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Category: Fee Allocation / Splitting

Pelvic Mesh MDL Fee Committee Accused of Self-Dealing

March 29, 2019

A recent Law 360 story by Andrew Strickler, “Pelvic Mesh MDL Fee Committee Accused of Self-Dealing,reports that a group of firms that worked on cases for plaintiffs in the multidistrict litigation over pelvic mesh implants has accused fee committee members of self-dealing and obscuring the process of divvying up the case's proceeds.  In one recent filing, New Jersey-based personal injury firm Mazie Slater Katz & Freeman said the committee's recommendations on a split of the "common benefit" fees had largely ignored its role as one of the “driving forces and largest risk-takers” in the massive litigation.

The firm also said some members of the fee and cost committee had raised concerns that committee leaders — chair Henry Garrard of Blasingame Burch Garrard & Ashley PC, Joseph Rice of Motley Rice, and Clayton Clark of Clark Love & Hutson GP — had “predetermined” to give themselves the lion’s share of the fund at the expense of other firms.  Adam Slater of the Mazie Slater firm also claimed that in the “most glaring example of self-dealing,” attorney Bryan Aylstock of Aylstock Witkin Kreis & Overholtz pressured Garrard to up his firm’s award by $10 million by threatening to stop an Aylstock firm partner who sits on the committee from backing the award recommendation.

Retired Judge Daniel Stack, who was appointed by the court to oversee fee allocations, “stated that he ‘was sickened’ and ‘angered’ by this conduct, which he described as Mr. Aylstock pressuring [Garrard] when he was particularly vulnerable,” according to the filing.

The litigation accusing Boston Scientific Corp. of making defective pelvic mesh implants was first centralized in West Virginia six years ago as three MDLs covering 150 cases.  It later grew into seven MDLs with some 53,000 lawsuits.  In January, U.S. District Judge Joseph R. Goodwin in West Virginia ordered that 5 percent of all proceeds should be set aside for attorneys at 94 common benefit firms, representing some $336 million.  Stack and the fee committee issued their fee allocation recommendations to the court in mid-March.

In another March 26 filing, personal injury firm Kline & Specter PC also objected to its $3.745 million award from the common benefit fund, and said fee committee members were attempting a “mass taking.”  The Philadelphia-based firm, which has raised previous objections about the fee committee, also accused Stack of “rubber stamping” the committee’s recommended awards and severely underestimating the firm’s contributions in mesh-focused state court litigation.  “Mr. Stack’s methodology, if one exists, is severely flawed,” the firm said, calling his contribution “worthless.”

A third law firm, Ohio’s Anderson Law Offices LLC, also told the court the eight-member fee committee had authorized for their own firms 66 percent of the total pool, leaving the rest to 79 other firms.  Garrard, Rice and Clark “alone are enriching themselves with 41 [percent] of the total fund; an astonishing $143,669,635,” the firm said.  “By definition, this is self-dealing pure and simple.”

Class Counsel Seek $45M in Fees in Latest NCAA Antitrust Case

March 27, 2019

A recent The Recorder story by Ross Todd, “Plaintiffs in Latest NCAA Antitrust Case Seek Nearly $45M in Fees,” reports that lawyers who recently won an injunction barring the National Collegiate Athletic Association from capping education-related benefits for certain college athletes are seeking nearly $45 million in attorney fees as a result of what they call “a historic and substantial judgment.”  Co-lead plaintiffs counsel at Winston & Strawn, Hagens Berman Sobol Shapiro, and Pearson, Simon & Warshaw submitted court papers claiming plaintiff lawyers spent more than 51,000 hours on the case, which culminated in a 10-day bench trial last year.

The firms claim they put in the equivalent of about $29,944,894 in hourly billings, but they’re asking U.S. District Senior Judge Claudia Wilken of the Northern District of California to apply a multiplier of 1.5 to that amount, based on the novelty of the case, the risks involved and the quality of the defense counsel representing the NCAA and its member conferences.

“Plaintiffs’ fees are reasonable in light of the substantial defense resources (involving more than a dozen of the top law firms in the world) that they had to overcome, the difficulty and novelty of the many issues presented by this case, the enormous amount of factual discovery and expert work that was required to prosecute the claims, and the substantial economic value of the injunctive relief delivered to the Plaintiff Classes,” plaintiffs counsel wrote.

Wilken earlier this month found the NCAA in violation of federal antitrust law and issued an injunction barring the organization and its member schools and conferences from capping education-related benefits such as computers, science equipment, postgraduate scholarships and aid to study abroad for NCAA Division I women’s and men’s basketball players and football players at schools in the NCAA’s Football Bowl Subdivision.  Plaintiffs submitted estimates from their economic expert which claim the injunction could be worth as much as $100,000 for individual class members over a four-year period—as much as $235 million annually in total.

According to a declaration filed alongside the fee motion, lawyers, paralegals and support staff at Winston & Strawn put in 41,152.05 hours on the case over about five years during the litigation, worth about $24,304,240 at the historical billing rates at the time of the work.  Jeffrey Kessler, co-executive chairman of the firm and co-chair of its antitrust/competition and sports law practices, saw his hourly rate go from $1,180 per hour when the case was initially filed in 2014, to $1,515 per hour for work done this year on the case, according to billing records submitted with the declaration.

Hagens Berman, according to a separate declaration filed, dedicated 5,575.20 hours of lawyer, paralegals and legal staff time to the matter, or $2,742,185 in firm time at historical rates.  Name partner Steve Berman put in 514.4 hours on the case at rates ranging from $950 to $1,025 per hour during the case, for a little more than $500,000 worth of total billings.  Attorneys with Pearson, Simon & Warshaw claim they spent 4,754.20 hours working on the applicable portion of the case, or about $2,754,725 worth of firm time.  The most recent rates for name partners Clifford Pearson, Bruce Simon, and Daniel Warshaw all recently hit $1,150 an hour, according to the firm’s declaration in support of the fee motion.

Elizabeth C. Pritzker of Oakland’s Pritzker Levine, whose firm represented two named plaintiffs who played women’s basketball for the University of California at Berkeley and served as additional plaintiffs counsel, filed a declaration claiming the firm logged 198 attorney hours in the injunctive relief portion of the case, or $143,745 in hourly billings.

In the fee motion, the plaintiffs team noted that, in a prior antitrust class action against the NCAA involving the names, likenesses and images of players, Wilken awarded injunctive relief class counsel about $40,794,246 in lodestar fees—roughly a third more than what’s being sought, timewise, in the current case.  The plaintiffs contend, however, that the more recent case has done more “to bridge the ‘great disparity’ between class members and defendants.”

5 Law Firms to Divide $214M in Fees in $1.5B Syngenta MDL

March 21, 2019

A recent Law 360 story by Ryan Boysen, “5 Firms to Get $214M in $1.5B Syngenta MDL Corn Settlement,” reports that five law firms will receive $214 million in fees from the $1.5 billion Syngenta AG tainted corn settlement after a Kansas federal court adopted those same firms' recommendation on how to allocate some of the money.  Those firms, who all played major leadership roles in guiding the multidistrict litigation to a successful settlement, submitted a report last month on how to allocate a $247 million chunk of the roughly $500 million in total attorneys' fees awarded by U.S. District Judge John W. Lungstrum last year.

In the order, Judge Lungstrum agreed to pay out the $247 million according to the six-tiered structure proposed by those firms, a structure that will see them take home $214 million in fees while the remaining $33 million is split between 59 other firms.  Judge Lungstrum said that despite the "inherent conflict of interest that exists" in having the five lead firms propose the overall allocation, "in that any undercompensation of non-lead counsel would increase [co-lead counsel]'s own share of the fee pool," he nonetheless decided to have those firms take the reins because they "performed the great majority of the substantive work on behalf of plaintiffs in this litigation."

Thus, he added, "they are in the best position to judge the relative contributions by the petitioning attorney to the settlement and the benefit of the settlement class."  Judge Lungstrum said that after reviewing the proposal he found it "fair, reasonable and appropriate," and noted that out of the 64 total firms affected by the proposal only two objected.  The order overruled those objections in the course of approving the report.

The five firms that will split the "Tier 1" award of $214 million are Stueve Siegel Hanson LLP, Gray Ritter & Graham PC, Gray Reed & McGraw LLP and Hare Wynn Newell & Newton, which all served as co-lead class counsel, and Seeger Weiss LLP, which served as settlement class counsel and by all accounts took the lead role during settlement discussions.

The litigation dates back to 2014, when corn farmers and others in the corn industry began filing lawsuits claiming Syngenta caused China to block millions of tons of U.S. corn exports because the Swiss-based agrochemical giant began marketing genetically modified corn seed varieties without prior approval from Chinese regulatory agencies, costing the farmers billions.  The case settled in 2017 for $1.5 billion, and last New Year's Eve Judge Lungstrum entered a controversial order setting aside one-third of that for attorneys' fees and splitting that $500 million fund into four pools.  That order has since spawned fears about how the inevitable appeals resulting from it will be handled.

Those four pools include one that covers the firms involved in the MDL he oversaw in Kansas, one that covers a simultaneous consolidated proceeding in Minnesota state court, one that covers yet another action in Illinois federal court, along with one that will go toward so-called individually retained private attorneys.

The bulk of the overall fund, roughly 50 percent, went toward the Kansas fund, and that's the money Judge Lungstrum asked the co-lead counsel firms and Seeger Weiss to divvy up.  The five Tier 1 firms performed "the great bulk of the work litigating the claims in the MDL," Judge Lungstrum said, in justifying their request to receive $214 million from the $247 million fund.

Tier 2 consists of six firms, "all involved since the beginning of the litigation, whose work focused on litigation of the class and bellwether cases," Judge Lungstrum said.  Those firms will receive a total of $21 million.  Tier 3 consists of "five firms that performed substantive legal work on class and bellwether plaintiff claims," and that group will receive a total of about $6 million.  The 48 firms covered by Tiers 4, 5 and 6 will receive the remaining $6 million.

Weller Green Toups & Terrell, a firm placed in Tiers 4 and 5, objected to its total payout of roughly $1.2 million recommended by the report, claiming it's owed more like $25 million.  Judge Lungstrum shut down that objection, remarking that many of the firm's arguments had been previously denied and were made "largely by cutting and pasting from its previous briefs."

Hossley — Embry LLP also objected, arguing in particular that the $600 per submitted plaintiff fact sheet recommended by the report was too low.  Hossley stands to receive $673,000 for both Tier 4 and Tier 5 work, much of it relating to fact sheets the firm submitted.  Judge Lungstrum rejected that argument, saying it shouldn't have taken more than two or so hours to fill out a plaintiff fact sheet and that the work was easily done by less-experienced attorneys or paralegals, who have lower hourly rates.  The Kansas fund report and its adopting by Judge Lungstrum appeared to be fairly straightforward and agreeable compared with other episodes that have surfaced since the settlement was approved.

One group of 60,000 farmers sued Watts Guerra LLP on civil Racketeer Influenced and Corrupt Organization Act claims last year, alleging the firm conspired to charge them hefty contingency fees on top of what it stood to reap from the $500 million fund that was ultimately established.  Judge Lungstrum dismissed that suit earlier this month, finding that the contingency fees had been voided when Watts Guerra and its clients finally joined the settlement and therefore the farmers didn't ultimately receive any more or less money from the deal than any other firm's clients.

The case is In re: Syngenta AG MIR162 Corn Litigation, case number 2:14-md-02591, in the U.S. District Court for the District of Kansas.

Fee Allocation Dispute in Citigroup 401K Class Action

March 12, 2019

A recent Law 360 story by Andrew Strickler, “Firm Ordered to Drop Arbitration Bid in $2.3M Atty Fee Fight,” reports that the New York federal judge who oversaw the settlement of a case focused on a Citigroup employee retirement plan ordered one of the plaintiff co-counsels to withdraw a request for court-ordered arbitration to resolve a dispute over $2.3 million in legal fees.  U.S. District Judge Sidney Stein's order arrives amid a scrap between the co-leads in the Citigroup case, McTigue Law LLP and Bailey & Glasser LLP, over the split of the January award.

Attorneys at the McTigue firm, a Washington, D.C. pension boutique, had asked the court to reject Bailey & Glasser LLP's call for arbitration as "premature and, arguably, nonsensical," because the dispute has "no legal existence" in terms of a motion pending before the court.  The previous day, Bailey & Glasser had asked the court to compel arbitration of the fee split dispute, saying the co-counsels had agreed to do so in a 2009 agreement.  That deal "was drafted by Mr. McTigue himself," the firm said in a motion.  "As such, any ambiguities in whether and to what extent the arbitration clause governs the dispute should be resolved in favor of Bailey & Glasser."

In January, Judge Stein put his final stamp of approval on a $6.9 million settlement for a class of over 300,000 Citigroup 401(k) plan participants who had argued that the company stacked the plan with Citigroup-affiliated funds in order to boost its own profits, even as other funds charged lower fees.  Judge Stein also signed an order awarding $2.3 million to the plaintiffs' attorneys, $15,000 to each of two class representatives, and putting $374,100 toward case-related expenses.  That left approximately $4.2 million for the class.

Last month, both firms filed letters with the court about a disagreement on the fee allocation.  In his letter, James Moore of McTigue Law accused Bailey & Glasser's Gregory Porter of holding the attorneys' fees hostage as leverage in negotiating for a bigger cut of the $2.3 million by refusing to give consent for any of the money to be distributed.  According to Moore, Porter is contesting an agreed-to allocation, because Bailey & Glasser paid roughly 10 percent more in expenses in the case than was anticipated.

Porter in turn said the McTigue firm breached their deal last spring by failing to pay its share of expert expenses and then refusing to respond to emails "to confer on the management and financing of the case given the McTigue firm's financial condition."  In a second set of tit-for-tat filings, Bailey & Glasser told the court that, after it filed its arbitration motion, the McTigue firm had agreed to proceed to mediation.  The McTigue firm responded with its own filings stating that the Bailey firm's notification was "unilaterally filed" and gives the "misleading impression" of being about a joint agreement of class counsels.

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

Judge Denies Additional Attorney Fees in Merck Securities MDL

March 7, 2019

A recent New Jersey Law Journal story by Charles Toutant, “Judge Rejects Plaintiff Firms’ Demand for More Fees in Merck Securities MDL,” reports that a federal judge in Newark has dismissed a lawsuit from two law firms claiming they were shortchanged on fees after referring a plaintiff to the Vioxx securities multidistrict litigation that settled for $1.06 billion in 2015.  The Whitehead Law Firm of Lafayette, Louisiana, and Goforth Lewis & Sanford of Houston claimed they had a fee-sharing deal with New York’s Stull, Stull & Brody when the firms teamed up on securities litigation against Merck & Co.  But the court said such an agreement would violate New Jersey ethics rules, and that the plaintiffs failed to show any contract existed.

The Whitehead firm and Goforth Lewis filed suit in the Eastern District of Louisiana on behalf of a Merck & Co. shareholder named Frank Pringle in 2003.  They later teamed up with Jules Brody of the Stull law firm in New York, who filed a similar suit in the same venue.  Their cases were consolidated, and later made part of multidistrict litigation in New Jersey.  Stull, Stull & Brody later was one of four law firms named co-lead counsel in the Vioxx securities MDL.  After the $1.06 billion settlement was reached in 2015, the court awarded $212 million in attorney fees, including $31 million to the Stull law firm.  The Vioxx securities settlement followed a $4.85 billion settlement in 2007 on behalf of users of the drug who claimed they suffered heart damage.

The suit claimed that Merck officials falsely assured the public that Vioxx, a painkiller, was safe when they knew of evidence that long-term users had an increased risk of heart attack or stroke.  Merck’s stock price dropped 27 percent in one day after the company announced Vioxx was being taken off the market in September 2004.  Whitehead was awarded $550,000 in fees and Goforth Lewis $450,000 after the securities litigation was settled.  But the firms claimed they had an agreement granting each of them a referral fee of 14 percent of Stull, Stull & Brody’s gross fee, or $4.3 million each. Whitehead and Goforth Lewis further maintained that if the Stull law firm did not honor that agreement, they were each entitled to 25 percent of the $31 million, or $7.75 million each.

The Whitehead firm; its principal, C. Mark Whitehead III; and Goforth Lewis sued Stull, Stull & Brody in a Louisiana state court in November 2016.  Stull removed the case to federal court in the Eastern District of Louisiana and then had it transferred to the District of New Jersey.  U.S. District Judge Sara Vance, of the Eastern District, ruled that the legal representation at issue occurred primarily in New Jersey and therefore the contract was performed in New Jersey.  U.S. District Judge Stanley Chesler, in Newark, said the alleged fee-splitting agreement was unenforceable because it violated a provision in RPC 1.5(e) that the client must be notified of any fee division and consent to the participation of all the lawyers involved.

There was no indication Pringle was advised of the terms of the alleged fee-splitting deal, Chesler said in granting summary judgment to the Stull law firm.  “This is not surprising inasmuch as Plaintiffs are still asserting inconsistent versions of what the alleged deal was,” he said.  In addition, Chesler said the law firms failed to adequately demonstrate that an enforceable referral fee contract existed.  Whitehead states that his copy of the referral fee agreement was lost during Hurricane Katrina, while Goforth Lewis says a copy of the agreement cannot be found after the death of a partner in the firm who negotiated and kept possession of it.