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Category: Class Fee Objector

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.

Hagens Berman $31M Fee Objection Heads to Ninth Circuit

April 19, 2022

A recent Law 360 story by Dorothy Atkins, “Hagens Berman Must Forfeit $31M Fee Win, 9th Circuit Told” reports that an objector's counsel urged the Ninth Circuit to force Hagens Berman Sobol Shapiro LLP to forfeit or reduce a revised $31 million fee award for securing deals worth $205 million in multidistrict litigation over optical disk drive price-fixing, arguing that the law firm violated multiple professional rules of ethics.  During a hearing before a three-judge panel, objector Connor Erwin's counsel, Robert Clore of Bandas Law Firm PC, argued that Hagens Berman violated multiple California Rules of Professional Conduct in securing its eight-figure fee award before a trial court, including by never placing the disputed funds into a client trust account, despite class members' objections and appeals pending.

But U.S. Circuit Court Judges Morgan Christen and Carlos T. Bea asked how class members have been harmed by the firm's failure to hold the funds in a client trust account.  "What harm, what foul?" Judge Bea asked.  Clore replied that as a result, the class has been denied up to $600,000 in interest that would have been collected on the disputed money.  At least a portion of that interest should have gone back to the class when a Ninth Circuit panel vacated Hagens Berman's previous $52.8 million fee and expense award, the attorney said.

"Why should they be entitled to interest on fees that don't belong to them?" Clore asked the panel.  The trip to the Ninth Circuit is the latest chapter in a decade-old multidistrict litigation claiming that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices.

Hagens Berman beat out other firms for lead class counsel in 2010, and the firm later struck multimillion-dollar deals to resolve the disputes.  After U.S. District Judge Richard Seeborg took over the case from U.S. District Court Judge Vaughn Walker, Judge Seeborg awarded the law firm $47.8 million in attorney fees for securing the settlements.  But in May 2020, a pair of Ninth Circuit panels vacated the fee awards after Clore argued before the appellate court that Judge Seeborg erred by keeping Hagens Berman's initial proposal for lead class counsel under seal and not properly taking it into account in awarding fees, among other objections.

On remand, in July, Judge Seeborg awarded Hagens Berman a revised $31 million fee, finding that the firm was entitled to a 20% premium on top of the $25.9 million it would be allotted under the firm's interpretation of the fee grid in its initial class counsel proposal.  Judge Seeborg also awarded Erwin's counsel $1.5 million in fees in September for their work helping to convince the Ninth Circuit to throw out the initial fee award.

But Erwin again challenged the fee award, with Clore arguing before the appellate court that Hagens Berman took too long to return the fees after the previous panel vacated the award, and did not place the funds in a client trust account, as required by professional rules of conduct.  Clore added that the trial court also erred in miscalculating the "starting point" for setting reasonable attorney fees on remand by using a flat rate instead of the sliding scale specified in the firm's initial proposal, resulting in an adjusted $25.9 million for the firm.  That amount should be $22.2 million, he said.

In light of the alleged violations, Clore asked the Ninth Circuit to send a message that class counsel are not immune to the California state bar's professional rules, and require the law firm to either forfeit its fees, or at the very least reduce the fees to keep in line with the firm's initial $22.2 million fee proposal.  As support, Clore cited the Ninth Circuit's 2012 decision in Rodriguez v. Disner, which held that a court has "broad equitable powers to … require an attorney to disgorge fees already received" for a serious ethical violation.

But class counsel Shana E. Scarlett, of Hagens Berman Sobol Shapiro LLP, argued that $31 million in fees is justified given the length of litigation and how fiercely the litigation was fought.  She also argued that the judge properly awarded additional fees on top of the initial $25.9 million proposal based on his discretion and understanding of the case.

But Judge Bea asked why the trial judge used a flat rate instead of the sliding scale methodology specified in the firm's initial bid proposal.  "Why isn't Judge Seeborg wrong in using a flat basis rather than a sliding scale basis based on the schedule we have before us?" the judge asked the attorney.  Scarlett replied that the firm's initial bid proposal was just one part of what informed the trial judge's decision. But Judge Bea appeared skeptical.

"You're talking about extrinsic evidence that was used by Judge Seeborg to interpret the writing, which we have before us?" Judge Bea asked.  "What factual evidence was there?  Are you saying that the written document is ambiguous and requires factual findings interpreted?"  Scarlett replied that the initial proposal was clear that the fees should use a flat rate, and not a sliding scale, but Judge Seeborg "went further and made the finding that we intended to be flat rate structure."

$12M Fee Award in $42M in Takata Air Bag MDL

April 6, 2022

A recent Law 360 story by Nathan Hale, “Court Oks $42M VW Deal, $12.6M Fee in Takata Air Bag MDL” reports that a Florida federal judge granted final approval to a $42 million settlement automakers Volkswagen and Audi reached to resolve multidistrict litigation over their alleged use of defective Takata Corp. air bags, as well as a $12.6 million attorney fee award from that total.  The proposed settlement with Volkswagen Group of America Inc., Audi of America LLC and their affiliates covers 1.35 million vehicles and is modeled on settlements previously approved with seven other automakers, according to the plaintiffs' motion for approval filed in September 2021.  The court granted preliminary approval in November 2021 and held a final fairness hearing March 7.

"We are pleased with Judge Moreno's order granting final approval of the VW settlement, and overruling the few objections that were raised, because the order is faithful to Eleventh Circuit precedent," the plaintiffs' chair lead counsel, Peter Prieto of Podhurst Orseck PA, told Law360.  "We will continue to litigate against the remaining automakers until there is a resolution or trial."  Miami-based U.S. District Judge Federico A. Moreno deemed the settlement agreement fair in all respects over objections from seven class members.

The objections focused primarily on three arguments: an outreach program to encourage drivers to get the parts replaced is ineffective, there is no value for many class members who have already sold their vehicles or gotten them repaired, and class counsel's request for 30% of the settlement fund to cover fees and expenses runs afoul of legal precedents.

Judge Moreno also certified a class for settlement purposes, noting the class consists of more than 1 million members across the U.S, the case involves common questions regarding Volkswagen's alleged activities, and the class representatives have no conflict with the other class members and are represented by experienced class counsel.

The judge appointed Prieto as lead settlement class counsel and also named the following attorneys as settlement class counsel: David Boies of Boies Schiller Flexner LLP, Todd A. Smith of Smith LaCien LLP, Roland Tellis of Baron & Budd PC, James E. Cecchi of Carella Byrne Cecchi Olstein Brody & Agnello PC and Elizabeth J. Cabraser of Lieff Cabraser Heimann & Bernstein LLP.  Nine potential class members opted out from the settlement, according to an exhibit attached to the order.

The settlement grants the defendants full release from liability for all economic loss claims asserted against them.  The releases also apply to German parent companies Volkswagen AG and Audi AG, which the court dismissed in 2019 for lack of personal jurisdiction, the order noted.  Judge Moreno said he disagreed with the objection that the outreach program is redundant or ineffective.

The record, including unchallenged statements the claims administrator made at the fairness hearing, shows similar programs in the first seven settlements have been successful, resulting in more than 9.1 million recalled air bag replacements being completed, the judge said.  He also noted the program provides assurances beyond what is required by the National Highway Traffic Safety Administration's recall mandates.

"Far from leaving outreach to the discretion of Volkswagen, the settlement's outreach program mandates that Volkswagen provide massive funding — more than $13 million — for outreach efforts and empowers the settlement special administrator to oversee and administer a dynamic, state-of-the art program," he said.  Judge Moreno also refuted claims of intra-class conflicts, saying differences in benefits various class members may receive are common and do not amount to fundamental conflicts that could trip up a deal.

Addressing the fee request, he rejected several objectors' suggestion that the court should apply Florida state law, which applies a lodestar-multiplier method to fee awards.  The judge said the class counsel's $12.6 million request, which comes out to as low as 22% of the settlement value — when the value of a customer support program is also taken into account — falls well within Eleventh Circuit precedent.

Some objectors had also argued that because this is the seventh settlement in the multidistrict litigation, the deal should be considered a "mega-fund" along with the previous deals and a lower percentage of fees awarded.  But Judge Moreno pointed out the Eleventh Circuit has said it does not reduce fees based on size because that would be "antithetical" to its percentage of the recovery method.

Federal Circuit to Hear $184M ACA Attorney Fee Award Dispute

April 1, 2022

A recent Law 360 story by Dorothy Atkins, “Quinn Emanuel ACA Clients Urge Fed. Circ. To OK $184M Fees” reports that a group of health care plan insurers represented by Quinn Emanuel Urquhart & Sullivan LLP have urged the Federal Circuit to affirm class counsel's $184 million attorney fee award for settlements totaling $3.7 billion that resolve litigation over so-called risk corridor payments under the Affordable Care Act.  In a 73-page response brief, the insurers argued that objections raised by Kaiser and United Healthcare health plan insurers largely ignore "key facts" that U.S. Court of Federal Claims Judge Kathryn C. Davis relied upon in determining that Quinn Emanuel's fee request was reasonable.

The insurers said Judge Davis awarded fees based on her finding that Quinn Emanuel "pioneered" a novel claim at great risk to itself and achieved a 100% recovery for the class.  She also found that the firm filed the first complaint by several months and drafted the first substantive brief on the issue, so she didn't abuse her discretion in awarding 5% in fees, the brief said.

The insurers added that the objectors' appeal focuses "myopically" on the lodestar multiplier, which is the number of times the firm's hourly rate would be multiplied to get the total fee award.  The objectors criticize the fee award for awarding the firm what comes out to an $18,000 hourly rate, but a percentage-of-the settlement fund is the appropriate method of determining fees, the brief said.  "Indeed, it would be nonsensical to treat hourly rates as the only legitimate means of determining reasonable compensation, especially when the competitive legal market for bringing these very claims proves otherwise," the brief said.

The multimillion-dollar fight over fees and the trip to the Federal Circuit is the latest chapter in litigation that Quinn Emanuel-represented Health Republic Insurance Co. initially launched in 2016, accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.  The certified opt-in class of health care plans accused the federal government of failing to make required "risk corridor" payments under the ACA, and Quinn Emanuel's suit purportedly sparked a firestorm of parallel litigation across the country — two of which ended up before 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.  Although 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 objectors 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, and no more.

They told the trial court that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and the firm was trying to walk away with an award that would work out to an astronomical hourly rate of $18,000. Class members also signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the objectors said, which the firm had eschewed.  But in September, Judge Davis granted the fee request, saying despite the "at times hyperbolic" motions for fees, Quinn Emanuel did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.

The objectors appealed the judge's ruling and told the Federal Circuit in their opening brief in January that Judge Davis abused her discretion by failing to cross-check the fee request.  The objectors argued that a reasonable hourly-rate multiplier for the firm's work should be in the lower single digits, and certainly not the 18 to 19 multiplier that would apply to reach the $184 million fee award.

"The effective multiplier of more than 18 the Claims Court awarded is astronomical and unjustified," the objectors said in their opening brief.  "In holding that a multiplier exceeding 18 would be reasonable (if it were to conduct a lodestar crosscheck, which it didn't do), the Claims Court cited three cases with high multipliers, though it did not provide any discussion as to why these cases were germane."  The insurers fired back, arguing the lower court appropriately rejected the lodestar method, particularly since adopting it would create "warped incentives, whereby attorneys are not rewarded for achieving outstanding results, and instead are rewarded for litigating inefficiently."

Ninth Circuit Affirms $98M Fee Award in Facebook Class Action

March 17, 2022

A recent Law 360 story by Dorothy Atkins, “9th Circ. Oks Facebook Class’s $98M Fee Win in Privacy Fight” reports that the Ninth Circuit affirmed class counsel's $97.5 million fee award for striking a $650 million deal that resolves claims Facebook's facial recognition technology violated Illinois users' biometric privacy rights, rejecting objectors' arguments that the award is "outrageous" and the trial judge abused his discretion in awarding it.  In a five-page unpublished opinion, a unanimous three-judge panel held that U.S. District Judge James Donato did not breach his fiduciary duty to the class by awarding class counsel 15% of the total $650 million settlement in fees.

Objectors' counsel had argued that the fees were too high and inappropriate because class counsel told Judge Donato they would not seek fees for an additional $100 million added to the settlement fund after the judge had rejected an initially proposed $550 million deal, which forced Facebook and class counsel back to the negotiating table.  Instead, Judge Donato should have awarded class counsel 10% of the initial $550 million proposed settlement, or $55 million, which would have been reasonable and in line with case law on other mega settlements, according to objectors' counsel, Kendrick Jan.

But the Ninth Circuit panel concluded that the 15% award is in line with 11 similarly sized settlements, which ranged between $400 million and $800 million and averaged around 16% in fees, and Judge Donato adequately explained why this was a reasonable fee based on the facts of this case.  Additionally, the panel said the trial judge appropriately cross-checked the fee award based on the 4.71 lodestar multiplier, which is the number of times the hourly rate would be multiplied to get the total fee award.  Although lodestar multipliers tend to average between 2.39 and 4.50, the Ninth Circuit said the multipliers tend to increase as the size of the class' recovery increases and the 4.71 multiplier in this case is reasonable based on the risks trial would have presented.

The Ninth Circuit also rejected the objectors' arguments that the fee lodestar was based on hours that included attorneys' lobbying activities, which cannot be included in contingency fees under both California and Illinois statutes.  The panel said the objectors waived their arguments on the matter because they didn't raise them before the trial judge.  But even if they had not done so, the fee award still would be affirmed, the panel added.

"To the extent that appellants did not waive the general argument that lobbying fees should not be included in the lodestar calculation, the district court did not abuse its discretion because its primary calculation tool was the percentage-of-recovery method," the opinion says.

The objectors' appeal challenged multiple aspects of Facebook's revised $650 million deal resolving claims the social media giant breached the Illinois Biometric Information Privacy Act by using facial recognition technology without users' consent to fuel its photo tag suggestion feature.  After years of hotly contested litigation, the case was headed to a jury trial, but the parties struck an initial $550 million settlement in 2020, which class counsel hailed as the largest amount ever doled out to resolve a privacy-related lawsuit.

But Judge Donato tore into the initial proposal, which he noted gave users just 1.25%, or $300 at most, of what they could be entitled to under BIPA, even though the state statute comes with a $1,000-per-violation fine and a $5,000 enhancement for intentional or reckless violations.  At the time, Judge Donato told the parties that the enhancement appeared to be a potentially viable claim in light of the $5 billion fine Facebook agreed to pay the Federal Trade Commission in 2019 for violations of a 2012 consent decree over its privacy practices.

Roughly a month later, the parties filed a motion asking the judge to preliminarily approve a revised $650 million deal, which attempted to address Judge Donato's concerns by narrowing the release provision and increasing class members' potential recoveries to up to $400.  At the time, class counsel said it would seek up to $110 million in fees plus expenses based on the initial settlement amount.

In February 2021, Judge Donato signed off on the revised deal, calling it a "landmark result," but trimmed the $110 million requested attorney fees to $97.5 million, which reflected a 15% portion of the settlement.  He also slashed the requested incentive awards to three class representatives from $7,500 each to $5,000 each.