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Category: Fee Allocation / Fee Apportionment

Judge Wants Trial for Law Firms’ Fee Allocation Dispute

May 1, 2023

A recent Law 360 by Chart Riggall, “Judge Says Trial Needed to Split Firms’ Fee Award,” reports that a federal magistrate judge said a trial is necessary to split the $1.8 million baby of attorney fees that two law firms have been squabbling over since their 2020 victory in a labor class action against DuPont.  In a recommendation, Pennsylvania Magistrate Judge Martin Carlson found that while there exists "no legally enforceable agreement" to split the fees between MoreMarrone LLC and Stephan Zouras LLP, the latter firm — which sued MoreMarrone shortly after the fees were awarded — had unquestionably contributed to winning the $5 million settlement.

"The undisputed evidence establishes that the Zouras firm has a valid, yet unquantified, quantum meruit claim, since it is uncontested that the plaintiff attorneys provided some value and sweat equity to the successful litigation of the Smiley case and have not yet been compensated for their efforts," Judge Carlson wrote, referring to the Bobbi-Jo Smiley v. E.I. du Pont De Nemours and Co. case resulting in the settlement.  Judge Carlson, whose recommendation will be reviewed by a federal district judge, lamented — as he has in past orders — the falling out between the firms as "a sobering parable regarding the divisive and destructive power of money."

The original lawsuit against DuPont was first filed in 2012 by MoreMarrone and Greenblatt Pierce Funt & Flores — now Weir Greenblatt Pierce LLP — on behalf of workers who said they were denied pay for off-clock work.  The Greenblatt firm eventually stepped away from the case, with Stephan Zouras joining as co-counsel in 2018.  MoreMarrone and Stephan Zouras, however, never entered into any formal agreement about how the funds would be split were they to prevail, according to Judge Carlson.  Zouras was instead assured by its co-counsel only that the terms would be "as favorable to you as possible."

After the district court awarded the roughly $1.8 million to MoreMarrone — charging the two firms with sorting out the split for themselves — Stephan Zouras sued, claiming a $573,000 figure well above the $325,000 MoreMarrone offered.  At issue before Judge Carlson were dueling motions for summary judgment.  MoreMarrone, citing the lack of a binding agreement, asked the court to toss out Stephan Zouras' breach of contract, fraud, and breach of fiduciary duty claims. That request was granted.

But Judge Carlson went on to find that contrary to MoreMarrone's claims, that lack of contract did not exclude Stephan Zouras from any and all compensation — the firm is still entitled to payment for the work done.  "There can be no question that it would be inequitable for the defendants to continue to retain the benefit of the full fees award without payment of value to the Zouras firm for its reasonable contribution to this effort," Judge Carlson wrote.

Contingency Fees in $787.5M Fox Defamation Settlement

April 20, 2023

A recent Reuters story by Andrew Goudsward, “Lawyers Win Big in $787.5 Million Fox Defamation Case,” reports that the $787.5 million settlement that ended Dominion Voting Systems' defamation lawsuit against Fox Corp also marks the end of a lucrative, two-year legal battle for the sprawling teams of highly-paid lawyers on both sides.  At least 31 lawyers from nine different law firms worked on the case, court filings show.

Dominion said Fox News broadcast false claims that the company’s voting machines were involved in a conspiracy to rig the 2020 U.S. presidential election, and won one of the biggest settlements paid in a defamation lawsuit.  Delaware Superior Court Judge Eric Davis complimented the legal teams in court after the settlement, saying he had not seen "as good of lawyering" in 13 years on the bench.

Law firm Susman Godfrey, one of two firms that represented Dominion in the case, was hired on a contingency, or success-fee, basis, according to a source familiar with the fee arrangement.  The firm gave Dominion a "substantial discount" because it viewed the case as pursuing accountability for election falsehoods, the source said.  It was not immediately clear how large a share of the settlement the firm would receive in legal fees.  A spokesperson for Dominion declined to comment.

Dominion accumulated about $12.2 million in out-of-pocket legal costs just from November 2020 through October 2022, according to court filings, which listed law firms and legal consulting companies retained by Dominion.  The filings do not include recent costs associated with preparing for trial or the success fees lawyers could earn from the settlement.

Lucrative Success Fees

Susman Godfrey helped pioneer the use of contingency fees in business litigation, a model more common for plaintiffs in personal-injury lawsuits.  Such arrangements, advertised on Susman's website, have included fees as high as one-third of a settlement in prior cases.  Partners at large corporate law firms like those representing Fox, meanwhile, sometimes bill more than $2,000 per hour, filings in other cases have shown.

Winston & Strawn and DLA Piper, which represented Fox News and parent company Fox Corp, respectively, each fielded teams led by two partners and multiple associates, court filings show.  The Winston & Strawn team was headed by Dan Webb, a top trial lawyer who represented Beef Products Inc in a closely watched defamation case against ABC News that settled in 2017 for at least $177 million.  Fox News also hired Paul Clement and Erin Murphy, top appeals court lawyers who have advocated for conservative causes at the U.S. Supreme Court.

Dominion's lead lawyers at Houston-founded Susman Godfrey included partners Justin Nelson, Stephen Shackelford and Davida Brook.  The company also hired Clare Locke, a firm specializing in defamation cases that represented former Alaska Gov. Sarah Palin in a libel lawsuit against The New York Times.

"We recognized right away just how momentous an issue this was, not only for Dominion, but for the entire country and the integrity of elections," Clare Locke partner Tom Clare told Reuters.  Clare would not discuss legal fees, but said his firm's small size allows it to be "flexible" in structuring agreements with clients.

Past examples of contingency fee arrangements show how lucrative they can be if a case is successful.  Susman Godfrey and another plaintiffs' firm earned about $106 million in 2018 under a contingency fee arrangement in a class action that secured $590 million in combined settlements with major banks accused of manipulating the Libor benchmark interest rate, according to court documents.

Last year, the firm took in one-third of the cash component of a $92.5 million class action settlement to resolve allegations that Voya Retirement Insurance and Annuity Company breached its contract with tens of thousands of life insurance policyholders, court records show.

Law Professors Say $285M Fee Request is Too High

April 12, 2023

A recent Law 360 story by Rose Krebs, “Law Professor Say $150M Fee is Fair in Dell Suit Deal,” reports that a group of law professors says the Delaware Chancery Court should award less than the $285 million fee sought for stockholder attorneys who secured a $1 billion class settlement after challenging a $23.9 billion conversion of Dell Technologies stock, saying a $150 million award would "adequately" compensate counsel.  In a brief submitted to the court, five professors assert that using a "declining-percentage" fee award structure — by which the percentage of fees awarded are reduced the larger the settlement size — in this case would be prudent.

"Even under the declining-fee approach, these mega-settlements are extremely profitable, demonstrating the winner-take-all reality of shareholder litigation," the brief said.  The professors, who said they "publish extensively on representative stockholder litigation," argue that a fee award equal to 15% of the settlement amount is warranted, rather than the 28.5% class attorneys seek.

"Plaintiffs pursue large settlements because they tend to have the highest multiplier to lodestar — in other words, they're more profitable than the alternatives," the professors said.  "Thus, class counsel have adequate incentive to take risk, even on a declining-percentage fee basis.  Overcompensating class attorneys simply diminishes class recovery."  The professors said they "respectfully suggest that a declining-percentage fee award adequately compensates Plaintiff's counsel while preserving funds for the class."  A 15% award would preserve an additional $135 million for the class, while still compensating counsel at a reasonable rate for time spent working on the case, the professors said.

Earlier this month, Vice Chancellor J. Travis Laster said in a letter to Pentwater Capital Management LP and other Dell institutional investors who oppose the fee request that the Chancery Court was considering a 20% floor for an award, to be adjusted if warranted.  The vice chancellor asked for additional briefing from Pentwater, and also said it would be helpful to know what "law professors say in favor of or against the declining percentage method."

In a filing, Pentwater, citing several studies, argued that "empirical research uniformly confirms that in federal class actions, as settlement amounts rise, fee percentages fall."  "Contrary to concerns about the decreasing percentage model, scholarship indicates that lowering fee percentages does not reward lawyers marginally less compensation for the same work," Pentwater said.  Pentwater contends that the 28.5 percent award being sought "is unfair to the class."

On Tuesday, Vice Chancellor Laster allowed the professors to submit a brief as amici curiae.  In their brief, the professors also said that "a declining-fee approach may not always be best."  They gave as an example cases that sophisticated institutional investors "negotiate for a 'baseline' recovery (i.e., a settlement amount that a typical plaintiffs' firm could likely achieve given the facts known at the start of the litigation) with a relatively low fee percentage for achieving this baseline and a larger percentage for achieving a greater recovery."

"This approach, however, would require the investor to determine this baseline amount when selecting lead counsel and incorporate it into the retainer agreement," the brief said.  "There is no indication of such an ex ante agreement in this case, and it would be difficult to judicially replicate the incentives of such an agreement after the fact."

The professors added that "absent such an agreement, the declining-percentage award matches risk and return, adequately compensates contingency counsel, and preserves settlement value for the class."  They also suggested the court "should consider requesting other information before setting a fee, including any ex ante agreements Plaintiff's counsel has reached with clients and fee-sharing arrangements with any other counsel."

In an order, Vice Chancellor Laster DIRECTED each firm representing the investor plaintiffs to submit information by detailing several issues such as: how many ex ante agreements they have negotiated in the past five years, what percentage of their representations have such agreements, the nature of any such past agreements, and if any fees awarded in the Dell case will be shared with other counsel that hasn't entered an appearance in the case.

Judge Says Trial Needed in $30M Attorney Fee Dispute

April 7, 2023

A recent Law 360 story by Jonathan Capriel, “Judge Says Trial Needed in $30M Attorney Fee Dispute,” reports that three Illinois law firms that made an oral agreement to share "fees" will have to go to trial to decide exactly what that means for the $30 million in attorney fees they were awarded for their work in the $1.5 billion Syngenta AG settlement, a Kansas federal judge ruled.  Exactly what the firms meant when they said "they would split 'fees' equally" is a question that can't be answered on summary judgment, said U.S. District Judge John W. Lungstrum, who shot down quick-win bids from both sides in his 18-page order.

As these firms fight over a pot worth tens of millions of dollars, other firms in Kansas and Minnesota that also worked on the original 2014 multidistrict litigation — which secured $1.5 billion in 2018 for a class of roughly 650,000 corn farmers who filed suit against Syngenta AG over genetically modified corn seed — tried to reverse the district court's method for splitting the larger $503 million in attorney fees.  But the Tenth Circuit refused to hold to an en banc hearing to review the lower court's decision.

Two of the Illinois firms at the center of the ongoing Kansas litigation, Crumley Roberts LLP and Burke Harvey LLC, argue that the spoken agreement they made with Heninger Garrison Davis LLC entitles them to two-thirds of the roughly $30 million award, and that Heninger Garrison has in fact breached a contract by not handing it over.  Heninger Garrison argues that in no way did it mean common benefit fees awarded to the class when it said "fees"; rather, it meant "contingent fees."  It further claims it performed the lion's share of the work and has offered to pay "more than the value of the compensable hours" that the two firms worked on the case.

But Judge Lungstrum said that the court can't make a determination at this stage of the litigation as to what "fees" means.  "The court concludes that any decision concerning ambiguity should be based on the totality of the circumstances surrounding the making of the oral agreement, including those relating to the parties' simultaneous agreement to work together to pursue litigation against Syngenta, and thus the court will await the presentation of evidence at trial," Judge Lungstrum wrote.

In 2019, the court divided the attorney fees into four pools, with each receiving a different amount of the fee. Kansas law firms received the bulk of counsel compensation with 49%. Minnesota firms got 23.5%, Illinois firms received 15.5% and about 12% went to private attorneys.  The Illinois pool consisted of the three present firms — Heninger Garrison, Crumley Roberts and Burke Harvey — and their sum ended up being about $29.1 million.

The three firms filed jointly as the "HGD Team" when seeking their compensation, and the court gave the entire amount to Heninger Garrison, which was then supposed to dole out the funds.  Once it became clear that Heninger Garrison didn't intend to give roughly $10 million to each party on the team, Crumley Roberts and Burke Harvey filed suit in state court. Their complaint was later removed to district court.  The two firms sought partial summary judgment on their breach-of-contract claim, arguing that "all fees" cannot be interpreted any other way.

Heninger Garrison sought summary judgment on a number of grounds, including arguing that William Bross of Heninger Garrison did not mean attorney fees when he orally agreed to split fees with Brian L. Kinsley of Crumley Roberts and Todd Harvey of Burke Harvey.  But even if the two did believe the agreement included counsel compensation, the amount they would receive "is so disproportionate to the work they performed that it would be an unreasonable fee and thus, unenforceable," Heninger Garrison said.

"Enforcing the agreement would thus pay plaintiffs nearly $20 million for a few hundred hours of common benefit work," Heninger Garrison said in its summary judgment motion.  The firms "never expected to receive that money.  Mr. Harvey conceded [Burke Harvey] was not entitled to 1/3 of the common benefit fee, 'far from it.'  And Mr. Kinsley conceded that most of [Crumley Roberts'] work was not compensable and did not benefit the class."

But the judge said he couldn't get past the broad use of the word "fees" in the agreement.  "Not only does the use of the word 'fees' in the agreement without limiting language weigh against Heninger Garrison's interpretation, the fact that the parties submitted a joint application … could suggest that the parties had agreed to divide any resulting award on some basis other than the relative common benefit hours included in the application, as the parties could simply have submitted separate applications if they were to be compensated only according to those hours," the judge said

Attorneys Push Back on Attorney Fee Cap in Camp Lejeune Act

April 6, 2023

A recent Law.com story by Brad Kutner, “Attorney Push Back on Proposed Camp Lejeune Act Attorney Fee Cap,” reports that bipartisan efforts in both the House and Senate aim to add a cap to attorneys fees on lawsuits linked to exposure to toxic chemicals at a North Carolina marine base.  But attorneys who are already working with clients to get some of the $6.1 billion made available via legislation passed last summer say the suggested caps are unreasonably low and the market will better police the process. 

“Passing the Camp Lejeune Justice Act was an important step toward providing long denied justice for veterans, their families, and civilian workers,” said Rep. Jerry Nadler, D-New York, when he announced the Protect Access to Justice for Veterans Act earlier this year.  He said “bad actors” looking to take advantage of elderly vets were to blame for the bill. 

The Camp Lejeune Justice Act signed by President Joe Biden in August, nixed the statute of limitations on claims related to hazardous chemical and water exposure at the North Carolina marine base from the 1950s until the late 80s.  It defined the illnesses that can be covered and superseded the Feres doctrine, which would otherwise preclude suits from military personnel against the government.  But it also lacked any cap on attorneys fees, an issue that has stirred debate among lawyers as much as elected officials.  

Nadler’s effort would cap attorneys fees between 17 and 33%, depending on the services and timeline for completion of a claim.  Another effort sponsored by Republicans in the Senate, the Protect Camp Lejeune VETS Act, caps fees at 12 or 17%.  “In my eight years in the U.S. Senate, there are few issues I’ve been involved with that more desperately cry out for a just resolution,” said Sen. Dan Sullivan, R-Alaska, about his effort, which includes Minority Leader Mitch McConnell, R-Kentucky, among its co-sponsors.  

Efforts to limit fees were also submitted last fall after the act was signed, but they failed to gain traction before the end of the 117th Congress.  Now in the 118th congressional session, both bills have only been introduced, but that’s enough for lawyers working in the space to start speaking up.  “These are individual cases; every one is unique,” said Baird Mandalas Brockstedt Federico & Cardea partner Philip Federico in a phone interview, about the effort his firm has already put in for the clients he’s representing in Camp Lejeune claims.

But, as Federico and other attorneys pointed out, the individual nature of every claimant and the law’s language precluding class action claims will require a lot of work.  “We prepare as though we’re trying the cases,” said Beasley Allen principal Rhon Jones. His firm, along with vet disability firm Bergmann & Moore, are representing over 10,000 vets in claims under the act.  Many are still in the administrative process, and he’s still weighing his options for those who may now file suit. 

“There’s a lot of unknowns there.  We want to be prepared to represent our clients,” he said.  Notably the bill created an administrative process, managed by the U.S. Navy Judge Advocate General’s Corps, for vets to file claims with before going to court.  But as the six-month window for responses has come to an end for the earliest filers, the lawsuits have started steaming in.

According to a Court Listener search, at least 47 such suits have been filed in the U.S. District Court for the Eastern District of North Carolina, where all such complaints must be filed.  But the number of claims could skyrocket, with hundreds of thousands of people possibly impacted, as the administrative process has so far yielded only denials for the lawyers the National Law Journal spoke to. 

In a statement, Patricia Babb, public affairs officer for the Office of the Judge Advocate General of the Navy. said the office intaking claims was “closely monitoring the number of CLJA claims it receives each week, and also continually assessing its adjudication procedures.”  When asked whether any administrative claims had received payouts yet, she said no claims had “been fully adjudicated.”

As for concerns about resources to address the demand, a theory posited by Federico, Babb said the office was “taking appropriate actions to address staffing issues … when needed.”  Steven German, managing partner with Scout Law firm, has about 160 clients with Camp Lejeune claims. He’s among those who’ve yet to see an approved administrative claim.  But even before that administrative process starts, German said his firm is putting in work that requires reasonable compensation. 

“Lots of victims are dead, so you’re working with family members.  And it gets trickery when you get into the succession of the victim,” German said.  He also said finding medical records, some destroyed after 10 years, can be another challenge.  “It’s harder than people think, and these are the things that keep me up at night,” he said. 

German also argued that concerns about unreasonable attorneys fees are overblown.  Liens, hospital bills, Medicaid-owed funds and reimbursement claims such as workers’ compensation claims and veterans disability claims, can all get taken out from any settlement.  “The government gets all their money back,” he said.  “And the liens come off the top.” 

So what may start as a 40% fee on $60,000 win, $24,000, turns into $12,000 just as quickly.  “That’s a big haircut,” he said, also noting language in the bill can cause attorneys to forfeit up to one-third in fees.. 

Federico also expressed concern about reportedly high fees: “My father was an attorney and he always said ‘don’t tell me what you made, tell me what you ended up with,’” he said. To that end he’s promised to cap his firm’s handling of these cases at 25%, but he called the GOP-led effort to cap fees well below that “grossly unfair.”

One solution Federico offered was court intervention via a mediation process.  Once the court starts taking in complaints, a judge can make a matrix for awards and injuries and start sorting claims.  “We don’t need to take a decade to have this play out,” he said of the alternative.  Jones, meanwhile, is hoping once suits start rolling the system will work itself out. With his thousands of clients, he’s got plenty of work to do..  “We are in the process of preparing a lot of lawsuits,” he said.