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Category: Fee Issues on Appeal

Class Counsel Lose Share of Fee Award in Dow Pollution Class Action

October 12, 2018

A recent Law 360 story by Juan Carlos Rodriguez, “10th Circ. Tosses Dow Pollution Class Attys’ Fee Appeal,” reports that the Tenth Circuit rejected a bid by three individual class counsel to snag a share of $150 million in attorneys' fees paid as part of a $375 million settlement with Dow Chemical Co. and another company in a nuclear pollution lawsuit.  While acknowledging that Louise Roselle, Paul De Marco and Jean Geoppinger McCoy, attorneys who used to work at the now-defunct firm of Waite Schneider Bayless & Chesley, “significantly contributed” to the litigation, a unanimous three-judge panel said they did not have standing to appeal a Colorado federal judge’s fee award.

“The WSBC attorneys argue they have been injured because they were not allocated personal bonuses separate and apart from the fees allocated to WSBC for their hourly work,” the panel said.  “Although pecuniary injury of that kind usually satisfies the injury requirement of standing ... such is not the case here because the WSBC attorneys do not have a ‘legally protected interest’ in any portion of the common fund.”

Because the attorneys were employees, not partners or other equity shareholders at WSBC, “all proceeds corresponding to their work on the Cook litigation belong to the firm,” the panel said.  And it said the attorneys never showed they were parties to any other contract or agreement with the firm that would have granted them a legal interest in WSBC’s share of the common fund.  “Even assuming a deficiency in lead class counsel’s fee allocation, any injury is to WSBC, not to its employees,” the panel said.  “And because the WSBC attorneys ‘cannot bring suit to vindicate the rights of others,’ they do not have a legally protected right for purposes of standing.”

The attorneys say they spent more than 4,500 hours working on the case at WSBC.  The long-running case, brought by Colorado residents who claimed injuries from exposure to waste from a nuclear weapons facility, was settled with Dow and a former Rockwell subsidiary now owned by The Boeing Co. in 2016.  The residents claimed they were exposed to plutonium releases from the Rocky Flats nuclear production facility, increasing their cancer risks, contaminating their properties and lowering property values.

The Colorado federal court issued final judgment on the suit in April 2017, the same day it granted $150 million in attorneys' fees and ordered lead counsel Berger & Montague PC to allocate them to various class counsel as reflected by their contributions.  The attorneys filed an objection to Berger & Montague’s distribution in July 2017, which was denied by the district court in August of that same year.

According to Berger & Montague, WSBC, although operating in bankruptcy, submitted a timely fee application — including for time worked by the objectors — and WSBC was allocated some of the fee award.  But the three former WSBC attorneys never filed a separate petition on their own behalf.  Berger & Montague had also asked the Tenth Circuit to sanction Roselle, De Marco and Geoppinger McCoy, calling their appeal frivolous, but the panel denied that motion in a footnote of the opinion.

Merrill Davidoff, Berger & Montague's chairman emeritus and managing shareholder, said the Tenth Circuit reached the correct decision.  "The appellants were attempting to collect personal bonuses on the same time for which their prior firm had been paid.  As such they had no 'legally protectable interest' in their time charges and so lacked standing," he said.

The case is Roselle et al. v. Berger & Montague PC, case number 17-1328, in the U.S. Court of Appeals for the Tenth Circuit.

Florida Supreme Court Undo Attorney Fees Over Settlement Offer

October 8, 2018

A recent Law 360 story by Carolina Bolado, “Fla. Justices Udo Attys’ Fees Ruling Over Settlement Offer” reports that the Florida Supreme Court quashed a decision deeming a settlement offer too ambiguous to warrant an attorneys’ fee award, ruling that the lower court’s “nitpicking” of offers adds to judicial workload, which is contrary to the purpose of the law.

In a 4-3 decision, Florida’s highest court said two settlement offers from W. Riley Allen to Gabriel Nunez and his father, Jairo Nunez, in a dispute over a car crash were clear and unambiguous and said Allen was entitled to the $343,590 in attorneys’ fees and costs under Florida’s offer-of-judgment statute after he prevailed in his suit.  Under the law, if a plaintiff makes a settlement offer that isn’t accepted and then wins a judgment of at least 25 percent more than the offer, the plaintiff can recover reasonable attorneys’ fees and costs.

In this case, Allen sent two separate identical $20,000 settlement offers to the two defendants that were rejected.  He then won a nearly $30,000 judgment and asked for an award of fees under the offer-of-judgment law.  The Fifth District Court of Appeal had ruled that one paragraph in the proposals for settlement were ambiguous because they did not make clear if $20,000 would resolve claims against just one or all of the defendants.

But the Supreme Court said the Fifth District had focused too much on one paragraph in the offers.  When read as a whole, the offers were not ambiguous, the Supreme Court said.  “If two codefendants each receive a proposal for settlement, in which they are specifically named, each codefendant should possess all the information necessary to determine whether to settle,” the high court said.  “In this context, it appears disingenuous to assert that there exists a legitimate question as to whether one codefendant’s acceptance could have settled the offeror’s claim against the other codefendant.”  The Fifth District “unnecessarily injected ambiguity into these proceedings and created more judicial labor, not less.”

In a concurring opinion, Justice Barbara Pariente noted the proliferation of litigation around proposals to settle and urged courts to refrain from “nitpicking” when assessing whether an offer is reasonable.  The three more-conservative justices signed on to a dissent by Justice Ricky Polston, who said the court did not have jurisdiction to review the case because the Fifth District’s decision did not expressly and directly conflict with other appellate opinions on the issue.

The case is Allen v. Nunez et al., case number SC16-1164, in the Supreme Court of Florida.

Ninth Circuit Vacates $8.7M Fee Award in ProFlowers.com Settlement

October 4, 2018

A recent Law 360 story by Dorothy Atkins, “9th Circ. Rejects Attys’ Fees in $38M ProFlowers Deal,” reports that a Ninth Circuit panel vacated a $8.7 million attorneys’ fees award in a $38 million settlement resolving claims that the company behind the websites Proflowers.com and RedEnvelope.com enrolled consumers in a bogus membership rewards program without their consent that charged them monthly fees.

In a 27-page opinion, a three-judge panel found that the lower court erred by considering $20 credits that Provide Commerce Inc. gave to class members as cash rather than coupons under the Class Action Fairness Act.  As a result, the panel said, the attorneys’ fees could be inflated.  "Nothing in the record could have given the district court reason to believe that any class member, let alone all class members, would have viewed the $20 credit as equivalently useful to $20 in cash," the opinion says.

The ruling is the latest happening in a putative class action filed in 2009 claiming that Provide Commerce gave consumers' information to the marketing agency Encore Marketing International Inc. for unauthorized enrollment in allegedly worthless rewards programs that charged customers $14.95 monthly membership fees.  After two years of litigation, the parties struck a settlement under which the companies would set up a $12.5 million cash settlement fund to reimburse 1.3 million potential class members who submit claims.  Provide Commerce also agreed to give all customers a $20 credit with certain restrictions, which the companies valued at $25.5 million.

The district court approved the deal in 2012, but only about 3,000 consumers submitted valid claims, leaving roughly $3 million in unclaimed settlement funds to go to San Diego State University, the University of California at San Diego and the University of San Diego School of Law in cy pres payments.  In January 2013, the district court held a hearing on the final approval of the settlement, which would award attorneys $8.7 million in fees and $200,000 in costs, purportedly representing 23 percent of the total $38 million deal.

Class member Brian Perryman objected to the deal, however, arguing that the attorneys’ fee award did not comply with CAFA’s requirements, since it did not consider the redemption rate, and that the cy pres award is inappropriate.  The district court rejected Perryman’s arguments, and he appealed the rulings to the Ninth Circuit.  The appeals court sided with Perryman on the attorneys’ fee challenge, noting that CAFA requires district courts to consider the value of only coupons that were actually redeemed when calculating the relief awarded to a class.

“Regardless of the substance of the underlying claim or injury, CAFA prevents settling parties from valuing coupons at face value without accounting for their redemption rate,” the opinion said.  “Accordingly, the district court erred by incorporating an improper factor into its analysis of whether the credit was a coupon under CAFA.”  The panel also noted that there were multiple limitations on the $20 credit, restricting the times they could be redeemed, such as before Mother's Day, making them not equivalent to cash.  The court vacated the attorneys’ fee award and remanded the issue for the lower court to recalculate the fees.  The appeals court affirmed the cy pres payments, finding them appropriate and ruling that there was no reason to overcompensate class members who filed a claim.

The case is In re: EasySaver Rewards Litigation, case number 16-56307, in the U.S. Court of Appeals for the Ninth Circuit.

CA Appeals Court: Fees Too Low in $18M Plane Crash Settlement

October 3, 2018

A recent Law 360 story by Y. Peter Kang, “Fees Too Low in $18M Plane Crash Suit Deal, Court Says,” reports that a California appellate panel published an opinion holding that a trial judge’s decision to grant just 10 percent attorneys' fees in an $18.1 million settlement of a wrongful death suit over a plane crash was too low and unreasonable given a much higher contingency fee agreement.

A three-judge Court of Appeal panel for the Second District reversed a trial judge’s decision to award attorneys' fees of 10 percent to Herzog Yuhas Ehrlich & Ardell APC after the firm successfully negotiated a settlement of product liability and other claims made against Cessna Aircraft Co. and others stemming from a 2012 plane crash in Germany that killed California-based entrepreneur Rainer Schulz and four others.

At issue is what constitutes reasonable attorneys’ fees for cases involving minors under California court rules, which require a judge’s approval of such settlements.  Herzog had asked the court to allocate 65 percent of the settlement to Silke Schulz and 35 percent to her four minor children and award the firm 31 percent of the $18.1 million.  But the judge allocated all of the money to the four minor children, except for $1 for Silke Schulz, and awarded Herzog just 10 percent fees, saying the firm did a good job litigating the case but did not have to go to trial and failed to notify Rainer Schulz’s two adult children from a previous marriage about the suit.

However, the panel said a 10 percent fee award was unreasonable, as the judge gave too little consideration to a court rule requiring the judge to account for the firm’s contingency fee agreement with the family.  The parties had agreed to a 31 percent contingency fee if the case was settled more than 30 days before trial and 40 percent if it settled within 30 days of trial; Herzog later agreed to a 31 percent fee even though the case settled just days before trial.

“Instead of balancing the relevant factors, the court gave overwhelming weight to a single concern, the expense of the children’s extensive medical needs,” the panel said in a 17-page opinion.  Three of the four minor children are triplets who were born prematurely, and two have permanent disabilities, according to the opinion.  “We accept that a child’s needs are a relevant and important factor in determining a reasonable attorney fee … This single factor, however, cannot overwhelm all other considerations,” the panel said.

The appeals court added that allowing a judge to overemphasize a child’s medical needs when deciding attorneys’ fees could have a chilling effect on an attorney’s willingness to take on cases involving disabled minors.  “If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court ... it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases,” the opinion states.

In addition, the panel said Herzog took on “significant risk” in accepting the case on a contingency basis when no other attorneys consulted by Silke Schulz would do so, and the firm spent a considerable amount of out-of-pocket expenses litigating the case.  However, the appeals court denied Herzog’s request to determine the proper fees amount, saying it should go back to the trial judge for reconsideration.

The case is Schulz v. Herzog Yuhas Ehrlich & Ardell APC, case number B277493, in the Court of Appeal of the State of California, Second Appellate District.

St. Luke’s Drops Appeal of $7.5M Fee Award in Antitrust Case

October 2, 2018

A recent Law 360 story by Danielle Nichole Smith, “St. Luke’s Drops Appeal of $7.5M Atty Fees in Antitrust Case,” reports that St. Luke’s Health System Ltd. has agreed to drop its appeal of a more than $7.5 million attorneys’ fees award to two hospitals that spearheaded an antitrust suit against the Idaho-based health organization, according to filings in the Ninth Circuit.

St. Luke’s submitted the stipulation to the Ninth Circuit, saying it had settled its fee dispute with Saint Alphonsus Medical Center-Nampa Inc. and Treasure Valley Hospital LP.  The stipulation, which gave no details of the settlement, ends St. Luke’s appeal over a federal district judge’s decision to grant the two hospitals attorneys’ fees after the judge sided with the Federal Trade Commission in their suit over St. Luke’s merger with Saltzer Medical Group PA.

The hospitals had sued St. Luke’s in November 2012, alleging that the health organization’s pending acquisition of Saltzer Medical Group would create a monopoly of certain health care markets in Idaho and could hike up the costs of health care while lowering its quality.  U.S. District Judge Lynn Winmill initially allowed the deal to move forward, denying Saint Alphonsus and Treasure Valley a preliminary injunction in December 2012.

However, after the FTC and Idaho attorney general intervened in the litigation in 2013 and took the case to trial, Judge Winmill ruled in 2014 that the acquisition would likely raise health care costs and have anti-competitive effects, even if that wasn’t its intention, and ordered St. Luke’s to divest from Saltzer Medical Group.  The Ninth Circuit affirmed the ruling in 2015, agreeing that there was evidence the deal would threaten competition.

Following that ruling, St. Luke’s and the FTC reached a deal that established the process for breaking Saltzer Medical Group out of the health organization, and Saint Alphonsus and Treasure Valley were eventually granted $7,247,878 and $335,382, respectively, in fees and costs for their roles in the judgment.  The state of Idaho was also granted $1,041,287, but St. Luke’s only appealed the fees granted to the private hospitals.

St. Luke’s argued on appeal that the hospitals hadn’t been the prevailing party in the suit since they didn’t have standing to bring the claims that the federal government ultimately prevailed on.  The court only ruled on the federal government's claims and never decided that the hospitals’ claims had merit, St. Luke’s said.

But the hospitals responded by arguing that it didn’t matter whether the court addressed their claims or not since they achieved the outcome they sought in bringing their case.  And the court said that the contributions from the hospitals’ attorneys had been crucial for obtaining that judgment, Saint Alphonsus and Treasure Valley said.

The case is Saint Alphonsus Medical Center-Nampa Inc. et al. v. St. Luke’s Health System Ltd. et al., case number 16-36044, in the U.S. Court of Appeals for the Ninth Circuit.