Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Billing Record / Entries

Judge Questions $30M Fee Request in Yahoo Data Breach MDL

June 18, 2020

A recent Law 360 story by Dorothy Atkins, “Judge Koh Questions $30M Atty Fee Bid in Yahoo Breach MDL” reports that California federal judge Lucy Koh declined to approve class counsel's $30 million fee bid for securing a $117.5 million deal resolving sprawling Yahoo data breach multidistrict litigation, demanding more billing information from dozens of plaintiffs' firms — including the "markup" on work by first-year law students.  During a hearing held via Zoom, Judge Koh heard objections to the fee request and said she wants more detailed billing information on the 31 law firms and 204 attorneys and paralegals who worked on the MDL and related litigation consolidated in state court, as well as total costs for hiring experts.

Judge Koh gave class counsel a week to submit a chart on how much time each partner and associate worked on the case, what work they did and how much they billed for the work.  She also said she wanted to know how much staff and hourly workers were paid compared with how much the firms billed, pointing out that they had billed $200 per hour for at least one first-year law school student.  "I need to know how much you are paying to know how much the markup is," she said.

Judge Koh also questioned the legitimacy of hundreds of hours of work that nine law firms charged after class counsel had filed the motion for final settlement approval in February, and she pointed out that multiple line items appeared to violate her orders, which prohibited class attorneys from billing at various points in litigation without first receiving court approval.  Class counsel apologized for any billings that went beyond her restrictions and said they would withdraw the charges from their fee request.  They also agreed to submit the additional information within the week.

The judge's comments came during a nearly four-hour hearing on a motion to finalize the approval of Yahoo's $117.5 million deal, which class counsel argued in court documents "provides the second largest common fund recovery ever obtained in a data breach case."  The motion compared the settlement with the health insurer Anthem's $115 million deal, which Judge Koh approved in 2018 to resolve similar data breach claims.

If the Yahoo deal is approved, the settlement would end multidistrict litigation in federal court and parallel state court proceedings over Yahoo's alleged multiple data security failings between 2012 and 2016.  During those four years, the company had annual attacks that potentially impacted millions of U.S. and Israeli account holders, exposing some of their logins, passwords, emails, dates of birth, and answers to security questions to hackers, according to the users.  Judge Koh preliminarily signed off on the proposed deal in July, after rejecting a previous version of the settlement for being too vague and inadequately describing the breaches at issue.

Under the proposed deal, Yahoo agreed to provide class members with either two years of comprehensive credit monitoring or alternative compensation for those that already have credit monitoring.  They also agreed to cover out-of-pocket costs such as fraud losses if class members submit proof and said they would make certain changes to its business to prevent future data breaches.

During the hearing, which was watched by more than 100 observers, Judge Koh said she doesn't think the class should have to pay for the initial proposed settlement, because it was "obviously not in compliance with federal rules of civil procedure."  Judge Koh also took issue with apparent discrepancies between the class size estimates and the number of Yahoo users since the case began, which she said seems to have changed throughout litigation.

The judge noted that Yahoo's CEO touted its 1 billion active users in corporate press releases in 2016, but there's been a "pattern in this case" that every time the parties come back to court the number is smaller.  Now that class counsel wants the settlement approved, they're likely going to argue that there are only 10 class members, the judge quipped.  At the end of the hearing, Judge Koh said she would at some point approve attorney fees, but she reiterated that she takes her responsibility very seriously and wants to review the attorneys' billing.

$88M Cut From $157M Fee Request in Namenda Class Settlement

June 15, 2020

A recent Law 360 story by Pete Brush, “$88M Cut From Requested $157.5M Atty Fee in Namenda Deal” reports that a Manhattan federal judge slashed nearly $88 million from a $157.5 million fee award requested by Garwin Gerstein & Fisher LLP and five other firms for guiding wholesalers of the Alzheimer's drug Namenda to a $750 million antitrust settlement with a unit of Allergan PLC.

After hinting she would reduce the payout, U.S. District Judge Colleen McMahon held Monday that six law firms that alleged Forest Laboratories Inc., a unit of Ireland-based Allergan, thwarted generic competition through unlawful "pay-for-delay" tactics are entitled to $69.538 million.  "It is still a handsome payday for counsel," Judge McMahon wrote, after cutting the request for about 21% of the settlement proceeds for plaintiffs' counsel down to about 9.3%.

The judge approved the lawyers' request for $5.8 million of expenses in the nearly five-year-old litigation, but slashed proposed $150,000 payouts for the two Namenda wholesalers that represented the class — Smith Drug Co. and Rochester Drug Co-Operative Inc. — by 50% to $75,000 each.  "Frankly, this was attorney-driven litigation.  All the class representatives really did was sit for a deposition," she wrote, calling the class reps' contributions "minimal."

Reasoning why she slashed the award, Judge McMahon said that the firms engaged in "duplicative work" — "or, in some cases triplicative or quadruplicative work" — and "inflated" their total number of hours worked.  "Class counsel's time sheets lack sufficient granularity to separate the productive hours from the wasted ones," she wrote.

The wholesalers had claimed Forest deployed a two-pronged strategy for keeping generic rivals to Namenda off the market, including unlawful "pay-for-delay" arrangements and "product-hopping" tactics that shielded its profits long after generic rivals should have developed robust sales.  A not-uncommon effort to settle ahead of trial led to the uncommonly large payout — one of the largest in the history of Hatch-Waxman Act generic-drug approval cases. Allergan admitted no wrongdoing in the deal.

"I fully understand why Forest settled this case for a large number.  Its downside was huge; this was a 'bet the company' case," Judge McMahon observed — awarding the plaintiffs' firms "twice the lodestar" but not "anything like the 4.5 times lodestar requested."

Judge McMahon also didn't like what she characterized as a suggestion that the six plaintiffs' firms should get an outsized payday to make up for the times they don't win.  "I am absolutely unmoved — indeed, I am offended — by the argument that class counsel deserves a humongous fee award in this case because 'the winning cases must help pay for the losing ones,'" she wrote.

Article: Five Tips for Drafting Effective Legal Billing Guidelines

June 11, 2020

A recent Law 360 article by Chris Seezen, “5 Tips for Drafting Effective Legal Billing Guidelines” reports on tips for drafting effective legal billing guidelines.  This article was posted with permission.  The article reads:

Relationships with outside counsel have taken on increased scrutiny as companies become more focused on the administrative processes of their legal departments and the work they do.  As a result, legal departments are looking more closely at the law firms they hire, what they pay those firms and the outcomes of the cases they've handled.

To properly manage outside counsel, it's imperative to implement and maintain effective legal billing guidelines.  These rules serve as a working guide to determine expectations and processes, allowing a legal department to decide with their law firms what they will and won't pay for, to set processes for staffing cases and requesting rate increases, and to lay out how matters will be handled.  This can include whether a company has a specific budget on a given matter and when it should be submitted, how budget revisions should be handled, or what to do when a matter goes over budget.  It's all about setting the table with the necessary information before the work begins.

Drafting legal billing guidelines requires a legal department to actively assess its case management practices, evaluate its law firm relationships and monitor ongoing guideline compliance — all of which are beneficial to keep track of. While some vendors or partners might not need much beyond a simple contract — such as an IT team, for example — when working with a more complex and costly service such as a law firm, having legal billing guidelines in place is a wise step for the investment and relationship.

To draft effective and enforceable legal billing guidelines, legal departments should consider the following:

Include all pertinent information in an easy-to-read format.

Including a process for law firms to get authorization for new timekeepers or rate increases, or determining a specific person in the department these requests should be sent to are examples of the kind of information that should be ironed out before a new law firm relationship begins.  Depending on the size of the firm, invoicing may be handled primarily by a billing department that doesn't have direct involvement in the matter, so providing all necessary details will improve compliance.

Additionally, most companies prefer to be billed monthly, but some may only want to be billed once services reach a certain amount and may request for the firm to hold the bill until the next pay cycle.  This is another matter that should be determined before work rolls out.  Although the latter option is a convenient way to cut down on administrative costs, monthly bills are still recommended as they keep information flow consistent and recent legal tasks top of mind.

Similar to other business documents, billing guidelines should be organized and presented in an easy-to-review format.  This may include using bullet points and lists instead of long sentences or paragraphs.  Additionally, similar items should be positioned together or organized in categories to keep the guidelines as straightforward as possible, such as travel bills/logistics, noncompensable administrative processes, etc.

Providing a brief overview that highlights the takeaways or expectations in bite-sized format, in addition to a more in-depth document, will also help to present the guidelines in a digestible way that supports compliance.

Identify the purpose of the guidelines.

Many legal departments use these guidelines to better control outside counsel costs.  In this case, they should outline all areas considered noncompensable (such as office overhead, scheduling or review of local rules) or that will have a cap.  The guidelines may also include protocol on matter management practices such as status update requirements or case staffing limitations.  Including this information, as well as requirements for any possible exceptions, will inform outside counsel how to approach similar matters upfront.

Draft a living document and reevaluate the guidelines as needed.

Although important to determine at the outset of the relationship, billing guidelines for outside counsel should not be set in stone.  While what's initially decided and drafted may seem appropriate, needs may change once set into practice and as time goes on.  Some requirements may prove too burdensome on outside counsel while other areas may be too lenient.  Additionally, there will always be that one matter that's the exception to the rule and the guidelines should cover those outlier cases.  Implementing an annual review of the billing guidelines will allow general counsel to revise and incorporate new procedures that best fit the company's needs.

Failing to review the guidelines regularly can cause legal departments to miss accommodations such as new travel time billing (for a case in a city with heavy traffic, for example) or important regulatory changes that may surface.  Therefore, even though a good rule of thumb is to review and update the general guidelines annually, the above situations and others like them should be updated in real time.  It's important to maintain a process that supports the company's evolving requirements.

Additionally, many billing guidelines include hiring protocol to cover what kind of attorney a company wants working on their claims, who will be carrying out tasks that vary in complexity, and what the rate will be for each.  When reviewing bills more closely to ensure they adhere to preexisting guidelines, companies are more likely to catch discrepancies in these agreements (such as an attorney billing time for work that a paralegal should be doing) and can call attention to the matter, lower their rate, or revise the guidelines to reflect the request.

Anticipate and prepare for resistance.

No one likes someone looking over their shoulder or second-guessing their work.  Outside counsel provides a valuable service to legal departments and should be properly compensated for it.  However, some law firms may be resistant to the implementation of billing guidelines, viewing them as intrusive or in place only to cut their bills.  Billing guidelines are becoming standard practice for legal departments, and almost every law firm has a client with billing requirements.  Informing outside counsel of the guideline implementation, as well as the purposes behind it, will help to alleviate any misunderstanding or animosity.

Stand by the guidelines.

The most important piece to consider when implementing billing guidelines is enforcement.  Many legal departments have them in place, but don't have the internal resources to ensure outside counsel is complying.  Failing to enforce the guidelines not only makes the time and effort to draft them a waste, but it can also undermine a company's position with its outside counsel.  In a newer relationship, enforcing the guidelines sets an important precedence.

To ensure all expectations are fairly treated in the event of a billing discrepancy, companies can ask to adjust the current bill down or request a current or future discount.  Referring to the guidelines will serve as leverage for this request.  For law firms that continue to violate agreements, companies have every right to discontinue their work with them.

The purpose of this method is to more clearly show rates that are being paid for the work that's being done.  Fostering a fair and transparent process is the ultimate goal.

Drafting, implementing and enforcing legal billing guidelines for outside counsel allows legal departments to be stewards of their company resources while maintaining control over case management.  For cost savings, streamlined administrative processes and deeper insight into their billing procedures, companies must invest the adequate time and effort into their initial and evolving guidelines — the foundation of a productive relationship with outside counsel.

Miami Attorney Wins Major Fee Dispute Against Big Tobacco

May 29, 2020

A recent Daily Business Review story by Raychel Lean, “In Rare News for Plaintiffs Lawyers, Miami Attorney Stages Fee Fight Against Big Tobacco – And Wins $2.4 Million” reports that the first court order sanctioning a Florida Engle progeny defendant with attorney fees has landed, and it’s causing a stir.  Four years after R.J. Reynolds refused a $250,000 settlement offer, Coral Gables attorney Richard J. Diaz secured a $2.4 million fee award for his client — more than double the $1 million in compensation jurors awarded at trial.

Miami-Dade Circuit Judge Alan Fine awarded the fees, along with $117,500 in costs, after a Zoom bench trial.  It’s an outcome that Diaz says shows just how stubborn tobacco giants can be in defending themselves from lawsuits over smoking-related illnesses and could even signal a new era of reckoning for the industry.

Of the roughly 150 Engle plaintiffs who could have fought for fees thus far, 145 of them settled, according to Diaz, who said that’s often because plaintiffs lawyers don’t keep time records the way defense firms do.  But that could change, as Diaz says he’s received an influx of calls from plaintiffs attorneys now inspired to push harder for fees.

“I think this now has motivated a lot of plaintiffs lawyers to stop settling these fee claims and start fighting them because they’re realizing that they’re leaving half a million to a million dollars on the table every time,” Diaz said.  “Then the counter effect, I think, will be that they [tobacco defendants] will be more reasonable and, ultimately, we’ll be able to settle more of these claims.  But sometimes they’ve got to get hit too many times to realize they’re getting hit, and then they’ll back down.”

This case revolved around Stefanny Sommers, who sued in 2008 on behalf of her husband Bert Sommers, a wealthy lawyer and real estate developer.  He died in 2007 after smoking for decades and suffered from multiple smoking-related diseases.  The case meandered through the courts and changed hands with various lawyers before Diaz came aboard in 2014.  He almost went straight to trial, but litigation stalled after jurors were blocked from considering punitive damages.  After about three years, Sommers opted to try the case while the appeal continued to play out.

It was a “royal nightmare” figuring out how many hours had been spent on the case, according to Diaz, as plaintiffs lawyers don’t normally keep meticulous records.  It meant opening every email and attachment, combing through phone records and filings, and being deposed.  One lawyer even shut down his practice for two weeks to reconstruct his bills, but Diaz said it was worth the effort.

“Out of those 150 opportunities to get huge fee awards from the defendants, only about five times have lawyers challenged it because it is so labor intensive,” Diaz said.  ”The tradition has been to kind of just take whatever you think you can get and the numbers are what they are, but I made a decision a year ago that I was going to take them on, fight them and see what I could do.”

Diaz said he now requires his team to use billing software, having estimated that they missed out on at least 10% of their fees because of a lack of meticulous business records.  “It taught us a lesson.  This will not happen again,” Diaz said.  “They won’t have the ability to attack whether the records were sufficiently accurate, contemporaneous and complete."

21 Percent Fee Request in Doubt in Namenda Class Settlement

May 27, 2020

A recent Law 360 story by Frank Runyeon, “$750M Namenda Deal OK’d But 21% Atty Fee Request in Doubt” reports that a Manhattan federal judge approved a landmark $750 million settlement over allegations that an Allergan PLC subsidiary thwarted generic competition for its Alzheimer's drug Namenda, but cast doubt on awarding $157 million in attorney fees, calling the figure "astronomically large."  During a teleconference fairness hearing, U.S. District Judge Colleen McMahon swiftly approved the settlement, which compensates wholesalers that accused Allergan and its Forest Laboratories LLC unit of anti-competitive conduct to keep generic versions of Namenda off pharmacy shelves.  The deal is one of the largest ever by a single drugmaker in an antitrust case.

But the judge quickly pivoted to criticize the payout for attorneys representing the class.  "With no disrespect meant about the quality of the work that went into this prosecution, I am a little nonplussed at the notion of awarding 21% of this settlement in attorneys fees," Judge McMahon said.  "It is an astronomically large number," the judge added.  "It is over four times lodestar, and, at these numbers, bears little resemblance to the work that's been done."

Judge McMahon said she had "some concern about duplication because of some things that I have seen in the record, and so before I reach a final decision on attorneys fees I want to take a look at time records."

Class counsel Bruce Gerstein said he would send over the records "expeditiously," but asked the judge to consider that the class members are "sophisticated" corporations who had agreed to the fees.  Attorneys had initially sought a third of the $750 million settlement, but dialed down their requested share following objections from wholesalers.

Judge McMahon said she would deal with the motion for attorney fees quickly, as soon as she could review the documents.  She noted that the allocation plan for distributing the fees was approved, and that the attorneys' $5.8 million in expenses would likely be approved in the forthcoming decision.