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Category: Contingency Fees / POF

Plaintiffs Firm Sues for Fees in Celgene $280M Settlement

August 16, 2017

A recent Bloomberg Big Law Business story by Max Siegelman, “Plaintiffs Firm Sues for Fees in Celgene $280M Settlement,” reports that court filings show plaintiffs law firm Grant & Eisenhofer is suing their former client and their former co-counsel from a $280 million settlement against pharmaceutical giant Celgene Corporation.

G&E claims it racked up a $7 million tab that has not been paid since the case was settled in July, and that it is entitled to a share of the contingency fee for the recovery effort.  Their original deal would have won the firm anywhere between $28 and $33 million, according to the complaint filed in California federal court.

In 2010, G&E filed a complaint against the pharmaceutical company Celgene on behalf of Beverly Brown, one of its former sales managers.  According to that complaint, the company pressured Brown and others to promote the drug Thalomid as a treatment for bladder, breast and brain cancer, despite lacking FDA approval for these uses.  As part of its marketing plan, the complaint alleged, Celgene dispatched over 100 “agents,” to hospitals and doctors offices around the country to aggressively push the drugs and their untested results.

The case was settled for $280 million in July, 2017.  Most of the settlement is earmarked for the federal government, 28 states and Washington D.C.  The payment is equivalent to about two weeks worth of sales of Revlimid, which generated $6.97 billion in revenue for Celgene last year, according to data compiled by Bloomberg News.

G&E is suing Brown, California firm Bienert, Miller & Katzman, and South Carolina based Richard Harpoolitan on the grounds that those firms and a former G&E director Reuben Guttman, poached Brown as a client after Guttman left the firm.  They are suing for breach of contract, intentional interference with contract, quantum meruit and declaratory relief in the U.S. District Court in the Central District of California.

The claims stem from a frayed relationship between the firm and Guttman, who took on the plaintiff Brown as a client in 2009, according to the complaint.  He left the firm in early 2015 and shortly after, Brown replaced the G&E legal team with Guttman and another former lawyer from the firm who later started a firm with Guttman called Guttman, Buschner & Brooks PLLC.

Despite the switch, G&E claims it should be compensated for the work it performed on behalf of Brown in the case.  According to the G&E complaint, whistleblowers typically receive 25 to 30 percent of the settlement.  Given the $280 million settlement with Celgene, that means Brown could receive anywhere from $70 to $84 million as a whistleblower “bounty,” some of which will go to her legal team.  According to G&E, their original deal with Brown would have won the firm a 40 percent contingency fee — anywhere between $28 and $33 million.

Law Firms Dispute Attorney Fees in Nearly 200 NFL Concussion Cases

August 15, 2017

A recent Legal Intelligencer story by Max Mitchell, “Fla. Firms Challenge Fee Liens in Nearly 200 NFL Concussion Cases,” reports that four Florida law firms that banded together into a limited liability company are disputing attorney fees in nearly 200 cases that resolved under the National Football League's settlement over concussion-related conditions.

The firms, which formed a professional limited liability company called Neurocognitive Football Lawyers PLLC, filed objections to attorney liens filed in 184 cases pending in the U.S. District Court for the Eastern District of Pennsylvania.  The objections contend that the attorneys who filed the liens at issue do not currently represent the 184 former players, and those attorneys failed to properly file those liens with the court, or provide any material benefits to their former clients.

"The vast majority of the liens were asserted by former individual counsel who filed boilerplate lien notices with no detail, or with scant detail reflecting any beneficial service that may have been performed for each listed NFL player before the effective date of the settlement," the objection, filed by Theodore Karatinos of Holliday Karatinos Law Firm in Tampa, Florida, said.  "While prior counsel may assert a quantum meruit lien after being discharged, most of the discharged counsel failed to prove that their legal services conferred substantial benefits to their clients, the former NFL players."

In 2013, the NFL agreed to settle the roughly 20,000-plaintiff multidistrict litigation for about $1 billion.  Some players sought—and failed--to challenge the accord, and some opt-out plaintiffs were recently given permission to outline a new set of claims against a company that made football helmets.

In February, lead attorneys in the litigation also filed a request asking the court to award $112.5 million in legal fees.  Since that time numerous attorneys have sought to score their piece of the potential fees.

The objection filed was not the first time the Neurocognitive Football Lawyers have disputed with others over the fees.  In March, the group asked the court to appoint a special fee master to look into the proposed fee agreements, and challenged the amount proposed be set aside for the lawyers.

The latest objection for the four firms focused on the argument that the prior counsel could not show the plaintiffs received any benefit from their former attorneys' representation, and contended that some of the discharged firms did not register the player with the claims administrator.

"Sending emails and form letters to the former NFL players with updates on the progress of the concussion class action before the claims process opened constituted an immaterial legal service," the objection said. "Where the former NFL player could simply Google the case website or secondary news source for updates on the progress of the case, legal services which merely updated the clients provide no 'reasonable value.'"

The objections also said that Pennsylvania law does not allow a discharged attorney to assert a lien on an unmatured contingency fee, and that many of the firms were unable to produce a fee agreement for the court to evaluate the claims.

Judge Questions Fee Request in Vibrator Privacy Action

August 8, 2017

A recent Law 360 story by Sophia  Morris, “Judge Questions $1.12M Atty Fees in Vibrator Privacy Suit, reports that an Illinois federal magistrate judge recommended a lowered fee award for attorneys who represented a proposed class of consumers who alleged a sex toy maker had secretly collected user data from an internet-connected vibrator, saying more information is needed on whether their $1.12 million fee request reflected the amount of work put into the case.

U.S. Magistrate Judge Michael T. Mason said the attorneys who secured a $3.75 million settlement for the proposed class had not shown that their request for fees totaling 33.3 percent of the settlement fund was justified, given that the case settled less than three months after it was filed.  But despite his concerns, Judge Mason said that as there were no objections to the request, he recommended that the attorneys submit a lodestar calculation of their fees and then be awarded 30 percent of the settlement fund.

“In a fee petition, class counsel often provide the court with some indication of the number of hours spent working on the litigation, although in this case, plaintiffs’ counsel failed to do so,” Judge Mason said in his report and recommendations.  “This omission is a red flag; we are concerned that class counsel did not want the court to know how much (or little) time was spent before their request for $1.12 million in fees.”

The suit was filed in September with anonymous lead plaintiffs N.P. and P.S. alleging that Standard Innovation Corp. had collected user data from the vibrators and app — including intimate user preference details such as date and time of each use, the chosen vibration intensity and pattern, and the email addresses of users who registered with the app — without their knowledge or permission.

In March, Standard Innovation agreed to set up two settlement funds: $3 million to go toward users of the app and $750,000 toward purchasers of the vibrator.  Roughly 300,000 customers have purchased the vibrators, and about 100,000 use it with the app, according to the settlement memo.  As part of the agreement, which was given preliminary approval, the company will stop collecting data from its We-Vibe sex toy and destroy all the data it had collected.

Although the motion for approval of the settlement was filed in March, the parties actually reached a deal in December.  Judge Mason noted that in their June fee request, the attorney pushed for 33.3 percent of the settlement fund by citing complex cases that took years to resolve and involved time-consuming discovery.  But given that this case was speedily resolved and involved no court time, Judge Mason questioned how much time the attorneys had actually needed to investigate and research their clients’ claims.

“In light of the circumstances of this case, it seems excessive and unreasonable to award plaintiffs counsel fees of $1.12 million when many class members are only receiving $20 for their claims,” he said.  Judge Mason did recommend that the requested $5,000 incentive award be given to the named plaintiffs, even though they never had to sit for a deposition or respond to discovery.  He said it was justified “given the sensitive and personal nature of the allegations at issue here.”

The case is N.P. v. Standard Innovation (US) Corp., case number 1:16-cv-08655, in the U.S. District Court for the Northern District of Illinois.

A New Standard for Attorneys’ Fee Awards in Copyright Cases

August 4, 2017

A recent article in Law 360 by Barry I. Slotnick and Tal E. Dickstein of Loeb & Loeb LLP, “A New Standard for Attorneys’ Fee Awards in Copyright Cases,” reports on the standard for shifting attorneys’ fees in copyright litigation.  This article was posted with permission.  The article reads:

Earlier this month, the U.S. Supreme Court issued its decision in Kirtsaeng v. John Wiley & Sons Inc. on the standard for shifting attorneys’ fees in copyright litigation.  Because copyright litigation is often expensive, and the opportunity (or risk) of an attorneys’ fees award plays a significant role in deciding whether to bring (or settle) a case, the decision was much anticipated among the media and entertainment industry as well as the copyright bar.  While the court’s decision — which directs lower courts to give significant weight to a losing party’s objectively unreasonable litigation position — is likely to deter some amount of meritless copyright litigation, the inability to collect a fee award from an impecunious litigant sometimes requires resort to other methods of deterrence.

The Need for a Uniform Standard

The Supreme Court last addressed the standard for shifting attorneys’ fees under Section 505 of the Copyright Act in 1994.  The court in Fogarty v. Fantasy Inc. held that courts must treat prevailing defendants the same as prevailing plaintiffs when deciding whether to issue an attorneys' fee award, but it offered little guidance on the standard to be applied in making that decision.  In the absence of a definitive standard, the lower courts have looked to a footnote in Fogarty that identified several nonexclusive factors used in deciding whether to issue a fee award: frivolous, motivation, objective unreasonableness (both factual and legal), and the need for compensation and deterrence.

Without clear direction from the Supreme Court as to how these factors were to be weighed, the courts of appeal differed widely in how they considered attorneys' fee motions.  Some adopted a presumption in favor of fee awards, others endorsed a case-by-case determination, focusing on the four Fogarty factors, while others permit district courts to look to as many as a dozen other factors.  The Second Circuit, for its part, focused primarily on the reasonableness of the losing party’s position.

Kirtsaeng’s Journeys to the Supreme Court

When the Supreme Court granted certiorari, it punched Supap Kirtsaeng’s ticket for a second trip to the high court.  His first visit stemmed from a textbook arbitrage business that he launched while studying at Cornell University.  Kirtsaeng bought low-cost foreign-edition textbooks in his native Thailand, shipped them to the United States, and resold them for a profit.  When the textbook publisher, John Wiley, sued for copyright infringement in the Southern District of New York, Kirtsaeng relied on the first-sale doctrine, which permits the resale of copies of copyrighted works.  The trouble for Kirtsaeng was that most courts, including the Second Circuit, had held that the first-sale doctrine did not apply to copies made outside the United States.  Kirtsaeng litigated the issue all the way to the Supreme Court, which handed him a 6-3 victory, ruling that the first sale doctrine does, in fact, apply to copies made outside the United States.

Although he prevailed in the Supreme Court, the district court denied Kirtsaeng’s attempt to recover his attorneys’ fees — including more than $2 million spent on the Supreme Court appeal — finding that none of the other Fogerty factors outweighed John Wiley’s reasonable litigation position.  The Second Circuit affirmed, and Kirtsaeng again successfully petitioned for a writ of certiorari to the Supreme Court.

Objective Unreasonableness Given Significant Weight

Justice Elena Kagan, writing for a unanimous court, first rejected Kirtsaeng’s contention that fees should be awarded where a lawsuit has clarified the boundaries of the Copyright Act.  That standard was both unworkable, because the ramifications of a case might not be fully known until far in the future, and unlikely to encourage meritorious litigation, because a fee award would be tied more to a litigant’s appetite for risk rather than the reasonableness of its litigation position.

Instead, the court held that substantial weight should be given to the objective reasonableness of the losing party’s litigation position.  That approach would best promote the purposes of the Copyright Act — encouraging creative expression, while also allowing others to build on existing works.  An emphasis on objective reasonableness would, according to the court, “encourage parties with strong legal positions to stand on their rights and deters those with weak ones from proceeding with litigation.”

While objective (un)reasonableness will play an outsized role in deciding wither to shift fees, the court explained that district courts must still consider fee motions on a case-by-case basis, considering all of the circumstances.  The court identified two scenarios in particular that could warrant fees despite the losing party’s reasonable position — where the loser engaged in litigation misconduct, or where a party engaged in repeated instances of infringement or overaggressive assertions of copyright claims.

Other Methods of Combating Frivolous Copyright Litigation

In many cases, the Supreme Court’s decision will no doubt discourage meritless litigation.  A plaintiff whose copyright ownership is questionable, or who has scant evidence of infringement, is unlikely to file suit, out of fear that it will have to pay the defendants’ attorneys’ fees.  And a defendant who has no colorable defenses is unlikely to put up much of a fight, lest it be forced to pay the plaintiffs’ attorneys’ fees, on top of a damages award and the costs of any injunctive relief.

But this is true only where a party has something to lose from an adverse fee award.  All too often, it seems, individuals with little or no resources bring frivolous infringement claims against well-known celebrity or entertainment-industry defendants, in the hopes of extracting a nuisance settlement, or of surviving to a jury trial where they rely more on sympathy than evidence.  For these impecunious plaintiffs — who are often assisted by contingency counsel — the risk of an attorneys’ fee award is not an effective deterrent, because they are essentially judgment-proof.

One method of combating this type of frivolous litigation is to seek sanctions against the plaintiffs’ counsel under Rule 11 of the Federal Rules of Civil Procedure, which prohibits filings that lack evidentiary or legal support, or under or Title 28, Section 1927 of the US Code, which targets unreasonable and vexatious litigation.  Unlike an attorneys’ fee award under Section 505 of the Copyright Act, which can be issued only against a party, a sanction under Rule 11 or Section 1927 can be imposed on counsel.  And while courts are sometimes reluctant to sanction lawyers for fear of chilling meritorious litigation, in truly egregious cases, seeking sanctions against counsel may be the only way to avoid having to litigate meritless copyright infringement claims.

Barry Slotnick and Tal Dickstein are partners in Loeb & Loeb's New York office.

Fee Dispute Between Firms in SAC Capital Case

August 2, 2017

A recent New York Law Journal story by Christine Simmons, “Reed Smith Battles Rival Firms Over Fees, Conflicts in SAC Capital Case,” reports that two plaintiffs firms are urging New York judges to deny Reed Smith's claim to $6.75 million in attorney fees for its work as co-counsel in a securities class action, claiming the traditionally defense-side firm misled them in stating it was free from conflicts.

Wohl & Fruchter, a four-attorney firm that was class counsel with Pomerantz, contends Reed Smith should not be allowed any portion of a $27 million attorney fee award obtained in May in the class action against SAC Capital Advisors and other defendants.  "No reasonable attorney would have supported Reed Smith's continued representation of the plaintiffs," said the class counsel firms, represented by Paduano & Weintraub in the fee dispute, in explaining why the firm was terminated.

The fee dispute became heated in June when Reed Smith filed a lawsuit in Manhattan Supreme Court against Wohl & Fruchter and name partner Ethan Wohl, alleging tortious inference with a contract and unjust enrichment.  Reed Smith claims that Wohl & Fruchter, when looking for co-counsel, realized that it was a small firm "overmatched by the resources available to the SAC defendants," represented by Paul, Weiss, Rifkind, Wharton & Garrison, Willkie Farr & Gallagher, Goodwin Procter and Bracewell.

Under its engagement letter, Reed Smith said it immediately committed significant resources to the SAC action.  And soon after Reed Smith filed notices of appearance in the case, the SAC defendants reached out to Wohl for settlement discussions, Reed Smith said.  "Reed Smith's appearance was the obvious catalyst for the settlement discussions, which proved to be successful," the firm claims.

But Reed Smith asserts that when counsel for the SAC defendants at Paul Weiss mused about a possible conflict involving Reed Smith before Southern District Judge John Koeltl, the Wohl firm saw an opportunity to eliminate Reed Smith.  "[Wohl] intentionally exploited Paul Weiss' statements in order to malign Reed Smith and to induce the lead plaintiffs to terminate the engagement agreement," Reed Smith said.

Wohl and his firm deliberately blocked and excluded Reed Smith from any interactions with the lead plaintiffs or opposing counsel in the SAC case, Reed Smith claims.  Reed Smith's engagement agreement states if the firm is terminated for any reason other than good cause," Reed Smith will continue to be entitled to the contingent fees," the firm notes.

Reed Smith was originally represented in the fee dispute by Marc Kasowitz at Kasowitz Benson Torres.  Earlier this month, Dechert partners Gary Mennitt and Andrew Levander replaced Kasowitz as Reed Smith's counsel.  Hitting back, the Wohl firm has moved to dismiss Reed Smith's case in state court.  It also brought a motion in the federal securities case last week, urging Koeltl to deny the fee claims and enjoin the state lawsuit.

Wohl and Pomerantz said Reed Smith should be barred from asking for fees because it chose not to apply for fees before the federal court and because its claim is too late.  The firms argue Reed Smith represented the plaintiffs "for less than a week," and the firm was dismissed after admitting it was not free from conflict.  "Its conflicts of interest and lack of candor fully justified class counsel's determination that it should be terminated," they said.