Lawyers in retiree class action vs Northern Marianas government seek $40M in fees

September 16, 2013

Lawyers in retiree class action vs Northern Marianas government seek $40M in fees

By Alexie Villegas Zotomayor

www.mvariety.com

THE total amount of the class counsel’s fees is now $40 million after Timothy Lord on Friday submitted to the federal court his request for an award of attorney’s fees and costs.

Former plaintiff counsel Timothy R. Lord filed his petition for an award of attorney’s fees on Sept. 13 in federal court.

Based on Lord’s petition, under the lodestar method, he is asking for an award of attorney fees for 717.4 hours at $325 an hour, totaling $233,155.

His paralegal Shawn Adams worked an additional 34.5 hjours at $175 an hour for a total of $6,037.50.

Lord’s and Adams’ cumulative base reached $239,192.50.

If the multiplier 15 were to be applied, this would yield an award of $3,587,887.50.

Under the percentage-of-the-fund approach, Lord said, “Given the enormous risk undertaken in taking this case, and the excellent results for the class, Lord proposes that 1 percent of the value of the benefit to the Fund is an appropriate award under the percentage of the fund approach.”

He said a 1 percent attorney fee award would yield an attorney fee award to Lord of $5,912,192.29.

According to Wikipedia, “lodestar” refers to a method of computing attorney’s fees whereby the court must multiply the number of hours reasonably spent by counsel by a reasonable hourly rate. This figure can then be adjusted upward or downward for certain factors known as multipliers, such as contingency and the quality of the work performed, to arrive at a final fee. Under the lodestar method, the most heavily weighted multipliers are the time and labor required.

If Lord’s $3.5 million fee is added to the amount requested by the other lawyers ($17.5 million, Bronster Hoshibata A Law Corp.; $18.65 million, Bruce L. Jorgensen; $1.012 million, Stephen Woodruff) the class counsel’s fees will total $40.73 million or approximately 6 percent of the net benefit obtained by the class from the settlement or $591,219,299.

This is 31.9 percent less than what would be owed the attorneys if the Ninth Circuit’s standard of 25 percent were to be followed. Twenty-five percent of the benefit obtained for the class in this case would mean $147,804,824.75 for the plaintiff’s lawyers.

California-based Lord stated in his petition that he was with Bruce L. Jorgensen at the very beginning of the lawsuit.

He said it was Jorgensen who contacted him regarding the potential action against the CNMI government to recover on a default judgment obtained by the Retirement Fund against the government for its refusal to meet payment obligations to the retirees.

On June 29, 2009, the Superior Court entered its judgment that found P.L. 15-15 unconstitutional.

This law allowed a contribution holiday for close to two years.

This resulted in the Retirement Fund drawing from its investment corpus to pay the retirees’ pensions.

The Superior Court entered a judgment in favor of the Retirement Fund in the amount of $23 1,689,475. This judgment rose to $336 million in 2011.

According to Lord, realizing that the Fund’s solvency and the retirees’ security were on the line, he sent a proposal to the Fund to represent it in an action in federal court which he said was rejected by the pension agency.

He said he and Jorgensen later determined that the best and only way to save the Fund from insolvency was to “to take the matter into their own hands and seek to wrest control of the Fund from political forces into the hands of a receiver appointed by the non-biased U.S. District Court Judge.”

He said the result was the filing of the action.

Lord said that at the time of the filing, they knew that as solo practitioners they had very little chance of success against the government “given its access to unlimited funds and its unbridled political power.”

He said they underestimated the resolve of the government which “took every conceivable action to thwart and delay the recovery of the lawful judgment, including a spectacularly failed attempt to bankrupt the Fund.”

Lord also said they later determined they would need to bring in the more experienced Bronster Hoshibata A Law Corporation “to bring in greater resources and experience.”

Lord said all of them “undertook great financial risk in championing the rights of the retirees.”

He said he brought to the case his vast experience in federal courts “with the tenacity to maintain his resolve in the face of what appeared to be overwhelming odds.”

He said he employed a highly competent paralegal — Shawn Adams — to take charge of the court filings, which Lord said was “voluminous” and usually performed under tight deadlines.

He also said he engaged the services of his colleague Jared Washkowitz to research, draft and file the appropriate and necessary briefs.

Retiree, lawmakers oppose fees

A MEMBER of the settlement class has expressed objections to the class counsel’s request for what he says are excessive attorney fees and costs.

Retiree John J. Angello filed his objection yesterday in federal court.

On Capital Hill, House members introduced a resolution urging the governor to object to the amount of the fees requested.

Angello, for his part, said he is asking the court “to strike down the pending submittals for plaintiff attorneys’ fees and make adjustments to the billings, in order to alleviate the financial strain on the retirees and the CNMI government, and to restore confidence in the United States legal system,” he said.

He said his objection is not an attack on “the spirit of this Honorable Court’s attempt to administer life-saving care to the Northern Mariana Islands Retirement Fund and its elderly members who are desperately clinging to their shrinking pensions and medical insurance, but it does attack the requests for excessive attorneys’ fees from overly euphoric litigators who are seeking more than 50 percent of the remaining benefits of the NMIRF’s manamko’, whom the Betty Johnson attorneys somehow feel they are legally saving from future retirement mayhem as they are simultaneously attempting to pick clean the remaining NMIRF carcass.”

For Angello, “In the scheme of nature’s give and take, vultures do play a useful role in clean-up duties, but not in this case in which retirees still need most of the settlement leftovers.”

In his view, the Betty Johnson attorneys seem to have become “delusional” since they secured a $779 million default judgment for the NMIRF Settlement Class and believe they deserve the “magnanimously reduced fee of 5% ($40 million) of that figure for their efforts.

He said the Ninth Circuit has established a 25 percent figure for certain judgments.

“So the Betty Johnson attorneys could conceivably ask for nearly $200 million of the pie-in-the-sky $779 million government liability to the fund, and this reduction of their fees from $200 to $40 million dollars initially brought tears of gratitude for the magnanimous actions of the BJ attorneys —except that this 779 million dollar default judgment is actually ‘‘judgment proof, or good luck trying to receive a Christmas card from the Taliban,’” stated Angello in his court filing.

He said the court cannot force the CNMI government to pay the NMIRF liability when the struggling CNMI government can claim they can’t pay it in the best interests of maintaining the safety and welfare of the entire Commonwealth.

Angello did note that even in the Notice of Class Action mailed to Fund retirees, the class counsels did point out that even the 75 percent of benefits to be disbursed to retirees is at risk due to market fluctuations.

Angello said the attorney fees should be subject to the same risks “and they should get in line at the CNMI treasury like the rest of the vendors who have set up tents on Capital Hill.”

He cited the latest Fund report that indicated that the settlement will eventually reduce the actual amount of remaining funds available to approximately $58 million after all the payouts to active government employees.

“Therefore, the 5 percent fee should be applied to the actual money in the bank, which would amount to approximately $3 million to be paid to the Betty Johnson attorneys and let them decide how it is to be divided amongst them,” said Angello.

He believes this is fair given that one of the attorneys claimed nearly 4,000 hours of work at $250 an hour that amounts to $1 million.

He said the $3 million should easily cover all their hourly rates, paid out over a reasonable time of 20 years pending availability of government funds.

He also said since he did not sign on as a part of this suit, and he assumed that other retirees did not sign on either, “shouldn’t the Betty Johnson attorneys deal with her individual award for any contingency fees, except for any reasonable fees to be charged to the CNMI government pursuant to the settlement agreement.”

Angello also quoted the Betty Johnson attorneys, saying that their fees will not come out of the Settlement Fund but from the CNMI government.

“Excuse us non-litigators, but that’s essentially the same source of funds, and their unrealistic fee demands will ultimately hurt and hamper the government contributions to the settlement fund along with financial assistance to the CNMI hospital and schools,” said Angello.

Further, he said, “In the ‘lodestar’ method of calculating attorneys’ fees, which was conveniently conceived by attorneys, the legal fees can be affected by multipliers, e.g., depending on how attorneys feel they can manipulate the existing grab bag of pensioners’ funds or other cash cows. Webster’s Dictionary defines lodestar as a star that shows the way. Does this mean that attorney stars with their out-of-control fees can be easily shown the way to the bank with any Court’s blessing? This same scenario has been played out before in the states where not-so-nice CEOs and their dutiful attorneys have ruined elderly senior citizens and their retirement security. Will this

Honorable Court allow this to happen in the CNMI?”

Angello appeals to the court to address this “latest case of pillaging by outsider attorneys and the excessive fees submitted by any and all Betty Johnson attorneys and, furthermore, the Court needs to invoke a binding sense of decency and a fair adjudication of the proper amount of fees to be awarded to the attorneys for the plaintiff, who should be applauded for trying to save the local NMIRF retirees’ financial futures, but is partly to blame for all the negative and ‘insensitive’ jokes about blood-sucking attorneys, as recently reiterated in the CNMI Senate.”

House wants Inos to oppose class-suit counsel fees

House members yesterday signed a House joint resolution urging Gov. Eloy S. Inos to object to the more than $37 million in attorneys’ fees requested by the Retirement Fund class-suit counsels.

Introduced by Speaker Joseph P. Deleon Guerrero, IR-Saipan, House Joint Resolution 18-9 was signed by the House members to be the co-authors.

The Senate and House members had a closed-door meeting with Gov. Eloy S. Inos in the morning to discuss the counsels’ fee requests which outraged the senators, prompting them to call the class-suit counsels, “sharks,” “blood suckers,” and “vampires.”

Variety learned that the meeting with the governor focused on “working together” to address the problem.

The governor and the lawmakers gave assurances that they will give their full cooperation. They agreed to question the “exorbitant” legal fees.

Variety was also told that the governors’ legal team is preparing a file motion questioning the legal fees.

In the meantime, the plan to circulate a petition to opt out of the settlement is being held back pending the court’s response to the motion the administration will file soon.

The House joint resolution noted that the plaintiff’s counsel failed to disclose to the class members, the amount of the anticipated attorneys’ fees. The counsels, the resolution said, “requested the court to place their request for approval of attorneys’ fees under seal so that the class members and other members of the public would not be aware of the amount of attorneys’ fees being requested. This was denied by the court.”

The Legislature considers the fees “excessive and unreasonable” the resolution said. It will “significantly deplete” CNMI resources which would otherwise by available for the payment of retirement benefits.

“The class members receive minimal benefit from the settlement agreement. Without the settlement agreement, the class members would be entitled to 100 percent of their retirement benefits, subject to availability of government general funds and appropriation by the Legislature. Under the settlement agreement, the class members are entitled to 75 percent of their retirement benefits subject to availability of government general funds and appropriation by the Legislature,” the resolution said.

In last Wednesday’s back-to-back budget session, the Senate expressed its rage over the fees the class-suit counsels are seeking.

Sen. Pete P. Reyes, IR-Saipan, and Senate Vice President Victor B. Hocog, R-Rota, called the counsels, “sharks,” “blood suckers,” and “vampires.”

They said the amount of the fees was “insane.”

Senate President Ralph DLG Torres, R-Saipan, Senate Floor Leader Ray N. Yumul, IR-Saipan, and Sen. Frank Q. Cruz, R-Tinian, shared the same sentiment. saying the fees were unreasonable.

‘Astonished’

In a statement yesterday, the Retirement Fund and its trustee ad litem said they were “astonished at the amount of money requested for plaintiff’s attorneys’ fees submitted by plaintiff’s class counsels as part of the global settlement of Johnson v. Inos, 09-CV- 00023 (D. N. Mar. I.). Because of the sheer size of the requests, the lack of supporting records to justify them, and the undue burden the requests places on NMI Fund members —members who are supposed to be the primary beneficiaries of any settlement — the NMI Fund and its trustee ad litem cannot and do not support, in any way, these requests for fees.”

The statement added:

“While the settlement agreement provides that plaintiff’s class counsels’ fees are to be paid by the government and not the NMI Fund or the still developing Settlement Fund, the agreement unfortunately does not provide a mechanism to allow the trustee ad litem to formally object to the fee requests. The trustee ad litem, however, will ask the federal court to ensure that the government’s obligations to the Settlement Fund are satisfied before it pays the legal fees requested by plaintiff’s class counsel.”

Bronster reacts

Attorney Margere Bronster, one of the class suit lawyers, issued the following statement yesterday:

“First, attorney fees will not be paid out of the settlement fund and will not be paid by the Retirement Fund. The settlement requires the government to pay the fees as the court decides them. The settlement fund, and the retirees, will not be paying any attorney fees, and they will not reduce the retirees’ benefits under the settlement.

“Second, the court’s decision on fees is separate from the court’s decision on approval of the settlement. The court can and should approve the settlement without approving the fees requested in the petitions.

“Third, if the settlement fails, it means refunds to active employees will stop, and the Retirement Fund will run out of money as soon as June 2014. It also means costly litigation will continue. Unlike the fees requested in the petitions, the fees incurred by the Retirement Fund in continuing litigation will come out of the Fund because the government has so far refused to pay them. The most important thing is to make sure the settlement does not fail, so the retirees will continue to get benefits without interruption. Bronster Hoshibata is not demanding its requested fees as a condition of the settlement.

Bronster Hoshibata also hopes that class members do not opt-out because if too many do, the settlement will also fail. Bronster Hoshibata hopes the settlement goes forward regardless of what happens with its fees because a failure of the settlement would be bad for all retirees and the entire CNMI.

“Finally, Bronster Hoshibata hoped the question of its fees could have been resolved by negotiations. Unfortunately, an agreement could not be reached before the deadline to file the petitions. The petitions outlined the legal standards for fees in class actions settlements and requested fees based on those standards. But Bronster Hoshibata is still hopeful that the government will continue to negotiate to resolve the fees. The court will have the final say and will determine the fees if no agreement can be reached. The fee petitions were simply the first step in the process of putting the issue to the court in case it cannot be resolved by agreement.

“Inquiries should be directed to mbronster@bhhawaii.net.”

Jorgensen: Not time for emotions

Plaintiff counsel Bruce L. Jorgensen and one of the four lawyers comprising the class counsel, has asked the public to remain reasonable in view of the requested fees and costs relating to their work in the settlement negotiations.

For Jorgensen, “When emotions get involved it sometimes confuses issues. It’s not the time for emotions.”

Jorgensen asked that the people leave it all up to the “wisdom of the court.”

Jorgensen told Variety last night, “We have a judge — District Court for the NMI designated Judge Frances Tydingco-Gatewood — who is very familiar with the law, and an exceptional federal judge by the name of Robert J. Faris who was called on to the scene by Judge Tydingco-Gatewood.”

Jorgensen said Judge Faris himself would not have put a stamp of approval of the tentative settlement unless all parties involved think it is in the best interests of the parties.

The court has yet to issue its final approval of the settlement agreement.

Jorgensen asked the public to have faith in the court to make the best decision.

“The court of law is a court of equity,” he said.

He also defended their profession.

Not everyone, he said, understands the language of the law.

Law is a different language and attorneys had to go to school to learn this language of the law, he said.

As far as settlement is concerned, he said that right now the retirees will be getting at least 75 percent of their benefits.

Absent their efforts at securing a settlement, a little over a year ago, Jorgensen said the CNMI wanted the retirees to take a 58 percent cut and receive 42 percent of their benefits at most.

As to the failed bankruptcy petition spearheaded by the Fund, Jorgensen said the Fund through its advisers retained a law firm from Boston, which include a classmate of one of the Fund lawyers.

Jorgensen was referring to Brown Rudnick LLP’s Jeremy Coffey.

This failed bankruptcy effort generated a bill in favor of the firm in the amount of about $800,000.

Jorgensen said the outcome of the bankruptcy petition should have been known to those advising the Fund.

He credited Governor Eloy S. Inos for “his wisdom in this process.”

“The governor is instrumental in having a fresh look at this situation,” he said.

He said Governor Inos “exercised admirable wisdom and objectivity in reassessing the situation following the departure of his predecessor.

He said the governor had the best interests of the public and the beneficiaries in mind.

“We all concurred with his view,” he said.

He asked the retirees not to rush to judgment and not to opt out of the settlement.

Jorgensen said the class counsel’s fees and costs and the settlement agreement are two separate issues.

As to some leaders suggesting the retirees should opt out of the settlement, Jorgensen said this course of action might be detrimental to people.

“They will not be getting anything. They will have no benefits. They will have to hire a lawyer if they opt out,” he said.