A recent The Recorder story by Amanda Bronstad, “$38M Fee Request in Anthem Data Breach Settlement Under Scrutiny” reports that an objection says the fee request, which is 33 percent of the $115 million settlement, was “outrageous on its face” and should be closer to $13.8 million.
A prospective class member has objected to the Anthem data breach settlement, specifically criticizing a fee request of nearly $38 million, and planning to ask that a special master investigate the case for potential over-billing.
Class action critic Ted Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness, filed the objection on Dec. 29 on behalf of Adam Schulman, who is an attorney at his Washington D.C. organization. The objection said the fee request, which is 33 percent of the $115 million settlement was “outrageous on its face” and should be closer to $13.8 million. He particularly targeted the average $360 per hour rate for contract attorneys submitted by four lead plaintiffs firms, one of which is San Francisco’s Lieff Cabraser Heimann & Bernstein. A special master in Boston is investigating Lieff Cabraser, along with two other law firms, for potential over-billing for staff attorneys in a $74.5 million fee request over securities class action settlements with State Street. The special master’s report is due in March. Frank said he planned to file a motion on Thursday asking that a special master be appointed in the Anthem case.
He wants a special master to look into “the same thing they’re investigating in State Street, which is why this billing happened and whether it’s appropriate and whether there was an attempt to mislead the court.” He also questioned why 49 other firms not appointed by the court stood to earn a total of $13.6 million in fees and “whether there were side agreements to back scratch or trade favors in other MDLs to get work in this MDL.”
U.S. District Judge Lucy Koh, who trimmed the number of plaintiffs firms appointed to lead the Anthem case, has scheduled a Feb. 1 hearing for final approval of the settlement in San Jose, California. Two other objections were filed on Dec. 29 that also challenged the fee request, among other things. Class counsel is expected to respond to the objections by Jan. 25.
Eve Cervantez, of San Francisco’s Altshuler Berzon, who is co-lead counsel in the case along with Andrew Friedman of Cohen Milstein Sellers & Toll in Washington D.C., wrote in an email: “The three professional objectors made the same typical, boilerplate objections we often see in consumer class actions, and neglected the true value of the settlement to the class—protection of their personal data both by mandated improvements to Anthem’s cybersecurity to prevent future hacks, and by credit monitoring to prevent misuse of their personal data by the hackers that stole it.”
In the Anthem case, Koh preliminarily approved the settlement in August. The deal provides two years of credit monitoring and identity protection services to more than 78 million people whose personal information was compromised in 2015. It also provides a $15 million fund to pay costs that class members were forced to pay due to the breach, such as credit monitoring services and falsified tax returns.
In motions filed last month, the four lead plaintiffs firms defended their fee request as adequate compensation for obtaining the largest data breach settlement in history. The case involved “massive discovery” and “complicated factual and legal research,” they wrote. It also was “extraordinarily risky,” given that many data breach cases have been dismissed. The fees also were reasonable given the total lodestar—or the amount billed multiplied by the hourly rate—was $37.8 million. The hourly billing rates of partners were between $400 to $970—rates that Koh has approved in prior cases.
“There is no true comparator to this groundbreaking settlement,” Cervantez wrote. “Other data breach cases have not resulted in common funds that come close to $115 million, nor have they included the comprehensive cybersecurity improvements mandated by this settlement, coupled with a major, quantifiable investment in cybersecurity.”
The other two objections, one filed by solo practitioners John Pentz in Massachusetts and Benjamin Nutley in California, and the other by a trio of law firms from Missouri and Colorado, raise additional concerns over the cash value of the settlement, a proposed $597,500 in incentive payments to 29 lead plaintiffs and a request on both sides to seal portions of the deal—in particular, the amount of money Anthem has agreed to spend on cybersecurity in the future.
Koh has slashed fee requests in past cases, some involving the same plaintiffs firms. Last year, she cut fees in a $150 million settlement involving the poaching of animators at DreamWorks and The Walt Disney Co. to $13.8 million after finding the original $31.5 million request to be “unreasonably high.” In that case, Koh relied on the billing records, concluding that the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark in class action settlements would result in a windfall to the three plaintiffs firms, which included Cohen Milstein.