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Category: Practice Area: Class Action / Mass Tort / MDL

Federal Judge Cites NALFA Survey in Attorney Fee Award

October 1, 2021

A federal judge has cited a NALFA survey in a class action attorney fee award.  U.S. District Judge Amos L. Mazzant of the U.S. District for the Eastern District of Texas referenced NALFA’s hourly rate survey in awarding attorney fees and expenses in Cone v. Porcelana Corona de Mexico, S.A.de C.V. et. al (“Vortens”).  The NALFA survey independently showed prevailing market rate data of class counsel in the Dallas-Fort Worth area. 

“To support its submitted rates, Class Counsel commissioned and submitted a survey conducted by the National Association of Legal Fee Analysis ("NALFA").  The sample of the NALFA survey was Dallas-Fort Worth metropolitan area plaintiffs’ counsel practicing in consumer related or product liability class-action work.  Class Counsel’s submitted hourly rates, while on the higher side, falls within the accepted range,” wrote Judge Mazzant.

NALFA conducts custom hourly rates for clients such as law firms to independently prove billing rates in court.  Lead plaintiffs’ counsel commissioned NALFA to conduct a billing rate survey of plaintiffs’ rates in class actions in the Dallas-Fort Worth area.  NALFA conducted this survey via email, employing its best practices measures.  In his 26-page fee order (pdf), Judge Mazzant accepted the hourly rate data and survey results and awarded over $4.3 million in attorney fees in the Vortens class settlement.

$22.5M in Fees in $100M Asbestos Settlement in NJ

September 27, 2021

A recent Law 360 story by Mike Curley, “BASF, Cahill Gordon To Pay $22.5M Atty Fees in Asbestos Suit,” reports that a New Jersey federal judge granted final approval to a $100 million settlement to resolve claims that BASF Catalysts LLC's predecessor and its former counsel at Cahill Gordon & Reindel LLP concealed that industrial and commercial talc from a Vermont mine may contain asbestos.  As part of the deal, class counsel will receive $22.5 million in attorney fees, as well as $1.2 million for costs and expenses incurred during the case and for the administration of the settlement, according to the order.  The six named plaintiffs, led by Kimberlee Williams, will each receive a $50,000 incentive award.

Christopher M. Placitella of Cohen Placitella & Roth PC, representing the plaintiffs, told Law360 that the total settlement comes to $100 million between the attorney fees and costs, incentive awards, $3.5 million for administering notice to the class, and the $72.5 million fund to be paid to the class.  He added that class members will be able to seek between $3,500 and $300,000 from the fund.  U.S. District Judge Brian R. Martinotti also certified a settlement class consisting of anyone who brought an asbestos suit against Englehard Corp. between 1984 and 2011 over the talc products in question, and who had either voluntarily dismissed or settled the suit or had it involuntarily dismissed before March 2011.

According to the lawsuit, Englehard, which was acquired by BASF in 2006, retained Cahill Gordon to defend it against claims that the Emtal Talc it produced between 1967 and 1983 contained asbestos.  The plaintiffs said Cahill Gordon and Englehard falsely said there was no evidence or testimony that the products contained asbestos, and had used those assertions to dismiss or settle thousands of claims.

Judge Martinotti said that the deal was entered into in good faith following substantial discovery and is a fair, reasonable and adequate method of resolving the claims at issue in the suit.  Williams and the other named plaintiffs asked the court for preliminary approval of the deal in July 2020, and the court granted preliminary approval in September of that year, according to court documents.

Article: Ninth Circuit Ruling Signals Scrutiny of Attorney Fees in Class Actions

September 25, 2021

A recent Law 360 article by Jason Russell, Hilary Hamilton and Adam Lloyd of Skadden Arps, “9th Circ. Ruling Signals Scrutiny of Class Settlement Fees,” reports on a recent ruling from the Ninth Circuit.  This article was posted with permission.  The article reads:

Despite the playful tone of the Briseño v. Henderson decision issued by the U.S. Court of Appeals for the Ninth Circuit in June, class action litigators should take the case seriously when structuring class action settlements.  Amid a thicket of pop-culture references, the Briseño panel held that under the revised Federal Rule of Civil Procedure 23(e)(2), federal courts must heavily scrutinize any settlement made on behalf of a class — whether pre- or post-class certification — to ensure that counsel for the defendant and the class have not colluded on an unfair distribution of settlement funds between recovery for the class and the fees for its attorneys.

Over a decade ago, in June 2011, the Briseño plaintiffs alleged that defendant ConAgra Foods Inc. misled consumers who wished to avoid consuming genetically modified organisms by placing a "100% Natural" label on its Wesson cooking oil brand, which allegedly contained GMO ingredients.  Notwithstanding the fact that the parties had been litigating the plaintiffs' false advertising claims for nearly 10 years, the Ninth Circuit rejected the parties' settlement that was negotiated after class certification, on grounds raised by a single objector.  The panel took significant issue with the class counsel's fee award, and found that the settlement "reek[ed]" of collusion.

The panel determined that the parties' settlement agreement and fee arrangement "raise[d] a squadron of red flags billowing in the wind and begg[ed] for further review," because (1) class counsel would receive disproportionately more money than the class; (2) the defendant agreed not to challenge class counsel's requested fee award (and any reduction in fees would revert to the defendant); and (3) the labeling-change injunctive relief that class counsel secured was "worthless," so it could not be used to justify class counsel's fee here.

The panel grounded its analysis in the history and text of Rule 23(e)(2), which was revised in December 2018, and requires a court to ensure that a class settlement is fair, reasonable and adequate.  Prior to the 2018 revision, however, Rule 23(e) did not provide guidance as to what was fair, reasonable or adequate.  So the Ninth Circuit filled in the gaps by providing several factors for district courts to consider, including the strength of the plaintiffs' claims and the risk and expense of further litigation at the stage of the proceedings.

The Ninth Circuit also was particularly wary of settlements reached on behalf of a class precertification — where it found that counsel may be most incentivized to maximize their own financial gain at the expense of the class members — and in 2011, provided an additional instruction for courts to watch out for what it called "subtle signs" that class counsel was putting their own self-interest before the class.

These signs included: (1) counsel receiving a disproportionate distribution of the settlement; (2) parties negotiating a "clear sailing arrangement," under which the defendant agrees not to challenge a request for an agreed-upon attorney fee; and (3) an agreement containing a "kicker" or "reverter" clause, that returns unawarded fees to the defendant, rather than the class.  In the Ninth Circuit, these are commonly known as the Bluetooth factors.

Then, in 2018, Rule 23 was amended to set forth specific factors for courts to consider when determining whether a class settlement was adequate, including "the costs, risks, and delay of trial and appeal"; "the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims"; and "the terms of any proposed award of attorney's fees, including timing of payment."

The Briseño panel focused on this last factor, and held that the new Rule 23(e) "indicates that a court must examine whether the attorneys' fees arrangement shortchanges the class" for all class settlements.  As a result, the panel found, district courts should apply the Bluetooth heightened scrutiny factors for both pre- and post-class certification settlements to "smoke out" potential collusion on attorney fee arrangements.

Applying the Bluetooth factors to the Briseño class counsel's fee arrangement here, the panel concluded that the fee arrangement "features all three red flags of potential collusion."  First, the panel noted the "gross disparity in distribution of funds between class members and their class counsel raises an urgent red flag," as counsel was set to receive nearly $7 million in fees, while the class received less than $1 million.

The panel found this disparity particularly problematic here because the parties knowingly structured a relatively common claims-made settlement, requiring class members to submit a claim to obtain a recovery, for a low-ticket item, which typically results in what the panel called "notoriously low" redemption rates. In this case, class members would recover 15 cents per unit of Wesson oil purchased during the class period.

Second, ConAgra agreed not to challenge the fees for class counsel, and the panel held that "the very existence of a clear sailing provision increases the likelihood that class counsel will have bargained away something of value to the class."  Third, the agreement provided that ConAgra was to receive any remaining funds if the district court reduced the agreed-upon attorney fees for class counsel, and the panel concluded that if a court determined the "full amount unreasonable, there is no plausible reason why the class should not benefit from the spillover of excessive fees."

Significantly, the panel also held that the settlement's injunctive relief component — ConAgra's agreement to no longer market Wesson oil as "100% Natural" — could not be used to justify the class counsel's excessive fee.  The panel panned the injunctive relief as "virtually worthless," "illusory" and "meaningless," because ConAgra had already decided to stop using the "100% Natural" label two years before the settlement agreement was reached — for reasons it stated were unrelated to the litigation — and no longer even owned the Wesson oil brand.

Although ConAgra's sale of the Wesson oil brand in Briseño clearly presents an uncommon circumstance, the panel made clear that going forward, courts must eliminate inflated valuations of injunctive relief "untethered to reality" that are used to justify excessive fee awards for class counsel.  Briseño's discussion of worthless injunctive relief will have significant repercussions for future settlement of many California federal class actions, as many companies often make labeling changes for business reasons before any complaints are even filed.

While the panel expressly stated that its decision did not mean that "courts have a duty to maximize the settlement fund for class members," and a "class does not need to receive much for a settlement to be fair when the class gives up very little," the practical effect of, and takeaway from, Briseño is that class counsel should expect significantly more resistance from defense counsel and courts to high attorney fee awards in class action settlements.

This will especially impact low-value and/or labeling claims arising from a plaintiff's subjective beliefs of purported harm — particularly when a defendant has already decided to make a labeling change for business reasons.  In such cases, the relief that counsel can secure for the class is likely to be limited, and Briseño plainly requires a commensurate fee award for class counsel.

Jason D. Russell is a partner, and Hillary A. Hamilton and Adam K. Lloyd are associates, at Skadden Arps Slate Meagher & Flom LLP.

$42M in Attorney Fees in $808M Ohio Opioid Settlement

September 17, 2021

A recent Law 360 story by Dave Simpson, “Ohio Cuts $808M Opioid Distributor Deal Plus $42M Legal Fees,” reports that the nation's three largest drug distributors struck an $808 million deal with Ohio, and agreed to pay $42.4 million in legal fees and implement reforms, to end the Buckeye State's claims in opioid litigation in relation to an upcoming nationwide settlement, the state attorney general announced.  Ohio Attorney General Dave Yost said that the deal with Cardinal Health Inc., AmerisourceBergen Corp. and McKesson Corp. is better than the national settlement, because it includes the legal fees.

The deal will start providing Ohio cities and counties with payments as early as November as part of an 18-year payment schedule, and the cash is guaranteed even if the national agreement falls apart, he said.  In July, seven attorneys general formally announced a global opioid settlement worth $26 billion with Johnson & Johnson, as well as the three distributors in the deal.  The deal will be distributed through Gov. Mike DeWine and Yost's OneOhio plan, with 85% of the cash targeted for local distribution and 15% going back to the state.  That plan was unveiled in March 2020.

Under the plan, 55% of any settlements reached would go toward a state foundation that would fund local projects to address the crisis while 30% would be sent directly to 2,000 counties, townships, villages and cities for community recovery.  More than 23,700 Ohioans died of opioid overdose from 2010 through 2019, Yost alleges.  The deal requires the three distributors to undergo a series of reforms, Yost said.

The deal requires that they "establish a centralized independent clearinghouse to provide all three distributors and state regulators with aggregated data and analytics about where drugs are going and how often, eliminating blind spots in the current systems used by distributors," Yost said.  In July, the same distributors struck a similar $1.1 billion opioid deal with New York's attorney general. That deal is also not contingent on the national deal going through.

The nationwide deal would end the bulk of the suits levied over the opioid crisis. Up to $5 billion would come from J&J over the next nine years and $21 billion from the distributors over the next 18 years, with up to $23.5 billion of the total going toward easing the opioid epidemic and the rest going to attorney fees and costs.  Ohio's deal was backed by 99% of so-called "litigating subdivisions," which are local governments within the state that stand to benefit from the deal, Yost said.

Quinn Emanuel Gets $185M in Attorney Fees in $3.7B ACA Win

September 16, 2021

A recent Law 360 story by Dave Simpson, “Quinn Emanuel Gets $185M Fee From $3.7B Win in ACA Suits,” reports that a U.S. Court of Federal Claims judge granted Quinn Emanuel Urquhart & Sullivan LLP's request for $185 million in fees stemming from two class actions against the federal government over so-called risk corridor payments under the Affordable Care Act, which resulted in a nearly $3.7 billion total win.  Judge Kathryn C. Davis said that despite the "at times hyperbolic" motions for fees, the law firm did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.  She granted its request for 5% of the winnings.

"At the end of the day, what is more important is that class counsel's legal theory resulted in a huge award to the classes here," Judge Davis said.  Quinn Emanuel was the first firm in the country to file a lawsuit on behalf of a qualified health plan insurer accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.

Health Republic Insurance Co. sued the government in 2016 and in July 2020 won a judgment for $1.9 billion alongside a subclass of insurers.  Common Ground Healthcare Cooperative sued the government in 2017 over similar claims and won a $1.7 billion judgment.  Those cases set off a firestorm of parallel litigation across the country, alleging similar claims.  Two of those cases ended up at the U.S. Supreme Court.  In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.

While Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."  But in August 2020, objectors like Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check.

They said that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and argued that the firm was trying to walk away with an award that would work out to an hourly rate of $18,000 per attorney.  Class members signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the motion said, which the firm had eschewed.

Quinn Emanuel shot back in September 2020 that the $8.8 million award proposed would discourage attorneys in the future from taking on similarly ambitious cases.  The percentage model, which the insurers agreed to when choosing to join the class instead of pursuing individual claims, is favored by the courts for exactly this reason, the firm said.  According to the firm, despite the dozens of companies signing on to the fee objection, most of them Kaiser or United entities, almost 90% of the class members have not objected.

Judge Davis sided with the firm.  "These are not cases in which class counsel merely rode the coattails of other innovative litigators," she said.  The 5% fee is well below market value, and the objectors propose what would amount to a .22% fee, she said.  Further, the firm allocated 10,000 billable hours and might not have been paid for any of it had the outcome gone differently, the judge said.