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Category: Fee Allocation / Splitting

$3.8M in Attorney Fees Sought in Sorin MDL

March 30, 2020

A recent Law 360 story by Matthew Santoni, “Anapol Weiss Seeks Much of $3.8M Sorin MDL,” reports that Anapol Weiss is seeking nearly $2 million for helping clients reach a global settlement over allegations that the former Sorin Group USA’s heater-coolers put heart surgery patients at greater risk of contracting dangerous bacterial infections, according to a filing in Pennsylvania federal court.  In its filing, the firm sought approval of a total of $3.8 million in fees and $441,000 in expenses for itself and 14 other firms that had worked toward a $225 million global settlement with Sorin, now known as Livanova PLC, which would leave about $334,000 in a common fund established for payment of fees and expenses to benefit all the cases gathered together under the multidistrict litigation.

“The size of the global settlement fund is approximately [$225 million] and a substantial number of individuals benefitted from the settlement program devised by lead counsel and members of the [plaintiffs’ executive committee], including plaintiffs with suits in the MDL and various state courts as well as others with unfiled claims,” the petition said.

As lead counsel, Anapol Weiss sought $1.7 million in fees and more than $250,000 in expenses for nearly 2,000 hours of “common benefit” work, with other firms —  including Johnson/Becker PLLC, Hayes Lorenzen Lawyers PLC and Chaffin Luhana LLP —  claiming the rest of the request for $3.8 million in fees and $440,000 in expenses from the fund.  Anapol Weiss also asked U.S. District Judge John E. Jones III to reduce the 6 percent assessment he’d put on all monetary recoveries in the MDL that fed into the common benefit fund.

In the original lawsuit, filed in 2016, lead plaintiffs Edward Baker and Jack Miller had sought medical monitoring and a declaration from the court that the Sorin 3T heater-cooler device, used to control the temperature of a patient’s blood during open-heart surgeries, was defective.  The devices allegedly made patients more susceptible to a slow-growing but potentially fatal bacterial infection from a family of bacteria known as nontuberculosis mycobacterium, or NTM.

Spearheaded and hosted by Johnson/Becker, the executive committee gathered data on potential claimants and negotiated the proposed settlement with Livanova, the petition said. Livanova and Anapol Weiss announced that they had reached a global settlement in March 2019, while the Baker case reached its own settlement in October.

The petition said the fees were reasonable given the amount of work required, the complexity of the case and the relative size of the global settlement.  “The current request for a total fee award of $3,750,000 represents less than 2% of the global settlement and is well within the range deemed reasonable in similar cases,” the petition said.

An earlier case management order had set an assessment of 6%  from each claimant’s monetary awards, including 2% for common-benefit fees and 4% for expenses.  Though it did not set a new target, Anapol Weiss requested that the court lower the assessment based on costs so far, and streamline the allocation of money from the fund.

“The actual common benefit costs were only 0.19% of each claimant’s gross monetary award,” the petition said. “Lead counsel requests that CMO 5 be modified to reduce the cost assessment and eliminate the need for a CPA to review the time and expenses as there is an agreement for the allocation among all counsel receiving a common benefit fee award and/or common benefit expense reimbursement.”  The remainder of the common benefit fund would be reserved for any future common work and the estimated $3,200-a-month cost of maintaining an online document repository, the petition said.

Law Firms Win Suit Over Pelvic Mesh Attorney Fees

March 27, 2020

A recent Law 360 story by Bill Wichert, “NJ, Texas Law Firms Beat Suit Over Pelvic Mesh Atty Fees,” reports that a New Jersey federal judge nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms over allegedly excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, saying Texas law governed the claims and permitted the fees.  U.S. District Judge Madeline Cox Arleo granted the firms' motions to dismiss an amended suit from plaintiffs Debbie Gore and Doris Lance-Smith over claims their retainer agreements ran afoul of a New Jersey rule capping contingent fees, noting that the fees were paid as part of settlement awards approved by a special master and a state judge in the Lone Star State.

The Garden State rule "does not apply and the fees awarded to defendants were entirely consistent with Texas law," Judge Arleo said in her written opinion.  The fee arrangements allowed the women's lawyers to receive 40% of their settlements, but Texas law has no particular cap on contingent fees, the judge said.  Under the New Jersey rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts, and those fees must be based on the "net sum recovered" after deducting expenses.

Gore and Lance-Smith cited no authority for extending that rule "to litigation settled in a foreign court by out-of-state lawyers representing out-of-state plaintiffs who sustained injuries outside of New Jersey," according to the judge's opinion.  Nagel Rice, which is based in New Jersey, did not receive any of the fees in question, but Potts and other Texas firms did, the opinion said.

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims they suffered injuries from allegedly defective pelvic mesh products, the opinion said.  Lance-Smith retained Potts in June 2012 to litigate such claims, the opinion said.  The following May, Gore retained a firm then known as Steelman & McAdams PC and partner Annie McAdams to pursue similar claims, the opinion said.

About two months later, Gore agreed to McAdams working and splitting attorney fees with a firm then known as Bailey Perrin Bailey LLP, the opinion said.  In July 2014, Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court "as part of the New Jersey iteration of the mesh litigation," the opinion said.  Nagel Rice and firm partner Andrew L. O'Connor were listed as the women's attorneys, with Potts and firm partner Derek Potts listed as co-counsel, the opinion said.

Those complaints represent the only connection in the current matter to New Jersey, but beyond them being filed, state dockets indicate that "no litigation activities occurred" and that those matters are now closed, Judge Arleo noted.  The settlements and fee awards at issue stem from a master settlement agreement reached in August 2016 between Potts Law Firm, among other firms, and J&J and Ethicon, the judge said.  That deal was administered through a Texas state court case, the judge said.  Judge Arleo pointed to that Texas link in finding that that state's law governed the proposed class action.

The judge noted that "the complex settlement process, which plaintiffs consented to after ample opportunity for objection, was reached by negotiations between Ethicon and Texas law firms and was administered by the Texas state court and a Texas special master."

"Indeed, no New Jersey law firms or lawyers were even listed as receiving contingency-based attorneys' fees as part of plaintiffs' settlements," the judge said.  "As such, the state with the most-significant relationship to the substantive claims at issue is Texas."

Adam M. Slater of Mazie Slater Katz & Freeman LLC, representing Gore and Lance-Smith, on Wednesday said they would appeal the judge's decision.  "When a case is filed in New Jersey, the New Jersey Court Rules apply, including the contingency fee rule.  According to this decision, the New Jersey contingency fee rule can be easily side stepped, allowing personal injury plaintiffs to be charged 40% contingency fees, in an MDL or any other New Jersey case," Slater told Law360.

$245M in Attorney Fees in Pinnacle Hip Implant MDL

March 12, 2020

A recent Law.com story by Amanda Bronstad, “Lawyers Suing Over DePuy’s Pinnacle Hip Implant Set to Receive $245M,” reports that a federal judge has approved an estimated $245 million in fees and costs to lawyers leading the multidistrict litigation over Pinnacle hip implants, of which more than 75% will go to the five firms in charge of allocating the award.  The order by U.S. District Judge Ed Kinkeade of the Northern District of Texas approved a special master’s report last month that recommended a disbursement of $215 million, which is the amount calculated from settlements so far, including $182.5 million in “common benefit” fees to about 40 law firms whose work assisted in 10,000 lawsuits over the Pinnacle.  The amount also includes nearly $7.9 million in expenses and $24.7 million for reimbursements of contributed assessments.

“This was unlike any litigation of my 35 years,” wrote Mark Lanier, whose firm, The Lanier Law Firm, is set to receive $77.2 million in fees after winning billions of dollars in verdicts against DePuy Orthopaedics Inc., a unit of Johnson & Johnson.  “Nine years of litigation; five trials, generally of three months each; over 30 million dollars spent; and a defendant that refused to engage in settlement discussions until the very end.  Many firms abandoned the litigation, as reflected by time entries and failure to pay assessments.  The judge’s distribution tracked carefully the time, money and level of work and commitment of firms.”

Lanier is one of five lawyers on a fee committee tasked with reviewing how much each firm should get.  He is co-lead counsel in the multidistrict litigation with Larry Boyd, of Houston’s Fisher, Boyd, Johnson & Huguenard, which is set to receive $17.2 million in fees.  Another firm, Neblett, Beard & Arsenault of Alexandria, Louisiana, is set to receive $47.9 million in fees.  Partner Richard Arsenault, who is on the plaintiffs executive committee, noted in an email that Kinkeade specifically mentioned in a Sept. 11 order that “the fee committee was composed of the primary hands-on lawyers.”

“Additionally, as a consequence of many firms abandoning the litigation, the fee committee members were required to bear over 90% of the litigation’s costs and contributed over 83% of the common benefit hours,” Arsenault wrote.  Another executive committee member, Jayne Conroy, is from Simmons Hanly Conroy in New York, to which the special master allocated $32.1 million, along with $11.4 million to its predecessor, Hanly Conroy Bierstein Sheridan Fisher & Hayes.  The fifth lawyer on the fee committee, Steve Harrison, is from Harrison Davis Steakley Morrison Jones, of Waco, Texas, which the special master ordered would receive nearly $2.7 million in fees.

In 2014, Johnson & Johnson won the first bellwether trial, but federal juries in Dallas followed with verdicts of $502 million, $1.04 billion and $247 million.  Johnson & Johnson agreed to pay nearly $1 billion to settle more than half of the cases in 2019.  In 2018, the U.S. Court of Appeals for the Fifth Circuit reversed the $502 million jury award, finding that Kinkeade had committed “serious evidentiary errors” and allowed Lanier to make “misrepresentations” before the jury.

In a prior ruling, a split Fifth Circuit also criticized Kinkeade for committing “grave error” in asserting jurisdiction over certain bellwether trials, which have featured plaintiffs in California and New York.  In a July 22 order approving a 10% holdback on all future settlements for common benefit fees following a contested fee fight, Kinkeade gave a stinging rebuke of Johnson & Johnson’s lawyers, whose “actions increased both time and expenses incurred for the common benefit throughout every phase of this litigation.”

He cited two motions for sanctions that plaintiffs attorneys had filed earlier last year that accused Johnson & Johnson’s lawyers of failing to disclose discovery that would have demonstrated “ghostwriting” of scientific studies, among other things.  “Those documents are a bombshell,” plaintiffs’ attorneys wrote in one of the sanctions motions, and represented a “long-standing problem” in the cases.  “Throughout the course of this MDL, defendants’ conduct has repeatedly followed a pattern of obfuscation and obstruction.”

Kinkeade also cited the novelty of the issues and the “undesirability” of the cases in approving the holdback.  “Plaintiffs could have agreed to a settlement that devalued their claims,” the judge wrote.  “Instead, plaintiffs’ counsel fought through years more discovery, three more trials, two mandamus proceedings, and three appeals just to reach this settlement.  The court is aware that some plaintiffs’ firms declined to participate in common benefit assessments after the first trial; those that stayed well deserve their fees and costs.”

Special Fee Master Appointed to Allocate $3B in Fees in Opioid MDL

March 10, 2020

A recent Law 360 story by Kevin Stawicki, “Opioid Judge Taps Harvard Prof to Guide $3B Fee Fight, reports that the Ohio federal judge overseeing multidistrict litigation over the opioid epidemic tasked a Harvard Law School professor with helping the court navigate "novel" legal issues about how to compensate attorneys, some of whom say their payday could amount to more than $3.3 billion.  U.S. District Judge Dan Aaron Polster said in a notice that William B. Rubenstein, who previously worked on the multimillion-dollar NFL concussion settlement and subsequent fee fight, is best positioned to help navigate the debate over how much attorneys will be able to take home after the dust settles on a wave of opioid-crisis lawsuits.

Rubenstein will assist with navigating both the plaintiffs' request to establish a common benefit fund and attorney fees generally, the judge said, adding that the pleadings "raise complex and novel fee issues," as several parties and non-parties oppose the motion for the common benefit.  "Professor Rubenstein has written extensively about attorney's fees issues in complex litigation, including common benefit fees," Judge Polster said.  "The court has accordingly asked professor Rubenstein to assist with questions posed both by the present motion and attorney's fees generally, as these may arise."

The idea of a common benefit fund, which would set a 7% fee against a global settlement, has come under fire in recent months. Opioid manufacturers and distributors — including Johnson & Johnson and McKesson Corp. — pounced on the proposal in February, saying it was nothing more than a "transparent" attempt by lawyers on the plaintiffs' executive committee to grab settlement funds.  Approving the proposal would favor the lawyers over the parties in the litigation, even their own clients, the companies said.

After four attorneys general in October unveiled a proposed $48 billion deal with major drug companies and the nation's largest drug distributor, drug companies said 7% of the settlement would amount to more than $3.3 billion in fees.  "The [plaintiffs executive committee] seeks to grab a piece of every opioid-related resolution across the country, including settlements with the state attorneys general and of the many other actions brought in state court," the companies said in a memo to the court in February.

A group of 37 attorneys general have also argued that the fee request could irreparably disrupt progress made toward reaching a large national settlement by only applying to certain parts of settlements reached by attorneys general as well as to state court actions that are beyond the district court's jurisdiction, violating state sovereignty.

Another part of the settlement that has come under mounting scrutiny is Judge Polster's certification of the negotiation class, a novel mechanism designed to help more than 30,000 local governments pursue deals with pharmaceutical companies accused of fueling the opioid crisis.  Rubenstein was among the first to suggest the negotiation class as a way of breaking down 13 sets of national defendants based on legal claims and then crafting settlements with individual drug companies and binding plaintiffs to a structured settlement before the terms are negotiated.

As envisioned, any settlement would be put to a vote and require approval by 75% of voting governments.  A group of states fired off warning shots against that idea in February, saying only they, not cities and counties, can sue on behalf of their citizens.  By letting those political subdivisions settle claims they lack state-law authority to litigate, Judge Polster created an "alternative to state government," the coalition of states argued.

Federal Judge: Botched Attorney Fee Requests Will Cost You

March 6, 2020

A recent Law 360 story by Chris Villani, “Labaton Rebuke Sends Message: Botch Fees and Pay a Price,” reports that by slashing $15 million in fees from Labaton Sucharow LLP and Thornton Law Firm LLP for a $300 million State Street Corp. settlement, a federal judge sent a sharp warning to the class action bar to remain vigilant about attorney fee fundamentals, or else risk an embarrassing and possibly expensive fight.

Double checking lodestar calculations before submitting a fee request, signing off on fee declarations, being careful about referrals and erring on the side of disclosure seem like routine activities for class action firms.  But if major players in the field like Labaton and Thornton can get slapped down by a federal judge for falling short on the basics, it should catch the attention of other firms across the bar, experts told Law360.

“It's a very important decision for all class action lawyers to pay close attention to, particularly when submitting lodestar applications, when contract attorneys are involved, when you have rates that you report to the court are your hourly billable rates,” said Lance Harke of Harke Clasby & Bushman LLP.  “There's a number of significant issues for all of us.”

The long-running fight began after Labaton Sucharow, Thornton Law and Lieff Cabraser were awarded a $75 million fee after reaching the nine-figure settlement.  A media report unveiled allegations of double-counting hours, which the firms admitted but asked the court to let slide.  But what the firms called an inadvertent mistake instead led to U.S. District Judge Mark L. Wolf's vacating the fee award and appointing retired U.S. District Judge Gerald Rosen as a special master to investigate.

Rosen suggested chopping up to $10 million from the fee, but Judge Wolf ended up reducing the award by $15 million and sending his order to the Board of Bar Overseers for potential disciplinary action.  “This case demonstrates that not all lawyers can be trusted when they are seeking millions of dollars in attorneys' fees and face no real risk that the usual adversary process will expose misrepresentations that they make,”  Judge Wolf wrote in the 160-page order.

Rosen’s investigation turned up a number of problems, including a false fee declaration signed by Thornton Law’s managing partner, Garrett Bradley, that he called a “stupid mistake” during a subsequent hearing.  Thornton was accused of trying to inflate the firm's lodestar by having lawyers bill at a higher rate than Rosen believed they should.

Drawing perhaps the most scrutiny was a $4 million payment to a Texas lawyer named Damon Chargois.  Chargois did not work on the case, but he did introduce Labaton Sucharow to the lead plaintiff, the Arkansas Teacher Retirement System.  The fee was never disclosed to the class or Judge Wolf.

John Coffee Jr., a professor at Columbia Law School with expertise in class action and securities litigation, was skeptical that the arrangement Labaton Sucharow had with Chargois is unique.  “That suggests that there are major plaintiffs’ law firms, and the Labaton firm is a major plaintiffs’ law firm, that have a business model of effectively buying lead plaintiffs on an open market from these finders,” Coffee said.  “The practices [Rosen] uncovered is like turning over a rock in the field and finding some ugly things crawling around.”

Another retired judge, hired by Labaton Sucharow, found that the Chargois arrangement was an aberration and that in other instances involving referral fees, the lawyers who referred the case did substantial work.  The firms vigorously pushed back against Rosen’s conclusions, and Labaton Sucharow even tried to have Judge Wolf removed from the case.

In a statement Friday, Labaton Sucharow said the Chargois arrangement was a one-off and highlighted the settlement it reached with Rosen in which it agreed to pay $4.8 million and institute new best practices regarding referral fees.  Judge Wolf “chose to ignore” the settlement, the firm said.  “We now identify who will be sharing in any fee the firm is awarded, regardless of whether the jurisdiction requires such disclosure,” Labaton Sucharow said, adding that a payment like the one in the State Street case is legal in Massachusetts.  “We are confident that the concerns raised in this case were an anomaly.”

But even those who support class actions as a valuable legal tool said Rosen’s findings are a black eye for a bar that already faces public criticism over the massive fees doled out to lawyers.  “Lawyers should not behave this way,” said Deborah Hensler, a professor at Stanford Law School.  “This is not the way that this powerful tool is intended to be used.  When leading class action firms appear to have been engaged in self-serving behavior, whether or not it complies with a narrow definition of the rules, it’s highly inappropriate and it weakens the arguments for continuing to use class actions.”

Francis Scarpulla of the Law Offices of Francis O. Scarpulla said the double counting seemed seemed unintentional on the firms' part, rather than Labaton trying to pull a fast one.  He also said the Chargois arrangement should have been disclosed.  The lesson, he said, is to be extra careful with fee declarations.  “Judges have to trust what lawyers tell them, and if they lose that trust, you can forget about that judge believing anything you tell him or her,” Scarpulla said.  “Even if it's the time of the day and you're both looking at the same watch.”  The worst-case scenario for the class action bar would be the U.S. Supreme Court getting involved in a class action fee fight, he added.

Other jurists have taken notice of the State Street case.  A few days after Judge Wolf’s order, another judge sat in a Boston courtroom and warned the class action firms before her about the scrutiny they would face if and when it came time for them to submit fee declarations.  “I don't know how many of you have read Judge Wolf’s order from this week,” U.S. District Judge Indira Talwani told the lawyers at the outset of a hearing over which firm would lead an ERISA suit against General Electric Corp. “If you haven't, you should.”

“If I was a class action lawyer, I would read the entire 160-page order twice, with a highlighter,” said Jan Jacobowitz of the University of Miami School of Law.  “And I would review the billing practices in my firm, which lawyers should do from time to time anyway, and just be especially careful to dot all my I’s and cross my T’s.”  The incentive is strong to follow the rules carefully, Jacobowitz said, because firms “are still going to make a whole lot of money” and can do so without the professional embarrassment of a scandal like this one.

Labaton Sucharow ended up losing more than $10 million in fees from the original amount approved by Judge Wolf to the amount awarded after the investigation.  Thornton Law lost nearly $7 million.  Even Lieff Cabraser, which emerged largely unscathed as Judge Wolf laid the blame on the other firms, had to shell out a portion of the nearly $5 million spent on Rosen’s investigation.

As rough as the lengthy battle was for all of the firms involved, they still each brought in eight-figure fees for their work on the State Street case, with the total fee reduced from 25% to 20% of the amount recovered for the class.  “That does not strike me as a major victory for four years and a special master and a significant amount of alleged misconduct,” said Daniel Klerman of the University of Southern California's Gould School of Law.  “For those lawyers, if I had gone through four years and I had a judge who sounds as hostile as this judge appears, I would be jumping for joy if I only lost 20%.”