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Category: Fee Request

NY Judge Vents on “Astronomical” Attorney Fee Requests

July 13, 2018

A recent New York Law Journal story by Christine Simmons, “Blasting Greenberg Traurig Request, Judge Says Fees ‘Zooming Out of Control’, reports that a Manhattan judge has slashed Greenberg Traurig’s $464,164 fee request by 62 percent in a co-op-tenant lawsuit, writing he was “troubled, almost haunted, by the idea of awarding almost half a million dollars to attorneys who simply prevailed upon a court to dismiss an untimely proceeding.”

In a decision punctuated with feisty commentary, such as writing the fee request could be viewed as “highway robbery without the six-gun,” Manhattan Supreme Court Justice Arthur Engoron called on the legal profession and fellow judges to cut down on astronomical fee awards.

“Fees are zooming out of control, and courts should not be complacent; rather, we should be on the front line, not the sideline, leading the charge to keep them reasonable (keeping in mind the considerable costs of running a law practice),” the judge said, in a decision issued Wednesday. “To focus solely on [Greenberg Traurig’s] rates and hours would be to miss the forest for the trees.”

The judge’s comments arose in a suit brought by five residents of a housing complex on the Lower East Side, Seward Park Housing Corp., who were upset over a decision by the co-op’s board to switch to a valet parking system. The residents filed an Article 78 Petition, seeking to annul the board’s decision.

After dueling motions, Engoron in July 2017 dismissed the case for untimeliness, while addressing other arguments raised by Greenberg Traurig, representing the co-op. Afterward, a special referee, Louis Crespo, recommended that the co-op parties be awarded $161,000 in legal fees, reflecting deductions for alleged double billing, lack of complexity, and failure to use more associates rather than partners.

In deciding to award just slightly more than Crespo’s recommendation, Engoron first contemplated the dueling ”perspectives” inspired by the firm’s request.

On one hand, it “is shocking and disturbing,” he wrote, “that a law firm is asking for the staggering sum of $464,164 to have prevailed upon a court to dismiss as untimely a relatively straightforward” petition filed by middle-class tenants.

He added, “Such an outrageous figure sounds like a typographical error or an April Fool’s joke; if it is not, it merits ‘fee shaming,’ public humiliation, and possible sanctions. For such egregious overreaching, a court could, and maybe should, award nothing.”

After all, he said, these days, $464,164—more than twice the salary of a New York State Supreme Court justice—could buy a one-bedroom co-op apartment on the Upper East Side with a doorman and onsite parking garage; a one-bedroom co-op in Bay Ridge with a live-in super and high ceilings; or “your very own private house in suburban Elmont, Nassau County, just over the Queens border.”

“The point being that we are not talking mere Monopoly money here!” Engoron wrote.

From another perspective, Engoron wrote that Greenberg’s papers are “beautiful: well-organized, well-written, and well-reasoned.” And Greenberg “argued just what you would expect, just what it had to, and just how it had to,” he said.

“Fish gotta swim, birds gotta fly, and lawyers gotta litigate. Arguments made in moving papers could also be found in reply papers, ad nauseum, etc., but that is how lawyers usually argue, and sometimes win, cases,” Engoron said. “In short, [Greenberg] did what lawyers do, submitted excellent papers, and prevailed.”

Risking the ’Golden Egg’?

In his analysis in Cruz v. Seward Park Housing, the judge confirmed the referee’s findings that Greenberg’s hourly rates, some of which topped $1,000 per hour, were reasonable and that its attorneys performed the work they claimed. He rejected the findings that Greenberg should have used more associate time. “Experienced partners charge more but work quicker,” he wrote.

But Engoron took issue with Greenberg’s time on its dismissal motion, outside of the time spent on the statute of limitations argument. The co-op would have achieved the same result—dismissal with prejudice—had the timeliness defense been its only argument, the judge said. “There was no need to make a double-barreled motion,” he said.

He added that the nearly half-million-dollar fee request was not in the context of “industrial or technological behemoths battling each other for market supremacy, but in the context of a handful of middle-class cooperators upset with a board of directors’ decision.”

Engoron pointed to larger issues from outsized fee requests and aggressive litigation tactics. “By requesting astronomical fees, attorneys are in danger of killing the goose that laid the golden egg,” the judge said, noting a recent New York City Bar Association report that asked attorneys to eschew litigation tactics like asserting defenses that could burden the parties. “Cultural change may be in the offing.”

This case should have been litigated, and would have been dismissed, solely on statute of limitations grounds, the judge said. “Gold-plated lawyering was not needed. [Greenberg] probably needed two partners to do everything it did as well as it did. But another approach could have achieved the same result: The partner in charge could have walked out into the hallway, grabbed the first mid-level litigation associate that walked by, and said, ‘Our client is being sued; it’s untimely; get it dismissed,’” the judge wrote.

Such an approach, the judge found, would have resulted in fees, including disbursements, of no more than $175,000—the figure Engoron ultimately awarded to the co-op.

That amount, the judge said, “may not seem like an awful lot of money, but could buy you a 55-foot yacht, equipped with multiple staterooms; a salon/galley/dining area; a washer-dryer; and stall showers.” He added, “To this court, that’s reasonable.”

The residents’ attorney, Joseph Giacoia, partner of Capuder Fazio Giacoia, did not return messages seeking comment.

The co-op was represented by James Perkins, a Greenberg shareholder. A firm spokeswoman said, “We respectfully disagree with the characterization of our firm’s fees in this matter on which our client prevailed.”

Judge Cuts $100M in Fees in $3B Petrobras Securities Settlement

June 27, 2018

A recent Reuters story by Alison Frankel, “Judge in $3B Petrobras Securities Case Cuts Class Lawyers’ Fees by $100M,” reports that on the attorney fee award in the Petrobras securities class action settlement.  The views expressed in this post are not those of NALFA.  The article reads:

Jeremy Lieberman and his partners at the securities class action firm Pomerantz are about $171 million richer, after U.S. District Judge Jed Rakoff of Manhattan issued a decision granting final approval of a $3 billion securities class action settlement against the Brazilian energy company Petrobras and one of its auditors.  Pomerantz, one of three lead firms in the case, did the bulk of the work, so it’s receiving the lion’s share of the total $186.5 million Judge Rakoff awarded class counsel for obtaining an “exceptional” result in a risky case without a foreordained outcome.  You might expect Lieberman to be a very happy man today.  He’s not – and it’s not just because Judge Rakoff awarded Petrobras class counsel nearly $100 million less than the $284.4 million they requested.

Lieberman told me that what bothers him wasn’t so much the result as the process.  I’ll explain below how Judge Rakoff got to $186.5 million, but Lieberman’s complaint is that the judge did not honor Pomerantz’s fee agreement with its U.K. pension fund client, lead shareholder Universities Superannuation Scheme.  When USS retained Pomerantz, the fund rejected Pomerantz’s initial fee suggestion and instead, as class counsel recounted in their memo requesting $284.4 million in fees, brought in former U.S. pension fund official Keith Johnson of Reinhart Boerner Van Dueren to advise the U.K. fund on appropriate fees for its class action lawyers.  Their eventual sliding-scale deal, which granted Pomerantz a declining percentage of the recovery as the size of the settlement fund increased, would have netted lead counsel 9.4 percent of the $3 billion settlement, or $284.5 million.  Judge Rakoff took that pre-negotiated fee deal into account when he appointed USS a lead plaintiff in the Petrobras case.

The judge, as Pomerantz and the other lead counsel acknowledged in their fee petition, was not required to defer to USS’s fee agreement with Pomerantz.  Federal judges, after all, are supposed to look out for the interests of all class members, not just lead plaintiffs.  But Pomerantz and the other firms argued that Judge Rakoff should give considerable weight to the USS fee deal, especially because it was negotiated before the litigation began.

Pomerantz partners relied on the terms of their USS fee deal when they made decisions about how to litigate the case, the fee memo said.  To finance the expensive undertaking, they pledged their personal assets to assume a crushing debt load, “in large part informed by the ex ante fee agreement that was previously reviewed (and commended) by (Judge Rakoff).”

But when it actually came time to award fees, the judge said Pomerantz’s pre-negotiated fee deal was “at best just one factor” to consider in the tapestry of litigation events “that provide a much better indication of what was the value of the attorneys’ work to the class as a whole than any before-the-fact private agreement reached with an individual plaintiff.”

Instead, as I’ll explain, Judge Rakoff based his fee award on class counsel’s lodestar billings, boosted by a multiplier to reflect the excellent result they obtained.  Rakoff used the 1.78 multiplier Pomerantz, Labaton and Motley Rice had originally suggested, when they analyzed lodestar billings as a cross-check on their fee request for the 9.4 percent of the settlement, the percentage Pomerantz had negotiated with lead shareholder USS.

Lieberman told me he’s distressed at the short shrift Judge Rakoff gave to Pomerantz’s fee agreement with its client and believes that, in the long run, disregarding such agreements undermines the legitimacy of class actions.  Federal judges, as the class action bar is all too aware, are pushing for more transparency in these cases, pressing for details on relationships between lead plaintiff candidates and their firms, referral fees paid to firms that don’t have a role in the litigation, and dubious dismissals.  Lieberman said judges should similarly recognize that arms-length fee agreements between institutional investors and their lawyers enhance the professionalism of the class action bar.

“Fee awards can’t be random in high-stakes litigation.  It shows a lack of respect for the process, to just say, ‘Oh, I’ll figure it out afterwards,’” Lieberman said.  “If you want class action work to be taken as a serious industry, you have to have a systematic way to assure in advance how lawyers will be paid.  If we’re trying to clean up the business, let’s clean it up in all ways.  No more randomness at the end.”

Lieberman said he believes Judge Rakoff acted with good intentions.  He also acknowledged the inescapable truth of the judge’s point that he’s awarding a tremendous amount of money to plaintiffs’ firms.  (Rakoff’s exact words: “It is important to also remember that we are dealing here, not just with percentages, billable rates, and multipliers, but with very large amounts of money in absolute terms that plaintiffs’ counsel will be receiving under any analysis.”)

But he said – and this is a legitimate point – that disregarding lead plaintiffs’ pre-negotiated fee agreements can distort the way class counsel litigate a case.  “I was thinking for three years my fee agreement was going to be honored,” he said.  “The future of our firm was on the line.  We did that because we thought our agreement with the client would be honored.”

For a contrary take, I went to the Competitive Enterprise Institute, which filed a thought-provoking objection to the Petrobras settlement, protesting class counsel’s fee request, among other things.  In an email responding to Lieberman’s argument, CEI lawyer Anna St. John said it’s important to remember that USS isn’t the only client in this class action, which is being settled on behalf of all Petrobras shareholders.  USS, St. John wrote, “is just one of more than 1 million potential class members who are the clients that Pomerantz is supposed to represent,” she said in her email.  “That agreement also does not protect those absent class members, who like in this case, are taken advantage of when lawyers seek to recover windfall hourly rates.”

CEI’s objection urged Judge Rakoff not to defer to the USS fee agreement because the class as a whole didn’t negotiate the deal and wasn’t apprised of its terms.  “If it fails to preclude a windfall hourly rate, then it does not satisfactorily protect the class’s interests,” the filing said.  “Class counsel fear that there is no value to ex ante vetting if courts can ‘simply upend (agreements) by the subjective post hoc determinations.’ Not so; a negotiated fee can reasonably serve as a ceiling even if it is inappropriate to employ it as a floor.”

Judge Rakoff’s award of $186.5 million, as I mentioned, was based on lodestar billings by class counsel, but he used a very unusual process to review their bills.  Rather than appoint a special master – presumably at the expense of class members – to comb through the timekeeping records submitted by plaintiffs lawyers, the judge asked defense lawyers for Petrobras and its auditor to do it.  “The court took this step because of defendants’ intimate knowledge of various aspects of the case, and the court’s confidence was rewarded by the highly professional way in which defendants’ counsel undertook their court-directed task,” he wrote.

Defense lawyers found some hinky charges, like the seven days a contract attorney claimed to have spent reviewing the third amended complaint – after the complaint had been filed.  Class counsel voluntarily adjusted their lodestar report to eliminate some of the questionable hours uncovered by the defense firms but protested other supposedly inflated charges.

Judge Rakoff then waded into the time records himself.  He ended up focusing on class counsel’s $28 million in billing for foreign contract lawyers who cannot practice in New York and nearly $100 million in bills for contract lawyers.  He shifted the foreign lawyers’ bills to a reimbursable litigation cost (which means no multiplier) and cut contract lawyers’ fees by 20 percent. He also imposed an additional 50 percent cut on bills by contract lawyers acting as translators.  Those cuts brought the total lodestar down from $159.5 million to $104.8 million.  When the judge applied the 1.78 multiplier, the total came to the aforementioned $186.5 million.

Judge Rakoff said any more would be a “windfall” to plaintiffs lawyers who were already “highly incentivized to heavily litigate this huge case regardless of the expected fee award.”  Jeremy Lieberman begs to differ.

Judge Wants Detailed Billing Records in Anthem Data Breach Class Action

June 15, 2018

A recent The Recorder story by Ross Todd, “Judge Again Says She’s ‘Disappointed’ in Plaintffs Lawyers in Anthem Data Breach Case ,” reports that the federal judge overseeing litigation targeting Anthem Inc. with data breach claims on continued her grilling of plaintiffs lawyers who represent the health insurer’s customers about the number of firms who worked on the case.

U.S. District Judge Lucy Koh asked lead plaintiffs counsel, Eve Cervantez of Altshuler Berzon and Andrew Friedman of Cohen Milstein Sellers & Toll, a string of detailed questions about which lawyers submitted bills on work settling the litigation, who defended depositions of name plaintiffs and who handled basic discovery tasks.  Koh previously grilled the lead plaintiffs for having 49 other firms beyond those on the four-firm plaintiff steering committee she appointed.

After Cervantez said that 27 firms had worked on the “crisis” of getting through millions of pages of discovery, Koh stopped the plaintiffs lawyer.  “Is that how you run most of your cases?  You have 27 firms doing document review?” the judge said.

Cervantez said it didn’t matter who did the work or the firm where they practiced, but “were the hours expended reasonable.”  “How is that consistent with the conversation that I had with you and Mr. Friedman at the selection of counsel hearing?” asked Koh, who initially trimmed the lead plaintiffs proposed six-member steering committee to two firms.

Plaintiffs struck a $115 million settlement deal with Anthem last June, which included a proposed $38 million in attorney fees, or 33 percent of the total settlement.  The deal provided two years of credit monitoring and identity protection services to Anthem customers whose personal data was compromised in the 2015 breach, and creates a $15 million fund to reimburse customers for things such as falsified tax returns.

The Competitive Enterprise Institute’s Center for Class Action Fairness filed an objection last year on behalf of Adam Schulman, an attorney at the Washington, D.C., organization, partially because of the fee request.  Schulman claimed fees should be closer to $13.8 million and questioned why 49 other firms not appointed by the court stood to earn a total of $13.6 million in fees as part of the settlement.

Koh told plaintiffs counsel that she was “deeply disappointed” about the number of firms brought on to handle the case at a hearing in February.  At Schulman’s request, she appointed a special master, retired Santa Clara County Superior Court Judge James Kleinberg, to comb over the fee request.

Kleinberg, who is now a mediator and arbitrator at JAMS, pointed to duplicate efforts and excessive billing rates for contract lawyers in suggesting in April that the fee award be trimmed to $28.59 million. 

Koh didn’t tip her hand on where she will ultimately come out on the fee request, but she did indicate that she’ll rule on final approval of the deal by late July.  She asked the plaintiffs to hand over detailed records about document review, depositions and post-settlement work.

“I would like to be able to see who did what work when at what hourly rate and for how many hours,” she said.  “I think I’ve already indicated that I’m disappointed, but it is what it is.”

Class Counsel Earn $1.3M in Fees in Pipe Price Fixing Class Action

June 14, 2018

A recent Law 360 story by Bill Wichert, “Attys Awarded $1.3M Fees in Pipe Price Fixing Class Action,” reports that counsel for indirect purchasers of ductile iron pipe fittings have won a New Jersey federal judge's approval for roughly $1.3 million in attorneys' fees in a consolidated class action against three suppliers over price-fixing claims, representing one-third of the combined settlements with the companies.  U.S. District Judge Anne E. Thompson approved the fees request from those plaintiffs' lawyers, citing the attorneys' "vigorous and effective pursuit" of the claims against Sigma Corp., Star Pipe Products Ltd. and McWane Inc.

By granting the fee request, the judge said she considered "the complexity and duration of the litigation" and "the amount of time devoted to the case by [the indirect purchaser plaintiffs'] counsel," among other factors.  "The court finds that the requested fee of one-third of the total amount of the Star, Sigma and McWane settlements is fair and reasonable and within the range of fees ordinarily awarded in this district and throughout the Third Circuit," Judge Thompson said in her order.

In addition to the $1.36 million in attorneys' fees, the judge approved the lawyers' requests for reimbursement of $87,270.35 in litigation expenses and service awards of $15,000 each for eight class representatives, including Yates Construction Co. in North Carolina and the city of Hallandale Beach, Florida.  Judge Thompson found that the litigation expenses were "necessary, reasonable and proper in the pursuit of this litigation."

In granting the service awards, the judge said, "The proposed class representatives were extensively involved in this case and devoted substantial time and energy to their duties, including working with counsel to understand the workings of the [ductile iron pipe fitting] market, collecting relevant documents, responding to interrogatories and preparing and sitting for depositions."

The attorneys' fees, litigation expenses and service awards will be paid from the total settlement funds of $4.07 million in the case, court documents state.

The attorneys for the indirect purchasers include interim co-lead counsel at Kirby McInerney LLP, Kohn Swift & Graf PC and Weinstein Kitchenoff & Asher LLC, and interim liaison counsel at Schnader Harrison Segal & Lewis LLP.

The indirect purchaser plaintiffs, who initially filed the lawsuits in 2012, have alleged that Sigma, Star Pipe and McWane took part in an unlawful scheme to raise and fix prices for ductile iron pipe fittings that were sold throughout the U.S., alleging antitrust violations under state and federal law, including the Sherman and Clayton acts.  The indirect purchasers accused the three manufacturers of conspiring to keep prices high for ductile iron pipe fittings used in municipal drinking water and wastewater systems.

In June 2015, the indirect purchaser plaintiffs reached settlements with Sigma and Star Pipe for $2.01 million and $641,250, respectively, court documents state.  About a year later, Judge Thompson certified the settlement classes and granted final approval of those deals.  The indirect purchaser plaintiffs and McWane reached a $1.43 million settlement last year, court documents state.  Judge Thompson certified the settlement class and granted final approval of that settlement.

As part of their attorneys' fees bid, the interim co-lead counsel argued last month in a brief that they and other law firms working under their oversight "have devoted 9,414.70 hours developing and advancing the plaintiffs' claims."  Those efforts included investigating the ductile iron pipe fittings industry, working with class representatives to draft and file complaints, submitting briefs and presenting arguments on motions, preparing for and defending depositions and negotiating separate settlements with the defendants, according to the brief.

"Plaintiffs' counsel's fee request is reasonable and consistent with fee awards in this circuit, particularly in light of the length and complexity of this case, the nature and extent of plaintiffs' counsel's efforts in litigating the case and, in the end, negotiating substantial settlements, and the litigation risks assumed," the brief states.

Robert S. Kitchenoff of Weinstein Kitchenoff & Asher LLC, an attorney representing the indirect purchasers, told Law360 in a statement, "Class counsel and the named class representatives aggressively and effectively represented the interests of the members of the class, and are gratified by the court’s recognition of those efforts."

The case is In Re Ductile Iron Pipe Fittings Indirect Purchaser Antitrust Litigation, case number 3:12-cv-00169, in the U.S. District Court for the District of New Jersey.

Attorneys Defend $16M Fee Request in Securities Class Action

June 12, 2018

A recent Law 360 story by Bonnie Eslinger, “Attys Defend $16M LendingClub Fee Bid That ‘Shocked’ Judge,” reports that attorneys seeking $16 million for representing LendingClub Corp. investors in securities class actions against the peer-to-peer lending company defended their fee bid to a California federal judge who previously said the amount “shocked” him, saying their work produced an “outstanding result under any measure.”

The 28-page motion filed by attorneys for Robbins Geller Rudman & Dowd LLP, lead counsel for the lead plaintiff, argues that the requested 13.1 percent cut of the $125 million settlement is reasonable in light of the results achieved, the risks of the litigation, the skill required to tackle the case, the financial burden carried by counsel in the contingency matter, the work performed in a related state action, the positive support of the class and the hours spent prosecuting the litigation.

“An undeniable reality of the legal industry’s evolution (or regression) is that few legal teams pose a credible threat to take large complex cases to trial on a contingent basis — and win.  The prosecution team for lead counsel Robbins Geller Rudman & Dowd LLP demonstrated that it was one of these few,” the attorneys state at the top of their motion.  “Defendants’ counsel are experienced enough to recognize when an adversary is preparing a case for trial, and that is what Robbins Geller was doing when this case settled.”  According to the law firm, it had obtained crucial documents, “secured the right to argue an inference that rendered summary judgment for the underwriter defendants almost impossible,” and was set to depose key LendingClub former executives.

As a percentage of reasonably recoverable damages, the settlement is several times greater than the average recovery in other cases under the Private Securities Litigation Reform Act, Robbins Geller argues, but the 13.1 percent fee is far below the average award.  The settlement ends class action claims in California federal and state court that allege the peer-to-peer lending company misled investors in the run-up to its $1 billion initial public offering in 2014.

But while the deal was preliminarily approved by U.S. District Judge William Alsup on March 16, at a hearing held one week prior the judge expressed skepticism over the proposed $16 million attorneys' fees award.  "I'm not sure you did enough to justify $16 million,” Judge Alsup said.  “To me that's too much money.  I'm shocked at that amount.  Maybe you can convince me."

At that hearing, an attorney for the class, Jason Forge of Robbins Geller, said his clients had negotiated the percentage cut of the net settlement before they signed a retainer agreement.  But Judge Alsup said he wasn’t beholden by that contract, adding, "I still, at the end of the case, have to do what’s right for the class, and you may be being greedy."

In its motion for attorneys' fees, Robbins Geller argues that basing the award on a percentage of a settlement is a “well tested and accepted” method throughout the country.  The requested fee is also significantly less than the Ninth Circuit’s 25 percent benchmark for similar cases, the law firm notes.

The results achieved in the litigation also lean toward the fee award, the firm said.  According to a study conducted by NERA Economic Consulting, the LendingClub settlement lands in the middle of 2017’s top 10 securities class action recoveries, "yet the requested fee percentage here is below the fee percentages awarded in all those cases,” Robbins Geller notes.

The top settlement, according to the study, was a $210 million deal to end a proposed class action by Salix Pharmaceuticals Ltd. shareholders, which yielded a $44.6 million, 21 percent fee cut.  A $100 million settlement between Halliburton Co. and disgruntled investors came with a $33 million class counsel award, or 33 percent.  A Dole Food Co. $74 million settlement in a Delaware federal securities suit included an $18.5 million fee award, or 25 percent.

Lead counsel’s prosecution of this case yielded a number of achievements in the litigation, the firm added, including defeating defendants’ motions to dismiss as to all claims and most allegations; moving to strike the majority of the defendants’ affirmative defenses, which led to them withdrawing 115 of 154 of their affirmative defenses and amending the remaining defenses; and obtaining class certification in the case.

But there were certainly risks to the case, the law firm said.  “Defendants had already staked out, and were actively developing, the argument that LendingClub’s admitted material weakness in internal control did not exist at the time of the IPO,” Robbins Geller states in its motion, adding that it was also “impossible to predict how a jury would assess a complex trial involving issues of specific intent or how an appellate court would view the myriad issues that arise in lengthy litigations.”

The reaction of the class also supports approval of the attorneys' fees, the motion states.  To date, over 104,600 notices have been sent out about the settlement and only one class member has objected.

Finally, Robbins Geller tells the court that 24,260.25 hours of attorney and paraprofessional time was spent prosecuting the action on behalf of the class.  Based on those professionals' rates, the resulting $13,152,167 lodestar would only be subject to a reasonable multiplier of 1.24 for the $16,384,087 requested fee, the firm states.

“Lead counsel’s efforts on behalf of the class resulted in an outstanding result under any measure,” Robbins Geller states.  The fee bid is the latest legal turn in the winding litigation, which stretches back to May 2016, when LendingClub shareholders began suing the company in federal court, claiming that before it went public, the company misled investors about its compliance practices, especially the adequacy of its internal controls to ensure its loans conformed to customers' criteria.  The parties announced a tentative $125 million settlement and filed a motion for preliminary approval in February.

The cases are In re: LendingClub Securities Litigation, case number 3:16-cv-02627, in the U.S. District Court for the Northern District of California, and In re: LendingClub Corp. Shareholder Litigation, case number CIV537300, in the Superior Court of the State of California, County of San Mateo.