Judge: Lawyers may need to justify $1.12M fee request for '3 months work' in sex toy case settlement

By Jonathan Bilyk | Jul 27, 2017

While saying he was concerned by the prospect of two lawyers attempting to claim “$550,000 for just over three months of work,” a federal magistrate judge has still recommended they receive more than $500,000 each for their work in collecting a $3.75 million class action settlement from the makers of a smartphone-controlled sex toy alleged to have essentially spied on users.

However, the judge also recommended the lawyers, who represented the woman who sued the sex toy makers, should be made to present documentation to justify even those reduced fees before the court formally signs off on the more than $1 million recommended fee award.

On July 25, U.S. Magistrate Judge Michael T. Mason filed his report and recommendations in Chicago federal court over the question of how much attorneys with the Chicago firm of Edelson P.C. should be allowed to collect as part of the settlement ending the class action privacy litigation against Ottawa, Ontario, Canada-based Standard Innovation Corp., the makers of the We-Vibe products at the heart of the case.

That litigation landed in federal court in September 2016, when the Edelson firm filed suit on behalf of a female plaintiff, identified in the complaint only as N.P. Another plaintiff, identified as P.S., was later also added to the complaint.

The lawsuit alleged the We-Vibe products, which can be controlled by a smartphone app, “monitor, collect, and transmit … usage information, including the date and time of each use and the selected vibration settings, and transmit such data – along with the user’s personal email address – to (Standard Innovation’s) servers in Canada.”

The lawsuit asserted such practices violate federal law.

A settlement agreement was produced by March 2017, under which the plaintiffs would pull the plug on the lawsuit in exchange for a class settlement of $3.75 million. After deducting administrative costs, the settlement funds would be reduced to $3.37 million.

However, Judge Mason noted the terms of the settlement had essentially been secured after a one-day mediation session in November 2016, just about three months after the plaintiffs and the Edelson firm had filed suit.

In his report, Mason estimated members of the class covered by the settlement could expect to receive about $20-$100 each.

At the same time, he noted, the Edelson lawyers asked the court to approve attorney fees of more than $1.1 million, or about one-third of the total settlement fund.

Named plaintiffs in the case would receive $5,000 each.

Mason noted Standard Innovation did not file any response to the fee request by the court’s June 29 deadline.

However, the judge said the court should still review the fee request. And he questioned whether the fees were actually merited in this case.

While the Edelson lawyers asserted a fee award of 33 percent is considered customary in settlements like this, the judge said, in this case, the lawsuit did not proceed to trial, and neither side pursued discovery.

“This is quite different from the typical class action settlement where the case has been pending for years, the parties have engaged in substantial and costly discovery and motion practice, and counsel has appeared in court many times,” the judge wrote in his report. “Here’ plaintiffs’ counsel was not required to produce any discovery, the only motions filed were for the approval of the settlement, and the case settled after a mediation that lasted only one day.”

He added later: “In light of the circumstances of this case, it seems excessive and unreasonable to award plaintiffs counsel fees of $1.12 million when many class members are only receiving $20 for their claims.”

However, despite these concerns, Mason only recommended the court reduce the fee award by three percentage points, to 30 percent of the settlement funds, or just over $1 million.

Mason also recommended the Edelson lawyers “be required to submit to the Court an estimate of the number of hours expended on the case to date,” documentation they did not submit with the initial fee request, he said.

“This will ensure that the Court is not over-compensating plaintiffs’ counsel for work done in this case,” Mason said.

The report will next be considered by U.S. District Judge Virginia M. Kendall, who is presiding in the case.

Parties have until Aug. 8 to file objections to the settlement.

Standard Innovation was represented by attorneys with the firms of Hunton & Williams LLP, of Washington, D.C., and Tucker Ellis LLP, of Chicago.

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Organizations in this Story

Edelson PC Hunton & Williams LLP Tucker Ellis LLP U.S. District Court for the Northern District of Illinois

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