U.S. District Judge Lucy Koh

A federal judge in California said Thursday she plans to hire a special master to scrutinize the billing records of plaintiffs firms in Anthem's $115 million data breach settlement.

“I'm deeply disappointed,” U.S. District Judge Lucy Koh told lead plaintiffs attorney Eve Cervantez at a hearing on Thursday in San Jose. Koh, who has been a critic of attorney billing in past cases, appeared to be particularly incensed about how plaintiffs attorneys Cervantez, of San Francisco's Altschuler Berzon, and Andrew Friedman, at Washington D.C.-based Cohen Milstein Sellers & Toll, brought in 49 other law firms—all of which submitted bills as part of a $38 million fee request. Among those additional firms were four of the eight law firms that Koh explicitly trimmed from the initial leadership team in 2015. Koh appointed Cervantez and Friedman as lead counsel along with plaintiffs steering committee members Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs.

“I would never have appointed you or Mr. Friedman, had I known you were going to pile on 53 law firms on this case,” she said. “And I'm going to keep that in mind if you apply for appointment of counsel in another case with me. I never would have approved 53 law firms in my case. If I thought eight was too many, what made you think I wanted 53 firms churning on this case?”

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In court, she said she planned to appoint retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS in San Jose, to be special master, but she allowed both sides to submit oppositions to her selection or alternative candidates by Feb. 2.

Cervantez, who acknowledged she had never been in charge of multidistrict litigation before, attempted to explain how most of the firms were not in charge of the “high level” decisions in the case and were brought in primarily to find more than 100 lead plaintiffs in the consolidated class action complaint.

“I understand you're upset,” she said. She noted that 26 law firms were involved “because they specifically had plaintiffs in the case, were involved in vetting plaintiffs, and they were involved in discovery responses and the depositions of their plaintiffs.”

Moreover, people's data had been hacked, she pointed out.

“Time was of the essence here,” she said. “We could have had fewer firms working on the case, and it would have taken a much longer time.”

But Koh, who had asked plaintiffs counsel for additional billing records earlier this week, went over the records one by one, questioning why of the 329 lawyers who submitted bills in the case, more than 100 were partners, and more than two dozen were contract attorneys charging $300 to $400 per hour.

“I would like you to find a single paying client that would have approved these type of markups in a contract attorney,” she said.

She ordered plaintiffs lawyers to submit detailed records, including those involving contract attorneys, by Monday.

“I'm supposed to be watching out for the interests of the class,” she said. “I'm entitled to know how much profit you think you're entitled to with regard to every one of these people.”

Class action critic Ted Frank, representing an objector, had asked for a special master, claiming the fee request was “outrageous on its face.” Frank, of the Competitive Enterprise Institute's Center for Class Action Fairness, had criticized $23 million in notice and administration costs and questioned the average $360 hourly rate for contract attorneys submitted in the fee request. He noted that a special master in Boston is investigating Lieff Cabraser, along with two other law firms, for potential overbilling for staff attorneys in a $74.5 million fee request in securities class action settlements with State Street.

Frank also questioned why 49 other firms were set to receive $13.6 million in fees in the case.

In court papers, Cervantez and Friedman defended their $38 million fee request. In a Jan. 25 reply brief, they said the fee request was less than eight percent of the settlement's estimated $500 million value, when including credit monitoring, and 33 percent of the $155 million amount, which was justified due to the “exceptional results” and “extremely risky nature” of the case. The $115 million settlement also would provide a $15 million fund to compensate class members.

As to the settlement itself, Koh said she was inclined to “wait on final approval and get all this sorted out.”

Prior to the hearing, the judge had ordered additional briefing on the effect that the U.S. Court of Appeals for the Ninth Circuit's Jan. 23 ruling in In re Hyundai and Kia Fuel Economy Litigation could have on the settlement. The 2-1 Hyundai decision reversed certification of a nationwide class of car consumers after concluding that the district judge failed to consider potential differences in various state consumer laws in finding that common issues predominated in the settlement. The decision sent shock waves throughout the class action bar for potentially threatening the viability of class action settlements in the Ninth Circuit.

But Koh didn't ask many questions about Hyundai during the hearing.

She did, however, raise several questions about the claims rate, which she calculated at about 1.86 percent of the total class. More than 78 million people had their personal information compromised in Anthem's data breach in 2015. And she raised concerns about the settlement's structure.

“It does bother me that 55 percent would go to attorney fees and administrative costs and only 45 percent goes to class members,” she said.