Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Class Incentive Awards

$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.

Judge to Award $1.5M in Fees in Walgreens Wage Settlement

November 26, 2020

A recent Law 360 story by Lauren Berg, “Calif. Walgreens Workers Bag $4.5M Wage Deal,” reports that Walgreens and a class of workers have received a California federal judge's approval for their $4.5 million settlement to resolve claims that the pharmacy chain broke Golden State labor law by not paying all wages to employees at its distribution centers.  U.S. District Judge William B. Shubb granted preliminary approval to the class action settlement that will see about 2,600 workers split $2.8 million, finding that the deal is fair and gives the workers a good recovery that might have been at risk had the case gone to trial.

Lucas Mejia, who worked as an hourly stocker for about seven years at a Walgreens distribution center in California, launched the class action in November 2018 in the Superior Court for the County of Yolo, alleging that the company failed to pay employees for all of the compensable time they worked.  Mejia said Walgreens rounded down employees' hours on their timecards, required employees to pass through security checks before and after their shift without paying them for that time and didn't pay premium wages to workers who were denied meal breaks.

The suit also included a claim for civil penalties under the Private Attorneys General Act based on Walgreens' alleged violations of California labor law.  The case was eventually removed to federal court in Sacramento.  In December, the parties started talking with a mediator, which produced the current settlement.

In exchange for releasing all of the claims, Walgreens has agreed to pay up to $4.5 million to create a common fund, from which $2.8 million will be distributed to the estimated 2,648 class members, according to the order filed.  Each class member who does not opt out is estimated to receive about $1,200, the judge noted.

Also out of the pot, $1.5 million, or 33% of the fund, will be set aside for attorney fees, while $150,000 will go to pay PAGA penalties and $7,500 will be used as an incentive award for Mejia.  Another $50,000 will be used to pay litigation costs incurred by class counsel and settlement administration costs, according to the order.  Judge Shubb gave preliminary approval to the deal, finding that it is in the best interest of the class.

While Mejia's counsel said the labor claims could be worth up to $20.2 million and the PAGA claim up to $16 million, they said Walgreens had legitimate defenses that risked reducing the amount Mejia and the class could recover at trial, according to the order.  With that in mind, the settlement is a strong result for the class, the attorneys said, with the $4.5 million representing 22% of the potential damages.

The judge also noted that, while the deal sets aside 33% of the fund for attorney fees, Mejia's counsel said they will seek 25% of the fund in a separate motion for fees.  "The court will defer consideration of the reasonableness of counsel's fees until the fee motion is filed," the judge wrote.  "Class counsel is cautioned that the reasons for the attorney's fees should be explained further in that motion."

Article: Unusual Settlement Structure Leads to Fee Award Almost Double Judgment

November 1, 2020

A recent New York Law Journal article by Thomas E.L. Dewey, “Unusual Settlement Structure Leads to Approval of Fee Award Nearly Double the Payout,” reports on a recent New York class action were the attorney fee award exceeded the settlement amount.  This article was posted with permission.  The article reads:

Public policy generally prohibits class action settlements in which the attorney fee awards dwarf the amount awarded to the class.  But as a recent case in the U.S. District Court for the Southern District of New York illustrates, such a settlement may be approved if it is structured so that class counsel’s award does not come at the class’s expense.

In Hart v. BHH, No. 15-cv-4804, 2020 WL 5645984, at *2 (S.D.N.Y. Sept. 22, 2020), Judge Pauley approved over $4.6 million in fees and expenses for class counsel, even though the total payments to class members were expected to top out at less than $2.5 million.  However, the court balked at the inclusion of a “quick-pay” provision in an earlier draft of the settlement, which would have allowed class counsel to collect its fees before the class members were paid, and did not allow the parties to submit attorney fees to a separate arbitration.

Background

The two named plaintiffs filed suit in in June 2015, alleging that “ultrasonic pest repeller” devices they had purchased from BHH LLC (branded Bell + Howell) were “ineffective and worthless.”  The complaint included claims under the federal Magnuson-Moss Warranty Act, multiple California consumer protection laws, and the implied warranty of merchantability. In May 2016, the court dismissed the federal statutory claim, but allowed the state law claims to proceed. An amended complaint then added a claim for fraud, citing representations made on the devices’ packaging and via the Home Shopping Network that they would rid homes of “ants, spiders, mice, roaches, rats and other pests.”

In July 2017, the court certified three classes of plaintiffs who had purchased the devices—a nationwide fraud class, a California-only class, and a multi-state breach of warranty class.  Each party then offered experts on the efficacy of the devices.  Judge Pauley began his Sept. 5, 2018, opinion on summary judgment with images from one of the expert reports, noting, “As the photographs show, mice can apparently relax comfortably under a Repeller and even appear to be so drawn in by its siren song that one would scale a wall just to snooze on it.”  Having thus found a disputed issue of fact regarding the efficacy of the devices, the court set jury trial for Sept. 9, 2019.  On July 16, 2019, the parties informed the court that they had reached a settlement, and on Sept. 3, 2019, the plaintiffs moved for preliminary approval of the agreement.

‘Quick-Pay’ Attorney Fees Provision Scuttles Preliminary Approval

The most notable feature of the proposed agreement in Hart was its so-called “quick-pay” provision, under which the plaintiff’s attorneys would be paid their fees within 10 days of final settlement approval.  Plaintiff contended the provision was necessary to discourage “the filing of baseless objections (and appeals), which can delay payment of class relief.”  Analyzing that provision in a July 17, 2020, opinion, the court wrote that it “strains credulity” that such a measure would deter baseless objections.  The court assured the litigants that such objections could be better discouraged by the threat of Rule 11 sanctions.

The court also found that, having reached a proposed agreement, the two parties had little incentive to pour any more resources into the case if valid objectors came forward.  The court noted that “money is the best way to keep lawyers engaged.”

Although plaintiffs’ counsel cited seven previous SDNY orders in which similar provisions had been granted preliminary approval, the court pointed out that none of those previous orders contained “an iota of analysis on ‘quick-pay’ provisions.”  Thus, in the first detailed analysis of such a provision in the Southern District, the court held that paying counsel “prior to compensating the class conflicts with Rule 23(e)’s mandate for fairness, reasonableness, and adequacy.”

Also as part of the preliminary agreement, the parties proposed to engage an arbitrator to determine the amount of attorney fees to be awarded to plaintiffs’ counsel.  The court ruled that such an arrangement was contrary to law, as it would usurp the court’s discretion and eviscerate its duty to “act as a fiduciary who must serve as a guardian of the rights of absent class members.”

The court thus denied preliminary approval of the settlement.  The plaintiffs quickly submitted a revised proposed settlement which no longer included the quick-pay provision or arbitration of attorney fees.  The court reviewed the revised settlement on Feb. 12, 2020, and granted preliminary approval, setting a hearing on final approval for September 2020.

Refunds for Class Members Found Fair

In its Sept. 22, 2020, opinion granting final approval of the settlement, the court devoted significant consideration to the structure of the awards to the class, which were styled as refunds for purchases of repeller devices.  By providing proof of purchase that included the price paid for each unit, a class member could receive a full refund for up to six units.  Without proof of the price paid, the amount of each refund was set at $15, which the parties chose as the best estimate of the purchase price.  Finally, class members who could not provide any proof of purchase could still receive $15 each for up to two units purchased.

As of August 24, class members had filed 82,503 claims for payment, and a total payout of $2,118,505 had been approved by the class administrator.  And crucially, no objections to the settlement had been received from notified class members.  The administrator expected a final payout between $2.1 million and $2.5 million.  BHH had agreed in the settlement to a total potential liability of over $57 million.

In evaluating the fairness of the settlement, the court noted that if the case had proceeded to a jury trial, class members might have received considerably less than full refunds—especially because plaintiffs “faced substantial risk in proving loss causation.”  The court found the settlement to be procedurally and substantively fair, and moved on to considering the fees to be awarded to class counsel.

Attorney Fees Exceed Amount Awarded to Class Members

The agreement allowed class counsel to seek up to $6.5 million in attorney fees and expenses—an amount almost triple the expected payout to class members.  That would typically pose a problem for a reviewing judge, who must “carefully scrutinize lead counsel’s application for attorneys’ fees to ensure that the interests of the class members are not subordinated to the interests of … class counsel.” Hart at 10, citing Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1078 (2d Cir. 1995).  But as the court explained, “This case provides one unique feature absent from most class-action settlements: rather than the class members sharing from a settlement pool, the recovery to the class will be claims based.  As a result, attorneys’ fees will not reduce the class recovery.” Hart at 10.

For such claim-based settlements, the court explained that its “fiduciary role in overseeing the award is greatly reduced, because there is no conflict of interest between attorneys and class members.” Id. citing McBean v. City of New York, 233 F.R.D. 377, 392 (S.D.N.Y.2006).  The opinion also noted that the attorney fees were negotiated after the parties had reached an agreement on class recovery, which “tends to eliminate any danger of the amount of attorneys’ fees affecting the amount of the class recovery.” Hart at 11, citing In re Sony SXRD Rear Projection Television Class Action Litig., 2008 WL 1956267, at *15 (S.D.N.Y. May 1, 2008).

Performing the Second Circuit’s preferred fee analysis from Goldberger v. Integrated Res., as checked by the lodestar method, the court awarded $3,976,762.50 in legal fees and $700,227.57 in litigation expenses.  It rejected plaintiffs’ argument that unclaimed funds should be used as the denominator to calculate the fee percentage, since in this instance, the unclaimed funds would revert to BHH instead of being distributed via cy pres, and therefore the unclaimed funds did not provide an actual benefit to the class.  That was significant, because by plaintiffs’ calculation, nearly 90 percent of the agreed $57 million settlement was expected to go undistributed.

Even so, the final fee award was substantially greater than the total award to the class.  The court considered this carefully. “On one hand, allowing lawyers’ recovery to dwarf the settlement is against public policy,” the court wrote.  Hart at 21. “On the other hand, Class Counsel should be rewarded for concentrating their time, effort, and resources in successfully representing the class on a contingent basis.  And, most importantly, the fee will be paid directly by Defendants and will not come at the class’ expense.”  The court ordered that the attorney fees may be paid when at least 75% of the settlement has been distributed.  The court also awarded each class representative a $5,000 incentive award.

Practice Tips

The Hart case is as a helpful illustration of the restrictions on attorney fee provisions in class action settlements.  Though courts will be skeptical of attorney fee provisions that approach or exceed the total benefit to class members, such skepticism may be overcome if the settlement is structured so that increasing class counsel’s payout does not decrease the benefit to the class.  Additionally, the Hart court’s reasoned disapproval of a quick-pay attorney fee provision may portend greater scrutiny of such provisions in future cases in the Southern District and elsewhere.

Thomas E.L. Dewey is a partner at Dewey Pegno & Kramarsky.  L. Lars Hulsebus, an associate at the firm, assisted in the preparation of the article.

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.

Class Counsel Earn $3M in Fees in $9M JPMorgan ERISA Deal

October 14, 2020

A recent Law 360 story by Max Kutner, “Workers’ Atty Get $3M in Fees From $9M JPMorgan Deal,” reports that a New York federal judge signed off on a $3 million payout for lawyers representing a huge class of workers who alleged JPMorgan Chase Bank mismanaged their retirement savings, giving final approval to a $9 million settlement.  U.S. District Judge Jesse M. Furman said in his settlement approval order that the sum was sufficient, given the likely high cost of continuing the years-long Employee Retirement Income Security Act litigation from about 250,000 current and former employees.

"The amount of the monetary relief provided to the class by the settlement, nine million dollars ($9,000,000.00), is fair, reasonable, and adequate, taking into account the costs, risks, and delay of trial and appeal," the order said.  Furman also approved of the workers' requests for attorney fees, reimbursement of expenses and service awards.  The nearly $3 million amount, which Furman called "fair, reasonable and appropriate," goes to attorneys from Kessler Topaz Meltzer & Check LLP, Nichols Kaster PLLP, Robbins Geller Rudman & Dowd LLP, Keller Rohrback LLP, Levi & Korsinsky LLP and Capozzi Adler PC.

The settlement also includes $735,000 for litigation expenses and $10,000 service awards to each of the four named plaintiffs.  The workers had sued JPMorgan Chase Bank and dozens of its entities and executives affiliated with the bank's 401(k) plan in January 2017.  They claimed that the plan administrators included pricey investment options because those options were managed by bank affiliates, even as cheaper options were available.  The judge certified the class action in June 2019, and the parties announced in April that they had reached a settlement.  In August, as they waited on final settlement approval, the workers requested the attorney fees.