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.