A federal appeals panel has plucked, for now, a $57 million fee award given to the attorneys behind part of massive antitrust litigation accusing poultry producers of conspiring to control and inflate chicken prices.
The panel said a lower court judge failed to properly consider lesser amounts the plaintiffs' lawyers have agreed to accept in class actions elsewhere, particularly in the West Coast states of the federal Ninth Circuit court.
The U.S. Seventh Circuit Court of Appeals opinion, issued Aug. 30, agreed with objectors who argued U.S. District Judge Thomas Durkin didn’t properly evaluate the fee request as part of a $181 million settlement. Judge Diane Sykes wrote the opinion; Judges Michael Brennan and Doris Pryor concurred.
Durkin finalized the fee award in October 2022 for attorneys who represented consumers and other “end users” of chicken in a consolidated legal action. The "end users" case was distinct from litigation on behalf of so-called “direct purchasers,” a group that includes wholesalers, supermarkets and other retailers.
Attorneys representing the end users include Shana E. Scarlett, of the firm of Hagens Berman Sobol Shapiro, of Berkeley, California, and Brent W. Johnson, of the firm of Cohen Milstein Sellers & Toll, of Washington, D.C., along with other attorneys from those firms. In addition to incentive awards for named plaintiffs, the lawyers sought more than $60 million in fees, and $8.75 million more to reimburse them for the cost of pursuing the litigation; they told the judge their actual expenses exceeded $9 million.
At the time, Durkin said he analyzed the filing of one of two objectors who sought discovery related to the fee requests, following which he ordered disclosure about fee awards in other antitrust litigation and the firms’ agreements with named plaintiffs. That objector insisted the fee “request was ‘exorbitant’ and ‘substantially above-market,’ and demanded that ‘there must be consequences’ for such ‘selfish’ conduct.”
Class member John Andren appealed that ruling through attorneys Theodore Frank and Frank Bednarz, of the Hamilton Lincoln Institute Center for Class Action Fairness, renowned as among the most successful in America at assailing allegedly unfair and excessive fee awards under class action settlements.
Sykes said Judge Durkin “followed the appropriate method in determining the fee award” but noted the appeals panel was allowed to review the final decision to determine if it revealed an abuse of judicial discretion. Noting Durkin “has done a fine job of shepherding” the complex litigation, the panel determined his “evaluation fell short in two areas: the consideration of bids made by class counsel in auctions, and the weight assigned to out-of-circuit decisions.”
On appeal, Andren argued Durkin improperly discounted bids one of the firms made in auctions as too old to be useful. Andren said the forecasting approach to fee assessment “requires the courts to examine the bargain that would have been struck at the outset of the litigation” Sykes wrote, and the lawsuit started in September 2016. The class counsel argued the U.S. Seventh Circuit views auctions skeptically and noted the firm didn’t win the bids in question.
The appeals panel noted Durkin also discounted the bids because of their declining fee scale award structures, ostensibly in accordance with federal appeals precedent, but Sykes said no Seventh Circuit panel has “categorically rejected consideration of” such bids and said they can sometimes be advantageous. She further said it didn’t matter that only one of the involved firms made the bids and that they were unsuccessful.
“The bids were made in pursuit of appointment and reflect the price of co-class counsel’s legal services in antitrust litigation,” Sykes wrote. “It was error to suggest that this court has cast doubt on the consideration of declining fee scale bids in all cases.”
Andren also argued Durkin should’ve included in his analysis fee awards in similar cases in the Ninth Circuit, noting the firms regularly bid for appointment as class counsel in that circuit. The panel said Durkin properly gave less weight to fee awards issued at the conclusion of a case when trying to assess a bargain that might’ve been struck at the outset, but said he still “should not have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a megafund rule,” a system that caps fees when recovery exceeds a certain figure.
Although the Seventh Circuit has rejected megafund rules, Sykes wrote, “continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel’s legal services and the bargain they may have struck.”
The panel vacated the award and remanded the request for legal fees, suggesting Durkin reappropriate the weight given to auction bids and Ninth Circuit litigation while also allowing him to re-evaluate Andren’s request to order additional discovery on the expert reports class counsel submitted to bolster their request.
“We recognize that the district court has lived with this complex litigation for a long time,” Sykes wrote in conclusion. “It reviewed and considered our court’s complicated law in this area, and it was correct to invite briefing on close questions. Ordinarily, this would place its decisions within the zone of discretion to which we would defer. But given the record as considered under our admittedly intricate law, the arrived-upon figure of one-third of the net settlement warrants greater explanation and consideration of the information described above.”