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Category: Fee Request

$100M Attorney Fee Award in $1B Vereit Settlement

January 23, 2020

A recent Law 360 story by Reenat Sinay, “Robbins Geller Bags $100M in Fees for $1B Vereit Settlement,” reports that Robbins Geller Rudman & Dowd LLP attorneys will receive a $100 million payday for securing a $1.025 billion settlement for Vereit Inc. investors in a suit that accused the real estate investment trust of lying about its books, a New York federal judge ruled.  U.S. District Judge Alvin K. Hellerstein approved the massive settlement but decided to take more time to rule on attorney fees due to the size of the deal.

Robbins Geller, which represented lead class plaintiff TIAA-CREF, 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.  The lawyers said in their December fee bid that the 12.4% amount "falls far below" the usual range for cases of this size and complexity, and noted a 13% fee award in a $2.3 billion class-action settlement was recently affirmed by the Second Circuit.

Without explaining his reasons for approving a lower amount than requested, Judge Hellerstein awarded $100 million in fees and $5,154,721 in expenses.  "The court finds that the amount of fees awarded is fair, reasonable, and appropriate under both the lodestar and 'percentage-of-recovery' methods," he said.  "Lead counsel has pursued the litigation and achieved the settlement with skill, perseverance and diligent advocacy."

The settlement ended five years of "hard-fought" litigation and represents a recovery of 50% of the maximum recoverable damages — the highest percentage recovery ever in a major private securities class action ahead of trial, according to Robbins Geller.

$6.2M Fee Award in Virgin Airline Wage Class Action

January 21, 2020

A recent Law 360 story by Vin Gurrieri, “Attys Behind $77M Virgin Wage Win Sought $13M Get $6M,” reports that lawyers for Virgin America flight attendants who recently won $77 million over claims the airline stiffed workers on pay and rest breaks were awarded nearly $6 million in fees by a California federal judge, which was about half the amount they had requested.  U.S. District Judge Jon Tigar awarded $5.7 million to attorneys representing a class of flight attendants led by named plaintiff Julia Bernstein who alleged that Virgin America Inc. flouted California labor laws by not paying them for all hours worked, including pay for overtime, and denying them state-mandated meal and rest breaks.

After having largely granted the flight attendants' bid for summary judgment, Judge Tigar a year ago awarded the flight attendants $77 million in damages.  The airline has since challenged the award to the Ninth Circuit, an appeal that is still pending.  In the meantime, Judge Tigar issued an order finding that the class members' legal representatives were due almost $6 million in fees and an additional $251,000 in court-related expenses.  That number, however, fell short of the approximately $13 million in fees and expenses the lawyers had sought.

Judge Tigar agreed with Virgin that class counsel didn't provide enough detail about certain declared hours and sided with the company in its objection to certain categories, like one labeled "other," that were billed in blocks.  "Virgin takes issue with plaintiffs' use of an 'Other' category, which accounts for 148.1 hours of the fee request," the judge said on the latter issue.  "Given that plaintiffs neglected to identify even representative examples of the types of tasks included, the court cannot award fees for those hours.  The court therefore excludes all 148.1 hours from the fee request."

The judge also shaved the billing rates of several attorneys representing the class but rejected Virgin's arguments that the class members' failure to win on certain claims warranted a significant reduction in fees awarded, leading him to arrive at the $5.7 million figure.  "Ultimately, the court finds that the hours expended were reasonable in light of the overall success achieved, and agrees that success was exceptional," Judge Tigar said.

Bankruptcy Court Denies Fee Enhancement Under Common Fund Doctrine

January 17, 2020

A recent Legal Intelligencer article by Rudolph J. DiMassa, Jr. and Geoffrey A. Heaton, “Bankruptcy Court Denies Motion for Fee Enhancement Under ‘Common Fund Doctrine’,” reports on a bankruptcy court that recently denied creditors’ counsel’s motion for a fee enhancement under the common fund doctrine.  This article was posted with permission.  The article reads:

In a bankruptcy case filed 91 years ago (and reopened 85 years later), the U.S. Bankruptcy Court for the Western District of Virginia recently denied creditors’ counsel’s motion for a fee enhancement under the “common fund doctrine,” finding it could not award the requested fees absent statutory authority.  In particular, the court determined it would be an abuse of its equitable powers to award fees beyond the scope of applicable bankruptcy law in In re Yellow Poplar Lumber, Case No. 605 B.R. 416 (Bankr. W.D. Va. 2019).

Background

In July 1928, White Oak Lumber Co. filed an involuntary Chapter 7 petition in the U.S. District Court for the Western District of South Carolina, seeking to have Yellow Poplar Lumber Co., Inc. “adjudged a bankrupt” under the Bankruptcy Act of 1898.  n 1931, the district court adjudged Yellow Poplar as bankrupt and closed the case.

In 2013, the case was reopened in connection with a dispute over ownership rights in certain gas estates on parcels of land in Virginia, and it ultimately found its way to the U.S. Bankruptcy Court for the Western District of Virginia.  The dispute resulted in a settlement whereby Yellow Poplar’s bankruptcy estate stood to receive approximately $2 million in gas royalties.  The Chapter 7 trustee appointed in the reopened case, with the assistance of a genealogist, identified several of the original creditors’ existing heirs or successors-in-interest.  The bankruptcy court, in turn, directed the trustee to file a brief addressing the appropriate interest rate on the anticipated distribution to creditors, and invited any other party-in-interest to do the same.  While the trustee contended that the interest rate should be 2.4%, counsel for the heirs of two creditors advocated a 7% rate, which reflected the legal rate in effect in South Carolina when Yellow Poplar’s bankruptcy case was filed.  The court ultimately ordered the application of a rate of 3.6%.

Creditors’ counsel, however, successfully appealed the court’s ruling, which resulted in general unsecured creditors receiving 7% interest on their distributions, and increasing the asset pool to be distributed to general unsecured creditors by approximately $740,000.  Notably, the efforts of creditors’ counsel did not increase the amount of funds in the bankruptcy estate, but rather increased just the proportion of estate funds going to the class of general unsecured creditors, effectively diverting funds from one class of constituents to another.  Creditors’ counsel then filed a motion with the bankruptcy court seeking a fee enhancement of $164,164.90 under the “common fund doctrine.”  The trustee opposed the motion, arguing, among other things, that the common fund doctrine does not apply in bankruptcy cases.

Common Fund Doctrine

The common fund doctrine is an exception to the American Rule, i.e., the general rule prevailing in the United States that each litigant is responsible to pay its own attorney fees.  The doctrine generally applies where a litigant, acting to recover on its own claim, recovers property from which others may satisfy their claims as well, entitling the litigant to payment of attorney fees and costs from the “common fund” used for payment of all claims.

Based upon principles of equity, the common fund doctrine recognizes that one who benefits from a lawsuit without contributing to its cost is unjustly enriched at the expense of the successful litigant who bore the costs.  In addition to payment of a litigant’s attorney fees and costs, the doctrine also allows the litigant’s attorney to collect an extra award of fees from the common fund, even if the attorney is merely performing services for his client per the terms of his engagement.

Court Analysis

The court determined that the operative question was not whether the common fund doctrine applies, but rather whether the court had authority to grant the requested fee enhancement from estate assets.  To that end, the court considered precedent under both the Bankruptcy Act of 1898 and the Bankruptcy Code currently in effect: although the Bankruptcy Act governed Yellow Poplar’s case, the court considered cases applying the Bankruptcy Code for additional guidance.

Quoting at length from In re Fesco Plastics, 996 F.2d 152 (7th Cir. 1993), a case filed under the Bankruptcy Code that denied a fee request under the common fund doctrine, the court highlighted the central problem with counsel’s requested fee enhancement: a bankruptcy court cannot award attorney fees without statutory authority, such as that found in Bankruptcy Code Sections 327-330, 1103 and 503(b)(4).  The court concluded that an award of fees outside the context of applicable statutory provisions is beyond a bankruptcy court’s mandate.  In the words of the Fesco Plastics court, “a bankruptcy court is simply not authorized to do whatever is necessary to reach an equitable result; it may only do whatever is necessary to enforce the Code.”

The court noted that prevailing case authority decided under the Bankruptcy Act was in accord with Fesco Plastics.  In particular, the court highlighted Cox v. Elliott (In re Calhoun Beach Club Holding), 122 F.2d 851 (8th Cir. 1941), which rejected the argument that a bankruptcy court “has inherent equitable power” to authorize payment of a creditor’s attorney fees from estate assets.  As the U.S. Court of Appeals for the Eighth Circuit explained in Cox, the Bankruptcy Act “carefully regulates the compensation and expenses that may be allowed in bankruptcy,” and contains an implied exclusion of other fee allowances not expressly set out in the Bankruptcy Act.

After considering Fesco Plastics, Cox and several other cases under both the Bankruptcy Act and the Bankruptcy Code, the court concluded it could not “abuse the equitable power Congress bestowed upon it to award fees for services outside the scope of applicable bankruptcy law.”  The bankruptcy court noted that, even were it to conclude that it had the authority to award fees under the common fund doctrine, counsel might nonetheless remain ineligible for the additional fees: as noted above, counsel’s efforts did not increase funds flowing into the bankruptcy estate, but rather reallocated estate funds among classes of creditors.

Although acknowledging that the common fund doctrine might apply in exceptional circumstances, the court confirmed that a fee award or enhancement would still have to be made pursuant to statutory authority, such as section 64(b)(3) of the Bankruptcy Act, allowing a “reasonable attorney fee” to petitioning creditors in an involuntary case, or section 64(b)(2), allowing for payment of “reasonable expenses” of creditors who recover property transferred by a bankrupt.

Here, however, no provision of the Bankruptcy Act or the Bankruptcy Code existed to authorize “fees for creditor’s attorneys whose actions incidentally benefited some creditors, to the detriment of others, while pursuing their clients’ best interests.”  The court noted, moreover, that counsel had not identified any provision of the Bankruptcy Act or the Bankruptcy Code that authorized the fee award, and the authorities it did cite were either distinguishable, were not on point, or supported the court’s analysis.  Accordingly, the court denied counsel’s motion for a fee enhancement.

Conclusion

Viewed through the equities of the case, it is arguably unfair that all members of the general unsecured creditor class benefited without having to contribute to the legal fees and expenses incurred by just a few creditors in the class.  Indeed, the court confessed that it was “not unsympathetic” to counsel’s fee request.  Nevertheless, Yellow Poplar provides valuable guidance to creditors seeking payment of attorney fees from estate funds: asserting equitable theories such as the “common fund doctrine” may engender judicial sympathy, but they are no substitute for statutory authority.  Consequently, creditors’ counsel seeking any fee enhancement should make their request pursuant to a Bankruptcy Code section that explicitly authorizes such an enhancement.

Rudolph J. Di Massa, Jr. is a partner at Duane Morris in Philadelphia.  Geoffrey A. Heaton, is a special counsel at Duane Morris in San Francisco.

Federal Circuit: Attorneys Lack Standing to Recover Attorney Fees for Veteran

January 13, 2020

A recent Law 360 story by Kevin Penton, “Fed Circ. Won’t Let Attys Get Fees From Feds on Vet’s Behalf, reports that attorneys lack standing under federal law to sue the federal government on their own to recover fees for work they performed on behalf of a veteran, the Federal Circuit held in a precedential opinion.  The appellate panel rejected arguments by attorneys Meghan Gentile and Harold H. Hoffman III of the nonprofit Veterans Legal Advocacy Group that they could collect over $4,000 in fees after their former client, Matthew Shealey, prevailed in his case, even though he had fired them and had opposed their attempt to collect the money.

The Federal Circuit noted that in a 2010 case known as Astrue v. Ratliff, the U.S. Supreme Court held that under the Equal Access to Justice Act, the “prevailing party” is the actual party in a case, not the individual’s attorneys.  “The fact that the statute awards to the prevailing party fees in which [its] attorney may have a beneficial interest or a contractual right does not establish that the statute ‘awards’ the fees directly to the attorney,” the Federal Circuit said, quoting the Supreme Court.

The Federal Circuit also rejected an alternative argument by Gentile and Hoffman that they had a right to the money under the fee agreement that they had inked with Shealey, as “the fee agreement on its face does not purport to assign Mr. Shealey’s [Equal Access to Justice Act] claim to intervenors, and the intervenors expressly disclaimed such a theory at oral argument.”  The appellate panel also rejected the argument that the attorneys had so-called third party standing to sue for fees on their former client’s behalf, as Shealey revoked his authorization for them to apply for the fees and costs, according to the opinion.

“The interests of a client such as Mr. Shealey — including the ability to resolve their fee claim by settlement with the government and the ability to decline pursuing an [Equal Access to Justice Act] claim at all — would be impaired if their attorneys were afforded standing to file a claim on their behalf when that authority has been revoked,” the Federal Circuit wrote.

$22.5M Fee Award in Mushroom Antitrust Settlement

January 10, 2020

A recent Legal Intelligencer story by Max Mitchell, “US Judge Awards $18M in Attorney Fees After Settlement in Mushroom Antitrust Suit,” reports that the judge handling the litigation over allegations that mushroom farmers conspired to fix prices has agreed to award class counsel more than $18 million for their work in the case.  U.S. District Judge Berle Schiller of the Eastern District of Pennsylvania agreed to award $18.23 million in attorney fees, plus $4.25 million in expenses to the 11 firms that served as class counsel in the litigation.

In August, the court granted preliminary approval of an agreement to settle seven claims for $33.7 million, after having previously approved settlements with three other defendants for nearly $12 million.  The order should finalize the litigation.

“In prosecuting this action, class counsel have expended more than 42,000 hours of uncompensated time, and incurred substantial out of pocket expenses, with no guarantee of recovery,” Schiller said in the order.  “Class counsel’s hours were reasonably expended in this highly complex case that was vigorously litigated for more than 13 years, and their time was expended at a significant risk of non-payment.”  Schiller’s class counsel award was the same amount that the parties had requested in the motion filed in November seeking attorney fees.

Though Schiller’s 11-page order did not outline exactly how much should be allocated to each firm, the motion requesting attorney fees allocated the lion’s share to New York-based Garwin Gerstein & Fisher.  According to the filing, the firm worked more than 11,000 hours on the case, with Odom & Des Roches working the second largest number of hours at nearly 9,000.  The firm that spent the third largest amount of time on the litigation, according to the filing, was Philadelphia-based Hangley Aronchick Segal Pudlin & Schiller, with nearly 6,500 hours.

Schiller’s motion directed Garwin Gerstein to allocate attorney fees and costs among the other firms serving as class counsel.  Several entities that directly purchased mushrooms originally filed the antitrust class action in 2006 against the members of the former Eastern Mushroom Marketing Cooperative.