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Category: Hourly Rates / Hourly Billing

Class Counsel Earn $36.5M in Fees in Navistar Engine Settlement

January 22, 2020

A recent Law 360 story by Mike Curley, “Class Counsel Gets $36.5M in Navistar Engine Settlement,” reports that an Illinois federal judge has approved $36.5 million in attorney fees as part of a $135 million settlement that ends litigation against Navistar alleging the company sold diesel engines with defective emissions systems.  U.S. District Judge Joan B. Gottschall granted final approval of the settlement, saying the attorney fees are reasonable in light of the 74,000 hours poured into the case by 15 firms that represented the class of truck owners.

In addition to the attorney fees, the judge approved $3.5 million in reimbursement for out-of-pocket costs for class counsel and $25,000 service awards for each of the 29 named plaintiffs, or $725,000 total.  "After many years of hard-fought litigation, we're happy that Judge Gottschall — recognizing the quality of this settlement and the work that went into achieving it — granted our fee and expense request in its entirety," Adam Levitt of DiCello Levitt Gutzler, co-lead counsel in the case litigation, told Law360.  "We look forward to continuing to work with class members in implementing the settlement and distributing the substantial relief that we obtained."

The final approval comes two weeks after, Judge Gottschall signed off on the $135 million settlement, which ends litigation brought by truck drivers who claim that 2010-13 model year MaxxForce 11 and 13 Advanced "Exhaust Gas Recirculation" diesel engines have a defectively designed integrated emissions system.  Class members have three options for compensation under the deal. They can choose a lump payment of up to $2,500, a rebate option of up to $10,000 to buy a new Navistar truck or recoup up to $15,000 in out-of-pocket costs from repairs related to the alleged defects in their vehicles.

For the purposes of the settlement, the judge certified the class as anyone who owned or leased the 2011-2014 model vehicles equipped with the MaxxForce 11- or 13-liter engines at issue in the suit before Aug. 11, 2019.

$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.

Article: Two Overlooked Advantages of Hourly Billing

January 20, 2020

A recent Law 360 article by J.B. Heaton, “2 Overlooked Advantages of Hourly Fees,” reports on hourly billing advantages.  This article was posted with permission.  The article reads:

I was happy to see that my former colleagues at Bartlit Beck LLP prevailed at arbitration on a large fee dispute with a contingency client.  However, it appears that the dispute remains active, and that the firm is now forced to seek confirmation of the award (Bartlit Beck LLP v. Okada, in the U.S. District Court for the Northern District of Illinois) before beginning what may be a long fight to enforce it against a Japanese billionaire.

Bartlit Beck was a forerunner in the effort to move clients away from hourly fees toward alternative fees.  While most of the firm’s work while I was there (1999-2017) was on a flat monthly fee with bonuses, some work was on a contingency of the type now at issue in the arbitration recently reported.  Those flat monthly fees and bonuses were also a source of tension with clients who sometimes felt (wrongly, in my view) they were not getting good value for their money.  The firm hurt its relationship with Microsoft Corp. when it insisted on the payment of a relatively small promised bonus.  And the firm has been in a similar arbitration before like the one now at issue, where a client, EchoStar Corp., unsatisfied with its payment obligation to the firm found itself in arbitration.

While alternative fees continue to get attention in the legal press, there is no question that such fees remain overshadowed by the hourly fee.  Fee disputes like the one Bartlit Beck finds itself in again may tell us something about the reasons for the continued vitality of the hourly fee, especially among clients who have the wherewithal to pay.  It is no coincidence that most of the very large fee disputes we read about involve alternative fees.  What we don’t read about, but what is well-known to plaintiff-side lawyers such as I used to be, is the additional problem that large contingency fees can cause in generating suspicion of the lawyer recommending that the client take a large, pretrial settlement offer.

Fee arrangements for litigation require picking between two bad choices.  Hourly fees come with the incentive problem that lawyers make more money with every hour for which the client is willing to pay.  Since clients are usually not in the best position to determine the efficiency of undertaking a particular task (that is, it’s impact on the expected value of the litigation), the possibility exists that lawyers will respond to their incentives to undertake tasks that are not worth doing.

Flat fees address this problem by removing the incentive to work on inefficient tasks, but flat fees bring their own serious problem: They create an incentive to underwork the case, again taking advantage of the client’s poor positioning to see that a worthwhile project was left undone.  This allows the flat-fee lawyer to either use those hours on another flat-fee or hourly case or use the time in leisure, not working at all.  Contingency fees create an even more powerful incentive to end a case on terms that generate a large return for the lawyer on few hours worked.

The possibility of high-stakes fee disputes may be a relatively unexplored reason why alternative fees have not caught on among well-funded clients in high-stakes cases.  Clients may say — on the front end — that they want to pay for performance, but it can be hard sometimes to judge the importance of the lawyers’ actions in resolving high-stakes business disputes.

Where a dispute is resolved for reasons unrelated to the work of the lawyers, it is difficult for a client to pay a walloping fee that was, perhaps, based on the assumption that the resolution would have depended more on the lawyers’ work.  In the place where huge contingency fees reign supreme — class action litigation — the court has the power to set the fee, and virtually never ignores the hours worked in doing so.

Even where the lawyers have generated huge value by identifying a novel legal theory and bringing a defendant to the table for serious settlement talks, even the most sophisticated of clients can and do question the incentives of the lawyers advising them.

In some cases, a defendant can be brought to the table with a very large settlement offer based on the legal risk it faces in a relatively untested area of law.  The client, however, may question the lawyer’s advice to take the settlement where the lawyer stands to make millions of dollars on only a few hundred hours' work.  This suspicion, in turn, may lead the client to reject the settlement, only to find out later that the lawyer was right, the theory was too risky to have a large enough possibility of prevailing, and the huge settlement was the best that could have been obtained.

Discussions of hourly versus alternative fees will no doubt continue in 2020.  The market has spoken rather clearly, however.  The legal market seems to prefer hourly fees, especially in high-stakes cases for clients that can pay the fees as they go.  The bad incentives are controlled by long-term relationships with lawyers and firms, and by more and more sophisticated review of bills and descriptions.  Especially for high-stakes cases, the cost of not doing a valuable task is higher than the cost of doing some additional tasks that may be inefficient or unnecessary.  There are exceptions, of course, but they remain the outliers.

Here, I suggest that hourly fees have two advantages not yet adequately focused on: minimizing large-scale fee disputes, and maintaining the perceived integrity of the lawyers’ advice.

J.B. Heaton is President of J.B. Heaton PC in Chicago.

NALFA to Conduct Hourly Rate Surveys in 5 Key Practice Areas

January 14, 2020

NALFA conducts custom hourly rate surveys for clients such as law firms, corporate legal departments, and government agencies.  Our surveys provide the most accurate and current hourly rates within a given geography and practice area. 

Starting this year, NALFA will be conducting hourly rate surveys in the nation’s 16 largest legal markets in 5 key practice areas.  These billing rate surveys will show the current average hourly rate range for both plaintiffs’ and defense counsel at partner and associate levels.  These hourly rate surveys will be conducted via email in early 2020. 

The surveys results will generate a collection of data points including the statistical variance between plaintiffs' and defense rates in a given practice area and geography, the statistical variance between partner and associate rates in a given practice area and geography, and the statistical variance of hourly rates among law firm size, just to name three data collection categories.  "This survey data may be the nation's first and only quantitative hourly rate data of its kind," said Terry Jesse, NALFA Executive Director.

The survey results will be available to survey participants and members of the NALFA network at no cost.  The following hourly rate surveys will be available to others for purchase:

The 2020 Class Action Hourly Rate Survey

The 2020 Litigation Hourly Rate Survey

The 2020 IP Litigation Hourly Rate Survey

The 2020 Insurance Coverage Hourly Rate Survey

The 2020 Chapter 11 Bankruptcy Hourly Rate Survey

$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.