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Category: Fee Allocation / Fee Apportionment

$45M Fee Award in $187M LIBOR MDL Settlement

November 25, 2020

A recent Law.com story by Nadia Dreid, “NY Judge ‘Surprised’ By Fee Application in Libor Rigging Case,” reports that a New York federal judge wasn't happy with the amount of hours or law firms on the attorney fee bill she received in the wake of a $187 million deal with JPMorgan and other major financial institutions over claims of interbank rate rigging, but she granted $45 million in fees anyway.  U.S. District Judge Naomi Reice Buchwald said in her opinion that she was "to say the least, surprised to learn from their fee application that [exchange-based plaintiff] class counsel involved twelve additional law firms" and that the work from those firms made up nearly a fifth of the submitted hours.

"The court cannot divine any reason why it was necessary, efficient or in the best interests of the class to have twelve additional law firms litigate this case," the opinion read.  "If anything, the hours were claimed for work that was duplicative, unnecessary and easily could have been performed by the two appointed firms."

Those firms were Kirby McInerney LLP and Lovell Stewart Halebian Jacobson LLP, who were appointed as class counsel to the exchange-based plaintiffs in the multidistrict litigation accusing JPMorgan, Deutsche Bank and a handful of other big banks of conspiring to rig the London Interbank Offered Rate, or Libor.  Judge Buchwald preliminarily approved the $187 million deal in March and gave it her final blessing in September, but she had yet to come to a final decision on attorney fees.  Ultimately, she decided that none of the 15,000 hours of additional work done by outside firms would be used in the lodestar calculations.

The court also had issues with the amount of hours billed by class counsel themselves.  Although she agreed to accept all of the more than 65,000 hours of work from the two firms, the court noted that their bill listed 10,000 hours more than their sister counsel claimed "in support of their fee application for a case of similar magnitude."  It would take a four-person law firm working on the case full-time for roughly nine years — minus a month annually for vacation — to reach the 65,000 mark, according to the court.

"While the sheer quantum of hours suggests some amount of over-litigation, the court will credit [class counsel] the full amount of time they claim," Judge Buchwald said.  The fees that the firms will walk away with comes out to 25% of the $187 million settlement, after the deduction of around $5.6 million in expenses, according to the opinion.

Class Counsel Seek $18.5M in Fees in LIBOR MDL

November 3, 2020

A recent Law 360 story by Dean Seal, “Class Atty Seek $18.5M in Fees for Libor Deal with 7 Banks,” reports that counsel for a class of bondholders asked a New York federal judge for an $18.5 million fee award for having negotiated settlements with seven financial giants accused of rigging the London Interbank Offered Rate (LIBOR).  Attorneys from Morris and Morris LLC Counselors At Law and Weinstein Kitchenoff & Asher LLC put the request before the court while seeking final approval for $68.6 million worth of settlements with JPMorgan Chase, Bank of America, RBS, Barclays, HSBC, UBS and Citibank.

According to the filings, class counsel has spent 34,743 hours representing the bondholders in their class action, which is part of sprawling multidistrict litigation launched over alleged rate-rigging coordinated by the world's largest financial institutions.  "Class counsel made this investment in vigorously litigating the bondholder action over more than eight years, with no assurance either of payment for their services or recoupment of their out-of-pocket litigation expenses," the bondholder attorneys said.

The bondholders' suit is one of many filed in connection with Barclays Bank PLC's 2012 admittance that it had been one of a number of banks lying about the interest rates it actually expected to pay in order to artificially influence Libor.  Investors contend the major financial institutions deliberately low-balled their submissions in the Libor rate-setting process to manipulate the benchmark.  As a result, the banks raked in hundreds of millions, and perhaps even billions, of dollars in ill-gotten gains, according to case filings.

Ellen Gelboim and Linda Zacher led the class of bondholders who owned U.S. dollar Libor-based debt securities between Aug. 1, 2007, and May 31, 2010.  Their highly complex antitrust action had already seen more than one dismissal, multiple appeals and even a trip to the U.S. Supreme Court by the time they announced settlements with Barclays, UBS AG and HSBC Bank PLC in 2017.

Under those deals, which received preliminary approval in July 2017, Barclays agreed to pay $7.1 million, UBS would contribute $17.9 million and HSBC would hand over $11.1 million.  Another deal that received preliminary approval in December 2018 stipulates that Citi will pay over $7 million to resolve bondholder claims.

Then last April, the bondholders announced three more settlements with JPMorgan Chase, Bank of America and Royal Bank of Scotland Group PLC that would recover a combined $25.5 million for the bondholder class.  The filings show that JPMorgan and BofA would each pay $6.25 million while RBS would turn over $13 million.  "Continuing to litigate against the settling defendants would likely last many years with the potential of no recovery for the bondholder class, and require the expenditure of significant resources of the court and the investment of hundreds if not thousands of hours of time and large sums of money," the bondholder class said.

Class counsel are asking for a 28% cut of the overall settlement fund net of roughly $2.5 million in expenses, resulting in a fee request of just over $18.5 million, along with another $817,237 in unreimbursed fees.  They noted that the settlements had been reached despite the fact that the bondholders' claims are currently dismissed and would rely on "an unpredictable appeal" to get reinstatement.

Law Firms Tussle Over Share of $8.3M in Attorney Fees

October 12, 2020

A recent Law 360 story by Emillie Ruscoe, “Fee Bid is ‘Unseemly Mudslinging.’ ICO Suit Co-Counsel Says,” reports that part of a co-lead counsel team accused their counterparts of "unseemly mudslinging" in a dispute over distribution of the $8.3 million counsel fee they earned in a settlement of allegations that Swiss blockchain company Tezos Stiftung's 2017 initial coin offering violated federal securities laws.

Lawyers from Block & Leviton LLP and Hagens Berman Sobol Shapiro LLP told U.S. Magistrate Judge Joseph C. Spero to deny a September motion for counsel fees filed by attorneys from Hung G. Ta Esq. PLLC, LTL Attorneys LLP, the Restis Law Firm PC and Lite DePalma Greenberg LLC, telling the magistrate judge that the fee request "is devoted to unseemly mudslinging, inaccurate accusations of deceit, and unfounded claims of violations of the rules of professional conduct."

The Hung G. Ta Esq. PLLC-helmed attorney group filed their counsel fee request in September, asking U.S. District Judge Richard Seeborg to order Block & Leviton to put funds back into the escrow account holding $8.3 million that the plaintiffs' counsel team was awarded for its work on the case.  In a memo accompanying the counsel fee motion, the HGT Law group told Judge Seeborg that "Block & Leviton has proceeded, without HGT Law's authority, to distribute attorneys' fees to itself and several other firms with which it is aligned," asking the judge not to permit "such brazen misconduct."

HGT Law said the Block group had "proceeded to unilaterally distribute fees" so that Block & Leviton and Hagens Berman received 25% of the total fee, and 50% of the fee went to Robbins Geller, which is not docketed in the matter but was also involved in the case, according to the co-lead counsel team.  "This proposal is irrational and unreasonable," the HGT group contended, suggesting that Block & Leviton was trying to "maintain good relations with Robbins Geller and ensure favorable treatment from Robbins Geller in other cases."

Two days after the counsel fee motion was filed, court records show, Judge Seeborg referred the case to Judge Spero for resolution of the attorney fees dispute.  "This development is unwelcome, and its disposition ought not involve the intervention of this court," Judge Seeborg said in the same order vacating the Oct. 29 hearing on the motion that HGT had requested.

The Block group apologized to the court "that counsel were unable to work things out among themselves" and promised to work with the magistrate judge to resolve the issue in good faith.  "The court should not have to deal with this dispute.  It is always unseemly for lawyers to be squabbling over a multimillion-dollar award of attorneys' fees," the Block group said.

The Block group contended that HGT Law knew since December 2019 that it could expect to receive a quarter of the counsel fee.  "The [HGT Law group] never proposed a different fee allocation until after fees were awarded and sat on its hands until B&L sought to distribute the money consistent with [co-lead plaintiff] Trigon's allocation," the Block group claimed.

The Block group also said that "The Ta Group's wild accusation that 'Block & Leviton (and the other firms in the Block group) have attempted to deceive HGT Law, and have violated numerous ethical duties and guidelines of this district' is absolutely false."  The Block group also said that it "reiterates its willingness — if the Ta Group would like to withdraw its motion without prejudice — to resolve this dispute either through further informal discussions or through more formal [alternative dispute resolution] mechanisms."

Records show the parties to the case reached a $25 million cash settlement agreement in March, ending claims that the Tezos defendants held an unregistered securities offering in July 2017.  The $8.3 million counsel fee comprised a third of the settlement fund, and the attorneys who worked on the case on behalf of the proposed investor class would also get $300,000 to cover their litigation costs, according to the settlement terms.

Article: 3 Tips for Working with Bankruptcy Fee Examiners

October 2, 2020

A recent Law 360 article by Robert M. Fishman, “3 Tips For Working With Bankruptcy Fee Examiners” provides practice tips for working with outside bankruptcy fee examiners.  This article was posted with permission.  The article reads:

The appointment of a fee examiner and the fee examination process in any given bankruptcy case seem to generate a variety of questions.

Will a fee examiner process be better for the case — read: me — than having the judge address the reasonableness and appropriateness of fees?  Will there now be three parties — the fee examiner, the court and the U.S. Trustee — scrutinizing my fees as well as criticizing my staffing, timing and approach to the case?  What will the nature and approach of the fee examiner be in my particular case?  Will the appointment of a fee examiner speed up the review and payment process?

Fee examiners are most often appointed in larger cases.  In such cases, the ability of the court to make the time to review, analyze and rule on fee applications may be a concern.  This is especially true if that court is one in which a large number of substantial cases are currently pending.

The number of parties that will be submitting fee applications to the court also plays a role in the consideration of whether a fee examiner is appropriate in a particular case.  Multiple law firms, financial advisers and other professionals for the debtor and one or more committees, creates a substantial burden on the court in terms of reviewing and ruling on fee applications.

A request for the appointment of a fee examiner can either come from the parties in the case or directly from the court.  Some courts routinely appoint a fee examiner in large, complex cases, while others do so only upon the request of one or more parties in interest.

The selection of the particular fee examiner can originate from any of three places.  Once a court decides to appoint a fee examiner, the court may: (1) select its own fee examiner; (2) appoint one that has been suggested, or agreed to, by the principle parties in the case; or (3) defer to the Office of the U.S. Trustee for the selection.  Courts are often happy to utilize a qualified fee examiner that has been agreed to by the main parties in the case.

In light of the current number of pending large cases, particularly in a few, specific jurisdictions, the burden of the fee review and allowance process is going to be substantial.  Further, I anticipate that the upcoming months may see an even greater number of small, medium and large cases filed, which will place an even greater strain on the system's ability to efficiently and timely process fee applications for numerous professional firms.

As a result, I believe that both courts and the affected parties will look to the appointment of fee examiners to ease that burden and provide a more timely and efficient practice for processing fee applications.  In evaluating candidates for fee examiner appointments, the following questions may be pertinent.

Is the candidate:

An experienced practitioner with actual bankruptcy case experience or an analyst who identifies typical problematic situations and focuses on them;

A reasonable, big picture type of examiner or a more granular, item-by-item examiner;

One that believes that he has been appointed to:

Cut fees (to a specific or general degree), or

Determine if the applicable rules have been followed and the services and expenses are actual, reasonable and necessary in the context of the particular case; or

One who generally gives deference to the billing partner involved or is more apt to substitute his/her own judgment for that of the billing partner as to how to staff cases or how much time it should take to write a brief?  As an attorney discussing fee application issues with fee examiners, I have discovered that examiners have a wide range of approaches and attitudes.

In my role as a fee examiner discussing fee application issues with countless professionals, I have found that they also exhibit a broad range of approaches and attitudes.  My experience both as an attorney submitting numerous fee applications subject to review by fee examiners, and as an appointed fee examiner in both large and medium-sized cases has led me to a view on the preferred type of fee examiner and how best to work with them.

Understanding where your fee examiner fits into the above criteria is essential to both having a realistic expectation of how you will be dealt with and knowing how best to interact with the fee examiner.   So, what lessons have I learned? Here are what I have found to be the three most important guidelines for a successful relationship with a fee examiner.

Every Case has Ground Rules

They include the Bankruptcy Code, the applicable local rules and the cases interpreting the same.  Importantly, the ground rules also include the process that the fee examiner intends to utilize — and most likely have the court bless — to govern the timing, organization and review of the fee applications.

One of the best pieces of advice I can give an applicant is to present the fee application in the way requested by the fee examiner.  Independent creativity is often not rewarded.  Most fee examiners have a method to their madness.

Choose the Right Person to Prepare the Fee Application.

The fee application or invoice must be prepared — or at least thoroughly reviewed — by someone who understands the case and is able to explain the issues handled by the firm and the staffing decisions that were made in support of providing the necessary services.  Many issues that fee examiners raise come from an inability to truly understand what has taken place and why things were handled in the manner in which they occurred.

Most fee examiners are willing to be at least somewhat deferential to the billing partner when presented with a cogent and rational explanation of what happened and why.  This approach tends to be even more effective when the explanation is part of the original application rather than offered only in response to concerns raised by the fee examiner.

It Doesn't Pay to Fight with a Fee Examiner

First of all, most fee examiners aren't out to get anyone.  They are merely trying to apply the rules in an even-handed way to provide for the allowance of reasonable compensation for actual and necessary services.  Every fee application or invoice has potential issues, such as too many professionals working on a project, too much time spent working on an issue or overqualified professionals providing basic services.

Also, a firm cannot be compensated for fighting fee objections in court, where raised by a fee examiner of a party in interest.  Be rational and open minded.  Fee examiners want to reach agreements and resolve differences of opinions by consent.  They will almost always compromise on the amount of reductions necessary to address any point they are raising.

The right fee examiner can be a valuable asset in a case.  They are likely to allow for a more timely resolution of interim fees.  A fee examiner who is also an experienced practitioner will likely speak the same language as the applicant and have a good feel for what it takes to perform the services for which the applicant seeks payment.  In short, a good and experienced fee examiner should really be your ally in making the process move quickly and efficiently, and in obtaining a fair and reasonable outcome for everyone.

Robert M. Fishman is a NALFA member and a member at Cozen O’Connor in Chicago.  He served as the fee examiner in the city of Detroit Chapter 9 case.

Court Resolves $4M Attorney Fee Dispute with Law Firms

October 1, 2020

A recent Law.com story by Raychel Lean, “Court Chides Morgan & Morgan as Holland & Knight Prevails in $4 Million Attorney Fee Dispute,” reports that a federal breach of contract lawsuit which saw Holland & Knight litigators take on Morgan & Morgan came to a head when U.S. District Judge K. Michael Moore awarded more than $4.1 million in fees and costs to one side and just $550,000 to the other.  Now more than seven years in, the litigation itself has proved more costly for the plaintiffs than the actual judgment it obtained.

The dispute began in 2013, when the plaintiffs — Miami construction companies Architectural Ingenieria Siglo XXI LLC and Sun Land & RGITC LLC — sued over a failed irrigation construction contract worth $51.8 million.  Their lawsuit accused the Dominican Republic and its water resource agency, Instituto Nacional De Recursos Hidraulicos, or INDRHI, of breaching its contract by terminating the deal under force majeure, citing financial hardship.

And though the defendants were initially slapped with a $50 million default judgment for failing to respond, that was reversed when it retained Holland & Knight attorneys, who argued service hadn’t been properly handled.  Then, an eight-day bench trial resulted in a comparatively low $576,000 judgment against the water resource agency, while the Dominican Republic was absolved of liability.

Both sides moved for prevailing party fees and costs.  And after a report from U.S. Magistrate Judge Honorable Chris M. McAliley, Moore found plaintiff AIS was entitled to fees from the water resource agency; the Dominican Republic was entitled to fees from both plaintiffs; and the water resource agency was entitled to fees from plaintiff Sun Land.  In the order, Moore adopted McAliley’s findings on how much each side could recover.  And it was good news for defense attorneys Gregory Baldwin, Eduardo Ramos and Ilene Pabian of Holland & Knight’s Miami office, who’d sought more than $3.6 million in fees, along with $629,450 in non-taxable costs and $33,000 in taxable costs.

Though the plaintiffs argued those numbers were unreasonably high and moved for a 50% to 75% reduction, Moore approved the magistrate’s 15% haircut instead, shaving $144,600 off their fees.  It was a satisfying result for a case that Baldwin said “took a lot of patience, a lot of dedication and a great deal of time.”  “We’re very pleased and satisfied with the result.  We think, overall, it’s a just and fair result,” Baldwin said.  “The Dominican Republic was completely vindicated, and INDRHI received a damages award against it in an amount that we think was reasonable.”

But the ruling was bad news for plaintiff AIS, which sought $2.7 million in fees under a 2.5x contingency fee multiplier, and asked for $438,203 in nontaxable costs.  But Moore only awarded about $248,000 in fees and $302,000 in nontaxable costs — thanks to a bruising 75% reduction in fees recommended by the magistrate.

McAiley’s report levied some criticism at Morgan & Morgan, which “substantially frustrated the court’s task of working through the issues.”  The report said the firm caused extra work and delay by failing to initially disclose certain fee information, demonstrated a “lack of care” in its filings, kept unreliable records and had mixed some non-recoverable appellate costs up with trial costs.

“Obvious examples include the several entries where single timekeepers claim to have worked nearly, or more than, 24 hours in one day,” McAiley’s report said. “For instance, Morgan & Morgan maintains that one of its attorneys worked 32.7 hours in one day.”  McAiley denied Morgan & Morgan’s request for a fee multiplier and reduced its fees by 10% for failure to keep proper time records, 15% for block billing and 50% after factoring in the plaintiffs’ “very limited success” in the underlying case.  But they argued the reduction was “too much given the significant amount of work it took to litigate this case,” according to the ruling.

Moore said he wasn’t swayed by the plaintiff’s objections.  “Here, in objecting to the 75% fee reduction, plaintiffs fail to identify any factual finding in the R&R to which plaintiffs object,” Moore’s ruling said. “Rather, plaintiffs take issue with Magistrate Judge McAliley’s reasoning by arguing not that plaintiffs accurately recorded their hours worked and avoided block billing, but that the hours requested were reasonable and their success was greater in context than Magistrate Judge McAliley found it to be.”

The plaintiffs team also requested $237,400 to cover work performed by GrayRobinson.  But Moore rejected that, accepting McAiley’s finding that the retainer agreement said Morgan & Morgan was obligated to pay GrayRobinson, not that the client was