is.jpgBy Chris Palamountain and Brian Wong

The availability of attorneys’ fees, costs, and expenses is a prime motivator for the plaintiffs’ employment class action bar, and Plumbers Union Local No. 12 Pension Fund v. Ambassadors Group Inc., No. CV-09-214-JLQ, 2012 U.S. Dist. LEXIS 26232 (E.D. Wash. Feb. 28, 2012), gives employers another reason not to simply agree to a ceiling for the fee and expense portions of a class action settlement. 

In Plumbers Union Local No. 12, Judge Justin Quackenbush of the U.S. District Court for the Eastern District of Washington issued an “Interim Memorandum”  requiring plaintiffs’ counsel in a securities fraud class action to provide written responses to the Court’s serious concerns about the expenses, disbursements, and attorney fees they sought after the action had settled.

The Court scrutinized plaintiffs’ “Motion For Award Of Attorneys’ Fees And Expenses” as a fiduciary representative of the interests of the class, and took issue with a number of requests.

For example, Judge Quackenbush examined at length the inconsistent representations plaintiffs’ counsel made when reporting amounts paid to a retired police officer to conduct an investigation related to the class action. While plaintiffs’ counsel initially reported paying the investigator $125,935.00 at a rate of $445 per hour, they conceded at a hearing before Judge Quackenbush that the investigator did not, in fact, receive such payment. Subsequent declarations filed by plaintiffs’ counsel further conceded the investigator was paid only $31,710.15 in total, at a rate of $112 per hour.

Judge Quackenbush also questioned the appropriateness of a number of other expenses and disbursements claimed by plaintiffs’ counsel, including dinner for four at a Newport Beach, California restaurant “that included two (2) bottles of $72 per bottle wine and a $60 waiter tip included in the $402.00 bill.” In what reads as admonition more than inquiry, Judge Quackenbush posed the following questions: “Should members of the class, who suffered the monetary loss, be required to pay for such an evening? Are such expenses ‘reasonable and necessary?’” 

Judge Quackenbush also highlighted a number of hotel bills, including a one-night Spokane, Washington hotel charge for $285, which he called excessive given that the charge included a $50 late checkout fee and “a one evening room in a good Spokane hotel may cost approximately $100.” Other excessive travel and hotel charges included Newport Beach hotel fees of $359, $371, and $398 per night, a round trip plane ticket between New York and Spokane for $1,676, and a round trip ticket between New York and San Diego for $2,169.

The Court also questioned a claim for $15,025 for “mediation.” As the mediator’s one-day charge was to be divided between plaintiffs and defendants, Judge Quackenbush took issue with the representation that the mediator’s one-day fee was over $30,000.

The Court took similar issue with the fee request of plaintiffs’ counsel, both in terms of the reasonableness of the hours claimed and the reasonableness of the hourly rates asserted. In particular, Judge Quackenbush expressed continued concerns over a claim of $52,257 in fees for preparation of an Amended Complaint, and also over a claim for $96,525 in fees for 135 hours billed by an attorney who was not involved in the matter until after settlement was achieved and worked only on preparation of final settlement papers. The Court likewise questioned the hourly rates asserted by plaintiffs’ counsel for both attorney and paralegal time, and cited to a number of lower rates found reasonable in other federal districts.

In light of its numerous concerns regarding the expenses, disbursements, and fees requested, as well as his recognition that plaintiffs’ counsel had previously made claims for reimbursement of expenses that the U.S. District Court for the Northern District of California called “misleading” – in the case of In re CV Therapeutics, Inc., Securities Litigation, No. C 03-3709, 2007 U.S. Dist. LEXIS 98244, at *3 (N.D. Cal. April 4, 2007) – Judge Quackenbush advised plaintiffs’ counsel the Court would, for the first time in his thirty-two (32) years on the federal bench, consider imposing sanctions, including at minimum a written admonition, and also initiation of disciplinary proceedings.

As for the Seattle law firm that served as local counsel, the Court warned that signing and filing misleading pleadings on behalf of plaintiffs’ counsel could result in possible damage to their reputations or other negative consequences.

Implications For Employers

The ruling in Plumbers Union Local No. 12 Pension Fund is a stunner. It’s worth reading twice – once is not enough.

Judge Quackenbush’s Interim Memorandum underscores the notion that there is no need to blindly accept class counsel’s representations that their fee and expense request is reasonable and that preserving the right to challenge the fee award may not only deter plaintiffs from identifying a client as lenient on fee issues, but also may result in measurable savings for defendants in the context of settlement of class action litigation.