Health Republic Ins. Co. v. United States

1

HEALTH REPUBLIC INSURANCE COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.

COMMON GROUND HEALTHCARE COOPERATIVE, Plaintiff, v. THE UNITED STATES, Defendant.

Nos. 16-259, 17-877

United States Court of Federal Claims

October 10, 2024

OPINION AND ORDER

KATHRYN C. DAVIS JUDGE

This matter is on remand from the United States Court of Appeals for the Federal Circuit for further proceedings concerning Quinn Emanuel Urquhart & Sullivan, LLP's ("Class Counsel") Motions for Approval of Attorney's Fee Request. See Health Republic ECF No. 192; Common Ground ECF No. 185.^[1] Class Counsel again seeks approval of a five-percent attorney's fee award, or approximately $185 million, of the combined $3.7 billion judgment recovered by the Non-Dispute Subclasses on their risk corridors claims. Objecting members of the Non-Dispute Subclasses ("Objectors") oppose these renewed motions due to the high lodestar and implicit multiplier for Class Counsel's requested fee, as well as Class Counsel's purported failure to justify its billable hours and rates. On remand, the Federal Circuit tasked the Court with (1) performing a lodestar cross-check, (2) assessing whether there is sufficient justification for an award with a multiplier outside the norm of lodestar multipliers, (3) providing more explanation as to the adequacy of Class Counsel's hours and rates, and (4) reconsidering any other part of the Court's original award decision in light of the Circuit's holdings. For the reasons that follow, the Court GRANTS Class Counsel's Motion subject to a reduction of the requested fee to 2.5 percent, resulting in a total attorney's fee award of $92,424,335.84.

I. BACKGROUND

A fulsome factual and procedural background is provided in the Court's original fee award opinion. See Op. & Order at 2-7, ECF No. 138. The Federal Circuit's opinion remanding the matter also provides an overview of the litigation background. See Health Republic Ins. Co. v. United States, 58 F.4th 1365, 1369-71 (Fed. Cir. 2023). As such, the Court will not summarize the background again, other than to provide an overview of the remand proceedings.

On January 31, 2023, the Federal Circuit vacated the Court's order approving Class Counsel's fee award and remanded the matter for further proceedings. See id. at 1378. The Circuit instructed the Court on remand to perform a lodestar cross-check consistent with Class Counsel's representation in the amended class notice.^[2] Id. The lodestar cross-check must "includ[e] an assessment of whether there is sufficient justification for an award with an implicit multiplier outside the mainstream of relevant multipliers." Id. Any such justification must draw upon "the facts of [the] particular case," consider "multipliers used in comparable cases," and "examine[] the reasoning behind . . . awards in cases of similar size." Id. at 1375 (collecting cases). Additionally, as related to the calculation of the lodestar, the Federal Circuit instructed the Court to "provide more explanation than so far presented concerning the adequacy of [Class Counsel's] hours and rates in light of the Objectors' criticisms." Id. at 1378. Finally, the Circuit instructed the Court to reconsider its original analysis beyond the cross-check to the extent it is "affected by the conclusions [the Circuit] . . . reached [in its decision]." Id.

On May 2, 2023, Class Counsel filed the present attorney's fee motions, renewing its request for five percent of the common fund. See Class Counsel's Mot. for Approval of Att'y's Fee Req., ECF No. 192. On the same day, Objectors filed a Motion for an Order Directing an Accounting and Safekeeping of the Disputed Funds and Limited Discovery, requesting (1) production of certain documents related to Class Counsel's obtaining judgment preservation insurance, (2) transfer of the fee award funds into an escrow account for safekeeping, and (3) an accounting of these funds from Class Counsel. See generally ECF No. 194. On January 30, 2024, the Court granted Objectors' request for limited discovery and denied their request for an accounting and safekeeping of the award funds. See Op. & Order, ECF No. 210. Subsequently, the parties completed briefing on Class Counsel's renewed fee-approval motions. See Objectors' Opp'n, ECF No. 211; Class Counsel's Reply, ECF No. 213.^[3] The Court held oral argument in this matter on July 25, 2024. See Min. Order (July 25, 2024). The motions are now ready for decision.

II. LEGAL STANDARD

Rule 23 of the Rules of the United States Court of Federal Claims ("RCFC") permits the Court to "award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement" in a certified class action. RCFC 23(h); see Moore v. United States, 63 Fed.Cl. 781, 786 (2005) (attorney's fee awards are "committed to the sound discretion of the court"). In common fund cases, such as this one, where "each member of a certified class has an undisputed and mathematically ascertainable claim to part of a lump-sum judgment recovered on his behalf," Boeing Co. v. Van Gemert, 444 U.S. 472, 479 (1980), "a litigant or a lawyer . . . is entitled to reasonable attorney fees from the fund as a whole," Haggart v. Woodley, 809 F.3d 1336, 1352 (Fed. Cir. 2016) (internal quotations and modifications omitted) (citing Boeing, 444 U.S. at 478). Awarding attorney's fees out of the common fund guarantees that each member of the class pays its fair share for class counsel's representation. See Boeing, 444 U.S. at 478 (explaining that common fund fee awards avoid unjustly enriching parties that substantially benefited from, but only minorly contributed to, the suit); see also Kane Cnty., Utah v. United States, 145 Fed.Cl. 15, 18 (2019).

The Court may utilize differing approaches to determine the reasonableness of an attorney's fee request in common fund cases, including the percentage-of-the-fund and lodestar approaches. Mercier v. United States, 156 Fed.Cl. 580, 591 (2021) (citing Haggart, 809 F.3d at 1355). Under the percentage-of-the-fund approach, several judges of the Court of Federal Claims have utilized the seven Moore factors as guideposts for determining the reasonableness of the percentage requested by counsel. See, e.g., Kane Cnty., 145 Fed.Cl. at 18; Lambert v. United States, 124 Fed.Cl. 675, 683 (2015); Quimby v. United States, 107 Fed.Cl. 126, 133 (2012). These factors consider:

(1) the quality of counsel; (2) the complexity and duration of the litigation; (3) the risk of nonrecovery; (4) the fee that likely would have been negotiated between private parties in similar cases; (5) any class members' objections to the settlement terms or fees requested by class counsel; (6) the percentage applied in other class actions; and (7) the size of the award.

Moore v. United States, 63 Fed.Cl. 781, 787 (2005) (citing Manual for Complex Litigation § 14.121 (4th ed. 2004)). No single factor is necessarily dispositive, and each can be weighed at the Court's discretion. See, e.g., Quimby, 107 Fed.Cl. at 134 (considering each factor and determining that the fee likely to have been negotiated between the parties most justified the award).

The lodestar approach utilizes a base calculation that multiplies the number of hours reasonably billed by class counsel during the litigation by the reasonable billable rates for their services. Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546, 564 (1986) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). This amount, or "lodestar," id. at 553, "'provides an objective basis on which to make an initial estimate of the value of a lawyer's services,'" id. at 564 (quoting Hensley, 461 U.S. at 433). In a common fund case, the court may increase or decrease the amount of the lodestar by a so-called "risk multiplier," which is a number symbolizing the amount of risk or difficulty involved with the case. Haggart, 809 F.3d at 1355 & n.19; see Health Republic, 58 F.4th at 1372 (explaining that the quotient of the requested fee divided by the lodestar is the "implicit multiplier").

Although the lodestar approach is more often used in fee-shifting cases to determine the reasonableness of the attorney's fee request, it is sometimes used in common fund cases as a crosscheck of, or comparison to, the percentage-of-the-fund calculation arrived at through the Moore factor analysis. See, e.g., Elec. Welfare Tr. Fund v. United States, 171 Fed.Cl. 362, 387 (2024); Perez v. Rash Curtis & Assoc., No. 4:16-cv-03396, 2020 WL 1904533, at *18 (N.D. Cal. Apr. 17, 2020). Used in that way, a lodestar cross-check, when required, acts as a secondary check on reasonableness and guards against windfall attorney's fees. See 5 William B. Rubenstein et al., Newberg and Rubenstein on Class Actions § 15.85 (6th ed. 2022); In re Cendant Corp. Litig., 264 F.3d 201, 285 (3d Cir. 2001).

As the first step of the cross-check, a court must determine whether counsel's billed hours and rates are reasonable. See Hensley, 461 U.S. at 433; Perez, 2020 WL 1904533, at *19. The court may reduce the hours and/or rates if they are found unreasonable because, for example, counsel's documentation is insufficient or counsel's rates are inflated. Hensley, 461 U.S. at 433 ("Where the documentation of hours is inadequate, the district court may reduce the award accordingly."). Next, the court calculates the lodestar by multiplying counsel's reasonable hours by its reasonable rates. Sci. Applications Int'l Corp. v. United States, No. 17-cv-00825C, 2021 WL 3557427, at *2 (Fed. Cl. July 26, 2021).

To calculate the implicit multiplier, the court divides counsel's total requested fee amount by the lodestar amount. Haggart, 809 F.3d at 1355 n.19. Although "the resulting multiplier need not fall within any...