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Category: Lodestar Crosscheck

AT&T Attorneys Seek $3.5M in Fees in $14M Settlement

August 17, 2022

A recent Law 360 story by Kelly Lienhard, “AT&T ‘Bait-and-Switch’ Customer Attys Want $3.5M in Fees reports that attorneys who secured a $14 million settlement for a group of AT&T customers claiming they were charged an improper fee asked a California federal court for a $3.5 million cut of the award to cover their legal fees, as well as additional funds to cover litigation expenses.  The requested fee is 25% of the full settlement amount, which aligns with the Ninth Circuit's benchmark for attorney fees, according to the attorneys' motion, and is warranted based on the risk taken and time spent on the case.

"[The fee] is well justified under the circumstances of this case, including in light of the significant risk settlement class counsel assumed in taking this case on and vigorously litigating it for years notwithstanding the possibility that the case could ultimately be derailed on arbitration or any number of other grounds," the counsel stated.  AT&T agreed to the $14 million settlement to avoid litigation after its customers sued the telecom company over claims that the company used bait-and-switch tactics by applying an "administrative fee" to customers' accounts.

The customers' counsel is asking for 25% of the settlement amount to cover their fees and almost $75,000 for litigation expenses.  According to the attorneys, over 4,674 hours were devoted to the case, with more work still ahead to secure the finalized settlement.  The work was done with no guarantee that the lawyers would see any compensation, with additional challenges that come with going up against a large, well-funded company, according to the attorneys.

The customers' counsel added that a lodestar-multiplier cross-check found that the requested $3.5 million fee represents a little less than 128% percent of the $2,754,739 in attorney fees accumulated so far in the case, which is at the lower end of the range typically awarded, the attorneys said.

Judge Cuts ‘Unreasonable’ $24M Fee Request in Mattel Settlement

May 23, 2022

A recent Law 360 story by Katryna Perera, “Judge Cuts ‘Unreasonable’ Atty Fee Bid in $98M Mattel Deal” reports that a California federal judge has granted final approval to a $98 million settlement between investors and toymaker Mattel Inc. and PwC, but slashed the requested $24.5 million in attorney fees, saying it was too high.  U.S. District Judge Mark C. Scarsi said in his order that while the Ninth Circuit typically considers 25% of a settlement fund the "benchmark," that figure is still only a "helpful starting point," and courts should depart from it when a benchmark award would "yield windfall profits for class counsel in light of the hours spent on the case."

Instead of granting the requested $24.5 million in attorney fees, the judge reduced it to approximately $13.6 million, which represents about 14% of the $98 million settlement.  A 25% award would provide an "unreasonable windfall" to the class counsel, the judge added.  "The Court finds persuasive class counsel's arguments and evidence concerning the excellent value of the results achieved through settlement, the riskiness and complexity of the litigation, the skill and quality of counsel's work, the contingent nature of the fee, and the significant financial burdens counsel carried during the course of litigation," the order states.  "While these factors merit a significant fee award, an award of 25% of the settlement fund is unreasonable given the magnitude of the fund."

John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, had previously urged Judge Scarsi to approve the fee bid and maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7.  Judge Scarsi agreed with Rizio-Hamilton's calculations and stated that the multiplier is within range of other resolved class actions with common fund settlements.  But the judge found that the requested multiplier in this case was "excessive … relative to counsel's performance."

"Counsel would reap an extra $15 million windfall … while counsel should be commended and compensated for the risk they took, the work they did, and the result they achieved, that outsized windfall would not be fair to the other interests in this case," the judge said.  Alternatively, Judge Scarsi's approved $13.6 million attorney fee award represents a 1.5 multiplier of the lodestar, according to the order, which the judge called "appropriate in light of the hours counsel spent on the case, the magnitude of the settlement fund, the results achieved, and the risks and burdens borne by counsel."

In addition to granting final approval of the settlement for the same reasons outlined previously when he granted preliminary approval, Judge Scarsi awarded $5,515 to DeKalb County Employees Retirement System and $3,100 to New Orleans Employees Retirement System as lead plaintiff service awards, as well as $1.1 million in litigation reimbursement to class counsel.

Judge Mulls $24M in Fees in $98M Mattel Investor Settlement

May 2, 2022

A recent Law 360 story by Gina Kim, “Mattel Judge Mulls $24.5M Atty Fee Bid in $98M Investor Deal” reports that U.S. District Judge Mark C. Scarsi said he will grant final approval of $98 million in settlements resolving investors' claims that Mattel and PwC misled them by understating an income tax expense, but said he's still considering the class counsel's $24.5 million attorney fee bid.  During a hearing, John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, urged Judge Scarsi to approve the fee bid, which he said is 25% of the $98 million deal and consistent with the Ninth Circuit's benchmark for percentage fee awards in common fund cases.

The investors' counsel also sought $1,139,330 in expenses, plus plaintiff awards to DeKalb County and New Orleans for $8,615. Defense counsel for PwC and Mattel did not object to the fee request.  Rizio-Hamilton maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7.  "I know it's 25% of the settlement, but it represents a 2.7 times multiplier of a lodestar calculation," Judge Scarsi began. "Why is this significant upward deviation from the lodestar reasonable in this case?"  Rizio-Hamilton said the fee bid comports with the benchmark and "if anything, it's a touch less, because we're requesting 25% of the settlement net of litigation expenses."

The lodestar crosscheck of 2.7 multiplier is actually in the middle range, and is a common figure awarded to comparable class action securities litigations, Rizio-Hamilton said.  He cited several cases, such as Vizcaino v. Microsoft Corp., where the Ninth Circuit affirmed an award of 28% of a $97 million settlement, and In re: Brocade Securities Litigation, where class counsel received 25% of a $160 million deal.

Furthermore, the recovery achieved for the class is above average considering the serious risks facing the class, justifying the fee request, Rizio-Hamilton argued.  Class counsel dedicated almost 19,000 hours into the case, and incurred more than $1.1 million in expenses to face off against well-funded, high-caliber law firms representing Mattel and PwC, he said.

The class's reaction to the requested fee has also been favorable, and no institutional investor objected to it, Rizio-Hamilton added.  Only one individual investor, James J. Hayes of Virginia, objected to the fee request, but those objections are without merit and Hayes doesn't explain why the fee request is purportedly excessive, Rizio-Hamilton said.

Judge Scarsi aired additional concerns he had with the billing rates provided in class counsel's papers, noting that there were hourly rates ranging from $300 to $425 for nonlawyer litigation staff.  "Why aren't those high?" Judge Scarsi asked Rizio-Hamilton.

Rizio-Hamilton defended the billing rates charged by nonlawyer staff, arguing that they have been repeatedly accepted by courts in connection with fee applications in similar cases across the nation and in the district.  He also cited Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation" In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation in the Northern District of California, where the court found hourly rates in that case — up to $490 per hour for nonlawyer paralegals — to be reasonable.

Rizio-Hamilton further contended that the billing rates are consistent with those charged by other firms litigating national securities litigations, including the very defense counsel in the instant Mattel litigation.  "We know that because we look at the bankruptcy fee applications they submit," Rizio-Hamilton said.  "Suffice it to say, the rates that they submitted to bankruptcy courts are meaningfully higher than the rates we submit here," he said.  "On the question of nonlawyer paralegals, for instance, Munger Tolles — and I don't mean to single them out — have submitted rates between $405 to $490 in 2020 for paralegals in the PG&E bankruptcy case in the Northern District of California."

Ultimately, class counsel achieved a recovery that is meaningfully greater than what is typically achieved in comparable cases, considering the time and quality of work poured into the case for more than two years without any payment, he added.  Class counsel are only asking for a benchmark, "and not a penny more," Rizio-Hamilton said.

"I do appreciate all the arguments, as you understand, you know, I'm just trying to do the best thing for the class, which is why I'm focusing on the attorney award, and I'll give that a little more thought based on the arguments today," Judge Scarsi said.  "So the court will approve the settlement, will issue an order, and you know, the attorneys' fees may not be the 2.7 multiple, so we'll see."

Federal Circuit to Hear $184M ACA Attorney Fee Award Dispute

April 1, 2022

A recent Law 360 story by Dorothy Atkins, “Quinn Emanuel ACA Clients Urge Fed. Circ. To OK $184M Fees” reports that a group of health care plan insurers represented by Quinn Emanuel Urquhart & Sullivan LLP have urged the Federal Circuit to affirm class counsel's $184 million attorney fee award for settlements totaling $3.7 billion that resolve litigation over so-called risk corridor payments under the Affordable Care Act.  In a 73-page response brief, the insurers argued that objections raised by Kaiser and United Healthcare health plan insurers largely ignore "key facts" that U.S. Court of Federal Claims Judge Kathryn C. Davis relied upon in determining that Quinn Emanuel's fee request was reasonable.

The insurers said Judge Davis awarded fees based on her finding that Quinn Emanuel "pioneered" a novel claim at great risk to itself and achieved a 100% recovery for the class.  She also found that the firm filed the first complaint by several months and drafted the first substantive brief on the issue, so she didn't abuse her discretion in awarding 5% in fees, the brief said.

The insurers added that the objectors' appeal focuses "myopically" on the lodestar multiplier, which is the number of times the firm's hourly rate would be multiplied to get the total fee award.  The objectors criticize the fee award for awarding the firm what comes out to an $18,000 hourly rate, but a percentage-of-the settlement fund is the appropriate method of determining fees, the brief said.  "Indeed, it would be nonsensical to treat hourly rates as the only legitimate means of determining reasonable compensation, especially when the competitive legal market for bringing these very claims proves otherwise," the brief said.

The multimillion-dollar fight over fees and the trip to the Federal Circuit is the latest chapter in litigation that Quinn Emanuel-represented Health Republic Insurance Co. initially launched in 2016, accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.  The certified opt-in class of health care plans accused the federal government of failing to make required "risk corridor" payments under the ACA, and Quinn Emanuel's suit purportedly sparked a firestorm of parallel litigation across the country — two of which ended up before the U.S. Supreme Court.

In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.  Although Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."

But objectors Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check, and no more.

They told the trial court that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and the firm was trying to walk away with an award that would work out to an astronomical hourly rate of $18,000. Class members also signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the objectors said, which the firm had eschewed.  But in September, Judge Davis granted the fee request, saying despite the "at times hyperbolic" motions for fees, Quinn Emanuel did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.

The objectors appealed the judge's ruling and told the Federal Circuit in their opening brief in January that Judge Davis abused her discretion by failing to cross-check the fee request.  The objectors argued that a reasonable hourly-rate multiplier for the firm's work should be in the lower single digits, and certainly not the 18 to 19 multiplier that would apply to reach the $184 million fee award.

"The effective multiplier of more than 18 the Claims Court awarded is astronomical and unjustified," the objectors said in their opening brief.  "In holding that a multiplier exceeding 18 would be reasonable (if it were to conduct a lodestar crosscheck, which it didn't do), the Claims Court cited three cases with high multipliers, though it did not provide any discussion as to why these cases were germane."  The insurers fired back, arguing the lower court appropriately rejected the lodestar method, particularly since adopting it would create "warped incentives, whereby attorneys are not rewarded for achieving outstanding results, and instead are rewarded for litigating inefficiently."

Ninth Circuit Affirms $98M Fee Award in Facebook Class Action

March 17, 2022

A recent Law 360 story by Dorothy Atkins, “9th Circ. Oks Facebook Class’s $98M Fee Win in Privacy Fight” reports that the Ninth Circuit affirmed class counsel's $97.5 million fee award for striking a $650 million deal that resolves claims Facebook's facial recognition technology violated Illinois users' biometric privacy rights, rejecting objectors' arguments that the award is "outrageous" and the trial judge abused his discretion in awarding it.  In a five-page unpublished opinion, a unanimous three-judge panel held that U.S. District Judge James Donato did not breach his fiduciary duty to the class by awarding class counsel 15% of the total $650 million settlement in fees.

Objectors' counsel had argued that the fees were too high and inappropriate because class counsel told Judge Donato they would not seek fees for an additional $100 million added to the settlement fund after the judge had rejected an initially proposed $550 million deal, which forced Facebook and class counsel back to the negotiating table.  Instead, Judge Donato should have awarded class counsel 10% of the initial $550 million proposed settlement, or $55 million, which would have been reasonable and in line with case law on other mega settlements, according to objectors' counsel, Kendrick Jan.

But the Ninth Circuit panel concluded that the 15% award is in line with 11 similarly sized settlements, which ranged between $400 million and $800 million and averaged around 16% in fees, and Judge Donato adequately explained why this was a reasonable fee based on the facts of this case.  Additionally, the panel said the trial judge appropriately cross-checked the fee award based on the 4.71 lodestar multiplier, which is the number of times the hourly rate would be multiplied to get the total fee award.  Although lodestar multipliers tend to average between 2.39 and 4.50, the Ninth Circuit said the multipliers tend to increase as the size of the class' recovery increases and the 4.71 multiplier in this case is reasonable based on the risks trial would have presented.

The Ninth Circuit also rejected the objectors' arguments that the fee lodestar was based on hours that included attorneys' lobbying activities, which cannot be included in contingency fees under both California and Illinois statutes.  The panel said the objectors waived their arguments on the matter because they didn't raise them before the trial judge.  But even if they had not done so, the fee award still would be affirmed, the panel added.

"To the extent that appellants did not waive the general argument that lobbying fees should not be included in the lodestar calculation, the district court did not abuse its discretion because its primary calculation tool was the percentage-of-recovery method," the opinion says.

The objectors' appeal challenged multiple aspects of Facebook's revised $650 million deal resolving claims the social media giant breached the Illinois Biometric Information Privacy Act by using facial recognition technology without users' consent to fuel its photo tag suggestion feature.  After years of hotly contested litigation, the case was headed to a jury trial, but the parties struck an initial $550 million settlement in 2020, which class counsel hailed as the largest amount ever doled out to resolve a privacy-related lawsuit.

But Judge Donato tore into the initial proposal, which he noted gave users just 1.25%, or $300 at most, of what they could be entitled to under BIPA, even though the state statute comes with a $1,000-per-violation fine and a $5,000 enhancement for intentional or reckless violations.  At the time, Judge Donato told the parties that the enhancement appeared to be a potentially viable claim in light of the $5 billion fine Facebook agreed to pay the Federal Trade Commission in 2019 for violations of a 2012 consent decree over its privacy practices.

Roughly a month later, the parties filed a motion asking the judge to preliminarily approve a revised $650 million deal, which attempted to address Judge Donato's concerns by narrowing the release provision and increasing class members' potential recoveries to up to $400.  At the time, class counsel said it would seek up to $110 million in fees plus expenses based on the initial settlement amount.

In February 2021, Judge Donato signed off on the revised deal, calling it a "landmark result," but trimmed the $110 million requested attorney fees to $97.5 million, which reflected a 15% portion of the settlement.  He also slashed the requested incentive awards to three class representatives from $7,500 each to $5,000 each.