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Judge Trims Attorney Fees in Vertex Junk Fax Settlement

March 22, 2019

A recent Law 360 story by Chris Villani, “Attys’ Fees Trimmed to $1.3M in Vertex Junk Fax Settlement,” reports that two firms serving as class counsel in a junk fax settlement with Vertex Pharmaceuticals should receive less than they requested in fees because they overstated the $4.75 million deal's benefit to the class, a Massachusetts federal judge ruled.  Counsel Anderson & Wanca and Swartz & Swartz PC had asked for a 33 percent cut, or just over $1.58 million, when the proposed class action settled in February 2018.  However, U.S. Magistrate Judge Jennifer C. Boal said that request was a bit too high, dropping the amount to 28 percent, or $1.33 million.

“This court is satisfied with the quality of class counsel; and counsel spent over 1,500 hours in this matter with a lodestar value of $807,148.16,” Judge Boal wrote.  “On the other hand, class counsel overstate the extent of the benefit obtained as it relates to the class as a whole.”  The attorneys who led the suit said it was the largest recovery under the Telephone Consumer Protection Act that the District of Massachusetts had ever seen.  But Judge Boal noted that only 8 percent of the class members made a timely claim, so the amount paid to them will total around $351,000.

“Thus, class counsel stands to receive more than four times the amount of money that will be received by clients in whose name the suit was brought,” the judge wrote.  “In balancing these considerations, this court finds that an attorney’s fee award in the amount of 28 percent of the settlement fund is reasonable in this case.”  Additionally, Judge Boal awarded only $41,000 of $90,000 in requested expense reimbursements, saying the balance lacked sufficient documentation.  She also approved a $15,000 incentive award for the class representative, Cincinnati health care provider Physicians Healthsource Inc.

US Court of Claims Hits Government with Attorney Fees as Sanctions

March 19, 2019

A recent Law 360 story by Daniel Siegal, “Gov’t Owes $4.4M in Fees After Losing $200K Patent Row,” reports that a U.S. Court of Federal Claims judge on tacked on nearly $4.4 million in fees and costs to a since-deceased inventor's $200,000 win on claims that the federal government infringed her patent for a metal treatment technology, finding that fees were warranted because government researchers stole the inventor's idea.  In a 30-page opinion, Federal Claims Judge Charles F. Lettow partially granted the fee request filed by Hitkansut LLC and Acceledyne Technologies Ltd. LLC, two companies owned by late inventor Donna Walker.  Judge Lettow said that under the Equal Access to Justice Act, Hitkansut had to prove that the government's opposition to its suit was not "substantially justified" to be awarded fees — and that the company had done so, through the conduct of the Oak Ridge National Laboratory researchers that did the infringing.

Judge Lettow said the government researchers did not just happen to develop a metal treatment technology and then find that it happened to infringe Hitkansut's patent, but directly took the patent pending technology Hitkansut showed them and "took sole credit for this process, publishing papers and submitting patent applications" without giving Hitkansut any credit, funding or contracts.  Judge Lettow also rejected the government's argument that it was inherently unreasonable to award this amount of fees in a case in which the plaintiff won a $200,000 judgment, and that the fee award should be capped at that amount plus interest.

The judge said the "significant" fee award was justified after the lengthy, hard-fought case, and noted, "Hitkansut’s claim, however, was vigorously contested by the government, involved highly technical subject matter, spanned six years and proceeded through a lengthy appeal.  Hitkansut also faced an opponent with vast resources whose calculus regarding settlement and the value of precedent differs from that of a private litigant."  The judge said although the government may think "it is unreasonable to spend millions to obtain a judgment of $200,000," precedent uniformly says otherwise, and added in a footnote that the government itself "likely spent far more than $200,000 to defend this case."

The judge didn't grant the full amount of fees and costs requested by Hitkansut — $4.51 million — instead making partial reductions in several fee and costs requests, ultimately awarding a total of $4.38 million.  That included roughly $3.1 million in attorneys' fees, $823,197 in expert fees and $434,327 in other expenses and costs.

Hitkansut attorney John Artz of Dickinson Wright PLLC told Law360 that Walker, the inventor and metallurgist behind Hitkansut, was inspired to create a new method for relaxing stressed metal when her son shipped off as a sailor on a U.S. Navy submarine, and then had to see the government take her idea and deny her any credit.  "I feel like the government felt like it could just take the invention, which it did, without there being any repercussions," Artz said.

Hitkansut applied for the patent in summer 2003 and, according to court documents, Walker met a few months later with researchers at Oak Ridge.  The laboratory, which receives about 80 percent of its funding from the U.S. Department of Energy, pursues research that involves metal processing, among other things.

After signing a nondisclosure agreement with the lab, Walker disclosed her as of then unpublished patent application to its researchers, who later filed multiple patent applications related to its technique for using magnetic fields and heat to relax stressed metal, according to court documents.  Hitkansut filed a lawsuit in May 2012, alleging patent infringement and, after several years of litigation, trial began in late May 2016.  In February 2017, Judge Lettow ruled in Hitkansut's favor, finding that Walker's patent was valid and had been infringed by Oak Ridge.

The $200,000 that Hitkansut was awarded represented an "upfront" fee that both sides agreed would have been part of a hypothetical licensing negotiation.  Judge Lettow rejected Hitkansut's assertion that it was entitled to an additional $4.5 million and $5.6 million in reasonable royalties, because the $4.5 million the lab received based on the infringed technology was all research funding, not the proceeds of commercialization.

The case is Hitkansut v. U.S., case number 12-303C, in the U.S. Court of Federal Claims.

$10M in Attorney Fees in Subway’s Record $31M FACTA Settlement

March 18, 2019

A recent Law 360 story by Joyce Hanson, “Attys Win $10M of Subway’s Record $31M FACTA Settlement,” reports that a Florida federal judge who signed off on the largest settlement in the history of the Fair and Accurate Credit Transactions Act (FACTA), a nearly $31 million deal between Subway and a class of consumers, has approved about $10 million in attorney fees for class counsel.  U.S. District Judge Cecilia M. Altonaga granted class counsel’s motion for $10.3 million of attorney fees plus $30,837.80 of expenses in the case alleging the sandwich chain unlawfully printed full credit card expiration dates on receipts, handing the award to Scott Owens PA, Bret Lusskin PA and Keogh Law Ltd.

Judge Altonaga agreed with the lawyers that the requested fee award is consistent with other fee awards in the Eleventh Circuit that are equal to one-third of a settlement fund, such as the one affirmed in 2018 in Muransky v. Godiva Chocolatier Inc.  “Attorneys who recover a common benefit for persons other than themselves or their clients are entitled to a reasonable attorney’s fee from the settlement fund as a whole, and the requested fee award is consistent with other fee awards in the Eleventh Circuit,” Judge Altonaga wrote.  “This fee is also consistent with three recent FACTA cases in this district, one of which was recently affirmed by the Eleventh Circuit in Muransky v. Godiva Chocolatier Inc.”

Class counsel moved on Nov. 20  for the fees and expenses, asserting that the lawyers achieved an excellent result for the class.  “Here, the parties’ mediated agreement provides a settlement fund of $30,900,000, by far the largest all-cash FACTA settlement in history, and many orders of magnitude greater than the recoveries obtained in typical FACTA settlements,” the motion said.  “While most FACTA settlements involve coupons or gift cards, this settlement provides cash, and not a penny will revert to defendant.”

Judge Altonaga's order also granted named plaintiffs Shane Flaum and Jason Alan’s Feb. 19 motion for final approval of the settlement with Doctor’s Associates Inc., which does business as Subway.  Each class member who has submitted a valid claim will receive about $56 in cash, and Flaum and Alan respectively will receive awards of $20,000 and $10,000 under the terms of the final approved settlement.

Flaum had submitted the settlement for preliminary approval on behalf of roughly 2.69 million people whose credit and debit card information was potentially compromised by the printed receipts showing the full expiration dates of their cards.  The order gave final certification to that class, which includes all Subway patrons who received receipts upon purchase that showed their credit and debit cards’ full expiration dates between Jan. 1, 2016, and the date of preliminary approval.

FACTA regulations require retailers to omit card expiration dates on receipts, as emphasized in the Credit and Debit Card Clarification Act.  Subway failed to get the suit tossed in August 2016, after a Florida federal judge, citing the U.S. Supreme Court’s 2016 Spokeo Inc. v. Robins decision, said that Flaum suffered a concrete harm to satisfy subject matter jurisdiction.  The suit is Flaum v. Doctor's Associates Inc., case number 0:16-cv-61198, in the U.S. District Court for the Southern District of Florida.

$2.4M Fee Award in CPI Credit Card IPO Action

March 14, 2019

A recent Law 360 story by Matthew Guarnaccia, “Credit Card Co. Investors Score $2.4M in IPO Suit Atty Fees,” reports that the New York federal judge overseeing a class action lawsuit related to CPI Card Group Inc.’s initial public offering awarded lead counsel Labaton Sucharow LLP $2.37 million in attorneys’ fees and costs, stopping short of the total amount requested by investors for work in reaching an $11 million settlement with the credit card company.  In addition to granting final approval of the settlement, U.S. District Judge Lewis A. Kaplan awarded 20.6 percent of the total amount of the deal as attorneys' fees to Labaton.

The award came in below the 25 percent, or $2.75 million, requested by Labaton, with Judge Kaplan saying he had a few reservations about the lodestar claimed by the firm.  The judge did note, however that his concerns were not about the validity or accuracy of the timekeeping figures provided by lead counsel.  In particular, Judge Kaplan said Labaton reported contributions from 19 attorneys and 14 other timekeepers during the case, and that it is likely this work included “some nontrivial amount of duplication or unnecessary effort.”  The overall number of timekeepers also seemed excessive given the amount of work that was actually done on this case, which included drafting the complaint, litigating class certification and dismissal motions, the defense of a deposition, and settlement negotiations, the judge said.

In addition, Judge Kaplan said the requested lodestar was based on current hourly rates of the timekeepers involved, even though the rates for some increased over the course of the litigation.  “Accordingly, the court has adjusted the lodestar to reflect historical hourly rates to the extent that some differ from current rates and considered the use of current hourly rates in considering the multiplier,” Judge Kaplan wrote.

Judge Kaplan’s final consideration in lowering the lodestar was Labaton’s assertion that more than 2,900 hours was dedicated to the case, which he called “relatively straightforward and not heavily litigated.”  As a result, the judge lowered the total hours sought by 10 percent, leaving a lodestar of approximately $1.5 million, and allowing for a 1.5 percent multiplier, as opposed to the 1.64 multiplier requested by Labaton.

The resulting attorneys’ fee figure is around $2.27 million. Judge Kaplan also tacked on around $106,000 in expenses, but said the lead plaintiff in the case was not entitled to a requested $10,000 award for “time and trouble.”  The fee award by Judge Kaplan comes a little more than a month after the judge gave final approval to a deal that ended the shareholder lawsuit led by investor Alex Stewart.

In his lawsuit, Stewart claimed CPI shipped more than 100 million extra cards to its biggest customers before its October 2015 IPO without telling investors.  Orders allegedly plummeted after the offering because of the "bloated" inventory at financial institutions, as did the initial $10-per-share stock price, which stood at $4.70 a share when the suit was filed in June 2016.  CPI produces 35 percent of all payment cards in the U.S. and serves the majority of the top 20 U.S. debit and credit card issuers, including JPMorgan Chase & Co., American Express Co., Bank of America Corp. and Wells Fargo & Co., according to its U.S. Securities and Exchange Commission registration statement.

The case is In Re: CPI Card Group Inc. Securities Litigation, case number 1:16-cv-04531, in the U.S. District Court for the Southern District of New York.

Deepwater Horizon Defendants Drown in Legal Fees

March 11, 2019

A recent Texas Lawyer story by Steven Meyerowitz, “Deepwater Horizon Defendants Drown in Legal Fees,” reports that the Supreme Court of Texas has ruled that an insurance policy issued to the minority owners in the Deepwater Horizon operation did not limit their right to recover for the legal fees and related expenses they incurred defending against liability and enforcement claims as argued by the policy’s underwriters.  Pursuant to a joint venture arrangement with BP entities and MOEX Offshore 2007 LLC, Anadarko Petroleum Corporation and Anadarko E&P Company, L.P. (together, “Anadarko”) held 25% of the ownership interest in the Macondo Well in the deep waters of the Gulf of Mexico.

During drilling operations on April 20, 2010, the well below the Deepwater Horizon drilling rig blew out.  Over the ensuing months and years, numerous third parties filed claims against the BP entities, Anadarko, and MOEX, seeking damages for bodily injury, wrongful death, and property damage.  Many of those claims were consolidated into a multi-district litigation (MDL) proceeding in the federal district court for the Eastern District of Louisiana.  The federal government also pursued civil penalties under the Clean Water Act and a declaratory judgment of liability under the Oil Pollution Act of 1990.

The MDL court granted a declaratory judgment, finding BP and Anadarko jointly liable under the Oil Pollution Act.  BP and Anadarko then reached a settlement agreement in which Anadarko agreed to transfer its 25% ownership interest to BP and pay BP $4 billion.  In exchange, BP agreed to release any claims it had against Anadarko and to indemnify Anadarko against all other liabilities arising out of the Deepwater Horizon incident.  In light of that agreement, the United States agreed not to pursue claims against Anadarko.  BP, however, did not agree to cover Anadarko’s legal fees and other defense expenses, which totaled well over $100 million, according to Anadarko.

Before the incident, Anadarko had purchased an “energy package” insurance policy through the Lloyd’s London market.  The policy provided excess liability coverage limited to $150 million per occurrence.  The policy did not require the underwriters to defend Anadarko against liability claims.  But it did require the underwriters to reimburse Anadarko for expenses it incurred providing its own defense.  The underwriters contended, however, that an endorsement within the policy reduced the $150 million limit when — as in this case — Anadarko’s liability arose out of the operations of a joint venture.  Based on the product of Anadarko’s percentage interest in the Deepwater Horizon joint venture (25%) and the total coverage limit under Section III ($150 million), the underwriters contended that this endorsement capped their excess coverage liability at $37.5 million.

Anadarko agreed that the Joint Venture Provision reduced the amount the Underwriters had to pay to cover Anadarko’s joint venture liabilities to third parties.  Anadarko contended, however, that the Joint Venture Provision capped the excess coverage only for Anadarko’s liabilities to third parties, and not for its “defense expenses.”  Therefore, it argued, in addition to the $37.5 million already paid, the underwriters still had to pay all of Anadarko’s defense costs up to the total $150 million limit.  When the parties could not resolve their dispute, Anadarko filed suit, seeking payment of its defense expenses up to $112.5 million ($150 million minus the $37.5 million already paid).

The trial court denied the Underwriters’ summary judgment motion and granted Anadarko’s summary judgment motion in part.  Finding the Joint Venture Provision unambiguous, the trial court concluded that the clause at issue in the Joint Venture Provision applied to and limited coverage for Anadarko’s defense expenses, but that an exception also applied and increased the Underwriters’ liability to “the combination of Anadarko’s working interest percentage ownership and the additional percentage for which Anadarko becomes legally liable, . . . subject only to the limits of the policy after subtracting monies that Underwriters have already paid.”

The court of appeals reversed the trial court’s judgment and rendered judgment for the Underwriters.  The dispute reached the Texas Supreme Court.  The court reversed the court of appeals’ judgment, rendered judgment granting Anadarko’s motion for partial summary judgment, and remanded the case to the trial court.  In its decision, the court explained that the primary issue was whether the clause at issue in the Joint Venture Provision limited Section III’s excess liability coverage only for amounts Anadarko was required to pay in response to third party claims or also for amounts Anadarko paid as defense expenses.  The court concluded that the clause did not limit the coverage for defense expenses and that, as a result, it did not have to address any exception.

The court observed that the clause stated that “the liability of Underwriters under this Section III shall be limited to” $37.5 million (that is, the product of Anadarko’s 25% interest in the joint venture — and $150 million — the total limit under Section III).  With a focusing on specific policy language, the court found that the clause only limited the underwriters’ liability for Anadarko’s “liability . . . insured,” which did not include its defense expenses.

The court was not persuaded by the underwriters argument that the reference to Anadarko’s “liability . . . insured” included defense expenses and that even if the term “liability” did not include defense expenses, the clause limited their liability for all of Anadarko’s Ultimate Net Loss, which included defense expenses.

The court observed that, although the policy did not define the term “liability,” it consistently distinguished between Anadarko’s “liabilities” and “expenses.”  Based on the policy’s usage of the term “liability” and its distinguishing references to “expenses,” the court concluded that, consistent with the term’s “common meaning within insurance and other legal contexts,” “liability” referred in this policy to an obligation imposed on Anadarko by law to pay for damages sustained by a third party who submitted a written claim.

The case is Anadarko Petroleum Corp. Houston Casualty Co., No. 16-1013.