In re Anthem, Inc. Data Breach Litigation, 5:15-md-02617

Background

MDL settlement in In re Anthem, Inc. Data Breach Litigation: $115 million all-inclusive fund; class counsel sought ~$37.95 million in fees (claimed lodestar) plus ~$2.0 million in expenses.
District Court appointed a Special Master to review lodestar, hours, rates, and expenses and to deduct time/expenses that were excessive, unnecessary, or duplicative.
Class counsel submitted detailed time records from 53 firms and over 300 timekeepers; Lead Counsel performed some pre-review and voluntarily struck hours.
Key concerns identified by the Special Master: large number of billing firms (53), heavy use of contract/staff attorneys billed at high hourly rates, potentially excessive hours (e.g., depositions and document review), and allocation of administrative/notice costs and expenses.
Special Master applied both lodestar review and percentage cross-checks (not bound to the 25% benchmark), performed spot checks, and recommended adjustments to fees and allocation of certain costs to counsel rather than the class.

Issues

Issue	Plaintiff's Argument	Defendant/Objector Argument	Held
Proper fee method: percentage vs. lodestar	Apply lodestar (counsel submitted detailed lodestar totaling ~$37.95M)	Use percentage benchmark (Ninth Circuit 25%) or cross-check lodestar for reasonableness	Special Master used lodestar review with percentage cross-checks and declined to rigidly apply 25% benchmark as sole method; offered alternative calculations.
Reasonableness of rates for contract/staff attorneys	Contract attorneys were billed in lodestar at rates up to $495/hr as reflected in firms' claims	Objectors and Special Master: contract attorneys are paid much less in reality; such rates are inappropriate and should be reduced (e.g., to paralegal-rate proxy)	Special Master found contract attorney billing inflated (~$7M claimed) and recommended reducing those hours' rates (used $156/hr proxy), cutting ~half of that component.
Excessive/duplicative hours and staffing (many firms)	Multiple firms and numerous timekeepers were necessary for complex, large-scale litigation	Objectors and Special Master: 53 billing firms and overlapping staffing likely produced duplication and unreasonable hours (e.g., 71 hrs avg per deposition)	Special Master concluded number of firms/staffing was excessive and recommended a haircut (10%) to lodestar to account for duplication/inefficiency.
Inclusion of administrative/notice costs and litigation expenses in fee base	Class counsel included expenses and administrative/notice costs in gross fund used to calculate fees	Objectors argued administrative costs should be excluded from fee denominator; precedent varies	Special Master noted Ninth Circuit allows inclusion but used net calculations as cross-checks; recommended certain reserves, service awards, and Special Master fees be borne by counsel, and deducted ~$2M in expenses from counsel's recovery in computing net.

Key Cases Cited

In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir.) (discusses percentage benchmark and lodestar cross-check)
Staton v. Boeing, 327 F.3d 938 (9th Cir.) (lodestar calculation and factors for adjustment)
Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (fees must be reasonable in relation to results obtained)
Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir.) (factors for lodestar multiplier and cross-checks)
Moreno v. City of Sacramento, 534 F.3d 1106 (9th Cir.) (approves modest percentage haircut as permissible shortcut when detailed parsing is impracticable)
Redman v. RadioShack, 768 F.3d 622 (7th Cir.) (discusses whether administrative costs belong in fee denominator)

Recommended outcome (Special Master's recommendation): award class counsel $28,587,696 in fees (after adjusting contract-attorney overcharges and applying a 10% haircut), reimburse $2,005,069 in litigation expenses, assign ~$23,000,000 for notice/administration from the fund, and require certain reserves/service awards and Special Master fees to be borne by counsel rather than the class.