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$267M Attorney Fee Award Appealed in $1B Dell Settlement

September 30, 2023

A recent Law 360 story by Jeff Montgomery, “Pentwater Appeals $267M Atty Fee Award in Dell Case in Del.”, reports that a private equity investor in Dell Technologies Inc. is appealing a Chancery Court's record $266.7 million fee award to class counsel that secured a $1 billion settlement for stockholders who sued over a $23.9 billion stock swap in 2018.

Pentwater Capital Management filed notice of appeal without a transcript late Friday with the Delaware Supreme Court, challenging both the attorney fee award and a $50,000 incentive award granted to Steamfitters Local 449 Pension Plan, the lead plaintiff for the suit filed in November 2018.

Vice Chancellor J. Travis Laster set the fee at $266.7 million on July 31, trimming a request of $285 million. He said in his July 31 decision and order that eight funds that had invested in Dell but were not part of the class suit, recommended a lower fee, citing concerns about "windfall" profits in the case of large awards.

Pentwater — holder of 1.6% of the Dell Class V tracking stock at issue in the Chancery Court suit — branded the fee award as massive and a potentially "dangerous" precedent. In a Chancery Court brief opposing the fee, Pentwater argued that "the requested fee in absolute and percentage terms is disproportionate to the value conferred on class members."

Settlement of the overall case prevented a trial on claims targeting Dell's effort to exchange Class V stock — created to finance much of Dell's $67 billion acquisition of EMC Technologies in 2016 — for shares of Dell common stock. The Class V shares generally traded at only 60% or 65% of the price of VMware, a business in which EMC owned an 81.9% equity stake when Dell acquired EMC.

Public shareholders, the class had argued, were shortchanged by $10.7 billion when, in December 2018, Dell Technologies paid $14 billion in cash and issued 149,387,617 shares of its Class C common stock for the Class V shares.

When the challenged conversion closed on Dec. 28, 2018, VMware stock closed at $158.38 per share, and Class V stockholders received just $104.27 per share, fueling objections that the Dell Class C stock to be received for Class V shares had been overvalued.

In his fee opinion, the vice chancellor noted that class attorneys provided hundreds of examples of contingent fee agreements to support their original request for $285 million. However, he noted, none of the objectors provided examples, except for Pentwater, and that example was "not for a Delaware case."

Vice Chancellor Laster also observed in his July 31 decision that investment funds that had recommended a lower amount, including Pentwater and seven others, had "a strong economic motivation for seeking a lower fee award."

The vice chancellor's decision elaborated on the idea that the investment funds that didn't go to the trouble of suing had a financial motivation now to object. Following a 10% fee trend in federal securities actions, he noted, would have given them an extra $49 million for the equity holders, rather than sharing it with the class.

Five law professors suggested in a friend-of-the-court brief that a 15% fee would be appropriate, which still would have added $35.78 million to the objectors' recovery, the vice chancellor's decision noted.

"Having sat back and done nothing, the objectors now claim that a fee award without a sizable reduction would 'not yield equitable results,'" the vice chancellor wrote in an August filing confirming the $266.7 million fee award. "That assertion masks self-interest with an appeal to equity. Wanting more money for yourself is understandable, but it is not grounds for a fee objection."

Bank Whistleblower Wins $2.4M in Attorney Fees

September 29, 2023

A recent Law 360 story by James Mills, “Auditor’s Atty Wins $2.4M Fees in Bank Whistleblowing Case”, reports that an attorney representing a former BofI Federal Bank employee was mostly successful in winning more than $2.4 million in fees for work on a suit that resulted in a jury finding the employee was illegally fired from the bank, with a California federal judge applying a multiplier of 1.1 "to account for contingency risk."

Plaintiff Charles Matthew Erhart had sued the bank for whistleblower retaliation and wrongful termination, with the suit taking seven years to reach a jury.  After he won his case, Erhart asked the court to recover $3 million in attorney fees for an estimated 4,470 hours of work, but also requested the court enhance the fee award to a total of $7.3 million.

"The court agrees Erhart is entitled to recover fees," U.S. District Judge Cynthia Bashant wrote in the order.  "That said, some of the hours his counsel spent will not be included in the lodestar. And the motion stumbles when it comes to justifying counsel's hourly rates. Ultimately, the court awards $2,405,559.20 in attorneys' fees."

Erhart worked for Bank of the Internet Federal Bank, now known as Axos Bank, as an auditor for about 18 months, starting in 2014. According to the order, when he found evidence of wrongdoing, he reported it to a federal regulator. Soon after, he was terminated, with the bank saying he was incompetent at his job.

Erhart filed a lawsuit for whistleblower retaliation with 10 causes of action which described over a dozen instances of alleged wrongdoing. His attorney tipped off The New York Times, which wrote about Erhart's lawsuit. The bank's stock plummeted 30% and several securities class actions were filed.

The bank responded by suing Erhart, contending it was his intention to "bring down the bank." With that suit came countless motions by the bank. Over the next several years, the parties and the court whittled down all the claims to the essence of the case: Erhart's whistleblower retaliation and wrongful termination claims.

In spring 2022, the case was finally heard in a three-week trial with Erhart prevailing. The jury found the bank violated the Sarbanes-Oxley Act, California Labor Code section 1102.5 and California public policy when it terminated Erhart. The jury awarded him $1 million for emotional distress and harm to his reputation, and another $500,000 on a California state law defamation claim.

The jury also said Erhart was entitled to punitive damages, but was deadlocked over an amount. A second trial to determine an amount resulted in the jury saying punitive damages were not appropriate.

Erhart's estimate of 4,470 hours of attorneys work breaks down to lead counsel expending approximately 1,581 hours, associate counsel spending 2,069 hours, their paralegals working for 780 hours, and one additional attorney working 40 hours. However, the bank argued these hours are unreasonable and asked the court to exclude 1,265 hours.

The court noted the case took seven years to get to trial and most of the hours were justifiable, but did eliminate some of the hours the bank requested. Similarly, it ruled the attorney's rates were higher than standard for San Diego and the Southern District of California.

"The prevailing rates in the Southern District of California are generally lower than the Central District of California," wrote Judge Bashant. "And it is commonplace for attorneys based in one district to solicit work in the other. Courts nevertheless reject attorneys' attempts to cherry-pick and run with higher rates from the Central District."

Missing Word Sinks $2.65M Attorney Fee Request

September 28, 2023

A recent Law 360 story by Travis Bland, “Missing Word Sinks $2.65M Honeywell Fee Bid in Royalty Row”, reports that Honeywell lost out on $2.65 million in attorney fees following a win in a scanner royalties dispute with a Japanese competitor in part because an agreement between the two companies didn't use the word "attorney" in a provision the American company invoked to try to receive the award.

In an order, a North Carolina federal court told Honeywell Wednesday that it would not be awarding the attorney fees after the company prevailed in a jury trial against OPTO Electronics Co., reasoning that while other parts of the partners' contract referenced attorney fees, the part Honeywell cited to try to recover the money only says "fees."

"That provision, drafted by sophisticated counsel, does not mention 'attorney fees' (like every other case under governing Delaware law that has awarded attorney fees under a contract)," U.S. District Judge Kenneth D. Bell wrote in his order.

Judge Bell also reasoned that the provision doesn't have the "prevailing party" language that is the "hallmark" of contracts under Delaware law for a winning litigant to force an opponent to pay attorney fees.

The provision Honeywell cited might not even apply to court actions, Judge Bell said.

Evidence in the case made it clear that Honeywell knew how to craft a contract so that attorney fees would be awarded when it won a case, but it didn't do that in the agreement with OPTO Electronics, according to Judge Bell.

OPTO Electronics was also let down by Judge Bell's order. He punted the Japanese company's requests to throw out the jury verdict, award it a victory or, at least, to grant a new trial.

OPTO Electronics had a "full and fair opportunity to present its evidence and arguments to the jury and the court," Judge Bell said. "While OPTO's arguments were potentially persuasive and the court would have upheld a jury verdict in OPTO's favor, the court finds that there was sufficient evidence to support the jury's and the court's verdicts."

In denying the company a new trial, Judge Bell also rejected arguments that the court made an error when it did not allow certain evidence that OPTO Electronic asserted was favorable to it.

The dispute is rooted in barcode scanner technology that can decode 1D barcodes — such as UPC codes commonly found on items in a grocery store that are scanned at checkout — and can decode 2D barcodes, such as QR codes frequently used by restaurants for online menus.

Honeywell had previously accused OPTO of infringing its patents for 2D products, resulting in a 2020 settlement agreement under which OPTO consented to pay Honeywell 7% royalties for the continued use of that technology.

But in the present case, Honeywell said OPTO tried to skirt that contract by not paying royalties on all of its 2D products, namely those that can read both 1D barcodes and a specific subset of 2D barcodes known as stacked barcodes. A common stacked barcode is PDF417, which is seen on driver's licenses and printed boarding passes at airports.

An eight-person jury sided with Honeywell in a July 19 verdict, finding OPTO scanners that can read both 1D and some 2D barcodes fall within the licensing agreement.

Southwest Airlines Calls Fee Request ‘Excessive’

September 27, 2023

A recent Law 360 story by Lynn LaRowe, “Southwest Slams ‘Excessive’ Fee Bid in Religious Bias Case”, reports that Southwest Airlines has called on a Texas federal court to reduce the nearly $180,000 in fees sought by a flight attendant in connection with contempt proceedings that followed her victory in a religious bias suit against the airline, saying the requested amount is "excessive rather than reasonable."

In a brief filed Monday, the airline said that while it "previously agreed to pay plaintiff's reasonable attorney's fees in connection with her contempt motion," the amount requested should be cut to about $83,000.

"However, Southwest respectfully submits that [Carter's] fee request is, in substantial part, excessive rather than reasonable," the airline said.

U.S. District Judge Brantley Starr sanctioned Southwest and in-house lawyers Kerrie Forbes, Kevin Minchey and Chris Maberry in August, saying they "didn't come close to complying with the court's order" in posting a notice of nondiscrimination over religious beliefs, and that the three attorneys "were at the root of the problem." The judge ordered them to attend training given by Alliance Defending Freedom, which advocates against abortion, and LGBTQ and similar causes.

Last month, plaintiff Charlene Carter urged the court to order Southwest to pay roughly $176,000 in attorney fees, $3,000 in expenses and $600 in other costs to the National Right to Work Legal Defense Foundation Inc., which represents her.

The airline pointed out in its brief Monday that the court held "approximately 9 hours of hearing (approximately 3 hours of which occurred ex parte without plaintiff's participation) during which [Bobby G. Pryor] examined four members of Southwest's legal team, [Matthew B. Gilliam] made a closing argument, and [Matthew D. Hill] displayed exhibits," referring to members of Carter's legal team.

Southwest is asking Judge Starr to cut Carter's lawyers' request to be paid for "nearly 500 hours of attorney time" and reduce the total award to just over $83,000. The airline argues that Carter's team used "block billing" for a large portion of their attorney fees, "making it impossible to assess how much time counsel spent on each specified task, and whether that time was reasonable." Southwest also noted that the court had reduced a previous fee award request from Carter's team by 30% that included block billing.

The airline further argued that each of the three lawyers who attended the contempt hearing had more than a decade of experience, and each could have handled the matter solo.

"Mr. Pryor handled all of the witness examinations," the airline said Monday. "In contrast, Mr. Hill's role was limited to displaying exhibits from his computer, a task that a non-lawyer could have handled; and Mr. Gilliam's role was to make a brief closing argument at the conclusion of the contempt hearing."

Southwest also said Carter's lawyers spent a lot of time filing pretrial motions related to the contempt proceeding, which were "unnecessary and minimally successful," and that Carter's attorneys have shown "a failure to exercise billing judgment."

The brief includes a detailed chart outlining the reasons for the more than $90,000 in reductions sought by the airline to Carter's fee bid.

The case underlying the sanctions dates back to August 2017, when Carter sued Transport Workers Union of America Local 556, alleging she was fired because of messages she sent to the flight attendant union's president opposing the use of union funds to help members attend the Planned Parenthood-sponsored Women's March in January 2017.

Carter had sent multiple messages on social media to the union president expressing outrage over that person's beliefs about abortion. Some messages contained graphic images of aborted fetuses.

Southwest fired Carter after determining she had violated a policy that directs all airline employees to "treat each other with civility and respect." Carter sued both Southwest and TWUA Local 556, claiming she was expressing protected religious views and alleging Title VII retaliation.

In July 2022, Carter won a jury trial and damages of $5 million, but that amount was revised to $800,000 in December. A court order at that time also compelled Southwest to rehire Carter, despite the airline's concerns over Facebook comments she made criticizing the airline and claiming TWUA used union dues to cover up sex trafficking and organ harvesting.

In his Aug. 7 order, the judge sanctioned Southwest and its lawyers for altering the language of a court-ordered message to inform employees of their Title VII rights. Title VII protects employees from discrimination on the basis of race, color, religion or sex, among other things. At trial, the jury had found Southwest had violated Carter's rights under both Title VII and the Railway Labor Act.

Judge Starr has given the airlines' lawyers until Sept. 26 to complete the religious liberty training, rejecting a request to stay the order pending appeal.

Class Counsel Seek 33 Percent in CVS Lidocaine Label Case

September 26, 2023

A recent Law 360 story by Mike Curley, “Class Seeks $1.1M Atty Fees in CVS Lidocaine Label Suit”, reports that plaintiffs in a class action against CVS Pharmacy Inc. over its labeling of lidocaine products are asking a New York federal court to award $1.1 million in attorney fees out of a $3.8 million settlement, saying attorneys' work and the scope of the settlement warrant the payout.

In a memorandum, named plaintiffs Monique Bell, Tree Anderson and Melissa Conklin said the fee request amounts to just over a quarter of the settlement's total value when the $3.8 million for the class is added to an estimated $500,000 for notice and administration costs, putting it well within the typical 33% benchmark.

The plaintiffs added that the requested amount represents about 800 hours of work so far. With a blended hourly rate of $620 an hour, it comes to a lodestar multiplier of about 2.29 — a multiplier that will go down, as the plaintiffs' attorneys estimate they have about 50 more hours of work ahead in administering the deal.

In addition, the plaintiffs argued that the result for the class was very good, considering the risks that the case could have been dismissed or that they could have lost at trial. They added that the injunctive relief requiring CVS to change its labeling further warrants a significant payment.

The suit was filed in December 2021, alleging that CVS tricked consumers into thinking that the labeling of "maximum strength" on its lidocaine patches referred to the maximum strength often prescribed by doctors and made false claims regarding how long the patches stay on the body.

The suit alleged violations of state consumer protection statutes, state warranty acts, the federal Magnuson-Moss Warranty Act and New York's General Business Law, as well as a claim of unjust enrichment. The class sought preliminary approval for the $3.8 million settlement in April.

CVS sold more than 9.5 million units of lidocaine products from December 2017 through January 2023, and the class is defined as all persons who purchased products during that time.

Under the agreement, CVS will provide consumers recovery of up to $4.50 per purchased unit and change product labels to clarify that "maximum strength" refers to lidocaine available over the counter. The settlement also requires CVS to remove any language referring to the length of time that the patches stick to the body.

In Friday's memorandum, Bell also asked the court for a $3,000 service award for the three named plaintiffs, arguing that they have spent significant time helping the class by investigating the claims, providing information and keeping in contact to discuss the progress and strategy of the case.