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Category: Fee Allocation / Fee Apportionment

NFL Player’s First Law Firm Entitled to Half Contingency Fee

September 11, 2023

A recent Law 360 story by PJ D’Annunzio, “NFL Player’s 1st Firm Entitled to Half Contingency Fees”, reports that an Atlanta law firm representing an NFL player who eventually replaced it with another firm is entitled to half the original contingency fee agreed to from the outset of the litigation, a Pennsylvania federal judge has ruled.  U.S. Magistrate Judge David R. Strawbridge held that the player, identified as R.B., will have to pay Pope McGlamry PC a 10% contingency fee while paying his current firm, Collins & Truett, the remainder of the funds withheld for attorney fees. Dollar amounts were not listed in the opinion.

Judge Strawbridge relied on the Third Circuit's ruling in McKenzie Construction v. Maynard to determine the reasonableness of the contingency fee agreement between R.B. and Pope McGlamry, with factors including the quality of the work done and the result obtained.  The firm, which represented R.B. from 2011 to 2016, did not represent him when he became eligible to participate in the NFL concussion settlement claims process in 2022.  However, Judge Strawbridge said he was in a position to participate in that settlement program because of the work done by the firm.

Judge Strawbridge was skeptical of R.B.'s claim that Pope McGlamry did not adequately represent him before 2016.  "We view these assertions with some suspicion, as Pope McGlamry provided substantiation for its observation that player's withdrawal was part of a wave of such changes in representation by [settlement class members] as other firms offered more competitive fees," Judge Strawbridge said.

The judge said Pope McGlamry reviewed R.B.'s medical records, filed a complaint on his behalf, kept him updated on litigation and eventual settlement discussions, and counseled him about opting in to the settlement.  But Judge Strawbridge said he also needed to consider the impact of the representation, noting that because it was terminated, Pope McGlamry was not in a position to register R.B. for the settlement program and set up the necessary medical testing to determine the amount of his compensation.

All that, the judge said, "occurred during a time that he was represented by neither firm. Collins & Truett then carried the case to a conclusion in 2022 when it filed player's claim and saw him past the appeal period and into what we presume has been a distribution of his award."  Judge Strawbridge said the combined efforts of both firms were worth 15% of R.B.'s recovery.

Record $267M Attorney Fee Award in $1B Dell Settlement

August 2, 2023

A recent Law 360 story by Jeff Montgomery, “Five Firms Win Record $266.7M Fee From $1B Dell Settlement”, reports that the Delaware Chancery Court gave the nod to a record $266.7 million fee award for stockholder class attorneys among five firms who secured a $1 billion settlement, one of the largest ever in any state-level court, for a suit that challenged Dell Technologies Inc.'s $23.9 billion stock swap in 2018.  Vice Chancellor J. Travis Laster's 92-page opinion awarded the fees to Labaton Sucharow LLP, Quinn Emanuel Urquhart & Sullivan LLP, Andrews & Springer LLC, Robbins Geller Rudman & Dowd LLP, and Friedman Oster & Tejtel PLLC.

The vice chancellor approved the overall settlement on April 19, saying class attorneys had undertaken a "huge effort," but reserved judgment on the 28.5% fee while considering objections that it took a disproportionate bite out of the per-share payment to stockholders.  Vice Chancellor Laster pruned the request from $285 million to $266.7 million, noting that eight investment funds had recommended a lower fee, citing concerns about "windfall" profits in the case of large awards.

"The funds have a strong economic motivation for seeking a lower fee award.  They collectively own shares comprising 26.1% of the class.  Although they did not propose an alternative amount, if the court were to follow the federal trend and award a 10% fee, the objectors would receive another $49 million," the vice chancellor wrote.  Five law professors separately suggested in a friend of the court brief that a 15% fee would be appropriate, which would have added $35.78 million to the objectors' recovery.

"In this case, plaintiff's counsel brought a real case, invested over $4 million of real money, and obtained a real and unprecedented result. Rather than requesting an unprecedented fee award, plaintiff's counsel asked for 28.5% of the common fund," consistent with past court practices and precedent, Vice Chancellor Laster wrote in the opinion.  Included in the fee award is a proposed $50,000 incentive fee for the plaintiff.  The award in Dell was eclipsed only by the $285 million fee approved for attorneys in the derivative Americas Mining case in 2012, set by then Chancellor Leo G. Strine Jr.

The deal heads off a trial on claims targeting Dell's effort to exchange Class V stock — created to finance much of Dell's $67 billion acquisition of EMC Technologies in 2016 — for shares of Dell common stock.  The Class V shares generally traded at only 60% or 65% of the price of VMWare, a business in which EMC owned an 81.9% equity stake when Dell acquired EMC.  Public shareholders, the class has argued, were short-changed by $10.7 billion when, in December 2018, Dell Technologies paid $14 billion in cash and issued 149,387,617 shares of its Class C common stock for the Class V shares.

During a settlement hearing last week, attorneys for the class told the vice chancellor that they logged more than 53,000 hours on the case, with nearly $4.3 million in expenses, with the fee and expense award reflecting an implied hourly rate of about $5,268 per hour.  The requested fee, they said, had already been adjusted downward by 5% from a typical eve-of-trial award of 30% or more.  In addition to towering over any state award, the $1 billion payout would rank as the 17th largest class settlement of all time, according to Institutional Shareholder Services Inc.

Among the objectors was Pentwater Capital Management LP, which held 1.8% of the Dell Class V stock at the center of the stockholder action.  Pentwater described the fee as "far in excess of what is appropriate in these circumstances" and "fundamentally unfair" to the class represented.

The objectors, the vice chancellor observed "argue that the $1 billion common fund is not so impressive because plaintiff's counsel had a high likelihood of prevailing at trial," and asserted that the combination of the court's "entire fairness test and flaws in the deal meant that liability, while contested was never in doubt.  "No one who is actually familiar with litigation in this court could think that," the vice chancellor wrote.

Defendants regularly win under the entire fairness test, the vice chancellor noted, and "plaintiff's counsel did not have a laydown hand on liability.  They had a strong case that the fiduciary defendants did not follow a fair process, but fair price was debatable, and damages were a Wildcard."  Had Dell shown that the price was sufficiently fair, the class would lose, the decision found.

"Plaintiff's counsel deserves to be well compensated for identifying real cases, investing real money in those cases, and obtaining real results.  But the law should not reward plaintiff's counsel for filing weak cases and obtaining insubstantial results," the vice chancellor wrote.  Litigation continued until 19 days before trial, with the class pre-trial brief weighing in at 134 pages.

"Plaintiff's counsel thus went beyond a mid-stage adjudication that should yield a fee of 15–25%" after multiple depositions and some level of motion practice, the vice chancellor wrote, referring to the court's practice of taking the stage of litigation and effort heavily into account when awarding fees.

Fee decisions generally take into account the complexity of a case, the experience and ability of the lawyers, time and effort invested, stage of litigation and contingency terms that subject counsel to a risk of no payment at all, according to the court.  Not requested were attorney expenses, which amounted to more than $4 million.  In part, class attorneys had to make a decision regarding the appearance of a request for deduction of expenses, the vice chancellor wrote, in a case where "the common fund is so large that the out-of-pocket costs become a rounding error."

Class Counsel Tout Claims Rate in $185M Fee Request

July 19, 2023

A recent Law 360 story by Lauren Berg, “Facebook Users Laud 6% Claims Rate in $725M Privacy Deal”, reports that a class of more than 200 million Facebook users asked a California federal judge to grant final approval to their landmark $725 million deal resolving privacy claims against Meta Platforms Inc. over the Cambridge Analytica data harvesting scandal, touting the nearly 6% claims rate as "well above claims rates approved in other large settlements."

In a 35-page motion, the preliminarily certified class said that after attorney fees, costs and service awards are subtracted from the $725 million settlement fund, "allocation points" will be used to divide the remaining money among authorized claimants, allowing class members to recover an average of about $35 per person.

Under this allocation plan, for every calendar month at any time during the class period — running from May 24, 2007, through Dec. 22, 2022 — that the authorized claimant was a Facebook user with an activated account, one "allocation point" will be assigned, the motion says.  The net settlement fund is then allocated to each claimant pro rata based on each claimant's share of allocation points.

In addition to those monetary benefits, Facebook must also provide discovery and declarations attesting that the data sharing practices at issue have either stopped or are monitored under a 2019 consent decree between the social media platform and the Federal Trade Commission, according to the motion.

The users said the "extensive and successful" notice program — which included individual in-app notices to 685 million Facebook accounts, digital advertisements, a settlement website and public notices in USA Today and People magazine — has led to the submission of more than 15.8 million claims as of July 10.  The settlement administrator did clear out 960,313 as duplicative claims and will assess the remaining 14.9 million to make sure they are valid, the motion says.

"Based on an estimated class of 250 million, the claims rate is already almost 6% — a rate that is well above claims rates approved in other large settlements," the users said, noting that this is the largest-ever data privacy class action settlement.  After the parties unveiled the details of the proposed deal in February, U.S. District Judge Vince Chhabria ruled that Facebook and Gibson Dunn must pay $925,000 to the users, citing the defense's "unusually egregious and persistent" misconduct delaying discovery and gaslighting of opponents in seeking to extract a lower-priced settlement.

After Judge Chhabria in March tentatively signed off on the proposed settlement, class counsel in June requested $181.25 million in fees and $4.1 million in costs, representing 25% of the total settlement.  The attorneys said the amount represents a 1.99 lodestar multiplier for roughly 150,000 hours of attorney work done over the past five years.  The motion for attorney fees noted that nearly every aspect of the case demanded "an extraordinary investment of resources" and class counsel faced "aggressive opposition," making progress "exceedingly difficult."

Michigan Says $5M Fee Request is ‘Overreach’ in Flint Water Case

July 18, 2023

A recent Law 360 story by Carolyn Muyskens, “Mich. Blasts $5M Fee Ask in Flint Water Case as ‘Overreach’”, reports that the state of Michigan is urging the judge presiding over Flint water crisis litigation to deny residents' request for $5 million in settlement funds to be set aside for the future litigation expenses, with the state saying the settlement "was never intended to be a litigation fund for plaintiffs' counsel."  In a filing, the state opposed plaintiffs' requests for fee distributions from the $626 million settlement, which resolved claims against the state government and the city of Flint for their roles in the disaster set off when the city, under a state-appointed manager, changed its water source to save money.

The state said attorneys' new batch of fee requests, which follows their first payout from the settlement fund, were either premature or not authorized by the agreement.  Class counsel and liaison attorneys got the first payment from the settlement fund approved in May, when U.S. District Judge Judith E. Levy ordered a distribution of $40 million as a common benefit award to the attorneys, with an additional $7 million for litigation expenses.  Although the settlement was approved in November 2021, appeals have held up distribution of the funds until recently.

In June, the attorneys filed a motion for additional fees and expenses. The motion seeks reimbursement for post-settlement litigation expenses, a $5 million fund for future litigation expenses, and interest that had accumulated on the $47 million already disbursed — as well as on any awards moving forward.  It also seeks the disbursement of an already-approved fee award of 10% of the programmatic relief fund, which is a subcategory of money to be used for special education services for school children exposed to lead.

The state blasted the request, calling it an "egregious overreach" and saying settlement dollars should not be put toward the plaintiffs' litigation against the remaining defendants in the case — Veolia North America and Lockwood Andrews & Newnam PC. LAN said last week it had reached a tentative settlement with the plaintiffs.  The settlement is "not a litigation fund for plaintiffs' counsel's expenses pursuing non-settling defendants," the state said.

In its motion seeking expenses incurred since February 2021 and the $5 million fund, the residents said the settlement agreement stated plaintiffs' counsel "shall be reimbursed and paid solely out of the FWC qualified settlement fund for all expenses and fees, including but not limited to: attorneys' fees [and] past, current or future litigation and administration expenses," highlighting that the deal explicitly provided for future expenses.

The plaintiffs cited an Eastern District of Michigan case, In re Packaged Ice Antitrust Litig., in which the court "authorized class counsel to utilize up to $750,000 of the settlement fund to pay expenses incurred in the litigation going forward, including 'in prosecuting the claims against the remaining non-settling defendants.'"  The Flint plaintiffs said the judge would have oversight to approve any disbursements from the $5 million fund and that any money leftover that wasn't used for litigation expenses would revert to the settlement fund.

"Plaintiffs' counsel have incurred millions in additional lodestar in continuing to prosecute this case but are not presently seeking any additional award of attorneys' fees, nor requesting a disbursement related to future reasonable litigation expenses," the lawyers said.  "When additional common benefit expenses are incurred and become known, and in consultation with the special master, plaintiffs' counsel may make further applications for disbursements from the $5 million portion of the FWC qualified settlement fund requested herein to be set aside for continuing reasonable litigation expenses," they added.

The state also opposed the request for a 10% fee award from the special education services fund, arguing it can't be calculated until the claims administrator finalizes the list of claimants and the value of the main qualified settlement fund is determined.

The state also said the attorneys aren't entitled to interest on their fee awards, pointing to a provision in the settlement agreement that "requires that all interest earned by the FWC qualified settlement fund or the sub-qualified settlement funds become and remain part of each such fund and may be used to pay any fees and expenses incurred to implement this settlement agreement."

The state argued this provision means interest that accrues in the settlement fund should be put toward the costs of the administration process, not attorneys.  "If any interest remains after implementation of the settlement is complete, then those funds should enure to the benefit of the claimaints," the state argued.  Lawyers for the class are ultimately expected to receive about $200 million for their work on the case.

Groupon Calls Attorney Fee Request ‘Unreasonable’

May 29, 2023

A recent Law 360 story by Leslie Pappas, “Groupon Calls Fee Bid For Del. Settlement ‘Unreasonable’,” reports that attorneys for shareholders who sued Groupon Inc. in Delaware's Court of Chancery deserve at most $750,000 in fees for brokering a settlement that includes only corporate governance reforms, the e-commerce company said, calling a proposed $2.5 million fee award "unreasonable."  In a court filing, the Chicago e-coupon provider said "tagalong derivative claims" in Delaware largely echoed a federal securities action in Illinois, and that attorneys hadn't shown that the work they'd put into the case deserved such a large award.

"Defendants agree that plaintiffs have earned a reasonable fee for achieving the governance reforms in the settlement," the brief said, "but defendants disagree that plaintiffs have demonstrated that a $2.5 million fee award is reasonable."  The proposed settlement would resolve a trio of suits filed in Delaware Chancery Court by stockholder Alyssa Estreen and others.  Groupon tentatively agreed to settle the three derivative suits and a similar federal action in March.

The Delaware complaints included allegations similar to those in a separate federal action in the Northern District of Illinois, which resulted in a $13.5 million settlement in May 2022 and a $4.5 million award of attorney fees.

The lawsuits accused Groupon's officers and directors of breaching their fiduciary duties by issuing upbeat statements about the company's performance despite a decline in 2019 third-quarter profits.  The rosy outlook allegedly pushed the stock price up temporarily, but when Groupon later announced it was ending its "Select" member subscription discount program, the stock took a one-day 44% nosedive.  Shareholders also alleged that Eric Lefkofsky, Groupon's co-founder, and board member Peter Barris sold thousands of shares of Groupon stock based on inside information before the stock price tanked.

Groupon argued that the $2.5 million fee award is not reasonable under the standards set forth in Sugarland Industries, Inc. v. Thomas, a 1980 Delaware Supreme Court decision that lays out several factors that a Chancery Court considers when calculating a fee award.  The proposed $2.5 million fee is also not supported by Delaware precedent, the brief said.

"Delaware precedent demonstrates that courts frequently award fees below $1 million for early-stage settlements that achieve strong corporate governance reforms without a monetary component," the company argued in its filing.  Even in cases when shareholder plaintiffs managed to secure monetary compensation along with corporate governance reforms, the court has awarded fees of no more than $1 million, the brief said.

Shareholders say that the appointment of an independent director alone should be worth $1 million, but Chancery Court has often valued the addition of a new independent director at "well below $1 million many times," the brief argued, suggesting that $250,000 would be more reasonable.

Corporate governance reforms that shareholders value at $1.5 million are also worth much less, given that the case wasn't highly complex, there was little to no litigation activity, and the complaints "largely piggybacked off the allegations" in the federal securities action in Illinois, the brief said.

The 1,900 total hours that shareholder attorneys spent is also not a helpful benchmark for evaluating the fee request in this situation, because it involved three uncoordinated actions and multiple law firms, which "inherently leads to redundancy and inefficiency," the brief added.  "Here, awarding $2.5 million would be a windfall," the brief said.