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Lieff Cabraser Can’t Freeze $1M Fee Reduction During Appeal

March 14, 2021 | Posted in : Billing Judgment, Billing Practices, Coverage of Fees, Fee Allocation / Fee Apportionment, Fee Award, Fee Disgorgement, Fee Dispute, Fee Expert / Member, Fee Issues on Appeal, Fee Recommendation, Fee Reduction, Fees & Judicial Discretion, Fees & Misconduct, Fees in Escrow

A recent Law 360 story by Brian Dowling, “Lieff Cabraser Can’t Freeze $1M State St. Fee Cut Amid Appeal,” reports that Lieff Cabraser Heimann & Bernstein LLP failed to persuade a Massachusetts federal judge to freeze $1.1 million of its fee slated for repayment in the wake of an overbilling scandal connected to a $300 million settlement with State Street Corp.  The firm, one of three ordered to repay seven-figure sums to the settlement fund, had sought to keep the money in escrow as it asks the First Circuit to review Senior U.S. District Judge Mark L. Wolf's reallocations of the fee award.

Denying Lieff Cabraser's motion in a 57-page order, Judge Wolf said the firm isn't likely to succeed on appeal and also faces no threat of irreparable harm if the money isn't frozen.  Instead of facing the tough odds of potentially having to recoup distributed settlement funds from the class, Lieff Cabraser would get any increase ordered by the First Circuit from its co-counsel, Labaton Sucharow LLP and Thornton Law Firm LLP.

Labaton Sucharow and Thornton received the bulk of the blame for improprieties and overbilling practices and repaid much higher sums to the settlement fund when Judge Wolf slashed the fee award from $75 million to $60 million in February 2020.  The two firms did not appeal the reallocation but supported Lieff Cabraser's request for a stay, Judge Wolf noted.

"The repeated, egregious misconduct of Labaton and Thornton alone caused the court to decide that it was most appropriate to award $60,000,000," Judge Wolf said. "If the court had allocated an additional $1,140,000 to Lieff, it would have reduced the awards to Labaton and Thornton by that amount."

Judge Wolf disputed Lieff Cabraser's arguments that the court violated noticing requirements in sanctioning it with the lower fee award.  There was no sanction, Judge Wolf said, just the court taking into account "proven misconduct of Labaton and Thornton in deciding to make a new fee award."  The court explained that its review of the attorney overbilling referred to Lieff Cabraser's conduct as "deficient" rather than as "misconduct" delineating that the firm's shortcomings were not critical to the new lower fee award.

The underlying suit, filed in 2011, alleged that Boston-based State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade. State Street settled the claims in 2016 for $300 million.  Judge Wolf approved the initial $75 million fee in 2016 but vacated that order after allegations of double-billing surfaced in a 2016 Boston Globe report.  He appointed retired U.S. District Judge Gerald Rosen as a special master to investigate the fee.  The firms admitted to overstating their billing but contended the $75 million fee was still proper.

Judge Rosen in 2018 recommended the firms disgorge just over $10 million, but Judge Wolf's 160-page order in late February ruled that the cuts should be even deeper and took the firms to task in the process.  Also before Judge Wolf is a legal fight between Thornton and its liability insurer over whether the company, Continental Casualty, can avoid covering the firm's attorney fees stemming from the court-ordered overbilling probe.