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Category: Fee Dispute

Seventh Circuit Tosses $11M Attorney Fee Award

May 20, 2022

A recent Law 360 story by Hailey Konnath, “Seventh Circ. Throws Out $11M Fee Award For Bernstein Litowitz” reports that the Seventh Circuit vacated an $11 million fee award for Bernstein Litowitz Berger & Grossmann LLP's work on a $45 million settlement between waste disposal company Stericycle and its shareholders, finding that the district court "did not give sufficient weight" to points raised in a class member's objection.  The three-judge panel said the Illinois federal court overseeing the case should've more seriously considered evidence of related fee agreements, all the work that Bernstein Litowitz inherited from earlier litigation against Stericycle and the early stage at which the settlement was reached.

"The cumulative effect of these issues leads us to conclude that the district court's analysis did not sufficiently 'reflect the market-based approach for determining fee awards that is required by our precedent,'" the Seventh Circuit said.  The panel added, "We vacate the fee award and remand for a fresh determination more in line with what an ex ante agreement would have produced."

Objector Mark Petri appealed a 25% cut that Bernstein Litowitz got from representing investors claiming that Stericycle falsely inflated its financial results through fraudulent pricing.  In particular, Petri argued that the attorney fees were potentially inflated by a pay-to-play scheme and the case never proceeded past the motion-to-dismiss stage.

In the underlying case, lead plaintiffs Public Employees' Retirement System of Mississippi and the Arkansas Teacher Retirement System had pointed to briefing in a study conducted by Nera Economic Consulting.  According to that study, for securities class action cases that settled between 2014 and 2018 in amounts ranging from $25 million to $100 million, the median attorney fee award was 25%, like the share awarded to Bernstein Litowitz.

Bernstein Litowitz asked the court to approve its $11 million fee request in June 2019, and the court gave its blessing in May 2020.  But the Seventh Circuit said that the district court's analysis was incomplete.  Notably, the court didn't address a 2016 retention agreement between the firm and the Mississippi attorney general, under which Bernstein Litowitz was authorized to represent the Mississippi fund and seek a percentage of the recovery achieved for the class as compensation.  That percentage, however, was supposed to be limited to the percentage corresponding to the fund's estimated individual recovery, the panel said.

At oral argument, Bernstein Litowitz had said that the sliding scale structure outlined in that agreement only applies to the amount recovered by the fund itself, not to the total amount recovered by the class.  The Seventh Circuit said that interpretation is "improbable, arbitrary, unreasonable and not consistent with a class representative's fiduciary duty to class members."

Additionally, the district court's assessment of the risk of non-payment also didn't give sufficient weight to prior litigation involving Stericycle, litigation that substantially reduced the risk of non-payment, the panel said.  The court had found that the risk of non-payment was "substantial," but that earlier litigation demonstrating Stericycle's billing practices and other settlements signaled that class counsel was not actually taking on much risk, the Seventh Circuit said.

And on top of that, the court didn't properly consider just how early on in the litigation the case was settled, according to the decision.  At the very least, the district court should've considered whether the preliminary stage of the litigation warranted a reduction in the requested fee, it said.  The Seventh Circuit also remarked that it wasn't convinced the settlement was a good outcome for the class, but that neither Petri nor anyone else was challenging that.

Client Drops Attorney Fee Dispute Against Law Firm

May 16, 2022

A recent Law 360 story by Caroline Simson, “Taiwanese Co. Says It Won’t Arbitrate Fisch Sigler Fee Dispute” reports that a Taiwanese manufacturer of smartphone camera lenses is pressing a DC federal court to quash arbitration initiated by intellectual property boutique Fisch Sigler LLP seeking millions in additional fees for its work on a "meandering, inconclusive" and expensive patent lawsuit that settled last year.  Largan Precision Co. Ltd. told the court in the lawsuit filed May 10 that it never gave its informed consent to arbitrate the dispute with Fisch Sigler, which is set to be heard by the DC Bar Attorney/Client Arbitration Board, or the ACAB.

The company noted that while the DC Court of Appeals requires any attorney who is a DC Bar member to submit to arbitration before the ACAB if a client chooses that venue to pursue a fee dispute in matters with some connection to DC, there has never been any such rule for clients.  Largan argued that since it intends to challenge the validity of an arbitration agreement that was "quietly added" to its engagement agreement with the firm near the end of their negotiations, that question should be left to the court.

"[G]overning precedent makes plain that only a court, and not an arbitration panel, can decide the threshold issue of whether a valid agreement to arbitrate exists, unless there is clear and unmistakable evidence that the parties agreed to have that question decided by the arbitrators," the company wrote.  "There is nothing here to suggest that the parties ever discussed, let alone agreed to, the ACAB deciding the specific issue of arbitrability."

Largan alleges in the litigation that the firm has already gotten $4.5 million in "fixed fee" payments.  It's now seeking an additional $5.6 million in success fees — despite the fact that Largan agreed to settle the litigation in Texas due to the outcome of parallel litigation in Taiwan that Fisch Sigler had not worked on, according to the brief.  The underlying dispute for which Largan engaged Fisch Sigler involved another Taiwanese company called Ability Opto-Electronics Technology Co. Ltd., which Largan accused of misappropriating its trade secrets in 2013.

While litigation was ongoing in Taiwan, Largan hired Fisch Sigler to file a patent infringement lawsuit in the U.S. against Ability Opto-Electronics Technology and two other entities in Texas.  Largan alleges that while the lawsuit was ongoing, Fisch Sigler charged a fixed fee despite not doing all the work that was supposed to be included under that fee.  That included depositions and a hearing in mid-2020 that Largan says never took place.

Largan won some $50 million in the Taiwanese litigation in early 2021, and it subsequently approached Fisch Sigler about settling the Texas litigation.  The company claims that the litigation had gone poorly, and that there was no reason to continue with it at that point.  It was then that the firm attempted to collect the success fee "based on the resolution of a litigation in Taiwan in which it had no role — and despite achieving nothing resembling success from the meandering, inconclusive, yet very expensive litigation it had pursued for Largan against [Ability Opto-Electronics Technology] and others in Texas and, later, California," according to the suit.

School Parents Denied Attorney Fees in Mask Dispute

May 12, 2022

A recent Law 360 story by Matthew Santoni, “Behrend Law Group Denied Fee Bid in School Mask Dispute” reports that a group of parents who sued to make a Pittsburgh-area school district keep its mask mandate were not the "prevailing party" for the purpose of awarding Behrend Law Group attorney fees just because the Third Circuit had temporarily restored the mask order, a Pennsylvania federal judge ruled.  U.S. District Judge William S. Stickman IV said he had denied the parents a temporary restraining order on the district, and they had never argued their case on the merits on appeal, so a temporary order from a single Third Circuit judge keeping the masks on until the case was dismissed was not the same as a win – and didn't merit nearly $109,000 in fees and costs that the parents' attorneys sought from the Upper St. Clair School District.

"The interim relief granted by the Third Circuit to maintain the status quo pending appeal does not constitute relief on the merits and does not render plaintiffs prevailing parties," Judge Stickman wrote.  "Plaintiffs had the burden of establishing their right to relief as prevailing parties, and the court has determined that they failed to do so.  Attorney fees are, therefore, not available."

Attorneys Ken Behrend and Kevin Miller had represented a group of parents of children with disabilities who claimed in January that the school district's decision to make masks optional while COVID-19 was still spreading would put their children at risk.  The school district, the parents claimed, had violated the Americans with Disabilities Act by forcing them to choose between risking infection and being shunted back into online learning.

Judge Stickman had denied the parents' request for an injunction, ruling that they were unlikely to succeed on the merits of their ADA claim.  But when they appealed to the Third Circuit later in January, U.S. Circuit Judge Thomas L. Ambro issued an order that temporarily granted the parents' request to keep the district's mask mandate while the case was pending.

Briefs were submitted, and the case was set for argument in March along with a similar suit from the North Allegheny School District, where a different judge had granted another group of parents' request for an injunction keeping masks.  But before the case was argued, the U.S. Centers for Disease Control & Prevention issued new guidance for measuring the level of the pandemic's spread and the necessity of masks, such that the Third Circuit declared the appeals moot.

When Behrend and Miller argued that the Third Circuit had granted the relief their clients wanted and they were entitled to fees, the school district countered that he hadn't actually gotten a ruling on the merits and therefore hadn't "prevailed." Judge Stickman agreed.  In other cases, the Third Circuit had denied fees to parties that had gotten temporary restraining orders and rulings that they had a likelihood of success on the merits, but the parents in Upper St. Clair hadn't even gotten that much, Judge Stickman said.  The Third Circuit's order wasn't enough, either, he said.

"The relief afforded to plaintiffs was not merits-based," Judge Stickman wrote.  "Here the Third Circuit's entry of a temporary emergency injunction was specifically viewed by that court as temporary.  Moreover, it did not even attempt to discuss and determine the substantive issues raised by the parties -- much less express a determination that plaintiffs had satisfied their burden to demonstrate that injunctive relief was warranted."

Without prevailing on the merits, the parents and Behrend could not seek to make the school district pay their attorney fees and were left to cover their own costs, the judge said.

Judge Clears Law Firm in Overcharge Fee Suit

May 6, 2022

A recent Law 360 story by Ryan Harroff, “Judge Axes Benicar Fee Suit. Says Firm Didn’t Overcharge” reports that Mazie Slater Katz & Freeman LLC beat a suit that claimed it overcharged its clients in multidistrict litigation over gastrointestinal injuries related to blood pressure drug Benicar and its generic Olmesartan after the New Jersey court found a state attorney fee rule did not apply to the MDL.  A New Jersey federal judge granted Mazie Slater's motion to dismiss the proposed class action, writing that the nearly $9 million award for the firm was "well within the reasonable and equitable percentages of Third Circuit examples."  The court agreed with the firm's argument from its dismissal bid that a state rule on attorney fees that served as the backbone of the action does not apply to mass tort MDL cases.

According to the court's opinion, named plaintiff Anthony Martino misapplied New Jersey Court Rule 1:21-7(i), which requires firms to aggregate class action fees based on individual client recoveries and seek court approval for fees over $3 million, by claiming that he and his proposed class members all had "substantially identical liability issues," a requirement for the rule, since they were all litigants in a New-Jersey resident-only multicounty consolidated litigation running parallel to the broader Benicar MDL.

According to the opinion, "there can be no rational, medical, logical, or legal justification why the claims of a subset of Olmesartan registrants could be interpreted as having substantially identical liability based merely on the fact they arose in the MCL."

The product liability MDL and MCL in question sought to hold Daiichi Sankyo Inc. and Forest Laboratories Inc. accountable for injuries suffered by Benicar and Olmesartan users.  The MDL settled initially for $300 million in August 2017 and the deal later grew to $380 million after triple the expected class members registered, according to the opinion.

Mazie Slater got $8.9 million of the total attorney fee allotment from the deal, and Martino accused the firm of running afoul of the New Jersey court rule in his November complaint, which claimed legal malpractice, unjust enrichment and conversion after firm partner Adam Slater allegedly failed to tell his clients that the firm would get "substantial fees and costs for the same, or substantially same, work that he had performed for each client and for which he received a full fee under the individual retainer agreements."

The rule does not apply to MCL or MDL consolidations, the court wrote, citing a lack of case law to support its application and the "very different and the very specific factual details" of each consolidated injury, which, according to the opinion, undercut Martino's argument the MCL litigants issues are substantially identical.

Bruce Nagel of Nagel Rice LLP, counsel for Martino and the proposed class, told Law360 that it is "nonsense" for the court to say the MCL plaintiffs do not all arise from the same liability issues since they all come from the same drug.  Nagel also said the MCL plaintiffs all had retainer agreements with Mazie Slater that included the New Jersey court rule and that he believed the Third Circuit would find that rule enforceable under those retainers.

Adam Slater of Mazie Slater Katz & Freeman LLC, who is both a named defendant and counsel for himself and the firm, told Law360 that the court's decision was "absolutely correct," and that there are many variances of liability issues in the consolidated cases, such as whether a plaintiff took the drug before or after a warning about potential side effects was added in 2013.  Slater said variances like that are why the New Jersey court rule does not apply for mass torts.

"What we did here is consistent with what every New Jersey lawyer litigating mass torts in the state and federal courts of New Jersey has been doing for over 40 years, calculating fees, and it's very clear that that rule does not apply in a mass tort setting like the Benicar case or the other mass tort cases that are routinely litigated in New Jersey," Slater said.

Former Client Fights Law Firm’s $1.9M Attorney Fee Lien

May 3, 2022

A recent Law 360 story by Matthew Santoni, “Ex-Client Fights Buchanan Ingersoll’s $1.9M Fee Lien” reports that a former client of Buchanan Ingersoll & Rooney PC has said the firm isn't entitled to $1.9 million from a settlement in a patent dispute, but it offered to put a smaller amount aside while the parties litigate whether the firm overcharged for its work.  Best Medical International Inc. opposed Buchanan Ingersoll's motion for an attorney's lien on its settlement with Varian Medical Systems Inc., arguing in a brief to a Pennsylvania federal court that its former firm wasn't as instrumental as it claimed in securing the settlement and couldn't seek fees for the work while the reasonableness of those fees was at the heart of the current lawsuit.

"BIR has produced no evidence whatsoever that any settlement discussions began because of the quality of or the quantity of BIR's work," Best's reply brief said.  "Settlement discussions which resulted in an actual settlement did not result until after a substantial amount of additional work was done by other law firms once BIR withdrew from, or were substituted as to, representation of BMI in the Varian case."  Best urged the federal court to deny Buchanan Ingersoll's motion to enforce the $1.9 million lien and offered to put $700,000 in escrow with the court "as a good faith gesture, and without admitting liability in any amount."

Best had sued Buchanan Ingersoll in July 2020, alleging the Pittsburgh-based firm had overcharged for representing the medical device maker in a pair of patent disputes, including the fight with Varian.  Best broke off its relationship with Buchanan Ingersoll in March 2020.  Best and Varian announced a settlement in Delaware federal court April 18, and Buchanan Ingersoll filed a motion with the Pennsylvania court to enforce a lien on the settlement proceeds April 26, expressing concern that its former client would spend or otherwise dispose of the funds before the firm could claim its share.

Although the law firm claimed its engagement contract with Best included a clause saying it would be governed by Virginia law, Best argued that the Federal Rules of Civil Procedure regarding liens superseded the choice of law provision and that the law of the state where the lien was brought should apply.  And under Pennsylvania law, Best claimed that Buchanan Ingersoll had failed to make the necessary showing that its work contributed substantially to the settlement it sought the lien against.

Buchanan Ingersoll said it did most of the work on the Varian case in Delaware and on six "inter partes review" challenges that Varian had filed with the U.S. Patent and Trademark Office.  But Best countered that more was done by the successor law firms, including a "substantial amount of discovery, the taking and defending of depositions, significant briefing and oral argument before the USPTO … and appeals of the IPR final decisions to and currently pending in the U.S. Court of Appeals for the Federal Circuit."

"It is this substantial work by others, not BIR, that ultimately led to the Varian case settlement more than two years after BIR's representation was terminated," Best's reply said.  Even if the court agreed with Buchanan Ingersoll that Virginia law applied, the firm had not given all parties to the settlement — including Varian — that state's required notice that a lien might be applied to the settlement proceeds, Best said.

Moreover, Best said that Virginia law required Buchanan Ingersoll to show that the fees it sought to recover were reasonable, and the current lawsuit contended that they were not.  Best cited the Virginia Supreme Court's 1997 ruling in Seyfarth Shaw Fairweather & Geraldson v. Lake Fairfax Seven Limited Partnership to support its argument.

"Similar to issues in the instant case, the issues in Seyfarth involved the law firm expending an unreasonable amount of time in the performance of legal services and, therefore, the total amount of legal fees charged was unreasonable," Best's reply said.  "Any fees recoverable must be reasonable and … the party claiming legal fees has the burden of proving prima facie that the fees are reasonable and necessary.  Clearly, BIR has not met its burden of proof, nor has there been any adjudication, that the fees in dispute allegedly owed BIR were reasonable and necessary."