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Counsel Fees remedies spring 2014
George W. Conk
Adjunct Professor & Senior Fellow, SteinCenter for Law & Ethics
Room 409
212-636-7446
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mailto:[email protected]:[email protected] -
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Each party bears its own costs
except.
The American Rule
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How lawyers fees are set
Free market pricinglodestar/reasonable and custoamry
Court rules Court decisions in fee-shifting and
common fund cases
Statutes
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R. 1.5 - A Reasonable Fee
(a) A lawyer shall not make an agreement
for, charge, or collect an unreasonable feeor an unreasonable amount for expenses.The factors to be considered in
determining the reasonableness of a feeinclude the following:
(1) the time and labor required, the
novelty and difficulty of the questionsinvolved, and the skill requisite to performthe legal service properly;
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FRCP 54Judgment (d) Costs; Attorneys
Fees
(2) Attorney's Fees.
(A) Claim to Be by Mot ion.A claim for
attorney's fees and related nontaxable
expenses must be made by motion
unless the substantive law requires
those fees to be proved at trial as an
element of damages.
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FRCP 54 (2)(B)Motion for Attorneys Fees
(ii) specify the judgment and thestatute, rule, or other grounds entitling
the movant to the award;
(iii) state the amount sought or providea fair estimate of it; and
(iv) disclose, if the court so orders, the
terms of any agreement about fees forthe services for which the claim is
made.
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N.J. Rule 4;42
(1) In a family action
(2) Out of a fund in court.
(3) In a probate action, if probate is
refused
(4) In an action for the foreclosure of
a mortgage, (rates specified)
(5) In an action to foreclose a tax
certificate Counsel Fees spring 2014 remedies 7
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N.J. Rule 4;42
(6) In an action upon a liability or
indemnity policy of insurance, infavor of a successful claimant.
(7) As expressly provided by theserules with respect to any action,whether or not there is a fund incourt.
(8) In all cases where attorney's feesare permitted by statute.
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Fee shifting and fees as damages
42 USC 1988 and state analogs
* Patent infringement35 USC 285(exceptional cases)
Copyright 5 USC 505 (may to prevailingparty)
Common fund casesclass actions,
bankruptcy, probate
As an element of damage
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Fee shifting and fees as damages
Statutes: e.g. fees barred in Veterans
claims, limited (e.g. $200 in UIappeals), PD `pool attorneys , 14B NY, Federal panel fees, appointments
by courts per Gideon v. Wainwright Cap and review: Social security
disability
Awarded by court: e.g. workerscompensation
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Court Awarded Fees state law Chancery cases
Common Funds Statutory fees
Statutory Discrimination Cases
Sanctions
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Fee shifting statutes
* ERISA29 USC 1132: - by participant or
beneficiarydiscretionarysome degree of success on the merits.
- - in collection actionmandatory
* EAJA28 USC 2412actions v. U.S. (non-tort)- Shall award fees to prevailing party unless
U.S. was substantially justified
- CAP - $125/hour + COLA
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EAJA 28 U.S.C. 2412
Under the Equal Access to Justice Act, acourt in a civil action against the UnitedStates shall award to a prevailing party
other than the United States fees andother expenses . . . incurred by that partyif the position of the United States was not
substantially justified.
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Lawyers working on spec
Contingent fees
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Contingent Fees R. 1.5
Generally permitted
Must be written retention agreement
Basis of calculation must be stated
Litigation expenses deducted or not
Written accounting reqd
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Contingent Fees - generally
The norm for plaintiffs in PI cases,workers compensation, SS disability,subrogation claims, debt collection
Closely regulated in PI cases bystatute and rule
Barred in
- criminal defense- marriage dissolution & child support
cases
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R. 1.5 (d) A lawyer shall not
Enter into an arrangement for, charge orcollect:
1) any fee in a domestic relations matter,
the payment of which is contingent ondivorce or the amount of alimony orsupport or property settlement in lieu
thereof 2) a contingent fee for representing a
defendant in a criminal case
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R. 1.5 Contingent Fees Permitted
(c) in a writingsigned by the client
shall state the methodby which the
fee is to be determined, including the
percentage or percentages that shall
accrue to the lawyer in the event of
settlement, trial or appeal
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R. 1.5 Contingent Fees Permitted
Expenses
whether such expenses are to bededucted before or afterthe contingentfee is calculated
In the event of loss
must clearly notify the clientof anyexpenses for which the client will beliable if the client does not prevail
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R. 1.5 Contingent Fees Permitted
Accounting the lawyer shall provide the client
with a written statement stating the
outcome of the matterand, if there isa recovery, showing the remittanceto the client and the methodof itsdetermination
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The criminal defense ban
In Commonwealth v. Facella, 679 N.E.2d221, 226 (Mass. App. Ct. 1996) defendantwas charged with armed assault withintent to murder
the retainer agreement provided thatdefense counsel Beatrice
would be paid an additional $ 15,000
if he negotiated a sentence of no morethan ten years. He did so.
Should such contracts be barred?Counsel Fees spring 2014 remedies 21
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SUPREME COURT RULES3rd JUDICIAL DEPT.
ARTICLE 1. APPELLATE DIVISION
SUBARTICLE B. ATTORNEYS
NY CLS Sup Ct 806.13 (a) (2007)
The receipt, retention or sharingof
contingent compensation in excess of
the scheduleof fees shall constitute
the exaction of unreasonable and
unconscionable compensation
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SUPREME COURT RULES3rd JUDICIAL DEPT.
ARTICLE 1. APPELLATE DIVISION
SUBARTICLE B. ATTORNEYS
NY CLS Sup Ct 806.13 (a) (2007) SCHEDULE A
(1) 50 per cent on the first $ 1,000 of the sumrecovered,
(2) 40 per cent on the next $ 2,000 of the sumrecovered,
(3) 35 per cent on the next $ 22,000 of the sumrecovered,
(4) 25 per cent on any amount over $ 25,000 of thesum recovered
Extraordinary result may justify higher fee app.Counsel Fees spring 2014 remedies
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SCHEDULE B
A percentage not exceeding
33 1/3 % of the [net or gross*] sum
recovered
No additional compensation because
of extraordinary circumstances maybe sought
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How the fee is computed NYCRR
691.20 Net sum recovered
after deducting
expensesand disbursements for
Filing fees Depositions
Medical records
Expert witnesses Investigative or other services
UNLESS LAWYER ADVANCES COSTS
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How the fee is computed
Taxed costs and interest upon a
judgmentare part of the amount
recovered
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How the fee is calculated
No deduction for liens, assignments orclaims in favor of hospitals, for medical
care and treatment by doctors and
nurses, or self-insurers or insurance
carriers.
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How the fee is calculated
Common liens
Medicare
Medicaid (and other publicentitlement)
Assignments of benefits
Union-mgt benefit funds (ERISA)
Workers compensation
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NY CLS Jud 474-a Contingent fees in claims or
actions for medical, dental or podiatric malpractice
30 % of the first $ 250,000 of the sumrecovered;
25 %of the next $ 250,000of the sumrecovered;
20 %of the next $ 500,000of the sumrecovered;
15 %of the next $ 250,000of the sumrecovered;
10 %of any amount over $ 1,250,000of the
sum recovered.Counsel Fees spring 2014 remedies
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NY CLS Jud 474-a Extraordinary Circumstances
Trial judgehas discretion to fix asreasonable compensation an amountgreater than 474-a
- in extraordinary circumstances - without regard to the claimant's
consent
BUT not in excess of that provided bycontract between attorney & client
Are such reductions in med mal cases
warranted? Counsel Fees spring 2014 remedies
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NY Rules of the Appel late Cour ts
691.20:
Retainer and Closing Statements
2nd Judicial Department
Written retainers, etc. reqd in:
personal injury
property damage
wrongful death
condemnation or change of grade
proceedings
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NY Rules of the Appel late Cour ts
691.20 Retainer and Closing Statements
2nd Judicial Department
(1) Every attorney who accepts a retainer orenters into an agreement, express orimplied, for compensation for services
whereby his compensation is to becontingent in whole or in part uponsuccessful prosecution or settlement
Shall, within 30 days sign personally andfilewith the Office of Court Administrationof the State of New York a writtenstatement of such retaineror agreement.
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NY Rules of the Appel late Cour ts
691.20 Retainer and Closing Statements
2nd Judicial Department
(b) Closing statement; statement where norecovery.
(1) A closing statement shall be filedin
connection with every claim in which aretainer statement is required, as follows:Every attorney upon receiving, retaining orsharing any [such] sum shall, within 15
daysafter such receipt, retention orsharing, sign personally and filewith theOffice of Court Administration and serve
upon the client a closing statementCounsel Fees spring 2014 remedies
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NY Rules of the Appel late Cour ts
691.20 Retainer and Closing Statements
2nd Judicial Department
Retainer agreement, under which attorneywould receive [less than rules permit] wasnot enforceable due to failure to timely file.
Connors v. Wildstein (2 Dept. 2000)
Attorney was suspended from practice of lawfor one year.. For failing to prepare retainer
statement for filing with Office of CourtAdministrationin personal injury case andby failing to prepare closing statementMatterof Laskorski (2 Dept. 1995)
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N.J. Court Rules, R. 1:21-7 Contingent fees
(c) In any [tort claim for damages] but
excludingstatutorily based discrimination
and employment claims, and the client is not
a subrogee, an attorney shall not contract
for, charge, or collect a contingent fee in
excess of the following limits
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N.J. Court Rules, R. 1:21-7 Contingent fees
(1) 33 1/3% on the first $ 500,000 recovered;
(2) 30% on the next $ 500,000 recovered;
(3) 25% on the next $ 500,000 recovered;
(4) 20% on the next $ 500,000 recovered; and
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N.J. Court Rules, R. 1:21-7 Contingent fees
25% in case of minors and mentally
incapacitated persons if the case settles
without trial
includes services rendered on any appeal or
review proceeding or on any retrial, but this
shall not be deemed to require an attorney to
take an appeal
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N.J. Court Rules, R. 1:21-7 Contingent fees
(f) If at the conclusion of a matter an
attorney considers the fee permitted by
paragraph (c) to be inadequate, an
application on written notice to the client
may be made to the Assignment Judgefor
the hearing and determining of a reasonable
fee in light of all the circumstances.
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Federal Tort Claims ActStatutory contingent fee limits
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28 U.S.C.2678. Attorney fees; penalty
No attorney shall charge, demand,
receive, or collect for services rendered,
fees in excess of 25%of any judgment
or [settlement] or in excess of 20%of any award,
compromise, or settlement (at
administrative adjustment stage] [28
USC 2672]
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28 U.S.C.2678. Attorney fees; penalty
Any attorney who charges, demands,
receives, or collects for servicesrendered in connection with such claimany amount in excessof that allowed
under this section, if recovery be had,shall be fined not more than $ 2,000 orimprisoned not more than one year, orboth.
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NJ ll ti t f
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NJ allows contingent fee
enhancement Walker v. Guiffre, A-72-10, the Court
reinstates a $99,000 legal fee on theplaintiff's $650 recovery in a suit accusing
Route 22 Nissan Inc. and other cardealerships of fraudulently inflating fees insales contracts."
In Humphries v. Powder Mill ShoppingPlaza wheelchair access claim
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Not only fees, but attitudes shift
City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.
The "lodestar" is "the product of reasonable hourstimes a reasonable rate"
District Court declared that Dague's "risk of notprevailing was substantial"and that "absent anopportunity for enhancement, [Dague] would havefaced substantial difficulty in obtaining counsel ofreasonable skill and competence in this complicatedfield of law [Clean Water Act]."
It concluded a 25% enhancement is appropriate, butanything more would be a windfallto the attorneys."
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Not only fees, but attitudes shift
City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.
We see a number of reasons for
concluding that no contingency
enhancement whatever is compatible
with the fee-shifting statutes at issue.
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N l f b i d hif
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Not only fees, but attitudes shift
City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.
Just as the statutory language limiting
fees to prevailing parties bars a
prevailing plaintiff from recovering fees
relating to claims on which he lost, so
should it bar a prevailing plaintiff from
recovering for the risk of loss.
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N t l f b t ttit d hift
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Not only fees, but attitudes shift
City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.
To award a contingency enhancement
under a fee-shifting statute would in
effect pay for the attorney's time (or
anticipated time) in cases where his
client does not prevail.
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R di P t 141 NJ 292 (2005)
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Rendine v. Pantzer, 141 NJ 292 (2005)
We are unpersuaded by Justice
Scalia's suggestion in Dague, supra,
that awarding contingency
enhancement under a fee-shifting
statute "would in effect pay for the
attorney's time (or anticipated time)
in cases where his client does notprevail." ...
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R di P t 141 NJ 292 (2005)
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Rendine v. Pantzer, 141 NJ 292 (2005)
In our view the case for contingency
enhancement has nothing to do with
the amount of time lawyers invest in
losing cases.
It rests on the desire to enable
parties to compete for legal services
in the private market.
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Rendine v Pantzer 141 NJ 292 (2005)
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Rendine v. Pantzer, 141 NJ 292 (2005)
A more practical approach is that
outlined in the Delaware Valley IIdissent. A court's job is to determine
1) was the case was taken on a
contingent basis? 2) was the attorney able to mitigate
the risk of nonpayment in any way?
3) were other economic risks wereaggravated by the contingency ofpayment?
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Rendine v Pantzer 141 NJ 292 (2005)
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Rendine v. Pantzer, 141 NJ 292 (2005)
It is the actual risks or burdensthat
are borne by the lawyer or lawyers
that determine whether an upward
adjustment is called for.'
483 U.S. at 747 (Blackmun, J., dissenting)Counsel Fees spring 2014 remedies
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Rendine v. Pantzer, 141 NJ 292 (2005)
We conclude that contingency
enhancements in fee-shifting casesordinarily should range between 5%and 50%of the lodestar fee,
the enhancement in typical contingencycases should range between 20% and35 % of the lodestar.
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Managing the conflicts amongclaimants and lawyers
Aggregate Litigation
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Deepwater Horizonan outlier
Any common benefit Class Counselfees and costs awarded by the Courtwill not be deducted from Class
Members recoveries, but will be paidby BP in addition to other classbenefits.
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R 1 8 (g) Conflicts Aggregate
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R. 1.8 (g) ConflictsAggregate
Litigation
A lawyer who represents two or moreclients shall not participate in makingan aggregate settlement of the
claims of or against the clients, or ina criminal case an aggregatedagreement as to guilty or nolo
contendere pleas, unless:
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Florin v. Nationsbank of Ga., N.A. p. 180
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o at o sba o Ga , p 80
(7th Cir. 1995) Class actions
Counsel for the classsought
Lodestar$ 1,863,838.75
Enhanced by risk multiplier (1.53) = $ 2.85 million or 18.45 % of the fund
District court on remand.... allowed the
smallest possible multiplier of 1.01
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, p
(7th Cir. 1995) Class actions
We reviewthe district court's award ofattorneys' fees deferentially
plaintiff class is unrepresentedin theissue of attorneys' fees
court mustjealously guard the interestsof the class.
court must also be careful to sustain theincentive for attorneyson an"inescapably contingent" basis
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Florin v. Nationsbank of Ga., N.A. p. 180
(7th Cir. 1995) Class actions
The risk multiplier is an effort to mimic
market forces.
The district court in essence foundthat the attorneys for the class faced no
risk in taking on the case, that in the
end, they were assured of a paycheck.
We disagree.Counsel Fees spring 2014 remedies
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Florin v. Nationsbank of Ga., N.A. p. 180
(7th Cir. 1995) Class actions
the benchmark in common fundcases is 20 % - 30 %
Usual range 13 % - 20 %for funds of
$ 51-$ 75million
6-10 % range for funds of $ 75-$ 200million
the multiplier of 1.53 leads toattorneys' fees of $ 2.85 million -about 18.5 % of the settlement fund
Counsel Fees spring 2014 remedies
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Florin v. Nationsbank of Ga., N.A. p. 180
(7th Cir. 1995) Class actions
the benchmark in common fundcases is 20 % - 30 %
Usual range 13 % - 20 %for funds of
$ 51-$ 75million
6-10 % range for funds of $ 75-$ 200million
the multiplier of 1.53 leads toattorneys' fees of $ 2.85 million -about 18.5 % of the settlement fund
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Private agreement or judicialcontrol?
Aggregate Tort Litigation
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WTC Ground Zero cases
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Judge Hellerstein refused to mark casessettled when the lawyers for City,
contractors and plaintiffs presented theiragreement.
He ordered them to continue to trial, etc.
He said that not enough money was goingto plaintiffs and too much was going tolawyers.
Its a quasi class action, he said
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WTC Ground Zero cases
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What should the lawyers do if they think
he is overreaching?
Did the Judge have the right to approve
or disapprove a private settlement?
Almost all the money is federal funds
(WTC Captive) - does that make adifference?
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R 1 8 (g) Conflicts Aggregate Litigation
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R. 1.8 (g) Conflicts Aggregate Litigation
each client gives informed consent,
in a writing signed by the client. The lawyer's disclosure shall include
the existence and nature of all the
claims or pleasinvolved and the participation of each person in
the settlement
Does the WTC settlement honor theseprinciples?
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Quaere
* are the plaintiffs adequately informed ofthe terms of the aggregate settlementunder RPC 1.8 (g)?
* do the opt outs have a realistic chance?
* will 95% take the settlement?
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Apportioning fees among
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Apportioning fees among
lawyers in MDL litigation
Individually retained lawyers
Lead counsel
State vs. Federal litigation on parallel
tracks
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Zyprexa
Judge Jack B. Weinstein
467 F. Supp. 2d 256 (EDNY 2006)
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Federalism: the state court problem
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Federalism: the state court problem
State-Federal Comity
Conflicts of interest due to differing feestructures
Equity Litigation misconduct
- state court filings to evade MDL fee
limits and common benefit assessments - filings of non-meritorious new claims
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Common benefit work by Plaitniffs
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Steering committee 1 Discovery
Bellwether trials
Settlement negotiations
8000 cases settled Claims processing and payment
procedures and implementation
Resolving Medicare and Medicaidliens (agreement approved by allstates and federal government)
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Attorneys fee structure
Capping fees
20% of recovery in smaller, lump-sumclaims
35% of recovery in all other claims
1% hold-back from the gross settlement ,plus interest on the escrow fund for
Plaintiff Steering Committee I (PSC 1)
PSC IInot set
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Common benefit fund purpose
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Common benefit fund purpose
Reimburse members of PSC I and
other attorneys for the time and
fundsexpended by them for the
common benefit of all settling
plaintiffs in
conduct of the litigation
implementation of the settlement
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FRCP R l 11
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FRCP Rule 11
Provides for sanctions for litigationmisconduct
- costs to adverse party including
attorneys fees
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S ti d N Y k L
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Sanctions under New York Law
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AWARDS OF COSTS AND IMPOSITION OF FINANCIAL
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83
SANCTIONS FOR FRIVOLOUS CONDUCT IN CIVIL
LITIGATION - 22 NYCRR 130-1.1
Costsand reasonable attorneys fees
may be awarded TO a party injured by
frivolous litigation conduct of
Attorneys
Parties
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AWARDS OF COSTS AND IMPOSITION OF FINANCIAL
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84
SANCTIONS FOR FRIVOLOUS CONDUCT IN CIVIL
LITIGATION - 22 NYCRR 130-1.1
Conduct is frivolousif:
(1) completely without merit in lawand
cannot be supported by a reasonableargument for an extension, modificationor reversal of existing law;
(2) it is undertaken primarily to delayorprolong the resolution of the litigation,or to harassor maliciously injureanother; or
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FRCP 11
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FRCP 11
(4) Nature of a Sanction.
A sanction imposed under this rulemust be limited to what suffices to
deter repetition of the conduct orcomparable conduct by otherssimilarly situated.
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FRCP 11
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FRCP 11
The sanction may include
nonmonetary directives
an order to pay a penalty into court
an order directing payment to themovant of part or all of thereasonable attorney's fees and other
expenses directly resulting from theviolation.
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Rule 11 FRCP - sanctions
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88
Rule 11 FRCP sanctions
As toAny papera lawyer signsor
advocates forthe attorney certifies factual contentionshave (or will have)
evidentiary support
denials of factual contentions arewarranted on the evidenceor arereasonably based on belief or a lack of
information
Counsel Fees spring 2014 remedies
28 USC 1927. Counsels liability forexcessive costs
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excessive costs
Any attorney ..who so multiplies theproceedings in any caseunreasonably and vexatiously may berequired by the court to satisfy
personallythe excess costs,expenses, and attorneys feesreasonably incurred because of such
conduct.