Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Award Factors

Attorneys Awarded Fraction in Vietnam Veteran’s Experimentation Case

October 10, 2018

A recent Bloomberg Law story by Joyce Cutler, “Vietnam Vets’ Law Firm Awarded Only $3.4M in Experimentation Case,” reports that the law firm that spent nine years fighting and winning health care for veterans subjected to government-administered human testing of chemicals including sarin, mustard gas, and LSD was awarded $3.4 million in fees.  U.S. District Judge Claudia Wilken approved Oct. 4 the fee award Morrison & Foerster LLP negotiated with the U.S. Army that’s $16 million less than the value of the hours the firm said it put into the case.

“For MoFo it’s represents a continuation of the commitment we’ve had over the 43 years I’ve been with this firm doing pro bono cases” that’s the “latest but not the last on the long line of work we’ve done on behalf of veterans,” James P. Bennett, Morrison & Forester partner in San Francisco, told Bloomberg Law.

“The larger impact of the case is we’re proud to have given these class members a small measure of relief through the court system that they were entitled to and the Army was wrongfully withholding.  We’re glad to have thrown further light on this history,” Bennett said in September. “It’s important that the government remember its history so A) as not to repeat and B) to recognize its moral and legal obligations to people who have been victims of our mistakes.”

The fee award is the latest and nearly last chapter in the litigation by soldiers subjected to the government’s decades-long human testing program who were seeking recognition and health care above what they could get at the Veterans Administration for injuries they suffered.  “The settlement amount of $3.4 million is a fraction of the fees actually incurred by Class Counsel.  After over nine years of contentious litigation, the total amount of Plaintiffs’ attorneys’ fees exceeds $20 million,” the firm’s motion said.

Wilken agreed, finding the fees were reasonable “because they were substantially discounted from the original total amount of $20 million down to $4.5 million” under the Equal Access to Justice Act rates and discounting hours.  The amount was further reduced to the stipulated $3.4 million.

Wilken, however, rejected plaintiffs’ requests contained in letters from the class seeking a formal apology and raising concerns about whether the government will abide by the agreement.  “These are not valid objections to the motion for attorneys’ fees and cost and service awards.  Ordering an apology is likewise not within the jurisdiction of the Court.”  The $20,000 award per named plaintiff is higher than what is presumptively reasonable in the Northern District “and a higher amount will not be ordered,” Wilken said in rejecting requests plaintiffs made in letters to the court.  The request for a change in tax treatment isn’t within the court’s jurisdiction.

Thousands of former service members over decades were unwitting subjects of medical testing that left lasting physical and mental injuries from drugs, chemicals, and electrocutions, Bennett, the lead attorney, said in a brief supporting the fee petition.  Until the lawsuit was filed in 2009, the government denied the vets additional care for injuries suffered and held them to secrecy oaths with threat of punishment so they couldn’t even discuss the testing they endured.

“As a result of this case, the Army set up a program to provide ongoing medical treatment for class members, and the Army continues to work toward sharing newly acquired information.  Plaintiffs were also released from their secrecy oaths.  Accordingly, Plaintiffs have obtained excellent and lasting benefits for the class,” the attorney’s supplemental brief for fees said.

The San Francisco-based firm negotiated for the fees and $20,000 each in awards to eight veterans and named plaintiffs who were subjected to experiments.  “After an extensive effort to voluntarily narrow the fees requested, Plaintiffs submitted contemporaneous billing records for attorneys’ fees and costs totaling more than $9 million.  More specifically, Plaintiffs submitted billing records for 16,309 hours and $836,864.71 in costs.”  The amount was further whittled down and doesn’t affect the injunctive relief for the class.

MoFo partner Gordon Erspamer filed the lawsuit for Vietnam Veterans of America, Swords to Plowshares: Veterans Rights Organization, and vets over injuries suffered by soldiers who were subjects in government-conducted tests.  The tests were conducted from World War II to the Vietnam War.  Erspamer died in 2014.  “This action chronicles the chilling tale of human experimentation, covert military operations, and heretofore unchecked abuses of power by our own government,” the January 2009 lawsuit said.

Some 7,800 soldiers between the 1950s and into the mid-1970s volunteered to participate in experiments on the effects of chemical and biological weapons, and research on mind-control methods, plaintiffs said.  “For decades, the Army ignored its legal obligation under its own regulations to provide medical care for class members and to notify them of newly acquired information that may affect their well-being,” the attorneys’ supplemental fee motion said.

Wilken in April 2017 granted the soldiers summary judgment and ordered the Army to provide medical care to those who participated in the chemical and biological substance testing program.  The judgment and fee award are final.

A total of 204 Morrison & Foerster staffers and e-discovery specialists worked on the case.  Plaintiffs in August were seeking fees for time spent by 19 attorneys and six paralegals, totaling $4,515,868, including $422,739 in expert costs before further negotiation.  The fees don’t include work done after the initial June 2017 filing.

The case is Vietman Veterans of America v. Central Intelligence Agency, N.D. Cal., No. 4:09-cv-00037, order filed 10/4/18.

CA Appeals Court: Fees Too Low in $18M Plane Crash Settlement

October 3, 2018

A recent Law 360 story by Y. Peter Kang, “Fees Too Low in $18M Plane Crash Suit Deal, Court Says,” reports that a California appellate panel published an opinion holding that a trial judge’s decision to grant just 10 percent attorneys' fees in an $18.1 million settlement of a wrongful death suit over a plane crash was too low and unreasonable given a much higher contingency fee agreement.

A three-judge Court of Appeal panel for the Second District reversed a trial judge’s decision to award attorneys' fees of 10 percent to Herzog Yuhas Ehrlich & Ardell APC after the firm successfully negotiated a settlement of product liability and other claims made against Cessna Aircraft Co. and others stemming from a 2012 plane crash in Germany that killed California-based entrepreneur Rainer Schulz and four others.

At issue is what constitutes reasonable attorneys’ fees for cases involving minors under California court rules, which require a judge’s approval of such settlements.  Herzog had asked the court to allocate 65 percent of the settlement to Silke Schulz and 35 percent to her four minor children and award the firm 31 percent of the $18.1 million.  But the judge allocated all of the money to the four minor children, except for $1 for Silke Schulz, and awarded Herzog just 10 percent fees, saying the firm did a good job litigating the case but did not have to go to trial and failed to notify Rainer Schulz’s two adult children from a previous marriage about the suit.

However, the panel said a 10 percent fee award was unreasonable, as the judge gave too little consideration to a court rule requiring the judge to account for the firm’s contingency fee agreement with the family.  The parties had agreed to a 31 percent contingency fee if the case was settled more than 30 days before trial and 40 percent if it settled within 30 days of trial; Herzog later agreed to a 31 percent fee even though the case settled just days before trial.

“Instead of balancing the relevant factors, the court gave overwhelming weight to a single concern, the expense of the children’s extensive medical needs,” the panel said in a 17-page opinion.  Three of the four minor children are triplets who were born prematurely, and two have permanent disabilities, according to the opinion.  “We accept that a child’s needs are a relevant and important factor in determining a reasonable attorney fee … This single factor, however, cannot overwhelm all other considerations,” the panel said.

The appeals court added that allowing a judge to overemphasize a child’s medical needs when deciding attorneys’ fees could have a chilling effect on an attorney’s willingness to take on cases involving disabled minors.  “If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court ... it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases,” the opinion states.

In addition, the panel said Herzog took on “significant risk” in accepting the case on a contingency basis when no other attorneys consulted by Silke Schulz would do so, and the firm spent a considerable amount of out-of-pocket expenses litigating the case.  However, the appeals court denied Herzog’s request to determine the proper fees amount, saying it should go back to the trial judge for reconsideration.

The case is Schulz v. Herzog Yuhas Ehrlich & Ardell APC, case number B277493, in the Court of Appeal of the State of California, Second Appellate District.

$4.2M Fee Award in Vioxx Economic Loss MDL

September 26, 2018

A recent Law 360 story by Emily Field, “Vioxx Economic Loss Counsel Win $4.2M in Attys’ Fees,” reports that a Louisiana federal judge signed off on $4.2 million in attorneys’ fees to class counsel who represented consumers in multidistrict litigation who claimed they lost money due to Merck’s recalled drug Vioxx, amounting to nearly a fifth of the $23 million settlement fund.  U.S. District Judge Eldon E. Fallon said he anticipated criticism of the fee award, given that only $698,767 was distributed in claims.  The judge chalked up the lower-than-anticipated figure to several factors, including the length of time between the 2004 recall and the 2013 settlement of the economic loss claims, five years after a $4.35 billion deal to settle personal injury and wrongful death claims.
 
“Individuals may have no longer had access to the documentation to recover these funds, they may have been unmotivated by the relatively small individual recovery amounts, or they may have simply forgotten,” Judge Fallon wrote.  “In any event, the decreased interest was in no way attributable to the significant efforts of class counsel.”

Under the terms of the settlement, claimants were eligible to recover out-of-pocket expenses for purchasing Vioxx and up to $75 in connection with a post-withdrawal medical consultation related to its use, or a onetime payment of $50 with proof of a Vioxx prescription.

Merck withdrew Vioxx from the market in 2004 after scientific studies showed a significantly increased risk of heart attacks after 18 months of continuous use.  The consumers had argued that they wouldn’t have paid for a prescription if not for Merck’s alleged misrepresentations.

The judge detailed the efforts that attorneys pursued to ensure that class members had every opportunity to pursue their claims, including direct mailings to claimants and law firms, a bilingual call center, and a paid print, broadcast and online advertising campaign.  By the time the claims period closed in 2014, 8,757 claims had been filed, of which 7,366 were payable; the others were either ineligible or dupes, according to the opinion.

The judge noted that, at the time the economic loss class action was filed in 2005, it was unclear how many members the potential class would contain.  While the attorneys’ fees may be criticized as unfair, “[s]uch criticism cannot prevail over the unvarnished truth that there are certain principles, the true value of which cannot be measured by or contingent upon the amount of monetary recovery received to secure them,” the judge said. “Justice and fairness are certainly two of those principles.”  In this case, to allow consumers, many of whom are elderly, uneducated and unsophisticated, to be taken advantage of just because the amount they lost is too small to allow them to hire an attorney “is simply unfair and unjust,” the judge said.

After the Vioxx drug was recalled, Merck was hit with multiple lawsuits, including numerous personal injury lawsuits and a purchase claims complaint filed in 2005 as part of the MDL in Louisiana.  In that lawsuit, the plaintiffs alleged that Merck “intentionally, recklessly and/or negligently concealed, suppressed, omitted and misrepresented the dangers, defects and disadvantages of Vioxx.”  The complaint also alleged that Merck engaged in a marketing campaign targeting third-party payors, physicians and consumers and it sold the drug to them at inflated prices.

The MDL is In re: Vioxx Products Liability Litigation, MDL number 1657, in the U.S. District Court for the Eastern District of Louisiana.

Class Counsel Seek $33M in Fees in $100M CBRE Settlement

September 24, 2018

A recent Law 360 story by Carolina Bolado, “Real Estate Investors’ Attys Want $33M of $100M CBRE Deal,” reports that attorneys for a class of real estate investors who recently agreed to a $100 million settlement with property management giant CBRE over a multimillion-dollar embezzlement asked for a one-third cut of the settlement as attorneys’ fees, arguing that the case was complex and risky and produced a great result for the class members.

Stearns Weaver Miller Weissler Alhadeff & Sitterson PA, which represented the 179-member class, asked a Florida federal court to sign off on a $33,333,333 fee award plus reimbursement of $1.7 million in out-of-pocket expenses after putting nearly 18,000 hours into the investigation and prosecution of the case against CBRE.  The attorneys said the litigation required in-depth study of a number of complex deal documents and drilling deep into the historical financial records for each property involved in order to understand how the alleged embezzlement was committed and concealed.  The resulting settlement of $100 million is 71.6 percent of the plaintiffs’ total damages, which Stearns Weaver called “an exceptional result.”

The firm added that it will continue to devote time and labor to this case during the claims process.  “While many law firms prosecute class actions, few continue to assist the class after a settlement or verdict has been achieved and the defendants have paid,” the attorneys said.  “Our law firm does so as a matter of course, in order to ensure that class members actually receive the monies due them.”

The plaintiffs accused CBRE, one of the largest firms of its kind in the world, and employee Gloria Hernandez of helping executives from Cabot Investment Properties LLC embezzle at least $7.9 million.  The defaults and foreclosures that resulted on the loans financing the acquisition of the Florida properties led the class to lose more than $139 million, according to the settlement documents.  The plaintiffs were seeking punitive damages in addition to compensatory damages.

Cabot Investment Properties and its subsidiaries went into default. Cabot CEO Carlton P. Cabot and Chief Operating Officer Timothy J. Kroll, also named as defendants, went to prison for committing the fraud.  Co-defendant Actuarial Risk Management Ltd. was dismissed from the case, leaving only CBRE and Hernandez as defendants in the case.

Cabot and Kroll were arrested in June 2015, with Kroll pleading guilty that October and Cabot pleading guilty in May 2016 to securities fraud in Manhattan federal court.  Prosecutors said the two executives repeatedly transferred money out of so-called “tenant-in-common accounts,” through which investors take collective ownership of a piece of commercial real estate.  They spent the funds on expensive cars, luxury apartments and private school tuition for their children, according to prosecutors.

The suit is Cabot East Broward 2 LLC et al. v. Cabot et al., case number 0:16-cv-61218, in the U.S. District Court for the Southern District of Florida.

Mootness Attorney Fee Awards Before the Seventh Circuit

September 18, 2018

A recent Law 360 story by Diana Novak Jones, “7th Circ. Has Chance to Cut Off ‘Mootness Fee’ Merger Case,” reports that against a backdrop of near-constant shareholder litigation challenging mergers, the Seventh Circuit is the first federal circuit that’s been asked to stop a burgeoning litigation strategy among plaintiffs attorneys that some view as extortion of the merging companies and their shareholders.

The strategy centers on plaintiffs attorneys’ ability to collect so-called mootness fees in exchange for dismissing class actions that accuse merging companies of disenfranchising their shareholders.  The fees come after the companies make some additional disclosures about the deal, mooting the litigation but giving the attorneys a way to get paid in exchange for its purported impact.  Lawsuits and class actions filed after merger announcements are so common that it’s rare to see a major deal go unchallenged, experts say.  Consumer advocates and courts have criticized the cases as “strike suits,” filed only to secure fees for the attorneys.

In what's believed to be the first time a federal appellate court has been given a chance to address the issue, the Center for Class Action Fairness — a group run by the free market advocates the Competitive Enterprise Institute -- on Sept. 10 filed a brief with the Seventh Circuit that attacks the "mootness fee racket."  The suit stems from the dismissal of shareholder suits over the now-scuttled merger of Akorn Inc. with Fresenius Kabi AG, which ended with a $322,500 fee payment to the plaintiffs’ attorneys, according to court records.

Researchers tracking litigation filed after merger announcements say the percentage of mergers with a value of more than $100 million that are the subject of a shareholder suit has been on the rise since around 2003.  By 2013, approximately 96 percent of all mergers at that level attracted at least one shareholder suit, according to a March 2018 Vanderbilt Law Review article, “The Shifting Tides of Merger Litigation,” featuring data compiled by a U.S. Securities and Exchange Commission economist and law professors from the University of Pennsylvania, the University of California Berkeley and Vanderbilt University.

The suits largely accused the merging companies of breaching their fiduciary duties to shareholders, sometimes by failing to secure a high enough per-share price or by withholding information.  They were almost exclusively filed in Delaware courts, where more than 60 percent of Fortune 500 companies are incorporated, according to the state.  A large number of the suits ended in settlements where the suit’s target agreed to amend some of its disclosure statements and pay the class’ attorneys’ fees, according to the economist who worked on the article, Matthew Cain, currently a visiting research fellow at Harvard Law School.

But the popularity of those “disclosure settlements,” as courts have called them, waned after the Delaware state courts issued a series of rulings that sought to restrict their use.  The most significant ruling came from the Delaware Court of Chancery in 2016 in response to litigation over Zillow Inc.’s acquisition of Trulia Inc., with the court saying that attorneys bringing these types of settlements should expect far more scrutiny going forward.

“It is beyond doubt in my view that ... the court’s willingness in the past to approve disclosure settlements of marginal value and to routinely grant broad releases to defendants and six-figure fees to plaintiffs’ counsel in the process have caused deal litigation to explode in the United States beyond the realm of reason,” Chancellor Andre Bouchard wrote.

The number of merger suits filed in Delaware dropped after that and it hasn’t rebounded in the years since, according to the researchers.  Instead, cases are popping up in federal courts across the country, and instead of ending in settlements, they’re ending in dismissals and “mootness fees,” the researchers said.  “The problem that existed in the state courts has now simply migrated to the federal courts,” said Vanderbilt Law School professor Randall Thomas, one of the researchers who wrote the article.

Thomas said he and his colleagues are still gathering the latest data, but his preliminary impression is that the trend is showing no sign of slowing down.  “Deal litigation is almost universal on every sizable deal,” he said, adding that the majority of these suits are being filed by just four law firms. He declined to name the firms, however.  And the majority of the cases are ending in “mootness fees,” resulting in average attorneys’ fees of $265,000 per case in 2017, according to the article.

That’s what happened in the six shareholder suits against Akorn in Illinois federal court, according to Frank.  As an Akorn shareholder, Frank sought to intervene in the cases and asked for a permanent injunction against the shareholders’ attorneys to bar them from accepting payment for dismissing Exchange Act class actions without court approval of their fee award.

But U.S. District Judge Thomas Durkin rejected Frank’s motion in three of the suits.  The Akorn transaction fell apart, and the plaintiffs’ attorneys filed motions disclaiming any right to the more than $300,000 in fees Akorn had agreed to pay, according to court records.  The judge said that disclaimer made Frank’s motion moot.

Frank’s appellate brief says the firms involved in the Akorn litigation are among the most prolific firms in the “mootness fee racket,” an industry of its own.  In filings opposing Frank’s motion to intervene in the Akorn suits, the shareholders called Frank a “paid activist” who was only looking to punish the plaintiffs’ counsel for fees earned following negotiations.