A Los Angeles-based global business law firm is facing a re-do of its attorneys’ fee awards in two high-stakes class actions in which health insurers won damages from the US as reimbursement for losses incurred when they joined new ACA online marketplaces.
Quinn Emanuel Urquhart & Sullivan LLP was awarded about $185 million—5% of each of the common funds recovered in cases alleging that the US had refused to honor its obligations under the Affordable Care Act’s “risk corridors” program. But the trial court’s analysis wasn’t consistent with class opt-in notices, where the firm said it wouldn’t seek more than 5% of any settlement or damages, subject to a “lodestar cross-check,” the US Court of Appeals for the Federal Circuit said Tuesday.
The Federal Circuit sent the case back to the trial court with instructions to recalculate the firm’s payday. Under the lodestar method for calculating attorneys’ fees, courts consider the hours actually worked and whether they were reasonable.
One of the hardest-fought ACA battles involved the risk corridors program, under which health insurers who joined marketplaces where people could buy health insurance using tax credits or subsidies offered by the federal government were promised that their losses for the marketplaces’ first three years would be reimbursed.
But Congress never appropriated the money, and the funds it collected from successful insurers weren’t enough to cover the others’ losses. Multiple insurers sued, seeking the overdue amounts. The US Supreme Court held that the US had breached its promise to pay the insurers and that they were entitled to the payments.
Quinn Emanuel represented two classes in actions filed by Health Republic Insurance Co. and Common Ground Healthcare Cooperative. Both were on hold while the Supreme Court considered the issue, but eventually ended in awards of about $1.9 billion to the Health Republic class and about $1.8 billion to the Common Ground class.
The trial court then awarded Quinn Emanuel a straight 5% of the common-fund recovery. Several insurers objected, saying the firm’s award should be about $8.8 million, with a maximum of $20 million.
The award was an abuse of the trial court’s discretion, the Federal Circuit said. The percentage method is an acceptable way of calculating attorneys’ fees in class actions, but the trial court should have conducted a lodestar cross-check because the opt-in notice guaranteed it, the court said. That was part of the deal offered to insurers considering joining the class, it said.
“Assurances about the future course of the litigation, when stated in a court-approved class notice like the ones here, must generally be respected,” Judge Richard G. Taranto‘s opinion said.
Chief Judge Kimberly A. Moore and Judge Raymond T. Chen joined.
Quinn Emanuel represents itself. Sheppard Mullin Richter & Hampton LLP represents the objecting insurers.
The case is Health Republic Ins. Co. v. United States, Fed. Cir., No. 22-1018, 1/31/23.
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