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Category: Lodestar / Multiplier

Class Counsel Win $15.2M Fee Award in Home Depot Breach

January 24, 2020

A recent Law 360 story by Mike LaSusa, “Home Depot Breach Class Attys Score $15.2M After Fee Fight,” reports that attorneys representing banks and other financial institutions that sued over Home Depot's 2014 data breach won a $15.2 million fee award after the Eleventh Circuit nixed an earlier award and asked the Georgia federal court that handled the case to take another look.  U.S. District Judge Thomas W. Thrash Jr. awarded the attorneys $14.5 million in fees and just over $730,000 in expenses, rejecting Home Depot’s contention that the Eleventh Circuit’s ruling limited the Georgia federal court’s latitude in deciding the fee issue.

The appeals court ruled in July that the lower court had erred in applying a multiplier of 1.3 to an $11.773 million lodestar, leading to a $15.3 million award.  Home Depot said that decision triggered a clause in its settlement with the financial institutions under which Home Depot would only be responsible for the lower amount if the attorney fees were reduced on appeal.  But Judge Thrash pointed out that the Eleventh Circuit left it up to him to determine the best way to decide the attorney fees.

“If the Eleventh Circuit had intended that this court simply enter an order awarding class counsel $11.773 million plus interest, as Home Depot contends, this court believes the appellate court would have said so explicitly,” the judge said.  “The Eleventh Circuit did not reduce the amount of the award; rather, the appellate court reversed the award and remanded for reconsideration.”

Rather than use the lodestar method that had yielded the earlier fee award, Judge Thrash instead calculated the new award based on a percentage of the benefit to the class.  Calculating the benefit to the class to be $42.5 million, the judge ruled that one-third of that amount would be appropriate, and added on interest as specified in the settlement agreement.

The attorneys asked for $18 million in late August, contending that their work had resulted in not only the $27.25 million settlement, but also pushed the retailer to offer some of the country's biggest banks $14.5 million to release their claims.

$100M Attorney Fee Award in $1B Vereit Settlement

January 23, 2020

A recent Law 360 story by Reenat Sinay, “Robbins Geller Bags $100M in Fees for $1B Vereit Settlement,” reports that Robbins Geller Rudman & Dowd LLP attorneys will receive a $100 million payday for securing a $1.025 billion settlement for Vereit Inc. investors in a suit that accused the real estate investment trust of lying about its books, a New York federal judge ruled.  U.S. District Judge Alvin K. Hellerstein approved the massive settlement but decided to take more time to rule on attorney fees due to the size of the deal.

Robbins Geller, which represented lead class plaintiff TIAA-CREF, had asked for attorney fees worth 12.4% of the settlement fund, which comes out to $127.1 million, plus expenses of just over $5.1 million.  The lawyers said in their December fee bid that the 12.4% amount "falls far below" the usual range for cases of this size and complexity, and noted a 13% fee award in a $2.3 billion class-action settlement was recently affirmed by the Second Circuit.

Without explaining his reasons for approving a lower amount than requested, Judge Hellerstein awarded $100 million in fees and $5,154,721 in expenses.  "The court finds that the amount of fees awarded is fair, reasonable, and appropriate under both the lodestar and 'percentage-of-recovery' methods," he said.  "Lead counsel has pursued the litigation and achieved the settlement with skill, perseverance and diligent advocacy."

The settlement ended five years of "hard-fought" litigation and represents a recovery of 50% of the maximum recoverable damages — the highest percentage recovery ever in a major private securities class action ahead of trial, according to Robbins Geller.

Bankruptcy Court Denies Fee Enhancement Under Common Fund Doctrine

January 17, 2020

A recent Legal Intelligencer article by Rudolph J. DiMassa, Jr. and Geoffrey A. Heaton, “Bankruptcy Court Denies Motion for Fee Enhancement Under ‘Common Fund Doctrine’,” reports on a bankruptcy court that recently denied creditors’ counsel’s motion for a fee enhancement under the common fund doctrine.  This article was posted with permission.  The article reads:

In a bankruptcy case filed 91 years ago (and reopened 85 years later), the U.S. Bankruptcy Court for the Western District of Virginia recently denied creditors’ counsel’s motion for a fee enhancement under the “common fund doctrine,” finding it could not award the requested fees absent statutory authority.  In particular, the court determined it would be an abuse of its equitable powers to award fees beyond the scope of applicable bankruptcy law in In re Yellow Poplar Lumber, Case No. 605 B.R. 416 (Bankr. W.D. Va. 2019).

Background

In July 1928, White Oak Lumber Co. filed an involuntary Chapter 7 petition in the U.S. District Court for the Western District of South Carolina, seeking to have Yellow Poplar Lumber Co., Inc. “adjudged a bankrupt” under the Bankruptcy Act of 1898.  n 1931, the district court adjudged Yellow Poplar as bankrupt and closed the case.

In 2013, the case was reopened in connection with a dispute over ownership rights in certain gas estates on parcels of land in Virginia, and it ultimately found its way to the U.S. Bankruptcy Court for the Western District of Virginia.  The dispute resulted in a settlement whereby Yellow Poplar’s bankruptcy estate stood to receive approximately $2 million in gas royalties.  The Chapter 7 trustee appointed in the reopened case, with the assistance of a genealogist, identified several of the original creditors’ existing heirs or successors-in-interest.  The bankruptcy court, in turn, directed the trustee to file a brief addressing the appropriate interest rate on the anticipated distribution to creditors, and invited any other party-in-interest to do the same.  While the trustee contended that the interest rate should be 2.4%, counsel for the heirs of two creditors advocated a 7% rate, which reflected the legal rate in effect in South Carolina when Yellow Poplar’s bankruptcy case was filed.  The court ultimately ordered the application of a rate of 3.6%.

Creditors’ counsel, however, successfully appealed the court’s ruling, which resulted in general unsecured creditors receiving 7% interest on their distributions, and increasing the asset pool to be distributed to general unsecured creditors by approximately $740,000.  Notably, the efforts of creditors’ counsel did not increase the amount of funds in the bankruptcy estate, but rather increased just the proportion of estate funds going to the class of general unsecured creditors, effectively diverting funds from one class of constituents to another.  Creditors’ counsel then filed a motion with the bankruptcy court seeking a fee enhancement of $164,164.90 under the “common fund doctrine.”  The trustee opposed the motion, arguing, among other things, that the common fund doctrine does not apply in bankruptcy cases.

Common Fund Doctrine

The common fund doctrine is an exception to the American Rule, i.e., the general rule prevailing in the United States that each litigant is responsible to pay its own attorney fees.  The doctrine generally applies where a litigant, acting to recover on its own claim, recovers property from which others may satisfy their claims as well, entitling the litigant to payment of attorney fees and costs from the “common fund” used for payment of all claims.

Based upon principles of equity, the common fund doctrine recognizes that one who benefits from a lawsuit without contributing to its cost is unjustly enriched at the expense of the successful litigant who bore the costs.  In addition to payment of a litigant’s attorney fees and costs, the doctrine also allows the litigant’s attorney to collect an extra award of fees from the common fund, even if the attorney is merely performing services for his client per the terms of his engagement.

Court Analysis

The court determined that the operative question was not whether the common fund doctrine applies, but rather whether the court had authority to grant the requested fee enhancement from estate assets.  To that end, the court considered precedent under both the Bankruptcy Act of 1898 and the Bankruptcy Code currently in effect: although the Bankruptcy Act governed Yellow Poplar’s case, the court considered cases applying the Bankruptcy Code for additional guidance.

Quoting at length from In re Fesco Plastics, 996 F.2d 152 (7th Cir. 1993), a case filed under the Bankruptcy Code that denied a fee request under the common fund doctrine, the court highlighted the central problem with counsel’s requested fee enhancement: a bankruptcy court cannot award attorney fees without statutory authority, such as that found in Bankruptcy Code Sections 327-330, 1103 and 503(b)(4).  The court concluded that an award of fees outside the context of applicable statutory provisions is beyond a bankruptcy court’s mandate.  In the words of the Fesco Plastics court, “a bankruptcy court is simply not authorized to do whatever is necessary to reach an equitable result; it may only do whatever is necessary to enforce the Code.”

The court noted that prevailing case authority decided under the Bankruptcy Act was in accord with Fesco Plastics.  In particular, the court highlighted Cox v. Elliott (In re Calhoun Beach Club Holding), 122 F.2d 851 (8th Cir. 1941), which rejected the argument that a bankruptcy court “has inherent equitable power” to authorize payment of a creditor’s attorney fees from estate assets.  As the U.S. Court of Appeals for the Eighth Circuit explained in Cox, the Bankruptcy Act “carefully regulates the compensation and expenses that may be allowed in bankruptcy,” and contains an implied exclusion of other fee allowances not expressly set out in the Bankruptcy Act.

After considering Fesco Plastics, Cox and several other cases under both the Bankruptcy Act and the Bankruptcy Code, the court concluded it could not “abuse the equitable power Congress bestowed upon it to award fees for services outside the scope of applicable bankruptcy law.”  The bankruptcy court noted that, even were it to conclude that it had the authority to award fees under the common fund doctrine, counsel might nonetheless remain ineligible for the additional fees: as noted above, counsel’s efforts did not increase funds flowing into the bankruptcy estate, but rather reallocated estate funds among classes of creditors.

Although acknowledging that the common fund doctrine might apply in exceptional circumstances, the court confirmed that a fee award or enhancement would still have to be made pursuant to statutory authority, such as section 64(b)(3) of the Bankruptcy Act, allowing a “reasonable attorney fee” to petitioning creditors in an involuntary case, or section 64(b)(2), allowing for payment of “reasonable expenses” of creditors who recover property transferred by a bankrupt.

Here, however, no provision of the Bankruptcy Act or the Bankruptcy Code existed to authorize “fees for creditor’s attorneys whose actions incidentally benefited some creditors, to the detriment of others, while pursuing their clients’ best interests.”  The court noted, moreover, that counsel had not identified any provision of the Bankruptcy Act or the Bankruptcy Code that authorized the fee award, and the authorities it did cite were either distinguishable, were not on point, or supported the court’s analysis.  Accordingly, the court denied counsel’s motion for a fee enhancement.

Conclusion

Viewed through the equities of the case, it is arguably unfair that all members of the general unsecured creditor class benefited without having to contribute to the legal fees and expenses incurred by just a few creditors in the class.  Indeed, the court confessed that it was “not unsympathetic” to counsel’s fee request.  Nevertheless, Yellow Poplar provides valuable guidance to creditors seeking payment of attorney fees from estate funds: asserting equitable theories such as the “common fund doctrine” may engender judicial sympathy, but they are no substitute for statutory authority.  Consequently, creditors’ counsel seeking any fee enhancement should make their request pursuant to a Bankruptcy Code section that explicitly authorizes such an enhancement.

Rudolph J. Di Massa, Jr. is a partner at Duane Morris in Philadelphia.  Geoffrey A. Heaton, is a special counsel at Duane Morris in San Francisco.

Class Counsel Says He Was Cheated Out of $2.6M in Attorney Fees

January 9, 2020

A recent Daily Report story by Greg Land, “Lawyer Booted From Class Action Says He Was Cheated Out of $2.6M in Legal Fees,” reports that a Georgia law firm is accused of scheming to cheat its former co-counsel out of nearly $2.6 million in legal fees, according to a series of court filings related to an $80 million MetLife class action settlement.  The court awarded more than $26 million in attorney fees as part of the July settlement, but M. Scott Barrett of Barrett Wylie in Indiana said his share awarded—more than $134,000—is a fraction of what he really should have gotten.

In a series of filings entered after the settlement was approved, Barrett said he was an integral part of the plaintiffs’ team until the lead lawyer, John Bell Jr. of Augusta’s Bell & Brigham “orchestrated” his removal.  Barrett said Bell—with whom he has a long history of co-counseling on class actions—had insisted that any fees he ultimately received would be totally at Bell’s discretion, “if and when there might be a fee.”

When Barrett protested, Bell purportedly manipulated the lead plaintiff and class representative, Laura Owens—whom Barrett had never met—to terminate his representation, which he was obliged to do.  Barrett argued that, his withdrawal notwithstanding, he should be paid 10% of the fee award, not a figure calculated on the hours he put into the case.

“Between April 24, 2014, and May 8, 2017, Barrett was actively involved in the prosecution of this matter,” said his September motion asking the court to allocate fees.  “During that time, over 140 docket entries were made, including multiple declarations from Barrett. Motions to dismiss and for summary judgment had been filed, responded to, and successfully defeated.  Discovery had been completed and an initial motion to certify the class had been filed.”

The settlement agreement approved by U.S. District Judge Richard Story of Georgia’s Northern District allocated $25 million in fees and $1.6 million in expenses to the plaintiffs’ counsel—nine lawyers, including Barrett.  The others include Bell and his partner, Leroy Brigham; Jason Carter and Michael Terry of Bondurant Mixson & Elmore; Cleveland, Georgia, solo Todd Lord; William Dobson and Michael Lober of Lober & Dobson in LaFayette, Georgia; and Oxendine Law Group principal John Oxendine.

Ruling on a motion by the plaintiffs’ counsel, U.S. District Judge Richard Story of the Georgia’s Northern District used the “lodestar” method to calculate Barrett’s portion of the award based on the hours he reported working on the case, rather than on a percentage basis of the fee award.  In his final order approving the settlement, Story specified that the issue of Barrett’s fees would not delay the settlement of the class’ claims.  In a Dec. 26 order, Story said Barrett’s share came to $134,311.

Barrett’s lawyer, Cochran & Edwards partner R. Randy Edwards, said in a motion to reconsider that the judge should at minimum reopen discovery and allow in evidence “because the court’s quantum meruit analysis is devoid of crucial and necessary findings of fact required under [federal rules] and to make an equitable allocation.  “This lack of findings has led to the anomalous result that Barrett’s allocation should be a scant one half-of one percent of the total attorneys’ fee.  How can this be?” Edwards said.

In response, the remaining plaintiffs lawyers argued that well-settled Georgia law makes clear that an attorney discharged from a case before it is resolved is not entitled to a contingency fee.  Further, they said, Barrett has provided “no evidence of any services he actually rendered for the benefit of Ms. Owens or the class she represents.”  Story has not yet ruled on Edward’s Dec. 31 motion.

Barrett filed another motion on Jan. 7 in opposition to Story’s division of fees after the plaintiffs filed a motion to approve it, arguing that “limited discovery and an evidentiary hearing” will allow the court to determine a proper split.  “Alternatively,” it said, “if the court is not inclined to do this, Barrett asks that he be allocated 10% of the total amount of the fee awarded as a minimum allocation.”

In an interview, Edwards said that—should those efforts prove unavailing—he can “virtually guarantee” that there will be an appeal.  The 10% figure, he said, is based upon Barrett and Bell’s “17-year track record of working together on these types of cases.”  As detailed in Barrett’s September motion for allocation, Bell, Barrett and three other lawyers not involved in the MetLife case began working together on retained asset account class actions several years ago.

They originally had a co-counseling agreement that any fee awards would first split 10% to each firm, with the remainder based on hours billed.  Bell became “dissatisfied” with the original arrangement, and it was reworked so that local counsel and the referring lawyer would each get 10% off the top.  Bell’s firm got 50% of the balance, Barrett’s got 30%, with the by then two remaining members splitting the last 20%.

$1.2M Fee Award in Chipotle Data Breach Class Action

December 31, 2019

A recent Law 360 story by Joyce Hanson, “Up to $1.6M Deal Over Chipotle Data Breach Gets Judge’s OK,” reports that a Colorado federal judge approved a class action settlement that will result in a payout that could total up to $1.6 million over a 2017 Chipotle data breach that exposed customer names and payment card numbers to hackers, saying the terms are fair and reasonable.  U.S. District Judge Christine M. Arguello said in her order granting the plaintiffs' unopposed motion for final approval that the settlement making class members eligible for out-of-pocket reimbursement of up to $250 is adequate and that the value of immediate recovery in the case outweighs "the mere possibility" of future relief after long and expensive litigation.  As of Nov. 19, class members have timely submitted 6,429 claim forms, according to the plaintiffs.

"The parties judge the settlement to be fair and reasonable, and no class member has objected to the settlement," the judge wrote.  "Class counsel are experienced class action litigators who are very knowledgeable about the claims, remedies and defenses at issue in this litigation."  In addition, class members who suffered other "extraordinary" unreimbursed monetary losses because of compromised information can make a claim for reimbursement of up to $10,000, according to the order.  The out-of-pocket reimbursement of up to $250 covers an automatic payment for each affected card, payment for customers' time spent dealing with fraud issues, and reimbursement for credit monitoring and identity theft insurance.

Judge Arguello also agreed to the customers' Nov. 1 unopposed motion for $1.2 million for their attorneys, comprised of $1,165,782 in fees and $34,000 in expenses, based on class counsel's 2,406 hours spent on investigation, prosecution and litigation settlement.  The judge also approved an incentive award of $2,500 for each of six class representatives in the suit led by plaintiff Todd Gordon.

Chipotle revealed in April 2017 that it had detected a data security breach in its electronic processing and transmission of confidential customer and employee information.  The burrito chain acknowledged at the time that it may be subject to lawsuits because of the breach that reportedly affected transactions from March 24 through April 18 of that year.  Financial institutions that sued over the breach told the court in March that the parties had reached a confidential settlement agreement.  On June 19, Judge Arguello granted the customers' June 13 unopposed motion for preliminary approval of the settlement, conditionally certifying the class.

The customers said the requested fee award is consistent with attorney fees approved in the court and in other data breach settlements.  Class counsel's lodestar of $1.44 million through Oct. 31 represents a 0.83 negative multiplier, which "supports the reasonableness of the fee requested," the customers said