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Judge Questions $30M Fee Request in Yahoo Data Breach MDL

June 18, 2020 | Posted in : Billing Record / Entries, Class Action / MDL, Fee Allocation / Fee Apportionment, Fee Award Factors, Fee Request, Hourly Rates / Hourly Billing

A recent Law 360 story by Dorothy Atkins, “Judge Koh Questions $30M Atty Fee Bid in Yahoo Breach MDL” reports that California federal judge Lucy Koh declined to approve class counsel's $30 million fee bid for securing a $117.5 million deal resolving sprawling Yahoo data breach multidistrict litigation, demanding more billing information from dozens of plaintiffs' firms — including the "markup" on work by first-year law students.  During a hearing held via Zoom, Judge Koh heard objections to the fee request and said she wants more detailed billing information on the 31 law firms and 204 attorneys and paralegals who worked on the MDL and related litigation consolidated in state court, as well as total costs for hiring experts.

Judge Koh gave class counsel a week to submit a chart on how much time each partner and associate worked on the case, what work they did and how much they billed for the work.  She also said she wanted to know how much staff and hourly workers were paid compared with how much the firms billed, pointing out that they had billed $200 per hour for at least one first-year law school student.  "I need to know how much you are paying to know how much the markup is," she said.

Judge Koh also questioned the legitimacy of hundreds of hours of work that nine law firms charged after class counsel had filed the motion for final settlement approval in February, and she pointed out that multiple line items appeared to violate her orders, which prohibited class attorneys from billing at various points in litigation without first receiving court approval.  Class counsel apologized for any billings that went beyond her restrictions and said they would withdraw the charges from their fee request.  They also agreed to submit the additional information within the week.

The judge's comments came during a nearly four-hour hearing on a motion to finalize the approval of Yahoo's $117.5 million deal, which class counsel argued in court documents "provides the second largest common fund recovery ever obtained in a data breach case."  The motion compared the settlement with the health insurer Anthem's $115 million deal, which Judge Koh approved in 2018 to resolve similar data breach claims.

If the Yahoo deal is approved, the settlement would end multidistrict litigation in federal court and parallel state court proceedings over Yahoo's alleged multiple data security failings between 2012 and 2016.  During those four years, the company had annual attacks that potentially impacted millions of U.S. and Israeli account holders, exposing some of their logins, passwords, emails, dates of birth, and answers to security questions to hackers, according to the users.  Judge Koh preliminarily signed off on the proposed deal in July, after rejecting a previous version of the settlement for being too vague and inadequately describing the breaches at issue.

Under the proposed deal, Yahoo agreed to provide class members with either two years of comprehensive credit monitoring or alternative compensation for those that already have credit monitoring.  They also agreed to cover out-of-pocket costs such as fraud losses if class members submit proof and said they would make certain changes to its business to prevent future data breaches.

During the hearing, which was watched by more than 100 observers, Judge Koh said she doesn't think the class should have to pay for the initial proposed settlement, because it was "obviously not in compliance with federal rules of civil procedure."  Judge Koh also took issue with apparent discrepancies between the class size estimates and the number of Yahoo users since the case began, which she said seems to have changed throughout litigation.

The judge noted that Yahoo's CEO touted its 1 billion active users in corporate press releases in 2016, but there's been a "pattern in this case" that every time the parties come back to court the number is smaller.  Now that class counsel wants the settlement approved, they're likely going to argue that there are only 10 class members, the judge quipped.  At the end of the hearing, Judge Koh said she would at some point approve attorney fees, but she reiterated that she takes her responsibility very seriously and wants to review the attorneys' billing.