A recent Law 360 story by Celeste Bott, “7th Circ. Scraps $57M Chicken Price-Fixing Atty Fee”, reports that the Seventh Circuit threw out a $57 million attorney fee award in a $181 million deal for chicken buyers in sprawling antitrust litigation, saying that the district court failed to consider bids made by class counsel in auctions in other cases and fee awards in different circuits. Objector John Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC were to receive in a deal the firms had struck with Fieldale Farms, Peco Foods, George's, Tyson Foods, Pilgrim's Pride and Mar-Jac Poultry in the sprawling antitrust case.
A three-judge Seventh Circuit panel complimented the lower court for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures. The published opinion concluded that "it was error to suggest that this court has cast doubt on the consideration of declining fee scale bids in all cases."
"In the district court's view, this court has explained that these awards do not reflect market realities and impose a perverse incentive insofar as they ensure that attorneys' opportunity cost will exceed the benefits of seeking a larger recovery, even when the client would otherwise benefit," the panel said. "Yet, this court has never categorically rejected consideration of bids with declining fee scale award structures. Rather, the nature of the typical costs in litigation must be assessed in determining whether counsel and plaintiffs would have bargained ex ante for such a structure."
The Seventh Circuit has observed that such a fee structure, where the amount being awarded in fees goes down as the settlement amount goes up, can present certain advantages, and the appellate court took that approach in another case — In re: Synthroid Marketing Litigation — which was a class action suit against the manufacturer of a synthetic thyroid drug.
"Fees do not always decline for securing a larger recovery, and in those instances, counsel will have an incentive to seek more," the panel said. "Accordingly, the appropriateness of a declining fee scale award structure may depend on the particulars of the case. It was an abuse of discretion to rule that bids with declining fee structures should categorically be given little weight in assessing fees."
Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees. The appellate panel agreed that the district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.
"It is true that this court has rejected the application of a mega-fund rule. Yet, continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel's legal services and the bargain they may have struck," the panel said. "The district court should have considered where class counsel's economic behavior falls on this spectrum and assigned appropriate weight to fees awarded in out-of-circuit litigation."
In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting that it expressed no preference as to the amount or structure of the award, just the need for further review.