January 23, 2018
A recent The Recorder by Amanda Bronstad, “Plaintiffs Lawyers in Anthem Data Breach Settlement Defend $38M in Fees” reports that laintiffs lawyers are fighting accusations by an objector that their $38 million fee request in the Anthem data breach settlement was “outrageous on its face” and required a special master to investigate potential over-billing.
“In effect, objector contends that counsel should have litigated this case on the cheap, rather than devoting the resources (and taking the risks) necessary to litigate it well and protect the class,” wrote co-lead plaintiffs attorneys Eve Cervantez and Andrew Friedman in a response filed Jan. 18. “To put it simply, the lodestar in this case reflects first-rate lawyering that yielded a first-rate result, something this court is well equipped to rule upon.”
As for a special master, there was no need for such “satellite litigation,” which would only delay the case and incur costs, they wrote. “Rhetoric aside,” they wrote of the objector, represented by class action critic Ted Frank, “he identifies no billing improprieties that would raise serious questions about counsel’s fee request and which might make the services of a special master useful to the court.”
U.S. District Judge Lucy Koh of the Northern District of California has scheduled a Feb. 1 hearing for final approval of the $115 million settlement, though a hearing on the special master request is expected to be on April 5.
The settlement provides two years of credit monitoring and identity protection services to more than 78 million people whose personal information was compromised in 2015. It also provides a $15 million fund to compensate for costs such as credit monitoring services and falsified tax returns.
Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness, filed an objection last month on behalf of Adam Schulman, who is an attorney at his Washington, D.C., organization. He wrote that the fee request, which is 33 percent of the settlement, should be closer to $13.8 million when subtracting $23 million in notice and administration costs.
He also questioned why 49 other firms not appointed by the court stood to earn a total of $13.6 million in fees and “whether there were side agreements to back scratch or trade favors in other MDLs to get work in this MDL.”
But he was especially critical of the average $360 hourly rate for contract attorneys submitted by the four firms, one of which is San Francisco’s Lieff Cabraser Heimann & Bernstein, which was on the plaintiffs steering committee along with Girard Gibbs in San Francisco. A special master in Boston is investigating Lieff Cabraser, along with two other law firms, for potential over-billing for staff attorneys in a $74.5 million fee request in securities class action settlements with State Street. The special master’s report is due in March.
Cervantez, of San Francisco’s Altshuler Berzon, and Friedman, of Washington, D.C.-based Cohen Milstein Sellers & Toll, wrote in their response that there are no similarities between the two cases.
“There is absolutely no indication that counsel’s fee application here suffers from the perceived irregularities that have prompted some trial courts to enlist the assistance of a special master,” they wrote. In State Street, a special master was appointed after class counsel admitted their lodestar was initially overstated due to a mistake in double counting time for contract attorneys. “Here, to the contrary, there is no suggestion that counsel duplicated any amount of the lodestar, inadvertently or otherwise,” they wrote.
But in a declaration, Cervantez said she had discovered “three clerical errors”: One associate at Scott + Scott was incorrectly identified as a contract attorney, as were staff attorneys at Lieff Cabraser, and the rate for an associate at Goldman, Scarlato Penny in Conshohocken, Pennsylvania, should have been $495, not $595, per hour.
In declarations filed with the court, Friedman, Cervantez, Lieff Cabraser’s Michael Sobol and Eric Gibbs of Girard Gibbs insisted they had not “made any agreements to exchange work or fees in this case for work or support for leadership positions in another MDL or in any other case.” Friedman and Cervantez added that they made all work assignments to other firms “on the basis of efficiency and relevant experience and expertise.”
Friedman, Cervantez, Sobol and Gibbs did not respond to a request for comment.
Frank said: “There are the same problems here that the State Street special master is investigating. The declarations were fascinating: the claim is that dozens of law firms allegedly did as much as $1.5 M of lodestar work on spec without any promise or tacit understanding of how they would be paid. I can’t even hire a local counsel for a couple of thousand dollars without signing a lengthy retainer agreement.”
Koh has been especially critical of fees, trimming the number of plaintiffs firms leading the Anthem case and slashing compensation in other cases involving Lieff Cabraser and Cohen Milstein.