Mega Fee Ruling in ExxonMobil Class Action

[Editor's note: This report illustrates the high level of revenue uncertainty that attends suits involving fee disputes.]

Miami law firm Stearns Weaver Miller Weissler Alhadeff & Sitterson scored a dream payday in July when a federal judge awarded the law firm $249 million in fees for its successful representation of gas station owners in a $1.1 billion class action case against ExxonMobil.

15-Year Case

The class action lawsuit against Exxon, alleging breach of contract, was filed in 1991 on behalf of 11,000 Exxon gas station owners around the country. The plaintiffs alleged that Exxon had operated a fraudulent discount-for-cash program.

In 1996, as the case was faltering, Stearns Weaver signed on as lead trial counsel and kicked the case into high gear, hiring a team of experts and putting together a high-tech jury presentation in preparation for the 1999 trial. After a deadlocked jury led to a mistrial in 1999, a second federal jury in Miami in 2001 awarded the plaintiff class $500 million plus interest after a 3-week trial before U.S. District Judge Alan S. Gold.

Exxon, which merged with Mobil in 1999, fought the claims vigorously and appealed the jury verdict and various Gold rulings. Last year, the U.S. Supreme Court upheld the verdict. ExxonMobil has already paid the $1.1 billion verdict, which is being doled out to the station owners.

Under Gold's ruling, the attorneys as a whole are entitled to 31.3% of the total award. The $325 million total award of attorney fees is one of the largest on record in class action lawsuits, certainly for Miami law firms.

'A casual observer ' may readily conclude that the attorneys' fees and incentive awards are too high,' Gold wrote in his 112-page ruling. But, he explained: 'This is not a situation where a class action is brought, soon settled, and class members receive an insignificant award and the lawyers get millions. This is a case that has lasted 15 years, resulted in two trials, extensive appeals including before the United States Supreme Court, a hotly contested claims administration process and a settlement whereby class members will receive their full compensatory damages and nearly all of their prejudgment interest.'

Conflicting Fee Claims

The ruling ends a ferocious fee battle between various attorneys who represented the plaintiffs, including Pertnoy Solowsky & Allen in Miami. Gold awarded Stearns Weaver 75% of the total fees, or $249 million, while Pertnoy Solowsky gets 16.3%, or $53 million. Three other firms that worked on the case ' including Virginia solo practitioner Gerald Bowen, who first found the case and left shortly after Stearns started ' will split the remaining 8.7%.

Stearns Weaver had sought 82% of attorney fees, claiming ExxonMobil would have prevailed if the firm hadn't entered the case. Eugene Stearns says that when he came on the case, he found that thousands of pages of documents were still unread, with only 3 months left in the allowed discovery period. No experts had been hired. Most alarming, Stearns wrote, was that the legal strategy was deeply flawed for proving that Exxon Mobil had fraudulently operated the discount program that allegedly overcharged 11,000 gas station owners around the country for gasoline.

Gold repeatedly complimented Stearns Weaver's performance, calling the firm's work 'groundbreaking' and 'highly skilled.' He also praised the firm's 'cutting edge' trial techniques that helped the jury understand the complex financial case, including providing individual juror notebooks and digitalized videotape depositions.

In making his fee award, Gold acknowledged that Stearns Weaver lost out on substantial revenue due to the large amount of time spent on the ExxonMobil case. Stearns Weaver estimated that it spent the equivalent of $26 million, or $500,000 a month, in billable hours on the case. (Stearns Weaver's work on the case isn't over yet. The firm ' the last law firm left on the case ' will continue as claims administrators, doling out an average of $130,000 each to the 11,000 gas stations in the class.)

Pertnoy Solowsky had fought hard to enforce the original 1996 fee split agreement that entitled the firm to 47% of total fees. Pertnoy Solowsky argued that it worked hard behind the scenes, pointing out that it launched the case, absorbed a great deal of the risk involved in taking on the case initially, and was the only firm to see the case through from start to finish. The firm said the case took a personal toll on its lawyers ' causing missed holidays, family events and paychecks. It labeled Stearns' allegations 'blatant untruths.'

But Gold wrote that simply enforcing the 1996 fee agreement would 'result in a grossly disproportionate award among the five law firms in relation to services actually rendered.' He said Pertnoy Solowsky contributed just 5% to the case once Stearns Weaver entered the case. The 1996 fee agreement, Gold wrote, should be put aside because Bowen and Pertnoy Solowsky 'significantly underestimated what was required to effectively proceed to trial and beyond.' Pertnoy Solowsky has 30 days to appeal.

Gold criticized Bowen for secretly entering into a fee agreement with one of the class representatives and being more concerned with protecting his fee percentage under the 1996 fee deal than in acting in the best interest of the class. Still, Gold awarded Bowen ' who previously complained to the court that he had no money to feed himself or his dog ' $14 million, enough for plenty of high-class dog chow.

Gold also awarded Grutman Greene & Humphrey in New York $2.5 million. The late Roy Grutman, a famed New York City litigator, was the original trial counsel in the case before he had to withdraw due to illness.

[Editor's note: This report illustrates the high level of revenue uncertainty that attends suits involving fee disputes.]

Miami law firm Stearns Weaver Miller Weissler Alhadeff & Sitterson scored a dream payday in July when a federal judge awarded the law firm $249 million in fees for its successful representation of gas station owners in a $1.1 billion class action case against ExxonMobil.

15-Year Case

The class action lawsuit against Exxon, alleging breach of contract, was filed in 1991 on behalf of 11,000 Exxon gas station owners around the country. The plaintiffs alleged that Exxon had operated a fraudulent discount-for-cash program.

In 1996, as the case was faltering, Stearns Weaver signed on as lead trial counsel and kicked the case into high gear, hiring a team of experts and putting together a high-tech jury presentation in preparation for the 1999 trial. After a deadlocked jury led to a mistrial in 1999, a second federal jury in Miami in 2001 awarded the plaintiff class $500 million plus interest after a 3-week trial before U.S. District Judge Alan S. Gold.

Exxon, which merged with Mobil in 1999, fought the claims vigorously and appealed the jury verdict and various Gold rulings. Last year, the U.S. Supreme Court upheld the verdict. ExxonMobil has already paid the $1.1 billion verdict, which is being doled out to the station owners.

Under Gold's ruling, the attorneys as a whole are entitled to 31.3% of the total award. The $325 million total award of attorney fees is one of the largest on record in class action lawsuits, certainly for Miami law firms.

'A casual observer ' may readily conclude that the attorneys' fees and incentive awards are too high,' Gold wrote in his 112-page ruling. But, he explained: 'This is not a situation where a class action is brought, soon settled, and class members receive an insignificant award and the lawyers get millions. This is a case that has lasted 15 years, resulted in two trials, extensive appeals including before the United States Supreme Court, a hotly contested claims administration process and a settlement whereby class members will receive their full compensatory damages and nearly all of their prejudgment interest.'

Conflicting Fee Claims

The ruling ends a ferocious fee battle between various attorneys who represented the plaintiffs, including Pertnoy Solowsky & Allen in Miami. Gold awarded Stearns Weaver 75% of the total fees, or $249 million, while Pertnoy Solowsky gets 16.3%, or $53 million. Three other firms that worked on the case ' including Virginia solo practitioner Gerald Bowen, who first found the case and left shortly after Stearns started ' will split the remaining 8.7%.

Stearns Weaver had sought 82% of attorney fees, claiming ExxonMobil would have prevailed if the firm hadn't entered the case. Eugene Stearns says that when he came on the case, he found that thousands of pages of documents were still unread, with only 3 months left in the allowed discovery period. No experts had been hired. Most alarming, Stearns wrote, was that the legal strategy was deeply flawed for proving that Exxon Mobil had fraudulently operated the discount program that allegedly overcharged 11,000 gas station owners around the country for gasoline.

Gold repeatedly complimented Stearns Weaver's performance, calling the firm's work 'groundbreaking' and 'highly skilled.' He also praised the firm's 'cutting edge' trial techniques that helped the jury understand the complex financial case, including providing individual juror notebooks and digitalized videotape depositions.

In making his fee award, Gold acknowledged that Stearns Weaver lost out on substantial revenue due to the large amount of time spent on the ExxonMobil case. Stearns Weaver estimated that it spent the equivalent of $26 million, or $500,000 a month, in billable hours on the case. (Stearns Weaver's work on the case isn't over yet. The firm ' the last law firm left on the case ' will continue as claims administrators, doling out an average of $130,000 each to the 11,000 gas stations in the class.)

Pertnoy Solowsky had fought hard to enforce the original 1996 fee split agreement that entitled the firm to 47% of total fees. Pertnoy Solowsky argued that it worked hard behind the scenes, pointing out that it launched the case, absorbed a great deal of the risk involved in taking on the case initially, and was the only firm to see the case through from start to finish. The firm said the case took a personal toll on its lawyers ' causing missed holidays, family events and paychecks. It labeled Stearns' allegations 'blatant untruths.'

But Gold wrote that simply enforcing the 1996 fee agreement would 'result in a grossly disproportionate award among the five law firms in relation to services actually rendered.' He said Pertnoy Solowsky contributed just 5% to the case once Stearns Weaver entered the case. The 1996 fee agreement, Gold wrote, should be put aside because Bowen and Pertnoy Solowsky 'significantly underestimated what was required to effectively proceed to trial and beyond.' Pertnoy Solowsky has 30 days to appeal.

Gold criticized Bowen for secretly entering into a fee agreement with one of the class representatives and being more concerned with protecting his fee percentage under the 1996 fee deal than in acting in the best interest of the class. Still, Gold awarded Bowen ' who previously complained to the court that he had no money to feed himself or his dog ' $14 million, enough for plenty of high-class dog chow.

Gold also awarded Grutman Greene & Humphrey in New York $2.5 million. The late Roy Grutman, a famed New York City litigator, was the original trial counsel in the case before he had to withdraw due to illness.