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.
Sunday, April 17, 2011
Friday, April 15, 2011
EA Sports Litigation (Pecover v. Electronic Arts Inc.)
Class members getting a notice for this case have been writing me. Dudes: I made my name in the Grand Theft Auto class action, of course I bought Madden and am a class member here.
This is a class action certification, rather than a settlement, so there isn't an easy way for me to get involved at this stage. At the moment, the problem is one of antitrust law, rather than class action law: as the defendant, Electronic Arts already has every incentive to litigate for a reasonable interpretation of antitrust law (and, more particularly, law geeks, the Aspen Skiing or bottleneck doctrine) without me butting in. Given my limited resources and heavy caseload (five cases have filings due in the next seven days!), I prefer to save my powder for cases—like class action settlements—where none of the parties before the court have the proper incentive to ensure the right questions get before the court unless I speak up. I would like to see more courts consider Rule 23(a)(4) in antitrust cases, since many class actions involve legal theories that would make the putative clients/consumers worse off, and a class certification is effectively a merits decision that a class member would prefer to endorse the class attorney's theory of the case. And some day in some case where the conflict is clearer and the defendant hasn't alienated me with poor customer service and buggy products, I'll make that argument. But given that courts have never considered this question before, I want the first time I make the argument to be a better test case than this one.
Rest assured, however, that I'm monitoring the case, and will not hesitate to get involved if class counsel tries to pull a fast one on their clients. (I'm naively hoping that, if I'm doing my job right, my vocal presence in the class will deter class counsel from negotiating a settlement I would object to in the first place.) If you're asking me what you should do, I can't give you individual legal advice if we don't have an attorney-client relationship, but I would note that there is no reason to ever opt out of a class action unless you plan to be suing the defendant yourself. If you're still in the class when it settles, you can always object later if the lawyers turn out to be settling the case for their benefit rather than yours.
The case number is 08-cv-2820-CW (N.D. Cal.).
This is a class action certification, rather than a settlement, so there isn't an easy way for me to get involved at this stage. At the moment, the problem is one of antitrust law, rather than class action law: as the defendant, Electronic Arts already has every incentive to litigate for a reasonable interpretation of antitrust law (and, more particularly, law geeks, the Aspen Skiing or bottleneck doctrine) without me butting in. Given my limited resources and heavy caseload (five cases have filings due in the next seven days!), I prefer to save my powder for cases—like class action settlements—where none of the parties before the court have the proper incentive to ensure the right questions get before the court unless I speak up. I would like to see more courts consider Rule 23(a)(4) in antitrust cases, since many class actions involve legal theories that would make the putative clients/consumers worse off, and a class certification is effectively a merits decision that a class member would prefer to endorse the class attorney's theory of the case. And some day in some case where the conflict is clearer and the defendant hasn't alienated me with poor customer service and buggy products, I'll make that argument. But given that courts have never considered this question before, I want the first time I make the argument to be a better test case than this one.
Rest assured, however, that I'm monitoring the case, and will not hesitate to get involved if class counsel tries to pull a fast one on their clients. (I'm naively hoping that, if I'm doing my job right, my vocal presence in the class will deter class counsel from negotiating a settlement I would object to in the first place.) If you're asking me what you should do, I can't give you individual legal advice if we don't have an attorney-client relationship, but I would note that there is no reason to ever opt out of a class action unless you plan to be suing the defendant yourself. If you're still in the class when it settles, you can always object later if the lawyers turn out to be settling the case for their benefit rather than yours.
The case number is 08-cv-2820-CW (N.D. Cal.).
Monday, April 11, 2011
Court reduces fees after CCAF objection to HP settlement
In January, we discussed a Center for Class Action Fairness objection to a coupon settlement involving HP inkjet printers. That settlement turned out to be even worse than the pathetic one advertised: $5 million in coupons were offered, but the multi-million member class only bothered to file claims for $1.5 million worth of the coupons, with the rest reverting to HP. And of course, a claim for a coupon is not an actual redemption of the coupon: my $2 coupon will likely go unused, since there's nothing HP sells on its website that isn't more than two dollars more expensive than what I can get it for elsewhere.
The attorneys asked for $2.9 million in fees and expenses, justifying it with a quack economic expert report valuing some token injunctive relief as being worth tens of millions of dollars. In a March 29 opinion, Judge Fogel rejected that valuation, held that the settlement was worth only $1.5 million to the class, and reduced the award of fees and expenses to $2.1 million.
Some of the language in the opinion is very good: all too often, courts divorce the fee inquiry from the relief actually won. As Russell Jackson points out, this court said, "To allow an award of attorneys' fees to outstrip the benefit to consumers in such cases would undermine the importance of focusing the efforts of class action counsel on issues that most affect consumers."
So why did the attorneys get $2.1 million? Because of the economic fiction of "fees" and "expenses," which are calculated differently. See, "expenses" cover things like travel, experts, and copying costs. But "fees," that covers things like rent and other overhead, attorney salaries, and paralegals. Attorneys will allocate a dollar received into one bucket or the other, and for some reason, courts will scrutinize the buckets differently, though at the end of the day, the attorneys get a single check for money that they can spend any way they want: the rent and the airlines are going to get paid either way. So the court held that the $2.9 million requested, consisting of $2.3 million in fees and $0.6 million in expenses, was unreasonable with respect to the fees, and reasonable with respect to the expenses—even though the fee request also includes money that goes to expenses, just a different category of expenses. So the attorneys got all of their "expense" request, and just had the "fee" request reduced—but still ended up with more than the class.
That's just business as usual, but there were a couple of other troubling things about the decision. The Class Action Fairness Act requires coupons to be valued by their redemption rate, not by the claim rate. Many of these coupons (such as the one I am scheduled to receive) are not going to be used; one institutional party received tens of thousands of unusable coupons because the terms of the settlement require a claimant to use only one coupon per order, and it would be infeasible for the company to split up its bulk orders to tens of thousands of individual orders.
Second, the court opinion says that there were only three objections, but this is false: there were hundreds of objections, but, because of a confusing notice, 99% of the objectors (including the institution discussed earlier) sent their objections to the claims administrator, the parties never passed along those objections to the court, and the court disregarded my complaint about the procedure in its opinion. Ironic for a consumer fraud case that the plaintiffs' attorneys successfully took advantage of a misleading notice they provided.
Should CCAF appeal this decision? An attorney commenting at Jackson's site suggests that the plaintiffs' attorneys will appeal, and if they do, we'll certainly cross-appeal. At some point CCAF will ask the appellate courts to create a bright-line rule forbidding attorneys from recovering more than their clients. Is this the case to do it?
The attorneys asked for $2.9 million in fees and expenses, justifying it with a quack economic expert report valuing some token injunctive relief as being worth tens of millions of dollars. In a March 29 opinion, Judge Fogel rejected that valuation, held that the settlement was worth only $1.5 million to the class, and reduced the award of fees and expenses to $2.1 million.
Some of the language in the opinion is very good: all too often, courts divorce the fee inquiry from the relief actually won. As Russell Jackson points out, this court said, "To allow an award of attorneys' fees to outstrip the benefit to consumers in such cases would undermine the importance of focusing the efforts of class action counsel on issues that most affect consumers."
So why did the attorneys get $2.1 million? Because of the economic fiction of "fees" and "expenses," which are calculated differently. See, "expenses" cover things like travel, experts, and copying costs. But "fees," that covers things like rent and other overhead, attorney salaries, and paralegals. Attorneys will allocate a dollar received into one bucket or the other, and for some reason, courts will scrutinize the buckets differently, though at the end of the day, the attorneys get a single check for money that they can spend any way they want: the rent and the airlines are going to get paid either way. So the court held that the $2.9 million requested, consisting of $2.3 million in fees and $0.6 million in expenses, was unreasonable with respect to the fees, and reasonable with respect to the expenses—even though the fee request also includes money that goes to expenses, just a different category of expenses. So the attorneys got all of their "expense" request, and just had the "fee" request reduced—but still ended up with more than the class.
That's just business as usual, but there were a couple of other troubling things about the decision. The Class Action Fairness Act requires coupons to be valued by their redemption rate, not by the claim rate. Many of these coupons (such as the one I am scheduled to receive) are not going to be used; one institutional party received tens of thousands of unusable coupons because the terms of the settlement require a claimant to use only one coupon per order, and it would be infeasible for the company to split up its bulk orders to tens of thousands of individual orders.
Second, the court opinion says that there were only three objections, but this is false: there were hundreds of objections, but, because of a confusing notice, 99% of the objectors (including the institution discussed earlier) sent their objections to the claims administrator, the parties never passed along those objections to the court, and the court disregarded my complaint about the procedure in its opinion. Ironic for a consumer fraud case that the plaintiffs' attorneys successfully took advantage of a misleading notice they provided.
Should CCAF appeal this decision? An attorney commenting at Jackson's site suggests that the plaintiffs' attorneys will appeal, and if they do, we'll certainly cross-appeal. At some point CCAF will ask the appellate courts to create a bright-line rule forbidding attorneys from recovering more than their clients. Is this the case to do it?
Friday, April 1, 2011
April Fools Day and the New York Times
I recently treated myself to the new iPad, which arrived this week, and was looking forward to reading the NY Times this morning with that pretty iPad app, only to learn that everything is behind a paywall. The Times has been good to me over the years, but they keep getting fooled by the likes of my former client Eric Turkewitz every April 1, as his 2010 prank demonstrates. The paywall hasn't changed anything: it's totally unbelievable, but it happened again in 2011 and Popehat has the details of the hilarious prank.
Alas, I won't be able to track how the blogosphere reacts, because I'm speaking at the University of Cincinnati today: check out the webcast.
Alas, I won't be able to track how the blogosphere reacts, because I'm speaking at the University of Cincinnati today: check out the webcast.
Wednesday, March 30, 2011
Speaking at University of Cincinnati April 1
I'm apparently a "leading advocate for class action reform." An impressive roster of speakers is going to have to sit through my lunchtime talk, which is part of the symposium entitled "The Principles and Politics of Aggregate Litigation: CAFA, PSLRA, and Beyond." The event will be webcast.
Tuesday, March 29, 2011
NVIDIA hearing held March 28
As I discussed on our Facebook page yesterday, I wasn't given our full ten minutes to argue in the hearing, while Milberg and NVIDIA took well over ten minutes each to argue against the motion. This could mean Judge Ware didn't care what I had to say, or it could mean that he wanted to give the other side the chance to exhaust every argument before ruling against them, or it could mean nothing at all or anything in between. The judge acknowledged the difference between a 17-inch screen and the smaller replacement computer screen. Judge Ware said he'd review the technical reports, so it seems that it will come down to which experts he believes. Will the judge see that Nader Bagherzadeh's conclusions are dishonestly inconsistent with his own data or that Jon Peddie applied the wrong legal standard and contradicted his non-litigation positions? I don't know, and I don't know when the judge will rule. I have one case in Chicago where we've been waiting since October for a ruling, and a recent case in New Jersey where a ruling came in less than 24 hours.
Update: Court rules for NVIDIA. If you're a class member with questions about the case, and why your attorneys argued against your own recovery, you need to talk to your attorneys at Milberg; I cannot help you.
Update: Court rules for NVIDIA. If you're a class member with questions about the case, and why your attorneys argued against your own recovery, you need to talk to your attorneys at Milberg; I cannot help you.
Monday, March 14, 2011
Reply brief filed in NVIDIA case
Our earlier post continues to update the docket, most notably with our reply brief filed today.
It's hard to believe that multiple millionaire lawyers from multiple law firms all asked the court to apply the wrong legal standard for deciding a dispute over a consent decree accidentally. I'll take it as a good sign that they didn't think they could win if the court applied the correct legal standard and that their only hope was to obfuscate. It is of some concern that lawyers think they can obfuscate like that and get away with it without getting sanctioned.
What is most remarkable is the shamelessness of the contrasting claims by NVIDIA and Milberg. When asking the court to disregard objections to the settlement, the settling parties argued that there would be hundreds of thousands of claims worth at least tens (and probably hundreds) of millions of dollars. (Milberg actually argued that there would be "exponentially" more than hundreds of thousands of claims, but I presume that was because they don't know what "exponentially" means rather than because they were arguing that there would be tens of billions of claims.)
But push has come to shove, and only 30 thousand class members have taken the preliminary steps of asking for relief—and the Settling Parties have the gall to argue that this response rate (which will correspond to less than $10 million of class benefit, less than the $13 million attorney fee) demonstrates the popularity of the settlement administration, because one couldn't reasonably expect any more claims than that. We didn't even ask for those numbers: NVIDIA shamelessly volunteered them as evidence of the success of the settlement.
This case is a poster child for why courts should not award attorneys' fees until after the claims period has ended. If we hadn't intervened in this case, no one would have ever disclosed that Milberg exaggerated class recovery twenty- to fifty-fold, and this would be recorded in some empirical study as evidence of attorneys generously restricting themselves to fees of less than 10% of class recovery, rather than 130% of class recovery.
Update: Court rules for NVIDIA. If you're a class member with questions about the case, and why your attorneys argued against your own recovery, you need to talk to your attorneys at Milberg; I cannot help you.
It's hard to believe that multiple millionaire lawyers from multiple law firms all asked the court to apply the wrong legal standard for deciding a dispute over a consent decree accidentally. I'll take it as a good sign that they didn't think they could win if the court applied the correct legal standard and that their only hope was to obfuscate. It is of some concern that lawyers think they can obfuscate like that and get away with it without getting sanctioned.
What is most remarkable is the shamelessness of the contrasting claims by NVIDIA and Milberg. When asking the court to disregard objections to the settlement, the settling parties argued that there would be hundreds of thousands of claims worth at least tens (and probably hundreds) of millions of dollars. (Milberg actually argued that there would be "exponentially" more than hundreds of thousands of claims, but I presume that was because they don't know what "exponentially" means rather than because they were arguing that there would be tens of billions of claims.)
But push has come to shove, and only 30 thousand class members have taken the preliminary steps of asking for relief—and the Settling Parties have the gall to argue that this response rate (which will correspond to less than $10 million of class benefit, less than the $13 million attorney fee) demonstrates the popularity of the settlement administration, because one couldn't reasonably expect any more claims than that. We didn't even ask for those numbers: NVIDIA shamelessly volunteered them as evidence of the success of the settlement.
This case is a poster child for why courts should not award attorneys' fees until after the claims period has ended. If we hadn't intervened in this case, no one would have ever disclosed that Milberg exaggerated class recovery twenty- to fifty-fold, and this would be recorded in some empirical study as evidence of attorneys generously restricting themselves to fees of less than 10% of class recovery, rather than 130% of class recovery.
Update: Court rules for NVIDIA. If you're a class member with questions about the case, and why your attorneys argued against your own recovery, you need to talk to your attorneys at Milberg; I cannot help you.
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