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Category: Contingency Fees / POF

Defense Claims ‘Overreaching’ Fee Request in ERISA Case

December 5, 2018

A recent Law 360 story by Danielle Nichole Smith, “Hospital Plan Rips ‘Overreaching’ $2.4M Fee Bid in ERISA Suit,” reports that the retirement plan for a Montana hospital told a federal judge that a request for $2.4 million in attorneys’ fees was “grossly excessive” after a $293,946 settlement resolving claims that the plan flouted the Employee Retirement Income Security Act.  The Retirement Plan for Employees of Northern Montana Hospital said in its objection that the $2.4 million fee request was “plainly overreaching” and needed to be reduced, noting that the amount was more than eight times the amount of monetary recovery.  And the proposed class counsel’s lodestar was $2 million more than that of the defendants’ attorneys, the plan said.

“The plaintiff’s attorneys’ fee request is grossly excessive by any measure,” the plan said.  “The fee request exemplifies the problem that led the Supreme Court to mandate that attorneys’ fee awards remain ‘reasonable in relation to the results obtained.’”

The settlement in the case provided $125,776 to named plaintiff Dr. Joel Cleary for retirement benefits he was wrongly denied and $168,170 to a proposed class of 175 plan participants whose benefits had been miscalculated, according to the plan’s objection.  The settlement also provides injunctive relief, requiring the plan to comply with ERISA statutes governing benefit determination and claims procedure, the plan said.  The plan contended, however, that the injunctive measures didn’t provide any meaningful relief or benefit since the plan had already complied with ERISA.  So the injunctive relief didn’t have any monetary value to consider when calculating attorneys’ fees, the plan said.

The Keller Rohrback LLP attorneys representing the proposed class had asked for the fees in November after the settlement with the plan and administrative committee was reached.  In support of their motion, the attorneys described their experience with ERISA cases and the work they performed in the suit.  The attorneys said they devoted a significant amount of time and effort to the case and that the rates they charged were what they typically billed clients whose cases weren’t handled on a contingency basis and had been approved in complex ERISA cases.  The attorneys also requested $75,086 in costs.

In the fee request, the attorneys also noted that the time they devoted to the suit kept them from working on other cases or taking on other representations.  The attorneys said they spent nearly 3,600 hours on the case as of October.  But the plan said that the attorneys’ lodestar amount was unreasonable, arguing that the reasonable hourly rate in Montana for ERISA cases was a lot less than what the attorneys requested.  The defendants’ attorneys only billed a total of $270,500 through October, the plan said.

If the court chose to use the lodestar method, the class’s attorneys’ lodestar had to be adjusted downward considering the results obtained, the plan said.  Additionally, the case didn’t present novel or difficult questions since the defendants didn’t dispute that Cleary was owed benefits or that the proposed class’s benefits had been miscalculated, the plan said.

The plan told the court that the percentage-of-recovery method was the best way to calculate the fees and that the $293,946 should be treated as a “constructive common fund” for determining such a percentage.  Though 25 percent was the “benchmark” for attorneys’ fees in the Ninth Circuit, the plan said it wouldn’t object to a 50 to 75 percent award since the recovery was so modest.

The case is Cleary v. Retirement Plan for Employees of Northern Montana Hospital et al., case number 4:16-cv-00061, in the U.S. District Court for the District of Montana.

Some Oppose 5 Percent Attorney Fee Set-Aside in Pelvic Mesh MDL

November 30, 2018

A recent Legal Intelligencer story by Max Mitchell, “Pelvic Mesh Trial Lawyer Slams MDL Settlements as ‘Puny’ Opposing Leadership’s Fee Petition,” reports that as the pelvic mesh MDL has begun to settle, attorneys on the leadership committee have asked the federal court overseeing the litigation’s massive inventory to set aside 5 percent of the awards for common benefit fees and expenses.  With the settlements already topping $7 billion, that means more than $360 million is set to distributed among the firms.

However, at least two firms are opposing the request, with one saying the hold-back amount is far too much.  Attorneys with Philadelphia-based Kline & Specter filed a response opposing the 5 percent set-aside request.  The highly critical filing contends that the federal cases have settled for “puny” amounts compared to the multimillion-dollar verdicts juries have been willing to award both in state and federal courts.  “The leaders in this litigation did the worst possible thing to the detriment of all plaintiff mesh victims and their attorneys: they settled their inventories way too cheaply, making it difficult for other attorneys to settle their cases reasonably,” attorney Shanin Specter said in the filing.

According to the filing, the average award for the tens of thousands of cases that have settled is about $40,000, while the average award for the cases that have gone to trial is about $9.8 million.  Specter’s firm took a leading role in several pelvic mesh cases that were tried in Philadelphia state court, including winning a $57 million verdict last year.  In the filing, Specter suggests that the set-aside amount be halved from the leadership committee’s request.

The firm’s filing also faults the leadership team with taking too many cases to effectively handle, saying the “discounted settlements were driven by the sheer enormity of the number of claims” and the “inability” of the lawyers to fully work up their inventories.  “It’s been an open secret in this litigation that the ‘leadership’ took too many cases to effectively litigate themselves.  By doing so and by not associating other lawyers to help discover and try their cases, they were forced to settle,” Specter said in the filing.  “This wasn’t bad for ‘leadership’ because a large number of small fees on small settlements is still a large number.  But it mistreated the women they represent. And it mistreated the other plaintiff’s counsel who were stuck behind this low bar set by the leadership.”

Andrus Wagstaff in Colorado also filed a notice of intent to oppose the petition for the 5 percent set aside.  The notice did not outline the crux of the firm’s objection, but the notice did say that it hired Blank Rome attorney Andrew Williamson to represent the firm in the dispute.  Georgia attorney Henry Garrard of Blasingame, Burch, Garrard & Ashley, who is chairman of the fee and compensation committee, said he plans to file a response, and declined to comment further, other than saying, “There is a lot to the story that’s not in their objection.”

The pelvic mesh MDL consists of seven separate consolidated litigations against some of the largest medical product manufacturers in the country.  According to federal records, the litigation topped out at nearly 107,000 claims, and, as of Nov. 15, the seven consolidated litigations have an inventory of 37,299.

On Nov. 12, Garrard filed the petition requesting the 5 percent award.  According to the petition, 94 law firms submitted more than 900,000 hours of time, and the committee has recognized nearly 680,000 of those hours as contributing toward the litigation’s common benefit.  The petition also noted that the current value of the settlements is roughly $7.25 billion, and the total amount for settlements is expected to be around $11 billion.  With the requested 5 percent set aside, that would make the total amount expected for the common benefit fund to reach $550 million.

The response from Kline & Specter, however, said the MDL leadership failed to secure a global settlement, and that the petition largely ignores the work done in the state court litigation that benefited the federal MDL, such as obtaining the verdicts, which, the filing said, weakened the defendants’ position and drove settlements.  “Given the paltry recoveries for the injured women in this successful-in-the-courtroom, surrender-at-the-settlement-table mass tort, it is more equitable for the common benefit fee to be half of the requested amount and to remit their proportionate share of these saved funds to the injured women,” Specter said in the filing.

Special Fee Master Recommends $500M in Fees in Syngenta MDL

November 27, 2018

A recent Law.com story by Amanda Bronstad, “Syngenta Special Master Rejects $150M in Fees for Texas Attorney Mikal Watts,” reports that a special master reviewing fee requests from hundreds of law firms in the $1.51 billion settlement with Syngenta has recommended that lead counsel get half the estimated $500 million in legal fees but rejected the idea that attorney Mikal Watts, who represents 60,000 farmers in the deal, should get $150 million.

U.S. District Judge John Lungstrum on Nov. 15 approved the class action settlement, which resolved lawsuits alleging Syngenta sold genetically modified corn seed that China refused to import, causing about 600,000 farmers and other producers to lose billions of dollars.  Lungstrum oversaw the multidistrict litigation coordinated in Kansas federal court, but many other cases were pending in federal and state courts in Minnesota and Illinois.  Some were class actions, while others were individual lawsuits.  That led to a big battle over attorney fees. On Nov. 21, special master Ellen Reisman issued a report and recommendation on how to allocate fees to about 400 law firms.

“Here, the settlement agreement recognizes that the successful result in this case was obtained through the work of multiple counsel in multiple jurisdictions who collectively applied litigation pressure in multiple forums that ultimately persuaded Syngenta to resolve the various litigations through a nationwide class action settlement,” wrote Reisman, of Reisman Karron Greene in Washington, D.C. “How to allocate the attorneys’ fee award among plaintiffs’ counsel is less straightforward.”

Objections to the report are due Dec. 5, and a hearing is set for Dec. 17.  Reisman’s report largely reflects a suggestion from lead counsel in the multidistrict litigation in Kansas on how to divvy up the fees, much of which was based on a fee sharing agreement in the settlement.  Although other lawyers played key roles in reaching the settlement, 50 percent of the fees should go to 95 law firms in the multidistrict litigation in Kansas, Riesman wrote.  That included lead counsel Patrick Stueve of Kansas City, Missouri-based Stueve Siegel Hanson; Don Downing of Gray, Ritter & Graham in St. Louis; Scott Powell of Hare, Wynn, Newell & Newton in Birmingham, Alabama; and William Chaney of Dallas-based Gray Reed & McGraw.

Reisman particularly praised the work of a lead settlement counsel Chris Seeger of New York’s Seeger Weiss.  “Mr. Seeger was the clear leader of the settlement effort on the plaintiffs’ side, and without his efforts a settlement would not have been achieved,” she wrote.  She rejected arguments from Watts, of Watts Guerra in San Antonio, that he and a group of 224 associated law firms, representing primarily individual farmers with cases in Minnesota state court, should get one third of the pie.

The dispute mirrors similar fee fights that have erupted in mass torts between plaintiffs attorneys appointed to represent the class and those who have brought individual suits on behalf of their clients.  Reisman, in her report, acknowledged those other cases, predominantly the $1 billion concussion settlement with the National Football League.  In that case, she wrote, the judge allowed some portion of attorney fees to go to lawyers with individual clients, and not just lead class counsel, but capped their contingency rates.  “There is significant legal support for the proposition that the courts have the required personal and subject-matter jurisdiction and the legal and equitable authority to modify contingent fee arrangements,” she wrote.

But she found that the Syngenta litigation had some key differences—most notably, the pressure that a large chunk of individual cases had on reaching a settlement.  In her report, she wrote that “no single event or group of plaintiffs’ counsel was solely responsible for pushing this litigation to resolution.”

The Syngenta multidistrict litigation, created in 2014, involved subclasses of farmers in eight states planned for trials.  Last year, a mistrial aborted the first bellwether trial, in Minnesota, but a federal jury awarded $217.7 million to a class of Kansas farmers in a second trial.  Another trial, on behalf of a class of Minnesota farmers, was ongoing when both sides struck a deal.

Watts Guerra partner Francisco Guerra was co-lead plaintiffs counsel in Minnesota state court, but no one from the firm had a lead role in the multidistrict litigation.  The firm did work on the Minnesota trial, however, and Watts was one of four lawyers appointed to the plaintiffs’ negotiating committee.  Watts did not sign the fee sharing agreement in the settlement but instead based his request on a 2015 joint prosecution agreement with lead counsel in the multidistrict litigation.  He calculated his request using a reduced contingency rate of less than 24.2 percent and $12.8 million in reimbursements for common benefit expenses he paid in the Minnesota state court litigation.

His request for fees got some pushback.  Some lawyers representing individual farmers, including one who filed a lawsuit with Watts earlier this year, accused the Texas lawyer of cutting them out of negotiations and luring farmers to retain him in order to get fees. Watts called the suit “frivolous.”

In court documents, lead counsel in the multidistrict litigation argued that the 2015 joint prosecution agreement had nothing to do with the class actions and would set Watts up to get as much as $200 million.  They sought 50 percent of the $500 million, with Seeger Weiss getting at least 10 percent, but suggested that 12.5 percent go to the lead lawyers in Minnesota state court and 17.5 percent to attorneys in Illinois.  The remaining $100 million would be reserved for other lawyers.

Reisman agreed on the 50 percent and, as to the arguments from Watts, found that the 2015 agreement was “irrelevant” to the fee award in a nationwide class action.  But she doubled the allocation to the Minnesota group, which includes Watts, assigning 24 percent, or about $120.8 million.

“Unquestionably, the Minnesota state court litigation both advanced the cause of pressuring Syngenta on multiple fronts and, through coordination with Kansas counsel, assisted the nationwide class effort,” Reisman wrote.  Lawyers in the Illinois cases, whose award totaled $80.5 million, or about 16 percent, “presented an important third pressure point on Syngenta,” she wrote.

She also allocated 10 percent to lawyers with individual clients, capping their contingency rates at 10 percent.  She said most of those firms recruited clients and filled out fact sheets, while lawyers in leadership in Kansas, Minnesota and Illinois did the “vast majority” of the work.  “A 10 percent contingent fee is obviously a significant reduction from the typical 30-40 percent contingent fee,” she wrote. “However, it is appropriate given the history of this litigation.”

Ninth Circuit: Big City Rates Proper Where Local Counsel Unavailable

November 21, 2018

A recent Metropolitan News story, “Award of Attorney Fees at ‘Big City’ Rate Proper Where Local Counsel Unavailable,” reports that the Ninth U.S. Circuit Court of Appeals has upheld a $135,876.75 attorney fee award to a special-needs student’s mother who prevailed in an administrative proceeding under the Individuals with Disabilities Education Act, rejecting the contention of the defendant, Tehachapi Unified School District, that fees should be set at a rate no higher than what local lawyers charge.

The district is located in a sparsely populated 522 square-mile mountainous area of Kern County, west of the Mojave Desert.  Plaintiff Charis Quatro, whose son suffers from a birth defect affecting the spine—resulting in his needing to use a walker and wear foot braces—engaged the services, on a contingency-fee basis, of attorney Andréa Marcus, whose office is in the City of Santa Barbara, to pursue remedies based on a refusal by the district to provide tutoring to the boy while recuperating from surgery.

District Court Judge Donald W. Molloy of the Eastern District of California set the fees for Marcus at $450 an hour, and the appeals court, in a memorandum opinion found that to be “a reasonable hourly rate” for her.  The panel was comprised of Circuit Judges Raymond C. Fisher and Milan D. Smith Jr., joined by District Court Judge Elaine E. Bucklo of the Northern District of Illinois, sitting by designation.

Marcus had sought $475 for her own work in connection with the administrative proceeding and her services in seeking an order for fees in the District Court, and less for hours put in by associates who devoted time to the case. Molloy found that that Marcus, in light of her experience in special education matters, was entitled to $450 an hour.  The judge multiplied the rate by the number of hours, but made some downward adjustments.

Responding to the district’s argument that it should not have to pay at big-city rates, and that fees should be set at $300 per hour or less, the opinion declares:  “The district court did not abuse its discretion in calculating the lodestar using rates from outside the local market.”  The opinion points to the Ninth Circuit’s 1997 decision in Barjon v. Dalton—which did not depart from the “local forum rule,” under which fees are ordered in accordance with the prevailing rates in the community—but it differentiates the factual circumstances.

The court in Barjon rejected the prevailing plaintiffs’ contention that their San Francisco attorney should be paid in accordance with the prevalent San Francisco rate—then $250 an hour—rather than the rate prevailing in the forum, Sacramento, which was $200 an hour. In that case, the plaintiffs did not show unavailability of local counsel capable of handling employment discrimination cases.  “Without evidence that Sacramento rates preclude the attraction of competent counsel, their argument remains too theoretical to warrant departure from the local forum rule…,” the 1997 opinion says.

By contrast, Monday’s opinion sets forth that Quatro provided her own declaration and that of two other persons, each a parent of a special needs pupil, to the effect that local counsel was unavailable to serve them.  It says Quatro presented “reports describing the limited access to legal representation in rural California and declarations describing the lack of local attorneys who were willing and qualified to represent clients in special education matters.”

In her trial brief, Marcus provided this factual summary: “The Defendant abandoned Plaintiff for 21-weeks (out of a 35-week school year), while he was recovering from multiple surgeries—dis-enrolling him from school, instead of providing home instruction while he recuperated from surgery, as is required by law.  This is the core of the dispute, as this child is bright and capable, yet lost most of a school year when the Defendant shrugged its legal duty to R.Q., a child with grave disabilities.  At the time of the underlying hearing, R.Q. was five years old, and had already undergone multiple complicated and painful surgeries in his short life.”  Following a four-day hearing, an administrative law judge awarded the boy 105 hours of instruction and ordered that Quatro be reimbursed for her transportation costs.

In an amicus curiae brief filed in the Ninth Circuit, the Council of Parent Attorneys and Advocates. Inc. said: “Here, Appellant Tehachapi Unified School District…seeks an outcome with potentially far-reaching and dangerous consequences for students with disabilities.  It seeks to slash the court-awarded hourly rate of $450 for an experienced special education attorney, by as much as two-thirds because it claims that $150-300 is the prevailing rate in Tehachapi without any proof that there was another equally qualified attorney in that underserved area willing to serve R.P. on a contingent basis….

“Essentially, the District is asking this Court to hold that, even when families cannot find local counsel willing and able to capably represent students in special education matters, attorneys who leave their own (more remunerative) markets to provide much needed legal support in underrepresented communities should never receive awards at their standard hourly rate.  Such a precedent would require attorneys working outside their standard markets to take on matters in underrepresented markets at a rate dramatically lower than they could command in their own markets, where attorneys are already in high demand.  Such a precedent would have a chilling effect on the willingness of qualified special education attorneys to take cases on in underrepresented markets.”

Both that brief and the one filed in the Ninth Circuit by Quatro make reference to a discovery response from the school district listing 35 attorneys it deemed qualified to handle special-needs cases; only four were located in Kern County, one having only four years’ experience in law practice, two with three years’ experience, and one who had resigned from the State Bar with charges pending.

Marcus asserted in her brief that the school district’s appeal “is pursued merely for the purpose of delay which has the real effect of discouraging other civil rights attorneys from practicing special education law on a pure contingency basis, further prejudicing families like the Quatro’s who would not have meaningful access to the judicial system otherwise.”

The case is Quatro v. Tehachapi Unified School District, 17-16210.  In a memorandum decision filed yesterday in Wright v. Tehachapi Unified School District, 17-16970, the same panel affirmed an award of attorney fees to parents who prevailed in an administrative action under the Individuals with Disabilities Education Act.  There, however, the school district acknowledged that local counsel was not available.  Marcus was also the attorney in that case.

Magistrate Judge Jennifer L. Thurston of the Eastern District of California made an award of $99,330.00 for services in the administrative proceeding and $39,087.50 for work done in the District Court.  She based the award on prevailing rates in the Central District.

SCOTUS Won’t Hear Case Involving Fee Award Calculation Method

November 13, 2018

A recent Law 360 story by Michael Phillis, “High Court Won’t Hear $17.3M Fee Dispute in Gas Royalty Row,” reports that the Supreme Court declined to take up a challenge to a Tenth Circuit panel's decision that said an incorrect method of calculating the $17.3 million attorneys' fees award for work on a $52 million settlement over gas well royalty payments meant the award should be set aside.

The Tenth Circuit panel’s decision, which will now remain intact, reversed a lower court's award of attorneys' fees and an incentive award of half a percent for lead plaintiff Chieftain Royalty Co.  The panel agreed with two class members who objected to that award, Charles David Nutley and Danny George, who said the lower court was required to use the lodestar approach under Oklahoma law instead of using the percentage-of-the-fund approach for allocating fees.

In its petition for review, Chieftain Royalty said the lodestar method that is based on how many hours the attorneys worked was "burdensome and creates a perverse incentive for class counsel to litigate inefficiently."  The petitioner preferred common-fund awards that distribute a percentage of a fund.

Chieftain Royalty further argued that in diversity class actions such as in the instant case, the courts should be able to decide how to award reasonable attorneys' fees instead of being forced to defer to the applicable state law.  The objectors, however, said Oklahoma law required the lodestar approach and must be applied, and the Tenth Circuit agreed.

Chieftain had filed the state-law putative class action against EverVest Energy Institutional Fund in 2011, alleging the oil and gas company underpaid lease royalties on gas from wells in Oklahoma.  The $52 million settlement, meant to benefit around 21,000 class members, netted final approval about four years later.  The objectors appealed with respect to the fees and incentive awards.  They argued the Oklahoma Supreme Court has held that reasonable attorneys' fees should be calculated by the lodestar method in common-fund cases.

The Tenth Circuit panel said in mid-2017 that while the circuit had no binding precedent on whether federal courts must follow state laws governing how to calculate attorneys' fees, it found a consensus among five other circuits that have considered the issue.  "When state law governs whether to award attorney fees, all agree that state law also governs how to calculate the amount," the panel said.  The decision nixed the awards and remanded the case, adding that class counsel didn't provide the necessary records about their hours to be used in a lodestar calculation, throwing their fees into question.

In an opposition brief Nutley filed in October, the objector said the high court should not take the case, although he did say that there was a circuit split on the issue.  However, the brief said that the question posed by the petitioner on whether "common-fund fee awards are governed in diversity cases by state or federal law" wouldn't fully deal with the question at hand.

"This court should direct the parties to brief and argue the additional question of whether, in a common-fund case like this, 'a reasonable attorney's fee' is presumed to be the attorney's lodestar ... provided it does not exceed a reasonable percentage of the common fund," the opposition brief said.  "An affirmative answer to that question would resolve many conflicts in federal common-fund jurisprudence by providing a uniform rule that is consistent with this court's prior holdings defining 'a reasonable attorney's fee.'"

Eric Alan Isaacson, an attorney for Nutley, said the Tenth Circuit got it right.  He said the justices likely recognized the case was a poor vehicle to resolve conflicts among various courts.  "As Nutley's Brief in Opposition pointed out, there are many conflicts in the federal decisions on common-fund fee awards, so that if the Supreme Court granted certiorari to consider Chieftain's arguments that federal law controls, the Court should also have the opportunity to clarify what the controlling federal law is," Isaacson told Law360.

The case is Chieftain Royalty Co. v. Charles David Nutley et al., case number 18-301, in the Supreme Court of the United States.