A recent Law 360 story by Jack Karp, “Quinn Emanuel’s 2nd $185M Fee Bid Blasted as ‘Indefensible’”, reports that Quinn Emanuel Urquhart & Sullivan LLP's second attempt to win $185 million in attorney fees in $3.7 billion litigation over the Affordable Care Act still fails to justify the "indefensible" amount and barely pays "lip service" to a reevaluation ordered by the Federal Circuit, health insurers told the federal claims court.

The Federal Circuit already wiped out the $185 million attorney fee that the U.S. Court of Federal Claims awarded to Quinn Emanuel and directed the claims court to reexamine objecting class members' insistence that the firm hadn't justified its fee request, Kaiser Foundation Health Plan Inc. and UnitedHealthcare Insurance Co. said.

"Despite this clear direction, class counsel's second petition again fails to justify its lodestar and again seeks to avoid a lodestar cross-check.  It instead asks the court to rubberstamp the same $185 million award," the health insurers said in their opposition to the firm's latest motion for approval of its fee request.

That motion for approval fails to support the 10,000 hours Quinn Emanuel says it spent on the case, suggests that the firm double-counted hours by including time spent on a separate multibillion-dollar class, and tries to skew its rates higher by seeking 2023 rates, even though its first fee petition was filed in 2020, according to the insurers.

"Trying to reverse-engineer defenses for its indefensible fee demand, class counsel uses inflated and unproven hours, multiplies those alleged hours by unprecedented rates, and then proposes a multiplier that is miles outside accepted norms.  That is akin to applying no cross-check at all," the insurers said.

Quinn Emanuel and a group of healthcare plan insurers the firm represents have insisted the firm used a novel claim and achieved a 100% recovery for the class in litigation over so-called risk corridor payments under the ACA.  But objectors Kaiser Foundation, UnitedHealthcare and others have argued that class counsel was entitled to just $8.8 million after a lodestar cross-check.

A Court of Federal Claims judge granted Quinn Emanuel's request for $185 million, or 5% of the total $3.7 billion settlement, in 2021 finding that a lodestar cross-check was unnecessary.  But that conclusion "was legal error," according to the Federal Circuit, which vacated the award in 2023.

That $185 million amount was inconsistent with promises made in class opt-in notices, and the "extraordinarily high award" wasn't justified, the three-judge panel ruled, ordering the fees to be recalculated.  But Quinn Emanuel's renewed request for $185 million "does little more than pay lip service" to the Federal Circuit's order, according to the insurers.

While the insurers still think their original $8.8 million fee request is reasonable, they are willing to agree to a fee award between $11.77 million and $23.14 million in "the interest of finality," they told the claims court.  "[T]he objectors sincerely want class counsel to be handsomely rewarded.  $11.77 [million] to $23.14 million represents an incredibly large fee award that also fulfills class counsel's promise of a lodestar cross-check," the insurers said.

Every year, NALFA conducts a survey of prevailing market rates in civil litigation in the U.S.  Today, NALFA has released the results from its 2023 hourly rate survey.  The survey results, published in the 2023 Litigation Hourly Rate Survey & Report, shows billing rate data on the factors that correlate to hourly rates in litigation:

City / Geography
Years of Litigation Experience / Seniority
Position / Title
Practice Area / Complexity of Case
Law Firm / Law Office Size

This empirical survey and report provides micro and macro data of current hourly rate ranges for both defense and plaintiffs' litigators, at various experience levels, from large law firms to solo shops, in regular and complex litigation, and in the nation's largest markets.  This data-intensive survey contains hundreds of data sets and thousands of data points covering all relevant billing rate categories and variables.  This is the nation's largest and most comprehensive survey or study of hourly billing rates in litigation.

This is the fourth year in a row NALFA has conducted this hourly rate survey.  The 2023 Litigation Hourly Rate Survey & Report contains additional categories and more accurate variables.  These updated features allow NALFA to capture new and more precise billing rate data.

Through its propriety email database and digital infrastructure, NALFA surveyed over 495,000 attorneys from thousands of law firms and law offices from across the U.S.  Over 24,800 qualified litigators participated in this hourly rate survey over a 10-month period.  This data-rich survey was designed to aid litigators in proving prevailing market rates in court and comparing their billing rates to their litigation peers.

A recent Law 360 article by Edward Flores, “The Shifting Landscape of Securities Class Action Fees”, reports on the changing landscape of attorney fees in securities class actions.  This article was posted with permission.  The article reads:

A recent Law360 article notes that there appears to be a growing shift in how class action fees are awarded, with the benefits secured for class members taking an increasing role in determining fees rather than fees simply being a function of the settlement amount.  An examination of data on the percentage of the recovery awarded to attorneys in securities class actions shows that while the percentage declines as recoveries get larger, that percentage also increases as recoveries grow relative to a statistically predicted recovery.

As part of the settlement stage of a securities class action, plaintiffs file motions for approval of the settlement, as well as attorney fees and expenses.  In these motions, the attorney fees sought are typically based on a percentage of the proposed settlement, with the proposed figures often based on a sample of recent cases, the case's lodestar multiplier or relevant benchmarks.  For example, a June case in the U.S. District Court for the District of Delaware, In re: Electric Last Mile Solutions Inc., noted that "Lead Counsel intends to seek an award of attorneys' fees of no more than one third of the Settlement Amount.  This fee request is in line with other settlements approved in recent cases."

In another case in the U.S. District Court for the Middle District of Tennessee in July, Bond v. Clover Health Investments Corp., the plaintiffs' counsel noted that the "request for 25% of the Settlement Fund ... amounts to a lodestar multiplier of 3.53, which is within the range of multipliers commonly awarded in securities class actions and other complex litigation."

Finally, the plaintiffs' counsel in a U.S. District Court for the Northern District of California case in August, Purple Mountain Trust v. Wells Fargo & Co., noted that "Lead Counsel seeks an award of attorneys' fees of 25% of the Settlement Amount.  This fee request ... is consistent with the benchmark for attorneys' fee awards in this Circuit."

Plaintiffs counsel also typically highlights the recovery they have obtained for the class and their work to obtain that recovery.  For example, in the aforementioned case involving Clover Health, counsel for the plaintiffs noted that the "recovery represents approximately 13.2% of the likely recoverable damages in this case, well above the median recovery of 1.8% of estimated damages for all securities class actions settled in 2022."

However, those recoveries are, at best, benchmarked as a percentage of some estimate of losses suffered by the class.  An important question is whether plaintiffs counsel receives a higher fee when they obtain an unexpectedly large settlement, potentially indicating productive work on their part.  Moreover, it may be of interest to see what other factors drive attorney fees awarded in securities class actions, both in terms of examining the direction and magnitude that certain factors have on attorney fees, as well as for purposes of estimating or cross-checking proposed fees given certain characteristics of a case.

Data and Analysis

To examine what factors can help explain attorney fees awarded, we analyzed securities class actions with alleged violations of Rule 10b-5 involving common stock that settled during the period from January 2012 through June.  In addition to the logarithm of the actual settlement amount, some of the variables analyzed include a potential proxy for attorney performance and the strength of a case, the time to resolution of a case, and the status of certain motions as of the time of settlement.

As a potential proxy for attorney performance and the strength of a case, we calculated the ratio of the actual settlement value to its mean predicted settlement value to examine if better-than-expected settlements are reflected in attorney fees received.  For each case, the mean predicted settlement value was calculated using an econometric model that uses as inputs variables that are historically known to drive settlement values.[8] For the middle 95% of cases in the dataset, the value of this ratio ranges from 0.2 to 3.8.

We also examined the effect that the time to resolution has on attorney fees, based on the filing of the first complaint of a case.  Finally, we examined the effects that the filing and outcome of the motion to dismiss and the motion for class certification have on attorney fees.  In measuring attorney fees, we used two different variables: attorney fees as a percentage of the settlement, and total attorney fees and expenses as a percentage of the settlement.  As these variables range from 0 to 1, a fractional logistic regression model is used to analyze the relationship between attorney fees and the independent variables.

As the coefficients of this model can be hard to interpret, we examined the marginal effects of the independent variables in order to get an idea of the effect that a change in one variable has on attorney fee percentage, holding all others constant.

Results

From Table 1, we see that the ratio of the actual settlement to the mean predicted settlement has a positive and statistically significant effect, possibly highlighting how a better-than-expected outcome is rewarded in attorney fees.  In terms of magnitude, we find that a 0.1 increase in this ratio results in an additional 0.1% in attorney fee percentage.

One interesting question that our data does not let us answer is whether higher-than-predicted settlements reflect a particularly strong prosecution of the case by plaintiffs counsel or case factors favorable to the class that are not captured by our model.  Overall, we find that the variables in the model using attorney fee percentage as the dependent variable can explain nearly 20% of the total variation in attorney fee percentage.

Looking at the individual variables beyond the ratio of the actual to predicted recovery, the logarithm of the settlement value is unsurprisingly the strongest predictor of attorney fees, with higher settlement values being associated with a lower attorney fee percentage, consistent with prior research.

On the other hand, the time-to-resolution variable had a small and statistically insignificant effect, with each year contributing an additional 0.22% in attorney fee percentage.  Thus, to the extent that courts are rewarding plaintiffs counsel — or plaintiffs counsel are willing to ask for more — through the fee percentage, that would appear to be based more on results than time spent.

When analyzing the motion variables, we find that the filing of a motion to dismiss has a statistically significant negative effect on attorney fees.  Meanwhile, the effect of a motion to dismiss being denied or partially granted is positive and statistically significant, contributing an additional 1.5% in attorney fee percentage and again potentially showing that plaintiffs counsel is rewarded for achieving outcomes favorable to the class.

As over 90% of settled cases have a motion to dismiss filed, this means that cases where the motion to dismiss is denied or partially granted tend to have a 1.5% higher attorney fee percentage relative to cases that settle before a court decision was reached in the motion to dismiss.

The filing of a motion for class certification has a small and not statistically significant effect on attorney fees.  However, the effect of a motion for class certification being granted is positive and statistically significant, contributing an additional 1.6% in attorney fee percentage, again consistent with the idea that plaintiffs counsel is being rewarded for achieving outcomes favorable to the class.

We also performed this analysis using total attorney fees and expenses as a percentage of the settlement size as the dependent variable.  Under this model, the explanatory variables explain roughly 40% of the total variation in total attorney fees and expenses.

While the results look similar for several of the variables analyzed, there are a few notable differences. For example, the time-to-resolution variable was statistically significant in this model, with each year contributing an additional 0.62% in attorney fee percentage and expenses.  In other words, plaintiffs counsel appear to be compensated for actual expenses, but are not being compensated through the fee percentage for time spent.

The filing of a motion for class certification was also positive and statistically significant, contributing to an additional 2.8% in attorney fee percentage and expenses.

Conclusion

Our analysis of settled cases shows that in addition to the settlement size, plaintiffs counsel in securities class actions appear to be rewarded for good settlement outcomes relative to a statistical prediction, with certain outcomes for the motion to dismiss and motion for class certification also affecting attorney fees awarded.

As a starting point, this means that in securities class actions, attorney fees are not just based on "the amount of money involved in a settlement," but also to at least some degree on the difference between that amount of money and the expected amount of money based on characteristics of the case.

That said, it is possible that analyses such as those described here may also be useful for purposes of estimating or cross-checking proposed fees given certain characteristics or outcomes in a case, particularly if one would like to reward successful advocacy by plaintiffs counsel. 

As noted above, however, while our proxy variable for attorney performance and strength of case incorporates several quantitative factors that drive settlement values, it may not account for other qualitative strengths and weaknesses of a case.

Nevertheless, given that there are some areas that we can measure, it may make sense to see how a proposed settlement compares to a statistical prediction as part of the consideration of the relevant amount of attorney fees.

Edward Flores is a senior consultant at NERA Economic Consulting.

A recent Law 360 story by Jack Maher, “Epstein Victim Attys Want Third of $290M JPMorgan Deal”, reports that class counsel for the victims of sex trafficking committed by Jeffrey Epstein who reached a $290 million settlement with JPMorgan Chase this summer asked this week for a fee award of 30%, citing their speedy results in achieving what they called a "historic victory" for their clients.  Attorneys from Boies Schiller Flexner LLP and Edward Henderson Lehman LLC requested the fee, plus just over $1 million expenses, in a motion filed Thursday in the U.S. District Court for the Southern District of New York.

"Class counsel is conscious that the fee requested is large," the filing read.  "But given the risks and uncertainties of this case during the extensive pre-complaint investigation as well as at the time the case was filed and the extraordinary result achieved, the requested fee of 30% of the settlement amount is fair and reasonable."  The class of survivors alleged in their lawsuit that JPMorgan Chase Bank NA served as Epstein's main financial institution from 1998 to 2013, allowing him to withdraw enormous amounts of cash at a moment's notice to finance his crimes.

The complexity of the suit, the work put into it and the final result — the largest settlement ever for victims of sex trafficking — justify the award, class counsel told the court.  The attorneys spent nearly 16,000 hours litigating the suit on a contingent basis, they told the court, confidentially interviewing over 100 people, including dozens of survivors, analyzing over 100,000 pages of documents produced in discovery and deposing people like JPMorgan CEO Jamie Dimon.

Class counsel fought off a motion to dismiss from the bank that presented complex legal arguments about under what circumstances a financial institution can be held liable in cases like this, they said.  As a result of their efforts, members of the class will receive a larger settlement from JPMorgan than from Epstein's estate, and they will not have to testify in a deposition or at a trial about traumatic experiences with Epstein, the lawyers noted.

According to their motion, class counsel used a percentage method to determine an appropriate award, but cross-checking it with the alternative lodestar method shows the award is in line with awards in other complex cases.  This suit is just one of many legal actions that have followed lurid revelations about Epstein's predation.  Epstein died by suicide in August 2019 while in detention in New York after he was arrested on federal sex trafficking charges.

A recent Law 360 story by Bonnie Eslinger, “Del Taco ‘Perplexed’ By Atty Fee Bid in $50M Deal”, reports that a California judge who tentatively awarded Del Taco workers' attorneys $12.5 million in fees for their work securing a $50 million wage deal said he's "perplexed" by their arguments for $16.7 million, saying they should have included legal authorities supporting the higher amount in an earlier court filing.  In his tentative ruling, Alameda County Superior Court Judge Evelio Grillo largely signed off on the $50 million deal, which settles wage and hour claims filed on behalf of more than 50,000 workers and also allegations of California labor code violations filed under the state's Private Attorneys General Act.  With regard to attorney fees, the court awarded a 25% cut of the $50 million, less than the one-third share requested.

At the start of a hearing held via Zoom, Judge Grillo told lawyers for the fast-food workers that he had tried to be responsive to arguments they had previously made in support of their fee request, but "I understand that you're still not happy with what I did."  Matthew Matern of Matern Law Group PC, a lawyer for the workers, said while they appreciated the court's consideration of their arguments, there was no reason not to award 30% or more in fees.  Among the cases he cited in support of his argument was a 2006 decision in Allapattah Services, Inc. v. Exxon Corp, awarding attorneys 31.33% of a $1.075 billion settlement.

"There were many other cases," Matern told the court. "And in many of those cases, the multipliers were very high as well."  Judge Grillo noted that the last time plaintiffs' counsel argued for a higher fee percentage they cited two cases.  "You argued successfully that the court should consider a higher multiplier," the judge said.  "And that's what I did."

Matern argued that the multiplier — an amount the total fees are multiplied by in determining a fee award — should be used simply as a "cross-check" to see whether the percentage awarded of the total settlement is reasonable.

Judge Grillo asked what the multiplier would be for in the case before him if he was to award 30% of the settlement to the lawyers. Matern said it would be about 6.5.  "There are many cases where it's over that," Matern told the court, saying that in the 1995 Weiss v. Mercedes-Benz of North America ruling has a 9.3 multiplier for the attorney fees.

The judge could find additional cases in support of the fee argument cited within a 2017 district court decision In re: National Collegiate Athletic Association Athletic Grant-In-Aid Cap Antitrust Litigation, which was affirmed by the Ninth Circuit, Matern said.  Another case in support of high multipliers, Matern told the court, is In re Merry-Go-Round Enterprises, Inc., a 2000 case in Maryland federal court.

"That one was a bankruptcy case, and they awarded a 19.6 multiplier on a 40% fee out of a $185 million fund," Matern said.  Ultimately, the court should grant the requested fees, because the lawyers for the Del Taco workers achieved an exceptional result, Matern argued.

"It was obtained for the class and this wouldn't have happened without the exceptional work we did and the substantial risk," the lawyer said.  Judge Grillo said he'd look at the other cases the lawyer cited.  "I'm a little bit... 'perplexed' is not the right word, but for lack of a better word, perplexed because you did cite me a couple of cases and I did read them," the judge said.

The judge had previously suggested that a multiplier used in a case affirmed by the Ninth Circuit, Vizcaino v. Microsoft Corp., was appropriate, Mattern noted.  Then, after the plaintiffs had highlighted a different case for the court, Steiner v. Am. Broad. Co., in which the Ninth Circuit concluded that a 6.85 multiplier "fell within the range of multipliers that courts have allowed," it appeared that Judge Grillo had picked a multiplier between those two, the lawyer said.  But in the Vizcaino case that was a 28% fee cut, so the court used the 3.96 multiplier, "because that's what it took to get to the 28% that they awarded," the lawyer said. "So it was merely just cross-checking."

The judge said he understood the argument, and he would put out a ruling later.  "You gave me the authorities, I considered them, and now you're suggesting that there are other authorities that I should consider," the judge said. "I'll do that.  But you know, it would have been nice to have them, to have those arguments initially."  According to the judge's tentative ruling, the lawyers for the plaintiff told the court they spent 3,140.8 attorney hours and 1,231.0 support staff hours for a total of 4,371.8 hours on the case.

The settlement also proposed a service award of $20,000 to the main plaintiff, Karolina Torrez.  In his tentative ruling, the judge said after factoring in administration costs, a PAGA payment of $1.5 million, awards for other plaintiffs, and litigation expenses, the amount left to distribute to the class would be just over $30.7 million, providing an average payment per class member of about $615.

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