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Client Balks at Lodestar Rates in $8.5M ERISA Fee Request

May 13, 2021 | Posted in : Contingency Fees / POF, Fee Award Factors, Fee Dispute, Fee Request, Hourly Rates, Hours Billled, Lodestar, Practice Area: Class Action / Mass Tort / MDL, Settlement Data / Terms

A recent Law 360 story by Brian Dowling, “Raytheon Balks at Hourly Rate in $8.5M ERISA Fee Ask,” reports that Raytheon Co. has urged a Massachusetts federal judge to shrink what it calls a bloated $8.5 million fee request by attorneys who secured a $59 million settlement in a benefits class action, saying that amount would equate to a staggering $3,800 hourly rate.

The company, now known as Raytheon Technologies Corp. after its merger with United Technologies Co., said the award "exceeds the bounds of reasonableness" and instead should be cut down to a more appropriate $1.5 million lodestar amount.  Raytheon pointed to the simple math of dividing the $8.5 million attorney fee request by the roughly 2,200 hours billed by class counsel at Izard Kindall & Raabe LLP and Bailey & Glasser LLP, resulting in about $3,800 per hour paid for the work.

In requesting the $8.5 million in fees plus nearly $400,000 in litigation costs, counsel for plaintiff Johnny Cruz and the class argued the sum comes to a reasonable 15% of the total settlement amount and is appropriate given such a "complex case involving a novel and highly technical legal theory."

Cruz sued Raytheon and its pension plan managers in 2019, arguing they violated ERISA by improperly calculating certain retirees' pensions.  He sued on behalf of over 10,000 Raytheon retirees who received their pensions in the form of a joint and survivor annuity, or JSA, or a pre-retirement survivor annuity, or PSA.

ERISA requires these pension types to be paid out at a rate that is actuarially equivalent to what single retirees — who typically select a benefit package called a single-life annuity, or SLA — receive. Cruz's lawsuit accused Raytheon of flouting that requirement by using outdated data to calculate JSA and PSA pensions.  Cruz said he personally received $57 less per month than he should have.

Raytheon asked the court to toss the claims in September 2019, but U.S. District Judge Patti B. Saris denied that request in January 2020, saying the reasonableness of Raytheon's actuarial assumptions is a matter that required discovery.  The company settled the suit in February 2021 in what Cruz called an "excellent" deal.

While Cruz calculated the attorney fees using a percentage of the whole settlement method, his counsel checked the math against the alternative lodestar method for calculating fees and the $8.5 million amounts to a multiplier of 5.5 times the $1.53 million lodestar.  Raytheon attacked the idea of using such a high multiple, if not solely for the resulting hourly rate, on the basis that class counsel didn't do enough work to deserve it.

The parties streamlined the litigation to focus on the critical question of the actuarial reasonableness and settled soon after it was decided, Raytheon said.  The company added that class counsel represents plaintiffs in eight other cases involving similar "novel (and so far, untested) legal theories," including another in Massachusetts against Partners Healthcare System Inc.  "The work performed in this case benefits class counsel's other cases — and vice versa," Raytheon said.  "There is no reason why defendants' retirees should foot the bill in this case for work that benefits a plethora of class actions."