Feuding Ex-Partners Are Chided for Hindering Class-Action Settlements
A New Jersey appeals court has taken two alienated former law partners to task for trying to "upend settlements involving thousands of plaintiffs with the aim of depriving the other of fees."
The court on Monday said objectors to a proposed settlement of a class-action suit against Horizon Blue Cross Blue Shield of N.J. were "prompted by class counsel's estranged former partner" and "the real dispute is over the fees."
Scolding aside, the result of the ruling was a reduction in legal fees for class counsel Mazie Slater Katz & Freeman, based on a finding that a 25 percent lodestar enhancement was unjustified.
Mazie Slater, of Roseland, was formed in 2006 when David Mazie led a defection from Nagel, Rice & Mazie, a Roseland firm headed by Bruce Nagel. The parting was acrimonious and Mazie and Nagel remain bitter rivals.
The suit, Kirsch v. Horizon Blue Cross Blue Shield of New Jersey,was one of two class actions on behalf of about 17,000 dentists alleging violations of New Jersey's prompt-payment laws and breach of contract arising out of alleged improper claims processing.
In 2012, after seven years of litigation, a settlement was reached and approved by Essex County Superior Court Judge Paul Vichness. Horizon was to set aside $2.85 million and to make maximum payments of $167 to each class member. It was also to adopt business initiatives designed to increase transparency in claim payments, reduce the dentists' administrative office overhead and improve customer relations.
The settlement further provided for a maximum $2.5 million in legal fees and expenses. Mazie Slater sought a 35 percent multiplier of a lodestar of roughly $1.8 million: 3,035 billable hours at a blended rate of $600 per hour.
Vichness agreed with the lodestar and gave a 25 percent enhancement, which, along with $488,713 in costs, brought the firm's award to $2 million.
Two objectors appealed, calling the pact a "meager monetary settlement" with "minor business reforms" of no quantifiable value. They also disputed the fee enhancement and the $600 blended rate used to compute the lodestar.
Horizon had agreed not to oppose or appeal any fee award below the $2.5 million cap and took no position on appeal.
"Although objectors and class counsel make a show of contesting the merits of the settlement, the real dispute is over the fees," Appellate Division Judges Jane Grall, Ellen Koblitz and Allison Accurso said in Monday's ruling.
Nagel was not the objectors' attorney of record, but there was no dispute that he had prompted the objection, the judges said. They also noted that one of the Kirsch suits was filed and certified as a class action when Mazie and Nagel were still partners, and thus the class consists of Nagel's former clients.
The appeals court found that Vichness was within his discretion in adopting the blended rate but that the 25 percent multiplier contradicted the Supreme Court's holding, in Walker v. Guiffre, 209 N.J. 124 (2012), that contingency enhancements are only available in fee-shifting cases.
The judges affirmed the Kirsch settlement on the merits.
Mazie Slater partner Eric Katz plans to petition the state Supreme Court on the fee-shifting issue, saying fee enhancements are supposed to reward risk-taking. He notes his firm litigated the case for seven years without pay.
The appeals court seemed to blame Mazie and Nagel equally, but Mazie says he has objected to only one of Nagel's settlements, DeVito v. Aetna, while Nagel has objected to three of his: Dewey v. Volkswagen, Jungels v. Delta Dental of New Jersey and Kirsch.
But Nagel says Mazie Slater set the combative mood by having one of its lawyers attend a hearing and criticize the terms of settlement of one of Nagel Rice's cases, Drazin v. Horizon Blue Cross Blue Shield of New Jersey, a class action over alleged improper denial of coverage for eating disorders. "This was all started by Mazie and his firm, who came to court without a client," he says.
The attorney for the objectors in Kirsch, Barry D. Epstein of Rochelle Park, calls the appeals court ruling "clearly a victory" for his clients.
The lawyer for Horizon, Maxine Neuhauser of Epstein, Becker & Green in Newark, declines to comment.