Northern District of Illinois Lowers Attorney Fees after Seventh Circuit Remand

By Samuel Smith

In a recent opinion following a Seventh Circuit decision to vacate and remand, Judge Thomas M. Durkin addressed attorney fees given by the Northern District of Illinois for In re Broiler Chicken Antitrust Litigation. No. 16 C 8637, 2024 U.S. Dist. WL 3292794, at *1 (N.D. Ill. July 3, 2024). Objector John Andren had appealed the initial attorney fee award amounting to one-third of certain settlement recoveries. Id. The Seventh Circuit vacated and remanded with the following instructions: ?

(1) “bids that class counsel made in auctions around the time this litigation began in September 2016 would ordinarily be good predictors of what ex ante bargain would have been negotiated,” (2) “it was an abuse of discretion to rule that bids with declining fee structures should categorically be given little weight in assessing fees” and “it was error to suggest that [the Seventh Circuit] has cast doubt on the consideration of declining fee scale bids in all cases,” and (3) “the district court should not have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega fund rule…. [because] continued participation in litigation in the Ninth Circuit is an economic choice that informs the price of class counsel’s legal services and the bargain they may have struck.”

Id. (citations omitted). The Court additionally found that attorney fees of one-third of recoveries was the market rate for complex class actions like the current case, but that courts must determine how the Seventh Circuit’s instructions and the Payment Card fee award and Interest Rate Swaps fee agreement factor in. Id.

Since filing this case, Class Counsel made two declining fee schedule bids at 13.5%, 17%, and a flat rate bid at 20% to become lead counsel in three other complex antitrust cases. Id. at *2. Andren argued that this is evidence of what the market rate should be and advocated for attorney fees of 20%. Id. The Court dismissed that argument by stating the three cases are not like the current case because they were all filed in the wake of criminal investigations. Id. Awards given for cases with prior government involvement often have much lower awards because of the decreased risk and work that goes into litigating the case. Id.

The Court addressed Ninth Circuit cases by stating that the Seventh Circuit has repeatedly rejected the Ninth Circuit’s mega fund rule that imposes a general cap on large recoveries of 25%. Id. Even though Class Counsel has consistently litigated in the Ninth Circuit in the past, Ninth Circuit awards provide information most useful to understanding the supply-side of the legal services market, but the Court does not believe that it is useful for figuring out the market rate. Id. at *2, *3. The fact that the Ninth Circuit has imposed a 25% cap, and the Seventh Circuit’s observation that it is counsel’s own choice to litigate where counsel may receive below the market rate, provides evidence that the Ninth Circuit is imposing a fixed rate lower than the market rate. Id. at *2. The Court stated that because outside the Ninth Circuit where there is no mega fund cap, and other data indicates a market rate of 30% for fees, Ninth Circuit data is not highly relevant. Id. at *3. Conversely, when litigating in the Ninth Circuit, awards outside the Ninth Circuit become less relevant. Id.

Andren next argued that the awards given in the Interest Rate Swaps case is highly probative because it is one of the few ex ante awards negotiated by a sophisticated client. Id. The Court agreed that the Interest Rate Swap case is a good comparator despite the differences that Class Counsel pointed out. Id. However, the Court found that the Interest Rate Swaps case dealt with financial institutions that generally have greater assets than food industry defendants, and financial institutions have a greater ability to pay larger settlements than food industry companies. Id. at *4. The Court noted that the possible damages in the current case and the Interest Rate Swaps case are similar, but without knowing the court ordered award amount the likely explanation that the declining fee schedule was negotiated is because the potential settlement value in Interest Rate Swaps was substantially higher. Id. The Interest Rate Swaps settlement was likely closer to the $1.8 billion and $2 billion settlement against other financial institutions settled prior to the Interest Rate Swaps case than the total potential settlement here. Id.

The Court reviewed data of 49 awards between $100 million and $1 billion and included twelve awards from the Ninth Circuit. Id. at *5. Ten of the awards are from the Interest Rate Swaps case, at a rate of 26.6%. Id. at *4. The average rate was 28.995% and the median was 31% for awarded fees. Id. at *5.

The Court lastly dismissed all studies that Andren submitted to support denial of any award over 26.6%. Id. *5-6. The first study was dismissed because the study only used settlements from 2006-2007 and is therefore too narrow. Id. at *5. The Court rejected the second and third studies because they considered all settlements over $100 million, an approach that leaves in settlements that far exceed the settlement in this case. Id. And the Court rejected the last study Andren relied on because it cites an average settlement percentage within the Seventh Circuit of 31.6%, which is even higher than what the Court concluded and is averse to his argument. Id. *5-6.

Although Andren is correct that ex ante awards should be given more weight than ex post awards, there is minimal volume of ex ante awards. Id. at *6. Andren presented no ex post award examples to support his argument that a fee between 20% and 26.6% is appropriate. Id.

The Court ultimately decreased the Class Counsel’s award to 30% of the settlement fund, consistent with the rates the Court had studied. Id.