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Category: Contingency Fees / POF

Seeger Weiss Targeted in NFL Concussion Fee Appeal

August 14, 2019

A recent Law 360 story by Ryan Boysen, “First Shots Fired in Seeger Weiss Concussion Fee Appeal,” reports that Seeger Weiss LLP has “hoarded” nearly $65 million for its work on the landmark NFL concussion settlement while punishing rival firms by docking their pay over perceived slights, all through an “improper process” that “lacked transparency and basic mechanisms of fairness,” according to the opening briefs in a contentious Third Circuit appeal.

The appeal was filed over a year ago, challenging an order by U.S. District Judge Anita B. Brody that created a $112.5 million common benefit fund to pay the 24 firms involved in bringing to fruition the uncapped concussion settlement, which has paid out nearly $660 million in claims since it was approved in 2015.  In opening briefs filed, two groups of law firms and retired football players led by Locks Law Firm and Lubel Voyles LLP took aim at Seeger Weiss’ role in divvying up that money.

The firms argued that Judge Brody essentially gave Chris Seeger carte blanche to award himself and other firms whatever he pleased, then rubber-stamped his decisions with hardly any oversight, violating constitutional due process obligations and binding precedent in the process.  Adding insult to injury, Locks Law said, all of the firms involved in the settlement were required to submit time records to Seeger while he determined their final awards, but to this day no other firm “has seen Mr. Seeger’s records” and “neither will this court: those records were never made part of the record below.”

“The court empowered Mr. Seeger … to reward himself and penalize rivals without any on-the-record scrutiny of his own time records,” Locks Law said.  “The court accepted Mr. Seeger’s [determinations] with only minor adjustments.”  “There is no justification for this manifestly inadequate process,” Locks Law added.

While ostensibly separate, the allegations in the briefs mirror complaints about the settlement as a whole, which many attorneys claim has been marred by a lack of transparency and a seeming willingness on Judge Brody’s behalf to improvise when deciding issues of considerable importance to the class of 20,000 retired players suffering from concussion-related brain damage the deal is meant to compensate.

The briefs also underscore the bad blood that’s been building up for years between Seeger and many of the other lawyers involved in the case.  To take just one example, Locks Law was terminated as class counsel alongside five other firms in May, a move many viewed as retaliation for its request that Judge Brody reconsider new medical guidelines that Locks Law had argued would make it harder for players to get paid.  Prior to that, Locks Law butted heads with Seeger directly when it sought to take over the implementation of the deal, arguing that Seeger was letting the NFL steamroll the players with “scorched earth” legal tactics.  Both of those motions were denied.

In a nod to those broader tensions, Lubel Voyles acknowledged in its brief that while “fee fights in class action litigation are, sadly, not rare,” it is rare “for the optics of a common benefit fee award to be so poor that even class counsel are divided on every aspect of the award, not just allocation of the money.”  Locks Law said that before Judge Brody made a decision on how to apportion the $112.5 million CBF, some firms recommended a special master be appointed for that purpose while Locks Law itself urged the creation of a committee.

Instead, Locks Law said, Judge Brody let Seeger make “the sole determinations of what work performed by other [leading firms] qualified for common benefit compensation in his petition.”  “The district court’s decision to delegate responsibility for that allocation to the largest recipient of those fees, co-lead counsel Christopher Seeger,” was an “improper process,” Locks Law said.

Locks Law said all of the firms applying for those fees had to submit their time sheets to Seeger for him to review, but Seeger’s own records were only ever reviewed in camera by Judge Brody.  After approving more hours for his firm than any other, and awarding a higher lodestar multiple — a common calculation used by law firms to determine fees in many instances — for those hours than to any other firm, Seeger ultimately received about $52 million of the initial $85 million payout from the fund.  His firm has since received $8 million more, and is waiting on Judge Brody to approve more than $4 million on top of that, for a total of nearly $65 million.

Meanwhile, Locks Law has received less than $5 million in common benefit fees thus far, despite representing more than 1,000 players in the litigation compared to Seeger’s 20-or-so clients, a common point of contention raised by many other lawyers involved in the case.  Locks Law says Seeger seized on an interview Gene Locks gave to Bloomberg Businessweek for a 2013 article that “infuriated the NFL” as a reason to justify the low lodestar multiple given to Locks Law, but in its brief the firm said that explanation was “not credible.”

Lance Lubel of Lubel Voyles claims he was cut out of the CBF fees entirely because he objected to the settlement, something he's done frequently, even though his earlier complaints about the deal’s language led to significant safeguards being put in place to protect retired players.  Lubel echoed many of Locks Laws’ concerns with Seeger’s role in the CBF distribution, but went one step further by also challenging a 5% holdback that’s currently applied to each successful monetary award and a 22% fee cap Judge Brody imposed on attorneys representing retired players.

The 5% holdback is being set aside, and Judge Brody has said she’ll rule at a later date on whether or not to tap those funds to continue paying CBF fees for the implementation of the 65-year-long program, money that would presumably only be available to Seeger after Judge Brody axed the other class counsel firms in May.  Lubel said the $112.5 million should be enough money to compensate the lead firms over the entire course of the settlement’s lifespan.

As to the 22% cap on attorney fees, which works out to 17% after the holdback is applied, Lubel said Judge Brody “has, in the spirit of helping class members, gutted their chances of qualifying for an award through the claims process.”  That’s because many retired players require expensive medical tests before they can qualify for an award, and the price of those exams can easily reach $10,000 or more.  For various reasons, a player’s attorney is often the only party willing and able to front those funds, Lubel said.  But artificially capping their fees at a relatively low 17% rate makes them less willing to spend that money to get the ball rolling on a client’s claim, he continued.

The case is In re: National Football Players' Concussion Injury Litigation, case number 18-2012, in the U.S. Court of Appeals for the Third Circuit.

$35M Fee Request in $110M Fiat Chrysler Emission Settlement

August 6, 2019

A recent Law 360 story by Emille Ruscoe, “Atty Wants $32M in Fees From Fiat Chrysler Emission Deal,” reports that a New York federal judge was asked to approve $32 million in fees for attorneys who negotiated a $110 million settlement in an investor suit accusing Fiat Chrysler of lying about its compliance with safety regulations and cheating on emissions tests.  In addition to the $32 million for the attorneys, which comprises nearly a third of the total settlement, the class counsel asked to be reimbursed $2.6 million for their expenses.  They also want the named plaintiffs in the case to be paid $15,000 each.  The settlement total after the expenses would be about $75 million.

The plaintiffs' attorneys calculated that they spent upwards of 44,000 hours on the case, which stretched out over four years.  They estimated the cost of their labor at about $23 million, assuming an approximate $518 hourly rate, which was then multiplied total by a factor of 1.4, in the "lodestar" method that is "intended to approximate what counsel would receive if they were bargaining for the services in the marketplace."  "Awards of fair attorneys' fees from a common fund should also serve to encourage skilled counsel to represent those who seek redress," the nine attorneys for the plaintiffs noted in their explanation of the fee, characterizing the request percentage total as comparable to other fees awarded within the jurisdiction.

The price tag on the expenses, they said, reflects, among other things, the costs associated with work related to the trial that the attorneys had to conduct in Detroit near Fiat Chrysler's American headquarters, far from the federal court in New York City where the case was adjudicated.  The attorneys emphasized the risk they undertook in footing those bills themselves.

"Class counsel pursued plaintiffs' claims against defendants in this complex litigation with no guarantee of ever being compensated for the investment of time and money that the case would require," they said.  They stressed that the defendants waited to settle until after the class was certified, thereby increasing the risk they took on.  Moreover, they said, their work continues: they'll assist class members with proofs of claim, guide the overall claims process and answer the class members' questions throughout.

They're not asking for much, they claimed.  "A 30% fee will not cause a windfall here," they said, as part of their explanation for why their requested total is reasonable.

The car company settled in April, ending a suit that investors brought when their stock dropped 5% after a joint Department of Justice and Environmental Protection Agency investigation charged the auto company with violating the Clean Air Act.  Court documents indicate the mediation talks went on for months, and in a joint statement at the time of the settlement, the parties said the agreement occurred "solely to eliminate the uncertainty, burden and expense of further protracted litigation."

$14.5M in Attorney Fees in $53M Landmark Class Action Settlement

July 31, 2019

A recent Law 360 story by Jeff Montgomery, “Chancery OKs $14.5M Atty Fee in Landmark $53M Settlement,” reports that in a possible Delaware litigation milestone, the Chancery Court approved a $53 million settlement with a $14.5 million attorney fee carveout in a stockholder suit that challenged the $640 million acquisition of a real estate investment trust by another REIT with the same private equity controller.  Christopher M. Foulds of Friedlander & Gorris PA told Vice Chancellor Joseph R. Slights III that the agreement with New Senior Investment Group and its directors ranks as the largest derivative action settlement, by far, as a percentage of market capitalization to date in Delaware.

New Senior, managed by Wesley Edens' Fortress Investment Group LLC, had a little over $450 million in market capitalization, or the shares times price, for the time period in Foulds' comparison.  Stockholder John Cumming sued the company in January 2017 after Fortress spun off and sold to New Senior 28 senior housing properties owned by Fortress-controlled Holiday Retirement Corp. in 2015. The derivative suit argued that Fortress — standing on both sides of the deal — received an unfair price from New Senior, under terms that included a secondary offering that diluted shareholder value.

"We believe we were able to extract the $53 million payment because we went so deep into the case.  That provided us with both maximum leverage and a wealth of information," Foulds said.  "We had maximum leverage because it [the settlement] was the result of a mediator's recommendation that occurred the weekend before a summary judgment hearing."

Vice Chancellor Slights approved the proposed settlement total and fee award — paid out of the total — without change, but rejected a proposed $4,500 incentive payment to Cumming.  He noted that recent decisions have generally held lead stockholders to the same value from a settlement as other investors, barring extensive contributions to the case.  In explaining his approval and ruling, the vice chancellor said that the suit involved extensive discovery investigation efforts, with a special master eventually appointed by the court to assist the process.

The $53 million, meanwhile, "represents at least more than half the amount that plaintiff's counsel might have achieved on their best day at trial, in my view," Vice Chancellor Slights said.  "In my view, that's a very solid, risk-adjusted outcome."  New Senior put up a substantial fight, the court noted, with Foulds describing the opposition as "the greatest litigation war machine ever assembled in our state."  Under a defense assessment, the vice chancellor noted, New Senior underpaid for the retirement home chain, rather than overpaying, producing an alleged but rejected estimate of an $80 million benefit for shareholders.

The $14.5 million fee amounts to 27.5% of the settlement amount, but includes more than $1.1 million in expenses, the vice chancellor said. After expenses, fees would total 25% of the settlement.  "The percentage of benefits paid is on the higher end of the range for pretrial fee awards, but the benefit achieved is significant and the effort to achieve that benefit is substantial and commensurate with the fee request," the vice chancellor said.  He added that the fee reflected an $850-per-hour rate that he viewed as "eminently reasonable under the circumstances."

The case is Cumming v. Edens et al., case number 13007-VCS, in the Court of Chancery of the State of Delaware.

No Fee Award for Winning ADA Award After Judge Tosses It?

July 19, 2019

A recent Law 360 story by Matthew Santoni, “Don’t Give Attys Fees for Losing ADA Award ‘Win’. Co. Says,reports that a Pittsburgh claims administration and management company said that attorneys for a woman denied extra breaks for her post-traumatic stress disorder shouldn't get to claim a "win" and seek fees after a federal judge vacated a jury's $285,000 damage award in May.

Premier Comp Solutions said that under a contingency fee structure, Stember Cohn & Davidson-Welling LLC shouldn't be able to ask for the company to pay almost $312,000 in fees and $24,000 in costs, since their client, former billing assistant Beth Schirnhofer, hadn't actually won the case after the judge tossed the award.

"Having lost the case, they want to be rewarded while their client receives nothing," said Premier's brief in opposition to the fees.  "If a contingent fee lawyer does not win money for the client, he or she does not get paid a fee.  For some reason, plaintiff's counsel believe they should get paid a fee even though they lost."

U.S. District Judge Billy Roy Wilson had erased the jury's award of $35,000 in back pay and $250,000 in noneconomic damages following a trial in April, citing its affirmative answer to the question of whether the company would have fired Schirnhofer regardless of her alleged disability.

Under the Americans with Disabilities Act, Judge Wilson said, the court could grant declaratory relief, injunctive relief and attorney fees in verdicts, but not any compensatory or punitive damages when the jury believed there could have been some other reason for firing Schirnhofer, also known as a "mixed motive."

Premier argued Monday that fees were inappropriate if there were no awards for Schirnhofer.  "Plaintiff's counsel took the risk that they would not win.  They should not be allowed to avoid the consequences of losing," Premier's brief said.  "By requesting a mixed-motive instruction on plaintiff's disability discrimination claims, plaintiff's counsel caused plaintiff to lose out on the $285,000 jury verdict and potential punitive damages."

Schirnhofer sued Premier in 2016, saying her doctor had provided the company with paperwork detailing her need for extra breaks due to PTSD, but Premier refused to provide them.  Premier allegedly decided Schirnhofer's PTSD was a disability, but it just didn't warrant accommodation, her suit said.  Her later firing, the company said, was because she violated its social media policy with Facebook comments about committing suicide, complaints about her coworkers, and a picture of a woman with a gun — not out of retaliation for her complaints.

Stember Cohn had claimed that the ADA and case law had shown the firm could still seek compensation for fighting the contentious case, since the jury had rejected Premier's claims it did no wrong.

"In mixed motive cases the award of attorney's fees is a matter left to the discretion of the district court," the firm wrote in its June 11 brief. "A court may award fees absent monetary or other tangible relief."

Premier countered that there had been no relief at all for Schirnhofer, since all she had sought was money damages. Five of her 11 claims were tossed before trial, three were determined in Premier's favor, and the three disability discrimination claims were not an "outright win" for her because of the mixed-motive verdict, the company said. After the judge had thrown out the award, nothing had changed for Schirnhofer; no precedents had been set and no declaratory judgments were made, Premier argued.

"Plaintiff and her counsel's principal purpose in bringing this lawsuit was to recover money from defendant ... Plaintiff did not make any specific claim for declaratory, injunctive, or any other kind of equitable relief," Premier's brief said.  "Plaintiff received none of the relief she sought in her complaint.  Such a result could not, with a straight face, be called a 'success.' ... Accordingly, plaintiff's counsel should not be rewarded with fees or costs."

Premier also said Stember Cohn's strategy had harmed its client's case because they had asked for the mixed-motive jury question rather than trying to present the social-media policy issue as a pretext for Schirnhofer's firing.  The firm could not then claim fees for work that had cost its client an award in her favor, the company said.

Kirkland Leans Into Contingency Fee Litigation

July 17, 2019

A recent American Lawyer story by Jack Newsham, “Kirkland’s Push Into Contingency Fee Litigation Not Threatening, Firm Leaders Say” reports that in the wake of Kirkland & Ellis’ announcement that it is “doubling down” on contingency fee litigation, you might expect lawyers who take on such matters to worry about competing for clients with Big Law’s 600-pound gorilla.  But in interviews, leading litigators at other firms said they’re not sweating the news.  They said there’s enough work for everyone and that Kirkland’s big client base and full-service offering could work against the firm in some ways.

“We don’t view it as threatening in any way,” said Neal Manne, the Houston-based managing partner of Susman Godfrey.  He said Susman Godfrey has a good brand, runs cases efficiently and his firm is already comfortable with alternative fees—less than 20% of its revenue comes from billable hours, he said.  “We don’t view [Kirkland] as a competitor in any way that would affect our business model or our approach,” he said.

Jason Peltz, whose trial-oriented firm Bartlit Beck was started by former Kirkland litigators with a distaste for the billable hour, said Kirkland’s announcement “doesn’t worry me at all.”  He said Kirkland is more associate-heavy than his firm and staffs matters differently.  “I think there are enough cases for the best lawyers out there,” Peltz added.  For some, the Kirkland announcement was seen more as a marketing play rather than a new strategic direction.

“I don’t think this is an event,” John Quinn, the managing partner of Quinn Emanuel Urquhart & Sullivan, said in an email.  “I very much doubt that this means that [Kirkland & Ellis] would now accept a good [contingency fee] case that they wouldn’t have accepted six months ago.”  Trial lawyers contacted for this article said they welcome the competition, but noted that Kirkland—for all its resources—has some disadvantages.  One is the risk of conflicts; Kirkland represents a wide array of the biggest businesses in America on litigation and corporate matters and can’t turn around and sue them.

Also, both Peltz and Manne noted that their own firms benefit from referrals from other law firms that don’t have to worry about losing a client for other legal services.  In other words, firms may be wary of sending a client to a full-service firm like Kirkland for a litigation matter, fearful of losing the entire client relationship.

Eyeing Profitability

Regardless of how the firm’s news was received, it’s now clear that Kirkland—known for mounting huge defense cases for the likes of BP in the aftermath of the Deepwater Horizon disaster and General Motors after its faulty ignition switches led to numerous deaths—wants the market of potential plaintiffs to know that it is open to going to bat for them.  Kirkland’s announcement this month comes less than three years after ALM reported a partner profit reallocation hurt the pay of some Kirkland litigators, as their peers in private equity and M&A contribute a growing share to the firm’s bottom line.

In recent years, there has been an industrywide drop in demand for litigation. It’s not clear how demand for Kirkland’s litigators has fared, but Kent Zimmermann, a law firm consultant with the Zeughauser Group, noted that going after more plaintiffs’ cases could mean more work for the firm’s litigators.  He said taking on more contingency cases was a high-risk, high-reward strategy, but said the firm has probably checked its data and has been satisfied with the results.  “They already have a record of success [with] some big plaintiffs-side wins at their back, and it’s unsurprising that they want more,” he said.

Former Kirkland lawyers said firm leaders have eyed the profitability of plaintiffs’ firms like Quinn Emanuel with some jealousy.  (Quinn Emanuel’s profit margin last year was 61%, compared with Kirkland’s at 58%, according to ALM data.) And the ex-Kirklanders note that the Chicago-founded firm has had great success taking the plaintiffs’ side in the past.

Just take the case of bankrupt chemical company Tronox. Kirkland represented a litigation trust that sued Kerr McGee for dumping its environmental liabilities on Tronox before spinning it off, freeing itself of the toxic burden and setting up its corporate offspring to fail.  The case ended in a $5 billion settlement, and Kirkland got paid $93 million; $70 million of that was a contingency fee.

Reed Oslan, who leads Kirkland’s special fee arrangement committee, said at a conference earlier this year that alternative-fee matters were “the most profitable part of our firm, by a large margin,” although he noted that it was a small portion of the firm’s business.  Kirkland has declined to say how much of its revenue comes from alternative fee arrangements and declined to comment for this article.  The firm was the highest grossing of the entire Am Law 200 last year, generating $3.757 billion.

Still, former Kirkland partners said alternative fees have ebbed and flowed.  They praised Oslan, saying his support for contingency fees, hybrid fees and arrangements blending fees from a portfolio of cases has resulted in major successes.  But only time will tell how far Kirkland pushes the contingency fee practice.  One source said there was a concern among some litigators inside Kirkland that the entire firm was watching a lawyer’s contingency fee matters and a worry that large risk-taking wouldn’t be rewarded.