Wednesday, August 21, 2019
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals, in a 2-1 decision, yesterday affirmed an order slashing attorney fees in a class action from the $7.2 million figure agreed upon by the settling parties to $3.6 million, agreeing with the District Court that a 15 percent share of the recovery is more reasonable than 30 percent.
In a memorandum opinion, the majority upheld the decision by Judge Cathy Ann Bencivengo of the Southern District of California who approved the settlement on April 12, 2018 and partially granted the motion for attorney fees and costs.
The plaintiffs alleged securities fraud. Lead plaintiff was Carl Schwartz and the lead counsel was the West Los Angeles firm of Kaplan, Fox & Kilsheimer, LLP.
At one point in the litigation, the action was dismissed, and Schwartz’s appeal to the Ninth Circuit resulted in a reversal.
District Court Order
Bencivengo said in her 2018 order:
“[T]he settlement amount of $24,000,000 confers substantial benefits upon the Settlement Class, particularly in light of the risks associated with continuing this litigation to trial and weighs in favor of the fee amount. Lead Counsel has achieved success in successfully appealing the dismissal order and the litigation as a whole involved some complicated and labor intensive claims and issues which weighs in favor of the award….The experience of Lead Counsel in litigating class actions of this type also support the request. Moreover, the reaction of the Class to the settlement has been positive, with only two class members requesting exclusion, which supports the fee application.
“But, while Lead Counsel had responsibility for litigating this case over a seven year period, the Court is mindful of the limited nature of the litigation that occurred in that time period.”
The judge said there was inadequate substantiation for the 6,678.65 hours the law firm claimed it expended on the case.
Disallows Some Costs
Kaplan, Fox claimed $251,313.10 in costs. Bencivengo said the lawyers “provide very little evidence to support” the claim.
Deducting $32,712.33 for “Travel/Meals” and $65,819.00 for “Experts and Consultants,” she awarded $152,781.77.
The judge also denied costs claimed by Schwartz, but ordered payment of a $2,000 incentive award.
Yesterday’s memorandum opinion was signed by Circuit Judges Carlos T. Bea Jacqueline H. Nguyen. Circuit Judge Johnnie B. Rawlinson agreed with her colleagues that Schwartz is entitled to “reasonable costs and expenses (including lost wages)” directly related to his class representation, but otherwise dissented.
The majority said:
“The district court reasonably considered the contingent nature of the work, the procedural posture of the case (which was just past the pleading stage after an appeal), and the lack of discovery and other fact-intensive work in calculating the award.
“Moreover, the district court attempted to rely on a lodestar calculation as a cross-check but was hampered by counsel’s failure to provide reliable evidence. To the extent the district court did not have enough information about rates and hours, counsel failed to meet their burden to provide reliable evidence.”
Motion for Reconsideration
The memorandum opinion rejects the contention that Bencivengo abused her discretion in denying a motion for reconsideration, remarking:
“The motion for reconsideration provided expert declarations and records to support counsel’s requested hours and rates, information absent from counsel’s initial motion for attorney’s fees. That information was available to counsel when they filed the initial motion for fees; they simply chose not to meet their burden of providing adequate documentation with the initial request….A motion for reconsideration should not be a better argument for the same position counsel previously put forth, just with better evidence it could have offered before.”
The opinion declares the order for the incentive fee vacated, explaining that “the Private Securities Litigation Reform Act…does not allow for incentive awards for class representatives.”
Rawlinson faulted Bencivengo for failing to explain how she concluded that 15 percent of the class’s recovery was reasonable while 25 percent is the norm.
“The district court acknowledged the excellent results achieved, the difficulty of the case, counsel’s experience, and the positive class response, all of which weighed in favor of granting the fee request….Yet, the district court inexplicably awarded only one-half of the requested percentage, citing the paucity of activity reflected on the district court’s docket. The court failed to cite any authority in support of this determination. More importantly, its ruling essentially penalized counsel for resolving the case effectively and efficiently….Moreover, the district court did not fully take into consideration the fact that counsel successfully obtained reversal in the Ninth Circuit of the district court’s dismissal of the second amended complaint. Although those successful efforts would not be reflected on the district court docket, we have considered successful appellate litigation as an important factor in determining the appropriate percentage rate.”
She declared: “…I would vacate the district court judgment in its entirety.”
The case is Schwartz v. Arena Pharmaceuticals, Inc., 18-55618.
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