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Category: Fee Denial

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.

Fifth Circuit Erases $500K Fee Award to Liberty Mutual

February 15, 2022

A recent Reuters story by Barbara Grzincic, “5th Circuit Erases $526,000 Fee Award to Liberty Mutual” reports that Liberty Mutual made a six-figure mistake by suing the Housing Authority of New Orleans for breach of contract rather than using the dispute-resolution process both sides had agreed to, a federal appeals court.  The 5th U.S. Circuit Court of Appeals overturned a $526,000 attorney fee award to Liberty, saying the dispute provisions of the contract remained in full force even after the Housing Authority had wrongfully terminated it.

The clauses – which required Liberty to submit a detailed written claim for payment to the Housing Authority and wait 60 days for a response – are plainly “meant to be binding even after a breach,” and Liberty’s claim to the contrary would render them “useless just when they are needed the most,” Circuit Judge Andrew Oldham wrote for the 5th Circuit panel.

“In other words, Liberty says the dispute-resolution clauses are binding — until a dispute arises. That can’t be right,” Oldham wrote. He was joined by Circuit Judges E. Grady Jolly and Jennifer Walker Elrod.  According to the opinion, Liberty had acted as the surety to Parkcrest Builders, which had an $11 million contract with the Housing Authority to build affordable units. The initial completion date was in July 2014.

On remand, the judge set the fee award at $526,000. The Housing Authority filed a second appeal last year.  This time the panel agreed with the Housing Authority, noting that its contract with Liberty authorized fee-shifting “upon the receipt by (HANO) of a properly presented claim.”  “Because HANO never received a properly presented claim, it cannot be liable for fees,” the 5th Circuit concluded.

Court Tosses Mootness Fee Request in Microsoft Merger Case

February 8, 2022

A recent Law 360 story by Dean Seal, “Court Boots Mootness Fee Bid in Microsoft Merger Challenge,” reports that a New York federal judge denied Monteverde & Associates PC's $250,000 fee request for representing an investor whose challenge to Nuance Communications Inc.'s $19.7 billion acquisition by Microsoft wasn't found to have benefited other Nuance shareholders.  U.S. District Judge J. Paul Oetken issued a brief order rejecting the firm's motion for what is commonly referred to as a "mootness fee," siding with Nuance's argument that investor Albert Serion hadn't met his burden of showing that his suit, one of several challenging disclosures in the proxy statement for Nuance's merger, "conferred a substantial benefit on Nuance shareholders."

Monteverde had argued that its suit prompted Nuance to disclose certain previously withheld metrics used by financial adviser Evercore Group LLC when doing a comparative analysis of Nuance and its peer companies, but the judge said the Nuance proxy statement already provided investors with a detailed summary of that analysis.  "Numerous courts have concluded that prompting disclosure of underlying valuation metrics does not confer a substantial benefit on shareholders and that their disclosure is not required by law," the order said.

The law firm had also claimed that it spurred Nuance to disclose price targets from research analysts that were previously withheld, but Judge Oetken said the range of price targets that were already included in the proxy statement "provides a fair summary of Evercore's work and '[q]uibbles with a financial advisor's work simply cannot be the basis of a disclosure claim.'"

The order will be warmly welcomed by opponents of mootness fees, a controversial merger litigation practice in which plaintiff firms file objections to mergers and other large-scale transactions, many on the premise of seeking additional disclosures, and then request fee awards after defendant companies "moot" the investors' allegations by providing those additional disclosures.  Nuance, which specializes in tools that enable speech recognition and transcription services for doctor's offices, slammed the law firm's fee request last fall as a "demand to be compensated lavishly for filing a meritless copy-cat lawsuit."

In its opposition to the fee bid, Nuance said the firm didn't submit billing records but had conceded that it put in less than 100 hours of work on the case, meaning its $250,000 request would come out to a minimum $2,500 hourly rate.

The firm represents investors who appealed the decision to the Seventh Circuit and argued in April 2020 that the district court has no jurisdiction to rescind attorney fees for claims that have been voluntarily dismissed.  The federal appellate court has not yet rendered a ruling in the case, according to court records.

$5.7M ‘Audacious’ Fee Request Reduced to $2.5M Fee Award

January 26, 2022

A recent Law 360 story by Bonnie Eslinger, “UHS Investors Get $2.5M Fees After ‘Audacious’ $5.7M Bid,” reports that shareholders who accused Universal Health Services Inc. of misleading them about an overbilling scheme and agreed to a settlement secured a $2.5 million attorney fee award, less than half of the $5.7 million request called "audacious" by the Fortune 500 company.  In a single-page order, Judge Joel H. Slomsky of the U.S. District Court for the Eastern District of Pennsylvania granted the plaintiff's motion for the $2,500,000 fee award and closed the case.

The order, he said, derived from a letter the court received just days earlier from counsel for the shareholder plaintiffs and the defendants, saying "the parties are pleased to report" an agreement had been reached on the matter of fees and expenses to be awarded.  The $2.5 million sum resolves the dispute and brings an end to the litigation, according to the letter from Michael Barry of Grant & Eisenhofer PA, representing the plaintiffs, and Matthew Madden of Robbins Russell Englert Orseck & Untereiner LLP, a lawyer for Universal Health Services.

"We thank the court for its indulgence as the parties continued their discussions," the letter added.  The united tone was a far cry from arguments the parties had exchanged after the investor plaintiffs had urged the court in November to approve a $5.7 million award along with final approval for a settlement the shareholders had reached with UHS.

UHS and its officers and directors in a Nov. 29 memorandum to the court contended that the attorney fees request should be denied or reduced to a far lower amount.  "That audacious request should be rejected," UHS said at the time, adding that compliance measures touted by the plaintiffs as resulting from the settlement were "in most cases exceedingly minor" and in addition to corporate governance measures that UHS already had in place.

UHS also pointed out that the fee awards presented by the plaintiffs' lawyers for other cases were not comparable because none of the cases had been dismissed with prejudice, as had been in this matter.  They also involved "far more substantial" reforms, UHS said in their November memorandum of opposition.  Counsel for the shareholders fought back, telling the court in a Dec. 13 memo that UHS can't say in one breath that the settlement is strong and should be finally approved but then object to the fee award.

According to the court docket, settlement discussions were held on Dec. 20 before Judge Slomsky, who followed up with an order on Jan. 18 asking the parties for an update on their talks about the award for attorneys fees and expenses.  After telling the court that the parties had engaged in "extensive discussions" to resolve the issue, the two sides announced the $2.5 million fees agreement to the court on Jan. 21.

Judge Denies Attorney Fees After $13M IP Trial Win

December 5, 2021

A recent Law360 story by Dani Kass, “Albright Denies Atty Fees For $13M Winner in Payment IP Trial,” reports that CloudofChange LLC isn't entitled to attorney fees after winning a $13.2 million jury verdict against NCR Corp. for infringement of payment processing patents, U.S. District Judge Alan Albright has ruled.  The Western District of Texas judge rejected all of CoC's arguments that NCR's litigation conduct was "unreasonable" or otherwise exceptional, holding that NCR didn't actively ignore a notice of infringement and that disputes over discovery and testimony weren't outside the norm.

"All conducts that CoC alleges as 'unreasonable' are rather common litigation practices within the bounds of legal doctrines," Judge Albright wrote.  "The fact that the jury ... found for one party, it does not automatically mean that the losing party's litigation positions are meritless."  After a four-day trial, the jury decided in May that all asserted claims of CoC's point-of-sale patents were valid and infringed.  The jurors put a $13.2 million price tag on the damages, and CoC had hoped the judge would tack on almost $2.6 million in attorney fees and some $460,000 in expert fees.

CoC's bid for fees had faulted NCR's counsel for not conferring about a discovery issue, as requested by a law clerk, but NCR had argued that the incident happened while the company was closed and as soon as it reopened, it gathered the discovery.  Judge Albright noted that the parties worked it out without court intervention, and that overall it was a "garden-variety dispute."  The fee attempt also claimed that NCR unilaterally canceled depositions, but Judge Albright said NCR made it clear that its witness wasn't available and offered alternative dates.