Lieff Cabraser Stuck With Formal Sanction Over Class Action Fees

Lieff Cabraser Heimann & Bernstein LLP failed on Wednesday to convince the First Circuit to reverse a formal sanction it received for misrepresenting typical fees to justify $60 million in attorneys’ fees in a class action challenging charges on foreign exchange products.

Lieff Cabraser and others represented a class of investors who successfully challenged the charges imposed by State Street Bank and Trust Co. The class and its lawyers from Lieff Cabraser and other firms got a combined $300 million.

The district court awarded class counsel $75 million, but later adjusted that amount to $60 million and sanctioned Lieff Cabraser, without monetary penalty, for materially misrepresenting a study on typical fee awards in similar cases.

The U.S. Court of Appeals for the First Circuit upheld the sanction, affirming that Lieff Cabraser violated Federal Rule of Civil Procedure 11(b) when it said a fee of 25% of the recovery was “right in line” with a study examining class action fee awards.

The fee memorandum didn’t detail that the study showed settlements between $250 million and $500 million were closer to 17.8% for fee awards, the appeals court said.

“Viewed in context, the fee memorandum painted a materially misleading picture,” Judge William J. Kayatta Jr. wrote. The fact that the firm included the complete study as part of exhibits doesn’t prevent that misleading description, Kayatta ruled.

The appeals court also dismissed as unappealable claims against the district court’s “mere criticisms” of the firm’s behavior. Lieff Cabraser was criticized for using a bad fee template and for contributing to another firm’s overpayment issue, but it wasn’t sanctioned for those issues, the appellate panel ruled.

Judges O. Rogeriee Thompson and David J. Barron joined the decision.

Lieff Cabraser is represented by Samuel Issacharoff.

The case is Lieff Cabraser Heimann & Berns v. Labaton Sucharow LLP, 1st Cir., No. 21-01069, 2/9/22.