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Category: Fee Allocation / Splitting

Fee Allocation Dispute Action Filed Against Milberg

March 27, 2017

A recent New Jersey Law Journal story by Charles Toutant, “Milberg Targeted in $10.6 Million Legal Fees Fight Linked to Merck Drug,” reports that a Louisiana law firm's seeking $10.6 million in legal fees from class action firm Milberg for securities litigation against Merck & Co. painkiller Vioxx was moved to the District of New Jersey.  Milberg, formerly known as Milberg Weiss Bershad & Schulman, is accused in the suit of underpaying law firm Kahn, Swick & Foti of Madisonville, Louisiana, which received $400,000 for its work on the Vioxx securities case.

Kahn Swick claims in the suit that its fees from the Vioxx securities case were reduced by strategic measures undertaken by Milberg as the firm and two of its principals were indicted in 2006 on charges of paying kickbacks to class action plaintiffs.  Milberg principals Steven Schulman and David Bershad were each sentenced to six months in prison in that case.

The Vioxx securities suit, filed in 2003, sought to recover damages on behalf of shareholders for allegedly false statements the company made about Vioxx, a pain medication that was withdrawn from the market amid reports it caused heart problems.  In June 2016, U.S. District Judge Stanley Chesler gave final approval to a settlement that included $830 million for class members and another $232 million in attorney fees and expenses.

The criminal indictment prompted challenges to Milberg's status as co-lead counsel in the Vioxx securities case, Kahn Swick said in its complaint.  Milberg retained Carella, Byrne, Cecchi, Olstein, Brody & Agnello of Roseland as local counsel, and consented to the appointment of two New York firms, Bern­stein Litowitz Berger & Grossman and Brower Piven, as co-lead counsel.  As a result, Kahn Swick saw its role in the case reduced.

Kahn Swick filed its fee suit in state court in the Parish of Orleans, Louisiana, before it was removed to federal court in the Eastern District of Louisiana and then to the District of New Jersey.  Milberg asserted in court papers that New Jersey is a suitable venue because a substantial portion of the events behind the claim occurred in that district.  Furthermore, an analysis of factors weighed in favor of transferring the case to New Jersey for the convenience of the parties and witnesses and in the interest of justice, the firm said.

The suit brings a petition for damages and seeks declaratory judgment and a preliminary and permanent injunction against Milberg.  Besides Milberg, the suit names Mark Whitehead III and the Whitehead Law Firm of Lafayette, Louisiana, as defendants. Whitehead and Milberg were co-liaison counsel in the Vioxx case in Louisiana state court.  Milberg claimed in its removal motion that Whitehead and his firm are fraudulently joined defendants because there is no reasonable basis to think the plaintiff will prevail against them.  Therefore, their citizenship must be ignored for removal purposes, Milberg claimed.

Milberg first approached Kahn Swick in 2003 and asked the firm to serve as its local counsel in Louisiana for Merck securities litigation, the suit claims.  The two firms entered into an oral agreement giving Kahn Swick 10 percent of Milberg's proceeds from the litigation, plus Kahn Swick's lodestar for its own work as liaison counsel.  The terms were placed in writing in 2005, according to Kahn Swick.

The Judicial Panel for Multidistrict Litigation transferred the Merck securities case to New Jersey for pretrial proceedings before U.S. District Judge Stanley Chesler.  After the settlement was reached, Special Master Layn Phillips was appointed to oversee the division of attorney fees.  Ultimately, Milberg was awarded $25 million.

Lewis Kahn of Kahn Swick said in a statement about the fee dispute, "We are pleased to be back in New Jersey, where we sought to have this contract dispute resolved initially through the court-ordered Special Master process, and look forward to moving forward to the merits of the case.  We believe our firm fulfilled our obligations under our written joint venture with Milberg and, notwithstanding Milberg's indictment and subsequent diminished role in the Merck litigation, believe that Milberg must honor this agreement."

Milberg, formerly known as a high-flying securities class action firm, was hurt badly by the 2008 financial crisis.  The firm notified the state of New York in late 2016 of its plans to lay off 32 employees by late December, according to a document filed with the state Department of Labor in September 2016.

$175M in Attorney Fees in $10B VW Settlement

March 22, 2017

A recent Courthouse News Services story by Nicholas Iovino, “Lawyers Share $175M Payday in VW Settlement,” reports that a federal judge awarded $175 million in attorneys’ fees and costs to lawyers that helped secure a $10 billion settlement in the Volkswagen diesel-gate scandal.

U.S. District Judge Charles Breyer approved the $10 billion package in October 2016 as part of a larger $15 billion deal, which included $4.7 billion in air quality improvement programs to mitigate the impact of cars that violated emissions standards.

The $15 billion deal was the most costly settlement Volkswagen has paid thus far for its use of emissions-cheating software in some 11 million cars worldwide.  The German automaker has paid more than $20 billion in U.S. civil settlements and criminal fines, and U.S. prosecutors have charged six of its executives over their roles in the scandal.

As part of the $15 billion deal approved last year, Volkswagen agreed to spend up to $10 billion buying back or modifying nearly 600,000 2-liter diesel engine vehicles tainted by defeat devices.  Defeat devices allowed the cars to mask emissions during tests while spewing up to 40 times more nitrogen oxide on the road than allowed under federal law.

Breyer found $167 million in attorneys’ fees and $8 million in costs requested by the plaintiff class lawyers was “reasonable and fair” given the “extraordinary result” achieved for the class.  The judge said the settlement put owners of affected vehicles back into the same position they were in before the scandal was made public in September 2015.  Volkswagen offered to buy back cars based on their pre-public scandal value or to repair them with EPA-approved emissions-reducing modifications.

Awarded attorneys’ fees make up 1.7 percent of the $10 billion settlement package.  The award will be shared among 21 law firms that made up the plaintiff class steering committee, headed by lead counsel Elizabeth Cabraser of Lief Cabraser Heimann & Bernstein.

The lawyers and their staff worked 98,000 hours litigating the case and negotiating the settlement.  They expect to spend an additional 21,00 hours processing claims over the next 26 months, according to Breyer’s March 17 ruling.

The average hourly rate for class attorneys’ work was $529, amounting to a $63.5 million lodestar, or total cost of litigation hours.  Breyer found applying a 2.63 multiplier to the lodestar was justified given “the complexities of this case and the extraordinary result achieved for the class.”

Lead attorney Elizabeth Cabraser said in an emailed statement, “The award will be allocated by lead counsel among firms who performed authorized common benefit work, based upon relative value of contributions to the case and time that was reported and complied with guidelines set forth by the Court.  These fees will not be deducted from any class member’s recovery amount.”

NALFA Podcast with Law Professor Charles Silver

March 17, 2017

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who’ve helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, judges, law professors, in-house counsel, and others on a range of attorney fee and legal billing issues.

NALFA’s second podcast featured an interview with Charles M. Silver, Professor of Law at the University of Texas at Austin School of Law.  The NALFA podcast with Professor Silver focused on his empirical research on the setting of attorney fees in securities class actions and economic principles at play in civil litigation.  The podcast discussion centered on fee calculation methods, judicial procedure for awarding fees, and private contingency fee agreements. 

Professor Silver also discussed the politics of class actions and the dynamics of the tort reform lobby.  In addition, Professor Silver also offered several recommendations for the class action world, including employing a more real world, market based approach to awarding fees in class actions.

“These podcasts are the perfect broadcast format to discuss attorney fee and legal billing issues,” said Terry Jesse, Executive Director of NALFA.  “In addition to his research, Professor Silver talked about a range of issues including the creation of a data set for judges to draw upon when awarding fees, fee allocation issues in MDLs, and setting attorney fees early in the class action process,” Jesse said.  Click on the link below to listen to the NALFA podcast:


Fee Allocation Dispute in NCAA Antitrust Case

February 28, 2017

A recent New York Law Journal by Charles Toutant, “Suit Says Lawyer Has Been Shortchanged on Fees in $60M Video Game Settlement,” reports that a New Jersey lawyer claims in a suit that class action firm Hagens Berman Sobol Shapiro shortchanged him on fees from a $60 million settlement of class action suits on behalf of college athletes over the use of their names and likenesses in video games.

Timothy McIlwain of Linwood claims Hagens Berman breached a contract between plaintiffs lawyers concerning sharing of fees in his suit against the firm and three principals, which was filed in federal court in the District of New Jersey.  In addition to the firm, the suit names managing partner Steven Berman and partners Leonard Aragon and Robert Carey as defendants.  Aragon said he had not had a chance to review the lawsuit, but said any claim contradicting a Northern District of California judge who awarded fees would be "frivolous."

The suit claims Hagens Berman breached a contract it entered into with McIlwain concerning division of fees from class action litigation against video game maker Electronic Arts and the National Collegiate Athletic Association.  Roughly 24,000 class members received payments averaging $1,600 each for appearing in a series of video games produced by EA between 2003 and 2014.  In July 2015 a U.S. judge in San Francisco approved the $60 million settlement, which was brought on behalf of college football and basketball players who said their rights of publicity were violated by unauthorized depictions of them in video games.

U.S. District Judge Claudia Wilken of the Northern District of California awarded $5.7 million in attorney fees to Hagens Berman in the combined settlement of three suits against EA and the NCAA on Dec. 10, 2015.  The judge awarded $696,000 to McIlwain after concluding that his fee application sought payment for several items that were unrelated to the case.

But McIlwain's suit cites an agreement between plaintiffs firms in the video game litigation that called for the pooling of any fee award, and a division giving 60 percent to Hagens Berman and 40 percent to McIlwain and his co-counsel, the Lanier Law firm.  Berman agreed to those terms in a Sept. 24, 2013, email that is included in an exhibit to McIlwain's complaint.

McIlwain brings counts for breach of contract, breach of the covenant of good faith and fair dealing, and interference with prospective economic advantage.  He seeks compensatory and punitive damages as well as costs, interest and legal fees.

McIlwain filed suit in state court on behalf of former Rutgers University football player Ryan Hart in 2009.  EA removed the case to U.S. District Court for the District of New Jersey.  Around the same time, Hagens Berman's attorneys filed suit in the Northern District of California on behalf of Sam Keller, who was a quarterback at Arizona State University and the University of Nebraska.

McIlwain's case, Hart v. Electronic Arts, was dismissed by a federal judge in New Jersey who found EA's use of the plaintiff's likeness was protected by the First Amendment. But t hat decision was overturned by the U.S. Court of Appeals for Third Circuit, which sent the case back to District Court in May 2013.

Meanwhile, in Keller v. NCAA, EA appealed a District Court judge's ruling denying its motion to strike right-of-publicity claims asserted by Keller.  EA claimed that its use of the player's likeness and jersey numbers was a transformative use and therefore protected by the First Amendment.  But the Ninth Circuit affirmed the lower court in July 2013.

Lawyers for those cases and for a similar suit, O'Bannon v. NCAA, signed their fee-splitting agreement on Sept. 24, 2013.  And two days later, on Sept. 26, 2013, EA agreed at a mediation session to settle the three suits for $40 million.  In June 2014, the NCAA agreed to pay $20 million to settle the three suits.

Hagens Berman argued before Wilken that it should receive the largest portion of the fee award in the case because a ruling it obtained from the Ninth Circuit in Keller was the catalyst for the $60 million settlement.  McIlwain, for his part, maintains that a ruling he received from the Third Circuit in Hart was the catalyst for the settlement and, therefore, he is entitled to over $4 million in fees.

But Wilken said in a Dec. 10, 2015, order that the right-of-publicity claims raised under California law in Keller exposed EA to the greatest liability.  That finding weighed in favor of a finding that the Keller case made the most significant contribution to the settlement, Wilken said.

Aragon, who is in Hagen Berman's Phoenix office, said his firm has not been served with the complaint yet, but added that the fee distribution was resolved by Wilken.  "Any attempt to bypass the court's order is frivolous.  If we are served, we will move to dismiss the case and will seek fees and costs against Mr. McIlwain."

Aragon said the email cited by McIlwain was "part of a much larger agreement and that agreement never came to fruition.  I would suggest to him that he re-read Judge Wilken's order and dismiss his case."

The litigation was notable because it marked the first time the NCAA paid for the use of the name, image and likeness rights of student athletes.  "Many students received thousands of dollars from the NCAA as a result of the Hagens Berman's work, and the settlement was universally well received by the athletes," he said.

Fee Allocation Issues in $12M False Claim Act Settlement

February 24, 2017

A recent Law 360 story by Carolina Bolado, “Doctors’ Counsel Ask Courts to Divide Fees in $12M FCA Deal,” reports that Aronovitz Law asked a Florida federal court to help divide the attorneys' fees among counsel for whistleblowers whose suit against a Miami-area hospital for submitting false claims to federal health care programs for medically unnecessary cardiac procedures netted a $12 million settlement.

Aronovitz told the court that the firm and its co-counsel, Aronfeld Trial Lawyers PA, could not agree on how to divide the attorneys' fee award for their work representing Dr. James A. Burks and Dr. James D. Davenport in their False Claims Act suit against South Miami Hospital and Dr. John R. Dylewski over procedures he performed when he worked at the Baptist Health-owned hospital.  The firm said the court would have to resolve disputed issues of fact before the fee award could be divided among counsel in the case.

“Those disputed issues of fact cannot be adequately presented to the court for resolution without first conducting some limited discovery, and the record is not sufficiently clear to allow the court to resolve the dispute without such discovery or an evidentiary hearing,” Aronovitz said in the filing.

The firms represented Burks and Davenport, a vascular surgeon and a cardiologist, respectively, who worked at the hospital and claimed to have personal knowledge of Dylewski and the hospital performing a number of unnecessary cardiac procedures for the sole purpose of increasing the amount of reimbursements paid to the hospital and its doctors by Medicare and other federally funded programs.

They said that since at least 2007, thousands of mostly elderly patients treated by Dylewski with the consent of Baptist and South Miami Hospital have been subjected to "invasive, improper, unjustified, medically unnecessary, repetitive, high risk and costly” medical procedures undertaken to allegedly treat abnormal heart rhythms.

Davenport said he witnessed the Medicare fraud and improper surgical practices when he worked with Dylewski from 2006 to 2007 and while later serving as a doctor for Baptist Health and South Miami Hospital.  Burks said he witnessed “repeated and continuing instances” of improper medical and billing practices.

The hospital agreed in December to pay $12 million to settle the allegations.  Dylewski, who no longer works at the hospital, was not a party to the settlement.  Burks and Davenport will receive about $2.75 million in the deal.

The case is United States of America et al. v. Dylewski et al., case number 1:14-cv-22079, in the U.S. District Court for the Southern District of Florida.