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Category: Challenging Fees

Second Circuit Upholds $300M Fee Award in Forex MDL

November 1, 2019

A recent Law 360 story by Anne Cullen, “2nd Circ. Upholds $300M Atty Fees in Forex Rigging Case,” reports that the Second Circuit downed an objector's efforts to lop more than a third off a $300 million fee award for the firms that scored an investor class billions of dollars in settlements from banks accused of rigging interest rates in the foreign exchange markets.  In a short, unpublished decision, a three-judge panel backed the fee award to lead counsel Scott & Scott Attorneys at Law LLP, Hausfeld LLP and other firms, rejecting arguments from sole objector Keith Kornell, who had insisted the attorneys' cut should have been closer to $190 million.

While Kornell had argued that any risk the firms faced taking on the case disappeared just over a year into the litigation when the investors cut the first deal, the Second Circuit found his theory runs counter to well-settled case law that states "litigation risk must be measured as of when the case is filed."  In addition, the panel said, "this contention ignores that claims against the other defendants remained unresolved."

Kornell had also argued that the lower court made a mistake when it relied on total hours in calculating the lodestar, rather than a breakdown of hours by time, task and defendant.  But the panel rejected that argument as well.  The panel said the Second Circuit previously held that "when a court relies on the lodestar 'as a mere cross-check, the hours documented by counsel need not be exhaustively scrutinized by the district court."'

The litigation kicked off in 2013, when investors accused 16 major banks — including Bank of America, Citigroup and Morgan Stanley — of manipulating the benchmark rates used in forex transactions involving millions of dollars' worth of their assets.  Five years later, after settlements totaling $2.3 billion had been reached with all but one of the banks, a New York federal judge ruled that the investor class' counsel could walk away with 13% of the pot.

The fee award was lower than the $381.4 million the firms had wanted, but Kornell indicated in a December appeal notice that he still believed the award was too high, although investors have expressed doubt about Kornell's motive or actual involvement in the case.

$62.5M in Fees in $250M Alibaba Securities Class Action Settlement

October 18, 2019

A recent Law 360 story by Dean Seal, “Rosen Law Gets $62.5M Award as Alibaba Deal Gets Final OK,” reports that a New York federal judge granted final approval to a $250 million settlement that resolves securities claims against Alibaba Group Holding Ltd. and provides class counsel, The Rosen Law Firm PA, with $62.5 million in fees.  U.S. District Judge Colleen McMahon found that a 25% cut of the settlement was reasonable for the firm that spent years representing investors who claimed Alibaba misled them ahead of its $25 billion initial public offering, noting that the firm "undertook a complex, expensive and likely lengthy litigation with no guarantee of compensation."

"Plaintiffs' counsel received no compensation for more than four years of litigation and advanced nearly $4 million in expenses that might never have been recovered," Judge McMahon said.  "The court finds that the contingency risk in this case supports the requested award."

The judge also granted the class attorneys' request for almost $4 million in expenses and $12,500 for each of the five class representatives.  The order closes the book on a securities class action that claimed Alibaba concealed a July 2014 closed-door meeting with China's commerce regulator, the State Administration of Industry and Commerce, or SAIC, during which the agency allegedly ordered the Chinese e-commerce giant to stop illegal business practices, including the sale of counterfeit goods.

A separate objection to the 25% fee award sought by the class counsel was based on a "benchmark" theory that would provide class counsel with "an improper windfall," Judge McMahon said, calling the objection "flatly wrong."  "The 25% fee was deemed reasonable upon 'scrutiny of the unique circumstances of [this] case,'" she said.

Calling the settlement the "largest ever against a Chinese company" that represents between 17% and 20% of the maximum recoverable damages in the case, Judge McMahon praised the quality of representation for both the investors and Alibaba in handling a case of "unquestionable" magnitude.  Considering the roughly 164,000 claims forms submitted thus far, relatively few opt-outs and only one objector who has not established his membership in the class, the reaction of the class strongly supports approval of the settlement, the judge concluded.

$22M Fee Request Draws Grousing in $47M Class Action Settlement

October 15, 2019

A recent Law 360 story by Rose Krebs, “Abrams, Olshan Draw Guff for $22M Fee Bid on $47M Deal,” reports that Abrams & Bayliss and Olshan Frome Wolosky faced pushback on a $22 million fee bid for brokering a potential $47 million deal on behalf of a putative class of investors challenging Medley Capital Corp.'s proposed tie-up with Sierra Income Corp., as the defendants cast doubt that the deal is worth that much.  MCC, Sierra and other Medley entities and certain directors named as defendants in the class suit filed briefs asking the Delaware Chancery Court to either deny or delay deciding co-lead counsel Abrams & Bayliss LLP and Olshan Frome Wolosky LLP's request, saying there is still too much uncertainty around deal terms and the settlement amount.

They also claim the settlement to be considered later this month is actually less beneficial to stockholders than an earlier merger proposal.  "To the extent the court awards a fee now, any fee should be reduced to account for the fact that plaintiffs conferred no benefit on the MCC stockholders through the revised merger plan," Sierra said in its brief.

The Medley entities and certain directors filed a brief asking the court to flat out reject the fee request, calling it "excessive" and "disproportionate to the litigation efforts involved in a case that took less than four weeks from complaint to trial."  The fee amount is "untethered to the benefits actually achieved for the class," the Medley entities and directors said.  They contend an award of no more than $3.1 million is "fair and reasonable."  "To award plaintiffs' counsel anything close to the $22 million they seek would only harm the class that plaintiffs' counsel is bound to represent, and which this court must safeguard," the Medley entities assert.

The opposing parties took issue with various details of the settlement and fee request, including provisions that tie the amount of recovery for shareholders to whatever fee award amount ends up being granted.  They were also critical of Abrams & Bayliss and Olshan Frome basing their fee request on what the co-lead counsel contends will be an up to $47 million cash and stock deal, calling into question if that amount will actually ever be realized.

"Plaintiffs seek a fee award of $22 million, roughly 80% of which is based on their suggestion that they created a 'settlement fund' ... Not so," Sierra asserted in its brief.  "That settlement fund is nothing more than a contingent, contractual commitment to pay additional cash and stock to MCC stockholders if the revised merger plan closes.  No settlement fund exists today, and the potential benefits may never be paid."  Sierra also flagged the amount of the fee request as being "equivalent to more than 15% of the total market capitalization of Medley Capital Corporation's common stock based on yesterday's closing price."  The opposing parties also said the fee request is way too high because co-lead counsel have not shown they secured a benefit for shareholders.

In April, the proposed deal was announced by which the stockholder suit would be dropped in return for the $17 million in cash and an estimated $30 million of common stock in the combined company, which is set to be distributed to the class upon closing of the proposed transactions.  The attorney fees and expenses would not be taken from the settlement fund, but rather "will be paid separately by Medley Capital or its successor," co-lead counsel claimed in court filings.  The exact value of the combined company and stock would not be determined until the merger is finalized and the related transactions will require regulatory and stockholder approval.

The suit stems from a deal announced last year through which MCC is to merge into Sierra.  The transaction was initially to be contingent on Sierra also acquiring the asset management business Medley Management Inc. to form a combined business development company of all three entities with roughly $5 billion in total assets under management, the companies said in a news release at the time.

Late last month, Abrams & Bayliss and Olshan Frome Wolosky told the court in a filing that the fee request is "reasonable compensation for the significant results achieved in this case."  The fee award is justified given they took on a "small army of attorneys from leading national and Delaware firms," that "spared no expense and waged a vigorous defense" and were still able to achieve substantial benefits for the proposed class, the firms assert.

Another stockholder, Stephen Altman, made similar claims as FrontFour in a suit he filed, and the cases were consolidated, with Abrams & Bayliss and Olshan Frome receiving the Chancery Court's nod to co-lead the proposed class.  Altman told the court on that his counsel, Kessler Topaz Meltzer & Check LLP and Prickett Jones and Elliott PA, are entitled to about $440,000 in fees and expenses for their work on the case, and also flagged co-lead counsel's $22 million request as being based on "questionable assumptions and calculations."

Hospital System Can Challenge Attorney Fees in FCA Case

October 3, 2019

A recent Law 360 story by Adam Lidgett, “Hospital Chain Can Fight FCA Atty Fees, Judge Rules,” reports that hospital giant Community Health Systems (CHS) Inc. can challenge the pursuit of attorney fees by whistleblowers in False Claims Act (FCA) lawsuits alleging improper inpatient admissions, a Tennessee federal judge has ruled, citing murky settlement language.

U.S. District Judge Marvin E. Aspen held that a settlement agreement reached by CHS — in which it agreed to pay $97.3 million plus interest to end claims in various FCA cases — doesn't bar the company from contesting whether the whistleblowers were eligible to collect attorney fees.  The judge said that the whistleblowers, or relators, were aware "or had reason to know" that CHS intended to retain its ability to fight whether the relators could collect those fees.

"Even if we found that relators did not share CHS' interpretation of their rights under the settlement agreement, the evidence ... establishes that they knew of CHS' position," the judge wrote.  "Multiple communications also show that relators had reason to know of CHS' position."

The judge was careful, however, to note that his ruling did not decide whether the whistleblowers can actually collect those fees.  The decision stood in contrast to a recommendation from U.S. Magistrate Judge Barbara D. Holmes that interpreted the agreement in favor of the whistleblowers.  One group of relators had sought $2.65 million in fees, according to that recommendation.

The ruling came on remand from the Sixth Circuit, which in November 2016 scrapped a lower court's decision that CHS waived its right to challenge the fee award.  The company's appeal at the Sixth Circuit centered on whether a sentence in the settlement agreement meant CHS could only challenge fees under a specific FCA provision dealing with the reasonableness of fees, or instead could reserve its right to such challenges on any basis.  While a Tennessee federal judge in 2015 found the former, the Sixth Circuit held that the language was ambiguous and therefore warranted a remand for further proceedings.

Novartis Whistleblower Attorneys Slam ‘Unjust' Fee Award

September 13, 2019

A recent Law 360 story by Jeannie O’Sullivan, “Novartis Whistleblower Attys Slam ‘Unjust’ $1.4M Fee Award,” reports that Webber McGill LLC urged a New Jersey state court to redo the $1.4 million in counsel fees it awarded the firm and a solo attorney for their representation of a former Novartis Pharmaceuticals Corp. executive in her whistleblower lawsuit, arguing that the court overlooked binding precedent and critical facts in arriving at the “manifestly unjust” sum.

The Hanover-based firm, which had sought more than $3 million for its representation of Min Amy Guo, invoked the New Jersey Supreme Court’s 1995 holding in Szczepanski v. Newcomb Medical Center that counsel fee awards should be determined independently of the fee agreement between counsel and client.  But the court factored in that very agreement in calculating the award, according to Webber McGill's reconsideration motion.

The award also ran afoul of another high court ruling from that same year, Rendine v. Pantzer, in which the justices held that counsel fee awards should be based on current rates rather than the prevailing rate at the time services were rendered, the motion said.  “In short, plaintiff believes the order yields manifestly unjust results and plaintiff respectfully requests that the court remedy those injustices,” the motion said.

The award, handed down Aug. 9 by Morris County Superior Court Judge Louis Sceusi, was based on hourly rates of $350 and $300, respectively, for name partners James K. Webber and Douglas J. McGill, $250 for firm member Michael J. Reynolds and $200 for firm counsel Christena A. Lambrianakos, the motion said. Morristown, New Jersey-based solo attorney Richard J. Murray, who also represented Guo, was awarded based on a $450 hourly rate.

Webber McGill went on to blast the “inequities” between the firm’s award and fees won by the defendants’ counsel for Guo's misconduct during the trial.  The Novartis attorneys won awards based on hourly rates of $395 for John B. McCusker of McCusker Anselmi Rosen & Carvelli PC and $390 for Patricia Prezioso of Nukk-Freeman & Cerra PC.  Webber McGill took on a higher risk of nonpayment because Guo is a one-time client, whereas Novartis is an institutional client for McCusker Anselmi and thus generates “reliability and volume” for that firm, the motion said.

Further, the court undervalued the contributions the individual Webber McGill attorneys made, according to the motion. Webber has more experience in employment law than Prezioso, and McGill is a “skilled and experienced litigator” who was an “integral part of the winning team,” the motion said.  Reynolds was “uniquely helpful” to the case in terms of his pharmaceutical industry compliance knowledge, and Lambrianakos’ work was “absolutely necessary and invaluable,” according to the motion.

The court also contravened Rendine with respect to Murray because it based his hourly rate of $450 on a previous case, whereas he should have been awarded based on the prevailing hourly rate of $525, the motion said.  “The solution to the court’s errors with respect to plaintiff’s counsel’s rates is to review the record on the fee application and follow the dictates of Rendine and Szczepanski to determine the appropriate market rates for the Webber McGill attorneys as they ought to be compensated today,” the motion said.  Lastly, Webber McGill decried the court’s “draconian” reduction of McGill’s and Reynolds’ hours by 42% and 35%, respectively, saying the cuts weren’t justified by the record.