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Judge Slashes Attorney Fees in Anthem Data Breach Class Action

August 17, 2018 | Posted in : Billing Practices, Billing Record / Entries, Contingency Fees / POF, Expenses / Costs, Fee Award, Fee Calculation Method, Fee Expert / Member, Fee Reduction, Fee Request, Hourly Rates, Practice Area: Class Action / Mass Tort / MDL

A recent story in The Recorder by Amanda Bronstad, “Federal Judge Approves Anthem Data Breach Case, Slashes Attorney Fees,” reports that after chastising plaintiffs lawyers in the Anthem data breach settlement for their excessive billing, a federal judge has awarded them $31.05 million and approved the $115 million deal.  In a order, U.S. District Judge Lucy Koh of the Northern District of California approved the fees after concluding that the results were “exceptional.”

Koh had hired a special master to review the billing records submitted by plaintiffs lawyers, who asked for $38 million for their work on the case.  The special master had recommended cutting more than $9 million based largely on the billable hours, but Koh based her decision on a percentage of the fund—about 27 percent.  Although still a reduction from the original request, the award is higher than the special master’s recommendation and the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark.

“Here, based on the court’s familiarity with the case, the choice of a percentage does not strike the court as arbitrary or unconnected from the performed work in a way that would create a windfall for class counsel,” Koh wrote.  Also, Koh approved the settlement, the largest ever in a data breach case.

As to the fee order, he noted that Koh didn’t adopt all of the special master’s findings.  “We’re pleased that the judge saw to go with a benchmark,” he said.  “Obviously, we’d like more.  We always want more.  We’ve asked for more.  But I didn’t read the tea leaves one way or the other.  We didn’t know what to expect.  I think she spent her time, gave a well-reasoned opinion for the final order and judgment and, on the fees, as well.”

Koh brought in a special master in February after telling the four lead plaintiffs lawyers she was “deeply disappointed” in their decision to bring in 49 additional law firms on the case.  The special master, retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS, proposed a 10 percent cut to the billable hours and suggested that the contract attorney rates, which averaged $360 per hour, be set at $156 instead.  Plaintiffs lawyers continued to press for their initial request, while Frank’s objector thought the award should have been closer to 15 percent of the fund.

In this week’s order, Koh continued to have reservations about the rates billed for contract attorneys—remarking “how striking the markup is”—and set an hourly rate at $240.  She also agreed that the hours were “almost necessarily excessive,” particularly given that there were 53 law firms on the case.  She found that was especially true with hours billed for depositions and settlement.  She cut that amount by 13 percent.

She approved a fee award that is more than the Ninth Circuit’s benchmark, however, citing the “novel legal issues and technical subject matter” and the risks inherent in a data breach case.  She noted that while the fee percentages were higher in data breach settlements with Home Depot and Target, those cases also included claims by financial institutions that skewed the compensation to consumers.  She also approved more than $2.1 million in costs and expenses and nearly $600,000 in service awards to 105 named plaintiffs.

In her approval of the settlement, Koh found that amendments in April resolved her concerns about potential money left over from a $15 million fund in the settlement earmarked for out-of-pocket costs.  The original settlement called for $3.3 million going to cy pres organizations, but the amendments said two organizations, the Center for Education and Research in Information Assurance and Security at Purdue University and the Electronic Frontier Foundation, would receive no more than about $417,000.