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Category: Fee Award Factors

Judge Rejects $200K Fee Request for $5K Settlement

August 15, 2019

A recent Law 360 story by Lauraann Wood, “$200K Fee After $5K Deal ‘Makes No Sense,’ Ill. Judge Says,” reports that an Illinois federal judge granted photo agency FameFlynet Inc. $10,500 of its request for $241,000 in attorney fees after settling a copyright suit for $5,000, saying awarding anything more after two-and-a-half years of avoidable litigation “makes no sense.”  FameFlynet and Jasmine Enterprises Inc. stipulated to the $5,000 in damages under the Copyright Act after U.S. District Judge Thomas Durkin ruled Jasmine was liable for publishing three photos of Nicky Hilton and James Rothschild’s wedding on a blog in 2015.

But the photo agency’s case only reached summary judgment issues because it canceled settlement talks and litigated discovery disputes after learning the parties were $1,000 apart during negotiations that happened three weeks after serving of its complaint on Jasmine, Judge Durkin said.  “For FFN to then incur hundreds of thousands of dollars in fees simply makes no sense, and it should not be rewarded for what should have been a straightforward case,” Judge Durkin said.  “This case exemplifies the familiar adage of cutting off your nose to spite your face,” he said.

The fee award represents a little more than the FFN incurred when it rejected Jasmine’s initial $15,000 settlement offer in November 2016 plus its filing fee and process server costs, since “the fault does not lie exclusively with FFN for failing to settle, and its early work advanced the goals of the Copyright Act,” Judge Durkin said.  But awarding FFN its entire fee request “would not advance considerations of compensation and deterrence,” since Jasmine removed the infringing photos the day it received notice of infringement and hasn’t posted to the blog since 2015, he ruled.

The agency argued that declining to award it fees would deter future plaintiffs from pursuing claims, but Judge Durkin said his concerns over awarding FFN's request was different.  “Far from advancing the Copyright Act’s goals, awarding FFN its requested fees would incentivize parties to reject reasonable settlement offers in hope of cashing in on enormous attorneys’ fees down the line,” he said.

Craig Sanders of Sanders Law PLLC, who represents FFN, told Law360 in an email that the judge’s decision to award fees was proper.  But he “appears to have committed reversible error” by failing to comply with Seventh Circuit and Supreme Court precedent by using the so-called lodestar method to calculate a reasonable fee in the photo agency’s case, Sanders said.

Jasmine claimed its photo publication was fair use before Judge Durkin sided with FFN on liability and said Jasmine likely would not win on that defense.  FFN argued that Jasmine’s defense was objectively unreasonable given “existing case law,” so fighting it warranted a fee award.  But Judge Durkin disagreed, saying the agency inaccurately “conflates whether a defense was successful with whether it was reasonable.”

“Losing on the merits does not establish that a party’s position was objectively unreasonable.  Otherwise, a losing defendant would ‘virtually always be found to have done something culpable,’” Judge Durkin ruled, quoting the U.S. Supreme Court’s ruling in Kirtsaeng v. John Wiley & Sons Inc.

FFN had demanded $16,000 to settle its copyright suit, and ended negotiations after Jasmine offered $15,000, according to Judge Durkin’s order.  Jasmine offered $15,000 to settle the case at several other times during litigation, including after the agency filed its bulky fee bid.  But assuming that constitutes poor litigation conduct would mean Jasmine’s offer was unreasonable in the first place, Judge Durkin said.

Seeger Weiss Targeted in NFL Concussion Fee Appeal

August 14, 2019

A recent Law 360 story by Ryan Boysen, “First Shots Fired in Seeger Weiss Concussion Fee Appeal,” reports that Seeger Weiss LLP has “hoarded” nearly $65 million for its work on the landmark NFL concussion settlement while punishing rival firms by docking their pay over perceived slights, all through an “improper process” that “lacked transparency and basic mechanisms of fairness,” according to the opening briefs in a contentious Third Circuit appeal.

The appeal was filed over a year ago, challenging an order by U.S. District Judge Anita B. Brody that created a $112.5 million common benefit fund to pay the 24 firms involved in bringing to fruition the uncapped concussion settlement, which has paid out nearly $660 million in claims since it was approved in 2015.  In opening briefs filed, two groups of law firms and retired football players led by Locks Law Firm and Lubel Voyles LLP took aim at Seeger Weiss’ role in divvying up that money.

The firms argued that Judge Brody essentially gave Chris Seeger carte blanche to award himself and other firms whatever he pleased, then rubber-stamped his decisions with hardly any oversight, violating constitutional due process obligations and binding precedent in the process.  Adding insult to injury, Locks Law said, all of the firms involved in the settlement were required to submit time records to Seeger while he determined their final awards, but to this day no other firm “has seen Mr. Seeger’s records” and “neither will this court: those records were never made part of the record below.”

“The court empowered Mr. Seeger … to reward himself and penalize rivals without any on-the-record scrutiny of his own time records,” Locks Law said.  “The court accepted Mr. Seeger’s [determinations] with only minor adjustments.”  “There is no justification for this manifestly inadequate process,” Locks Law added.

While ostensibly separate, the allegations in the briefs mirror complaints about the settlement as a whole, which many attorneys claim has been marred by a lack of transparency and a seeming willingness on Judge Brody’s behalf to improvise when deciding issues of considerable importance to the class of 20,000 retired players suffering from concussion-related brain damage the deal is meant to compensate.

The briefs also underscore the bad blood that’s been building up for years between Seeger and many of the other lawyers involved in the case.  To take just one example, Locks Law was terminated as class counsel alongside five other firms in May, a move many viewed as retaliation for its request that Judge Brody reconsider new medical guidelines that Locks Law had argued would make it harder for players to get paid.  Prior to that, Locks Law butted heads with Seeger directly when it sought to take over the implementation of the deal, arguing that Seeger was letting the NFL steamroll the players with “scorched earth” legal tactics.  Both of those motions were denied.

In a nod to those broader tensions, Lubel Voyles acknowledged in its brief that while “fee fights in class action litigation are, sadly, not rare,” it is rare “for the optics of a common benefit fee award to be so poor that even class counsel are divided on every aspect of the award, not just allocation of the money.”  Locks Law said that before Judge Brody made a decision on how to apportion the $112.5 million CBF, some firms recommended a special master be appointed for that purpose while Locks Law itself urged the creation of a committee.

Instead, Locks Law said, Judge Brody let Seeger make “the sole determinations of what work performed by other [leading firms] qualified for common benefit compensation in his petition.”  “The district court’s decision to delegate responsibility for that allocation to the largest recipient of those fees, co-lead counsel Christopher Seeger,” was an “improper process,” Locks Law said.

Locks Law said all of the firms applying for those fees had to submit their time sheets to Seeger for him to review, but Seeger’s own records were only ever reviewed in camera by Judge Brody.  After approving more hours for his firm than any other, and awarding a higher lodestar multiple — a common calculation used by law firms to determine fees in many instances — for those hours than to any other firm, Seeger ultimately received about $52 million of the initial $85 million payout from the fund.  His firm has since received $8 million more, and is waiting on Judge Brody to approve more than $4 million on top of that, for a total of nearly $65 million.

Meanwhile, Locks Law has received less than $5 million in common benefit fees thus far, despite representing more than 1,000 players in the litigation compared to Seeger’s 20-or-so clients, a common point of contention raised by many other lawyers involved in the case.  Locks Law says Seeger seized on an interview Gene Locks gave to Bloomberg Businessweek for a 2013 article that “infuriated the NFL” as a reason to justify the low lodestar multiple given to Locks Law, but in its brief the firm said that explanation was “not credible.”

Lance Lubel of Lubel Voyles claims he was cut out of the CBF fees entirely because he objected to the settlement, something he's done frequently, even though his earlier complaints about the deal’s language led to significant safeguards being put in place to protect retired players.  Lubel echoed many of Locks Laws’ concerns with Seeger’s role in the CBF distribution, but went one step further by also challenging a 5% holdback that’s currently applied to each successful monetary award and a 22% fee cap Judge Brody imposed on attorneys representing retired players.

The 5% holdback is being set aside, and Judge Brody has said she’ll rule at a later date on whether or not to tap those funds to continue paying CBF fees for the implementation of the 65-year-long program, money that would presumably only be available to Seeger after Judge Brody axed the other class counsel firms in May.  Lubel said the $112.5 million should be enough money to compensate the lead firms over the entire course of the settlement’s lifespan.

As to the 22% cap on attorney fees, which works out to 17% after the holdback is applied, Lubel said Judge Brody “has, in the spirit of helping class members, gutted their chances of qualifying for an award through the claims process.”  That’s because many retired players require expensive medical tests before they can qualify for an award, and the price of those exams can easily reach $10,000 or more.  For various reasons, a player’s attorney is often the only party willing and able to front those funds, Lubel said.  But artificially capping their fees at a relatively low 17% rate makes them less willing to spend that money to get the ball rolling on a client’s claim, he continued.

The case is In re: National Football Players' Concussion Injury Litigation, case number 18-2012, in the U.S. Court of Appeals for the Third Circuit.

$35M Fee Request in $110M Fiat Chrysler Emission Settlement

August 6, 2019

A recent Law 360 story by Emille Ruscoe, “Atty Wants $32M in Fees From Fiat Chrysler Emission Deal,” reports that a New York federal judge was asked to approve $32 million in fees for attorneys who negotiated a $110 million settlement in an investor suit accusing Fiat Chrysler of lying about its compliance with safety regulations and cheating on emissions tests.  In addition to the $32 million for the attorneys, which comprises nearly a third of the total settlement, the class counsel asked to be reimbursed $2.6 million for their expenses.  They also want the named plaintiffs in the case to be paid $15,000 each.  The settlement total after the expenses would be about $75 million.

The plaintiffs' attorneys calculated that they spent upwards of 44,000 hours on the case, which stretched out over four years.  They estimated the cost of their labor at about $23 million, assuming an approximate $518 hourly rate, which was then multiplied total by a factor of 1.4, in the "lodestar" method that is "intended to approximate what counsel would receive if they were bargaining for the services in the marketplace."  "Awards of fair attorneys' fees from a common fund should also serve to encourage skilled counsel to represent those who seek redress," the nine attorneys for the plaintiffs noted in their explanation of the fee, characterizing the request percentage total as comparable to other fees awarded within the jurisdiction.

The price tag on the expenses, they said, reflects, among other things, the costs associated with work related to the trial that the attorneys had to conduct in Detroit near Fiat Chrysler's American headquarters, far from the federal court in New York City where the case was adjudicated.  The attorneys emphasized the risk they undertook in footing those bills themselves.

"Class counsel pursued plaintiffs' claims against defendants in this complex litigation with no guarantee of ever being compensated for the investment of time and money that the case would require," they said.  They stressed that the defendants waited to settle until after the class was certified, thereby increasing the risk they took on.  Moreover, they said, their work continues: they'll assist class members with proofs of claim, guide the overall claims process and answer the class members' questions throughout.

They're not asking for much, they claimed.  "A 30% fee will not cause a windfall here," they said, as part of their explanation for why their requested total is reasonable.

The car company settled in April, ending a suit that investors brought when their stock dropped 5% after a joint Department of Justice and Environmental Protection Agency investigation charged the auto company with violating the Clean Air Act.  Court documents indicate the mediation talks went on for months, and in a joint statement at the time of the settlement, the parties said the agreement occurred "solely to eliminate the uncertainty, burden and expense of further protracted litigation."

Judge Scrutinizes $68M Fee Request in Wells Fargo Settlement

August 2, 2019

A recent The Recorder story by Alaina Lancaster, “Judge Scrutinizes Plaintiffs’ $68M Fee Request in Wells Fargo Settlement,” reports that disputes over $68 million in attorney fees in a $240 million class action settlement against Wells Fargo & Co. have spurred a federal judge to consider setting new precedents for contract lawyer fees.  In a fairness hearing, U.S. District Judge Jon Tigar of the Northern District of California took issue with a motion for attorney fees filed by San Francisco’s Lieff Cabraser.  The case involves a settlement with Wells Fargo shareholders over the financial institution’s widespread opening of unauthorized accounts to reach sales quotas and artificially inflate the company’s stock.

As co-lead counsel in the litigation dating back two years, Lieff Cabraser had calculated a fee for its contract attorneys that was about nine times higher than the attorney’s rate.  Tigar suggested to Richard M. Heimann of Lieff Cabraser that contract attorney fees should be no different than a plane ticket and calculated as a cost.  With no law or ruling that reflects such a shift in procedure, Heimann asked how it was fair that his team’s fees should suffer because the judge wanted to change the rules.  “If I think that should be the rule, how could I ever do that without an order?” Tigar responded.

Co-lead plaintiffs Fire & Police Pension Association of Colorado and the City of Birmingham Retirement & Relief System represented a class of shareholders who brought the suit to hold Wells Fargo’s directors accountable for putting “unrelenting pressure” on sales members to cross-sell eight products per account holder, resulting in the creation of falsified accounts, according to the consolidated complaint.  Saxena White in Boca Raton, Florida, is co-lead plaintiffs counsel alongside Lieff Cabraser.

The judge thanked Ted Frank of the Hamilton Lincoln Law Institute’s Center for Class Action Fairness for raising the issue in his motion opposing the attorney fees.  Frank pointed out that the co-lead counsel paid contract attorneys between $40 and $50 an hour but requested about $415 an hour to cover their investment.  “The unreasonableness of co-lead counsel’s fee request is confirmed by the lodestar crosscheck,” Frank wrote in his opposition to the motion.  “Using these rates, the lodestar figure is exaggerated by at least $5.5 million, but the precise amount is unclear due to counsel’s failure to submit daily billing records.  This means the lodestar multiplier is actually about 4.04.”

Heimann argued that the work and the overhead costs for staff and contract employees are the same in regard to training, supervision and providing workspaces.  Tigar said the law firm wouldn’t contract out staff if it weren’t more profitable.  “Are you telling me with a straight face that you don’t make more money on contract lawyers?” the judge asked.

Heimann said that taking advantage of contract employees is only marginally more profitable—about 10% to 20% more than staff attorneys—but the primary reason the firm hires contract workers is to handle fluctuating caseloads.  Tigar also set out to address another objection mentioned in Frank’s opposition over a 5% fee allocated to 12 law firms who brought similar cases in Delaware courts.  “The gravy train is so heavy that co-lead counsel has agreed to pay law firms that brought other cases even where they provided no common benefit, who represent plaintiffs who lack any colorable claims,” Frank wrote.

Heimann confirmed the Delaware counsel did not work on the case, and Tigar said it sounded to him like the attorneys were paid to withdraw their litigation, so as not to obtain a ruling that could impact the outcome of this case.  “I can imagine a circumstance in which a class action lawsuit is filed and the claims are clearly unsupported by the law,” the judge said.  “Most sensible judges could see the claims aren’t good, but say you have one case where the lawyers clearly have some momentum, and you just go pay them off.  That’s not good for the development of the law and doesn’t lead to a just result.  Why shouldn’t I be worried about that?”

$14.5M in Attorney Fees in $53M Landmark Class Action Settlement

July 31, 2019

A recent Law 360 story by Jeff Montgomery, “Chancery OKs $14.5M Atty Fee in Landmark $53M Settlement,” reports that in a possible Delaware litigation milestone, the Chancery Court approved a $53 million settlement with a $14.5 million attorney fee carveout in a stockholder suit that challenged the $640 million acquisition of a real estate investment trust by another REIT with the same private equity controller.  Christopher M. Foulds of Friedlander & Gorris PA told Vice Chancellor Joseph R. Slights III that the agreement with New Senior Investment Group and its directors ranks as the largest derivative action settlement, by far, as a percentage of market capitalization to date in Delaware.

New Senior, managed by Wesley Edens' Fortress Investment Group LLC, had a little over $450 million in market capitalization, or the shares times price, for the time period in Foulds' comparison.  Stockholder John Cumming sued the company in January 2017 after Fortress spun off and sold to New Senior 28 senior housing properties owned by Fortress-controlled Holiday Retirement Corp. in 2015. The derivative suit argued that Fortress — standing on both sides of the deal — received an unfair price from New Senior, under terms that included a secondary offering that diluted shareholder value.

"We believe we were able to extract the $53 million payment because we went so deep into the case.  That provided us with both maximum leverage and a wealth of information," Foulds said.  "We had maximum leverage because it [the settlement] was the result of a mediator's recommendation that occurred the weekend before a summary judgment hearing."

Vice Chancellor Slights approved the proposed settlement total and fee award — paid out of the total — without change, but rejected a proposed $4,500 incentive payment to Cumming.  He noted that recent decisions have generally held lead stockholders to the same value from a settlement as other investors, barring extensive contributions to the case.  In explaining his approval and ruling, the vice chancellor said that the suit involved extensive discovery investigation efforts, with a special master eventually appointed by the court to assist the process.

The $53 million, meanwhile, "represents at least more than half the amount that plaintiff's counsel might have achieved on their best day at trial, in my view," Vice Chancellor Slights said.  "In my view, that's a very solid, risk-adjusted outcome."  New Senior put up a substantial fight, the court noted, with Foulds describing the opposition as "the greatest litigation war machine ever assembled in our state."  Under a defense assessment, the vice chancellor noted, New Senior underpaid for the retirement home chain, rather than overpaying, producing an alleged but rejected estimate of an $80 million benefit for shareholders.

The $14.5 million fee amounts to 27.5% of the settlement amount, but includes more than $1.1 million in expenses, the vice chancellor said. After expenses, fees would total 25% of the settlement.  "The percentage of benefits paid is on the higher end of the range for pretrial fee awards, but the benefit achieved is significant and the effort to achieve that benefit is substantial and commensurate with the fee request," the vice chancellor said.  He added that the fee reflected an $850-per-hour rate that he viewed as "eminently reasonable under the circumstances."

The case is Cumming v. Edens et al., case number 13007-VCS, in the Court of Chancery of the State of Delaware.