Ninth Circuit You Tube argument

When plaintiffs lawyers from Hagens Berman Sobol Shapiro made their pitch in 2010 to be appointed lead class counsel in a massive price-fixing conspiracy involving the sale of optical disk drives, they offered to work for a bargain-basement rate.

In a sealed bid submitted to now-retired U.S. District Judge Vaughn Walker of the Northern District of California, they laid out a sliding-scale 11% fee. That would have worked out to a $22.6 million payday after they notched a series of settlements totaling $205 million.

Instead, Hagens Berman has been awarded more than twice as much—$47.78 million by U.S. District Judge Richard Seeborg, who took over the matter from Walker when he retired in 2011. 

One class member is crying foul, calling it a "bait-and-switch at the expense of the class."

Objector Conner Erwin has got a point. It's not that Hagens Berman doesn't deserve the fee—they make a strong case for why they earned every penny. But at the same time, shouldn't the firm's initial promise to work for less count for something?

On Tuesday, the U.S. Court of Appeals for the Ninth Circuit heard arguments via Zoom—and hinted that it may remand the case, though perhaps only to consider the portion of the award covering expenses. 

It's a novel issue for the appellate court. As Judge Morgan Christen (above, top left) put it, "This will be an opportunity for us to provide more guidance," she said. "Should a fee bid be a Vizcaino factor that must be considered?"

If the underlying case sounds familiar, it's probably because hordes of Am Law 100 firms were on the other side representing defendants including Sony, Hitachi, Philips, Samsung and Toshiba. 

Firms listed on the docket include Latham & Watkins; O'Melveny & Myers; Boies Schiller; Baker Botts; Katten Muchin; Winston & Strawn; Sheppard Mullin; Kasowitz; Blank Rome; Jones Day; Shearman & Sterling; Davis Polk; Gibson Dunn; Ropes & Gray and more.

Their clients were accused of fixing prices for optical disc drives in computers, DVD and Blu-Ray players in the 1990s and 2000s. The ODDs were used for storing data, music, and other multimedia files.

Hagens Berman beat out a competing bid by a group of more than a dozen plaintiffs firms led by Stephen Larson of Griardi Keese and another bid by Zelle Hofmann Voelbel & Mason to represent a class of 107 million consumers who bought the devices.

But Hagens Berman partner Shana Scarlett (bottom ,middle) stressed to the Ninth Circuit panel, which also included Judge Ronald Gould (top middle, who suffers from MS) and U.S. District Judge Robert Lasnik  (top right) sitting by designation from the Western District of Washington, that litigating the case was a massive undertaking. 

There were "dozens of hearings of discovery disputes … two rounds of motions for class certification and an extraordinary number of motions for summary judgment," she said. Indeed, there are nearly 3,000 entries in the lower court's docket.

Scarlett also noted that Seeborg in awarding the fees praised Hagens Berman's "excellent work in this case," and described the litigation as "extraordinarily difficult."

When Judge Walker picked lead counsel, she continued, he "never ruled that he saw that Hagens Berman was bound by a single data point. … Instead, it was an interim order of the court, that it had the inherent authority to modify at any time under Rule 54(b)."

The fee bid was simply "one data point" to consider at the end of the case, Scarlett said—and Seeborg concluded that it was not dispositive.

Instead, she said, Seeborg "went to extraordinary lengths" to consider other factors in awarding the fee, including the results achieved, whether the case was risky, the market rate for antitrust cases and whether the case was handled on a contingency basis.

Moreover, the court found that the class counsel's requested fee was reasonable under both the percentage-of-fund and lodestar methods. It's not as if Hagens Berman got some crazy windfall.

But Robert Clore of the Bandas Law Firm (bottom, ,left) representing objector Conner Erwin argued that Seeborg didn't even look at the firm's original bid before awarding the bulk of the legal fees. In fact, the judge initially couldn't even find a copy of it, Clore said. 

At a minimum, he argued, the Ninth Circuit should remand the case to require Seeborg to "at least articulate his analysis for declining to apply the bid."

Clore also stressed that the bid specifically promised "no separate expense award would be made on top of any-percentage-based fee award." 

Hagens Berman was awarded more than $5 million in expenses. 

Scarlett countered that this provision actually referred to "taxation of costs"—a specific and enumerated list that's separate from expenses.

But Lasnik was not persuaded. "I think Judge Walker understood costs to be expenses," he said. "I as a district court reviewing that would have thought costs were expenses."

Taxable costs, he continued, "are a meager amount of money but expenses are something significant. This is an area where I am casting aspersions on Hagens Berman. … We might need a little more clarification from Judge Seeborg about what he did in that area."