Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Contingency Fees / POF

Should Judges Police The Gender Hourly Rate Disparity?

June 1, 2022

A recent Law 360 story by Andrew Stricker, “Should Judges Police The Legal Industry Pay Gap?” reports that as the pay gap between male and female attorneys persists despite industry pledges to do better, the power of judges to potentially bridge the divide is coming into sharper focus.  Following an unusual decision by a federal magistrate, some members of the Philadelphia bar have endorsed the idea that other judges should follow suit and help police gender pay inequities, or at least call them out from the bench.

U.S. Magistrate Judge Timothy R. Rice recently issued the order critiquing elements of a notable employment firm's request and awards that put attorney "status" over performance.  "I don't think it's always my role, but in this instance, I felt I had to set the rates based on the performance of the attorneys who really tried the case, and not a rate that was maybe based more on age or seniority," Judge Rice told Law360 Pulse.

In April, Judge Rice was overseeing the last stage of an age discrimination case brought by Alison Ray, a former sales director at AT&T Mobility Services who was let go at age 49 after more than two decades at the company.  Following a five-day trial, Ray last year secured a $2.3 million award after a jury determined that a company restructuring plan had targeted older employees as "surplus."

In February, lawyers at the firm representing Ray, Console Mattiacci Law LLC, asked for $847,945 in "shifted" fees from AT&T.  That lodestar calculation, based on a 40% contingency agreement, was justified by the complexity of the plaintiff's case, Ray's counsel argued, as well as a "complete and total victory" on her claims that AT&T had willfully violated federal age discrimination law.  The fee petition included nearly 1,570 hours from partners Susan Saint-Antoine and Laura C. Mattiacci, a highly experienced lead trial counsel, and associate Daniel S. Orlow. Saint-Antoine and Mattiacci, who have practiced since 1989 and 2002, respectively, both listed their "usual and customary" rate of $730 an hour. Orlow, who has practiced since 2011, was at $320 an hour.

The petition also included 37 hours contributed by firm principal Stephen G. Console. Console, a nationally recognized employment law expert, charged $900 an hour for consulting on strategy decisions and filings, as well as settlement demands and other key elements of the case.  In an order granting a handful of reductions totaling about $83,000, Judge Rice said Saint-Antoine and Mattiacci should be entitled to the same per-hour rate as Console, who has been practicing for three decades.

"Historically, women in law earn less than their male counterparts, a discrepancy that may reflect hidden bias," he said, citing a 2020 report that found widening pay discrepancies at large law firms.  Referring to a fee schedule used widely in the Third Circuit to determine market rates for Philadelphia-area lawyers, Judge Rice said Saint-Antoine and Mattiacci should be in line for a "premium" over those numbers that put them in line with Console.  Even if the fee schedule "serves as a useful guide on setting hourly rates, its reference to experience should not serve as a cap that precludes exceptionally talented trial lawyers from receiving fair compensation simply because of age or gender," Judge Rice said.

The legal industry pay gap, and its role in women reaching firm leadership and a lack of diversity in many areas of the profession, has been under intense scrutiny for years, but without much in the way of real progress.  In the 2020 report cited by Judge Rice, legal recruiting firm Major Lindsey & Africa found that partner compensation soared between 2010 and 2018.  But in that same period, the pay disparity between male and female equity partners widened significantly, from 24% to 35%.

Nancy Ezold, a veteran Philadelphia employment lawyer, said it was "absolutely" appropriate for Judge Rice to consider rate disparities for lawyers in his court, even though AT&T counsel hadn't raised the issue in its fee-award opposition.  "I don't know of anything in the law that says you have to consider what a law firm pays people," Ezold said.  "But Judge Rice looks at the bigger picture and asks, 'Am I going to do something to perpetuate an inequality and authorize a fee for a male partner over two female partners who really handled this case?'"

Ezold, who once sued her own former law firm in the late 1980s for denying her a partnership based on her gender, argued that fee petitions often provide a substantive overview of who did what work over the history of a litigation.  Depending on the nature of the case, they can also be an opportunity for judges to compare requested rates across different firms and legal teams comprising different gender and experience makeups.

"Here the judge couldn't overlook a difference between male and female in this case because it related directly to the responsibility to decide what would be allowed for each of these attorneys," Ezold said.  "Judges speak out on a lot of things, and I don't see why this should be any different."  Judge Rice served as an assistant U.S. attorney for the Eastern District of Pennsylvania before being appointed as a federal magistrate in 2005.  He retired in April, just after issuing the Ray opinion.

In an interview with Law360 Pulse, Judge Rice said the timing was coincidental, noting that the issue of male-female pay disparities had never before been "so squarely presented" to him in a fee petition.  "From the [fee] affidavits I see, and from all I know about law firm pay structures, I do think the pay gap is huge, and there are just so many variables out there that have cut against giving women equal pay," such as lack of trial experience and other opportunities to advance, he said.

"When I see lawyers perform in an exemplary fashion, it's appropriate they be paid at higher rates commensurate with their skills, not just based on the years they've practiced," Judge Rice added.  Alice Ballard, another veteran Philadelphia employment lawyer who provided a fee affidavit in the Ray case, said Judge Rice's prior time as a trial lawyer was evident in the opinion, including in his positive assessment of the hours Console Mattiacci dedicated to mock trial runs and other "essential" advocacy preparation.

Judge Rice "really understands what it means to prepare for a trial like this, and everyone on my beat really appreciates that," she said.  But Ballard took issue with Judge Rice's ultimate reliance on what she described as an outdated fee schedule, rates that don't well reflect the special skills of trial work, Mattiacci's successful track record or the contingency fee model.

She also cautioned against reading the opinion as a critique of the hourly rate request for Console, whom she called a "lion" of the city's employment bar.  Regarding his reference to the legal industry's gender pay disparities,"it's great that he took the opportunity to bring it up, but I just don't think it has much to do with this specific case," Ballard said.

Eleventh Circuit Orders Recalculation of Attorney Fees

May 26, 2022

A recent Law 360 story by Rosie Manis, “11th Circ. Orders New Look At $6M Atty Fee in Man’s Death” reports that the Eleventh Circuit has vacated a $6 million attorney fee awarded as part of a $21 million jury verdict over the death of a Georgia pedestrian who was hit by a truck, ordering the trial court to reconsider its reasonableness.  The three-judge panel's per curiam opinion affirmed the jury verdict but said that two subsequent opinions from the Georgia Court of Appeals warrant the reconsideration of the attorney fees.  The jury had ordered the $6 million fees after finding bad faith on the trucker's part.

The estate of Alabama trucker James Harper and his insurer Cypress Insurance Co. appealed the February 2020 verdict in favor of Patricia and Wayne Holland, the mother and brother of Kip Holland, who was hit by Harper's truck and died in December 2016 after Harper suffered an unspecified medical event while driving.

The panel rejected most of the defendants' arguments for overturning the verdict, but they said the Hollands' 40% contingency agreement alone doesn't necessarily make the attorney fee award reasonable.  U.S. Circuit Judge R. Lanier Anderson III pointed out during oral arguments in February that the fee amounted to about $5,000 an hour.  "A contingency fee agreement alone, without more, is not sufficient to support the award of attorney fees," the court said, citing Georgia case law.  "Rather, the party seeking fees must provide other evidence of the value of the professional services actually rendered."

The panel cited a March 2021 opinion from the Georgia Court of Appeals that vacated a $12.7 million attorney fee award in a wrongful death case after a $32.8 million damages verdict.  The attorney fee in that case was based solely on a 40% contingency fee agreement.  In the other cited case, the Court of Appeals upheld a July 2021 $1 million attorney fee award that was less than what the relevant contingency fee agreement would have provided.  The trial court in that case assessed the work of the plaintiff's lawyers as well as the fee agreement in determining a reasonable award.

The Eleventh Circuit judges said they did not comment on the cited cases or the reasonableness of the original $6 million attorney fee "to avoid influencing the district court's reconsideration."  They were not persuaded by the defendants' contention that Harper did not act in bad faith and therefore the Hollands couldn't get attorney fees under Georgia law.

$7M Cut From Attorney Fee Award in John Hancock Case

May 25, 2022

A recent Law 360 story by Josh Liberatore, “$7M Cut From Atty Award in John Hancock Overcharging Suit” reports that attorneys who helped a class of John Hancock life insurance policyholders score a $123 million settlement will now take home $27 million for their work, after a New York federal judge trimmed about $7 million from Susman Godfrey LLP's initial award to reflect settlement opt-outs.  According to an amended order signed by U.S. District Judge Alvin K. Hellerstein, the class attorneys will receive $27 million in fees, down from $34.4 million the judge awarded to Susman Godfrey in March.  The fee reduction comes after it was revealed at a fairness hearing on May 17 that policyholder opt-outs have reduced the total settlement fund by around $30 million.

On May 17, Judge Hellerstein also gave full approval to the class settlement, which had called for $123 million in cash to go to around 1,300 John Hancock Life Insurance Co. of New York universal life insurance policyholders who were subject to "cost of insurance" increases in 2018 and 2019.  However, two groups of policyholders opted out of the settlement, dropping the cash total to around $93 million, Judge Hellerstein said at the fairness hearing.

In March, Judge Hellerstein granted in full Susman Godfrey's proposed order for $34.4 million in fees, plus a pro rata share of interest earned on the settlement fund as well as $1.4 million in expenses.  Each of the seven named plaintiffs in the class action will receive $25,000 in incentive awards, according to the March order.  Following the opt-outs, the judge sought to trim Susman Godfrey's award to $25 million.  The firm had argued for just under $30 million, but Judge Hellerstein thought that was "excessive" and could be considered a "windfall."  The firm and judge eventually agreed on $27 million.

Other than the fee reduction, Judge Hellerstein's order from March will stay largely the same.  The only other change was a provision stating that as class counsel, the Susman Godfrey attorneys "shall not receive attorney fees or be reimbursed expenses until after the settlement administrator sends for delivery a settlement check to each settlement class member," which must come "within 44 days after the final settlement date."

The settlement itself was given full approval following its preliminary approval in January.  In addition to $123 million in total available cash, it provides class members with nonmonetary benefits, including a five-year freeze on COI increases for class members, that Susman Godfrey has said are worth an additional $67.8 million.  The original $123 million settlement amount as well as the new $93 million figure equal 91.25% of the COI overcharges that John Hancock collected from class members through August 2021, Susman Godfrey said.  That ratio is well above previous COI overcharge cases in New York federal court, the firm has said.

The $34.4 million that the Susman Godfrey attorneys were set to take home had represented 28% of the cash settlement and 18% of the overall settlement benefits when nonmonetary benefits are included, the firm said. The new $27 million award represents around 29% of the cash settlement when adjusted for opt-outs.

Judge Cuts ‘Unreasonable’ $24M Fee Request in Mattel Settlement

May 23, 2022

A recent Law 360 story by Katryna Perera, “Judge Cuts ‘Unreasonable’ Atty Fee Bid in $98M Mattel Deal” reports that a California federal judge has granted final approval to a $98 million settlement between investors and toymaker Mattel Inc. and PwC, but slashed the requested $24.5 million in attorney fees, saying it was too high.  U.S. District Judge Mark C. Scarsi said in his order that while the Ninth Circuit typically considers 25% of a settlement fund the "benchmark," that figure is still only a "helpful starting point," and courts should depart from it when a benchmark award would "yield windfall profits for class counsel in light of the hours spent on the case."

Instead of granting the requested $24.5 million in attorney fees, the judge reduced it to approximately $13.6 million, which represents about 14% of the $98 million settlement.  A 25% award would provide an "unreasonable windfall" to the class counsel, the judge added.  "The Court finds persuasive class counsel's arguments and evidence concerning the excellent value of the results achieved through settlement, the riskiness and complexity of the litigation, the skill and quality of counsel's work, the contingent nature of the fee, and the significant financial burdens counsel carried during the course of litigation," the order states.  "While these factors merit a significant fee award, an award of 25% of the settlement fund is unreasonable given the magnitude of the fund."

John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, had previously urged Judge Scarsi to approve the fee bid and maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7.  Judge Scarsi agreed with Rizio-Hamilton's calculations and stated that the multiplier is within range of other resolved class actions with common fund settlements.  But the judge found that the requested multiplier in this case was "excessive … relative to counsel's performance."

"Counsel would reap an extra $15 million windfall … while counsel should be commended and compensated for the risk they took, the work they did, and the result they achieved, that outsized windfall would not be fair to the other interests in this case," the judge said.  Alternatively, Judge Scarsi's approved $13.6 million attorney fee award represents a 1.5 multiplier of the lodestar, according to the order, which the judge called "appropriate in light of the hours counsel spent on the case, the magnitude of the settlement fund, the results achieved, and the risks and burdens borne by counsel."

In addition to granting final approval of the settlement for the same reasons outlined previously when he granted preliminary approval, Judge Scarsi awarded $5,515 to DeKalb County Employees Retirement System and $3,100 to New Orleans Employees Retirement System as lead plaintiff service awards, as well as $1.1 million in litigation reimbursement to class counsel.

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.