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A Haddonfield, N.J., firm and a Summit, N.J., sole practitioner came up winners last Monday in the settlement of a nationwide class action against sweepstakes sponsor American Family Publishers of Jersey City. Rodriguez & Richards and John Maher are among 25 to 50 firms expected to share more than $8 million fees and costs in the multidistrict case. The suit alleged that deceptive sweepstakes mailings induced recipients to order magazines and merchandise by creating the false impression that the purchases were necessary to win, or improved the odds of winning. On Sept. 11, U.S. District Judge Nicholas Politan in Newark approved the plaintiffs’ attorneys’ fees and the $33 million settlement in In re American Family Publishers Business Practices Litigation, 98 CV 1653 (MDL No. 1235). He also confirmed the Chapter 11 plan in the underlying bankruptcy, In re American Family Enterprises, 99-41774. While other class actions have produced higher settlements and fees, the case — in terms of the sheer class size — is among the largest class actions ever litigated. Politan’s orders state no specific class size but refer generally to “tens of millions of members, placing them among the largest of which the Court is aware.” The class consists of everyone in the United States, including Puerto Rico and U.S. territories, who received American Family Publishers’ sweepstakes materials between Jan. 20, 1992 and Dec. 9, 1999, the date on which Politan gave preliminary approval to the settlement. As Guy Burns, a lead counsel in the case, comments, “It was the stated goal of American Family Publishers to put a piece of mail in every household in the country at least four times a year,” and the company largely succeeded in that effort. Burns, a partner in the Tampa, Fla., firm of Johnson, Blakely, Pope, Boker, Ruppel & Burns, is one of three designated lead counsel for the class action plaintiffs. The others are Elizabeth Cabraser of San Francisco’s Lieff, Cabraser, Heimann & Bernstein and Steven Katz of Carr, Korein, Tillery, Kunin, Montroy, Cates & Glass of Belleville, Ill. Under the fee order, the lead counsel will allocate and distribute the award among class counsel. They will distribute $8,028,435 after payment of $631,565 in out-of-pocket expenses from the $8,660,000 award. Just how many firms will divide the jackpot is unclear. There were 63 separate litigations in federal and state courts around the United States — 28 of which were class actions — that were resolved by the settlement and whose plaintiffs’ attorneys arguably are entitled to some of the monies. Some lawyers, including Lisa Rodriguez of Rodriguez & Richards, worked on more than one case, and several law firms often represented plaintiffs in the same action. Noting that some lawyers did not assist in prosecuting the multidistrict action, Burns estimates that about 25 firms will split the pot. Katz says it could reach 50 firms. Nor have lead counsel decided on a formula for distributing the fees. “The issue has not been addressed,” says Katz, and will not be until any appeals are resolved. Only the 140 or so claimants who objected to the settlement have standing to challenge Politan’s orders. Burns says it is premature to comment on fee allocation. But, he adds, “generally speaking, the allocation will be done in relation to the work done.” Also likely to be taken into account, says Katz, are the date the lawyer filed his or her case and how far along they were when the Judicial Panel on Multi-District Litigation transferred all federal court actions to the District Court of New Jersey in August 1998. Elizabeth Cabraser was out of town and could not be reached for comment. Her partner, Barry Himmelstein, who also worked on the case, declines to discuss the allocation. Though not one of the lead counsel, Rodriguez stands to do well in the allocation process, under the factors identified by Katz and Burns. She says that in 1997 her firm, acting at the behest of the Lieff Cabraser firm, filed two of the earliest cases. Stachula v. American Family Enterprises et al., C-31-98, filed in Bergen County Superior Court, was stayed during the pendency of the multidistrict litigation. The other, Jackson et al v. American Family Enterprises et al., a class action filed in U.S. District Court in Newark, became the lead case in the multidistrict action. Rodriguez accordingly took on an active role as liaison to the lead counsel. She spent many hours, she says, reviewing all the papers, which were filed over her signature, and attended all conferences and hearings. Partner Ira Richards also assisted in the litigation. Rodriguez, who says she is pleased with the total fee award, expects “it will be divided up proportionally.” Maher says he was brought in before consolidation as local counsel for a plaintiff’s firm from Boston, and his role was mainly to monitor the action. The fees are less than the $11.7 million ceiling plaintiffs’ counsel imposed in the December 1999 notice of settlement. They later reached the $8 million figure in negotiations with defense counsel. Katz calls the $8 million “a fair fee,” especially given the sweepstakes company’s bankruptcy. But he acknowledges that it is a bit lower than fees allowable under standard measures in common fund cases. As Politan’s order notes, the fee amount is about 24 percent of the $33 million in cash to be distributed under the settlement. It is also about 20 percent of the $39.6 million value of the settlement, including additional sweepstakes to be held, and less than 17 percent of the total benefit to the class, including counsel fees and costs. Politan compares these percentages with the typical one-third contingency fee percentage, and a benchmark of 25 percent for complex litigation. The amount also passes the lodestar “cross-check,” Politan found, with its lodestar multiplier of 1.8 based on the $4.45 million value of the 16,600 hours that the plaintiffs’ attorneys devoted to the litigation. Politan rejected application of the “sliding scale approach,” which he described as appropriate for megafund cases, which he defined as starting at a settlement figure of $100 million. He also found that the fees satisfy the “quality of representation” factor based on the “excellent result,” the difficulties faced and the quality of counsel. The $8,660,000 will not come out of the $33 million to be paid to claimants. Like the settlement itself and the Chapter 11 plan, the fees will be funded by Time Inc. and a related entity, AFP Partners LLC. Time, a defendant in the class action, owns the sweepstakes company, now known as Magazine Associates. Under the settlement, a subclass of the millions who bought magazine subscriptions or other goods in response to a sweepstakes mailing were eligible to submit claims for refunds until May 5. Refunds will be distributed among the more than 143,000 people who filed claims. The refunds will be allocated in proportion to the claimants’ purchases in excess of $40 per year or “their total purchases influenced by the belief that a purchase was either necessary to win or enhanced their chances of winning.” The injunctive relief also provided by the settlement imposes numerous requirements on Magazine Associates in future contests. These include printing rules in at least 8-point type and explaining that no purchase is necessary to win. Lead counsel for the defendants was former federal judge Frederick Lacey of the Newark, N.J., office of LeBoeuf, Lamb, Greene & MacRae. He did not return calls seeking comment.

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