Monday, February 08, 2010

Mulligan Stew: Second Circuit Refuses to Overturn Cap on Attorney Fees

Here's what passes for our light reading lately: cases involving plaintiff lawyers griping about their fees. We recently posted about a battle royale among ex-partners in a plaintiff firm. Now we have a Second Circuit opinion where a plaintiff lawyer chafed under fee limitations imposed by Judge Weinstein in the Zyprexa MDL. Mulligan Law Firm v. Zyprexa MDL Plaintiffs' Steering Committee II and Eli Lilly and Co., No. 07-3815-cv (2d Cir. Feb. 3, 2010).


It's not as if we're obsessed by plaintiff attorney fees. Mostly it's none of our business -- consenting adults and all that. But sometimes it's like driving past a car accident; you know that rubber-necking doesn't do anybody any good, but you still slow down and glance at the wreckage. Further, turnabout is fair play. We've read way too many plaintiff briefs where, apropos of nothing, they make snarky comments about how much money the defendant is paying its lawyers. (Most of our clients are public companies and disclose these matters.) It's as if the plaintiff attorneys are bleating that the defendant should stop defending itself and should, instead, short-circuit the process by simply handing the money over to them. Of course there is that minor distinction between paying for a valid defense versus shelling out bucks for an inflated inventory of cases, most of which are comically deficient. Plus, the problem with paying nuisance values is like the problem with voting: it only encourages them.

The other amusing thing about plaintiff lawyer fee disputes is that they remind us of what really is driving these folks -- and it usually isn't civic virtue. Plaintiff lawyers like to rail against corporate greed. The next case where a plaintiff lawyer doesn't wheel out the "dollars over lives" rubric will be the first. Meanwhile, we've seen some lawyers treat their plaintiff-clients more like pawns or obstacles than like, um, clients. To our eyes, the theme of these fee disputes is so ugly we are loath to utter it, but it begins with "hypo" and ends with "crisy."

So much for our Monday screed. Now to the case.

As part of the Zyprexa settlement, Judge Weinstein issued two orders on plaintiff attorney fees that rubbed at least one firm the wrong way: (1) capping plaintiff attorney fees at 35%, and (2) requiring 3% of settlement proceeds to be set aside for a common benefit fund, which would go to a plaintiffs' steering committee. That's why one of the appellees is "Zyprexa MDL Plaintiffs' Steering Committee II." Therefore, in challenging these provisions, the Mulligan law firm is fighting against not only the defendant, but also other plaintiff lawyers. So we've got that going for us, which is nice.

Judge Weinstein's orders seem neither novel nor crazy. 35% sounds like the going rate. As for the common fund, our experience in MDL's is that the level of effort among the various plaintiff firms is ... diverse. Usually there are a couple of firms that do all the heavy lifting (document analysis, depositions, briefing, general annoyance) while most merely sit on the sidelines and collect marginal cases. Where do we hear the most vivid kvetching about lazy, bottom-feeding plaintiff attorneys? Out of the mouths of lead plaintiff lawyers, that's where.

The Mulligan firm didn't like the 35% cap because it had negotiated a 40% rate with its clients. It also - big surprise - didn't like paying 3% to its co-counsel. How to escape these cramps on its style? Mulligan argued that 61 of its Zyprexa cases -- brought by over 1,000 (!) plaintiffs -- had been improperly removed. Mulligan had moved to remand, and those remand motions were still pending at the time of the appeal. Well, that argument is sort of clever. There's only one problem: the Second Circuit held that it lacked jurisdiction over the appeal.

Mulligan filed an interlocutory appeal under 28 USC section 1292(a), which confers on appellate courts jurisdiction over, inter alia, "[i]nterlocutory orders of the district courts ... granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions ...." The Second Circuit interprets that provision to authorize an appeal only from an injunction that gives substantive relief. Hence, the question is whether attorney fees are "substantive." The Second Circuit answered that question in the negative: "Indeed, it does not so much as relate to the substantive issues in the litigation." An injunction under 1292(a)(1) must grant at least part of the ultimate relief sought by the moving party. The Second Circuit pointed out that to the extent there was a "moving party" here, it was the plaintiff steering committee -- which is not a party to the litigation itself and was not seeking ultimate coercive relief.

We're not done. In the alternative, Mulligan sought mandamus. That's a drastic remedy. It is reserved for extraordinary cases where there is judicial usurpation of power or a clear abuse of discretion. The Second Circuit saw none of that here.

Judge Lewis Kaplan (SDNY) was sitting on the panel by designation. As some of you doubtless know, Judge Kaplan has been busy dealing with some high-profile financial cases. But he was not, apparently, too busy to write an extensive and thoughtful concurring opinion in this case where he favors an "advisory mandamus" on the issue of whether Judge Weinstein could legally apply the 3% set-aside to plaintiffs whose remand motions were pending. Judge Kaplan contends that in mass tort cases a shrewd judge might want to focus on issues other than remand, and that a common fund might make sense in terms of pretrial management and overcoming inevitable free-rider problems.

The majority opinion expresses "sympathy with the carefully reasoned concurring views of Judge Kaplan," but concludes that those complex issues simply need not be addressed at this point.

We view this result with equanimity. We don't have a dog in this hunt. We're not working on the case, and we don't have any rooting interest among the various plaintiff lawyers. To the contrary.

In the end, what is most interesting about this case is something we've seen a lot lately, at least where judges are smart and probing: jurisdictional questions can be paramount, and can offer elegant ways of disposing of thorny issues. No matter what legal issue is being teed up, at least one member of a legal team should spend some quality time focusing on jurisdictional issues. That can include time traipsing through Westlaw, LEXIS, and White & Miller. It can also include closing the door, sitting back, and thinking.

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