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Category: Expenses / Costs

Chancery Court: Railroad Operator’s Attorney Fees Must Be Covered

November 27, 2020

A recent Law 360 story by Rose Krebs, “Railroad Operator’s Fees Must Be Covered Chancery Says,” reports that a Delaware vice chancellor ruled that American Rail Partners LLC must cover legal expenses incurred by a railroad ownership company that it sued over unjust enrichment claims, saying an agreement in place "unambiguously" provides that expenses be covered.  In a 24-page memorandum opinion, Vice Chancellor Paul A. Fioravanti Jr. said fee advancement provisions of American Rail Partners' limited liability agreement are "quite broad" and unambiguous.

"For purposes of this action, there is no dispute that the plaintiffs are covered persons under the broad advancement and indemnification provisions of the company's limited liability company agreement," the opinion said.  International Rail Partners LLC, its manager Gary O. Marino and Boca Equity Partners LP sued American Rail for the advancement of fees earlier this year, asserting that their LLC agreement entitles them to "mandatory advancement and indemnification" related to a suit filed in the First State's Superior Court in February.

Boca Equity is the sole owner and only member of International Rail, according to court filings. International Rail is one of two members of American Rail, the opinion said.  Despite the "broad scope" of the advancement provisions, American Rail had argued it should not be required to advance legal fees because the LLC agreement "does not provide indemnification for claims between the company and any covered person — what it calls 'first-party claims,'" the suit said.

American Rail argued that "an indemnification or advancement provision may only cover first-party claims if it expressly says so," the opinion said.  The vice chancellor, however, said that argument was "not based upon a plain reading" of the agreement, and there is a "strong public policy in favor of indemnification and advancement" in Delaware.  That policy aims to assure key corporate officers that they will not have to shoulder the risk of paying legal expenses for claims related to the performance of their duties, the opinion said.

In April, Vice Chancellor Fioravanti refused to toss the suit, saying questions remained about fee advancement provisions agreed to by the parties. The vice chancellor said he couldn't conclude as a "matter of law" that American Rail offered the only "reasonable" interpretation of the applicable limited liability agreement.  Although Vice Chancellor Fioravanti identified certain shortcomings with how the complaint was pled, including a failure to invoke certain advancement provisions that were later referenced in briefings, he said there was not enough cause to toss the Chancery Court suit.

Judge to Award $1.5M in Fees in Walgreens Wage Settlement

November 26, 2020

A recent Law 360 story by Lauren Berg, “Calif. Walgreens Workers Bag $4.5M Wage Deal,” reports that Walgreens and a class of workers have received a California federal judge's approval for their $4.5 million settlement to resolve claims that the pharmacy chain broke Golden State labor law by not paying all wages to employees at its distribution centers.  U.S. District Judge William B. Shubb granted preliminary approval to the class action settlement that will see about 2,600 workers split $2.8 million, finding that the deal is fair and gives the workers a good recovery that might have been at risk had the case gone to trial.

Lucas Mejia, who worked as an hourly stocker for about seven years at a Walgreens distribution center in California, launched the class action in November 2018 in the Superior Court for the County of Yolo, alleging that the company failed to pay employees for all of the compensable time they worked.  Mejia said Walgreens rounded down employees' hours on their timecards, required employees to pass through security checks before and after their shift without paying them for that time and didn't pay premium wages to workers who were denied meal breaks.

The suit also included a claim for civil penalties under the Private Attorneys General Act based on Walgreens' alleged violations of California labor law.  The case was eventually removed to federal court in Sacramento.  In December, the parties started talking with a mediator, which produced the current settlement.

In exchange for releasing all of the claims, Walgreens has agreed to pay up to $4.5 million to create a common fund, from which $2.8 million will be distributed to the estimated 2,648 class members, according to the order filed.  Each class member who does not opt out is estimated to receive about $1,200, the judge noted.

Also out of the pot, $1.5 million, or 33% of the fund, will be set aside for attorney fees, while $150,000 will go to pay PAGA penalties and $7,500 will be used as an incentive award for Mejia.  Another $50,000 will be used to pay litigation costs incurred by class counsel and settlement administration costs, according to the order.  Judge Shubb gave preliminary approval to the deal, finding that it is in the best interest of the class.

While Mejia's counsel said the labor claims could be worth up to $20.2 million and the PAGA claim up to $16 million, they said Walgreens had legitimate defenses that risked reducing the amount Mejia and the class could recover at trial, according to the order.  With that in mind, the settlement is a strong result for the class, the attorneys said, with the $4.5 million representing 22% of the potential damages.

The judge also noted that, while the deal sets aside 33% of the fund for attorney fees, Mejia's counsel said they will seek 25% of the fund in a separate motion for fees.  "The court will defer consideration of the reasonableness of counsel's fees until the fee motion is filed," the judge wrote.  "Class counsel is cautioned that the reasons for the attorney's fees should be explained further in that motion."

$45M Fee Award in $187M LIBOR MDL Settlement

November 25, 2020

A recent Law.com story by Nadia Dreid, “NY Judge ‘Surprised’ By Fee Application in Libor Rigging Case,” reports that a New York federal judge wasn't happy with the amount of hours or law firms on the attorney fee bill she received in the wake of a $187 million deal with JPMorgan and other major financial institutions over claims of interbank rate rigging, but she granted $45 million in fees anyway.  U.S. District Judge Naomi Reice Buchwald said in her opinion that she was "to say the least, surprised to learn from their fee application that [exchange-based plaintiff] class counsel involved twelve additional law firms" and that the work from those firms made up nearly a fifth of the submitted hours.

"The court cannot divine any reason why it was necessary, efficient or in the best interests of the class to have twelve additional law firms litigate this case," the opinion read.  "If anything, the hours were claimed for work that was duplicative, unnecessary and easily could have been performed by the two appointed firms."

Those firms were Kirby McInerney LLP and Lovell Stewart Halebian Jacobson LLP, who were appointed as class counsel to the exchange-based plaintiffs in the multidistrict litigation accusing JPMorgan, Deutsche Bank and a handful of other big banks of conspiring to rig the London Interbank Offered Rate, or Libor.  Judge Buchwald preliminarily approved the $187 million deal in March and gave it her final blessing in September, but she had yet to come to a final decision on attorney fees.  Ultimately, she decided that none of the 15,000 hours of additional work done by outside firms would be used in the lodestar calculations.

The court also had issues with the amount of hours billed by class counsel themselves.  Although she agreed to accept all of the more than 65,000 hours of work from the two firms, the court noted that their bill listed 10,000 hours more than their sister counsel claimed "in support of their fee application for a case of similar magnitude."  It would take a four-person law firm working on the case full-time for roughly nine years — minus a month annually for vacation — to reach the 65,000 mark, according to the court.

"While the sheer quantum of hours suggests some amount of over-litigation, the court will credit [class counsel] the full amount of time they claim," Judge Buchwald said.  The fees that the firms will walk away with comes out to 25% of the $187 million settlement, after the deduction of around $5.6 million in expenses, according to the opinion.

$2B in Attorney Fees Offered in $26B Opioid MDL Settlement

November 5, 2020

A recent Law 360 story by Emily Field, “$26B Opioid Deal Offer to Include $2B in Atty Fees,” reports that the $26 billion settlement proposal from Johnson & Johnson and McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp. will include a separate $2 billion fund to pay attorney fees and costs for the local governments that have sued over the opioid epidemic in multidistrict litigation, a source confirmed.

A source with knowledge of the settlement negotiations confirmed that the fund will be $2 billion and will be used to pay the plaintiffs' attorney fees, including the private counsel hired by the state attorneys general who have claimed that the companies fueled the opioid crisis.  The fund will be administered by an arbitration panel, the details of which have yet to be worked out with U.S. District Judge Dan Polster, who is overseeing the multidistrict litigation over the crisis in Ohio federal court, the source said.

The source also noted that the $2 billion was less than the $3 billion that had initially been reported.  In February, drug companies told Judge Polster that a proposal for 7% fee against a global settlement could be more than $3.3 billion, potentially jeopardizing negotiations.  The plaintiffs' executive committee in the MDL said in a statement that they supported the deal, which includes $4 billion more than an initial offer of $22 billion in cash in the fall of 2019.

"While no dollar figure can restore the lives and families already devastated by the crisis, these settlement dollars are desperately needed in areas that have been hardest hit by this man-made epidemic, particularly as they now grapple with COVID-19," said Paul T. Farrell Jr. of Farrell Law, Paul J. Hanly Jr. of Simmons Hanly Conroy and Joe Rice of Motley Rice LLC in a joint statement.  "Addiction prevention, education and treatment is critical to the recovery of our families and communities. We need to get these resources out to them as fast as we can — this settlement does that."  The committee also noted that the attorney fees fund is intended to replace the collection of contingency fees so that money can reach communities faster.

In a filing with the U.S. Securities and Exchange Commission McKesson said it would pay up to $8 billion over 18 years, and Cardinal and AmerisourceBergen would pay the rest over that time.  In October, J&J disclosed that it's offering up to $5 billion to end the litigation, a 25% increase from an earlier settlement proposal.

The MDL contains 3,000 cases filed mostly by cities and counties that want money for health care and law enforcement costs related to opioid abuse.  Some MDL attorneys also represent cities and counties with similar cases in state courts.  The attorneys general of virtually every state have also filed cases in state courts.

Class Counsel Seek $18.5M in Fees in LIBOR MDL

November 3, 2020

A recent Law 360 story by Dean Seal, “Class Atty Seek $18.5M in Fees for Libor Deal with 7 Banks,” reports that counsel for a class of bondholders asked a New York federal judge for an $18.5 million fee award for having negotiated settlements with seven financial giants accused of rigging the London Interbank Offered Rate (LIBOR).  Attorneys from Morris and Morris LLC Counselors At Law and Weinstein Kitchenoff & Asher LLC put the request before the court while seeking final approval for $68.6 million worth of settlements with JPMorgan Chase, Bank of America, RBS, Barclays, HSBC, UBS and Citibank.

According to the filings, class counsel has spent 34,743 hours representing the bondholders in their class action, which is part of sprawling multidistrict litigation launched over alleged rate-rigging coordinated by the world's largest financial institutions.  "Class counsel made this investment in vigorously litigating the bondholder action over more than eight years, with no assurance either of payment for their services or recoupment of their out-of-pocket litigation expenses," the bondholder attorneys said.

The bondholders' suit is one of many filed in connection with Barclays Bank PLC's 2012 admittance that it had been one of a number of banks lying about the interest rates it actually expected to pay in order to artificially influence Libor.  Investors contend the major financial institutions deliberately low-balled their submissions in the Libor rate-setting process to manipulate the benchmark.  As a result, the banks raked in hundreds of millions, and perhaps even billions, of dollars in ill-gotten gains, according to case filings.

Ellen Gelboim and Linda Zacher led the class of bondholders who owned U.S. dollar Libor-based debt securities between Aug. 1, 2007, and May 31, 2010.  Their highly complex antitrust action had already seen more than one dismissal, multiple appeals and even a trip to the U.S. Supreme Court by the time they announced settlements with Barclays, UBS AG and HSBC Bank PLC in 2017.

Under those deals, which received preliminary approval in July 2017, Barclays agreed to pay $7.1 million, UBS would contribute $17.9 million and HSBC would hand over $11.1 million.  Another deal that received preliminary approval in December 2018 stipulates that Citi will pay over $7 million to resolve bondholder claims.

Then last April, the bondholders announced three more settlements with JPMorgan Chase, Bank of America and Royal Bank of Scotland Group PLC that would recover a combined $25.5 million for the bondholder class.  The filings show that JPMorgan and BofA would each pay $6.25 million while RBS would turn over $13 million.  "Continuing to litigate against the settling defendants would likely last many years with the potential of no recovery for the bondholder class, and require the expenditure of significant resources of the court and the investment of hundreds if not thousands of hours of time and large sums of money," the bondholder class said.

Class counsel are asking for a 28% cut of the overall settlement fund net of roughly $2.5 million in expenses, resulting in a fee request of just over $18.5 million, along with another $817,237 in unreimbursed fees.  They noted that the settlements had been reached despite the fact that the bondholders' claims are currently dismissed and would rely on "an unpredictable appeal" to get reinstatement.