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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.

Judge Appoints Special Fee Master in Anthem Settlement

February 1, 2018

A recent The Recorder story by Amanda Bronstad, “Judge Hires Special Master to Vet Attorney Bills in Anthem Settlement,” reports that a federal judge in California said Thursday she plans to hire a special master to scrutinize the billing records of plaintiffs firms in Anthem’s $115 million data breach settlement.

“I’m deeply disappointed,” U.S. District Judge Lucy Koh told lead plaintiffs attorney Eve Cervantez at a hearing on Thursday in San Jose. Koh, who has been a critic of attorney billing in past cases, appeared to be particularly incensed about how plaintiffs attorneys Cervantez, of San Francisco’s Altschuler Berzon, and Andrew Friedman, at Washington D.C.-based Cohen Milstein Sellers & Toll, brought in 49 other law firms—all of which submitted bills as part of a $38 million fee request. Among those additional firms were four of the eight law firms that Koh explicitly trimmed from the initial leadership team in 2015. Koh appointed Cervantez and Friedman as lead counsel along with plaintiffs steering committee members Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs.

“I would never have appointed you or Mr. Friedman, had I known you were going to pile on 53 law firms on this case,” she said. “And I’m going to keep that in mind if you apply for appointment of counsel in another case with me. I never would have approved 53 law firms in my case. If I thought eight was too many, what made you think I wanted 53 firms churning on this case?”

In court, she said she planned to appoint retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS in San Jose, to be special master, but she allowed both sides to submit oppositions to her selection or alternative candidates by Feb. 2.

Cervantez, who acknowledged she had never been in charge of multidistrict litigation before, attempted to explain how most of the firms were not in charge of the “high level” decisions in the case and were brought in primarily to find more than 100 lead plaintiffs in the consolidated class action complaint.

“I understand you’re upset,” she said. She noted that 26 law firms were involved “because they specifically had plaintiffs in the case, were involved in vetting plaintiffs, and they were involved in discovery responses and the depositions of their plaintiffs.”

Moreover, people’s data had been hacked, she pointed out.

“Time was of the essence here,” she said. “We could have had fewer firms working on the case, and it would have taken a much longer time.”

But Koh, who had asked plaintiffs counsel for additional billing records earlier this week, went over the records one by one, questioning why of the 329 lawyers who submitted bills in the case, more than 100 were partners, and more than two dozen were contract attorneys charging $300 to $400 per hour.

“I would like you to find a single paying client that would have approved these type of markups in a contract attorney,” she said.

She ordered plaintiffs lawyers to submit detailed records, including those involving contract attorneys, by Monday.

“I’m supposed to be watching out for the interests of the class,” she said. “I’m entitled to know how much profit you think you’re entitled to with regard to every one of these people.”

Class action critic Ted Frank, representing an objector, had asked for a special master, claiming the fee request was “outrageous on its face.” Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness, had criticized $23 million in notice and administration costs and questioned the average $360 hourly rate for contract attorneys submitted in the fee request. He noted that a special master in Boston is investigating Lieff Cabraser, along with two other law firms, for potential overbilling for staff attorneys in a $74.5 million fee request in securities class action settlements with State Street.

Frank also questioned why 49 other firms were set to receive $13.6 million in fees in the case.

In court papers, Cervantez and Friedman defended their $38 million fee request. In a Jan. 25 reply brief, they said the fee request was less than eight percent of the settlement’s estimated $500 million value, when including credit monitoring, and 33 percent of the $155 million amount, which was justified due to the “exceptional results” and “extremely risky nature” of the case. The $115 million settlement also would provide a $15 million fund to compensate class members.

As to the settlement itself, Koh said she was inclined to “wait on final approval and get all this sorted out.”

Prior to the hearing, the judge had ordered additional briefing on the effect that the U.S. Court of Appeals for the Ninth Circuit’s Jan. 23 ruling in In re Hyundai and Kia Fuel Economy Litigation could have on the settlement. The 2-1 Hyundai decision reversed certification of a nationwide class of car consumers after concluding that the district judge failed to consider potential differences in various state consumer laws in finding that common issues predominated in the settlement. The decision sent shock waves throughout the class action bar for potentially threatening the viability of class action settlements in the Ninth Circuit.

But Koh didn’t ask many questions about Hyundai during the hearing.

She did, however, raise several questions about the claims rate, which she calculated at about 1.86 percent of the total class. More than 78 million people had their personal information compromised in Anthem’s data breach in 2015. And she raised concerns about the settlement’s structure.

“It does bother me that 55 percent would go to attorney fees and administrative costs and only 45 percent goes to class members,” she said.

Attorney Fee Expert Needed to Establish Reasonable Attorney Fees in Florida

January 18, 2018

In a blog post, “Expert Witness Needed to Establish Reasonable Attorney Fees in Florida,” Joel Ewusiak writes about recovering reasonable attorney fees in Florida.  This was posted with permission.  The blog post reads:

Under Florida law (with very limited exceptions), when awarding attorney fees to a prevailing party pursuant to a contract provision or statute authorizing the recovery of attorney fees, the trial court must determine a reasonable hourly rate for the particular services rendered and a reasonable amount of time for the attorney to have spent performing the necessary work. 

Although the attorney for the prevailing party can obviously testify as to the rate charged and the amount of time expended, the attorney must present independent expert testimony in order to establish that the rate charged and the amount of time expended is reasonable and necessary for the nature of the services rendered.  See Snow v. Harlan Bakeries, Inc., 932 So. 2d 411, 412 (Fla. 2d DCA 2006)("Florida has a long-standing practice of requiring testimony of expert fee witnesses to establish the reasonableness of attorney's fees."); See also Ghannam v. Shelnutt, 199 So. 3d 295, 299-300 (Fla. 5th DCA 2016).  Expert witness testimony is particularly important when the attorney is representing a client on a contingency fee basis and seeks to establish a lodestar (i.e., multiplying the number of hours reasonably expended times a reasonable hourly rate) and a “contingency risk” factor or multiplier (i.e., an upward adjustment in the lodestar calculation based a variety of factors such as the risk of litigation, results obtained, etc.).  See Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828, 834 (Fla. 1990).

Joel Ewusiak is the principal of Ewusiak Law in Tampa, FL.

Law Firms Question Expert’s Analysis of Attorney Fees

January 4, 2018

A recent Legal Intelligencer story by Max Mitchell, “NFL Concussion Lawyers Questions Expert’s Analysis of Attorney Fees” reports that several leading law firms in the NFL concussion settlement litigation are taking issue with an expert report that suggested slashing attorney fee recoveries.

More than 10 law firms have filed responses to a December expert report that recommended capping attorney fees.  Attorneys questioning the report’s conclusions included both Chris Seeger of Seeger Weiss and Sol Weiss of Anapol Weiss, who are co-lead class counsel in the litigation that came to a $1 billion settlement with the National Football Association in early 2015.  Most responses from the attorneys questioned the assumptions underpinning the report Harvard professor William Rubenstein issued last month, and some said that capping attorney fees could damage some of the former players’ ability to recover under the settlement.

Seeger’s response, specifically took issue with Rubenstein’s determination that, since the litigation settled relatively quickly, it was reasonable to recommend that the court reject a proposed 5 percent set-aside that would go toward a common benefit fund for class counsel attorneys.  “Any suggestion that class counsel did not invest sufficient time in this litigation to warrant the requested $106.8 million in common benefit fees is simply wrong,” Seeger said.  “Although this may not have been a typical MDL involving extensive discovery bellwether trials, and the like, all kinds of labor, resources, and ingenuity went into resolving this litigation.”

Last year, class counsel asked U.S. District Judge Anita Brody of the Eastern District of Pennsylvania, who is overseeing the litigation, to approve $112.5 million for attorney fees and costs stemming from the settlement, which is intended to compensate about 20,000 former players suffering from concussion-related injuries.  The NFL has agreed to pay the money in addition to the money for the class members.

The fee request included a 15.6 percent rate for attorneys representing claimants directly, along with the 5 percent set-aside that would be paid to the common benefit fund either from attorney fees, if the claimant had individual representation, or from the claimants’ recovery if they were unrepresented.  Rubenstein, who Brody asked to review the fee request, issued a 47-page expert report in mid-December recommending a presumptive 15 percent cap on contingency fees and that the court not adopt the 5 percent set-aside.

Responses largely took issue with the class participation rate Rubenstein used, and said the report did not take into account how vigorously the NFL would contest some of the claimant’s petitions.  A filing by X1Law said attorneys also said that cutting the fees could have a chilling effect on attorneys wanting to represent claimants who have difficult cases.

“Capping attorney’s fees at 15 percent would cut the legs out from under independently retained plaintiff’s attorneys (IRPAs) due to the time and risk involved in this complex and contentious claims process, essentially gutting their ability to represent class members by making the representation financially dangerous,” X1Law attorney Patrick Tighe said in the filing.  “Professor Rubenstein’s proposed cap would severely chill access to IRPAs, limiting IRPA advocacy and oversight, resulting in a lack of oversight in any otherwise dangerous claims process for class members.”

When reached for comment, Tighe said a 15 percent cap on fees would specifically impact players whose symptoms do not presently show up on tests, but may manifest in a few years.  “It’s going to eliminate a vast majority of class members from being able to present a claim,” he said.

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. Meckler.  Hosted by Terry Jesse, NALFA Executive Director, the podcast shares thoughts and memories from his peers and fellow NALFA members.  The podcast also reflects on how Bruce helped shape the legal fee analysis profession.

Bruce Meckler passed away in November 2016.  Meckler grew up in Maryland and attended Bradley University in Peoria and John Marshall Law School in Chicago.  He began his legal career as a prosecutor in the Cook County State Attorney's Office then went to Pope & John before co-founding the firm that merged with Philadelphia-based Cozen O'Connor.  He served on the management committee and national board of directors at Cozen O'Connor.  He conducted more than 500 legal bill audits involving more than $5 billion in legal fees.

“Bruce Meckler was one of the pioneers of legal fee analysis and one of the nation’s top attorney fee experts.  At NALFA, we want to honor that legacy.  He was widely respected by his peers and colleagues from across the legal fee analysis field.  As one of the founding members of NALFA, Bruce not only supported our CLE programs, but he helped shape and establish our Best Practices in Legal Fee Analysis, the professional standards of legal fee analysis," said Terry Jesse.

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who've helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, fellows, and others to discuss a range of issues on attorney fee and legal billing matters.

CLICK HERE to listen to this podcast.

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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4 Reasons to Get Help on a Fee Requests

November 24, 2017

A recent CEBblog article by Julie Brook, “4 Reasons to Get Help on a Fee Motion,” reports on attorney fee requests.  This article was posted with permission.  The article reads: Just because...

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