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Category: Fee Allocation / Splitting

Class Counsel Spar Over $2.3M in Attorney Fees in Citigroup 401K Case

February 14, 2019

A recent Law 360 story by Dean Seal, “Citigroup Class’ Attys Spar Over $2.3M in Fee in 401K Row,” reports that, one day after McTigue Law LLP sought court intervention for a dispute with former co-counsel Bailey Glasser LLP over $2.3 million in attorneys' fees in a case for a class of Citigroup 401(k) plan participants, Bailey Glasser told a New York federal judge the McTigue attorney "forg[ot] to mention" that the fee dispute must go to arbitration, not the courts.  Bailey Glasser’s Gregory Y. Porter asked U.S. District Judge Sidney Stein to remind James A. Moore of McTigue that in March 2009, the firms signed an agreement as co-counsel for a class of over 300,000 Citigroup Inc. 401(k) plan participants who scored a $6.9 million settlement in their long-running Employee Retirement Income Security Act suit last August.

That agreement contained a clause stating that any disputes must first be mediated and, if that failed, arbitrated, yet that agreement was unmentioned in Moore’s letter to the court asking for a status conference to discuss Bailey Glasser’s attempt to take back a percentage of the attorneys' fees award, according to Porter’s letter.  "Instead, we urge the court to convene a status conference so Mr. Moore can explain why he failed to bring the arbitration agreement to the court’s attention and why the arbitration clause should not be enforced," Porter said.

In his letter, Moore accused Porter of holding the attorneys' fees hostage as leverage in negotiating for a higher percentage of the $2.3 million award by refusing to give consent for a single dollar of the award, held in escrow, to be distributed.  According to Moore, Porter is contesting the allocation of fees because Bailey Glasser paid roughly 10 percent more in expenses than was laid out in the allocation agreement.  Moore said that Bailey Glasser had already been fully reimbursed for that amount through the total expenses award and has incurred no losses, and even if the minor dispute were merited, it would not be affected by the distribution of the majority of the fees award.

"The timing of Mr. Porter’s communications raising his objections and withholding his approval were apparently calculated to prevent my firm from seeking to have the court resolve this matter through the fee petition and final approval process,"  Moore said before asking that the court either dictate the allocation of the fees or simply order their distribution.  Porter followed up the next day, saying that he would not address Moore’s views on the fees allocations "except to note that Mr. Moore’s firm breached the agreement and its duties to the class in Spring 2018 by failing to pay its share of expert expenses (which share my firm paid)."

According to Porter, McTigue refused to respond to emails from Porter asking to confer on the management and financing of the case "given McTigue’s financial condition."  The letter goes into no further details on the expense dispute.  "In sum, the court should not entertain the issues raised in Mr. Moore’s letter without first deciding our motion to compel arbitration," Porter said.

The two firms secured a $6.9 million settlement last summer for a class of current, former and retired Citigroup employees who claimed since 2007 that a Citigroup committee stuffed the company’s 401(k) plan with Citigroup-affiliated funds even though other funds charged lower fees.  Moore, whose firm was allocated more than 77 percent of the lodestar, said in August, "the case was hard-fought for over a decade, and we think the result is an excellent one for plan participants."

The case is Leber et al. v. The Citigroup 401(k) Plan Investment Committee et al., case number 1:07-cv-09329, in the U.S. District Court for the Southern District of New York.

61 Law Firms Share in $111.4M Fee Award in Chinese Drywall MDL

February 6, 2019

A recent Law 360 story by John Kennedy, “The Firms that Earned the Most in the Chinese Drywall MDL,” reports that this week, a Louisiana federal judge distributed $111.4 million in fees and costs among 61 law firms that worked on multidistrict litigation over allegedly defective drywall imported from China.  The amount covers work done for the common benefit of all the cases in the MDL through 2013 and relates only to matters involving Knauf Gips KG.  Claims involving Taishan Gypsum Co. Ltd. and Tai'an Taishan Plasterboard Co. Ltd. remain pending.

The drywall in question came into the U.S. as a result of a shortage of building materials in the early- and mid-2000s caused by a Florida housing boom and rebuilding efforts in the wake of hurricanes Rita and Katrina, according to the suits.  Homeowners on the Gulf and East coasts, where the drywall was installed, began to complain about foul smells, corrosion of metal objects and the breakdown of appliances and electrical devices.  Many also reported feeling ill and blamed it on the drywall.

The issues spawned a slew of state and federal lawsuits against homebuilders, developers, drywall installers, realtors, brokers, suppliers, importers, exporters, distributors, manufacturers and anyone else involved with the drywall.  The federal cases were consolidated into an MDL in 2009.  Some of the top law firm earners include:

Levin Sedran & Berman: $23.23M

Herman Herman & Katz: $22.34M

Seeger Weiss: $10.2M

Gainsburgh Benjamin: $9.4M

Colson Hicks: $5.3M

Richard J. Serpe PC: $4.4M

Whitfield Bryson & Mason: $3.9M

Potential $550M Fee Award in Pelvic Mesh Litigation

February 4, 2019

A recent Law.com story by Amanda Bronstad, “Judge Grants Potential $550M in Pelvic Mesh Fees, Allocation Fight Looms,” reports that a federal judge has issued an order that could result in about $550 million in common benefit fees and expenses to plaintiffs lawyers in the transvaginal mesh litigation, setting the stage for a possible fight over who gets what.  U.S. District Judge Joseph Goodwin of the Southern District of West Virginia, who is overseeing seven MDL proceedings that at one point surpassed 100,000 lawsuits, granted a request from a fee and cost committee that defendants hold back five percent of all settlements and judgments to pay common benefit counsel.  He rejected three objections from law firms including Philadelphia’s Kline & Specter, which had sought to halve that request, calling the mesh settlements “puny” in comparison to the jury verdicts.

“The court notes that this percentage results in a substantial amount of money awarded to common benefit counsel,” Goodwin wrote in his Jan. 30 order.  “However, based on the numerous factors discussed above and the awards given in similar MDLs, this court believes that the award given is conservative and serves to justly compensate common benefit counsel for their work without unnecessarily burdening the plaintiffs in this litigation.”  In court documents, Henry Garrard of the Law Office of BBGA in Athens, Georgia, who is chairman of the fee committee, had called Kline & Specter’s criticisms “blatant hypocrisy.”

“The court correctly notes that the most important factor in assessing such a fee request is the result obtained,” wrote Kline & Specter’s Shanin Specter, in an email.  “The core of our objection is that the cases were settled for way too little and therefore the lawyers are asking for way too much.  That objection was simply not addressed.  Unfortunately, the court did not look at how much was obtained per claimant and whether these recoveries were good or bad, individually or generally.”

The eight lawyers on the fee committee made their request Nov. 12.  They estimated that about 680,000 of the 900,000 hours that 94 law firms worked on the case was for the common benefit of everyone and sought a hold-back that would grant $366 million in common benefit fees based on the $7.25 billion in settlements so far.  The final settlement price tag, though, could be closer to $11 billion, granting about $550 million in fees in the end.

In a Nov. 26 objection, Specter wrote that the hold-back should be 2.5 percent, noting that the average settlement was about $40,000, while the average award for the cases that have gone to trial is about $9.8 million.  Many of those were in state court, such as a $57 million award that Specter won against Johnson & Johnson’s Ethicon Inc. subsidiary in 2017.  Last week, Thomas Kline and Kila Baldwin of Kline & Specter secured another $41 million verdict against Ethicon.  Specter also found fault in lead counsel’s failure to get a global settlement, which he said was proof that that its work was not for the common benefit.

“The court strongly disagrees,” Goodwin wrote in his order.  “Far from failing to provide a common benefit in the form of a global settlement, the plaintiffs’ leadership facilitated the settlement of tens of thousands of cases through its persistent efforts to weaken the defendants’ factual and legal standing compared to individual women across the country.  Plaintiffs’ leadership also provided the MDL plaintiffs with all the work-product they created and educated individual plaintiff attorneys on how to prosecute a pelvic mesh case.  These are global benefits.”

The judge called other arguments “premature.”  Those included Specter’s claim that the fee committee hadn’t provided certain documents and that work by other firms would be uncompensated.  “K&S is essentially arguing certain slices of the pie are too small before the court has even issued its order determining the size of the pie,” he wrote.  “The purpose of this court’s order is to evaluate the reasonableness of the aggregate proposed award that will be individually allocated in a later order.”

More generally, he found the fee request to be “very reasonable” given the investment of tens of millions of dollars, the complexity of the cases and, most importantly, the amount obtained.  He calculated the lodestar—or the total amount billed multiplied by an average hourly rate of $400—to be less than $272 million.  But the award, he wrote, was comparable to other “super-mega-fund” cases, like the $2.4 billion settlement over Actos, in which a judge assessed an 8.6 percent holdback.  He called the other two objections “untimely.”

One of those, by Andrus Wagstaff, which hired Blank Rome attorney Andrew Williamson to file its objection, alleged that the fee committee hadn’t treated the firm fairly.  Another came from Philadelphia’s Sheller, which on Jan. 18 called the fee request a “ ‘smoking gun’ admission” that the fee committee had been “hijacked by a small band of profiteers, outrageously demanding unsupervised use of the common benefit fund as their personal ATM.”

Other firms did not challenge the hold-back percentage overall but have grumbled about the specific amount that the fee committee has earmarked for them—a fight that could magnify in the coming months as special master Dan Stack, a retired judge on the Madison County, Illinois, Circuit Court, reviews the fee allocation.

“Eight law firms took two-thirds of the money, and 91 firms got the rest,” said partner Adam Slater.  “We are hopeful and optimistic that Judge Stack, and, ultimately, Judge Goodwin, will apply the criteria in a fair and equitable way to fairly compensate all the law firms.”  The fee committee also got support from other law firms.  Those included San Francisco’s Levin Simes Abrams; Birmingham, Alabama’s Freese & Goss; and Matthews & Associates in Houston.

Judge Rejects $35M Fee Request in Yahoo Data Breach Settlement

January 31, 2019

A recent The Recorder story by Ross Todd, “Judge Hammers Plaintiffs Counsel, Rejects Yahoo Breach Settlement,” reports that the federal judge overseeing litigation targeting Yahoo! Inc. with data breach claims has rejected a proposed $85 million settlement citing a number of problems with the deal—including that the plaintiffs are asking for an “unreasonably high” attorneys fees of up to $35 million.  U.S. District Judge Lucy Koh, who has been overseeing In re Yahoo! Inc. Customer Data Security Breach Litigation since 2016, took issue with the fact that 143 lawyers at 32 firms were included in the $22 million lodestar calculation submitted by the plaintiffs, even though she only authorized five firms to work on the case.

Koh wrote in a 24-page order that legal issues involved were “not particularly novel.”  The proposed deal, the judge noted, was filed before the parties finished briefing class certification.  She also noted that the case involved only a limited number of claims under California law, and class counsel took only 7 depositions, declining to depose Yahoo’s proposed experts.  “Specifically, the court finds that class counsel prepared limited legal filings with numerous overlapping issues, and that class counsel completed limited discovery relative to the scope of the alleged claims,” Koh wrote.  “Moreover, class counsel fails to explain why it took 32 law firms to do the work in this case.”

Koh issued a superseding order clarifying that she only authorized “five attorneys, who are not members of Plaintiffs’ Executive Committee, to attend and help prepare their respective clients for depositions.”  Plaintiffs lead counsel, John Yanchunis, of Morgan & Morgan in Tampa, Florida, didn’t immediately respond to an email seeking comment.

Koh has been overseeing the multidistrict litigation brought on behalf of 3 billion Yahoo account holders whose data was compromised in three massive breaches dating back to 2013.  She previously signed off on an $80 million deal in Sept. 2018, which Yahoo reached with investors who claim the company misled them about the breaches.

In the order, she called Yahoo’s track record of nondisclosure and lack of transparency “egregious.”  She further found that the proposed settlement failed to disclose that it released claims dating back to 2012, when Yahoo suffered smaller breaches that still affected millions of accounts.  Koh found further found that releasing those claims would be improper, that the deal didn’t adequately disclose the sorts of business changes Yahoo has made to protect customers going forward, and that estimated 200 million member class size was likely inaccurate.

“Any of these bases would be sufficient to deny the motion for preliminary approval,” Koh wrote.  Koh compared the Yahoo deal unfavorably to two prior high-profile class action settlements that she oversaw—the $415 million settlement on behalf technical workers to settle claims that their wages were suppressed by Silicon Valley companies’ alleged agreements to avoid recruiting each others’ workers, and the $115 million settlement Anthem reached on behalf of 79 million customers affected by the insurer’s data breach.

Koh noted that the lodestar for the Yahoo lawyers was higher than the $18 million figure submitted by the lawyers working on the high-tech worker case, even though the latter had taken 93 depositions, served 28 third-party subpoenas, litigated two rounds of class certification, had handled an appeal in the case, and prepared it for trial.  “Moreover, class counsel in In re High-Tech secured a significantly larger settlement of $415 million with more direct payments to class members than the $50 million settlement fund disclosed in the proposed notice here,’ Koh wrote.

In the Anthem case, Koh noted, that the insurance company disclosed the breach timely and offered all those affected two years of free credit monitoring prior to settlement.  Anthem also committed to tripling its data security budget for three years.  By contrast, Koh found that Yahoo delayed disclosure and its customers’ data ended up on the dark web.

“Yahoo’s history of nondisclosure and lack of transparency related to the data breaches are egregious,” Koh wrote.  “Unfortunately, the settlement agreement, proposed notice, motion for preliminary approval, and public and sealed supplemental filings continue this pattern of lack of transparency.”  Worth noting for the Yahoo lawyers: In both the high-tech case and the Anthem data breach Koh gave the plaintiffs lawyers lower fees than they had requested.  She granted the high-tech lawyers less than half the $81 million they’d requested and cut more than $9 million from the $38 million the Anthem lawyers requested.

Saveri Firm Wins Fight Over $54M Fee Award in Fourth Circuit

January 15, 2019

A recent The Recorder story by Scott Flaherty, “San Francisco’s Saveri Wins Fight Over $54M Fee Award,” reports that San Francisco’s Joseph Saveri Law Firm, a specialist in antitrust class actions, has prevailed in a dispute with another plaintiffs firm over fees from a price fixing case that settled in 2013 for $163.5 million.  The U.S. Court of Appeals for the Fourth Circuit ruled in the Saveri firm’s favor, shooting down a bid by Miami’s Criden & Love for additional fees from an underlying antitrust case in Maryland federal court that accused titanium dioxide suppliers of fixing prices.  The fee dispute began after a class settlement in the antitrust litigation that led to a $54 million award for plaintiffs lawyers involved in the case.

Criden & Love had argued that it deserved a referral fee from Joseph Saveri, a former Lieff Cabraser Heimann & Bernstein partner who split off in 2012 to start his own firm.  But the appeals court held that Saveri, who served as lead counsel in the price fixing case, never actually entered a referral agreement with Criden & Love and had no obligation to pay.  “The appellant [Criden & Love] asserts a number of claims in this case, all of which ask for the same thing: a referral fee payment from Saveri’s law firm,” the Fourth Circuit wrote in a per curiam opinion.  “There is simply no basis on this record for finding the appellant entitled to such a payment.”

In reaching its decision, the appeals court first walked through the basics of referral fee arrangements among plaintiffs lawyers.  The court explained that antitrust legal precedent allows only consumers who purchased goods or services from a supplier to challenge alleged anti-competitive conduct on that supplier’s part.  Because many buyers are hesitant to sue their suppliers and potentially disrupt their businesses, there’s a relative shortage of plaintiffs for antitrust class actions, the Fourth Circuit continued. Firms such as Criden & Love “step into the void,” finding purchasers willing to sue and referring them to larger antitrust specialist firms that have the resources to pursue a major class action.  Criden & Love, in turn, typically earns a referral fee equal to 12.5 percent of whatever the larger firm earns.

In this case, Criden & Love in 2010 referred a purchaser of titanium dioxide, a substance used in paints and inks, to Lieff Cabraser and a second plaintiffs firm, Berger & Montague.  At the time, Saveri was still at Lieff Cabraser and entered an appearance on behalf of the referred client, a business called Isaac Industries.  Saveri left Lieff Cabraser in 2012 to start his own firm, effectively ending his representation of Isaac Industries as an individual client, and his firm later filed an appearance for another titanium dioxide purchaser called Breen Color Concentrates, the Fourth Circuit wrote.

Saveri eventually became co-lead plaintiffs counsel in the price fixing litigation, alongside Lieff Cabraser and Cera LLP.  When the case settled in 2013 for some $163.5 million, it opened the door for a sizable fee award.  In all, the plaintiffs lawyers made $54 million and Saveri, as lead counsel, earned about $10 million of that, the Fourth Circuit wrote.  Criden & Love, for its part, took in about $2.8 million, with $900,000 of that coming as referral fees from Lieff Cabraser and Berger & Montague.  But the firm believed Saveri, too, owed Criden & Love a referral payment, setting off a string of legal proceedings that led to the ruling.

The Fourth Circuit found that Saveri explicitly did not enter a referral deal with the other plaintiffs firm, and that Saveri’s $10 million in lead counsel fees compensated him only for his work once he was at his new firm and had left Lieff Cabraser.  “Saveri’s relationship to Isaac Industries was identical to his relationship to all other class members; he never represented the company’s individual interest,” the Fourth Circuit wrote.  “That role continued to be filled by his old firm, Lieff Cabraser, which paid C&L the full fee the firm was owed.”