Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Calculation Method

Hagens Berman $31M Fee Objection Heads to Ninth Circuit

April 19, 2022

A recent Law 360 story by Dorothy Atkins, “Hagens Berman Must Forfeit $31M Fee Win, 9th Circuit Told” reports that an objector's counsel urged the Ninth Circuit to force Hagens Berman Sobol Shapiro LLP to forfeit or reduce a revised $31 million fee award for securing deals worth $205 million in multidistrict litigation over optical disk drive price-fixing, arguing that the law firm violated multiple professional rules of ethics.  During a hearing before a three-judge panel, objector Connor Erwin's counsel, Robert Clore of Bandas Law Firm PC, argued that Hagens Berman violated multiple California Rules of Professional Conduct in securing its eight-figure fee award before a trial court, including by never placing the disputed funds into a client trust account, despite class members' objections and appeals pending.

But U.S. Circuit Court Judges Morgan Christen and Carlos T. Bea asked how class members have been harmed by the firm's failure to hold the funds in a client trust account.  "What harm, what foul?" Judge Bea asked.  Clore replied that as a result, the class has been denied up to $600,000 in interest that would have been collected on the disputed money.  At least a portion of that interest should have gone back to the class when a Ninth Circuit panel vacated Hagens Berman's previous $52.8 million fee and expense award, the attorney said.

"Why should they be entitled to interest on fees that don't belong to them?" Clore asked the panel.  The trip to the Ninth Circuit is the latest chapter in a decade-old multidistrict litigation claiming that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices.

Hagens Berman beat out other firms for lead class counsel in 2010, and the firm later struck multimillion-dollar deals to resolve the disputes.  After U.S. District Judge Richard Seeborg took over the case from U.S. District Court Judge Vaughn Walker, Judge Seeborg awarded the law firm $47.8 million in attorney fees for securing the settlements.  But in May 2020, a pair of Ninth Circuit panels vacated the fee awards after Clore argued before the appellate court that Judge Seeborg erred by keeping Hagens Berman's initial proposal for lead class counsel under seal and not properly taking it into account in awarding fees, among other objections.

On remand, in July, Judge Seeborg awarded Hagens Berman a revised $31 million fee, finding that the firm was entitled to a 20% premium on top of the $25.9 million it would be allotted under the firm's interpretation of the fee grid in its initial class counsel proposal.  Judge Seeborg also awarded Erwin's counsel $1.5 million in fees in September for their work helping to convince the Ninth Circuit to throw out the initial fee award.

But Erwin again challenged the fee award, with Clore arguing before the appellate court that Hagens Berman took too long to return the fees after the previous panel vacated the award, and did not place the funds in a client trust account, as required by professional rules of conduct.  Clore added that the trial court also erred in miscalculating the "starting point" for setting reasonable attorney fees on remand by using a flat rate instead of the sliding scale specified in the firm's initial proposal, resulting in an adjusted $25.9 million for the firm.  That amount should be $22.2 million, he said.

In light of the alleged violations, Clore asked the Ninth Circuit to send a message that class counsel are not immune to the California state bar's professional rules, and require the law firm to either forfeit its fees, or at the very least reduce the fees to keep in line with the firm's initial $22.2 million fee proposal.  As support, Clore cited the Ninth Circuit's 2012 decision in Rodriguez v. Disner, which held that a court has "broad equitable powers to … require an attorney to disgorge fees already received" for a serious ethical violation.

But class counsel Shana E. Scarlett, of Hagens Berman Sobol Shapiro LLP, argued that $31 million in fees is justified given the length of litigation and how fiercely the litigation was fought.  She also argued that the judge properly awarded additional fees on top of the initial $25.9 million proposal based on his discretion and understanding of the case.

But Judge Bea asked why the trial judge used a flat rate instead of the sliding scale methodology specified in the firm's initial bid proposal.  "Why isn't Judge Seeborg wrong in using a flat basis rather than a sliding scale basis based on the schedule we have before us?" the judge asked the attorney.  Scarlett replied that the firm's initial bid proposal was just one part of what informed the trial judge's decision. But Judge Bea appeared skeptical.

"You're talking about extrinsic evidence that was used by Judge Seeborg to interpret the writing, which we have before us?" Judge Bea asked.  "What factual evidence was there?  Are you saying that the written document is ambiguous and requires factual findings interpreted?"  Scarlett replied that the initial proposal was clear that the fees should use a flat rate, and not a sliding scale, but Judge Seeborg "went further and made the finding that we intended to be flat rate structure."

Federal Circuit to Hear $184M ACA Attorney Fee Award Dispute

April 1, 2022

A recent Law 360 story by Dorothy Atkins, “Quinn Emanuel ACA Clients Urge Fed. Circ. To OK $184M Fees” reports that a group of health care plan insurers represented by Quinn Emanuel Urquhart & Sullivan LLP have urged the Federal Circuit to affirm class counsel's $184 million attorney fee award for settlements totaling $3.7 billion that resolve litigation over so-called risk corridor payments under the Affordable Care Act.  In a 73-page response brief, the insurers argued that objections raised by Kaiser and United Healthcare health plan insurers largely ignore "key facts" that U.S. Court of Federal Claims Judge Kathryn C. Davis relied upon in determining that Quinn Emanuel's fee request was reasonable.

The insurers said Judge Davis awarded fees based on her finding that Quinn Emanuel "pioneered" a novel claim at great risk to itself and achieved a 100% recovery for the class.  She also found that the firm filed the first complaint by several months and drafted the first substantive brief on the issue, so she didn't abuse her discretion in awarding 5% in fees, the brief said.

The insurers added that the objectors' appeal focuses "myopically" on the lodestar multiplier, which is the number of times the firm's hourly rate would be multiplied to get the total fee award.  The objectors criticize the fee award for awarding the firm what comes out to an $18,000 hourly rate, but a percentage-of-the settlement fund is the appropriate method of determining fees, the brief said.  "Indeed, it would be nonsensical to treat hourly rates as the only legitimate means of determining reasonable compensation, especially when the competitive legal market for bringing these very claims proves otherwise," the brief said.

The multimillion-dollar fight over fees and the trip to the Federal Circuit is the latest chapter in litigation that Quinn Emanuel-represented Health Republic Insurance Co. initially launched in 2016, accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.  The certified opt-in class of health care plans accused the federal government of failing to make required "risk corridor" payments under the ACA, and Quinn Emanuel's suit purportedly sparked a firestorm of parallel litigation across the country — two of which ended up before the U.S. Supreme Court.

In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.  Although Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."

But objectors Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check, and no more.

They told the trial court that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and the firm was trying to walk away with an award that would work out to an astronomical hourly rate of $18,000. Class members also signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the objectors said, which the firm had eschewed.  But in September, Judge Davis granted the fee request, saying despite the "at times hyperbolic" motions for fees, Quinn Emanuel did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.

The objectors appealed the judge's ruling and told the Federal Circuit in their opening brief in January that Judge Davis abused her discretion by failing to cross-check the fee request.  The objectors argued that a reasonable hourly-rate multiplier for the firm's work should be in the lower single digits, and certainly not the 18 to 19 multiplier that would apply to reach the $184 million fee award.

"The effective multiplier of more than 18 the Claims Court awarded is astronomical and unjustified," the objectors said in their opening brief.  "In holding that a multiplier exceeding 18 would be reasonable (if it were to conduct a lodestar crosscheck, which it didn't do), the Claims Court cited three cases with high multipliers, though it did not provide any discussion as to why these cases were germane."  The insurers fired back, arguing the lower court appropriately rejected the lodestar method, particularly since adopting it would create "warped incentives, whereby attorneys are not rewarded for achieving outstanding results, and instead are rewarded for litigating inefficiently."

Ninth Circuit Affirms $98M Fee Award in Facebook Class Action

March 17, 2022

A recent Law 360 story by Dorothy Atkins, “9th Circ. Oks Facebook Class’s $98M Fee Win in Privacy Fight” reports that the Ninth Circuit affirmed class counsel's $97.5 million fee award for striking a $650 million deal that resolves claims Facebook's facial recognition technology violated Illinois users' biometric privacy rights, rejecting objectors' arguments that the award is "outrageous" and the trial judge abused his discretion in awarding it.  In a five-page unpublished opinion, a unanimous three-judge panel held that U.S. District Judge James Donato did not breach his fiduciary duty to the class by awarding class counsel 15% of the total $650 million settlement in fees.

Objectors' counsel had argued that the fees were too high and inappropriate because class counsel told Judge Donato they would not seek fees for an additional $100 million added to the settlement fund after the judge had rejected an initially proposed $550 million deal, which forced Facebook and class counsel back to the negotiating table.  Instead, Judge Donato should have awarded class counsel 10% of the initial $550 million proposed settlement, or $55 million, which would have been reasonable and in line with case law on other mega settlements, according to objectors' counsel, Kendrick Jan.

But the Ninth Circuit panel concluded that the 15% award is in line with 11 similarly sized settlements, which ranged between $400 million and $800 million and averaged around 16% in fees, and Judge Donato adequately explained why this was a reasonable fee based on the facts of this case.  Additionally, the panel said the trial judge appropriately cross-checked the fee award based on the 4.71 lodestar multiplier, which is the number of times the hourly rate would be multiplied to get the total fee award.  Although lodestar multipliers tend to average between 2.39 and 4.50, the Ninth Circuit said the multipliers tend to increase as the size of the class' recovery increases and the 4.71 multiplier in this case is reasonable based on the risks trial would have presented.

The Ninth Circuit also rejected the objectors' arguments that the fee lodestar was based on hours that included attorneys' lobbying activities, which cannot be included in contingency fees under both California and Illinois statutes.  The panel said the objectors waived their arguments on the matter because they didn't raise them before the trial judge.  But even if they had not done so, the fee award still would be affirmed, the panel added.

"To the extent that appellants did not waive the general argument that lobbying fees should not be included in the lodestar calculation, the district court did not abuse its discretion because its primary calculation tool was the percentage-of-recovery method," the opinion says.

The objectors' appeal challenged multiple aspects of Facebook's revised $650 million deal resolving claims the social media giant breached the Illinois Biometric Information Privacy Act by using facial recognition technology without users' consent to fuel its photo tag suggestion feature.  After years of hotly contested litigation, the case was headed to a jury trial, but the parties struck an initial $550 million settlement in 2020, which class counsel hailed as the largest amount ever doled out to resolve a privacy-related lawsuit.

But Judge Donato tore into the initial proposal, which he noted gave users just 1.25%, or $300 at most, of what they could be entitled to under BIPA, even though the state statute comes with a $1,000-per-violation fine and a $5,000 enhancement for intentional or reckless violations.  At the time, Judge Donato told the parties that the enhancement appeared to be a potentially viable claim in light of the $5 billion fine Facebook agreed to pay the Federal Trade Commission in 2019 for violations of a 2012 consent decree over its privacy practices.

Roughly a month later, the parties filed a motion asking the judge to preliminarily approve a revised $650 million deal, which attempted to address Judge Donato's concerns by narrowing the release provision and increasing class members' potential recoveries to up to $400.  At the time, class counsel said it would seek up to $110 million in fees plus expenses based on the initial settlement amount.

In February 2021, Judge Donato signed off on the revised deal, calling it a "landmark result," but trimmed the $110 million requested attorney fees to $97.5 million, which reflected a 15% portion of the settlement.  He also slashed the requested incentive awards to three class representatives from $7,500 each to $5,000 each.

$11.7M Attorney Fee Award in Home Depot Data Breach

January 5, 2022

A recent Law 360 story by Sarah Jarvis, “Home Depot Data Breach Attys Get $11.7M in Fees After Fight,” reports that an Eleventh Circuit panelordered a Georgia federal court to award $11.7 million in fees, plus interest, to attorneys representing banks and other financial institutions in litigation over Home Depot's 2014 data breach, ending a tumultuous, four-year fight over the attorney fees.  In a per curiam opinion, the panel said the Northern District of Georgia erred in opting to use a percentage method to award $14.5 million in attorney fees, including interest, after the appellate panel had previously found that a $11.7 million lodestar amount was "fully supported by the record."

The panel remanded the case and instructed the district court to enter an order requiring Home Depot Inc. to pay class counsel for the financial institutions $11.7 million plus interest from the date of the amended fee award in January 2020.  "The law of the case doctrine and Home Depot I's mandate precluded the district court from awarding class counsel an attorney's fee other than the $11.733 million lodestar plus interest," the panel said, referencing the previous appeal in the case.

Home Depot's 2014 data breach compromised 56 million credit and debit card numbers, and was one of the largest payment card data breaches in history, the trial judge had said.  The 2017 settlement agreement provided $27.2 million in cash to the class and required the retailer to improve its data security.  In addition, Home Depot gave money to the financial institutions affected by the breach, including an extra $14.5 million to obtain releases from putative class members of their claims in the litigation.

After settling, the class of financial institutions sought $18 million in attorney fees, comprising the $11.7 million lodestar and a multiplier of 1.55, which Home Depot opposed as excessive.  The retailer had argued that $5.6 million in fees was appropriate.  In September 2017, a Georgia federal judge set attorney fees at $15.3 million. But in July 2019, the Eleventh Circuit trimmed the award against Home Depot, saying U.S. District Judge Thomas W. Thrash Jr. improperly enhanced an $11.7 million lodestar amount by a multiplier of 1.3 to factor in attorney risk.

On remand, the trial judge sided with new arguments from the class of financial institutions and awarded in January 2020 $14.5 million in attorney fees, including interest, against Home Depot, plus about $730,000 in costs.  Home Depot appealed again, arguing the settlement agreement clearly states the retailer should pay the amount of attorney fees that were reduced on appeal, plus interest.

Cari K. Dawson of Alston & Bird LLP, an attorney for Home Depot, argued in December 2020 that the trial judge didn't have the authority to reconsider an appropriate attorney fees amount using a different calculation method because the appellate court affirmed all but the multiplier in his previous decision, including the $11.7 million lodestar.  She said that although the appellate panel did not explicitly state in its 2019 opinion that $11.7 million was the appropriate amount of attorney fees, that was implied by its affirmation of all but the risk multiplier.

But Kenneth S. Canfield of Doffermyre Shields Canfield & Knowles LLC, an attorney for the class, had argued that Judge Thrash did have discretion on remand to take a second look at what was appropriate, as long as he didn't use the 1.3 risk multiplier that appellate judges had rejected.  Canfield said the trial judge could instead apply a percentage method to calculate fees rather than rely on the $11.7 million lodestar, which is what he did.

Quinn Emanuel Gets $185M in Attorney Fees in $3.7B ACA Win

September 16, 2021

A recent Law 360 story by Dave Simpson, “Quinn Emanuel Gets $185M Fee From $3.7B Win in ACA Suits,” reports that a U.S. Court of Federal Claims judge granted Quinn Emanuel Urquhart & Sullivan LLP's request for $185 million in fees stemming from two class actions against the federal government over so-called risk corridor payments under the Affordable Care Act, which resulted in a nearly $3.7 billion total win.  Judge Kathryn C. Davis said that despite the "at times hyperbolic" motions for fees, the law firm did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.  She granted its request for 5% of the winnings.

"At the end of the day, what is more important is that class counsel's legal theory resulted in a huge award to the classes here," Judge Davis said.  Quinn Emanuel was the first firm in the country to file a lawsuit on behalf of a qualified health plan insurer accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.

Health Republic Insurance Co. sued the government in 2016 and in July 2020 won a judgment for $1.9 billion alongside a subclass of insurers.  Common Ground Healthcare Cooperative sued the government in 2017 over similar claims and won a $1.7 billion judgment.  Those cases set off a firestorm of parallel litigation across the country, alleging similar claims.  Two of those cases ended up at the U.S. Supreme Court.  In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.

While Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."  But in August 2020, objectors like Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check.

They said that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and argued that the firm was trying to walk away with an award that would work out to an hourly rate of $18,000 per attorney.  Class members signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the motion said, which the firm had eschewed.

Quinn Emanuel shot back in September 2020 that the $8.8 million award proposed would discourage attorneys in the future from taking on similarly ambitious cases.  The percentage model, which the insurers agreed to when choosing to join the class instead of pursuing individual claims, is favored by the courts for exactly this reason, the firm said.  According to the firm, despite the dozens of companies signing on to the fee objection, most of them Kaiser or United entities, almost 90% of the class members have not objected.

Judge Davis sided with the firm.  "These are not cases in which class counsel merely rode the coattails of other innovative litigators," she said.  The 5% fee is well below market value, and the objectors propose what would amount to a .22% fee, she said.  Further, the firm allocated 10,000 billable hours and might not have been paid for any of it had the outcome gone differently, the judge said.