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Category: Fee Caps / Fee Limits

Law Firms Win Suit Over Pelvic Mesh Attorney Fees

March 27, 2020

A recent Law 360 story by Bill Wichert, “NJ, Texas Law Firms Beat Suit Over Pelvic Mesh Atty Fees,” reports that a New Jersey federal judge nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms over allegedly excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, saying Texas law governed the claims and permitted the fees.  U.S. District Judge Madeline Cox Arleo granted the firms' motions to dismiss an amended suit from plaintiffs Debbie Gore and Doris Lance-Smith over claims their retainer agreements ran afoul of a New Jersey rule capping contingent fees, noting that the fees were paid as part of settlement awards approved by a special master and a state judge in the Lone Star State.

The Garden State rule "does not apply and the fees awarded to defendants were entirely consistent with Texas law," Judge Arleo said in her written opinion.  The fee arrangements allowed the women's lawyers to receive 40% of their settlements, but Texas law has no particular cap on contingent fees, the judge said.  Under the New Jersey rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts, and those fees must be based on the "net sum recovered" after deducting expenses.

Gore and Lance-Smith cited no authority for extending that rule "to litigation settled in a foreign court by out-of-state lawyers representing out-of-state plaintiffs who sustained injuries outside of New Jersey," according to the judge's opinion.  Nagel Rice, which is based in New Jersey, did not receive any of the fees in question, but Potts and other Texas firms did, the opinion said.

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims they suffered injuries from allegedly defective pelvic mesh products, the opinion said.  Lance-Smith retained Potts in June 2012 to litigate such claims, the opinion said.  The following May, Gore retained a firm then known as Steelman & McAdams PC and partner Annie McAdams to pursue similar claims, the opinion said.

About two months later, Gore agreed to McAdams working and splitting attorney fees with a firm then known as Bailey Perrin Bailey LLP, the opinion said.  In July 2014, Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court "as part of the New Jersey iteration of the mesh litigation," the opinion said.  Nagel Rice and firm partner Andrew L. O'Connor were listed as the women's attorneys, with Potts and firm partner Derek Potts listed as co-counsel, the opinion said.

Those complaints represent the only connection in the current matter to New Jersey, but beyond them being filed, state dockets indicate that "no litigation activities occurred" and that those matters are now closed, Judge Arleo noted.  The settlements and fee awards at issue stem from a master settlement agreement reached in August 2016 between Potts Law Firm, among other firms, and J&J and Ethicon, the judge said.  That deal was administered through a Texas state court case, the judge said.  Judge Arleo pointed to that Texas link in finding that that state's law governed the proposed class action.

The judge noted that "the complex settlement process, which plaintiffs consented to after ample opportunity for objection, was reached by negotiations between Ethicon and Texas law firms and was administered by the Texas state court and a Texas special master."

"Indeed, no New Jersey law firms or lawyers were even listed as receiving contingency-based attorneys' fees as part of plaintiffs' settlements," the judge said.  "As such, the state with the most-significant relationship to the substantive claims at issue is Texas."

Adam M. Slater of Mazie Slater Katz & Freeman LLC, representing Gore and Lance-Smith, on Wednesday said they would appeal the judge's decision.  "When a case is filed in New Jersey, the New Jersey Court Rules apply, including the contingency fee rule.  According to this decision, the New Jersey contingency fee rule can be easily side stepped, allowing personal injury plaintiffs to be charged 40% contingency fees, in an MDL or any other New Jersey case," Slater told Law360.

Second Circuit: No Attorney Fee Caps in FLSA Settlements

February 4, 2020

A recent Law 360 story by Braden Campbell, “2nd Circ. Says There’s No Attorney Fee Can in FLSA Deals,” reports that district courts should not limit plaintiffs’ attorney fees to a third of the settlement amount in Fair Labor Standards Act cases, the Second Circuit said, reversing a Manhattan judge’s decision to give a tour group chaperone a bigger cut of the $25,000 settlement in his overtime suit.

Second Circuit courts “routinely apply” the one-third benchmark when evaluating whether such settlements are fair, as courts must do for deals resolving FLSA cases, a three-judge panel said.  But the use of a 33% cap hurts low-wage workers — like SD Protection Inc. chaperone Michael Fisher — whom Congress passed the FLSA to help, the panel said.

“By implementing a percentage cap on attorneys’ fees in FLSA actions, district courts impede Congress’s goals by discouraging plaintiffsʹ attorneys from taking on 'run of the mill' FLSA cases where the potential damages are low and the risk of protracted litigation high,” the panel said.

The panel likewise admonished the trial court for revising the settlement to give Fisher a larger share of the award, saying judges exceed their authority when they rewrite settlements. Instead, courts should reject unfair settlements and give the parties a do-over, the panel said.  The decision vacates a Southern District of New York order ending Fisher’s unpaid overtime suit against SD Protection.  Fisher, who was paid $10 an hour to supervise student tour groups, alleges he worked several hours of overtime at his regular wage each week for the 26 weeks he worked for SD Protection.

The parties agreed to a settlement worth $25,000, with $2,000 going to Fisher and the rest going to his counsel with Lee Litigation Group.  But U.S. District Judge Richard Berman said that split was unfair, boosting Fisher’s payout to about $15,000 and dropping his attorney’s share accordingly in an order approving the deal.  Lee Litigation appealed.

While workers bringing claims for violations of other federal employment laws can settle them privately, a judge or the U.S. Department of Labor must deem FLSA settlements fair before they take effect.  Courts in the Second Circuit analyze fairness by looking at several factors, including whether the amount of fees and costs paid to the plaintiff’s attorney are “reasonable.”  The panel noted that courts often use a “proportionality limit” that deems payouts that top 33% of the settlement fund to be unfair.  But “neither the text nor the purpose of the FLSA” supports that limit, the panel said.

The law itself only requires that deals be “reasonable,” the panel said, while a 33% benchmark is “inconsistent with the remedial goals of the FLSA.”  Because FLSA plaintiffs generally earn modest wages to begin with, a hard fee cap would leave “employees like Fisher … with little legal recourse,” the court reasoned.  “No rational attorney would take on these cases unless she were doing so essentially pro bono,” the panel said.

FL Legislation Would Cut Attorney Fees, Aid Insurers

January 28, 2020

A recent Daily Business Review story by Raychel Lean, “Proposed Florida Law Would Cut Attorney Fees, Aid Insurance Companies,” reports that a bill working its way through the Florida Legislature would curb the use of attorney-fee multipliers—bad news for plaintiffs counsel who represent clients on a contingency basis, but a boon for the insurance industry, which claims attorneys often charge three times their hourly rate for routine property cases.

Senate Bill 914 has jumped its first hurdle, gaining approval from the Florida Senate Committee on Banking and Insurance.  It reflects a conflict between attorneys—who say the proposed law would prevent homeowners from suing insurers—and insurers, who say some lawyers take advantage by tripling their fees for routine cases.  Fee multipliers are meant to protect homeowners who can’t afford to bring suit unless attorneys agree to take on difficult and high-risk litigation on a contingency basis.  Lawyers bear the cost of the litigation, but if they win, their clients could apply a contingency risk multiplier.

The proposed law would prevent this.  The bill by Republican Sen. Jeff Brandes would cap attorney fees for plaintiffs.  It would award fees through the lodestar method, which multiplies a reasonable hourly rate by the number of hours attorneys worked.  Tallahassee attorney Michael Carlson agrees it should be more difficult for plaintiff counsel to seek fee multipliers.  “It is too common now, throughout Florida, for courts to award a fee multiplier on what we would call a relatively simple case,” said Carlson, who represents insurance companies and is president and CEO of the Personal Insurance Federation of Florida.

Critics suggest fee multipliers were meant to have a narrow scope.  They say the measure was introduced decades ago to encourage attorneys to take on complex or controversial federal civil rights and environmental torts cases because potential clients were struggling to find representation. The U.S. Supreme Court eventually limited its use, they argue.  And in the 1992 case City of Burlington v. Dague, former Justice Antonin Scalia wrote a majority opinion rejecting the contingency fee model.

Carlson claims multipliers are no longer necessary for property insurance cases in Florida, because there’s no shortage of competent counsel.  “If you have a tree fall on your roof, and you have a dispute with your insurance company over that tree having fallen on your roof and you need to hire a lawyer anywhere in Florida, you will not have a problem,” he said.

‘Army’ of lobbyists?

Plaintiffs attorney William F. “Chip” Merlin of the Merlin Law Group in Tampa argued against the bill at a hearing, claiming that although it was “well-intentioned,” it will hurt some policyholders who won’t be able to find competent lawyers to handle declined insurance claims.  “The insurance companies do not ever want to be held accountable for wrongfully denied claims and claims that they are slow to be paid, and certainly do not like to be sued at all, even if their competitors are committing illegal actions,” Merlin said.  “So there is always an army of insurance lobbyists claiming that a new crisis exists to reduce policyholder rights or make it easier to skirt consumer protection laws and regulations.”

Merlin notes that while insurance companies have teams of lobbyists, policyholders “have jobs and are working on their own life, and simply do not show up in Tallahassee.”  “People do not buy insurance to have their claims turn into lawsuits,” Merlin said.  “They just want to be paid fairly.”

In most instances, Merlin claims policyholder’s attorneys don’t get a multiplier but says in certain small cases where upfront costs outweight the amount in controversy there’s no other incentive for attorneys to take them.  William Large of the Florida Justice Reform Institute stressed the personal injury field has survived without fee multipliers, and claims there’s already “an extraordinary advantage” under Florida’s one-way attorney fee statute, allowing recovery for plaintiffs who prevail against their insurer.

“That is fair,” Large said. “That’s a real incentive for insurance companies to make sure they’re settling cases appropriately for insureds. But then to get a multiple on top of that isn’t fair, so we’re trying to make sure that the multiplier is not used except in the most extraordinary and exceptional circumstances.”  However, a 2019 law has already restricted the use of assignment-of-benefit agreements, which allow policyholders to sign over their insurance rights to contractors — some of whom claim would give homeowners “the monumentally short end of the stick.”

Carlson said he sees this bill as restoring the law to its original purpose, and claims its passage could reduce insurance rates for consumers.  “The lawyers are making their hourly rate, they’re getting paid for representing their client when they win,” Carlson said.  “What’s become much more commonplace in the 2017 period forward is lawyers in these same cases, when they win and they’re having their lodestar amount calculated, they ask for a separate amount as well.”  He points to a 2017 Florida Supreme Court case, Joyce v. Federated National Insurance Co., which made it easier to obtain fee multipliers.  In it, Justice Charles Canady wrote a dissent that said the court had overreached, because the fee multiplier should only be used in rare circumstances. 

But as Merlin sees it, the focus should be on the fact that policyholders are having to sue their insurers in the first place.  “The insurance lobby points to a few cases about how much the winning policyholder attorney made, rather than talk about why the claim should never have been denied in the first place, and that the insurance companies’ attorneys fought and fought the payment to the policyholder because that is the only way a case can generate large fees,” Merlin said.  “Instead, they fight with their own attorneys whom are paid on an hourly basis, win or lose, often to wear down the policyholder.”

Ninth Circuit Judge Skeptical of $42M Fee Award in Price Fixing Settlements

October 23, 2019

A recent Law 360 story by Dorothy Atkins, “9th Circ. Judge ‘Concerned’ Over Hagens Berman’s $42M Fees,” reports that a Ninth Circuit judge appeared skeptical of keeping intact Hagens Berman Sobol Shapiro LLP's $42 million fee award in multiple price-fixing settlements, saying she's "concerned" the district judge didn't know the extent the fee requests varied from the amount the firm submitted in its lead class counsel bid.

During a hearing in Portland, Oregon, U.S. Circuit Court Judge Morgan Christen said she's not sure that U.S. District Judge Richard Seeborg, who took over the case from another judge, had access to or could find the law firm's initial proposal to serve as lead class counsel. Judge Christen said it took the circuit court "three runs" to get a copy of the proposal from the clerk's office, and she questioned whether the district judge faced similar accessibility challenges.  "You may well have expected that the district court had access to it ... But I can't see that he did have it," she said.

The judge's comments came during a hearing on appeals filed by two objectors — Conner Erwin and Christopher Andrews — who are challenging the $42 million in attorney fees awarded in multiple settlements totaling $124.5 million.  The deals resolve decade-old litigation alleging that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices.  During the hearing before a three-judge panel, Erwin's counsel, Robert Clore of Bandas Law Firm PC, argued that Judge Seeborg erred by keeping the lead class counsel proposal that Hagens Berman submitted to the court under seal.

He said the judge also erred by allowing the firm to collect $42 million, or 25% of the total settlements, instead of keeping fees capped at 12% of the settlement, or $22 million, which it had originally promised it would seek.  "If reasonableness is the bottom line for attorneys' fees, how is it ever reasonable to award a firm twice what it bid to become class counsel?" Clore said.

But Kevin Kamuf Green of Hagens Berman, an attorney for the class, defended the fees, arguing that the judge appropriately exercised his "broad discretion" in awarding them and noting the law firm isn't bound by the fee estimates submitted in its bid for lead counsel.  Green also quoted from Judge Seeborg's order approving one of the last settlements, which acknowledged that the fee award is higher than what the firm initially proposed, but lower than what it could be.  The judge also had "talked about the bid" in another order, so he must have been aware of it.

Green also pointed out that Hagens Berman fronted $30 million over 10 years to obtain significant recovery for the class, and not many other firms would agree to take such litigation on contingency.  Green added that there were risks associated with taking on the case; for example, the U.S. Department of Justice had launched related investigations into possible antitrust violations, but the government didn't issue broader indictments.

But Judge Morgan said she "frankly" found the firm's argument "mystifying." The judge also noted that this is a "mega settlement" and therefore fees are typically lower than typical benchmark percentages.  "I think it is less cut and dry than you are presenting," she told Green.

U.S. Circuit Court Judge Carlos Bea also appeared skeptical of Green's argument, pointing out that the objectors are essentially arguing that Hagens Berman "did a bait and switch," by submitting a proposal for $22 million in fees and then later doubling its request, and the lower court should have taken it into consideration.  But U.S. Circuit Court Judge Joseph Jerome Farris seemed unconvinced by the objectors, saying there was no way to know at the outset of litigation how much work would go into the case.

Aside from the attorney fee issue, the other objector, Christopher Andrews, appeared pro se.  He argued that the lower court made material errors approving the deals, which he claimed gave "usurious" incentive payments to lead plaintiffs.  Among his many concerns with the settlements, Andrews complained that the class notice had an ambiguous start and end date, and he said a copy of the two-page settlement release was not attached to the claims form, so class members couldn't know what they were agreeing to by submitting a claim.

Weil Gotshal Seeks $2M in Fees in PG&E Bankruptcy

October 22, 2019

A recent Law 360 story by Ryan Boysen, “Weil Gotshal Seek $2M for Work on PG&E Case,” reports that Weil Gotshal & Manges LLP is asking for $2 million in fees and costs for its work in August on the massive bankruptcy of California’s Pacific Gas and Electric Co., with billable hours from just two partners accounting for nearly half of the haul.  In a fee application, the firm said it put in about $2.5 million worth of work into the PG&E case throughout August, just as a proposed $24 billion Chapter 11 reorganization plan came into focus.  After a customary 20% haircut is applied, it brings the total to about $2 million.

Nearly $1 million of that comes from the billable hours of just two attorneys: Weil Gotshal’s Stephen Karotkin, who worked 300 hours, and Jessica Liou, who worked 275 hours.  While Weil Gotshal is the primary firm representing PG&E, the nation’s largest power utility has retained lawyers at several other firms in various capacities.  One report estimated in March that PG&E had spent at least $84 million in attorney fees up to that point.  It’s not clear how much more overall the utility has since spent.  That's not to mention the powerhouse restructuring attorneys representing the committees, creditors and other stakeholders who are all vying for an advantage in the massive case.

Earlier this month PG&E criticized the court-appointed fee examiner for attempting to put its attorneys on too tight of a leash, saying the examiner's suggested cost-cutting measures and fee caps were too strict.  PG&E, the nation's largest utility, filed for bankruptcy in January after racking up more than $30 billion in potential liabilities tied to its alleged role in causing a series of wildfires that tore through the Golden State in 2017 and 2018, killing 130 people and destroying billions of dollars in property.