A recent Law 360 story by Hailey Konnath, “1st Circ. Backs Sanctions Against Lieff Cabraser in Fee Tiff,” reports that the First Circuit left intact a Massachusetts federal judge's sanctions against Lieff Cabraser Heimann & Bernstein LLP in a fees spat, finding that the lower court didn't abuse its discretion in punishing the firm for misrepresenting a study regarding fee awards in similar cases. A three-judge panel affirmed a decision from U.S. District Judge Mark L. Wolf, who sanctioned the firm for misrepresentations it made to the court while justifying a $75 million fee award for Lieff Cabraser and co-counsel at Labaton Sucharow LLP and Thornton Law LLP.
The fees stemmed from their work securing a $300 million settlement with State Street Corp., and they were later slashed to $60 million following a lengthy investigation into allegations of overbilling and other improprieties. The First Circuit said that Judge Wolf had provided notice to the firm that it was facing possible violations of Rule 11 in several instances, rejecting the firm's argument to the contrary.
"The court repeatedly explained to Lieff, over the course of two years, that it would consider whether any misconduct in the original fee application warranted sanctions — specifically flagging 'the accuracy and reliability of the representations' made by class counsel in its filings," the panel said. It added that Lieff Cabraser "certainly responded as if it well understood what was at stake." Thus, Judge Wolf met the important requirement of giving the firm both notice of the basis for a possible sanction and a fair opportunity to show why there shouldn't be any sanction, the First Circuit panel said.
The panel had hinted that the firm's appeal may be futile at oral arguments in November, saying that Judge Wolf may just double down if the appeals court held that he unfairly punished the firm. Lieff Cabraser received far less flak from Judge Wolf than the other two firms but fought a $1.1 million reduction in its fees, arguing that reversing the rule violation finding is even more important than the money.
In the decision, the First Circuit noted that the district court had found that Lieff Cabraser and its co-counsel used a template for their fee declaration that misleadingly indicated that they regularly charged paying clients the rates supporting its lodestar. The court also held that the firms failed to exercise reasonable care in contributing to a suspect $4.1 million payment to a lawyer in Texas and for misrepresenting a study regarding typical fees awarded in similar cases, according to the opinion. Lieff Cabraser was formally sanctioned for misrepresenting the study, but not for the other criticisms, the panel said.
No other firm joined Lieff Cabraser in the appeal and no parties to the underlying litigation wanted to participate either, the First Circuit said. That led Judge Wolf himself to try to lawyer up to defend his ruling. However, the appellate court refused to let Judge Wolf participate and instead permitted amicus Hamilton Lincoln Law Institute to file a brief in the dispute. While Lieff Cabraser didn't challenge the fee award in its appeal, it argued that if the appellate court set aside all of the district court's criticisms, it may be entitled to some money out of the funds awarded to the class if any funds are unclaimed, according to the decision.
But the First Circuit said it found no basis for deviating from the circuit's general rule that a district court's criticism of counsel unconnected to any challenge to a judgment or order on appeal is not itself reviewable on appeal. The panel also rejected Lieff Cabraser's argument that it didn't sign the memorandum in support of the fee award underlying the dispute and thus cannot be held liable for any misrepresentations contained in it. That contention "goes nowhere," the First Circuit said. The firm's name and the names of three of its attorneys were placed on the signature page of the challenged papers and the firm advocated for the fee at a hearing, the panel said.