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Category: Fee Calculation Method

Seventh Circuit Cuts Fee Award in Half

August 18, 2017

A recent NLJ story by Amanda Bronstad, “Fees in Class Action Over Moldy Washing Machines Nearly Halved,” reports that a federal appeals court has slashed plaintiffs' attorney fees by nearly half in a class action settlement over defective washing machines — but the firms could have taken a bigger hit.  A much bigger hit.

The opinion by the U.S. Court of Appeals for the Seventh Circuit reduced the fees in a 2015 settlement from $4.8 million to $2.7 million.  The suit alleged that front-loading washing machines made by Whirlpool Corp. and sold by Sears, Roebuck and Co. from 2004 to 2006 had a defect in their central control units and grew mold inside them.  Sears estimated that the settlement, which resolved just the claims over the control units in Kenmore and Whirlpool brands, was worth about $900,000.

The Seventh Circuit found a federal magistrate judge's reasoning "questionable" when she boosted the award 1.75 times what lawyers charged for their work.  "The judge's reasoning was that the case was unusually complex and had served the public interest and that the attorneys had obtained an especially favorable settlement for the class," wrote Judge Richard Posner.  "The district court, comparing the hourly rates sought by class counsel with the complexity of their work, concluded that for the most part the case wasn't very complex — it was just about whether or not Sears had sold defective washing machines.  This conclusion leaves us puzzled about the court's decision nevertheless to allow a multiplier."

What the Seventh Circuit did not do, however, is find any problem awarding fees greater than the benefits to class members, despite two of its own precedents in 2014 cautioning courts to presume that such fees are unreasonable.  Defense attorneys insisted that the fee award disregarded those precedents — Pearson v. NBTY and Redman v. RadioShack — and that the plaintiffs' attorneys should get no more than $900,000 given that 95 percent of the class won't get anything.

Yet such a presumption, Posner clarified, wasn't "irrebuttable."  He noted the "extensive time and effort that class counsel had devoted to a difficult case against a powerful corporation entitled them to a fee in excess of the benefits of the class."  But three times what class members got?  The attorneys should get what they billed for — "no more, no less," Posner wrote, remanding with directions to award $2.7 million.

Plaintiffs' attorneys, meanwhile, spent much of their appeal brief focused on the Seventh Circuit's 2015 ruling in In re Southwest Airlines Voucher Litigation, which awarded $1.6 million in fees in a coupon settlement.  But Posner's opinion never mentioned that ruling.  Sears and Whirlpool were represented by Timothy Bishop, a partner at Mayer Brown in Chicago.  In an email, both companies praised the Seventh Circuit's decision to reduce "the plaintiffs' lawyers' excessive and unreasonable fee by more than 43 percent."

Steven Schwartz of Chimicles & Tikellis in Haverford, Pennsylvania, did not respond to a request for comment.  His firm sought fees alongside five others, including Carey, Danis & Lowe in St. Louis, San Francisco's Lieff Cabraser Heimann & Bernstein and New York's Seeger Weiss.

The class actions were filed in 2006.  In 2012, the Seventh Circuit certified two classes of customers in a ruling written by Posner that ended up before the U.S. Supreme Court, which remanded the case in light of its ruling in Comcast v. Behrend. Posner reaffirmed the certification ruling in 2013.  Separate claims over mold against were transferred to multidistrict litigation in the Northern District of Ohio, where a federal jury issued a defense verdict in 2014.  In that case, the lawyers got $14.75 million in counsel fees and costs.

After U.S. Magistrate Judge Mary Rowland of the Northern District of Illinois approved the central unit settlement last year, the attorneys sought $6 million in fees.  They claimed their lodestar — the amount they actually billed — was $3.25 million and that they deserved a 1.85 multiplier to account for their efforts in the case.

In a 55-page opinion, Rowland reduced their lodestar to $2.7 million after finding issues with some of their billing records, but multiplied the amount by 1.75 due to the novelty and complexity of the case, the success achieved and the advancement of a public interest.

"It is no exaggeration to say that this protracted nine-year litigation has concerned fees and little else," Bishop wrote in the brief for Sears and Whirlpool appealing her fee award.  "The approach taken by the district court would encourage prolonged litigation to drive up class counsel's hours with no added value to the class."

But it was the defendants, Schwartz wrote in the plaintiffs' response brief, who drove up those hours.  "The only reason why it took a decade of litigation up through the eve of trial to get the cases settled was defendants' refusal to even discuss settlement," he wrote.

The case is In re: Sears, Roebuck and Co Front-Loading Washer Products Liability Litigation, 7th U.S. Circuit Court of Appeals, No. 16-3554.

Judge Questions Fee Request in Vibrator Privacy Action

August 8, 2017

A recent Law 360 story by Sophia  Morris, “Judge Questions $1.12M Atty Fees in Vibrator Privacy Suit, reports that an Illinois federal magistrate judge recommended a lowered fee award for attorneys who represented a proposed class of consumers who alleged a sex toy maker had secretly collected user data from an internet-connected vibrator, saying more information is needed on whether their $1.12 million fee request reflected the amount of work put into the case.

U.S. Magistrate Judge Michael T. Mason said the attorneys who secured a $3.75 million settlement for the proposed class had not shown that their request for fees totaling 33.3 percent of the settlement fund was justified, given that the case settled less than three months after it was filed.  But despite his concerns, Judge Mason said that as there were no objections to the request, he recommended that the attorneys submit a lodestar calculation of their fees and then be awarded 30 percent of the settlement fund.

“In a fee petition, class counsel often provide the court with some indication of the number of hours spent working on the litigation, although in this case, plaintiffs’ counsel failed to do so,” Judge Mason said in his report and recommendations.  “This omission is a red flag; we are concerned that class counsel did not want the court to know how much (or little) time was spent before their request for $1.12 million in fees.”

The suit was filed in September with anonymous lead plaintiffs N.P. and P.S. alleging that Standard Innovation Corp. had collected user data from the vibrators and app — including intimate user preference details such as date and time of each use, the chosen vibration intensity and pattern, and the email addresses of users who registered with the app — without their knowledge or permission.

In March, Standard Innovation agreed to set up two settlement funds: $3 million to go toward users of the app and $750,000 toward purchasers of the vibrator.  Roughly 300,000 customers have purchased the vibrators, and about 100,000 use it with the app, according to the settlement memo.  As part of the agreement, which was given preliminary approval, the company will stop collecting data from its We-Vibe sex toy and destroy all the data it had collected.

Although the motion for approval of the settlement was filed in March, the parties actually reached a deal in December.  Judge Mason noted that in their June fee request, the attorney pushed for 33.3 percent of the settlement fund by citing complex cases that took years to resolve and involved time-consuming discovery.  But given that this case was speedily resolved and involved no court time, Judge Mason questioned how much time the attorneys had actually needed to investigate and research their clients’ claims.

“In light of the circumstances of this case, it seems excessive and unreasonable to award plaintiffs counsel fees of $1.12 million when many class members are only receiving $20 for their claims,” he said.  Judge Mason did recommend that the requested $5,000 incentive award be given to the named plaintiffs, even though they never had to sit for a deposition or respond to discovery.  He said it was justified “given the sensitive and personal nature of the allegations at issue here.”

The case is N.P. v. Standard Innovation (US) Corp., case number 1:16-cv-08655, in the U.S. District Court for the Northern District of Illinois.

Tenth Circuit: District Court Used Wrong Method to Calculate Fee Award

July 27, 2017

A recent Law 360 story by Melissa Daniels, “10th Circ. Nixes $17.3M Fee Award in Royalties Settlement,” reports that a Tenth Circuit panel set aside a $17.3 million attorneys’ fees award in a published decision that found the district court incorrectly calculated the award in a $52 million settlement over gas well royalty payments by failing to use the lodestar method of calculation.

Class counsel in the Oklahoma federal court action moved for a fees award of 40 percent, but two class members objected to the request.  The court settled on an award of about $17.3 million, or a third of the fund, plus an incentive award of half a percent for lead plaintiff Chieftain Royalty Company.

The panel reversed the awards and remanding the case.  In a 26-page opinion, the panel observed that class counsel didn’t provide necessary records about their hours to be used in a lodestar calculation, which could end up preventing it from getting fees at all.  Any figures about hours worked were “mere estimates,” the panel said.

“The district court will have to decide in the first instance whether any award can be made in light of the absence of contemporaneous time records,” the panel said.  “It is unfortunate that class counsel did not do the necessary homework on Oklahoma law.”

Chieftain had filed the state-law putative class action against EnerVest Energy Institutional Fund in 2011, alleging the oil and gas company underpaid lease royalties on gas from wells in Oklahoma.  The $52 million settlement, meant to benefit around 21,000 class members, netted final approval about four years later.

The panel said that while the circuit had no binding precedent on whether federal courts must follow state laws governing how to calculate attorney fees, it found a consensus among five other circuits who’ve considered the issue.  “When state law governs whether to award attorney fees, all agree that state law also governs how to calculate the amount,” the panel said.

The decision also nixed the $260,000 incentive award for Chieftain, saying the percentage-based award is unsupported by the record.  “When discussing the time [Chieftain president Robert] Abernathy had expended on the case, counsel did not provide detailed contemporaneous records but offered only approximations and generalities,” the panel said.

The case is Chieftain Royalty et al. v. EnerVest Energy et al., case number 16-6022, in the U.S. Circuit Court of Appeals for the Tenth Circuit.

Attorneys Garner $125M in Second VW Settlement

July 26, 2017

A recent Courthouse News story by Nicholas Iovino, “Attorneys Awarded $125 Million for Second VW Settlement’,” reports that a federal judge awarded $125 million in fees and costs to lawyers who secured a second settlement in Volkswagen’s diesel emissions cheating scandal.

U.S. District Judge Charles Breyer approved the $1.2 billion settlement in May, one of two deals worth nearly $16 billion, to settle claims in Volkswagen’s installation of emissions test cheating software in some 580,000 diesel-powered vehicles sold in the United States.

“The settlement not only provides class members with significant value, but class counsel obtained the settlement swiftly,” Breyer wrote in his 7-page ruling.  He noted that the second deal was approved less than 18 months after lead class counsel Lieff Cabraser Heimann & Bernstein was appointed by the court.

It was the second big payday for attorneys in the multidistrict consumer class action.  Breyer in March awarded counsel $175 million for securing a $14.7 billion deal for 500,000 2.0-liter engine vehicles.  In that settlement, Volkswagen agreed to spend $10 billion on vehicle buybacks and emissions-reducing repairs, and $4.7 billion to regulators for air quality improvement programs.

The 3.0-liter engine deal approved in May comes with a value of at least $902 million for consumers, along with payouts to U.S. and California for air pollution mitigation.  Under the settlement, Volkswagen could have to pay an extra $4 billion if it can’t come up with regulator-approved, emissions-reducing repairs for 58,000 newer-model cars by deadlines in October, November and December this year.

The requested $121 million in attorneys’ fees accounts for 13.4 percent of the estimated $902 million value of the settlement, “well below the Ninth Circuit’s 25 percent benchmark for common fund cases,” Breyer wrote in the Friday ruling.  He found the attorneys’ request for an additional $4 million in expenses was reasonable and granted it.

Volkswagen has paid more than $20 billion in U.S. civil settlements and criminal fines so far for installing of emissions-cheating software in some 11 million vehicles worldwide, and U.S. prosecutors have criminally charged six of its executives with conspiracy and obstruction of justice.

Also, Breyer approved a third partial consent decree in which Volkswagen agreed to pay a $93.8 million fine to California’s air quality regulator, the California Air Resources Board.  That money will go to the state’s Air Pollution Control Fund, according to the consent decree.

On top of that, Volkswagen will pay California another $60 million, in $10 million installments over six years, to reimburse it for the costs of securing three consent decrees.  The third consent decree also requires Volkswagen make changes to its corporate governance structure, maintain an approved whistleblower system, and hire third-party testers and auditors to evaluate its emissions compliance.

The plaintiffs’ steering committee said in a statement that it appreciated the court’s consideration of its fee request and was “gratified” to be implementing the two class-action settlements.

More than 10,000 of 30,000 filed claims have been paid for the 3.0-liter settlement in less than two months, and more than $540 million in payment offers have been made, according to class attorneys.

“We negotiated these agreements to hold Volkswagen accountable for its breach of consumer trust, and we hope that all class members choose to take advantage of the benefits detailed in these settlements,” the class attorneys said in a statement.  “These legal fees are in addition to the compensation Volkswagen has already agreed to pay under the terms of the settlement, and will not be deducted from any class member’s recovery amount.”

Class Attorneys Seek $45M in Fees in $210M Shareholder Settlement

July 11, 2017

A recent Law 360 story by Rachel Graf, “Salix Class Attys Seek $44.6M in Fees For $210M Settlement,” reports that attorneys who secured a tentative $210 million settlement to end a proposed class action by Salix Pharmaceuticals Ltd. shareholders claiming the company misrepresented inventory levels to falsely inflate its stock price asked a New York federal judge for $44.6 million in fees.

The shareholders’ attorneys said the amount, representing about 21.24 percent of the settlement, is similar to the fees granted in comparable class actions, and is reasonable given the “numerous challenges” the counsel faced in proving liability and damages, especially since they brought the action on a contingent basis.

“The significant monetary recovery was achieved through the skill, tenacity and effective advocacy of lead counsel, which litigated this action on a fully contingent fee basis against highly skilled defense counsel,” the attorneys said in the filing.  “Lead counsel had to devote a vast amount of time and resources to the action, litigating through an extensive and hard-fought fact discovery process before the settlement could be obtained.”

The case originated from two securities lawsuits that were filed after Salix stock plunged by more than 30 percent following the company’s November 2014 disclosure that it had much more inventory of many of its drugs than management had previously claimed.  The suits were consolidated in March 2015, and the amended complaint alleged violation of the Securities and Exchange Act.  The parties agreed to a $210 million settlement in March for a class of shareholders estimated to be in the thousands.

The shareholders’ attorneys said that fees for a non-class action would typically range between 30 percent and 33 percent of the settlement amount, and argued their requested award of 21.24 percent of the settlement is “well within the range of percentage fees that have been awarded in the Second Circuit in securities class actions and other similar litigation with comparable recoveries.”

The requested fee is based on an agreement the firm reached with a lead plaintiff before litigation began, and should therefore be given a “presumption of reasonableness,” according to the filing.  In addition to the $44.6 million fees award, the attorneys have requested to be reimbursed for $1.9 million in litigation expenses and $29,800 in costs. 

The suit is In re Salix Pharmaceuticals Ltd, case number 1:14-cv-08925 in the U.S. District Court for the Southern District of New York.