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Category: Fee Award Factors

Attorneys Seek Attorney Fees in New Balance Class Action

February 15, 2019

A recent Law 360 story by Rick Archer, “Attys Want $650K in Fees in New Balance ‘Made in USA’ Suit,” reports that class counsel in a suit accusing New Balance Athletics Inc. of falsely marketing its athletic shoes as being “made in the U.S.A.” are asking a California federal court for $650,000 in fees and costs for the $750,000 settlement they won for the class.  In a motion, class counsel Schneider Wallace LLP argued the settlement involved “extensive” work and also included “substantial injunctive relief,” making their request for nearly $228,000 in expenses and close to $422,000 in attorneys' fees — split between the monetary award and the injunctive relief — reasonable.

“In common fund cases, the Ninth Circuit Court of Appeals’ benchmark for attorneys’ fees is 25 percent of the fund created for the benefit of the class, plus recovery of costs,” they said.  “Here, if half the attorney fee is (conservatively) allocated to the monetary portion of the settlement, the fee sought by class counsel is close to the 25 percent benchmark.”  Under the settlement, customers who bought the shoes in California can receive $10 per pair of shoes, with individuals receiving up to $50 for five pairs and families receiving up to $100 per household, with unused settlement funds going to the Public Justice Foundation and Consumer Federation of California.  Also under the settlement, New Balance must more accurately disclose where the parts of its shoes are made.

New Balance consumers filed the proposed class action in California state court in December 2017, alleging the company falsely advertises that its shoes are made domestically even when as much as 30 percent of the value of the shoes comes from foreign parts or labor, purportedly violating California’s consumer protection statutes.  New Balance and the customers first proposed the settlement in April after the judge halted proceedings the month before to allow them to pursue negotiations.

U.S. District Judge M. James Lorenz initially denied approval in October, saying there would need to be an “abysmally low” participation rate of 5 percent for each class member to receive the $10 the settlement proposed.  In November, the proposed class responded, saying the $10 represented the maximum recovery possible and that the $3 to $5 class members would receive if 10 to 15 percent participated still represented a good percentage of recovery.  Judge Lorenz agreed and granted preliminary approval in January.  The final approval hearing has been scheduled for June.

In their fee motion, counsel argued the fees and expenses were reasonable, saying they conducted “extensive” investigation and discovery.  They also argued that for purposes of comparison the fee award should be split between the monetary and injunctive relief.  “A 50 percent allocation between the two forms of relief for this limited purpose is reasonable — if not conservative — because injunctive relief is the primary remedy under the California consumer protection statutes that formed the basis of plaintiffs’ claims,” they said.

The case is Sheila Dashnaw et al. v. New Balance Athletics Inc., case number 3:17-cv-00159, in the U.S. District Court for the Southern District of California.

Court Ends Fee Dispute in Acacia Derivative Action

February 5, 2019

A recent Law 360 story by Aaron Leibowitz, “Acacia Shareholders’ Attys End Up with $725K in Fee Fight,” reports that the attorneys who brought a derivative suit against Acacia Communications Inc. and its executives will receive $725,000 in fees and expenses in the litigation after reaching a compromise on the amount with the company, according to a Boston federal court order approving the deal.  Lawyers for the suing shareholders and the fiber optics company reached the compromise before U.S. District Judge William G. Young could bring in a Harvard Law School scholar to testify, a step the judge said he was prepared to take at a December hearing about the fee dispute.

The shareholders initially requested $1.75 million in fees plus more than $30,000 in expenses, a figure that Acacia contended was outlandish.  In putting forward that number, the shareholders' attorneys said the internal reforms proposed at Acacia in the settlement of the case, which involved insider trading allegations, would increase stockholder value.  But Acacia pointed to a settlement in a similar case involving internal reforms in which the plaintiffs' team was awarded about $200,000.

Now, the two sides have reached a middle ground.  "The parties have engaged in extensive arms-lengths negotiations, as per the court’s directive, on the attorneys’ fees and expense award and have reached an agreed fee award of $690,633 and an agreed expense award of $34,367," the shareholders' attorneys said in a proposed order.  Judge Young accepted the order as it was proposed the next day.

The shareholders' attorneys had filed a declaration by Harvard Law School scholar Matthew D. Cain, estimating the internal reforms at Acacia would net between $68 million and $82 million for the company's shareholders. Judge Young said in December that he would like to hear from Cain in person as he took on the difficult task of determining a fee amount for a settlement that isn't monetary, but involves changes to the oversight of insider trading at Acacia.

"You say you are the catalyst that caused [these reforms] to be put in place," Judge Young said to the shareholders' attorneys at the December hearing.  "How are you gonna value it?"  The consolidated cases allege that Acacia executives and private equity backers obtained early releases from so-called lockup agreements, allowing them to sell off their shares two weeks before announcements from the company's two largest customers led to a significant drop in Acacia's stock price.

The settlement, which Judge Young approved in part in December while the fee dispute dragged on, mandates the creation of a trading compliance committee to oversee Acacia's insider trading policy, review requests to waive stock sale lockups and report quarterly to the company's audit committee, which will approve any waivers.  Acacia also agreed to amend its insider trading policy to give the company the right to terminate employees and disgorge profits if the policy has been violated.  And the board will be required to add a new independent director.

Geoffrey Johnson of Scott & Scott Attorneys at Law LLP -- co-lead counsel for the shareholders along with Robbins Arroyo LLP – said in December that finding the right fee amount is more art than science, but he said the Harvard expert used "very conservative assumptions" on how the reforms would boost Acacia's worth.  The shareholders' attorneys said they expended nearly 1,690 hours on the case and used a multiplier of 1.72 to calculate the award.

Acacia countered by citing a settlement in a recent case involving internal reforms at Aveo Pharmaceuticals, in which the plaintiffs requested over $800,000 in attorneys' fees but were instead awarded about $200,000 by U.S. District Judge Denise J. Casper, also in Boston.  "The requested fee here is just way too high," Daniel Halston of WilmerHale, representing Acacia, told the judge last month.  "It's just out of bounds."  In addition to the internal reforms and the fee award, the settlement provides $2,500 to each of the five shareholder plaintiffs who brought the case, to be pulled from the larger attorney fee pool.

The case is Tharp et al. v. Acacia Communications et al., case number 1:17-cv-11504, in the U.S. District Court for the District of Massachusetts.

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.

Receiver Attorneys Awarded $15.5M in Fees in Stanford Ponzi Scheme

February 1, 2019

A recent Law 360 story by Reenat Sinay, “Attys Awarded $15.5M in Fees After Stanford Ponzi Deal,” reports that a Texas federal judge has awarded fees of nearly $15.5 million to the attorneys representing a court-appointed receiver and a group of investors in their suit against Proskauer Rose LLP over its former partner's participation in R. Allen Stanford's $7 billion Ponzi scheme.  A team of lawyers from Castillo Snyder PC, Clark Hill Strasburger PLC and Neligan LLP led the investors to a $63 million settlement with Proskauer in August, bringing six years of litigation to a close.

U.S. District Judge David C. Godbey said that the award, which represents 25 percent of the settlement amount, was warranted due to the "extraordinarily complex" litigation involved in the case.  "The court finds that the 25 percent contingency fee agreements between plaintiffs and plaintiffs' counsel is reasonable and consistent with the percentage charged and approved by courts in other cases of this magnitude and complexity," Judge Godbey said.  "The attorneys' experience, reputation and ability also support the fee award."

The court-appointed receiver for the investors, Ralph S. Janvey, and the official Stanford investors committee had Proskauer in their sights because Thomas V. Sjoblom, a former attorney with the firm, allegedly helped R. Allen Stanford's bank hide his shady dealings from the U.S. Securities and Exchange Commission beginning in 2005.  The former financier defrauded tens of thousand of investors in a $7 billion Ponzi scheme in which he misused or misappropriated certificates of deposit purchased by investors and administered by Stanford International Bank.

Stanford Financial Group retained Sjoblom, then a partner at Chadbourne & Parke LLP, to represent several Stanford-affiliated entities in connection with the SEC investigation.  Sjoblom joined Proskauer in August 2006 and continued to represent Stanford Financial until February 2009, when the SEC accused R. Allen Stanford of running the multibillion-dollar fraud.  Sjoblom left Proskauer in September 2009. Stanford was convicted in 2012 and is serving a 110-year prison sentence.

Judge Godbey pointed to the "nature and length" of the investors' relationship with their counsel as further justification for the requested attorneys’ fees.  The investors' lawyers have collectively invested more than $16 million and more than 14,600 hours of work in the Stanford case overall since 2009, according to the order.

"Plaintiffs' counsel have represented the receiver, the committee and investor plaintiffs in numerous actions pending before the court in connection with the Stanford receivership since 2009," the judge said.  "The Stanford receivership and the litigation are extraordinarily complex and time-consuming and have involved a great deal of risk and capital investment by plaintiffs' counsel as evidenced by the declarations of plaintiffs' counsel submitted in support of the request for approval of their fees," Judge Godbey said.

Judge Godbey also held that the requested fees were far less than what many firms would have asked for in a similar situation.  "The 25 percent fee requested is also substantially below the typical market rate contingency fee percentage of 33 percent to 40 percent that most law firms would demand," Judge Godbey said.

The case is Janvey et al. v. Proskauer Rose LLP et al., case number 3:13-cv-00477, in the U.S. District Court for the Northern District of Texas.

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.