With that kind of markup, Tigar said the use of contract lawyers could be considered a profit-seeking scheme. Heimann argued that the work and the overhead costs for staff and contract employees are the same in regard to training, supervision and providing workspaces. Tigar said the law firm wouldn’t contract out staff if it weren’t more profitable.
The decision is a victory for Ted Frank, the litigation director at the Hamilton Lincoln Law Institute and prominent critic of many class-action settlements. Frank said the money awarded to the privacy groups, under a legal doctrine known as “cy pres,” should have gone to class members like himself. He drew support from a bipartisan group of 13 state attorneys general led by Arizona’s Mark Brnovich.
Tigar also set out to address another objection mentioned in Frank’s opposition over a 5% fee allocated to 12 law firms who brought similar cases in Delaware courts. “The gravy train is so heavy that co-lead counsel has agreed to pay law firms that brought other cases even where they provided no common benefit, who represent plaintiffs who lack any colorable claims,” Frank wrote.
Ted Frank, an Akorn shareholder, moved to intervene and object to the fee. Judge Durkin ordered the parties to brief the issue whether he had “inherent authority” to abrogate the settlement in light of the Seventh Circuit’s ruling in the Walgreen case...
The decision is vindication for class action watchdog Ted Frank of the Hamilton Lincoln Law Institute. Frank, an Akorn shareholder, tried to intervene in the litigation in 2017, when plaintiffs’ lawyers disclosed their $322,500 mootness fee in a stipulation asking Judge Durkin to sign an order closing cases voluntarily dismissed by individual shareholders.
“The circuit split is still there,” Frank said. “They granted cert on it before and the Ninth Circuit is still signing off on some really appalling cy pres settlements.”
Frank, litigation director at the Hamilton Lincoln Law Institute, said the case would now go back to appellate judges in the Ninth Circuit, who would decide whether to kick it to the Northern District of California or decide the matter themselves. “The day of reckoning has been postponed,” he told MarketWatch. “But the writing is on the wall.”
In the original settlement with Lenny & Larry’s, the DOJ estimated only $350,000 in cash went to the class members, and suggested that fees should be in the range of $228,000 to $463,000. The government was particularly critical of a provision that gave potentially $3.15 million in free cookies to General Nutrition Centers Inc. and The Vitamin Shoppe in the event that not enough class members make claims.
"We think the court got it half right," attorney Adam Schulman, who argued the CEI's position before the appeals court, told the Northern California Record, adding that the remanding of the attorney fees was welcome, but it still allowed millions of dollars to be disbursed to non-class members. The institute objects to the way the "cy pres" doctrine is used in class actions.
No one has a precise count of the class action settlements that include cy pres payments, and Frank said many may be included in quiet agreements that are never disclosed to the class. Federal courts dispose of about 275,000 cases a year, with 350 of them class actions.
