Opinion
Civil Action No. 3:04-cv-00831-G, In re UICI "Association-Group" Insurance Litigation, MDL 1578 Related Actions: Case No. 3:04-cv-00470-G, Case Nos. 3:04-cv-00928-G, 3:04-cv-00929-G, 3:04-cv-01285-G, 3:04-cv-01286-G, 3:04-cv-01842-G, Civil Action No. 3:04-cv-00470-G, In re UICI "Association-Group" Insurance Litigation, MDL 1578 Related Actions: Case No. 3:04-cv-00831-G, Case Nos. 3:04-cv-00928-G, 3:04-cv-00929-G, 3:04-cv-01285-G, 3:04-cv-01286-G, 3:04-cv-01842-G.
January 13, 2005
SPECIAL MASTER'S FINDINGS AND RECOMMENDATIONS APPROVING CLASS COUNSEL'S ATTORNEYS' FEES AND EXPENSES
Pursuant to an Order dated October 15, 2004, this Court extended Judge Frank Andrews' Appointment as a Special Master ("Master") "for purposes of considering Class Counsel's Application for Approval of Attorneys' Fees and Expenses." Pursuant to the terms of that Order, Class Counsel was to provide the Master "for in camera inspection, their detailed time and expense records supporting Class Counsel's Application for Approval of Attorneys' Fees and Expenses, as well as copies of all motions and briefs that have been filed with the Court in support of or in opposition to Class Counsel's Application for Approval of Attorneys' Fees and Expenses." This information was provided to the Master, in accordance with this Order, on October 25, 2004.
Subsequently the Objectors to the Settlement requested the Court to reconsider the Order directing Class Counsel to submit their detailed time records to the Master for in camera inspection. By Order dated November 19, 2004, the Court overruled this Motion for Reconsideration.
The Master was subsequently informed that an agreement had been reached between all parties to resolve the Objectors' complaints regarding the Settlement ("Objectors' Settlement Agreement"). The Master was provided with a copy of the Objectors' Settlement Agreement, and pursuant to its terms, was requested by Class Counsel and the Objectors' Counsel to conduct a telephone conference to consider both Class Counsel's and the Objectors' Counsel's request for fees and expenses. That conference occurred on December 22, 2004.
The Master has now considered Class Counsel's request for approval of attorney's fees and expenses, the submissions of Class Counsel and the arguments and information provided during the December 22, 2004 conference. In performing the obligations imposed by the Order, the Master has specifically considered: (1) the terms of the Stipulation, (2) the terms of the Objectors' Settlement Agreement, (3) Class Counsel's Brief and Appendix in Support of Application for Approval of Payment of Attorneys' Fees and Expenses, (4) the Affidavits of Class Counsel, (5) the Affidavit of Roger Mandel, (6) the Supplemental Appendix in Support of Class Counsel's Brief in Support of Application for Approval of Payment of Attorneys' Fees and Expenses, (7) the entire record of this proceeding and all evidence on file or presented at the hearing, (8) the representations and argument of all counsel, and (9) the relevant law applicable to Class Counsel's request. Based thereon, the Master makes the following findings and recommendations:
1. Class Counsel's proposed attorneys' fees and expenses are reasonable in relation to the benefits achieved through the settlement. If analyzed as a percentage of the benefit of the settlement, Class Counsel's request for approval of attorneys' fees and expenses falls within the range of reasonableness approved by courts under similar circumstances. Class Counsel's request for fees and expenses represents less than 2% of the total value of the settlement on the low end to 33% on the high end, and the Master finds that these percentages are reasonable in this case. Class Counsel was also responsible for negotiating the Objectors' Settlement Agreement, both with Defendants and the Objectors' Counsel, and this also provided additional benefits to the Class.
2. Class Counsel's proposed attorneys' fees and expenses are reasonable in comparison to fees normally negotiated and paid in the relevant market place in a case of this nature.
3. Class Counsel's proposed attorneys' fees and expenses are also reasonable when considered under a hybrid analysis, applying both a percentage method and a lodestar method of analysis.
4. The Master has also considered each of the factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (5th Cir. 1974), including (1) the time and labor required, (2) the novelty and difficulty of the questions, (3) the skill requisite to perform the legal service properly, (4) the preclusion of other employment by the attorney due to acceptance of the case, (5) the customary fee for similar work in the community, (6) whether the fee was fixed or contingent, (7) the amount involved and the results obtained, (8) the experience, reputation and ability of the attorneys, (9) the undesirability of the case, and (10) awards in similar cases. The Master finds that each of these factors supports Class Counsel's proposed award of attorneys' fees and expenses in this case for the following reasons:
a. Time and Labor Required. The Master has considered the time and expense records of Class Counsel and finds that the hourly rates are reasonable, and that the time expended was reasonable and necessary in the prosecution of this case. In addition, because of Class Counsel's experience, they were in a unique position to quickly and accurately investigate and assess the merits of the case and efficiently obtain a successful outcome on behalf of the Settlement Class. This factor, therefore, supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
b. Novelty and Difficulty of the Questions. The novelty and difficulty of the questions involved in this case support Class Counsel's Application for Approval of Attorneys' Fees and Expenses. This case implicated innumerable state and federal laws, many of which were highly complicated, which required significant expertise on the part of Class Counsel. In addition, because of the novelty and difficulty of the questions involved, the outcome of this case was highly uncertain, and given the fact that Class Counsel undertook to prosecute this case on a contingent fee basis, these factors greatly increased the risk of not being compensated. In addition, there were substantial factual disputes in the case which further complicated the prosecution and made the outcome uncertain at the time that representation was commenced. Finally, Class Counsel achieved the favorable results through settlement of this case without the benefit of governmental investigation and exercised their unique skills and experiences in accomplishing this result.
c. The Skill Required to Perform the Legal Services Properly. Due to the complexities of this case, the litigation required considerable skill and experience to bring it to a successful conclusion. Lead Class Counsel are all highly experienced insurance class action attorneys, some of whom are Board Certified in Civil Trial Law, and one of whom is also Board Certified in Consumer Law and is a Certified Public Accountant. In addition, Defendants were represented by prominent and well-respected law firms, which increased the challenges faced by Class Counsel in successfully pursuing the case. These factors further support the Application for Approval of Attorneys' Fees and Expenses in this case.
d. Preclusion of Other Employment. The considerable time expended by Class Counsel as previously described precluded other employment, which further supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses in this case.
e. The Customary Fee for Similar Work. The fee requested in this case is consistent with fees awarded in other similar cases, whether analyzed on a percentage basis, a hybrid percentage/lodestar basis, or a pure lodestar basis. Even on a pure lodestar basis, only a multiplier of less than 4 would have to be applied to achieve the requested award of attorneys' fees and expenses. Based on all the matters set forth herein, the Master finds that the multipliers suggested by Class Counsel are reasonable and consistent with multipliers applied in other cases of a similar nature. In addition, the hourly rates expended are also consistent with hourly rates approved in other cases, and the expenses requested are likewise consistent with the expenses approved in other cases of a similar nature. Accordingly, this factor likewise supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
f. Whether the Fee is Fixed or Contingent. Class Counsel undertook prosecution of this action on a contingent fee basis and thereby assumed a substantial risk that the litigation would yield no recovery and leave them uncompensated. As previously described, there was significant legal and factual risk to successful prosecution of this case. Attorneys who are to be compensated only in the event of a victory are routinely compensated at rates higher than those who are assured of compensation regardless of the outcome. In addition, the risk of non-payment in this case was increased by the fact that the Defendant Insurance Companies are highly regulated by various departments of insurance, and a significant monetary recovery in this case could have caused an intervention by regulatory authorities preventing any distribution to the Class. Thus, the risk of non-payment of attorneys' fees in this case further supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
g. The Amount Involved and the Results Obtained. The amount involved and the results obtained in this case are significant. As previously explained, if compared to the total results in the case, Class Counsel's requested fee ranges, from 2% on the low end to 33% on the high end of the benefit obtained. The Court has already approved the settlement as fair, reasonable and adequate, which confirms the value of the results obtained. This factor, therefore, justifies approval of Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
h. Experience, Reputation and Ability of the Attorneys. This factor has previously been addressed above. Class Counsel has successfully managed this litigation in an expedited and pragmatic fashion which further confirms the ability of Class Counsel and supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
i. Undesirability of the Case. As discussed above, there were many factors militating against the successful prosecution of this case. These factors, when viewed at the time that Class Counsel undertook litigation, made success highly uncertain. Because of this, Class Counsel's compensation was also highly uncertain. This factor, therefore, supports Class Counsel's Application for Approval of Attorneys' Fees and Expenses.
5. Class Counsel's proposed attorneys' fees and expenses are reasonable when considered on a pure lodestar basis, taking into account the hours expended by Class Counsel, which the Master finds to be reasonable and necessary, the hourly rates proposed by Class Counsel, which the Master finds to be reasonable, and applying a reasonable multiple based upon the Master's consideration of the Johnson factors set forth above.
6. The expenses incurred by Class Counsel were both reasonable and necessary and further support Class Counsel's request for approval of attorneys' fees and expenses.
7. The negotiations of the provisions of the Stipulation regarding attorneys' fees were conducted at arm's length in good faith, and since this aspect of the settlement was addressed separate and apart from the Class consideration, it did not negatively impact the negotiation thereof in any way, which further supports Class Counsel's request for approval of the attorneys' fees and expenses in this case.
8. Pursuant to the Stipulation, Defendants have agreed to pay up to $6,000,000 in attorneys' fees and expenses to Class Counsel, subject to approval of the Court. Because of this, Class Counsel's request for approval of attorneys' fees and expenses will not detract from or reduce any of the benefit to the Class provided by the Stipulation.
9. The Master hereby incorporates the Final Order and Judgment Approving Class Action Settlement, and all findings made therein, in support of this Recommendation Approving Class Counsel's Attorneys' Fees and Expenses.
11. For the foregoing reasons, the Master recommends that the Court grant Class Counsel's request for approval of the payment by Defendants of attorneys' fees and expenses in the total amount of $6,000,000 in accordance with the terms of the Stipulation, and order Defendants to pay the total sum of $6,000,000 in attorneys' fees and expenses in accordance with the terms of the Stipulation.
12. Pursuant to the terms of the Objectors' Settlement Agreement, the Master has also considered the request by Objectors' Counsel for payment of attorney's fees and expenses out of the $6,000,000 to be paid by Defendants. By separate recommendation the Master has determined that out of the total attorney's fees and expenses to be paid by Defendants, a total of $625,000.00 should be paid to all of the Objectors' Counsel. Therefore, the Master recommends that the Court approve a payment of attorney's fees and expenses to Class Counsel of the balance of the $6,000,000 to be paid by Defendants, in the total sum of $5,375,000.00, and order Defendants to pay this sum to Class Counsel in accordance with the terms of the Stipulation.