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Attorney Fees Report Draws Critics in Anthem Data Breach Case

May 16, 2018

A recent NLJ story by Amanda Bronstad, “Anthem Data Breach Attorney Fees Report Faulted by Plaintiffs Lawyers and Objector,reports that plaintiffs lawyers in the Anthem data breach settlement have objected to the report of a court-appointed special master, which found what it said was inappropriate billing and recommended their $38 million fee request be slashed by nearly 24 percent.  The report was also faulted by Ted Frank, an advocate for reining in class-action litigation.

In a court filing late Tuesday night, lead counsel Eve Cervantez of Altshuler Berzon and Andrew Friedman of Cohen Milstein Sellers & Toll — along with plaintiffs steering committee lawyers Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs — wrote that special master James Kleinberg should abandon his findings. They stuck to their original fee request, which compensated 49 additional law firms.

“The court should defer to counsel’s judgment here as to the number of hours required to reach the $115 million settlement and achieve the significant changes in business practices,” they wrote. “Because plaintiffs have shown that the hours spent in the case were reasonable and nonduplicative, the court should not reduce the requested fee award based on the number of law firms that billed for those reasonable hours.”

Frank, representing an objector to the settlement who had asked for a special master, called the report “a disappointingly superficial review” of lead plaintiffs attorneys’ billing, according to an objection he filed on Tuesday.

“As an initial matter, the special master’s report did not accomplish what the court assigned the special master to do,” wrote Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness. “The special master’s rough review failed to determine the propriety of the hours billed and is insufficient to uncover the extent of the duplication and inefficiencies that this court sought.”

U.S. District Judge Lucy Koh has set a hearing for June 14.

Koh appointed a special master earlier this year to look into potential overbilling, stating that she was “deeply disappointed” in the fee request. She was particularly troubled that the request was made for 53 law firms, particularly since she had explicitly wanted a lean leadership team in the case.

On April 24, Kleinberg, a retired Santa Clara County Superior Court judge who is now a mediator and arbitrator at JAMS, recommended a fee award of about $28 million in his report. Most of the reduction came from cutting the rates of 33 contract attorneys and shaving 10 percent due to potentially duplicative billing.

As to the contract attorneys, Kleinberg found their billing rates to be “inappropriate.” Plaintiffs lawyers paid them $25 to $65 per hour but, in their fee request, asked for an average of nearly $360 per hour for those lawyers. His report lowered the rate to $156 per hour — that of a paralegal.

He also chastised a “virtual army of billers.”

“The special master is not accusing plaintiffs’ counsel of deliberate overbilling,” he wrote. “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 53 firm billing participants presents at least a strong probability of duplication and unreasonable hours.”

His report also looked at the percentage of the fund and the 25 percent benchmark in the U.S. Court of Appeals for the Ninth Circuit.

Plaintiffs attorneys noted in their objection that the report found that an average hourly rate of $455 per biller was not excessive. And they continued to emphasize that the case was novel and complex. As to the 53 law firms, they wrote “the question is not how many firms a paying client would retain, but how much the client would pay to have the work done.”

The additional 49 firms “were forbidden to bill for any start-up time learning the facts and law of the case,” they wrote, and had $1.5 million already cut from their lodestar.

The special master’s reduction of contract attorney rates was also unreasonable, they wrote.

“This recommendation was in error, and plaintiffs are not aware of any court to have adopted this approach,” they wrote. “Plaintiffs are aware of no authority supporting the proposition that it would be permissible, let alone reasonable, to delegate such crucial legal work to paralegals.”

They also criticized the special master’s deduction of their expenses and service awards from the fee amount.

Frank, in his objection, said Kleinberg should have followed case law on fee awards in settlements of similar size, which often are between 10 to 20 percent. That would put an appropriate Anthem award at closer to $13.8 million, which is 15 percent of the fund after excluding $23 million in notice and administrative expenses.

He also said that Kleinberg did not reduce enough on the contract attorney rates.

“The special master’s report completely sidesteps ethical and market considerations, and should not be adopted,” Frank wrote.

In a footnote, Frank noted that the contract attorney issue would be “comprehensively addressed” by a special master in Boston who is investigating Lieff Cabraser, along with two other law firms, for potential overbilling in a $75 million fee request in securities class action settlements with State Street. “Indeed, three of the very same contract attorneys billed in this case were billed by counsel in State Street,” he wrote.

The State Street special master filed his report Monday under seal. On Tuesday, U.S. District Judge Mark Wolf issued an order saying he sealed the report “temporarily to permit the parties to propose redactions.”

Finally, Frank wrote, Kleinberg’s 10 percent “haircut” did little to address what he said was at least $8.8 million in wasteful billing.

“Contrary to the court’s instruction, not one hour is deducted as excessive, unnecessary, or duplicative,” he wrote. “The special master does not provide a calculation of reasonable hours, but simply takes class counsel’s fee request as a baseline and provides minimal adjustments to these figures. Indeed, there would be no reason for the court to have ordered disclosure of the billing records to the special master if he had no obligation to scrutinize them.”

The Nation’s Top Attorney Fee Experts of 2018

May 10, 2018

Every year, NALFA announces the nation’s top attorney fee experts.  Attorney fee experts are judicially qualified experts who provide expert testimony and reports on the reasonableness of attorney fees and expenses in underlying cases.  Attorney fee experts are increasingly retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses.

Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.  NALFA, a non-profit group, helps organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  The following profile quotes are based on bio, CV, case summaries, and case materials provided to NALFA.  Here are the nation’s top attorney fee experts of 2018:

John D. O’Connor: “Nation’s Top Attorney Fee Expert”
O’Connor & Associates
San Francisco, CA

Andre E. Jardini: “30 Years of Fee Audit and Expert Experience”
KPC Legal Audit Services
Glendale, CA

Stephen J. Herman: "Outstanding Skills Assessing Fees in Class Actions"
Herman Herman & Katz
New Orleans, LA

Gary E. Mason: “Highly Skilled on a Range of Fee and Billing Issues”
Whitfield Bryson & Mason
Washington, DC

Robert M. Fishman: "Nation's Top Bankruptcy Fee Examiner"
Shaw Fishman
Chicago, IL

Elise S. Frejka: "Widely Respected as a Bankruptcy Fee Examiner"
Frejka PLLC
New York , NY

Robert L. Kaufman: “Experienced on Cumis Counsel Fees and Billings”
Woodruff Spradlin & Smart
Costa Mesa, CA

Glenn Newberry: “Understands Fee and Billing Issues Across Borders”
Eversheds Sutherland
London, UK

George F. Indest: “Excellent on Attorney Fee Issues in Florida”
Health Law Firm
Altamore Springs, FL

Please note: NALFA did reach out to other self-identified attorney fee experts for this survey.  They did not respond to our requests.  For more on the Nation's Top Attorney Fees Experts, visit https://www.law.com/legalnewswire/news.php?news=eXBJV01pb2plTkQzR3NBOVY3SHJJZz09

Special Fee Master Finds Fee Request Excessive in Anthem Data Breach Case

April 26, 2018

A recent The Recorder story by Scott Flaherty, “Special Master Finds Legal Fee Bid Excessive in Anthem Data Breach Case,” reports that a court-appointed special master has recommended cutting more than $9 million off a legal fee request by plaintiffs lawyers involved in a $115 million class-action settlement of data breach litigation against health insurer Anthem Inc.

Pointing to duplicated efforts and excessive hourly billing rates for contract lawyers, special master James Kleinberg, a retired Santa Clara County superior court judge who is now a mediator and arbitrator at JAMS, recommended on Tuesday a legal fee award of $28.59 million to lawyers for the settlement class, plus just more than $2 million in expenses, according to his report.

The special master was appointed in February by U.S. District Judge Lucy Koh in San Jose, California. Koh is overseeing multidistrict litigation spurred by a massive, 2015 cyberbreach at Anthem that compromised the personal information of more than 78 million people.

Tuesday’s recommendation marks a significant reduction from the $38 million that plaintiffs lawyers sought after settling the Anthem litigation in June. The plaintiffs lawyers’ initial request constituted 33 percent of the $115 million settlement, but Kleinberg recommended awarding them just less than 25 percent of the total settlement.

Explaining the downward revision, Kleinberg pointed to several issues that he saw with the fee request. One specific critique involved the billing rates for 33 contract lawyers on the case; plaintiffs firms paid those lawyers between $25 and $65 per hour, according to Kleinberg. By contrast, the initial fee request asked for the equivalent of, on average, nearly $360 per hour for those lawyers.

“It is simply inappropriate for these rates to be charged,” Kleinberg wrote.

The special master also found that, because some 53 law firms were involved as plaintiffs counsel, there were instances of duplicated efforts that, in turn, led to overbilling.

“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 53 firm billing participants presents at least a strong probability of duplication and unreasonable hours,” Kleinberg wrote.

Kleinberg’s report and recommendation come after Koh said during a hearing in February that she was “deeply disappointed” in the plaintiffs lawyers’ initial fee request, in part because it included bills submitted from some 53 firms. Earlier in the case, Koh had explicitly urged the plaintiffs firms to keep their leadership team lean.

The judge ultimately appointed as lead counsel Eve Cervantez of Altschuler Berzon, and Andrew Friedman of Cohen Milstein Sellers & Toll, and allowed for a plaintiffs steering committee led by Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs. In February, the judge informed the plaintiffs firms that she intended to appoint Kleinberg as a special master to scrutinize their billing records.

Following the submission of the special master report, Koh on Tuesday issued an order that gives parties in the litigation until May 15 to object to or file a motion to adopt or modify the recommendations. The judge also set a hearing on the special master’s report for May 31.

$112.5M Fee Award in $1B NFL Concussion Settlement

April 6, 2018

A recent Legal Intelligencer story by Max Mitchell, “Judge Awards $112.5M in Total Attorney Fee in NFL Concussion Case,” reports that attorneys who helped hammer out the $1 billion settlement between the National Football League and former professional football players suffering cognitive injuries have been awarded $112.5 million for their work.  But, the judge has reserved for a later time her determination of the exact amount each firm will receive for its respective efforts.

U.S. District Judge Anita Brody for the Eastern District of Pennsylvania awarded class counsel $106.8 million in attorney fees and $5.7 million in expenses in the NFL concussion case.  The amount conforms to class counsel’s fee request, and is also the number the NFL had agreed to pay without objection as part of the settlement.

In making the ruling, Brody lauded class counsel efforts, noted that class attorneys billed more than 50,000 hours for their work on the settlement, and said the fee award is only 11 percent of the total settlement.  “The performance of class counsel regarding the complex settlement has been extraordinary,” Brody said, noting that more than 20,000 class members are registered to participate in the settlement and more than 360 claims valuing over $400 million have been approved.  “The fees requested here are well-earned.”

Individual class counsel attorneys have requested as much as $70 million for their firm, but Brody said that issue, along with determining how much the court should withhold from players’ individual awards to cover costs and fees of implementing the settlement, “will be determined at a later date.”

In footnotes, Brody said she plans to make a determination regarding fee allocation to the individual firms after reviewing the numerous responses and replies that have been filed.  She added it will likely take a year to determine how much money should be held back from players’ individual awards.  “The court hopes to address this issue once more data regarding the scope of implementation work is available—ideally in one year,” Brody said in a footnote.

Class counsel have asked the court to hold back 5 percent of the award to cover implementation costs.  Brody also determined that fees for individual retained attorneys should be capped at 22 percent.  The ruling adopts the recommendations from William Rubnestein, a Harvard professor who had been appointed by the court to consider the issue.

Individually retained attorney are lawyers who represent the injured players, but are not part of class counsel.  Brody said their fees should be capped because “it is undeniable that all [individually-represented plaintiffs’ attorneys] have benefitted from class counsel’s work.” Brody added that she will grant deviations above the 22 percent cap only “in exceptional of unique circumstances.”

In October, Seeger Weiss attorney Chris Seeger, who is co-lead class counsel in the case, requested that the court allocate more than $70 million to his firm,  The money, according to the fee request, would compensate Seeger Weiss for a total of 21,044 hours his firm spent on the litigation since he was appointed to represent the class in 2012.

Attorneys from more than 15 firms including Anapol Weiss, which is home to Seeger’s co-lead class counsel, Sol Weiss, subsequently challenged Seeger’s proposal.  “We appreciate the court’s consideration of this matter.  The settlement is on track to lost the NFL hundreds of million, if not billions of dollars more than anticipated,” Seeger said in an email statement.  “We will make sure that former NFL players and their families receive every benefit they are entitled to under this agreement.”

Fee Examiner Says Too Many Attorneys at Puerto Rico Hearing

March 2, 2018

A recent Law 360 story by Alex Wolf, “Fee Examiner Says Too Many Attys at Puerto Rico Hearings,” reports that the firms representing Puerto Rico’s public debtors and creditor committees in the territory’s restructuring cases are sending too many professionals to court hearings and mediation sessions and are seeking excessive coverage for travel expenses, according to a fee examiner report filed Thursday.

For their work over the first five months of what amounts to the largest municipal bankruptcy in history, the legal and financial professionals hired to represent Puerto Rico’s government, public corporations, pensioners and committee of unsecured creditors have requested $77 million in fees and expenses. Of that amount, nearly $50 million should be approved by the federal judge overseeing the territory’s restructuring cases while another $26 million is under further review, an appointed fee examiner said in his first initial report, identifying several problematic practices and areas of concern.

While expressing an understanding that there are bound to be areas of confusion and disagreement in a massive and complex reorganization, examiner Brady Williamson said he encountered “problematic billing practices” that ought to be addressed, like professionals charging disparate rates or failing to provide discounts for their services where others have.

Notably, the average attorney hourly rate for applying firms based in Puerto Rico is about $245, while the average rate for firms based in New York or in other major U.S. cities is just under $775, with one reported rate at $1,425 an hour, Williamson said. His report shows that all of the BigLaw firms filing requests for payment – O'Melveny & Myers LLP, Greenberg Traurig LLP Willkie Farr & Gallagher LLP, Paul Hastings LLP, Jenner & Block LLP and Proskauer Rose LLP - have voluntarily discounted their service fees.

The entities billing the commonwealth have also employed multiple firms and professionals to conduct seemingly duplicate types of work and have been sending too many people to attend mediation sessions and court hearings, Williamson said.

“The remarkable number of professionals in attendance, both in the aggregate and from individual firms, cannot be ignored and may lead to formal objection,” he said. “It is unreasonable, whether the clients or the professionals make the staffing decisions, to expect compensation for 12 attorneys from a single firm to attend an omnibus hearing at which only one or two were expected to speak.”

Williamson also said some professionals charged for unnecessary electronic research and travel while others “routinely fail to observe applicable caps and prohibitions” on expenses, citing bills for first-class airfare and charges for hotel laundry service. He identified more than $680,000 in “apparently excessive or undocumented expenses” out of just over $2 million being sought.

Despite these findings, “almost every firm that was asked to do so adjusted their requested fees and expenses,” according to Williamson’s report.

The fees and expenses recommended for approval Thursday encompass the work done by the majority of professionals employed by the debtors and committees, but do exclude compensation requested by counsel for the federal board appointed to oversee the island’s debt overhaul and some of its hired professionals. Williamson said that consideration for payments requested by Proskauer Rose and McKinsey & Co. Inc., among a few others, is being deferred until April.

Puerto Rico began its court-monitored restructuring process last May with about $74 billion in public debt and an additional $49 billion in pension liabilities. Officials are using the bankruptcy-like process created under Title III of the Puerto Rico Oversight, Management and Economic Stability Act to address a flurry of competing claims for payment while attempting to keep the struggling territory afloat.

The bankruptcy case is In re: Commonwealth of Puerto Rico, case number 3:17-bk-03283, in the U.S. District Court for the District of Puerto Rico.

NALFA Honors Bruce R. Meckler

January 2, 2018

NALFA hosts a podcast series on attorney fee issues.  In a special podcast, "NALFA Podcast No. 6: NALFA Honors Bruce R. Meckler", NALFA honors the work and legacy of founding member Bruce R....

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Attorneys Want to Depose NFL Fee Expert

December 22, 2017

A recent Legal Intelligencer story, by Max Mitchell, “Lawyers Want to Depose NFL Fee Expert Over Slashed Attorney Fees,” reports that attorneys from five law firms have asked the court presiding...

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