A recent article by Judge Marina Corodemus and Mark Eveland, “Four Ways Plaintiffs’ Firm Can Prevent Common Benefit Fund Fee Disputes”, reports on ways plaintiffs’ firms can prevent common benefit fund fee disputes. This article was posted with permission. The article reads:
Common benefit funds (CBFs) ensure fairness and equity in the distribution of legal fees and expenses in aggregate and complex litigation, including class actions, mass torts, trust and securities, and multidistrict litigations (MDLs), where the litigation is prosecuted by either an ad hoc or judicially appointed committee or team of attorneys. Their primary purpose is to recognize and compensate the plaintiffs’ attorneys who contribute their time, expertise, and resources to advancing the interests of most, if not all, of the plaintiffs in a particular litigation, including litigants who are not their clients but are benefited by the attorneys’ work product prosecuting the suit.
CBFs provide a compensation mechanism that enables large scale, highly expensive complex class actions and mass torts to proceed. They provide the financial incentive for plaintiffs’ attorney groups to organize and then collect and centralize financial contributions and disbursements necessary to fund critical litigation activities like document management and reviews, scientific or factual investigations, expert recruitment, and, where needed, retention of specialized legal experts (such as bankruptcy, tax, and transactional practitioners). CBFs help ensure that no single attorney or firm shoulders the entire financial burden of the legal work that puts the plaintiffs in complex litigation in position to resolve the litigation favorably. When appropriately managed, CBFs reward attorneys and firms for doing work that benefits the greater good.
Certainly, attorneys who take on the risks and leadership roles in complex litigation deserve fair compensation for their efforts. But lately, there seems to be a larger number of disputes over disbursements from CBFs among the plaintiffs’ firms involved in complex litigation (so called “Common Benefit Attorneys”) when and where such disbursements are forthcoming. These disputes often garner public attention, perpetuating a narrative that plaintiffs’ attorneys are motivated solely by greed and self-interest. Certain defense firms whose clientele often are mass tort defendants and advocacy organizations—the entities most responsible for creating this narrative in the first place—are happy to use those disputes as part of their public relations efforts supporting “tort reform.”
The pelvic mesh MDL, established in 2010 and which involved over 100,000 female plaintiffs suing seven companies in what is undoubtedly one of the most complicated MDLs in history because it is a series of seven MDLs (MDL nos. 2187, 2325, 2326, 2327, 2387, 2440 and 2511) consolidated in the U.S. District Court for the Southern District of West Virginia, is an example of how a highly publicized CBF dispute can cast a shadow on the legal profession. That dispute, like so many other CBF disputes, centered on whether certain law firms deserved the allotted fees from the CBF that the members of the plaintiffs’ executive committee in that litigation allocated to them.
And, just this past August, the Ninth Circuit settled a dispute—for now—in the Bard IVC filters litigation, In Re Bard IVC Filters Products Liability Litigation, MDL No. 2641 (D. Ariz.), established in 2015, regarding whether plaintiffs’ attorneys who agree to contribute to common benefit funds in MDLs are bound by those deals if they settle cases that were not part of an MDL.
In our view, there are four principal causes of CBF disputes. We list them below, along with strategies for preventing them.
1. A lack of billing standards and concurrent billing and time/expense review can be readily avoided through precise case management orders (CMOs) and clear billing guidelines.
Many CBF disputes are caused by the absence of well-defined requirements and standards for billing common benefit time and expenses. Ambiguity surrounding billing practices leads to inconsistencies in the way attorneys record and submit their costs, giving rise to misunderstandings and disputes when fees are allocated. Additionally, the lack of a standardized framework and mechanics for billing and expenses complicates attorneys’ perceptions of the fairness and validity of fee requests, in turn potentially eroding trust among plaintiffs’ firms. Without clear and precise billing standards in place, and an evenhanded administration of those standards, it becomes challenging to objectively gauge the contributions of each attorney and firm.
Implementing comprehensive case management orders (CMOs) and clear billing guidelines can prevent CBF disputes. CMOs should not only specify the tasks that qualify for compensation but also the allowable rates and expenses. In doing so, they will provide an independent standard to reference when disputes arise.
For instance, a standardized CMO might include a provision stating that research tasks directly related to the case, such as reviewing medical records or consulting with expert witnesses, are billable, while unrelated tasks, like administrative work, are not. (Of course, in highly complicated cases requiring extensive coordination and collaboration, administrative work may certainly be deemed permitted billable time.) In addition, it is well established that there is a hierarchy of value for work that has a greater impact on the litigation and generates more “common benefit.” Such work deserves greater compensation. A CMO and related agreements can specify this hierarchy, providing guidelines for determining what kind of work generates a common benefit, and calculating the fees to be paid for this work.
CMOs and agreements as to billing guidelines are binding and provide clarity needed during fee allocation in MDL cases, potentially preventing major fee disputes.
For example, the CBF dispute in the pelvic mesh litigation arose in part because of a disagreement over what work provided more of a common benefit: the settlement of cases quickly and for relatively small dollar amounts or high-dollar jury verdicts. Ultimately, Judge Joseph R. Goodwin of the Southern District of West Virginia granted a request from a fee and cost committee in that litigation that deemed the former to provide more common benefit than the latter.
The Bard IVC filters litigation provides another useful illustrative case. There, some plaintiffs’ attorneys moved to reduce and exempt their clients’ recoveries from common benefit and expense assessments, arguing that no assessment should be paid by clients whose cases were filed in federal court after the MDL closed, were filed in state court, or were never filed in any court. U.S. District Judge David G. Campbell of the District of Arizona denied this motion. As we noted above, the Ninth Circuit affirmed Campbell’s ruling, holding that these attorneys, who had agreed to pay a share of their fees to the MDL leaders, were required to abide by those agreements even if they settled cases outside of the consolidated proceeding.
Agreed-upon CMOs that set forth procedures, guidelines, and limitations for submitting applications for reimbursement of litigation fees and expenses inuring to the claimants’ common benefit can be instrumental in resolving or avoiding CBF disputes.
2. The problems caused by late submissions of billing records can be avoided by requiring attorneys to make regular, contemporaneous submissions.
Another frequent cause of CBF disputes is attorneys delaying their submission of billing records. Too often, attorneys and their support teams, engrossed in all-consuming complex litigation, fail to timely submit their time and expense records. Attorneys sometimes submit crucial billing details months or even years after the fact, making it necessary for others to “forensically” reconstruct this information, a practice that not only jeopardizes the accuracy of time and expense submissions but may result in crucial work being overlooked or submitted without adequate supporting documentation.
Delayed submissions also prevent courts and plaintiffs’ leadership teams from performing comprehensive and accurate assessments of work described in billing submissions.
CMOs or fee committees that mandate the regular submission of time and expense records can put an end to this problem. As was the case in the pelvic mesh MDL, adopting CMOs that include specific provisions requiring attorneys to submit their time and expense records at regular intervals throughout a litigation significantly enhances efficiency and transparency. These CMOs may, for instance, stipulate that detailed records must be submitted monthly or quarterly, with a reduction in potential compensation for any submissions beyond agreed-upon deadlines.
This practice ensures that time and expense records are submitted relatively promptly after attorneys perform the work described in them, capturing the most accurate information (and fresh memories). The regular submission of records also enables the court and MDL leadership to compare billing records with case calendars to determine if the work completed and the time spent completing it is consistent with expectations of when that work should have been completed and how long it should have taken.
3. The lack of independent oversight can be remedied by bringing on a neutral.
When plaintiffs’ leadership teams collect, review, and approve CBF allocations, and stand to benefit personally from those decisions, it is easy to see how this lack of independent oversight can cause CBF disputes and give rise to accusations of conflicts of interest and self-dealing. Appointing a neutral third party to oversee time and expense submissions to the CBF and mediate disputes can remedy this problem.
This impartial overseer should be an independent legal expert or mediator with no vested interest in the litigation outcome, which should preclude accusations of conflicts of interest and self-dealing. This neutral party should also be empowered to enforce deadlines for submissions, review and evaluate the reasonableness of time and expenses submissions, disallow submissions containing excessive time and expenses, and swiftly address any discrepancies that arise during the allocation process.
Some attorneys and judges are satisfied with handing off the issues at the center of a CBF dispute to an accountant. We would suggest that the calculations necessary to resolve such a dispute require more than a bookkeeping background. We believe hiring a neutral who is experienced in mass torts litigation and awarding attorneys’ fees, and who recognizes the worth of litigation roles, is a superior selection method.
4. Disputes caused by an opaque process could be reduced by making it more transparent.
Inadequate transparency is a major cause of CBF disputes. Those attorneys and firms that are not in leadership positions often have limited knowledge of the fees and expenses incurred as the litigation progresses, which could make them feel blindsided when their allocated fees are less than those they submitted. Without ongoing and timely communication regarding billing submissions and allocations, attorneys and firms outside the leadership circle may question the fairness and reasonableness of both.
The solution to this problem is simple. Leadership committees in complex litigation should provide all law firms that pay assessments into the CBF with regular reports that explain time and expense submissions. In addition, every firm could ask questions of the people responsible for submitting those bills and allocating distributions from a CBF.
Attorneys whose inquiries are addressed by leadership and a court-appointed neutral throughout the process are far less likely to contest fee allocations at the conclusion. Plus, increased transparency enhances confidence among plaintiffs’ firms, fostering greater trust and a more cooperative environment.
Simple solutions to a complex problem?
Given the time plaintiffs’ attorneys spend litigating complex litigation, it is not surprising that they want to ensure they are paid for the work they did that went to the common benefit of the plaintiffs in a litigation. But given the number of attorneys and firms representing clients in these litigations, and the sizes of CBFs in complex litigation today—the CBF in the Vioxx litigation, In re Vioxx Products Liability Litigation, MDL No. 1657 (E.D. La.), established in 2005, was $315 million—disputes over whether those attorneys’ contributions are fairly reflected in their CBF allocation are practically inevitable.
In our view, the core four causes of CBF disputes can be reduced in frequency and severity, if not outright eliminated, by implementing standardized billing practices, promoting timely billing submissions, and instituting impartial oversight and increasing transparency concerning the CBF allocation process.
Unless plaintiffs’ attorneys can eliminate CBF disputes, the positive social change they can bring about through complex litigation will be overshadowed by what the public—thanks in part to the corporate defense bar and advocacy organizations—will perceive as greedy attorneys bickering over millions of dollars. That, in and of itself, should motivate more plaintiffs’ leadership teams to adopt these methods for reducing CBF disputes.
Judge Marina Corodemus is a former New Jersey Superior Court judge who helped establish New Jersey Mass Torts court (MCL). She is now the managing partner of the ADR practice at Corodemus & Corodemus. She has served as a special master in numerous MDLs and complex litigation in federal and state courts. Mark Eveland is the CEO of Verus, a leading mass tort litigation support services firm.