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Category: Fee Caps / Fee Limits

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.

PG&E Bankruptcy Attorneys Blast Fee Examiner’s Caps on Fees

October 2, 2019

A recent Law 360 story by Rick Archer, “PG&E Case Attorneys Blast Fee Application Protocol,” reports that counsel for Pacific Gas and Electric Co. (PG&E), the utility’s board of directors and the unsecured creditors in its bankruptcy case have jointly claimed the court-appointed fee examiner is seeking to impose excessively strict caps and unnecessary barriers to their fee applications.

In a filing with a California bankruptcy court, the parties said the fee examiners' proposal would unreasonably put a flat cap on compensation for time spent preparing fee applications, bar compensation for travel time and place other “unwarranted” barriers to fee applications.  “The protocol and motion together contain a litany of requirements that have no basis in the Bankruptcy Code, rules or guidelines,” they said.

The filing is a response to a September filing by Bruce Markell, the fee examiner appointed by the court in the case, proposing guidelines and procedures to evaluate applications to approve legal fees.  According to the filing, 23 firms had submitted appearances in the bankruptcy case as of Sept. 16, although only eight had filed fee applications.

Markell argued he should be allowed to bar redacted time entries and applications for nonworking travel time, which he said made up about $1 million of the then-current fee applications.  He also sought a cap on payable hours for time preparing employment and fee applications.  “The fee examiner has been impressed by the amount charged for obtaining court approval of employment. In one interim application, these fees approached $200,000,” he said.

In the filing, counsel for PG&E and the unsecured creditors argued the proposed guidelines are too strict, saying the general local guidelines call for fee application preparation to be capped at 5% of total fees, and that standard guidelines call for attorneys be compensated for up to two hours of non-working travel time.  They noted a number of attorneys in the case who are based in New York and others are required to travel around California in connection with wildfire litigation.  They also argued the procedures would unnecessarily penalize late applications and impose other “unwarranted barriers.”

“The protocol and motion should not impose requirements beyond what Congress has commanded,” they argued.  PG&E filed for Chapter 11 bankruptcy in January after racking up over $30 billion in liabilities related to its alleged role in sparking wildfires that charred vast swaths of California and killed 130 people.

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.

Feds Fight ‘Bad Faith” Fee Award to Supreme Court

June 17, 2019

A recent Law 360 story by Suzanne Monyak, “Feds Fight ‘Bad Faith’ Fee Award in High Court No-Fly Suit,” reports that a Stanford-educated Malaysian woman who was mistakenly placed on the no-fly list does not deserve to recoup her full legal expenses from challenging that placement, the federal government told the U.S. Supreme Court, disputing the Ninth Circuit's finding that government attorneys had acted in "bad faith" during the lengthy litigation.

The full Ninth Circuit overstepped when it paved the way for Rahinah Ibrahim's attorney fee award to be bumped up from less than $500,000 to as much as $3.9 million, the U.S. Department of Justice said in its high court petition.  That higher fee award was based on the appeals court's finding that the federal government had acted in "bad faith" over the course of the decade-long litigation, reversing decisions from both the appellate panel and the lower court.  "As a unanimous panel of the court of appeals held, the district court's finding of no bad faith, as well as the underlying findings that support it, were correct or, at a minimum, not clearly erroneous," the petition says.  "The en banc court went out of its way, and out of its proper role, to rule otherwise."

Ibrahim sued the U.S. Department of Homeland Security and other government agencies after she, then a Ph.D. student at Stanford University on an F-1 student visa, was detained in 2005 at the San Francisco International Airport while en route to Malaysia because her name popped up on a no-fly list.  At the time, she was recovering from a hysterectomy and was in a wheelchair.  Although she was eventually released and able to leave the country, the government later revoked her student visa, and she has not been allowed to return to the U.S. because of her inclusion on several other terrorist watch lists.

After nearly a decade of litigation, Ibrahim prevailed during the first no-fly list bench trial of its kind, according to the majority opinion.  However, despite winning her case and commending the attorneys who worked on it, U.S. District Judge William Alsup only awarded her $419,987 in fees and $34,768 in expenses, which was a fraction of the $3.92 million in attorneys' fees and costs her firm McManis Faulkner had requested, finding that Ibrahim didn't win on all of her claims.

A three-judge Ninth Circuit panel upheld the district court's decision in August 2016, and she asked the full court for a rehearing, arguing that the government had used aggressive and secretive litigation tactics — including the use of 26 attorneys who spent thousands more hours on the case than McManis Faulkner's.

The majority of judges on the full court agreed.  In that January decision, the Ninth Circuit concluded that Ibrahim was entitled to full attorney fees under the Equal Access to Justice Act, a law that caps attorney's fees at $125 per hour unless the losing side acted in "bad faith."  Throwing out the district court's lower fee award, the full court ripped the federal government for engaging in years of "scorched earth litigation" despite knowing "all along" that the Muslim woman's inclusion on the Transportation Security Administration's no-fly list was a mistake.

The Ninth Circuit also faulted Judge Alsup's "piecemeal approach" to calculating fees based on the government's individual arguments instead of evaluating the government's conduct as a whole, and instructed the lower court to recalculate the fee in light of the new bad faith finding.  In the petition, the DOJ urged the justices to take up the case, stressing that the en banc court's ruling, if left standing, threatens to "undermine the government's efforts to fairly but vigorously litigate to protect the public interest in the future" and "unfairly impugns the integrity of the career government attorneys faithfully carrying out their duty to defend the government's policies and protect its sensitive information."