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Category: Class Fee Objector

Judge Needs More Data in $57M Antitrust Fee Request

March 27, 2024

A recent Law 360 story by Celeste Bott, “Ill. Judge Needs More Info To OK $57M Chicken Antitrust Fee”, reports that an Illinois federal judge overseeing a sprawling antitrust litigation against broiler chicken producers said he couldn't rule on class counsel's renewed bid for a $57 million attorney fee award thrown out by the Seventh Circuit last year without more information on one of the firm's graduated fee arrangements in a similar 2015 antitrust case, which wasn't disclosed in the first go-around.

U.S. District Judge Thomas Durkin said during a remote hearing that he wanted more briefing from the both plaintiffs' firms — Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC — and from class objector John Andren as to what effect the 2015 case has had in assessing the attorney fee award in the $181 million deal for chicken buyers.

In the earlier case, Cohen Milstein took on some of the nation's largest investment banks while representing the Public School Teachers' Pension and Retirement Fund of Chicago, a sophisticated plaintiff which negotiated attorney fees ex ante, or ahead of case resolution.

In that case, the plaintiff adopted a graduated scale.  If the same scale were to be used in the chicken case, class counsel estimated they would be entitled to $44 million for the $181 million settlement, or roughly 26%.  But the counsel argued they would have negotiated a higher rate in the broiler chicken case because it doesn't involve a trillion-dollar financial market.

Andren, meanwhile, said Judge Durkin should apply a similar fee schedule agreed to by Chicago Teachers, which entail fee brackets that decline both by the size of the settlement and by the stage of settlement.

"The latter is as important as the former, because sophisticated plaintiffs realize that trials are expensive and risky," Andren said in his opposition to the firms' renewed bid for a $57 million fee award in the chicken case.  "To align the incentives of class and counsel, attorneys need to receive a larger share of the recovery for more procedurally-advanced settlements and verdicts. This cannot occur when relatively early settlements are paid at 33%."  Judge Durkin also noted Tuesday that both are large, complex antitrust cases with many defendants and astronomical damages.  "There's enough similarities where I want to hear from both sides," he said.

The law firms, however, have contended "there is an ocean" between the size of the potential recovery, and potential fee awards, in both cases, and noted that in the chicken case, they represent indirect purchasers, which increases the risk relative to the banking cases.

"Indirect purchasers face defendant attacks that direct purchasers do not, and these attacks increase the chance of waking away with nothing.  And even though they take on this additional risk, the total damages indirect purchasers can recover based on state law claims is about half of what direct purchasers can recover for their federal claims," the firms said in a renewed fee motion filed in September 2023.

In that motion, they argued the court applied the correct methodology for determining fees the first time and came to the correct conclusion in awarding just over 33% of the settlement fund.  "Not only does the original award align with other awards in this specific case, it also aligns with the best available data on negotiated rates in antitrust cases," the class counsel said.  The fee award is back for reconsideration by Judge Durkin after the Seventh Circuit held last year that he failed to adequately consider bids made by class counsel in auctions in other cases and fee awards in different circuits.

Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman and Cohen Milstein were to receive in a deal the firms had struck with Fieldale Farms Corp., Peco Foods Inc., George's Inc., Tyson Foods Inc., Pilgrim's Pride Corp. and Mar-Jac Poultry.

Private plaintiffs began suing the nation's largest broiler-chicken producers in September 2016, claiming the producers coordinated and limited chicken production to raise prices and exchanged detailed information about capacity, sales volume and other data through statistical research compiler Agri Stats Inc.

The settlements at issue in this appeal were reached with Tyson for $99 million, Pilgrim's for $75.5 million, Peco for $1.9 million, George's for $1.9 million, Fieldale for $1.7 million and Mar-Jac for $1 million.  The agreements were awarded final approval by a district judge in December 2021.

A three-judge Seventh Circuit panel complimented the lower court in August 2023 for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures.

Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees.  The Seventh Circuit panel agreed the Illinois district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.  In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting it expressed no preference as to the amount or structure of the award, just the need for further review.

Disrupting the Class: Objections to Class Action Settlements

January 17, 2024

A recent Law.com article by Adam J. Levitt, Arguing Class Actions: Objections to Class Action Settlements” reports on the role of class action objectors in the settlement process.  This article was posted with permission.  The article reads:

After years of litigating and negotiating, the parties and their counsel seek approval from the court of a class action settlement.  All parties are eager for final approval but objections start flowing in.  But final approval and ultimate disbursement of much-needed relief to class members is delayed for months, if not years, as the objectors appeal.  This scene has played out time and time again, particularly in the case of large, well-publicized class action settlements.

Federal Rule of Civil Procedure 23(e) guarantees each class member who does not opt out the right to object to a class action settlement. Fed. R. Civ. P. 23(e)(4), (5).  Objectors can sometimes play a role in helping the court or the parties evaluate a settlement.  Indeed, one court noted that objectors can add value to the class action settlement process by: “(1) transforming the fairness hearing into a truly adversarial proceeding; (2) supplying the Court with both precedent and argument to gauge the reasonableness of the settlement and lead counsel’s fee request; and (3) preventing collusion between lead plaintiff and defendants.” In re Cardinal Health, Inc. Sec. Litig., 550 F. Supp. 3d 751, 753 (S.D. Ohio 2008).  Objections may also address uniquely-situated class members with independent, unusual circumstances that may affect the adequacy of their recovery under the proposed settlement.

But all too often, objectors only object to class action settlements for personal gain, an individual (often undefined) animus toward the class action mechanism, or for purportedly policy-based or “principled” reasons that are generally ham-fisted attacks on the plaintiffs’ bar in general.  These bad-faith objectors are often referred to as “professional objectors.”  Professional objectors file meritless objections, seeking, in a small number of cases, to extract a payoff in exchange for withdrawing the objection.  Other “professional objectors” have a well-known agenda and animus against class action attorneys, filing “gotcha” appeals which do nothing to materially improve settlements, but instead prolong when settlement payments are made.  Either flavor of professional objector is bad.  The first kind puts pressure on class counsel to engage in blackmail to finalize settlements so that class members can get paid.  The second kind only helps defense counsel, who are paid hourly, while advancing the personal view of one person and holding up payments to potentially millions of others who are happy with the settlement.

Courts across the United States have noted the havoc that professional objectors can wreak on the settlement approval process.  One court held that “settlement funds of $147 million, the product of four years of hard-fought litigation, have hung in limbo for more than eight months because a person who knows he has no right to object to the settlement nonetheless refuses to withdraw his meritless Objection.” In re Polyurethane Foam Antitrust Litig., 165 F. Supp. 3d 664, 670–71 (N.D. Ohio 2015).  Another referenced professional objectors as “a pariah to the functionality of class action lawsuits.” Snell v. Allianz Life Ins. Co. of N. Am., No. 97-cv-2786, 2000 WL 133640, at *9 (D. Minn. Sep. 8, 2000).  In a particularly egregious case, an objector sent class counsel a letter stating “[s]ettle with me for $10,000 and not a penny more or a penny less to remove me and only me from the equation of the case. . . You have one week to decide.”  The judge ordered the objector to show cause “why his communications with class counsel should not be referred to the United States Attorneys Office” for possible wire or mail fraud. Junge v. Geron Corp., No. C 20-00547, 2023 WL 2940048, at *1 (N.D. Cal. Apr. 13, 2023)).  Any objector still has the ability to appeal approval of a class settlement, regardless of a district court’s findings about their motivations.  For example, a settlement that would resolve antitrust claims against Blue Cross Blue Shield of Michigan was held up for over a year before the United States Court of Appeals for the Sixth Circuit was able to address an objector’s “raft of objections, many of them undeveloped, all of them meritless.” Shane Grp., Inc. v. Blue Cross Blue Shield of Michigan, 833 F. App’x 430, 431 (6th Cir. 2021).  Even after an appellate court ruling, objectors can still file a petition for a writ of certiorari with the United States Supreme Court, and the class has to wait until the petition is rejected before any settlement relief becomes available—a process which, itself, could take yet another year.  By way of example, members of my firm helped to resolve the class action against Equifax related to its 2017 data breach in April 2019.  The settlement was upheld, but an endless litany of objectors’ spurious appeals resulted in payments being delayed until January 2022. See, e.g., In re Equifax Inc. Customer Data Sec. Breach Litig., 999 F.3d 1247 (11th Cir. 2021), cert. denied sub nom. Huang v. Spector, 142 S. Ct. 431 (2021), and cert. denied sub nom. Watkins v. Spector, 142 S. Ct. 765 (2022).

Both the plaintiff and defense class action bar agree on the need to reform the objection process.  The April 2016 Minutes from the Meeting of the Civil Rules Advisory Committee note that “there was virtually unanimous agreement that something should be done to address the problem of ‘bad’ objectors.” Civ. Rules Advisory Comm., Draft Minutes, at 13 (Apr. 14, 2016). On December 1, 2018, new language was added to the Federal Rules of Civil Procedure to address professional objectors.  Rule 23(e)(5) now requires objectors to: (1) state “with specificity the grounds for the objection;” and (2) requires court approval for “forgoing or withdrawing an objection” or “forgoing, dismissing, or abandoning an appeal from a judgement approving the proposal.” Fed. R. Civ. P. 23(e)(5).

While it appears these changes have resulted in some reduction in the number of frivolous objections, courts have continued to approve side payments to professional objectors. See Brian Fitzpatrick, Objector Blackmail Update: What Have the 2018 Amendments Done?, 89 Fordham L. Rev. 437, 437-38 (2020). More can still be done.

The difficulty in reforming the objection process is balancing the approach so that good-faith objectors are not deterred while professional objectors are sufficiently deterred.  For example, barring side payments to objectors, as proposed by Professor Brian Fitzpatrick, id., would potentially eliminate the professional objector problem, but others have voiced the concern that it would also discourage good-faith objectors from raising objections that might improve the settlement agreement.  See Robert Klonoff, Class Action Objectors: The Good, The Bad, and The Ugly, 89 Fordham L. Rev. 475, 492-93 n.99 (2020).

One oft-proposed reform is requiring objectors to post an appeals bond under Federal Rule of Appellate Procedure 7.  Requiring hefty appeals bonds for frivolous appeals could deter professional objectors but again there is a concern that this could deter good-faith objectors (i.e., those without any agenda or personal bent against class actions, but who legitimately want to make the settlement materially better, rather than engage in seriatim “gotcha” appeals) who may be pro se and have limited funds. Id. at 497.  Courts, however, can use their discretion to assess whether the objection is in good faith and determine whether an appeals bond is appropriate.

Class counsel can also request that courts conduct an expedited review of objections and appeals.  For example, if an objector files an appeal, class counsel and the defendant can file a motion for summary affirmance where “no substantial question is presented” in the objection. See id. at 501 n.160.  This would allow the appellate court to quickly dismiss a frivolous appeal without full briefing.  Both the Seventh and Ninth Circuits have recently granted summary affirmance in cases involving professional objectors. Id. at 502.  Another option is simply for the parties to move for expedited review with an accelerated briefing and oral argument schedule.

Courts can take a more active role in sanctioning and barring professional objectors from practicing in their jurisdiction.  Reform along these lines has been somewhat limited, as a judge in one federal district court cannot bar a professional objector from practicing before another court.  This practice could be aided if courts coordinated at the national level to maintain a list of problematic professional objectors, along with information about the number of times each has objected and whether the objector has been barred from practicing in any court. See id. at 499.  This list could then be easily cited by class counsel in an objection response or sanctions motion.  Such a database could also assist courts in determining whether to require an appeals bond and if expedited review is appropriate.  If managed well, it may be the most promising mechanism for deterring serial professional objectors without deterring good faith objections.

Finally, another reform that can serve as an effective check on settlement objectors is adopting provisions in settlement agreements that allow for the payment of fees and expenses before objector appeals are resolved.  While settlement objectors and other class action opponents characterize these as “quick pay” provisions, they are actually anything but—as settlements usually only come after a significant amount of time and resources are spent litigating a case without any guarantee of recovery.  Provisions for fee payments before objector appeals are resolved serve to deter professional objectors, because enabling plaintiffs’ counsel to be paid for their work in achieving a settlement removes the ransom payment tool from the objector’s extortionate toolbox.  A survey from the Western Alliance Bank Class Action Law Forum in April 2021 found that nearly two-thirds of the survey’s respondents had participated in class action settlements permitting timely payments to settling plaintiffs’ counsel.

Complex issues such as navigating objections to class action settlements require complex, balanced, and intersectional solutions.  We encourage judges and class action practitioners to use their creativity and judgment to address the continuing problem of professional objectors—as well as the problem of purported “principled objectors,” whose sole “principle” is to undermine the class action process for their own political ends—and to point out and criticize this bad behavior in the hopes of deterrence.  And, in the future, we would also encourage the Rules Committee to consider additional measures—such as requiring objectors to successfully intervene before they may file an objection, which prevents the class from being paid after an already long wait.

Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups.

‘Superb’ Juul MDL Attorneys Earn $76.5M in Attorney Fees

December 22, 2023

A recent Law 360 story by Bonnie Eslinger, “’Superb’ Juul MDL Attys Get $76.5M, But Diversity Issue Noted”, reports that a California federal judge approved an attorney fee award of $76.5 million in multidistrict litigation alleging Juul marketed its nicotine products to adolescents, saying the plaintiffs' lawyers did a "superb job," while also expressing concern about the lack of Black and Latino attorneys involved.

During a hearing in San Francisco held over Zoom, U.S. District Judge William Orrick was full of praise for the work done by co-counsel for the plaintiffs, which he said obtained an "excellent" result.  Ruling from the bench, he awarded the lawyers 30% of the $255 million settlement, $76.5 million.

Before issuing that ruling, however, Judge Orrick said he wished there had been more Black and Latino lawyers working on the MDL.  Pointing at a report put together by the plaintiffs about the demographics of their lawyers, the judge applauded the gender diversity, in particular with the four co-lead counsel he selected in 2019, which includes three women.

During the hearing, the court heard from one objector to the requested fee amount and a second against the proposed allocation of the fees.  The latter was filed by the Law Offices of Esfand Nafisi, who said lawyers who worked for the common benefit of all plaintiffs in the litigation were getting shortchanged.  "This was an extraordinary result that required a lot of hard work and a lot of hard lawyering," Nafisi said.  "We think that the fruits of those results and hard work ought to be proportionally distributed."

Judge Orrick overruled the objection, noting that Nafisi's was the lone objection to the work of the fee committee, which was assisted by a court-appointed special master.  "I agree ... I think the work that was done really was excellent, and the result obtained was also excellent," the judge said. 

The other objector, Juul purchaser Reilly Stephens, told the court that a nearly one-third cut of the settlement was too high.  His lawyer, Neville Hedley of the Hamilton Lincoln Law Institute, called the 30 percent proposed a "windfall."

Judge Orrick rejected the assertion.  "I think this was an excellent result for the class; the legal risks were significant and it took good and creative lawyering to get there," Judge Orrick said.

The fee committee noted in a Dec. 13 memo to the court that the settlement followed a little more than three years after the MDL was formed in October 2019.  "A little more than three years later, defendant Juul Labs Inc. agreed to four global settlement programs: personal injury, government entity, tribal entity, and class.  While the amounts and terms of the non-class settlements are confidential, the aim of the settlements is to resolve virtually all cases pending in either the MDL or [Judicial Council Coordination Proceedings] and to fund solutions to the youth vaping epidemic," the memo adds.

The settlements include all claims pending against Juul Labs Inc., its officers and directors, as well as its suppliers and retailers.  "These remarkable results happened at remarkable speed, particularly in the context of a global pandemic that could have, but did not, grind this litigation to a halt," the fee committee states.

In September, Judge Orrick signed off on the Juul deal, but held off on the attorney fees and expense request to consider the determinations made by the fee committee.  The approval came nearly a year after Juul announced it struck an agreement with the plaintiffs, which include adolescents, school districts and municipalities —  just as the litigation was heading to bellwether trials led by California schools.  Juul and the class later unveiled details of the proposed settlement, which Judge Orrick preliminarily approved in late January.

$185M Fee Award in $725M Meta Privacy Class Settlement

October 13, 2023

A recent Law 360 story by Lauren Berg, “Facebook Users’ Attys Get $185M In $725M Meta Privacy Deal”, reports that counsel representing a class of more than 200 million Facebook users will take home nearly $181 million in fees and $4 million in costs after a California federal judge granted final approval to the $725 million deal resolving privacy claims over the Cambridge Analytica data harvesting scandal.  U.S. District Judge Vince Chhabria put his final stamp of approval on the $725 million settlement that the preliminarily certified class reached with Meta Platforms Inc. in December.  Judge Chhabria also awarded class counsel $180.4 million in attorney fees, which equals 25% of the settlement fund, and almost $4 million in costs, according to the simultaneously filed orders.

The fee and costs take into account amounts previously awarded to class counsel as sanctions, according to the order, including in February when Meta and its attorneys at Gibson Dunn & Crutcher LLP were ordered to pay $925,000 over their "unusually egregious and persistent" misconduct delaying discovery and gaslighting of opponents in seeking to extract a lower-priced settlement.

"The court does not take lightly the concern that a fee award equaling 25% of the settlement fund can be inappropriate in cases involving a massive monetary recovery for the class," Judge Chhabria said in the order.  "In many such cases, the 25% benchmark will be too high."  "As a result, the court has viewed the proposed fee award with greater skepticism, and less deference to the 25% benchmark, than in a typical case," he added.  "That said, the court finds that the attorneys' fee award is fair and reasonable under the percentage-of-the-recovery method."

The fee amount represents a 1.99 lodestar multiplier for roughly 150,000 hours of attorney work done over the past five years, which is below average in settlements of comparable size, the order states.  The judge said the settlement is a substantial portion of the maximum amount of damages the class could have recovered after trial and an appeal.  Novel legal issues and complicated facts, as well as Meta's resources and "aggressive approach to litigation," created a risk that the class would take home nothing — a risk shouldered by Bleichmar Fonti & Auld LLP and Keller Rohrback LLP, according to the order.  "The magnitude of the settlement fund is due more to the efforts of counsel than the size of the class," Judge Chhabria said.

The parties secured preliminary approval of the $725 million deal in March, before asking for final approval in July, in which the users touted the nearly 6% claims rate as "well above claims rates approved in other large settlements."  But objectors told the court later that month that the deal was overly broad and unfairly favorable to certain Facebook users.

Class members Stewart Harris and Ryan Cino argued that the likelihood that someone's data was compromised "almost certainly depends" on how many Facebook friends they had, which means users with fewer friends are getting just as much compensation despite having faced less risk.  And Sarah Feldman argued the settlement is too small, saying the potential damages in the case could be $6.25 billion.

At a final approval hearing in September, however, Judge Chhabria lauded the high rate of class participation, saying he was "blown away" that over 17.7 million valid claims have been submitted in what may be the largest response to a U.S. class action.  The judge granted final approval to the settlement, finding that more than 93% of the target audience of 253 million Americans had received notice of the settlement.  He also overruled the settlement's objectors.

Seventh Circuit Scraps $57M Fee Award in Antitrust Case

August 30, 2023

A recent Law 360 story by Celeste Bott, “7th Circ. Scraps $57M Chicken Price-Fixing Atty Fee”, reports that the Seventh Circuit threw out a $57 million attorney fee award in a $181 million deal for chicken buyers in sprawling antitrust litigation, saying that the district court failed to consider bids made by class counsel in auctions in other cases and fee awards in different circuits.  Objector John Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC were to receive in a deal the firms had struck with Fieldale Farms, Peco Foods, George's, Tyson Foods, Pilgrim's Pride and Mar-Jac Poultry in the sprawling antitrust case.

A three-judge Seventh Circuit panel complimented the lower court for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures.  The published opinion concluded that "it was error to suggest that this court has cast doubt on the consideration of declining fee scale bids in all cases."

"In the district court's view, this court has explained that these awards do not reflect market realities and impose a perverse incentive insofar as they ensure that attorneys' opportunity cost will exceed the benefits of seeking a larger recovery, even when the client would otherwise benefit," the panel said.  "Yet, this court has never categorically rejected consideration of bids with declining fee scale award structures.  Rather, the nature of the typical costs in litigation must be assessed in determining whether counsel and plaintiffs would have bargained ex ante for such a structure."

The Seventh Circuit has observed that such a fee structure, where the amount being awarded in fees goes down as the settlement amount goes up, can present certain advantages, and the appellate court took that approach in another case — In re: Synthroid Marketing Litigation — which was a class action suit against the manufacturer of a synthetic thyroid drug.

"Fees do not always decline for securing a larger recovery, and in those instances, counsel will have an incentive to seek more," the panel said.  "Accordingly, the appropriateness of a declining fee scale award structure may depend on the particulars of the case.  It was an abuse of discretion to rule that bids with declining fee structures should categorically be given little weight in assessing fees."

Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees.  The appellate panel agreed that the district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.

"It is true that this court has rejected the application of a mega-fund rule.  Yet, continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel's legal services and the bargain they may have struck," the panel said.  "The district court should have considered where class counsel's economic behavior falls on this spectrum and assigned appropriate weight to fees awarded in out-of-circuit litigation."

In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting that it expressed no preference as to the amount or structure of the award, just the need for further review.