9th Circuit seeks justification for $43M in attorney fees

A federal appellate panel vacated attorney fees and litigation expenses for most of a $205 million settlement between a class of consumer plaintiffs and companies in the optical disk drive industry Friday, instructing a lower court judge to make more detailed findings to justify an award of $43 million.

The issue was the terms of a sealed bid Hagens Berman Sobol Shapiro LLP made to persuade now-retired U.S. District Judge Vaughn R. Walker of San Francisco to appoint the firm as lead counsel. The firm won the appointment in part because it suggested an undisclosed sliding fee scale that would have awarded it 12% to 13% of the settlement, the judge determined in 2010.

When the first two rounds of settlements were reached by indirect purchaser plaintiffs with the technology companies in 2016 and 2017, Hagens Berman argued for 25% in attorney fees for the first round and 21% for the second round, according to court documents.

Objectors cried foul, saying Hagens Berman would get $43 million in attorney fees instead of $22 million. "How is it reasonable to award a firm twice what it bid to become class counsel?" Robert Clore, an attorney with the Bandas Law Firm PC, asked during oral arguments last October.

Hagens Berman attorneys defended the fee request, which was approved by U.S. District Judge Richard G. Seeborg of San Francisco, saying it was justified given the complexity, length and difficulty of the case.

9th U.S. Circuit Court of Appeals Judge Morgan B. Christen said one major problem with the fee request is that even Seeborg did not know about the sealed bid that won Hagens Berman the appointment as lead counsel in the first place. He only learned of it after the third settlement was reached.

"Given this record and the fiduciary duty the court owes to the class at the fee award stage, we remand the first- and second-round fee awards for further consideration and findings," Christen wrote. "Both parties now agree that the bid is a factor that must be considered and that the bid may now be unsealed."

"We agree with Hagens Berman that the district court was not bound by the original bid, but counsel's continued reliance on the 25% benchmark -- the firm referred to the benchmark as 'granite' in its briefing on the third-round fee award -- misses the mark," she added. In re: Optical Disk Drive Products Antitrust Litigation, 2020 DJDAR 4619 (9th Cir., filed Jan. 13, 2017).

Christen said that's especially true in lawsuits that end with large awards, so-called "megafund cases."

She instructed Seeborg to provide more information justifying why the attorney fee award diverges so much from the original bid. "District courts enjoy broad discretion to determine reasonable fee awards, but the size of the variance between the bid and the awards in this case requires more explanation," the judge wrote.

Attorneys with Hagens Berman could not be reached for comment Friday. Kevin K. Green, senior counsel at the firm, told the panel the original proposal was not binding on the judge and said Seeborg knew about the original bid by the time he approved the third settlement. "The award is based on all the circumstances," he said last fall.

Clore also could not be reached for comment Friday.

The 9th Circuit panel also included Senior Judges J. Jerome Farris and Carlos T. Bea.