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Category: Class Fee Objector

Ninth Circuit Strikes Down $7M Fee Award in ConAgra Class Settlement

June 2, 2021

A recent Law 360 story by Emily Field, “9th Circ. Strikes Down $7M Atty Fees in ConAgra Label Deal,” reports that the Ninth Circuit overturned a judge's approval of a class action settlement with ConAgra Food Inc. over its labeling on oil products, saying the parties crammed into the deal "a squadron of red flags" including attorney fees of nearly $7 million that are much larger than what consumers were awarded.  The panel in a published opinion said the agreement includes a number of questionable provisions and "reeks of collusion," particularly the attorney fee award of $6.85 million that is seven times higher than what class members received.

ConAgra and class counsel contended the deal could be worth more than $100 million, but ultimately, ConAgra paid out less than $8 million, with just $1 million going to the class.  Large counsel fees comparative to the payout for class members raises the possibility that counsel colluded with the defendant to lower class compensation in exchange for a larger fee, the panel said.  A defendant would go along with this kind of conspiracy because it only cares about how much it's paying in total, not how it's divided up, they added.

The panel said district courts must scrutinize attorney fee award arrangements when deciding whether a class action settlement is fair, following revisions to the Federal Rules for Civil Procedure that introduced the requirement in 2018.  Specifically, that requirement also applies to settlements that were reached after a class was certified, the panel held for the first time.  "[A] post-class certification settlement only ensures that the parties litigated aggressively to arrive at an adequate total fund size; it does not, however, address the inherent incentives that tempt class counsel to elevate his or her own interest over those of the class members," the panel said.

The panel's decision reverses the 2019 approval of the deal and sends the case back to California federal court.  In the suit, the buyers alleged ConAgra mislabeled its Wesson oil products as "100% natural" even though they contain genetically modified ingredients.

The deal also included a stipulation that ConAgra not advertise the Wesson brand of essential oils as "100% natural" anymore, which was supposedly worth tens of millions of dollars but now appears worthless since ConAgra no longer owns the brand, the panel said.  "That is like George Lucas promising no more mediocre and schlocky Star Wars sequels shortly after selling the franchise to Disney.  Such a promise would be illusory," the panel wrote in their opinion.

Objector and University of Chicago law professor M. Todd Henderson brought the appeal last year, arguing the lower court did not take into account the deal's value to the class when it granted the fees.  The panel also found other red flags in the settlement, such as a "clear sailing arrangement" under which ConAgra agreed not to challenge the class counsel fees.  "A clear sailing provision signals the potential that a defendant agreed to pay class counsel excessive fees in exchange for counsel accepting a lower amount for the class members," the panel said.

Class Counsel Argue for Attorney Fees in Flint Water Crisis Settlement

May 31, 2021

A recent Law 360 story by Michael Phills, “Flint Plaintiffs' Attys Argue For Final OK of $641M Settlement,” reports that plaintiffs' attorneys want to seal the deal on a $641 million settlement over the Flint, Michigan, water crisis that objectors have said carves out too much for legal fees, arguing that the fee request is fair for the hard-fought work to secure compensation for an environmental catastrophe.  In a trio of filings, the plaintiffs' attorneys pushed back against several types of objections around the settlement, including the argument that a nearly 32% award of attorney fees is unreasonable.  The attorneys argue that their work produced something significant that the judge should sign off on.  They say that despite the objections the court has received, more than 50,000 have supported the deal, showing its widespread backing from the Flint community.

On the question of fees, plaintiffs' counsel defended their request as reasonable, reflective of the many years and hours of work spent on the case.  And they said the top line fee request is more complicated than objectors make it out to be.  "Some objectors have claimed that plaintiffs' counsel seek an award of more than $200 million in attorneys' fees.  That is not true — a substantial portion of the attorneys' fees in this matter will be paid by claimants to their individually retained counsel," the plaintiffs' attorneys wrote.

According to court filings, individual attorneys that were privately hired had often already locked in their fees and "much of the aggregate fee request will go to these individual attorneys."  In May, 26 individuals objected to the deal and raised a range of concerns, including that the settlement generally lacks clarity on what it entails and that it won't provide enough money to help residents as they try to move past a crisis that has left them with medical concerns and exorbitant water bills.

In March, other objectors opposed the fee request, saying a motion for the fee award included "scant detail" about the claimed common benefit work and didn't estimate what the common benefit fees might amount to.  "[The request] provides absolutely no evidence that ceding 27% of claimants' recovery to private attorneys for work sight unseen could possibly be fair to Flint residents who need this money to help them grapple with oft-debilitating, ruinous, and violent consequences of lead exposure for their entire lives," the objectors said.

They said that in "megafund" settlements of this size, typical fee awards are in the 10% to 12% range.  In March, the plaintiffs' attorneys made their fee request for their five years and more than 180,000 hours of attorney work to reach the "remarkable" settlement result.  "Contrary to every single 'megafund' case cited by the [objectors], this case involved complicated questions of sovereign immunity which necessarily rendered the case riskier and required a heightened level of skill," the plaintiffs' attorneys wrote.  They argued that they should not have to provide detailed billing records to certain objectors.

U.S. District Judge Judith Levy gave preliminary approval to the deal in January, saying that it is a partial settlement that doesn't end the litigation over the lead-tainted water.  The settlement with Michigan and others provides a mechanism for minors, injured adults, property owners and renters, those who paid Flint water bills and impacted business owners to receive monetary awards, the judge said. It also offers a "class action" solution for adults who have not hired their own attorneys, the judge said.

Tenth Circuit Upholds Attorney Fees in Samsung Washer Settlement

May 7, 2021

A recent Law 360 story by Mike Curley, “10th Circ. Won’t Undo Samsung Washer Settlement Over Fees,” reports that the Tenth Circuit refused to toss a settlement that ended multidistrict litigation alleging that a defect in Samsung Electronics America Inc. washing machines caused the lids to blow off mid-cycle, rejecting a lone objector's challenge to how attorney fees were handled in the deal.  In a published opinion, the three-judge panel denied John Douglas Morgan's bid to undo the final settlement approval over the "kicker" and "clear-sailing" agreements in the 2018 deal reached by the appliance buyers and defendants Samsung, Best Buy Co. Inc., The Home Depot Inc. and Lowe's Companies Inc.

The panel wrote that while a settlement including both provisions is subject to heightened scrutiny, the district court applied such scrutiny and was well within its discretion to approve the deal, particularly as the agreement provided class members with a benefit double the value of what they could have received had the case gone to trial.

The "kicker" agreement in the settlement holds that if the attorney fees and costs came in at under $6.55 million, the difference would revert to the defendants, while the "clear-sailing" agreement bound the defendants not to object to any request for attorney fees and costs up to $6.55 million.  The district court's final judgment on the fees and costs came to around $3.8 million.  Morgan had objected based on those agreements, saying that they deprived class members of potential relief and that the attorneys negotiated the deal for their own benefit, not the class members'. The district court overruled his objections, leading to the appeal.

According to the opinion, the settlement gives the average class member a rebate of 15.5% of the cost of a washing machine, rather than the amount that would have been provable damages at trial, which came to 7%.  This shows that class counsel fought hard for the class members and obtained more than equitable compensation, according to the opinion.  "Where class members were receiving compensation equivalent to or in excess of actual damages, it cannot be said that class counsel and defendants negotiated terms that favored attorneys' fees and costs at the expense of adequate and reasonable compensation for the class," the panel wrote.

The circuit court found that the attorney fees were within acceptable ranges whether the court used the lower estimate for the value of the settlement, $6.44 million, or the higher estimate of $11.31 million.  Morgan also challenged three factual findings that the court made in rejecting his motion to disqualify class counsel, and while the circuit court found that one such finding was clearly in error, and it said that error was harmless.

Morgan argued that the court was wrong in finding that he and the defendants did not finalize a side agreement under which a portion of the unspent attorney fees would have been distributed to the class, but the panel found no such error.  Morgan walked away from negotiations and the side agreement was never ratified, the panel wrote, so the district court was within its right to conclude that the deal might never come to fruition.

Morgan had also argued that class counsel should be disqualified for threatening to sue him over the side agreement, saying the court's determination that no such threat was made was in error.  Again, however, the panel found that the record undermines Morgan's assertion, saying that an allegation that Morgan had engaged in "misconduct" was far from a threat of litigation.

The Tenth Circuit did, however, agree that the district court was wrong to find that class counsel never took a position about the side agreement, saying it was clear they opposed it by accusing Morgan and the defendants of "misconduct."

But the panel also found that class counsel's objections were not baseless as they had reason to be skeptical, noting the side agreement allowed Morgan's attorneys from the Hamilton Lincoln Law Institute to seek attorney fees, while Morgan's niece served as president of the institute, calling into question his motives.

Class Counsel Earn $80.6M in Fees in Apple iPhone Slowdown Settlement

March 20, 2021

A recent Law 360 story by Mike Curley, “Attys Get $80.6M in Apple IPhone Slowdown Settlement,” reports that a California federal judge greenlighted a settlement of up to $500 million for iPhone users who accused Apple of deliberately slowing down their devices with an update and granted class counsel $80.6 million in fees after objections from some class members, Apple and government entities that the initial request was too high.  In a pair of orders, U.S. District Judge Edward J. Davila first granted final approval to the settlement, which will see Apple pay out between $310 million and $500 million — which the judge called one of the largest class action settlements in the circuit — then turned to the divisive request for fees.

Those fees are to be awarded to Cotchett Pitre & McCarthy LLP; Kaplan Fox & Kilsheimer LLP; the Law Offices of Andrew J. Brown; and the Brandi Law Firm.  Class counsel in the case had requested $87 million in fees, which prompted Apple to ask the court to cut it down by at least $7 million.  While Judge Davila praised the attorneys for their work on the case, including their assumption of the risks of taking it on contingency, the risks of continued litigation, and the substantial payout that class members are likely to receive, he said that other factors don't support increasing the total fees beyond the court's normal 25% benchmark.

In particular, the judge noted how a large settlement fund could support granting attorneys a higher percentage, but in this case, the high settlement fund is mostly the result of the large amount of class members — not the amount of work performed by the class counsel.  "Class counsel's work in litigating this case up to the point of reaching settlement would have been the same whether there were 10,000, 100,000, 1,000,000 or more devices at issue," the judge wrote.

For the purposes of the fee calculation, the judge decided it was most appropriate to go by the percentage-of-the-fund model, based on the $310 million minimum Apple will have to pay, rather than a lodestar model that would be used for a settlement based on the number of claims made, and the judge found that 26% of the $310 million — or $80.6 million — was appropriate.  He also granted $995,245 in expenses, finding that none of the objections to either the fees or the expenses warranted knocking the total down any further than that.

The settlement resolves dozens of consumer protection lawsuits that were filed in 2018 after Apple admitted to issuing software updates that slowed certain iPhones.  The suits allege that Apple designed its software updates to slow down some phone models, nudging consumers to buy newer iPhones.  Under the deal, Apple agreed to pay up to $500 million in total, depending on the amount of iPhone users to participate in the deal, according to court filings, with a minimum settlement fund of $310 million.  Class members would receive $25 each for their phones.  If the payouts, attorney fees and expenses don't add up to at least $310 million, class members will receive up to $500 apiece until that minimum settlement amount is reached.

Judge Slams $32M Wells Fargo Fee Request as Unreasonable

March 18, 2021

A recent Law 360 story by Dorothy Atkins, “Wells Fargo Judge Slams $32M Atty Fee Bid As Unreasonable,” reports that a California federal judge said she'll preliminarily approve Wells Fargo's $95.7 million deal to resolve certified class claims that the bank stiffed thousands of mortgage consultants' wages, but told class counsel "nothing" about their $31.9 million attorney fees request "looks reasonable to me."  During a hearing held via Zoom, U.S. District Judge Beth Freeman asked the parties to make minor revisions to the settlement notice and said the proposed deal, which gives out roughly $11,500 per class member, is "very solid" for the class.

She took issue, however, with class counsel's proposed fee award, which asks for a third of the settlement, or $31.9 million, reflecting an hourly lodestar calculated with an 8.9 multiplier.  "Nothing about this looks reasonable to me," she said.  "And it appears to me it doesn't seem reasonable to you, because you reserve your right to appeal [the settlement's approval]. I have never seen that."  Judge Freeman said by reserving their right to appeal, the attorneys seem to expect to lose their fee bid and appear to plan to appeal unless she gives them everything they want.

Class counsel Joshua H. Haffner of Haffner Law PC noted that they haven't fully briefed their reasoning for their requested fee award yet, but he argued that the litigation has been hard fought for years, making it through motions for summary judgment and a trip to the Ninth Circuit.  He added that the lodestar is still in the range of what is acceptable, albeit the higher end.  She told the attorneys to be sure to cite cases in which class attorneys were awarded fees that reflected a lodestar with a multiplier greater than eight in their motion for attorney fees.  "I just about jumped out of my chair when I saw the 8.9 multiplier," she said, adding "I think you invite objectors."

The judge's comments came during a hearing on a motion to preliminarily approve a global $95.7 million settlement that would resolve meal and rest claims, as well as derivative wage and hour claims on behalf of a class of roughly 5,377 California home mortgage consultants employed by the bank between 2013 and 2019.  If approved, the deal would include $25 million that the San Francisco-based bank already paid in a consolidated case called Ibarra, plus another $70 million for follow on cases alleging the bank claws back hourly wages and vacation time from the consultants' earned sales commissions.  Wells Fargo has since discontinued the pay practices underlying the plaintiffs' claims in the cases, according to court documents.

Judge Freeman acknowledged that her concern about the requested fee award doesn't "hold us up" with the final approval process and class notice, and the settlement agreement itself doesn't need to go back to the bargaining table.  She did, however, question how class counsel plans to pay for their appeal if she approves the settlement with a lesser fee award.