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Category: Fee Calculation Method

Federal Judges Question Attorney Fee Formula in Florida Coverage Cases

December 12, 2019

A recent Daily Business Review story by Steven Meyerowitz, “Florida Split: Should Attorney Fees Count Toward Federal Amount in Controversy?,” reports that a decision by a Miami federal judge highlights a split among Florida district courts on whether to include statutory attorney fees when calculating whether an insurance coverage case removed from state court meets the federal minimum for the amount in controversy.

On Sept. 10, 2017, Hurricane Irma struck South Florida and damaged the home owned by Jaclyn and Xavier Caceres. The Cacereses submitted a claim to their insurer, Scottsdale Insurance Co.  Scottsdale assigned a claim number and issued the Cacereses a check for $10,975, reflecting a wind deductible in the amount of $5,854.

In May 2019, after renewing their policy, the Cacereses submitted a separate claim for property damage due to heavy rain and roof collapse. Scottsdale assigned a claim number and issued the Cacereses a check for $7,975.  On June 22, 2019, the Cacereses presented Scottsdale with a repair estimate for $91,863 that covered the estimated damages for both claims.

On Sept. 5, 2019, the Cacereses sued Scottsdale in state court. Their complaint alleged they were seeking damages in excess of $15,000, and they sought to recover attorney fees and costs under Florida Statutes Section 627.428.  Scottsdale removed the state court action to federal court, indicating among other things that the amount in controversy was $75,034 based on the $91,863 repair estimate minus the $10,975 check paid and the wind deductible.

The Cacereses moved to remand, arguing the amount in controversy did not exceed $75,000.  Specifically, they contended Scottsdale could not use a pre-suit damage estimate as a basis for establishing the amount in controversy and, even using the pre-suit damage estimate, Scottsdale failed to account for the second check to the Cacereses, which decreased the amount in controversy from $75,034 to $67,059.

For its part, Scottsdale countered the amount in controversy requirement was satisfied because the Cacereses sought to recover attorney fees and costs, which through trial could easily exceed the remaining $7,941 needed to establish the amount in controversy under the Cacereses’ interpretation.  U.S. District Judge Beth Bloom granted the Cacereses’ motion to remand.  In her decision, she ruled  district courts may consider pre-suit demands in evaluating whether a case has been properly removed.

The district court then observed the Cacereses’ total estimate of damages for the claims from both the Sept. 10, 2017 loss and the May 13, 2019 loss amounted to $91,863, Scottsdale issued two checks to the Cacereses for the losses, and the wind deductible of $5,853.68 was applied to the 2017 claim.  The district court said it was “clear” the amount in controversy was $67,059.

Bloom next considered whether the Cacereses’ bid for attorney fees counted toward the amount in controversy.  She noted the issue has caused a split in district courts within the U.S. Court of Appeals for the Eleventh Circuit, citing a 2017 Middle District of Florida decision discussing the divide and a 2010 Southern District of Florida case discussing the “conflicting case law” on whether the amount of  should be calculated on the date of removal or through the end of the case.

The district court then ruled the amount in controversy did “not include highly speculative, prospective amounts” of attorney fees but rather only those fees accrued at the time of removal.  According to the district court, this ruling was in line with a 1994 Eleventh Circuit precedent establishing “jurisdictional facts are assessed on the basis of plaintiff’s complaint as of the time of removal.”

The district court noted Scottsdale provided no evidence to establish the Cacereses accrued $7,941 in attorney fees by the removal.  Accordingly, the district court concluded Scottsdale had not satisfied its burden of establishing the amount in controversy exceeded $75,000.

Novartis Whistleblower Attorneys Slam ‘Unjust' Fee Award

September 13, 2019

A recent Law 360 story by Jeannie O’Sullivan, “Novartis Whistleblower Attys Slam ‘Unjust’ $1.4M Fee Award,” reports that Webber McGill LLC urged a New Jersey state court to redo the $1.4 million in counsel fees it awarded the firm and a solo attorney for their representation of a former Novartis Pharmaceuticals Corp. executive in her whistleblower lawsuit, arguing that the court overlooked binding precedent and critical facts in arriving at the “manifestly unjust” sum.

The Hanover-based firm, which had sought more than $3 million for its representation of Min Amy Guo, invoked the New Jersey Supreme Court’s 1995 holding in Szczepanski v. Newcomb Medical Center that counsel fee awards should be determined independently of the fee agreement between counsel and client.  But the court factored in that very agreement in calculating the award, according to Webber McGill's reconsideration motion.

The award also ran afoul of another high court ruling from that same year, Rendine v. Pantzer, in which the justices held that counsel fee awards should be based on current rates rather than the prevailing rate at the time services were rendered, the motion said.  “In short, plaintiff believes the order yields manifestly unjust results and plaintiff respectfully requests that the court remedy those injustices,” the motion said.

The award, handed down Aug. 9 by Morris County Superior Court Judge Louis Sceusi, was based on hourly rates of $350 and $300, respectively, for name partners James K. Webber and Douglas J. McGill, $250 for firm member Michael J. Reynolds and $200 for firm counsel Christena A. Lambrianakos, the motion said. Morristown, New Jersey-based solo attorney Richard J. Murray, who also represented Guo, was awarded based on a $450 hourly rate.

Webber McGill went on to blast the “inequities” between the firm’s award and fees won by the defendants’ counsel for Guo's misconduct during the trial.  The Novartis attorneys won awards based on hourly rates of $395 for John B. McCusker of McCusker Anselmi Rosen & Carvelli PC and $390 for Patricia Prezioso of Nukk-Freeman & Cerra PC.  Webber McGill took on a higher risk of nonpayment because Guo is a one-time client, whereas Novartis is an institutional client for McCusker Anselmi and thus generates “reliability and volume” for that firm, the motion said.

Further, the court undervalued the contributions the individual Webber McGill attorneys made, according to the motion. Webber has more experience in employment law than Prezioso, and McGill is a “skilled and experienced litigator” who was an “integral part of the winning team,” the motion said.  Reynolds was “uniquely helpful” to the case in terms of his pharmaceutical industry compliance knowledge, and Lambrianakos’ work was “absolutely necessary and invaluable,” according to the motion.

The court also contravened Rendine with respect to Murray because it based his hourly rate of $450 on a previous case, whereas he should have been awarded based on the prevailing hourly rate of $525, the motion said.  “The solution to the court’s errors with respect to plaintiff’s counsel’s rates is to review the record on the fee application and follow the dictates of Rendine and Szczepanski to determine the appropriate market rates for the Webber McGill attorneys as they ought to be compensated today,” the motion said.  Lastly, Webber McGill decried the court’s “draconian” reduction of McGill’s and Reynolds’ hours by 42% and 35%, respectively, saying the cuts weren’t justified by the record.

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.

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?”

Eleventh Circuit Scraps Attorney Fee Award in Home Depot Litigation

July 26, 2019

A recent Daily Report story by R. Robin McDonald, “11th Circuit Scraps $15M Attorney Fee Award in Home Depot Litigation” reports that a federal appeals court has vacated a $15.3 million legal fee award and remanded it with instructions to reduce it in litigation stemming from a  2014 data breach that impacted 56 million Home Depot customers.  The U.S. Court of Appeals for the Eleventh Circuit determined that the fee award to counsel representing a slate of financial institutions that sued Home Depot over the breach should have been based solely on the lawyers’ hourly rates and time spent litigating the case and should not have included any financial enhancement.

Holding that the legal fees were part of a separate contractual deal not included in the final settlement, Judge Gerald Tjoflat wrote that, “It was an abuse of discretion to use a multiplier to account for risk in a fee-shifting case.”  Tjoflat was joined by Judge William Pryor and Judge Ronald Lee Gilman of the U.S. Court of Appeals for the Sixth Circuit.

Ken Canfield, a partner at Atlanta’s Doffermyre Shields Canfield & Knowles, and co-class class counsel for the financial institutions, said, “The Eleventh Circuit affirmed that Judge Thrash was correct in deciding every argument that was presented to  him.  The fee award was vacated based on a new argument Home Depot made for the first time on appeal.  We are confident that Judge Thrash will again make the right calls on remand after a complete record is put before him.”  Canfield argued the case at the 11th Circuit and is co-lead counsel for the consumer plaintiffs in the Equifax data breach litigation.

The legal fees at issue were calculated as a lodestar, which is based on lawyers’ hourly rates and time but traditionally includes a financial enhancement to compensate plaintiffs lawyers for the risk they assumed when they signed onto the litigation.

The multidistrict litigation on behalf of financial institutions that sought damages stemming from the data breach settled in 2017 for $25 million.  U.S. District Court Chief Judge Thomas Thrash Jr., who presided over the Home Depot data breach cases, set the fee award after plaintiffs attorneys agreed, at the request of Home Depot lawyers, to negotiate the specifics of “reasonable legal fees,” costs and expenses after closing the settlement deal.  But Home Depot reserved the right to object to any fee request—and ultimately did so after class counsel requested $18 million, according to Tjoflat.  Home Depot countered that reasonable legal fees should be about $5.6 million.

Thrash stepped in after lawyers on both sides were unable to agree on a dollar amount.  He accepted the lodestar proposed by class counsel—about $11.7 million—as “an appropriate measure of the time expended by the plaintiffs in this case,” Tjoflat said.  Thrash then applied the same 1.3 multiplier that had been used in a parallel settlement compensating Home Depot consumers whose financial and personal data had been compromised by the breach, bringing the total to $15.3 million.

“The Home Depot argued that class counsel was not entitled to a multiplier,” Tjoflat said.  “Home Depot did not suggest that a multiplier was prohibited, only that it was not warranted” and that financial institution  lawyers “did not achieve a great result.”  Thrash also rejected arguments by Home Depot lawyers that counsel for the financial institutions should be the same as the fees paid to consumer class counsel

Thrash said in awarding the fees that financial institution counsel expended more effort and more time than consumer lawyers in settling the cases and that “dealing with [banks] rather than consumers added difficulty to the process of litigating this case.”  Thrash also cross-checked his lodestar award, including the fee enhancement, against a separate percentage calculation based on the class settlement benefits.  Thrash ultimately found that the $15.3 million award was only slightly more than one-third of the settlement benefits, which Thrash determined was reasonable.

“It is hard to imagine how the settlement agreement could be any clearer that Home Depot will pay the attorney’s fees, and that payment will not come out of the class fund,” Tjoflat said.  “A settlement agreement is a contract, … and the parties’ intent seemed to be for the fees to be paid separately by Home Depot—i.e., a fee-shifting arrangement.”

“The District Court’s only stated reason for using a multiplier was the exceptional risk taken by counsel in litigating the case,” Tjoflat continued.  “And risk, according to the Supreme Court, is not an appropriate basis for enhancing an attorney’s fee in statutory fee-shifting cases.”