CLEVELAND (Legal Newsline) - Private lawyers working for state and municipal governments will be paid almost $700 an hour for their work in negotiating some $26 billion in settlements with the opioid industry.
A panel formed by U.S. District Judge Dan Aaron Polster recommended a $2.13 billion payout to 97 law firms who worked on the multidistrict litigation, one of the largest and most complex cases in U.S. history. The so-called common benefit fees – payment for legal work that benefitted all plaintiffs -- represent about 8% of the total recovered by government entities and Indian tribes. Overall plaintiff fees are capped at 15% under an order Judge Polster issued earlier.
The largest slice will go to Motley Rice, which was awarded 15.5% of the fund or $330 million. The next biggest payout goes to Simmons Hanley, which will receive 10.6%, or $226 million (it is also being accused of fraud in its asbestos lawsuits). Other firms receiving a significant share of the money are Lanier Law Firm in Houston, $100 million; and Leiff Cabraser at $112 million.
All of the fees are subtracted from settlements state, local and tribal governments negotiated with opioid manufacturers and distributors including Amerisource Bergen, Cardinal Health, McKesson and Johnson & Johnson. Lawyers accepted the total fee cap of 15% in exchange for dropping contracts that would have paid them 30% or more.
Most of the contracts were no-bid contingency-fee contracts that government officials described as low-risk, since no fees would be paid unless the plaintiffs won settlements. Every dollar paid to the lawyers is a dollar not available for governments, however. In at least one case, the fee awards violated a Florida law capping fees for all litigation over the same matter at $50 million. New Mexico Attorney General Raul Torrez also approved a 33% fee, or $150 million, for Baron & Budd in that state’s opioid settlements, triple the national rate.
The law firms were required to keep detailed time sheets and reported working 3.46 million hours, although 387,000 of those hours were either withdrawn by the firms or rejected by the fee panel. The lawyers were awarded $2.13 billion in fees, meaning they averaged $694 an hour. Given law-firm economics where junior attorneys typically earn far less than billing rates, much of that average hourly fee will likely flow into the pockets of senior partners.
The rates approved by the fee panel ranged from $30 an hour for paralegals up to $1,500 an hour for senior partners on the plaintiffs’ executive committee, which included Motley Rice and Simmons Hanly. Lawyers with less than five years of experience still could earn up to $1,000 an hour.
At the outset of the litigation, Judge Polster set out rules designed to cut down on abuses that are common with class actions, including marking up the services of contract attorneys and document reviewers.
The fee panel said they engaged in a lengthy review process, reviewing time reports for hours that were needlessly duplicative or didn’t serve the interests of the entire plaintiff group. Fee panel members interviewed lawyers and asked them to fill out “report cards” as well as submitting essays about the work they performed. Those interviews helped smoke out work that wasn’t for the common benefit or actually hurt the interests of the group, the panel said, and identify duplicative hours.
The panel said it uncovered cases where document reviewers reported “grossly excessive time,” claimed identical hours for days in a row or submitted identical document review time to two different law firms. Document review is a particularly lucrative business for plaintiff firms, since they can pay reviewers minimal hourly rates and mark them up under court-approved fee orders.
In one particularly scandalous case involving a $300 million settlement with State Street bank, reporters at the Boston Globe revealed law firms led by Labaton “borrowed” low-paid attorneys among themselves and double-counted their hours to increase their payout.
Firms in the opioid MDL were awarded a higher percentage for “skill, value and leadership,” and given no credit for preexisting relationships with clients, the fee panel said. The fees finally worked out to a multiplier of 1.25 times the “lodestar,” or fee request based on hours submitted.
“It was certainly both art and science to calibrate each applicant’s multiplier,” the fee panel said.