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Category: Fee Request

Contingency Fee Percentages in Megafund Class Actions

August 21, 2020

Quinn Emanuel relies mostly on recent attorney fee scholarship and attorney fee jurisprudence in their recent $185M attorney fee request in the ACA class action.  Their fee request reads: 

In one recent case, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 991 F. Supp. 2d 437 (EDNY 2014), the Court conducted a survey of so-called “megafund’ cases and provided its thoughts on a graduated scale for attorneys’ fees.  The scale set forth in Interchange Fee suggests a marginal fee percentage at various levels if recover; as recoveries go higher, the marginal fee percentage decreases. Id. at 445.  Using that matrix, which is set forth below, the Interchange Fee Court awarded class counsel $544.8 million in fees out of a $5.7 billion settlement fund, representing a contingent fee of 9.56%.

NALFA Releases 3 Models of Growth for Litigation Hourly Rates

August 10, 2020

NALFA conducts custom hourly rate surveys for law firms, corporate legal departments, and government agencies.  Our hourly rate surveys provide our clients with the most current and accurate hourly rates within a given geography and practice area.  Starting this year, 2020, NALFA is conducting hourly rate surveys in 5 key practice areas.  These billing rate surveys show the current average hourly rate range for both plaintiffs' and defense counsel at partner and associate levels.

NALFA has released 3 different models of growth (linear, logarithmic, and logistic) for hourly rate ranges in litigation.  These growth curves are based on the universally accepted principle that hourly rates increase with experience (i.e. partner rates are greater than associate rates).  Linear growth is consistent straight-line growth.  Generally, logarithmic growth rises sharply then levels off.  Generally, logistic (S-shaped) growth starts slowly, rises sharply, then levels off.  We did not use exponential (J-shaped) growth because an ever-increasing, very steep curve does not fit hourly rate billing economics.

“These growth models do not account for the factors that effect hourly rates such as geography, practice area, party to litigation, complexity of case, size of law firm, and economics that our surveys do,” said Terry Jesse, Executive Director of NALFA.  "Those variables were not a part of this purely mathematical exercise," Jesse emphasized.

From these growth curves, we learn 2 key concepts:

1.  Logarithmic growth seems to represent the economics of hourly rates and the career span of litigators the best.  Generally, the growth starts rapidly, then increases slower, then eventually levels off.  Here, the highest rate of billing growth takes place in early-career.

2.  Logistic growth is another model that has some appeal to the economics of hourly rates and the career span of litigators.  Generally, the growth starts slowly, then increases rapidly, then eventually levels off.  Here, the highest rate of billing growth takes place in mid-career.



The parameters of these models include the number of years continuously practicing litigation (12 data points), plotted along the x axis and hourly rate ranges (20 data points) along the y axis.  The litigation experience data sets range (less than 2 Years-35+ years) has a variance of 1 year to 5 years.  The hourly rate ranges (less than $200-over $1,200) include a variance of $50 and $100.

NALFA Quoted in Portland Business Journal

August 5, 2020

NALFA and NALFA member and attorney fee expert John D. O'Connor of O'Connor & Associates in San Francisco were quoted in Portland Business Journal.  The news article, by Elizabeth Hayes, “Former Portland Insurer’s Law Firm Asks for $184M in Legal Fees” reports on Quinn Emanuel’s attorney fee request in the health insurers Obamacare reimbursement case.  Below is a copy of the article:

Health Republic went out of business after it took a $20 million hit when the government didn't pay it in full under the risk corridors program.  In February 2016, when Lake Oswego-based Health Republic Insurance was winding down its operations, it made an audacious move.  The small Consumer Operated and Oriented Plan, which had just 15,000 customers, took on the federal government.

Health Republic filed the first of what would become multiple lawsuits brought by insurers across the U.S. over the federal “risk corridors” program.  The cases sought to require the government’s to make good on its promise to compensate health plans that lost money on Affordable Care Act plans.

The shortchanging cost Health Republic $20 million and dealt a fatal blow to the company and dozens of other insurers.  Portland-based Moda Health took an even bigger hit than Health Republic, at $250 million, and followed Health Republic’s lawsuit with one of its own. Moda's suit worked its way to the U.S. Supreme Court, which in April ruled that the government owed U.S. insurers $12 billion.

Now Health Republic’s law firm, Chicago-based Quinn Emanuel Urquhart & Sullivan LLP, is seeking $184 million in attorney fees for the 183 clients it represented in the two class action suits it filed.  Both are related to the risk corridors but didn’t go to the Supreme Court.  The firm argues, however, that it filed a first-of-its-kind lawsuit. It “did not remain idle" while the other, non-class action cases, moved forward, but submitted multiple amicus briefs focusing on the “negative economic and societal impact that would result if the government failed to honor its commitments.”  Justice Sonia Sotomayor used that reasoning in her majority opinion, saying “the government should honor its obligations.

Quinn Emanuel, which specializes in complex litigation, represented Health Republic and the other insurers in the class actions on a contingency basis, meaning it would receive a fee only if they win the cases.  Quinn Emanuel’s “stellar performance” resulted not only nearly $4 billion for its insurer clients, but 100 percent industrywide recovery, the firm argues in its 40-page motion for attorney’s fees filed last week in the U.S. Court of Federal Claims.

It is asking for 5 percent of the judgments in its two class actions, which it argues would be “one of the lowest percentage rates ever awarded to class counsel, even in cases with multi-billion-dollar recoveries, such as this.”

If approved, the amount would still be one of the largest fee requests for a single law firm in U.S history, according to the National Association of Legal Fee Analysis.  There have been much larger fee awards, including those in the Enron lawsuit, but they are generally split between multiple firms.  John O’Connor, a San Francisco attorney and attorney fee expert, said it’s hard to say if the court will approve Quinn Emanuel’s request.  The percentage is low, but the total amount would represent an unusually high multiple of the firm’s average hourly rate of around $1,000.

The firm put in about 10,000 hours, translating to an hourly average rate of $18,500, if the award is granted.  “You can’t say it’s totally ridiculous,” O’Connor said. “Nor can you say it’s a slam dunk that they should get it. The thing they have going for them is it’s such a small slice of the pie.”  Quinn Emanuel emphasizes in its brief that it and Health Republic took on a “substantial risk” in suing the government.  Stephen Swedlow, a Quinn Emanuel partner, did not respond to a request for comment.

In an ironic twist given the eventual outcome, Moda CEO Robert Gootee apparently agreed.  When former Health Republic CEO Dawn Bonder told Gootee she was going to file the lawsuit, he responded that she was “making a ‘bold’ choice and that he would not even consider doing so on behalf of Moda, as he thought the lawsuit had no chance of success,” according to Quinn Emanuel’s recent brief.

Moda spokesman Jonathan Nicholas declined to comment on the conversation.  “Moda did not have any contingency fee arrangement with our law firm,” he said. “Robert insisted from the very outset that a core, fundamental right was at issue here, and he determined that our company would go all in — and all alone – in an effort to see that our judicial system, at its highest level, could indeed right a wrong!”

Virgin Urges Ninth Circuit to Vacate Attorney Fees in Wage Case

July 30, 2020

A recent Law 360 story by Linda Chiem, “Virgin Asks 9th Circ. To Ax $6M Atty Fee in Wage Spat” reports that Alaska Airlines and Virgin America asked the Ninth Circuit to vacate nearly $6 million in fees awarded to attorneys for a certified class of flight attendants who won $77 million in a long-running dispute over pay and rest breaks.  Virgin America Inc., which merged with Alaska Airlines Inc., filed an opening brief with the Ninth Circuit claiming that U.S. District Judge Jon S. Tigar in January signed off on $5.7 million in fees for the plaintiffs' attorneys without digging into whether their hours and calculations were properly justified.

The attorneys, who initially requested $13.2 million, but were awarded less than half that, are representing named plaintiff Julia Bernstein and flight attendants alleging Virgin America flouted California labor laws by not paying them for all hours worked, including overtime, and denying them state-mandated meal and rest breaks.  Judge Tigar had acknowledged that the attorney fee application was too vague, saying "the level of specificity at which plaintiffs have documented their time makes it difficult or impossible for Virgin to raise certain challenges that courts have found justified partial reductions in other cases."

Despite that critical flaw, according to the airline, the court accepted all of the hours that the plaintiffs' counsel claimed and awarded a $5.7 million fee award, subject to only a 5% general reduction in hours.  "That decision cannot stand," the airline said in the brief.  "Because the lack of detail in the fee application deprived Virgin of a fair adversarial process and did not allow meaningful judicial review, the fee award must be vacated for that reason alone."

Moreover, the class counsel's flawed lodestar consisted of nearly 4,500 hours of billable time, most of which was billed at an absolute "top of the market" rate of $750 per hour, according to the brief.  On top of that, Judge Tigar improperly approved $251,000 in court-related expenses for the plaintiffs' attorneys, Virgin argued.  "Most of the expenses that the district court awarded were for 'expert fees,' which are not recoverable under black-letter California law," the airline said.  "In addition, the district court erred by ignoring the rule that a party cannot recover expenses without submitting an itemized list and accompanying receipts.  The district court did not identify any exception to this rule, and it candidly acknowledged that plaintiffs' counsel failed to comply with it.  But the court awarded expenses anyway."

Opioid MDL Judge Won’t Set Up $3B Attorney Fee Fund

July 28, 2020

A recent Law 360 story by Kevin Stawicki, “Opioid MDL Judge Won’t Set Up $3B Fund For Plaintiffs’ Attys” reports that an Ohio federal judge refused to set up a $3 billion "common benefit fund" to cover fees incurred by attorneys for the plaintiffs in sprawling multidistrict opioid litigation, saying that now's not the time for a "one-size-fits-all" approach given a possible national settlement.  While U.S. District Judge Dan Aaron Polster agreed with the plaintiffs' view that they deserve fair compensation for litigating the massive MDL over the opioid epidemic, he said the likelihood that separate funds will be provided through a global settlement further complicates how the exact terms of the benefit fund would even look, not to mention other issues like "knotty jurisdictional concerns."

"Because of the inordinate complexity of this MDL, the court is hesitant to enter a 'one-size-fits-all' common benefit order applicable by default to every possible settlement permutation — especially because, at this juncture, both plaintiffs and defendants believe settlement negotiations will lead to a global settlement," Judge Polster said.  After the plaintiffs' executive committee asked the court to approve the common benefit fund in January, pharmaceutical companies like Purdue and Cardinal, along with cities, counties and state attorneys general, lined up to oppose the fee request, saying it could irreparably disrupt progress toward reaching a national settlement.

A group of 37 attorneys general said in a letter in February that the proposal for the fund went "well beyond what is necessary to ensure fair compensation for private counsel" by making some local governments pay more in attorney fees and violating state sovereignty.  Judge Polster recognized that those concerns underscore how difficult it will be to ensure incentives are appropriately set through a common benefit fund, which would have to take into account the settlement amount, which cases settle, what amount of common benefit fund corresponds with particular settlements, and what other plaintiffs' attorney fee arrangements look like.

"It is more prudent to defer entry of a common benefit order than to attempt to re-write those generally-familiar terms to fit the specific, complex particulars of this unique MDL at this critical juncture," Judge Polster wrote.  Paul Geller of Robbins Geller Rudman & Dowd LLP, who represents plaintiffs in the MDL, told Law360 in an email that it's "hard to take issue with the judge's contemplative approach to the entry of a common benefit order.  Seems to me it's a question of timing — a matter of when, not if."