Dickman v. Banner Life Ins. Co.

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RICHARD DICKMAN, KENT ALDERSON, LESLEY S. RICH, trustee for RICHARD S. WALLBERG INSURANCE TRUST, individually and on behalf of all those similarly situated, Plaintiffs, v. BANNER LIFE INSURANCE COMPANY, WILLIAM PENN LIFE INSURANCE COMPANY OF NEW YORK, Defendants.

Civil Action No. RDB-16-0192 GLR-17-2026

United States District Court, D. Maryland

March 9, 2023

MEMORANDUM OPINION

RICHARD D. BENNETT UNITED STATES SENIOR DISTRICT JUDGE

This case features two consolidated class action claims against life insurance companies for misrepresentations and unjustified cost increases related to their universal life policies. (Final Approval Ord. 1-2, ECF No. 361.) See Dickman v. Banner Life (Banner), No. RDB-16-192 (D. Md. filed Jan. 19, 2016); Rich v. William Penn Life Ins. Co. (Penn), No. GLR-17-2026 (D. Md. filed July 20, 2017). On May 20, 2020, following extensive litigation and discovery, this Court approved a classwide settlement of approximately $40 million in damages $7,851,011.68 in attorneys' fees, and $1,023,172.20 in expenses. (Final Approval Ord. ¶¶ 10, 15; see Settlement Ag't, ECF No. 250-3.) A single class member objected to this settlement, and the United States Court of Appeals for the Fourth Circuit denied that objection and affirmed. See 1988 Tr. for Allen Children v. Banner Life Ins. Co., 28 F.4th 513, 517-18 (4th Cir. 2022).

With the settlement affirmed and the award finalized, the only remaining issue is the allocation of the $7,851,011.68 fee award between the firms that served as plaintiffs' counsel. Prior to the onset of this litigation, the parties entered a fee-splitting agreement (the “Letter Agreement”) allocating fees as follows: (1) 35.8% to Beasley-Allen, Crow, Methvin, Portis & Miles P.C (“Beasley Allen”); (2) 35.8% to Geoff McDonald & Associates, P.C. (“McDonald”); (3) 23.4% to The Finley Firm, P.C. (“Finley”); and (4) 5% to Paulson & Nace, PLLC (“Nace”). (Letter Ag't, ECF No. 354-1.) However, by the time this case settled, and the parties requested an award of attorneys' fees, it became apparent that the contributions of the four firms varied significantly from their initial projections. (See Beasley Allen Obj. R&R 7, ECF No. 376.) Further complicating matters, an attorney appointed to serve as lead counsel, George W. “Wally” Walker, departed Finley and associated with another firm that is not counsel of record in this case. (See Decl. of George W. “Wally” Walker (“Walker Decl.”) ¶ 2, ECF No. 378-1.) In light of these events, the firms now dispute whether the Letter Agreement is enforceable and how the fee award should be allocated.

On May 29, 2020, this Court appointed the Honorable Frederic N. Smalkin, the retired former Chief Judge of this Court, to serve as a Special Master and resolve the fee dispute. (Ord. Appointing Special Master, ECF No. 366.) Judge Smalkin issued his Report and Recommendations on November 17, 2020. (ECF No. 375). In this Report, the Special Master recommends that this Court allocate fees in accordance with the Letter Agreement, after first paying Walker out of the general fund to account for any work that he completed on this litigation following his departure from the Finley Firm. (Report & Recommendations (“R&R”) 11, 13-17, ECF No. 375.) Now pending are several motions addressing the Special Master's Report and Recommendations:

• The Finley Firm's Motion to Adopt the Report and Recommendations of the Special Master (ECF No. 377);

• Geoffrey R. McDonald & Associates, P.C.'s Motion to Adopt the Report and Recommendations of the Special Master (ECF No. 379);

• Beasley Allen's Objection to the Special Master's Report and Recommendations (ECF No. 376);

• George W. Walker and Boles Holmes Parkman White, LLC's Motion to Modify and Clarify the Report and Recommendations of the Special Master (ECF No. 378); and

• Co-Lead Counsel's Notice of Allocation of Attorneys' Fees (ECF No. 406).

The parties' submissions have been reviewed and no hearing is necessary. Local Rule 105.6 (D. Md. 2021).

For the reasons that follow, the Motions to Adopt the Special Master's Report (ECF Nos. 377, 379) are hereby GRANTED; the Objection to the Special Master's Report (ECF No. 376) is hereby DENIED; the alternative Notice of Allocation of Attorneys' Fees (ECF No. 406) is hereby DENIED; and the Motion to Modify Report and Recommendations of the Special Master (ECF No. 378) is hereby GRANTED in part and DENIED in part. Specifically, the Motion to Modify is granted with respect to three of the four proposed modifications. It is denied with respect to the proposed modification that would change the deadline recommended by Judge Smalkin for the submission of documents. The $7,851,011.68 fee award in this case shall be allocated in accordance with the Special Master's Report and Recommendations, subject to limited modifications.

BACKGROUND

This years-long fee dispute arises from two putative class actions against life insurance companies, alleging that the Defendant companies misrepresented the performance of their universal life policies and fraudulently increased their cost-of-insurance charges to a class of policyholders. (Final Approval Ord. 1-2.) See Dickman v. Banner Life (Banner), No. RDB-16-192 (D. Md. filed Jan. 19 2016); Rich v. William Penn Life Insurance Co. (Penn), No. GLR-17-2026 (D. Md. filed July 20, 2017). Following four years of protracted litigation, the parties reached a settlement in principle in June 2019, (Status R., ECF No. 241), and the Banner and Penn cases were consolidated for settlement purposes, (Consolidation Ord., ECF No. 245). At a final fairness hearing on May 20, 2020 (ECF No. 367), this Court approved a settlement of roughly $40 million in damages, $7,851,011.68 in attorneys' fees, and $1,023,172.20 in litigation expenses. (Final Approval Ord. ¶¶ 10, 15; Settlement Ag't, ECF No. 250-3.)^[1] A single class member objected to this settlement, and the United States Court of Appeals for the Fourth Circuit denied that objection and affirmed. See 1988 Tr. for Allen Children v. Banner Life Ins. Co., 28 F.4th 513, 517-18 (4th Cir. 2022).

Four firms represented the plaintiffs in these consolidated cases: (1) Beasley-Allen, Crow, Methvin, Portis & Miles P.C. (“Beasley Allen”); (2) Geoff McDonald & Associates, P.C. (“McDonald”); (3) The Finley Firm, P.C. (“Finley”); and (4) Paulson & Nace, PLLC (“Nace”). At the outset of Banner, in 2016, the parties signed a Letter Agreement providing for an allocation of fees and responsibilities among these firms. (See Letter Ag't, ECF No. 354-1.)

This agreement provided that all litigation costs would be split equally between Beasley Allen and McDonald, and that any attorneys' fees awarded in Banner would be allocated at the following rates: (1) 23.4% to Finley; (2) 35.8% to Beasley Allen; (3) 35.8% to McDonald; and (4) 5% to Nace. (Id. at 1-2.) The Agreement provided that these percentages represented the parties' good-faith efforts to forecast, “as accurately as possible, the fair and reasonable value of client acquisition and services rendered and to be rendered in the above-referenced matter by each of the parties hereto.” (Id. at 2.)

Early in the litigation, this Court appointed W. Daniel “Dee” Miles (“Miles”) of Beasley Allen and George W. “Wally” Walker (“Walker”) of the Finley Firm to serve as Interim Class Counsel. (See Ord. Granting Pls.' Mot. to Appoint Interim Class Counsel (“Lead Counsel Ord.”), ECF No. 74.)^[2] Interim Class Counsel were made responsible for “performing work to advance the litigation for the common benefit of all plaintiffs,” and charged with several responsibilities intended to further the interests of the plaintiff class and coordinate the work of plaintiffs' counsel. (Id. at 2-4.) Their case-management responsibilities included assigning work to plaintiffs' counsel, encouraging cooperation and efficiency among plaintiffs' counsel, and monitoring the activities of plaintiffs' counsel. (Id. at 3.) Additionally, lead counsel were granted authority to “[r]equest that the Court approve any proposed settlement and fee petition, and allocate those fees among Plaintiffs' counsel.” (Id. at 4.)

Complicating matters, one of the attorneys designated Interim Class Counsel changed his employment before the approval of the final settlement. For health reasons unrelated to this litigation, Walker departed Finley on November 30, 2019, and joined Boles Holms Parkman White, LLC (“Boles”) on December 2, 2019. (See Decl. of George W. “Wally” Walker (“Walker Decl.”) ¶ 2, ECF No. 378-1; Suppl. Decl. of George W. “Wally” Walker ¶ 14, ECF No. 378-2.) Nevertheless, Walker remained Interim Class Counsel and continued to fulfill the responsibilities of this position. In collaboration with Miles, he “continued to take all necessary steps to provide notice to class members, respond to class member inquiries, receive notices of exclusions, respond to the Objector, and obtain final Court approval of the Settlement.” (Beasley Allen Obj. 5.) He also entered an appearance in the Fourth Circuit to defend the Settlement against the objector's appeal. (Miles Decl. ¶ 25.)

Ultimately things did not work out as the parties anticipated. After years of discovery and litigation, the work that the parties completed by the end of the case did not align with the division of labor that they forecast at the outset. According to Beasley Allen and Walker, Interim Class Counsel took the lead on discovery and summary judgment practice, handled motions to compel and evidentiary objections, and led mediation and settlement discussions. (Beasley Allen Obj. 8; see BA Banner Case Expenses, ECF No. 376-5; Miles Billable Hours, ECF No. 376-6.) The evidence submitted in support of the general fee award indicates that “Beasley Allen accounted for 62.58% of...