SAN FRANCISCO — So, this is what a $300 million fee fight looks like.
With a federal judge set to approve a whopping payoff to attorneys in one of the LCD price-fixing class actions, two prominent Bay Area antitrust lawyers are bitterly feuding over their share of the fees.
What’s more, Joseph M. Alioto of Alioto Law Firm and Francis Scarpulla of Zelle Hofmann Voelbel & Mason aren’t just co-lead counsel turned rivals: They’re also first cousins.
Each attorney insists he deserves more credit for achieving huge settlements and had to put up with interference from the other.
Their dispute — vividly described in court filings and now in the hands of U.S. District Judge Susan Illston — provides a glimpse of wrangling over class action legal fees that is frequently part of the process, but typically occurs out of view.
In interviews, both men said there was more than money at stake and that their family connection had no bearing. (Scarpulla’s mother was the sister of Alioto’s father, former San Francisco Mayor Joseph L. Alioto.)
Scarpulla said his first priority was looking out for the interests of class members. “Neither family nor friendship can stand in the way of that,” he said.
Alioto said he was the true class advocate, adding, in his characteristically blunt style, “It doesn’t make any difference if he’s my cousin.” The team led by Alioto and Scarpulla, representing a class known as the indirect purchaser plaintiffs, secured settlements of $1.1 billion from the makers of screens used in televisions, computer monitors and mobile phones — which Alioto says is the largest collection ever in a consumer antitrust class action.
However, the results were not achieved through teamwork or unity, wrote Martin Quinn of JAMS, the court-appointed special master charged with allocating attorney fees to plaintiffs counsel.
“There was the Zelle Hoffman group and the Alioto group. Each group has its passionate adherents,” Quinn wrote. “Each group believes that its members contributed most to the excellent result.”
In December, Quinn suggested payment of $75 million to Scarpulla’s firm and $47 million to Alioto’s firm. Minami Tamaki, law firm of liaison counsel Jack Lee, stands to receive $20 million. The more than 100 other plaintiffs firms were allocated amounts ranging from $700 to $18 million.
At a hearing this past week, Illston said she would likely approve total legal fees of $308 million, 28.5 percent of the settlement fund.
Illston, a former plaintiffs attorney who has been presiding over the long-running TFT-LCD suits and related criminal prosecutions, praised the outcome — cash payments of $140 for TV purchases and $70 for other products.
Filings over the attorney fees, she noted, had gotten “very snarky.”
She had granted the prized positions of co-lead counsel to Alioto and Scarpulla in 2007.
Disputes erupted almost immediately and the men agreed to divide responsibilities. Scarpulla’s group took charge of class certification and coordinated settlement talks, while Alioto’s team focused on trial preparation.
According to Alioto, Scarpulla and the group of lawyers he supervised were more interested in racking up hours and maintaining polite relations with defense counsel than in pushing hard for cash settlements that would return money to class members. In contrast, Alioto said his strategy had been to scare defendants with a meaningful threat that they would be forced to trial and face treble damages and joint and several liability.
“It is true that the Zelle firm and Francis Scarpulla administered and coordinated the settlement negotiations,” Alioto stated in an affidavit. “However, they had little to do with the results achieved for the class, and in fact undermined the strategy.”
That elicited this response from Scarpulla: “Once again, Joseph M. Alioto is rewriting history to bolster his attempt to get more fees to which he is not entitled.”
Objector counsel Grenville Pridham threw his support behind Alioto at the hearing, calling him “the lone voice on behalf of the class.”
“Maybe he was a little rough around the edges at times … Maybe he should have played a little more politician,” Pridham said. “But Mr. Alioto absolutely added value to this settlement.”
However it resolves, the final fee award should bring down the curtain on a six-year fight to compensate consumers for collusion in the market for thin-film transistor liquid crystal display screens, or TFT-LCD screens.
Illston said she questioned the large sums going to class attorneys but concluded they were justified by the results achieved and the challenges of pursuing a case with evidence and witnesses located around the globe.
“This case could have foundered at so many different places along the way, and I think it’s remarkable that it has come to the conclusion that it has,” Illston said.
On top of the $308 million, various state attorneys general stand to receive roughly $11 million.
Lawyers representing a companion class of direct purchasers have been awarded more than $140 million. In that case, Illston did not use a special master and instructed co-lead counsel to allocate payment to firms based on their good faith judgment.
The Alioto-Scarpulla fee fight has been unusually transparent because of two detailed reports issued by Quinn, the special master appointed by Illston in light of past disagreements between Alioto and Scarpulla.
Quinn determined the allocations for individual firms by looking to each firm’s lodestar — a figure representing the number of hours spent on the case multiplied by applicable rates. For both Alioto and Scarpulla, Quinn applied an hourly billing rate of $1,000 and a multiplier greater than four. Quinn wrote that he tried to assess each firm’s contribution “without being swayed by intemperate rhetoric on both sides.”
But his report provides a harsh view of Alioto, who Quinn describes as “disruptive, uncooperative and intransigent toward the mediators and other plaintiffs counsel.”
At the same time, Quinn’s report credits Alioto for insisting on high, all-cash settlements without coupons or cy pres components.
“The overall contribution of the Alioto firm to the final result was considerably less that it might have been had Mr. Alioto adopted a more cooperative approach, and was materially less than the contribution of Zelle Hoffman and other lead firms,” Quinn concluded.
Not surprisingly, Scarpulla endorses Quinn’s report. “The special master got it right, regardless of what Joe says,” Scarpulla said.
Alioto says using each firm’s lodestar was the wrong approach.
“This is a corrupt practice in my view,” he said. “It rewards time spent rather than results achieved.”