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Category: Fee Award

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.

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.

Opinion: The Trouble with Lodestar Fee Awards

May 30, 2018

A recent Reuters editorial by Alison Frankel, “The Trouble with Lodestar Fee Awards, Anthem Class Action Edition,” opines on the recent fee award in the Anthem class action.  The editorial reads:

A special master appointed by U.S. District Judge Lucy Koh of San Jose to recommend a fair fee for class counsel in the $115 million Anthem data breach settlement succeeded in pleasing no one with a vested interest in the outcome, based on filings Tuesday by lawyers for the class and the objector who first pushed for scrutiny of class counsel’s request for nearly $40 million in fees and expenses.

I’ll explain why both sides believe the special master, retired Santa Clara Superior Court Judge James Kleinberg, made critical mistakes in recommending a fee award of $28.6 million, based on a 10 percent chop off the top of class counsel’s adjusted hourly billings in the case. But more fundamentally, I was struck as I read both sides’ objections to his recommendation that lodestar fee awards are a quagmire for judges.

As you know, most federal judges calculate class action fees as a percentage of the recovery lawyers obtain for the class, sometimes applying multipliers to reward plaintiffs’ lawyers for taking on particularly risky or strenuous cases. Percentage-based fee awards have the advantage of incentivizing efficiency and aligning the interests of lawyers and their clients. They predominate, although many judges also look at lodestar billings as a check on percentage-based fees.

But as I told you last year, there’s been a bit of a recent boom in California federal court for awarding fees based on class counsel’s hourly billings, mostly in mega-cases in which judges were worried that a percentage-based fee award, even of 10 or 15 percent, would be an unseemly windfall for plaintiffs’ lawyers. Judge Koh, who is overseeing the Anthem case, has used lodestar billings to calculate fee awards in big anti-poaching class actions, 2015’s In re High-Tech Employee Antitrust Litigation and 2017’s Nitsch v. Deamworks Animation.  In both cases, lodestar billings resulted in a smaller award to class counsel than they would have received as a percentage of the recovery for class members.

The Anthem case is different. The hourly fees class counsel said they generated far exceeded the percentage-based fees they could have expected, given that courts typically award fees of less than 20 percent in cases with recoveries of more than $100 million. Plaintiffs’ lawyers said their lodestone fees and costs were nearly $40 million. They requested fees of about $38 million, or 33 percent of the $115 million class recovery. That was an ambitious request. California’s benchmark is 25 percent, $28.8 million in the Anthem case, and judges seldom award even that high a percentage in megacases.

After plaintiffs’ lawyers submitted their fee request, a class member represented by the Competitive Enterprise Institute objected, contending (among other things) that class counsel overcharged for the services of contract lawyers and otherwise overbilled their clients for nearly $9 million in unnecessary or duplicative work. In her order appointing a special master, Judge Koh said she was concerned that the sheer number of lawyers and law firms that billed time in the case – 331 billers across 53 plaintiffs’ firms – meant the class was overcharged “by virtue of the fact that so many billers needed to familiarize themselves with the case and keep abreast of case developments.”

Judge Koh ordered the special master to review the billing records of plaintiffs’ lawyers. Judge Kleinberg said in his April 24 report that he did, along with explanations of the records from class counsel at Altshuler Berzon and Cohen Milstein Sellers & Toll. But he also said he did not review every line item in the records because his goal was “a rough cross check, not auditing perfection.”

The special master decided class counsel had billed the time of contract lawyers at way too high an average rate. He recommended slashing fees for their work from the $6 million lodestar class counsel claimed to $3 million, taking into account his conclusion that contract lawyers should be billed out at a paralegal rate of $156 per hour. Judge Kleinberg said plaintiffs lawyers’ blended rate of $455 per hour was reasonable. But he said class lawyers devoted an apparently unreasonable number of hours to deposition preparation, class certification briefing and settlement negotiations. He blamed the “virtual army” of lawyers on the case.

“How could lead counsel possibly conduct effective oversight of this very large team of lawyers?” Kleinberg wrote. “The special master is not accusing plaintiffs’ counsel of deliberate overbilling. However, every time a new law firm was added to the group, those lawyers had to spend time learning the history, issues and facts being litigated. Thus, the inevitable result of the 53 billing participants presents at least a strong probability of duplication and unreasonable hours.”

He offered three alternatives for determining fees: applying the 25 percent benchmark percentage (and subtracting certain costs) to award $26.75 million; awarding $33.9 million in lodestar fees after adjusting the lodestar for contract lawyers and shifting expenses from the class to their counsel; or lodestar fees of $28.6 million, reflecting Judge Kleinberg’s recommendation of a 10 percent trim for potential overbilling. The special master said that was the maximum haircut he could apply, short discounting specific overcharges, under the 9th U.S. Circuit Court of Appeals’ ruling in 2008’s Moreno v. City of Sacramento.  Kleinberg recommended that Judge Koh pick the discounted lodestar option.

In their response to the special master’s recommendation, class counsel protested his recommended 10 percent haircut as unjustified. Kleinberg himself said their blended rate was fair, plaintiffs lawyers said, which implicitly means class counsel did not overstaff the case with high-cost partners. “Because the blended hourly rate is the total lodestar divided by the total number of hours expended, it reflects the cost of the average hour in the case and captures the extent to which the work was distributed among higher- and lower-cost professionals,” their filing said. “When, as here, the blended hourly rate is well below the median, it shows that counsel distributed work among partners, associates, contract attorneys, and paralegals in an even more cost-effective manner than has been found reasonable in past cases in this district.”

They also repeated previous explanations for why they had to involve so many lawyers from different firms to maximize efficiency in a compressed time frame. (The explanations included an accounting of the hours spent on depositions, class certification and settlement negotiation.) Class counsel instructed other firms not to bill for acquainting themselves with the case and reviewed other firms’ time sheets, cutting hours that seemed duplicative or inefficient. ‘The requested lodestar should be reduced only if the use of multiple firms actually resulted in duplication or inefficiency. That did not occur here,” the filing said. “The key assumption underlying the (special master’s) contrary conclusion is that ‘every time a new law firm was added to the group, those lawyers had to spend time learning the history, issues, and facts being litigated.’ This was incorrect.”

$13M Fee Award in Medical Device Patent Infringement Case

May 25, 2018

A recent New Jersey Law Journal story by Michael Riccardi, “Medical Device Makers’ Patent Infringement Battle Yields $13M Fee Award” reports that a Newark, New Jersey, federal judge has awarded $13.8 million in fee and costs to Zimmer Inc. after it came out the victor in a 13-year patent infringement battle with Howmedica Osteonics Corp.

U.S. District Judge William Walls made the award to Zimmer as the prevailing party after four patents that Howmedica claimed were infringed were found to be invalid. The patents, all carrying the title “non-oxidizing medical implant,” concern irradiating and heating polymers used in medical implants in order to extend the usable life of those implants. The suit said Zimmer sold products that infringed on Howmedica’s patents.

Walls granted Zimmer $13,296,559 in fees, which is nearly all the $13.5 million it sought, and granted the entire $513,258 in costs that the company  sought. But he rejected outright Zimmer’s request for $1.01 million in expert fees and for $5.8 million in prejudgment interest.

Walls awarded fees and costs after finding the litigation met the standard for an “exceptional case.” The judge said that standard was met for a variety of reasons. Among them was that an individual who testified before a patent examiner in the case on behalf of Howmedica, Aiguo Wang, failed to disclose at trial that he was an employee of that company. Walls also found that the case was exceptional because Howmedica failed to withdraw its infringement claims once it knew they were baseless, and the judge cited “selective disclosure of data and evasive responses” to a patent examiner by Howmedica.

Howmedica, for its part, argued that is had simply lost “11 years of hard-fought litigation between sophisticated competitors” over groundbreaking medical implants.

Walls ruled in 2007 that three of the patents were invalid, and the U.S. Court of Appeals for the Federal Circuit affirmed his ruling in 2010.  In 2009, Zimmer sought a re-examination of claims in the fourth patent, and the U.S. Patent and Trademark Office rejected the claims in that patent.

Howmedica, a maker of orthopedic devices, was acquired in 1998 by Stryker Corp. of Kalamazoo, Michigan. It claimed in the suit that Zimmer infringed its process for irradiating and heat-treating medical implant materials. Although this process was not novel, Howmedica claimed that its process of heating the materials at 50 degrees celsius for 144 hours was superior to similar methods. But Howmedica withheld key information from federal patent examiners during the course of the litigation, prompting their patents to be invalidated, according to court documents.

Zimmer, a maker of medical devices now known as Zimmer Bionet, is based in Warsaw, Indiana.

Howmedica has indicated that it will appeal the final judgment to the U.S. Court of Appeals for the Federal Circuit, according to court documents.

Zimmer was represented by lawyers from Kirkland & Ellis, Latham & Watkins and Tompkins, McGuire, Wachenfeld & Barry of Roseland, New Jersey. Walls said the Am Law 50 average was an appropriate basis for evaluating the hourly rates claimed by counsel from Kirkland & Ellis and Latham & Watkins, citing the highly specialized area of law, the expertise required and what he termed the “exorbitant” $2 billion in damages sought by Howmedica in the case. Some Kirkland & Ellis lawyers charged as much as $1,295 per hour, but Walls said, “The court also finds any billing rate over $900 to be unreasonable,” and he cut three lawyers down to that rate—Mark Pals, Bryan Hales and David Callahan.

Walls issued an order in the case announcing his ruling on April 24, but the reasons for his ruling were unknown until he unsealed a 39-page opinion on Wednesday.

Lawyers representing Zimmer did not return calls about the fee award. Nor did lawyers at Gibbons in Newark and at McAndrews, Held & Malloy in Chicago, who represented Howmedica. Representatives at Howmedica and at Zimmer also did not return calls about the case.

Fee Ruling Incentives Lawyers to Take on Wage Cases in Connecticut

May 22, 2018

A recent Connecticut Law Tribune story by Robert Storace, “Defense: Attorney Fee Award in Wage Case Could Mean ‘Open Season’ for Suits Against Restaurants,” reports that a ruling by a Connecticut Superior Court judge on minimum wage law is getting mixed reaction from attorneys on both sides of the issue.

The ruling by Hartford Superior Court Judge Cesar Noble giving $31,445 to an attorney who worked on a tip credit employment case was hailed by the attorney as a major incentive for plaintiff’s counsel to take on such cases. But the defense decried the ruling as unjust, unfair and inappropriate.

The litigation hinged on “tip credit”—the difference between the minimum fair wage under Connecticut’s Minimum Wage Act and the minimum wage permitted for service employees who receive gratuities. It pits plaintiff Shaneque Stevens against Windsor-based Italian restaurant Vito’s By The Water, and resulted in two rulings from Noble.

The latest ruling, on May 17, granted the plaintiff $31,445 in legal fees for work by attorney Richard Hayber of the Hayber Law Firm in Hartford. An earlier ruling in November found the restaurant did not pay fair and just wages to Stevens, a former server. At the time, the judge awarded Stevens $20,704.

“This is an important ruling for attorneys who take on wage cases for low-wage workers that they will be paid when they win,” said Hayber, a labor/employment lawyer in Connecticut and Massachusetts for 20 years. “This will encourage lawyers to help otherwise resourceless  workers who need their help. It’s a big incentive for those lawyers to take on these cases.”

But defense counsel took the opposite view.

Kennelly Law Firm attorney John Kennelly, who represents Vito’s owner Robert Maffucci, said both rulings set a dangerous precedent and will negatively affect restaurants across the state.

Kennelly called the attorneys fee award given to Hayber “inappropriate.”

“The amount of repetitive billing should not have been rewarded by this court. I believe $32,000 was way too much,” he said. “My motion was for him to get about $10,000 for a case with some minor and legal factual disputes.”

Kennelly said he is leaning toward appealing and has until June 3 to decide. He said Maffucci has yet to make a final decision on whether to appeal. The restaurateur did not return a call for comment Monday.

The November ruling ”means there is now an open season for every small restaurant business that does not have an entire legal department to protect them from the minutia of the state Department of Labor regulations,” Kennelly said.

In that ruling, Noble stated that Vito’s paid Stevens solely a tip credit wage when some of her work should have been paid at the state’s $10.10-an-hour minimum wage. The tip credit wage in Connecticut is $6.38 an hour, or $3.72 less than the minimum wage. State law allows for restaurant wait staff to be paid the tip credit wage if they are serving customers and earning tips. Employees must, under state law, get the state’s minimum wage when they are not serving, such as times they are vacuuming or rolling silverware or cleaning pizza trays.

According to Hayber, Stevens and others servers, on average, would work about 30-35 hours a week. Of that time, Hayber said, about five hours a week should have been earmarked for minimum wage pay. That is disputed by Kennelly, who said minimum wage pay constituted only a few minutes each day.

“We are talking only a few minutes in the beginning and the end of the shift,” Kennelly told the Connecticut Law Tribune Monday. “That is when [Stevens] was doing things like setting up and filling condiments. We are talking about a minor violation here. We are talking about minutes. It was all done on good faith and was not nefarious. There are not conspiracies here. What the court has done is applied what is significant punitive damages to a situation that, at the very worst, was ignorance of application of the tip credit rate.”

Kennelly said the most unfair part of the November ruling was that the judge “applied double damages” for the plaintiff.

But Hayber said the judge’s action might deter other restaurants from doing what Vito’s allegedly did.

In addition to awarding his client back pay for about 18 months, Hayber noted Noble also tacked on 12 percent interest per year.

“The penalty damages under the Connecticut Wage Act are designed to punish and deter this type of activity in Connecticut,” Hayber said. “This ruling is very important because it strictly construes the Wage Act, which is designed to help protect low-wage workers from employers who would take advantage of their status as employees.”

Hayber, who said he plans to file similar suits in the near future against other restaurants, described his lawyering style in the case as “relatively straightforward.”

“I obtained the payroll records and side-work lists and took the deposition of the owner, who testified truthfully that [Stevens] performed side work at the beginning and end of her shift and he paid her at the service rate. That was the end of the case for me.”

While the ruling might not set precedent because Superior Court judges do not have to follow what a fellow Superior Court judge ruled, Hayber suggested it might influence other decisions.

Judges “do read each other’s opinions and try to follow them,” he said. “They are not bound to them, but judges try to create a cohesive body of law.”