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Category: Settlement Amount / Data

Litigation Funder Seeks Share of Attorney Fees

February 16, 2021

A recent Law 360 story by Carolina Bolado, “Litigation Funder Wants Cut of $350M Shire Deal,” reports that law firm lender Counsel Financial Services asked a Florida federal judge for permission to intervene in a dispute over divvying up attorney fees from a $350 million whistleblower settlement with biotech company Shire, alleging the law firm Barry A. Cohen PA should be forced to direct any fees it receives to pay back a $43.8 million line of credit.

Counsel Financial says it loaned money to the Cohen firm in February 2009 in exchange for a secured interest in the firm's assets, which includes legal fee proceeds.  In January 2019, the company obtained a $43,778,684 judgment against the Cohen firm, which previously represented whistleblower Brian Vinca in his suit against Shire.

"Counsel Financial thus has an interest in the legal fees that will be awarded to [the Cohen firm] in this action," the company said in the motion.  "Consequently, Counsel Financial seeks to intervene to ensure that its interest in the legal fees obtained by [the Cohen firm] in connection with this matter are rightfully directed by this Court to Counsel Financial directly from the court registry."

The motion is the latest development in a fight over fees from the $350 million settlement, which was announced in August 2016 and resolved claims stemming from Shire's sales and marketing practices around Dermagraft, a skin substitute the company picked up when it acquired Advanced BioHealing Inc. — now known as Shire Regenerative Medicine Inc. — as part of a $750 million deal in 2011.  Vinca and co-plaintiff Jennifer Sweeney filed the first of the six False Claims Act suits against Shire that led to the settlement.

Kevin J. Darken, who represents Vinca's former counsel, says Vinca's current attorneys, Noel McDonell of Macfarlane Ferguson & McMullen and Bryen Hill of Mahany Law, have tried to cut him and the Cohen firm out of a fee award.  Darken has asked the court to disqualify McDonell and Hill for allegedly using stolen confidential emails to challenge the charging lien filed by Darken, Cohen and Saady & Saxe PA for a cut of the attorney fees.

McDonell and Hill have accused Darken and Kevin M. Cohen, the representative for Barry Cohen's estate, of conspiring to a fee-splitting scheme of the proceeds.  Vinca, who fired his attorneys in March 2018, is suing Darken, the Cohen firm and Saady & Saxe for malpractice, claiming they cost him the full whistleblower's cut of the Shire settlement.  Vinca claims his former counsel's failures forced him to share the whistleblower award of the Shire settlement with the five other relators who filed FCA suits after he did.

Generally, the first whistleblower to file gets about 20% of the government's recovery, and any subsequent whistleblowers do not receive a cut. But in this case, U.S. District Judge James Moody Jr. decided to divvy up the proceeds, in part because of deficiencies in the initial eight-page complaint from Vinca and Sweeney, according to McDonell.  Vinca and Sweeney shared more than $50 million from the settlement, while the other whistleblowers shared approximately $30 million.

The six whistleblower lawsuits that led to the settlement all alleged misconduct by Shire from 2007 through the beginning of 2014, including that it paid illegal kickbacks to get health care providers to use or overuse Dermagraft, marketed Dermagraft for uses not approved by the U.S. Food and Drug Administration, inflated the price of the drug and spurred the coding of Dermagraft-related reimbursement claims for payouts higher than what was appropriate.

McDonell told Law360 that Counsel Financial's claim has no bearing on this lawsuit because Vinca was not a party to the financing contract between Counsel Financial and the Cohen firm.  "As Magistrate Judge Porcelli noted in June of 2019, the matter at issue is the merits of a charging lien filed against relator Brian Vinca by former counsel, and to what extent compensation is appropriate," McDonell said.  "Accordingly, on behalf of Brian Vinca, we are confident that CFS has, as Judge Porcelli so aptly put it, 'no dog in this fight.'"

Delaware Supreme Court to Decide on ‘Mootness Fee’

February 15, 2021

A recent Law 360 story by Jeff Montgomery, “Del. Justices Unsure $12M Deal ‘Mootness Fee’ Is Off-Base”, reports that a Delaware Supreme Court justice questioned calls for the reversal of a supposedly unsupported, $12 million Chancery Court "mootness fee" to stockholder attorneys whose successful challenge to a Versum Materials Inc. merger poison pill begat a deal that was $1.2 billion higher.

During arguments on an appeal filed by Versum and its directors, Justice Karen L. Valihura told the company's counsel William Lafferty of Morris Nichols Arsht & Tunnell LLP that Vice Chancellor J. Travis Laster acknowledged concerns about both the size of the fee — amounting to about $10,700 per hour for a mooted claim — and the semiconductor industry supplier's call to pay either nothing or $680,000 based on standard rates.  "So he said you started out with a non-starter, extreme position" on the fee, "but you didn't engage with the evidence and the precedents meaningfully" to back up the position, Justice Valihura said.  "What are we supposed to do with that?" she asked Lafferty during arguments before the full five-member court.

And earlier Justice Valihura had asked Lafferty, "Isn't part of the problem here, clearly, that the vice chancellor had some misgivings about the [fee] number," but also that, if he had "meaningful help from the defendant in engaging on the matter, he might have reached a different conclusion?"  The fee approved by the Chancery Court followed relatively brief stockholder litigation in early 2019 over Versum's consideration of a $3.8 billion all-stock merger with Entegris Inc. worth about $43 per share, and the adoption of a poison pill shield for the deal after Merck KGaA offered $48 per share.

The "pill" would have given all shareholders the right to buy additional, potentially deal-blocking shares at a steep discount if another party or potential buyer acquired 12.5% or more of the company's equity.  Days after the stockholders sued, Versum dropped what the vice chancellor described as a related, "truly expansive" provision that would trigger the poison pill if individual stockholders were deemed to be "acting in concert" in discussions about the deal, regardless of their intent.  Soon afterward, the poison pill itself was withdrawn, with Merck soon winning the deal with a higher, $53 per share offer.

In approving the fee last year, the vice chancellor noted it would have been reasonably conceivable in a motion to dismiss proceeding to conclude Versum fielded the deal protections "to block a high-value cash deal and protect its merger of equals" with Entegris.  Lafferty said the vice chancellor erred by conflating the better, company-secured price with the "monetary, corporate, therapeutic benefit" resulting from removal of the pill and acting-in-concert provisions.

"Plaintiff played no role in the bidding dynamic and bidding process that led to the increased merger consideration," Lafferty said, adding that the vice chancellor's fee award "effectively rewards counsel as if they had created a monetary fund" and benefit, "which they didn't."

Michael Hanrahan of Prickett Jones & Elliott PA, counsel to the stockholders, told the justices that Lafferty was asking the court to second-guess the vice chancellor's factual findings, and said that the award amounted to about 1% of the benefit.  "The defendant basically just disagreed with the court of chancery's finding of a causal connection between the litigation and the increased merger price," Hanrahan said.  "They said no fee at all should be awarded, because the litigation did not cause Merck's offer.  The question is, what the board did" on the issues.  "They didn't put in any evidence on that."

Hanrahan said that Versum conceded on appeal that the litigation caused the removal of the acting-in-concert provision.  "That's fatal to their causation argument," he said. "The vice chancellor found those were obstacles to the Merck offer, and the removal of those obstacles caused the success of the Merck offer."  Lafferty said Versum's decision to accept Merck's offer came weeks after the stockholder suit had been mooted, while the court's fee decision was made without an assessment of the stockholder suit's likelihood of success or merit when it was filed.

"So what you're suggesting is, the process the Court of Chancery should have followed here, if your standard is likelihood of success, do they have to relitigate this case as part of the fee application?"  Chief Justice Collins J. Seitz Jr. asked. "I think what you're advocating has practical consequences for the court."  Lafferty said the case implicated important public policy considerations regarding the institutional role of shareholder suits, and the fact that past court cases have found that "generosity plays no role" in determining benefit amounts.

"If the court below wanted to exercise its discretion, if it thought there was a strong correlation between pulling the pill and the outcome, it could have awarded a multiple of plaintiff's attorney fees, not 17 times, but something reasonable," Lafferty said.  "The bottom line here is, the court of chancery had a duty to use its discretion to set a reasonable fee, and it didn't do that, we believe."

Class Counsel Earn $24M in Fees for Clean Coal Investors

February 11, 2021

A recent Law 360 story by Morgan Conley, “Attys for Southern Co. ‘Clean Coal’ Investors Get $24M”, reports that a Georgia federal judge approved just over $24 million in fees to attorneys for a class of Southern Co. investors accusing the company of misleading them about a botched plan to build a "clean coal" plant in Mississippi, trimming the initial request by about $2.1 million.

In an order granting the attorney fees, U.S. District Judge William M. Ray said the unusually good recovery in the settlement warrants a greater than average take-home for lead counsel from Robbins Geller Rudman & Dowd LLP.  But, the court declined to grant class counsel's full request for a 30% share of the $87.5 million settlement fund because, while the recovery for the class is "commendable," the litigation was settled early enough that class counsel didn't stomach "the riskier stages of litigation."

"Being able to achieve such a favorable recovery so early in the litigation suggests that a continued successful pursuit of the litigation could have yielded an even more favorable result for plaintiffs," Judge Ray said.  "That favorable result would then necessarily lead to an increase in the percentage of attorneys' fees.  The court, based upon the totality of the factors, is thus satisfied that 27.5% adequately reflects the impressive results of this case."

According to the court, reasonable attorney fees are usually pegged at around 20% to a quarter of the settlement fund, which the court preliminarily approved in October.  The court said that although class counsel said a study of attorney fee awards in the Eleventh Circuit put the median amount at 33%, that figure factors in a wide range of settlement sizes and a "closer inspection of the study reveals a more nuanced result."

"Because class action attorney fee percentages vary widely based upon the size of the settlement, it would be more insightful to look at settlements with a larger fund," the judge said.  "The same study points out that the average fee percentage is 22.3% when considering only cases with a settlement fund greater than $67.5 million."  Judge Ray said he is confident awarding the attorneys slightly above that average will continue to "incentivize high-caliber and vigorous representation" without awarding attorneys with an unnecessarily large payday.

Southern Co. agreed in September to pay $87.5 million to settle claims it misled shareholders about bungled plans to build a "clean coal" power plant in Kemper County, Mississippi — a project the company eventually admitted would cost almost three times more than originally budgeted and would never actually operate as a "clean coal" plant.

The settlement agreement makes up about 16% to 28% of what the class stood to receive in a best-case scenario if litigation continued to play out, according to the opinion.  Judge Ray said his rationale for not granting counsel's full 30% fee request is partially based on the risks of further litigation not being fully realized.

One potential threat surfaced when Southern Co. appealed the class' certification to the Eleventh Circuit.  But when the settlement deal was reached, no briefs had been filed in the appeal, which was stayed during the negotiations.  Class counsel argued the certification challenge posed significant risks to the litigation and supported a higher fee award.

Judge Ray disagreed, saying it might be a different story if the circuit court appeal had gone active and class counsel had overcome the appeal.  Or, if the class had defeated a summary judgment bid, the heightened stakes would have been fodder for a high fee award argument, the court said.  But since the litigation never reached such a stage, the upper end of the counsel's fee request isn't justifiable, Judge Ray said.

Fee Dispute Looms Over $800M in Fees in Roundup MDL

February 5, 2021

A recent Law.com story by ‘Money Grab’: Objections Fly Over $800M in Fees for Lead Counsel in Roundup MDL”, reports that lawyers are pushing back against a request in the multidistrict litigation over Monsanto’s Roundup pesticide to turn over portions of their settlement amounts to provide lead counsel with what some estimate to be $800 million in attorney fees.  More than a dozen firms with thousands of lawsuits across the country, including Beasley Allen, The Lanier Law Firm and Gibbs Law Group, filed objections to a Jan. 11 motion that lead counsel filed asking for an 8.25% assessment on their Roundup settlements to pay for fees and expenses spent on the “common benefit” of all lawyers.

Many said the holdback for so-called common benefit fees equates to $800 million for lead counsel—what one attorney called a “colossal amount.”  “This court should not condone what is essentially nothing more than a money grab,” said Karen Barth Menzies, of Gibbs Law Group in Oakland, California, who filed an objection on behalf of her firm and two others.  Menzies insisted that the $800 million is on top of an estimated $2 billion in attorney fees that lead counsel made from contingency fee contracts associated with their own cases, which they settled last year for greater amounts than Monsanto is now offering.

In June, Bayer, which now owns Monsanto, announced it planned to settle about 125,000 Roundup claims for an estimated $10.9 billion.  The agreements were not part of a global settlement, however.  Lawyers have conducted their own negotiations, which have been confidential, and many cases remain unsettled.  Many lawyers objecting to the common benefit fee assessment argue that lead counsel settled their own cases for much more than everyone else.

“Now you have a defendant who’s offering people $45,000 for a cancer case,” said Hunter Shkolnik, of Napoli Shkolnik.  His New York firm filed an objection with appellate attorney Thomas Goldstein, of Goldstein & Russell in Washington, D.C.  “And there was no common benefit tax associated with those initial billions of dollars in cases that were settled,” Shkolnik said.  “They intentionally did not tax their own cases and put them into the fund.  You now have the next series of cases settling at much smaller amounts, and they’re seeking 8% common benefit.”

Lead counsel—Robin Greenwald, of Weitz & Luxenberg in New York; Michael Miller, of The Miller Firm in Orange, Virginia; and Aimee Wagstaff, of Andrus Wagstaff in Lakewood, Colorado —declined to comment about the objections.  They are due to respond Feb. 18.  In their request, lead counsel noted that the proposed holdback, of 8% in fees and 0.25% in expenses, includes an assessment on their own cases.

Meanwhile, U.S. District Judge Vince Chhabria of the Northern District of California, overseeing the Roundup multidistrict litigation, has his own questions—including whether a holdback is even necessary and, if so, how much it should be.  On Jan. 26, he asked lawyers to address four questions he had about the lead counsel’s request, including whether he could issue a holdback “without understanding how much of a premium co-lead counsel has already received on their settlements compared to the typical settlement.”  He also asked, “If a hold-back is truly warranted, why shouldn’t it be much lower than the 8% requested by co-lead counsel?”

The objections are the latest dispute among plaintiffs lawyers over common benefit fees, used to reimburse lead counsel in multidistrict litigation for costs and fees associated with discovery, trials and settlement.  Much of that work ends up benefiting lawyers not in leadership positions in the event they want to pursue trials or settlements of their own cases.

In their fee motion, however, lead counsel emphasized that six firms, including their own, did most of the work in the Roundup litigation, including in state courts.  Other firms, they noted, did not want to take the risks early on in the litigation.  “The world was watching this litigation; there can be no doubt that it was high risk for contingency fee lawyers, which explains why all the heavy lifting and lion’s share of litigation costs and risks were left to the MDL leadership,” they wrote.

A “tsunami of advertising” following their big wins, such as the Roundup verdicts in 2018 and 2019, led to thousands more cases filed by “law firms that hedged their bets and previously sat on the sidelines,” they wrote.  “That argument doesn’t at all describe us,” said Rhon Jones, of Beasley Allen in Montgomery, Alabama, who filed an objection to the holdback.  “We very much want to try our own cases and work our own cases, so I don’t see where any of that applies to Beasley Allen.”

Many of the objectors, like Beasley Allen, have cases in state courts that they say are not subject to multidistrict litigation—a response to one of Chhabria’s questions asking whether the holdback should apply to state court cases.  Jones estimated that as much as 90% of the cases over Roundup are in state courts. His own firm, he said, has only six cases in the multidistrict litigation, but 2,000 in state courts, mostly in Missouri.

Many firms argued that Chhabria, as a federal judge, did not have jurisdiction over state court cases, particularly where plaintiffs firms that did not sign any participation agreements with lead counsel.  “We’re not saying they didn’t do good work—there is going to be a common benefit order in the Roundup case,” said Shkolnik, who said he has 100 Roundup cases in the multidistrict litigation but several thousand lawsuits in state courts in Missouri.  “I just question whether or not the court has jurisdiction to apply to purely state court cases.”

Not only did some law firms claim they did not use discovery obtained in the multidistrict litigation, but they insisted that lead counsel purposely kept the experts to themselves and attempted to get other lawyers to refer cases to them.  Several firms submitted declarations, including Mikal Watts, of Watts Guerra in San Antonio, and W. Mark Lanier, of The Lanier Law Firm in Houston, stating they not request help from lead counsel in the multidistrict litigation.  Watts and Lanier both noted, however, that leadership also did not offer them “a trial packet, discovery documents, transcripts, or any other MDL work product,” according to their declarations.

In his objection, filed on behalf of her own firm and seven others, Arati Furness, of Dallas-based Fears Nachawati, wrote that lead counsel “refused to help any of the Roundup victims they do not represent,” and some even solicited referrals from other firms “to enhance their own settlements.”  “In some instances,” she wrote, lead counsel “attempted to push firms into settlements with threats that they were going to be left out in the cold with no experts, no depositions, and no trial package.”  Chhabria has scheduled a March 3 hearing on the fee dispute.

$1.2B Valeant Settlement Earns Robbins Geller $157M Fee Award

February 2, 2021

A recent Law 360 story by Dean Seal “Final OK on $1.2B Valeant Deal Earns Robbins Geller $157M”, reports that a New Jersey federal judge gave final approval to a $1.2 billion settlement of an investor action against Valeant Pharmaceuticals, landing lead counsel Robbins Geller Rudman & Dowd LLP a hefty payday.  U.S. District Judge Michael A. Shipp overruled objections from two investor plaintiffs when he granted a special master's recommendation to approve the deal reached in December 2019 between investors and the pharmaceutical company that became known as Bausch Health Cos. Inc. in 2018.

The nearly five-year-old lawsuit claimed Valeant used a clandestine network of pharmacies to push high-priced drug prescriptions, sending the stock plummeting once price-gouging allegations surfaced.  Investor plaintiff Cathy Lochridge had lodged an objection to the 13% attorney award for Robbins Geller and local lead counsel Seeger Weiss LLP, arguing that the $157.3 million request was too high considering that the settlement "captures just 3% of class damages," but Judge Shipp said it was also the ninth-largest securities class action recovery ever.

"As Lochridge correctly notes, 'what is important is that the district court evaluate what class counsel actually did and how it benefited the class,'" the judge said.  "Here, lead counsel obtained a $1.21 billion all-cash recovery for the benefit of over 400,000 members."

The stock-drop litigation represents consolidated claims by investors who saw Valeant's stock price slide from more than $250 a share in 2015 to below $10 two years later.  The company has been fined by regulators and sued by investors who said it defrauded the market.  Investors claimed that Valeant had employees work under aliases for a company called Philidor Rx Services LLC that used deceptive practices to block generic alternatives from competing with Valeant's branded drugs.  Valeant allegedly duped insurers by changing prescription codes to ensure they were filled with Valeant-branded drugs and making claims for unrequested refills, investors said, and covered up the scheme by lying about the pharmacies' ownership and issuing a series of false statements to investors.

In December 2019, Bausch announced that it had agreed to resolve the case with a $1.21 billion settlement while admitting no liability and denying all wrongdoing.  Last June, a special master issued a report recommending final approval of the settlement, plan of allocation and attorney fees and expense reward, leading to objections from two plaintiffs.

The first, from brokerage firm Timber Hill LLC, objected to the settlement itself as well as the plan of allocation, arguing against the plan's imposition of an "arbitrary" 5% recovery cap on options investors while permitting common stock and debt investors to take the remaining 95%.  The cap demonstrated that options investors were not adequately represented in the settlement, Timber Hill said, asking that the cap be increased to around 9.5%.

Judge Shipp overruled the objection, saying that Timber Hill's expert had originally supported an options cap in the 5% range and that he found the plan to be "fair, reasonable and adequate."  The second objector, Lochridge, had asked that the attorney fee award be reduced to 6% of the settlement fund, or around $72.6 million, arguing that "this is the lowest ever return on class damages for a billion-dollar securities settlement."

Judge Shipp disagreed, saying Lochridge's low recovery argument was based on "new and inconsistent" analysis from Timber Hill's expert and speculation that Valeant could have agreed to a higher settlement amount despite its uncertain financial position.  The judge also found that the hefty settlement fund and low number of objectors and opt-outs weighed in favor of approving the award, as did the complexity and duration of the litigation and lead counsel's devotion of more than 75,000 hours to the case.