Unsuccessful Litigant Still Wins Fees Under Vaccine Injury Act

Posted on June 7, 2013 by David J. McMahon

In Sebelius v. Cloer, the United States Supreme Court decided a closely watched attorney fee case arising under the National Childhood Vaccine Injury Act of 1986 (“the Act”). That Act established a no‑fault compensation system to speed compensation to any injured parties.

In Sebelius, the Court concluded that so long as the claimant’s petition was filed in “good faith and with a reasonable basis,” attorney fees were proper, even to a losing party. The Plaintiff received a hepatitis immunization. Shortly thereafter, the Plaintiff began to experience symptoms that ultimately led to multiple sclerosis (“MS”). Subsequently, the Plaintiff alleged a link between her MS diagnosis and the vaccine.

The Plaintiff then filed a claim for compensation under the Act. The Act requires claims to be adjudicated before a Special Master. 

After hearing the matter, the Special Master concluded that the Plaintiff’s filing was untimely as the claim was filed after the three year period set forth in the Act. The Federal Circuit agreed with the Special Master that the claim was not timely. Nonetheless, the Plaintiff sought attorney fees, and the Federal Circuit ultimately found she was entitled to recover reasonable fees.

On appeal, the Supreme Court affirmed the fee award. The Court noted that a court may award attorney fees and costs incurred by a claimant in any proceeding brought under the Act, even for an unsuccessful petition. A fee award is proper so long as the petition was brought in “good faith” and there was a “reasonable basis” for the claim. On that basis, the Court affirmed the grant of fees to the claimant.

HP Inkjet Printer Litigation: Fee Award Fails to Comply With Provisions of the Class Action Fairness Act

Posted on May 28, 2013 by David J. McMahon

In In re: HP Inkjet Printer Litigation, 2013 DJDAR 6149 (2013) the Ninth Circuit Court of Appeals reversed the approval of an attorney's fee award. The Ninth Circuit concluded that the fee award did not comply with the provisions of the Class Action Fairness Act (CAFA). Specifically, the Ninth Circuit found that the district court awarded fees that were “attributable” to the coupon relief offered in the settlement, but failed to first calculate the redemption value of the coupons as required by applicable law.

Plaintiffs filed three class actions alleging that HP engaged in unfair business practices relating to the use of ink cartridges. HP reached a settlement with the consumers, who purchased inkjet printers. The district court approved the settlement, which provided for coupons for the class members as well as injunctive relief. In addition, the district court approved an award of attorney fees of $1.5 million and a significant award of costs. 

The district court reviewed the fee request and awarded lodestar fees based on its conclusion that the settlement value to the class was $1.5 million. Recognizing that it would be improper to award fees that were higher than the class benefit, the court ordered HP to pay a reduced lodestar of $1.5 million down from a potential of $7 million in fees. Two class members objected, contending the reduced fee award still violated the provisions of CAFA.

The Ninth Circuit reversed the lower court’s decision on fees. The Ninth Circuit noted that under CAFA, when a settlement provides for coupon relief, the court must first calculate the redemption value of the coupon, as a prerequisite to considering the claim for attorney fees. As such, the Ninth Circuit concluded that under the provisions of CAFA, the district court was required to first calculate the redemption value of the e-credits in making its determination of attorney fees. 

Because the record did not reflect such an analysis, the Ninth Circuit remanded the case to the District Court to make a determination consistent with the required analysis under CAFA.

Trial Court Abuses Its Discretion by Forcing Insurer to Bear the Cost of Giving Notice to Putative Class Members

Posted on January 22, 2013 by David J. McMahon

In In re Insurance Installment Fee Cases, 2012 DJDAR 16696 (2012), the California Court of Appeal for the Fourth Appellate District decided an important class action cost recovery issue. The case arose in the insurance context.

A class action was filed against State Farm (“State Farm”) by a class representative. The representative pursued discovery seeking access to the class members’ personal and payment information, designed to identify which insureds might be eligible as plaintiffs in the class.  State Farm objected to the discovery requests. The plaintiff filed motions to compel the requested documents and the parties agreed to refer the dispute to a discovery referee. The discovery referee overruled State Farm’s objections. State Farm filed written objections to the referee’s recommendation which were subsequently overruled by the trial judge. The trial court also ordered State Farm to pay for and to mail out the notices regarding the discovery propounded by the plaintiffs. The merits of the litigation were subsequently decided in favor of State Farm.

State Farm filed a memorandum of costs after prevailing at the trial court level. In the cost memorandum State Farm sought to recover the $713,463 it incurred in sending out the notices to putative class members. The plaintiffs filed a motion to tax those costs. The trial court granted the motion to tax costs in its entirety.

The court of appeal reversed the trial court’s decision in part, and concluded the trial judge abused his discretion in taxing the costs relating to the mailing of the notices to putative class members. 

The court of appeal noted that certain cost items may be awarded in the trial court’s discretion if they are “reasonably necessary to the conduct of the litigation.” CCP § 1033.5(c)(2) and Seever v. Copley Press, 141 Cal. App. 4th 1550, 1558 (2006). 

However, when a party demands discovery involving significant “special attendant costs” beyond those typically involved in responding to routine discovery, the demanding party should bear those costs if the party is not successful in prevailing in the litigation. 

In reversing the trial court’s decision, the court of appeal reasoned that the costs State Farm incurred in providing the notice were “special attendant” costs beyond those involved in responding to routine discovery.

Prevailing Employer Is Entitled To Fee Award

Posted on November 2, 2012 by David J. McMahon

In Aleman v. AirTouch Cellular, 2012 DJDAR 13269 (2012), the California Court of Appeal for the Second Appellate District reexamined the denial of an attorney fee award based on the recently decided California Supreme Court decision in Kirby v. Immoos Fire Protection Inc., 53 Cal. 4th 1244 (2012) (discussed here).

Former employees of AirTouch Cellular sued the company, alleging that it failed to pay them compensation for attending mandatory meetings. The thrust of the plaintiffs’ claim was that AirTouch violated two separate provisions of the Industrial Welfare Commission’s Wage Orders. The trial court granted the defendant’s motion for summary judgment, finding that the plaintiffs were not entitled to additional compensation as they were paid significantly more than the minimum wage, which would trigger the requirement to pay more money.

After AirTouch sued for summary judgment but prior to its ruling, the plaintiffs moved for class certification. The court denied the plaintiffs’ class certification motion and the plaintiffs appealed. The second district rendered a decision in December of 2011, but in June 2012, the California Supreme Court directed reconsideration of the ruling in light of the Kirby decision.

After winning summary judgment, the defendant sought attorney fees under California Labor Code Section 218.5. Labor Code Section 218.5 allows a prevailing defendant to recover reasonable fees specified in wage litigation. The plaintiffs contended their causes of action were governed by Labor Code Section 1194. That Code section states that only plaintiffs in litigation involving unpaid wage allegations have standing to recover fees. Over the plaintiffs’ objection, the trial court awarded AirTouch $146,000 in fees against one plaintiff and $140,000 for the second.

The court of appeal reversed the award of fees in part. The court noted that in Kirby, the California Supreme Court noted that Section 1194 applies to claims for unpaid minimum wages or overtime compensation. Thus, to fall under Labor Code Section 1194, a claim must seek unpaid minimum wages or overtime compensation, as those terms are generally understood.

The second district held that only one of the claims was subject to Labor Code Section 1194. In doing so, it explained that the “split shift claim” is subject to Section 1194, given that the claim seeks to recover unpaid minimum wage compensation. However, a “reporting time claim” is not subject to Labor Code Section 1194. That claim seeks to recover unpaid wages. For these reasons, the court remanded the case, directing the trial court to allocate the fees incurred by AirTouch in defending the reporting time claim.

Ethical Conflicts Dooms Fee Claim in a Major Antitrust Class Action

Posted on August 23, 2012 by David J. McMahon

In Rodriguez v. Disner, 2012 DJDAR 11142 (2012), the United States Court of Appeals for the Ninth Circuit decided a novel attorney fee case implicating the rules of ethics in a class action context. The case implicated the propriety of “incentive agreements” between the plaintiffs’ class action lawyers and the five named plaintiffs in a massive antitrust class action.

The class action plaintiffs’ firm brought an action against a bar preparation course company. After the case settled, the class counsel sought attorney fees under the provisions of Federal Rule of Civil Procedure 23(a). The district court denied the fees petition in its entirety, on the grounds that the incentive agreements entered into between the class lawyers and five of the named plaintiffs breached the California Rules of Professional Conduct by creating conflicts of interests that were not disclosed and discharged by waiver or consent. Class counsel contended that the court could not deny fees unless counsel knowingly or willfully violated an ethical rule. The lawyers also suggested that because there was no “harm,” it was not proper to deny the fee claim.

The Ninth Circuit affirmed the trial court’s decision. The Ninth Circuit noted that in determining what fees are reasonable, a court may consider whether the attorney violated the California Rules of Professional Conduct during the handling of the litigation. The Ninth Circuit also referenced the court’s equitable power to deny attorney fees when an attorney represents clients with conflicting interests.

The Ninth Circuit seemed convinced that it was appropriate to deny fees where the class lawyers knowingly created a conflict of interest. The court noted that the agreements at issue created a conflict between clients because it treated certain clients better than others. The Ninth Circuit also referenced the fact that class counsel failed to disclose the agreements to the court and to the class in violation of both its fiduciary duties to the class and the duty of candor. On this basis, the court affirmed the denial of fees.

 

Fee Awards in Class Actions Vary Widely

Posted on May 8, 2012 by Peter Felsenfeld

As reported in the San Francisco Daily Journal, (subscription required), there is a wide disparity in attorney fees awarded in class actions. Though many jurisdictions provide fee award guidelines, judges are largely left to their discretion to decide what is fair.

The Journal reports that several recent awards have raised eyebrows. For example, an Arizona federal court last month approved $50 million in fees for securities firm Barrack, Rodos & Bacine after it achieved a $145 million settlement against the Apollo Group, Inc. for misleading investors. That fee far exceeded the amount awarded to lawyers who recovered four times as much for Countrywide Financial investors last year.

The Ninth Circuit Court of Appeals has established a guideline that fee awards should be set at approximately 25 percent of the final award, the Journal reports. Judges, however, have discretion to assess factors such as the amount of time attorneys actually worked, and reasonable rates and expenses.

The firm Robbins Geller recently drew the ire of U.S. District Judge Justin Quackenbush for unreasonable expenses. The Journal reports that the judge threatened sanctions upon discovering that the firm sought $125,000 for an in-house investigator that was paid only $30,000. The lawyers also sought reimbursement for a $400 meal that included an expensive wine.

According to the Journal, cost markups are a common practice, especially among plaintiffs firms that attempt to cover overhead from costly litigation. Defense firms are not immune from the practice either, though their clients are more likely to monitor the invoices for unjustified expenses.

The Journal reports that class members sometimes must file objections to fee awards in order to learn the details of a request. That happened in the New York federal case of Cassese v. Washington Mutual, Inc., where the relationship between plaintiffs and their attorneys deteriorated to the point that the firm sought to depose its former clients. The judge eventually ordered the firm to pay plaintiffs’ new lawyer nearly $19,000 for his costs in opposing the deposition.

Attorney Fees are Properly Awarded Under Prison Litigation Reform Act

Posted on May 8, 2012 by David J. McMahon

In Balla v. State of Idaho, 2012 DJDAR 4848 (2012), the Ninth Circuit Court of Appeals granted attorney fees in a class action brought under the provisions of the Prison Litigation Reform Act. The case began in the 1980s. The appeal arises out of a crisis which began at the end of 2008 relating to the retransfer of inmates back to the State of Idaho (the “State”). The State brought the prisoners back to the State even though it lacked the facilities to house or care for them. The class action was initiated on behalf of the prisoners and the complaint alleged a myriad of constitutional violations.

After nine years of litigation, the district court found the State had violated the prisoners’ constitutional rights and granted the plaintiffs an injunction to remedy the constitutional violations.

The law firm of Stoel Rives LLP had been appointed by the court as counsel for the class. After learning of the State’s plan to house prisoners, allegedly in violation of the prior injunction, Stoel Rives filed a contempt motion against the State. In response, the State took measures to comply with the injunction. Due to the State’s remedial actions, the court denied the contempt motion. Despite losing the motion, the district court thereafter awarded Stoel Rives its attorney fees and costs. The State appealed the fee award.

The Ninth Circuit affirmed the trial court’s ruling. The court noted that under the Prisoner Litigation Reform Act, attorney fees shall not be awarded, except to the extent that the fee was incurred in enforcing the plaintiff’s constitutional rights.

The court noted that a previously granted injunction was sufficient to meet the statutory threshold. The Ninth Circuit affirmed the award on that basis.

Ninth Circuit Finds Insufficient Basis for Large Attorney Fee Award

Posted on September 26, 2011 by David J. McMahon

In Jones v. GN Netcom Inc., 2011 DJDAR 12668 (2011), the U.S. Court of Appeal for the Ninth Circuit decided an issue that frequently arises in class action litigation. That issue relates to the often minimal benefits paid to class members while plaintiffs’ class counsel fees are often very high.

The case arose when numerous products liability class actions were fled against defendant Motorola Inc. The lawsuits alleged that Motorola purposefully failed to disclose the risk of hearing impairments caused by the use of Bluetooth headsets. The parties participated in mediation which resulted in a settlement. Motorola agreed to pay $100,000 in cy pres awards. The agreement also carved out up to $800,000 for fees to class counsel, and $12,000 for the class representative.

Certain class members objected to the fee award. Despite the objections, the district court approved the settlement and awarded $850,000 to class counsel for fees and costs based on the lodestar method. The trial court made the award despite the fact that the fees awarded were eight times more than the class recovery. The class objectors argued that the settlement was not fair and reasonable. They claimed the fee award advanced the interests of class counsel over the class itself.

The Ninth Circuit reversed the attorney fee award, noting that the trial court had an independent obligation to ensure that an award is reasonable. Because the record in the trial court did not contain an explicit calculation of the method utilized to calculate the lodestar amount, the Ninth Circuit found the award deficient. The Ninth Circuit found the record was not sufficient to support the award. Specifically, the Appellate Court found no comparison between the settlement’s attorney fee award and the benefit to the class, or degree of success in litigation. As such, there was an insufficient basis for determining the reasonableness of the award.

 

Technical Construction of 'Actual Controversy' Requirement Under CCP § 1060 is Overturned in Dispute Over Fees

Posted on October 25, 2010 by David J. McMahon

In Leonard Carder, LLP v. Patten, Faith & Sandford 2010 DJDAR 15776 (2010) the Second Appellate District interpreted the “actual controversy” requirement contained in CCP § 1060 in a fee dispute context.

Two law firms Leonard Carder LLP (“Carder”) and Patten, Faith & Sandford (“Patten”) were appointed to represent a class in a class action lawsuit. The litigation effort was successful and the class was awarded approximately $14.4 million in compensation. Carder moved for an award of attorney fees, presenting a lodestar calculation stating that Carder worked 11,414 hours and Patten worked 673 hours. Under the lodestar presented by Carder, fees were due in the sum of $10,879,272 for Carder and $373,040 for Patten. 

At the hearing on the motion, the trial court signed a stipulation by the parties concerning the fees owed. The court authorized payment of attorney fees totaling $12,475,000 to be paid to Carder “as trustees for distribution to all counsel.” 

Thereafter, Carder filed a declaratory relief action against Patten, alleging that Patten had received $373,040, but was also claiming the right to 40 percent of the award based on an alleged agreement between the firms. Patten failed to respond to the action in a timely manner and Carder applied for a default judgment. The court denied relief to Carder, ruling that “no controversy” existed under CCP § 1060.

The court of appeal reversed the lower court’s decision. 

The court stated that CCP § 1060 states that a person desiring a declaration of rights may file an action in cases of actual controversy.

“Actual controversy” refers to a probable future controversy relating to the parties’ rights and duties. The court concluded that the record on appeal contained evidence that Carder had written a letter to Patten agreeing to give 40 percent of fees to Patten but then later Carder repudiated the agreement. The court concluded that based on this record, there was an ongoing controversy over the distribution of attorney fees.

The court of appeal therefore reversed the trial court’s decision and remanded the case for further proceedings.

 

Prevailing Defendant Entitled to Fee Award Unrelated To Claims Seeking Unpaid Wages

Posted on September 1, 2010 by David J. McMahon

In Kirby v. Immoos Fire Protection Inc., 2010 DJDAR 11569 (2010) the Third Appellate District of the California Court of Appeal decided an appeal challenging an award of attorneys fees to an employer who successfully defended against allegations of labor violations by two employees.

Anthony Kirby and Rich Leech (hereinafter “Plaintiffs”) filed suit against Immoos Fire Protection Inc. The complaint alleged six causes of action for violations of various labor laws as well as unfair competition (Business & Professions Code §17200).

The trial court rejected the Plaintiffs’ motion for class action certification. The Plaintiffs then dismissed with prejudice their complaint as to all causes of action. The trial court awarded the Defendant attorney fees of $49,846.05 for its defense of three of the six causes of action, including Labor Code violations and the §17200 claims. The Plaintiffs appealed the decision awarding the Defendant attorneys fees.

The Court of Appeal noted that Labor Code § 218.5 provides for fee shifting in favor of the party that prevails on a claim for unpaid wages. The court noted, however, that § 218.5 does not allow employers to recover fees in any action for minimum or overtime wages.

The Plaintiffs’ complaint included causes of action involving failure to pay minimum wages as well as other, non‑wage claims. The court rejected the Plaintiffs’ argument that a prevailing Defendant may not recover fees in a case that includes a claim for unpaid minimum or overtime wages. The court noted that attorney fees may still be awarded for unrelated claims subject to the fee‑shifting provisions of § 218.5.  

The Court of Appeal concluded that the trial court’s award of attorney fees for Immoos non‑wage related defense was proper. However, attorney fees awarded on two other causes of action was overruled as the award was miscalculated.

Award of Attorney Fees Under the Automobile Sale Finance Act Upheld by Court of Appeal

Posted on July 20, 2010 by David J. McMahon

by David J. McMahon and Tino X. Do

In Nelson v. Pearson Ford Co., D054369 (July 15, 2010), the Fourth Appellate District upheld the trial court’s judgment awarding attorney fees to plaintiff class representative under the Automobile Sale Finance Act (“ASFA”), and denied costs to defendant in its claim under California Code of Civil Procedure Section 998.

Nelson involved a class action against the Pearson Ford car dealership for alleged violations of the ASFA, Consumers Legal Remedies Act (“CLRA”) and California Unfair Competition Law (“UCL”) arising from a backdated car sale contract that resulted in a car buyer paying interest for a time period when no contract existed, and for erroneously adding insurance premium to the sales price of the car which resulted in additional sales tax and financing charges. 

Two separate classes were certified by the trial court: the backdating class and the insurance class. 

Following a bench trial, the trial court found Pearson Ford liable under the ASFA to only the insurance class, liable to both classes under the UCL, and not liable to either class under the CLRA. The trial court granted certain remedies under the ASFA and the UCL, and awarded Nelson his attorney fees and costs under the ASFA. Both parties appealed. 

The appellate court reversed the trial court as to the portion of the judgment finding Pearson Ford not liable to the backdating class under the ASFA and the CLRA. The court also found that the trial court erred in the remedies it awarded under the ASFA and the UCL. The court upheld the trial court’s ruling on the award of attorney fees and costs.

Attorney fees in this matter were not awarded under the UCL, which does not permit this type of remedy, but under the AFSA, a statute that specifically grants the recovery of attorney fees to the prevailing party. 

The appellate court noted that Pearson Ford did not challenge the trial court’s conclusion that Nelson was the prevailing party for both classes under the ASFA (Civ. Code section 2983.4), or dispute the awarded amount. Instead, Pearson Ford argued that the trial court should have taken into consideration the fact that it had made a Section 998 offer of $500,000 before trial, and that Nelson failed to obtain a more favorable judgment at trial. 

The appellate court, while noting that a valid settlement offer can be made under Section 998 in a certified class action, agreed with the trial court that the Section 998 offer at issue was invalid because it was a lump-sum offer to two classes. The court stated that it would be impossible to determine whether either class received a less favorable result at trial than it would have received under the offer.

"Clear Sailing" Agreement Is Approved By Court In Consolidated Consumer Class Action Case

Posted on August 21, 2009 by David J. McMahon

In Consolidated Consumer Privacy Cases, California Court of Appeal – 1st District, 2009 DJDAR 9765 (June 30, 2009), the First Appellate District approved what is sometimes referred to as the “clear sailing” doctrine concerning an attorney fee award. The award was sought under the common fund doctrine and under the “private attorney general” provisions of CCP § 1021.5.

The Utility Consumers’ Action Network (“Utility Consumers’”) sued Bank of America N.A. (hereinafter the “Bank”) and related entities for unfair competition, false advertising, invasion of privacy and related claims. Thereafter, the case was coordinated with similar actions filed against the Bank. In April of 2003, a consolidated class action complaint was filed against the Bank pursuant to court order. That complaint alleged that the Bank disclosed confidential information to unauthorized third parties for a fee. The parties reached a comprehensive settlement agreement in 2007, which provided that class counsel would seek court approval for payment of not more than $4 million in attorney fees from the Bank.

The Bank agreed not to oppose such an application by class counsel, so long as the fee award was capped at $4 million or below. The Bank did reserve the right to seek to withdraw from the agreement if the court awarded a higher amount. The arrangement not to oppose a set sum amount of attorney fees is often referred to as a “clear sailing” agreement. After approving the settlement, the trial court awarded almost $3 million to class counsel plus expenses. Numerous parties then filed an appeal, arguing that the trial court erred in approving the amount of fees to class counsel and specifically the procedural vehicle referred to as the “clear sailing” agreement.

The court of appeal affirmed. The court noted, that under the record before it, there were no terms contained in the agreement that were inappropriate. The court specifically noted that it could find no federal or California authority which condemned an agreement by the defendant to pay reasonable attorney fees as awarded by the court, up to a certain amount. The court noted that the objectors’ claims that such a payment scheme constituted a breach of fiduciary responsibility by affording class counsel on incentive to prioritize their fee claim, over the class’s recovery was not meritorious. The court even recognized that the Federal Manual for Complex Litigation acknowledged and implicitly approved of such an arrangement. 

Clear sailing agreements are a useful tool in resolving complex cases and take some of the uncertainty out of the amount and ultimate resolution of fee awards.

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.