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Category: Fee Reduction

$110M Fee Request Trimmed in $650M Facebook Biometric Settlement

February 26, 2021

A recent Law 360 story by Lauren Berg, “$650M Facebook Privacy Deal OK’d, $110M Atty Fees Trimmed,” reports that a California federal judge praised a $650 million settlement resolving claims that Facebook's facial recognition technology violated Illinois users' biometric privacy rights, calling it a "landmark result," but he trimmed the $110 million requested attorney fees to $97.5 million.  U.S. District Judge James Donato gave his final stamp of approval to the multimillion-dollar deal resolving claims under the "new and untested" Illinois Biometric Information Privacy Act, calling it a major win for consumers in the "hotly contested" area of digital privacy.

The settlement will put at least $345 each into the hands of 1.6 million class members who filed claims, according to the order, and Facebook has agreed to set its "face recognition" default setting to "off" for all global users and delete all existing and stored face templates for the class members.

But Judge Donato also cut back the $110 million in attorney fees that class counsel at Edelson PC, Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP asked for, saying the $650 million size of the settlement fund is not a typical case that warrants the use of a 25% contingency fee as a benchmark.  The judge said in this case it would be more appropriate for him to adjust the benchmark percentage or employ the lodestar method instead to avoid "windfall profits" for class counsel.

"To be clear, the court recognizes the skill, dedication and hard work class counsel brought to this case and their clients," Judge Donato said.  "The fact that the court cannot in good conscience award fees on the presumption of a 25% contingency cut should not be read as detracting from that in any way."

"It is simply a matter of fairness and proportion," the judge said.  He said a 25% presumption is just too big to be applied to a settlement fund as large as this one.  The class counsel spent more than 30,103 hours on the case, according to the order — including 9,577 hours by Robbins Geller, 8,103 hours by Labaton Sucharow and 12,423 hours by Edelson.

The judge adjusted the percentage rate from 16.9% of the settlement fund to 15%, giving the class counsel $97.5 million in attorney fees, according to the order.  The judge said he also cross-checked that number with a lodestar calculation and found the award to be more reasonable than the one requested.  But the judge said 15% of the attorney fee award will be held back pending further order.  He granted the class counsel's request for $915,000 in expense reimbursement, finding sufficient documentation, according to the order.

The judge also reduced the incentive awards for the three class representatives — Nimesh Patel, Adam Pezen and Carlo Licata — from the requested $7,500 each to $5,000 each, saying that even though the requested amount would be a "minuscule proportion" of the settlement, it's still too high in comparison to the amount other class members will receive.

Judge Donato praised the parties' "proposed array of innovative ways to reach class members" and notify them of the settlement, including by direct email, Facebook's newsfeed notifications, publication in Illinois newspapers, a settlement website and an internet ad campaign.  "These were robust measures, and they paid off in spades," the judge said.

Apple Challenges $87M Fee Request in iPhone Settlement

February 18, 2021

A recent Law 360 story by Dorothy Atkins, “Apple, Ky. AG Rip Class Attys’ $87M Fee Bid in IPhone Deal,” reports that Apple and the Kentucky attorney general joined objectors in urging a California federal judge to reject class counsel's $87.7 million fee bid for cutting a $310 million deal resolving claims over slowed iPhones, slamming it for being millions above the benchmark and padded by unsupported rates.  During a three-hour hearing, Christopher Chorba of Gibson Dunn & Crutcher LLP, counsel for Apple, argued that awarding the fee request would set a "very bad precedent" because class counsel overlitigated the case and shouldn't be awarded for its conduct.

He also said it would result in a net reduction of between $19 and $20 for class members who would otherwise receive more than $100 per claim.  Chorba also argued that class counsel failed to go through the factors warranting its large fee request and that its lodestar calculation is unsupported by the billing submissions.  "We're not saying they shouldn't get any fees," Chorba said.  "The fees are just so outside the norm and so in excess of what would be appropriate."

If approved, the settlement would resolve dozens of consumer protection lawsuits that were filed in 2018 after Apple admitted to issuing software updates that slowed certain iPhones.  The suits allege that Apple designed its software updates to slow down some phone models, nudging consumers to buy newer iPhones.

In May, Apple reached a deal to settle the case for $500 million but objected to the plaintiffs' request for $87 million in attorney fees, asking the court to cut it down by at least $7 million.  Since the settlement was announced, dozens of people have objected, arguing that it doesn't do enough for class members and doles out too much to class attorneys.  In December, the federal government also made clear in a filing that it does not object to the proposed settlement itself but views the fee request as over the top.

During a hearing on the deal's final approval, class counsel Mark Molumphy of Cotchett Pitre & McCarthy LLP argued that the fee award is warranted because the case was exceptional and the risks were great, particularly since the plaintiffs' firms were working on a contingency basis.  He also noted that it's the "first and largest" settlement of the Computer Fraud and Abuse Act claims at issue and that class counsel secured significant recovery that's nearly half of the potential $1 billion damages at issue.

Molumphy argued that a 28% fee award is supported by a lodestar cross-check for the three years of litigation, which included "World War III" discovery, 18 motions, including a motion to dismiss, and what he called Apple's unreasonable litigation demands.  "Frankly there was no roadmap.  There's not a case in which there was a government investigation or plea.  We were the leaders in this case," he said.  "We created a roadmap for others, including government investigation that followed us."

But Apple, the state of Kentucky and multiple class members objected to the size of the fee award and how class counsel proposed to calculate it.  Four attorneys representing objecting class members argued that the 3.5% claims rate was "puny" and the fee request should not be based on the initial $500 million deal because Apple is only paying $310 million due to the low claims rate.

The objectors also argued that a fee recovery of between 10% and 18% is more in line with case precedent, and they slammed class counsel for not submitting detailed billing.  They said the information class counsel provided appears to inflate the hourly rate of staff attorneys to $350 per hour when those attorneys likely received less than $50 per hour for their work and that it appeared to include work by dozens of attorneys who weren't authorized to bill for their time.

John Pentz, counsel for two objectors, pointed out that the alleged billing padding caused U.S. District Judge Lucy Koh to "hit the roof" when she presided over Anthem's $115 million data breach deal, and noted that of the eight contract attorneys billed by Kaplan Fox & Kilsheimer LLP only one is listed on the firm's website.  He also said class counsel didn't explain why those who first filed lawsuits in state court were entitled to a cut of the fees.

Another attorney, Robert William Clore of Bandas Law Firm PC, argued on behalf of objector Alexis West that based on class counsel's own information, the aggregate potential damages at issue were over $4 billion, not $1 billion, and the $310 million represents only 5% of the potential $4 billion damages.

Philip R. Heleringer of the Office of the Kentucky Attorney General echoed other objectors' comments and emphasized that the court has a fiduciary duty to step in for absent class members in situations in which there is a "tension" between class counsel and class members.  Heleringer pointed out that in In re. Yahoo litigation, a court rejected a fee request that had a $10 million discrepancy between the lodestar and fee request, but class counsel's fee request in this case is five times larger than the lodestar.

Heleringer also argued that the settlement does not guarantee class members will receive $310 million.  He said the court should use base lodestar without a multiplier.  He added that there are no rare or exceptional circumstances here and that it's not enough that class counsel is going up against a well-heeled, well-resourced opponent to warrant a multiplier or that it's fighting on a contingent basis, particularly since 81 firms initially filed lawsuits over it.

PA Enviro Board Can Weigh ‘Bad Faith’ in Awarding Attorney Fees

February 17, 2021

A recent Law 360 story by Matthew Santoni, “Pa. Enviro Board Can Weight ‘Bad Faith’ in Awarding Attorney Fees,” reports that the administrative board that hears appeals of decisions by Pennsylvania's Department of Environmental Protection was justified in denying attorney fees to environmental groups that reached a settlement with Sunoco over its Mariner East 2 pipeline, since the board found neither side acted in "bad faith," a state appellate court ruled.

A majority of the Commonwealth Court ruled the state's Environmental Hearing Board could deny a petition for fees from the Clean Air Council, The Delaware Riverkeeper Network and Mountain Watershed Association Inc. based on the so-called bad faith standard, since neither the environmental groups nor Sunoco had acted in bad faith through the groups' appeal of the DEP granting permits for the pipeline, which resulted in a settlement between the groups and the state.

The environmental groups had argued that the board should have applied the looser "catalyst test," which would have only required them to show that their appeal was the motivating factor behind some benefit conferred by the other side in order to trigger fee-shifting provisions in the state's Clean Streams Law and have Sunoco pay their nearly $230,000 legal bill.

"Contrary to objectors' assertions, the catalyst test is not the sole and exclusive standard that EHB may employ in disposing of a request for costs and fees against a permittee under ... the Clean Streams Law.  Indeed, we have specifically recognized that EHB's 'broad discretion includes the authority to adopt standards by which it will evaluate applications for costs and fees,'" wrote Judge Michael H. Wojcik for the majority.  "It was entirely within EHB's discretion, and eminently appropriate, to apply the instant bad faith standard in deciding whether or not to impose costs and fees upon a private party permittee."  The court ruled that the EHB had wide discretion when weighing whether and how to award fees, and in a separate decision it upheld another EHB ruling that had cut the fees awarded to a family that challenged the DEP permits for another part of the pipeline crossing their land.

The environmental groups had challenged 20 permits the DEP had granted Sunoco for construction of a pipeline linking gas wells in Western Pennsylvania to a refinery in the east. The matter wound its way through various proceedings before the EHB until the challengers reached a deal with the DEP in which it would establish a "stakeholder group" on pipeline construction and would put more of its permitting documents online in exchange for the groups dropping their challenge.  The DEP also agreed to pay $27,500 of the challengers' legal fees.

But the challengers then asked the EHB to make Sunoco pay additional legal bills related to their appeal, and Sunoco filed its own petition to make the environmental groups pay nearly $300,000 toward what it had spent defending the permits.  The EHB was split, with the majority saying it could apply the bad-faith standard and find that neither side had "engaged in dilatory, obdurate, vexatious, or bad faith conduct in the course of prosecuting or defending" the appeals.  The minority had agreed that neither side was entitled to fees, but said the bad-faith test was not necessary and the board had broad discretion to award fees as it saw fit.

The environmental groups and the DEP both appealed, though the Commonwealth Court found the DEP lacked standing and granted Sunoco's bid to quash that side of the appeal because the state agency hadn't formally intervened in the fee debate and would not have been affected by the EHB ruling against the private parties.

President Judge P. Kevin Brobson wrote a concurring opinion, joined by Judge Renée Cohn Jubelirer, expressing concerns that the EHB's discretion might be so broad that the particular section of the Clean Streams Law might run afoul of the state constitution's requirement that the law contain standards to "guide and restrain" the administrative board's decision-making.  But because that issue wasn't brought up on appeal, and the EHB had denied either side any fees, this wasn't the case to address that with, Judge Brobson wrote.  In this case, there was no reason Sunoco should have been required to pay, he said.

"There is absolutely no basis in the record upon which the EHB could have exercised its discretion below in such a way as to compel Sunoco to pay objectors' legal fees," he wrote. "Sunoco was not a party to the settlement agreement between objectors and DEP that essentially ended objectors' appeals.  Moreover, Sunoco gave up nothing in the settlement or otherwise.  Sunoco kept its permits, unaltered, as if objectors had not even filed their appeals with the EHB."

A dissenting opinion from Judge Ellen Ceisler said the courts shouldn't apply a tougher standard to permit holders when the DEP itself could have been made to pay fees under the catalyst test.  "It does not therefore seem reasonable that, in theory, the DEP could be saddled with fees and costs in response to inadvertent mistakes or good faith, negotiated compromises or settlements, while a permittee could get off scot-free under similar circumstances unless it has conducted itself in a dilatory, obdurate, or vexatious way," she wrote.

The court then applied its ruling to a separate appeal by the DEP of another EHB order, which said the state had to pay about $13,000 of a family's requested $266,000 in fees from the DEP and Sunoco.  Huntingdon County landowners Stephen and Ellen Gerhart had convinced the EHB in 2019 that the DEP had misclassified a wetland on their property and that Sunoco had to do more work to restore it after completing the pipeline's construction.  But the EHB held Sunoco to the bad-faith standard and the DEP to the catalyst test in parceling out who was responsible for the reduced fee award.

Following the same logic as its ruling in the Clean Air Council case, the court affirmed that the EHB had the discretion to apply both standards in awarding fees.  "We agree that the statute and the case law grant broad discretion to the EHB in setting the standard and applying it," said Robert Fox of Manko Gold Katcher & Fox LLP, representing Sunoco in both cases.  An attorney for the environmental groups said they were weighing the decision and their options.

The attorney for the Gerharts said he thought the court correctly balanced the different standards for fee-shifting against the state and against private actors, but noted that in cases like his where the DEP and Sunoco essentially worked together to defend the permits, the state would have to be mindful of whether it would need to build a record to establish that the permit-holder was acting in bad faith.

Class Counsel Earn $24M in Fees for Clean Coal Investors

February 11, 2021

A recent Law 360 story by Morgan Conley, “Attys for Southern Co. ‘Clean Coal’ Investors Get $24M”, reports that a Georgia federal judge approved just over $24 million in fees to attorneys for a class of Southern Co. investors accusing the company of misleading them about a botched plan to build a "clean coal" plant in Mississippi, trimming the initial request by about $2.1 million.

In an order granting the attorney fees, U.S. District Judge William M. Ray said the unusually good recovery in the settlement warrants a greater than average take-home for lead counsel from Robbins Geller Rudman & Dowd LLP.  But, the court declined to grant class counsel's full request for a 30% share of the $87.5 million settlement fund because, while the recovery for the class is "commendable," the litigation was settled early enough that class counsel didn't stomach "the riskier stages of litigation."

"Being able to achieve such a favorable recovery so early in the litigation suggests that a continued successful pursuit of the litigation could have yielded an even more favorable result for plaintiffs," Judge Ray said.  "That favorable result would then necessarily lead to an increase in the percentage of attorneys' fees.  The court, based upon the totality of the factors, is thus satisfied that 27.5% adequately reflects the impressive results of this case."

According to the court, reasonable attorney fees are usually pegged at around 20% to a quarter of the settlement fund, which the court preliminarily approved in October.  The court said that although class counsel said a study of attorney fee awards in the Eleventh Circuit put the median amount at 33%, that figure factors in a wide range of settlement sizes and a "closer inspection of the study reveals a more nuanced result."

"Because class action attorney fee percentages vary widely based upon the size of the settlement, it would be more insightful to look at settlements with a larger fund," the judge said.  "The same study points out that the average fee percentage is 22.3% when considering only cases with a settlement fund greater than $67.5 million."  Judge Ray said he is confident awarding the attorneys slightly above that average will continue to "incentivize high-caliber and vigorous representation" without awarding attorneys with an unnecessarily large payday.

Southern Co. agreed in September to pay $87.5 million to settle claims it misled shareholders about bungled plans to build a "clean coal" power plant in Kemper County, Mississippi — a project the company eventually admitted would cost almost three times more than originally budgeted and would never actually operate as a "clean coal" plant.

The settlement agreement makes up about 16% to 28% of what the class stood to receive in a best-case scenario if litigation continued to play out, according to the opinion.  Judge Ray said his rationale for not granting counsel's full 30% fee request is partially based on the risks of further litigation not being fully realized.

One potential threat surfaced when Southern Co. appealed the class' certification to the Eleventh Circuit.  But when the settlement deal was reached, no briefs had been filed in the appeal, which was stayed during the negotiations.  Class counsel argued the certification challenge posed significant risks to the litigation and supported a higher fee award.

Judge Ray disagreed, saying it might be a different story if the circuit court appeal had gone active and class counsel had overcome the appeal.  Or, if the class had defeated a summary judgment bid, the heightened stakes would have been fodder for a high fee award argument, the court said.  But since the litigation never reached such a stage, the upper end of the counsel's fee request isn't justifiable, Judge Ray said.

Lieff Cabraser to Appeal Attorney Fee Reduction Before Paying It

January 27, 2021

A recent Law 360 story by Chris Villani, “Lieff Wants To Appeal $1M State St. Fee Cut Before Paying It,” reports that Lieff Cabraser Heimann & Bernstein LLP asked a federal judge to hold off on ordering the firm to pay out a $1.1 million chunk of its fee for work on a years-old $300 million settlement with State Street Corp. so it can ask the First Circuit whether the repayment is justified.  In the latest salvo stemming from revelations of overbilling and other improprieties largely laid on its co-class counsel, Labaton Sucharow LLP and Thornton Law Firm LLP, Lieff Cabraser told U.S. District Judge Mark L. Wolf that once the money goes out, the firm is not likely to get it back.

Lieff Cabraser is appealing its part of the overall fee reduction order by Judge Wolf that slashed the tab owed to it, Labaton Sucharow and Thornton Law from $75 million to $60 million.  "Under the fee order, absent a stay, Lieff Cabraser's escrowed funds will be distributed to the class before the First Circuit can rule on the firm's appeal from the court's decision to penalize Lieff Cabraser," the firm said.  "Recovering those funds from the class, once distributed, will be impossible — effectively mooting the appeal."

But the vast majority of the money ordered repaid can go out right away, Lieff Cabraser argued, so the class of consumers who alleged they were swindled by State Street and Employee Retirement Income Security Act lawyers who worked on the case can get the rest of the money without any delay.  Putting a pause on the $1,139,4572 of Lieff Cabraser's money would not inconvenience anyone in line for a payout since it would take some time to distribute the funds even if the firm was not appealing, it said.

"Complete settlement distributions — especially those involving settlement funds in the hundreds of millions of dollars — commonly take years, not months," the firm said.  The case has wound through the court system since the suit, led by the Arkansas Teacher Retirement System, was first filed against State Street in 2011.  The parties reached a $300 million settlement and Judge Wolf approved a $75 million fee in 2016.  The order was vacated after allegations of double-billing surfaced in a Boston Globe report.

Judge Wolf appointed retired U.S. District Judge Gerald Rosen as a special master to investigate, and the probe ran up a seven-figure tab paid by the firms under investigation.  In a February order, Judge Wolf took Labaton Sucharow and Thornton Law to task, saying they repeatedly violated the rules of professional conduct by overbilling and failing to disclose a $4.1 million finder's fee paid to a lawyer who did not work on the case.  Lieff Cabraser's appeal is the only one to come from Judge Wolf's order and challenges a narrow set of issues pertaining only to findings related to the firm and alleged violations of Rule 11, which concerns representations made to the court in civil cases.

Judge Wolf indicated he would retain counsel to represent himself and his order before the First Circuit, but no attorney appearance has been entered on the First Circuit docket and no one filed an opposition to Lieff Cabraser's appeal.  It was also unclear, both to Lieff Cabraser and to the First Circuit, whether Judge Wolf's order last February was "final."  The firm told the appellate court it felt it had to treat the February order as "final" lest it lose the chance to appeal altogether, but Judge Wolf entered a "final judgment" on Jan. 19 of this year and Lieff Cabraser acknowledged to the First Circuit that the question of whether an actual appealable order existed last summer was murky.

In September, the First Circuit said it would dismiss the appeal without prejudice, writing that "the district court appears to have simultaneously treated its order as both final and non-final; that is, the court sought to retain counsel to file a brief in this court in support of its order and at the same time has issued several post-fee orders, the cumulative effect of which may well be to alter the fee ruling."  With the final judgment entered, Lieff Cabraser plans to revive its appeal, which has centered on due process issues and is a matter of first impression in the circuit.

A strict adherence to notice requirements in Rule 11 matters is necessary, Lieff Cabraser argued, because "sanctions imposed on the court's own motion circumvent the adversarial process, putting the district court in the position of being the 'accuser, fact-finder and sentencing judge all in one.'"  Five circuits, the firm has argued, have found that sanctions like the ones imposed by Judge Wolf are problematic "when a court fails to set out the precise issues to be considered."

"This issue has not directly been addressed by the First Circuit," the firm said, "although the circuit has noted that 'judges must be especially careful where they are both prosecutor and judge.'"  The underlying suit alleged Boston-based State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade.  The law firms admitted to overstating their billing but contended the $75 million fee award initially approved by Judge Wolf was still proper.  The special master, Rosen, recommended in 2018 that the firms disgorge just over $10 million, but Judge Wolf's 160-page order in late February ruled that the cuts should be even deeper.