MONTGOMERY, Ala. (Legal Newsline) - The Alabama Supreme Court, in a recent decision, agreed that a schedule requiring class members to object to class counsel’s attorney fee request before the request was formally made -- for more than $100 million -- violated class members’ due process rights.
The state’s high court, in its Oct. 20 opinion, also sided with objectors’ arguments that they were entitled to more information from class counsel about the time spent on the case, to allow them to “properly articulate their objections.”
Chief Justice Lyn Stuart authored the court’s 41-page ruling, which vacated an order entered by a trial court awarding class counsel a fee of $124 million for their work on a $310 million class action settlement.
The settlement, granted final approval in August 2016, seeks to rectify a fraud committed on more than 20,000 individuals, entities and pension plans who owned stock in MedPartners Inc. in the late 1990s.
Class counsel were listed as Scott Powell, John Haley, Ralph Cook, Bruce McKee, Brian Vines and Tempe Smith of Hare Wynn Newell & Newton LLP, John Somerville of Somerville LLC and Tim Francis of Francis Law LLC in a 2016 news release announcing the final approval order.
Stuart said on remand, class counsel may file a new attorney fee application, including more detailed information regarding the time spent on the case and how that time was spent.
“The objectors shall then be given a reasonable opportunity to review that application and may, if they still have objections to class counsel's new application, file those objections with the trial court,” she wrote. “After the trial court considers those objections and enters a new order making an award of attorney fees, any party with a grievance may file a new appeal with this Court.”
The objectors were several Georgia Urology PA member physicians.
The lawsuit claims that Birmingham-based MedPartners, a physician practice management company once led by former HealthSouth CEO Richard Scrushy, lied to its shareholders about how much the company could pay to settle securities fraud lawsuits in 1999.
MedPartners changed its name in 2000 to Caremark Rx and merged with CVS Health in 2007.
The objectors, in their appeal, argued class counsel’s 40 percent attorney fee is “excessive” and amounts to a “windfall.” They also argued they were given insufficient time and information to properly object to the size of the award.
“The class members in this case were not afforded due process inasmuch as they were not allowed to view, consider, and respond to class counsel’s attorney fee application before they were required to file any objections to that application,” Stuart wrote.
“It is insufficient that class members had an opportunity to file a general objection to what they anticipated class counsel might request as an attorney-fee award; principles of due process require that they have an opportunity to respond to the attorney-fee application that is actually filed.”
Stuart said the trial court, in authorizing a schedule requiring class members to object to class counsel's requested attorney fee before class counsel filed its attorney fee application, acted “beyond its discretion.”
The Supreme Court also took issue with the trial court’s review of the time class counsel spent on the case.
Class counsel argued the trial court stated it had seen the “thousands” of hours of time expended by class counsel over the many years the case has been pending and that it did not need time sheets to come to its conclusion in favor of the $124 million award.
But Stanley D. Lawler, one of the objectors, argued much of the time expended by class counsel was due to its own “missteps” and “questionable decisions.”
“We agree with Lawler that the class members are entitled to more information about the amount of time class counsel expended in this case and the manner in which that time was spent,” Stuart concluded.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.