After ‘unfounded’ collusion claim, Entwistle law firm is awarded fees in Valeant class action

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A sign for the headquarters of Valeant Pharmaceuticals International Inc is seen in Laval, Quebec June 14, 2016. REUTERS/Christinne Muschi

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(Reuters) - There’s deep, unspoken irony in a decision last week awarding $75,000 in fees to Entwistle & Cappucci, which represented an objector to a $1.2 billion securities class action settlement between Valeant Pharmaceuticals International Inc and its shareholders.

Entwistle, as counsel to the investment firm Timber Hill LLC, had argued throughout the long-running case against Valeant (now known as Bausch Health Companies Inc) that the class action needed to account for losses by investors in Valeant stock options.

The shareholder case, broadly speaking, alleged that the company deceived investors about the viability of its business model of raising acquiring companies that made crucial drugs and then raising prices for those products.

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When class counsel from Robbins Geller Rudman & Dowd sought approval of a $1.2 billion deal that set a 5% cap on recovery for Valeant options traders, Entwistle filed an objection on Timber Hill’s behalf. And in 2021, after U.S. District Judge Michael Shipp of Trenton, New Jersey, granted final approval to the settlement, including the allocation plan restricting recovery for options investors, Entwistle appealed that ruling to the 3rd U.S. Circuit Court of Appeals.

Last October, Entwistle agreed to drop the appeal, in a stipulation of dismissal that was also signed by Robbins Geller and defense counsel from several big firms. The stipulation noted that the administrator of the $1.2 billion settlement had determined that claims by options traders would be way below the 5% threshold. Since Timber Hill’s appeal challenged only the cap on payouts to options investors, the stipulation said, the appeal was moot in light of the claims administrator’s report. The 3rd Circuit eventually accepted the stipulation and tossed the appeal in December.

Entwistle, meanwhile, asked the trial judge to approve a $75,000 fee award for its work on behalf of options investors. That amount, the firm said, was a small fraction of the firm’s lodestar bills of more than $1 million – and would barely cover the firm’s $50,000 in expenses. Moreover, Entwistle told Shipp, the money would come from the $157 million he already awarded in fees to class counsel, so the class recovery would not be diminished at all.

If you follow class action litigation, this is where the alarm bells usually start ringing. An objector drops an appeal in exchange for a share of class counsel's fees? Isn’t that precisely the scenario that led to a 2018 amendment to the federal rules of procedure for class actions requiring trial courts to scrutinize “side deals” in which class counsel agree to pay objectors to drop appeals?

Entwistle and class counsel from Robbins Geller assured Shipp and Special Master Dennis Cavanaugh that there was nothing remotely fishy about Timber Hill’s decision to dismiss its appeal. There was no quid pro quo between the plaintiffs’ firms, both of them said. The dismissal was not contingent on a fee award, they said, and was simply a reflection of Timber Hill’s realization that there was no longer a need to challenge the settlement’s allocation plan.

Those assurances rang hollow to another party in the Valeant case. And here’s where irony enters this story. A second objector to the Valeant settlement told the 3rd Circuit and the trial court that Entwistle and class counsel appeared to have engaged in a “secret deal” in which Robbins Geller agreed to pay Entwistle to ditch its challenge to the settlement. Counsel to the second objector? None other than the Bandas Law Firm — a law firm that is frequently criticized as a serial objector and is known to have profited from exactly the sort of secret side deals it accused Entwistle of entering.

Bandas lawyer Robert Clore told the trial court that after he raised questions about collusion between Entwistle and Robbins Geller, Entwistle revealed to the 3rd Circuit that Robbins Geller had agreed not to oppose a modest fee request. That’s exactly the sort of agreement, Clore argued, that demands skepticism after the 2018 amendment rule change, which was supposed to discourage the practice known as “objector blackmail.”

“Timber Hill’s complicity with class counsel in attempting to pass off the secret arrangement in the 3rd Circuit,” Clore wrote in a brief to Shipp, “certainly bears on the appropriateness of any fee.”

There’s a strong “takes one to know one” energy in Robbins Geller’s response to the Bandas firm’s “baseless” assertion of a collusive side deal. “The Bandas Firm’s error is in its assumption (based on its practice of manufacturing objections with serial objectors connected to the firm in order to extract fees) that objectors will only dismiss appeals if their fee request is approved,” class counsel said. But that’s not what happened with the Timber Hill appeal, the filing said: Entwistle’s determination that the appeal was moot was distinct from any discussion of a fee application.

Ultimately, both the special master, Cavanaugh, and the trial judge, Shipp, agreed with Entwistle and Robbins Geller. “The dismissal of Timber Hill’s appeal was based on mootness, not any paid or promised consideration in the form of attorneys’ fees,” Cavanaugh wrote in his Dec. 6 report. Shipp’s June 30 decision adopting the special master’s report said Clore’s assertion of a secret side deal to pay Entwistle to drop Timber Hill’s appeal was “unfounded,” and that the Bandas firm had failed to explain how its “concern over collusion ... morphed into proof.”

Clore did not respond to my email request for comment. Jim Barz of Robbins Geller declined to comment beyond class counsel’s brief.

Andrew Entwistle said he was gratified that the court didn’t take Bandas’ “patently false” bait about collusion. “We were wholly transparent on the basis for dropping the appeal,” he said. “It was never contingent on a fee.”

Read more:

Judge rejects class counsel’s payout to objector in lithium battery case

$1.2 billion Valeant shareholder class action (and $157 million fee award) wins final approval

In 'unconditional surrender,' serial objector Bandas agrees not to practice in Illinois

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.