Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fees & Judicial Discretion

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."

53 Law Firms to Divide $34M in Fees Using Tier System in GM Ignition MDL

May 20, 2021

A recent Law 360 story by Marco Poggio, “Judge Initially Oks 53 Firms’ Fee Plan in GM Ignition MDL,” reports that a federal judge in Manhattan pushed forward a plan for a three-tier system for distributing $34 million in attorney fees and expenses among the 53 law firms involved in multidistrict litigation against General Motors, but asked for clarifications on how firms are assigned to each tier after objections were raised.  In an order, U.S. District Judge Jesse M. Furman of the Southern District of New York said the tier system works but stopped short of approving the full deal, pending resolution of a dispute arising from how fees are calculated between the leading counsel and three other firms.

Judge Furman dismissed main objections brought by three firms — Golenbock Eiseman Assor Bell & Peskoe LLP, Wolf Haldenstein Adler Freeman & Herz LLP, and a group of attorneys working under the supervision Gary Peller, a professor at Georgetown University Law Center — who claimed they were being shortchanged for their work in the sprawling case, which involves faulty ignition switches.  However, the judge found some merit in the three objectors' "claim that the proposed allocation fails to credit them for many hours of compensable work without adequate explanation," and he ordered the co-lead plaintiff firms — Lieff Cabraser Heimann & Bernstein LLP and Hagens Berman Sobol Shapiro LLP — to submit a document detailing the criteria used to determine the compensation for each participating firm.

"It is incumbent on class counsel to explain and justify the criteria they used to make these determinations," Judge Furman said in the order.  The judge approved the arrangement's structure, in which Lieff Cabraser and Hagens Berman stand at the top tier and are entitled to 35% of the lodestar.  Members of the plaintiffs' executive committee are in tier two, along with liaison counsel and bankruptcy counsel, with an allocation of 19.3%.  Finally, the rest of the attorneys would fall in tier three and receive the greater between $1,000 or 7.5% of the lodestar.

Firms in tier one, two and three will collectively receive more than $15.4 million, $8.9 million, and $254,000 respectively, according to the arrangement. The only exception will be Brown Rudnick LLP, which will receive 23.37% of the lodestar despite being in tier two because it contributed more work than firms in the same tier, according to the order.  Judge Furman also agreed to placing the three objectors in tier three.

One of the objections came from Peller, who claimed the difference in earning between tiers is unfair because it fails to compensate non-lead attorneys properly.  In a call to Law360, Peller said the lead counsel "punished" his group by assigning a small share of the lodestar compared to firms in the higher tiers.  "This is amazingly low compensation for lawyer work," he said.

Case law has put in place limits to the power of lead counsels in class actions. The same protections do not apply to multidistrict litigation, though Peller argued with Judge Furman that they should.  "The lead counsel in multidistrict litigation have virtually unfettered power over the litigation and litigation decisions, and that's a problem from a due process point of view," said Peller, who has been working on the case since 2014.

The MDL saw its turning point in March 2020, when General Motors proposed a $120 million settlement with drivers who claimed that their cars lost value due to faulty ignition switches.  Under the settlement, a trust controlled by creditors in the company's 2009 bankruptcy will contribute up to $50 million.  The deal also included $24.6 million in attorney fees and $9.9 million in litigation expenses, according to court documents.

In the order, Judge Furman acknowledged there is little case law guidance about the allocation of attorney fees among co-counsel, and that courts routinely give lead counsel the initial responsibility of determining how much each participating firm deserves.

Golenbock Eiseman had argued that the allocation system proposed by the lead counsel is only based upon fees and expenses incurred between Oct. 20, 2014, and Feb. 29, 2016, and fees and expenses it incurred between April 7 and Sept. 30, 2014, were improperly excluded.

Similarly, Wolf Haldenstein had told the judge that Lieff Cabraser and Hagens Berman had failed to credit it for work done before August 2014, without providing a rationale.  Golenbock Eiseman and Wolf Haldenstein had also argued they should have been assigned to tier two, claiming they had put in as much work as bankruptcy counsel during the early stages of the case, the order says.  Golenbock Eiseman said it expected to receive a share of the lodestar similar to that given to Brown Rudnick, "or at worst, [be categorized] in Tier 2," according to the order.

In the end, Judge Furman brushed off all objections except those regarding the allegedly unexplained omissions by the lead counsel in calculating the hours of compensable work for the three objecting firms.  The judge will issue a decision on the proposal after evaluating possible discrepancies between the attorney fees and expenses determined by Lieff Cabraser and Hagens Berman and those submitted by each participating counsel.

Elizabeth Cabraser of Lieff Cabraser, who also served as lead counsel for plaintiffs in the MDL against Volkswagen for its cheating of emission standards, cheered the judge's approval of the tier arrangement in an email to Law360.  "We are pleased the hard work we put into a fee allocation designed to reflect the relative efforts and risk undertaken by counsel who worked for the class resulted in a structure fully supported by the court as well as nearly all plaintiffs' counsel," she said.  "We look forward to a final distribution to counsel after submitting the requested information."

SCOTUS Won’t Hear IP Attorney Fee Claim

May 17, 2021

A recent Law 360 story by Dani Kass, “’Radical’ IP Atty Fee Claim Doesn’t Strike Justices’ Interest,” reports that the U.S. Supreme Court rejected a patent-holding company's attempt to limit when district court judges can make plaintiffs in frivolous patent cases cover attorney fees.  WPEM LLC's March 16 petition had called U.S. District Judge Rodney Gilstrap's decision to make it pay fees after a failed patent suit a "radical expansion" on the court's powers.  But the justices weren't persuaded, and rejected the petition without further comment.

The petition was rejected at the high court before the opposing party, SOTI Inc., had a chance to file an opposition or waive its right to do so, according to the court's online docket.  WPEM had sued Canada-based SOTI in 2018, accusing it of infringing a patent with a manual for a product called the MobiControl Speed Lockdown.  Judge Gilstrap then dismissed the case, saying a reasonable plaintiff "conducting minimally diligent" research into the case would have found an earlier version of the manual was issued before WPEM's patent.

Looking at WPEM's own evidence, Judge Gilstrap had found it was "clear that WPEM conducted no pre-filing investigation into the validity and enforceability of the asserted patent at all," and he ordered WPEM to cover SOTI's attorney fees.  The Federal Circuit upheld that ruling in December 2020, in a nonprecedential opinion.  Three months later, WPEM told the justices the ruling reflected "a radical expansion of discretion," as Judge Gilstrap was still obligated to presume that its patent was valid.

"The district court determined petitioner's case to be frivolous because the accused technology was prior art, but the district court did not make an invalidity determination, as such would require clear and convincing evidence," the company said in its petition.  WPEM had argued that Judge Gilstrap should have done more to figure out if its patent was also invalid, and said if it wasn't invalid, that would necessitate a new ruling on those fees and whether the case was exceptional.

Federal Circuit Backs $4.2M Fee Award in IP Case

May 11, 2021

A recent Law 360 story by Adam Lidgett, “Fed. Circ. Backs Apple and Cisco’s $4.2M Fee Win in IP Case,” reports that the Federal Circuit has refused to undo a lower court order allowing Apple and Cisco to collect $4.2 million in attorney fees from tech company Straight Path in a patent case, despite arguments that a California federal judge wrongly found the case was exceptional.  In a short order, a three-judge appellate panel affirmed the California federal court's decision handing Cisco $1.9 million and Apple $2.3 million in fees from Straight Path in a dispute over internet phone patents.  The panel gave no reason behind its decision.

The order came just days after oral arguments in which the panel had a hard time believing that U.S. District Judge William Alsup — who delivered the fee award almost a year ago — lacked the discretion to do so.  Judge Alsup declared the case exceptional since Straight Path's infringement claims contradicted a position it had advocated at the Federal Circuit in appealing a Patent Trial and Appeal Board decision.

The fee dispute between the parties has been a lively one, sparking fireworks in the courtroom during a May 2020 hearing when Judge Alsup scolded Apple and Cisco for initially requesting $10 million in fees after beating the suit.  The judge said the tech giants "played games," used "abusive" tactics and were motivated by "greed, G-R-E-E-D."  He required them to resubmit their fee bids and appointed a special master to determine a reasonable amount of fees and costs.  In May of last year, the court awarded Cisco $1.9 million — half of its initial request — while Apple netted $2.3 million of its initial $3.9 million ask.

Straight Path argued that as a result, Federal Circuit precedent required it to reverse Judge Alsup's finding of exceptionality, which is required for a prevailing party in a patent dispute to get fees.  Desmarais LLP attorney Justin P.D. Wilcox, an attorney for Cisco, told Law360 that his team was "pleased with the Federal Circuit's ruling and that the Federal Circuit affirmed Judge Alsup, who down at the district court had ruled that Cisco was entitled to attorneys' fees for the exceptional case that Straight Path had brought."

Class Counsel Denied $12M in Fees in Nonmonetary Settlement

May 8, 2021

A recent Law 360 story by Dave Simpson, “Attys Denied $12M Fees From ‘Modest At Best’ Facebook Deal,” reports that a California federal declined a bid for $12 million in fees for lawyers representing a class of Facebook users that reached a non-monetary settlement over a data breach suit, calling the outcome "modest as best and cosmetic at worst."  U.S. District Judge William Alsup gave final approval to the settlement but nixed the present bid for fees from counsel at Tadler Law LLP, Cohen Milstein Sellers & Toll PLLC and Morgan & Morgan Complex Litigation Group, instead tasking a special master with reviewing the attorneys' billing information and reducing fees to a "reasonable amount," noting that they would not be receiving a bonus.

"The settlement is really little more than what Facebook would have done anyway," Judge Alsup said.  "In the preliminary settlement approval and in their supplemental briefing, both parties explained that Facebook voluntarily adopted most of the security measures upon the recommendation of a working group created in 2018."  The users sued Facebook in California federal court in 2018 following a data breach that affected roughly 29 million individuals, alleging the company negligently allowed the cyberattack.

In 2019, Judge Alsup certified a class of users who sought to change Facebook's security practices to avoid further harm to users but denied two other classes seeking monetary compensation.  A non-monetary settlement resolved the case last year, and Judge Alsup gave it his blessing in November.

Under the deal, Facebook has agreed to take a series of steps that the court believes will help the company avoid a repeat of the 2018 cyberattack, in which hackers exploited a security flaw in Facebook's "View As" feature, which allows users to preview how their profiles appear to the public or other users, to access personal data.  Facebook agreed to reform its security protocols and allow an independent third party to both monitor its compliance through 2026 and provide class counsel and the court with annual reports.

"Two of the settlement terms were practices Facebook had been using even before the breach occurred," Judge Alsup said.  "The only truly novel element of the settlement agreement is the involvement of the court, class counsel, and an independent monitor in ensuring that Facebook maintains the security measures they would have implemented anyway."

Facebook slammed the attorney fee bid in March, saying that the class' attorneys refused to provide detailed time records and that the figures they did provide show that their side of the litigation wasn't handled efficiently.  Facebook also slammed class counsel for including time spent on unsuccessful litigation efforts.  At a hearing in late April, Judge Alsup said he was disturbed that class counsel "farmed out" work in the litigation, telling them to trim their $12 million request for attorney fees and expenses or he wouldn't approve it.

But earlier this month, class counsel moved forward with their bid anyway.  The attorneys asked Judge Alsup to approve their bid for nearly $12 million in fees and costs, including a $2.1 million bonus, arguing that the non-monetary settlement provides a significant benefit to the public, as it requires the world's largest social media platform to improve its security practices and be subject to independent oversight for five years.

Judge Alsup ripped into their argument.  "Class counsel waxed poetic about the complexity, technicality, and novelty of the data security issues presented in this case, but note well the settlement calls for only pocket change to the monitor who will ensure that Facebook abides by the settlement terms," he said.  "That amount is merely $15,000 over five years.  This is further evidence of a cosmetic settlement."

In a companion order, Judge Alsup appointed a special master and gave instructions as to how billing should be reviewed.  He'd previously threatened the attorneys with such an appointment, saying their $12 million ask was too much money to not go over with "bone-crushing" thoroughness.