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Category: Class Fee Objector

$1.9M Fee Award in $7.5M Google Data Breach Settlement

January 8, 2021

A recent Law 360 story by Dorothy Atkins, “Google’s $7.8M Data Breach Deal OK’d. Attys Get $1.8M” reports that a California federal judge overruled 761 objections and approved Google's $7.5 million deal resolving a proposed class action over a years-long data breach that exposed millions of accounts on the now-defunct Google+ social media platform, with class counsel getting $1.875 million in fees and $69,000 in costs.

During a hearing held via Zoom, U.S. District Judge Edward Davila approved the fee request, which represents 25% of the total settlement fund, along with a $1,500 incentive award to each class representative, but he asked counsel to give a breakdown of their lodestar.  Class counsel, John A. Yanchunis of Morgan & Morgan, said their lodestar estimate is roughly $995,000, making the requested fees subject to a 1.88 multiplier.

Before approving the deal, Judge Davila noted there have been a little less than 50,000 opt-outs and 761 objectors, with a total pool of about 1.8 million individuals who opted in who will receive an estimated $3 each.  The judge overruled the objections to the settlement and notice provisions, saying "the potential for the breach was large.  It was great.  It was significant," but the settlement reached was an arm's-length resolution that was fair, reasonable and adequate.  The judge didn't address any of the objections further.  Two objectors appeared during the hearing, but submitted their objections on their papers.

The complaint alleges Google learned of the initial breach in March 2018, but made the "calculated decision" not to tell its users until months later.  It also alleges that the number of those impacted is likely "much higher" than the 500,000 users Google cited in its announcement, pointing to the fact the API logs are only built to keep historical data for two weeks.  The suit, which claims the users' data is highly valuable on the dark web, accused Google and Alphabet of unfair and unlawful business practices, negligence, invasion of privacy, and violating California's Customer Records Act.

Full Eleventh Circuit Urged to Buck Ban on Class Incentive Awards

October 28, 2020

A recent Law 360 story by Allison Grande, “Full 11th Circ. Urged to Buck Ban on Class Incentive Awards,” reports that the full Eleventh Circuit is being pressed to review a panel decision in a dispute over a $1.4 million robocall settlement that found class representatives can't recover routine incentive awards, with the lead plaintiff arguing that this categorical ban would hobble class action litigation and an objector to the deal taking issue with the calculation of class counsel's fees.

Lead plaintiff Charles Johnson and objector Jenna Dickenson in separate petitions filed seized on differing rationales in attempting to convince the appellate court to reconsider a panel ruling handed down last month that directed the lower court to revisit its approval of the contested class action settlement in a dispute accusing medical debt collector NPAS Solutions LLC of violating the Telephone Consumer Protection Act.

In a divided decision, the panel concluded that a pair of U.S. Supreme Court rulings from the 1880s prohibited Johnson from being awarded $6,000 for his role in the litigation and that the district court had failed to provide a sufficient explanation for signing off on the deal or class counsel's request to recover 30% of the settlement fund.

Johnson argued that the panel's clearly incorrect decision to categorically prohibit the common practice of awarding incentive payments to named plaintiffs established a precedent that not only conflicted with every other circuit but also upended long-standing class action practice.

"No court in the last century has ever held that incentive awards are categorically impermissible," Johnson argued.  "That incentive awards are a universally accepted practice provides ample reason for the full court to consider whether such an established aspect of class-action settlements should be held per se unlawful."

Contending that the panel's decision "effects a sea change in class action practice," Johnson stressed the importance of incentive awards in encouraging plaintiffs to step forward to lead lawsuits that enable redress for widespread harm that's "inflicted in small increments" on a large group of individuals that aren't willing or able to bring claims separately.

 "If few plaintiffs would suffer litigation for the hope of a tiny recovery, fewer still would do so for the same possible award alongside the added burdens — including, potentially, paying a defendant's costs — and fiduciary responsibilities that attend litigating on behalf of a class," Johnson argued.  "Incentive payments help attract class representatives willing to shoulder those burdens."

Johnson urged the full Eleventh Circuit to order the parties to provide "full, targeted briefing" on this "vital issue," noting that the parties have barely addressed the topic to date since courts have repeatedly approved incentive awards without incident.  He also argued that the more than century-old Supreme Court cases on which the panel relied to buck this trend "provide no authority" for its novel conclusion.  "The panel majority broke from all other circuits and remade the landscape of class-action litigation on the premise that Supreme Court precedent so required," Johnson added.  "That precedent — if it applies — requires nothing of the sort."

Dickenson, who was the lone objector to the TCPA deal and appealed its approval to the Eleventh Circuit, asserted in her own brief that the full appellate should take a look at the case to clarify the appropriate standard for calculating attorney fees in such disputes.  While the panel held that the lower court hadn't provided enough information about why the fee request was reasonable, it backed the method of calculating and awarding fees as a percentage of the settlement fund, concluding that an Eleventh Circuit case from 1991 that endorsed this practice was still "good law."

Dickenson argued that this holding conflicts with Supreme Court precedent, most notably its 2010 holding in Perdue v. Kenny A. ex rel. Winn, which "directly repudiated" the use of the factors relied on by the Eleventh Circuit and directed lower courts "to recognize a strong presumption that attorneys' unenhanced lodestars — i.e., their hourly rates times the hours expended — provide them a reasonable fee that is sufficient both to attract capable counsel and to equitably compensate them."

Therefore, it's imperative for the full Eleventh Circuit to step in to clearly announce whether lower courts should award class counsel fees based on attorneys' actual time and billings or as a percentage of the common class settlement fund, according to Dickenson.  "Attorney's fees are a critical issue in class-action litigation, and uniform rules governing their calculation are a matter of overriding national importance," Dickenson argued.

Article: Seventh Circuit Ruling Should Deter Class Objector Side Deals

August 11, 2020

A recent Law 360 article by Michael McTigue, Meredith Slawe, and Max Kaplan of Cozen O’Connor, “7th Circ. Ruling Should Deter Class Objector Side Deals,” report on a recent Seventh Circuit ruling on class action fee objectors.  This article was posted with permission.  The article reads:

On Aug. 6, the U.S. Court of Appeals for the Seventh Circuit issued an opinion addressing exploitation of the class action settlement process by individual objectors.  The first sentence of U.S. Circuit Judge David F. Hamilton's opinion in Pearson v. Target Corp. frames the issue: "We address here a recurring problem in class-action litigation known colloquially as 'objector blackmail.'"

This practice, in which objectors threaten to delay and unravel negotiated class resolutions absent payments to them, has occurred with greater frequency over the past few years.  Concerns with coercive objector side deals even prompted a change to the Federal Rules of Civil Procedure in 2018.

Background

The underlying action, which challenged supplement labeling practices, was litigated over several years.  In March 2013, the parties reached a class settlement, which was approved by the U.S. District Court for the Northern District of Illinois over concerns raised by "serial objector" and activist Theodore Frank, among others.

Frank appealed and the Seventh Circuit reversed the district court's final approval order, finding the settlement plagued by "fatal weaknesses," amounting to a "selfish deal" between class counsel and defendants that "disserve[d] the class."  Frank was subsequently awarded $180,000 in attorney fees.

The parties renegotiated the settlement in April 2015, and proposed the creation of a $7.5 million common fund accompanied by permanent injunctive relief.  The district court approved the revised settlement over the objections of three individuals.

These objectors submitted brief statements to the district court, "light on citations to law and fact."  One submission contained irrelevant assertions regarding the defendant's failure to acknowledge liability under the Telephone Consumer Protection Act, a statute not at issue in the litigation.

The objectors challenged the district court's final approval order, but abandoned their appeals prior to briefing and after negotiating side payments with the settling parties.  On May 19, 2017, Frank moved to reopen the case and disgorge the funds paid to those objectors because, "with no benefit to the absent class," the objectors "received unjust payments for appeals that plaintiffs called 'vexatious' and 'bad faith.'”

The district court denied Frank's motion for lack of jurisdiction.  He again appealed, and the Seventh Circuit again reversed, finding that the district court had jurisdiction over Frank's motion.

On remand, the parties disclosed that they had paid a total of $130,000 to the objectors in exchange for the dismissal of their appeals.  The district court rejected Frank's motion for disgorgement of those funds, concluding that the objectors' actions: (1) did not constitute criminal blackmail and (2) otherwise did not harm the class.  Frank appealed a third time, and the Seventh Circuit reversed once again.

Seventh Circuit Emphasizes the Fiduciary Role of Objectors

The Seventh Circuit ruled that equity required the disgorgement of all funds paid to these objectors.  The court characterized the objectors' conduct as "[f]alsely flying the class's colors," to extract substantial monetary benefits for themselves with no benefit to the class.  Specifically, the court held that "settling an objection that asserts the class's rights in return for a private payment to the objector is inequitable and that disgorgement is the most appropriate remedy."

In reaching this conclusion, the court primarily relied on a 1945 U.S. Supreme Court case — Young v. Higbee Co.  In Young, the Supreme Court held an accounting of profits was appropriate where a bankrupt entity purchased preferred stock from two of its shareholders at a premium in exchange for the shareholders abandoning their appeal from approval of the rehabilitation plan.

By appealing as they did, the Supreme Court reasoned, these shareholders purported to act on behalf of all preferred shareholders, to reshape the company's rehabilitation to better their common fate.  "This control of the common rights of all the preferred stockholders imposed on [appellants] a duty fairly to represent those common rights," and it was therefore a breach of this duty to "trade in the rights of others for their own aggrandizement."  Any profits individually gained thus belonged in equity to benefit all preferred shareholders.

The Seventh Circuit characterized the payments to the three objectors in Pearson as "not meaningfully different" from the transactions in Young.  These objectors, like those in Young, raised alleged settlement defects that purportedly injured all class members, and if corrected would benefit all class members; indeed, it was this protection of the common interest that enabled the objectors to bring their appeals under Federal Rule of Civil Procedure 23(e)(5).

Thus, the court reasoned, as an objector "temporarily takes 'control of the common rights of all' the class members" by appealing the overruling of an objection, the objector thereby assumes a "limited representative or fiduciary duty ... 'fairly to represent those common rights.'"  Here, however, while the objectors "were ... 'bound to protect' the common interests of the class," they "'sacrifice[d] those interests' to their own advantage by selling their appeals without benefit to the class."

The Seventh Circuit made clear that objectors may properly seek a personal benefit, whether in the form of attorney fees or incentive payments, so long as such benefits are earned in bettering the class as a whole.  The Pearson objectors, however, abandoned any attempt to better the class — which received nothing as a result of their efforts — for what was in effect a premium worth almost 100 times what other class members could receive.

As the objectors would have received such a benefit had they succeeded in their appeals, the court viewed the abandonment thereof as evidence the objectors either "sold off [a] genuine chance of improving the entire class's recovery" or otherwise asserted meritless objections to leverage the class interest.  In either case, the funds obtained should rest with the class and not with the individual objectors.

Given the posture of the settlement, the Seventh Circuit found the most appropriate manner to distribute the ill-gotten gains was to divert the funds to the organization designated by the parties as the cy pres recipient in the settlement agreement.

2018 Amendment to Rule 23(e)(5)

The Pearson objectors predate, and were not subject to, the 2018 amendment to Federal Rule of Civil Procedure 23(e)(5).  This amendment addressed the improper use of "objections to obtain benefits for [objectors] rather than assisting in the settlement-review."

To that end, Rule 23(e)(5) now requires objectors to "state with specificity the grounds for the objection" and prohibits an objector from "forgoing, dismissing, or abandoning an appeal" in exchange for "payment or other consideration" without court approval.  This change has already proved somewhat effective.

The Seventh Circuit noted that neither its decision nor the 2018 amendment should deter good faith objectors who are compensated for successfully improving the position of the class.

Takeaways

The Seventh Circuit's opinion sends a powerful message to objectors who seek to take advantage of the class action settlement process for personal gain, and should serve to deter such efforts.  In this case, the improper activities took the form of frivolous appeals that threatened to delay and disrupt the distribution of settlement benefits to class members and burden the court by multiplying proceedings.

This happens all too often at the expense of all parties, except for the objectors.  When a fair settlement is reached and approved, compelling interests support having the proceeds be distributed to the class, which also enables the parties to gain finality.

Further, courts should not be saddled with contrived appeals brought for the sole purpose of benefiting individuals who have no genuine interest in securing additional relief for or otherwise elevating the position of the class as a whole.

The court's opinion in Pearson, along with the 2018 amendment to Rule 23(e)(5), should be instructive for parties that are engaged in the settlement approval process.  The parties should consider objectors' motives and actions prior to negotiating separately with them.  Objectors should be mindful of their duties to class members.

Finally, courts should be vigilant in addressing illegitimate objector activity and may wish to consult the frank discussion of what it means for objectors to represent the interests of a class in this opinion.  Collectively, all parties can combat abuse in connection with class action settlements.

This ruling also highlights increasing awareness in the courts of exploitive conduct in the context of modern class action practice. Indeed, the cottage industry of presuit demand letters — often invisible to federal court judges — threatening class action litigation absent quick stealth payouts bears similarity to the so-called objector blackmail portrayed by the Seventh Circuit.

Additionally, mass litigation tactics by serial plaintiffs and their counsel have prompted some judges to engage in diligence and hold parties and their counsel accountable.  As putative class actions continue to flood the court dockets, judicial awareness of incidents of abuse and self-serving conduct become of heightened importance.

Michael W. McTigue Jr. is a partner and co-chair of the class actions practice at Cozen O'Connor.  Meredith C. Slawe is a partner and co-chair of the class actions practice at the firm.  Max E. Kaplan is an associate at the firm

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA