‘Structural and Procedural Flaws’ Foul Up Fees in Syngenta Settlement
More than $440 million in common benefit fees have been allocated in a class action settlement with Syngenta, prompting multiple appeals, but a federal judge’s order this month threw a big wrench in the process.
Judges in three states have divvied up more than $440 million in attorney fees so far in the litigation over Syngenta’s genetically modified corn, but their orders have prompted multiple appeals and an unusual rebuke from the bench.
U.S. District Judge John Lungstrum of the District of Kansas, who is overseeing the multidistrict litigation against Syngenta, granted $503 million in common benefit fees last year as part of a $1.5 billion class action settlement.
He divided the fees into four pools, three of which focused on cases in specific venues: Kansas, Minnesota and Illinois.
Lungstrum allocated nearly $247 million in fees to 59 firms handling the multidistrict litigation in Kansas but allowed judges in Minnesota and Illinois to decide which firms got how much in their own venues.
On Aug. 19, Chief U.S. District Judge Nancy Rosenstengel of the Southern District of Illinois, doled out more than $78 million for law firms in the Illinois cases but criticized the report and recommendation of special master Daniel Stack, whom she appointed in the case, as having “structural and procedural flaws.”
“Because the report and recommendation placed claimant numbers, expenses, and client acquisition costs at an equal footing with the hours actually expended in pursuit of the plaintiffs’ cause, the methodology does not accurately display the firms’ common benefit value,” she wrote.
“The methodology also carries the risk of blindly and disproportionately rewarding attorneys for marketing efforts, rather than work performed advocating for the benefit of the plaintiffs.”
She then slashed $23.4 million to Houston’s Clark, Love & Hutson and two other firms, Chicago’s Meyers & Flowers and Phipps Anderson Deacon, a San Antonio firm now called Phipps Deacon Purnell.
Stack had awarded those firms $61.6 million, or about 79% of the total fees in Illinois—an amount Rosenstengel called “grossly excessive.”
Rosenstengel’s criticism of Stack, a retired judge on the Madison County, Illinois, Circuit Court, got the attention of Cleveland-based Anderson Law Offices, which is appealing an allocation of $550 million in common benefit fees in the transvaginal mesh litigation. Stack served as special master in that case, in which Clark Love, whose managing partner, Clayton Clark, served on the fee and cost committee, is set to receive more than $45 million in fees.
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Rosenstengel’s order had “strikingly similar circumstances” to the mesh case, according to a Monday filing by Anderson Law Offices before the U.S. Court of Appeals for the Fourth Circuit, and “presents a compelling example of how common benefit fee allocations should be closely scrutinized by the district courts, which plainly has yet to be conducted in this case.”
Stack, now at Alaris ADR Services, did not return a call for comment. Clark, Pete Flowers of Meyers & Flowers and Martin Phipps of Phipps Deacon Purnell did not respond to requests for comment.
The Syngenta settlement, approved Dec. 7, resolved lawsuits alleging it sold genetically modified corn seed that China refused to import, causing about 600,000 farmers and other producers to lose billions of dollars.
Objectors represented by two lawyers, George Cochran of the Law Offices of George W. Cochran in Streetsboro, Ohio, and Robert Clore of Corpus Christi, Texas-based Bandas Law Firm, have appealed the settlement’s approval, including the $503 million in fees.
That award, which is one-third of the class action settlement fund, is far more than the average of 5% to 15% in deals involving more than $1 billion, they wrote.
“The unprecedented fees deprived the injured farmers of hundreds of millions of dollars that should have addressed their losses,” they wrote. “Without a sizeable reduction in fees, approval of the settlement itself was error.”
In a response filed last month, lead plaintiffs counsel defended the settlement and the fees, noting that they advanced $31 million to fund the litigation.
“This was no ordinary class action but one with multiple forums that went to class trial—twice—and the size of the fund was directly related to the work of plaintiffs’ counsel, who imposed ‘unprecedented’ liability on the defendants,” they wrote.
Settlement counsel Chris Seeger of Seeger Weiss, Patrick Stueve of Stueve Siegel Hanson, and Dan Gustafson of Gustafson Gluek did not respond to a request for comment.
In approving the common benefit fees, Lungstrum largely adopted the report and recommendation of special master Ellen Reisman of Reisman Karron Greene in Washington, D.C.
On March 20, Lungstrum allocated fees to specific firms in the Kansas cases, agreeing with the recommendations of co-lead counsel in the multidistrict litigation and rejecting two objections that questioned whether firms responsible for doling out the fees, including to themselves, had conflicts of interest.
Co-lead counsel were Stueve and Don Downing of Gray, Ritter & Graham in St. Louis; Scott Powell of Hare, Wynn, Newell & Newton in Birmingham, Alabama; and William Chaney of Dallas-based Gray Reed & McGraw. Their four firms, plus Seeger Weiss, collectively received almost $215 million in fees.
On May 30, Hennepin County District Court Judge Laurie Miller divvied up nearly $118.3 million in fees to 188 law firms. She also relied on co-lead counsel, which included Gustafson Gluek, Bassford Remele and Watts Guerra, which collectively stand to receive $87 million.
Watts Guerra is among the firms that have appealed the allocation orders to the U.S. Court of Appeals for the Tenth Circuit. Watts Guerra initially sought $150 million in common benefit fees for itself and hundreds of other law firms that represented 57,000 farmers.Mikal Watts, of Watts Guerra, to which Miller awarded $39.7 million in fees, declined to comment.
The Tenth Circuit abated the fee appeals pending Lungstrum’s final judgment following an allocation of $60.4 million in remaining fees to attorneys with individual clients, referred to in court documents as the “IRPA,” or individually retained private attorneys.
At issue in Rosenstengel’s order this month was Stack’s reliance on using a percentage, along with his “personal experience and observations,” rather than billing records of the law firms. She also found that, although the Clark/Phipps group submitted 141,663 common benefit hours, more than any other firm, a “large portion” of the time was logged by anonymous employees and lacked records.
She instead awarded $24.2 million in additional fees to nine firms led by Heninger, Garrison & Davis, based in Birmingham, Alabama, which were “at the forefront of the Illinois Syngenta litigation.” Stack had given those firms, called “The Garrison Group,” less than $9.7 million, or 12.4%, of the fees.
“Ultimately, the report and recommendation fails to carefully evaluate the benefit of the work behind the hours, which dilutes the contributions of some applicants while significantly inflating the value of others,” she wrote.
In a footnote, she also described as “highly inappropriate” a declaration from retired U.S. District Judge David Herndon of the Southern District of Illinois, who previously oversaw the Syngenta litigation, supporting Stack’s “totally unprecedented methodology.”
Paul Flowers of Paul W. Flowers Co. Cleveland, representing Anderson Law Offices, said Stack’s methods were similar in the mesh case.
“It’s all very concerning because he did the exact same thing in the TVM case: giving up on all the time data and hourly rates and multipliers and using a percentage approach where numbers are assigned based on what the committee thinks everybody deserves,” he said. “And there’s no way to double check that or confirm it.”
The limousine for President Barack Obama sits in the driveway of the home of Mikal Watts, a trial lawyer, in San Antonio, Texas, Tuesday, July 17, 2012. Obama, who is at the Watts’ home, is spending the day fundraising in Texas. (AP Photo/Susan Walsh & DonkeyHotey)
(AP Photo/Susan Walsh & DonkeyHotey)