A recent Law 360 story by Rose Krebs, “Class Attorneys Defend $285M Fee Bid in Dell Stock Deal,” reports that class attorneys are defending their bid for a $285 million fee award as the Delaware Chancery Court gets ready to consider a proposed $1 billion settlement to end a stockholder suit challenging a $23.9 billion conversion of Dell stock, arguing the "record-breaking" deal warrants a big payout.  In a filing, attorneys with Labaton Sucharow LLP, Quinn Emanuel Urquhart & Sullivan LLP, Andrews & Springer LLC, Robbins Geller Rudman & Dowd LLP and Friedman Oster & Tejtel PLLC took issue with an objection lodged by Pentwater Capital Management LP and other Dell Technologies Inc. institutional investors who oppose the fee request.

"Plaintiff's counsel invested years of professional time and millions of dollars out-of-pocket to deliver this record-breaking result for the class," the filing asserts.  "Plaintiff's counsel did so on a fully contingency[sic] basis, with no guarantees, and without the comfort of knowing — as objectors do today — that plaintiff's counsel would (or even could) achieve this successful outcome."

In the filing, the class attorneys argue that they "achieved this outcome in the face of extraordinary risk, on the eve of trial, and against highly determined defendants with endless resources and a history, well known to this court, of dogged litigation."  The fee and expense award sought "is eminently fair, reasonable, and well-supported by governing precedent and prevailing market practices," they contend.

Earlier this month, and in another filing, Pentwater argued that an award equal to 28.5% of the $1 billion settlement would be unfair to the class.  Citing several studies, it argued last week that "empirical research uniformly confirms that in federal class actions, as settlement amounts rise, fee percentages fall."  "Contrary to concerns about the decreasing percentage model, scholarship indicates that lowering fee percentages does not reward lawyers marginally less compensation for the same work," it said.

Vice Chancellor J. Travis Laster earlier this month asked for additional briefing from Pentwater, saying it would be helpful to know what "law professors say in favor of or against the declining percentage method."  Pentwater had asked the court to "carefully examine" the fee application, given "the sheer enormity of the fees sought."

Last week, Vice Chancellor Laster allowed a group of professors to submit a brief as amici curiae.  In the brief, five professors who said they "publish extensively on representative stockholder litigation" argued that a fee award equal to 15% of the settlement amount is warranted, rather than the 28.5% class attorneys seek.  A $150 million award would "adequately" compensate counsel, they said.  But in a filing, the lead plaintiff Steamfitters Local 449 Pension Plan's counsel argued that the court "should reject objectors' groundless arguments" and also toss aside the professors' argument.

Pentwater and the other objectors "do not address the court's many decisions adopting similar or larger fee percentages, the reasonableness of plaintiff's counsel's implied hourly rate, or the risk plaintiff's counsel incurred expending tens of thousands of hours and millions of dollars prosecuting this enormously complex case," the filing asserts.  Those objecting to the fee request also didn't "identify anything plaintiff's counsel could have done to litigate this case more effectively or efficiently," the filing said.

"Instead, objectors demand a lower fee percentage because of the settlement's sheer value," it said.  "Delaware courts have expressly rejected this approach, and for good reason: It fails to account for the greater risk in larger cases not settled early in litigation, and to properly reward outstanding results in the face of that risk; it creates perverse incentives for plaintiffs' counsel; and it defies the market among sophisticated parties negotiating fee arrangements, which seldom use a declining fee percentage (and more often have an increasing one)."  Nothing in the professors' brief "warrants reducing" the requested fee award, and the professors and objectors omitted "scholarship questioning the practice of discounting fee awards in mega-fund settlements," the class attorneys said.

A recent Law 360 story by Rose Krebs, “Law Professor Say $150M Fee is Fair in Dell Suit Deal,” reports that a group of law professors says the Delaware Chancery Court should award less than the $285 million fee sought for stockholder attorneys who secured a $1 billion class settlement after challenging a $23.9 billion conversion of Dell Technologies stock, saying a $150 million award would "adequately" compensate counsel.  In a brief submitted to the court, five professors assert that using a "declining-percentage" fee award structure — by which the percentage of fees awarded are reduced the larger the settlement size — in this case would be prudent.

"Even under the declining-fee approach, these mega-settlements are extremely profitable, demonstrating the winner-take-all reality of shareholder litigation," the brief said.  The professors, who said they "publish extensively on representative stockholder litigation," argue that a fee award equal to 15% of the settlement amount is warranted, rather than the 28.5% class attorneys seek.

"Plaintiffs pursue large settlements because they tend to have the highest multiplier to lodestar — in other words, they're more profitable than the alternatives," the professors said.  "Thus, class counsel have adequate incentive to take risk, even on a declining-percentage fee basis.  Overcompensating class attorneys simply diminishes class recovery."  The professors said they "respectfully suggest that a declining-percentage fee award adequately compensates Plaintiff's counsel while preserving funds for the class."  A 15% award would preserve an additional $135 million for the class, while still compensating counsel at a reasonable rate for time spent working on the case, the professors said.

Earlier this month, Vice Chancellor J. Travis Laster said in a letter to Pentwater Capital Management LP and other Dell institutional investors who oppose the fee request that the Chancery Court was considering a 20% floor for an award, to be adjusted if warranted.  The vice chancellor asked for additional briefing from Pentwater, and also said it would be helpful to know what "law professors say in favor of or against the declining percentage method."

In a filing, Pentwater, citing several studies, argued that "empirical research uniformly confirms that in federal class actions, as settlement amounts rise, fee percentages fall."  "Contrary to concerns about the decreasing percentage model, scholarship indicates that lowering fee percentages does not reward lawyers marginally less compensation for the same work," Pentwater said.  Pentwater contends that the 28.5 percent award being sought "is unfair to the class."

On Tuesday, Vice Chancellor Laster allowed the professors to submit a brief as amici curiae.  In their brief, the professors also said that "a declining-fee approach may not always be best."  They gave as an example cases that sophisticated institutional investors "negotiate for a 'baseline' recovery (i.e., a settlement amount that a typical plaintiffs' firm could likely achieve given the facts known at the start of the litigation) with a relatively low fee percentage for achieving this baseline and a larger percentage for achieving a greater recovery."

"This approach, however, would require the investor to determine this baseline amount when selecting lead counsel and incorporate it into the retainer agreement," the brief said.  "There is no indication of such an ex ante agreement in this case, and it would be difficult to judicially replicate the incentives of such an agreement after the fact."

The professors added that "absent such an agreement, the declining-percentage award matches risk and return, adequately compensates contingency counsel, and preserves settlement value for the class."  They also suggested the court "should consider requesting other information before setting a fee, including any ex ante agreements Plaintiff's counsel has reached with clients and fee-sharing arrangements with any other counsel."

In an order, Vice Chancellor Laster DIRECTED each firm representing the investor plaintiffs to submit information by detailing several issues such as: how many ex ante agreements they have negotiated in the past five years, what percentage of their representations have such agreements, the nature of any such past agreements, and if any fees awarded in the Dell case will be shared with other counsel that hasn't entered an appearance in the case.

A recent Law 360 article by Tyler Brown, Jason Harbour and Justin Paget of Hunton Andrews Kurth LLP, “How Ch. 11 Ruling Ends War Between National, Local Rates” reports on a recent ruling on hourly rates in Chapter 11 cases.  This article was posted with permission.  The article reads:

On Oct. 18, the U.S. Bankruptcy Court for the Eastern District of Virginia approved the professional fee applications in the Nordic Aviation Capital bankruptcy cases, including the rates of each of the professionals as appropriate market rates.  This settles any remaining uncertainty in how professionals' hourly rates will be considered for approval in bankruptcy courts in the district. In particular, the bankruptcy court noted that

[m]uch ink has since been spilled differentiating so-called "local" rates from "national" rates. The distinction is much ado about nothing.  The market for professional services cannot be predetermined by geography alone.

Instead of relying on geography alone, the bankruptcy court stated that

the plain language of the Bankruptcy Code directs the Court to consider the "customary compensation charged by comparably skilled practitioners in cases other than cases under [Title 11]."  The Court must, therefore, look at whether the rates charged are consistent with those set in the relevant market.

To determine the relevant market, the court noted that the market rate will be set for the most part by the amount clients are willing to pay for professional services.  The factors clients may consider in the selection process might include the reputation of the professional, the specialization of the professional, the need for the professional's experience and expertise, the stakes of the transaction and the time pressures of the engagement.

The court also stated that a good understanding of the relevant market in any given case could be gleaned from the rates of professionals other than those engaged by:

    The debtor;

    Debtor-in-possession financing budgets;

    Monthly operating reports of the debtor;

    Information required by the U.S. trustee program guidelines; and

    The checks and balances built into the fabric of the reorganization process to police the market.

The bankruptcy court also reiterated that the applicable factors for approving professional fee applications are those enumerated in Title 11 of the U.S. Code, Section 330(a)(3), and the Johnson factors.

Additionally, the bankruptcy court noted that in applying the Johnson factors, "it must heed the Fourth Circuit's admonition against per se rules beyond those legislatively mandated," noting that the court cannot "abdicate the equitable discretion granted to it by establishing rules of broad application which fail to take into account the facts of a particular case and the overall objectives of the bankruptcy system."[6]

After identifying the applicable legal standard, the bankruptcy court addressed the evidence that was relevant to the approval of the professional fee applications, including the rates of the professionals.  As the fee applications were uncontested, the court stated that it issued the memorandum opinion to provide guidance to practitioners on the facts they need to develop in support of fee applications filed in bankruptcy cases pending before that court.

In taking the unusual step of issuing a lengthy memorandum opinion for uncontested fee applications, the bankruptcy court put to rest what one commentator recently suggested was a war between national and local rates in the Eastern District of Virginia in mega Chapter 11 cases.  The issue arose in connection with the appeal of the plan confirmation order in the Mahwah Bergen Retail Group Inc. cases on unrelated grounds.

After vacating confirmation in that case, the U.S. District Court for the Eastern District of Virginia ordered that the bankruptcy court issue proposed findings of fact and conclusions of law on any further fee applications in the case and questioned whether attorney rates should exceed the prevailing market rates in the Richmond division of the Eastern District of Virginia.

The district court's order created uncertainty as to how the bankruptcy court might subsequently analyze the rates of professionals from outside the Richmond division.  That uncertainty was short-lived.  Importantly, the memorandum opinion represented one of the bankruptcy court's first opportunities to address professional fee applications in a large Chapter 11 case since the entry of the district court order adopting the bankruptcy court's report and recommendation in the Mahwah Bergen bankruptcy cases.

In the memorandum opinion and the bankruptcy court's report and recommendation, two bankruptcy judges from the Eastern District of Virginia have extensively detailed the legal precedent in the U.S. Court of Appeals for the Fourth Circuit and the appropriate factual predicates for approving market rates.

In sum, the memorandum opinion provides comfort to all practitioners, including those from outside the Eastern District of Virginia, that the appropriateness of attorney rates in cases filed in the district will continue to be assessed through application of the factors identified in Section 330(a)(3) and the Johnson factors on a case-by-case basis, without any additional requirements or per se rules.

Every year, NALFA conducts an hourly rate survey of civil litigation in the U.S.   Today, NALFA released the results from its 2021 hourly rate survey.  The survey results, published in The 2021 Litigation Hourly Rate Survey & Report, shows billing rate data on the very factors that correlate directly to hourly rates in litigation:

City / Geography
Years of Litigation Experience / Seniority
Position / Title
Practice Area / Complexity of Case
Law Firm / Law Office Size

This empirical survey and report provides micro and macro data of current hourly rate ranges for both defense and plaintiffs’ litigators, at various experience levels, from large law firms to solo shops, in regular and complex litigation, and in the nation’s largest markets.  This data-intensive survey contains hundreds of data sets and thousands of data points covering all relevant billing rate categories and variables.  This is the nation’s largest and most comprehensive survey or study on hourly billing rates in litigation.

This is the second year NALFA has conducted this survey on billing rates.  The 2021 Litigation Hourly Rate Survey & Report contains new cities, additional categories, and more accurate variables.  These updated features allow us to capture new and more precise billing rate data.  Through our propriety email database, NALFA surveyed thousands of litigators from across the U.S.  Over 8,400 qualified litigators fully participated in this hourly rate survey.  This data-rich survey was designed to aid litigators in proving their lodestar rates in court and comparing their rates to their litigation peers.

The 2021 Litigation Hourly Rate Survey & Report is now available for purchase.  For more on this survey, email NALFA Executive Director Terry Jesse at terry@thenalfa.org or call us at (312) 907-7275.

A recent Law 360 story by Andrew Stricker, “Should Judges Police The Legal Industry Pay Gap?” reports that as the pay gap between male and female attorneys persists despite industry pledges to do better, the power of judges to potentially bridge the divide is coming into sharper focus.  Following an unusual decision by a federal magistrate, some members of the Philadelphia bar have endorsed the idea that other judges should follow suit and help police gender pay inequities, or at least call them out from the bench.

U.S. Magistrate Judge Timothy R. Rice recently issued the order critiquing elements of a notable employment firm's request and awards that put attorney "status" over performance.  "I don't think it's always my role, but in this instance, I felt I had to set the rates based on the performance of the attorneys who really tried the case, and not a rate that was maybe based more on age or seniority," Judge Rice told Law360 Pulse.

In April, Judge Rice was overseeing the last stage of an age discrimination case brought by Alison Ray, a former sales director at AT&T Mobility Services who was let go at age 49 after more than two decades at the company.  Following a five-day trial, Ray last year secured a $2.3 million award after a jury determined that a company restructuring plan had targeted older employees as "surplus."

In February, lawyers at the firm representing Ray, Console Mattiacci Law LLC, asked for $847,945 in "shifted" fees from AT&T.  That lodestar calculation, based on a 40% contingency agreement, was justified by the complexity of the plaintiff's case, Ray's counsel argued, as well as a "complete and total victory" on her claims that AT&T had willfully violated federal age discrimination law.  The fee petition included nearly 1,570 hours from partners Susan Saint-Antoine and Laura C. Mattiacci, a highly experienced lead trial counsel, and associate Daniel S. Orlow. Saint-Antoine and Mattiacci, who have practiced since 1989 and 2002, respectively, both listed their "usual and customary" rate of $730 an hour. Orlow, who has practiced since 2011, was at $320 an hour.

The petition also included 37 hours contributed by firm principal Stephen G. Console. Console, a nationally recognized employment law expert, charged $900 an hour for consulting on strategy decisions and filings, as well as settlement demands and other key elements of the case.  In an order granting a handful of reductions totaling about $83,000, Judge Rice said Saint-Antoine and Mattiacci should be entitled to the same per-hour rate as Console, who has been practicing for three decades.

"Historically, women in law earn less than their male counterparts, a discrepancy that may reflect hidden bias," he said, citing a 2020 report that found widening pay discrepancies at large law firms.  Referring to a fee schedule used widely in the Third Circuit to determine market rates for Philadelphia-area lawyers, Judge Rice said Saint-Antoine and Mattiacci should be in line for a "premium" over those numbers that put them in line with Console.  Even if the fee schedule "serves as a useful guide on setting hourly rates, its reference to experience should not serve as a cap that precludes exceptionally talented trial lawyers from receiving fair compensation simply because of age or gender," Judge Rice said.

The legal industry pay gap, and its role in women reaching firm leadership and a lack of diversity in many areas of the profession, has been under intense scrutiny for years, but without much in the way of real progress.  In the 2020 report cited by Judge Rice, legal recruiting firm Major Lindsey & Africa found that partner compensation soared between 2010 and 2018.  But in that same period, the pay disparity between male and female equity partners widened significantly, from 24% to 35%.

Nancy Ezold, a veteran Philadelphia employment lawyer, said it was "absolutely" appropriate for Judge Rice to consider rate disparities for lawyers in his court, even though AT&T counsel hadn't raised the issue in its fee-award opposition.  "I don't know of anything in the law that says you have to consider what a law firm pays people," Ezold said.  "But Judge Rice looks at the bigger picture and asks, 'Am I going to do something to perpetuate an inequality and authorize a fee for a male partner over two female partners who really handled this case?'"

Ezold, who once sued her own former law firm in the late 1980s for denying her a partnership based on her gender, argued that fee petitions often provide a substantive overview of who did what work over the history of a litigation.  Depending on the nature of the case, they can also be an opportunity for judges to compare requested rates across different firms and legal teams comprising different gender and experience makeups.

"Here the judge couldn't overlook a difference between male and female in this case because it related directly to the responsibility to decide what would be allowed for each of these attorneys," Ezold said.  "Judges speak out on a lot of things, and I don't see why this should be any different."  Judge Rice served as an assistant U.S. attorney for the Eastern District of Pennsylvania before being appointed as a federal magistrate in 2005.  He retired in April, just after issuing the Ray opinion.

In an interview with Law360 Pulse, Judge Rice said the timing was coincidental, noting that the issue of male-female pay disparities had never before been "so squarely presented" to him in a fee petition.  "From the [fee] affidavits I see, and from all I know about law firm pay structures, I do think the pay gap is huge, and there are just so many variables out there that have cut against giving women equal pay," such as lack of trial experience and other opportunities to advance, he said.

"When I see lawyers perform in an exemplary fashion, it's appropriate they be paid at higher rates commensurate with their skills, not just based on the years they've practiced," Judge Rice added.  Alice Ballard, another veteran Philadelphia employment lawyer who provided a fee affidavit in the Ray case, said Judge Rice's prior time as a trial lawyer was evident in the opinion, including in his positive assessment of the hours Console Mattiacci dedicated to mock trial runs and other "essential" advocacy preparation.

Judge Rice "really understands what it means to prepare for a trial like this, and everyone on my beat really appreciates that," she said.  But Ballard took issue with Judge Rice's ultimate reliance on what she described as an outdated fee schedule, rates that don't well reflect the special skills of trial work, Mattiacci's successful track record or the contingency fee model.

She also cautioned against reading the opinion as a critique of the hourly rate request for Console, whom she called a "lion" of the city's employment bar.  Regarding his reference to the legal industry's gender pay disparities,"it's great that he took the opportunity to bring it up, but I just don't think it has much to do with this specific case," Ballard said.

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