Class Counsel and Objectors May Both Be Entitled to Fees

Posted on May 21, 2009 by Gary A. Bresee

The 9th Circuit Court of Appeals has provided us with an interesting analysis into the entitlement of attorneys' fees -- for both sides on appeal -- of an anti-trust class action.  In Rodriguez v. West Publishing Corporation, 08 C.D.O.S. 4853 (9th Cir., 4/23/2009), the 9th Circuit reversed and remanded the question of fees, and provided guidance to the District Court for its decision on remand.  The trial court must now decide, not only the reasonableness of class counsel's fees, but also a reasonable amount of fees being claimed by certain Objectors to the settlement. 

The class members sued West Publishing Corporation for violation of anti-trust statutes arising out of its BAR/BRI review courses.  The District Court approved a $49 million settlement between the parties, and granted class counsel a generous 1.75 multiplier up to twenty five percent of the settlement fund.  Moreover, the District Court denied fees claimed by certain Objectors, concluding Objectors played no significant role in securing the denial of any incentive awards.  Objectors claimed that certain incentive retainer agreements between class representatives and class counsel were not disclosed to the remaining class members.  These "ex ante incentive agreements" were ultimately insufficient for the 9th Circuit to reject the entire settlement, but they were held to be relevant to the question of fees.  

First, with respect to class counsel's fees, on remand the District Court was ordered to consider the effect, if any, of the conflict of interest arising out of the incentive agreements on the request for fees.  Objectors claimed the 1.75 multiplier and the twenty five percent cap were grossly excessive.  The 9th Circuit declined to address that due to the inadequacy of the record, and so directed that argument to the District Court on remand.

With respect to the Objectors' fees, the 9th Circuit also reversed and remanded the denial of fees.  The Court of Appeals ordered the District Court to determine the reasonable amount of fees to Objectors, given their contribution to the denial of the requests for incentive awards. 

This decision is a "must read" for any class action litigators.  

Litigant Is Not Entitled To Attorney Fees Where Insurer Disputes Request For Medical Treatment

Posted on May 18, 2009 by David J. McMahon


In Smith v. Workers’ Compensation Appeals Board, 2009 DJDAR 6715, May 11, 2009, the California Supreme Court decided a case concerning the contours of Labor Code §4607. That statute provides:

“Where a party to a proceeding institutes proceedings to terminate an award made by the appeals board to an applicant for continuing medical treatment and is unsuccessful in such proceedings, the appeals board may determine the amount of attorney’s fees reasonably incurred by the applicant in resisting the proceeding to terminate the medical treatment, and may assess such reasonable attorney’s fees as a cost upon the party instituting the proceedings to terminate the award of the appeals board.”

The Plaintiffs in the case sustained injuries while working for their respective employers. The Plaintiffs were awarded partial permanent disability and future medical treatment. After some passage of time, the Plaintiffs requested additional treatment. The State Compensation Insurance Fund (SCIF), the Plaintiffs’ employers’ insurance carrier, declined the demand for further treatment. The Plaintiffs instituted proceedings to obtain the treatment. The workers’ compensation judge found that treatment remained medically necessary and authorized the requested medical procedures. The Plaintiffs then moved for attorney fees under Labor Code Section 4607. The workers’ compensation judge denied the requests, asserting that SCIF did not institute proceedings to terminate the Plaintiffs’ awards for medical treatment. The Court of Appeal reversed the determination below.

The California Supreme Court reversed the appellate court. The Court stated that Section 4607 authorizes an award of attorney fees to an employee who has successfully defended against his employer’s attempt to terminate an award for medical treatment. The employee is entitled to attorney fees only if the employer challenged the continuing necessity for the original award. Attorney fee awards are not proper where the employer or insurer has denied a request for specific treatment. Here, each plaintiff made specific requests for treatment. SCIF disputed the specific requests and did not attack the plaintiffs’ initial awards of future treatment. The Court concluded that Section 4607 did not authorize an award of attorney fees to the Plaintiffs.

Fees Must Be Allocated Between Successful and Unsuccessful Claims in the Pigford Litigation

Posted on May 15, 2009 by Gary A. Bresee

The Pigford litigation involved a group of African American farmers who alleged the U.S. Department of Agriculture denied them farm loans and otherwise discriminated against them based upon their race.  One of those farmers, Robert Homes, was awarded $300,000 against the USDA.  However, Mr. Homes' was not as successsful in his fee request filed under the Equal Credit Opportunity and Equal Access to Justice Acts.  His $192,000 fee claim was recently rejected by Judge Paul Friedman of the U.S. District Court for the District of Columbia. 

The court reasoned that Mr. Homes alleged eleven distinct claims, but only succeeded on five.  And since each claim was based on a separate set of facts, they were unrelated.  Homes' lawyers were allegedly seeking time expended on some of the unsuccessful claims, so the court rejected the request.  Judge Friedman further explained:

[S]imply reducing Covington’s fee by a fraction corresponding to the number of unsuccessful claims is not likely to result in a fair and reasonable fee for Covington’s service.

Comment:  This is another good example of how fees could and should be allocated between claims.  Whether you are the party requesting fees, or opposing the fee application, depending upon the statutory scheme, one should not rely on simple ratios based upon successful vs. unsuccessful claims (in this case, 5/11).  Consider retaining an expert to analyze the specific billing entries, and allocate the time entries to work performed on only those claims upon which the party succeeded. 

$55.1 Million Sought In Attorneys' Fees for 5 Months of Work

Posted on May 14, 2009 by John "Jack" S. Pierce

On April 13, 2009, the law firm of Weil, Gotchal & Manges filed an application for legal fees in the Lehman Brothers bankruptcy case seeking a total of $55.1 million for professional services rendered over the 5 month and 15 day period from September 15, 2008, through January 31, 2009.

Justification for the fees is set forth in an Application filed in support which, amongst other things, proclaimed, in a somewhat dramatic fashion:

As Lehman’s employees rushed out of Lehman’s offices with boxes and suitcases filled with their belongings, WGM attorneys rushed in.

During this time the Weil Gotchal lawyers clocked a total of 100,296 hours on Lehman-related work as counsel for Lehman Brother, the debtor in possession. While most firms in today’s economy are facing a shortage of billable hours, Weil Gotshal is apparently not.

A review of the petition provides some interesting observations:

  • Collectively the firm’s timekeepers (partners, associates, paralegals etc) averaged more than 700 billed hours per day, seven days per week.
  • Billing rates of at least 15 Weil Gotshal timekeepers were in excess of $1,000.00 per hour.
  • More than 19 attorneys billed at legal rates in between $900 and $975 per hour.
  • 68 other lawyers billed at legal rates between $800 and $890 per hour.
  • Recent 2009 bar admittees were billing at rates as high as $415 per hour.
  • Harvey R. Miller, the head of the firm’s restructuring practice, billed 794.8 hours at the rate of $950 an hour for a total of $755,060 for his fees alone during this 5 month period.
  • One Corporate associate, licensed in 2008, billed at $560 per hour and had his billing rate increased to $650 per hour during this same 5 month period.

 The Application for fees was submitted to the Court on April 13, 2009, and will be reviewed by the Trustee in Bankruptcy. All objections were required to be filed by May 6, 2009. To date there has been no ruling on the issue of Weil Gotshal’s fees.

Surprisingly there has been an absence of objections filed to date. The sole objection filed thus far is from a retired Arizona school teacher, Ms. Edith S. Hall, who had purchased $50,000 of Lehman’s AA-rated corporate bonds in 2005 for their security value, which, at the time she believed to be a “conservative investment”.

Ms. Hall has asked the court to carefully review the fees of Weil Gotshal to which she has objected on the grounds that their fee request was “exorbitant”. She also told the court that “when the economy is in crisis and executive bonuses are being questioned, I feel these fees are excessive and should be capped.”  Other potential objectors have, thus far, been suspiciously silent.

Weil isn’t the only firm seeking significant fees from Lehman’s Chapter 11 case. Milbank Tweed Hadley McCloy, which is advising Lehman’s official committee of unsecured creditors, is now seeking $12.1 million in fees for the period through the end of January.

Lazard, Lehman’s investment banker, is also asking for $6.6 million in fees.

Ninth Circuit Reverses Trial Court's McCowan Decision on Prevailing Party Fees

Posted on May 1, 2009 by Gary A. Bresee

 

We reported on the Ninth Circuit's opinion in McCowan v. City of Fontana here, holding that the District Court failed to consider the level of success obtained by the plaintiff in a civil rights action.  See Ian McCowan v. City of Fontana 550 F3d 918 (2008).  McCowan had been arrested and tased by officers of the Fontana police department who had mistakenly believed that he was in possession of illegal drugs.  In his subsequent excessive force case, McCowan prevailed on only one of his nine claims and recovered only $20,000 in damages via settlement, despite alleging damages in excess of $75,000.  The District Court's award of $200,000 in legal fees and costs was overturned by the 9th Circuit.

On April 24, 2009, the Ninth Circuit recently denied McCowan's petition for panel rehearing and rehearing en banc.  See Ian McCowan v. City of Fontana, 08 C.D.O.S. 4957 (April 24, 2009).  However, the court also took the oportunity to amend its original opinion, issued December 24, 2008, by clearly explaining the tasks required by the District Court after remand.  The following instructions can be found in the conclusion of the amended opinion, but were not included in the original decision:

"When awarding attorney fees on remand, the district court should adequately explain the reasonable number of hours and hourly rate it uses in calculating the fee, and appropriately adjust the award to account for McCowan's limited success on claims and damages, and for any public benefit derived form his suit."

The original Ninth Circuit opinion had merely "reversed and remanded for reconsideration of the issue of attorneys' fees and costs consistent with" the opinion.  This quote is an excellent amendment to the opinion, because it provides the court (and the rest of us) with a clear step-by-step approach to analyzing these fee applications in the context of prevailing party suits.  If the December 2008 McCowan opinion was considered an important decision, then this amended opinion is now a "must read" for all prevailing parties.