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In re Syngenta AG MIR162 Corn Litigation

United States District Court, D. Kansas

December 31, 2018

IN RE SYNGENTA AG MIR 162 CORN LITIGATION, This Document Relates to All Cases Except: Louis Dreyfus Co. Grains Merchandising LLC
v.
Syngenta AG, et al., No. 16-2788 Trans Coastal Supply Co., Inc.
v.
Syngenta AG, et al., No. 14-2637 The Delong Co., Inc.
v.
Syngenta AG, et al., No. 17-2614 Agribase Int'l Inc.
v.
Syngenta AG, et al., No. 15-2279 MDL 2591

          David R. Herndon District Judge United States District Court for the Southern District of Illinois

          Laurie J. Miller District Judge District Court of Hennepin County, Minnesota

          MEMORANDUM AND ORDER

          JOHN W. LUNGSTRUM UNITED STATES DISTRICT JUDGE

         In this multi-district litigation (MDL), by Memorandum and Order of December 7, 2018, after a hearing conducted on November 15, 2018, the Court granted final approval of a settlement agreement resolving claims against Syngenta[1] and certified a settlement class. See In re Syngenta AG MIR 162 Corn Litig., 2018 WL 6436074 (D. Kan. Dec. 7, 2018) (Lungstrum, J.). At that time, the Court also awarded total attorney fees in the amount of one third of the settlement fund, or $503, 333, 333.33, see Id. at *11-16, which fees compensated for work for the benefit for the settlement class and which also were “intended to account for all contingent fee recoveries from payments to class members from the settlement fund, ” see Id. at *11, 15. On November 15, 2018, after the final approval hearing (at which the Court had announced its intention to award one third of the settlement fund for attorney fees), the Court appointed Ellen Reisman as special master, pursuant to Fed.R.Civ.P. 23(h)(4), to review pending applications and to issue a report and recommendation “concerning the Court's initial allocation of its attorney fee award from the settlement fund; the reimbursement of expenses from the fund; and the Court's approval of any requests for service awards.” The master filed her report and recommendation (R&R) on November 21, 2018 (Doc. # 3816). Pursuant to the Court's order, various attorneys filed timely objections to the R&R, and on December 17, 2018, the Court conducted a hearing on the R&R and the objections thereto. Also participating at the hearing were the Hon. David Herndon of the United States District Court for the Southern District of Illinois and the Hon. Laurie Miller of the District Court of Hennepin County, Minnesota.

         As required by the settlement agreement, the Court has consulted with Judge Herndon and Judge Miller, and they have approved the rulings contained herein regarding the initial allocation of fees, expenses, and service awards, as evidenced by their signatures below. As more fully set forth below, the Court adopts the R&R in large part. The Court concludes that the pool for individually retained private attorneys (IRPAs) should be increased from the recommended percentage to 12 percent of the total fee award, and that the other three pools should be reduced slightly (Kansas pool to 49 percent, Minnesota pool to 23.5 percent, Illinois pool to 15.5 percent) to accommodate the IRPA increase. The remaining modifications are set forth in more detail below. The following objections are thus sustained in part to the extent that the Court has altered the master's recommendations concerning the IRPA pool: Bassford Remele, P.A. (Doc. # 3823); Hossley-Embry (Doc. # 3825); Paul Byrd Law Firm, PLLC (Doc. # 3826); Toups / Coffman (Doc. # 3827); Clark / Phipps Group (Doc. # 3832); The Hecker Law Group (Doc. # 3833); Watts Guerra LLP (Doc. # 3836); Shields Law Group, LLC (Doc. # 3840); and Kirk Law Firm (Doc. # 3842). Those objections are otherwise overruled. The objection by Heninger Garrison Davis, LLC (Doc. # 3835) is overruled in its entirety. Johnson Becker, PLLC's request for clarification (Doc. # 3838) is granted, as set forth below.[2]

         I. Report and Recommendation and Objections Thereto

          In the R&R, the special master summarizes the history of this litigation against Syngenta, which took place primarily on three fronts: in the federal court MDL in the District of Kansas, in the consolidated Minnesota state court proceeding, and in federal court in the Southern District of Illinois. As a part of that summary, the R&R contains the master's findings regarding the relative contributions to the ultimate settlement of the attorneys litigating on those three fronts, based in large part on the master's experience overseeing and facilitating settlement negotiations and implementation of the final settlement.

         The master recommends a framework for allocating the $503, 333, 333.33 award of attorney fees to all attorneys whose efforts contributed to the settlement class's ultimate recovery, as follows. All attorneys who have filed fee applications are assigned to one of three common benefit pools - Kansas MDL, Minnesota state court, and Illinois federal court - based primarily on where they performed their common benefit work. Specified percentages of the total fee award are then allocated to those three pools, reflecting the relative contributions to the settlement class recovery by the attorneys in those pools (with further allocation within those three pools to be made in a subsequent procedure by the three courts separately). The master recommends the following such allocations: 50 percent to the Kansas pool, 24 percent to the Minnesota pool, and 16 percent to the Illinois pool. The master also recommends that the remaining 10 percent of the total fee award be allocated to a pool for individually retained private attorneys (IRPAs), who would share that allocation pro rata based on the ultimate recoveries by their claimant clients, subject to a 10 percent cap. These fee awards from the three common benefit pools and the IRPA pool would represent the entire amount paid to any attorneys for contingent fees with respect to this litigation, notwithstanding any client contracts or other agreements.

         The master further recommends that certain standards be adopted for the approval of reasonable attorney expenses, which will be paid separately from the settlement fund (and not from the one-third attorney fee award). The master recommends that she make final expense determinations after receiving and reviewing additional documentation. The master also recommends the approval of the service awards requested on behalf of various plaintiffs.

         Ten objections to the R&R were filed by various attorneys, and those objections may be summarized as follows. Toups / Coffman argues that the entire allocation to attorneys should not be undertaken until claimant recoveries are known and that the allocation should be accomplished in one phase. Heninger Garrison Davis argues that the Illinois percentage should be increased. Clark / Phipps argues that the Illinois percentage is too small, that the Heninger group should not be placed in the Illinois pool, and that the IRPA percentage should be increased. Bassford Remele argues that some of the Illinois allocation should be shifted to the IRPA pool. Watts Guerra objects to the recommended framework and alternatively argues that the Minnesota and IRPA percentages should be increased. Hossley-Embry argues that common-benefit time should be broadly construed and that either the IRPA pool allocation should be increased or client contingent fee contracts should be honored. Paul Byrd, Hecker Law Group, Shields Law Group, and Kirk Law Firm argue that the IRPA percentage is too low or that client contracts should be honored.

         Finally, Johnson Becker filed a request for clarification of the R&R with respect to allocations for attorneys who performed common benefit work in more than one jurisdiction.

         II. Allocation of Attorney Fees

         A. Applicable Legal Authority

         The Court referred to the special master the issues addressed in the R&R pursuant to Rule 23, which allows for such a referral as provided in Rule 54, which in turn directs the Court to Rule 53. See Fed. R. Civ. P. 23(h)(4), 54(d)(2)(D). Rule 53 sets the Court's standard of review: in the absence of a stipulation by the parties, the Court reviews de novo all objections to the special master's factual findings and legal conclusions.

         In its final approval order, the Court discussed its authority to award attorney fees from the settlement fund. See In re Syngenta, 2018 WL 6436074, at *11. Specifically, the Court noted that in a class action, pursuant to Fed.R.Civ.P. 23(h), it may award fees as authorized by law, and that the settlement agreement and the common fund doctrine authorized an award of reasonable fees in this case for all work that contributed to the settlement, in an amount warranted by consideration of the so-called Johnson factors. See Id. at *11-12.

         In her report, the special master has recommended an approach that would award fees to class counsel, designated lead counsel, other attorneys who performed work that benefited the entire litigation, and attorneys who filed cases on behalf of individual clients. The master states that her approach in this hybrid case involving a class settlement of litigation involving class and individual claims is derived from that used by the Tenth Circuit in Gottlieb v. Barry, 43 F.3d 474 (10th Cir. 1994), and by the Eastern District of Pennsylvania in In re National Football League Players' Concussion Injury Litigation (NFL), 2018 WL 1658808 (E.D Pa. Apr. 5, 2018), appeals filed (3d Cir.). The Court agrees that an award of fees from the settlement fund to both attorneys who performed common benefit work and attorneys who filed individual cases is permitted under Tenth Circuit law. See Gottlieb, 43 F.3d at 489 (requiring fee awards both to class counsel and to other individual counsel). No. attorney has argued, either in applying for fees or in objecting to the R&R, that the Court may not adopt such an approach.

         The special master also recommends that the Court effectively modify individual contingent fee contracts relating to this litigation to limit any contingent recovery by attorneys to the fees awarded and allocated by the Court in this order. After a thorough discussion of the law, the master concludes that the Court has the authority to impose such a limitation. Significantly, although Watts Guerra and a few other attorney applicants questioned whether the Court has such authority in their briefs in support of their fee applications, no attorney has objected to this conclusion in the R&R.[3] The Court is persuaded by the master's analysis in the R&R, and it agrees that it possesses the requisite authority to modify contingent fee contracts.

         More specifically, because the Court has certified a nationwide settlement class, with adequate class notice and an opportunity to opt out, the requirements of due process are satisfied here, and the Court may exercise personal jurisdiction over class members and their counsel. See In re Diet Drugs Products Liability Litig., 282 F.3d 220, 230-31 (3d Cir. 2002). Moreover, the settlement agreement authorizes the Court's continuing jurisdiction over the settlement and settlement fund, and the All Writs Act, 28 U.S.C. § 1651, grants the Court authority to issue orders necessary to aid that jurisdiction. See Diet Drugs, 282 F.3d at 233-39.

         The Court also concludes that it has the legal and equitable authority to determine the reasonableness of and modify contingent fee contracts relating to this litigation and settlement class. As more fully set forth in the master's legal analysis in the R&R, the Court may exercise its inherent authority to supervise attorneys appearing before it, to act as a fiduciary for and protect the interests of the settlement class members, and to ensure that the integrity of the judicial process is not undermined by the recovery of unreasonable attorney fees. In mass actions, courts have routinely reviewed and capped attorney fees. See In re World Trade Center Disaster Site Litig., 754 F.3d 114, 126 (2d Cir. 2014). The special master cites a number of such cases in her R&R. See Report and Recommendation of Nov. 21, 2018 (Doc. # 3816) at 46-54. In NFL, the court adopted the conclusion of Professor William B. Rubinstein, who had submitted an expert report, that a court presiding over a class action or MDL has the authority to review individual fee awards and to impose a cap on contingent fees. See NFL, 2018 WL 1658808, at *2. The special master in the present case also relied on Professor Rubinstein's report in NFL, and that report cites a number of cases supporting his conclusion that “there is no doubt that [the NFL court] possesses the authority to assess the reasonableness of each class member's contingent fee contract with his individually retained attorney.” See Expert Report of Professor William B. Rubinstein (Doc. # 9526) at 14-19, In re NFL, No. 12-md-2323 (E.D. Pa.). Similarly, in the present action, Professor Robert H. Klonoff has submitted an expert declaration in which he cites legal authority and concludes that the Court has the authority to review the reasonableness of contingent fees and impose caps. See Supplemental Declaration of Professor Robert H. Klonoff (Doc. # 3693-4) at 5-13. The Court is confident that it does possess the authority to limit contingent fee recoveries by IRPAs in this case, as many courts have done in other mass actions.

         A few points merit comment concerning the Court's authority to regulate contingent fee recovery in this case. As the master points out in the R&R, the settlement agreement, in granting the Court jurisdiction over attorney fee liens, contemplated judicial review of attorneys' contingent fee arrangements. Thus, the Court's authority to act also arises from the settlement agreement. See, e.g., In re Vioxx Products Liability Litig., 574 F.Supp.2d 606, 614 (E.D. La. 2008) (settlement agreement granted court express authority to review contingent fee contracts for reasonableness).

         The Court notes that Watts Guerra supported its fee application with an expert report by five law professors who were “doubtful that any inherent authority to rewrite fee agreements exists here.” See Report of Miller, et al. (Doc. # 3580-2) at 18. The Court rejects that argument. Those professors support that statement only by citing to one state court case from Texas (because Watts Guerra's fee contracts are governed by Texas law), two Minnesota state court cases, and cases from the Supreme Court noting that courts should exercise their inherent power with discretion; those cases do not create any doubt about the Court's authority in this regard, however. The Supreme Court has not indicated that a court may not exercise its inherent authority in this way, and federal courts have routinely concluded that they may do so. As Professor Klonoff points out, the cited state court cases do not actually support the position that a court may not exercise its inherent authority to interfere with attorney fee contracts. See Klonoff Report, supra, at 10-11.[4] Moreover, this Court necessarily applies federal law, not state law, in exercising its inherent authority in this way. See Dunn v. H.K Porter Co., 602 F.2d 1105, 1110 n.8 (3d Cir. 1979) (federal law applies to court's act in supervising members of its bar and in meeting obligations of Fed.R.Civ.P. 23).[5]

         In overseeing the conduct of the attorneys that practice before it, this Court has adopted the Kansas Rules of Professional Conduct. See D. Kan. Rule 86.1(a). Those rules require attorney fees to be reasonable, and they authorize courts to modify unreasonable fee contracts. See Kan. Rules Prof. Conduct 1.5(a), (e). Those rules thus support the Court's exercise of authority here.

         Watts Guerra's five professors also cite to the Restatement (Third) of the Law Governing Lawyers, in arguing that Watts Guerra's contingent fee contracts did not become unreasonable because of an uncontemplated change in circumstances. See Report of Miller, et al., supra, at 19-21. The Restatement states unequivocally, however, that a lawyer may not charge an unreasonable fee. See Restatement (Third) of the Law Governing Lawyers § 34. The master concluded in the R&R that it would be unreasonable for IRPAs to collect on their contingent fee contracts without limitation in this case, and as discussed below, the Court agrees.[6]

         Finally, the Court rejects Watts Guerra's argument that the Rules Enabling Act prohibits Fed.R.Civ.P. 23 from abrogating contract rights under state law. Rule 23 does not authorize the Court's action here; rather, Rule 23 provides that a court may award fees as authorized by law, and the limitation of contingent fee recovery in this case is authorized by the Court's inherent authority and the settlement agreement itself.

         B. General Approach

         The Court adopts the special master's general approach to the allocation of the attorney fee award, by which the award is first allocated among the three common benefit pools and the IRPA pool. The Court agrees with the master that this is the most reasonable and appropriate way to allocate the fee award, for the reasons set forth in the R&R, particularly given the hybrid nature of this litigation, which involved both class and individual claims. Creation of the IRPA pool allows the Court to recognize the contribution to the ultimate recovery made by the very existence of the huge number of individual claims, while at the same time limiting fees for those attorneys to a reasonable amount. Creation of the three common benefit pools allows for a reasonable allocation of the remainder of the fee award based on the attorneys' relative contributions to the recovery, including the actual litigation of the claims against Syngenta and the negotiation and defense of the settlement. Although there was overlap among jurisdictions, particularly because of the great of amount of coordination among plaintiffs' counsel, the fact that the litigation took place primarily on the three discrete jurisdictional fronts allows the remainder to be divided reasonably into the three pools based on a comparison of the relative contributions to the recovery by the attorneys placed in those pools. This framework further allows the court most familiar with the work on a particular front to allocate fees to particular attorneys and firms within that court's common benefit pool. Although the task of allocation is necessarily a difficult one, the framework recommended by the special master most ably facilitates a reasonable allocation.

         Accordingly, the Court rejects Watts Guerra's argument in favor of a direct award to it of a fixed percentage of the attorney fee award. Similarly, the Court rejects the argument by Toups / Coffman in favor of a single-stage approach undertaken after the claimants' recoveries are determined. No. other attorney has objected to the recommended two-stage approach, and the Court is persuaded that the attorney fee award may be allocated reasonably and appropriately among the pools at this time.[7]

         C. IRPA Pool

         1. First, the Court agrees with the special master that it is appropriate to include an allocation to an IRPA pool from the total award of fees, for the reasons set forth in the R&R. The sheer number of individual suits filed against Syngenta created enormous pressure on Syngenta, and thus the mere existence of the IRPAs and their clients contributed in a meaningful way to the ultimate resolution that benefits the entire settlement class. That contribution merits an award from the common fund. The Court finds persuasive these other reasons cited by the master in her R&R: payment of IRPA fees from the attorney fee award is a concept reflected in the settlement agreement; such a payment is necessary to achieve the settlement's principle of providing similar recoveries to similarly-situated plaintiffs (regardless of whether they retained their own counsel); and that principle and its implementation were essential to achieving the settlement (including because mass opt-outs could have doomed the settlement otherwise).

         2. The Court generally agrees with the special master concerning the relative contribution to the settlement class's recovery by the IRPAs. The Court (after a de novo review) adopts the factual findings in the R&R concerning the relative weight of the contributions by IRPAs and by attorneys performing common benefit work. Those findings are persuasive in light of Ms. Reisman's experience as special master ...


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