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Category: Fee Allocation / Fee Apportionment

Law Firms Set for Fee Allocation Dispute in CytoDyn Action

June 22, 2021

A recent Law 360 story by Rose Krebs, “Fight on Tap Over Firms’ $4M Fee Bid in CytoDyn Suit Deal,” reports that as a Delaware vice chancellor is set to consider a proposed stockholder suit settlement that will require five directors of life sciences venture CytoDyn Inc. to forfeit certain awards, three firms have come under fire for seeking $4.1 million in fees for their work on the case.  In a letter to Vice Chancellor Paul A. Fioravanti Jr., attorney Mark Richardson of Labaton Sucharow LLP argued that a special litigation committee set up by CytoDyn's board is being unreasonable in proposing that the firms representing shareholders only receive $1 million in attorney fees and expenses.

In the letter, Richardson told the vice chancellor that the committee's proposal is "well outside the range of reasonableness, lacks support under Delaware law, and is not the product of a 'logical deductive process' that is helpful to the court."  In a March court filing, Labaton Sucharow, Faegre Drinker Biddle & Reath LLP and Purcell Julie & Lefkowitz LLP asserted they are entitled to the $4.1 million award for successfully challenging "fiduciary malfeasance that was blatant and egregious in equal measure, and, thus, entirely unfair to CytoDyn."

Earlier this year, the CytoDyn special litigation committee asked the Chancery Court to approve the settlement, which would require five directors to forfeit some or all of the 7.2 million shares they were granted in 2019.  The committee said it could find no "meaningful" justification for the compensation.  The recommendation followed Vice Chancellor Fioravanti's decision in 2020 granting the SLC's request to stay the litigation so it could investigate the December 2019 and January 2020 stock awards that were flagged by the suing stockholders in their 2020 derivative suit.

The three firms asserted that the rescission of December 2019 awards and additional stock options from CytoDyn's CEO, Nader Z. Pourhassan, "represents an economic benefit for the company valued at approximately $15,647,828."  The firms also argued the plaintiffs "deserve at least partial credit" for the forfeiture of January 2020 awards that were valued at roughly $41 million.  The firms argued that the six suing stockholders obtained a roughly $13.6 million benefit for the company through their challenge of the 2020 stock awards.

The firms said the suit also led to important corporate governance reforms by CytoDyn, including considering the addition of a new independent director within the next year, a reconstituted compensation committee that will have at least three independent directors and strengthened compensation policies.

The fee award the firms are seeking amounts to roughly 10% of the nearly $27.2 million "economic benefit achieved for CytoDyn as a result of this lawsuit" and is "appropriate and reasonable," they said in a court filing.  But the committee is unhappy with the fee award being sought with its attorney Andrew D. Cordo of Wilson Sonsini Goodrich & Rosati telling the vice chancellor in a recent letter that "a $1 million fee award to plaintiffs' counsel would be reasonable."

The committee takes issue with the way the firms calculated the monetary value for the benefit achieved as a result of the lawsuit and asserts that "there is no factual basis for plaintiffs (or anyone) to take credit for the expiration of the January awards."

Those awards "lapsed on their own due to the failure of a vesting condition unrelated to this litigation," the committee said.  "Removing the value incorrectly attributed to the January awards and otherwise applying plaintiffs' methodology yields a fee of $1.875 million," the committee asserted.  However, the committee also argued the amount still needed to be reduced to take into account that the plaintiffs' firms only played a "relative role in bringing about the settlement."  "The SLC conducted the investigation and negotiated the settlement," Cordo's letter contended.  The committee also argued that a $4.1 million award "would be damaging to the company's financial condition."

Boies Cites ‘Trench Warfare’ in $627M BCBS Fee Request

June 21, 2021

A recent Bloomberg Law story by Roy Strom, “Boies Cites ‘Trench Warfare’ in $627 Million BCBS Legal Fee Bid,” reports that David Boies and Michael Hausfeld are requesting nearly $627 million in fees and another $40 million in expenses for the work a horde of lawyers did over eight years to secure a $2.7 billion antitrust settlement with Blue Cross Blue Shield.  The fee could provide a much-needed boost for Boies’ law firm, Boies Schiller Flexner, which has suffered an exodus of lawyers and saw its revenue in 2020 fall nearly 40% to $250 million, according to AmLaw data.

It’s unclear how the fee would be split between the myriad lawyers who worked on the case, but Boies and Hausfeld stand to gain most having served as co-lead counsel.  The fee application follows a preliminary approval in November of a settlement between the health insurer and plaintiff’s counsel. The judge in the case, R. David Procter of the Northern District of Alabama, said at the time the fees would be subject to his approval and would “receive intense scrutiny.”  He also said the proposed fee, which is roughly 25% of the settlement value, is “in line with benchmarks” for the Eleventh Circuit.

“This case has been the litigation equivalent of trench warfare, engaging scores of lawyers on both sides,” wrote Boies and Hausfeld, who are co-lead counsel.  The lawyers noted that from 2013 to August last year, a total of more than 434,000 hours had been spent litigating the case.

Filed in February 2012, the case alleged Blue Cross Blue Shield health plans divided up insurance markets across the country and agreed not to compete with one another across those markets.  The settlement agreement includes changes to the Blue Cross business model designed to enhance the market for health insurance, including eliminating a cap on revenue that BCBS affiliates could earn selling other health insurance plans.

The motion for legal fees compared the scope of the litigation to some of the most well-known antitrust cases, including those brought against Standard Oil, American Tobacco Co., and AT&T. Those cases were investigated and brought by the U.S. government.  Boies and Hausfeld noted there was no government investigation in the Blue Cross case.  “This was a purely private effort to enforce the antitrust laws,” the lawyers wrote.  The parties briefed over 150 discovery motions that led to 91 discovery orders, Judge Procter noted in an earlier filing.  He wrote that lawyers conducted over 120 depositions and defended over 20 depositions of class representatives and experts.

The lawyers wrote in their fee application that the defendants produced more than 75 million pages that were reviewed by a team of 178 attorneys for the plaintiffs.  The settlement negotiations began in 2015 and included 158 in-person and virtual meetings with mediators and 282 telephone conferences, they wrote.  The lawyers also noted they went up against “a who’s who of the nation’s most experienced antitrust litigators” at a number of major law firms, including Kirkland & Ellis, Hogan Lovells, Crowell & Moring, Foley & Lardner, Shearman & Sterling, and Cravath, Swaine & Moore.

Eleventh Circuit Upholds Fee Award in Chinese Drywall MDL

June 10, 2021

A recent Law 360 story by Carolina Bolado, “11th Circ. Upholds Fee Award in Chinese Drywall MDL,” reports that the Eleventh Circuit ruled that court-appointed class counsel in the defective Chinese drywall multidistrict litigation could receive 45% of the total fees paid to attorneys who negotiated settlements for 497 Florida plaintiffs because their work on the common case helped lead to the individual recoveries.  The appeals court said U.S. District Judge Marcia G. Cooke did not abuse her discretion when she awarded class counsel $5.8 million of the more than $40 million paid by Taishan Gypsum Co. Ltd. to end claims over shoddy drywall imported from China.

The class counsel includes firms Colson Hicks Eidson, Lieff Cabraser Heimann & Bernstein LLP, Morgan & Morgan, Herman Herman & Katz LLC and Seeger Weiss LLP.  The Eleventh Circuit said that although the attorneys for the 497 plaintiffs had worked hard to get the deal, their work "did not exist in a vacuum."

"They benefited from the decade of foundational work that class counsel exerted in this groundbreaking MDL, which involved evasive defendants in China, complex jurisdictional challenges requiring two trips to the Fifth Circuit, decertification attempts and liability determinations," the appeals court said.  "That class counsel has otherwise been compensated for this work does not prevent them from continuing to reap the rewards of their efforts."  The 497 plaintiffs were part of 1,734 Florida cases remanded in 2018 from the MDL in Louisiana to Judge Cooke in the Southern District of Florida for further proceedings.

Following the settlement with the 497 plaintiffs, class counsel said that much of their foundational work was used to secure the deals, entitling them to 20% of the total settlement.  After a global settlement was approved in January 2020 between Taishan and the remaining class members, the class counsel amended their award request to 60% of the attorney fees paid out to the individual plaintiffs, according to the opinion.  In May 2020, Judge Cooke awarded them a 45% cut.

The counsel for the individual plaintiffs appealed the decision, arguing that common benefit fees are only appropriate when there is a common fund from which to award them.  In this case, there is no common fund or judicial supervision of a fund, they said.  They also argued that class counsel have already been highly compensated for their common benefit work by the MDL court.

But the Eleventh Circuit said that particularly in complex litigation, courts have broad managerial power and discretion to award fees.  "The district court had control over the funds pursuant to the agreement of the parties to litigate common benefit fees in the SDFL and the actions taken by the court after the settlement agreement was first filed," the appeals court said.  "Awarding a portion of these fees to class counsel was therefore within the district court's power."  The appeals court added that preventing appointed counsel from recovering fees when their work leads to settlements down the road would make it more difficult for courts to find competent lawyers to take on that work.

Jimmy Faircloth, who represents the attorneys who worked on the individual settlements, told Law360 the ruling conflicts with Eleventh Circuit precedent by allowing contractual attorney fees to be used as a fund for purposes of the common benefit doctrine.  "[The ruling] allows MDL authority to reach even deeper into the jurisdiction of a transferor court following a remand," Faircloth said.  "This creates a slippery slope with negative consequences for the class action device."

Patrick Montoya, who represents the class counsel, said he was pleased the Eleventh Circuit affirmed Judge Cooke's "well-founded opinion recognizing class counsel's efforts in this decade-long, hard-fought case."  "The settlement obtained by class counsel was an unprecedented result against Chinese companies and the first of its kind in the United States," Montoya said.  "Judge Cooke and the Eleventh Circuit prevented a group of splinter lawyers from doing an end-around and unfairly benefitting from the class counsel's monumental efforts and the excellent results obtained for class members by class counsel."

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.

Law Firms Net $1M in Fees in Scotts OT Action

May 25, 2021

A recent Law 360 story by Matt  Perez“Scott OT Suit Nets More Than $1M in Atty Fees,” reports that a Florida federal judge has approved over $1 million in fees for attorneys at law firms Morgan & Morgan PA, Cohen Rosenthal & Kramer LLP and Gallup Auerbach who successfully brought a proposed class action against Scotts Co. LLC to a $3.1 million settlement.

U.S. District Judge Rodney Smith in the Southern District of Florida gave final approval Monday for $1,028,332.96 in attorney fees and $39,715.30 for costs and expenses. The payment amounts to just over 33% of the settlement figure.

The order also approved the $3,084,999 settlement — aside from the service awards that were stricken from the agreement — between The Scotts Co. and hundreds of lawn care workers, who accused the company of shorting them of overtime pay by using a "fluctuating workweek" methodology.

Plaintiffs Antonio Ervin, Kyle Borgailo, Colin Rogers, Matthew Shedron, Alexander Ramirez and Michael Melchior were designated class representatives, per Monday's order.

Members of the settlement class will receive an award of $100 or more before taxes, making up an average 83% of the back wages they're owed before attorney and other fees. Ervin alleged in his 2018 complaint that Scotts paid him just $4 to $5 an hour in overtime, despite his hourly pay rate being $13.75.

The final approval order released the defendants of any claims related to unpaid wages prior to Dec. 31, 2016.

"The court finds that the prerequisites for a class action under Federal Rule of Civil Procedure 23 have been satisfied for settlement purposes for each settlement class member," the order said.

The court approved the attorneys' awards due to the 1,700 hours of work required, the complex substantive issues of the case that presented "significant risk of nonpayment," the "excellent monetary results" for the plaintiffs and the level of skill required to work through the lawsuit. The court also felt the percentage cut from the settlement was consistent with other class action settlements in its jurisdiction.