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Anthem data-breach judge OKs huge fee award, but not as much as attorneys wanted

August 20, 2018
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A federal judge late last week awarded plaintiffs’ lawyers $31.05 million in legal fees in the Anthem Inc. data-breach case, ending a months-long dispute over how much they deserved for striking the $115 million settlement last year.

The fees approved by Judge Lucy Koh of the Northern District of California exceeded the $28.6 million recommended in April by a special master appointed by Koh to analyze what attorneys should be paid. But it exceeded the $38 million the attorneys originally had requested.

Koh herself had been sharply critical of the plaintiffs’ lead lawyers, stating in court last year that “I am deeply disappointed. I would not never have appointed you [co-lead counsel] if I knew you were going to pile on 53 law firms in this case.”

But in her 65-page order, Koh noted that the settlement was the largest to date in a U.S. data-breach case and that results compare favorably to other high-profile data breach cases, including those involving Target and Home Depot customers.

“Having seen the strengths and weaknesses in each side’s case throughout litigation over the past three years, the court finds that the results obtained in the settlement are exceptional,” Koh said in her ruling.

Koh—who also approved the overall $115 million deal—settled on $31.05 million in fees by using a percentage-of-the-settlement analysis. The 27 percent cut for attorneys was higher than the 25 percent benchmark in the Ninth Circuit, Law.com reported. The special master, James Kleinberg, had based his calculations primarily on an analysis of attorneys’ billable hours.

Indianapolis-based Anthem, among the nation's largest health insurers, disclosed in early 2015 that 78.8 million current and former customers’ records had been stolen by hackers from December 2014 through the following January—a disclosure that touched off more than 100 class action lawsuits accusing the insurer of inadequate data security. The cases, some brought by Indianapolis-based Cohen & Malad LLP, were consolidated into the California suit.

Under the $115 million settlement, $51 million will go to the victims, with the largest chunk of that, $17 million, earmarked for credit-monitoring services. Another $15 million will go to customers who suffered out-of-pocket costs from the data breach, and $13 million will go to customers who demonstrate that they already have credit-monitoring services.

At the same time, $23 million is earmarked to pay California-based Kurtzman Carson Consultants, which was hired to administer the settlement, including mailing postcards to 50 million current or former Anthem customers for whom addresses are known. Another $2 million is earmarked to reimburse attorneys for expenses.

Several outside parties, including the Competitive Enterprise Institute’s Center for Class Action Fairness, had challenged the request for $38 million in attorney’s fees.

And The Wall Street Journal, in an editorial early this year, blasted the settlement. It noted that the recovery—even if it were all cash—works out to an average of just 65 cents per customer.

“Plaintiff attorneys aren’t easily shamed, but they should be after a rebuke by a federal judge in California for trying to con class-action victims,” the editorial began.

The attorneys made no apologies. They said in a January court filing that the results they achieved were impressive and that the fees were justified in light of the “extremely risky nature” of the case.

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