A recent Law 360 story by Jeff Montgomery, “Pentwater Appeals $267M Atty Fee Award in Dell Case in Del.”, reports that a private equity investor in Dell Technologies Inc. is appealing a Chancery Court's record $266.7 million fee award to class counsel that secured a $1 billion settlement for stockholders who sued over a $23.9 billion stock swap in 2018.

Pentwater Capital Management filed notice of appeal without a transcript late Friday with the Delaware Supreme Court, challenging both the attorney fee award and a $50,000 incentive award granted to Steamfitters Local 449 Pension Plan, the lead plaintiff for the suit filed in November 2018.

Vice Chancellor J. Travis Laster set the fee at $266.7 million on July 31, trimming a request of $285 million. He said in his July 31 decision and order that eight funds that had invested in Dell but were not part of the class suit, recommended a lower fee, citing concerns about "windfall" profits in the case of large awards.

Pentwater — holder of 1.6% of the Dell Class V tracking stock at issue in the Chancery Court suit — branded the fee award as massive and a potentially "dangerous" precedent. In a Chancery Court brief opposing the fee, Pentwater argued that "the requested fee in absolute and percentage terms is disproportionate to the value conferred on class members."

Settlement of the overall case prevented a trial on claims targeting Dell's effort to exchange Class V stock — created to finance much of Dell's $67 billion acquisition of EMC Technologies in 2016 — for shares of Dell common stock. The Class V shares generally traded at only 60% or 65% of the price of VMware, a business in which EMC owned an 81.9% equity stake when Dell acquired EMC.

Public shareholders, the class had argued, were shortchanged by $10.7 billion when, in December 2018, Dell Technologies paid $14 billion in cash and issued 149,387,617 shares of its Class C common stock for the Class V shares.

When the challenged conversion closed on Dec. 28, 2018, VMware stock closed at $158.38 per share, and Class V stockholders received just $104.27 per share, fueling objections that the Dell Class C stock to be received for Class V shares had been overvalued.

In his fee opinion, the vice chancellor noted that class attorneys provided hundreds of examples of contingent fee agreements to support their original request for $285 million. However, he noted, none of the objectors provided examples, except for Pentwater, and that example was "not for a Delaware case."

Vice Chancellor Laster also observed in his July 31 decision that investment funds that had recommended a lower amount, including Pentwater and seven others, had "a strong economic motivation for seeking a lower fee award."

The vice chancellor's decision elaborated on the idea that the investment funds that didn't go to the trouble of suing had a financial motivation now to object. Following a 10% fee trend in federal securities actions, he noted, would have given them an extra $49 million for the equity holders, rather than sharing it with the class.

Five law professors suggested in a friend-of-the-court brief that a 15% fee would be appropriate, which still would have added $35.78 million to the objectors' recovery, the vice chancellor's decision noted.

"Having sat back and done nothing, the objectors now claim that a fee award without a sizable reduction would 'not yield equitable results,'" the vice chancellor wrote in an August filing confirming the $266.7 million fee award. "That assertion masks self-interest with an appeal to equity. Wanting more money for yourself is understandable, but it is not grounds for a fee objection."

A recent Law 360 story by Ryan Harroff, “Kraft-Heinz Shareholder Class Counsel Gets $90M in Fees”, reports that an Illinois federal judge awarded $90 million in fees to class counsel for the Kraft Heinz Co. investors who accused the company and a Brazilian private equity firm of hiding the snack food maker's cost-cutting measures after a merger to cover up a $15.4 billion goodwill impairment.

U.S. District Judge Jorge L. Alonso said in his order that the investor class' counsel from Kessler Topaz Meltzer & Check LLP, Bernstein Litowitz Berger & Grossmann LLP and other firms worked with "skill, perseverance, and diligent advocacy" to secure the $450 million total settlement that their clients agreed to with Kraft Heinz and 3G Capital Partners, the private equity firm that guided the 2015 merger between H.J. Heinz Co. and Kraft Foods Group Inc.  According to Judge Alonso's order, class counsel will also receive $2.6 million to cover litigation expenses on top of its 20% cut of the settlement fund.

The settlement is believed to be one of the largest pretrial securities deals in history and is the largest deal of its kind in the Seventh Circuit. Judge Alonso gave his preliminary approval to the agreement in May and issued final approval in a minute order Sept. 12.

Investors first filed suit in 2019, alleging Kraft Heinz engaged in shady accounting practices and cost-saving strategies that harmed its own supply chain, lost it customers and made potential new investors too nervous to buy in to the company, all while publicly stating it was saving money because of "synergies" from the 2015 merger.

3G Capital — which according to the suit owned 24% of Kraft Heinz and installed seven of its own partners as the new company's senior executives or board members — had directed Kraft Heinz's actions and overseen its belt-tightening moves, the investors had said.  Those cost-cutting measures lost shareholders a net $12.6 billion after the resulting supply chain and customer issues caused the company to write down the value of its own brands by $15.4 billion, they alleged.

Attorneys for the shareholders had asked the court in August for the $90 million they have now been awarded, estimating that their firms had collectively spent over 112,000 hours working on behalf of their clients to get the settlement on the books.  Judge Alonso also noted the substantial time investment in his order granting their request.

A recent Law 360 story by Katryna Perera, “Epstein Victim Atty Want $22.5M Fee in Deutsche Bank Deal”, reports that attorneys for victims of Jeffrey Epstein suing Deutsche Bank over claims that it improperly kept Epstein as a client despite knowledge of his sex trafficking scheme have asked a New York federal judge for a $22.5 million fee award and roughly $1.1 million in litigation expenses for their work in resolving the case. 

In a motion for attorney fees, attorneys for the suit's lead plaintiff, identified as Jane Doe 1 in the case, said their performance in the litigation resulted in a $75 million settlement with Deutsche Bank that will provide "life-changing relief to Jeffrey Epstein's victims," since the recovery from the deal is much greater than the average recovery the victims received from Epstein and his estate.

Under the deal, each eligible class member will receive an award of between $75,000 and $5 million.  The attorneys from Boies Schiller Flexner LLP and Edwards Henderson Lehrman PLLC say they worked for more than 11,000 hours on the litigation, which was "factually and legally complex."

"Class counsel vigorously pursued claims pursuant to the Trafficking Victims Protection Act and state-law tort claims against sophisticated defense counsel, litigating the case past a challenging motion to dismiss and through a robust fact and expert discovery period," the motion states.  "And because there have been no prior actions against banking institutions under a TVPA beneficiary liability claim, the quantity of damages a jury would award is far from certain."

If the case had gone to trial, there would have been significant risks, including that each class member would have had to provide the amount of damages they were entitled to based on "recounting personal and intimate information," the motion states.  Therefore, the settlement is an "excellent result," the motion states, and the 30% requested fee award "is more than justified."  The $75 million deal was preliminarily approved by the court in June, and it calls for relief for women and girls who were sexually abused or trafficked by Epstein or his associates from Aug. 19, 2013, to Aug. 10, 2019.

A recent Law 360 story by Hailey Konnath, “Feds Question $23M Fee Request in PACER Overcharge Spat”, reports that the U.S. government urged a Washington, D.C., federal judge to "carefully examine" nonprofits' $23 million attorney fee request in long-running litigation challenging PACER charges, saying the review is needed "to ensure that class members' rights and recovery are appropriately safeguarded.

The government said that the court should indeed grant final approval to the $125 million deal but that it should also "exercise its discretion" in determining the attorney fees and costs requested by lawyers with appellate boutique Gupta Wessler LLP and plaintiffs litigation firm Motley Rice LLC.  In particular, the government said the attorneys calculated their fee request using their 2023 hourly rates but didn't account for the fact that the litigation began in 2016, when those rates were likely lower.

And they've apparently calculated the request without consulting the D.C. U.S. Attorney's Office's Fitzpatrick Matrix, a table that breaks down the hourly rates for legal fees in complex federal litigation in the District of Columbia based on attorneys' years of experience, according to the filing.  That's evident because both firms have laid out rates that are significantly above those in the Fitzpatrick Matrix, the government said in its response.

"In light of plaintiffs' failure to satisfy their burden to establish that above-market rates are appropriate in this case, the court may wish to inquire as to the basis for counsels' rates, and determine whether a reduction in line with prevailing market rates pursuant to the Fitzpatrick Matrix rate is appropriate," it said.

The government agreed to pay $125 million to resolve the dispute last year.  In their suit, the National Veterans Legal Services Program, the National Consumer Law Center and the Alliance for Justice alleged that PACER fees paid by the public exceeded limits under the E-Government Act of 2002.  The Public Access to Court Electronic Records system provides public access to federal court records.  Under the deal, settlement class members would receive up to $350 for PACER fees they paid between April 21, 2010, and May 31, 2018, with those who paid more than $350 receiving an additional pro rata share of the remaining settlement funds.

The court has already preliminarily approved the agreement, and the class has been notified.  The nonprofits asked the court for final approval of the settlement and their fee request last month.  According to the nonprofits, the roughly $23 million represents about 19.1% of the settlement fund and is "below the average percentage fee awarded for funds of this size."

But the government said that the fee request includes approximately $900,000 in work that "has not yet occurred and may not occur."  The court may want to ask the nonprofits' counsel how they reached that number, it said, adding that their declarations "provide little, if any, explanation of those estimates."  The nonprofits have also requested a $1 million payment to the class administrator, a request that includes $100,000 for work that hasn't yet been done, according to the motion.

"Defendant does not take issue with the general approach of awarding plaintiffs' counsel a percentage of the common fund in this case, but here are indicia – including above-market hourly rates that plaintiffs' counsel have not shown to be reasonable and inadequately explained predictions of future work — that the common fund may be excessively depleted, to the detriment of class members, if plaintiffs' counsel are awarded the percentage of the common fund that they have requested," the government said.

A recent Law 360 story by Celeste Bott, “7^th Circ. Scraps $57M Chicken Price-Fixing Atty Fee”, reports that the Seventh Circuit threw out a $57 million attorney fee award in a $181 million deal for chicken buyers in sprawling antitrust litigation, saying that the district court failed to consider bids made by class counsel in auctions in other cases and fee awards in different circuits.  Objector John Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC were to receive in a deal the firms had struck with Fieldale Farms, Peco Foods, George's, Tyson Foods, Pilgrim's Pride and Mar-Jac Poultry in the sprawling antitrust case.

A three-judge Seventh Circuit panel complimented the lower court for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures.  The published opinion concluded that "it was error to suggest that this court has cast doubt on the consideration of declining fee scale bids in all cases."

"In the district court's view, this court has explained that these awards do not reflect market realities and impose a perverse incentive insofar as they ensure that attorneys' opportunity cost will exceed the benefits of seeking a larger recovery, even when the client would otherwise benefit," the panel said.  "Yet, this court has never categorically rejected consideration of bids with declining fee scale award structures.  Rather, the nature of the typical costs in litigation must be assessed in determining whether counsel and plaintiffs would have bargained ex ante for such a structure."

The Seventh Circuit has observed that such a fee structure, where the amount being awarded in fees goes down as the settlement amount goes up, can present certain advantages, and the appellate court took that approach in another case — In re: Synthroid Marketing Litigation — which was a class action suit against the manufacturer of a synthetic thyroid drug.

"Fees do not always decline for securing a larger recovery, and in those instances, counsel will have an incentive to seek more," the panel said.  "Accordingly, the appropriateness of a declining fee scale award structure may depend on the particulars of the case.  It was an abuse of discretion to rule that bids with declining fee structures should categorically be given little weight in assessing fees."

Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees.  The appellate panel agreed that the district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.

"It is true that this court has rejected the application of a mega-fund rule.  Yet, continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel's legal services and the bargain they may have struck," the panel said.  "The district court should have considered where class counsel's economic behavior falls on this spectrum and assigned appropriate weight to fees awarded in out-of-circuit litigation."

In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting that it expressed no preference as to the amount or structure of the award, just the need for further review.

A recent Law 360 story by Bonnie Eslinger, “Wells Fargo Investors’ Attys Get $75M As Insurance Deal OK’d”, reports that a California federal judge granted final approval at a hearing to a $300...

Read Full Post

A recent Law 360 story by Rachel Riley, “9th Circ. Oks Fee Cut In Progressive Deal Over Totaled Cars”, reports that a Ninth Circuit panel ruled that a lower court had the discretion to decide a $5...

Read Full Post

A recent Law 360 story by Dorothy Atkins, “Juul’s $255M MDL Gets Nod, Judge Mulls $76.5M Atty Fee Bid”, reports that a California federal judge said he plans to approve Juul's $255 million...

Read Full Post

A recent Law 360 story by Jeff Montgomery, “Chancery’s Fee Ruling In Dell Is On The Money, Experts Say”, reports that the $266.7 million fee award Delaware's Chancery Court granted shareholder...

Read Full Post