A recent Law 360 by Sydney Price, “Attys Get $37M For Landing Forex Rigging Deals,” reports that a New York federal judge awarded $36.8 million in attorney fees to counsel for investors who accused a group of banks of rigging foreign exchange markets, about $10.4 million less than the lawyers wanted, for securing nearly $186 million in settlements for their clients.  U.S. District Judge Lewis A. Kaplan said in a letter that class counsel sought legal fees of $47.2 million, which represents 25.4% of the settlement fund, and litigation expenses of $845,471.57.  Judge Kaplan decided to apply a lodestar method to evaluate the payout, which removed some billable hours counsel included in its request.

Counsel submitted a proposed lodestar of $29.9 million for over 53,000 hours worked.  This calculation included over 3,000 hours by four non-lawyer analysts, including a derivatives expert.  Judge Kaplan said counsel did not provide enough data on the rates charged by these analysts to include them in his final calculation. The litigation expenses of $845,471.57 were granted without objections.

"After approximately six years of hard-fought litigation, counsel obtained eight class action settlements and twelve settling defendants, creating a common fund of $185,875,000," Judge Kaplan said.  "This was a good result for the class and counsel deserve to be compensated adequately."  The attorneys previously noted that no other firms attempted to represent the class in the case, contending that was "likely because of the ... high risks" the investors knew they would face in the matter.

The suit accused the banks of coordinating a "horizontal conspiracy to manipulate prices in favor of the defendants' derivatives trading positions" and cites investigations by Australia's securities regulator, which showed certain banks had worked together to fix derivative contract prices.

The parties reached a final settlement in the case last May. Credit Suisse had agreed to pay $8.88 million, and a group of five other banks, comprising BNP Paribas, Deutsche Bank, the Royal Bank of Canada, the Royal Bank of Scotland and UBS, had agreed to pay a total of $40 million to end the claims they face in the matter.

The settlement sum also includes $137 million in settlements reached earlier in the matter, including December 2021 agreements that Australia and New Zealand Banking and Commonwealth Bank of Australia would each pay $35 million, National Australia Bank would pay $27 million and Morgan Stanley would pay $7 million.  Westpac Banking Corp. agreed to pay $25 million in March 2021, and JPMorgan struck a $7 million settlement deal in November 2018.

A recent Law 360 by Irene Spezzamonte, “Workers for Virgin, Alaska Seek $10M Fees in $31M Wage Suit,” reports that a group of flight attendants asked a California federal court to grant their attorneys $10 million in fees after they were able to reach a $31 million deal to solve their suit claiming Virgin America and Alaska Airlines cheated them out of pay.  The workers asked the court to sign off on the fees, as well as on more than $600,000 in expenses. 

The workers added that those amounts are reasonable after their attorneys put in about 7,300 hours of work during the eight-year litigation on claims that Virgin America Inc. and Alaska Airlines Inc. violated California labor laws.  "Plaintiffs and class counsel have litigated this matter for nearly eight years against unyielding defendants vigorously represented by skilled counsel," the workers said.  "Every single step of this litigation was hard-fought and fraught with risk."

In January, U.S. District Judge Jon S. Tigar entered a judgment order against the airlines, which are both a part of Alaska Air Group, directing them to shell out the settlement aimed at resolving claims they failed to pay overtime, meal and rest periods and did not provide workers with accurate wage statements.  The settlement also ended claims under California's Private Attorneys General Act.

In that order, Judge Tigar also asked the parties to separately file a motion for the attorney fees, service awards for the three named plaintiffs and to address the plan of allocation, triggering the filing.  The flight attendants said that the $10 million in attorney fees, which the airlines agreed to pay, are reasonable given the amount of time and work their counsel put into the litigation.  Of that amount, about $6 million will come directly from the airlines while the remaining $4 million will come from the $31 million common fund, the workers said.

The fees represent overall 33% of the settlement, but the $6 million the airlines will pitch in will be credited against the $31 million total, resulting in a 13% total of the deal, the workers added.  The $600,000 in expenses will also come from two sources: $40,000 from the airlines in the form of a reimbursement for the plaintiffs' taxable costs and the remainder from the common fund.

The workers also seek $25,000 to each of the three named plaintiffs, saying that "over the past eight years, plaintiffs have provided invaluable assistance and guidance to class counsel with respect to understanding the airline industry" and the airlines' practices and policies.  Additionally, each service award of $25,000 represents less than .001% of the final common fund judgment, the workers said.

A recent Law 360 by Jeff Montgomery, “Chancery Oks $1B Dell Class Suit Deal; $285M Fee Pending,” reports that a record $1 billion settlement of a stockholder class suit that challenged a $23.9 billion Dell Technologies Inc. stock swap in 2018 won Delaware Court of Chancery approval, while a proposed $285 million class attorney fee got sidelined for further consideration.  Vice Chancellor J. Travis Laster described the deal — announced in November and the largest on record for the court — as the result of "a huge effort" on the part of class attorneys who battled through nearly 4½ years of litigation and racked up more than 53,000 attorney hours to reach the hearing.

Waiting at the hearing, however, were arguments by a large shareholder and a friend-of-the-court brief filed by law professors urging the court under some proposals to slash the fee by $100 million or more.  Pentwater Capital Management LP, which holds 1.6% of the shares at issue, argued that the 28.5% fee award would be excessive and urged the court to adopt a sliding, or diminishing, rate for mega-settlements.  A group of law professors also backed a declining scale, saying a $150 million fee would be defensible while keeping $135 million for stockholders.  "I do think the objectors have raised important points that I'm going to think about," the vice chancellor said after a 2½-hour hearing.

The class suit accused Dell and controlling investors Silver Lake Group and its affiliates of shortchanging regular shareholders by some $10.7 billion in a deal that converted Class V stock — created to finance much of Dell's $67 billion acquisition of EMC Technologies in 2016 — to common shares.

When the challenged conversion closed on December 28, 2018, VMware stock closed at $158.38 per share, and DVMT, or Class V, stockholders received just $104.27 per share because Dell's Class C stock had been overvalued.  "The simple fact is, defendants would not settle for a billion dollars unless there was a real, credible risk of much higher damages at trial," said David Cooper of Quinn Emanuel Urquhart & Sullivan LLP, counsel to the class, while explaining the decision to settle rather than pursue a much larger share of the stockholders' short-changing.

"There were an enormous number of obstacles, and this was very far from a typical case," Cooper said.  "In determining whether $1 billion is fair value for the class, whether it reflects positively on the performance of counsel, it simply did not make sense to look at $10.7 billion while ignoring risk" that there would be nothing recovered, as happens in many deal challenges.

Stephen B. Brauerman of Bayard PA, counsel to Pentwater, said it would be "credibility killing" to call the settlement unimpressive, but told the court there are concerns that the deal did not fully compensate the stockholder class for the potential $10.7 billion in damages.  "All were requesting the court to consider in its exercise of discretion" the potential for "adversely impacting the class, impacting substantially their recovery," Brauerman said.

Ned Weinberger of Labaton Sucharow LLP, also counsel to the class, told the vice chancellor that stockholder attorneys logged more than 53,000 hours on the case, with nearly $4.3 million in expenses, with the fee and expense award reflecting an implied hourly rate of about $5,268 per hour.  If the court is entertaining a size adjustment, Weinberger said, "we have already done it for you.  All of the precedents support a fee award on the eve of trial of 30% or more.  We sought only 28.5%," or a 5% reduction.

Anthony A. Rickey of Margrave Law LLC, counsel to the law professor group, advocated in part 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, "even in Chancery practice."

Vice Chancellor Laster said federal securities cases seldom go to trial and often settle after motions to dismiss.  "Why isn't that a fair distinction?" the vide chancellor said.  "It makes sense" in federal court, when there is similar work in each case "and people are benefiting from the size of the issuer rather than actual value added" in litigation.  In contrast, the vice chancellor said, the Dell counsel "had to litigate against the army of the excellent until they got to the verge of trial, where they had to settle."

A recent Law 360 by Gina Kim, “Joint Juice Maker Rips Class Attys’ ‘Overstated’ $8.3M Fee Bid,” reports that Premier Nutrition asked a California federal judge to cut $2.4 million from class counsel's "bloated and unreasonable" $8.3 million fee request in litigation over allegedly misleading advertising claims about its Joint Juice, citing block billing, overstaffing, lavish hotel stays and fringe expenses for "boba and coffee runs dating back to 2013."  In a 33-page opposition, Premier Nutrition's attorney Steven E. Swaney of Venable LLP accused class counsel, except for Iredale & Yoo, of presenting to the court "a bloated and unreasonable application asking this court to award $8,274,516" in combined fees, expenses and costs.

Premier argued the lodestar calculation of the two other class counsel firms, Blood Hurst & O'Reardon and Lynch Carpenter "betray a lack of 'billing judgment,'" as they propose a fee award that doesn't approximate what a paying client is willing to approve.  Their lodestar calculation is "massively overstated" since it includes time spent for other related Joint Juice class actions, Premier argued, pointing out the plaintiffs only prevailed in one of 11 related cases but are now submitting a fee bid as if they prevailed on all of them.

Excluding Eugene Iredale and Grace June of Iredale & Yoo, Premier complained that Blood Hurst and Lynch Carpenter's billing records are riddled with inefficiencies, including "top-heavy administration of work," block billing, billing in quarter-hour increments, overstaffing, nontravel work billing and other things.  Examples include Blood Hurst lawyers billing 24 or more hours per day and submitting several duplicative entries on a single day, staffing six lawyers on the trial, "two of whom sat passively in the gallery of the courtroom" and charging $575 per hour for a contract attorney, Craig Straub, doing document review, the opposition states.

"As explained in the declaration of Premier's fee expert Steven Tasher, a 40% across-the-board percentage reduction to BHO's and Lynch Carpenter's lodestar is warranted to account for these inefficiencies," Premier said.  "The total lodestar for class counsel should be reduced to $2,406,809.  This constitutes approximately 29% of the judgment amount, which aligns with the Ninth Circuit's 25% benchmark for reasonable fees."

Premier balked at class counsel's suggestion for the court to apply a multiplier to pump their fee award if their lodestar is reduced, and also took issue with their "extravagant expenses" that it said warrants an across-the-board cut in their claimed charges.

"Class counsel also seek reimbursement from Premier for every sundry or fringe expense they encountered over this decade-long litigation, including boba and coffee runs dating back to 2013," the opposition states. "Class counsel even tries to bill Premier for hundreds of dollars in laundry expenses incurred during trial — even though they apparently traveled back home to San Diego that same day."

The opposition references defense's expert, Tasher, who reviewed the billing entries and opined the class counsel's requests costs also reveal "a 'spare no expense' approach" to the case along with double billing and "phantom charges."  "In my opinion, while the dollar value for many of these items may seem small, they reflect a big attitude of no cost being too great to throw onto the bill and eat, drink and be merry on someone else's dime," Tasher wrote.  "No paying client would tolerate class counsel's lifestyle expenses or lavishness."

Premier said that Blood Hurst and Lynch Carpenter's proposed lodestar figure was grossly inflated and warrants dramatic cuts across the board, arguing that the firms can't include time spent on class representative depositions in other related actions in their calculation.  Blood Hurst's proposed lodestar also includes nearly 1,000 hours for trial prep spent in Mullins, which Premier said should be removed since the Mullins trial never occurred.  It's inappropriate for Blood Hurst to get 100% of the fees for work common to the related cases based on the successful outcome of just one case, the opposition states.

Premier also sought a 40% cut to Blood Hurst's remaining lodestar account for several deficiencies in their billing practices, noting that  the firm's Timothy Blood and Thomas Joseph O'Reardon billed for work done in 2013 at their current hourly rate, which is significantly higher.

While Blood, partner Paula Brown and Straub billed 1,000 hours for trial prep, Blood was the only one who had an active role at trial, and O'Reardon and Straub "sat passively in the gallery," Premier alleged.  Premier also accused Straub and O'Reardon of billing extra hours after trial each day and erroneously adding entries that exceed 24 hours a day "or are obvious duplicates," totaling $62,207.50.

Premier also attacked Lynch Carpenter's fee bid of $392,392.50, arguing the billed work was entirely spent on Mullins.  The fee should be apportioned among the related cases and then cut by 40% due to excessive time and top-heavy administration work, Premier said.  That should leave Lynch Carpenter with $20,842.77.  "As an initial matter, in what can only be described as a shocking act of chutzpah, Mr. Carpenter — who has not worked on these cases since 2020 — includes in his fee petition 13.7 hours to fly to San Francisco to observe one day of trial on May 25, 2022," the opposition states.

Nor should class counsel recover fees and deposition costs for experts that weren't used in the Montera suit, Premier said.  Furthermore, several charges from the two firms weren't only lavish and extravagant, but also "purely wasteful," Tasher said.

"Each of these issues is exacerbated by the level of staffing," Tasher wrote. "Had the trial been staffed with attorneys Iredale, Jun and Blood, (the three attorneys who actually appeared on the record to try the case), the expenses would also have been much more modest.  However, given the excessive staffing (and related trial expenses) of attorneys [Todd] Carpenter, O'Reardon and Straub, the costs grew exponentially, considering the additional flights, Uber/taxi charges, meals/alcohol, and snacks brought about by these three additional timekeepers (essentially double the trial team.)"

A recent Bloomberg Law by Roy Strom, “Quinn Emanuel Justifies Hugh Fee With $384,000-Per-Hour Return,” reports that Quinn Emanuel has new ammunition in its fight for a $185 million fee award, saying in a filing this week that every hour its lawyers worked on the case generated about $384,000 in returns.  That figure, according to a Harvard Law professor the firm hired to analyze (pdf) the fee award, shows the firm’s work in the Obamacare case was perhaps the most efficient ever performed by attorneys in a large class-action.  Lawyers in 13 similarly sized class action cases generated about $10,000 in returns per hour on average, professor William Rubenstein said.

Does that figure show Quinn Emanuel lawyers were, as Rubenstein argued, “epically productive?”  Or does it prove they’re getting a windfall?  That’s the question the judge overseeing the fee award legal fight, Kathryn Davis, will have to consider.  

The fee fight comes after Quinn Emanuel won nearly $4 billion for health insurers who were stiffed by Congress when it decided not to pay them for selling new, risky policies mandated by Obamacare.  Quinn Emanuel filed the first case taking on the US government, but a separate challenge wound its way all to the Supreme Court, resulting in $12 billion in total payouts.

The firm’s clients won every dollar they sought.  But Quinn Emanuel’s lawyers worked relatively few hours on the case—9,630 hours, to be exact.  It’s the equivalent of fewer than five Big Law attorneys working for one year, hardly a massive undertaking.  In the 13 large class-actions Rubenstein compared to the case, no law firm had worked less than 37,000 hours.

Because Quinn Emanuel’s lawyers worked so few hours to generate such a huge reward, the case has teed up thorny questions about how lawyers’ work should be valued.  Do attorneys just sell their time? Or should courts reward the result lawyers achieve?

In the Quinn Emanuel case, technical considerations have also been in play.  The firm initially received 5% of the $3.7 billion award they won—roughly $185 million.  That’s the figure Quinn Emanuel told clients they’d ask a judge to pay them.  It’s worth noting that a 5% fee on a contingency case is significantly lower than the 33% or 40% lawyers often charge.  But that fee got tossed when some of the health insurers appealed to the Federal Circuit.  They argued Quinn Emanuel should be paid around $9 million.  The appeals court noted Quinn Emanuel told clients its award figure would be subject to a “lodestar crosscheck.”  The Federal Circuit said that hadn’t been done and sent the case back to Judge Davis to consider that analysis.

This is how Quinn Emanuel described a lodestar crosscheck to its clients: “a limitation on class counsel fees based on the number of hours actually worked on the case.”  The lodestar method applies a multiplier to the attorneys’ hourly bill as a reward for success.  It’s usually about 1.5 to 3 times the total bill in successful cases.  If Quinn Emanuel was charging its standard hourly rates, it says its lawyers would have been paid about $9.7 million for their work on the case.  That means the firm is seeking a multiplier of around 19. (Rubenstein says the lodestar is closer to 10 when applying the firm’s newer, higher hourly rates.)

Just like the $384,000 in value-generated-per-hour, a lodestar multiplier of 19 is a serious outlier.  All of this makes the judge’s task a difficult one.  Davis must decide whether to reward the firm for its most-efficient result, or compensate it for the relatively little time case took.

How We Got Here

These outlandish fee award figures made me wonder: What happened to create such a unique case?  Rubenstein’s $384,000 figure doesn’t just tell us something about the lawyers and the result they achieved.  It hints at an underlying fact pattern that must be devastating.  The idea of the “most efficient” litigation in class-action history roughly translates to “the least effort to convince a judge of the most damages.”  What happened that required such little legal work to produce such a huge reward?

The answer can only be described as an unusual and epic failure by Congress.  As the US government careened toward a shutdown in late 2014, Congress cobbled together a massive funding bill to avert disaster.  It included, of all things, a provision that limited the government from appropriating funds to pay subsidies promised to health insurers who participated in an Obamacare program known as “risk corridors.”

The program encouraged insurers to provide new health insurance plans to riskier patients by sharing profits and receiving subsidies from the government. In the end, the government racked up a bill of more than $12 billion.  Sen. Marco Rubio (R-FL) took credit for the provision, though other Republicans argued they were just as responsible, slamming what he called a “bailout” for insurers.

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