Posts Tagged ‘feeing frenzy’

Grand Theft Auto: Class Action Settlement – $26,505 for the unrepresented class, $1 million fee request

We now know how many people signed up for the Grand Theft Auto: San Andreas class action settlement out of the millions of members in the purported class.

Tier 1 (up to $35.00) (no exchange required): 416
Tier 2 (up to $17.50) (exchange required): 22
Tier 3 ($10.00) (exchange required): 131
Tier 4 ($5.00) (no exchange required): 2,050
Disc Exchange w/o cash: 57

2676 total claimants, receiving a total cash value of at most $26,505, though likely even less than that, given that the plaintiffs’ attorneys record no actual cash distribution.

The seven “representative” class members are asking for approval to receive another $24,500, or nearly half of the total cash recovery.

Of course, as we’ve discussed, none of these people had a legitimate cause of action or suffered any legally cognizable injury. But how much are the plaintiffs’ attorneys (from thirteen different offices of twelve different law firms!) asking for for this travesty of a lawsuit and settlement–one that was entirely redundant of the taxpayer-funded investigation conducted by the Los Angeles district attorney? They claim their time devoted to the litigation was worth $1,317,433, but are “generously” claiming a 28% discount for a total fees-and-costs request of $1 million.

Recognizing that this 3774% contingent fee looks fishy to the least scrutinizing of judges applying Rule 23 review, the plaintiffs have sought to inflate the appearance of accomplishment through a $870,000 cy pres award to the National PTA and ESRB. (As I’ve discussed, cy pres awards that do not directly benefit class members should not be used to justify fee awards.) They also inflate the award by claiming that the costs of notice, administration and disk replacement should be attributed to the size of the accomplished result, thus puffing matters up to over $2 million, consisting nearly entirely of empty calories for the plaintiffs they purport to be representing.

Alas, I was the only class member to docket a formal objection to this rip-off. (While it was my idea to object, I can take no credit for the objection brief, which was written by my attorney, Larry Schonbrun.) On Thursday, the plaintiffs’ attorneys filed a brief defending the settlement, with many cites to Overlawyered as ad hominem attacks on the objection. The court’s hearing is June 25.

Disbar Dickie Scruggs?

Not so fast, he says — the Mississippi Bar didn’t file a “certified copy” of his guilty plea. (Patsy R. Brumfield, “Dickie Scruggs files to dismiss attempt to have him disbarred”, Northeast Mississippi Daily Journal, Apr. 1).

David Rossmiller has ten unanswered questions about loose ends in the Scruggs scandal (Mar. 24) which elicit responses in turn (and more unanswered questions) from NMC and Lotus at Folo (plus an NMC update). These latter bloggers, by the way, have shed their anonymity and stand revealed as Oxford, Miss. lawyer Tom Freeland (NMC) and retired lawyer Jan Goodrich, now of New Smyrna Beach, Fla. (Lotus), now also joined by Jane Tucker.

Is it okay for the University of Mississippi (Ole Miss) to take Scruggs’s money? “It depends on what the felony is…” Chancellor Robert Khayat is quoted as saying (Folo/NMC, Apr. 1; more). Gulfport M.D. Bill Hemeter, in a letter to the editor printed in the Biloxi Sun-Herald (Mar. 19), is claiming prescience: “I sent Chancellor Khayat the book ‘The Rule of Lawyers’ by Walter Olson several years ago, with a warning not to take money from plaintiff attorneys.” Earlier, when Scruggs pled guilty, another university official was heard from:

“My initial reaction is one of sadness,” said Samuel Davis, dean of the University of Mississippi Law School, Scruggs’ alma mater. “I’ve known and been friends with Dick and Diane Scruggs almost 50 years now going back to our days in Pascagoula, and I feel a great sense of compassion for him and his family. And that’s just a very personal reaction. I haven’t really thought about the implications for the legal community or the legal profession.

Davis, who also directs the Ole Miss Law Center, said not everybody who pleads guilty is guilty and that Scruggs might have had other reasons for the move. If that were the case, Davis said, the reasons likely were good ones.

(emphasis added by an understandably astonished Lotus @ Folo; many, many comments follow).

And from Sid Salter of the Jackson Clarion-Ledger (Mar. 19): “In spite of their insistence that there were no ethical lapses in their behavior on the tobacco suit, [former attorney general Michael] Moore and Scruggs still owe the taxpayers of Mississippi an accounting of the lawyers’ fees and expenses that accrued from that litigation.”

Not Not Guilty Guilty!!

Overlawyered reported last summer on William Ross’s findings about the double billing of clients, and Ted opined on it at Point of Law.

Cameron Stracher’s book (his second) entitled Double Billing: A Young Lawyer’s Tale Of Greed, Sex, Lies, And The Pursuit Of A Swivel Chair is careful not to assert that there was double billing going on in his fictional New York white shoe law firm, but there was certainly plenty of churning, redundant/unnecessary work, etc., the ethics of which is comparably impugned by the principles behind the rule against double billing.

In light of Judge Matsch’s repudiation of Big City trial counsel’s conduct in the Medtronic Case, I got to thinking about unethical lawyer conduct, and asked myself this:

Aside from the obvious business remedy available to the client, does trial counsels’ misconduct excuse the client from paying their bill (or enable them to recover the fees paid)? Does the answer to that depend on whether the client was complicit in the unethical strategy?

January 24 roundup

  • Longtime Overlawyered favorite Judy Cates, of columnist-suing fame, is using large sums of her own money to outspend incumbent James Wexstten in hard-fought race for Illinois state judgeship; Democratic primary is Feb. 5 [Belleville News-Democrat, Southern Illinoisan]
  • City council told: we’ll cancel your liability coverage if you throw all meetings and city records open to public [Seattle Times]
  • Attorney member of Canadian Senate in spot of bother after revelation that she billed client for 30 hours in one day [Vancouver Province, edit]
  • A public wiki just for Scruggsiana? After Keker’s minions swoop in to do their edits, the Mississippi attorney may wind up portrayed as the next Mother Teresa, and not the Hitchens version either [WikiScruggs]
  • Same general category of point, my Wikipedia entry now suddenly describes me as “controversial”, when but a month ago I wasn’t;
  • $28 to $52 million in 18 months for serving as a DoJ “corporate monitor” sounds like nice work if you can get it, and former AG Ashcroft got it without competitive bidding [Lattman, St. Pete Times edit, PolitickerNJ, NJLJ]
  • The Amiable Nancy (1818), admiralty case that could prove crucial precedent in Exxon Valdez punitive appeal, has nothing to do with The Charming Betsey (1804), key precedent on international law [Anchorage Daily News; Tom Goldstein/Legal Times]
  • “First do no harm… to your attorney’s case” [Cole/Dallas Morning News via KevinMD]
  • Probers haven’t come up with evidence of more than middling tiger-taunting, and attorney Geragos says he’ll sue zoo’s p.r. firm for defaming his clients [KCBS; SF Chronicle; AP/USA Today]
  • UK’s latest “metric martyr” is Janet Devens, facing charges for selling vegetables in pounds and ounces at London’s Ridley Road market [WSJ; earlier]
  • Lawyer can maintain defamation suit over being called “ambulance chaser” interested only in “slam dunk” cases, rules Second Circuit panel [eight years ago on Overlawyered]

Damages: $0 settlement; Attorneys’ fees: $9.5 million

The lead plaintiff had claimed losses of $25 million, but settled for zero plus some corporate-governance changes that, as a Rutgers professor notes, probably would have happened anyway. But a settlement approved by a New Jersey federal judge in a shareholder suit against Schering-Plough awarded $9.5 million in attorneys’ fees, even applying a multiplier to lodestar hourly rates. [New Jersey Law Journal/; In re Schering-Plough Corp. Securities Litigation, Case No. 2:01cv829 (D.N.J.)] Paying for those fees: shareholders, who also paid for what were likely multi-million dollar defense costs of litigation. Judge Katharine Sweeney Hayden, when certifying a single class in 2003, rejected arguments that there was an inherent conflict between class members that had already sold their stock and class members who continued to hold stock; she was appointed by Clinton in 1997.

Lawrence v. Graubard Miller

Alice Lawrence had timely paid $18 million over 22 years to Graubard Miller in a lengthy dispute over her husband’s estate. The law firm had billed her on an hourly basis—until there was a $60 million settlement offer on the table, at which point it suddenly renegotiated its retainer agreement to be a 40% “contingent fee”, though there was obviously nothing contingent about the award, and the firm wasn’t offering to repay the money it had already billed. Five months later, there was a $105 million settlement—and Graubard Miller claimed as its fee for the five months of work $42 million of the $45 million additional money that it had negotiated, for a total of $60 million for the case. Lawrence asked the New York courts to protect her, but a 4-1 majority of the Appellate Division upheld the decision (via Lattman). The New York Times article (not to mention Bizarro-Overlawyered, which unsurprisingly doesn’t care much about fraud and rip-offs when they’re occasioned by attorneys against widows) doesn’t even begin to mention the fact that the “contingent fee” didn’t provide any risk for the law firm: the retainer agreement had a floor whereby Graubard Miller got to charge an hourly rate for the first year of trial even if it didn’t collect anything, guaranteeing it another $1.2 million on top of the $18 million it had already collected. The best coverage in the New York Law Journal, which notes that Graubard Miller schnorred another $7.8 million in gifts and gift taxes from Lawrence, whose total payment thus totaled nearly $68 million. (Anthony Lin, “Late 40 Percent Retainer Pact Survives Widow’s Dismissal Bid”, Nov. 29; Anthony Lin, “Widow’s Suit Seeks Return of $50M in ‘Excessive’ Fees and Gifts”, Sep. 16, 2005).

Unfortunately for Lawrence’s case, she did negotiate the Graubard Miller firm down from its original 50% (!) contingent-fee proposal, so in one sense she wasn’t completely the unwitting pawn of the firm, even though Graubard Miller failed to suggest that she consult independent counsel about the multi-million dollar negotiation. The question becomes whether the attorney-client relationship is at all fiduciary, or whether it’s purely contractual—in which case, one wonders why there is such an elaborate screening mechanism to permit prospective attorneys to participate in the guild in the first place.

It’s nice that the New York courts are so respectful of contracts that they dismiss cases at an early stage of the litigation. One hopes that they do that in situations other than those involving the fiduciary duties of attorneys.

Read On…

May 22 roundup

  • Class action lawyer on the divvying up of $6.9M of attorneys fees among 79 attorneys: “There were two firms that . . . we generously gave a substantial award that really didn’t do anything for the common benefit.” But the award is still under seal; the Fifth Circuit is now considering. WSJ: “Unsealing the records would be a good first step, but Mr. Barrett’s statements suggest that the juiciest story is not how the money was divided among the lawyers, but how 79 lawyers extracted nearly twice as much from the defendant for themselves than they won for their 81,000 clients. Just another day at the office for the tort bar.” We reported Apr. 9. [W$J]
  • Street vendor sign of “180-degree coffee” reminds professor that McDonald’s coffee isn’t all that relatively hot. [Childs]
  • Briefing from the Pearson pants case (Apr. 26, etc.). [On Point]
  • FDA scandal! Or is it? Is it really the case, as some claim, that safety is never too expensive? [Point of Law]
  • Trial lawyers and Jay Angoff, at it again, incredibly accusing a non-profit mutual med-mal insurer of gouging. [RiskProf]
  • “Treating patients is a lot harder for this physician—and much less fun—in a climate of fingerpointing.” [Medical Economics via Kevin MD]
  • Are abuse victims squandering their moral authority? [Commonweal]

Moody v Sears: Lawyers, $1M. Class, $2,402.

No, not $2,402 each. The $2,402 represents the total redemption of coupons by a 1,500,000-member class, or $0.0016 per class member. The Illinois state court (in the judicial hellhole of Cook County) awarded plaintiffs’ attorneys Gary K. Shipman of Shipman & Wright $1,000,000, presumably because they represented the face value of the unlikely-to-be-redeemed coupons to be in the millions of dollars. A North Carolina state judge was not impressed after he forced the forum-shopping attorneys (and defendants) to reveal the results of the settlement before dismissing a parallel lawsuit. (Moody v. Sears, Roebuck, & Co.) (via Nick Pace of RAND Institute at CL&P Blog).

Note that the widely-publicized Eisenberg/Miller class-action study, regularly cited for the proposition that state courts were no worse than federal courts in terms of awarding attorneys’ fees, would have erroneously calculated this attorney fee as 14% or so of the total settlement value, rather than the actual number of 100%. Garbage in, garbage out.

Pace mistakenly thinks that the class members were deprived of a remedy. Not really, though consumers are certainly worse off because of such litigation. Problems like this arise because a Sears is only willing to settle a frivolous consumer-fraud suit for nuisance amounts, and the plaintiffs’ attorneys just want a paycheck, so Sears is willing to pay the protection money to make the meritless lawsuit go away, since it will cost more in litigation expense to defend itself. When neither the plaintiffs’ attorneys nor the judge cares about the class members, plaintiffs’ attorneys can extract, as here, 99.9% of the settlement amount. If, on the other hand, a court ensures that the majority of a nuisance settlement must go to the ostensible plaintiffs, the plaintiffs’ attorneys will be less likely to find it profitable to bring the meritless suit and try to extort a settlement, because defendants will be more likely to find it worthwhile to defend against the suit, and the suit won’t happen in the first place. Which does make consumers better off, because then they realize a substantial part of the savings of doing business when there’s less protection money paid off to plaintiffs’ lawyers like Gary Shipman.

The Class Action Fairness Act fixes these matters—or at least it does in the cases where federal judges apply its rules and accept jurisdiction. First, CAFA effectively consolidates national class actions into a single federal jurisdiction, defendants are unable to play one plaintiffs’ attorney off of another, as happens when plaintiffs file several dozen identical and parallel class actions. Second, CAFA requires federal judges to apply meaningful scrutiny to class-action settlements and the award of attorneys’ fees, especially coupon settlements like this one. A $2402 coupon redemption with a million-dollar attorneys’ fee would have been impossible under CAFA.

When, however, judges misread the jurisdictional provisions of CAFA and remand legitimate removals back to the state courts that routinely approve such travesties, they undo the whole point of the legislation, and hurt consumers in the bargain. That Public Citizen regularly argues for such narrow readings of CAFA suggests their true interests lie with trial attorneys, rather than consumers, and that the true consumer advocates are those who support civil justice reform. (Cross-posted to Point of Law)

More fen-phen fun

We’ve recently discussed the Kentucky fen-phen scandal, in which the plaintiffs’ lawyers are accused of stealing tens of millions of dollars from their clients; there’s another brewing scandal involving fen-phen lawyers in New York.

Napoli Kaiser Bern (now known as Napoli Bern) represented more than 5,000 plaintiffs who had opted out of the larger class action suit against manufacturer AHP; a whistleblower, or disgruntled ex-employee (take your pick) alleged that Napoli Bern manipulated the amounts of the settlement to be paid to each plaintiff — giving more to its own direct clients — so that Napoli could maximize its own profits at the expense of other law firms.

More important is the allegation that Napoli Bern lied to its clients (and to its own expert witness on ethics) in making them think that the amounts allocated to each plaintiff had been determined by AHP and reviewed by a special master appointed by the court; in fact, it appears that Napoli Bern may have decided unilaterally how much to offer each plaintiff. Yesterday, a New York state judge ruled that the allegations had sufficient merit to reopen the settlement and send the allegations against Napoli Bern to trial.

The stakes are high here; the total amount of this settlement — confidential, but reportedly at least a billion dollars — is not at issue, but the distribution of that money among the lawyers and plaintiffs is. As the judge noted, in theory the penalty could be as severe as requiring Napoli Bern to forfeit all fees earned in the case. (Isn’t mass tort litigation fun? Billions of dollars of Other People’s Money floating around, waiting for lawyers to figure out how to distribute it.)

(Previously covered on Overlawyered: Feb. 2005, Dec. 2001)