A recent Law 360 story by Marco Poggio, “Judge Initially Oks 53 Firms’ Fee Plan in GM Ignition MDL,” reports that a federal judge in Manhattan pushed forward a plan for a three-tier system for distributing $34 million in attorney fees and expenses among the 53 law firms involved in multidistrict litigation against General Motors, but asked for clarifications on how firms are assigned to each tier after objections were raised. In an order, U.S. District Judge Jesse M. Furman of the Southern District of New York said the tier system works but stopped short of approving the full deal, pending resolution of a dispute arising from how fees are calculated between the leading counsel and three other firms.
Judge Furman dismissed main objections brought by three firms — Golenbock Eiseman Assor Bell & Peskoe LLP, Wolf Haldenstein Adler Freeman & Herz LLP, and a group of attorneys working under the supervision Gary Peller, a professor at Georgetown University Law Center — who claimed they were being shortchanged for their work in the sprawling case, which involves faulty ignition switches. However, the judge found some merit in the three objectors' "claim that the proposed allocation fails to credit them for many hours of compensable work without adequate explanation," and he ordered the co-lead plaintiff firms — Lieff Cabraser Heimann & Bernstein LLP and Hagens Berman Sobol Shapiro LLP — to submit a document detailing the criteria used to determine the compensation for each participating firm.
"It is incumbent on class counsel to explain and justify the criteria they used to make these determinations," Judge Furman said in the order. The judge approved the arrangement's structure, in which Lieff Cabraser and Hagens Berman stand at the top tier and are entitled to 35% of the lodestar. Members of the plaintiffs' executive committee are in tier two, along with liaison counsel and bankruptcy counsel, with an allocation of 19.3%. Finally, the rest of the attorneys would fall in tier three and receive the greater between $1,000 or 7.5% of the lodestar.
Firms in tier one, two and three will collectively receive more than $15.4 million, $8.9 million, and $254,000 respectively, according to the arrangement. The only exception will be Brown Rudnick LLP, which will receive 23.37% of the lodestar despite being in tier two because it contributed more work than firms in the same tier, according to the order. Judge Furman also agreed to placing the three objectors in tier three.
One of the objections came from Peller, who claimed the difference in earning between tiers is unfair because it fails to compensate non-lead attorneys properly. In a call to Law360, Peller said the lead counsel "punished" his group by assigning a small share of the lodestar compared to firms in the higher tiers. "This is amazingly low compensation for lawyer work," he said.
Case law has put in place limits to the power of lead counsels in class actions. The same protections do not apply to multidistrict litigation, though Peller argued with Judge Furman that they should. "The lead counsel in multidistrict litigation have virtually unfettered power over the litigation and litigation decisions, and that's a problem from a due process point of view," said Peller, who has been working on the case since 2014.
The MDL saw its turning point in March 2020, when General Motors proposed a $120 million settlement with drivers who claimed that their cars lost value due to faulty ignition switches. Under the settlement, a trust controlled by creditors in the company's 2009 bankruptcy will contribute up to $50 million. The deal also included $24.6 million in attorney fees and $9.9 million in litigation expenses, according to court documents.
In the order, Judge Furman acknowledged there is little case law guidance about the allocation of attorney fees among co-counsel, and that courts routinely give lead counsel the initial responsibility of determining how much each participating firm deserves.
Golenbock Eiseman had argued that the allocation system proposed by the lead counsel is only based upon fees and expenses incurred between Oct. 20, 2014, and Feb. 29, 2016, and fees and expenses it incurred between April 7 and Sept. 30, 2014, were improperly excluded.
Similarly, Wolf Haldenstein had told the judge that Lieff Cabraser and Hagens Berman had failed to credit it for work done before August 2014, without providing a rationale. Golenbock Eiseman and Wolf Haldenstein had also argued they should have been assigned to tier two, claiming they had put in as much work as bankruptcy counsel during the early stages of the case, the order says. Golenbock Eiseman said it expected to receive a share of the lodestar similar to that given to Brown Rudnick, "or at worst, [be categorized] in Tier 2," according to the order.
In the end, Judge Furman brushed off all objections except those regarding the allegedly unexplained omissions by the lead counsel in calculating the hours of compensable work for the three objecting firms. The judge will issue a decision on the proposal after evaluating possible discrepancies between the attorney fees and expenses determined by Lieff Cabraser and Hagens Berman and those submitted by each participating counsel.
Elizabeth Cabraser of Lieff Cabraser, who also served as lead counsel for plaintiffs in the MDL against Volkswagen for its cheating of emission standards, cheered the judge's approval of the tier arrangement in an email to Law360. "We are pleased the hard work we put into a fee allocation designed to reflect the relative efforts and risk undertaken by counsel who worked for the class resulted in a structure fully supported by the court as well as nearly all plaintiffs' counsel," she said. "We look forward to a final distribution to counsel after submitting the requested information."