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Category: Fees & Common Fund

Eleventh Circuit Upholds Fee Award in Chinese Drywall MDL

June 10, 2021

A recent Law 360 story by Carolina Bolado, “11th Circ. Upholds Fee Award in Chinese Drywall MDL,” reports that the Eleventh Circuit ruled that court-appointed class counsel in the defective Chinese drywall multidistrict litigation could receive 45% of the total fees paid to attorneys who negotiated settlements for 497 Florida plaintiffs because their work on the common case helped lead to the individual recoveries.  The appeals court said U.S. District Judge Marcia G. Cooke did not abuse her discretion when she awarded class counsel $5.8 million of the more than $40 million paid by Taishan Gypsum Co. Ltd. to end claims over shoddy drywall imported from China.

The class counsel includes firms Colson Hicks Eidson, Lieff Cabraser Heimann & Bernstein LLP, Morgan & Morgan, Herman Herman & Katz LLC and Seeger Weiss LLP.  The Eleventh Circuit said that although the attorneys for the 497 plaintiffs had worked hard to get the deal, their work "did not exist in a vacuum."

"They benefited from the decade of foundational work that class counsel exerted in this groundbreaking MDL, which involved evasive defendants in China, complex jurisdictional challenges requiring two trips to the Fifth Circuit, decertification attempts and liability determinations," the appeals court said.  "That class counsel has otherwise been compensated for this work does not prevent them from continuing to reap the rewards of their efforts."  The 497 plaintiffs were part of 1,734 Florida cases remanded in 2018 from the MDL in Louisiana to Judge Cooke in the Southern District of Florida for further proceedings.

Following the settlement with the 497 plaintiffs, class counsel said that much of their foundational work was used to secure the deals, entitling them to 20% of the total settlement.  After a global settlement was approved in January 2020 between Taishan and the remaining class members, the class counsel amended their award request to 60% of the attorney fees paid out to the individual plaintiffs, according to the opinion.  In May 2020, Judge Cooke awarded them a 45% cut.

The counsel for the individual plaintiffs appealed the decision, arguing that common benefit fees are only appropriate when there is a common fund from which to award them.  In this case, there is no common fund or judicial supervision of a fund, they said.  They also argued that class counsel have already been highly compensated for their common benefit work by the MDL court.

But the Eleventh Circuit said that particularly in complex litigation, courts have broad managerial power and discretion to award fees.  "The district court had control over the funds pursuant to the agreement of the parties to litigate common benefit fees in the SDFL and the actions taken by the court after the settlement agreement was first filed," the appeals court said.  "Awarding a portion of these fees to class counsel was therefore within the district court's power."  The appeals court added that preventing appointed counsel from recovering fees when their work leads to settlements down the road would make it more difficult for courts to find competent lawyers to take on that work.

Jimmy Faircloth, who represents the attorneys who worked on the individual settlements, told Law360 the ruling conflicts with Eleventh Circuit precedent by allowing contractual attorney fees to be used as a fund for purposes of the common benefit doctrine.  "[The ruling] allows MDL authority to reach even deeper into the jurisdiction of a transferor court following a remand," Faircloth said.  "This creates a slippery slope with negative consequences for the class action device."

Patrick Montoya, who represents the class counsel, said he was pleased the Eleventh Circuit affirmed Judge Cooke's "well-founded opinion recognizing class counsel's efforts in this decade-long, hard-fought case."  "The settlement obtained by class counsel was an unprecedented result against Chinese companies and the first of its kind in the United States," Montoya said.  "Judge Cooke and the Eleventh Circuit prevented a group of splinter lawyers from doing an end-around and unfairly benefitting from the class counsel's monumental efforts and the excellent results obtained for class members by class counsel."

Class Counsel Argue for Attorney Fees in Flint Water Crisis Settlement

May 31, 2021

A recent Law 360 story by Michael Phills, “Flint Plaintiffs' Attys Argue For Final OK of $641M Settlement,” reports that plaintiffs' attorneys want to seal the deal on a $641 million settlement over the Flint, Michigan, water crisis that objectors have said carves out too much for legal fees, arguing that the fee request is fair for the hard-fought work to secure compensation for an environmental catastrophe.  In a trio of filings, the plaintiffs' attorneys pushed back against several types of objections around the settlement, including the argument that a nearly 32% award of attorney fees is unreasonable.  The attorneys argue that their work produced something significant that the judge should sign off on.  They say that despite the objections the court has received, more than 50,000 have supported the deal, showing its widespread backing from the Flint community.

On the question of fees, plaintiffs' counsel defended their request as reasonable, reflective of the many years and hours of work spent on the case.  And they said the top line fee request is more complicated than objectors make it out to be.  "Some objectors have claimed that plaintiffs' counsel seek an award of more than $200 million in attorneys' fees.  That is not true — a substantial portion of the attorneys' fees in this matter will be paid by claimants to their individually retained counsel," the plaintiffs' attorneys wrote.

According to court filings, individual attorneys that were privately hired had often already locked in their fees and "much of the aggregate fee request will go to these individual attorneys."  In May, 26 individuals objected to the deal and raised a range of concerns, including that the settlement generally lacks clarity on what it entails and that it won't provide enough money to help residents as they try to move past a crisis that has left them with medical concerns and exorbitant water bills.

In March, other objectors opposed the fee request, saying a motion for the fee award included "scant detail" about the claimed common benefit work and didn't estimate what the common benefit fees might amount to.  "[The request] provides absolutely no evidence that ceding 27% of claimants' recovery to private attorneys for work sight unseen could possibly be fair to Flint residents who need this money to help them grapple with oft-debilitating, ruinous, and violent consequences of lead exposure for their entire lives," the objectors said.

They said that in "megafund" settlements of this size, typical fee awards are in the 10% to 12% range.  In March, the plaintiffs' attorneys made their fee request for their five years and more than 180,000 hours of attorney work to reach the "remarkable" settlement result.  "Contrary to every single 'megafund' case cited by the [objectors], this case involved complicated questions of sovereign immunity which necessarily rendered the case riskier and required a heightened level of skill," the plaintiffs' attorneys wrote.  They argued that they should not have to provide detailed billing records to certain objectors.

U.S. District Judge Judith Levy gave preliminary approval to the deal in January, saying that it is a partial settlement that doesn't end the litigation over the lead-tainted water.  The settlement with Michigan and others provides a mechanism for minors, injured adults, property owners and renters, those who paid Flint water bills and impacted business owners to receive monetary awards, the judge said. It also offers a "class action" solution for adults who have not hired their own attorneys, the judge said.

$203M Attorney Fee Request in Flint Water Settlement

March 10, 2021

A recent Law.com story by Amanda Bronstad, “Plaintiffs Counsel in Flint Water Settlement Seek $200M in Attorney Fees,” reports that plaintiffs lawyers who obtained a settlement in the Flint, Michigan, water crisis litigation are asking for more than $200 million in attorney fees.  The request, outlined in the filing in the U.S. District Court for the Eastern District of Michigan, is part of a $641.25 million settlement with the state of Michigan, former Michigan Gov. Rick Snyder, the city of Flint and several individual government defendants.

The fee request would include an estimated $40.6 million in common benefit fees to lead counsel and others who spent five years litigating both a class action and individual cases.  The fees also would provide a fee award to class counsel and cap contingency rates of individually retained counsel at 27%.  In all, the fees could total nearly $203 million, according to the motion.

“Plaintiffs’ counsel have worked on a contingency basis for more than five years now, without compensation of any kind, to achieve this remarkable result,” the fee motion says.  “The fee proposal is designed to provide reasonable and fair compensation to plaintiffs’ counsel and to ensure equitable treatment for all who make claims under the settlement.”  U.S. District Judge Judith Levy has scheduled a fairness hearing, including potential approval of the fees, for July 12.

In April 2014, state officials decided to shift Flint’s water supply from Lake Huron to the Flint River despite studies warning the corrosive nature of the river water could send lead into the drinking water.  Early on in the litigation, co-lead counsel Ted Leopold, a partner at Cohen Milstein Sellers & Toll in Palm Beach Gardens, Florida, and Michael Pitt, of Pitt, McGehee, Palmer, Bonanni & Rivers in Royal Oak, Michigan, had a protracted fight with co-liaison counsel Hunter Shkolnik, of New York-based Napoli Shkolnik, over potential fees.  Meanwhile, the Flint water cases dragged through several procedural hurdles, with the U.S. Court of Appeals for the Sixth Circuit reversing some key rulings.

The partial settlement, filed in court Nov. 17, excludes two engineering firm defendants and the U.S. Environmental Protection Agency.  On Jan. 21, Levy preliminarily approved the settlement, 79.5% of which provides a compensation fund for minors.  The settlement also includes subclasses of adult residents, businesses and property owners.  Signing the fee motion were lawyers at 20 law firms, including Leopold, Pitt, Shkolnik and co-liaison counsel Corey Stern, of New York’s Levy Konigsberg.

The motion requests a 6.33% common benefit assessment, divided equally between co-lead counsel and co-liaison counsel, with higher percentages imposed on lawyers retained after July 16, 2020.  Lead counsel said they provided $7 million upfront expenses and invested 182,571 hours of work—about $84 million in an estimated lodestar, which is the billing amount multiplied by the hourly rate.  The requested fees, which are more than double the lodestar, are justified given the length and risks of the case, the number of defendants, the complexity of the issues and litigation that involved more than a dozen appeals, Leopold said.  “The work speaks for itself,” he said.

The fee motion says lawyers with individual cases would have a 27% cap on their contingency fees.  Michigan law caps contingency fees at one-third of a recovery amount.  “For the vast majority of the cases and the lawyers who did not work on the common benefit, we didn’t think it would be fair to the clients to take 33%,” Leopold said.

The fee request also takes into account the fact that the work isn’t over.  Levy has scheduled the first bellwether trials to occur in October.  Many of the settlement’s beneficiaries also are minors who do not have lawyers and will need help from lead counsel during the claims process, Shkolnik said.  “There’s going to be a whole new round of work that’s going to be done for individual cases to process them as if we represent them,” he said.

Class Counsel Spar Over $800M in Fees in Roundup MDL

March 8, 2021

A recent WSJ story by Sara Randazzo, “Roundup Plaintiffs’ Lawyers Spar Over $800 Million in Fees,” reports that plaintiffs’ firms that led the legal campaign against Bayer AG are fighting over $800 million in fees from the Roundup weedkiller litigation, arguing that they deserve a bigger slice of one of the largest-ever corporate settlements than firms that joined later.

The high-stakes dispute is coming to the fore eight months after Roundup’s maker, Bayer, announced that it would pay up to $9.6 billion to resolve 125,000 cancer claims brought by dozens of law firms.  The fee fight underscores increasing tension between law firms that do the in-court work necessary to win cases and those that advertise to sign up scores of clients.

The Roundup deal isn’t a single, all-encompassing pact that needs signoff from a court but instead a series of confidential settlements between Bayer and the many law firms with eligible clients.  Some of those firms spearheaded the litigation, but most signed up clients later in the process, building on work already started.

Six law firms appointed by a federal court as leaders in the litigation are asking a judge to set aside 8.25% of the Bayer settlements into a fund to be distributed among those firms and others that handled the brunt of the work.  Under their proposal, those firms would get a share of the fund and reap whatever fees they agreed upon with their clients.  Plaintiffs' lawyers often take a cut of more than 30% from such settlements.

The leadership firms, led by Andrus Wagstaff PC, Weitz & Luxenberg PC and the Miller Firm, argue that they invested at least $20 million and years of time to build a case linking Roundup to cancer.  They described the common-benefit fund as a sort of “tax” on law firms that waited until the litigation was successful before getting involved.

Several law firms have objected, saying the court doesn’t have the power to create the common fund—estimated at $800 million.  They say the leadership team is trying to double-dip, speculating that their confidential deals with Bayer are already more lucrative than those that other firms received.  “They’ve already been adequately compensated multiple times over,” Melissa Ephron, a Texas lawyer objecting to the extra fees, said at a virtual court hearing on the matter.

The confidential nature of Bayer’s settlements means the public is unlikely to know each law firm’s take and how much money the affected plaintiffs who blame their cancer on Roundup use will personally receive.  Bayer hasn’t conceded that its weedkiller can cause non-Hodgkin lymphoma and will continue to sell the product without a cancer-warning label.  U.S. District Judge Vince Chhabria in San Francisco, who oversees around 4,000 Roundup cases filed in federal court, raised doubts that he has the authority to require every law firm striking a deal to give up 8.25%.

“They all got their settlements because you achieved such a good result.  There’s no question about that,” he said during the hearing, but added that he wasn’t convinced it was appropriate for the leadership to get a windfall.  The fight highlights a dynamic playing out more in recent years in large cases alleging harms from drugs or everyday products.  A sophisticated ecosystem of advertisers and marketers sign up plaintiffs in bulk and pass them off to lawyers who file claims in court, often with little vetting on the strength of the cases. The rising number of plaintiffs can help pressure companies to settle.

The lead lawyers for Roundup plaintiffs pointed to this dynamic to bolster their argument for why they deserve more money than the more than 500 other law firms with Roundup clients.  After the lead firms had some key early success in the litigation, “a tsunami of advertising resulted in thousands of new lawsuits filed by law firms that had hedged their bets,” the leadership team wrote in a January filing.

Working Paper: Judicial Guide to Awarding Attorney Fees in Class Actions

March 7, 2021

A recent Fordham Law Review working paper by Brian T. Fitzpatrick, “A Fiduciary Judge’s Guide To Awarding Fees in Class Actions (pdf),” considers the fiduciary role of judges in awarding attorney fees in class action litigation.  This article was posted with permission.  Professor Fitzpatrick concludes his article:

If judges want to act as fiduciaries for absent class members like they say they do, then they should award attorneys’ fees in class actions the way that rational class members who cannot monitor their lawyers well would do so at the outset of the case.  Economic models suggest two ways to do this: (1) pay class counsel a fixed or escalating percentage of the recovery or (2) pay class counsel a percentage of the recovery plus a contingent lodestar.  Which method is better depends on whether it is easier to verify class counsel’s lodestar (which favors the contingent-lodestar-plus-percentage method) or to monitor against premature settlement (which favors the percentage method) as well as whether it is possible to run an auction to determine the market percentage for the contingent-lodestar-plus-percentage method.  The (albeit limited) data from sophisticated clients who hire lawyers on contingency shows that such clients overwhelmingly prefer to monitor against premature settlement, since they always choose the percentage method.  Whether the percentage should be fixed or escalating depends on how well clients can do this monitoring.  Data from sophisticated clients shows both that they choose to pay fixed one-third percentages or even higher escalating percentages based on litigation maturity just like unsophisticated clients do, and they do so even in the most enormous cases.  Unless judges believe they can monitor differently than sophisticated corporate clients can, judges acting as good fiduciaries should follow these practices as well.  This conclusion calls into question several fee practices commonly used by judges today: (1) presuming that class counsel should earn only 25 percent of any recovery, (2) reducing that percentage further if class counsel recovers more than $100 million, and (3) reducing that percentage even further if it exceeds class counsel’s lodestar by some multiple.

Brian T. Fitzpatrick is a professor of law at Vanderbilt University Law School in Nashville.