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Category: Expenses / Costs

Class Counsel Earn $1.3M in Fees in Pipe Price Fixing Class Action

June 14, 2018

A recent Law 360 story by Bill Wichert, “Attys Awarded $1.3M Fees in Pipe Price Fixing Class Action,” reports that counsel for indirect purchasers of ductile iron pipe fittings have won a New Jersey federal judge's approval for roughly $1.3 million in attorneys' fees in a consolidated class action against three suppliers over price-fixing claims, representing one-third of the combined settlements with the companies.  U.S. District Judge Anne E. Thompson approved the fees request from those plaintiffs' lawyers, citing the attorneys' "vigorous and effective pursuit" of the claims against Sigma Corp., Star Pipe Products Ltd. and McWane Inc.

By granting the fee request, the judge said she considered "the complexity and duration of the litigation" and "the amount of time devoted to the case by [the indirect purchaser plaintiffs'] counsel," among other factors.  "The court finds that the requested fee of one-third of the total amount of the Star, Sigma and McWane settlements is fair and reasonable and within the range of fees ordinarily awarded in this district and throughout the Third Circuit," Judge Thompson said in her order.

In addition to the $1.36 million in attorneys' fees, the judge approved the lawyers' requests for reimbursement of $87,270.35 in litigation expenses and service awards of $15,000 each for eight class representatives, including Yates Construction Co. in North Carolina and the city of Hallandale Beach, Florida.  Judge Thompson found that the litigation expenses were "necessary, reasonable and proper in the pursuit of this litigation."

In granting the service awards, the judge said, "The proposed class representatives were extensively involved in this case and devoted substantial time and energy to their duties, including working with counsel to understand the workings of the [ductile iron pipe fitting] market, collecting relevant documents, responding to interrogatories and preparing and sitting for depositions."

The attorneys' fees, litigation expenses and service awards will be paid from the total settlement funds of $4.07 million in the case, court documents state.

The attorneys for the indirect purchasers include interim co-lead counsel at Kirby McInerney LLP, Kohn Swift & Graf PC and Weinstein Kitchenoff & Asher LLC, and interim liaison counsel at Schnader Harrison Segal & Lewis LLP.

The indirect purchaser plaintiffs, who initially filed the lawsuits in 2012, have alleged that Sigma, Star Pipe and McWane took part in an unlawful scheme to raise and fix prices for ductile iron pipe fittings that were sold throughout the U.S., alleging antitrust violations under state and federal law, including the Sherman and Clayton acts.  The indirect purchasers accused the three manufacturers of conspiring to keep prices high for ductile iron pipe fittings used in municipal drinking water and wastewater systems.

In June 2015, the indirect purchaser plaintiffs reached settlements with Sigma and Star Pipe for $2.01 million and $641,250, respectively, court documents state.  About a year later, Judge Thompson certified the settlement classes and granted final approval of those deals.  The indirect purchaser plaintiffs and McWane reached a $1.43 million settlement last year, court documents state.  Judge Thompson certified the settlement class and granted final approval of that settlement.

As part of their attorneys' fees bid, the interim co-lead counsel argued last month in a brief that they and other law firms working under their oversight "have devoted 9,414.70 hours developing and advancing the plaintiffs' claims."  Those efforts included investigating the ductile iron pipe fittings industry, working with class representatives to draft and file complaints, submitting briefs and presenting arguments on motions, preparing for and defending depositions and negotiating separate settlements with the defendants, according to the brief.

"Plaintiffs' counsel's fee request is reasonable and consistent with fee awards in this circuit, particularly in light of the length and complexity of this case, the nature and extent of plaintiffs' counsel's efforts in litigating the case and, in the end, negotiating substantial settlements, and the litigation risks assumed," the brief states.

Robert S. Kitchenoff of Weinstein Kitchenoff & Asher LLC, an attorney representing the indirect purchasers, told Law360 in a statement, "Class counsel and the named class representatives aggressively and effectively represented the interests of the members of the class, and are gratified by the court’s recognition of those efforts."

The case is In Re Ductile Iron Pipe Fittings Indirect Purchaser Antitrust Litigation, case number 3:12-cv-00169, in the U.S. District Court for the District of New Jersey.

Opinion: The Trouble with Lodestar Fee Awards

May 30, 2018

A recent Reuters editorial by Alison Frankel, “The Trouble with Lodestar Fee Awards, Anthem Class Action Edition,” opines on the recent fee request in the Anthem data breach class action.  The editorial reads:

A special master appointed by U.S. District Judge Lucy Koh of San Jose to recommend a fair fee for class counsel in the $115 million Anthem data breach settlement succeeded in pleasing no one with a vested interest in the outcome, based on filings by lawyers for the class and the objector who first pushed for scrutiny of class counsel’s request for nearly $40 million in fees and expenses.

I’ll explain why both sides believe the special master, retired Santa Clara Superior Court Judge James Kleinberg, made critical mistakes in recommending a fee award of $28.6 million, based on a 10 percent chop off the top of class counsel’s adjusted hourly billings in the case.  But more fundamentally, I was struck as I read both sides’ objections to his recommendation that lodestar fee awards are a quagmire for judges.

As you know, most federal judges calculate class action fees as a percentage of the recovery lawyers obtain for the class, sometimes applying multipliers to reward plaintiffs’ lawyers for taking on particularly risky or strenuous cases.  Percentage-based fee awards have the advantage of incentivizing efficiency and aligning the interests of lawyers and their clients.  They predominate, although many judges also look at lodestar billings as a check on percentage-based fees.

But as I told you last year, there’s been a bit of a recent boom in California federal court for awarding fees based on class counsel’s hourly billings, mostly in mega-cases in which judges were worried that a percentage-based fee award, even of 10 or 15 percent, would be an unseemly windfall for plaintiffs’ lawyers.  Judge Koh, who is overseeing the Anthem case, has used lodestar billings to calculate fee awards in big anti-poaching class actions, 2015’s In re High-Tech Employee Antitrust Litigation and 2017’s Nitsch v. Deamworks Animation.  In both cases, lodestar billings resulted in a smaller award to class counsel than they would have received as a percentage of the recovery for class members.

The Anthem case is different.  The hourly fees class counsel said they generated far exceeded the percentage-based fees they could have expected, given that courts typically award fees of less than 20 percent in cases with recoveries of more than $100 million.  Plaintiffs’ lawyers said their lodestar fees and costs were nearly $40 million.  They requested fees of about $38 million, or 33 percent of the $115 million class recovery.  That was an ambitious request.  California’s benchmark is 25 percent, $28.8 million in the Anthem case, and judges seldom award even that high a percentage in megacases.

After plaintiffs’ lawyers submitted their fee request, a class member represented by the Competitive Enterprise Institute objected, contending (among other things) that class counsel overcharged for the services of contract lawyers and otherwise overbilled their clients for nearly $9 million in unnecessary or duplicative work.  In her order appointing a special master, Judge Koh said she was concerned that the sheer number of lawyers and law firms that billed time in the case – 331 billers across 53 plaintiffs’ firms – meant the class was overcharged “by virtue of the fact that so many billers needed to familiarize themselves with the case and keep abreast of case developments.”

Judge Koh ordered the special master to review the billing records of plaintiffs’ lawyers.  Judge Kleinberg said in his April 24 report that he did, along with explanations of the records from class counsel at Altshuler Berzon and Cohen Milstein Sellers & Toll.  But he also said he did not review every line item in the records because his goal was “a rough cross check, not auditing perfection.”

The special master decided class counsel had billed the time of contract lawyers at way too high an average rate.  He recommended slashing fees for their work from the $6 million lodestar class counsel claimed to $3 million, taking into account his conclusion that contract lawyers should be billed out at a paralegal rate of $156 per hour.  Judge Kleinberg said plaintiffs lawyers’ blended rate of $455 per hour was reasonable.  But he said class lawyers devoted an apparently unreasonable number of hours to deposition preparation, class certification briefing and settlement negotiations.  He blamed the “virtual army” of lawyers on the case.

“How could lead counsel possibly conduct effective oversight of this very large team of lawyers?” Kleinberg wrote.  “The special master is not accusing plaintiffs’ counsel of deliberate overbilling.  However, every time a new law firm was added to the group, those lawyers had to spend time learning the history, issues and facts being litigated.  Thus, the inevitable result of the 53 billing participants presents at least a strong probability of duplication and unreasonable hours.”

He offered three alternatives for determining fees: applying the 25 percent benchmark percentage (and subtracting certain costs) to award $26.75 million; awarding $33.9 million in lodestar fees after adjusting the lodestar for contract lawyers and shifting expenses from the class to their counsel; or lodestar fees of $28.6 million, reflecting Judge Kleinberg’s recommendation of a 10 percent trim for potential overbilling.  The special master said that was the maximum haircut he could apply, short discounting specific overcharges, under the 9th U.S. Circuit Court of Appeals’ ruling in 2008’s Moreno v. City of Sacramento.  Kleinberg recommended that Judge Koh pick the discounted lodestar option.

In their response to the special master’s recommendation, class counsel protested his recommended 10 percent haircut as unjustified.  Kleinberg himself said their blended rate was fair, plaintiffs lawyers said, which implicitly means class counsel did not overstaff the case with high-cost partners.  “Because the blended hourly rate is the total lodestar divided by the total number of hours expended, it reflects the cost of the average hour in the case and captures the extent to which the work was distributed among higher- and lower-cost professionals,” their filing said.  “When, as here, the blended hourly rate is well below the median, it shows that counsel distributed work among partners, associates, contract attorneys, and paralegals in an even more cost-effective manner than has been found reasonable in past cases in this district.”

They also repeated previous explanations for why they had to involve so many lawyers from different firms to maximize efficiency in a compressed time frame.  (The explanations included an accounting of the hours spent on depositions, class certification and settlement negotiation.)  Class counsel instructed other firms not to bill for acquainting themselves with the case and reviewed other firms’ time sheets, cutting hours that seemed duplicative or inefficient.  ‘The requested lodestar should be reduced only if the use of multiple firms actually resulted in duplication or inefficiency.  That did not occur here,” the filing said.  “The key assumption underlying the (special master’s) contrary conclusion is that ‘every time a new law firm was added to the group, those lawyers had to spend time learning the history, issues, and facts being litigated.’  This was incorrect.”

Attorney Fees Report Draws Critics in Anthem Data Breach Case

May 16, 2018

A recent NLJ story by Amanda Bronstad, “Anthem Data Breach Attorney Fees Report Faulted by Plaintiffs Lawyers and Objector,reports that plaintiffs lawyers in the Anthem data breach settlement have objected to the report of a court-appointed special master, which found what it said was inappropriate billing and recommended their $38 million fee request be slashed by nearly 24 percent.

In a court filing, lead counsel Eve Cervantez of Altshuler Berzon and Andrew Friedman of Cohen Milstein Sellers & Toll — along with plaintiffs steering committee lawyers Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs — wrote that special master James Kleinberg should abandon his findings.  They stuck to their original fee request, which compensated 49 additional law firms.

“The court should defer to counsel’s judgment here as to the number of hours required to reach the $115 million settlement and achieve the significant changes in business practices,” they wrote.  “Because plaintiffs have shown that the hours spent in the case were reasonable and non-duplicative, the court should not reduce the requested fee award based on the number of law firms that billed for those reasonable hours.”

Frank, representing an objector to the settlement who had asked for a special master, called the report “a disappointingly superficial review” of lead plaintiffs attorneys’ billing, according to an objection he filed.  “As an initial matter, the special master’s report did not accomplish what the court assigned the special master to do,” wrote Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness.  “The special master’s rough review failed to determine the propriety of the hours billed and is insufficient to uncover the extent of the duplication and inefficiencies that this court sought.”

Koh appointed a special master earlier this year to look into potential overbilling, stating that she was “deeply disappointed” in the fee request.  She was particularly troubled that the request was made for 53 law firms, particularly since she had explicitly wanted a lean leadership team in the case.  On April 24, Kleinberg, a retired Santa Clara County Superior Court judge who is now a mediator and arbitrator at JAMS, recommended a fee award of about $28 million in his report.  Most of the reduction came from cutting the rates of 33 contract attorneys and shaving 10 percent due to potentially duplicative billing.

As to the contract attorneys, Kleinberg found their billing rates to be “inappropriate.” Plaintiffs lawyers paid them $25 to $65 per hour but, in their fee request, asked for an average of nearly $360 per hour for those lawyers.  His report lowered the rate to $156 per hour — that of a paralegal.  He also chastised a “virtual army of billers.”

“The special master is not accusing plaintiffs’ counsel of deliberate overbilling,” he wrote. “However, every time a new law firm was added to the group, those lawyers had to spend time learning the history, issues and facts being litigated.  Thus, the inevitable result of 53 firm billing participants presents at least a strong probability of duplication and unreasonable hours.”

His report also looked at the percentage of the fund and the 25 percent benchmark in the U.S. Court of Appeals for the Ninth Circuit.  Plaintiffs attorneys noted in their objection that the report found that an average hourly rate of $455 per biller was not excessive.  And they continued to emphasize that the case was novel and complex.  As to the 53 law firms, they wrote “the question is not how many firms a paying client would retain, but how much the client would pay to have the work done.”

The additional 49 firms “were forbidden to bill for any start-up time learning the facts and law of the case,” they wrote, and had $1.5 million already cut from their lodestar.  The special master’s reduction of contract attorney rates was also unreasonable, they wrote.

“This recommendation was in error, and plaintiffs are not aware of any court to have adopted this approach,” they wrote.  “Plaintiffs are aware of no authority supporting the proposition that it would be permissible, let alone reasonable, to delegate such crucial legal work to paralegals.”  They also criticized the special master’s deduction of their expenses and service awards from the fee amount.

ABA Urges Federal Circuit Not to Include Attorney Fees in Patent Case “Expenses”

January 24, 2018

A recent ABA Journal story by Lorelei Laird, “ABA Urges Federal Circuit Not to Include Attorney Fees in Patent Case ‘Expenses’” reports that the American Bar Association is urging the U.S. Court of Appeals for the Federal Circuit not to include the government’s attorney fees when awarding “all expenses of the proceedings” to the U.S. Patent and Trademark Office.  The ABA filed an amicus brief in NantKwest v. Joseph Matal, urging the full Federal Circuit to overturn a split decision of a three-judge panel.

The panel had ruled that language in a recent revision of patent law permits the PTO to recover not only $33,103.89 in expert fees, but also nearly $80,000 in attorney fees, according to an ABA press release. This is a departure from precedent in patent law, the ABA argues, and would make it difficult for people without deep pockets to seek court review of PTO decisions.

“The ABA submits that imposing governmental attorneys’ fees on patent applicants who choose civil actions under [patent law] will hamper equal access to justice and chill the assertion of meritorious claims,” the brief says. “It is also contrary to the express language of Section 145, which does not overcome the presumption of the American rule that each party pays its own fees.”

NantKwest, a biotechnology company, invoked its right under patent law to appeal a PTO decision to federal district court. Under federal law, this requires it to pay for “all expenses of the proceedings.” For nearly 200 years, the ABA brief says, courts have interpreted this to mean only out-of-pocket costs, such as expert fees or travel expenses. The Virginia district court awarded the PTO only expert fees.

But on appeal, a three-judge panel of the Federal Circuit added $80,000 in attorney fees. Unusually, the Federal Circuit then reopened the appeal on its own in order to review the case using the full Federal Circuit. The ABA’s brief supports NantKwest.

The panel made a “radical, novel” decision, the brief says. Traditionally, U.S. courts use the “American rule,” which says litigants must pay their own attorney fees unless a statute or contract expressly says otherwise. Those provisions are clearer then the patent statute’s call to pay “all expenses all of the proceedings,” the brief says, and they typically reward only the winner of a case. Here, by contrast, the statute applies regardless of who wins. Furthermore, the brief says, the PTO did not start asking for attorney fees until 2013, even though the statute has existed for nearly two centuries.

Furthermore, the brief says, fee-shifting is often used to provide access to the courts. Here, however, the ABA argues that it will achieve the exact opposite, by making it unduly expensive for patent applicants to challenge a PTO decision. Individuals, nonprofits and small businesses would be disproportionately affected by the Federal Circuit’s ruling if it is upheld, the brief says. Congress surely did not intend to create a way to resolve patent disputes that would be unavailable to many applicants, the ABA argues.

“The PTO’s newfound interpretation, if accepted, would have intolerable results,” the brief says. “The doors of justice should be open to all, regardless of individual prosperity.”

The ABA’s position comes from a 2016 resolution before the House of Delegates, Resolution 108A.  The resolution addressed this exact topic in reaction to a 4th U.S. Circuit Court of Appeals case, Shammas v. Focarino, which also granted attorney fees. The U.S. Supreme Court declined to review that case.

Fee Request Denied Because Neither Party Prevailed

January 9, 2018

A recent Delaware Business Court Insider by Tom McParland, “Seven-Figure Fee Request Crumble as Bouchard Calls Cookie Contract Case a Draw” reports that the Delaware Court of Chancery denied multimillion-dollar requests for attorney fees from Mrs. Fields Brand Inc. and Interbake Foods, ruling that neither party had prevailed in a dispute over a contract to sell Mrs. Fields cookies in grocery and convenience stores.

Chancellor Andre G. Bouchard said the baked-goods companies had fought to a draw on the two main issues of a 2016 trial, where Interbake argued that it could exit a five-year licensing agreement to sell Mrs. Fields’ products.

In June, Bouchard ruled in favor of Mrs. Fields, saying that Interbake could not rely on its “material adverse change” argument to escape the deal.  But he also rejected Mrs. Fields’ “astounding” claim for $28.7 million in damages in the case.

Both sides later moved for attorney fees under a provision of the contract that required the “prevailing” party to be reimbursed for costs and expenses of litigation stemming from the licensing agreement.  Interbake asked for $2.6 million, and Mrs. Fields requested $5.3 million for its efforts.

In an 11-page letter opinion, Bouchard said Interbake’s attempts to validate its exit from the agreement spawned a slew of related legal questions, which accounted for the bulk of his 108-page ruling in June.  But he also noted that Mrs. Fields made its losing push for money damages a “central focus” of its litigation strategy, despite a standstill agreement that ensured the licensing agreement would remain in place throughout the case.

“In sum, because each side both won and lost on one of the two equally core issues in this case, I hold that neither Mrs. Fields nor Interbake predominated in the litigation and thus neither is entitled to an award of attorneys’ fees or expenses as the ‘prevailing party’ under [the licensing agreement],” the chancellor wrote.