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Archive: 2019

$1.2M Fee Award in Chipotle Data Breach Class Action

December 31, 2019

A recent Law 360 story by Joyce Hanson, “Up to $1.6M Deal Over Chipotle Data Breach Gets Judge’s OK,” reports that a Colorado federal judge approved a class action settlement that will result in a payout that could total up to $1.6 million over a 2017 Chipotle data breach that exposed customer names and payment card numbers to hackers, saying the terms are fair and reasonable.  U.S. District Judge Christine M. Arguello said in her order granting the plaintiffs' unopposed motion for final approval that the settlement making class members eligible for out-of-pocket reimbursement of up to $250 is adequate and that the value of immediate recovery in the case outweighs "the mere possibility" of future relief after long and expensive litigation.  As of Nov. 19, class members have timely submitted 6,429 claim forms, according to the plaintiffs.

"The parties judge the settlement to be fair and reasonable, and no class member has objected to the settlement," the judge wrote.  "Class counsel are experienced class action litigators who are very knowledgeable about the claims, remedies and defenses at issue in this litigation."  In addition, class members who suffered other "extraordinary" unreimbursed monetary losses because of compromised information can make a claim for reimbursement of up to $10,000, according to the order.  The out-of-pocket reimbursement of up to $250 covers an automatic payment for each affected card, payment for customers' time spent dealing with fraud issues, and reimbursement for credit monitoring and identity theft insurance.

Judge Arguello also agreed to the customers' Nov. 1 unopposed motion for $1.2 million for their attorneys, comprised of $1,165,782 in fees and $34,000 in expenses, based on class counsel's 2,406 hours spent on investigation, prosecution and litigation settlement.  The judge also approved an incentive award of $2,500 for each of six class representatives in the suit led by plaintiff Todd Gordon.

Chipotle revealed in April 2017 that it had detected a data security breach in its electronic processing and transmission of confidential customer and employee information.  The burrito chain acknowledged at the time that it may be subject to lawsuits because of the breach that reportedly affected transactions from March 24 through April 18 of that year.  Financial institutions that sued over the breach told the court in March that the parties had reached a confidential settlement agreement.  On June 19, Judge Arguello granted the customers' June 13 unopposed motion for preliminary approval of the settlement, conditionally certifying the class.

The customers said the requested fee award is consistent with attorney fees approved in the court and in other data breach settlements.  Class counsel's lodestar of $1.44 million through Oct. 31 represents a 0.83 negative multiplier, which "supports the reasonableness of the fee requested," the customers said

Jones Day Says Pharma Client Owes $5.3M in Legal Bills

December 30, 2019

A recent Law 360 story by Hailey Konnath, “Jones Day Says Pharma Client Owes $5.3M in Legal Bills,” reports that Jones Day sued a pharmaceutical company in New York state court, claiming the former client has refused to pay nearly $5.3 million in legal bills it racked up while the firm defended it in two patent disputes.  According to the complaint, Serenity Pharmaceuticals LLC researches and develops patented pharmaceuticals to address urinary conditions.  The company tapped Jones Day to represent it and several affiliated companies in a pair of patent lawsuits over antidiuretic products in 2017, the firm said.

Jones Day "zealously represented" the company in both suits, dedicating nearly a dozen attorneys and staff and spending more than 15,000 hours working the cases, the firm said.  And up until December 2018, Serenity paid its bills in full, it said.  But starting that month, the company stopped paying, and now it owes nearly $5.3 million in fees and costs, according to the complaint.

"Serenity has never disputed that it owes this sum in full," Jones Day said. "Because Serenity still has not paid what it owes, Serenity is in breach of the engagement agreement and Jones Day now brings this action."  Serenity confirmed Jones Day's billing arrangement, including its attorneys' hourly rates, in an engagement agreement dated July 2017, the firm said. 

Following the agreement, Jones Day represented Serenity through "complex fact and expert discovery and extensive motion practice," including the successful defense of two summary judgment motions, the filing of a motion to dismiss, a preliminary injunction hearing, a bench trial, post-trial briefings and appellate proceedings, the firm said.

"Defendants often praised Jones Day for its work related to the representation," the complaint said.  And throughout its representation, the firm regularly sent detailed billing statements to Serenity and its CEO, Dr. Samuel Herschkowitz, Jones Day said.  On top of not paying Jones Day, Serenity owes third-party service providers — including experts, a trial graphics vendor, a document management vendor and court reporters — almost $468,000, the firm said.

Jones Day said it spent six months meeting, emailing and speaking on the phone with the company, trying to reach an agreement regarding payment.  But over the course of those meetings, emails and phone calls, "Serenity declined to provide payment for the overdue Jones Day legal fees," it said.  The firm said it asked to withdraw from one of the cases, but was told such a move would be impractical given a trial that began in July.  Since then, the firm continued its "uninterrupted representation," though it informed the company it would not be representing it in an upcoming appeal, per the complaint.

FTC Ordered to Pay Attorney Fees and Costs Under EAJA

December 27, 2019

A recent NLJ story by Mike Scarcella, “FTC Ordered to Pay $843K in Legal Fees, Costs After Losing Privacy Case,” reports that the Federal Trade Commission must pay more than $843,000 in attorney fees and costs to the law firms that represented a now-defunct medical diagnostic testing company that had long argued the agency was misguided in an enforcement action alleging inadequate data-privacy protections.

Atlanta-based LabMD, which has claimed the FTC’s enforcement action put it out of business, was represented by such firms as Ropes & Gray, Dinsmore & Shohl, and Wilson Elser Moskowitz Edelman & Dicker.  A team from Ropes & Gray served pro bono as lead counsel for LabMD in the U.S. Court of Appeals for the Eleventh Circuit, which last year ruled against the FTC.

The appeals court this week upheld a special master’s report that said the law firms were entitled to fees and costs for their successful advocacy on behalf of LabMD.  The report said the FTC’s litigation position was not “substantially justified,” a threshold test for disputes involving whether a federal agency is on the hook for legal fees.  Ropes & Gray was awarded nearly $300,000 in fees.  Dinsmore was granted about $346,000, and Wilson Elser was awarded $83,200.

LabMD’s lawyers sought to recoup attorney fees under the Equal Access to Justice Act, which can provide some relief to parties who prevail against federal agencies.  FTC lawyers had urged the federal appeals panel to reject any legal-fee award at all.  “LabMD is not entitled to recover any of its fees or costs because the commission’s position at every stage—when it opened the investigation, prosecuted an enforcement complaint, and defended its cease-and-desist order on appeal—had ‘a reasonable basis in both law and fact’ and therefore was ‘substantially justified,’” FTC attorney Theodore Metzler said in a court filing last month.

The special master, Walter Johnson, a U.S. magistrate judge in Rome, Georgia, concluded the FTC was not “substantially justified” in its investigation and prosecution of LabMD.  Johnson, like others before him, examined the FTC’s relationship with, and reliance on, a company that allegedly tried to get LabMD to buy its data-protection services after informing the company of an alleged information-security breach.  “Tragically, as this case was proceeding through the enforcement action stage, LabMD was forced to cease operations,” Johnson wrote in his report.

LabMD’s fee petition in the Eleventh Circuit revealed various rates for leading Ropes & Gray partners and associates as of October 2018.  The firm said it would reinvest any awarded compensation into further pro bono work.  Douglas Meal, the primary lawyer for LabMD in the Eleventh Circuit and formerly co-leader of the firm’s privacy and cybersecurity practice, reported an hourly rate of $1,500.  Appellate partner Douglas Hallward-Driemeier was charging $1,200, and then-partner Michelle Visser was billing at $1,060 hourly.  The firm’s fee application presented both current hourly rates and discounted figures that were used as the basis for the petition.

Federal Circuit Faults Judge in Patent Fee Award

December 26, 2019

A recent Law 360 story by Ryan Davis, “Fed. Circ. Faults Judge’s $444K Fee Award in IV Patent Case,” reports that the Federal Circuit vacated a Delaware judge’s decision ordering patent licensing company Intellectual Ventures to pay Trend Micro Inc. $444,000 in attorney fees after a failed patent suit, saying the judge may not have used the right legal standard.  The appeals court said it seemed that after Chief Judge Leonard P. Stark of the District of Delaware invalidated Intellectual Ventures’ patents, he only considered one aspect of the case to have “stood out from others,” the U.S. Supreme Court’s standard for when attorney fees are warranted, rather than the case as a whole.

The Patent Act states that attorney fees may be awarded "in exceptional cases.”  When he awarded fees to Trend Micro in 2017, Judge Stark said an unusual situation in the case, when Intellectual Ventures’ expert witness changed his testimony, was exceptional, but the case as a whole was not.  He ordered the company to pay Trend Micro’s fees related to that witness, but the Federal Circuit said it was concerned by the judge’s statement that the overall case was not exceptional.

“Instead of determining whether the case was exceptional, it appears that the district court may have focused on whether one discrete portion of the case stood out from other cases," the Federal Circuit said.  "This is not the appropriate analysis."  The court noted that it has held that an award of attorney fees can be related to particular conduct and circumstances that stood out and made the case exceptional, "but in all such cases we have required a finding of an exceptional case — not a finding of an exceptional portion of a case — to support an award of partial fees."  The court therefore remanded the case so that Judge Stark can consider whether the specific circumstances render the case exceptional and deserving of attorney fees.

During pretrial proceedings in that case, Intellectual Ventures' expert offered an opinion about the meaning of a phrase in one of the patents.  During trial, however, the expert offered a different interpretation, saying he changed his opinion after working with Intellectual Ventures' lawyers.  Judge Stark later invalidated all three patents, finding that they claim only abstract ideas.  Trend Micro then moved for attorney fees and Judge Stark granted the motion, ruling that Intellectual Ventures' conduct was exceptional, "solely with respect to this collection of circumstances" regarding the changed expert testimony.

The Federal Circuit ruled that because Judge Stark only found that those specific circumstances were exceptional, "it is not clear that the district court applied the proper legal standard when it considered whether the case was exceptional."  However, the appeals court rejected Intellectual Ventures' argument that attorney fees can only be awarded for a pattern of "bad faith, sharp tactics, and unreasonable litigation positions," and not for a single act.

NCAA Ordered to Pay $33M in Fees and Costs in Antitrust Case

December 25, 2019

A recent Law 360 story by Dave Simpson, “NCAA Owes Student-Athletes’ Attys $33M in Fees and Costs,” reports that a California magistrate judge ordered the NCAA to pay $31.8 million to cover the attorneys who scored an injunction for student-athletes barring the NCAA from restricting their education-related compensation, but declined to provide the attorneys with the full $45 million they requested.  U.S. Magistrate Judge Nathanael Cousins applied minor reductions to the student-athletes’ baseline bid for fees and costs and declined to apply their ask for another $15 million based on a 1.5 multiplier, requested in light of "the exceptional nature of the outcome."

“Representation was of excellent quality on both sides of this litigation, and counsel for both sides expertly handled this exceedingly complex case,” Judge Cousins said.  “But the court finds that this quality and complexity are already reflected in plaintiffs’ counsels’ hourly rates and the number of hours billed.”

Further, he said, while the students’ victory was “historic,” they didn’t get everything they asked for.  “That both parties appealed the final judgment in the case indicates that neither wholly succeeded on their claims,” the magistrate judge said.  Finally, he said, the students’ attorneys have already recovered fees related to a damages portion of the case as a part of a settlement agreement.  In addition to the fees, the magistrate judge awarded the students’ attorneys nearly $1.4 million in costs.

Nearly $26 million of the fees will go to Winston & Strawn LLP, with about $3 million apiece heading to Hagens Berman Sobol Shapiro LLP and Pearson Simon & Warshaw LLP, while Pritzker Levine LLP will rake in $163,000.

The bid for fees and costs follows a landmark 10-day bench trial that kicked off in Oakland in September 2018 over allegations by Division I college football and basketball players that the NCAA's rules illegally restrict what they can receive to play.  The rules had limited athlete benefits to cost-of-attendance scholarships; Student Assistance Funds, which cover certain school-related expenses; some need-based grants, like Pell Grants; and bowl participation awards, which are typically capped around $450.

During the trial, sports economists, former athletes, university officials and NCAA administrators took turns testifying on the impacts of the NCAA's compensation rules.  Three former athletes, who didn't play professionally after college, recalled how they struggled as students to pay for meals, clothes and trips home, while they spent between 40 and 60 hours a week on their sports, which left little time for academics.