A recent Reuters article by Alison Frankel, “Appeals Court Will Decide If Lawyers Can Evade Common Fund Fees in Consolidated Cases,” reports on common fund fees in class actions and MDLs.  The story reads:

Can a plaintiffs lawyer who was a member of the steering committee in consolidated multidistrict litigation get out of paying common benefit fees for cases resolved outside of the MDL’s confines?  That’s the question that will be argued before the 9th U.S. Circuit Court of Appeals in a case arising from consolidated litigation over C.R. Bard Inc’s blood clot filter implants.  The 9th Circuit punted last year in a similar case addressing common fees in the Roundup MDL because the fee ruling on appeal was not a final order.

But assuming there are no jurisdictional problems in the Bard case – as both parties assured the appeals court in a joint supplemental brief filed earlier this month – the 9th Circuit will be just the third federal appeals court in the last decade to offer answers to vexing questions about the scope of MDL judges’ power to order fees in cases they do not oversee.

Common benefit fees, as you know, are intended to compensate MDL lead counsel who expend significant time and money to conduct discovery and litigate legal issues that affect all of the cases in the MDL.  The fees address what might otherwise be the problem of “free-riding” by lawyers trying to capitalize on the efforts of MDL leaders without paying for it.

There’s little doubt that MDL judges have the authority to order plaintiffs lawyers whose cases are part of the consolidated proceeding to turn over a share of their clients’ settlements to MDL leadership.  (In the Bard MDL, common benefit fees have been held back in an escrow account before ever reaching plaintiffs and their lawyers.)  But what about cases outside of the MDL, such as state-court lawsuits, claims that were settled before they were formally filed or cases filed after the closure of the MDL?  Can MDL judges require plaintiffs lawyers to pay common benefit fees in those cases?

Federal circuits have reached different conclusions.  In 2014, the 8th Circuit ruled in In re Genetically Modified Rice Litigation that the MDL judge did not have authority to order fees from plaintiffs’ lawyers in state-court GMO suits.  But in 2015’s In re Avandia, the 3rd Circuit ruled that MDL courts are entitled to enforce their own orders, so an MDL judge had authority to order a plaintiff’s firm that participated in the MDL to pay a common benefit fee on all of its settled cases.

Two highly-regarded MDL judges also recently diverged on the scope of their authority. U.S. District Judge Jesse Furman of Manhattan ruled in 2020’s In re: General Motors that his MDL orders required lawyers who had litigated before him to pay common benefit fees from settlements of unfiled cases.  But U.S. District Judge Vince Chhabria of San Francisco held in 2021’s In re: Roundup that his power to order fees was limited to cases within the MDL.

Like I said, this is a vexing issue.  The twist in the Bard case is that plaintiffs lawyer Ben Martin of Martin Baughman was appointed to the MDL’s steering committee at the very beginning of the case in 2015.  He and the lawyers at his firm settled about 200 cases in the MDL.  But they also settled an additional 300 or so cases that were never formally filed, were brought in state court, or were filed after U.S. District Judge David Campbell of Phoenix closed the Bard MDL.

Martin’s counsel, Howard Bashman of the indispensable How Appealing blog, told the 9^th Circuit that Campbell erred when he ruled in 2022 that all of Martin’s cases – and not just those settled within the MDL -- were subject to a fee holdback.  Bashman argued that MDL judges simply do not have a right, under their inherent case management power or common fund doctrine, to order fees in cases that are not before them.

In a phone interview, Bashman acknowledged the free rider problem, but said that the 9th Circuit must distinguish between the legitimate goal of deterring abusive case-filing by plaintiffs lawyers who want to avoid common benefit fees and the limited power of MDL judges to accomplish that end.  “Those are two different questions,” Bashman said. (He emphasized that Martin and his firm were not trying to avoid common benefit fees by settling cases outside of the MDL.)

The other lawyers on the Bard MDL steering committee, who are represented by Shannon Clark of Gallagher & Kennedy, assert that MDL judges have inherent power to assess fees on cases outside of their court.  But the lawyers' primary argument is that Martin and his firm agreed to common benefit fee holdbacks for all of their cases when Martin accepted an MDL leadership role, based on a participation agreement attached to a Campbell case management order. (Martin has also received common benefit fees under those orders.)  Clark, who did not respond to my email query, argued that Martin waived his right to challenge the fees by failing to object to Campbell’s orders.

Bashman told the 9th Circuit that there is no evidence Martin signed the relevant participation agreement.  And even if he did, Bashman said, the MDL judge is not entitled to exceed his authority by imposing an impermissible condition on Martin’s ability to represent his clients.

In some ways, the stakes in the Bard appeal are small. Martin’s briefing does not say precisely how much money has been held back but says his clients’ 2% share amounts to less than $1 million.  The overall holdback is 10%, so this fight seems to involve between $5 and $10 million.  On the other hand, common benefit fees affect every MDL, and surely total hundreds of millions of dollars across all of the consolidated multidistrict cases being litigated in U.S. court.

Moreover, Bashman said, the 9th Circuit panel – 9th Circuit judges John Owens and Bridget Bade and Judge Miller Baker of the U.S. Court of International Trade – might not be the last word on the fee question, regardless of who wins.  “This does seem like the kind of issue the U.S. Supreme Court would be interested in,” he said.

A recent Law 360 by Piper Hudspeth Blackburn, “CSX Hits Back at $14M Atty Fee Bid in Norfolk Southern Case,” reports that CSX Transportation Inc. has urged a Virginia federal judge not to award Norfolk Southern Railway Co. and a smaller railroad $14 million in attorney fees for beating back its antitrust claims, arguing that Virginia's state law does not allow it.  In a memorandum, CSX also said that no contractual provision between the parties allows an award for attorney fees as Virginia law requires, and the Sherman Act does not mandate that a defendant obtain a fee award for prevailing on a suit.

According to CSX, Virginia law mandates that successful claims be supported by "a statutory or contractual right" to attorney fees.  Therefore, if at all possible, the only claims Norfolk Southern and Norfolk & Portsmouth Belt Line Railroad Co. can seek are those related to their defense of CSX's injunctive-relief request under the Virginia's business conspiracy law, CSX added.

However, CSX also noted that the railway companies did not cite "a single decision" in the history of the Virginia statute "in which a court has awarded a prevailing defendant attorneys' fees."  The years-long litigation ended in April, when U.S. District Judge Mark S. Davis sided with Norfolk Southern and Belt Line and dismissed the suit, finding that CSX's claims were time-barred.

The companies filed separate motions on May 3 in an effort to get the court to order CSX to pay their court costs and attorney fees.  While Norfolk Southern estimates its costs and fees at around $11 million, the Belt Line put forth a much lower estimate of $3 million.  Belt Line argued that CSX must pay because Virginia law says prevailing defendants in a conspiracy case where plaintiffs requested injunctive relief are entitled to costs and attorney fees.

"Whether CSX sought money damages or injunctive relief, its core set of facts was identical for all claims, and therefore the Belt Line's entitlement to costs and attorneys' fees encompasses its efforts to overcome them all," the interchange railroad said.  However, CSX disagreed Wednesday, claiming that the statute does not mandate that losing plaintiffs pay attorney fees.  Instead, CSX said, the law requires only "a potential discretionary fee award for those fees specifically attributable to the state-conspiracy injunctive-relief remedy."

A recent Law.com story by Alaina Lancaster, “9^th Circ. Finds Epic Failed to Prove Antitrust Claims Against Apple, Reverses Attorney Fee Denial,” reports that Apple Inc. is entitled to attorney fees in the antitrust litigation brought by game developer Epic Games Inc. after an appeals court ruling held that the game developer failed to prove the tech giant was a monopolist.  An 87-page majority opinion from the U.S. Court of Appeals for the Ninth Circuit affirmed a district court judgment that the Fortnite maker failed to prove its state and federal antitrust claims against Apple after a May 2021 bench trial. 

The ruling reverses the part of an order from U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California, who is overseeing the litigation, that denied Apple attorney fees, and remands the issue back to the district court for further proceedings.  Still, Apple was not able to avoid liability under California’s Unfair Competition Law.

The dispute stems from Epic’s August 2020 complaints claiming that Apple and Google LLC have monopolized their app distribution stores and in-app payment processing markets.  Epic filed the lawsuits after the tech giants removed Fortnite from their app stores for adding an in-app purchasing feature in violation of developer licensing agreements.  Apple has argued that it designed a “walled garden,” an integrated and secure ecosystem, to protect consumer trust, security and privacy.

The majority panel found that Gonzalez Rogers erred as a matter of law in defining the relevant antitrust market.  To establish a single-brand aftermarket, the court majority said that plaintiffs must show the following:

1. The challenged aftermarket restrictions are “not generally known” when consumers make their foremarket purchase;
2. “Significant” information costs prevent accurate life-cycle pricing;
3. “Significant” monetary or nonmonetary switching costs exist;
4. General market-definition principles regarding cross-elasticity of demand do not undermine the proposed single-brand market.

Epic and the district court interpreted court precedent to rely on a different four-part test.  The majority opinion also found that the district court erred in holding that a non-negotiated contract of adhesion, such as the developer licensing agreement, falls outside of the scope of Section 1 of the Sherman Act.

In a footnote, the court said that it had “no opinion” on what portion of Apple’s attorney fees incurred in this litigation can be fairly attributed to Epic’s breach of the developer licensing agreement.

A recent Law 360 story by Collin Krabbe, “Wis. Judge Awards Attys $2.7M in Fees Over $1M Settlement,” reports that a Wisconsin federal judge has awarded attorneys a dollar figure for fees and costs that is more than double the amount of a $1.05 million settlement negotiated to resolve claims by residents of the town of Superior who had to evacuate their homes following a 2018 explosion at a nearby refinery owned by Husky Energy Inc.

U.S. District Judge William M. Conley said in an opinion that Zimmerman Reed LLP will receive $2.7 million in fees and costs, reducing the fees requested by 25%, in the suit against Husky Oil Operations Ltd. and Superior Refining Company LLC. Still, the judge noted the defendants' perceived aggressive litigation tactics "at virtually every turn in this case."

"Taking into account theJu degree of counsel's success in achieving a class settlement, the time spent on unsuccessful claims and theories, and excessive fees driven by defendants' aggressive tactics, therefore, the court concludes that a reduction of 25% in fees is appropriate," the judge noted.  Zimmerman Reed submitted billing records reflecting 6,251 hours of work with hourly rates ranging from $350 to $845 for attorneys and $200 to $315 for paralegals, for a grand total of $3,151,017 in attorney fees and $359,948 in costs, according to the order.

But the judge reduced the fee amount to $2.3 million, noting that the settlement award was "significantly less" than plaintiffs initially sought.  Less than a third of the potential class ultimately submitted claims, and under the settlement, each class member got around $167.23 — not including "offsets for earlier, voluntary reimbursements by defendants," the order said.  The $1.05 million settlement was given final approval last year in a suit that stems from an explosion at a refinery in Superior on April 26, 2018, which caused a fire that allegedly created a risk of hydrogen fluoride being released and potentially harming residents.

In ruling on fees and costs, Judge Conley took issue with compensation for time spent on unsuccessful claims and legal theories.  "From the court's own review, plaintiffs appear to have billed at least several hundred hours relating to claims and theories that were unsuccessful, particularly in developing its unsuccessful classwide damages theory and in opposing defendants' successful motion for summary judgment," Judge Conley's order said.  "However, it is not possible to determine precisely how many of plaintiffs' 6,251 hours were allocated to successful versus unsuccessful claims," according to Judge Conley.

Finally, the judge said a review of the fees incurred by defendants reflect total fees of about $4 million, which is roughly $1 million more than Zimmerman Reed was asking to be awarded.  The judge added that "this substantially larger fee paid is certainly consistent with this court's perception of the aggressive litigation tactics by defendants at virtually every turn in this case."

The judge also disregarded the defendants' argument that Zimmerman Reed's rates were unreasonable.  Zimmerman Reed Partner Gordon Rudd told Law360 that "this was an extremely hard-fought case.  The litigation involved residents who were forced to evacuate their homes due to a refinery fire and explosion in Superior, Wisconsin.  Both Husky Oil Operations and Superior Refining Company aggressively litigated the case and aggressively challenged the attorneys' fees being requested by the homeowners."

"We are pleased with the result that the homeowners achieved and with the Court's recognition that scorched earth litigation strategies by companies can result in the award of increased fees and costs incurred by plaintiffs in responding to these tactics," Rudd added.  The judge also disregarded the contention that class counsel agreed in contingency fee contracts to accept only 33% of any recovery acquired in litigation, noting that Zimmerman Reed's retainer agreements with individually named plaintiffs had separate fee clauses for "individual and class recovery."

A recent Law 360 story by Piper Hudspeth Blackburn, “Judge Wants Sabre to Pay Fees in Airline’s $1 Antitrust Win,” reports that a federal magistrate judge has recommended that airline booking giant Sabre should cover the costs of attorney fees for US Airways, which pursued antitrust claims that ultimately resulted in a mere $1 jury award after more than a decade of litigation.  In a report, U.S. Magistrate Judge James L. Cott determined that the airline is entitled to fees because of the "plain language" of federal antitrust law despite the nominal damages award. Judge Cott also noted that the amount could be reduced after looking at billing records.

Because a jury returned a verdict for US Airways on its monopolization claim under Section 2 of the Sherman Act, "a plain reading" of Section 4 of the Clayton Act allows US Airways to recover the cost of the suit, "including a reasonable attorney's fee," the report stated.  In 2022, a Manhattan federal jury found, after a three-week trial, that Sabre willfully maintained monopoly power through exclusionary conduct. It was a redo of a 2016 trial that had awarded US Airways $15 million in damages before the Second Circuit scrapped the verdict on technical legal grounds.

Sabre has argued that U.S. Supreme Court precedent shows that when a party recovers only nominal damages, the only reasonable fee is "usually no fee at all."  However, US Airways insists that the damages it received shouldn't affect its ability to recover costs and attorney fees.  According to Judge Cott, Sabre's argument fails because the precedent the booking company pointed towards, Farrar v. Hobby, doesn't apply to this case but rather to the reasonableness of fee awards in civil rights cases. Farrar holds that the reasonableness of a fee award is indicated by the size of damages awarded.

"Farrar concerned the entitlement to fees under § 1988 of the U.S. Code, not the Clayton Act or any other mandatory fee statute, and there is no suggestion in the opinion itself that its holding extended beyond § 1988," the report stated.  Judge Cott pointed toward a Second Circuit decision on "an identical issue" to this one, United States Football League v. National Football League, instead.  In that case, the court had to determine whether a plaintiff is entitled to reasonable attorney fees "after decade-long antitrust litigation resulting in a $1 jury verdict only on Sherman Act Section 2 grounds."

Not only did the court decide that the plaintiff could recover attorney fees, it "further explained that civil rights cases are inapposite as they concern discretionary awards of fees, while Section 4 mandates them," the report continued.  Judge Cott also rejected Sabre's argument that in the event it must pay attorney fees, the amount should be reduced by 99% because US Airways only "obtain[ed] .0000003% of its alleged damages ... and no injunctive relief."

While no legal rule requires that fees be proportional to the requested amount and the recovered damages, Judge Cott, wrote that the court can reduce the requested fees after analyzing billing records.  While "a downward adjustment is undoubtedly warranted" in this case, Judge Cott noted that the court couldn't determine the amount without first calculating the lodestar.

"The court's eventual reduction will be guided by comparable cases in this circuit, which do not necessarily dictate the extreme slashing that Sabre seeks," the report stated.  The litigation began in 2011, when US Airways sued Sabre, alleging that the company had monopolized the market for systems that connect airlines to travel agents and violated federal antitrust laws.

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