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Category: Lodestar / Multiplier

Defense Claims ‘Overreaching’ Fee Request in ERISA Case

December 5, 2018

A recent Law 360 story by Danielle Nichole Smith, “Hospital Plan Rips ‘Overreaching’ $2.4M Fee Bid in ERISA Suit,” reports that the retirement plan for a Montana hospital told a federal judge that a request for $2.4 million in attorneys’ fees was “grossly excessive” after a $293,946 settlement resolving claims that the plan flouted the Employee Retirement Income Security Act.  The Retirement Plan for Employees of Northern Montana Hospital said in its objection that the $2.4 million fee request was “plainly overreaching” and needed to be reduced, noting that the amount was more than eight times the amount of monetary recovery.  And the proposed class counsel’s lodestar was $2 million more than that of the defendants’ attorneys, the plan said.

“The plaintiff’s attorneys’ fee request is grossly excessive by any measure,” the plan said.  “The fee request exemplifies the problem that led the Supreme Court to mandate that attorneys’ fee awards remain ‘reasonable in relation to the results obtained.’”

The settlement in the case provided $125,776 to named plaintiff Dr. Joel Cleary for retirement benefits he was wrongly denied and $168,170 to a proposed class of 175 plan participants whose benefits had been miscalculated, according to the plan’s objection.  The settlement also provides injunctive relief, requiring the plan to comply with ERISA statutes governing benefit determination and claims procedure, the plan said.  The plan contended, however, that the injunctive measures didn’t provide any meaningful relief or benefit since the plan had already complied with ERISA.  So the injunctive relief didn’t have any monetary value to consider when calculating attorneys’ fees, the plan said.

The Keller Rohrback LLP attorneys representing the proposed class had asked for the fees in November after the settlement with the plan and administrative committee was reached.  In support of their motion, the attorneys described their experience with ERISA cases and the work they performed in the suit.  The attorneys said they devoted a significant amount of time and effort to the case and that the rates they charged were what they typically billed clients whose cases weren’t handled on a contingency basis and had been approved in complex ERISA cases.  The attorneys also requested $75,086 in costs.

In the fee request, the attorneys also noted that the time they devoted to the suit kept them from working on other cases or taking on other representations.  The attorneys said they spent nearly 3,600 hours on the case as of October.  But the plan said that the attorneys’ lodestar amount was unreasonable, arguing that the reasonable hourly rate in Montana for ERISA cases was a lot less than what the attorneys requested.  The defendants’ attorneys only billed a total of $270,500 through October, the plan said.

If the court chose to use the lodestar method, the class’s attorneys’ lodestar had to be adjusted downward considering the results obtained, the plan said.  Additionally, the case didn’t present novel or difficult questions since the defendants didn’t dispute that Cleary was owed benefits or that the proposed class’s benefits had been miscalculated, the plan said.

The plan told the court that the percentage-of-recovery method was the best way to calculate the fees and that the $293,946 should be treated as a “constructive common fund” for determining such a percentage.  Though 25 percent was the “benchmark” for attorneys’ fees in the Ninth Circuit, the plan said it wouldn’t object to a 50 to 75 percent award since the recovery was so modest.

The case is Cleary v. Retirement Plan for Employees of Northern Montana Hospital et al., case number 4:16-cv-00061, in the U.S. District Court for the District of Montana.

Ninth Circuit: Big City Rates Proper Where Local Counsel Unavailable

November 21, 2018

A recent Metropolitan News story, “Award of Attorney Fees at ‘Big City’ Rate Proper Where Local Counsel Unavailable,” reports that the Ninth U.S. Circuit Court of Appeals has upheld a $135,876.75 attorney fee award to a special-needs student’s mother who prevailed in an administrative proceeding under the Individuals with Disabilities Education Act, rejecting the contention of the defendant, Tehachapi Unified School District, that fees should be set at a rate no higher than what local lawyers charge.

The district is located in a sparsely populated 522 square-mile mountainous area of Kern County, west of the Mojave Desert.  Plaintiff Charis Quatro, whose son suffers from a birth defect affecting the spine—resulting in his needing to use a walker and wear foot braces—engaged the services, on a contingency-fee basis, of attorney Andréa Marcus, whose office is in the City of Santa Barbara, to pursue remedies based on a refusal by the district to provide tutoring to the boy while recuperating from surgery.

District Court Judge Donald W. Molloy of the Eastern District of California set the fees for Marcus at $450 an hour, and the appeals court, in a memorandum opinion found that to be “a reasonable hourly rate” for her.  The panel was comprised of Circuit Judges Raymond C. Fisher and Milan D. Smith Jr., joined by District Court Judge Elaine E. Bucklo of the Northern District of Illinois, sitting by designation.

Marcus had sought $475 for her own work in connection with the administrative proceeding and her services in seeking an order for fees in the District Court, and less for hours put in by associates who devoted time to the case. Molloy found that that Marcus, in light of her experience in special education matters, was entitled to $450 an hour.  The judge multiplied the rate by the number of hours, but made some downward adjustments.

Responding to the district’s argument that it should not have to pay at big-city rates, and that fees should be set at $300 per hour or less, the opinion declares:  “The district court did not abuse its discretion in calculating the lodestar using rates from outside the local market.”  The opinion points to the Ninth Circuit’s 1997 decision in Barjon v. Dalton—which did not depart from the “local forum rule,” under which fees are ordered in accordance with the prevailing rates in the community—but it differentiates the factual circumstances.

The court in Barjon rejected the prevailing plaintiffs’ contention that their San Francisco attorney should be paid in accordance with the prevalent San Francisco rate—then $250 an hour—rather than the rate prevailing in the forum, Sacramento, which was $200 an hour. In that case, the plaintiffs did not show unavailability of local counsel capable of handling employment discrimination cases.  “Without evidence that Sacramento rates preclude the attraction of competent counsel, their argument remains too theoretical to warrant departure from the local forum rule…,” the 1997 opinion says.

By contrast, Monday’s opinion sets forth that Quatro provided her own declaration and that of two other persons, each a parent of a special needs pupil, to the effect that local counsel was unavailable to serve them.  It says Quatro presented “reports describing the limited access to legal representation in rural California and declarations describing the lack of local attorneys who were willing and qualified to represent clients in special education matters.”

In her trial brief, Marcus provided this factual summary: “The Defendant abandoned Plaintiff for 21-weeks (out of a 35-week school year), while he was recovering from multiple surgeries—dis-enrolling him from school, instead of providing home instruction while he recuperated from surgery, as is required by law.  This is the core of the dispute, as this child is bright and capable, yet lost most of a school year when the Defendant shrugged its legal duty to R.Q., a child with grave disabilities.  At the time of the underlying hearing, R.Q. was five years old, and had already undergone multiple complicated and painful surgeries in his short life.”  Following a four-day hearing, an administrative law judge awarded the boy 105 hours of instruction and ordered that Quatro be reimbursed for her transportation costs.

In an amicus curiae brief filed in the Ninth Circuit, the Council of Parent Attorneys and Advocates. Inc. said: “Here, Appellant Tehachapi Unified School District…seeks an outcome with potentially far-reaching and dangerous consequences for students with disabilities.  It seeks to slash the court-awarded hourly rate of $450 for an experienced special education attorney, by as much as two-thirds because it claims that $150-300 is the prevailing rate in Tehachapi without any proof that there was another equally qualified attorney in that underserved area willing to serve R.P. on a contingent basis….

“Essentially, the District is asking this Court to hold that, even when families cannot find local counsel willing and able to capably represent students in special education matters, attorneys who leave their own (more remunerative) markets to provide much needed legal support in underrepresented communities should never receive awards at their standard hourly rate.  Such a precedent would require attorneys working outside their standard markets to take on matters in underrepresented markets at a rate dramatically lower than they could command in their own markets, where attorneys are already in high demand.  Such a precedent would have a chilling effect on the willingness of qualified special education attorneys to take cases on in underrepresented markets.”

Both that brief and the one filed in the Ninth Circuit by Quatro make reference to a discovery response from the school district listing 35 attorneys it deemed qualified to handle special-needs cases; only four were located in Kern County, one having only four years’ experience in law practice, two with three years’ experience, and one who had resigned from the State Bar with charges pending.

Marcus asserted in her brief that the school district’s appeal “is pursued merely for the purpose of delay which has the real effect of discouraging other civil rights attorneys from practicing special education law on a pure contingency basis, further prejudicing families like the Quatro’s who would not have meaningful access to the judicial system otherwise.”

The case is Quatro v. Tehachapi Unified School District, 17-16210.  In a memorandum decision filed yesterday in Wright v. Tehachapi Unified School District, 17-16970, the same panel affirmed an award of attorney fees to parents who prevailed in an administrative action under the Individuals with Disabilities Education Act.  There, however, the school district acknowledged that local counsel was not available.  Marcus was also the attorney in that case.

Magistrate Judge Jennifer L. Thurston of the Eastern District of California made an award of $99,330.00 for services in the administrative proceeding and $39,087.50 for work done in the District Court.  She based the award on prevailing rates in the Central District.

SCOTUS Won’t Hear Case Involving Fee Award Calculation Method

November 13, 2018

A recent Law 360 story by Michael Phillis, “High Court Won’t Hear $17.3M Fee Dispute in Gas Royalty Row,” reports that the Supreme Court declined to take up a challenge to a Tenth Circuit panel's decision that said an incorrect method of calculating the $17.3 million attorneys' fees award for work on a $52 million settlement over gas well royalty payments meant the award should be set aside.

The Tenth Circuit panel’s decision, which will now remain intact, reversed a lower court's award of attorneys' fees and an incentive award of half a percent for lead plaintiff Chieftain Royalty Co.  The panel agreed with two class members who objected to that award, Charles David Nutley and Danny George, who said the lower court was required to use the lodestar approach under Oklahoma law instead of using the percentage-of-the-fund approach for allocating fees.

In its petition for review, Chieftain Royalty said the lodestar method that is based on how many hours the attorneys worked was "burdensome and creates a perverse incentive for class counsel to litigate inefficiently."  The petitioner preferred common-fund awards that distribute a percentage of a fund.

Chieftain Royalty further argued that in diversity class actions such as in the instant case, the courts should be able to decide how to award reasonable attorneys' fees instead of being forced to defer to the applicable state law.  The objectors, however, said Oklahoma law required the lodestar approach and must be applied, and the Tenth Circuit agreed.

Chieftain had filed the state-law putative class action against EverVest Energy Institutional Fund in 2011, alleging the oil and gas company underpaid lease royalties on gas from wells in Oklahoma.  The $52 million settlement, meant to benefit around 21,000 class members, netted final approval about four years later.  The objectors appealed with respect to the fees and incentive awards.  They argued the Oklahoma Supreme Court has held that reasonable attorneys' fees should be calculated by the lodestar method in common-fund cases.

The Tenth Circuit panel said in mid-2017 that while the circuit had no binding precedent on whether federal courts must follow state laws governing how to calculate attorneys' fees, it found a consensus among five other circuits that have considered the issue.  "When state law governs whether to award attorney fees, all agree that state law also governs how to calculate the amount," the panel said.  The decision nixed the awards and remanded the case, adding that class counsel didn't provide the necessary records about their hours to be used in a lodestar calculation, throwing their fees into question.

In an opposition brief Nutley filed in October, the objector said the high court should not take the case, although he did say that there was a circuit split on the issue.  However, the brief said that the question posed by the petitioner on whether "common-fund fee awards are governed in diversity cases by state or federal law" wouldn't fully deal with the question at hand.

"This court should direct the parties to brief and argue the additional question of whether, in a common-fund case like this, 'a reasonable attorney's fee' is presumed to be the attorney's lodestar ... provided it does not exceed a reasonable percentage of the common fund," the opposition brief said.  "An affirmative answer to that question would resolve many conflicts in federal common-fund jurisprudence by providing a uniform rule that is consistent with this court's prior holdings defining 'a reasonable attorney's fee.'"

Eric Alan Isaacson, an attorney for Nutley, said the Tenth Circuit got it right.  He said the justices likely recognized the case was a poor vehicle to resolve conflicts among various courts.  "As Nutley's Brief in Opposition pointed out, there are many conflicts in the federal decisions on common-fund fee awards, so that if the Supreme Court granted certiorari to consider Chieftain's arguments that federal law controls, the Court should also have the opportunity to clarify what the controlling federal law is," Isaacson told Law360.

The case is Chieftain Royalty Co. v. Charles David Nutley et al., case number 18-301, in the Supreme Court of the United States.

Attorneys Awarded $300M in Fees in Forex Price Fixing Settlement

November 8, 2018

A recent New York Law Journal story by Colby Hamilton, “Attorneys Awarded $300M in Fees in Bank Exchange Fee Settlement” reports that U.S. District Judge Lorna Schofield of the Southern District of New York knocked more than three-and-a-half percentage points off the requested attorney fees in the blockbuster $2.3 billion settlement over price-fixing by banks in the foreign exchange market, but that still left the lawyers for the 15 consolidated cases with more than $300 million in approved fees.  As the court noted, the litigation involved several hundred attorneys working over the course five years, resulting in what the plaintiffs claim is the third largest antitrust class action settlement in history.

Class counsel, led by co-lead counsel from Scott + Scott and Hausfeld LLP, were already awarded $22.5 million for litigation expenses.  Schofield granted counsel 13 percent of the settlement fund for attorney fees—which was less than the 16.51 percent sought.  Schofield noted that two class members objected to the proposed fee as being “grossly excessive,” while requesting a fee of no more than 8 percent.  Schofield found that the experts presented by the plaintiffs ultimately showed that comparable settlements of such size had a regressive percentage attached to them, noting that a pair of settlements that exceeded $3 billion had the smallest fee percentages, under 10 percent.

In looking at risk, results and policy consideration, the judge also found that “nothing in the record … indicates that this case is exceptional” when compared with similar cases.  Notably, Schofield pointed to government investigations and criminal prosecutions relating to price-fixing in the foreign exchange market that laid substantial groundwork ahead of the litigation.  Finally, Schofield’s cross-check against the lodestar multiplier, which she said stood at 1.72 and was “within the typical range for megafund cases.”

New Class Action Guidelines Address Attorney Fee Issues in N.D. Cal.

November 7, 2018

A recent The Recorder story by Amanda Bronstad, “New Class Action Guidelines in Northern District of California Prompt Commendation and Concerns,” reports that the Northern District of California’s new procedural guidance for class action settlements is among the most detailed in the nation, prompting welcome relief to critics but raising fresh concerns for some practitioners.  The guidance, announced on Nov. 1, comes as little surprise to lawyers who practice in the Northern District of California, which is home to numerous consumer class actions and judges who have spoken out about reforms.  The guidance also mimics proposed changes to the Federal Rules 23 of Civil Procedure.

But the Northern District’s guidance seeks to implement some of the most far-reaching revisions in the country.  Many lawyers said it creates transparency that’s been long needed in the class action process.  “It’s a good first step,” said Joel Fleming, a partner at Block & Leviton in Boston.  “Sunlight is the best disinfectant and, generally speaking, having more information to the courts and the class is a good thing.”

Defense attorneys and law professors who have called for more transparency in the class action process praised the new procedures.  “They’ve done a wonderful job of figuring out what are the most important things to worry about, and let’s make sure every judge has a checklist,” said Brian Fitzpatrick, a professor at Vanderbilt University Law School.  “They are wise to focus on what happens to the money after the settlement’s approved because we don’t know.”

The guidelines apply to all of the district’s judges, some of whom already have detailed standing orders on class action settlements.  Others have raised numerous questions about class action settlements before approving them.  “It’s been my experience that the judges in the Northern District of California have been more attentive to these issues than others in the country,” said William Rubenstein, a professor at Harvard Law School.

Among other things, the guidance asks lawyers to provide billing calculations in class counsel’s fee request, identify the process used to select the settlement administrator, consider social media and a marketing specialist for the notice program, disclose relationships between the parties and cy pres recipients, and file an accounting of the settlement 21 days after distributing the fund to the class.  Most of the concerns, such as poor claims rates or leftover settlement funds that revert to the defendants, focus on consumer class actions, not securities fraud cases, Fleming said.  For most lawyers, he said, the guidelines shouldn’t impact how they do their jobs.

“If a settlement is reached that would benefit the attorneys more than class members, this information being required will probably serve as a deterrent because it’s getting at information that’s useful for class members to know,” Fleming said.  “But for plaintiffs’ lawyers doing their jobs, and keeping the best interests of class members at heart, I don’t think any of this would change the way you’d litigate your case or change the way you’d structure a settlement.  It will require careful review of your materials to make sure you’re complying, but it won’t have a strategic impact.”

The biggest change in the guidelines is the accounting guidance.  That revision is noteworthy because, in most cases, judges don’t keep up with what happens to a class action settlement after granting final approval.  And there’s a slew of information that lawyers are supposed to post on the settlement’s website: The number of notices sent to class members, claim forms submitted, opt-outs and objections, for example, and the average, largest and smallest amounts paid to class members, methods of notice and payment, number and amount of checks not cashed—all in an “easy-to-read chart.”

The accounting revision is similar to a requirement tucked into a class action reform bill that the U.S. House of Representative passed last year.  “It’s very hard to determine whether class settlements are doing what they’re supposed to be doing if you don’t know where the money goes and where it winds up, and you don’t know how much of the class gets paid,” said Andrew Trask, of counsel at Shook Hardy & Bacon in San Francisco.  “In the past, it’s the propriety information of the settlement vendor.  So the defendant might see that information in a few cases, but usually they don’t.  To the degree we continue to have debates over what class certification ought to be and what class settlement ought to look like, having that information publicly available is better than not having it.”

Fitzpatrick said the data also would help law professors who study class action trends.  “The data that we will be able to gather from these new guidelines will help inform a lot of debate and discussions about whether the class action system is working as intended,” he said.  “They’re making a great contribution to the public understanding of class actions by requiring the lawyers to be transparent and return to the court with this data.”  But the guidelines haven’t come without new concerns.  Rubenstein said the guidance could “dissuade lawyers from filing in the Northern District because it feels like more hoops to jump through.”

Fitzpatrick specifically flagged the revisions prompting plaintiffs attorneys to turn over their lodestar billing, which are the hours they worked on the case multiplied by their hourly rate.  He said such a mandate could encourage more judges to use the lodestar when assessing an attorney fee request that is based on a percentage of the settlement fund. That’s not required in the U.S. Court of Appeals for the Ninth Circuit, he said.

More importantly, he said, the practice raised concerns about the motivations of plaintiffs attorneys in settling class actions.  “The more and more courts that are doing lodestar cross-checks, the more lawyers are going to worry they need to bill a bunch of hours in order to get a decent fee award instead of focusing on the most important thing, which is getting the most recovery for the class,” Fitzpatrick said.  Fleming agreed that requiring lodestar could create “misaligned incentives” but, in most cases, plaintiffs lawyers are prepared to submit billing records as part of their fee requests in the event judges use them as cross-checks.

For more on the N.D. Cal.'s new class action guidelines, visit https://www.cand.uscourts.gov/ClassActionSettlementGuidance