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Category: Expenses / Costs

Chancery Approves $75M Fee Award in Williams Merger Dispute

August 29, 2022

A recent Law 360 story by Jeff Montgomery, “Chancery Oks $75M Cravath Fee in Williams Merger Dispute” reports that Cravath Swaine & Moore LLP nailed a nearly $75 million fee after a Delaware vice chancellor upheld its 15% contingent pay agreement with The Williams Cos. during much of a long battle with Energy Transfer LP and its affiliates over a $410 million deal-termination damage claim.

Vice Chancellor Sam Glasscock III also upheld a provision of the agreement that shifted Cravath's fees to Energy Transfer — the losing side of a $410 million battle with Williams over a termination fee triggered when Williams abandoned an earlier deal with one of its affiliates to pursue an eventually doomed, $38 billion Energy Transfer merger.

Energy Transfer, already required to pay Williams' $410 million break fee, fought the reasonableness of Cravath's fee, the 15% contingent arrangement as well as the court's decision to allow quarterly compounding interest for the fee, including a multiyear span while the case was stayed.  According to the decision and a transcript of earlier arguments on the dispute, Cravath's average or "lodestar" rate was $47.1 million for the same hours, compared with $74.8 million under the contingent fee arrangement.

"It is worth pointing out that these sophisticated parties surely were aware that post-merger-agreement litigation, seeking a break fee, could likely include representation on a contingent basis." the vice chancellor wrote in a decision that upheld the Williams side on all points.  Energy Transfer "had every opportunity, therefore, to contract against use of a contingent fee to determine the amount of fees shifted, if they so desired. This they failed to do," the vice chancellor wrote.

"The merger agreement contains no limitation on what kinds of attorneys' fees and expenses may be shifted to the losing party, other than a requirement, which is already implied under Delaware law, that the shifted fees and expenses must be 'reasonable,'" the vice chancellor wrote.  Williams had argued that a new general counsel secured the contingent agreement with Cravath in mid-2017, after Delaware's Supreme Court let stand the vice chancellor's finding that failure of a required tax-treatment for the $1.38 billion merger allowed Energy Transfer to walk away.

Energy Transfer argued that interest should have been suspended during a two-year period between 2019 and 2021 when a Williams' discovery vendor's error brought litigation to a halt. They also argued that litigation time over the interest rate and fees should likewise not count.

The decision also provided for interest at 3.5%, compounded quarterly, with the court observing other decisions that found compound interest "the standard form of interest in the financial market."  In all, according to a court brief filed, Cravath earned $4,358,372.70 prior to the start of the contingent fee terms, $4 million under a contractual fixed fee and $74,846,161 under the contingent fee.

Apple Urges Judge to Cut Fees in iPhone Class Settlement

August 26, 2022

A recent Law 360 story by Piper Hudspeth Blackburn, “Apple Urges Judge To Trim IPhone Class Atty Fees” reports that Apple Inc. has asked a New York federal judge to lower a $6.6 million fee request from attorneys who helped secure a $20 million class settlement for iPhone users over device updates, insisting that there is a lack of documentation supporting the price tag.  While attorneys from Pomerantz LLP and Bronstein Gewirtz & Grossman LLC have asked for one-third of the payout for their services, Apple wants the award shaved by $666,000 to 30% of the total settlement, or exactly $6 million. The reduction, Apple argued in a brief, would provide an additional $600,000 to the class and give each member a payment of $68.56, up from $62.94 at the current number of claims.

Apple also took aim at the plaintiff's counsel's billable hours, calling their submission "insufficient."  According to Apple's memorandum, the class's counsel failed to submit any documentation that "substantiates" the over 10,000 hours they billed for the suit that lasted more than six years.  "Class Counsel merely provide a chart listing the names of billers, their requested hourly rate, and an aggregate number of hours each worked, with no elucidation as to whom did what," the motion said.

In an Aug. 12 motion for attorney fees, the plaintiff's attorneys said the fee is warranted given the number of hours they spent working on the suit and the expenses they incurred in the process – as well as the favorable outcome they achieved.  "From the outset, class counsel understood they were embarking on a complex, expensive, and likely lengthy litigation with no guarantee of ever being compensated for the substantial investment of time and money the case would require," the attorneys wrote.

Apple also asked the court to reduce the requested $2.8 million in litigation expenses and service awards of $15,000 for each named plaintiff.  Apple contends that a reduction of the amount of the plaintiff's service award is warranted because the plaintiffs would receive an award one hundred times greater than the maximum recovery afforded to class members.  Apple also took issue with the reported costs for meals, taxis and online research, which they said were not recoverable.

Hagens Berman Earn $5.3M in Fees in Sasol Settlement

August 19, 2022

A recent Law 360 story by Emilie Ruscoe, “Hagens Berman Nabs $5.3M in Fees Over Sasol Investor Deal” reports that attorneys who represented investors in South African energy and chemical company Sasol Ltd. will get nearly $5.3 million for their work on the case after brokering a $24 million settlement deal with the company to end claims it hid risks taken as it built a facility in Louisiana.  In an order, U.S. District Judge John P. Cronan said the investors' Hagens Berman Sobol Shapiro LLP legal team could have 22% of the settlement fund and nearly $432,000 to cover their litigation expenses. Together, the attorney fee and the reimbursement sum total over $5.7 million.

"Lead counsel conducted the litigation and achieved the settlement with skill, perseverance, and diligent advocacy," the order states, adding later that the fee and reimbursement sums are "consistent with awards in similar cases."  Judge Cronan also said lead plaintiff David Cohn could have $20,000 and additional plaintiff Chad Lindsey Moshell could have $15,000 from the settlement fund to reimburse their "reasonable costs and expenses directly related" to the litigation.

The court's order comes a day after a final hearing on the proposed fee and reimbursement sums and adopts language proposed by the investors in July, when they filed the request for the attorney fees.  The order also noted that none of the members of the class had objected to the settlement sum, despite the fact that nearly 90,000 potential class members had been mailed notices about the final hearing, and that the attorneys spent an estimated 6,000 hours on the case since moving to become lead counsel in the matter in April 2020.

FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award

May 31, 2022

A recent Metropolitan News story, “FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award” reports that the Federal Trade Commission’s “Holder Rule”—under which an assignee of a consumer credit contract cannot be held liable for a breach by the seller for more than what the purchaser has paid—does not preclude the award of attorney fees in excess of that amount under California’s “lemon law,” the California Supreme Court held.

Justice Goodwin H. Liu authored the opinion which affirms a Jan. 29, 2021 decision by Div. Five of this district’s Court of Appeal. Div. Five, in an opinion by Presiding Justice Laurence D. Rubin, upheld a $169,602 award of attorney fees against TD Auto Finance, LLC, declaring that “the Holder Rule does not limit the attorney fees that a plaintiff may recover from a creditor-assignee.”  Yesterday’s opinion resolves a conflict among the courts of appeal.

Under a provision of the Code of Federal Regulations, a consumer credit contract must include this notice: “Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”

The contract that Tania Pulliam signed when she purchased a used Nissan from HNL Automotive Inc. in Beverly Hills contained that language.  Dissatisfied with the vehicle she purchased, Pulliam sued HNL and the assignee of the contract, TD Auto Finance, under the Song-Beverly Consumer Warranty Act (the “lemon law”) and was awarded $21,957.25 in damages.  TD insisted that the award against it of attorney fees, under the act’s fee-shifting provision, was improper because Pulliam was entitled to nothing in excess of what she had paid under the credit contract.

Disagreeing, Liu wrote: “We conclude that the Holder Rule does not limit the award of attorney’s fees where, as here, a buyer seeks fees from a holder under a state prevailing party statute.  The Holder Rule’s limitation extends only to ‘recovery hereunder.’  This caps fees only where a debtor asserts a claim for fees against a seller and the claim is extended to lie against a holder by virtue of the Holder Rule.  Where state law provides for recovery of fees from a holder, the Rule’s history and purpose as well as the Federal Trade Commission’s repeated commentary make clear that nothing in the Rule limits the application of that law.”

Before the FTC enacted its rule in 1975, Liu recited, a consumer was liable to the holder in due course of a note even for goods that were not delivered.  The rule places the holder in the shoes of the seller, subjecting it to all claims against, and defenses available to, the seller, limiting damages against the seller, and consequently against the assignee, he explained.  In formulating the rule, Liu said, “the FTC had damages in mind when limiting recovery under the Rule, and there is no indication that attorney’s fees were intended to be included within its scope.”

Attorney fees, in California, where awardable, are costs, not an element of damages, he noted.  The FTC, itself, has issued an advisory opinion declaring, “the Holder Rule does not limit recovery of attorneys’ fees and costs when state law authorizes awards against a holder,” Liu said.  The justice pointed out: “Were attorney’s fees part of the Holder Rule’s limit on recovery, the effective result for many, if not most, consumers would be the same as their options were under the holder in due course rule that the FTC sought to supplant.”

UK Authorities May Feel Sting From ‘Loser Pays’ Ruling

May 27, 2022

A recent Law 360 story by Christopher Crosby, “Authorities May Feel The Sting From Loser Pays Ruling” reports that the U.K. Supreme Court opened the door to public authorities being forced to pay defendants' costs from failed enforcement actions, but attorneys say it is too soon to know whether that risk will deter agencies from bringing cutting-edge cases.  Britain's highest court has ruled that the Competition and Markets Authority might have to cover the legal costs of drugmaker Pfizer and a distributor, Flynn Pharma, after the watchdog's market abuse case against the two companies fell short.

Britain's highest court ruled, in a unanimous 55-page decision handed down, that costs could follow a failed enforcement action because there is no automatic presumption that authorities do not pay for legal fees when they lose cases.  Businesses and trade organizations have applauded the development, which they say will help defendants with small budgets recover their legal fees if they can prove that an enforcement case was groundless.

But the ruling, written by Justice Vivien Rose, does not mean that regulators will always be on the hook for costs — that issue will be determined by the trial court or tribunal on a case-by-case basis.  But the justices said the Court of Appeal was wrong to assume that costs automatically have a chilling effect on regulators in every case.  "The Court of Appeal had created an unhelpful precedent, which puts a potential appellant in the unenviable position of being forced to pay the CMA's legal costs if their appeal failed yet prevented them recovering their own legal costs if their appeal succeeded," Robert Vidal, a competition partner at Pinsent Masons LLP, said.

The competition watchdog fined the drug companies £84.2 million ($106 million at today's rates) in 2016. A three-year investigation had concluded the companies had overcharged the National Health Service for the anti-epilepsy drug phenytoin sodium.  But the Competition Appeal Tribunal found errors in the regulator's analysis in 2020 and ordered it to reassess the fairness of the prices.  Those findings were upheld by the Court of Appeal.  The tribunal then ordered the CMA to pay part of Flynn and Pfizer's multimillion-pound costs after concluding that the default position in cases involving regulators was that the loser bears the burden of costs.

Although the losing side in litigation usually pays the winner's costs, the Court of Appeal disagreed with the tribunal.  The appellate court ruled in 2019 that the "starting position" is that public agencies should not be made to pay for trying to do their job — even if they are unsuccessful in court.  Overturning the lower court's findings, the justices said the Court of Appeal was wrong to overturn the Competition Markets Authority's costs ruling and instructed that there would be no order about costs.

The appellate court had looked at a line of cases beginning with Bradford Metropolitan District Council v. Booth in 2000 and found that the starting assumption for courts was that all public bodies are protected from costs when they lose a case.  Justice Rose said that, even though those cases created a strong preference against deterring regulators, it cannot be assumed that every case involving every regulator carries that risk.

In the case of the CMA, the watchdog can offset its litigation costs against the penalties it imposes, the Supreme Court said.  The competition authority incurred £2 million in legal costs during the last year, which it covered with £56.7 million in penalties handed out, justices noted.  Justice Rose said the "way that the functions of the CMA are funded dispels any plausible concern that its conduct will be influenced by the risk of adverse costs orders."

Robert Vidal said that the CMA "already has all the financial and legal resources of the state behind it, so it was difficult to understand why the Court of Appeal felt it needed to provide the CMA with an additional advantage on exposure to legal costs."  Stijn Huijts, a former CMA director and partner at Geradin Partners, said that it was a "bridge too far" for justices to accept that a public body like the CMA should be shielded from adverse cost awards.

"It's important to recognize that this doesn't mean all costs of litigants like Pfizer will fall to the CMA from now on," Huijts said.  "Nevertheless, the CMA will be in a position where it will need to challenge costs claimed in individual cases and, in most cases that it loses, it will at least need to pay part of the litigants' costs from public money."  Sophie Lawrance, a Bristows partner who acted for two pharmaceutical groups in the CMA case, said the issue was of particular concern to companies active in the pharmaceutical industry, which may have been discouraged against appealing future infringement decisions by the watchdog.

In the last year the CMA has fined several drugmakers in complex medication-pricing cases, finding in February that the cost for anti-nausea medication and thyroid medication was excessive.  In one case, Advanz Pharma Corp. and two private equity firms, Hg and Cinven, have asked the Competition Appeal Tribunal to annul a £100 million ($126 million) fine over Liothyronine tablets, which are used to treat thyroid hormone deficiency.

Drugmaker Allergan and four other pharmaceutical companies are also appealing against a record £260 million fine from the competition watchdog for allegedly abusing their market dominance over an adrenal drug.  Lawrence said that the Supreme Court's decision "ensures that meritorious appeals — which can result in crucial guidance for the sector as a whole — are not deterred."

The Supreme Court Justices highlighted the fact that costs have not prevented the CMA from investigating large companies such as Google and Apple.  The regulator is looking into whether their duopoly on the "mobile ecosystem" threatens competition for digital services, setting up potential enforcement actions.  "Whether this will have a chilling effect on the CMA will in reality probably depend on how it fares in a number of high-profile cases making their way through the courts now, and in investigations against digital giants like Apple and Google," Huijts said.  "Win most of those, and this chapter will be easily forgotten. Lose the majority, and the watchdog may grow more timid."