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Category: Fee Award Factors

$9M in Attorney Fees in Fidelity Workers 401K Settlement

February 27, 2021

A recent Law 360 story by Alexis Shanes, “Fidelity Workers’ Attys Get $9M Cut of 401K Settlement,” reports that a Boston federal court approved $9 million in fees for the attorneys who helped current and former Fidelity Investments employees secure a $28.5 million settlement in their suit accusing the company of loading its workers' 401(k) plans with costly, proprietary investment options. 

In addition to granting the request by attorneys from Nichols Kaster PLLP and Block & Leviton LLP for a one-third cut of the settlement, U.S. District Judge William Young greenlighted $1.4 million in litigation expenses and $115,000 in settlement administration expenses.  The court also approved service awards of $10,000 each for lead plaintiffs Kevin Moitoso, Tim Lewis, Mary Lee Torline and Sheryl Arndt.  The four plaintiffs represented a class of roughly 41,000 current and former Fidelity workers.

In a December motion for fees, the attorneys said they had logged 7,862 hours working on the case.  In that time, they said, they developed the original complaint and amended it four times; reviewed or produced more than 180,000 pages of documents; and deposed a dozen witnesses.

"There is no question that class counsel devoted significant time and effort to this case," the attorneys said in the fee bid.  "Plaintiffs litigated this case vigorously, pursuing the case up to one month before trial was set to begin.  "This court and other courts have approved one-third fee awards in cases at far earlier stages of litigation," they added.

The parties struck the deal in July, after Judge Young set the suit up for trial with a March case stated order, an alternative to cross-motions for summary judgment that allowed the court to draw inferences and reach a decision based on undisputed facts in the case.  The order found Fidelity liable for failing to monitor proprietary mutual funds in the workers' 401(k) plan.  The parties had requested the case stated procedure after filing dueling summary judgment motions in September 2019.

The Fidelity workers sued under the Employee Retirement Income Security Act in October 2018, alleging Fidelity Management & Research Co., FMR LLC and four related entities had loaded their retirement plans with costly investment options that burdened plan participants.  The Fidelity retirement plan had roughly $15 billion in assets by the end of 2016, according to the complaint, ranking it among the top 20 such plans in the nation.

Kessler Topaz Garner $41M in Attorney Fees for Snap Investors

February 21, 2021

A recent Law 360 story by Emilie Ruscoe, “Kessler Topaz Garners $41.1M For Repping Snap Investors,” reports that Kessler Topaz Meltzer & Check LLP attorneys will take home $41.1 million for their work representing social media giant Snap Inc. investors in a suit alleging fraud, even as the federal judge who approved the deal opined that the overall fee request process does not face any "meaningful opposition and rigorous testing."

In his order out of Los Angeles, U.S. District Judge Stephen V. Wilson found that the multimillion counsel fee, which comprises a quarter of the $155 million settlement sum in the case, is reasonable "in light of the length of the litigation, a comparison to awards made in similar cases, and the minimal reaction from the class."  Judge Wilson signed off on the settlement sum in the same order.

Though the judge approved the fee total, he also noted in his analysis that, "Ultimately, the [counsel fee request] process fails to create any incentive to ensure that requests for attorney's fees in these cases face meaningful opposition and rigorous testing, thereby rendering a court's task in these situations unusually difficult."

Neither the defendants nor the members of the proposed class are in a position to really scrutinize the requested attorney fee, the judge said.  Defendants would have to pay their own attorneys more to go through the process of opposing the counsel fee, and class members are unlikely to retain and pay additional counsel just to oppose the counsel fee, he said.

While courts are required to undertake their own review of the requested counsel fee, they also "are faced with hundreds of cases per year and must allocate limited time across those cases," Judge Wilson said.  Nonetheless, the judge said, the requested 25% fee is reasonable.  Only two members of the putative class, out of 828,000 who received notice about the case, objected to the settlement, and neither of them objected to the attorney fees.

The settlement ends claims that Snap failed to disclose in its initial public offering that Snap's daily active user engagement metrics had been negatively impacted as a result of stiff competition from Facebook.  Snap's March 2017 IPO raised $3.4 billion, but investors claim that revelations about the company's stalling performance indicators pushed down the company's trading price.

Apple Challenges $87M Fee Request in iPhone Settlement

February 18, 2021

A recent Law 360 story by Dorothy Atkins, “Apple, Ky. AG Rip Class Attys’ $87M Fee Bid in IPhone Deal,” reports that Apple and the Kentucky attorney general joined objectors in urging a California federal judge to reject class counsel's $87.7 million fee bid for cutting a $310 million deal resolving claims over slowed iPhones, slamming it for being millions above the benchmark and padded by unsupported rates.  During a three-hour hearing, Christopher Chorba of Gibson Dunn & Crutcher LLP, counsel for Apple, argued that awarding the fee request would set a "very bad precedent" because class counsel overlitigated the case and shouldn't be awarded for its conduct.

He also said it would result in a net reduction of between $19 and $20 for class members who would otherwise receive more than $100 per claim.  Chorba also argued that class counsel failed to go through the factors warranting its large fee request and that its lodestar calculation is unsupported by the billing submissions.  "We're not saying they shouldn't get any fees," Chorba said.  "The fees are just so outside the norm and so in excess of what would be appropriate."

If approved, the settlement would resolve dozens of consumer protection lawsuits that were filed in 2018 after Apple admitted to issuing software updates that slowed certain iPhones.  The suits allege that Apple designed its software updates to slow down some phone models, nudging consumers to buy newer iPhones.

In May, Apple reached a deal to settle the case for $500 million but objected to the plaintiffs' request for $87 million in attorney fees, asking the court to cut it down by at least $7 million.  Since the settlement was announced, dozens of people have objected, arguing that it doesn't do enough for class members and doles out too much to class attorneys.  In December, the federal government also made clear in a filing that it does not object to the proposed settlement itself but views the fee request as over the top.

During a hearing on the deal's final approval, class counsel Mark Molumphy of Cotchett Pitre & McCarthy LLP argued that the fee award is warranted because the case was exceptional and the risks were great, particularly since the plaintiffs' firms were working on a contingency basis.  He also noted that it's the "first and largest" settlement of the Computer Fraud and Abuse Act claims at issue and that class counsel secured significant recovery that's nearly half of the potential $1 billion damages at issue.

Molumphy argued that a 28% fee award is supported by a lodestar cross-check for the three years of litigation, which included "World War III" discovery, 18 motions, including a motion to dismiss, and what he called Apple's unreasonable litigation demands.  "Frankly there was no roadmap.  There's not a case in which there was a government investigation or plea.  We were the leaders in this case," he said.  "We created a roadmap for others, including government investigation that followed us."

But Apple, the state of Kentucky and multiple class members objected to the size of the fee award and how class counsel proposed to calculate it.  Four attorneys representing objecting class members argued that the 3.5% claims rate was "puny" and the fee request should not be based on the initial $500 million deal because Apple is only paying $310 million due to the low claims rate.

The objectors also argued that a fee recovery of between 10% and 18% is more in line with case precedent, and they slammed class counsel for not submitting detailed billing.  They said the information class counsel provided appears to inflate the hourly rate of staff attorneys to $350 per hour when those attorneys likely received less than $50 per hour for their work and that it appeared to include work by dozens of attorneys who weren't authorized to bill for their time.

John Pentz, counsel for two objectors, pointed out that the alleged billing padding caused U.S. District Judge Lucy Koh to "hit the roof" when she presided over Anthem's $115 million data breach deal, and noted that of the eight contract attorneys billed by Kaplan Fox & Kilsheimer LLP only one is listed on the firm's website.  He also said class counsel didn't explain why those who first filed lawsuits in state court were entitled to a cut of the fees.

Another attorney, Robert William Clore of Bandas Law Firm PC, argued on behalf of objector Alexis West that based on class counsel's own information, the aggregate potential damages at issue were over $4 billion, not $1 billion, and the $310 million represents only 5% of the potential $4 billion damages.

Philip R. Heleringer of the Office of the Kentucky Attorney General echoed other objectors' comments and emphasized that the court has a fiduciary duty to step in for absent class members in situations in which there is a "tension" between class counsel and class members.  Heleringer pointed out that in In re. Yahoo litigation, a court rejected a fee request that had a $10 million discrepancy between the lodestar and fee request, but class counsel's fee request in this case is five times larger than the lodestar.

Heleringer also argued that the settlement does not guarantee class members will receive $310 million.  He said the court should use base lodestar without a multiplier.  He added that there are no rare or exceptional circumstances here and that it's not enough that class counsel is going up against a well-heeled, well-resourced opponent to warrant a multiplier or that it's fighting on a contingent basis, particularly since 81 firms initially filed lawsuits over it.

PA Enviro Board Can Weigh ‘Bad Faith’ in Awarding Attorney Fees

February 17, 2021

A recent Law 360 story by Matthew Santoni, “Pa. Enviro Board Can Weight ‘Bad Faith’ in Awarding Attorney Fees,” reports that the administrative board that hears appeals of decisions by Pennsylvania's Department of Environmental Protection was justified in denying attorney fees to environmental groups that reached a settlement with Sunoco over its Mariner East 2 pipeline, since the board found neither side acted in "bad faith," a state appellate court ruled.

A majority of the Commonwealth Court ruled the state's Environmental Hearing Board could deny a petition for fees from the Clean Air Council, The Delaware Riverkeeper Network and Mountain Watershed Association Inc. based on the so-called bad faith standard, since neither the environmental groups nor Sunoco had acted in bad faith through the groups' appeal of the DEP granting permits for the pipeline, which resulted in a settlement between the groups and the state.

The environmental groups had argued that the board should have applied the looser "catalyst test," which would have only required them to show that their appeal was the motivating factor behind some benefit conferred by the other side in order to trigger fee-shifting provisions in the state's Clean Streams Law and have Sunoco pay their nearly $230,000 legal bill.

"Contrary to objectors' assertions, the catalyst test is not the sole and exclusive standard that EHB may employ in disposing of a request for costs and fees against a permittee under ... the Clean Streams Law.  Indeed, we have specifically recognized that EHB's 'broad discretion includes the authority to adopt standards by which it will evaluate applications for costs and fees,'" wrote Judge Michael H. Wojcik for the majority.  "It was entirely within EHB's discretion, and eminently appropriate, to apply the instant bad faith standard in deciding whether or not to impose costs and fees upon a private party permittee."  The court ruled that the EHB had wide discretion when weighing whether and how to award fees, and in a separate decision it upheld another EHB ruling that had cut the fees awarded to a family that challenged the DEP permits for another part of the pipeline crossing their land.

The environmental groups had challenged 20 permits the DEP had granted Sunoco for construction of a pipeline linking gas wells in Western Pennsylvania to a refinery in the east. The matter wound its way through various proceedings before the EHB until the challengers reached a deal with the DEP in which it would establish a "stakeholder group" on pipeline construction and would put more of its permitting documents online in exchange for the groups dropping their challenge.  The DEP also agreed to pay $27,500 of the challengers' legal fees.

But the challengers then asked the EHB to make Sunoco pay additional legal bills related to their appeal, and Sunoco filed its own petition to make the environmental groups pay nearly $300,000 toward what it had spent defending the permits.  The EHB was split, with the majority saying it could apply the bad-faith standard and find that neither side had "engaged in dilatory, obdurate, vexatious, or bad faith conduct in the course of prosecuting or defending" the appeals.  The minority had agreed that neither side was entitled to fees, but said the bad-faith test was not necessary and the board had broad discretion to award fees as it saw fit.

The environmental groups and the DEP both appealed, though the Commonwealth Court found the DEP lacked standing and granted Sunoco's bid to quash that side of the appeal because the state agency hadn't formally intervened in the fee debate and would not have been affected by the EHB ruling against the private parties.

President Judge P. Kevin Brobson wrote a concurring opinion, joined by Judge Renée Cohn Jubelirer, expressing concerns that the EHB's discretion might be so broad that the particular section of the Clean Streams Law might run afoul of the state constitution's requirement that the law contain standards to "guide and restrain" the administrative board's decision-making.  But because that issue wasn't brought up on appeal, and the EHB had denied either side any fees, this wasn't the case to address that with, Judge Brobson wrote.  In this case, there was no reason Sunoco should have been required to pay, he said.

"There is absolutely no basis in the record upon which the EHB could have exercised its discretion below in such a way as to compel Sunoco to pay objectors' legal fees," he wrote. "Sunoco was not a party to the settlement agreement between objectors and DEP that essentially ended objectors' appeals.  Moreover, Sunoco gave up nothing in the settlement or otherwise.  Sunoco kept its permits, unaltered, as if objectors had not even filed their appeals with the EHB."

A dissenting opinion from Judge Ellen Ceisler said the courts shouldn't apply a tougher standard to permit holders when the DEP itself could have been made to pay fees under the catalyst test.  "It does not therefore seem reasonable that, in theory, the DEP could be saddled with fees and costs in response to inadvertent mistakes or good faith, negotiated compromises or settlements, while a permittee could get off scot-free under similar circumstances unless it has conducted itself in a dilatory, obdurate, or vexatious way," she wrote.

The court then applied its ruling to a separate appeal by the DEP of another EHB order, which said the state had to pay about $13,000 of a family's requested $266,000 in fees from the DEP and Sunoco.  Huntingdon County landowners Stephen and Ellen Gerhart had convinced the EHB in 2019 that the DEP had misclassified a wetland on their property and that Sunoco had to do more work to restore it after completing the pipeline's construction.  But the EHB held Sunoco to the bad-faith standard and the DEP to the catalyst test in parceling out who was responsible for the reduced fee award.

Following the same logic as its ruling in the Clean Air Council case, the court affirmed that the EHB had the discretion to apply both standards in awarding fees.  "We agree that the statute and the case law grant broad discretion to the EHB in setting the standard and applying it," said Robert Fox of Manko Gold Katcher & Fox LLP, representing Sunoco in both cases.  An attorney for the environmental groups said they were weighing the decision and their options.

The attorney for the Gerharts said he thought the court correctly balanced the different standards for fee-shifting against the state and against private actors, but noted that in cases like his where the DEP and Sunoco essentially worked together to defend the permits, the state would have to be mindful of whether it would need to build a record to establish that the permit-holder was acting in bad faith.

Delaware Supreme Court to Decide on ‘Mootness Fee’

February 15, 2021

A recent Law 360 story by Jeff Montgomery, “Del. Justices Unsure $12M Deal ‘Mootness Fee’ Is Off-Base”, reports that a Delaware Supreme Court justice questioned calls for the reversal of a supposedly unsupported, $12 million Chancery Court "mootness fee" to stockholder attorneys whose successful challenge to a Versum Materials Inc. merger poison pill begat a deal that was $1.2 billion higher.

During arguments on an appeal filed by Versum and its directors, Justice Karen L. Valihura told the company's counsel William Lafferty of Morris Nichols Arsht & Tunnell LLP that Vice Chancellor J. Travis Laster acknowledged concerns about both the size of the fee — amounting to about $10,700 per hour for a mooted claim — and the semiconductor industry supplier's call to pay either nothing or $680,000 based on standard rates.  "So he said you started out with a non-starter, extreme position" on the fee, "but you didn't engage with the evidence and the precedents meaningfully" to back up the position, Justice Valihura said.  "What are we supposed to do with that?" she asked Lafferty during arguments before the full five-member court.

And earlier Justice Valihura had asked Lafferty, "Isn't part of the problem here, clearly, that the vice chancellor had some misgivings about the [fee] number," but also that, if he had "meaningful help from the defendant in engaging on the matter, he might have reached a different conclusion?"  The fee approved by the Chancery Court followed relatively brief stockholder litigation in early 2019 over Versum's consideration of a $3.8 billion all-stock merger with Entegris Inc. worth about $43 per share, and the adoption of a poison pill shield for the deal after Merck KGaA offered $48 per share.

The "pill" would have given all shareholders the right to buy additional, potentially deal-blocking shares at a steep discount if another party or potential buyer acquired 12.5% or more of the company's equity.  Days after the stockholders sued, Versum dropped what the vice chancellor described as a related, "truly expansive" provision that would trigger the poison pill if individual stockholders were deemed to be "acting in concert" in discussions about the deal, regardless of their intent.  Soon afterward, the poison pill itself was withdrawn, with Merck soon winning the deal with a higher, $53 per share offer.

In approving the fee last year, the vice chancellor noted it would have been reasonably conceivable in a motion to dismiss proceeding to conclude Versum fielded the deal protections "to block a high-value cash deal and protect its merger of equals" with Entegris.  Lafferty said the vice chancellor erred by conflating the better, company-secured price with the "monetary, corporate, therapeutic benefit" resulting from removal of the pill and acting-in-concert provisions.

"Plaintiff played no role in the bidding dynamic and bidding process that led to the increased merger consideration," Lafferty said, adding that the vice chancellor's fee award "effectively rewards counsel as if they had created a monetary fund" and benefit, "which they didn't."

Michael Hanrahan of Prickett Jones & Elliott PA, counsel to the stockholders, told the justices that Lafferty was asking the court to second-guess the vice chancellor's factual findings, and said that the award amounted to about 1% of the benefit.  "The defendant basically just disagreed with the court of chancery's finding of a causal connection between the litigation and the increased merger price," Hanrahan said.  "They said no fee at all should be awarded, because the litigation did not cause Merck's offer.  The question is, what the board did" on the issues.  "They didn't put in any evidence on that."

Hanrahan said that Versum conceded on appeal that the litigation caused the removal of the acting-in-concert provision.  "That's fatal to their causation argument," he said. "The vice chancellor found those were obstacles to the Merck offer, and the removal of those obstacles caused the success of the Merck offer."  Lafferty said Versum's decision to accept Merck's offer came weeks after the stockholder suit had been mooted, while the court's fee decision was made without an assessment of the stockholder suit's likelihood of success or merit when it was filed.

"So what you're suggesting is, the process the Court of Chancery should have followed here, if your standard is likelihood of success, do they have to relitigate this case as part of the fee application?"  Chief Justice Collins J. Seitz Jr. asked. "I think what you're advocating has practical consequences for the court."  Lafferty said the case implicated important public policy considerations regarding the institutional role of shareholder suits, and the fact that past court cases have found that "generosity plays no role" in determining benefit amounts.

"If the court below wanted to exercise its discretion, if it thought there was a strong correlation between pulling the pill and the outcome, it could have awarded a multiple of plaintiff's attorney fees, not 17 times, but something reasonable," Lafferty said.  "The bottom line here is, the court of chancery had a duty to use its discretion to set a reasonable fee, and it didn't do that, we believe."