Judge mulling $36 million attorney fee request in Wells Fargo MDL

SANTA ANA -- A U.S. judge on Monday tentatively awarded $32 million in attorney fees in multi-district litigation over a Wells Fargo insurance scheme with National General Insurance, rejecting seven state attorney generals' requests to have a special master recommend a revised figure.

U.S. District Judge Andrew J. Guilford's order, which has not been finalized, reduced the $36 million sought by plaintiff's counsel by applying a 2.3 multiplier instead of a 2.58, which he said was "principally driven" by federal investigations that "no doubt helped bring about this settlement agreement." The probes also lessens the importance of counsel taking the case on a contingency basis because they "made the likelihood of recovery more certain than in the average contingency fee case."

Roland K. Tellis, head of Baron & Budd PC's class action practice group, said that isn't true, but if Guilford reduces the multiplier, he should account for the additional hours counsel spent on the settlement in the last few months, beyond the 29,707.45 hours included in the initial motion.

That would bring the final award to $34 million, said Tellis, who was joined Monday by fellow plaintiffs' co-lead counsel Roman M. Silberfeld, national trial chair at Robins Kaplan LLP. Tellis emphasized the quality of the settlement, which was initially said to be about $393 million but has since jumped to $423.9 million because of additional claims. The court's received only five objections out of a class of 2 million.

If the settlement had problems, "I promise you we would have seen a line of professional objectors who wanted to voice their concerns," Tellis said.

"Did you snarl when you said 'professional objector'?" Guilford asked.

"I did," Tellis answered.

Guilford didn't share the sentiment.

"Say what you will about professional objectors. It makes me sleep better at night that people are financially motivated to be very picky," the judge said.

Arizona led the states calling for the appointment of a special master to better scrutinize the billings with Arizona Deputy Solicitor General Drew Ensign appearing before Guilford Monday and calling the settlement "already lopsided in favor of class counsel."

He asked that any reduction in fees be applied to the settlement, which he said currently includes only $8.5 million in damages that are solely the work of class counsel.

Ensign wrote an amicus brief on behalf of Arizona, Arkansas, Idaho, Indiana, Louisiana, Nebraska and Oklahoma that said class counsel "can plainly take credit for the new $8.5 million in new restitution created by the Proposed Settlement and claim a proportionate share relative to it." In Re Wells Fargo Collateral Protection Insurance Litigation,17ML-02797 (C.D. Cal., Oct. 18, 2017).

But Ensign said he doesn't see an "adequate explanation" why counsel should be credited for the remainder of the more than $400 million, which he said resulted from Wells Fargo's pre-existing obligations with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau. He suggested class counsel are due fees based only on the $8.5 million, which would be an award of $2.1 million or less.

In arguing for the $36 million award, Tellis pointed to a few factors beyond the quality of the settlement, including arbitration clauses he said "would have gutted this class in half," if enforced. But Guilford said Wells Fargo likely didn't want individual arbitration and instead was "desperate" to obtain class-wide relief.

"The last thing Wells Fargo wanted to do was have hundreds of thousands of four-figure cases, which people will pursue," Guilford said. "And it might not be four figures. It might be $300,000, and we've seen today people will pursue that."

The judge was referencing comments at the beginning of the hearing from claimant Jennifer Murphy, who's opting out of the settlement to pursue her own $300,000 lawsuit about Wells saddling her with unwanted insurance that led to her car being repossessed. A former Miss Oregon who appeared on Donald Trump's television show "The Apprentice," Murphy told Guilford the damages are "to help compensate the fact that for years, I was in a downward spiral" and was raped by a man who falsely said he wanted to help her.

Wells Fargo's lawyer David C. Powell, managing partner of McGuireWoods LLP's San Francisco office, said he'll accept Murphy as an opt-out even though she missed the deadline. Regarding the fee dispute, he emphasized the settlement was negotiated separately.

"It would be absurd to blow up a settlement that everyone agrees is fair and adequate for the class because of the AG's concern about attorney fees," Powell said.