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Category: Fee Award

Class Counsel Win $15.2M Fee Award in Home Depot Breach

January 24, 2020

A recent Law 360 story by Mike LaSusa, “Home Depot Breach Class Attys Score $15.2M After Fee Fight,” reports that attorneys representing banks and other financial institutions that sued over Home Depot's 2014 data breach won a $15.2 million fee award after the Eleventh Circuit nixed an earlier award and asked the Georgia federal court that handled the case to take another look.  U.S. District Judge Thomas W. Thrash Jr. awarded the attorneys $14.5 million in fees and just over $730,000 in expenses, rejecting Home Depot’s contention that the Eleventh Circuit’s ruling limited the Georgia federal court’s latitude in deciding the fee issue.

The appeals court ruled in July that the lower court had erred in applying a multiplier of 1.3 to an $11.773 million lodestar, leading to a $15.3 million award.  Home Depot said that decision triggered a clause in its settlement with the financial institutions under which Home Depot would only be responsible for the lower amount if the attorney fees were reduced on appeal.  But Judge Thrash pointed out that the Eleventh Circuit left it up to him to determine the best way to decide the attorney fees.

“If the Eleventh Circuit had intended that this court simply enter an order awarding class counsel $11.773 million plus interest, as Home Depot contends, this court believes the appellate court would have said so explicitly,” the judge said.  “The Eleventh Circuit did not reduce the amount of the award; rather, the appellate court reversed the award and remanded for reconsideration.”

Rather than use the lodestar method that had yielded the earlier fee award, Judge Thrash instead calculated the new award based on a percentage of the benefit to the class.  Calculating the benefit to the class to be $42.5 million, the judge ruled that one-third of that amount would be appropriate, and added on interest as specified in the settlement agreement.

The attorneys asked for $18 million in late August, contending that their work had resulted in not only the $27.25 million settlement, but also pushed the retailer to offer some of the country's biggest banks $14.5 million to release their claims.

$100M Attorney Fee Award in $1B Vereit Settlement

January 23, 2020

A recent Law 360 story by Reenat Sinay, “Robbins Geller Bags $100M in Fees for $1B Vereit Settlement,” reports that Robbins Geller Rudman & Dowd LLP attorneys will receive a $100 million payday for securing a $1.025 billion settlement for Vereit Inc. investors in a suit that accused the real estate investment trust of lying about its books, a New York federal judge ruled.  U.S. District Judge Alvin K. Hellerstein approved the massive settlement but decided to take more time to rule on attorney fees due to the size of the deal.

Robbins Geller, which represented lead class plaintiff TIAA-CREF, had asked for attorney fees worth 12.4% of the settlement fund, which comes out to $127.1 million, plus expenses of just over $5.1 million.  The lawyers said in their December fee bid that the 12.4% amount "falls far below" the usual range for cases of this size and complexity, and noted a 13% fee award in a $2.3 billion class-action settlement was recently affirmed by the Second Circuit.

Without explaining his reasons for approving a lower amount than requested, Judge Hellerstein awarded $100 million in fees and $5,154,721 in expenses.  "The court finds that the amount of fees awarded is fair, reasonable, and appropriate under both the lodestar and 'percentage-of-recovery' methods," he said.  "Lead counsel has pursued the litigation and achieved the settlement with skill, perseverance and diligent advocacy."

The settlement ended five years of "hard-fought" litigation and represents a recovery of 50% of the maximum recoverable damages — the highest percentage recovery ever in a major private securities class action ahead of trial, according to Robbins Geller.

Class Counsel Earn $36.5M in Fees in Navistar Engine Settlement

January 22, 2020

A recent Law 360 story by Mike Curley, “Class Counsel Gets $36.5M in Navistar Engine Settlement,” reports that an Illinois federal judge has approved $36.5 million in attorney fees as part of a $135 million settlement that ends litigation against Navistar alleging the company sold diesel engines with defective emissions systems.  U.S. District Judge Joan B. Gottschall granted final approval of the settlement, saying the attorney fees are reasonable in light of the 74,000 hours poured into the case by 15 firms that represented the class of truck owners.

In addition to the attorney fees, the judge approved $3.5 million in reimbursement for out-of-pocket costs for class counsel and $25,000 service awards for each of the 29 named plaintiffs, or $725,000 total.  "After many years of hard-fought litigation, we're happy that Judge Gottschall — recognizing the quality of this settlement and the work that went into achieving it — granted our fee and expense request in its entirety," Adam Levitt of DiCello Levitt Gutzler, co-lead counsel in the case litigation, told Law360.  "We look forward to continuing to work with class members in implementing the settlement and distributing the substantial relief that we obtained."

The final approval comes two weeks after, Judge Gottschall signed off on the $135 million settlement, which ends litigation brought by truck drivers who claim that 2010-13 model year MaxxForce 11 and 13 Advanced "Exhaust Gas Recirculation" diesel engines have a defectively designed integrated emissions system.  Class members have three options for compensation under the deal. They can choose a lump payment of up to $2,500, a rebate option of up to $10,000 to buy a new Navistar truck or recoup up to $15,000 in out-of-pocket costs from repairs related to the alleged defects in their vehicles.

For the purposes of the settlement, the judge certified the class as anyone who owned or leased the 2011-2014 model vehicles equipped with the MaxxForce 11- or 13-liter engines at issue in the suit before Aug. 11, 2019.

$6.2M Fee Award in Virgin Airline Wage Class Action

January 21, 2020

A recent Law 360 story by Vin Gurrieri, “Attys Behind $77M Virgin Wage Win Sought $13M Get $6M,” reports that lawyers for Virgin America flight attendants who recently won $77 million over claims the airline stiffed workers on pay and rest breaks were awarded nearly $6 million in fees by a California federal judge, which was about half the amount they had requested.  U.S. District Judge Jon Tigar awarded $5.7 million to attorneys representing a class of flight attendants led by named plaintiff Julia Bernstein who alleged that Virgin America Inc. flouted California labor laws by not paying them for all hours worked, including pay for overtime, and denying them state-mandated meal and rest breaks.

After having largely granted the flight attendants' bid for summary judgment, Judge Tigar a year ago awarded the flight attendants $77 million in damages.  The airline has since challenged the award to the Ninth Circuit, an appeal that is still pending.  In the meantime, Judge Tigar issued an order finding that the class members' legal representatives were due almost $6 million in fees and an additional $251,000 in court-related expenses.  That number, however, fell short of the approximately $13 million in fees and expenses the lawyers had sought.

Judge Tigar agreed with Virgin that class counsel didn't provide enough detail about certain declared hours and sided with the company in its objection to certain categories, like one labeled "other," that were billed in blocks.  "Virgin takes issue with plaintiffs' use of an 'Other' category, which accounts for 148.1 hours of the fee request," the judge said on the latter issue.  "Given that plaintiffs neglected to identify even representative examples of the types of tasks included, the court cannot award fees for those hours.  The court therefore excludes all 148.1 hours from the fee request."

The judge also shaved the billing rates of several attorneys representing the class but rejected Virgin's arguments that the class members' failure to win on certain claims warranted a significant reduction in fees awarded, leading him to arrive at the $5.7 million figure.  "Ultimately, the court finds that the hours expended were reasonable in light of the overall success achieved, and agrees that success was exceptional," Judge Tigar said.

Bankruptcy Court Denies Fee Enhancement Under Common Fund Doctrine

January 17, 2020

A recent Legal Intelligencer article by Rudolph J. DiMassa, Jr. and Geoffrey A. Heaton, “Bankruptcy Court Denies Motion for Fee Enhancement Under ‘Common Fund Doctrine’,” reports on a bankruptcy court that recently denied creditors’ counsel’s motion for a fee enhancement under the common fund doctrine.  This article was posted with permission.  The article reads:

In a bankruptcy case filed 91 years ago (and reopened 85 years later), the U.S. Bankruptcy Court for the Western District of Virginia recently denied creditors’ counsel’s motion for a fee enhancement under the “common fund doctrine,” finding it could not award the requested fees absent statutory authority.  In particular, the court determined it would be an abuse of its equitable powers to award fees beyond the scope of applicable bankruptcy law in In re Yellow Poplar Lumber, Case No. 605 B.R. 416 (Bankr. W.D. Va. 2019).

Background

In July 1928, White Oak Lumber Co. filed an involuntary Chapter 7 petition in the U.S. District Court for the Western District of South Carolina, seeking to have Yellow Poplar Lumber Co., Inc. “adjudged a bankrupt” under the Bankruptcy Act of 1898.  n 1931, the district court adjudged Yellow Poplar as bankrupt and closed the case.

In 2013, the case was reopened in connection with a dispute over ownership rights in certain gas estates on parcels of land in Virginia, and it ultimately found its way to the U.S. Bankruptcy Court for the Western District of Virginia.  The dispute resulted in a settlement whereby Yellow Poplar’s bankruptcy estate stood to receive approximately $2 million in gas royalties.  The Chapter 7 trustee appointed in the reopened case, with the assistance of a genealogist, identified several of the original creditors’ existing heirs or successors-in-interest.  The bankruptcy court, in turn, directed the trustee to file a brief addressing the appropriate interest rate on the anticipated distribution to creditors, and invited any other party-in-interest to do the same.  While the trustee contended that the interest rate should be 2.4%, counsel for the heirs of two creditors advocated a 7% rate, which reflected the legal rate in effect in South Carolina when Yellow Poplar’s bankruptcy case was filed.  The court ultimately ordered the application of a rate of 3.6%.

Creditors’ counsel, however, successfully appealed the court’s ruling, which resulted in general unsecured creditors receiving 7% interest on their distributions, and increasing the asset pool to be distributed to general unsecured creditors by approximately $740,000.  Notably, the efforts of creditors’ counsel did not increase the amount of funds in the bankruptcy estate, but rather increased just the proportion of estate funds going to the class of general unsecured creditors, effectively diverting funds from one class of constituents to another.  Creditors’ counsel then filed a motion with the bankruptcy court seeking a fee enhancement of $164,164.90 under the “common fund doctrine.”  The trustee opposed the motion, arguing, among other things, that the common fund doctrine does not apply in bankruptcy cases.

Common Fund Doctrine

The common fund doctrine is an exception to the American Rule, i.e., the general rule prevailing in the United States that each litigant is responsible to pay its own attorney fees.  The doctrine generally applies where a litigant, acting to recover on its own claim, recovers property from which others may satisfy their claims as well, entitling the litigant to payment of attorney fees and costs from the “common fund” used for payment of all claims.

Based upon principles of equity, the common fund doctrine recognizes that one who benefits from a lawsuit without contributing to its cost is unjustly enriched at the expense of the successful litigant who bore the costs.  In addition to payment of a litigant’s attorney fees and costs, the doctrine also allows the litigant’s attorney to collect an extra award of fees from the common fund, even if the attorney is merely performing services for his client per the terms of his engagement.

Court Analysis

The court determined that the operative question was not whether the common fund doctrine applies, but rather whether the court had authority to grant the requested fee enhancement from estate assets.  To that end, the court considered precedent under both the Bankruptcy Act of 1898 and the Bankruptcy Code currently in effect: although the Bankruptcy Act governed Yellow Poplar’s case, the court considered cases applying the Bankruptcy Code for additional guidance.

Quoting at length from In re Fesco Plastics, 996 F.2d 152 (7th Cir. 1993), a case filed under the Bankruptcy Code that denied a fee request under the common fund doctrine, the court highlighted the central problem with counsel’s requested fee enhancement: a bankruptcy court cannot award attorney fees without statutory authority, such as that found in Bankruptcy Code Sections 327-330, 1103 and 503(b)(4).  The court concluded that an award of fees outside the context of applicable statutory provisions is beyond a bankruptcy court’s mandate.  In the words of the Fesco Plastics court, “a bankruptcy court is simply not authorized to do whatever is necessary to reach an equitable result; it may only do whatever is necessary to enforce the Code.”

The court noted that prevailing case authority decided under the Bankruptcy Act was in accord with Fesco Plastics.  In particular, the court highlighted Cox v. Elliott (In re Calhoun Beach Club Holding), 122 F.2d 851 (8th Cir. 1941), which rejected the argument that a bankruptcy court “has inherent equitable power” to authorize payment of a creditor’s attorney fees from estate assets.  As the U.S. Court of Appeals for the Eighth Circuit explained in Cox, the Bankruptcy Act “carefully regulates the compensation and expenses that may be allowed in bankruptcy,” and contains an implied exclusion of other fee allowances not expressly set out in the Bankruptcy Act.

After considering Fesco Plastics, Cox and several other cases under both the Bankruptcy Act and the Bankruptcy Code, the court concluded it could not “abuse the equitable power Congress bestowed upon it to award fees for services outside the scope of applicable bankruptcy law.”  The bankruptcy court noted that, even were it to conclude that it had the authority to award fees under the common fund doctrine, counsel might nonetheless remain ineligible for the additional fees: as noted above, counsel’s efforts did not increase funds flowing into the bankruptcy estate, but rather reallocated estate funds among classes of creditors.

Although acknowledging that the common fund doctrine might apply in exceptional circumstances, the court confirmed that a fee award or enhancement would still have to be made pursuant to statutory authority, such as section 64(b)(3) of the Bankruptcy Act, allowing a “reasonable attorney fee” to petitioning creditors in an involuntary case, or section 64(b)(2), allowing for payment of “reasonable expenses” of creditors who recover property transferred by a bankrupt.

Here, however, no provision of the Bankruptcy Act or the Bankruptcy Code existed to authorize “fees for creditor’s attorneys whose actions incidentally benefited some creditors, to the detriment of others, while pursuing their clients’ best interests.”  The court noted, moreover, that counsel had not identified any provision of the Bankruptcy Act or the Bankruptcy Code that authorized the fee award, and the authorities it did cite were either distinguishable, were not on point, or supported the court’s analysis.  Accordingly, the court denied counsel’s motion for a fee enhancement.

Conclusion

Viewed through the equities of the case, it is arguably unfair that all members of the general unsecured creditor class benefited without having to contribute to the legal fees and expenses incurred by just a few creditors in the class.  Indeed, the court confessed that it was “not unsympathetic” to counsel’s fee request.  Nevertheless, Yellow Poplar provides valuable guidance to creditors seeking payment of attorney fees from estate funds: asserting equitable theories such as the “common fund doctrine” may engender judicial sympathy, but they are no substitute for statutory authority.  Consequently, creditors’ counsel seeking any fee enhancement should make their request pursuant to a Bankruptcy Code section that explicitly authorizes such an enhancement.

Rudolph J. Di Massa, Jr. is a partner at Duane Morris in Philadelphia.  Geoffrey A. Heaton, is a special counsel at Duane Morris in San Francisco.