Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 1 of 28 PageID #:12939

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1 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 1 of 28 PageID #:12939 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION GERARDO ARANDA, GRANT BIRCHEMEIER, STEPHEN PARKES, and REGINA STONE, individually and on behalf of all others similarly situated, Plaintiffs, NO. 1:12-CV Honorable Matthew F. Kennelly v. CARIBBEAN CRUISE LINE, INC., ECONOMIC STRATEGY GROUP, ECONOMIC STRATEGY GROUP, INC., ECONOMIC STRATEGY, LLC, THE BERKLEY GROUP, INC. and VACATION OWNERSHIP MARKETING TOURS, INC., Defendants OBJECTION OF FREEDOM HOME CARE, INC.

2 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 2 of 28 PageID #:12940 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii INRODUCTION... 1 STANDING AND PROCEDURES TO OBJECT... 2 BACKGROUND... 4 OBJECTIONS... 5 I. Careful Scrutiny of Class Counsels Fee Request is Required II. Courts in the Seventh Circuit and in this District Recognize the Diminishing Marginal Fee Approach Best Mimics the Market for Large TCPA Settlements III. Application of the Accepted TCPA Market Fee Scale in this District Results in a Fee Award Between $11.7 and $14.7 Million IV. Professor Rubenstein s Scales Depart from Authority in this District V. Class Counsel are Not Entitled to a Fixed Percentage Recovery, Particularly One as High as 33% VI. This Court Should Decline to Apply Mr. Henderson s Methodology VII. The 5.1 Lodestar Multiplier is Excessive CONCLUSION i

3 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 3 of 28 PageID #:12941 TABLE OF AUTHORITIES Statutes 47 U.S.C. 227, et seq... 4 Cases Craftwood Lumber Co. v. Interline Brands, Inc., 11-CV-4462, 2015 WL (N.D. Ill. May 6, 2015)... 2, 7, 8 Gehrich v. Chase Bank USA, N.A., 316 F.R.D. 215 (N.D. Ill. 2016)... 2, 7, 8, 10 Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir. 1991) Hopkins v. Stryker Sales Corp., 2013 WL (N.D.Cal.2013) In re Capital One Tel. Consumer Prot. Act Lit., 80 F. Supp. 3d 781 (N.D. Ill. 2015)... passim In re Linkedin User Privacy Litig., 309 F.R.D. 573 (N.D. Cal. 2015) In re Southwest Airlines Voucher Litigation, 11 C8176, 2014 WK (N.D. Ill, June 20, 2014), aff'd, 799 F.3d 701 (7th Cir. 2015)... 5, 15 In re Southwest Voucher Litig., 799 F.3d 701 (7th Cir. 2015)... 6 In re Synthroid Mktg. Litig., 264 F.3d 712 (7th Cir. 2001) (Synthroid I)... 6, 12 In re Synthroid Mktg. Litig., 325 F.3d 974 (7th Cir. 2003) (Synthroid II)... 2, 8, 12 Jaffee v. Redmond, 142 F.3d 409 (7th Cir. 1998)... 6 Kolinek v. Walgreen Co., 311 F.R.D. 483 (N.D. Ill. 2015)... 6 Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781 (7th Cir. 2004)... 5 Pearson v. NBTY, Inc., 772 F.3d 778 (7th Cir. 2014)... 2 Redman v. RadioShack Corp., 768 F.3d 622 (7 th Cir. 2014)... 6 Samantha Ellison v. Steve Madden, Ltd., No. 2:11-cv PSG-AGR, ECF Doc. 73 (C.D. Cal. May7, 2013)... 13, 14 Silverman v. Motorola Solutions, Inc., 739 F.3d 956 (7 th Cir. 2013)... 2, 13 Wilkins v. HSBC Bank Nevada, N.A., 14 C 190, 2015 WL (N.D. Ill. Feb. 27, 2015)... 2, 7, 8 Wright v. Nationstar Mortage LLC, 14 C 10457, 2016 WL ii

4 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 4 of 28 PageID #:12942 (N.D. Ill. Aug. 29, 2016), appeal dismissed (Oct. 24, 2016)... 13, 14 Other Authorities 7 J. Empirical Legal Studies at iii

5 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 5 of 28 PageID #:12943 INTRODUCTION Freedom Home Care, Inc., a member of the class as set forth herein, files this objection to class counsels proposed attorneys fees, which if reduced, would present a substantial benefit to the absent class members. This TCPA settlement will provide between $56 million and $76 million to the class depending on the results of the claims process. Class counsel request 33% of the common fund (not including notice and administration expenses), resulting in attorneys fees between $17.9 and $24.5 million. 1 A fixed 33% percentage is not authorized for large TCPA settlements like this one. The Seventh Circuit, and particularly courts in the Northern District of Illinois, recognize that a diminishing marginal fee structure best replicates the market for these settlements: Many costs of litigation do not depend on the outcome; it is almost as expensive to conduct discovery in a $100 million case as in a $200 million case. There may be some marginal costs of bumping the recovery from $100 million to $200 million, but as a percentage of the incremental recovery these costs are bound to be low. It is accordingly hard to justify awarding counsel as much of the second hundred million as of the first. The justification for diminishing marginal rates applies to $50 million and $500 million cases too, not just to $200 million cases... Awarding counsel a decreasing percentage of the higher tiers of recovery enables them to recover the principal costs of litigation from the first bands of the award, while allowing the clients to reap more of the benefit at the margin (yet still preserving some incentive for lawyers to strive for these higher awards). 1 Plaintiffs Motion and Memorandum in Support of Motion for Attorneys Fees, Expenses, and Incentive Awards, ECF Doc. 533, at 26 ( if Class Counsel recover the full $76 million for the Class, then the requested one-third fee award will be approximately $24.5 million, or a multiplier of 5.1 ); id. at 22 ( Class Counsel s request is for one-third of the final amount of the common fund, not including notice and administration expenses. Because the total size of the Settlement Fund will depend on the number of claims, the fee award, in turn, will depend on the total size of the Settlement Fund. Although the parties agreement to a floor and a ceiling adds some minor complications to how the size of the fund is calculated (a detailed explanation is included in the Appendix to this brief), the basic principle is that the per-call relief will not dip below $500 unless the sum of claims, incentive award, notice and administration costs, and attorneys fee award exceeds the $76 million cap. ). 1

6 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 6 of 28 PageID #:12944 Silverman v. Motorola Solutions, Inc., 739 F.3d 956, 959 (7 th Cir. 2013). Class counsels fee motion scarcely mentions the sliding-scale approach. Yet, no fewer than four opinions from this District over the last two years have required application of a diminishing marginal fee scale for attorneys fees in large TCPA class action settlements. Gehrich v. Chase Bank USA, N.A., 316 F.R.D. 215, 222, (N.D. Ill. 2016) ($34 million TCPA settlement); Craftwood Lumber Co. v. Interline Brands, Inc., 11-CV-4462, 2015 WL , at *1-5 (N.D. Ill. May 6, 2015) ($40 million TCPA settlement); Wilkins v. HSBC Bank Nevada, N.A., 14 C 190, 2015 WL , at *9 (N.D. Ill. Feb. 27, 2015) ($39.9 million TCPA settlement); In re Capital One Tel. Consumer Prot. Act Lit., 80 F. Supp. 3d 781, (N.D. Ill. 2015) ($75.4 million TCPA settlement). None have allowed a fixed percentage, nor anything close to 33%. Following the modified Synthroid II 2 scale applied in this District, the Court should award no more than $11.7 million (for a $54 million net settlement) or $14.7 million (for a $74 million net settlement). Class counsels fee request should be denied, with the excess returned for the benefit of the class. Pearson v. NBTY, Inc., 772 F.3d 778, 786 (7th Cir. 2014) ( [t]he simple and obvious way for the judge to correct an excessive attorney's fee for a class action lawyer is to increase the share of the settlement received by the class, at the expense of class counsel ). STANDING AND PROCEDURES TO OBJECT Objector s full name, address and telephone number are as follows: Freedom Home Care Inc., P.O. Box 565, Highland Park, IL (847) Objector is a person (which under the settlement is defined to include any entity and 2 In re Synthroid Mktg. Litig., 325 F.3d 974, (7th Cir. 2003) (Synthroid II). 2

7 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 7 of 28 PageID #:12945 its representatives) 3 who received (1) one or more telephone calls made by, on behalf of, or for the benefit of the Defendants, (2) purportedly offering a free cruise in exchange for taking an automated public opinion and/or political survey, (3) which delivered a message using a prerecorded or artificial voice, (4) between August 2011 and August 2012, (5) and whose (i) telephone number appears in Defendants records of those calls and/or the records of their third party telephone carriers or the third party telephone carriers of their call centers or (ii) whose own records prove that it received the calls. See Declaration of Robert J. Burack, Exhibit 1 hereto, incorporated by reference as though set forth in full. The telephone number at which Objector received the foregoing telemarketing call(s) is (847) , which is a cell phone line owned by Freedom Home Care, Inc. Id. Additionally, Objector received a postcard notice in the mail, and filed a claim on the settlement website. See Exhibit 1-A and Exhibit 1-B. For the foregoing reasons, Freedom Home Care is a class member as defined in the class notice. See Exhibit 1. As such, Objector has standing to make his objection. Objector is represented by local counsel, Jonathan P. Novoselsky, with Jonathan Novoselsky, P.C., 303 W. Madison, 22 nd Floor, Chicago, Illinois, 60606, who is admitted to practice before the Northern District of Illinois. Objector is also represented by Christopher Bandas, with Bandas Law Firm, PC, 500 N. Shoreline, Corpus Christi, Texas 78401, as his general counsel in objecting to the settlement. Contemporaneous with this Objection, Mr. Bandas is applying for admission to practice before this Court pro hac vice. Objector objects to the proposed settlement in Birchmeier et al. v. Caribbean Cruise Line, Inc. et al., Case No. 12-cv-04069; and in particular, seeks a reduction in class counsels 3 Settlement Agreement, ECF Doc , at 9,

8 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 8 of 28 PageID #:12946 proposed fees in accordance with the case law briefed herein, which would increase the money available to the class, and result in a substantial benefit to the absent class members. Objector does not intend on appearing at the fairness hearing either in person or through counsel but ask that his objection be submitted on the papers for ruling at that time. Objector relies upon the documents contained in the Court s file in support of these objections. Objection is made to any procedures or requirements to object in this case that require information or documents other than those that are contained herein on grounds that such requirements seek irrelevant information to the objections, are vague and unnecessary, are not adequately described in the class notice, are unduly burdensome, are calculated to drive down the number and quality of objections to the settlement and violate Objector s and counsel's due process rights and/or Rule 23. Objector incorporates by reference the arguments and authorities contained in other filed objections, if any, made in opposition to the fairness, reasonableness and adequacy of the proposed settlement, the adequacy of class counsel and to the proposed award of attorneys fees and expenses that are not inconsistent with this objection. BACKGROUND The underlying TCPA class action involves claims of illegal unsolicited phone calls that misrepresented to the recipients that they would receive a free cruise if they took a public opinion survey. 47 U.S.C. 227, et seq. Between August 2011 and August 2012, millions of individuals received [these] phone calls on their landlines or cell phones Three law firms initiated lawsuits in connection with these allegations. The law firm of Loevy & Loevy filed a class action complaint on May 24, 2012 in the U.S. District Court for the 4 Expert Declaration of Professor William B. Rubenstein, ECF Doc , at 9. 4

9 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 9 of 28 PageID #:12947 Northern District of Illinois. 5 The next day, Edelson PC filed a similar case action in the U.S. District Court for the Southern District of Florida. 6 A few months later, a different group of lawyers filed a third putative class action in state court in Missouri, which was removed to the United States District for the Eastern District of Missouri. 7 The three cases were consolidated, with Edelson and Loevy & Loevy appointed as co-lead counsel. 8 This settlement was eventually reached, offering a $56 million recovery floor and $76 million ceiling. Class counsel propose to take 33% of the final amount after the claims process. 9 OBJECTIONS I. Careful Scrutiny of Class Counsels Fee Request is Required. This Court, in In re Southwest Airlines Voucher Litigation, described its obligation on behalf of the absent class members when awarding attorneys fees from a common fund. 11 C 8176, 2014 WL , at *3 (N.D. Ill. June 20, 2014), aff'd, 799 F.3d 701 (7th Cir. 2015) (reducing class counsels requested fees from $3 million to $1.65 million). When it comes to class actions, a court must give careful scrutiny to the terms of proposed settlements in order to make sure that class counsel are behaving as honest fiduciaries for the class as a whole. Id. at *3 (quoting Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 785 (7th Cir. 2004)). The Seventh Circuit, in upholding this Court s fee reduction in the same case, confirmed that [j]udicial deference to the results of private negotiations is undoubtedly appropriate for many settlements, but not for class action settlements, including their attorney fee terms. In re Southwest Voucher 5 Id. 6 Id. 7 Id. at Id. at Plaintiffs Motion and Memorandum in Support of Motion for Attorneys Fees, Expenses, and Incentive Awards, ECF Doc. 533, at 1. 5

10 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 10 of 28 PageID #:12948 Litig., 799 F.3d 701, 713 (7th Cir. 2015). The district court must not... assume the passive role that is appropriate when there is genuine adverseness between the parties... the judge must assess the value of the settlement to the class and the reasonableness of the agreed-upon attorneys fees for class counsel, bearing in mind that the higher the fees the less compensation will be received by the class members. Redman v. RadioShack Corp., 768 F.3d 622, 629 (7 th Cir. 2014). A district court is... empowered to reduce a fee request sua sponte, and... has an independent obligation to scrutinize the legitimacy of such a submission. Jaffee v. Redmond, 142 F.3d 409, 416 n.2 (7th Cir. 1998). II. Courts in the Seventh Circuit and in this District Recognize the Diminishing Marginal Fee Approach Best Mimics the Market for Large TCPA Settlements. This fee request screams for judicial scrutiny. 33% of this substantial TCPA settlement (between $56-$76 million) diverges from authority in the Seventh Circuit, and no fewer than four opinions from the Northern District of Illinois. In common fund cases, courts determine reasonable attorneys fees by award[ing] counsel the market price for legal services, in light of the risk of nonpayment and the normal rate of compensation in the market at the time. In re Synthroid Mktg. Litig., 264 F.3d 712, 718 (7th Cir. 2001) (Synthroid I); Kolinek v. Walgreen Co., 311 F.R.D. 483, 500 (N.D. Ill. 2015). This market-based approach depends in part on the risk of nonpayment a firm agrees to bear, the quality of its performance, the amount of work necessary to resolve the litigation, and the stakes of the case. Synthroid I, 264 F.3d at 721; Kolinek, 311 F.R.D. at 500. The object is to award the lawyer what he would otherwise have bargained for in an arm s length negotiation at the outset of the litigation. Kolinek, 311 F.R.D. at 500 (citation omitted). 6

11 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 11 of 28 PageID #:12949 The Seventh Circuit in Synthroid I set forth three guides or benchmarks to help estimate the market fee: (1) actual fee contracts between plaintiffs and their attorneys; (2) data from similar common fund cases where fees were privately negotiated; and (3) information from class-counsel actions. Synthroid I, 264 F.3d at 719; Wilkins, 2015 WL , at *9. In the context of TCPA class action settlements, class counsels fee agreements in TCPA class actions are not useful for determining the market rate because named plaintiffs are less often sophisticated buyers of legal services and more often the cat s paws of the class lawyers. Capital One, 80 F. Supp. 3d at 796 (quotation omitted). More helpful is data on past TCPA cases which demonstrates that the mean and median fee for large TCPA class actions is between 20% and 24% of the settlement. Id. at ; Wilkins, 2015 WL , at *10. Most significantly, four cases in the Northern District of Illinois in the last two years have considered the market rate for attorneys fees for large TCPA settlements like this one, and have uniformly concluded that a diminishing marginal fee like the one in Synthroid II, best replicates the market. Gehrich, 316 F.R.D. at 222, ; Craftwood Lumber, 11-CV-4462, 2015 WL , at *1-5; Wilkins, 2015 WL , at *9-12; Capital One, 80 F. Supp. 3d at These courts specifically rejected the notion of a fixed percentage as class counsel advance here. Gehrich, 316 F.R.D. at ; Craftwood, 2015 WL , at *2; Wilkins, 2015 WL , at *9-10; Capital One, 80 F. Supp. 3d at This downward sliding scale: affords Class Counsel a relatively high rate for the initial recovery consistent with Class Counsel s need to devote most of their efforts to determining liability. The marginal rates diminish as the recovery increases because, notwithstanding the class s desire to incentivize counsel to seek a higher award, the measure of damages depends more on the number of class members (or phone calls) than the additional efforts of counsel. Capital One, 80 F. Supp. 3d at

12 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 12 of 28 PageID #:12950 The resulting diminishing marginal fee scale from these cases, modeled after the Seventh Circuit s Synthroid II opinion, is as follows: Recovery First $10 million 30% Next $10 million 25% $20-$45 million 20% Excess above $45 million 15% Fee Percentage Gehrich, 316 F.R.D. at ; 10 Craftwood Lumber, 2015 WL , at *1-5; 11 Wilkins, 2015 WL , at *10; 12 Capital One, 80 F. Supp. 3d at This scale s only deviation from Synthroid II is a 20% fee percentage for the third tier rather than 22% percentage based on the facts of that case. Synthroid II, 325 F.3d at Additionally, Capital One allowed an upward adjustment based on risk in the litigation. The district court increased the fee by 6% for the first $10 million (from 30% to 36%), but declined to do so for the remaining tiers. Capital One, 80 F. Supp. 3d at (citing 7 J. Empirical Legal Studies at 265). The remaining three opinions did not apply the 6% increase to the initial tier. Gehrich, 316 F.R.D. at ; Craftwood Lumber, 2015 WL , at *5; 8; Wilkins, 2015 WL , at *11. And, the overall percentages were between 20% and 25%. Gehrich, 316 F.R.D. at 237 (21.35% of the common fund, and 25.21% of the sum of fees and class recovery); Craftwood, 2015 WL , at *1 (23.75% of the common fund); Wilkins, 2015 WL , at *11 ( 23.75% of the settlement or 24.54% of the amount available to the 10 Using the Synthroid II structure as a general model, the court awards Class Counsel attorney fees as follows: 30% of the first $10 million of the settlement, 25% of the second $10 million, and 20% of the remaining amounts from $20 to $28.79 million. Gehrich, 316 F.R.D. at Craftwood Lumber denied a motion to reconsider awarding attorneys fees based on a sliding scale contingency fee as follows: 30 percent of the first $10 million of the settlement, 25 percent of the second $10 million, and 20 percent of the remaining amounts from $20 to $40 million. Craftwood Lumber, 2015 WL , at *1. 12 Wilkins concluded that the court finds that the TCPA market rate fee scale the court recently estimated in Capital One applies with equal force here. Wilkins, 2015 WL , at *10. 8

13 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 13 of 28 PageID #:12951 class after subtracting administrative costs and service awards ); Capital One, 80 F. Supp. 3d at (20.77% of the entire $75.4 [million] settlement fund). III. Application of the Accepted TCPA Market Fee Scale in this District Results in a Fee Award Between $11.7 and $14.7 Million. The sliding scale approved in the Northern District results in the following fees in this case (based on the $56 million floor and $76 million ceiling): $56 Million Settlement/$54 Million Net First $10 million 30% $3,000,000 Second $10 million 25% $2,500,000 $20-$45 million 20% $5,000,000 $46-$54 million 15% $1,200,000 Total award in $ $11,700,000 Award as % of net fund 21.6% $76 Million Settlement/$74 Million Net First $10 million 30% $3,000,000 Second $10 million 25% $2,500,000 $20-$45 million 20% $5,000,000 $46-$74 million 15% $4,200,000 Total award in $ $14,700,000 Award as % of net fund 19.8% Thus, the accepted model in this District produces a fee between $11.7 million and $14.7 million. These amounts are 19.8% and 21.6% of the common fund (excluding notice and administration costs), and comport with the mean and median fees for large TCPA class actions. Capital One, 80 F. Supp. 3d at 796. Class counsels requested 33% ($17.9 million and $24.5 million) is far off the mark. It is $6.2 or $9.8 million more than the required sliding-scale calculation. Alternatively, if the pure Synthroid II model is used (applying 22% instead of 20% as the 9

14 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 14 of 28 PageID #:12952 third tier), as outlined in the expert report of Professor Rubenstein, 13 the resulting fees are between $12.4 million and $15.4 million. 14 These amounts still fall well below class counsels request for $17.9 and $24.5 million. Even if we indulge class counsels assertion that this was a high risk case and apply the Capital One 6% risk premium to the first tier (36% of the first $10 million tier), the results are $12.3 and $15.3 million, significantly below class counsels requested $17.9 to $24.5 million. IV. Professor Rubenstein s Scales Depart from Authority in this District. Not satisfied with Capital One s risk premium, Professor Rubenstein proposes fee scales never applied in this District or the Seventh Circuit. He applies a 6% risk adjustment, not just to the first tier as in Capital One, but to each tier. 15 Judge Finerman rejected this precise deviation: Gehrich, 316 F.R.D. at 239. Class Counsel here argue that no reason exists to limit the risk premium to the first $10,000,000 recovered since Class Counsel would have been required to exert time and expense to extract every last penny on behalf of the class, and therefore that the 6% risk premium should apply at each level of the sliding scale. This argument misses the point of the sliding-scale approach, which is that after a certain point the costs incurred in increasing a recovery are low relative to the actual increase in the recovery. See Silverman, 739 F.3d at 959. The issue is not how hard the lawyers did or did not work; rather, it is how hard they did or did not work for each dollar of recovery, and that does indeed differ between the first large chunk and the rest of the settlement. Applying a 6% premium to the entire fee award does not make sense in a case like this 13 Expert Declaration of Professor William B. Rubenstein, ECF Doc , at Additionally, aalthough class counsels fee motion never mentions the possibility of $30 million as the total recovery, Professor Rubenstein s report submits the possibility of $28 million as the guaranteed lowest payment (of the $30 million due at settlement). 14 These figures would result in a $7.1 million fee, which would constitute 25.3% of the net settlement fund. 15 Expert Declaration of Professor William B. Rubenstein, ECF Doc , at 17 (setting for a scale Adjusted Upward 6 Points for Risk at Each Level ). 10

15 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 15 of 28 PageID #:12953 where the risk existed only with regard to liability, not damages.... Once the risk resulting from the impediments to establishing liability was overcome and... liability [was] established, Class Counsels ability to obtain a large recovery was no longer materially affected by that risk. Capital One, 80 F. Supp. at 806. The risks discussed in class counsels motion relate to liability, not damages. 16 As the Capital One court noted, [s]ophisticated class members... would have balked at agreeing to a similar adjustment to the second, third, and fourth recovery tiers, because the risk factors present in this case related only to establishing liability and would not have affected Class Counsels ability to achieve the additional damages recovery reflected in the second, third and fourth tiers. Id. at 807. Even under this inflated scale, Professor Rubenstein admits Class Counsels 33 1/3% request is somewhat higher than the 6-point adjusted sliding scale utilized in Synthroid. 17 In fact, class counsels request is $2.4-$4.7 million more than recovery under this scale ($15.6- $19.8 million). 18 Professor Rubenstein then takes a hypothetical scale mentioned in Synthroid never applied in the Seventh Circuit or this District, (granting 35% of the first $20 million, 25% of the next $20 million, and 10% of the residue), and even those numbers ($13.4-$15.4 million) fall well below class counsels $17.9-$24.5 request. Finally, Professor Rubenstein takes the best of both worlds and applies a 6% premium to each tier (which is unauthorized) to the hypothetical scale never before utilized in the Seventh Circuit. Remarkably, even this far-fetched calculation 16 See e.g., Plaintiffs Motion and Memorandum in Support of Motion for Attorneys Fees, Expenses, and Incentive Awards, ECF Doc. 533, at 5-6 (discussing summary judgment on whether the calls violated the TCPA and the issue of vicarious liability, and noting that the issues remaining for trial included whether any TCPA exemptions applied to the calls made to members of the residential line class and whether Defendants were vicariously liable for the calls under the federal common law principles of agency). 17 Id. at Id. 11

16 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 16 of 28 PageID #:12954 (producing fees of $16.6 to $19.8 million) falls below class counsels $17.9 to $24.5 million fee request. No scale advanced by Professor Rubenstein justifies the excessive fee request. V. Class Counsel are Not Entitled to a Fixed Percentage Recovery, Particularly One as High as 33%. While their own expert utilizes the sliding-scale methodology in concluding (erroneously) that class counsels fee request is not unreasonable, class counsel maintain this Court should award 33% as a fixed percentage. No authority supports this position for such a large settlement. Class counsel reluctantly admit that several courts in this District considering fee requests in TCPA cases have applied different structures, such as the declining marginal percentage scale Rather than distinguish these four opinions, class counsel rely on dicta in Synthroid I, where the Court remarked, [t]his is not to say that systems with declining marginal percentages are always best. They also create declining marginal returns to legal work, ensuring that at some point attorneys opportunity cost will exceed the benefits of pushing for a larger recovery, even though extra work could benefit the client. Synthroid I, 264 F.3d at 721. Yet, there is no indication that application of the declining marginal percentage scale, which class counsel were aware applies in this district, created any disincentive to perform extra work in this litigation that spanned over four years. Further, Syntrhoid II eventually applied a declining marginal percentage scale. Synthroid II, 325 F.3d at 980. Class counsel cite Silverman to support the 33% request. Silverman upheld a flat percentage of 27.5% to a mega-fund settlement, but is hardly an endorsement of the fixed percentage method. To the contrary, Silverman observed that negotiated fee agreements regularly provide for a recovery that increases at a decreasing rate and reminded in Synthroid II,... the award was 30% of the first $10 million, 25% of the next $10 million, 22% of the band 19 Fee Motion, ECF Doc. 533, at

17 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 17 of 28 PageID #:12955 from $20 to $46 million, and 15% of everything else. Silverman, 739 F.3d at 959. The Court identified that the justifications for diminishing marginal rates were present, and only upheld the fixed 27.5% because no party raised the issue of a marginal sliding-scale fee before the district court. Id. In the absence of this specific argument before the district court, the Seventh Circuit declined to reverse the award while acknowledging 27.5% of a megafund may be at the outer limit of reasonableness[.] Id. at 959. Even if Silverman could be construed as allowing a fixed percentage (it cannot), it suggests 27.5% as a maximum percentage for a large-scale settlements. Also, Silverman ostensibly involved greater risk. Unlike this case, no other law firm was willing to serve as lead counsel. Id. at 958. Moreover, class counsel in Silverman incurred more than $5 million in out-of pocket expenses, whereas class counsel here incurred much less $412,206 for a similar four year period. 20 Id. Accordingly, in no case should an award exceed Silverman s 27.5%. Class counsels overreaching fee request is in line with a history of similar excessive fee requests from Jay Edelson and his firm, Edelson, P.C. See e.g., In re Linkedin User Privacy Litig., 309 F.R.D. 573, 589 (N.D. Cal. 2015) (Mr. Edelson requesting 32% where the benchmark was 25%); Wright v. Nationstar Mortage LLC, 14 C 10457, 2016 WL , at *15 (N.D. Ill. Aug. 29, 2016), appeal dismissed (Oct. 24, 2016) (Rafey S. Balabanian and Mr. Edelson of Edelson PC requesting 36% of a $10 million fund); Samantha Ellison v. Steve Madden, Ltd., No. 2:11-cv PSG-AGR, ECF Doc. 73, at (C.D. Cal. May7, 2013) (noting class counsel requested $2.5 million with a 3.2 multiplier). Recognizing such fees do not serve the best interests of the class, courts have repeatedly rejected Edelson s requests. Linkedin, 309 F.R.D. at 589 (declining Mr. Edelson s request for 32% based on a claimed substantial risk, and instead 20 Fee Motion, ECF Doc. 533, at

18 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 18 of 28 PageID #:12956 awarding the 25% benchmark ); Wright, 2016 WL , at *15 (denying 36% of a $10 million, and instead awarding 30%, while noting the fee requested by class counsel is too high ); Steve Madden, Ltd., No. 2:11-cv PSG-AGR, ECF Doc. 73, at (C.D. Cal. May7, 2013) (reducing class counsels requested $2.5 million in fees based on a lodestar multiplier of 3.2 to a more reasonable $1.25 million based on a 1.7 multiplier). This Court should do the same. VI. This Court Should Decline to Apply Mr. Henderson s Methodology. Class counsels fee request also cannot be sustained on the basis of their expert, Professor M. Todd Henderson s belief that this case initially had zero inherent value. 21 It goes without saying that three firms would not have taken the initiative to file class action lawsuits if they had no inherent value. Professor Henderson uses this false premise to categorize this as a purely lawyer-value-generated case, which he believes supports class counsels 33% fee request. Of course, this approach has not been adopted by the Northern District or the Seventh Circuit. In fact, the court in Capital One refused to adopt Professor Henderson s methodology. The court noted that Professor Henderson filed a report analyzing the data and proposing an alternative method for approximating the ex ante market rate at the conclusion of a case. The court discounted his analysis on fees because no district court or court of appeals has ever adopted Professor Henderson s method of estimating the appropriate fee award in this case. Capital One, 80 F. Supp. 3d at 807. The court concluded: Ultimately, the court must follow the Seventh Circuit s guidance in approximating the fee that would have been negotiated ex ante in this TCPA case had such a negotiation occurred. Unfortunately for Professor Henderson, his model is not among the methods accepted by the Seventh Circuit. Using the benchmarks set forth in as explained above, the court concludes that the tiered fee 21 Expert Report of Professor M. Todd Henderson, ECF Doc , at 15,

19 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 19 of 28 PageID #:12957 Id. at 808. arrangement displayed above, which approximates the agreedupon negotiated percentage of the attorneys fees to be taken from a $75.5 million settlement had Class Counsel negotiated with capable, sophisticated class members having a real stake in the litigation, is about 20%. VII. The 5.1 Lodestar Multiplier is Excessive. The lodestar cross-check confirms class counsels 33% request provides a windfall. Class counsel disclose their lodestar as approximately $4.98 million. 22 A 5.1 multiplier (based on a $24.5 million fee, or 33% of $76 million) is excessive. See Harman v. Lyphomed, Inc., 945 F.2d 969, 976 (7th Cir. 1991) ( multipliers anywhere between one and four... have been approved ); In re Sw. Airlines Voucher Litig., 11 C 8176, 2014 WL , at *6 7 (N.D. Ill. June 20, 2014), aff'd, 799 F.3d 701 (7th Cir. 2015) (this Court reducing an excessive 2.63 multiplier and replacing it with a multiplier of 1.5); Hopkins v. Stryker Sales Corp., No. 11-CV LHK, 2013 WL , *4 (N.D. Cal. 2013) ( Multipliers of 1 to 4 are commonly found to be appropriate in complex class action cases ). Application of the sliding scale for a $76 million settlement, with a $14.7 million fee, yields a far more palatable 2.9 multiplier ($14.7 million % $4.9 million lodestar). Under any analysis, 33% of this settlement is too much. CONCLUSION Class counsels 33% fee request for this $56-$76 million TCPA settlement is out of step with authority from this Circuit, and the Northern District of Illinois in particular. The Court should reduce the requested fee in accordance with the diminishing marginal fee structure outlined in Gehrich, Craftwood Lumber, Wilkins, and Capital One. The millions in excess of the permissible fee should be returned to the class as the rightful settlement beneficiary. 22 Fee Motion, ECF Doc. 533, at

20 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 20 of 28 PageID #:12958 DATED: January 23, 2017 Respectfully submitted, /s/ Jonathan P. Novoselsk _ Jonathan P. Novoselsky Attorney for Objector/Class Member Freedom Home Care, Inc. Jonathan P. Novoselsky Jonathan Novoselsky, P.C. 303 W. Madison, 22 nd Floor Chicago, IL fax

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22 Case: 1:12-cv Document #: 548 Filed: 01/23/17 Page 22 of 28 PageID #:12960 Certificate of Service The undersigned certifies that today he filed the foregoing objection and associated declarations on ECF which will send electronic notification to all attorneys registered for ECFfiling. The undersigned further certifies he caused to be served via USPS First Class Mail, postage prepaid, a copy of this Objection and associated exhibits upon the following. DATED: January 23, 2013 Clerk of the United States District Court for the Northern District of Illinois Everett McKinley Dirksen United States Courthouse 219 S. Dearborn St. Chicago, IL Eve-Lynn J. Rapp Jay Edelson Edelson PC 350 North LaSalle Street Suite 1300 Chicago, Illinois Brian P. O Meara Forde Law Offices LLP 111 West Washington Street Suite 1100 Chicago, Illinois Richard W. Epstein Greenspoon Marder, P.A. 200 East Broward Blvd. Suite 1800 Fort Lauderdale, Florida /s/ Jonathan P. Novoselsk Jonathan P. Novoselsky _

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