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Criticism of Boies Schiller Discovery Tactics in NY Case
Wednesday, May 18 2005 @ 10:34 AM EDT

The New York Observer is reporting that the judge in a New York case, Fears v. Wilhelmina Model Agency, Inc., approved a $22 million settlement for the plaintiff models, but has criticized their lawyers -- Boies, Schiller & Flexner were the lead counsel -- and granted the attorneys millions less than they asked for in attorneys' fees. Reason? Their behavior in discovery.

They asked for $8,875,164.65 in attorneys' fees, but were awarded only $3,759,583.16 plus expenses of $1,590,164.65. The case was about price fixing. And here's the Order [PDF], dated May 5, 2005.

The article explains why the lawyers were awarded more than $3 million less than they asked for:

"Certain conduct in which class counsel engaged during the discovery phase of this litigation," Judge Baer wrote.

He cited three sanctions that the magistrate judge (who oversaw the lengthy discovery process) issued against the models’ counsel after motions filed by Mr. Golub: charges of $5,000, $250 and $25,000 (the latter stayed by Judge Baer) for what the magistrate judge called their "failure to respond appropriately to interrogatory answers."

"[P]laintiffs have unnecessarily made the straightforward task of responding to interrogatories a difficult and grueling process," wrote the magistrate judge in a passage cited by Judge Baer. "I am left with the firm conclusion that plaintiffs’ counsel determined they were going to provide discovery in the manner that they saw fit, notwithstanding the Federal Rules of Civil Procedure and notwithstanding my prior Orders."

It seems they did things like filing 270 separate interrogatories, instead of what the court ordered, consolidated interrogatories, so that the other side had to answer each one separately. Ultimately it cost them millions. They paid a fine too, as you can see from this docket entry:

209 Filed: 09/19/2003
Entered: 09/24/2003 Order
Docket Text: ORDER; next appliction to compel identification of the confidential source referred to by pltffs' counsel was denied on the ground that Next has not served an interrogatory requesting the identification of such a source ; Elite's application for a protective order restricting pltffs' ability to disclose the documents designated EL4052-EL4835 was denied. In order to permit Elite to take an appeal, I stay my order concerning these documents for a period of 48 hrs. ; a sanction in the amount of $250.00 was imposed on pltffs' counsel as a result of pltffs' false and gratuitous references to Mindel's purported criminal record in pltffs' response to Click's interrogatories. Such sanction is payable to the Clerk of the Court no later than 9/22/03 ; next and Wilhelmina were ordered to produce all non-privileged e-mails responsive to pltffs' documents requests no later than 9/19/03. The applications of these defts to shift the costs of such production of pltffs was denied. ; ( signed by Magistrate Judge Henry B. Pitman ); (sac) Modified on 09/24/2003

The article notes that in addition to the Habie case the firm was just thrown off of by the judge (they are appealing), there have been other issues:

As reported in Forbes, this isn’t the only time that Boies, Schiller and Flexner (which was not singled out in Judge Baer’s order and opinion) has been punished with sanctions. In 1998, a judge fined Mr. Boies and his client $46,000 for filing a "barely sensible" motion in New York State Court. In 2003, the Second Circuit Court of Appeals called a lawsuit Mr. Boies had filed on behalf of Hard Rock Cafe founder Peter Morton "frivolous" and ordered a mild slap on the wrist; Boies Schiller and another firm had to pay the defendant’s legal costs—times two.

If you are interested, here's the complaint. Here is a summary of the class action issues. And here are excerpts from the Order with regard to attorneys' fees, in which the judge explains how he did his math:


1. Legal Standard

“As in every class action, there are a number of factors that enter into the Court’s decision with respect to fees.” Thompson, 216 F.R.D. at 71. In particular, and pursuant to Goldberger and its progeny, a reasonableness assessment requires the Court to evaluate: (1) the time and labor expended by counsel, (2) the magnitude of the litigation, (3) the risk of the litigation, (4) the quality of representation, (5) the requested fee in relation to the settlement, and (6) public policy considerations. Goldberger, 209 F.3d at 50. The ultimate determination of a reasonable fee award is within the district court’s sound discretion. Id. at 47.

2. Attorneys’ Fees Analysis

According to plaintiffs’ counsel, a fee award of 33.3% of the Fund, plus reimbursements of actual expenses, is fair, reasonable, and in accordance with the Second Circuit’s decision in Grinnell. In contrast, Defense counsel maintains that such an award is “shamefully high” and vigorously oppose such an award. (Ltr. from Gotkin, Att’y for Next, to Judge Baer, dated Feb. 11, 2005.)

a. The Time and Labor Expended by Counsel

The first Goldberger factor, and “the traditional criteria in determining a reasonable common fund fee,” requires consideration of the time and labor expended by counsel. Goldberger, 209 F.3d at 50. In total, eight firms, including partners, associates, paralegals and support staff, represented the class. Andrew Hayes served as lead counsel for the plaintiffs in this litigation. He is a partner at Boise, Schiller & Flexner, LLP (“Boise Schiller”). (Hayes Decl. at ¶ 1.) Boise Schiller logged a total of 18,834.7 hours on this matter. (Hayes Decl. at ¶ 4.) 7 At its current rates, approximately $500.00 per hour for Andrew Hayes, the firm estimates the total lodestar amount for professional time spent is $5,540,571.00, plus $714,333.98 in unreimbursed expenses. (Hayes Decl. at ¶ 4; Hayes Suppl. Decl. at ¶ 3.)

The other firms and individuals involved in this litigation claim less fees. . . . According to lead counsel for plaintiffs, Andrew Hayes, when taken together, the attorneys logged approximately 28,000 professional hours on this matter. (Hayes Decl. ¶ 91.) The lodestar calculation for professional time expended by Plaintiffs’ counsel was estimated at $8,816,275, plus $1,590,164.65 in unreimbursed expenses. In addition, according to Hayes, if you include in the total lodestar the 335 additional professional hours from the four additional counsel who worked on specific discovery tasks, “the total lodestar is estimated at $9,112,160.00.” (Supp. Decl. Hayes at ¶¶ 3, 5.) Because I have concluded to award fees on a claims made basis, the lodestar calculation is primarily for crosscheck purposes. See Wal-Mart Stores, 396 F.3d at 121. . . .

c. The Risk of the Litigation

“[C]ontingency risk and quality of representation must be considered in setting a reasonable fee.” Goldberger, 209 F.3d at 54; see In Re: Medco Health Solutions, Inc., Pharm. Benefits Mgmt. Litig., No. 03 MDL 2004, 2004 WL 1243873, at *11 (S.D.N.Y. May 25, 2004).

Plaintiffs’ success was never a sure thing. During the course of the litigation, Plaintiffs’ counsel defended against various motions to dismiss (Dckt. No. 21, 29, 34, 39, 43, 45, 47, 52, 62, 66, 99, ect.), an order to show cause (Dckt. No. 66), and summary judgment motions (Dckt. 211, 227, 247, 248, 251, 263, ect.). Discovery began in 2002, continued throughout the litigation and up to the commencement of trial in June 2004, and included at least 24 discovery conferences before Magistrate Judge Henry Pitman.

Due to the contingent nature of the lawsuit, had the trial continued, and Class Plaintiffs were unsuccessful, Plaintiffs’ counsel would have received no compensation. As the litigation evolved, Class Counsel advanced tens of thousands of dollars in disbursements. See In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465, 488 (S.D.N.Y. 1998) (“Risk, of course, must be judged as it appeared to counsel at the outset of the case, when they committed their capital (human and otherwise)”); see also Harman v. Lyphomed, Inc., 945 F.2d 969, 976 (7th Cir. 1991).

Accordingly, the manner in which this case unfolded demonstrates the significant possibility that Class Counsel could have failed to achieve any recovery at all and, consequently, no compensation. . . . .

Upon review of plaintiff counsels’ resumes and achievements, and with due consideration both to the $21,855,000 Fund and the formidable opposition from nationally recognized and respected law firms, the quality of representation appears to be satisfactory. Furthermore, in my view, in having brought this lawsuit, the plaintiffs’ lawyers performed a valuable public service for which they are to be commended.

All that having been said, praise for Plaintiffs’ counsel must be tempered by certain conduct in which class counsel engaged during the discovery phase of this litigation. That conduct prompted Defendants, Click Model Management and Next Management Company, to move for sanctions pursuant to Fed. R. Civ. P. 26, 37(b) and 41(b) for Plaintiffs’ failure to properly respond to interrogatories. See Fears, No. 02 Civ. 4911, 2004 WL 1065543, (S.D.N.Y. May 11, 2004) (Pitman, J.). In his decision, the magistrate judge condemned plaintiffs’ counsels’ behavior throughout the discovery process, mentioned two prior sanction orders, which imposed fines of Two Hundred Fifty Dollars ($250.00) and Five Thousand Dollars ($5,000.00), and went on to sanction counsel $25,000 dollars plus reasonable attorneys’ fees as follows:

[P]laintiffs have unnecessarily made the straightforward task of responding to interrogatories a difficult and grueling process. I am left with the firm conclusion that plaintiffs’ counsel determined they were going to provide discovery in the manner that they saw fit, notwithstanding the requirements of the Federal Rules of Civil Procedure and not withstanding my prior Orders. Such a tactic is, of course, unacceptable and richly deserves the imposition of a sanction.

Counsel’s conduct is particularly disturbing because their failure to respond appropriately to interrogatory answers here is not an isolated event. I have had to sanction plaintiffs’ counsel on two prior occasions for discovery shortcomings. Despite these prior sanctions, it appears that plaintiffs’ counsel’s {sic} still unwilling to comply with the Federal Rules of Civil Procedure and my Orders implementing those rules.

Id. at *6 (Pitman, J.). Considering Judge Pitman’s language, it would be unreasonable for me not to consider this behavior in my decision and this despite defendants’ representation that they would agree not to oppose a motion to vacate. Settling parties sometimes makes strange bedfellows.

I am obligated to review the quality of plaintiffs’ counsels’ representation, and that review must “eschew any rubber stamp approval,” put another way, attorneys’ conduct throughout the litigation must be factored into the quality of representation analysis. Thompson, 216 F.R.D. at 61 (citing to Grinnell, 495 F.2d at 462).

Accordingly, I have reduced the sought for fee award to include and emphasize my concern on this score.

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