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Category: Challenging Fees

DOJ Opposes Attorney Fees in Dial Soap Class Action

May 10, 2019

A recent NLJ story by Nate Robson and Amanda Bronstad, “DOJ Opposes $3.8M in Legal Fees in Latest Swipe at Plaintiffs Bar,” reports that the U.S. Justice Department announced it is opposing a class action settlement in New Hampshire federal court that grants a $3.8 million attorney fee award to plaintiffs’ lawyers who alleged Dial overstated the ability of its antibacterial soap to kill germs.

The government said in a prepared statement that the fee award “would afford little value to consumers while handsomely compensating attorneys.”  The department’s opposition to the class action settlement was filed as a statement of interest by trial attorneys in the consumer protection branch, a component of the civil division.  The government argued that the settlement fund of $7.4 million fails to adequately compensate consumers and that the injunctive relief, in the form of changes to the soap’s ingredients, is “virtually worthless.”

“A class action settlement that affords little meaningful consumer benefit while rewarding attorneys with sizable fees is inappropriate,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division.  “Congress intended to prevent these types of unbalanced settlements with the Class Action Fairness Act.”  A final approval hearing is set for May 29.  Plaintiffs attorney Lucy Karl of Shaheen & Gordon and Robert Miller, of Sheehan Phinney, who represents Dial, did not respond to requests for comment. Both are in New Hampshire.

The Trump-era Justice Department has ramped up efforts to weigh in on pending class actions under the Class Action Fairness Act.  In a separate class action settlement with Lenny & Larry’s, the department in February criticized the purported $3.5 million settlement, preliminarily approved Nov. 1, for giving $1.1 million in legal fees to plaintiffs attorneys, while class members received up to $50 in cash or $30 worth of cookies.  Separately, the DOJ also filed a Feb. 4 amicus brief challenging a settlement over allegedly defective Tristar pressure cookers that gave $2.3 million to plaintiffs attorneys and discount coupons to class members.  The Arizona Attorney General’s Office, joined by 17 other states, has petitioned the U.S. Court of Appeals for the Sixth Circuit to unravel that deal.

Plaintiffs in the soap case, In re: Dial Complete Marketing & Sales Practices Litig., alleged that The Dial Corp. falsely advertised its “Dial Complete” hand soaps containing triclosan as more effective at killing germs over other brands’ soap.  Under a proposed settlement reached between the parties, Dial would pay $2.32 million to class members, with most class members receiving up to $8.10 in compensation for previous purchases of certain soap products, according to the statement of interest.  The settlement also provides for injunctive relief that would require Dial to refrain from using triclosan or claiming that its hand wash product “Kills 99% of Germs.”

Under the agreement, class counsel would seek a total of $3.825 million in attorney’s fees without opposition from Dial, including $1.9 million in fees specifically tied to obtaining the injunctive relief.  In its Statement of Interest, the United States argues that the injunction would provide no benefit to consumers, given that Dial years ago voluntarily made the same changes to its soap products that are required by the proposed injunctive relief.  Moreover, the U.S. Food and Drug Administration banned the use of triclosan in such products in 2016.  The case is pending in U.S. District Court for the District of New Hampshire, which must approve any settlement.

The government also complained about the use of cy pres in the settlement.  Under the deal, any unclaimed funds would go to the Ronald McDonald House Charities or Children’s Health Fund.  A footnote in the Statement of Interest said a cy pres distribution is “very unlikely,” given the government’s communication with the parties.  The settlement had no objectors.

The case got attention in 2017 when Dial appealed class certification based on the plaintiffs’ inability to identify class members, particularly in cases where people don’t keep receipts, like consumer products.  The U.S. Court of Appeals for the First Circuit refused to take up the interlocutory appeal, but, in a dissent, Judge William Kayatta warned his colleagues that the court’s recent precedent over how class members could be identified was destined to result in “further mischief” that could challenge the constitutional rights of defendants.

$15M Fee Request Called ‘Exorbitant’ in Shareholder Class Action

April 16, 2019

A recent Law 360 story by Vince Sullivan, “Globalstar Called Shareholder $15M Fee Request ‘Exorbitant’,” reports that satellite communications company Globalstar Inc. said a $15 million attorney fee request from shareholder Mudrick Capital Management LP is far too high given the quick settlement reached in Mudrick’s Delaware Chancery Court suit over a proposed $1.6 billion insider transaction.  In an objection to the fee request, Globalstar said the fee application claimed that a substantial increase in the company’s stock trading price resulted from the announcement of the case's settlement in December, but that claim is based on “unsubstantiated conjecture” and results in an "exorbitant" request for fees.

“Setting aside that there is no precedent for awarding fees based on a claimed stock price increase, plaintiffs’ valuation is based on an expert report that is untethered from reality, as it incorrectly analyzes Globalstar’s stock price movement … ,” the objection said.

Mudrick Capital and Warlander Asset Management LP filed suit in September accusing Globalstar’s directors of acting disloyally in agreeing to a $1.6 billion transaction with Thermo Capital Partners, in which Thermo would be given additional shares of Globalstar.  At the time the deal was proposed, Globalstar board Chairman James Monroe III controlled both Globalstar and Thermo.  He held 53 percent of Globalstar stock and sought to increase his holdings to 90 percent through the transaction, according to court filings.

The fee request claims Globalstar’s market value increased by $80 million upon announcement of the suit’s settlement, which came less than two months after the minority investors’ suit was filed and five months after the Thermo merger was terminated.  The $15 million fee request was based on receiving a percentage of the alleged $80 million in value created by the settlement.

Globalstar argued in its objection that it announced several other pieces of company news that impacted its stock price the same day the settlement was made public.  The objection claims that Globalstar announced the settlement on Dec. 17, but also announced a new financing deal that would stave off loan obligation defaults and that Globalstar had achieved a significant developmental milestone by having its wireless spectrum approved for terrestrial network use.

“Plaintiffs’ experts’ dismissal of the effect of the latter two announcements on the company’s stock price is both illogical and inconsistent with his own analysis,” the objection said.  “It also ignores the pressure that the lawsuit itself put on the company’s share price … ”  Globalstar claimed that its shares were trading at $0.50 each when the Mudrick suit was filed, but the price had dropped to $0.30 by the time the settlement was announced.  These issues create doubt about whether the settlement created any value for the company that can be the basis for an award of attorney fees from a common fund, the objection said, and raises questions about the amount of work actually done by the shareholders' attorneys.

Globalstar said the fee request indicates those attorneys incurred $1.5 million in actual fees based on more than 2,700 hours of work on the case, but doesn’t provide any details on the work performed.  The objection said that figure is significantly inflated because the lawyers only drafted a complaint and negotiated a settlement.  The defense counsel in the case incurred $260,000 to review the complaint and negotiate the settlement, which, if extrapolated to the plaintiffs, would call for a much smaller fee accrual of $530,000, Globalstar claims.

Plaintiff attorney Gregory V. Varallo of Richards Layton & Finger PA said the benefits realized in the settlement are unprecedented and warrants an award of the requested fees.  "From the defendants' argument, you'd think this was a run of the mill settlement," Varallo told Law360. "But it's unprecedented.  Nothing like this has happened before."

Contractor Challenges Fee Request in False Claims Act Case

April 3, 2019

A recent Law 360 story by Michael Phillis, “Contractor Fights ‘Cash Grab’ Fee Request in FCA Suit,” reports that a joint venture that included Bechtel Group blasted a whistleblower's bid for nearly $2 million in attorney fees and expenses as a "cash grab" after the contractor agreed to pay $3.2 million to resolve claims it lied about its subcontractors at a nuclear waste cleanup.  Washington Closure Hanford LLC told a Washington federal court that whistleblower Salina Savage and Savage Logistics LLC’s request for nearly $2 million in attorney fees, expenses and “fees on fees” was based on an elevated hourly rate of $800 and was generally unreasonable.  According to the memorandum filed, an appropriate fee award would be roughly $300,000 after applying a $150 to $400 per-hour rate.

The U.S. Department of Justice in June announced it settled the False Claims Act case for $3.2 million, ending accusations that WCH — a joint venture of AECOM, Bechtel and CH2M Hill Cos. Ltd. — made misrepresentations about its subcontractors while doing nuclear waste cleanup work at the Hanford Site in Washington state.  Savage and her company Savage Logistics, which received a $643,000 cut of the settlement, originally filed the suit against WCH in 2010 after having unsuccessfully bid on subcontract work.  Any attorney fees awarded would be on top of that amount.

“If the court grants Savage’s exorbitant request, Savage would recover nearly $2.6 million from WCH for a case litigated primarily between WCH and the [U.S. Department of Justice] that settled for $3.2 million,” the memorandum said.  “Savage’s motion is nothing more than a cash grab by a relator whose efforts did little to bring the case to resolution.”  WCH responded to what it said was an overblown request by Savage in March for a too-large share of fees.

According to WCH, Savage’s fee request was based on an inflated hourly rate that was inappropriate for the local area in which the litigation occurred.  It asked for too many hours and Savage was only involved in part of the litigation, which mainly was pursued by the federal government, which intervened in the suit.  “WCH spent its time and resources after intervention defending against the DOJ, not against Savage,” the memorandum said.  “The small number of hours worked by Savage’s counsel reflects only her limited role after intervention.”

In its request for fees, Savage said her efforts and those of her attorneys took years and resulted in an important settlement.  That work should be properly considered and compensated, according to court filings.  “Work performed by the attorneys securing the government’s participation and presenting Savage’s case to the court has created invaluable precedent over the viability of — and measure of damages in — False Claims Act cases predicated on false small-business certifications,” Savage’s March filing said.

Marisa Bavand, an attorney with Groff Murphy PLLC who represents WCH, said the fee request was "inflated."  "[The memorandum] also highlights the highly improper costs Savage is seeking to recover including costs associated with her personal office, undisclosed “interns,” copy paper and various other costs that are not recoverable," Bavand told Law360 in an email.

The case is United States of America et al. v. Washington Closure Hanford LLC et al., case number 2:10-cv-05051, in the U.S. District Court for the Eastern District of Washington.

Pelvic Mesh MDL Fee Committee Accused of Self-Dealing

March 29, 2019

A recent Law 360 story by Andrew Strickler, “Pelvic Mesh MDL Fee Committee Accused of Self-Dealing,reports that a group of firms that worked on cases for plaintiffs in the multidistrict litigation over pelvic mesh implants has accused fee committee members of self-dealing and obscuring the process of divvying up the case's proceeds.  In one recent filing, New Jersey-based personal injury firm Mazie Slater Katz & Freeman said the committee's recommendations on a split of the "common benefit" fees had largely ignored its role as one of the “driving forces and largest risk-takers” in the massive litigation.

The firm also said some members of the fee and cost committee had raised concerns that committee leaders — chair Henry Garrard of Blasingame Burch Garrard & Ashley PC, Joseph Rice of Motley Rice, and Clayton Clark of Clark Love & Hutson GP — had “predetermined” to give themselves the lion’s share of the fund at the expense of other firms.  Adam Slater of the Mazie Slater firm also claimed that in the “most glaring example of self-dealing,” attorney Bryan Aylstock of Aylstock Witkin Kreis & Overholtz pressured Garrard to up his firm’s award by $10 million by threatening to stop an Aylstock firm partner who sits on the committee from backing the award recommendation.

Retired Judge Daniel Stack, who was appointed by the court to oversee fee allocations, “stated that he ‘was sickened’ and ‘angered’ by this conduct, which he described as Mr. Aylstock pressuring [Garrard] when he was particularly vulnerable,” according to the filing.

The litigation accusing Boston Scientific Corp. of making defective pelvic mesh implants was first centralized in West Virginia six years ago as three MDLs covering 150 cases.  It later grew into seven MDLs with some 53,000 lawsuits.  In January, U.S. District Judge Joseph R. Goodwin in West Virginia ordered that 5 percent of all proceeds should be set aside for attorneys at 94 common benefit firms, representing some $336 million.  Stack and the fee committee issued their fee allocation recommendations to the court in mid-March.

In another March 26 filing, personal injury firm Kline & Specter PC also objected to its $3.745 million award from the common benefit fund, and said fee committee members were attempting a “mass taking.”  The Philadelphia-based firm, which has raised previous objections about the fee committee, also accused Stack of “rubber stamping” the committee’s recommended awards and severely underestimating the firm’s contributions in mesh-focused state court litigation.  “Mr. Stack’s methodology, if one exists, is severely flawed,” the firm said, calling his contribution “worthless.”

A third law firm, Ohio’s Anderson Law Offices LLC, also told the court the eight-member fee committee had authorized for their own firms 66 percent of the total pool, leaving the rest to 79 other firms.  Garrard, Rice and Clark “alone are enriching themselves with 41 [percent] of the total fund; an astonishing $143,669,635,” the firm said.  “By definition, this is self-dealing pure and simple.”

Select Income REIT Challenges Fee Request in Merger Suit

January 30, 2019

A recent Law 360 story by Reenat Sinay, “REIT Fights Investor’s Attys’ Fee Bid Merger Suit,” reports that Select Income Real Estate Investment Trust hit back at an investor’s request for “an exorbitant $350,000” in attorneys’ fees in his putative class action over a proposed merger with Government Properties REIT, arguing in New York federal court that the shareholder’s counsel is not entitled to a fee award under federal law.  Select Income said Monteverde & Associates PC, which is representing lead plaintiff Jesse Chen, cannot collect attorneys’ fees because the Private Securities Litigation Reform Act (PSLRA) bars awards in cases where the class did not receive damages or a monetary settlement, such as this one.

Chen had alleged that Select Income violated federal securities laws by not disclosing “certain immaterial minutiae” in filings related to the proposed deal.  Chen’s suit was followed by a host of copycat lawsuits in which other minor shareholders accused Select Income of failing to disclose “superfluous details” surrounding the transaction, the trust said.  Select Income reached an agreement with the other plaintiffs and released supplemental information in December about its now-completed merger with Government Properties “solely to avoid any further nuisance, distraction and expense,” it said.  After those additional disclosures, Chen withdrew his motions for preliminary injunction and expedited discovery, according to the opposition.

“Crediting this litigation conduct would encourage meritless nuisance litigation and contravene the express goals of the PSLRA,” Select Income said.  “As a threshold matter, plaintiff’s fee petition should be denied outright pursuant to the PSLRA because plaintiff has conferred no monetary benefit on the putative class.”  Chen filed suit on Nov. 9, ahead of a planned Dec. 20 shareholder vote on the merger.  He alleged that the company’s October proxy statement was misleading because it lacked details about Select Income’s financial projections, the valuation analyses performed by UBS Securities LLC and any potential conflicts of interest faced by UBS, among other information.

The trust responded by accusing Chen of merely following a recent trend of investor suits over company mergers and of presenting no real allegations of unfairness, false statements or breach of fiduciary duties on the part of its board of trustees.  Select Income also accused Monteverde of developing a pattern of filing award-seeking “strike suits” in federal court after a recent wave of criticism of such suits in various state courts.

It opposed the “extravagant” fee requested by Chen on behalf of Monteverde, arguing that the calculation does not make sense and is not warranted by the settlement result.  “Plaintiff’s fee demand is based on a 3.16 lodestar multiplier, which implies an average hourly rate of $1,683.50,” the trust said.  “This should be a nonstarter.  The boilerplate nature of plaintiff’s disclosure claims and the lack of any appreciable contingency risk in this case justify, at most, a nominal fee award.”

Select Income also contended that the terms of the settlement with the other plaintiffs, in which extra merger details were divulged in return for dismissal of all claims, provided very little actual benefit to those shareholders and therefore would not justify such a large fee award.  “Even if the PSLRA did not bar the fee petition (and it does), plaintiff has failed to establish that he pled a meritorious claim or that the supplemental disclosures provided a substantial benefit to SIR’s former shareholders, as required for an award of fees under the pre-PSLRA case law on which plaintiff extensively relies,” the trust said.

The case is Chen v. Select Income REIT et al., case number 1:18-cv-10418, in the U.S. District Court for the Southern District of New York.

Law 360 Covers NALFA CLE Program

October 25, 2018

A recent Law 360 story by Bonnie Eslinger, “Excessive Attys’ Fee Bids Can Backfire, Judges Say,” reported on a NALFA CLE program hosted today, “View From the Bench: Awarding Attorney Fees in...

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