MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS SIRIANNI YOUTZ SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104 TEL. (206) 223-0303 FAX (206) 223-0246 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 HON. JOHN P. ERLICK Noted for Hearing: September 9, 2015, at 9:00 a.m. With Oral Argument IN THE SUPERIOR COURT OF WASHINGTON FOR KING COUNTY O.S.T., by and through his parents, G.T. and E.S.; L.H., by and through his parents, M.S. and K.H.; K.B. and A.B., by and through their parents, H.B. and M.B.; and D.F. by and through his parents, An.F. and Al.F.; each on their own behalf and on behalf of all similarly situated individuals, Plaintiffs, v. REGENCE BLUESHIELD, a Washington corporation, Defendant. NO. 11-2-34187-9 SEA MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS
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MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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HON. JOHN P. ERLICK Noted for Hearing: September 9, 2015, at 9:00 a.m.
With Oral Argument
IN THE SUPERIOR COURT OF WASHINGTON FOR KING COUNTY
O.S.T., by and through his parents, G.T. and E.S.; L.H., by and through his parents, M.S. and K.H.; K.B. and A.B., by and through their parents, H.B. and M.B.; and D.F. by and through his parents, An.F. and Al.F.; each on their own behalf and on behalf of all similarly situated individuals,
Plaintiffs,
v.
REGENCE BLUESHIELD, a Washington corporation,
Defendant.
NO. 11-2-34187-9 SEA MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS - i
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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Table of Contents
I. INTRODUCTION ............................................................................................................... 1
II. BACKGROUND ................................................................................................................. 3
III. EVIDENCE RELIED UPON .............................................................................................. 6
IV. LAW AND ARGUMENT ................................................................................................... 6
A. Attorneys’ Fees Should Be Awarded to Counsel for its Success
in the Case. ................................................................................................................. 6
1. Legal Standard for Attorney Fee Awards .......................................................... 6
2. Class Counsel’s Request Is Below the Benchmark Because
the Prospective Relief Alone Is Worth More than $3.35
Million per Year. ............................................................................................... 7
3. Even if Only the Cash Fund Is Considered (and No Value Is
Attributed to the Future Benefits), the Request is
“State Needs Mandate to Cover Autism Therapy,” The Seattle Times,
May 21, 2014 .......................................................................................................................... 2
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 1
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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I. INTRODUCTION
As a direct result of class counsels’ years of in-the-trenches effort—including a
successful battle against defendant Regence BlueShield before the Washington State
Supreme Court1—children with developmental disabilities who have Regence coverage
can now access medically necessary Neurodevelopmental Therapy (NDT) and Applied
Behavior Analysis (ABA) therapies to treat their conditions. For many children, access
to these therapies is life-changing—even to the point of preventing lifelong disability:
Access to medically necessary NDT and ABA therapy, without arbitrary treatment limits, age caps or exclusions, can make an enormous difference in the lives of Washington’s children with autism and other developmental disabilities. For years, I recommended these therapies knowing that for many families the cost and the lack of private insurance coverage put the therapies out of reach. Since the series of cases brought by Class counsel under the Mental Health Parity Act against Washington insurers and Medicaid, many Washington children with developmental disabilities now have access to the key therapies to treat their conditions. With ABA and NDT therapy coverage, the promise of early intervention in the lives of children with developmental conditions can be fully realized. The lives of many thousands of children have been and will be improved as a result of this litigation.
Decl. of Stephen T. Glass, M.D., ¶12. The Seattle Times recognized this as well, and went
out of its way to applaud the efforts of class counsel as the only meaningful enforcement
of Washington’s Mental Health Parity Act:
… Washington remains in a minority of states without an insurance mandate to cover these therapies. The Legislature has failed to act, and so has the state insurance commissioner.
But a series of lawsuits since 2010 has begun to change all that. One insurer after another—including Group Health, Medicaid, the state employees’ plan and, just this week, Premera—have settled suits and begun coverage.
1 See O.S.T. v. Regence, 181 Wn.2d 692, 335 P.3d 416 (2014).
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SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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…
[Insurance Commissioner Mike] Kreidler and the Legislature left enforcement to class-action lawyers, in particular attorneys Rick Spoonemore and Ele Hamburger.
Dkt. No. 309, filed on 10/14/14 (Spoonemore Decl., Exh. A), “State Needs Mandate to
Cover Autism Therapy,” The Seattle Times, May 21, 2014.
Not only do Regence insureds now have broad prospective coverage for
medically necessary NDT and ABA therapy as a direct result of class counsel’s actions,
they may also seek reimbursement from a $6,000,000 settlement fund to pay past claims.
It is anticipated that this fund will be sufficient to pay claimants full compensation. Dkt.
No. 309, filed on 10/14/14 (Spoonemore Decl.), ¶6. Few class actions can claim such
resounding success.
For their efforts in this case, class counsel now seeks, from this Court, a fee award
of $700,000, or 35% of the $2,000,000 allocated to this case.2 This is less than class
counsel’s loadstar (which exceeds $725,000). Dkt. No. 309, p. 131. Moreover, the request
2 Class counsel is seeking separate awards from both this Court and the Federal Court in K.M. based on a two-thirds to one-third allocation between the two courts. This allocation will allow each court, without interfering with the other court, to make a fee award based just on the action before it.
The allocation was presented to, and approved by, Judge Jones in K.M. upon his request to allocate the cash fund for the purposes of determining the attorneys’ fees award. The two-thirds to one-third allocation is based on the approximate ratio of the affected individuals within the ERISA and non-ERISA classes. The population for the non-ERISA plans here was 8,497,672 member months. Dkt. No. 309, pp. 78-79 (2006-2011 data). The population covering the same time period in K.M. is 17,062,623 member months. Dkt. No. 309, pp. 35, 49 (excluding the partial 2012 year). Using this 2006 to 2011 data puts the percentage at 66.75% for K.M. to 33.25% for this case.
This allocation is also consistent with other provisions of the Settlement Agreement. Pursuant to the Agreement, two-thirds of any residual funds in the Settlement Trust Fund will be also allocated to K.M., and one-third allocated to this matter for purpose of cy pres awards:
7.4.6.1 Allocation. For the purposes of this Section 7.4.6, one third (1/3) of any residual funds shall be allocated to the O.S.T. Action, and two-thirds (2/3) of the residual funds shall be allocated to the K.M. Action.
Dkt. No. 310, App. 1 (Settlement Agreement).
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 3
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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for 35% of just the cash fund represents less than 14% of the total benefit to class
members, which includes not only the back benefits but also the value of prospective
relief securing coverage of medically necessary NDT and ABA services. See Vizcaino v.
Microsoft Corp., 142 F. Supp. 2d 1299, 1305 (W.D. Wash. 2001) (applying Washington law,
“the ‘benchmark’ percentage of recovery fee is 25% of the recovery obtained, including
Class counsel, however, reserves the right to lower its fee request if the class is
faced with a possible termination of the agreement under §9.6, because class members
are faced with a pro rata reduction of more than 45.14%. As class counsel represented to
the Court in K.M.—and repeats for the benefit of the class members here—class counsel
will lower its fee if necessary to ensure a substantial recovery by all claimants:
If class counsel is faced with a possible termination of the agreement under §9.6, because class members are faced with a reduction of more than 45.14%, then class counsel will take steps, including reducing the fee request, to order to avoid termination of the agreement. As the Settlement Agreement provides:
The Parties, individually or collectively, may cure termination under this section by taking steps to ensure that Class Members receive the threshold payment level under this subsection.
Dkt. No. 73-1, App. 1, §9.6. Class counsel would lower its requested fees to make money available for class members in the event such action is necessary to avoid a potential termination.
Class counsel also seeks reimbursement of its costs incurred in this case (totaling
$66,795.46 to date), and incentive awards of $25,000 for each named plaintiff to account
for their time, effort and risk in prosecuting these cases.
II. BACKGROUND
Before this litigation, Regence excluded all coverage of neurodevelopmental
therapies for its insureds on individual plans, and all coverage for individuals over the
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 4
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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age of six in its group contracts. See generally O.S.T. v. Regence, 181 Wn.2d 692, 335 P.3d
416 (2014). Regence excluded this coverage even if: (1) the insured had a DSM mental
health condition; and (2) the neurodevelopmental therapy was medically necessary to
treat the condition. Regence also excluded all ABA therapy. See, e.g., Dkt. No. 251,
Exh. A, p. 46, (Regence’s counsel: “If there’s one thing that’s been crystal clear in this case
since the day the complaint was filed it is that Regence doesn’t cover ABA and never
has.”).
Filed over three years ago, this case has a lengthy and complex history. It was
originally filed on October 1, 2011 by O.S.T., a child with autism who had been denied
coverage of NDT and ABA therapies by Regence. Over time, the complaint has been
amended to include additional class representatives. The current operative complaint is
the Fourth Amended Complaint, filed on January 14, 2014.
Over the last three years, this Court and the Washington State Supreme Court
have entered various significant orders, including the following:
Date Court Nature of Order
12/12/12 King Co. Superior Order (1) Granting Plaintiff’s Motion for Partial Summary Judgment Re: Neurodevelopmental Therapy Exclusion and (2) Denying Defendant’s Cross Motion for Partial Summary Judgment.
12/12/12 King Co. Superior Order Denying Defendant’s Motion for Partial Summary Judgment Re: O.S.T. Damage Claims
12/12/12 King Co. Superior Order Granting in Part and Denying in Part Defendant’s Motion to Dismiss Plaintiffs’ Claims for Lack of Standing
12/13/12 King Co. Superior Order Certifying Neurodevelopmental Class under Civil Rule 23(b)(3)
12/13/12 King Co. Superior Order and Findings on Civil Rule 54(b) and RAP 2.3(b)(4) Certification
4/11/13 King Co. Superior Order Denying Motion for Stay of Proceedings Pending Appeal
5/13/13 King Co. Superior Order Denying Plaintiffs’ Motion for Injunctive Relief
7/18/13 King Co. Superior Order Appointing Class Representatives and Issuing Permanent Injunctive Relief
8/5/13 King Co. Superior Order Granting Plaintiffs’ Motion to Bifurcate Neurodevelopmental Class Claims from ABA Claims
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 5
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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Date Court Nature of Order
7/8/13 Wash. Supreme Ct. Order Transferring Regence’s Appeal from Court of Appeals to Washington State Supreme Court
9/6/13 King Co. Superior Order: (1) Granting Neurodevelopmental Class’s Motion for Summary Judgment on Retrospective Liability; (2) Directing Reprocessing and Processing of Neurodevelopmental Claims from Effective Date of Parity Act; (3) Directing Notice; (4) Adopting Trial Plan; (5) Granting Neurodevelopmental Class’s Motion for Summary Judgment with Respect to Regence’s Affirmative Defenses of Exhaustion and Claims Submission Bar; and (6) Instructing Class to Seek Permission for Entry of Order Pursuant to 7.2(e).
9/12/13 Wash. Supreme Ct. Order Granting Regence’s Motion to Modify to Add Standing Issue to Appeal
12/23/13 Wash. Supreme Ct. Order (1) Granting Permission to Enter Order on Retrospective Relief, (2) Granting Permission to Add Additional Class Representatives, (3) Denying Regence’s Request to Consolidate Issues, (4) Dismissing, as Improvidently Granted, Review of Regence’s Standing Issue
1/10/14 King Co. Superior Order Re: Approval of Supreme Court for Formal Entry of Orders
1/17/14 King Co. Superior Order Lifting Stay of Proceedings
1/31/14 Wash. Supreme Ct. Order Denying Regence’s Motion for Reconsideration
10/9/14 Wash. Supreme Ct. Order unanimously affirming Grant of Partial Summary Judgment, concluding that Regence’s exclusions are “void and unenforceable.”
After the class was certified and an injunction entered in the federal K.M. action,
the parties concluded that a global settlement might be possible. Class counsel and
Regence entered into a detailed agreement to negotiate on February 19, 2014, which set
forth the principles upon which the parties would discuss settlement. As part of that
agreement, the parties agreed to exchange damage reports and to engage in targeted
discovery in order to create an environment where informed settlement could occur.
The parties jointly moved for a stay of this case, K.M. and J.T., and proceeded to engage
in the discovery and expert-related disclosures required by the agreement to negotiate.
Upon completion of the discovery and depositions, the parties engaged in
mediation with Tom Harris on June 4, 2014, but a settlement agreement could not be
reached. However, Mr. Harris recommended that the process continue, so extensions of
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 6
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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the stays were requested from the courts. An additional session was held on July 31,
2014, after the parties exchanged additional material and met face-to-face. The July 31
session was generally successful, with many of the key deal points resolved. Additional
progress was made the next day, when the parties again met face-to-face. By August 14,
the parties were confident that the case could settle. Codifying the understandings into
an actual agreement, however, proved difficult. Protracted exchanges occurred in an
attempt to agree on language in the final agreement. After more than a month of
discussions and drafts, the parties finally reached agreement on the language of the
proposed Settlement Agreement.
III. EVIDENCE RELIED UPON
This motion is supported by the Declarations of Stephen T. Glass, M.D., G.T.,
M.B.S., H.B. and Al.F., as well as records and filings previously filed in this case.
IV. LAW AND ARGUMENT
A. Attorneys’ Fees Should Be Awarded to Counsel for its Success in the Case.
1. Legal Standard for Attorney Fee Awards
The results-oriented percentage-of-recovery approach is used in calculating fees
in common fund cases. Bowles v. Washington Dept. of Ret. Sys., 121 Wn.2d 52, 72, 847 P.2d
440 (1993); Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002). The only
significant difference between state and Ninth Circuit federal law on calculating
attorneys’ fees is that Washington law applies the percentage method without the use of
any “lodestar cross-check.” Vizcaino, 142 F. Supp. 2d at 1302 (“Under Washington law,
the percentage method, without a lodestar cross-check, should be used in common fund
cases.”).
The primary consideration in the fee determination is the magnitude of the benefit
conferred on class members. “In a common fund case, the size of the recovery constitutes
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 7
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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a suitable measure of the attorneys’ performance.” Bowles, 121 Wn.2d at 72. See also
Vizcaino, 142 F. Supp. 2d at 1302. Accord, Manual for Complex Litigation (4th), §14.121
(“[T]he factor given the greatest emphasis is the size of the fund created, because ‘a
common fund is itself the measure of success … [and] represents the benchmark from
which a reasonable fee will be awarded.’”). Once the size of the total benefit to the class
is determined, the Court may award a percentage of the benefit as attorneys’ fees. In
Washington State, as well as within the Ninth Circuit, 20% to 30% of the total benefit
conferred on the class is awarded in the typical case, with 25% considered the
benchmark. Bowles, 121 Wn.2d at 72-73; Vizcaino, 290 F.3d at 1047.
Awards of fees of 35% or more are not unusual. 4 Alba Conte and Herbert B.
Newberg, NEWBERG ON CLASS ACTIONS, §14.6 (4th ed. 2002) (awards typically range in the
20% to 50% of the common fund); see e.g. Morris v. Lifescan, Inc., 54 Fed. Appx. 663, 664
(9th Cir. 2003) (Ninth Circuit approved 33%); Principe v. Ukropina (In re Pacific Enters. Sec.
Litig.), 47 F.3d 373, 379 (9th Cir., 1995) (same); see also In re Ampicillin Antitrust Litig., 526
F. Supp. 494, 503 (D.D.C. 1981) (40.4%); Van Gemert v. Boeing Co., 516 F. Supp. 412, 420
(S.D.N.Y. 1981) (36%). In a study of attorney’s fee awards in 2006-2007, nearly two-thirds
of all awards were between 25-35%, with the most common fee awards in the Ninth
Circuit being 25%, 30% and 33%. In re Toyota Motor Corp., 2013 U.S. Dist. LEXIS 94485,
*219 (C.D. Cal., June 17, 2013).
2. Class Counsel’s Request Is Below the Benchmark Because the Prospective Relief Alone Is Worth More than $3.35 Million per Year.
The “common fund” includes the prospective value received by class members
due to a forced change in a defendant’s policy:
Though in many common fund cases the size of the recovery is easily determined, if prospective or other nonmonetary relief is granted, the recovery may be difficult to evaluate. Nevertheless, the
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 8
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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fee should be based on a percentage of the value of all the relief obtained for the class of beneficiaries through counsel’s effort, whether monetary or nonmonetary.
M.F. Derfner and A. Wolf, COURT AWARDED ATTORNEY FEES, ¶2.06, pp. 2-86-87 (2000)
(emphasis in original). This was part of the holding in Bowles. Bowles, 121 Wn.2d at 73-
74. See also A. Conte, ATTORNEY FEE AWARDS, §2.05, p. 37 (2d ed. 1993) (“[N]umerous
courts have concluded that the amount of the benefit conferred logically is the
appropriate benchmark against which a reasonable common fund fee charge should be
assessed.”) (emphasis added); id., §2.22 (all benefits should be presented to court in
common fund fee application). See also Vizcaino, 142 F. Supp. 2d at 1302 (“[T]he
‘benchmark’ percentage of recovery fee is 25% of the recovery obtained, including future
benefits, with 20 to 30% as the usual range of common fund fees.”); Vizcaino, 290 F.3d at
1049 (“[N]onmonetary benefits conferred by the litigation are a relevant circumstance”
to consider when evaluating the total benefit of the litigation).
As this Court is well aware, Regence fought hard to avoid prospective relief
because that relief represents the most significant cost to the insurer (and the greatest
benefit to Regence insureds). The reason is clear: many people simply cannot afford
medical services. However, when insureds know they have coverage, they are able to
access medically necessary services. This is known as the “insurance effect.” See Dkt.
No. 309, pp. 55, 63-68 (describing the “insurance effect” and the research documenting
it). As Frank G. Fox, Jr., Ph.D. explains, if insureds do not have coverage for a certain
medically necessary treatment, the lack of coverage essentially raises the price of the
service for insureds. For many insureds, the loss of coverage means that they will go
without the service or they will use less of the service, even though the service is
medically necessary. Conversely, when coverage is put in place, many more insureds
will seek the services they need because the price of the service has been effectively
lowered.
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 9
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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As a result, Dr. Fox concludes that the value of just one year of covered care for
ABA services alone is, conservatively, $9,165,171. Dkt. No. 309, p. 226. Likewise, a single
year of NDT is valued at $911,320 in a fully insured environment. Dkt. No. 309, ¶6.
Using the two-thirds to one-third allocation, that totals more than $3.35 million in
benefits just for prospective relief, just for one year, and just for this case.
Under the settlement, there is no limit on the duration of the prospective relief.
However, the prospective relief obtained for a single year combined with the cash
settlement fund totals more than $16 million (or $5.35 million for just this action). Class
counsel’s fee request to this court for $700,000 from this court is less than 14% of the
common benefit—well below the benchmark.
3. Even if Only the Cash Fund Is Considered (and No Value Is Attributed to the Future Benefits), the Request is Reasonable.
The 25% benchmark is not a cap or ceiling on fees. “That percentage amount can
then be adjusted upward or downward to account for any unusual circumstances
involved in th[e] case.” Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir.,
1989); Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1310 (9th Cir. 1990)
(“The benchmark percentage should be adjusted … when special circumstances indicate
that the percentage recovery would be either too small or too large….”). Where such
circumstances exist, as in class action cases which are “risky and complicated,” subjected
to “vigorous opposition throughout the litigation,” and where settlement is the result of
class counsel’s work, a higher percentage is appropriate. Morris, 54 Fed. Appx. at 664.
When supported by the complexity of the issues and the risks involved in the litigation,
a court can—and should—depart from the benchmark.
Factors that may justify departure from the benchmark include:
(1) the result obtained;
(2) counsel's efforts, experience, and skill;
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 10
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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(3) the complexity of the issues;
(4) the risks of non-payment assumed by counsel;
(5) the reaction of the class;
(6) non-monetary benefits, such as clarification of certain points of law; and
(6) comparison with the lodestar.
Vizcaino, 290 F.3d 1048-50. Even though the fees sought here are below the benchmark
when taking into account the value of future benefits, this case meets every factor for an
increase above the benchmark. Each is addressed below.
a. Factor 1: Class Counsel Achieved Extraordinary Results.
(i) Class Counsel Obtained Broad Prospective Relief for the Class.
The sweeping prospective relief obtained for the class speaks for itself. It is not
an understatement to say, as Dr. Glass does, that the prospective coverage for NDT and
ABA without caps, exclusions, or limitations (other than medical necessity) is life-
changing. See generally Glass Decl. He notes that access to these services at the right time
in a child’s life can mean the difference between little or no disability and lifelong
impairment.3 See Glass Decl., ¶¶6-12. For many class members, this benefit is far more
significant than the cash fund. Where, as here, class counsel’s advocacy resulted in
meaningful benefits in addition to the cash settlement fund, an award above the
benchmark is warranted. Vizcaino, 290 F.3d at 1049.
3 Some children may ultimately fully recover from their developmental condition with timely, intensive interventions. See http://www.nytimes.com/2013/01/17/health/some-with-autism-diagnosis-can-recover-study-finds.html?_r=0. (In one study, children who lost the ASD diagnosis were twice as likely to have received behavioral therapy such as ABA as those who continued to have the diagnosis).
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SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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(ii) Class Counsel Obtained a Substantial, if Not Full, Recovery for Class Members.
Even considering the size of the cash fund alone, the settlement is an
extraordinary result. The benchmark award of 25% contemplates compromise
settlements which often result in claims awards for small fractions of a class member’s
actual loss. When class counsel is able to recover more than a small fraction of loss for
individual class members, courts find that the recovery is “unusual” such that an award
beyond 30% is warranted. See In Re: Heritage Bond Litig., 2005 U.S. Dist. LEXIS 13555, *60
(C.D. Cal. June 10, 2005) (awarding 33⅓% because of “exceptional result” in obtaining
settlement for just 23% of class members’ losses, and citing cases awarding 33⅓% or more
for recoveries ranging from 10% to 17% of class members’ losses).
Here, class counsel anticipates that a full or near full recovery can be obtained for
participating class members. In fact, if all claims are paid at 100%, then class members
will get much more than was available under their insurance policies which (unlike the
settlement) impose copayments and coinsurance upon the insured. Few class actions
can claim this result.
(iii) Residual Funds Will Be Distributed to Organizations To Assist Persons with Developmental Disabilities, Not Regence.
Class members further benefit because any funds remaining after paying claims,
fees and costs will be distributed to organizations dedicated to helping families with a
family member with developmental conditions access health care and health coverage.
This, too, is unusual. In many class action settlements (and judgments), excess funds
revert back to the defendant after the claims process. See, e.g., Boeing Co. v. Van Gemert,
444 U.S. 472, 477, 100 S. Ct. 745 (1980).
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 12
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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(iv) The Litigation Spearheaded by Named Plaintiffs and their Parents Benefited All Washington Insureds.
In many private class actions, class counsel will “piggyback” a case on the
enforcement efforts of the government or on some other action. See e.g., Swedish Hosp.
Corp. v. Shalala, 1 F.3d 1261, 1272 (D.C. Cir. 1993). This case was just the opposite.
Prior to class counsel’s litigation efforts, the Office of the Insurance Commissioner
(OIC) routinely allowed health carriers to include exclusions, a fact that the Washington
State Supreme Court noted. O.S.T., 181 Wn.2d at 700, n.9. The OIC failed to issue any
regulations regarding the implementation of the Parity Act, even though it had been
enacted years earlier, and actually approved Regence’s policies with the limitations and
exclusions. Id.
In sum, the efforts of named plaintiffs and class counsel are and have been the
primary enforcement mechanism in the State of Washington for violations of the state
Mental Health Parity Act. See Dkt. No. 75-1, p. 37 (“The Legislature has failed to act, and
so has the state insurance commissioner. … Kreidler and the Legislature left
enforcement to class-action lawyers, in particular attorneys Rick Spoonemore and Ele
Hamburger.”).
b. Factor 2: Effort, Experience and Skill of Class Counsel
Regence, more than any other insurance carrier, litigated these cases to the hilt.
As this Court is well aware (and review of the dockets confirms), this case involved
substantial motions practice, including motions practice and extensive briefing before
the Washington State Supreme Court. Regence aggressively attacked the standing of
every class representative, fought class certification at every stage, filed multiple motions
to dismiss, and fought the classes’ motions for summary judgment and injunctive relief.
And when it lost, Regence appealed to the Washington State Supreme Court.
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 13
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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Regence’s highly aggressive litigation posture is a relevant consideration in
setting the appropriate fee percentage:
Any appraisal of the risks inherent in instituting suit on a contingent basis also requires some evaluation of the character of the defense. This should focus on two aspects. First, there is the degree to which protraction in the case is attributable to the tactical maneuvers of the defendants. Second, and not entirely separable from the first, the court should evaluate the professional quality of the defense.
Thus, some courts have indicated that the quality of opposing counsel bears on the risk factor.
7B FED. PRAC. & PROC. CIV., Attorney Fees—Standards for Assessing §1803.1 (3d ed.).
Regence’s aggressive procedural maneuvers to avoid class-wide injunctive relief, and
class counsel’s determined (and successful) efforts to obtain class-wide relief, merit an
above-the-benchmark award.
Class counsel had the right combination of class action and substantive insurance
law experience. It also retained top Washington experts in autism and
neurodevelopmental conditions, including Stephen T. Glass, M.D., one of the region’s
leading pediatric neurologists; Charles Cowan, M.D., the medical director of Seattle
Children’s Autism Center; and Ilene Schwartz, Ph.D., the Director of the University of
Washington’s Haring Center for Applied Research and Training in Education, and a
local expert on the provision of ABA therapy. Dkt. No. 309, ¶4. Class counsel’s ability to
navigate the complex legal, regulatory and substantive mental health framework for all
three cases was critical to its success.
c. Factor 3: The Complexity of the Issues
“Courts have recognized that the novelty, difficulty and complexity of the issues
involved are significant factors in determining a fee award.” In Re: Heritage Bond Litig.,
2005 WL 1594403, *20. “Cases of first impression generally require more time and effort
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 14
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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on the attorney’s part ... [counsel] should not be penalized for undertaking a case which
may ‘make new law,’ [but] appropriately compensated for accepting the challenge.”
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 718 (5th Cir. 1974).
This was not a cookie-cutter securities or stock-drop case. Class counsel brought
the first cases interpreting and enforcing the state Mental Health Parity Act in our state
and among the very first in the country. Thanks to the path blazed by this litigation,
attorneys representing children with ASD in other states are achieving the same or
similar outcomes. See A.F. v. Providence Health Plan, 2014 U.S. Dist. LEXIS 109507, *45 (D.
Ore., Aug. 8, 2014).
d. Factor 4: Risk of Non-Payment Assumed by Class Counsel
This case was fraught with risk from the beginning. As noted above, the OIC had
been asleep at the regulatory wheel, allowing insurers to include within their health
plans all sorts of blanket exclusions which eliminated coverage of medically necessary
mental health services. O.S.T., 181 Wn.2d at 700, n.9. Regence raised the OIC’s inaction
as justification for its exclusionary practices at every turn. Id. (“Regence asks us to attach
significant to the fact that the Washington State Office of the Insurance Commissioner
(OIC) has never disapproved Regence BlueShield’s NDT exclusion.”). If the Washington
State Supreme Court had ruled against the class then this case (as well as many other
cases against other carriers) would have been lost. This is a relevant factor:
[T]he Court recognizes that the case was extremely risky for class counsel to pursue because of negative facts, no controlling law and the vigorous defense of the case. Courts have recognized that a high risk factor is one reason for increasing class counsel’s attorney fee award above the “benchmark” 25% fee.
Vizcaino, 142 F. Supp. 2d at 1303.
In addition to being risky from a legal and factual perspective, this case posed
financial risks to class counsel. Not only were class counsel’s fees contingent upon
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 15
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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success, but costs were as well. See RPC 1.8(e)(2) (“[I]n matters maintained as class
actions only, repayment of expenses of litigation may be contingent on the outcome of
the matter.”). A loss before the Supreme Court would have tanked all of the cases against
Regence, and would have cost class counsel over 1,975 hours in lost income-generating
time (representing more than a million dollars in time value) and over $100,000 in earned
firm income that was expended on costs. Dkt. No. 309, pp. 108, 131, 182, 199, 203, 208.
This is an extraordinary commitment for a small law firm. See A. Conte, ATTORNEY FEE
AWARDS, §2.22 (3d ed. 2012) (“special factors” include “burdens caused by the
expenditure of time and money by a small firm”); Municipal Authority of Town of
Bloomsburg v. Com. of Pa., 527 F. Supp. 982, 994 (M.D. Penn. 1981) (“expending 795.3 hours
… without any guarantee of remuneration over a period of almost two years” is “a
substantial financial risk to a small firm”).
These risks, on a novel legal claim, were far from typical even for a contingent fee
case. Where, as here, the litigation has resulted in broad public policy change benefitting
thousands of Washington residents, the risks involved should be incentivized. In re
Checking Account Overdraft Litig., 830 F. Supp. 2d 1330, 1364 (S.D. Fla. 2011) (“[G]iven the
positive societal benefits to be gained from lawyers’ willingness to undertake difficult
and risky, yet important, work like this, such decisions must be properly incentivized.”).
e. Factor 5: Reaction of the Class
It is too early in the claims process for the court or class counsel to conclusively
evaluate the reaction of the class. However, the calls and emails to date are all
supportive, with many class members taking time to express thanks to class counsel.
This factor will be updated in class counsel reply brief upon the close of the comment
period.
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 16
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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f. Factor 6: Lodestar Cross-Check
As noted above, the lodestar cross-check does not apply under Washington
substantive law. Vizcaino, 142 F. Supp. 2d at 1302. Nonetheless, even if the cross-check is
applied, the requested $700,000 is less than the loadstar time value put into this case.4
B. Class Counsel’s Out-Of-Pocket Costs and Expenses Should Be Reimbursed.
Litigation costs are recoverable in a class action settlement. Staton v. Boeing Co.,
327 F.3d 938, 975 (9th Cir. 2003); In re Media Vision Tech. Sec. Litig., 913 F. Supp. 1362, 1366
(N.D. Cal. 1996) (“Reasonable costs and expenses incurred by an attorney who creates or
preserves a common fund are reimbursed proportionately by those class members who
benefit by the settlement.”). The expenses are awarded “in addition to the fee
percentage.” A. Conte, ATTORNEY FEE AWARDS, §§2.08, 2:19 (3d ed. 2012); In re
Businessland Sec. Litig., 1991 U.S. Dist. LEXIS 8962, *6 (June 18, 1991) (same; collecting
cases). Reimbursement of the costs is subject to the court’s determination of relevance
and reasonableness. Id.
As of September 12, 2014, class counsel had incurred $66,795.46 in costs and out-
of-pocket expenses in the case before this court. Dkt. No. 309, p. 203. More costs will be
incurred through the conclusion of this case, and class counsel will detail all those cost
when the reply brief is filed. The bulk of the expenses relates to payments to the experts
4 The lodestar fees in the federal actions total $374,193.50. Dkt. No. 309, pp. 108, 182. Class counsel is seeking $1.4 million in fees in that case, a sum that represents a multiplier, in those cases, of 3.7. This is right in line with the Ninth Circuit’s directives. See Vizcaino, 290 F.3d at 1051 (multiplier of 3.65 “was within the range of multipliers applied in common fund cases”). See Vizcaino, 142 F. Supp. 2d at 1305 (multiplier of 3-4 is “wholly justified” by duration of case and combative nature of defendant). See also NEWBERG ON CLASS ACTIONS, §14.6 (multipliers of five or more justified in significant recoveries, collecting cases); Craft v. County of San Bernardino, 624 F. Supp. 2d 1113, 1122 (C.D. Cal. 2008) (approving 5.2 multiplier as “there is ample authority for such awards resulting in multiplier in this range or higher” and noting that a court should not punish efficient counsel because “other counsel … would likely have had to expend considerably more time to accomplish the same result.”) (collecting cases).
Class counsel is only seeking $700,000 here – an amount that is less than the lodestar – so that the total request, from both courts, does not exceed 35% of the $6,000,000 cash fund.
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 17
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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hired by the plaintiff class, the costs of mediation, and discovery-related expenses. Id.
Class counsel has been paying for all costs out of pocket with no guarantee of ever being
repaid if the action was lost. Class counsel had every incentive to be cautious in incurring
costs. All of those costs were necessary to achieve the settlement of this matter, and were
reasonable.
C. Incentive Awards of $25,000 per Plaintiff Family Are Appropriate.
The Court has the discretion to order incentive awards, and courts routinely do
so for class representatives who act as private attorneys general and undertake financial
and reputational risks for the class. Rodriguez v. West Publ’g Corp., 563 F.3d 948, 958 (9th
Cir. 2009); In re GNC Shareholder Litig., 668 F. Supp. 450, 451 (W.D. Pa. 1987). See generally
Newberg, §11.38. A study by the Federal Judicial Center of four federal district courts
found that a substantial number of class action settlements included designated awards
to class representatives. T. Willging, L. Hooper, and R. Niemic, Empirical Study of Class
Actions in Four Federal District Courts: Final Report to the Advisory Committee on Civil Rules
(Federal Judicial Center 1996). In 1994, the median incentive awards to class
representatives in northern California was $17,000, ranging up to $28,600 in cases with
an average monetary settlement of $10 million. Id., p. 26. A more recent study revealed
that in insurance class action litigation, the average incentive award was $28,708.90. See
Theodore Eisenberg & Geoffrey P. Miller, Symposium: Emerging Issues in Class Action Law:
Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 UCLA L. REV. 1303, 1308,
1333 (Aug. 2006) (across all categories of cases, the average award was $15,992 per class
representative). The proposed $25,000 award for each named plaintiff family is well
within the range of incentive awards granted in similar class action litigation.
Courts have used the following criteria when determining the amount of an
incentive award:
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 18
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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(1) the risk to the class representative in commencing a class action, both financial and otherwise; (2) the notoriety and personal difficulties encountered by the class representative; (3) the amount of time and effort spent by the class representative; (4) the duration of the litigation; and (5) the personal benefit, or lack thereof, enjoyed by the class representative as a result of the litigation.
Pelletz v. Weyerhaeuser Co., 592 F. Supp. 2d 1322, 1329 (W.D. Wash. 2009). The
declarations of the named plaintiffs’ parents demonstrate that each has undertaken
significant risk, effort, and time away from work and family to act as a private attorney
general in this litigation. See Decls. of H.B., Al.F. and M.B.S.
The parents spent countless hours advancing the cause of the class while
simultaneously caring for children with intense medical needs. H.B. Decl., ¶¶3-5; Al.F.
Decl., ¶¶3-5; M.B.S. Decl., ¶¶5-8. Regence sought discovery of each of the class
representatives, including extensive medical records. H.B. Decl., ¶4 (“Regence also
requested extensive discovery related to my daughters’ developmental conditions.
Responding to Regence’s discovery required significant time and effort from my
family.”); Al.F. Decl., ¶4; M.B.S. Decl., ¶5 (“After L[] was added to the lawsuit, Regence
requested extensive discovery related to his providers in Washington D.C., his providers
here in Seattle, and correspondence including emails regarding his treatment.”). Each
family was responsible for monitoring the activities in the cases. H.B. Decl., ¶5; Al.F.
Decl., ¶5; M.B.S. Decl., ¶8. Medical providers who received subpoenas from Regence
were spooked, and the parents had to spend time reassuring the providers to respond to
the requests (and to continue to provide care to their children despite the litigation).
Al.F. Decl., ¶3 (“It took me significant time and effort to assuage the concerns of these
providers.”). The parents had to take time off of work—without pay—to attend
mediation sessions. Al.F. Decl., ¶5 (“I also participated in two mediation sessions that
lasted into the evening. I took my role as a named plaintiff seriously, and actively
engaged in the negotiations between the parties. Participating in the mediation required
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 19
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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that I find specialized child care for D[]. Neither my time nor the cost of the child care
were compensated.”).
In sum, all of the parents took their roles as private attorneys general and
fiduciaries for thousands of developmentally disabled Regence insureds very seriously.
They should be rewarded for their efforts in advancing the interests of all class members
at personal expense.
V. CONCLUSION
For the foregoing reasons, class counsel respectfully requests that this Court
award: (1) attorneys’ fees of $700,000; (2) incentive awards of $25,000 to the parents of
O.S.T., L.H. and K.B./A.B. (for a total of $75,000); and (3) reimbursement of all costs and
out-of-pocket expenses in the case before this Court, totaling (at present) $66,795.46.
DATED: May 13, 2015.
SIRIANNI YOUTZ SPOONEMORE HAMBURGER
/s/Richard E. Spoonemore Richard E. Spoonemore (WSBA #21833) Email: [email protected]
MOTION FOR ATTORNEYS’ FEES, COSTS AND INCENTIVE AWARDS – 20
SIRIANNI YOUTZ
SPOONEMORE HAMBURGER 999 THIRD AVENUE, SUITE 3650 SEATTLE, WASHINGTON 98104
TEL. (206) 223-0303 FAX (206) 223-0246
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CERTIFICATE OF SERVICE
I certify, under penalty of perjury and in accordance with the laws of the State of
Washington, that on May 13, 2015, I caused a copy of the foregoing document to be
served on all counsel of record as indicated below:
Timothy J. Parker Jason W. Anderson CARNEY BADLEY SPELLMAN, P.S. 701 Fifth Avenue, Suite 3600 Seattle, WA 98104 Attorneys for Defendant Regence BlueShield