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Category: Fee Allocation / Splitting

Seeger Weiss Targeted in NFL Concussion Fee Appeal

August 14, 2019

A recent Law 360 story by Ryan Boysen, “First Shots Fired in Seeger Weiss Concussion Fee Appeal,” reports that Seeger Weiss LLP has “hoarded” nearly $65 million for its work on the landmark NFL concussion settlement while punishing rival firms by docking their pay over perceived slights, all through an “improper process” that “lacked transparency and basic mechanisms of fairness,” according to the opening briefs in a contentious Third Circuit appeal.

The appeal was filed over a year ago, challenging an order by U.S. District Judge Anita B. Brody that created a $112.5 million common benefit fund to pay the 24 firms involved in bringing to fruition the uncapped concussion settlement, which has paid out nearly $660 million in claims since it was approved in 2015.  In opening briefs filed, two groups of law firms and retired football players led by Locks Law Firm and Lubel Voyles LLP took aim at Seeger Weiss’ role in divvying up that money.

The firms argued that Judge Brody essentially gave Chris Seeger carte blanche to award himself and other firms whatever he pleased, then rubber-stamped his decisions with hardly any oversight, violating constitutional due process obligations and binding precedent in the process.  Adding insult to injury, Locks Law said, all of the firms involved in the settlement were required to submit time records to Seeger while he determined their final awards, but to this day no other firm “has seen Mr. Seeger’s records” and “neither will this court: those records were never made part of the record below.”

“The court empowered Mr. Seeger … to reward himself and penalize rivals without any on-the-record scrutiny of his own time records,” Locks Law said.  “The court accepted Mr. Seeger’s [determinations] with only minor adjustments.”  “There is no justification for this manifestly inadequate process,” Locks Law added.

While ostensibly separate, the allegations in the briefs mirror complaints about the settlement as a whole, which many attorneys claim has been marred by a lack of transparency and a seeming willingness on Judge Brody’s behalf to improvise when deciding issues of considerable importance to the class of 20,000 retired players suffering from concussion-related brain damage the deal is meant to compensate.

The briefs also underscore the bad blood that’s been building up for years between Seeger and many of the other lawyers involved in the case.  To take just one example, Locks Law was terminated as class counsel alongside five other firms in May, a move many viewed as retaliation for its request that Judge Brody reconsider new medical guidelines that Locks Law had argued would make it harder for players to get paid.  Prior to that, Locks Law butted heads with Seeger directly when it sought to take over the implementation of the deal, arguing that Seeger was letting the NFL steamroll the players with “scorched earth” legal tactics.  Both of those motions were denied.

In a nod to those broader tensions, Lubel Voyles acknowledged in its brief that while “fee fights in class action litigation are, sadly, not rare,” it is rare “for the optics of a common benefit fee award to be so poor that even class counsel are divided on every aspect of the award, not just allocation of the money.”  Locks Law said that before Judge Brody made a decision on how to apportion the $112.5 million CBF, some firms recommended a special master be appointed for that purpose while Locks Law itself urged the creation of a committee.

Instead, Locks Law said, Judge Brody let Seeger make “the sole determinations of what work performed by other [leading firms] qualified for common benefit compensation in his petition.”  “The district court’s decision to delegate responsibility for that allocation to the largest recipient of those fees, co-lead counsel Christopher Seeger,” was an “improper process,” Locks Law said.

Locks Law said all of the firms applying for those fees had to submit their time sheets to Seeger for him to review, but Seeger’s own records were only ever reviewed in camera by Judge Brody.  After approving more hours for his firm than any other, and awarding a higher lodestar multiple — a common calculation used by law firms to determine fees in many instances — for those hours than to any other firm, Seeger ultimately received about $52 million of the initial $85 million payout from the fund.  His firm has since received $8 million more, and is waiting on Judge Brody to approve more than $4 million on top of that, for a total of nearly $65 million.

Meanwhile, Locks Law has received less than $5 million in common benefit fees thus far, despite representing more than 1,000 players in the litigation compared to Seeger’s 20-or-so clients, a common point of contention raised by many other lawyers involved in the case.  Locks Law says Seeger seized on an interview Gene Locks gave to Bloomberg Businessweek for a 2013 article that “infuriated the NFL” as a reason to justify the low lodestar multiple given to Locks Law, but in its brief the firm said that explanation was “not credible.”

Lance Lubel of Lubel Voyles claims he was cut out of the CBF fees entirely because he objected to the settlement, something he's done frequently, even though his earlier complaints about the deal’s language led to significant safeguards being put in place to protect retired players.  Lubel echoed many of Locks Laws’ concerns with Seeger’s role in the CBF distribution, but went one step further by also challenging a 5% holdback that’s currently applied to each successful monetary award and a 22% fee cap Judge Brody imposed on attorneys representing retired players.

The 5% holdback is being set aside, and Judge Brody has said she’ll rule at a later date on whether or not to tap those funds to continue paying CBF fees for the implementation of the 65-year-long program, money that would presumably only be available to Seeger after Judge Brody axed the other class counsel firms in May.  Lubel said the $112.5 million should be enough money to compensate the lead firms over the entire course of the settlement’s lifespan.

As to the 22% cap on attorney fees, which works out to 17% after the holdback is applied, Lubel said Judge Brody “has, in the spirit of helping class members, gutted their chances of qualifying for an award through the claims process.”  That’s because many retired players require expensive medical tests before they can qualify for an award, and the price of those exams can easily reach $10,000 or more.  For various reasons, a player’s attorney is often the only party willing and able to front those funds, Lubel said.  But artificially capping their fees at a relatively low 17% rate makes them less willing to spend that money to get the ball rolling on a client’s claim, he continued.

The case is In re: National Football Players' Concussion Injury Litigation, case number 18-2012, in the U.S. Court of Appeals for the Third Circuit.

Texas Attorney Fee Dispute Heads to Arbitration

July 29, 2019

A recent Law 360 story by Sarah Jarvis, “Texas Attys Must Arbitrate Dispute Over Referral Fees,” reports that a dispute between two Texas attorneys over fees stemming from a referral agreement for asbestos lawsuits will head to arbitration after a state appellate court ruled that the lower court erred when it denied an arbitration motion.  Judge Peter Kelly said Dennis Weitzel’s motion to compel arbitration with Brent Coon’s law firm was allowed under an agreement the two signed in 2010 after Weitzel left Coon’s firm.  The panel remanded the case to trial court with the direction that the court order Weitzel and Brent Coon & Associates to arbitrate.

The case arose from a dispute about a fee agreement between Brent Coon & Associates and a nonparty law firm that Coon alleges was supposed to receive portions of payments for referrals of certain asbestos, mesothelioma and lung cancer clients.  Michael T. Gallagher and The Gallagher Law Firm PLLC sued Coon and his firm in 2018 alleging breach of the referral agreement, and Coon filed a third-party claim against Weitzel, arguing he did not forward portions of payments to Gallagher that he received from Coon’s firm.

Weitzel moved to compel arbitration on the matter, under the 2010 separation agreement, but the trial court denied Weitzel’s motion in December 2018, according to the opinion.  The arbitration clause in that agreement stipulates that Weitzel and Brent Coon & Associates would resolve any disputes that arose under the agreement by arbitration, Judge Kelly said.

The law firm argued that the dispute was not covered by the scope of the 2010 agreement, but by another agreement from 2002 which outlined the percentage of fees Weitzel and Gallagher would receive upon a case’s favorable resolution if they referred certain clients.  The panel sided with Weitzel’s argument that the 2010 agreement applies, and that the 2002 agreement was incorporated into the 2010 agreement by reference.

“Because BCA and Weitzel agreed that the arbitrator would decide these questions, the trial court should have granted this aspect of Weitzel’s motion so that the dispute, including the extent to which the 2002 agreement was incorporated into the 2010 agreement, could be resolved in arbitration,” Judge Kelly said.  “The parties incorporated the AAA Rules into the 2010 agreement and thus agreed that the arbitrator, not the trial court, would decide gateway issues, including whether their dispute falls under the arbitration clause of the 2010 agreement.”

But the panel said Weitzel did not meet his burden to show the trial court abused its discretion by denying his motion to compel arbitration against Coon, because the signatory to the 2002 and 2010 agreements was Coon’s firm and not Coon himself.

$75M Fee Award Draws Judicial Scrutiny in State Street Case

July 4, 2019

A recent Law 360 story by Aaron Leibowitz, “$75M Fee Award in State Street Row Faces Judge’s Scrutiny,” reports that a Boston federal judge heard arguments on whether to reduce a $75 million attorney fee award for three firms that brokered a $300 million class action settlement with State Street Corp., saying the firms may have misled him about how fees are typically calculated in massive deals like this one.

In the first of up to three days of hearings, lawyers representing Labaton Sucharow LLP, Thornton Law Firm and Lieff Cabraser Heimann & Bernstein LLP said the 25% cut of the settlement that they received was reasonable under the circumstances, even in a so-called "megafund" settlement worth hundreds of millions of dollars   Some experts have suggested attorneys should receive a relatively smaller percentage of the total award when a settlement is that large.  Richard Heimann, an in-house attorney representing Lieff Cabraser, said the firms made note of those expert opinions when they first filed their fee request in 2016, and never had any intention of leading the judge astray.

"We discussed all this in the briefs," Heimann told U.S. District Judge Mark L. Wolf. "We were hardly hiding from your honor."  But Judge Wolf wondered why the firms had failed to mention in those briefs that a study they cited found that, in settlements ranging from $250 million to $500 million, the average fee award was 17.8%, well below the 25% they requested after their $300 million settlement.  The judge said he "basically trusted" the firms' own calculations at the time, suggesting it would have been difficult to reject their proposal given that multiple regulatory agencies had already reviewed it.

But a lot has changed since then, the judge noted. He has since vacated his original attorney fee award in the wake of a Boston Globe report that raised questions about the double-billing of attorneys' hours and a special master's investigation that found additional billing issues.

"I know much more than I knew in 2016," the judge said.  The special master, retired U.S. District Judge Gerald Rosen, held in his report that the 25% figure the firms used for attorney fees was proper, a point that his attorney emphasized again in court.  But Judge Rosen has maintained that Judge Wolf should lower the fee award by as much as to $10.6 million, including more than $4 million for hours that were allegedly double-billed and $2.3 million for so-called contract attorneys at Thornton who were paid a higher rate than he said they should have earned.

As the hearing wore into the late afternoon, attorneys for the three firms described their billing practices in detail and grappled with the varying definitions of contract attorneys versus staff attorneys.  Judge Rosen has suggested only that the billing for contract attorneys was improper, but the arguments also addressed rates charged for some staff attorneys who pored over documents in the case.

Joan Lukey of Choate Hall & Stewart LLP, representing Labaton, said the firm defines staff attorneys as those who are not on track to become partners but receive full benefits and do in-depth document work. In the State Street case, some received more than $400 an hour, she said.  "It troubles me when I hear suggestions that they should be treated as something other than what they are, which is very skilled and talented attorneys," Lukey said.

Frank Bednarz, a representative of the Hamilton Lincoln Law Institute — a nonprofit firm that has provided amicus guidance to Judge Wolf in the case — countered that those rates were far higher than what staff attorneys should be charged.  A more appropriate figure, he said, would be around $200 an hour.

A representative for Labaton told Law360 after the hearing that the firm hopes Judge Wolf ultimately accepts the special master's recommendations.  "Counsel for Special Master Rosen highlighted some of the factors supporting the reasonableness of the court’s original award of a 25% fee to class counsel," the firm said.  "That included the special master’s view that the underlying State Street action hinged on a complex and challenging case, with novel legal issues, at substantial risk of success, and the excellent work done by counsel in obtaining a record recovery for the class — against a highly formidable adversary."

Representatives for other parties in the case did not immediately return requests for comment after the hearing.  The underlying suit, filed in 2011, alleged that State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade.

The hearing will continue with witness testimony on some of the key issues that Judge Rosen flagged in his report, including allegedly false representations made to the court by Thornton's Garrett Bradley, a former Massachusetts state representative.  Judge Rosen's attorney, William Sinnott of Barrett & Singal PC, said that there was "no legitimate basis" for Bradley to sign the fee declaration he submitted in the case, in part because the firm did not have any hourly clients.  "It was just so outrageously inaccurate," Sinnott said.

The case is Arkansas Teacher Retirement System v. State Street Corp. et al., case number 1:11-cv-10230, in the U.S. District Court for the District of Massachusetts.

Attorney Fee Dispute Litigation in Pelvic Mesh Case

July 3, 2019

A recent Law 360 story by Bill Wichert, “NJ, Texas Firms Unlawfully Pocketed Mesh Funds, Suit Says,” reports that law firms including Nagel Rice LLP and Potts Law Firm improperly pocketed attorney fees and expenses from the settlements of roughly 1,450 pelvic mesh cases in New Jersey state court by using invalid retainer agreements or no agreements at all, according to a proposed class action made available.  The lawsuit, filed in Bergen County Superior Court, says the firms unlawfully retained excessive fee percentages, deducted those fees "off the top" of gross settlement amounts, took expenses out of clients' portions of the recovery, and engaged in invalid fee-sharing.

"The defendants were negligent in that their conduct fell below and breached the applicable standard of care, because they failed to ensure that all the cases were retained, filed, litigated, settled and disbursed in accordance with New Jersey law,” according to the complaint filed by Mazie Slater Katz & Freeman LLC.  The alleged misconduct was "reckless and undertaken with willful and wanton disregard" for the rights of plaintiff Debbie Gore and the proposed class members, the complaint said.

In addition to New Jersey-based Nagel Rice and Texas-based Potts Law Firm, the defendants include Texas-based firms Bailey Cowan Heckaman PLLC, Junell & Associates PLLC, Burnett Law Firm and Houston attorney Annie McAdams.  The complaint, which includes legal malpractice, breach of fiduciary duty and other claims, asserts that the defendants should be ordered to disgorge all attorney fees and expenses from the cases and be limited to collecting attorney fees on a quantum meruit basis.

"On information and belief, defendants performed very little, if any, actual legal services of value on behalf of plaintiff and the proposed class members, thus entitling defendants to little or no recovery in quantum meruit," the complaint said.

Gore, a Texas resident, has demanded that the defendants provide "a full accounting" of the retainer agreements in the cases, the settlements, and the attorney fees and expenses deducted from those settlements.  Superior Court Judge Rachelle Lea Harz ordered the defendants to appear in court on July 11 to show cause why the court should not issue an order requiring them to turn over that information.  Gore entered into an invalid retainer agreement with one or more of the defendants in May 2013 that provided for 40% in attorney fees that would be deducted from the gross settlement amount and for expenses to be taken out of her share of the recovery, the complaint says.

Those provisions ran afoul of a New Jersey rule governing contingent fees, the complaint says.  Under that 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.

The retainer agreement also "failed to disclose that some or all of the defendants were sharing the legal fees, and New Jersey law requires that all attorneys sharing in the legal fees — and the fee-sharing arrangement — be disclosed to and approved by the client in writing," the complaint said.  The agreement "allowed for the sharing of legal fees to attorneys who provided no legal services," the complaint said.

Nagel Rice and Potts — even though they were not "retained to act as legal counsel pursuant to a retainer agreement compliant with New Jersey law" — filed a suit on Gore's behalf in July 2014 as part of multicounty litigation against Johnson & Johnson and C.R. Bard Inc., according to the complaint.  Following settlements in the roughly 1,450 cases filed by Nagel Rice and Potts, the defendants improperly retained attorney fees and expenses and took part in the unlawful fee-sharing, the complaint says.

Insurer Fights $19M Fee Request in Coverage Action

June 14, 2019

A recent Law 360 story by Ryan Boysen, “Insurer Fights $19M Atty Fee Bid in Heparin Coverage Suit,” reports that Travelers Property Casualty Co. is pushing back against American Capital Ltd.’s request for nearly $19 million in attorney fees following a 2017 ruling that found the insurer liable for some defense costs in underlying tainted blood thinner litigation, calling the request untimely and its hourly rates “extraordinarily high.”

In an opposition brief, Travelers said the fee request submitted by the private equity firm’s attorneys at Reed Smith LLP ran afoul of several basic tenets of controlling Maryland law, starting with a local rule that requires a motion seeking attorney fees to be filed “during a 14 day window” that starts when judgment is entered, which happened two years ago in this case.

Travelers said American Capital also never properly preserved its right to seek attorney fees, which means the claim was “extinguished” when U.S. District Judge Deborah K. Chasanow ruled mostly in favor of American Capital following a four-week bench trial.  “Accordingly, the final judgment bars defendants’ untimely motion, which the court should deny,” Travelers said.  Even if those procedural problems were fixed, the hourly rates that led to the $19 million figure were “wildly in excess” of local Maryland guideline rates and further inflated by glaringly inefficient work practices, the insurer said.

At one point in time, for example, 36 lawyers and 21 attorneys at Squire Patton Boggs were working on the matter, the insurer said, before American Capital’s lead attorney John Schryber departed and ultimately ended up at Reed Smith.  “The defendants have submitted no factual basis regarding reasonable Maryland hourly rates sufficient to justify the request for a massive departure from the guideline rates,” the insurer said.  Expert testimony picking apart those rates and other aspects of the fee request was filed under seal along with the brief.  Travelers said that if the motion weren’t denied outright, it would seek a trial on the matter.

The coverage dispute stemmed from the tidal wave of litigation American Capital had been facing over a bad batch of the blood thinner heparin manufactured by its portfolio company Scientific Protein Laboratories LLC.

Travelers argued it wasn’t obligated to defend American Capital in those suits because SPL wasn’t technically an insured under its policy, but Judge Chasanow ultimately found that other language in the policy extends coverage to all companies the insured holds a “majority interest” in.  That order appears to have been the first federal ruling to clarify that the “majority interest” language — "widely-used" by various insurers, according to the opinion — extends coverage held by a private equity firm to its portfolio companies.  The Fourth Circuit upheld that reasoning earlier this year.

Besides being untimely, Travelers said the $19 million request was massively bloated because, while Maryland law allows victorious insureds to seek attorney fees as damages in coverage disputes, those fees can only cover the insured’s efforts to prove the insurer’s duty to defend.  Instead of narrowly tailoring its request to isolate the time spent on that specific issue, Travelers said American Capital simply dumped the whole kitchen sink into its request and sought reimbursement for work that was likely done on separate claims that were ultimately defeated, like a claim for bad faith damages.

Those other claims, Travelers said, had nothing to do with establishing its duty to defend.  Therefore the fee request overall is tainted by including hours that were likely billed for work on those claims and other legal arguments that were equally unrelated, Travelers said.  “Simply put, defendants have failed to identify what part of its claimed $16.5 million in alleged fees and nearly $2.0 million in expenses actually were for establishment of a duty to defend,” Travelers said.

Travelers also said that American Capital hadn’t proved it ever actually paid any of the $19 million in fees, or that it ever had an obligation to do so.  That’s an open question because American Capital and SPL entered into a fee-sharing agreement with Baxter Healthcare Corp. to fight and then settle the heparin suits.