In re Capital One TCPA Litigation Seventh Circuit appeal

Litigation over whether Capital One and its affiliates violated the Telephone Consumer Protection Act settled for $75.5 million—about $4 for each of the 17.5 million class members who allegedly had a statutory claim for $500 or more. Six law firms asked for 30% of that, or over $22.6 million. We objected on behalf of a class member, Jeffrey Collins, introducing evidence showing that something more in the 4.6% range would more than fully compensate class counsel for the risk they incurred. The district court did not adopt our arguments, but agreed with us that there should be a declining percentage as the fund grew larger, and awarded "only" $15,668,265. That's for 4,268 hours of work by six law firms, including associates and paralegals, or over $3,671/hour. Other TCPA cases have awarded over $5,000/hour for similarly mediocre results.

This award is not because the underlying TCPA action was extraordinarily risky: the evidence showed that class counsel won settlements in 16 out of 38 TCPA class actions over the last four years and collected handsome fees for 64% of the hours they devoted to TCPA litigation. Moreover, the court found only that this case was “slightly” more risky than typical TCPA litigation. Nor did it reflect extraordinary litigation efforts: the case settled immediately after the filing of the MDL complaint. Nor did it reflect above-average efficiency: six firms claimed a right to fees, though only three had been appointed in the district court’s original Rule 23(g) order, and the lodestar was substantially higher than in other TCPA cases. Nor is this an extraordinary settlement: as mentioned, class members’ multiple $500 statutory claims were settled for about $4/class member before attorneys’ fees.

We do not contend that a court can never award such a generous hourly rate. But the Seventh Circuit has “held repeatedly that, when deciding on appropriate fee levels in common-fund cases, courts must do their best to award counsel the market price for legal services, in light of the risk of nonpayment and the normal rate of compensation in the market at the time.” We do not believe a sophisticated arms-length transaction would produce this sort of windfall for these sorts of results, and we have appealed, filing our opening brief Monday.

The case presents another interesting issue: can class counsel agree not to compete for lead-counsel status, and then divvy up a lump-sum fee request in a secret side agreement without approval or review of the court and the class? We think Rule 23(h) and Rule 23(e)(3) do not permit that.

Daniel Fisher has a great summary of the appeal on Forbes.com.

Festivus update

• In the Toys "R" Us baby products antitrust case, the E.D. Pa. approved a settlement and fee request that pays $14M to attorneys and $8.1M to class members over our objection. Law.com describes it as a "24% recovery for the class"; if that's accurate, that raises the question why there will be another $13 million of payments to cy pres recipients not disclosed to the class instead of to the class. Aside from the fact of attorneys getting nearly twice as much as class members.
• We also lost in the Franklin Templeton Mutual case, where the judge approved a settlement and fee request where the attorneys are getting $2.142 million and the class $2.27 million. To me, that effectively reads the attorneys' fees restrictions directly out of the PSLRA, but we'll wait for a more egregious abuse to take that legal question up on appeal.
• With all that bad news, we'll take a small partial victory in the Fogel v. Farmers case, where the court reduced an outrageous fee request of $90 million (for a $159 million class recovery) to a merely ginormous $73.7 million award. The judge praised our objection as helpful and invited us to make a fee request. We requested between $10,500 and $33 thousand in fees and expenses, and the court awarded us over $47 thousand. Awkward. We'll try to put the money to good use for class members in other cases, though with appeals, we aren't going to see it for some time. The settlement had Bluetooth problems and the fee disposition is a gigantic windfall that could have been more appropriately directed at the class, but it's in California state court (a legacy pre-CAFA case), there are other objectors who will appeal, and we'll defer to what they're doing, with perhaps an amicus instead of a direct appeal; the long-term precedential value of this case, with even a successful appeal, is pretty close to zero.
• I forgot to mention a similar small partial victory in the HP Laserjet case back in August; the court approved the settlement after valuing the coupon relief at zero, but did reduce the attorney award from $2.75M to $2M. Close enough for government work; we didn't appeal.
• We've been invited to make a fee request in another case where we objected in the District Court of Maine a while back, the New Vehicles Canadian Export Antitrust Litigation, MDL No. 1532; our objection resulted in an improper $500,000 cy pres being returned to the class common fund. We haven't decided whether to request a token amount of that. 
• Appellee briefs are in in the Inkjet case in the Ninth Circuit. I'll post about that after the new year if you don't want to look it up on PACER yourself.

mid-December update

• Wednesday, we filed our Second Circuit brief in Blessing v. Sirius XM Radio, Inc. 
• Appellees are filing response briefs in Cobell v. Salazar today. We'll put them up in our Cobell appeal update post when they make it onto the web. Oral argument is scheduled for February 16. If you're going to be in the DC area at the beginning of February, and I know you personally, let me know if you're interested in attending a moot.
• The district court approved the settlement in Barber Auto Sales v. UPS. I'm unhappy with the ruling, which I think is very wrong, but the case is both too small and too narrow to be worth appealing; we already have the larger Sirius case and pending HP Inkjet case in appellate courts to raise the Class Action Fairness Act issues that would have been central to this case. Devoting resources to appealing this case would preclude us from objecting in a couple of other cases, and stretch us pretty thin with the existing appellate schedule. Can't win 'em all, even if we only bring cases that should be won.
• The district court approved the settlement and the fee request in Trombley v. National City Bank. If it's not an abuse of discretion to approve a 28% fee and $3000/hour-of-paralegal recovery when a case settles without any risk on Docket Entry No. 5, it never is, so we're thinking long and hard about whether to appeal this one; one objector has already appealed, so our appeal wouldn't have any effect on when payouts occurred.
• The appalling refusal of Missouri appellate courts to do anything about the coupon settlement ripoff in Bachman v. AG Edwards earlier this year resulted in that state receiving attention in the annual Judicial Hellholes report earlier this week.
• It's not all bad news. Yesterday was the hearing in the second Classmates.com settlement. The parties agreed to modify the settlement to remove the Bluetooth kicker, and the court indicated it would reduce the $1.05M fee request, meaning that money will go to the class. The fee reduction alone might outstrip the original $117,000 settlement, which is now worth over $2.5M. If you're keeping track, that's the fifth time in a row we've won a case and/or fee reduction against Kabateck Brown Kellner; one hopes that this discourages them from continuing to bring bad class actions just to negotiate self-serving settlements. This time, they refrained from abusive ad hominem attacks against us in their briefs; they're learning.

Baby products objection

As discussed at Point of Law, CCAF has filed an objection to the Babies "R" Us settlement in McDonough v. Toys "R" Us, Inc., No. 06-cv-242 (E.D. Pa.).

Objectors and fee requests

We recently had two victories in two cases in front of the same judge; the question then becomes whether to submit a fee request. There's good precedent for us asking for fees in both cases on the theory that the objection "improved the process," but we take the position that class attorneys should only recover fees rationally related to the size of the class benefit achieved, so, to remain cleaner than Caesar's wife, we only ask for fees when we actually achieve a pecuniary benefit for the class, and our fee request is always on a percentage basis of the benefit. (Moreover, we only accept fees that are court-ordered, and we do not "settle" our objections unless the settlement results in a fix of the issues we objected to, i.e., we don't make quid quo pro extortionate objections for settlement money.)

A lodestar calculation is a bad idea for objections, because it encourages technical objections that don't benefit the class, and encourages wasteful litigation over fishing-expedition discovery. It's too easy to manipulate lodestar: we see this often in the class action context, where lots of low-paid temp attorneys request and review millions of pointless documents and then get "billed" at over $300/hour. Nor is it a good use of court resources to scrutinize the hourly bills for waste and duplication (which is bound to happen given the number of cases unnecessarily involving multiple law firms). The right way, and most efficient way, to align incentives is, in my view, a reasonable percentage of the recovery.

So, in one case, our only accomplishment was to reduce the exorbitant fee request; we didn't ask for fees for ourselves because the class didn't see a penny of that reduction (though a for-profit objector did request fees, as was their right). In the other case, the parties responded to our objection by modifying the settlement to partially address our concerns, and, as a result, the class received an additional $2.5 million in recovery that would have otherwise instead gone to unrelated third parties (including two schools affiliated with lead class counsel).

A year ago I said we wouldn't seek more than 4.4% in a fee request, but that was when we consisted of one attorney and one part-time volunteer; I was indifferent if we were short on cash flow in any given month, because I live a frugal life and could support myself out of my own savings and occasional poker-playing Las Vegas trips if I had to (as I did for several months). Now that I have other attorneys doing work for CCAF who do depend on CCAF for an embarrassingly below-market income, and who would suffer financially if we ever ran out of money; and now that I find CCAF having to turn down legitimate cases because of lack of resources, I'm hurting my cause by being so noble-minded. And because we only ask for fees to be deducted from class counsel's fee request, the only beneficiary of that noble-mindedness are the trial lawyers who were happy to shortchange their putative clients to begin with.

In the case where we won $2.5 million, the plaintiffs' attorneys made lots of frivolous arguments and filings that raised our costs and time-commitment substantially, and created risk that we wouldn't get any fees at all. We would have been willing to stipulate for a joint application for 3.5% of what we had won, but the plaintiffs' attorneys, embarrassed by our success, insisted on scorched-earth litigation tactics instead (including the standard offensive ad hominem name-calling), so, given the increased risk we were facing, and the increased hassle of having to collaterally litigate attorneys' fees instead of other class action settlements, we saw no reason not to request the full extent of what the law permits—a proportionate share of attorneys' fees, reflecting our contribution to the class recovery. 15% of the class recovery was directly attributable to our objection: why shouldn't we get 15% of the total amount of attorneys' fees? In this case, it works out to an 11.9% contingent-fee request, still well under the 25% benchmark for settlements of this size or the 35%+expenses we see some class attorneys abusively request.

Nevertheless, we operate largely on the basis of the generosity of our donors. If you gave us money between May 30 and today because you thought we were only going to ask for 4.4% of attorneys' fees, and do not believe you have gotten fair charitable value from your donation or are otherwise offended by our fee request, let me know, and we can discuss a refund or a modification of our request.