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Archive: 2013

Ninth Circuit Tosses Fee Award in Prius Litigation

December 31, 2013

A recent NLJ story, “Circuit Tosses Attorney Fee Award in Prius Litigation,” reports that the U.S. Court of Appeals for the Ninth Circuit has again struck down an award of attorney fees in a class action settlement, this time over allegedly defective headlights in Toyota Prius vehicles.  Plaintiffs firms had petitioned the court to reverse a federal district judge’s rejection of their proposed $4.7 million in attorney fees.

U.S. District Judge Manuel Real had called the fee request “highly unreasonable” for such a simple case and awarded $760,000 which he said represented 20 percent of the settlement’s estimated $3.8 million value.  The Ninth Circuit panel found that Real had abused his discretion in calculating fees based on a percentage of the settlement, rather than the lodestar method, which is the actual amount billed.

In its Ninth Circuit brief Eric Gibbs, a partner at San Francisco’s Girard Gibbs had argued that Real should not have applied the percentage method in the cases brought under California law.  Real also failed to take into account the lodestar calculation, wrote Gibbs, who estimated the firm billed $1.25 million.  Three additional plaintiffs firm—Wasserman, Comden, Casselman & Esensten of Tarzana, Calif.; Cohen Milstein Sellers & Toll in Washington; and Los Angeles-based Arias Ozzello & Gignac—joined in the appeal.  A fifth firm, Initiative Legal Group of Los Angeles, filed a separate brief.

The case draws parallels to the In re Bluetooth Headset Products Liability Litigation opinion in 2011, in which the Ninth Circuit found that U.S. District Judge Dale Fischer had failed to cross-check the lodestar amount against what plaintiffs attorneys would have received on a percentage basis when determining the fairness of a $800,000 fee request in a class settlement.

But in the Prius litigation, the Ninth Circuit grappled with whether California statutes—rather than federal case law—defined the fees calculation.  “To some degree what CAFA has done has introduced some uncertainly into where the state law applies and where it doesn’t,” Gibbs said, referring to the U.S. Class Action Fairness Act.  “Here, the Ninth Circuit clarified that in this instance it’s the underlying state law that governs rather than the federal standard.”

NALFA also reported on this case in, “Plaintiffs’ Lawyers Petition Ninth Circuit to Restore Fee Award”

Ninth Circuit Ends $28M Fee Allocation Dispute in Walmart MDL

December 30, 2013

A recent The Recorder story, “In Walmart Fee Fight, Ninth Circuit Balks at ‘Non-Appealable’ Arbitration,” reports that two Bay Area plaintiff lawyers have won an arbitration battle but lost a bitter $28 million fee allocation dispute.  The U.S. Court of Appeals for the Ninth Circuit ruled that Carolyn Burton and Robert Mills may challenge the allocation of attorney fees in multidistrict litigation against Walmart, even though they had previously agreed to “non-appealable” arbitration.

“Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text” of the Federal Arbitration Act, Judge Milan Smith Jr. wrote in In re Wal-Mart, “but would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.”

But exercising that judicial review, the Ninth Circuit rejected the attorneys’ fiercely contested claims that arbitrator Layn Phillips colluded with Fredrick Furth and another plaintiffs attorney to get more Walmart mediation work, and then stiffed Burton and Mills on fees to punish them for refusing to play ball. 

Burton, Mills, and co-counsel Carol LaPlant will receive about $6.7 million in fees, while New Hampshire attorney Robert Bonsignore will keep $11 million.  The remainder of the $28 million goes to some 40 state and local counsel who helped negotiate an $85 million settlement of wage-and-hour claims in multidistrict litigation across 30 states.  Mills and Burton claim Phillips punished them by allocating the lion’s share of the MDL fees to Bonsignore.

Bad blood in the case dates back to 2007, when Burton left the Furth Firm, accusing the famed attorney of cheating her out of bonuses and selling the MDL to get a better settlement of his California state court case.  The federal litigation settled in 2008 for $85 million, and Phillips was chosen to arbitrate the division of the $28 million in attorney fees.

The Ninth Circuit rejected all of the bias claims.  Instead, Judge seemed more interested in a provision of the MDL settlement agreement that provided arbitration would be binding and non-appealable.  “This appeal presents a question of first impression in this circuit: Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under Section 10 of the FAA, enforceable?” he wrote.  “We conclude it is not.”

Ambiguous Contingency Fee Agreement Could Cost Lawyers

December 23, 2013

A recent The Legal Intelligencer story, “Flawed Notice of Contingency Terms Cuts Attorney Fees,” reports that the Pennsylvania Superior Court has ruled that a law firm’s contingency fee agreement was ambiguous because it failed to expressly state whether the fee would be calculated based on the gross proceeds from the settlement or on the net proceeds after the litigation costs and medical expenses were deducted.

In an unreported opinion in Nguyen v. O’Neill, a three-judge panel of the court unanimously upheld a Philadelphia trial judge’s ruling reduced Philadelphia-based personal injury firm Simon & Simon’s cut of an $86,300 settlement in a motor vehicle accident case from about $32,000 to just under $20,000.

Writing for the court, Senior Judge William Platt agreed with Philadelphia Court of Common Pleas Judge Annette Rizzo that Simon & Simon’s fee agreement was unclear as to how the attorney fees would be calculated was therefore in violation of Rule 1.5(c) of the Rules of Professional Conduct.  Rule 1.5(c) requires fee agreements to “state the method by which the fee is to be determined, including…litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingency fee is calculated.”

“After review, we agree with the trial court’s determination that the contingent fee agreement is ambiguous, and that appellant’s failure to specify whether it would deduct litigation and medical expenses from the recovery before calculating its attorney fee is in contravention of the clear directive set forth in Rule 1.5(c),” Senior Judge William Platt said.  “This ambiguity in the contingent fee agreement must be construed against appellate as contract drafter, and the court correctly determined that the attorney fee must be calculated based on the net settlement recovery, after deduction of expenses.”

Concerns Over Attorney Fees in NFL Concussion Settlement

December 20, 2013

When the NFL announced the concussion settlement in August, the former players assured the league that no part of the $765 million settlement was for lawyers.  Plaintiffs’ lawyers were to be paid from a separate fund, to cover attorney fees and expenses.  But, according to documents and emails obtained by ESPN’s “Outside the Lines,” some plaintiffs’ lawyers have separate fee arrangements with former players.

Lead plaintiffs’ lawyer, Christopher Seeger of Seeger Weiss in New York, tried to arrange an agreement to receive a 10 percent cut of any money awarded to a 79-year-old former NFL player, Billy Kinard.  Seeger quickly withdrew the proposal after the player’s attorney challenged it by calling the fee agreement “most troubling.”

In a statement provided to “Outside the Lines,” Seeger wrote: “Seeger Weiss is not representing any new plaintiffs, from when the settlement was announced on Aug. 29, on a fee arrangement.  A small number of plaintiffs were mistakenly offered a retainer agreement after approaching Seeger Weiss for representation post-announcement.  After learning of this error, we notified these plaintiffs and agreed to continue representing them for no fee.”

It is unclear how many lawyers could be engaged in “double-dipping” and how many former players might have a separate fee arrangement.  In some cases, those fee agreements call for the players to pay as much as one-third of any money they recover to their attorneys.

In response to this double-dipping, U.S. District Judge Anita Brody has appointed special fee master Perry Golkin to assist her in evaluating the “financial aspects” of the proposed settlement.  She said the “appointment is warranted by the expected financial complexity of the proposed settlement.”

NALFA also reported on this case in “Attorney Fees To Be Determined in NFL Concussion Settlement.”  For more on this settlement, visit http://nflconcussionlitigation.com/

Senate Weighs Fee Shifting Provision in Patent Reform Legislation

December 19, 2013

A recent Corporate Counsel story, “Senate Weighs Fee Shifting in Anti-Patent Troll Bills,” reports that business leaders urged the Senate Judiciary Committee to include fee shifting in legislation it’s debating to combat abusive litigation from patent trolls.  Speaking at a hearing the panel held on patent lawsuit reform, representatives of the Credit Union National Association, Printing Industries of America and Adobe Systems Inc. said provisions that called for the loser patent litigation to pay for court expenses are necessary to effectively fight patent trolls.

Dana Rao, Adobe’s vice president and associate general counsel for intellectual property litigation, said the Senate measure doesn’t properly address patent troll abuses without tools that include fee shifting.  “In order to disrupt the patent troll problem that we have today, we have to look at the economics,” Rao said, “and the economics are: They face no risk from bringing these lawsuits.”

Not all witnesses at the hearing thought Congress must legislate on fee shifting, however.  Phillip Johnson, Johnson & Johnson Services Inc.’s senior vice president and chief intellectual property counsel, said he supports fee shifting as a tool to combat trolls.  But he said Congress might want to wait until the U.S. Supreme Court in February takes up patent cases Octane Fitness LLC v. ICON Health & Fitness Inc. and Highmark Inc. v. Allcare Health Management Systems, both of which concern fee shifting.  “By waiting for the Supreme Court to act, you’ll be able to decide whether the way that they’ve acted is a bitter way to go forward than whatever legislation you may wish to write,” Johnson said.

The Senate’s version of the patent reform legislation is called the Patent Transparency and Improvements Act.  The House passed its version, the Innovation Act, which has a fee shifting provision.