No one wins when plaintiffs lawyers fight over fees

July 16, 2015

The multidistrict litigation accusing Bayer of tainting the U.S. long-grain rice crop with its genetically modified product should be a shining example of how consolidated litigation can deliver justice to thousands of injured people. In 2011, after losing several bellwether trials, Bayer agreed to pay as much as $750 million to about 11,000 rice farmers in Texas, Louisiana, Missouri, Arkansas and Mississippi. In 2012, the judge overseeing the consolidated federal-court litigation against Bayer, U.S District Judge Catherine Perry of St. Louis, said the outcome entitled the lawyers who led the case to as much as $72 million from a common benefit fund. That award was more, as a percentage, than lead lawyers usually receive for work that supposedly benefits all of the plaintiffs in consolidated litigation, but the judge said the award was justified by the time lead counsel sank into the case and the excellent results they obtained.

Unfortunately, what has happened since then in the rice litigation has not been such a triumph for the plaintiffs bar. Lead counsel in the federal cases, primarily Don Downing of Gray, Ritter & Graham, Adam Levitt of Grant & Eisenhofer (formerly of Wolf Haldenstein Adler Freeman & Herz) and Patrick Stueve of Stueve Siegel Hanson, have spent three years battling a few rogue groups of plaintiffs lawyers who brought rice contamination cases in state court and balked at turning over a portion of their fees.

I want to be clear: I’m not criticizing Downing, Levitt and Stueve, who have so far won at every turn, and according to all of the judges who have looked at the dispute, unquestionably deserve to be compensated for work that benefited lawyers in the state case. In August 2014, the 8th U.S. Circuit Court of Appeals affirmed their fee award and agreed that state-court plaintiffs’ lawyer Martin Phipps should not receive the $13 million he requested from the federal common-benefit fund. Phipps, who has been at the heart of the fee fight in the rice litigation, argued that his state-court litigation against Bayer gave the lead federal-court lawyers leverage in negotiating a global settlement. The 8th Circuit deferred to Judge Perry, who said that, if anything, Phipps’ efforts may have had “a direct negative impact” on the consolidated federal litigation.

The 8th Circuit also, however, affirmed Judge Perry’s holding that she did not have jurisdiction to order Phipps and his allies to kick in money from their state-court cases for the lead lawyers in the federal litigation. So since 2013, the federal court lawyers have been litigating an unjust enrichment suit against Phipps and the other state-court lawyers, claiming that those lawyers reaped the rewards of work executed by lead counsel in the federal court consolidated litigation but have refused to pay for the privilege.

At the end of June, Judge Perry, who is overseeing the unjust enrichment case, denied a motion by Phipps and the other defendants to dismiss the suit. On Monday, she granted Downing, Levitt and Stueve’s motion for certification of a class of plaintiffs who either provided or paid for common benefit services in the consolidated rice litigation. (That class definition sweeps in not only the law firms that are hoping to receive fees from the state-court lawyers but also the clients that paid into the common benefit fund.)

Meanwhile, Phipps is resisting attempts by Downing, Stueve and other lawyers to pin him down to contributing to a common benefit fund in consolidated rice contamination litigation against Syngenta in federal court in Kansas City. Earlier this month, Phipps filed a brief contending that the federal-court lawyers cannot enforce a joint prosecution agreement that would require him to surrender money to the common fund.

This fee fight threatens to obscure the good work of plaintiffs lawyers in the rice contamination cases. Consolidated litigation, as the 8th Circuit pointed out in its 2014 ruling, is effective because all plaintiffs benefit from the time and money contributed by the lawyers leading the case, who are almost always working on contingency. Judge Perry had no doubt that Phipps, for instance, relied on work performed by plaintiffs’ lawyers in her courtroom when he litigated his cases in state court. To permit him and his allies to ride for free on the backs of lead counsel in federal court undermines the goal of multidistrict litigation, which is to streamline litigation and hasten resolution.

There are already too many skeptics who believe plaintiffs lawyers are motivated only by money. Fee fights only breed more of them.

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