Federal judge issues scathing rebuke of MDL fee ‘holdbacks’

The federal judge overseeing coordinated litigation about Monsanto's weed killer Roundup on Monday refused to mandate an 8.25% holdback of all recoveries nationwide -- including those not involved in the multi-district litigation and those not filed yet -- to contribute a common benefit fund established by lead plaintiffs' counsel.

The judge criticized the counsel's "free-rider obsession" as going "out of control."

"The fact that counsel is even requesting such a far-reaching order -- a request that has some support from past MDL practice -- suggests that courts and attorneys need clearer guidance regarding attorney compensation in mass litigation, at least outside the class action context," U.S. District Judge Vince G. Chhabria of the Northern District of California wrote.

"The Civil Rules Advisory Committee should consider crafting a rule that brings some semblance of order and predictability to an MDL attorney compensation system that seems to have gotten totally out of control," Chhabria said.

The judge also refused to issue a holdback order for claimants who have cases against Roundup in state court. Chhabria said he would instead order a holdback of 8% of recoveries from only those involved in the multi-district litigation. He declined to add the quarter percent to reimburse the lead counsel's litigation costs, but said he might revisit that decision. The 8% holdback must come out of the portion of money set aside solely for attorney compensation. No attorney is allowed to cut a plaintiff's net recovery based on his decision, Chhabria ruled.

Plaintiffs have claimed that Roundup causes cancer. The German conglomerate Bayer purchased Monsanto in 2018 and has tried to settle thousands of cases in federal and state courts. Chhabria last month rejected a $2 billion proposed settlement for future claimants.

Lead plaintiffs' counsel, attorneys for the defense and a group of objectors did not respond to requests for comment.

Chhabria's order stems from a request filed in January by Robin Greenwald of Weitz & Luxenberg; Michael Miller of The Miller Law Firm and Aimee Wagstaff of Andrus Wagstaff PC, all of whom were appointed lead counsel in the consolidated Roundup cancer cases against Monsanto in 2016. In re: Roundup Products Liability Litigation, 3:16-md-2741 (N.D. Cal., filed Oct. 4, 2016).

That request asked Chhabria to hold back 8.25% of recoveries from all plaintiffs, anyone who was diagnosed with non-Hodgkin's lymphoma who got settlements or judgments from the company, regardless of whether they were involved in the MDL.

Judges who sit on the Northern District have increasingly scrutinized large attorney-fee schemes.

In Monday's decision, Chhabria wrote that the fact that the lead counsel would even make such a request "is perhaps reflective of a more widespread problem in the MDL world."

"What began as a healthy concern about the free rider problem seems to have evolved into an obsession. From reading lead counsel's papers you begin to get the feeling that any lawyer who secures for their client a quick settlement from Monsanto has committed some great injustice that must be rectified at all costs."

He cited three favorable plaintiffs' jury verdicts that mounted pressure on Bayer; two of which weren't litigated in federal court.

"Poor lead counsel does all the hard work killing the prey, only to see the 'TV Lawyers' and other vultures swoop in and pick at the remains," Chhabria wrote. "There is nothing inherently wrong with lawyers (and by extension their clients) benefiting from the work of other lawyers without paying them. That happens all the time in our legal system."

The judge wrote in a footnote that he was particularly worried about plaintiff Edwin Hardeman. Chhabria pointed out that if the U.S. Supreme Court concludes that Hardeman's state law claims are preempted by federal law and reverses the 9th U.S. Circuit Court of Appeals' affirmation of his $25 million verdict, Hardeman himself would be liable for expenses and would essentially be left with nothing.

The judge approved the common benefit structure in 2017. Chhabria wrote Monday "The motion was unopposed at the time, and the court was not very familiar with the nuances of MDL proceedings."

The holdback from recoveries would go into a common benefit fund that would compensate attorneys whose work will affect all claimants, the MDL plaintiffs' leadership lawyers maintained. It would address concerns of "free riders," in other words, lawyers who sit back, watch, wait and then benefit from the leadership's hard work. Several firms objected to the proposed percentage holdback plan.

Chhabria contended in his ruling that "free riding occurs all across our legal systems."

"The presence of free riding and the desire to address it is not itself a source of judicial power. The power of a court to address free riding concerns -- just like the power of a court to address any concern -- must actually come from somewhere," the judge wrote.

The judge also said it wasn't clear to him why it would be concerning for a state court plaintiff to benefit from accessing MDL work product.

"In our system, lawyers regularly pick up where other lawyers left off, benefiting from the good work of their predecessors," Chhabria wrote. "So if a lawyer with access to an expert deposition becomes better prepared with the expert testimony in a separate case, what's the problem with that?"