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Category: Fee Reduction / Denial

US Airways Defends $122M Fee Request in Sabre Antitrust Case

April 20, 2017

A recent Law 360 story by Rick Archer, “US Airways Defends $122M Fee Bid in Sabre Antitrust Suit” reports that US Airways defended its request for $122 million in attorneys' fees for its $15 million victory against trip-planning giant Sabre Inc. in a suit over a contract giving booking access to all of the airline's seats, saying the fees are reasonable and in line with Sabre’s own legal costs.

Refuting Sabre’s argument that the fee request should be trimmed by nearly 90 percent because of unnecessary expenses, failure to get the full award sought and the dismissal of three-fourths of its claims, US Airways said the recommendation would make its fee award $40 million less than Sabre’s own reported defense costs.

“Although Sabre begrudgingly concedes that US Airways is entitled to some of what it incurred in this lengthy and aggressively defended case, reading Sabre’s opposition, one would think that Sabre — not US Airways — had won,” US Airways said.

The airline won a $5 million verdict, automatically tripled to $15 million, late last year in its case accusing Sabre — which controls 58 percent of the ticket distribution market — of restraining trade by forcing unfavorable terms on US Airways in a 2011 contract that required the airline to give Sabre access to all of its seats in order to reach the large cadre of travel agents that use the Sabre system.

US Airways has requested $122 million in attorneys’ fees and costs, arguing last month that the lengthy and complex nature of litigation justified fees that are more than eight times the amount of damages.  Sabre had argued US Airways should receive only $13 million in fees, noting three of its four original claims were rejected and the award was less than US Airways had asked for, and claiming a number of specific decisions in the airline’s legal strategy had generated unnecessary fees.

US Airways replied that the claim it ultimately won on was always the focus of their efforts, saying two of the claims were dismissed at the beginning of the case when minimal work had been done and the third had required only a fraction of the work.  “The Clayton Act does not require a plaintiff to prevail on all motions and claims in order to be entitled to a full recovery, particularly where it wins what it set out to achieve,” the airline said.

The airline said the reasonableness of the fees was justified by Sabre’s own $53 million in reported attorneys' fees, and argued this number was deceptively low because defense counsel Bartlit Beck Herman Palenchar & Scott LLP agreed to work at a discount in exchange for a success fee.

“Sabre refused our request to see Bartlit’s success-fee rate, but it appears to be nearly 50 percent based on the bonus Sabre paid for defeating declaratory relief,” it said.  “Even a 30 percent bonus would have increased Sabre’s fees to roughly $70 million had it, not US Airways, won.  That approximates US Airways’ roughly $85 million in attorneys’ fees.”

The case is US Airways Inc. v. Sabre Holdings Corp. et al., case number 1:11-cv-02725, in the U.S. District Court for the Southern District of New York.

Question: When Is a $3 Million Attorney Fee Award Painful?

April 19, 2017

Answer:  When your fee request was $25 million higher.

And so it was in In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, pending in federal court in San Francisco.  The case arose, in the court’s words, from VW’s “deliberate use of a defeat device – software designed to cheat emissions tests and deceive federal and state regulators – in nearly 600,000 Volkswagens- and Audi-branded turbocharged direct injection diesel engine vehicles sold in the United States.” 

Here’s how the software worked, per the court:  the “defeat device” would sense when the vehicles were being tested and would then produce regulation-compliant results.  But when the vehicles were driven under normal circumstances, they’d use a less effective emissions control system.  “Only by installing the defeat device on its vehicles was Volkswagen able to obtain” the requisite governmental approvals “for its 2.0- and 3.0-liter diesel engine vehicles,” even though those vehicles actually emitted “nitrogen oxides at a factor of up to 40 times over the permitted limit.”

Franchise dealers of VW-branded vehicles sued VW, claiming they were damaged by this “emissions scandal.”  Class certification was sought, and a settlement was reached, encompassing a nationwide class consisting of “all authorized Volkswagen dealers in the United States who, on September 18, 2015, operated a Volkswagen branded dealership pursuant to a valid Volkswagen Dealer Agreement.”  Under the settlement, VW was required to pay $1.19 billion in cash and provide various non-cash benefits to the class.

All told, a good deal for the class.  As the court noted, the settlement “had multiple cash and non-cash components, and … ultimately will provide franchise dealer class members with a recovery of nearly all of their losses attributable to Volkswagen’s disclosure of its use of a defeat device.” 

High fives in plaintiffs’ camp!  Crack open the Veuve Clicquot! 

Class counsel then moved for attorneys’ fees, stating in their motion that their “intense negotiations with Volkswagen led to the second largest class action settlement in automotive case history … and likely one of the top 20 largest class settlements in history in any arena.  In fact, the over $2.1 million average payment to Franchise Dealer Class Members may be the highest average payment to members of a class in any class action settlement.” 

They asked the court to award them “$28.56 million in attorneys’ fees, inclusive of costs.”  And they described their request – which represented, they said, “a fee of 2.0% of the constructive settlement fund of $1.39 billion” – as a “historically miniscule fee” which was “unquestionably fair, reasonable and appropriate compensation in relation to the exceptional results achieved for the” class.  “This remarkably small request,” they declared, “is likely the second-smallest fee amount ever requested in a large common fund case.”

So why did the district court cut their requested fee by nearly ninety percent? 

Because it found that under “the unique circumstances leading to the Settlement,” the “lodestar method, as opposed to the percentage method, is the appropriate method for determining fees,” and the lodestar amount was far lower than the amount they’d requested in their fee application. 

Under the “lodestar method,” fees are calculated by multiplying the number of hours reasonably expended by reasonable hourly rates.  Computing fees by this method tends to yield lower fee awards than does the percentage method, especially in cases like this one where the settlement fund is large.

The court found that using the percentage method in this case “would overcompensate” class counsel “for its work.”  Class counsel, it reasoned, “did not expend significant additional time procuring the Settlement, nor did it undertake significant additional risk, given Volkswagen’s incentive to settle quickly.”

What does that mean, “significant additional time” and “significant additional risk?”  And why did VW have an “incentive to settle quickly?”

Well, as it happens, before settling the franchise dealer case, VW had settled another emissions-related case; that one between VW, on one hand, and consumers, dealers, securities plaintiffs and government agencies, on the other.  That case settled for $10.033 billion, and class counsel in that one were awarded $167 million in fees. 

That case, in other words, was the main event.  Given that the franchise dealer settlement followed on the heels of that larger settlement, the court reasoned that the former “flowed naturally and necessarily” from the latter.  It calculated class counsels’ lodestar sum in the franchise dealer case as being “only $1.48 million,” meaning that their requested $28.56 million fee “would be a 19x lodestar multiple.”  That didn’t fly.  But a 2x multiplier did, given the risks class counsel assumed in the litigation, and so class counsel were awarded $2,954,455 in fees for work performed relating to that settlement, plus $87,538 in costs. 

And so class counsels’ fee request was mightily reduced by the court.  But they could still take solace in the praise their efforts elicited from the court.  Class counsel “achieved a great result for the franchise dealer class members, even in the face of uncertain risk and litigation length.” “The result” they “achieved is excellent.”  Words like those endure long after the fees have evaporated.

Wouldn’t you say?

The case is In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, United States District Court, Northern District of California, MDL No. 2672 CRB (JSC), and the decision was rendered on April 12, 2017.

This article, “Question: When Is a $3 Million Attorney Fee Award Painful?”, was written by Jeremy Gilman, a partner at Benesch based in Cleveland.  He has been litigating complex business cases for both plaintiffs and defendants nationwide for the past 34 years.  He is a prolific writer on legal topics, and his fiction has been nominated for a national literary prize.  He is also a musician whose first album is due out this summer.

Fee Request Reduced 90 Percent in VW Dealer Case

April 13, 2017

A recent Courthouse News story by Nicholas Iovino, “Judge Whacks 90% of Attorney Fees in VW Dealer Case,” reports that a federal judge cut more than $25 million from attorneys’ fees in a $1.2 billion settlement between Volkswagen and its U.S. dealerships.  U.S. District Judge Charles Breyer reduced the award to $2.9 million, finding a request for $28.5 million too high, given that “much of the groundwork for the settlement was laid in negotiations” for a previous deal.

Breyer lopped off $1.5 million in billable hours deemed as “hybrid time,” or hours spent negotiating both the dealership settlement and a larger, $10 billion deal for owners of 2.0-liter diesel engine vehicles.  He found that attorneys already had been compensated for those hybrid hours in a $175 million fee award approved in March.

The $2.9 million fees award is the latest Volkswagen must pay to make amends for its installation of emissions-cheating software in 11 million vehicles worldwide, including nearly 600,000 diesel-powered vehicles sold in the United States.  The defeat device software kicked in to hide emissions during tests, while allowing cars to spew up to 40 times more nitrogen oxide on the road than allowed under federal law.

Under the $1.2 billion deal approved in January, 644 U.S. dealerships will each receive an average $1.85 million to cover losses precipitated by the German automaker’s diesel-gate scandal.  Although the requested $28.5 million makes up a mere 2.8 percent of the $1.2 billion deal, granting it would allow the lawyers to pocket more than 14 times the value of hours they actually worked, Breyer wrote.

“Dealer class counsel did not expend significant additional time procuring the settlement, nor did it undertake significant additional risk, given Volkswagen’s incentive to settle quickly,” Breyer wrote in the 10-page ruling.  He cut an additional $560,000 in anticipated billable hours, finding Volkswagen has already started paying dealerships and no further hours are needed to execute the deal.

Breyer recalculated the total value of billable hours at $1.47 million and applied a 2.0-multiplier, for a total of $2.95 million to be split between two law firms.  Hagens Berman Sobol Shapiro will receive $2.3 million; Bass Sox & Mercer will get $622,000.  The judge also granted the firms $87,538 in litigation costs.

Fee Allocation Dispute Action Filed Against Milberg

March 27, 2017

A recent New Jersey Law Journal story by Charles Toutant, “Milberg Targeted in $10.6 Million Legal Fees Fight Linked to Merck Drug,” reports that a Louisiana law firm's seeking $10.6 million in legal fees from class action firm Milberg for securities litigation against Merck & Co. painkiller Vioxx was moved to the District of New Jersey.  Milberg, formerly known as Milberg Weiss Bershad & Schulman, is accused in the suit of underpaying law firm Kahn, Swick & Foti of Madisonville, Louisiana, which received $400,000 for its work on the Vioxx securities case.

Kahn Swick claims in the suit that its fees from the Vioxx securities case were reduced by strategic measures undertaken by Milberg as the firm and two of its principals were indicted in 2006 on charges of paying kickbacks to class action plaintiffs.  Milberg principals Steven Schulman and David Bershad were each sentenced to six months in prison in that case.

The Vioxx securities suit, filed in 2003, sought to recover damages on behalf of shareholders for allegedly false statements the company made about Vioxx, a pain medication that was withdrawn from the market amid reports it caused heart problems.  In June 2016, U.S. District Judge Stanley Chesler gave final approval to a settlement that included $830 million for class members and another $232 million in attorney fees and expenses.

The criminal indictment prompted challenges to Milberg's status as co-lead counsel in the Vioxx securities case, Kahn Swick said in its complaint.  Milberg retained Carella, Byrne, Cecchi, Olstein, Brody & Agnello of Roseland as local counsel, and consented to the appointment of two New York firms, Bern­stein Litowitz Berger & Grossman and Brower Piven, as co-lead counsel.  As a result, Kahn Swick saw its role in the case reduced.

Kahn Swick filed its fee suit in state court in the Parish of Orleans, Louisiana, before it was removed to federal court in the Eastern District of Louisiana and then to the District of New Jersey.  Milberg asserted in court papers that New Jersey is a suitable venue because a substantial portion of the events behind the claim occurred in that district.  Furthermore, an analysis of factors weighed in favor of transferring the case to New Jersey for the convenience of the parties and witnesses and in the interest of justice, the firm said.

The suit brings a petition for damages and seeks declaratory judgment and a preliminary and permanent injunction against Milberg.  Besides Milberg, the suit names Mark Whitehead III and the Whitehead Law Firm of Lafayette, Louisiana, as defendants.  Whitehead and Milberg were co-liaison counsel in the Vioxx case in Louisiana state court.  Milberg claimed in its removal motion that Whitehead and his firm are fraudulently joined defendants because there is no reasonable basis to think the plaintiff will prevail against them.  Therefore, their citizenship must be ignored for removal purposes, Milberg claimed.

Milberg first approached Kahn Swick in 2003 and asked the firm to serve as its local counsel in Louisiana for Merck securities litigation, the suit claims.  The two firms entered into an oral agreement giving Kahn Swick 10 percent of Milberg's proceeds from the litigation, plus Kahn Swick's lodestar for its own work as liaison counsel.  The terms were placed in writing in 2005, according to Kahn Swick.

The Judicial Panel for Multidistrict Litigation transferred the Merck securities case to New Jersey for pretrial proceedings before U.S. District Judge Stanley Chesler.  After the settlement was reached, Special Master Layn Phillips was appointed to oversee the division of attorney fees.  Ultimately, Milberg was awarded $25 million.

Lewis Kahn of Kahn Swick said in a statement about the fee dispute, "We are pleased to be back in New Jersey, where we sought to have this contract dispute resolved initially through the court-ordered Special Master process, and look forward to moving forward to the merits of the case.  We believe our firm fulfilled our obligations under our written joint venture with Milberg and, notwithstanding Milberg's indictment and subsequent diminished role in the Merck litigation, believe that Milberg must honor this agreement."

Judge Reduces Fee Request in Rita’s Water Ice Class Action

March 21, 2017

A recent Legal Intelligencer story by P.J. D’Annunzio, “Lawyers Want $1M Fee, Get $651K in Rita’s Class Action,” reports that the attorneys handling the Rita's Water Ice class action over the company sending unsolicited text messages asked for $1 million in fees, but a federal judge said that price is too steep.

On March 16, U.S. District Judge Timothy J. Savage of the Eastern District of Pennsylvania granted class counsel's request for $40,000 in expenses and $10,000 in incentive awards, but denied their request for $1 million in legal fees, instead awarding them $651,000.  That reduced fee represents roughly 22 percent of the litigation's settlement fund.

According to Savage's opinion, more than 110,300 people are eligible for a piece of the $3 million settlement fund, and of those noticed, roughly 25,500 filed valid claims.  "The amount each class-member claimant will receive is not significant, but rather modest," Savage said, and because there were more claimants than class counsel had anticipated, each would get less than previously thought.

"Counsel claim that they extracted the largest settlement possible for the class in light of Rita's ability to pay," Savage said.  "Yet, rather than adjust the attorney fees to increase the amount available to the class, counsel propose a lesser recovery for the class members."

The class action was filed in 2015 by Sherry Brown and Ericka Newby.  The two claimed that Rita's sent them "Cool Alerts" text messages announcing when certain water ice flavors and other products were available at local stores.  They alleged that the lists were generated using a database of telephone numbers that the owners did not provide to Rita's.  They also claimed that they kept receiving messages after texting "STOP" in response to the texts' instructions to stop receiving future notifications.

A settlement agreement was reached between the parties in March 2016 and was approved by the judge shortly thereafter. Brown and Newby received $5,000 each as class representatives.

MetLife Faces $6.2M in Attorney Fees

March 9, 2017

A recent Law 360 story by Bonnie Eslinger, “MetLife Faces $6.2M in Atty Fees Over Ponzi Scheme Ruling,” reports that a California judge tentatively ordered MetLife Inc. and various subsidiaries...

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