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Category: Fee Discovery / Fee Disclosure

Judge Calls Fee Disclosure in Voya Class Settlement 'Inadequate'

January 14, 2022

A recent Reuters story by Allison Frankel, “N.Y. Judge Calls Out Susman Godfrey for “Inadequate Fee Disclosure,” reports that Manhattan federal judge Kevin Castel refused this week to grant preliminary approval of a proposed $92.5 million class action settlement to resolve allegations that Voya Retirement Insurance and Annuity Company breached its contract with more than 46,000 life insurance policyholders who were subjected to a “cost of insurance” rate increase when Voya’s predecessor sold the policies to Lincoln Life and Annuity Company of New York.

The judge’s beef was not with the terms of the proposed settlement itself, which class counsel from Susman Godfrey described in a brief backing preliminary approval as “extraordinary.”  Susman Godfrey’s brief certainly establishes the firm’s tenacity in more than five years of litigation, all the way through class certification and summary judgment rulings.  The cash portion of the proposed agreement, Susman said, will provide at least as robust a recovery for policyholders as settlements that have previously been approved in other cost of insurance class actions.  And here, the firm said, the money will go straight to policyholders, who don’t even have to assert a claim to receive their share of the settlement fund.

Susman Godfrey said it intended to request a fee award of less than one-third of the settlement.  More specifically, the proposed notice to class members, attached as an exhibit to a declaration from the claims administrator, said Susman “will file a motion seeking an award for attorneys’ fees not to exceed one-third of the gross benefits provided to the settlement class.”

That mention of "gross benefits" caught Castel’s attention.  In the memo requesting preliminary approval, Susman touted the value of the non-monetary benefits it had obtained in the proposed settlement, including Voya’s pledge not to raise cost of insurance rates for class members for five years.  In an analogous class action mentioned in Susman’s motion, similar benefits were valued at more than $90 million.

Castel said it wasn’t clear from the language of the proposed class notice whether Susman Godfrey would ask for less than 33% of the cash value of the settlement – a number that would be simple for class members to calculate – or 33% of some as-yet unknown total settlement value.

“No hint is given as to the methodology that class counsel plans to employ,” Castel said, pointing out that if Susman Godfrey evaluated the non-monetary settlement provisions as generously as they were viewed in the class action cited in class counsel’s brief, one-third of the “gross benefits” could be as much as $62 million – which would give Susman Godfrey two-thirds of the cash in the settlement.  “If this is what counsel has in mind – or anything close to it – class members and the court should know it now,” Castel said.

Castel had to connect some dots to understand the potential gap between fees based on just the $92.5 million cash recovery for the class and an award that included the value of the non-cash benefits.  Susman’s memo requesting preliminary approval of the settlement does not put a dollar figure on those benefits.  Castel must have obtained the valuation figure he cited in this week’s opinion from a declaration filed by Susman’s Seth Ard.

Castel also took issue with class counsel’s proposed explanation to class members of the consequences of opting out of the settlement.  The proposed notice advised class members that they could tell the judge what they didn’t like about the settlement but would still be bound by the deal.  “This statement is fundamentally misleading,” Castel said.  “The purpose of an objection is to persuade the court not to approve the proposed settlement.  A successful objection means that the objector and other members of the class are not bound.”

Susman’s Steven Sklaver told me by email that the firm has taken Castel’s feedback to heart.  Susman intends to file a revised motion for preliminary approval clarifying that its fee request will be based only on the cash payout to class members, not on any additional value from the non-cash benefits.  “We are thankful for the court’s consideration of the matter and guidance,” Sklaver said.

NJ Law Firm Keeps Attorney Fees in Fee Dispute Action

July 28, 2021

A recent Law 360 story by Nick Muscavage, “McCarter & English Keeps Win in $860K Fee Suit,” reports that a New Jersey state appeals court upheld an $860,000 judgment for McCarter & English in its suit seeking unpaid fees from former client Moerae Matrix, finding that the biotech company couldn't show how the fees were unreasonable.  Moerae Matrix, a Morristown-based biopharmaceutical company that develops treatments for fibrotic and inflammatory diseases, retained McCarter & English in August 2017 to provide legal services for intellectual property and patent matters, according to court documents.

By signing the engagement letter with the Newark-based firm, Moerae Matrix agreed to its terms, "including McCarter & English's hourly rates, according to court documents.  McCarter & English "regularly" emailed its invoices to Moerae Matrix for legal fees and expenses incurred throughout the course of its representation.  The invoices detailed the work performed by the firm, the attorneys involved, how much time was spent on the tasks, the date of the tasks and the cost of the services.

Although Moerae Matrix made "certain payments" to McCarter & English, it was not current on its fees.  In September 2018, Moerae Matrix proposed converting the full amount of the outstanding balance to a promissory note, "but the parties could not agree on terms," according to court documents.  Three months later, the biotech company notified McCarter & English by email that it decided to terminate the firm's representation and to transfer its legal needs to Cooley LLP.  The email sent to the firm said, "We truly valued all your support over the years and are committed to seeing that [McCarter & English] is paid in full for past services and costs," according to court documents.

In the record presented to the appellate court, Moerae Matrix did not provide the invoices from McCarter & English, according to court documents.  Instead, the biotech company provided only a detailed statement of account, which shows the amounts billed, payments made and the balance McCarter & English claimed was owed.  "As a result, we are unable to independently assess the invoices either to confirm their contents or to render an independent determination concerning the reasonableness or fairness of [McCarter & English's] fees," the appellate court wrote in its Tuesday opinion.

Beverly Lubit, a partner at McCarter & English, served as the originating, billing and handling attorney responsible for the day-to-day representation of Moerae Matrix.  In seeking a summary judgment of $860,593, McCarter & English submitted certifications to the trial court from Lubit and Daniel P. D'Alessandro, another attorney with the firm. Lubit certified that the legal services provided, and the expenses incurred as a result, "were reasonable and necessary," according to court documents.

In an effort to escape the unpaid legal fees, Moerae Matrix relied on certifications from Moerae Matrix's founder, chairman and chief executive officer, Dr. Cynthia Lander, who asserted that Cooley was handling the very same tasks that were handled by McCarter & English "for less than half of the cost."  She argued that McCarter & English "charged too much in fees for the work that it performed" and "that [McCarter & English] filed many more patent applications and filings than necessary to protect the intellectual property interests of [Moerae Matrix]."

Moerae Matrix relied on an additional certification, one from Texas patent attorney Frank Grassler, who claimed to be an expert in patent law.  "In short, Grassler opined [McCarter & English] did a great deal of work, which was simply not necessary," the three-judge appellate panel wrote in its opinion.  However, Moerae Matrix did not disclose Grassler as an expert in its responses to McCarter & English's interrogatories prior to the conclusion of discovery, as required by state court rules, nor did the biotech company move to amend its responses to identify Grassler as an expert or supply an expert report from him.

Instead, Moerae Matrix submitted Grassler's certification in opposition to McCarter & English's summary judgment motion "well after the conclusion of discovery and unaccompanied by a certification setting forth the reason [Moerae Matrix] failed to identify Grassler as an expert in its answers to [McCarter & English's] interrogatories," the appellate panel noted.

For these reasons, the appellate panel agreed with the trial court's decision to exclude Grassler's certification.  The appellate panel also found that Moerae Matrix could not point to "competent evidence it claims establishes [McCarter & English's] fees are unreasonable or unfair," according to court documents.  There is no basis to conclude that the trial court erred by awarding McCarter & English the unpaid legal fees, the appellate panel wrote in affirming the lower court's $837,524 judgment, plus interest and costs of suit.

Attorneys’ Invoices in Prior Case May Be Admitted to Support Testimony

July 13, 2021

A recent Metropolitan News story, “Attorneys’ Invoice in Prior Case May Be Admitted to Support Testimony”, reports that a landowner who was sued by a man induced by a real estate agent into believing he had a contractual right to purchase her property when no contract had been formed was given a second chance by the Court of Appeal to win recompense from the realty company in a “tort of another” case for the attorney fees she incurred in the prior action.  The opinion was authored by Justice William Dato of the Fourth District’s Div. One.  It reverses a judgment to the extent that San Diego County Superior Court Judge Ronald L. Styn denied attorney fees to plaintiff Hue Thi Dong Mai.

Styn did so, with expressed reluctance, in light of the Oct. 19, 2018 decision by the Fourth District’s Div. Three in Copenbarger v. Morris Cerullo World Evangelism, Inc.  He read the case as barring Mai’s introduction of invoices for attorneys fees she expended in the breach-of-contract action against her, as inadmissible hearsay, and precluding him from taking judicial notice of what work was done in the prior case, over which he had also presided.

Mai was sued by John Fike who had been told by realtor Victoria Robinson of Keller Williams that a deal for the purchase of Mai’s property had been reach, when it hadn’t.  After telling Fike that an accord had been reached, Robinson—desiring to obtain a commission on a sale for more than $1 million—then sought to persuade Mai to sell at the price she had set, but she declined.

After Fike dropped his suit, Mai sued Robinson and the company that owns Keller Williams under the “tort of another” doctrine which, Dato noted, “allows for the recovery of attorney’s fees as damages when a plaintiff is forced into litigation with a third party due to the tortious conduct of the defendant.”  She obtained a judgment for $50,000 for emotional distress but nothing for the attorney fees she had expended in the action brought by Fisk.

Once Styn realized that attorney fees were being sought as damages subject to proof at trial, and not as costs which could be reckoned by reference to his own assessment of the value of services, he expressed a powerless to deviate from what he saw as constraints set down by Copenbarger and denied an award of those fees.  Dato said he would read Copenbarger narrowly to avoid a conflict with other decisions.

He said of Copenbarger: “We are… of the opinion that its commentary on the inadmissibility of the invoices would only apply to cases where plaintiffs attempt to read the detailed entries on the bills during their testimony to prove the specific repairs made or services rendered—and not where the invoices are offered for the more limited and appropriate purpose of corroborating testimony that they actually paid certain amounts and/or to make a prima facie showing that the charges were reasonably incurred.

“As pertinent to this case, Mai sought to introduce redacted copies of the attorney invoices only to support her testimony that she paid the billed amounts and as some evidence that the amounts were reasonable….The trial court erred in broadly reading Copenbarger to preclude both Mai’s testimony and receipt of the invoices for these limited and appropriate purposes.  This evidence would have satisfied Mai’s prima facie burden to establish how much she paid for legal services and the reasonableness of that amount.”

Dato went on to say that Copenbarger “strongly implies—though it does not hold” that judicial notice of the content of the file in a previous action would be improper.  He said: “The sounder and long-established rule is that materials filed by attorneys on behalf of litigants can be judicially noticed and provide evidence to support an award of attorney’s fees.  As relevant to this case, the materials filed on Mai’s behalf by her attorneys in the Fike action were properly subject to judicial notice and provide some evidence of the work performed defending that case.”  A remand was ordered for the limited purpose of setting attorney fees.

3 Firms Give Up $1M in Fees in Purdue Bankruptcy

May 1, 2021

A recent Law 360 story by Justin Wise, “3 Firms Give Up $1M in Fees From Purdue Ch. 11,” reports that Skadden Arps Slate Meagher & Flom LLP, WilmerHale and Dechert LLP have agreed to a settlement with the U.S. Department of Justice to relinquish $1 million in fees earned in their representation of Purdue Pharma in its ongoing bankruptcy cases, after concerns were raised about the adequacy of the firms' disclosures.

The DOJ Trustee Program said that the firms failed to disclose a joint defense and common interest agreement between Purdue and the Sackler family, the company's owners, in their retention applications.  The agreement created obligations for the firms to the Sacklers in their defense of hundreds of lawsuits relating to Purdue's opioid sales, the DOJ said.  Purdue had invoked the agreement in an effort to avoid turning over documents to unsecured creditors reviewing debtors' conduct.  The settlement is subject to approval by the Bankruptcy Court for the Southern District of New York.

"These disclosure violations are particularly concerning because a central question in these cases has been the independence of Purdue from the Sackler families," Cliff White, director of the DOJ's Trustee Program, said in a statement.  "This agreement reflects the USTP's ongoing efforts to police law firms and other bankruptcy professionals who fail to disclose connections that may raise questions about their ability to perform their duties free of conflicts of interest."

Law firms are required under bankruptcy laws to disclose their connections to other parties who may have a stake in a case.  The three firms did not consider the common interest agreement to represent a "connection" requiring disclosure at the time of their applications, but agreed to the settlement to resolve a dispute with the U.S. Trustee, according to a court filing.  The U.S. Trustee first raised concerns about the firms' disclosures in early March.

The U.S. Trustee said it discovered no "evidence that the failure to disclose in this case was intentional or that there was an effort by any of the firms to mislead."  Under the settlement, Skadden, WilmerHale and Dechert will collectively reduce their pending or future fees by $1 million and file supplemental retention applications to reflect any agreements entered on behalf of debtors and other parties.

Ninth Circuit Bumps Up Hourly Rate in Labor Case

April 19, 2021

A recent Law 360 story by Lauren Berg, “9th Circ. Bumps Ore. Atty’s Hourly Fee Rate in Labor Case,” reports that a U.S. Department of Labor administrative law judge wrongly reduced an Oregon attorney's hourly rate by $100 while awarding attorney fees in a Longshore and Harbor Workers' Compensation Act case, the Ninth Circuit ruled, telling the Benefits Review Board to assign the case to another judge.

In a 35-page published opinion (pdf), the three-judge panel said the review board should not have upheld the administrative law judge's decision to knock down attorney Charles Robinowitz's fee rate from $450 per hour to $349.85 per hour, finding that the attorney had presented "substantial evidence" that his requested rate was in line with similar services by lawyers of comparable skill and experience.  Robinowitz provided supportive affidavits from other attorneys, the 2012 Oregon State Bar Survey reporting that Portland attorneys with more than 30 years of experience billed between $300 per hour and $400 per hour, and court decisions awarding him $425 per hour and $420 per hour for work performed in 2012, 2013 and 2014, according to the opinion.

The fee appeal comes after Ladonna E. Seachris in 2006 filed a claim for benefits under the LHWCA following the 2005 death of her husband, who was injured while working as a longshoreman in 1979, according to court filings.  An administrative law judge denied the claim in 2010 and Seachris appealed to the Benefits Review Board, which affirmed the judge's order.  Seachris appealed again to the Ninth Circuit, which remanded the case in 2013, and the administrative law judge ruled in her favor in 2016, according to court records.

Following that decision, Seachris' attorney Robinowitz filed for attorney fees for 109 hours at a rate of $450 per hour, as well as costs of $5,413.  The administrative law judge in 2017, however, allowed the attorney 98 hours at about $341 per hour, according to court filings.  The Benefits Review Board then affirmed the decision, but increased the hourly rate to $349.85 because of an inflation error.

Seachris and her attorney then appealed to the Ninth Circuit. Seachris' husband's former employer, Brady-Hamilton Stevedore Co., said Robinowitz should only get an hourly fee rate of $358, arguing that the administrative law judge correctly calculated the market rate using the 2012 Oregon State Bar Survey, according to court filings.

In its opinion, the appellate panel said the judge erred by rejecting Robinowitz's evidence of prevailing market rates as outdated, saying reliance on historical market conditions is appropriate when it is the most current information available.  The panel said the judge needs to treat the parties equally, finding that both parties, as well as the judge, relied on dated evidence.

Brady-Hamilton also relied on the 2012 OSB Survey, the panel said, and the judge herself relied on that same survey as the linchpin of her rate decision.  By the time her fee decision came out in January 2017, the 2011 rates in that 2012 survey were already six years old, according to the opinion.  "The ALJ nevertheless relied on the survey by adjusting the 2011 data for inflation — appropriately so," the panel said. "But the ALJ declined to make similar adjustments to Robinowitz's evidence."

"We see no reason why she should not have taken the same approach to Robinowitz's evidence, and it was [an] error not to do so," the panel added.  The administrative law judge also erred by rejecting Robinowitz's evidence from the 2012 OSB Survey and not taking into account the way the survey reported rates, the panel said.  The survey reported hourly rates charged by Portland attorneys based on their years of experience, irrespective of practice area, and based on their practice area, irrespective of experience, according to the opinion.

Robinowitz relied on the survey chart based on years of experience to calculate his hourly rate, but the judge rejected the evidence as being too "one-dimensional," according to the panel.  But then the judge relied on the other survey chart based on practice area to determine her rate, the panel said.

"Although the ALJ rejected Robinowitz's survey evidence as 'one dimensional,' she proceeded to base her rate determination on the equally one dimensional chart reporting rates by practice area," the panel said.  "Even assuming arguendo that rates based on practice area are more probative than rates based on years of experience, the latter rates are at least relevant."  The panel found that the judge and the review board committed legal error in determining Robinowitz's hourly rate and that the judge's rate decision isn't supported by substantial evidence, according to the opinion.

The panel remanded the case and told the review board to assign it to a different judge, finding that "the tone of the ALJ's decision and the manner in which the ALJ evaluated the evidence suggest that the ALJ may not be able to provide Robinowitz with a fair and impartial hearing on remand."

The panel also noted that the Oregon State Bar has published an updated survey, saying the 2017 survey reports that Portland attorneys with more than 30 years of experience charged a median rate of $425 per hour in 2016 and for attorneys in the 75th percentile, the average rate was $495 per hour.  "These updated rates, which the BRB should take into account on remand, provide further support for Robinowitz's requested rate," the panel said.