Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Expenses / Costs

Article: How the Contingency Fee Provides Access to Justice

May 19, 2019

A recent article in Legal Intelligencer by Samuel H. Pond, “The ‘Great Equalizer—How the Contingent Fee Provides Access to Justice” reports on the benefits of the contingency fee model in civil litigation.  This article was posted with permission.  The article reads:

The core principle of our legal system is that all people, no matter their station in life, can bring their disputes to be heard in a court of law.  That’s in theory, in practice, however, justice is not always so available to those with limited means.  However, one innovation has somewhat evened the playing field—the contingent fee agreement.

Leveling the Playing Field

The pursuit of justice can be expensive, with litigation costs and attorney fees piling up quickly.  The average billing rate in 2018 for Pennsylvania attorneys was $262 per hour, according to Clio, a Canadian research firm tracking legal industry metrics.  Corporations and insurance companies often have unlimited resources at their disposal during litigation, putting the average person at a great disadvantage.

Under a contingent fee agreement, a client in a civil matter does not need to pay an attorney unless the case is successful.  Often, attorneys will also front all litigation costs.  Thus, the client does not have to pay anything out of their pocket.  Thus, all fees and costs are paid out of the recovery.

‘Not Going to Get Bullied’

This arrangement has greatly expanded access to the justice system and allowed those with modest means obtain the justice they deserve.  It’s the only way an injured worker can go up against a big insurance company and feel comfortable and confident. You’re not going to get bullied.  It’s a great equalizer.

The contingent fee has allowed ordinary people to sue large corporations and influential entities and receive monetary compensation.  In addition, the contingent fee has given credence to the idea all should be held accountable for their actions and no one is above the law.

Incentivizing Success

In addition, the contingent fee ensures that a lawyer’s interests are fundamentally linked to those of the client.  It incentivizes lawyers to provide the best quality service to clients because if they fail, they will not get paid.

The contingent fee agreement also discourages the filing of frivolous matters.  It is highly unlikely that an attorney on a contingent fee agreement will take on a case that lacks merit because doing so would mean investing thousands of dollars on a case with no hope of recovery.

Contingent fees restore some fairness to the system.  A powerful corporation with its economic clout and high-priced attorneys cannot simply steamroll over a litigant of modest means.  The average person can still get a fair shake by hiring a worthy champion to take up their cause.

Samuel H. Pond is the managing partner at Pond Lehocky Stern Giordano, the a workers’ compensation firm.  For more than 30 years, he has been representing workers injured on the job.  He is also the host of the Legal Eagles radio show, which aims to educate the public on the law.

$66M Fee Request in $800M Chrysler Emission Class Action Settlement

May 2, 2019

A recent The Recorder story by Amanda Bronstad, “Plaintiffs Lawyers in $800M Chrysler Emissions Settlement Want $66M,” reports that plaintiffs lawyers who helped craft an $800 million settlement with Fiat Chrysler this year over its “EcoDiesel” vehicles are asking for $66 million more in attorney fees and costs.  U.S. District Judge Edward Chen of the Northern District of California has scheduled oral arguments Friday about whether to grant final approval of the deal, which includes a $307 million class action settlement and $400 million to federal and state regulators to resolve claims that it installed software in 100,000 vehicles nationwide to cheat emissions tests.

In court papers, lead counsel Elizabeth Cabraser said the request for $59 million in attorney fees and $7 million in costs would be in addition to, and not deducted from, the settlement’s $800 million value.  She said the fees were reasonable in light of the complexities of the case.  “This significant result was not easily won,” wrote Cabraser, of San Francisco’s Lieff Cabraser Heimann & Bernstein, in an April 25 reply supporting the settlement.  “Plaintiffs’ claims were hotly contested and vigorously litigated for nearly two years.”

In the class action, Chen early on appointed Kenneth Feinberg, founder and managing partner of The Law Offices of Kenneth R. Feinberg in Washington, D.C., to serve as settlement master.  Last year, the judge allowed claims to go forward against Fiat Chrysler under the federal Racketeer Influenced and Corrupt Organizations Act.  Under the settlement’s terms, Fiat Chrysler Automobiles N.V. agreed to give individual cash payments of up to $3,075 and extended warranties to eligible consumers who brought their vehicles in for software fixes.  Fiat Chrysler agreed to provide $280 million, with software maker Robert Bosch GmbH contributing $27.5 million.

Class members have 18 months after the settlement’s final approval to make claims.  Unlike the $14.7 billion emission settlement in 2016 with Volkswagen, Chrysler agreed to provide a software fix for two years that would allow drivers to continue using their cars. Also unlike Volkswagen, Fiat Chrysler did not admit liability.  “We look forward to finalizing this agreement with the court, which will bring us another step closer to achieving the settlements’ goals: providing consumers the vehicles they were promised plus cash compensation, while also protecting our environment,” Cabraser said in a statement.

In the reply, Cabraser noted that only three out of 100,000 class members objected to the deal and, of the 3,461 who opted out, nearly 90 percent of them came from “vigorous marketing and solicitation campaigns by a handful of attorneys”—in particular, at Stern Law PLLC in Novi, Michigan, and Heygood, Orr & Pearson in Irving, Texas.  Ken Stern, of Stern Law, and Michael Heygood, of Heygood Orr, did not respond to questions about why they recommended their clients opt out.

“This high level of engagement and remarkably low level of opposition is a strong endorsement of the settlement terms,” Cabraser wrote in the reply.  “Under any circumstances, this extremely low objection rate would strongly favor final approval, and it does so with particular force here given the well-publicized nature of this litigation and the significant sums at stake.”  So far, she wrote, nearly 34,000 class members had registered on the settlement’s website.

In separate declarations, Robert Klonoff, a professor at Lewis & Clark Law School, and Brian Fitzpatrick, a professor at Vanderbilt University Law School, said the fee request represented between 10 to 18 percent of the settlement amount, depending on how benefits are calculated.  Both are reasonable and fall below the 25 percent benchmark established by the U.S. Court of Appeals for the Ninth Circuit.

Cabraser, in her initial motion for final approval, calculated the fee request at 13 percent, when based on a minimum required 85 percent participation rate in the cash fund and cutting the $239.5 million value of the extended warranties in half to account for the government’s role, plus $67.5 million in attorney fees and legal and administrative costs.  When assessed against the total potential value of the settlement—the entire cash fund and value of the extended warranties—the request was 9.6 percent, she wrote.

She estimated that class counsel would have spent more than 100,000 hours on the case upon completion of the claims process in two years, billing at a blended rate of $453 per hour.  “This is more than justified given the intensity of the litigation, the quality of the work, and most importantly, the results achieved,” she wrote.  In addition to Cabraser’s firm, the fees would compensate the other nine law firms on the plaintiffs’ steering committee, plus 10 additional firms who did work on the case, according to a declaration Cabraser submitted in support of final approval.

Class Counsel Seek $23.2M in Attorney Fees/Costs in BNY Settlement

May 1, 2019

A recent Law 360 story by Dean Seal, “Lieff Cabraser, Kessler Topaz Seek $23.2M for BNY Deal,” reports that attorneys for a class of investors want 30% of the $72.5 million settlement they negotiated with the Bank of New York Mellon over claims that it overcharged for certain foreign currency conversions.  Counsel from Lieff Cabraser Heimann & Bernstein LLP and Kessler Topaz Meltzer & Check LLP said that the "extraordinary" recovery achieved after three years of hard-fought litigation for holders of BNY-backed American depositary receipts justifies a $21.75 million attorney fee award and $1.41 million in expenses.

The investors had alleged they'd been overcharged on conversions of their foreign currency dividends for more than two decades, presenting their attorneys with a host of challenges for claims that could be time-barred or claimants that lacked standing, the attorneys told a New York federal judge.  "Even if the court ultimately certified a litigation class, it might have held only claims encompassing FX transactions within only a few years of the case's commencement could proceed, which would have vastly reduced classwide damages," according to the motion.  "The requested fee is, in short, commensurate with plaintiffs' counsel's vigorous efforts as well as the end result."

To date, only six ADR holders have opted out of the settlement, and none have objected, the investors said.  Counsel for the ADR holders said they've devoted more than 32,535 hours to the action and are seeking $1.41 million on top of their fees award for expenses, including $35,000 in awards for the ADR holders named as plaintiffs in the complaint.

Article: Court Reduces Class Action Fee Award After Reversionary Clause

April 29, 2019

A recent New York Law Journal article by Thomas E.L. Dewey of Dewey Pegno & Kramarsky, “District Court Reduces Class Counsel’s Attorney Fee Award in Light of Reversionary Clause,” reports on a case, Grice v. Pepsi Beverages Co., where a district court reduced an attorney fee award in a class action by more than one-third based primarily on the reversionary clause in the settlement agreement.  This article was posted with permission.  The article reads:

When parties to a class action reach a settlement agreement and include a clause that defendant will not oppose class counsel’s attorney fee award, they may expect that the unopposed fee will be approved by the court.  But a recent decision from the Southern District of New York reminds us that courts have an interest in ensuring the reasonableness of attorney fees and protecting the members of the class. Courts are particularly wary of reversionary clauses, which allow the defendant to recoup portions of the settlement fund not claimed during a claims process.

In Grice v. Pepsi Beverages Co., No. 17-CV-8853 (JPO), 2019 WL 340714 (S.D.N.Y. Jan. 28, 2019), after reaching a class action settlement, class counsel sought approval of their attorney fees.  The court reduced the attorney fee award by more than one-third based primarily on the reversionary clause in the settlement agreement.

Background

In Grice, plaintiffs brought a class action against defendant Pepsi Beverages Company (Pepsi) based on Pepsi’s alleged violations of the Fair Credit Reporting Act (FCRA). Id. at *1  Plaintiffs alleged that Pepsi had violated the FCRA by procuring plaintiffs’ consumer reports for employment purposes without making the required disclosure in a stand-alone document. Id.  Less than eight months after the case was filed and before any significant discovery or motion practice, the parties engaged in a private mediation and settled the case. Id.

Under the proposed settlement, Pepsi agreed to pay approximately $1.2 million to a common fund, which would cover all payments owed under the settlement, including class member payouts, attorney fees and costs, the cost of settlement administration, and a service fee to the named class plaintiff. Id.  After deducting all costs and fees, the remaining amount in the settlement fund was $710,850, which was to be distributed to the class members submitting valid claims forms. Id.  However, only about 8 percent of the class members submitted valid claims forms. Id.  This low participation rate triggered a reversionary clause under the settlement agreement that allowed Pepsi to claw back 40 percent of the settlement fund, meaning that only $426,510 remained to be distributed among the participating class members. Id.

Class counsel then moved for an attorney fee award of $397,387. Id.  The $397,387 attorney fee figure represented one-third of the initial $1.2 million common fund. Id.  In support of their application, class counsel stated that they had worked over 450 hours at hourly rates ranging from $500-875 per hour, which resulted in a lodestar figure of $331,281. Id.

Per the terms of the settlement agreement, Pepsi agreed not to oppose the attorney fee award and no class member objected to the motion. Id.

District Court Reduces Attorney Fee Award

Even without a motion opposing class counsel’s proposed attorney fee award, Judge J. Paul Oetken performed an in-depth analysis of the reasonableness of the requested fees, and ultimately ruled that a lower amount was appropriate.

In determining the reasonableness of class counsel’s attorney fees, the court followed the three-step analysis set forth in Goldberger v. Integrated Res., 209 F.3d 43, 47 (2d Cir. 2000). Id. at *2.  The first step in the Goldberger analysis is to compare the attorney fee sought to fees in other common fund settlements of similar size and complexity. Id.  The court noted that recent studies of attorney fees in common fund settlements for similarly sized cases found the median percentage to be 26.4 percent to 30 percent of the settlement fund. Id.  The court also cited empirical evidence showing that for FCRA cases, the median fee is approximately 29 percent. Id.  In distinguishing the cases offered by class counsel, the court reasoned that those cases “differ[] materially” while the empirical studies offered a more comprehensive view. Id. at *3.

The court determined that the Grice class action was “not very complex” since it involved a “single claim” and a “single statutory provision.” Id.  Therefore, the “magnitude and complexity” of the case favored a baseline fee percentage on the lower end of the median fees found by empirical studies. Id. (citing McGreevy v. Life Alert Emergency Response, 258 F. Supp. 3d 380, 386 (S.D.N.Y. 2017)).  Furthermore, the court noted that the parties settled early in the litigation, without any extensive discovery. Id.  The court rejected class counsel’s arguments that the need to prove willfulness under the FCRA statute and the inherently complex nature of Rule 23 class actions justified a higher baseline fee percentage. Id.  As such, the court concluded that a reasonable baseline fee for this case was 27 percent. Id.

The second step in the Goldberger analysis is to consider (1) the risk of the litigation; (2) the quality of class counsel’s representation; and (3) any remaining public policy considerations to determine whether there is any basis to further adjust the baseline fee. Id.  With respect to the riskiness of litigation, the court determined that though class counsel would have had to prove willfulness in order to recover any statutory damages under the FCRA, the risks were “not so unusual as to merit a change in the reasonable baseline fee for this case.” Id. at *4 (quoting McGreevy, 258 F. Supp. 3d at 387).

Next, to analyze the quality of class counsel’s representation, the court compared the total possible recovery to that obtained in the settlement. Id.  The court noted that each class member had obtained a recovery of $51.54, which was only 5 percent of their maximum potential recovery, since the FCRA statutory damages range from $100 to $1,000. Id. (citing 15 U.S.C. §1681n(a)(1)(A)).  However, this payout was “generally in line with other FCRA class action settlement recoveries” and in light of the “factual and legal hurdles” the class would have had to overcome to obtain a favorable judgment, the court determined that the settlement was a “good result” for the class members. Id.  Despite finding that the settlement was favorable, the court ruled that it was “not so exceptional as to merit an increase in the baseline percentage, especially where the court does not have the benefits of an adversarial examination of the issues.” Id.

Finally, the court considered any other policy considerations to determine whether to adjust the baseline fee.  Significantly, the court found that the public policy consideration that “distinguish[ed] this case from other common fund cases is the reversionary nature of the settlement fund.” Id. at *5.  The court explained that the reversion clause in the settlement agreement, which allowed Pepsi to claw back 40 percent of the settlement fund since the participation rate was less than 60 percent, was the “least favored” way to distribute unclaimed common settlement funds due to its potential to create perverse incentives. Id.  The court pointed out that if class counsel’s fees were calculated based on the gross settlement amount prior to reversion, class counsel risk having an incentive to acquiesce in such reversion arrangements even if they are not in the best interest of the class. Id.  Here, the fee award requested by class counsel was calculated as one-third of the gross settlement prior to the reversion. Id.  As such, the court determined that a further reduction of the baseline percentage from 27 percent to 22 percent was appropriate, resulting in an attorney fee award of $262,300. Id.

The third step involved a lodestar “cross-check” on the reasonableness of the award. Id.  A reasonable fee under lodestar is generally “the product of a reasonable hourly rate and the reasonable number of hours required by the case.” Id. (quoting Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011)).  Notwithstanding class counsel’s hourly rates of $500 and $875 in other states, the court determined that the “prevailing market rates in the Southern District of New York” for partners in consumer cases is $300 per hour. Id. at *5-6.  The court accepted class counsel’s representation that they had worked 450.4 hours on the case, despite their failure to “substantiate their representation.” Id. at *6.  Based on the lodestar cross-check, the court concluded that the $262,300 fee award was reasonable. Id.

Practice Tips

The Grice case provides helpful insight into the factors courts consider when faced with a class action attorney fee award motion.  Furthermore, this case reminds us that even if the class action settlement agreement includes a clause that defendant will not oppose class counsel’s attorney fee award and even if no other class member objects, the award may still be modified sua sponte by the court.  In class actions, courts typically take on a proactive role in approving settlements and awarding costs.  Here, the court reduced the proposed attorney fee award by more than one-third.

This case also shows that courts disfavor reversionary clauses and practitioners should be mindful that including such clauses may result in a lower attorney fee award.  As explained by Judge Oetken, there are other options to address a situation when some portion of a common fund goes unclaimed: (1) pro rata redistribution among the class members who did make claims; (2) escheat to the state; or (3) cy pres distribution to charitable organizations. Id. at *5.  The court described reversion as the “least favored” option due to “its potential to create perverse incentives.” Id.  In drafting settlement agreements, practitioners should consider whether including a reversion clause is in the best interests of the class and how such clauses may be perceived by courts.

Thomas E.L. Dewey is a partner at Dewey Pegno & Kramarsky.  Sarah A. Sheridan, an associate at the firm, assisted in the preparation of the article.

Attorneys Seek $34M in Fees in Lithium Battery Price-Fixing Settlements

April 25, 2019

A recent Law 360 story by Nadia Dreid, “Attys Seek $34M From Lithium Battery Price-Fixing Deals,” reports that attorneys who worked out more than $113 million in settlements on behalf of buyers accusing a slew of battery makers of conspiring to fix the price of lithium-ion batteries are asking a California federal judge to allow them to pocket $34 million for their trouble. 

Hagens Berman Sobol Shapiro LLP, Lieff Cabraser Heimann & Bernstein LLP and Cotchett Pitre & McCarthy LLP are serving as co-lead counsel to the indirect purchasers and plan to split the bounty.  They argued that the 30% fee was par for the course for similar big-name antitrust class actions, including a deal with the direct purchasers of the same MDL.

“The requested 30 percent fee award is reasonable compared to awards in similar antitrust class actions,” the battery buyers said.  “For example, last year this court approved a 30-percent fee award to counsel for direct purchaser plaintiffs in this action.  The firms also requested nearly $5.9 million in reimbursement for expenses.

The settled suits are part of sprawling multidistrict litigation that was formed in 2013 to combine suits accusing battery sellers of working together to hike prices for lithium-ion batteries — which are used primarily in computers and other electronics — from 2000 to 2011.  Hitachi Maxell Ltd., Sony Corp., LG Chem America, Toshiba Corp. and NEC Corp. were among the accused battery makers.

The firms managed to recover 11.7% of the damages they originally sought through three settlements, which is considered to be an “exceptional result.”  Samsung SDI Co. agreed to the biggest payout at $39.5 million, but LG Chem followed close behind with a deal for $39 million.  Sony will pay $19.5 million under the deal, with five other companies also agreeing to settlements in the low millions.

The case is In re: Lithium Ion Batteries Antitrust Litigation, case number 4:13-md-02420, in the U.S. District Court for the Northern District of California.