The test for determining how much, if any, prevailing counsel should be reimbursed for expert expenditures relies upon whether their contribution to the fact-finder's determinations on the prevailing claims, a unanimous Ninth Circuit holds.
Tibble v. Schlichter Bogard & Denton LLP, No. 18-55974 (9th Cir. Jan. 6, 2019) (unpublished) (“Tibble II”), did not involve an arbitration, but in our view is worth noting, nonetheless. In 2015, the U.S. Supreme Court decided Tibble v. Edison International, 575 U.S. __, 135 S. Ct. 1823 (“Tibble I”), and issued the seminal ruling on an ERISA fiduciary's duty of prudence and the concomitant duty to monitor investments in the 401(k) Plan's portfolio. Class claimants, beneficiaries of the Edison Intl. 401(k) Savings Plan, had alleged that Edison and other named fiduciaries added six mutual funds as Plan investments that were "higher-priced retail-class mutual funds" when "materially identical" lower-priced institutional funds were available.
Case Below
The District Court, affirmed by the Ninth Circuit, held that the claims were untimely under the time limitations provided in ERISA, Section 1113, because more than six years had passed from the time the funds were added to the Plan to the filing of the Complaint. The Ninth Circuit did discuss a "change of circumstances" test under which review by the fiduciaries might be triggered, thus re-winding the time-bar clock, but such changes were not sufficiently demonstrated. The Supreme Court held unanimously in Tibble I that the Ninth Circuit erred, as the duty to monitor is a continuing duty, with an affirmative obligation to review and to remove imprudent trust investments. The Ninth Circuit relied too heavily upon the initial selection, the Court wrote, "without considering the contours of the alleged breach of fiduciary duty."
Latest Iteration…
After remand, this class action was actually certified and tried, ultimately rendering plaintiffs an award of $13.2 million in damages and class counsel fees of $5.8 million in Tibble II. Thereafter, the law firm sought reimbursement for $964,212 in expert witness fees, to be deducted from class action damages awarded. The District Court denied the motion, and the Court of Appeals affirms unanimously. The Ninth Circuit reviews the denial of fees under an "abuse of discretion" standard, which means that it must affirm, unless the lower court applied the wrong legal standard or, judging from the record, the lower court's findings were "illogical, implausible, or without support...." Says the Memorandum Opinion: “Here, the district court denied Appellants’ motion because they prevailed on only one of ten claims, the district court did not rely on any particular expert’s conclusions in reaching its decision on that claim, and the evidence offered in support of the motion did not show that any particular expert’s work was ‘crucial or indispensable’ to the claim upon which Appellants prevailed.” In the District Court's words, none of the experts' work was "crucial or indispensable" to the prevailing claim and "the district court [evidently a bench trial] did not rely on [them] in reaching its decision on that claim."
(ed: *This case has a long history in the California federal courts, much of which is well-summarized in an article by the Miller & Chevalier firm, titled "Ten Years After: The Pendulum Swings Back in Tibble...." Among other things, the article mentions that class counsel was initially awarded $2.5 million in fees and successfully appealed to obtain more. It was thereafter that it sought this deduction from the class award. **Not that we're sympathetic to this move towards grabbing more of the class award, but the test for reimbursement strikes us as overly rigid and arbitrary. Experts help in understanding complicated issues, in clarifying and focusing the factfinder. Their contribution to the Court's or arbitration Panel’s thinking may be subtle, yet influential. Query how would a court apply this test were a jury doing the fact-finding? ***Experts are used often in securities arbitrations, so the holding here is of some relevance. ****Query whether in a FINRA arbitration the Panel would explain this – i.e., whether any part of the Award is attributable to an expert’s testimony – if requested.)
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