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Category: Fee Allocation / Splitting

Judge: Reed Smith Can’t Sue for Share of Attorney Fees in Class Action

November 21, 2017

A recent New York Law Journal story by Christine Simmons, “Judge Says Reed Smith Can’t Sue for $7M Slice of SAC Capital Fees,reports that a Manhattan federal judge ruled that Reed Smith can't sue former co-counsel Wohl & Fruchter in state court for a chunk of class action attorney fees.

A federal judge has shot down Reed Smith’s attempt to sue its former co-counsel law firm Wohl & Fruchter, in state court for its share of fees from a class action against SAC Capital Advisors, finding Reed Smith was “seeking a mulligan.”

U.S. District Judge Naomi Reice Buchwald of the Southern District of New York ruled Nov. 16 that she had misgivings about Wohl’s conduct—including its settling a case amid the expulsion of Reed Smith from the plaintiffs’ counsel group—but said Reed Smith, which had served as class co-counsel for a brief period in September 2016, missed an opportunity to seek its fees in the right venue.

“The sequence of events surrounding Reed Smith’s retention and subsequent termination certainly raises questions regarding Wohl and [Wohl & Fruchter's] motivations. But Reed Smith was given an opportunity to fully raise those questions, and it failed to do so,” Buchwald said, enjoining Reed Smith’s lawsuit in New York state court against the Wohl firm.

In the underlying class action case against hedge fund SAC Capital and other defendants alleging insider trading of securities, plaintiffs attorneys in May were awarded $27 million in attorney fees after obtaining a $135 million settlement.

About a month after the fee award, Reed Smith, which submitted no fee application in federal court, sued attorney Ethan Wohl and his four-attorney law firm in New York state court arguing it was entitled to fees for its work under tortious interference and unjust enrichment claims. The firm was seeking at least $6.75 million.

Reed Smith claimed 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.

After Reed Smith was retained, the firm 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 and “intentionally exploited Paul Weiss’ statements.” Reed Smith formally withdrew from the SAC case in December 2016.

Reed Smith was originally represented in the fee dispute by Marc Kasowitz at Kasowitz Benson Torres. In July, Dechert partners Gary Mennitt and Andrew Levander replaced Kasowitz as Reed Smith’s counsel.

Wohl & Fruchter then moved in federal court to block Reed Smith’s state court lawsuit.

In her Nov. 16 ruling, Buchwald rejected Reed Smith’s jurisdictional arguments. “We have jurisdiction over the fee dispute between Reed Smith on the one hand and Wohl and [Wohl & Fruchter] on the other, and our jurisdiction is exclusive,” Buchwald said, adding that Reed Smith’s presentation of a tort-based theory of recovery “does not change the reality that some quantum of attorneys’ fees is the ultimate recovery sought.”

Buchwald also considered collateral estoppel issues. “The amount of fees to which [Wohl & Fruchter] was entitled was an issue that was litigated, and Judge Koeltl determined that a $27 million award was ‘fair and reasonable,’” she said.

Analyzing the case broadly, Buchwald said she found “little about either side’s conduct that is sympathetic.”

“The rapid succession of events—Reed Smith’s entry into the case, the settlement, and Reed Smith’s dismissal—naturally raises questions as to Wohl and [Wohl & Fruchter's] actions and motivations, and these questions are amplified when the weakness of [Wohl & Fruchter's] conflicts arguments are considered,” she said. “The record is hardly inconsistent with Reed Smith’s theory that it was terminated by [Wohl & Fruchter's] so that [Wohl & Fruchter] could obtain a larger share of attorneys’ fees.”

However, Reed Smith missed an opportunity to submit an application for fees, she noted. “We find little equity in allowing Reed Smith to take a mulligan, through duplicative litigation, on an issue that had been squarely teed up,” Buchwald said.

Reed Smith’s explanation for why it failed to do so—that it did not want to interfere with approval of the settlement—“holds little water,” Buchwald said, noting that Reed Smith’s declaration supporting its withdrawal from the federal case detailed its grievances with Wohl and raised questions about the propriety of the settlement.

While the judge said she was enjoining Reed Smith from prosecuting the state court lawsuit “and the implicit application for fees contained therein,” she denied Wohl’s request to reject Reed Smith’s application for attorney fees in federal court. “Reed Smith has never made a direct application for attorneys’ fees in this court, and there accordingly exists no such application for us to deny,” Buchwald said.

Fee Allocation Dispute in Dow Chemical Nuclear Pollution Class Action

November 3, 2017

A recent Law 360 story by Juan Carlos Rodriguez, “Class Counsel in Dow Pollution Suit Slam Attys’ Fee Bid,” reports that lead class counsel representing residents in a $375 million settlement with Dow Chemicals Co. in a nuclear pollution suit have told the Tenth Circuit that three individual attorneys who say they were denied a share of $150 million in fees have filed a frivolous claim.

Attorneys at Berger & Montague PC said Wednesday that the objectors primarily worked on the case while they were employed by Waite Schneider Bayless & Chesley Co. LPA, but that they left the firm in 2012. By the time the fee petition in the Dow case was filed in January of this year, WSBC “was effectively being operated in bankruptcy,” Berger & Montague said.

“The objectors have filed no claim in the Ohio proceeding for their work on Cook while they were employed by WSBC, although Ohio state court is the proper forum for such claims,” Berger & Montague said.

According to Berger & Montague, WSBC did submit a timely fee application — including for time worked by the objectors — and WSBC was allocated some of the fee award. But the three former WSBC attorneys never filed a separate petition on their own behalf.

“Nor, in connection with the fee petition filed in this case, did the objectors file anything saying, or even suggesting, that they had some ‘personal’ right to be compensated for time they spent on Cook while they were employed by WSBC," Berger & Montague said.

The three objecting attorneys, who say they worked on the 26-year-long case from 1990 until 2012, earlier this month told the 10th Circuit that it has jurisdiction over their appeal.

In response to the attorneys’ brief, Berger & Montague acknowledged that a final district court ruling on the attorney fee dispute possibly gives the appeals court jurisdiction, but said the effort remains “frivolous,” and that they may move to dismiss the appeal at the “appropriate time.”

The three attorneys say they spent more than 4,500 hours working on the case. The long-running matter, brought by Colorado residents who claimed injuries from exposure to waste from a nuclear weapons facility, was settled in 2016.

A Colorado federal district court issued final judgment on the suit in April, granting $150 million in attorneys fees and ordering lead counsel Berger & Montague PC to allocate them to various class counsel as reflected by their contributions, according to the objecting attorneys.

“Berger refused to supply appellants with the amounts allocated to all other class counsel,” the attorneys said earlier this month. “Berger also refused to pay appellants any portion of the $150 million fee on the legal ground that as lead counsel it could only pay fees to the now defunct law firm that employed appellants until 2012, rather than to appellants as individual class counsel.”

The case is Roselle et al. v. Berger & Montague PC, case number 17-1328, in the U.S. Court of Appeals for the Tenth Circuit.

Judge Stands By Fee Split in Wells Fargo Class Action

November 2, 2017

A recent Law 360 story by Dave Simpson, “Court Won’t Nix Fee Split in Wells Fargo Case Dispute” reports that an Iowa federal judge declined to set aside a decision that requires one of the firms that handled a $25 million class action against Wells Fargo & Co. to give half its fee award in the case to one of its co-counsel, ruling that an arbitration agreement between the firms is not within the court’s jurisdiction. U.S. District Judge Robert W. Pratt said that Reese LLP’s gripes over the amount of work done by Finkelstein Blankinship Frei-Pearson & Garber LLP’s do nothing to cancel out an arbitration agreement it signed with the firm.

“FBFG and Reese LLP — neither of whom are parties to this class action — present a separate dispute over their independent contractual obligations to each other as set out in [their arbitration agreement],” Judge Pratt said. “That dispute is not amenable to resolution by this court in this case. Rather, FBFG and Reese LLP have properly engaged in arbitration and discrete litigation concerning confirmation of the arbitration award in the state and federal courts of New York.”

Tuesday’s decision rejects Reese’s July motion, in which it told the court that Finkelstein Blankinship had not done enough work to justify taking 50 percent of Reese’s share of the Wells Fargo settlement.  Reese claimed that the fee-sharing agreement between Reese and Finkelstein Blankinship contradicted the settlement terms and asked the court to set aside an arbitration panel’s decision to uphold the agreement.

Judge Pratt shot down that argument on Tuesday as well, ruling that the agreement does not conflict with the settlement terms.

“FBFG’s request for fees is directly and exclusively related to the legal services rendered, whether or not the claimed fee and the amount of work are proportionate,” he said.

Reese’s July motion was swiftly opposed by Finkelstein Blankinship, Reese’s co-counsel Scott & Scott Attorneys at Law LLP, and Reese’s former partner Kim E. Richman, now of the Richman Law Group, who has also sued Reese in New York state court concerning Richman’s share of the fees from the case.

The firms all represented homeowners in a class action accusing Wells Fargo of ordering unnecessary property inspections and charging delinquent borrowers that concluded in 2015 with a $25.75 million settlement, the attorneys in which have been tied up in Reese’s fee dispute with FBFG, according to Scott & Scott.

Reese Richman LLP and then Reese LLP were co-lead counsel throughout the case, according to Judge Pratt. Finkelstein Blankinship joined the case in August 2014 and signed a joint prosecution agreement with Reese LLP that entitled it to half of Reese’s share of any eventual fees, according to the decision.

Reese later disputed the legitimacy of the agreement, saying that Finkelstein Blankinship did only 4 percent of the work in the case. It argued that the agreement between the firms was superseded by the settlement agreement, which gave Finkelstein Blankinship a smaller share, according to the decision.

The case is Edward Huyer et al. Wells Fargo & Co. et al., case number 4:08-cv-00507 in the U.S. District Court for the Southern District of Iowa.

Fee Allocation Dispute in NFL Concussion Litigation

October 30, 2017

A recent Legal Intelligencer story by Max Mitchell, “NFL Concussion Lawyers Pile on Seeger’s $70M Fee Request” reports that nearly 20 attorneys and firms involved in the NFL concussion litigation are challenging a lead attorney’s proposal for divvying up $112 million in attorney fees, which had allocated the lion’s share to his firm.  According to court filings, 16 firms and one former member of the plaintiff’s steering committee have filed objections to the proposal that Christopher Seeger submitted to the court in mid-October.  That proposal had included more than $70 million for his firm, Seeger Weiss.  Among the firms that submitted objections to the proposal are Anapol Weiss, home to Sol Weiss, who is co-lead counsel with Seeger in the litigation.

Anapol’s response proposed an alternative methodology for the court to use in dividing up the fees.  The suggested formula would not rely as heavily on lodestar multipliers and would accounted for hours spent working toward significant benchmarks in the litigation, rather than applying a “straight-line mathematical computation” that treated all hours equally, the filing said.

The 15-page alternative proposal, which was filed by Pietragallo Gordon Alfano Bosick & Raspanti attorney Gaetan Alfano, said it would more adequately account for Anapol’s role in developing the litigation and hammering out the settlement agreement.

“While Seeger and Anapol shared the role of co-lead class counsel, the Seeger firm’s proposed apportionment would leave one co-lead class counsel firm (Seeger) with 65.4 percent of the attorneys’ fees and the other (Anapol) with 4.3 percent of the attorneys’ fees,” the filing said in a footnote.  “The Seeger firm requests that this court award it over 15 times the fees that it allocated to its co-lead counsel, Anapol.  On its face, Mr. Seeger’s proposed apportionment is grossly inequitable, given, inter alia, Anapol’s extensive contributions to the case.”

In an emailed statement to the press, Seeger said, “We believe this allocation is reasonable and well within the precedent set in similar cases. Judge [Anita] Brody will ultimately determine the final allocation, and we appreciate her consideration of this matter.”

On Oct. 10, Seeger filed a 22-page declaration to the U.S. District Court for the Eastern District of Pennsylvania, asking the court to award his firm $70.4 million.  The money, according to the request, would compensate Seeger Weiss for a total of 21,044 hours that his firm spent on the litigation since he was appointed to represent the class in 2012.

Although many of the responses took issue with the lodestar multipliers Seeger used to develop his proposal, some contended that a neutral special master needed to be appointed to handle the fees and others said the proposal was premature.

“To avoid even the appearance of placing their own financial interests ahead of the retired NFL players’ needs, class counsel is urged to join this motion and voluntarily seek to defer any ruling on payment of claimed attorneys’ fees until after at least the majority of the players have been paid,” Tampa-based attorney Steven Yerrid of the Yerrid Law Firm said in his firm’s response.  “With all respect, the undersigned submits this case must first be about the players’ well-deserved compensation and not the compensation of the lawyers representing them.”

Fee Allocation Dispute in NCAA Concussion Case

September 21, 2017

A recent American Lawyer story by Roy Strom, “High-Powered Plaintiff’s Lawyers Battle Over Fees in NCAA Concussion Case,” reports that a group of prominent plaintiff’s lawyers are battling for their cut of potentially $21 million in legal fees related to a pending concussion settlement with the National Collegiate Athletic Association, one of the many litigation battles that the governing body for collegiate sports now faces.  The dispute between Chicago-based Jay Edelson and Steve Berman, a co-founder of Seattle-based plaintiffs powerhouse Hagens Berman Sobol Shapiro, began as a strategy disagreement as late as 2014.

That’s when an Edelson client objected to a class action settlement led by Berman’s firm and others that would have the NCAA create a $70 million medical monitoring program for current and former college athletes, as well as put $5 million toward concussion research.  Edelson’s objection sought to preserve personal injury claims on behalf of former student athletes in a variety of sports, including football.

As part of the settlement, the lead counsel at Hagens Berman and Joseph Siprut, the founder and managing partner of Chicago’s Siprut PC requested $15 million in fees for themselves and about 10 other firms.  The fee request was made in January with the firms stating that they had worked 18,000 hours on the case and reached 4.2 million people to alert them to a preliminary approval of a settlement in July 2016.

Edelson’s firm objected to that amount last week in a court filing that takes aim at various aspects of the lead counsels’ work and argues for no more than $8 million in fees to be awarded to Hagens Berman and Siprut.  The Edelson objection states that the requested fees, which represent 21 percent of the amount of the settlement, are too high.  It also argues the lead counsels’ request takes credit for $50 million in settlement value that Edelson claims his objector added when a judge agreed to knock out a “reversion” provision that would have returned to the NCAA unused money in the concussion monitoring program.

Berman’s firm, which is disputing Edelson’s request for $6 million in fees, argues the reversion provision would not have added anything close to $50 million in value to the settlement and that U.S. District Judge John Zee decided to knock it out of the deal for reasons that had little to do with Edelson’s objections.

Edelson’s firm had originally sparred with the lead counsels’ tactics in the case by saying they were not providing monetary benefits for potentially injured college athletes.  Unlike the National Football League’s $1 billion class action settlement with retired players, which continues to have its own unique issues ahead of resolution, the NCAA’s accord does not provide a fund to compensate injured athletes.

Fearing the settlement would bar athletes from pursuing personal injury claims, Edelson objected to create a “carve-out” for those claims.  His firm, working with Sol Weiss of Philadelphia’s Anapol Weiss, is now leading a series of nearly 50 class action suits on behalf of athletes who played the same sport at the same school.  For instance, the widow of a former University of Texas football player is the named plaintiff in a class action on behalf of all Longhorns football players who played between 1952 to 2010.

In a filing last week, Berman’s firm argues that Edelson’s firm should receive fees in the NCAA settlement case that represent a “pro rata portion” of his fees tied to the issue of arguing for a personal-injury carve out in the case.  That amount would be something less than $1.4 million.

Mark Mester, global chair of the consumer class action practice at Latham & Watkins in Chicago, is representing the NCAA in the litigation. The Indianapolis-based organization paid nearly $8.2 million to Latham—and another $5.8 million to Skadden, Arps, Slate, Meagher & Flom—during 2014-15, according to the NCAA’s most recent federal tax filing.