsel Robbins Geller Rudman & Dowd LLP demonstrated that it was one of these few,” the attorneys state at the top of their motion. “Defendants’ counsel are experienced enough to recognize when an adversary is preparing a case for trial, and that is what Robbins Geller was doing when this case settled.”

According to the law firm, it had obtained crucial documents, “secured the right to argue an inference that rendered summary judgment for the underwriter defendants almost impossible,” and was set to depose key LendingClub former executives.

As a percentage of reasonably recoverable damages, the settlement is several times greater than the average recovery in other cases under the Private Securities Litigation Reform Act, Robbins Geller argues, but the 13.1 percent fee is far below the average award.

The settlement ends class action claims in California federal and state court that allege the peer-to-peer lending company misled investors in the run-up to its $1 billion initial public offering in 2014.

But while the deal was preliminarily approved by U.S. District Judge William Alsup on March 16, at a hearing held one week prior the judge expressed skepticism over the proposed $16 million attorneys' fees award.

"I'm not sure you did enough to justify $16 million,” Judge Alsup said. “To me that's too much money. I'm shocked at that amount. Maybe you can convince me."

At that hearing, an attorney for the class, Jason Forge of Robbins Geller, said his clients had negotiated the percentage cut of the net settlement before they signed a retainer agreement. But Judge Alsup said he wasn’t beholden by that contract, adding, "I still, at the end of the case, have to do what’s right for the class, and you may be being greedy."

In its motion for attorneys' fees, Robbins Geller argues that basing the award on a percentage of a settlement is a “well tested and accepted” method throughout the country. The requested fee is also significantly less than the Ninth Circuit’s 25 percent benchmark for similar cases, the law firm notes.

The results achieved in the litigation also lean toward the fee award, the firm said. According to a study conducted by NERA Economic Consulting, the LendingClub settlement lands in the middle of 2017’s top 10 securities class action recoveries, "yet the requested fee percentage here is below the fee percentages awarded in all those cases,” Robbins Geller notes.

The top settlement, according to the study, was a $210 million deal to end a proposed class action by Salix Pharmaceuticals Ltd. shareholders, which yielded a $44.6 million, 21 percent fee cut. A $100 million settlement between Halliburton Co. and disgruntled investors came with a $33 million class counsel award, or 33 percent. A Dole Food Co. $74 million settlement in a Delaware federal securities suit included an $18.5 million fee award, or 25 percent.

Lead counsel’s prosecution of this case yielded a number of achievements in the litigation, the firm added, including defeating defendants’ motions to dismiss as to all claims and most allegations; moving to strike the majority of the defendants’ affirmative defenses, which led to them withdrawing 115 of 154 of their affirmative defenses and amending the remaining defenses; and obtaining class certification in the case.

But there were certainly risks to the case, the law firm said.

“Defendants had already staked out, and were actively developing, the argument that LendingClub’s admitted material weakness in internal control did not exist at the time of the IPO,” Robbins Geller states in its motion, adding that it was also “impossible to predict how a jury would assess a complex trial involving issues of specific intent or how an appellate court would view the myriad issues that arise in lengthy litigations.”

The reaction of the class also supports approval of the attorneys' fees, the motion states. To date, over 104,600 notices have been sent out about the settlement and only one class member has objected.

Finally, Robbins Geller tells the court that 24,260.25 hours of attorney and paraprofessional time was spent prosecuting the action on behalf of the class. Based on those professionals' rates, the resulting $13,152,167 lodestar would only be subject to a reasonable multiplier of 1.24 for the $16,384,087 requested fee, the firm states.

“Lead counsel’s efforts on behalf of the class resulted in an outstanding result under any measure,” Robbins Geller states.

The fee bid is the latest legal turn in the winding litigation, which stretches back to May 2016, when LendingClub shareholders began suing the company in federal court, claiming that before it went public, the company misled investors about its compliance practices, especially the adequacy of its internal controls to ensure its loans conformed to customers' criteria.

The first federal court complaint was filed one week after LendingClub disclosed that its board of directors had accepted CEO Renaud Laplanche’s resignation in the wake of an investigation into altered loan documents and an internal review that found the company had sold $22 million in loans made to people with low credit scores to a single investor.

Various suits were later consolidated by Judge Alsup, who also appointed the Water and Power Employees' Retirement, Disability and Death Plan of the City of Los Angeles as lead plaintiff. The litigation asserts both Securities Act and Exchange Act claims against LendingClub, Laplanche and an array of other current and former top brass as well as the underwriters of the 2014 IPO.

The state court case dates back to February 2016 and asserts only Securities Act claims against the same set of defendants, based on similar allegations about the company’s purportedly deficient offering documents.

The parties announced a tentative $125 million settlement and filed a motion for preliminary approval in February.

The cases are In re: LendingClub Securities Litigation, case number 3:16-cv-02627, in the U.S. District Court for the Northern District of California, and In re: LendingClub Corp. Shareholder Litigation, case number CIV537300, in the Superior Court of the State of California, County of San Mateo.

Minnesota Supreme Court Sets Attorney Fee Award Factors

June 11, 2018

A recent Minnesota Lawyer story by Barbara L. Jones, “Supreme Court Sets Fee Award Factors,” reports on the recent Minnesota Supreme Court decision in Faricy Law Firm v. API Inc. Asbestos Settlement Trust.  The story reads:

When a contingent-fee client fires a law firm shortly before settlement, the court should consider not only the contingent fee agreement but also other factors including the timing of the termination and the contributions of others when making a quantum meruit fee award.

That’s the ruling of the Supreme Court in Faricy Law Firm v. API Inc. Asbestos Settlement Trust, decided June 6 by a 4-2 court. Chief Justice Lorie Gildea dissented, joined by Justice G. Barry Anderson, and Justice Paul Thissen did not participate.

The court remanded the matter to the District Court for determination of an appropriate quantum meruit award.

“The set of factors that we adopt today should guide district courts faced with the task of balancing the equities in determining the quantum meruit value of the services of a discharged contingent-fee attorney,” wrote Justice Margaret Chutich for the court.

Evidence to calculate fee award

For 10 years, the plaintiff Faricy represented API Trust and its predecessor, API in connection with indemnification claims for asbestos-related verdicts and settlements. This case concerns work performed in a case with Home Liquidator under a 33 1/3 percent contingent fee after January 2009. While Faricy represented API Trust, Home Liquidator offered $11 million to settle the case. Shortly thereafter, API fired Faricy. About two months later, the case settled for $21.5 million.

API had acknowledged that Faricy was entitled to a fee but later refused to pay the contingent fee or any fee at all. Faricy filed a lien seeking the entire one-third fee.

However, the District Court evaluated the case under quantum meruit. It said that Faricy’s work product, advice and recommended negotiation strategy led to the settlement in significant part. But it also said that Faricy, because it was sticking to its claim for one-third of the settlement, failed to provide significant evidence to calculate a fee award.

“Although the district court ‘implored Faricy’ to provide more evidence of the value that its legal work conferred on API Trust, the lack of evidence of the hours that Faricy had worked stymied the district court’s efforts,” Chutich wrote.

The Court of Appeals said it was error to award nothing and remanded for a quantum meruit analysis. Both sides sought review. The court granted both petitions — how to calculate a quantum meruit award in contingent-fee cases and whether the remand was appropriate in light of the evidence submitted to show the value of the legal services provided by Faricy. It did not rule on the second issue.

Walking away empty-handed

A discharged attorney may not sue for breach of contract because the client always has the right to terminate the relationship. For similar reasons, an attorney may not sue for the contingent fee but “should not necessarily walk away empty-handed,” Chutich wrote. Instead, the attorney is entitled to pursue a quantum meruit recovery, which is an equitable remedy. The discharged attorney must prove the value of the attorney services.

The question thus becomes how to value the services and whether to consider the contingent-fee agreement. The Court of Appeals has provided various factors but never explicitly designated the contingent fee award as one of them.

The court delineated eight factors (see sidebar) including the contingency fee, and added two that have not been announced previously—the contributions of others and the timing of the termination. “We have chosen these factors because they combine considerations that we have previously applied to determine the value of an attorney’s services in other contexts with concerns that are specific to the context of a discharged contingent-fee attorney,” explained Chutich.

The first six factors derive from the considerations for determining the reasonable value of legal services owed in the condemnation context and under the lodestar method.

But those factors do not suffice to determine the value conferred upon the client, the court continued, particularly where representation is terminated after a firm has substantially contributed to a successful end.

“These factors allow the court to measure the value of the services depending on how the timing of the termination related to the ultimate result and whether the discharged attorney added value compared to other contributors in the case. … Considering the timing of the termination is especially crucial to prevent a client from avoiding a contingent fee when it becomes apparent that the client will recover or reach a successful result,” Chutich wrote.

They are also consistent with principles of equity, which requires a balance of equities and not a bright line rule, the court continued.

Accordingly the court remanded the case for consideration of all the factors, including the contingent fee. The court went on to explain that it was not holding that Faricy was “automatically” entitled to its full contingent fee, but it also held that evidence of hours worked was not the only measure of value. The court has the discretion to open the record on remand.

Dissent: Absence of proof

The dissent was dissatisfied with the majority opinion because Faricy provided no evidence that could be used to compute fees. The District Court was correct when it refused to compute fees. “Even if the equities weighed in favor of Faricy, there is still an absence of proof on the fundamental element of the claim—reasonable value of services provided,” Gildea wrote. The firm should not get a second bite at the apple via a reopened record on remand, she added.

Quantum meruit factors

(1) Time and labor required;

(2) Nature and difficulty of the responsibility assumed;

(3) Amount involved and the results obtained;

(4) Fees customarily charged for similar legal services;

(5) Experience, reputation, and ability of counsel;

(6) Fee arrangement existing between counsel and the client;

(7) Contributions of others; and

(8) Timing of the termination.