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Category: Contingency Fees / POF

$175M in Attorney Fees in $10B VW Settlement

March 22, 2017

A recent Courthouse News Services story by Nicholas Iovino, “Lawyers Share $175M Payday in VW Settlement,” reports that a federal judge awarded $175 million in attorneys’ fees and costs to lawyers that helped secure a $10 billion settlement in the Volkswagen diesel-gate scandal.

U.S. District Judge Charles Breyer approved the $10 billion package in October 2016 as part of a larger $15 billion deal, which included $4.7 billion in air quality improvement programs to mitigate the impact of cars that violated emissions standards.

The $15 billion deal was the most costly settlement Volkswagen has paid thus far for its use of emissions-cheating software in some 11 million cars worldwide.  The German automaker has paid more than $20 billion in U.S. civil settlements and criminal fines, and U.S. prosecutors have charged six of its executives over their roles in the scandal.

As part of the $15 billion deal approved last year, Volkswagen agreed to spend up to $10 billion buying back or modifying nearly 600,000 2-liter diesel engine vehicles tainted by defeat devices.  Defeat devices allowed the cars to mask emissions during tests while spewing up to 40 times more nitrogen oxide on the road than allowed under federal law.

Breyer found $167 million in attorneys’ fees and $8 million in costs requested by the plaintiff class lawyers was “reasonable and fair” given the “extraordinary result” achieved for the class.  The judge said the settlement put owners of affected vehicles back into the same position they were in before the scandal was made public in September 2015.  Volkswagen offered to buy back cars based on their pre-public scandal value or to repair them with EPA-approved emissions-reducing modifications.

Awarded attorneys’ fees make up 1.7 percent of the $10 billion settlement package.  The award will be shared among 21 law firms that made up the plaintiff class steering committee, headed by lead counsel Elizabeth Cabraser of Lief Cabraser Heimann & Bernstein.

The lawyers and their staff worked 98,000 hours litigating the case and negotiating the settlement.  They expect to spend an additional 21,00 hours processing claims over the next 26 months, according to Breyer’s March 17 ruling.

The average hourly rate for class attorneys’ work was $529, amounting to a $63.5 million lodestar, or total cost of litigation hours.  Breyer found applying a 2.63 multiplier to the lodestar was justified given “the complexities of this case and the extraordinary result achieved for the class.”

Lead attorney Elizabeth Cabraser said in an emailed statement, “The award will be allocated by lead counsel among firms who performed authorized common benefit work, based upon relative value of contributions to the case and time that was reported and complied with guidelines set forth by the Court.  These fees will not be deducted from any class member’s recovery amount.”

Judge Reduces Fee Request in Rita’s Water Ice Class Action

March 21, 2017

A recent Legal Intelligencer story by P.J. D’Annunzio, “Lawyers Want $1M Fee, Get $651K in Rita’s Class Action,” reports that the attorneys handling the Rita's Water Ice class action over the company sending unsolicited text messages asked for $1 million in fees, but a federal judge said that price is too steep.

On March 16, U.S. District Judge Timothy J. Savage of the Eastern District of Pennsylvania granted class counsel's request for $40,000 in expenses and $10,000 in incentive awards, but denied their request for $1 million in legal fees, instead awarding them $651,000.  That reduced fee represents roughly 22 percent of the litigation's settlement fund.

According to Savage's opinion, more than 110,300 people are eligible for a piece of the $3 million settlement fund, and of those noticed, roughly 25,500 filed valid claims.  "The amount each class-member claimant will receive is not significant, but rather modest," Savage said, and because there were more claimants than class counsel had anticipated, each would get less than previously thought.

"Counsel claim that they extracted the largest settlement possible for the class in light of Rita's ability to pay," Savage said.  "Yet, rather than adjust the attorney fees to increase the amount available to the class, counsel propose a lesser recovery for the class members."

The class action was filed in 2015 by Sherry Brown and Ericka Newby.  The two claimed that Rita's sent them "Cool Alerts" text messages announcing when certain water ice flavors and other products were available at local stores.  They alleged that the lists were generated using a database of telephone numbers that the owners did not provide to Rita's.  They also claimed that they kept receiving messages after texting "STOP" in response to the texts' instructions to stop receiving future notifications.

A settlement agreement was reached between the parties in March 2016 and was approved by the judge shortly thereafter. Brown and Newby received $5,000 each as class representatives.

NALFA Podcast with Law Professor Charles Silver

March 17, 2017

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who’ve helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, judges, law professors, in-house counsel, and others on a range of attorney fee and legal billing issues.

NALFA’s second podcast featured an interview with Charles M. Silver, Professor of Law at the University of Texas at Austin School of Law.  The NALFA podcast with Professor Silver focused on his empirical research on the setting of attorney fees in securities class actions and economic principles at play in civil litigation.  The podcast discussion centered on fee calculation methods, judicial procedure for awarding fees, and private contingency fee agreements. 

Professor Silver also discussed the politics of class actions and the dynamics of the tort reform lobby.  In addition, Professor Silver also offered several recommendations for the class action world, including employing a more real world, market based approach to awarding fees in class actions.

“These podcasts are the perfect broadcast format to discuss attorney fee and legal billing issues,” said Terry Jesse, Executive Director of NALFA.  “In addition to his research, Professor Silver talked about a range of issues including the creation of a data set for judges to draw upon when awarding fees, fee allocation issues in MDLs, and setting attorney fees early in the class action process,” Jesse said.  Click on the link below to listen to the NALFA podcast:

https://soundcloud.com/thenalfa/nalfa-podcast-with-law-professor-charles-m-silver

Texas High Court to Hear $42M Fee Dispute

March 6, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court to Hear $42M Atty-Client Fee Dispute,” reports that the Texas Supreme Court on granted a request from the owner of a water supply company, who argued a lower court ignored a jury's findings and wrongly granted a new trial to his two former lawyers in a contingency fee dispute lawsuit involving their right to a stake in his company.
 
In October 2013, a jury rejected the claims of solo practitioners Thomas C. Hall and F. Blake Dietzmann that they were entitled to $42 million in damages under a contingency agreement with Dean Davenport, who won full ownership of a water supply company in an underlying suit.  But about 105 days after rendering judgment, the trial court vacated the judgment and granted the attorneys' request for a new trial.  After an appellate court directed the trial court to provide specific reasons for granting a new trial, it did so in March 2015, holding that the agreement unambiguously provided that fees would be paid out of the ownership in any business recovered, and that the jury's findings weren't supported by the evidence, Davenport told the court.  The high court has scheduled oral arguments in the matter for March 23.

In his petition for writ of mandamus, filed in November 2015, Davenport told the high court it should take the case because the dispute raises the important issue of when a trial court should be allowed to grant a new trial.  In this case, Davenport argued, the trial court disregarded a jury's findings, misstated the record, ignored evidence, credited disputed testimony and “substituted its judgment and credibility decisions for the jury's” in granting his former attorneys' request for a new trial. 

Davenport also argued that the court should weigh in on the “narrow circumstances” under which lawyers and clients can become business partners under contingent fee agreements.  Rule 1.08(a) of the Texas Disciplinary Rules of Professional Conduct allows for that only if the transaction is fair, reasonable and fully disclosed; the client is given a chance to seek advice from outside counsel; and the client consents to it in writing. None of those safeguards were met in this case, Davenport told the court.

“Nonetheless, the trial court concluded as a matter of law — eleven months after a jury verdict in favor of the client (and after the trial court determined the fee agreement was ambiguous) — that the fee agreement was unambiguous and supposedly entitled the lawyers to become partners in businesses the client purchased in settling his lawsuit,” Davenport wrote.  “In so doing, the trial court ignored the plain language of the fee agreement at issue and the special rules and ethical principles underlying the interpretation of attorney-client fee agreements and attorney-client business transactions, as set forth in Levine, Anglo-Dutch, and Rule 1.08.”

In a February 2016 response arguing against granting the mandamus petition, Hall and Dietzmann told the court that Davenport wants the court to “greatly expand Texas law in ways that would substantially reduce the significance and reliability of all written contracts.”  Their agreement with Davenport, the attorneys told the court, “expressly contemplates paying fees out of the recovery of a business ownership.”

“The trial court did not clearly abuse its discretion by granting a new trial for the reasons stated. As it relates to the payment of attorneys’ fees out of the recovery of an ownership of a business, the agreement is unambiguous,” the brief reads.  “Furthermore, the trial court did not abuse its discretion in concluding the evidence was insufficient to support findings that Hall and Dietzmann had waived or should be equitably estopped from asserting their right to be paid under their unambiguous fee agreement with Davenport.”

Hall and Dietzmann filed suit in February 2012, claiming that after the settlements because Davenport was “paid” through his former partners' ownership interests in Water Exploration Co Ltd., they were owed a percentage of the company, instead of the about $400,000 in cash he paid them in December 2009.  They sought about $24.6 million in damages, equivalent to what they said would be the current value of their alleged ownership interest in WECO, plus $18 million in punitive damages.

But the jury found Davenport's contingent fee agreement with the two attorneys did not include a potential ownership stake in WECO, and found the attorneys had waived their rights to seek ownership of WECO and were each estopped from trying to claim a stake in the company.  Jurors also found both attorneys complied with their fiduciary duties to Davenport.

The case is In Re Dean Davenport et al., case number 15-0882, in the Supreme Court of Texas.

Read This Before You Go the Contingency Fee Route

March 3, 2017

A recent CEBblog article by Julie Brook, “Read This Before You Go the Contingency Fee Route,” discusses some of the pitfalls of contingency fees in California.  This article was posted with permission.  The article reads:

Among the several alternatives to the traditional hourly fee arrangement, contingency fees have been commonly used for decades.  Under a contingent fee agreement, the attorney and client agree that the attorney will receive a particular percentage of the client’s recovery or of the savings obtained for the client as a fee for legal services, if there is a recovery.  The attorney takes on the risk with the potential for significant reward.  Not surprisingly, there are statutory requirements for these types of agreements—and failing to comply with them is risky, too.

Follow these statutory requirements whenever you enter into a contingent fee agreement:

  1. Put it in writing. Contingent fee agreements must be in writing to be enforceable, except those for the recovery of workers’ compensation benefits or certain merchants’ claims. Bus & P C §§6147-6147.5.
  2. Include certain specific provisions.  In addition to a description of the contingencies entitling the attorney to a fee, the agreement must specify such matters as (Bus & P C §6147(a)):
    • The fee rate agreed on;
    • How the costs of prosecuting and settling the case will affect the fee and the client’s recovery (e.g., in the event of a structured settlement, whether the attorney is paid from first funds);
    • A statement as to what extent the client is required to pay compensation for related matters arising out of his or her relationship with the attorney that aren’t covered by the contingency fee agreement; and
    • A statement that the fee is negotiable.
  3. Follow additional requirements for medical malpractice claims.  If the claim is for medical malpractice and is subject to the maximum fee limits on contingent fees (see Bus & P C §6146), then the fee agreement must include a statement that the rates set out in §6146 are the maximum limits for the contingent fee arrangement and that the attorney and the client may negotiate a lower rate.  Bus & P C §6147(a)(5).  You may want to attach a copy of Bus & P C §6146 to the fee agreement to ensure that the client is informed of its content.
  4. Specify the contingent fee rate.  Contingent fee agreements must specify the contingent fee rate (Bus & P C §6147(a)(1)) and how disbursements and costs in connection with the prosecution or settlement of the claim will affect the contingent fee and the client’s recovery (Bus & P C §6147(a)(2)).  Unless the claim is for medical malpractice and the agreement is thus subject to Bus & P C §6146, the agreement must also include a statement that the fee isn’t set by law but rather is negotiable between the attorney and the client.  Bus & P C §6147(a)(4).
  5. Provide an hourly rate just in case.  The agreement should provide an hourly rate so that the attorney may establish a baseline to recover quantum meruit in the event the attorney is discharged by the client before the completion of the representation.  The hourly rate will also assist the attorney in providing a basis for attorney fee recovery in any potential attorney fee motion.
  6. Anticipate deferred payments or structured settlements.  Whenever payment of the recovery, or any part of it, may be deferred, the fee agreement should specify when the attorney fees must be paid and, when appropriate, how they should be calculated.  Otherwise, the agreement invites dispute and may be subject to being voided by the client for failing to fully comply with Bus & P C §6147.  If the award for future damages in an action for injury or damages against a health care provider is at least $50,000 and either party requests that the award be paid by periodic payments, then the court must order that the future damages be paid, in whole or in part, by periodic payments rather than by a lump-sum payment. CCP §667.7.  In that event, the court must also place a total value on the periodic payments and include that amount in computing the total award from which attorney fees are calculated for purposes of determining the statutory maximum fee. Bus & P C §6146(b).
  7. Provide for noncash awards.  When the award might be partially or entirely in a form other than cash (e.g., reinstatement in a wrongful termination action), the fee agreement should provide for that possibility.  This might be done by providing for a specified hourly fee if the award is not entirely in cash and a contingent fee if it is.  It may also be accomplished by providing for a method for valuing noncash awards.

Failure to include any of the required items makes the agreement voidable at the option of the client (but you would still be entitled to a reasonable fee). Bus & P C §6147(b).  See, e.g., Arnall v Superior Court (2010) 190 CA4th 360, 366 (failure to state in fee agreement that fees were negotiable rendered fee agreement void; fees recoverable by way of quantum meruit).