The U.S. Justice Department is planning to oppose the $90.8 million legal fee request in the black farmers' loan discrimination case in Washington federal district court.
Justice lawyers said in a recent court filing the government will litigate the plaintiffs' attorneys assertion that they should receive 7.4% of the $1.25 billion settlement.
The settlement, reached in February 2010, set the fee range between 4.1% and 7.4%. The deal between the government and farmers resolved claims among people who missed a court-imposed deadline to participate in an earlier settlement that involved discrimination allegations.
The U.S. Department of Agriculture has called the settlement fair and reasonable. But that doesn’t mean the government is entirely on board with the plaintiffs’ lawyers, who include Gregorio Francis of Morgan & Morgan, Andrew Marks of Crowell & Moring and Henry Sander of Chestnut, Sanders, Sanders, Pettaway & Campbell.
“Although the USDA submits that this settlement agreement provides potential class members an opportunity to obtain meaningful relief for their claims while fairly resolving the parties’ respective litigation positions, the government does not agree with every point made by plaintiffs in support of final approval of this settlement agreement,” DOJ lawyer Tamra Moore of the federal programs branch said in court papers.
Moore did not articulate why the government will oppose the $90.8 million fee request. DOJ lawyers have not yet filed a formal opposition to the fee petition.
In two other recent large class actions in Washington where the plaintiffs’ lawyers asked for the maximum fee allowed, DOJ called the petitions excessive. DOJ argued in those cases the class members should receive as much of the settlement fund as possible.
The Justice Department has also asked Judge Paul Friedman of U.S. District Court for the District of Columbia to strike an expert’s declaration (PDF) that the plaintiffs’ lawyers in the black farmers case filed with the fee petition. DOJ called the declaration “improper.”
Cornell University Law School professor Theodore Eisenberg, who has written several studies on attorney fees and class actions, said in the declaration the plaintiffs’ fee petition is reasonable. The benefit the plaintiffs’ lawyers obtained for the class, he said, supports a $90.8 million legal fee award. Eisenberg charged $650 an hour to prepare the declaration.
Earlier this month, Precious Martin Sr., an attorney in Jackson, Miss., filed an objection to the settlement on behalf of ten people.
Martin said in court papers (PDF) that “there are obvious problems” with approving a settlement before discovery. The plaintiffs, he said, lose bargaining leverage with the federal government. Martin urged Friedman to reject class certification.
“Where there is less investigation into what the individual claims may be worth, and less admissible evidence regarding liability obtained from discovery, class counsel has significantly less bargaining power to obtain the best settlement for its clients,” Martin said.
Martin said there’s no “particularized evidence” as to what individuals claimants’ damages are. “There is no way to determine whether the settlement is fair or not, especially in light of the dearth of discovery in this case,” he said.
Friedman is scheduled to meet with lawyers in the case on Sept. 1 for a fairness hearing.
Given the lack of any discovery in the "Black Farmers' case and the high fee request of Class Counsel, it reminds me of the $295 million class settlement with De Beers for violating antitrust laws and inflating the price of diamonds. The various class actions settled before any discovery was taken, and the only documents the plaintiffs looked at were 50 boxes that De Beers self-selected; the plaintiffs were not allowed to make copies of those documents. They were only permitted to review the documents and take notes during a limited period of time. The documents covered approximately 2 years out of an approximately 12-year class period. In short, there was no discovery so it was impossible for the plaintiffs to assess the true value of the case.
The various class actions settled for $295 million on behalf of Direct Purchasers and Indirect Purchasers even though treble damages were estimated at $7.7 billion to $10.2 billion. The Indirect Purchasers Class contained two subclasses: Resellers Subclass and Consumers Subclass. The Consumers Subclass had up to 117 million people who stood to gain $1 each from the settlement. The Consumers Subclass size was much larger than the 1.5 million people in the Wal-Mart v. Dukes class that Justice Scalia wrote, in the majority opinion, was "one of the most expansive class actions ever."
Class Counsel filed their motion for attorney's fees after the deadline for objections. The plaintiffs never gave an estimate of the damages suffered by the 117 million Consumers Subclass members so it was impossible to compare the settlement to their non-estimated damages. In addition, the Consumers Subclass representatives asked for incentive fee awards of $5,000 each which were disproportionate and excessive in comparison to the $1 or $16 (i.e., a higher pro-rated amount that would be available to consumers if few people filed claims) that will go to the Consumers Subclass members. Ultimately, less than 1% of Consumers Subclass members ever filed claims.
Despite these shortcomings, the District Court of New Jersey approved the settlement as fair and adequate and awarded $75 million in attorney's fees for Class Counsel, i.e., 25% of the settlement fund. The District Court refused to consider the Class's right to treble damages in assessing the settlement, and it only compared the overall settlement amount to the estimated single damages suffered by the Class. Of course, there was no estimate of single damages suffered by the Consumers Subclass, in particular, so the District Court could not specifically assess the value of the settlement for 117 million consumers.
The settlement is now on appeal before the U.S. Court of Appeals for the Third Circuit. The lack of discovery is one of the issues that my clients (who are objector class members) raised on appeal regarding the insufficiency of the settlement. Oral argument was held in February 2011 and a decision is expected in the near future.
Briefs containing further details are part of the public record and available on the docket of Sullivan v. DB Investments, Inc., Appeal No. 08-2819 (3d Cir.).
Posted by: Robert J. Gaudet, Jr. | August 25, 2011 at 04:16 AM