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Category: Fee Reduction

Attorneys Get Fraction of Fees Sought in USAA Bad Faith Trail

June 16, 2020

A recent Law 360 story by Cara Salvatore, “Attys Score Fraction of Fees Sought in USAA Bad Faith Trial” reports that an Oregon federal judge has ruled that lawyers who helped a driver win claims in a two-phase trial against her insurer will be paid only $179,000 for the second phase, or a quarter of the $715,000 they'd requested.  The suit concerned USAA Casualty Insurance Co.'s alleged refusal to pay out an uninsured motorist policy to plaintiff Peggy Foraker, who was hurt when a suspect fleeing from police crashed into her.  After a two-day, two-phase bench trial, U.S. District Judge Michael Simon found in April that USAA acted in bad faith and awarded Foraker $323,000.

But Judge Simon said that Foraker's lawyers deserved much less in legal fees than the $715,000 lodestar they requested, because their wins in the second phase were limited — unlike the first phase, where they got more than $1 million in fees.  "Based on plaintiff's pretrial filings and the time spent at trial, it appears to the court that approximately 75 percent of plaintiff's efforts were directed toward plaintiff's unsuccessful claims and arguments.  This is also consistent with the results obtained.  Thus, the court will award plaintiff an attorney fee award at Phase II equal to 25 percent of plaintiff's Phase II lodestar figure," the judge said.

In the first phase, a different judge awarded Foraker the full $1 million USAA uninsured motorist policy limit, but rejected her claim that the insurer breached its contract because USAA hadn't denied her claim in full before she sued.  "Much of the legal and factual work spent by plaintiff at Phase II related to plaintiff's claim for non-economic damages, plaintiff's claim for economic damages based on the lost gains that she would have earned in her investment portfolio, and other legal issues on which plaintiff did not prevail," the judge said.  Judge Simon also called the attorneys' 340-page sheaf of submitted bills "massive but poorly organized."  In the first phase, Foraker was awarded legal fees of $1.31 million.

$88M Cut From $157M Fee Request in Namenda Class Settlement

June 15, 2020

A recent Law 360 story by Pete Brush, “$88M Cut From Requested $157.5M Atty Fee in Namenda Deal” reports that a Manhattan federal judge slashed nearly $88 million from a $157.5 million fee award requested by Garwin Gerstein & Fisher LLP and five other firms for guiding wholesalers of the Alzheimer's drug Namenda to a $750 million antitrust settlement with a unit of Allergan PLC.

After hinting she would reduce the payout, U.S. District Judge Colleen McMahon held Monday that six law firms that alleged Forest Laboratories Inc., a unit of Ireland-based Allergan, thwarted generic competition through unlawful "pay-for-delay" tactics are entitled to $69.538 million.  "It is still a handsome payday for counsel," Judge McMahon wrote, after cutting the request for about 21% of the settlement proceeds for plaintiffs' counsel down to about 9.3%.

The judge approved the lawyers' request for $5.8 million of expenses in the nearly five-year-old litigation, but slashed proposed $150,000 payouts for the two Namenda wholesalers that represented the class — Smith Drug Co. and Rochester Drug Co-Operative Inc. — by 50% to $75,000 each.  "Frankly, this was attorney-driven litigation.  All the class representatives really did was sit for a deposition," she wrote, calling the class reps' contributions "minimal."

Reasoning why she slashed the award, Judge McMahon said that the firms engaged in "duplicative work" — "or, in some cases triplicative or quadruplicative work" — and "inflated" their total number of hours worked.  "Class counsel's time sheets lack sufficient granularity to separate the productive hours from the wasted ones," she wrote.

The wholesalers had claimed Forest deployed a two-pronged strategy for keeping generic rivals to Namenda off the market, including unlawful "pay-for-delay" arrangements and "product-hopping" tactics that shielded its profits long after generic rivals should have developed robust sales.  A not-uncommon effort to settle ahead of trial led to the uncommonly large payout — one of the largest in the history of Hatch-Waxman Act generic-drug approval cases. Allergan admitted no wrongdoing in the deal.

"I fully understand why Forest settled this case for a large number.  Its downside was huge; this was a 'bet the company' case," Judge McMahon observed — awarding the plaintiffs' firms "twice the lodestar" but not "anything like the 4.5 times lodestar requested."

Judge McMahon also didn't like what she characterized as a suggestion that the six plaintiffs' firms should get an outsized payday to make up for the times they don't win.  "I am absolutely unmoved — indeed, I am offended — by the argument that class counsel deserves a humongous fee award in this case because 'the winning cases must help pay for the losing ones,'" she wrote.

Attorney Fees Cut in Defective Toilet Class Settlement

April 27, 2020

A recent Law 360 story by Mike Curley, “$12M Atty Fee Slashed in Defective Toilet Settlement,” reports that a Texas federal judge cut a request for $12 million in attorney fees in a settlement between Porcelana Corona De Mexico and consumers alleging the company knowingly sold defective toilet seats, giving class counsel a $4.7 million award of fees and costs.  U.S. District Judge Amos L. Mazzant rejected both arguments from the class counsel that the $4.3 million lodestar calculation should get a 2.9 times multiplier and arguments from Porcelana that the lodestar should have a negative multiplier.

The settlement encompasses two class actions filed against Porcelana and its predecessor, Sanitarios Lamosa, over toilets made in 2011 that were allegedly defective, and caused property damage.  In the settlement, class members can get up to $300 to replace the defective tanks and up to $4,000 for property damage resulting from the alleged defect, according to court documents.

After a settlement was reached in June, class counsel requested the $12 million in fees, citing the complex, cross-border litigation involved in the three-year case, its risk as a contingency case and that tens of thousands of class members have secured benefits.  Porcelana, however, argued that the lodestar should be reduced through the multiplier as the class counsel ended up giving up on several claims the class initially pushed for, such as punitive and treble damages, and shouldn't be rewarded for time spent on claims that didn't pan out.

Judge Mazzant disagreed with both arguments, saying the time and labor required for the complex litigation was already accounted for in the lodestar itself, adding this case was not particularly novel in its claims or arguments such that it warrants a multiplier.  Likewise, the judge said the risks of a contingent-fee arrangement are also accounted for in the lodestar, and class counsel did not show how the case was "undesirable" aside from the assertion that it was novel and was taken on contingency.

The class and Porcelana most vigorously disputed how the end result should affect the lodestar multiplier, Judge Mazzant wrote, with the plaintiffs touting their success in getting both monetary and non-monetary relief, and Porcelana arguing that the class counsel gave up on several claims.  While the judge found the overall results of the settlement did not justify a multiplier, he wrote that the lodestar does not need to be reduced just because the class counsel did not get everything the plaintiff class requested.

The class counsel's work was done in good faith, the judge wrote, and class counsel is not seeking fees for time spent on punitive or treble damages after those claims were dropped, adding the work that was done was not fruitless.

Attorneys Awarded Bulk of $24.5M Fees Sought in IP Litigation

April 16, 2020

A recent Law 360 story by Hannah Albarazi, “BladeRoom Attys Awarded Bulk of $24.5M Sought in IP Row,” reports that a California federal judge awarded BladeRoom most of the $24.5 million in attorney fees and costs it sought after it won a $77.4 million trial verdict over Emerson Electric's use of stolen trade secrets to win a lucrative Facebook contract, while also ordering a minor reduction and recalculation.  U.S. District Judge Edward J. Davila, who presided over the jury trial, ordered a 10% reduction to the lodestar as well as other adjustments, instructing BladeRoom's counsel at Farella Braun & Martel LLP to resubmit new calculations reflecting the alterations to the court for approval.

Judge Davila said the reductions would be appropriate to account for the “deficiencies in the billing records ... primarily due to the block-billing.”  Upon conducting a de novo review of the special master’s report and recommendation, the judge said he disagreed with the special master’s conclusion that BladeRoom’s attorney billing records were “improper and in various ways problematic" and justified a 40% haircut.  Judge Davila said upon reviewing the billing records and other evidence, he found BladeRoom counsel’s representations in support of its fee request to be “trustworthy.”

However, the judge did agree with the special master on other issues.  For instance, Judge Davila agreed that BladeRoom should not recoup the entirety of attorney fees for its in-house counsel, saying the requested amount “is not completely substantiated and to some degree excessive” and reducing the award for BladeRoom’s general counsel Michael Joy from $3.3 million to $1.5 million.

U.K.-based BladeRoom sued Facebook and Emerson five years ago, accusing the pair of stealing its method for manufacturing and installing prefabricated data centers, which it had pitched separately to Facebook and Emerson in 2011. After those meetings, BladeRoom claimed the two larger companies began secretly working together to steal BladeRoom's proprietary techniques for the Facebook project.

Facebook settled BladeRoom's claims mid-trial in April 2018 and a month later, a jury found that Emerson owed BladeRoom $30 million for using its stolen trade secrets to land a $200 million contract to build a Facebook data center in Sweden.  Judge Davila ruled last year that Emerson owed BladeRoom $77.4 million comprising $30 million in compensatory damages, $30 million in exemplary damages and $17.4 million in prejudgment interest on the compensatory damages.

Emerson filed a notice of appeal challenging, among other rulings, the jury's verdict and the judge's denial of Emerson's bid to compel Facebook and BladeRoom to disclose the terms of their settlement.

At a hearing in March, Emerson's counsel, Rudolph A. Telscher Jr. of Husch Blackwell LLP, urged Judge Davila not to grant BladeRoom's bid for attorney fees and costs, saying BladeRoom overbilled for its work and overredacted its billing statements to a degree that made it impossible for Emerson to see which activities BladeRoom had billed.

Jeffrey M. Fisher of Farella Braun told the judge during the March hearing that Emerson's and Facebook's misconduct "overlapped so much" that it made it a challenge to differentiate the litigation, but that BladeRoom is only seeking to recover money for work that contributed to its victory against Emerson, not Facebook.

But Judge Davila said that BladeRoom's fees and costs are reasonable.  “As BladeRoom pointed out during the hearing, litigation can resemble a tennis game or war in that when one side hits the ball or shoots heavy artillery, the other side necessarily spends time hitting the ball or shooting heavy artillery back,” Judge Davila said in his order.

The judge found that the work described in BladeRoom’s billing records, “even if certain entries may appear duplicative or inefficient, was reasonably necessary in the context of this heavily contested and time consuming litigation,” further noting that Farella’s team of six attorneys at times went up against 23 attorneys who represented Facebook and Emerson.

Judge Davila said he didn't observe “across-the-board duplicative and inefficient efforts” that would justify a 40% reduction of BladeRoom’s lodestar, as recommended by the special master.  Instead, Judge Davila awarded BladeRoom 30% of the fees it incurred prior to the filing of its second amended complaint and ordered a 10% percent reduction to the award sought by BladeRoom for all fees incurred after the filing of that complaint.  The judge also ordered BladeRoom and Emerson to split 50-50 the special master’s fees.  BladeRoom was instructed to submit its recalculations of attorney fees and costs to the court within the next two weeks.

$7.5M in Attorney Fees in $286M Derivative Class Settlement

April 15, 2020

A recent Law 360 story by Reenat Sinay, “Glancy Prongay Gets $7.5M in Fees for $286M Deal,” reports that a New York federal judge awarded attorneys at Glancy Prongay & Murray LLP $7.5 million in fees — $15.4 million less than what they had initially requested — for their role in guiding American Realty Capital Properties investors to a $286.5 million deal ending derivative claims.  U.S. District Judge Alvin K. Hellerstein approved a steeply reduced fee amount for lead counsel in the derivative suit, making up just 2.6% of the total settlement.  Judge Hellerstein approved the agreement resolving allegations of shady accounting practices back in January but had declined to rule on attorney fees at that time.

The judge noted that while the attorneys “strongly pursued this complex and risky action” and “completed extensive discovery,” they also overbilled for their work and relied on a parallel class action against ARCP, now known as Vereit Inc.  “The Derivative Action piggybacked on, and at times even distracted from, the class action,” he said.  “Counsel in the class action spearheaded the global settlement efforts.  Derivative counsel billed excessive time for background research, overstaffed depositions and duplicated efforts between law firms.”

The law firm had initially asked for $22,920,000 in attorney fees, or 8% of the settlement fund, and $594,882 in expenses.  Following Judge Hellerstein’s refusal to rule on the bid back in January due to a lack of billing records, Glancy Prongay submitted a revised request for $15,752,232, while counsel for Vereit contended that $6.35 million would be enough.  Judge Hellerstein approved a revised request for $548,267 in expenses.

ARCP investor Joanne Witchko brought the derivative suit in 2015, claiming ARCP — by then renamed Vereit — had wrongly refused to pursue claims against its own brass over an accounting restatement and stock drop.  The complaint by Witchko was one of a slew of suits over the retraction of 18 months' worth of ARCP financial reports, which led to executive departures and torpedoed the planned $700 million sale of an ARCP unit.

A number of class actions surrounding the accounting scandal were consolidated before resulting in last year's billion-dollar settlement, which would see Vereit pay $738.5 million.  A related entity called AR Capital and others, including former ARCP CEO Nicholas Schorsch, would be responsible for $225 million.  Former ARCP manager Grant Thornton would pay $49 million, and former ARCP CFO Brian Block would pay $12.5 million, according to court records.

In that action, Judge Hellerstein also awarded lead counsel at Robbins Geller Rudman & Dowd LLP less than what they had requested, although he offered no explanation for the decision.  The firm had asked for attorney fees worth 12.4% of the settlement fund, which comes out to $127.1 million, plus expenses of just over $5.1 million.  Judge Hellerstein awarded Robbins Geller $100 million in fees and $5,154,721 in expenses.