Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Contingency Fees / POF

Attorneys Seek Attorney Fees in New Balance Class Action

February 15, 2019

A recent Law 360 story by Rick Archer, “Attys Want $650K in Fees in New Balance ‘Made in USA’ Suit,” reports that class counsel in a suit accusing New Balance Athletics Inc. of falsely marketing its athletic shoes as being “made in the U.S.A.” are asking a California federal court for $650,000 in fees and costs for the $750,000 settlement they won for the class.  In a motion, class counsel Schneider Wallace LLP argued the settlement involved “extensive” work and also included “substantial injunctive relief,” making their request for nearly $228,000 in expenses and close to $422,000 in attorneys' fees — split between the monetary award and the injunctive relief — reasonable.

“In common fund cases, the Ninth Circuit Court of Appeals’ benchmark for attorneys’ fees is 25 percent of the fund created for the benefit of the class, plus recovery of costs,” they said.  “Here, if half the attorney fee is (conservatively) allocated to the monetary portion of the settlement, the fee sought by class counsel is close to the 25 percent benchmark.”  Under the settlement, customers who bought the shoes in California can receive $10 per pair of shoes, with individuals receiving up to $50 for five pairs and families receiving up to $100 per household, with unused settlement funds going to the Public Justice Foundation and Consumer Federation of California.  Also under the settlement, New Balance must more accurately disclose where the parts of its shoes are made.

New Balance consumers filed the proposed class action in California state court in December 2017, alleging the company falsely advertises that its shoes are made domestically even when as much as 30 percent of the value of the shoes comes from foreign parts or labor, purportedly violating California’s consumer protection statutes.  New Balance and the customers first proposed the settlement in April after the judge halted proceedings the month before to allow them to pursue negotiations.

U.S. District Judge M. James Lorenz initially denied approval in October, saying there would need to be an “abysmally low” participation rate of 5 percent for each class member to receive the $10 the settlement proposed.  In November, the proposed class responded, saying the $10 represented the maximum recovery possible and that the $3 to $5 class members would receive if 10 to 15 percent participated still represented a good percentage of recovery.  Judge Lorenz agreed and granted preliminary approval in January.  The final approval hearing has been scheduled for June.

In their fee motion, counsel argued the fees and expenses were reasonable, saying they conducted “extensive” investigation and discovery.  They also argued that for purposes of comparison the fee award should be split between the monetary and injunctive relief.  “A 50 percent allocation between the two forms of relief for this limited purpose is reasonable — if not conservative — because injunctive relief is the primary remedy under the California consumer protection statutes that formed the basis of plaintiffs’ claims,” they said.

The case is Sheila Dashnaw et al. v. New Balance Athletics Inc., case number 3:17-cv-00159, in the U.S. District Court for the Southern District of California.

Class Counsel Spar Over $2.3M in Attorney Fees in Citigroup 401K Case

February 14, 2019

A recent Law 360 story by Dean Seal, “Citigroup Class’ Attys Spar Over $2.3M in Fee in 401K Row,” reports that, one day after McTigue Law LLP sought court intervention for a dispute with former co-counsel Bailey Glasser LLP over $2.3 million in attorneys' fees in a case for a class of Citigroup 401(k) plan participants, Bailey Glasser told a New York federal judge the McTigue attorney "forg[ot] to mention" that the fee dispute must go to arbitration, not the courts.  Bailey Glasser’s Gregory Y. Porter asked U.S. District Judge Sidney Stein to remind James A. Moore of McTigue that in March 2009, the firms signed an agreement as co-counsel for a class of over 300,000 Citigroup Inc. 401(k) plan participants who scored a $6.9 million settlement in their long-running Employee Retirement Income Security Act suit last August.

That agreement contained a clause stating that any disputes must first be mediated and, if that failed, arbitrated, yet that agreement was unmentioned in Moore’s letter to the court asking for a status conference to discuss Bailey Glasser’s attempt to take back a percentage of the attorneys' fees award, according to Porter’s letter.  "Instead, we urge the court to convene a status conference so Mr. Moore can explain why he failed to bring the arbitration agreement to the court’s attention and why the arbitration clause should not be enforced," Porter said.

In his letter, Moore accused Porter of holding the attorneys' fees hostage as leverage in negotiating for a higher percentage of the $2.3 million award by refusing to give consent for a single dollar of the award, held in escrow, to be distributed.  According to Moore, Porter is contesting the allocation of fees because Bailey Glasser paid roughly 10 percent more in expenses than was laid out in the allocation agreement.  Moore said that Bailey Glasser had already been fully reimbursed for that amount through the total expenses award and has incurred no losses, and even if the minor dispute were merited, it would not be affected by the distribution of the majority of the fees award.

"The timing of Mr. Porter’s communications raising his objections and withholding his approval were apparently calculated to prevent my firm from seeking to have the court resolve this matter through the fee petition and final approval process,"  Moore said before asking that the court either dictate the allocation of the fees or simply order their distribution.  Porter followed up the next day, saying that he would not address Moore’s views on the fees allocations "except to note that Mr. Moore’s firm breached the agreement and its duties to the class in Spring 2018 by failing to pay its share of expert expenses (which share my firm paid)."

According to Porter, McTigue refused to respond to emails from Porter asking to confer on the management and financing of the case "given McTigue’s financial condition."  The letter goes into no further details on the expense dispute.  "In sum, the court should not entertain the issues raised in Mr. Moore’s letter without first deciding our motion to compel arbitration," Porter said.

The two firms secured a $6.9 million settlement last summer for a class of current, former and retired Citigroup employees who claimed since 2007 that a Citigroup committee stuffed the company’s 401(k) plan with Citigroup-affiliated funds even though other funds charged lower fees.  Moore, whose firm was allocated more than 77 percent of the lodestar, said in August, "the case was hard-fought for over a decade, and we think the result is an excellent one for plan participants."

The case is Leber et al. v. The Citigroup 401(k) Plan Investment Committee et al., case number 1:07-cv-09329, in the U.S. District Court for the Southern District of New York.

Potential $550M Fee Award in Pelvic Mesh Litigation

February 4, 2019

A recent Law.com story by Amanda Bronstad, “Judge Grants Potential $550M in Pelvic Mesh Fees, Allocation Fight Looms,” reports that a federal judge has issued an order that could result in about $550 million in common benefit fees and expenses to plaintiffs lawyers in the transvaginal mesh litigation, setting the stage for a possible fight over who gets what.  U.S. District Judge Joseph Goodwin of the Southern District of West Virginia, who is overseeing seven MDL proceedings that at one point surpassed 100,000 lawsuits, granted a request from a fee and cost committee that defendants hold back five percent of all settlements and judgments to pay common benefit counsel.  He rejected three objections from law firms including Philadelphia’s Kline & Specter, which had sought to halve that request, calling the mesh settlements “puny” in comparison to the jury verdicts.

“The court notes that this percentage results in a substantial amount of money awarded to common benefit counsel,” Goodwin wrote in his Jan. 30 order.  “However, based on the numerous factors discussed above and the awards given in similar MDLs, this court believes that the award given is conservative and serves to justly compensate common benefit counsel for their work without unnecessarily burdening the plaintiffs in this litigation.”  In court documents, Henry Garrard of the Law Office of BBGA in Athens, Georgia, who is chairman of the fee committee, had called Kline & Specter’s criticisms “blatant hypocrisy.”

“The court correctly notes that the most important factor in assessing such a fee request is the result obtained,” wrote Kline & Specter’s Shanin Specter, in an email.  “The core of our objection is that the cases were settled for way too little and therefore the lawyers are asking for way too much.  That objection was simply not addressed.  Unfortunately, the court did not look at how much was obtained per claimant and whether these recoveries were good or bad, individually or generally.”

The eight lawyers on the fee committee made their request Nov. 12.  They estimated that about 680,000 of the 900,000 hours that 94 law firms worked on the case was for the common benefit of everyone and sought a hold-back that would grant $366 million in common benefit fees based on the $7.25 billion in settlements so far.  The final settlement price tag, though, could be closer to $11 billion, granting about $550 million in fees in the end.

In a Nov. 26 objection, Specter wrote that the hold-back should be 2.5 percent, noting that the average settlement was about $40,000, while the average award for the cases that have gone to trial is about $9.8 million.  Many of those were in state court, such as a $57 million award that Specter won against Johnson & Johnson’s Ethicon Inc. subsidiary in 2017.  Last week, Thomas Kline and Kila Baldwin of Kline & Specter secured another $41 million verdict against Ethicon.  Specter also found fault in lead counsel’s failure to get a global settlement, which he said was proof that that its work was not for the common benefit.

“The court strongly disagrees,” Goodwin wrote in his order.  “Far from failing to provide a common benefit in the form of a global settlement, the plaintiffs’ leadership facilitated the settlement of tens of thousands of cases through its persistent efforts to weaken the defendants’ factual and legal standing compared to individual women across the country.  Plaintiffs’ leadership also provided the MDL plaintiffs with all the work-product they created and educated individual plaintiff attorneys on how to prosecute a pelvic mesh case.  These are global benefits.”

The judge called other arguments “premature.”  Those included Specter’s claim that the fee committee hadn’t provided certain documents and that work by other firms would be uncompensated.  “K&S is essentially arguing certain slices of the pie are too small before the court has even issued its order determining the size of the pie,” he wrote.  “The purpose of this court’s order is to evaluate the reasonableness of the aggregate proposed award that will be individually allocated in a later order.”

More generally, he found the fee request to be “very reasonable” given the investment of tens of millions of dollars, the complexity of the cases and, most importantly, the amount obtained.  He calculated the lodestar—or the total amount billed multiplied by an average hourly rate of $400—to be less than $272 million.  But the award, he wrote, was comparable to other “super-mega-fund” cases, like the $2.4 billion settlement over Actos, in which a judge assessed an 8.6 percent holdback.  He called the other two objections “untimely.”

One of those, by Andrus Wagstaff, which hired Blank Rome attorney Andrew Williamson to file its objection, alleged that the fee committee hadn’t treated the firm fairly.  Another came from Philadelphia’s Sheller, which on Jan. 18 called the fee request a “ ‘smoking gun’ admission” that the fee committee had been “hijacked by a small band of profiteers, outrageously demanding unsupervised use of the common benefit fund as their personal ATM.”

Other firms did not challenge the hold-back percentage overall but have grumbled about the specific amount that the fee committee has earmarked for them—a fight that could magnify in the coming months as special master Dan Stack, a retired judge on the Madison County, Illinois, Circuit Court, reviews the fee allocation.

“Eight law firms took two-thirds of the money, and 91 firms got the rest,” said partner Adam Slater.  “We are hopeful and optimistic that Judge Stack, and, ultimately, Judge Goodwin, will apply the criteria in a fair and equitable way to fairly compensate all the law firms.”  The fee committee also got support from other law firms.  Those included San Francisco’s Levin Simes Abrams; Birmingham, Alabama’s Freese & Goss; and Matthews & Associates in Houston.

Receiver Attorneys Awarded $15.5M in Fees in Stanford Ponzi Scheme

February 1, 2019

A recent Law 360 story by Reenat Sinay, “Attys Awarded $15.5M in Fees After Stanford Ponzi Deal,” reports that a Texas federal judge has awarded fees of nearly $15.5 million to the attorneys representing a court-appointed receiver and a group of investors in their suit against Proskauer Rose LLP over its former partner's participation in R. Allen Stanford's $7 billion Ponzi scheme.  A team of lawyers from Castillo Snyder PC, Clark Hill Strasburger PLC and Neligan LLP led the investors to a $63 million settlement with Proskauer in August, bringing six years of litigation to a close.

U.S. District Judge David C. Godbey said that the award, which represents 25 percent of the settlement amount, was warranted due to the "extraordinarily complex" litigation involved in the case.  "The court finds that the 25 percent contingency fee agreements between plaintiffs and plaintiffs' counsel is reasonable and consistent with the percentage charged and approved by courts in other cases of this magnitude and complexity," Judge Godbey said.  "The attorneys' experience, reputation and ability also support the fee award."

The court-appointed receiver for the investors, Ralph S. Janvey, and the official Stanford investors committee had Proskauer in their sights because Thomas V. Sjoblom, a former attorney with the firm, allegedly helped R. Allen Stanford's bank hide his shady dealings from the U.S. Securities and Exchange Commission beginning in 2005.  The former financier defrauded tens of thousand of investors in a $7 billion Ponzi scheme in which he misused or misappropriated certificates of deposit purchased by investors and administered by Stanford International Bank.

Stanford Financial Group retained Sjoblom, then a partner at Chadbourne & Parke LLP, to represent several Stanford-affiliated entities in connection with the SEC investigation.  Sjoblom joined Proskauer in August 2006 and continued to represent Stanford Financial until February 2009, when the SEC accused R. Allen Stanford of running the multibillion-dollar fraud.  Sjoblom left Proskauer in September 2009. Stanford was convicted in 2012 and is serving a 110-year prison sentence.

Judge Godbey pointed to the "nature and length" of the investors' relationship with their counsel as further justification for the requested attorneys’ fees.  The investors' lawyers have collectively invested more than $16 million and more than 14,600 hours of work in the Stanford case overall since 2009, according to the order.

"Plaintiffs' counsel have represented the receiver, the committee and investor plaintiffs in numerous actions pending before the court in connection with the Stanford receivership since 2009," the judge said.  "The Stanford receivership and the litigation are extraordinarily complex and time-consuming and have involved a great deal of risk and capital investment by plaintiffs' counsel as evidenced by the declarations of plaintiffs' counsel submitted in support of the request for approval of their fees," Judge Godbey said.

Judge Godbey also held that the requested fees were far less than what many firms would have asked for in a similar situation.  "The 25 percent fee requested is also substantially below the typical market rate contingency fee percentage of 33 percent to 40 percent that most law firms would demand," Judge Godbey said.

The case is Janvey et al. v. Proskauer Rose LLP et al., case number 3:13-cv-00477, in the U.S. District Court for the Northern District of Texas.

Select Income REIT Challenges Fee Request in Merger Suit

January 30, 2019

A recent Law 360 story by Reenat Sinay, “REIT Fights Investor’s Attys’ Fee Bid Merger Suit,” reports that Select Income Real Estate Investment Trust hit back at an investor’s request for “an exorbitant $350,000” in attorneys’ fees in his putative class action over a proposed merger with Government Properties REIT, arguing in New York federal court that the shareholder’s counsel is not entitled to a fee award under federal law.  Select Income said Monteverde & Associates PC, which is representing lead plaintiff Jesse Chen, cannot collect attorneys’ fees because the Private Securities Litigation Reform Act (PSLRA) bars awards in cases where the class did not receive damages or a monetary settlement, such as this one.

Chen had alleged that Select Income violated federal securities laws by not disclosing “certain immaterial minutiae” in filings related to the proposed deal.  Chen’s suit was followed by a host of copycat lawsuits in which other minor shareholders accused Select Income of failing to disclose “superfluous details” surrounding the transaction, the trust said.  Select Income reached an agreement with the other plaintiffs and released supplemental information in December about its now-completed merger with Government Properties “solely to avoid any further nuisance, distraction and expense,” it said.  After those additional disclosures, Chen withdrew his motions for preliminary injunction and expedited discovery, according to the opposition.

“Crediting this litigation conduct would encourage meritless nuisance litigation and contravene the express goals of the PSLRA,” Select Income said.  “As a threshold matter, plaintiff’s fee petition should be denied outright pursuant to the PSLRA because plaintiff has conferred no monetary benefit on the putative class.”  Chen filed suit on Nov. 9, ahead of a planned Dec. 20 shareholder vote on the merger.  He alleged that the company’s October proxy statement was misleading because it lacked details about Select Income’s financial projections, the valuation analyses performed by UBS Securities LLC and any potential conflicts of interest faced by UBS, among other information.

The trust responded by accusing Chen of merely following a recent trend of investor suits over company mergers and of presenting no real allegations of unfairness, false statements or breach of fiduciary duties on the part of its board of trustees.  Select Income also accused Monteverde of developing a pattern of filing award-seeking “strike suits” in federal court after a recent wave of criticism of such suits in various state courts.

It opposed the “extravagant” fee requested by Chen on behalf of Monteverde, arguing that the calculation does not make sense and is not warranted by the settlement result.  “Plaintiff’s fee demand is based on a 3.16 lodestar multiplier, which implies an average hourly rate of $1,683.50,” the trust said.  “This should be a nonstarter.  The boilerplate nature of plaintiff’s disclosure claims and the lack of any appreciable contingency risk in this case justify, at most, a nominal fee award.”

Select Income also contended that the terms of the settlement with the other plaintiffs, in which extra merger details were divulged in return for dismissal of all claims, provided very little actual benefit to those shareholders and therefore would not justify such a large fee award.  “Even if the PSLRA did not bar the fee petition (and it does), plaintiff has failed to establish that he pled a meritorious claim or that the supplemental disclosures provided a substantial benefit to SIR’s former shareholders, as required for an award of fees under the pre-PSLRA case law on which plaintiff extensively relies,” the trust said.

The case is Chen v. Select Income REIT et al., case number 1:18-cv-10418, in the U.S. District Court for the Southern District of New York.