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Category: Fee Cap / Fee Limits

Fees Capped at 25 Percent in $2.67B BCBS MDL Settlement

November 17, 2020

A recent Law 360 story by Jeff Montgomery, “Ala. Judge Wary of Second-Guessing $2.67B BCBS Deal,” reports that a federal judge in Alabama cautioned an attorney for non-consenting class members about second-guessing "the tactical decisions of class counsel" in a proposed $2.67 billion multidistrict class settlement for alleged overpayments to Blue Cross-Blue Shield insurers.

U.S. District Judge R. David Proctor made the point during a video-conference preliminary approval hearing in the Northern District of Alabama for the settlement of a suit filed in January 2013, targeting allegations that the insurers divvied up the nation and conspired to restrain competition among themselves and from other insurers, causing damages estimated at between $19 billion and $38 billion.

The settlement, reached after more than eight years of battling, would provide proportional payouts to tens of millions of business and individual BCBS subscribers, while also establishing court-ordered reforms prohibiting anti-competitive conduct, including ending a Blues practice of requiring members to derive at least two-thirds of their revenues from "Blue branded" services.

Attorneys for the class hailed the deal as historic — potentially reshaping competition in the health insurance industry and increasing consumer choice.  But attorneys for three Blues customers told the judge their clients declined to support the deal based on a "lack of openness" in negotiations and requirement to release individual claims in order to participate in the settlement.

"I feel like I'm dealing with a college football team that has 70 players and the flag comes from the sideline and three of the players don't like the coach's call and want to see the playbook, which is all well and good," Judge Proctor said, "but I've got to make a decision here in the near future about whether to give preliminary approval."

Under the settlement, individual class members and their past costs for Blue Cross coverage, either through workplace or individual plans, will be developed from insurer records, with protection for sensitive information. Individuals will also have an opportunity to submit individual claims if they choose.

No more than 25% of the $2.67 billion will go toward attorney fees and expenses, with 93.5% of an estimated $1.9 billion in payouts expected to go to fully insured individuals or business premium-payers and the balance to self-insured individuals.

Federal Circuit Backs Attorney Fee Cap in IDEA Cases

August 14, 2020

A recent Law 360 story by Andrew Karpan, “DC Circ. Backs Atty Fee Cap in Civil Right Row” reports that the D.C. Circuit rejected the efforts of attorneys representing hundreds of parents in a civil rights case to collect over $5 million in fees from Washington, D.C., and ruled that a congressional cap that strictly limited the amount they could collect in those cases was perfectly valid.

The opinion, authored by U.S. Circuit Judge Gregory Katsas, found that an appropriations rider Congress passed in 2009 did not violate the Takings Clause of the Fifth Amendment nor was it an illegal intervention into the court's power to award fees.  The rider expressly forbade Washington from paying more than $4,000 in attorney fees in any single civil rights case filed under the Individuals with Disabilities Education Act, which mandates special education services for kids.

Crucially, Judge Katsas wrote, Congress started limiting the city's ability to pay out legal fees in IDEA cases in 1999, which was before the parents in these cases filed suit.  "The fee cap does not interfere with any reasonable expectations, for each of the awards at issue was entered at a time when Congress had already limited the District's ability to pay IDEA fee awards," the judge said.  The ruling covered eleven separate IDEA cases, all of which preceded 2009 and all of which successfully alleged that Washington didn't provide a special needs education to students who qualified for one.

Back in 2015, a magistrate judge calculated the city's tab in those cases at about $3.7 million, along with another $1.3 million in interest, according to the ruling.  Two years later, a D.C. federal judge used the cap to trim the fee award to $220,000 but left the interest, which had notched up to $1.4 million by then.  Both the parents and the city challenged that ruling.  Congress, which provides funding to public schools in Washington through the District of Columbia Appropriations Act, had every reason to be concerned about using that budget to pay lawyers in IDEA cases, Judge Katsas observed.

The city's "long struggle" to comply with IDEA was costing it $10 million a year by the time Congress began limiting how much of that funding could be spent on fee payments in those cases, the ruling noted.  An appropriations rider passed in 2009 had instituted the permanent $4,000 cap on the awards.

The parents argued, in part, that the rider violated their rights to fees that a court had awarded them but the panel said shaving a fee award isn't "a per se taking."  Deciding to trim an award that had already been issued didn't misappropriate the powers of Congress either, the panel added.  Lawyers for the parents should also have known they wouldn't be able to collect more than $4,000 a case because the initial rider dated to 1999, Judge Katsas added.

But in addition to ruling that the cap was perfectly legal, the D.C. Circuit also scratched the $1.4 million in interest the parents had won.

"This principle is as old as the Republic," Judge Katsas mused on this point, citing a ruling the Supreme Court made in 1789, in Hoare v. Allen, and in which the court similarly scratched the interest on debts owed to a British creditor during the Revolutionary War, as the Constitutional Congress had expressly banned paying debts to British subjects.

Similarly, Judge Katsas wrote, Congress had banned Washington from paying lawyers in IDEA cases fees above a certain amount: interest couldn't be collected on fees above that amount either.  The panel sent the award back to a lower court to recalculate using the capped award instead. 

The D.C. Circuit ruled on an IDEA fee bid in a different case just last year, when a panel initially rejected a nearly $7 million fee award in a class action suit leveled under that law, ruling in that case that a lower court had used an invalid matrix for calculating fees.

GAO Says Attorney Fee Cap Applies to Former Small Business

August 7, 2020

A recent Law 360 story by Alyssa Aquino, “GAO Says Protest Fee Cap Applies to Former Small Biz,” reports that a Virginia company can't recoup the full legal costs of protesting a $19 million information technology task order because the former small business is subject to a cap on large business protesters' reimbursable legal fees, a federal watchdog has said.

The U.S. Government Accountability Office refused to direct the government to foot Harmonia Holdings Group LLC's entire $73,000 legal bill, finding that though the software company held small business status when it bid on the contract, the company was certified as a large company when it protested the award, according to a decision publicly released.  The GAO said it must be "vigilant" in settling requests for reimbursement.

"In our view, vigilance in evaluating the reasonableness of these requests for public funds is not served by permitting an entity that has certified … that it is no longer small, to benefit from a statutory provision designed to aid small businesses in pursuing protests," the GAO concluded.  The decision ran counter to Harmonia's claims that it was free from the large business cap because it held small business certification when it bid on the contract.

According to GAO filings, the U.S. Department of Agriculture's Animal and Plant Health Inspection Service issued a small-business task order in November 2018 to support its software systems.  AttainX Inc. nabbed the award, but Harmonia protested the deal at the GAO and scored a victory when the office found issues in the evaluation process.

Harmonia and the agriculture agency then grappled over Harmonia's resulting legal fees.  Harmonia sought repayment for the entire bill, but the agency countered with $30,000, saying the company was bound to a $150-per-hour cap on attorney fees, the GAO said.

The cap on fees doesn't clarify how to evaluate protesters whose size status changes between a solicitation and a bid protest, the watchdog acknowledged.  But the GAO pointed out that federal contracting law refers to payments to a "party" when it describes the fee cap, suggesting that size status at the time the bid protest began was the deciding factor.

The approach also falls in line with how federal courts award fees under the Equal Access to Justice Act, the GAO said, referring to the bill allowing an entity with a net value of $7 million or less to recoup the legal costs of suing the government.  "While the language in [federal contracting law] is not identical, we think the approach taken by the federal courts provides a good guideline for addressing the issue," the GAO said.

Second Circuit Affirms $20M Fee Award for Madoff Investor Class Counsel

July 7, 2020

A recent Law 360 story by Dean Seal, “2nd Circ. Oks $20M Award For Madoff Investor Class Attys” reports that the Second Circuit rejected the last objection to a nearly $20 million fee award for counsel of an investor class that received a $1 billion settlement for money lost through Bernard Madoff's Ponzi scheme.  The appellate panel said aspects of the objection, which contended that class counsel was being compensated for work unconnected to the case, were "plainly untrue" and went beyond the scope of what the Second Circuit had mandated when it sent the award back to a New York federal judge in 2017 for revision of the award's lodestar multiplier.

"There is also no cogent reason for this court to revisit our earlier order affirming all but the lodestar multiplier cap in the 2015 attorneys' fee award," the appellate judges said.  The order affirmed the $19.9 million award for Entwistle & Cappucci LLP, Hagens Berman Sobol Shapiro LLP and Bernstein Liebhard LLP, firms that represented investors in the $1 billion deal known as the Tremont Fund settlement.

Tremont Group Holdings Inc., part of Massachusetts Mutual Life Insurance Co., was the second-largest Madoff feeder fund.  The $1 billion settlement Tremont reached with investors in 2011 stemmed from allegations by trustee Irving Picard that the company continued to pour money into Bernard L. Madoff Investment Securities LLC despite obvious red flags.

In August 2015, U.S. District Judge Thomas Griesa issued an oral order approving a complex plan of allocation to the plaintiffs that included a 3% fee award for the plaintiffs' counsel, capped at 2.5 times the lodestar.  Based on the size of the settlement fund at the time, the award would have been $18.7 million and capped at about $40 million.  Several Tremont investors objected to the plan and the fee request, in particular, on the grounds that there was little risk involved in reaching the settlement and because class counsel had already received substantial fees from a previous settlement in the litigation.

Judge Griesa rejected those objections, and in June 2017, the Second Circuit upheld his ruling on the settlement distribution but remanded the fee award, saying the lodestar multiplier was not justified by the "limited risk" plaintiffs' counsel had run.  After Judge Griesa's death in December 2017, the case was remanded to a different New York federal court, which asked a federal magistrate judge to issue a report.

The report, issued in February 2019, said that while plaintiffs' counsel was now requesting a lodestar of 1.67, which would produce a $33.2 million fee cap, the magistrate judge found that the risk factors did not justify any modifier and set the cap at approximately $19.9 million.  A group of Tremont investors filed a new objection to the fees, arguing new evidence provided last year showed that 75% of the fees Judge Griesa used to calculate the lodestar were for work unconnected with the fund distribution.  But class counsel argued that the Second Circuit had rejected those claims and had remanded solely to recalculate the lodestar multiplier cap.

U.S. District Judge Colleen McMahon followed the report's recommendation and agreed that the only reason the case had been remanded was to revise the lodestar cap downward.  On appeal, the Second Circuit reached the same conclusion, saying that its 2017 order only took issue with the lower court's "failure to account for the lack of contingency risk involved in the litigation, finding 'no merit in appellants' other arguments.'"  "We did not instruct the district court to determine whether the hours included in lead counsel's lodestar related only to [fund distribution]," the judges said.  "Consequently, doing so would have exceeded the scope of our mandate.

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
Los Angeles, CA
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA