A recent Law 360 story by Katryna Perera, “DaVita Investor Attys Score $40.5M in Fees From Settlement”, reports that the law firms that represented investors in a case against health care company DaVita Inc. were awarded $40.5 million Thursday for their work on a $135 million class-action settlement of claims that shareholders were hurt when it was revealed that the company pressured patients to enroll in high-cost, private insurance plans.
U.S. District Judge William Martinez of the District of Colorado awarded attorney fees of 30% of the settlement fund as well as reimbursement of $547,409.27 in litigation expenses and $10,000 in representative rebates after the lead plaintiffs requested it.
Attorneys from Saxena White PA and Shuman Glenn & Stecker represented the plaintiffs, led by the Peace Officers' Annuity and Benefit Fund of Georgia and the Jacksonville Police and Fire Pension Fund.
Judge Martinez said the attorney fees would be calculated using a percentage rather than the lodestar approach because the case is a common fund case.
In his order, Judge Martinez mentioned the "extensive and extremely comprehensive investigation" the attorneys conducted and how time-consuming the settlement negotiations were.
Over four years of litigation, the lead counsel expended more than 31,000 hours, equivalent to $14.7 million in attorney and staff time, the judge said.
Additionally, the lead counsel will continue to work and incur out-of-pocket expenses in connection with the distribution of the settlement, now that it has received final approval, Judge Martinez noted.
A 30% award fee is typical even in "megafund" settlements, the judge said, and he noted the prominence of the $135 million resolution, calling it an "exceptional" monetary result.
"The $135 million recovery represents the second-largest all-cash securities class action recovery ever obtained in this district, is among the top five such settlements in Tenth Circuit history, and is more than 20 times larger than the $6.7 million median for securities class action settlements in the Tenth Circuit from 2010 to 2019," Judge Martinez said.
The judge also pointed out the risk that law firms take with class actions, as there is no guarantee of success.
"To date, lead counsel has received no compensation for its prosecution of this case, and since the extensive commitment of time and resources devoted here necessarily entailed the preclusion of other projects, the primary focus of this factor is to acknowledge this incongruence by permitting a higher recovery to compensate for the risk of recovering nothing," he said.
DaVita settled with investors last year after it was accused of steering patients away from government health insurance plans and into high-cost, private insurance plans.
According to the original complaint brought in 2017, DaVita pressured patients to enroll in the high-cost plans to obtain dialysis reimbursement rates that were up to 10 times higher than the rates for the same dialysis treatment under government plans.
The class members alleged that DaVita stock prices plummeted after its "scheme" was revealed.
Trouble continued for the company on Thursday when the U.S. Department of Justice announced that DaVita and its former CEO, Kent Thiry, were indicted by a federal grand jury in Denver, charged with conspiring with competing employers not to solicit certain employees.