A recent Law 360 story by Celeste Bott, “7^th Circ. Scraps $57M Chicken Price-Fixing Atty Fee”, reports that the Seventh Circuit threw out a $57 million attorney fee award in a $181 million deal for chicken buyers in sprawling antitrust litigation, saying that the district court failed to consider bids made by class counsel in auctions in other cases and fee awards in different circuits.  Objector John Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC were to receive in a deal the firms had struck with Fieldale Farms, Peco Foods, George's, Tyson Foods, Pilgrim's Pride and Mar-Jac Poultry in the sprawling antitrust case.

A three-judge Seventh Circuit panel complimented the lower court for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures.  The published opinion concluded that "it was error to suggest that this court has cast doubt on the consideration of declining fee scale bids in all cases."

"In the district court's view, this court has explained that these awards do not reflect market realities and impose a perverse incentive insofar as they ensure that attorneys' opportunity cost will exceed the benefits of seeking a larger recovery, even when the client would otherwise benefit," the panel said.  "Yet, this court has never categorically rejected consideration of bids with declining fee scale award structures.  Rather, the nature of the typical costs in litigation must be assessed in determining whether counsel and plaintiffs would have bargained ex ante for such a structure."

The Seventh Circuit has observed that such a fee structure, where the amount being awarded in fees goes down as the settlement amount goes up, can present certain advantages, and the appellate court took that approach in another case — In re: Synthroid Marketing Litigation — which was a class action suit against the manufacturer of a synthetic thyroid drug.

"Fees do not always decline for securing a larger recovery, and in those instances, counsel will have an incentive to seek more," the panel said.  "Accordingly, the appropriateness of a declining fee scale award structure may depend on the particulars of the case.  It was an abuse of discretion to rule that bids with declining fee structures should categorically be given little weight in assessing fees."

Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees.  The appellate panel agreed that the district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.

"It is true that this court has rejected the application of a mega-fund rule.  Yet, continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel's legal services and the bargain they may have struck," the panel said.  "The district court should have considered where class counsel's economic behavior falls on this spectrum and assigned appropriate weight to fees awarded in out-of-circuit litigation."

In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting that it expressed no preference as to the amount or structure of the award, just the need for further review.

A recent Law 360 story by Jeff Montgomery, “Chancery’s Fee Ruling In Dell Is On The Money, Experts Say”, reports that the $266.7 million fee award Delaware's Chancery Court granted shareholder attorneys in the $1 billion Dell settlement represents a win for those seeking incentives for class counsel doggedness and a setback for corporate and institutional investors hoping to prune attorney fees after mega awards, experts told Law360.

In a 92-page decision, Vice Chancellor J. Travis Laster approved one of the largest fee awards of its type in Chancery Court history even though it was trimmed from the original request of $285 million.  His decision held to the Chancery Court's history of notching up fees for the plaintiffs' side when it's successful after pushing deep into the litigation and piling up risk.  The defense bar has routinely pushed the other way, arguing for adoption of approaches taken in federal securities actions that grant declining fee percentages as total awards grow.

Vice Chancellor Laster's opinion relied heavily on the Delaware Supreme Court's 2012 decision upholding a $304 million legal fee from a $2 billion Chancery award in Americas Mining Corp. v. Theriault, a case that went to trial.  The opinion "doubled down on that Americas Mining decision" and examined it extensively in the order, said Brian T. Fitzpatrick, the Milton R. Underwood chair in Free Enterprise at Vanderbilt Law School.  "And it doubles down on the notion that judges in Delaware are going to do what is best for class members," Fitzpatrick said.

In Americas Mining, stockholders sought damages after a 2004 deal that saw the company and its parent, Southern Copper Corp., agree to an overpriced, $3 billion acquisition of a Mexican mining company owned by Southern Copper's controller.  Then-Chancellor Leo E. Strine Jr. found in 2011 that the plaintiffs "indisputably prosecuted this action through trial and secured an immense economic benefit" for Southern Copper, while working on an entirely contingent basis for six years, facing "major league, first-rate legal talent" and grappling with complex financial and valuation issues.

In his decision this week after the Dell settlement, Vice Chancellor Laster said that the best scheme for compensating class attorneys working on a contingent fee remains the current standard, first paying out-of-pocket costs, then providing a fee based on a percentage of the net award and how far the case had progressed.  "This case involved true contingency risk. Plaintiff's counsel did not enter the case with a ready-made exit or obvious settlement opportunity.  There was a serious possibility that plaintiff's counsel would lose and receive nothing," the vice chancellor wrote.  That risk, the vice chancellor said, "supports a results-based award using the Americas Mining percentages.  No downward reduction is warranted under this factor."

At issue was Dell Technologies decision to issue a "tracking" stock after it went private in order to finance its acquisition of EMC Technologies.  The "Class V" shares were meant to follow the value of VMware Inc., in which Dell acquired a majority as a result of the EMC deal. In practice, the Class V shares traded at a steep discount, with shareholders alleging in Chancery that the 2018 swap short-changed them by about $34 per share.  The Dell settlement recovered 9.34% of the estimated potential $10.7 billion in damages that attorneys for the stockholders identified, the vice chancellor found, making it the 11th largest among cases studied as a percentage of maximum damages.

Minor Myers, a University of Connecticut School of Law professor, said the settlement was "garden variety" in every respect but its size and the opposition from some of Dell's big private investment funds.  "Presumably that's why these objecting funds are paying attention (most don't)," Myers said in an email to Law360.  "The fee request in this case was, if anything, modest in percentage terms, but of course it's gotten a lot of attention because it's a big number in the aggregate.

Myers said the opinion is in "the best tradition of Delaware's extraordinary sensitivity to incentives in confronting settlements in stockholder litigation.  When people do bad things out in the world, we rely, for better or worse, on plaintiffs' attorneys to do something about it.  They're the ones who generate results in class actions, on behalf of people who aren't usually paying attention."

Definitely paying attention were some private fund investors in Dell, who argued that the court would make a wrong turn if the award went forward as proposed.  "The enormity of plaintiff's counsel's $285 million fee application, both in absolute terms and as a proportion of the settlement fund, risks creating a dangerous precedent for Delaware courts," Pentwater Capital Management LP, holder of 1.6% of the Dell Class V tracking stock at issue in the case, said in a brief.  Pentwater was joined in its objection by other fund investors representing 24.6% of the stock. Vice Chancellor Laster acknowledged their arguments in his decision, but also pointed out their potential multimillion-dollar gain should the court prune the fee award and leave more in the settlement pool.

Jacqueline S. Vinaccia, a California attorney and member of the National Association of Legal Fee Analysis, said in a telephone interview that Vice Chancellor Laster supported his decision with an "incredibly detailed" analysis that addressed each of the objectors' points.  "All of the theories and different approaches to attorney fees that I have seen seem to have been referred to and analyzed in this case.  It's a really extensive and well-thought-out and supported opinion, which we don't often see in fee cases.  But then again, this is a billion-dollar settlement with a 26 and ⅔ percent fee award."  A group of law professors also backed a declining scale, saying a $150 million fee would be defensible while keeping $135 million more for stockholders.

Anthony A. Rickey of Margrave Law LLC, counsel to the five law professors who filed a friend of the court brief opposing the settlement and suggesting bringing Chancery Court litigation fees more in line with relatively lower payouts for large cases in U.S. District Court securities actions.  Rickey said a 15% fee would be more appropriate, providing a still-large $150 million fee while earmarking another $135 million for shareholders.  "There is a considerable amount of decreased risk after motions to dismiss," Rickey said in court papers, "even in Chancery practice."

In Dell, Vice Chancellor Laster rejected motions to toss the case in June 2020, but the battle and risks continued for another three-plus years before the settlement.  "Even where a plaintiffs' attorney has been dealt an especially strong hand, sometimes the cards aren't worth a dime if you don't lay them down on the settlement table," said Myers, the Connecticut professor.  "This opinion ensures that the incentives will be well-calibrated in the future to push attorneys to take good settlements but still make it worth it to decline bad settlements and push forward with the case."

Lawrence A. Hamermesh, professor emeritus at Widener University Delaware Law School, said the court was wrestling with the question of "What's a good approximation of what people bargaining at arm's length would do if one of them had a claim, went to a lawyer and said, 'I want you to prosecute this for us. I don't want to put up the money. You're going to take all the risk.'"  The issue becomes one of deciding when the recoveries are large, as in Dell, and whether throttling back on fees as the total rises discourages class attorneys from risking dismissal if they push past a $500 million offer and go for $1 billion.

"The government cannot do everything, and sometimes the government doesn't do anything.  If we didn't have private attorneys looking out for us, there would be more corporate misconduct in the world," Vanderbilt's Fitzpatrick said.  "This is not icing on the cake.  Private enforcement is the cake," Fitzpatrick said.  "And we need to make sure those lawyers have the right incentive.  Cutting their fee because they get more for you is not the right incentive."

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.

The old adage in real estate that it's all about location, location, location may also apply to hourly rates in litigation.  NALFA released the results from its annual hourly rate survey of civil litigation in the U.S.  The results, published in the 2022 Litigation Hourly Rate Survey & Report, contains billing rate data on the factors that correlate to hourly rates in litigation: geography, years of litigation experience, position or title, complexity of case, and law firm size.

This empirical survey and report provides macro and micro data of defense and plaintiffs' rates in regular and complex litigation, at various litigation experience levels, from large law firms to solo shops, and in the nation's largest markets.  This is the nation's largest and most comprehensive survey or study of hourly billing rates in civil litigation.  Over 16,600 qualified litigators, both defense and plaintiffs' counsel, from across the U.S. participated in this hourly rate survey.

For the third year in a row, the nation's top litigation billing rate city is Washington, DC.  When we aggregate all the responses from Washington, DC, 23 percent of the responses fall within Tier 4 rates ($901-Over $1100), the highest percentage of the 24 cities in the billing rate survey.  Only 10 percent of DC litigators fall within Tier 1 rates (Less Than $200-$400), the lowest percentage of cities and slightly over two-thirds of all DC litigation rates fall within Tier 2 rates ($401-$650) and Tier 3 rates ($651-$900).

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.

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