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Category: Fees & Common Fund

Delaware Court Wants More Info on Opioid Fee Award

October 26, 2022

A recent Law 360 story by Jeff Montgomery, “Del. Court Demands Info on $2.7M Atty Fee in Opioid Deal” reports that, citing unsatisfactory answers to questions about a flat, $2.7 million attorney fee payout request as part of Delaware's $100 million share of a nationwide opioid damage settlement, Delaware's chancellor cautioned she might sever the fee from the deal pending a fuller explanation.  In a letter to Cross & Simon LLC, Chancellor Kathaleen St. J. McCormick gave those seeking to wrap up the deal a choice between severing the fee award from the settlement for now or accepting a three-day deadline for briefs on the issue.

The chancellor said the request to direct the state's Prescription Opioid Distribution Commission to pay $2.7 million to unnamed outside attorneys "gave me pause for a few reasons."  Among the concerns, the chancellor said, is that "in analogous circumstances, this court exercises its own business judgment when approving attorneys' fees in representative litigation from a settlement fund."

At issue is Delaware's share of a $4 billion fund for state and local governments, carved out of an overall $26 billion settlement that, for Delaware, resolves investigations and litigation over the role that Johnson & Johnson and distributors Cardinal, McKesson and AmerisourceBergen played in creating and accelerating the opioid crisis.  Delaware Attorney General Kathleen Jennings announced the state's portion of the settlement in July 2021.  A complaint and final consent judgment were filed together in the Court of Chancery on Aug. 24, 2022.

Funds from the settlement will finance addiction treatment and prevention as well as other services and programs.  The agreement also mandates producer, distributor and health care reforms to prevent a recurrence of the crisis, including Johnson & Johnson's exit from opioid production.  Attorneys for Delaware told the chancellor that "court approval is not required," but said in a letter earlier this month that they are prepared to submit documents for a traditional court fee analysis if required.

Michael L. Vild of Cross & Simon said in a letter Oct. 13 that "this matter involves a two-party contract between the state and its counsel, unrelated to the state's agreement with the defendants.  There are no unrepresented or absent third parties."  That explanation, the chancellor said, "gave me pause."  Included in the overall settlement, the chancellor said, are provisions for establishment of an outside counsel fund, and statements in some parts of the settlement agreement say that payment of fees from the settlement fund is "disfavored."

A related agreement, "Remediating Opioids Across Delaware through State-Municipal Abatement Partnership," also discourages attorney fee payments from the settlement fund, the chancellor observed, adding that a multistep review and approval process is called for under some provisions.  "The parties effectively ask that I shortcut the statutory process for authorizing distributions by ordering the commission to distribute the $2.7 million to the state's outside counsel, without any opportunity for public comment or investigation by the commission, without any role of the consortium, and without the requisite approvals," the chancellor wrote.  "Maybe that is warranted and appropriate, but the parties did not expressly address this aspect of the relief requested."

Acknowledging concerns about delaying the payment, the chancellor suggested a three-day window for supplemental briefs on the issue or severing the fee provisions from the order, allowing the rest of the funds to go forward, pending a resolution on fee terms.

Judge Cuts ‘Unreasonable’ $24M Fee Request in Mattel Settlement

May 23, 2022

A recent Law 360 story by Katryna Perera, “Judge Cuts ‘Unreasonable’ Atty Fee Bid in $98M Mattel Deal” reports that a California federal judge has granted final approval to a $98 million settlement between investors and toymaker Mattel Inc. and PwC, but slashed the requested $24.5 million in attorney fees, saying it was too high.  U.S. District Judge Mark C. Scarsi said in his order that while the Ninth Circuit typically considers 25% of a settlement fund the "benchmark," that figure is still only a "helpful starting point," and courts should depart from it when a benchmark award would "yield windfall profits for class counsel in light of the hours spent on the case."

Instead of granting the requested $24.5 million in attorney fees, the judge reduced it to approximately $13.6 million, which represents about 14% of the $98 million settlement.  A 25% award would provide an "unreasonable windfall" to the class counsel, the judge added.  "The Court finds persuasive class counsel's arguments and evidence concerning the excellent value of the results achieved through settlement, the riskiness and complexity of the litigation, the skill and quality of counsel's work, the contingent nature of the fee, and the significant financial burdens counsel carried during the course of litigation," the order states.  "While these factors merit a significant fee award, an award of 25% of the settlement fund is unreasonable given the magnitude of the fund."

John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, had previously urged Judge Scarsi to approve the fee bid and maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7.  Judge Scarsi agreed with Rizio-Hamilton's calculations and stated that the multiplier is within range of other resolved class actions with common fund settlements.  But the judge found that the requested multiplier in this case was "excessive … relative to counsel's performance."

"Counsel would reap an extra $15 million windfall … while counsel should be commended and compensated for the risk they took, the work they did, and the result they achieved, that outsized windfall would not be fair to the other interests in this case," the judge said.  Alternatively, Judge Scarsi's approved $13.6 million attorney fee award represents a 1.5 multiplier of the lodestar, according to the order, which the judge called "appropriate in light of the hours counsel spent on the case, the magnitude of the settlement fund, the results achieved, and the risks and burdens borne by counsel."

In addition to granting final approval of the settlement for the same reasons outlined previously when he granted preliminary approval, Judge Scarsi awarded $5,515 to DeKalb County Employees Retirement System and $3,100 to New Orleans Employees Retirement System as lead plaintiff service awards, as well as $1.1 million in litigation reimbursement to class counsel.

Judge Mulls $24M in Fees in $98M Mattel Investor Settlement

May 2, 2022

A recent Law 360 story by Gina Kim, “Mattel Judge Mulls $24.5M Atty Fee Bid in $98M Investor Deal” reports that U.S. District Judge Mark C. Scarsi said he will grant final approval of $98 million in settlements resolving investors' claims that Mattel and PwC misled them by understating an income tax expense, but said he's still considering the class counsel's $24.5 million attorney fee bid.  During a hearing, John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, urged Judge Scarsi to approve the fee bid, which he said is 25% of the $98 million deal and consistent with the Ninth Circuit's benchmark for percentage fee awards in common fund cases.

The investors' counsel also sought $1,139,330 in expenses, plus plaintiff awards to DeKalb County and New Orleans for $8,615. Defense counsel for PwC and Mattel did not object to the fee request.  Rizio-Hamilton maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7.  "I know it's 25% of the settlement, but it represents a 2.7 times multiplier of a lodestar calculation," Judge Scarsi began. "Why is this significant upward deviation from the lodestar reasonable in this case?"  Rizio-Hamilton said the fee bid comports with the benchmark and "if anything, it's a touch less, because we're requesting 25% of the settlement net of litigation expenses."

The lodestar crosscheck of 2.7 multiplier is actually in the middle range, and is a common figure awarded to comparable class action securities litigations, Rizio-Hamilton said.  He cited several cases, such as Vizcaino v. Microsoft Corp., where the Ninth Circuit affirmed an award of 28% of a $97 million settlement, and In re: Brocade Securities Litigation, where class counsel received 25% of a $160 million deal.

Furthermore, the recovery achieved for the class is above average considering the serious risks facing the class, justifying the fee request, Rizio-Hamilton argued.  Class counsel dedicated almost 19,000 hours into the case, and incurred more than $1.1 million in expenses to face off against well-funded, high-caliber law firms representing Mattel and PwC, he said.

The class's reaction to the requested fee has also been favorable, and no institutional investor objected to it, Rizio-Hamilton added.  Only one individual investor, James J. Hayes of Virginia, objected to the fee request, but those objections are without merit and Hayes doesn't explain why the fee request is purportedly excessive, Rizio-Hamilton said.

Judge Scarsi aired additional concerns he had with the billing rates provided in class counsel's papers, noting that there were hourly rates ranging from $300 to $425 for nonlawyer litigation staff.  "Why aren't those high?" Judge Scarsi asked Rizio-Hamilton.

Rizio-Hamilton defended the billing rates charged by nonlawyer staff, arguing that they have been repeatedly accepted by courts in connection with fee applications in similar cases across the nation and in the district.  He also cited Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation" In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation in the Northern District of California, where the court found hourly rates in that case — up to $490 per hour for nonlawyer paralegals — to be reasonable.

Rizio-Hamilton further contended that the billing rates are consistent with those charged by other firms litigating national securities litigations, including the very defense counsel in the instant Mattel litigation.  "We know that because we look at the bankruptcy fee applications they submit," Rizio-Hamilton said.  "Suffice it to say, the rates that they submitted to bankruptcy courts are meaningfully higher than the rates we submit here," he said.  "On the question of nonlawyer paralegals, for instance, Munger Tolles — and I don't mean to single them out — have submitted rates between $405 to $490 in 2020 for paralegals in the PG&E bankruptcy case in the Northern District of California."

Ultimately, class counsel achieved a recovery that is meaningfully greater than what is typically achieved in comparable cases, considering the time and quality of work poured into the case for more than two years without any payment, he added.  Class counsel are only asking for a benchmark, "and not a penny more," Rizio-Hamilton said.

"I do appreciate all the arguments, as you understand, you know, I'm just trying to do the best thing for the class, which is why I'm focusing on the attorney award, and I'll give that a little more thought based on the arguments today," Judge Scarsi said.  "So the court will approve the settlement, will issue an order, and you know, the attorneys' fees may not be the 2.7 multiple, so we'll see."

Three Law Firms Seek $4M in Fees in $20M Fidelity Settlement

April 5, 2022

A recent Law 360 story by Rose Krebs, “3 Firms to Seek Up to $4.4M for $20M Fidelity National Suit Settlement” reports that three firms are set to seek $4.4 million for a proposed $20 million settlement of an investor suit in Delaware Chancery Court that accused Fidelity National Financial Inc. directors and others of forcing through a $1.8 billion acquisition of annuity and life insurance provider F&G.  In a stipulated settlement filed to Chancellor Kathaleen St. J. McCormick, plaintiff City of Miami General Employees' and Sanitation Employees' Retirement Trust is set to drop its suit in exchange for the defendants paying or having their insurers pay $20 million to Fidelity.  The settlement still needs to be approved by the court at a future hearing.

Bernstein Litowitz Berger & Grossmann LLP, Andrews & Springer LLC and Klausner Kaufman Jensen & Levinson are set to seek a fee award of up to $4.4 million in connection with the deal, according to the stipulation.  The fee award would be paid out of the $20 million settlement.

The lawsuit alleged Foley used the F&G deal as an opportunity to earn fees for his affiliated companies, including MVB Management LLC and Trasimene Capital Management LLC.  Foley and business partner Chinh Chu, the latter of whom is not named as a defendant, allegedly already took in millions of dollars per year from F&G through a sub-advisory investment management agreement with a Blackstone unit, the suit asserted.

The pension fund claimed that through the acquisition of F&G, Blackstone and MVB renegotiated the agreement giving MVB more advisory fees but for the same amount of work.  Also, the suit similarly alleged Fidelity paid Trasimene an "exorbitant" amount of money for a five-year services agreement, which that entity earned by giving two presentations to the special committee and didn't provide a fairness opinion.

The deal was approved largely because of Foley's "patronage machine" — the special committee that reviewed the transaction — which included individuals loyal to Foley, the lawsuit asserted.  The suit argued the transaction was not a strategically sound decision and made little sense to Fidelity shareholders as the company and F&G operate in separate spheres of the insurance world, title insurance and annuities.

Although the pension fund continues to assert the suit's claims have legal merit, it believes the proposed settlement is "fair, reasonable, and adequate, and in the best interests of the company and its stockholders," the stipulation said.  Defendants deny "all allegations of wrongdoing or liability" and have agreed to settle to "avoid the costs, disruption and distraction of further litigation," the stipulation said.

High Court Won’t Review Chinese Drywall Attorney Fee Award

January 11, 2022

A recent Law 360 story by Emily Field, “High Court Won’t Review Chinese Drywall Atty Fee Award,” reports that the U.S. Supreme Court declined to review an Eleventh Circuit decision that upheld a fee award of $5.8 million to class counsel in the defective Chinese drywall multidistrict litigation from MDL attorney fees from past work on the case.

As is custom, the high court did not explain why it chose not to hear the November petition from lawyers who represented 497 individual plaintiffs in suits stemming from the MDL.  In their petition, the attorneys had argued that the MDL compensation system is out of control, and the award conflicts with the so-called American Rule, under which litigants generally pay their own attorney fees.  "Multidistrict litigation has revolutionized civil procedure, leaving courts and scholars puzzled by an assortment of issues, including the high-stakes attorney fee compensation system at issue here," the lawyers said.

The Eleventh Circuit said in June that the court-appointed class counsel could receive 45% of the total fees paid to attorneys who negotiated settlements for the 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.  In affirming the decision, the appellate panel said the attorneys' work for the 497 plaintiffs "did not exist in a vacuum."  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.

"The Eleventh Circuit's decision was well-reasoned.  I'm not surprised that the Supreme Court denied review.  The Supreme Court's decision not to accept review is further vindication for the team of lawyers that obtained this historic result after over 10 years of hard fought litigation," Patrick Montoya, who represents the class counsel, told Law360.  "This case was unique for so many reasons, but chief among them was receiving compensation from Chinese companies for the U.S. victims of Chinese drywall."