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Category: Fee Allocation / Fee Apportionment

Judge Questions $30M Fee Request in Yahoo Data Breach MDL

June 18, 2020

A recent Law 360 story by Dorothy Atkins, “Judge Koh Questions $30M Atty Fee Bid in Yahoo Breach MDL” reports that California federal judge Lucy Koh declined to approve class counsel's $30 million fee bid for securing a $117.5 million deal resolving sprawling Yahoo data breach multidistrict litigation, demanding more billing information from dozens of plaintiffs' firms — including the "markup" on work by first-year law students.  During a hearing held via Zoom, Judge Koh heard objections to the fee request and said she wants more detailed billing information on the 31 law firms and 204 attorneys and paralegals who worked on the MDL and related litigation consolidated in state court, as well as total costs for hiring experts.

Judge Koh gave class counsel a week to submit a chart on how much time each partner and associate worked on the case, what work they did and how much they billed for the work.  She also said she wanted to know how much staff and hourly workers were paid compared with how much the firms billed, pointing out that they had billed $200 per hour for at least one first-year law school student.  "I need to know how much you are paying to know how much the markup is," she said.

Judge Koh also questioned the legitimacy of hundreds of hours of work that nine law firms charged after class counsel had filed the motion for final settlement approval in February, and she pointed out that multiple line items appeared to violate her orders, which prohibited class attorneys from billing at various points in litigation without first receiving court approval.  Class counsel apologized for any billings that went beyond her restrictions and said they would withdraw the charges from their fee request.  They also agreed to submit the additional information within the week.

The judge's comments came during a nearly four-hour hearing on a motion to finalize the approval of Yahoo's $117.5 million deal, which class counsel argued in court documents "provides the second largest common fund recovery ever obtained in a data breach case."  The motion compared the settlement with the health insurer Anthem's $115 million deal, which Judge Koh approved in 2018 to resolve similar data breach claims.

If the Yahoo deal is approved, the settlement would end multidistrict litigation in federal court and parallel state court proceedings over Yahoo's alleged multiple data security failings between 2012 and 2016.  During those four years, the company had annual attacks that potentially impacted millions of U.S. and Israeli account holders, exposing some of their logins, passwords, emails, dates of birth, and answers to security questions to hackers, according to the users.  Judge Koh preliminarily signed off on the proposed deal in July, after rejecting a previous version of the settlement for being too vague and inadequately describing the breaches at issue.

Under the proposed deal, Yahoo agreed to provide class members with either two years of comprehensive credit monitoring or alternative compensation for those that already have credit monitoring.  They also agreed to cover out-of-pocket costs such as fraud losses if class members submit proof and said they would make certain changes to its business to prevent future data breaches.

During the hearing, which was watched by more than 100 observers, Judge Koh said she doesn't think the class should have to pay for the initial proposed settlement, because it was "obviously not in compliance with federal rules of civil procedure."  Judge Koh also took issue with apparent discrepancies between the class size estimates and the number of Yahoo users since the case began, which she said seems to have changed throughout litigation.

The judge noted that Yahoo's CEO touted its 1 billion active users in corporate press releases in 2016, but there's been a "pattern in this case" that every time the parties come back to court the number is smaller.  Now that class counsel wants the settlement approved, they're likely going to argue that there are only 10 class members, the judge quipped.  At the end of the hearing, Judge Koh said she would at some point approve attorney fees, but she reiterated that she takes her responsibility very seriously and wants to review the attorneys' billing.

$88M Cut From $157M Fee Request in Namenda Class Settlement

June 15, 2020

A recent Law 360 story by Pete Brush, “$88M Cut From Requested $157.5M Atty Fee in Namenda Deal” reports that a Manhattan federal judge slashed nearly $88 million from a $157.5 million fee award requested by Garwin Gerstein & Fisher LLP and five other firms for guiding wholesalers of the Alzheimer's drug Namenda to a $750 million antitrust settlement with a unit of Allergan PLC.

After hinting she would reduce the payout, U.S. District Judge Colleen McMahon held Monday that six law firms that alleged Forest Laboratories Inc., a unit of Ireland-based Allergan, thwarted generic competition through unlawful "pay-for-delay" tactics are entitled to $69.538 million.  "It is still a handsome payday for counsel," Judge McMahon wrote, after cutting the request for about 21% of the settlement proceeds for plaintiffs' counsel down to about 9.3%.

The judge approved the lawyers' request for $5.8 million of expenses in the nearly five-year-old litigation, but slashed proposed $150,000 payouts for the two Namenda wholesalers that represented the class — Smith Drug Co. and Rochester Drug Co-Operative Inc. — by 50% to $75,000 each.  "Frankly, this was attorney-driven litigation.  All the class representatives really did was sit for a deposition," she wrote, calling the class reps' contributions "minimal."

Reasoning why she slashed the award, Judge McMahon said that the firms engaged in "duplicative work" — "or, in some cases triplicative or quadruplicative work" — and "inflated" their total number of hours worked.  "Class counsel's time sheets lack sufficient granularity to separate the productive hours from the wasted ones," she wrote.

The wholesalers had claimed Forest deployed a two-pronged strategy for keeping generic rivals to Namenda off the market, including unlawful "pay-for-delay" arrangements and "product-hopping" tactics that shielded its profits long after generic rivals should have developed robust sales.  A not-uncommon effort to settle ahead of trial led to the uncommonly large payout — one of the largest in the history of Hatch-Waxman Act generic-drug approval cases. Allergan admitted no wrongdoing in the deal.

"I fully understand why Forest settled this case for a large number.  Its downside was huge; this was a 'bet the company' case," Judge McMahon observed — awarding the plaintiffs' firms "twice the lodestar" but not "anything like the 4.5 times lodestar requested."

Judge McMahon also didn't like what she characterized as a suggestion that the six plaintiffs' firms should get an outsized payday to make up for the times they don't win.  "I am absolutely unmoved — indeed, I am offended — by the argument that class counsel deserves a humongous fee award in this case because 'the winning cases must help pay for the losing ones,'" she wrote.

Federal Judge: More Needed for $3B Fee Request in Opioid MDL

June 3, 2020

A recent Law 360 story by Mike Curley, “Opioid MDL Judge Orders More Briefing on $3B Atty Fees” reports that an Ohio federal judge overseeing sprawling opioid multidistrict litigation adopted the recommendation of a Harvard Law School professor that more information is needed before he can approve a request for a common benefit fund setting aside $3.3 billion in attorney fees.  U.S. District Judge Dan Aaron Polster ordered more briefing following a report from William B. Rubenstein, the professor who was brought in to assess the plaintiffs' request.  The judge issued a set of questions based on the report to the plaintiffs and other interested parties.

Rubenstein told the court in his report that the MDL's "truly unique" structure and nature means the court should proceed cautiously, saying the request for a common benefit fund "tests uncharted waters."  While a common benefit fund is usually put in place in anticipation of an aggregate settlement, at this point in the opioid MDL, it's unclear whether such a settlement is even feasible, what structure it would take, and which defendants will settle, Rubenstein said.

In addition, there are numerous different types of suits in the MDL, some with many plaintiffs and some with few, and dozens of defendants involved in different aspects of the pharmaceutical chain, Rubenstein said.  As such, smaller settlements that might be taxed to support the benefit fund could take very different forms, he said.  "A single common benefit assessment levied on multiple different types of settlements involving many different types of plaintiffs and multiple defendants runs the risk of being too crude an approach," he said.

That many of the plaintiffs include states, counties, cities and tribal governments could pose other difficult legal questions in establishing the fund, he added.  There are also ongoing settlement negotiations going on in the MDL that could be impacted by the establishment of such a fund, Rubenstein said, citing warnings from the National Association of Attorneys General, who suggested the fee might "disrupt" settlement negotiations "irreparably."

To resolve the issues involved, Rubenstein recommended the court seek briefing from the plaintiffs and other interested parties answering questions on how an aggregate settlement might take shape, how likely parties and lawyers in the smaller cases are to reach an agreement on how much to contribute to such a fund, and how much of the fund should go toward the attorneys, given the size of the MDL and the potential size of such a settlement.  Four attorneys general in October unveiled a proposed $48 billion deal with major drug companies and the nation's largest drug distributor, after which drug companies said 7% of the settlement would amount to more than $3.3 billion in fees.

The idea of a common benefit fund 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.

Rubenstein, who previously worked on the multimillion-dollar NFL concussion settlement and subsequent fee fight, was tapped in March by Judge Polster to help the court decide whether to approve the $3.3 billion in fees.  "A common benefit order is a widely accepted reality in complex MDLs based on the fundamental fairness of recognizing a distinction between those who work the soil and those who grab the fruit," Paul Geller of Robbins Geller, who represents plaintiffs in the MDL, told Law360.

Federal Judge: Accept Fee Award or Hire Fee Expert

May 28, 2020

A recent Law 360 story by Chris Villani, “Judge Makes Schlichter Bogard $5M Fee Offer It Won’t Refuse” reports that Schlichter Bogard & Denton LLP and two other firms will receive nearly $5.25 million in fees after a federal judge during a hearing offered the attorneys representing Massachusetts Institute of Technology workers in an $18 million ERISA settlement a choice: take the deal or pay for a special master.  The fee award is less than the $6 million Schlichter Bogard, Fair Work PC and the Law Offices of Michael M. Mulder sought for guiding the class to a settlement with MIT on the eve of trial last fall.  But it's more than U.S. District Judge Nathaniel M. Gorton typically hands out in cases like these.

Judge Gorton had already rejected the firms' bid for a 33% cut.  And he told them again that while he had no issue with the nuts and bolts of the settlement itself — including awarding the firms $522,000 in expenses and giving $25,000 each to four named plaintiffs — he does have a problem with the $6 million fee ask.  "The custom of the courts is generally to award between 20 and 30% and the custom of this particular session is to award no more than 25%,"  Judge Gorton said, noting those numbers have held up even when the lawyers achieved certain "nonmonetary" benefits for the class, as was the case here.

"After careful consideration, I have decided to split the difference," Judge Gorton said, offering the firms 29%, or $5,249,000.  He then made them an offer: They could either accept the 29% fee or pay for the appointment of a special master whose recommendation would guide Judge Gorton in the apportionment of fees, though the report would not be binding.

Speaking for the firms, Schlichter Bogard's Jerome Schlichter took the deal on the spot.  "We will accept the court's ruling that the 29% fee will be what the court awards rather than go down the road of having a special master," Schlichter said.  Prior to Judge Gorton's fee ultimatum, Schlichter touted the lawyers' success in achieving the largest settlement of its kind.  Schlichter Bogard effectively pioneered class action suits against prominent universities over retirement plan fees.  None of the cases his firm has filed has achieved a settlement of $18 million, and suits filed by other firms against Brown University and the University of Chicago were settled for $6 million and $3.5 million respectively, Schlichter said.

$245M Fee Award in DePuy Hip Implant Mass Tort

May 11, 2020

A recent New Jersey Law Journal story by Amanda Bronstad, “DePuy Hip Implant Mass Tort Yields $245 Million Fee Award” reports that a federal judge has approved an estimated $245 million in fees and costs to lawyers leading the multidistrict litigation over DePuy’s Pinnacle hip implants, of which more than 75% will go to the five firms in charge of allocating the award.

The March 5 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 added.

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.”