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Tech Firm Slams $24M Fee Request in IP Litigation

March 23, 2020

A recent Law 360 story by Hannah Albarazi, “Emerson Electric Slams BladeRoom’s $24M Atty Fee Bid,” reports that Emerson Electric told a California federal judge that BladeRoom doesn't deserve $24.5 million in attorney fees and costs, arguing that the data center manufacturer has gotten more than enough from a $77.4 million verdict in their favor over Emerson's use of stolen trade secrets to win a lucrative Facebook contract.  Emerson Electric Co. told U.S. District Judge Edward J. Davila via telephonic hearing that BladeRoom Group Ltd. overbilled for its work and shouldn't be granted its bid for $21 million in attorney fees and $3.5 million in costs.

BladeRoom also overredacted its billing statements, which made it impossible for Emerson to see what activity BladeRoom billed for and whether there was duplication of effort by counsel, said Emerson's counsel, Rudolph A. Telscher Jr. of Husch Blackwell LLP.  "Everything is blacked out," Telscher told the court. "The law does not allow redactions at this level."  But BladeRoom's counsel disagreed, arguing that they have worked hard to redact as little as possible.

Jeffrey M. Fisher of Farella Braun & Martel LLP, counsel for BladeRoom, told the judge that Emerson and Facebook's misconduct "overlapped so much" that it made it a challenge to differentiate the litigation, but that BladeRoom is only seeking to recover money for work that contributed to their victory against Emerson, not Facebook.

U.K.-based BladeRoom sued Facebook and Emerson five years ago, accusing the pair of stealing its method for manufacturing and installing prefabricated data centers, which it had pitched separately to Facebook and Emerson in 2011.  After those meetings, BladeRoom claimed the two larger companies began secretly working together to steal BladeRoom's proprietary techniques for the Facebook project.

Facebook settled BladeRoom's claims mid-trial in April 2018 and a month later, a jury found that Emerson owed BladeRoom $30 million for using its stolen trade secrets to land a $200 million contract to build a Facebook data center in Sweden.  Judge Davila ruled last year that Emerson owed BladeRoom $77.4 million comprising $30 million in compensatory damages, $30 million in exemplary damages and $17.4 million in prejudgment interest on the compensatory damages.

Emerson's counsel urged Judge Davila to adopt a special master's recommendations, which identified overbilling by BladeRoom from duplication of attorney effort and inefficient staffing.  The special master found last year that 40 percent of BladeRoom's billings were either improper or problematic, and recommended a 40 percent reduction in BladeRoom's lodestar, or a reduction of about $8.1 million.

Emerson's counsel told the court that the $77.4 million verdict more than makes BladeRoom whole.  Emerson also challenged BladeRoom's bid to recover in-house counsel fees, saying that they merely acted as a liaison and that BladeRoom failed to provide documentation to the contrary.  Emerson further expressed concern that the Facebook settlement may have funded part of BladeRoom's defense, and if so, that should be considered by the court in determining fees and costs.

$245M in Attorney Fees in Pinnacle Hip Implant MDL

March 12, 2020

A recent Law.com story by Amanda Bronstad, “Lawyers Suing Over DePuy’s Pinnacle Hip Implant Set to Receive $245M,” reports that a federal judge has approved an estimated $245 million in fees and costs to lawyers leading the multidistrict litigation over Pinnacle hip implants, of which more than 75% will go to the five firms in charge of allocating the award.  The order by U.S. District Judge Ed Kinkeade of the Northern District of Texas approved a special master’s report last month that recommended a disbursement of $215 million, which is the amount calculated from settlements so far, including $182.5 million in “common benefit” fees to about 40 law firms whose work assisted in 10,000 lawsuits over the Pinnacle.  The amount also includes nearly $7.9 million in expenses and $24.7 million for reimbursements of contributed assessments.

“This was unlike any litigation of my 35 years,” wrote Mark Lanier, whose firm, The Lanier Law Firm, is set to receive $77.2 million in fees after winning billions of dollars in verdicts against DePuy Orthopaedics Inc., a unit of Johnson & Johnson.  “Nine years of litigation; five trials, generally of three months each; over 30 million dollars spent; and a defendant that refused to engage in settlement discussions until the very end.  Many firms abandoned the litigation, as reflected by time entries and failure to pay assessments.  The judge’s distribution tracked carefully the time, money and level of work and commitment of firms.”

Lanier is one of five lawyers on a fee committee tasked with reviewing how much each firm should get.  He is co-lead counsel in the multidistrict litigation with Larry Boyd, of Houston’s Fisher, Boyd, Johnson & Huguenard, which is set to receive $17.2 million in fees.  Another firm, Neblett, Beard & Arsenault of Alexandria, Louisiana, is set to receive $47.9 million in fees.  Partner Richard Arsenault, who is on the plaintiffs executive committee, noted in an email that Kinkeade specifically mentioned in a Sept. 11 order that “the fee committee was composed of the primary hands-on lawyers.”

“Additionally, as a consequence of many firms abandoning the litigation, the fee committee members were required to bear over 90% of the litigation’s costs and contributed over 83% of the common benefit hours,” Arsenault wrote.  Another executive committee member, Jayne Conroy, is from Simmons Hanly Conroy in New York, to which the special master allocated $32.1 million, along with $11.4 million to its predecessor, Hanly Conroy Bierstein Sheridan Fisher & Hayes.  The fifth lawyer on the fee committee, Steve Harrison, is from Harrison Davis Steakley Morrison Jones, of Waco, Texas, which the special master ordered would receive nearly $2.7 million in fees.

In 2014, Johnson & Johnson won the first bellwether trial, but federal juries in Dallas followed with verdicts of $502 million, $1.04 billion and $247 million.  Johnson & Johnson agreed to pay nearly $1 billion to settle more than half of the cases in 2019.  In 2018, the U.S. Court of Appeals for the Fifth Circuit reversed the $502 million jury award, finding that Kinkeade had committed “serious evidentiary errors” and allowed Lanier to make “misrepresentations” before the jury.

In a prior ruling, a split Fifth Circuit also criticized Kinkeade for committing “grave error” in asserting jurisdiction over certain bellwether trials, which have featured plaintiffs in California and New York.  In a July 22 order approving a 10% holdback on all future settlements for common benefit fees following a contested fee fight, Kinkeade gave a stinging rebuke of Johnson & Johnson’s lawyers, whose “actions increased both time and expenses incurred for the common benefit throughout every phase of this litigation.”

He cited two motions for sanctions that plaintiffs attorneys had filed earlier last year that accused Johnson & Johnson’s lawyers of failing to disclose discovery that would have demonstrated “ghostwriting” of scientific studies, among other things.  “Those documents are a bombshell,” plaintiffs’ attorneys wrote in one of the sanctions motions, and represented a “long-standing problem” in the cases.  “Throughout the course of this MDL, defendants’ conduct has repeatedly followed a pattern of obfuscation and obstruction.”

Kinkeade also cited the novelty of the issues and the “undesirability” of the cases in approving the holdback.  “Plaintiffs could have agreed to a settlement that devalued their claims,” the judge wrote.  “Instead, plaintiffs’ counsel fought through years more discovery, three more trials, two mandamus proceedings, and three appeals just to reach this settlement.  The court is aware that some plaintiffs’ firms declined to participate in common benefit assessments after the first trial; those that stayed well deserve their fees and costs.”

Special Fee Master Appointed to Allocate $3B in Fees in Opioid MDL

March 10, 2020

A recent Law 360 story by Kevin Stawicki, “Opioid Judge Taps Harvard Prof to Guide $3B Fee Fight, reports that the Ohio federal judge overseeing multidistrict litigation over the opioid epidemic tasked a Harvard Law School professor with helping the court navigate "novel" legal issues about how to compensate attorneys, some of whom say their payday could amount to more than $3.3 billion.  U.S. District Judge Dan Aaron Polster said in a notice that William B. Rubenstein, who previously worked on the multimillion-dollar NFL concussion settlement and subsequent fee fight, is best positioned to help navigate the debate over how much attorneys will be able to take home after the dust settles on a wave of opioid-crisis lawsuits.

Rubenstein will assist with navigating both the plaintiffs' request to establish a common benefit fund and attorney fees generally, the judge said, adding that the pleadings "raise complex and novel fee issues," as several parties and non-parties oppose the motion for the common benefit.  "Professor Rubenstein has written extensively about attorney's fees issues in complex litigation, including common benefit fees," Judge Polster said.  "The court has accordingly asked professor Rubenstein to assist with questions posed both by the present motion and attorney's fees generally, as these may arise."

The idea of a common benefit fund, which would set a 7% fee against a global settlement, has come under fire in recent months. Opioid manufacturers and distributors — including Johnson & Johnson and McKesson Corp. — pounced on the proposal in February, saying it was nothing more than a "transparent" attempt by lawyers on the plaintiffs' executive committee to grab settlement funds.  Approving the proposal would favor the lawyers over the parties in the litigation, even their own clients, the companies said.

After four attorneys general in October unveiled a proposed $48 billion deal with major drug companies and the nation's largest drug distributor, drug companies said 7% of the settlement would amount to more than $3.3 billion in fees.  "The [plaintiffs executive committee] seeks to grab a piece of every opioid-related resolution across the country, including settlements with the state attorneys general and of the many other actions brought in state court," the companies said in a memo to the court in February.

A group of 37 attorneys general have also argued that the fee request could irreparably disrupt progress made toward reaching a large national settlement by only applying to certain parts of settlements reached by attorneys general as well as to state court actions that are beyond the district court's jurisdiction, violating state sovereignty.

Another part of the settlement that has come under mounting scrutiny is Judge Polster's certification of the negotiation class, a novel mechanism designed to help more than 30,000 local governments pursue deals with pharmaceutical companies accused of fueling the opioid crisis.  Rubenstein was among the first to suggest the negotiation class as a way of breaking down 13 sets of national defendants based on legal claims and then crafting settlements with individual drug companies and binding plaintiffs to a structured settlement before the terms are negotiated.

As envisioned, any settlement would be put to a vote and require approval by 75% of voting governments.  A group of states fired off warning shots against that idea in February, saying only they, not cities and counties, can sue on behalf of their citizens.  By letting those political subdivisions settle claims they lack state-law authority to litigate, Judge Polster created an "alternative to state government," the coalition of states argued.

Federal Judge: Botched Attorney Fee Requests Will Cost You

March 6, 2020

A recent Law 360 story by Chris Villani, “Labaton Rebuke Sends Message: Botch Fees and Pay a Price,” reports that by slashing $15 million in fees from Labaton Sucharow LLP and Thornton Law Firm LLP for a $300 million State Street Corp. settlement, a federal judge sent a sharp warning to the class action bar to remain vigilant about attorney fee fundamentals, or else risk an embarrassing and possibly expensive fight.

Double checking lodestar calculations before submitting a fee request, signing off on fee declarations, being careful about referrals and erring on the side of disclosure seem like routine activities for class action firms.  But if major players in the field like Labaton and Thornton can get slapped down by a federal judge for falling short on the basics, it should catch the attention of other firms across the bar, experts told Law360.

“It's a very important decision for all class action lawyers to pay close attention to, particularly when submitting lodestar applications, when contract attorneys are involved, when you have rates that you report to the court are your hourly billable rates,” said Lance Harke of Harke Clasby & Bushman LLP.  “There's a number of significant issues for all of us.”

The long-running fight began after Labaton Sucharow, Thornton Law and Lieff Cabraser were awarded a $75 million fee after reaching the nine-figure settlement.  A media report unveiled allegations of double-counting hours, which the firms admitted but asked the court to let slide.  But what the firms called an inadvertent mistake instead led to U.S. District Judge Mark L. Wolf's vacating the fee award and appointing retired U.S. District Judge Gerald Rosen as a special master to investigate.

Rosen suggested chopping up to $10 million from the fee, but Judge Wolf ended up reducing the award by $15 million and sending his order to the Board of Bar Overseers for potential disciplinary action.  “This case demonstrates that not all lawyers can be trusted when they are seeking millions of dollars in attorneys' fees and face no real risk that the usual adversary process will expose misrepresentations that they make,”  Judge Wolf wrote in the 160-page order.

Rosen’s investigation turned up a number of problems, including a false fee declaration signed by Thornton Law’s managing partner, Garrett Bradley, that he called a “stupid mistake” during a subsequent hearing.  Thornton was accused of trying to inflate the firm's lodestar by having lawyers bill at a higher rate than Rosen believed they should.

Drawing perhaps the most scrutiny was a $4 million payment to a Texas lawyer named Damon Chargois.  Chargois did not work on the case, but he did introduce Labaton Sucharow to the lead plaintiff, the Arkansas Teacher Retirement System.  The fee was never disclosed to the class or Judge Wolf.

John Coffee Jr., a professor at Columbia Law School with expertise in class action and securities litigation, was skeptical that the arrangement Labaton Sucharow had with Chargois is unique.  “That suggests that there are major plaintiffs’ law firms, and the Labaton firm is a major plaintiffs’ law firm, that have a business model of effectively buying lead plaintiffs on an open market from these finders,” Coffee said.  “The practices [Rosen] uncovered is like turning over a rock in the field and finding some ugly things crawling around.”

Another retired judge, hired by Labaton Sucharow, found that the Chargois arrangement was an aberration and that in other instances involving referral fees, the lawyers who referred the case did substantial work.  The firms vigorously pushed back against Rosen’s conclusions, and Labaton Sucharow even tried to have Judge Wolf removed from the case.

In a statement Friday, Labaton Sucharow said the Chargois arrangement was a one-off and highlighted the settlement it reached with Rosen in which it agreed to pay $4.8 million and institute new best practices regarding referral fees.  Judge Wolf “chose to ignore” the settlement, the firm said.  “We now identify who will be sharing in any fee the firm is awarded, regardless of whether the jurisdiction requires such disclosure,” Labaton Sucharow said, adding that a payment like the one in the State Street case is legal in Massachusetts.  “We are confident that the concerns raised in this case were an anomaly.”

But even those who support class actions as a valuable legal tool said Rosen’s findings are a black eye for a bar that already faces public criticism over the massive fees doled out to lawyers.  “Lawyers should not behave this way,” said Deborah Hensler, a professor at Stanford Law School.  “This is not the way that this powerful tool is intended to be used.  When leading class action firms appear to have been engaged in self-serving behavior, whether or not it complies with a narrow definition of the rules, it’s highly inappropriate and it weakens the arguments for continuing to use class actions.”

Francis Scarpulla of the Law Offices of Francis O. Scarpulla said the double counting seemed seemed unintentional on the firms' part, rather than Labaton trying to pull a fast one.  He also said the Chargois arrangement should have been disclosed.  The lesson, he said, is to be extra careful with fee declarations.  “Judges have to trust what lawyers tell them, and if they lose that trust, you can forget about that judge believing anything you tell him or her,” Scarpulla said.  “Even if it's the time of the day and you're both looking at the same watch.”  The worst-case scenario for the class action bar would be the U.S. Supreme Court getting involved in a class action fee fight, he added.

Other jurists have taken notice of the State Street case.  A few days after Judge Wolf’s order, another judge sat in a Boston courtroom and warned the class action firms before her about the scrutiny they would face if and when it came time for them to submit fee declarations.  “I don't know how many of you have read Judge Wolf’s order from this week,” U.S. District Judge Indira Talwani told the lawyers at the outset of a hearing over which firm would lead an ERISA suit against General Electric Corp. “If you haven't, you should.”

“If I was a class action lawyer, I would read the entire 160-page order twice, with a highlighter,” said Jan Jacobowitz of the University of Miami School of Law.  “And I would review the billing practices in my firm, which lawyers should do from time to time anyway, and just be especially careful to dot all my I’s and cross my T’s.”  The incentive is strong to follow the rules carefully, Jacobowitz said, because firms “are still going to make a whole lot of money” and can do so without the professional embarrassment of a scandal like this one.

Labaton Sucharow ended up losing more than $10 million in fees from the original amount approved by Judge Wolf to the amount awarded after the investigation.  Thornton Law lost nearly $7 million.  Even Lieff Cabraser, which emerged largely unscathed as Judge Wolf laid the blame on the other firms, had to shell out a portion of the nearly $5 million spent on Rosen’s investigation.

As rough as the lengthy battle was for all of the firms involved, they still each brought in eight-figure fees for their work on the State Street case, with the total fee reduced from 25% to 20% of the amount recovered for the class.  “That does not strike me as a major victory for four years and a special master and a significant amount of alleged misconduct,” said Daniel Klerman of the University of Southern California's Gould School of Law.  “For those lawyers, if I had gone through four years and I had a judge who sounds as hostile as this judge appears, I would be jumping for joy if I only lost 20%.”

Special Fee Master: More Needed in Cisco’s $4M Fee Request

March 5, 2020

A recent Law 360 story by Dani Kass, “Special Master Blasts Cisco’s $4M Fee Bid, Oks Apple’s $2M,” reports that a special master appointed by U.S. District Judge William Alsup lectured Cisco for not backing up its massive $3.8 million attorney fee request with documentation after beating Straight Path IP Group's infringement litigation, but said the more meticulous Apple deserved most its requested $2.4 million.  Despite the upbraiding, BraunHagey & Borden LLP partner Matthew Borden still recommended that Baker Botts LLP- and Desmarais LLP-backed Cisco Systems Inc. get $1.9 million — half of its initial request.  Pending Judge Alsup's approval, Hogan Lovells-backed Apple Inc. would get $2.3 million, with the possibility for more.

Apple and Cisco had won the case accusing them of infringing Straight Path's internet telephone patents on summary judgment.  Judge Alsup declared the case exceptional since Straight Path's infringement claims contradicted a position it had advocated at the Federal Circuit in appealing a Patent Trial and Appeal Board decision.

But he was furious when Apple and Cisco requested a combined $10 million in fees over the summer, accusing them of overstating costs. He appointed Borden to determine a reasonable amount of fees.  The special master said Cisco failed to provide documents requested by the court to support its fee request.  He also said the alternative methods for fees proposed by Cisco didn't provide "a meaningful check against overbilling."

"Apple followed the court's order and therefore provided transparency into what it was billing for, and how much it charged," Borden wrote.  "The two lawsuits involved substantially similar claims and defenses.  The main difference is that plaintiff sought $41 million in hard damages from Cisco, which is less than half of what it sought from Apple.  Yet Cisco has demanded over $1.5 million more in fees than Apple ... Cisco has not carried its burden of proving that it is entitled to the amount it claims."

Overall, the special master said Cisco didn't provide records that described which attorneys were working on the case and what they did, in chronological order.  He also raised questions about when Desmarais took over the case from Baker Botts, as well as how to parse the current litigation from a flat-fee agreement.  Under that agreement, Cisco paid a monthly fee for all dealings between the firm and the company, including inter partes review proceedings that were explicitly excluded from the current fee award, according to the report.  Cisco did provide an estimate of how much of that monthly fee was related to the litigation, but didn't explain how it was decided, Borden said.

The special master noted that there was no precedent to dictate whether alternative fee arrangements like Cisco's are eligible for attorney fees, but recommended that they should be.  Cisco had suggested comparing its fees to those in other patent cases, but Borden said "every case is unique" so it's hard to create such a calculation.  The only true comparison is Apple's case, which asks for far less than Cisco, he said.  "In the absence of better information, an award of 50% of Cisco's documented flat fees is recommended," the report states.

Apple had lowered its original request from $3.9 million to $2.4 million, which Borden suggested be trimmed in areas where there were inconsistencies or less-detailed record-keeping.  But overall, he said Apple's time spent on the case and rates charged were reasonable, and that most of its work stemmed from having to defend against claims that never should have been brought.

"Had plaintiff not elected to pursue its exceptional claims, Apple would not have incurred these fees," the report and recommendation states.  Borden added that the exceptional conduct starts in June 2016, when Straight Path started pursuing the contrary infringement theory.  Apple may also be able to get additional appellate fees, but it first has to get permission from the court to file an untimely application, Borden said.