Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Dispute

Judge: Reed Smith Can’t Sue for Share of Attorney Fees in Class Action

November 21, 2017

A recent New York Law Journal story by Christine Simmons, “Judge Says Reed Smith Can’t Sue for $7M Slice of SAC Capital Fees,reports that a Manhattan federal judge ruled that Reed Smith can't sue former co-counsel Wohl & Fruchter in state court for a chunk of class action attorney fees.  A federal judge has shot down Reed Smith’s attempt to sue its former co-counsel law firm Wohl & Fruchter, in state court for its share of fees from a class action against SAC Capital Advisors, finding Reed Smith was “seeking a mulligan.”

U.S. District Judge Naomi Reice Buchwald of the Southern District of New York ruled that she had misgivings about Wohl’s conduct—including its settling a case amid the expulsion of Reed Smith from the plaintiffs’ counsel group—but said Reed Smith, which had served as class co-counsel for a brief period in September 2016, missed an opportunity to seek its fees in the right venue.

“The sequence of events surrounding Reed Smith’s retention and subsequent termination certainly raises questions regarding Wohl and [Wohl & Fruchter's] motivations.  But Reed Smith was given an opportunity to fully raise those questions, and it failed to do so,” Buchwald said, enjoining Reed Smith’s lawsuit in New York state court against the Wohl firm.

In the underlying class action case against hedge fund SAC Capital and other defendants alleging insider trading of securities, plaintiffs attorneys in May were awarded $27 million in attorney fees after obtaining a $135 million settlement.  About a month after the fee award, Reed Smith, which submitted no fee application in federal court, sued attorney Ethan Wohl and his four-attorney law firm in New York state court arguing it was entitled to fees for its work under tortious interference and unjust enrichment claims.  The firm was seeking at least $6.75 million.

Reed Smith claimed that Wohl & Fruchter, when looking for co-counsel, realized that it was a small firm “overmatched by the resources available to the SAC defendants,” represented by Paul, Weiss, Rifkind, Wharton & Garrison, Willkie Farr & Gallagher, Goodwin Procter and Bracewell.  After Reed Smith was retained, the firm said, it immediately committed significant resources to the SAC action.  And soon after Reed Smith filed notices of appearance in the case, the SAC defendants reached out to Wohl for settlement discussions, Reed Smith said.  “Reed Smith’s appearance was the obvious catalyst for the settlement discussions, which proved to be successful,” the firm claims.

But Reed Smith asserts that when counsel for the SAC defendants at Paul Weiss mused about a possible conflict involving Reed Smith before Southern District Judge John Koeltl, the Wohl firm saw an opportunity to eliminate Reed Smith and “intentionally exploited Paul Weiss’ statements.” Reed Smith formally withdrew from the SAC case in December 2016.

In her Nov. 16 ruling, Buchwald rejected Reed Smith’s jurisdictional arguments.  “We have jurisdiction over the fee dispute between Reed Smith on the one hand and Wohl and [Wohl & Fruchter] on the other, and our jurisdiction is exclusive,” Buchwald said, adding that Reed Smith’s presentation of a tort-based theory of recovery “does not change the reality that some quantum of attorneys’ fees is the ultimate recovery sought.”

Buchwald also considered collateral estoppel issues. “The amount of fees to which [Wohl & Fruchter] was entitled was an issue that was litigated, and Judge Koeltl determined that a $27 million award was ‘fair and reasonable,’” she said.  Analyzing the case broadly, Buchwald said she found “little about either side’s conduct that is sympathetic.”

“The rapid succession of events—Reed Smith’s entry into the case, the settlement, and Reed Smith’s dismissal—naturally raises questions as to Wohl and [Wohl & Fruchter's] actions and motivations, and these questions are amplified when the weakness of [Wohl & Fruchter's] conflicts arguments are considered,” she said.  “The record is hardly inconsistent with Reed Smith’s theory that it was terminated by [Wohl & Fruchter's] so that [Wohl & Fruchter] could obtain a larger share of attorneys’ fees.”

However, Reed Smith missed an opportunity to submit an application for fees, she noted.  “We find little equity in allowing Reed Smith to take a mulligan, through duplicative litigation, on an issue that had been squarely teed up,” Buchwald said.

Reed Smith’s explanation for why it failed to do so—that it did not want to interfere with approval of the settlement—“holds little water,” Buchwald said, noting that Reed Smith’s declaration supporting its withdrawal from the federal case detailed its grievances with Wohl and raised questions about the propriety of the settlement.

While the judge said she was enjoining Reed Smith from prosecuting the state court lawsuit “and the implicit application for fees contained therein,” she denied Wohl’s request to reject Reed Smith’s application for attorney fees in federal court.  “Reed Smith has never made a direct application for attorneys’ fees in this court, and there accordingly exists no such application for us to deny,” Buchwald said.

Samsung Opposes Attorney Fees in “Duplicative Suit”

November 9, 2017

A recent Delaware Business Court Insider story by Tom McParland, “Samsung Opposes Fees in ‘Duplicative’ Suit, Citing Appeal” reports that Samsung Electronics Co. Ltd. told a federal judge in Delaware that any decision on Imperium IP Holdings’ motion for sanctions for having to defend a “duplicative” suit should be delayed pending an appeal to the U.S. Court of Appeals for the Third Circuit.

In a 23-page filing, Samsung said that a decision from the appeals court could moot Imperium’s request for $247,000 in the case, which followed a $20 million patent infringement ruling against Samsung in a Texas federal court.  Last month, U.S. District Judge Mark A. Kearney dismissed Samsung’s second-filed case in Delaware and criticized the electronics giant for “duplicating” the earlier litigation in order to attack the result in the U.S. District Court for the Eastern District of Texas.

Imperium filed its motion for attorney fees two weeks later, arguing that Samsung’s “bad-faith” tactics had qualified the case as exceptional under U.S. patent law.  The court, Imperium said, also had the authority to award fees based on Samsung’s decision to “unreasonably and vexatiously” multiply proceedings.

Samsung notified Kearney that it was appealing the Oct. 10 order and asked that consideration of motion for attorney fees be deferred until after the Third Circuit could weigh in.  Even then, Samsung said, the “exceptional” designation did not apply to a breach-of-contract suit, and Imperium had failed to prove bad faith conduct that would trigger the court’s discretion in granting sanctions.

“Samsung and Imperium have been engaged in hard-fought litigation for over three years, and Samsung’s filing and prosecution of this action in good-faith reliance on the forum selection clause is nothing more than vigorous advocacy,” attorneys for the company wrote.  ”Awarding attorneys’ fees under these circumstances will only serve to promote what courts strive to avoid: a chilling effect on an attorney’s legitimate ethical obligation to represent clients zealously.”

The case is Samsung Electronics v. Imperium IP Holdings.

NCAA Athletes Fire Back at $41M Lone Fee Objector

November 7, 2017

A recent Law 360 story by Darcy Reddan, “NCAA Athletes Fire Back at $41M Fee Objection,” reports that student-athletes suing the NCAA over alleged anti-competitive caps on scholarships pushed back against the single objection to their $209 million settlement over a $41 million cut for attorneys, saying the fee is less than established Ninth Circuit precedent.
 
The class of student-athletes fired back at the lone objector, NCAA Division I football player Darrin Duncan, citing a 25 percent benchmark for assessing the fairness of a fee award set by the Ninth Circuit after Duncan called the request unfair.  Duncan also cited a “mega fund rule” that the class argues runs contrary to established circuit law and if applied would give attorneys less incentive to take cases with inherent risk.

“Duncan simply arbitrarily argues that the fee award should be lower, unsupported by Ninth Circuit law.  And the facts here show that the fee request is reasonable,” counsel for the class said in the filing.  “The fact that Duncan is the only, lone objector also indicates the reasonableness of the fee request.” 

Aside from challenging Duncan’s arguments, the class pointed out that Duncan allegedly objected to other settlements before the court, including O’Bannon v. NCAA and Keller v. Electronic Arts Inc. et al.  In September, Duncan objected to a $41.7 million fee request for the $209 million settlement reached in March.  The lawsuit challenged NCAA rules that prohibit universities from paying students more than a full grant-in-aid, which covers up to the full cost of attendance.  Duncan had argued that the percentage of the award, 20 percent of the settlement, was too high and that a “mega fund rule,” which decreases fee awards as the settlement total increases, should be applied.

The class fought back against this logic, though, stating in the filing that a Ninth Circuit ruling, Fischel v. Equitable Life Assur. Soc’y of the United States, established a 25 percent benchmark as a starting point for evaluating fees that is then subject to five factors.  The class contends that the award is fair when analyzed under these criteria.  The five factors include the results of the case, risk and complexity, whether fees were contingent upon success, similar case results and whether the class was notified of the requested fees.

The class also said that reducing the award simply due to the size of the award “has the potential to disincentivize counsel from risking pursuing even larger awards for the class.”

The request is for approximately $41.7 million in fees, or 20 percent of the settlement's common fund, as well as nearly $3.2 million in costs and expenses, and $20,000 each as an incentive award for the four class representatives.  The rest of the class is entitled to an average of $6,000.

The class characterized the rest of the objection as “absurd,” pointing out that Duncan suggests “subtle signs of collusion” despite the fact that a mediator was used during the settlement process and there is a lack of a clear sailing provision in the settlement terms.

The cases are In re: National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, case number 4:14-md-02541, and Jenkins et al. v. National Collegiate Athletic Association et al., case number 4:14-cv-02758, both in the U.S. District Court for the Northern District of California.

Fee Allocation Dispute in Dow Chemical Nuclear Pollution Class Action

November 3, 2017

A recent Law 360 story by Juan Carlos Rodriguez, “Class Counsel in Dow Pollution Suit Slam Attys’ Fee Bid,” reports that lead class counsel representing residents in a $375 million settlement with Dow Chemicals Co. in a nuclear pollution suit have told the Tenth Circuit that three individual attorneys who say they were denied a share of $150 million in fees have filed a frivolous claim.

Attorneys at Berger & Montague PC said that the objectors primarily worked on the case while they were employed by Waite Schneider Bayless & Chesley Co. LPA, but that they left the firm in 2012.  By the time the fee petition in the Dow case was filed in January of this year, WSBC “was effectively being operated in bankruptcy,” Berger & Montague said.  “The objectors have filed no claim in the Ohio proceeding for their work on Cook while they were employed by WSBC, although Ohio state court is the proper forum for such claims,” Berger & Montague said.

According to Berger & Montague, WSBC did submit a timely fee application — including for time worked by the objectors — and WSBC was allocated some of the fee award.  But the three former WSBC attorneys never filed a separate petition on their own behalf.  “Nor, in connection with the fee petition filed in this case, did the objectors file anything saying, or even suggesting, that they had some ‘personal’ right to be compensated for time they spent on Cook while they were employed by WSBC," Berger & Montague said.

The three objecting attorneys, who say they worked on the 26-year-long case from 1990 until 2012, earlier this month told the 10th Circuit that it has jurisdiction over their appeal.  The three attorneys say they spent more than 4,500 hours working on the case.  The long-running matter, brought by Colorado residents who claimed injuries from exposure to waste from a nuclear weapons facility, was settled in 2016.

In response to the attorneys’ brief, Berger & Montague acknowledged that a final district court ruling on the attorney fee dispute possibly gives the appeals court jurisdiction, but said the effort remains “frivolous,” and that they may move to dismiss the appeal at the “appropriate time.”

A Colorado federal district court issued final judgment on the suit in April, granting $150 million in attorneys fees and ordering lead counsel Berger & Montague PC to allocate them to various class counsel as reflected by their contributions, according to the objecting attorneys.

“Berger refused to supply appellants with the amounts allocated to all other class counsel,” the attorneys said earlier this month.  “Berger also refused to pay appellants any portion of the $150 million fee on the legal ground that as lead counsel it could only pay fees to the now defunct law firm that employed appellants until 2012, rather than to appellants as individual class counsel.”

The case is Roselle et al. v. Berger & Montague PC, case number 17-1328, in the U.S. Court of Appeals for the Tenth Circuit.

Fee Allocation Dispute in NFL Concussion Litigation

October 30, 2017

A recent Legal Intelligencer story by Max Mitchell, “NFL Concussion Lawyers Pile on Seeger’s $70M Fee Request” reports that nearly 20 attorneys and firms involved in the NFL concussion litigation are challenging a lead attorney’s proposal for divvying up $112 million in attorney fees, which had allocated the lion’s share to his firm.  According to court filings, 16 firms and one former member of the plaintiff’s steering committee have filed objections to the proposal that Christopher Seeger submitted to the court in mid-October.  That proposal had included more than $70 million for his firm, Seeger Weiss.  Among the firms that submitted objections to the proposal are Anapol Weiss, home to Sol Weiss, who is co-lead counsel with Seeger in the litigation.

Anapol’s response proposed an alternative methodology for the court to use in dividing up the fees.  The suggested formula would not rely as heavily on lodestar multipliers and would accounted for hours spent working toward significant benchmarks in the litigation, rather than applying a “straight-line mathematical computation” that treated all hours equally, the filing said.

The 15-page alternative proposal, which was filed by Pietragallo Gordon Alfano Bosick & Raspanti attorney Gaetan Alfano, said it would more adequately account for Anapol’s role in developing the litigation and hammering out the settlement agreement.

“While Seeger and Anapol shared the role of co-lead class counsel, the Seeger firm’s proposed apportionment would leave one co-lead class counsel firm (Seeger) with 65.4 percent of the attorneys’ fees and the other (Anapol) with 4.3 percent of the attorneys’ fees,” the filing said in a footnote.  “The Seeger firm requests that this court award it over 15 times the fees that it allocated to its co-lead counsel, Anapol.  On its face, Mr. Seeger’s proposed apportionment is grossly inequitable, given, inter alia, Anapol’s extensive contributions to the case.”

In an emailed statement to the press, Seeger said, “We believe this allocation is reasonable and well within the precedent set in similar cases. Judge [Anita] Brody will ultimately determine the final allocation, and we appreciate her consideration of this matter.”

On Oct. 10, Seeger filed a 22-page declaration to the U.S. District Court for the Eastern District of Pennsylvania, asking the court to award his firm $70.4 million.  The money, according to the request, would compensate Seeger Weiss for a total of 21,044 hours that his firm spent on the litigation since he was appointed to represent the class in 2012.

Although many of the responses took issue with the lodestar multipliers Seeger used to develop his proposal, some contended that a neutral special master needed to be appointed to handle the fees and others said the proposal was premature.

“To avoid even the appearance of placing their own financial interests ahead of the retired NFL players’ needs, class counsel is urged to join this motion and voluntarily seek to defer any ruling on payment of claimed attorneys’ fees until after at least the majority of the players have been paid,” Tampa-based attorney Steven Yerrid of the Yerrid Law Firm said in his firm’s response.  “With all respect, the undersigned submits this case must first be about the players’ well-deserved compensation and not the compensation of the lawyers representing them.”