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Lawyer Chided for Dragging Out Deal in Blue Cross Suit
New Jersey Law Journal
October 09, 2009
image: Caroline Fong
A federal judge on Wednesday accused a class action lawyer of trying to delay a settlement that helped nearly 600 eating disorder patients so he could pursue a fight with a co-counsel over shares of a $2.45 million fee award.
U.S. District Judge Faith Hochberg in Newark, N.J., told David Mazie of Roseland, N.J.'s Mazie Slater Katz & Freeman at a hearing that he put his own interests above "those of people who are dying" when he sought to make the division of fees an issue just before the preliminary settlement in January of a case against Horizon Blue Cross Blue Shield of New Jersey.
Then she scolded Mazie for denying the accusation.
The exchange took place near the end of an unusual hearing in which Hochberg gave Mazie and opponent Bruce Nagel, of Nagel Rice in Roseland, an opportunity to testify under oath and cross examine each other in the fee dispute that continues months after the underlying case settled.
It was like an exasperated parent ordering two children claiming the largest dish of ice cream to duke it out in backyard. In this case, Hochberg jumped into the fray and gave Mazie a few verbal shots to the head before dismissing both lawyers with a warning not to add their time at the hearing to their bills.
"Nothing in this discussion gets charged, that's for sure," she declared.
Hochberg is studying how to divide up $2.45 million in fees that Horizon and its claims consultant agreed to pay to settle the class action eating disorder case the firms pursued together for the class but for different lead plaintiffs, Mazie's Beye v. Horizon, 06-5337 and Nagel's Drazin v. Horizon, 06-6219.
The defendants will pay the fee on top of the $1.2 million set aside for 566 anorexia and bulimia patients for past denial of benefits and the estimated $17 million future claimants will obtain in benefits thanks to reforms required by the settlement.
By law, judges base their division of plaintiffs' class counsel fees on evidence of how much each firm contributed to the benefits the class received.
But Hochberg, who said she had never seen a more hotly contested fee fight in her 30 years as a lawyer and a judge, apparently decided she needed more information than the mountain of billing statements and written attempts at one-upmanship submitted by the two firms.
So she ordered Mazie and Nagel to support their claims, not with oral argument but with 30 minutes of direct testimony by each, followed by 30 minutes of cross examination.
The analogy of a fight within a family is apt because Mazie initiated the first suit against Horizon in 2006 when they were partners in Nagel Rice & Mazie in Roseland.
When their firm split in two a few months later in a clash over money and egos, Nagel obtained another client and filed a companion case against Horizon. That made them co-counsel in the class action at the same time they were suing each other over their breakup.
The firms cooperated, but Nagel entered into negotiations with the defendants without telling Mazie, engineered the settlement and won Hochberg's appointment as class counsel. By Nagel's reckoning, the hero in the case is Nagel.
But Mazie had evidence that the settlement was made possible by his firm's hiring of experts and taking of depositions that proved the defense was untenable and gave Nagel the ammunition to make Horizon surrender.
Nagel started the testimony under questioning from partner Jay Rice, sounding less like a fact witness than a presidential election debater trying to stay on message and not confuse the audience with details.
"They never shared anything with me," he said of Mazie's firm. "I didn't rely on a single thing from them."
He insisted that the suit settled because he used a "template" taken from another of his eating disorder class actions, a case against Aetna Insurance Co. that provided reimbursements for about 100 eating disorder patients and promises of better treatment in the future. Hochberg approved the settlement in that case, De Vito v. Aetna, 07-418 in 2008.
"Aetna set the legal framework in this case," Nagel said.
On cross examination, Mazie tried to get Nagle to admit it was a two-firm effort. Isn't it a fact that partners in their firms confer about the case several times a day? Mazie asked. Just on routine matters, Nagel asserted. Didn't Nagel's firm hire an expert Mazie's firm had hired six months earlier? Mazie asked. Nagel was noncommittal.
After a few minutes, Mazie gave up trying to pin his ex-partner to the mat and decided to use the bulk of his hour for direct examination by his partner, Beth Baldinger, one of the key lawyers in the case against Horizon.
Mazie testified that his firm's aggressive pursuit of the defendants included the taking of 14 depositions that proved that Horizon and its claims consultant, Magellan Health Services Inc., had no scientific basis for considering anorexia and bulimia nonbiologically based mental illnesses. He also said his firm's addition of Magellan as a defendant prevented Horizon from blaming an empty chair for any liability.
He mentioned a record of 1,000 e-mails and daily consultations between Baldinger and the lead lawyer from Nagel's firm, Randee Matloff, to show how much the firms worked together. And he said his firm obtained four experts who made the case that Nagel ultimately settled. In the end, he said, seven of the 10 key elements in the settlement were the direct result of his firm's experts, theories of liability and damage research.
Mazie's goal was to convince Hochberg that besides contributing mightily to the outcome for the class, there was little overlap between the two firms' work. He estimated that 50 percent of the work was divided among lawyers as if they were in the same firm.
Of the remaining half of the work, his firm took the lead on 35 percent and Nagel's firm did 15 percent, he said.
When Mazie was done, Hochberg got around to what may have been a motive for ordering the hearing: Getting Mazie on the stand so she could quiz and, ultimately, berate him for filing papers last December and January that enflamed the fee dispute and -- in her opinion -- unnecessarily delayed the settlement.
Back then, with a hearing on preliminary approval of the settlement and appointment of Nagel as class counsel scheduled for late December, Mazie filed a motion asking Hochberg to enforce a fee-split deal giving him 42.5 percent and Nagel the rest.
The two lawyers had shaken hands on the split, but Nagel changed his mind and Mazie wanted Hochberg to make Nagel stick to it. In the alternative, he wanted her to make him co-lead counsel.
A magistrate declined to even consider the papers for procedural reasons and the settlement went forward with Hochberg's preliminary approval of the settlement at a hearing in January, in which Baldinger appeared for the firm's client.
At that hearing, Baldinger voiced no objection to the settlement but did make a plea that the firm's lead plaintiff, Dawn Beye -- not just Nagel's lead plaintiff Ronald Drazin -- receive a $20,000 grant as class representative. Hochberg declined to consider it. If Baldinger was going to agree to the settlement, she had to agree to all of it, including the award of the grant to Drazin only, she said.
On Wednesday, Hochberg turned to Mazie and demanded to know why he had tried to "adjourn the consideration" of the settlement.
He answered that his only interest was getting some compensation for Beye, a national leader in the cause for better benefits for eating disorder patients who had been in the fight long before either of the lawyers and had been impoverished by the cost of care for her child.
"But it was absolutely clear to me there was more to it," Hochberg retorted, asserting that the fee fight was the motivation for Mazie's actions at the time. "There was a bigger battle going on -- that's really what was going on."
Mazie wouldn't back down and insisted it was all about getting money for Beye.
Hochberg tried a third time, more sharply. "You know as well as I do that it's borderline," she said of his answer. "Don't rewrite history, because if you do maybe I will have to rewrite history." He finally conceded there might have been more to it than Beye.
Throughout it all, lawyers for Horizon and Magellan watched from the audience. Perhaps better than Mazie, Nagel and Hochberg, they are in a position to know who deserves credit among the plaintiffs' lawyers for their clients' settlements. Or, whether any lawyer delayed the deal.
Hochberg called out to Thomas Quinn of Wilson Elser Moskowitz Edelman & Dicker for Magellan and David Jay of Greenberg Traurig for Horizon to see whether they wanted to say anything. They didn't.
