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Ninth Circuit:
Fee Cut Proper for Subclass Counsel in Antitrust Action Who Delayed Payout
Opinion Affirms Reduction Where Postponement Caused by Lawyers Representing Non-Settling Class Members, Despite Attorneys’ Insistence ‘Working for’ Clients
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday upheld the 50% reduction of an attorney fee award in an antitrust class action for a law firm representing a subclass of plaintiffs—who reside in states that bar recovery on their claims—where the lawyers delayed payout to the other class members by appealing the approval of a proposed settlement.
Challenging the attorney fee award was the San Francisco firm of Cooper & Kirkham, P.C. (“C&K”), which agreed to represent the subclass of plaintiffs in an antitrust case initially filed in 2007.
The complaint alleges price fixing of cathode ray tube components—used in televisions and computers—by Toshiba Corporation, Phillips Corporation of North America, Hitachi Ltd., Samsung SKI America, Panasonic Corporation, and Technicolor SA, and related entities, and asserts claims by direct and indirect purchasers of the products.
Complicating the litigation is the 1977 U.S. Supreme Court case of Illinois Brick Co. v. Illinois, which held that indirect purchasers—those who purchase products from third parties—are barred from seeking damages under federal antitrust law.
Following the decision, many states passed work-around legislation to permit recovery by such plaintiffs but others—including Alabama, Colorado, Delaware, Idaho, Indiana, Louisiana, New Jersey, Oklahoma, and Texas—have left the prohibition in place.
Proposed Settlement
The initial settlement proposed a total of $576.8 million for the indirect purchasers from so-called “repealer” states, and a total of $158.6 million in fees to be divided among the 50 law firms, including C&K which was to receive $3.45 million. This initial settlement proposal provided no compensation to claimants from non-repealer states but required those parties to release their claims for injunctive and equitable relief.
After the class was unable to obtain release from the claimants in the non-repealer states, objections also arose from claimants from certain repealer states—Massachusetts, New Hampshire, and Missouri—that they had been left out of the recovery.
C&K announced its intention to represent buyers from the so-called “non-repealer” states, asserting that they are entitled to representation because the complaint seeks equitable relief on their behalf and are required to surrender those claims as part of the proposed global settlement.
The parties reached a new agreement calling for the reduction of the settlement and attorney fees award, each by $29 million. District Court Judge Jon S. Tigar approved the settlement in July 2020.
C&K unsuccessfully appealed the approval.
Lead counsel for the class—San Francisco-based firm Trump, Alioto, Trump & Prescott—sought authorization to distribute attorney fees and to reduce the proposed allocation to C&K.
On Aug. 27, 2022, Tigar ordered the $3.45 million initially set aside for C&K to be cut in half, noting that C&K “worked against the interest” of the settling class by delaying payout and that “some class members will not receive any benefits from the settlements because they have died, will not be able to be found, or are companies that have gone ‘bankrupt or no longer exist.’ ”
The Ninth Circuit affirmed the order in a memorandum opinion by Senior Circuit Judges Richard R. Clifton and William A. Fletcher, and Judge Gary S. Katzmann of the United States Court of International Trade, sitting by designation.
Delay in Benefits
The panel agreed with Tigar that C&K’s actions caused a detrimental delay, saying:
“C&K fails to persuade that the district court clearly erred in concluding that settling class members would receive benefits later than they would have without C&K’s actions. By the terms of the settlement underlying the attorneys’ fees award here at issue, the settlement did not become final until the time for appeal expired or, if appealed, the court of last resort entered judgment affirming the settlement in its entirety. The district court granted final approval to the settlement on July 13, 2020, and entered final judgment on July 29, 2020. Accordingly, the settlement could have become final permitting payments on the claims as early as August 2020.”
The judges continued:
“However, C&K appealed the settlement approval, so that the settlement did not become final until the Supreme Court denied C&K’s petition for writ of certiorari on June 13, 2022. The district court thus supportably found that C&K’s actions delayed the conclusion of the settlement and distribution of funds to class members.”
Worked Against Class
The panel said that an award of attorney fees from a common award depends on whether the lawyers’ services benefited the fund. In this case, they reasoned:
“At one point, C&K requested that the district court ‘vacate all orders and judgment…approving’ a prior version of the settlement. Had the district court done so, the settlement terms would have required a return to defendant manufacturers of the settlement funds in escrow as well as the interest accrued….Releasing the settlement funds from escrow would render their future availability to settling class members less certain and the attendant loss of accrued interest would not have benefitted the class. The settlement itself, on terms that appeared favorable to class members, might have been lost. Thus, the district court did not clearly err in concluding that C&K worked against the settling class members’ interests by putting the settlement at risk.”
C&K argued that it should not be penalized for vigorously representing its clients as the firm was “not working against the settling class, it was working for the non-settling class members.” Unpersuaded, the jurists wrote:
“C&K was not involuntarily assigned to be lead counsel for the non-repealer state plaintiffs. C&K decided to take action to assume that role, despite significant reasons to doubt the value of the non-repealer state plaintiffs’ claims, even going so far as to, in the words of the district court, ‘no longer represent a repealer state plaintiff’ in order to assuage ‘the Court’s previously-expressed concerns about a potential conflict.’ That action illustrated C&K’s awareness that vigorous pursuit on behalf of the non-settling class members could conflict with the interests of the settling class members. C&K made a decision in seeking to represent the non-repealer state plaintiffs. Sometimes decisions by counsel prove to be unlucrative. That does not render the district court’s fee allocation unjust or unreasonable.”
The case is Indirect Purchaser Plaintiffs v. Toshiba Corporation, 22-16534.
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