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Moran v. IOD Inc.

Superior Court of Massachusetts, Suffolk

August 5, 2014

PAUL MORAN, Plaintiff, on behalf of himself and all others similarly situated,


Janet L. Sanders, Justice of the Superior Court.

This is a class action brought against IOD Incorporated (IOD), a company in the business of fulfilling medical records requests under contracts with hospitals and other medical providers. The plaintiff alleges that IOD has overcharged him and others similarly situated for postage fees, in violation of G.L.c. 111 § 70 and G.L.c. 93A § 9. The average overcharge amounts to 57 cents per transaction. The parties almost immediately reached a settlement whereby the defendant would be required to disgorge the entire amount of any overcharge over a four year period by way of a cy pres payment to a public interest not-for-profit law firm. That amount totals $11, 170.70. In addition to seeking final approval of the settlement, plaintiff's counsel also asks that this Court award his firm and other lawyers affiliated with it a total of $45, 000. Although this Court approves the substance of the settlement, the amount requested in fees is entirely out of line with the result obtained. Indeed, it suggests that the principal reason for bringing this action in the first place was not to benefit any individual plaintiff but to financially reward the law firm creative enough to have conceived of the claim on which the request for an award is based.

The claim has its genesis in a Superior Court decision three years ago against another company in the same business as the defendant here. Mantia v. Bactes Imaging Solutions, Inc., (2011). In Mantia, the defendant charged the plaintiff postage and handling fee of $4.12, which the parties agreed exceeded the cost of ordinary postage. The court (Fabricant, J.) determined that this practice violated G.L.c. 111 § 70, which allows additional fees over copying charges only to cover the costs of postage; it allowed summary judgment for plaintiff as to its request for declaratory judgment on that count. The claim for damages, however, was asserted under a theory of a breach of contract. The agreement to provide copies of medical records to the plaintiff did not reference the statute and the plaintiff willingly paid the extra fee. Accordingly, the Court concluded that, as a consequence of this voluntary payment, the plaintiff effectively waived the chance to challenge the fees, and it awarded no damages.

In 2013, another group of lawyers (operating as the " Law Offices of PIP Collect") picked up the baton. In the span of a few months, no less than five complaints including the instant one were filed on behalf of consumers who had requested copies of medical records and who had allegedly been overcharged. See McCoy et al. v. Bactes Imaging Solutions, al., Civ. No. 13-0681-BLS 1; Case v. Bactes Imaging Solutions, LLC , Civ. No. 14-0352-BLS 1; Moran, et al. v. Bactes Imaging Solutions, LLC, Civ. No. 13-4165-BLS 1; Fama et al. v. Bactes Imaging Solutions, Inc., Civ. No. 13-1435--BLS 1. In each of these cases, the overcharge per transaction was (like the instant one) relatively small. But plaintiffs' counsel had an additional arrow in their quiver: Chapter 93A. In almost identical demand letters sent out by PIP Collect, plaintiffs threatened the defendant with three times the amount of actual damages per transaction or $25 (whichever was greater), together with attorney's fees. They also insisted that the defendant pay the cost associated with notifying the class and distributing the proceeds, and added that a refusal to capitulate to these demands would itself be the basis for a 93A violation supporting multiple damages.

The case now before the Court is the first to resolve by settlement. Tellingly, the proposed settlement (reached within a couple of months of filing suit) is less favorable to any class plaintiff than that which was offered by the defendant in response to the 93A demand letter. In that response, the defendant, while denying any wrongdoing, estimated that even assuming the largest potential class, the maximum amount of damages was $11, 429.28. Accordingly, the defendant offered to pay the putative class $12, 000. The settlement which both parties ask this Court to approve is for less than that, and does not go to any individual plaintiff, the parties agreeing to a cy pres award instead. That is because the costs of determining the identity of each injured party would almost certainly be more than the 57 cents that he or she would receive. But then that had to have been known from the outset, leading one to question why this suit was brought at all.

The answer, of course, is clear. If this Court were to approve the petition for attorney's fees, the big winner would be plaintiffs' counsel. In negotiating the settlement, counsel convinced the defendant not to oppose a request for attorney's fees in the amount $45, 000 -- a relatively small price to pay to avoid further litigation but a cost which will ultimately be passed on to consumers generally. The fee request must still be approved by this Court, however.

In support of the fee request, counsel presents the affidavits of six different lawyers, all with PIP Collect or affiliated in some way with it. In describing their work, the petition avers that they had to spend considerable time determining the precise amount of the overcharges and then negotiating a settlement. Since the result for class plaintiffs was not significantly different from that proposed in the defendant's 93A response, it is reasonable to infer that much of these discussions were likely consumed by a negotiation over the agreed upon attorney's fee. The petition also states that the lawyers had to review Mantia (a four page decision relatively straightforward in its reasoning) and other cases now pending in the BLS. Because those other cases are substantially identical to the instant one and are all brought by the same group of lawyers in the same time period, this Court fails to see how this research could consume much time.

The itemized bills in support of the petition purport to justify an even larger fee of $47, 759.50. But close examination of those bills suggests that they have been heavily padded. For example, three lawyers drafted and edited the 93A letter and the complaint, all billing precisely the same amount of time. On January 14, 2014, no less than six of them reviewed the defendant's response to that letter. Five lawyers billed for primarily the same tasks on January 20, 2014; on January 28, four of them discussed the case law together. A single conference call with defense counsel on January 30, 2014 resulted in billings by three different lawyers. On March 1, 2014, an email from lead counsel John Yasi was reviewed by three lawyers, who then billed for their time.

There is also no attempt to support the hourly rates for any of the lawyers. John Yasi and Paul Yasi state that their practice is focused on the representation of persons injured in auto accidents -- representations which typically involve contingent fee arrangements. They aver that this experience together with their knowledge of Massachusetts auto insurance law supports an hourly rate for each of them of $550. Together, their work comprises over $20, 000 of the total award requested. Kevin McCullough and Robert Mazow, also a personal injury plaintiff's lawyers, seek compensation at the same hourly rate. Michael Forrest and Matthew LaMothe, both three years out of law school, claim hourly rates of $330 and $350 respectively. All six lawyers practice in Salem and yet submit nothing to suggest that this is the prevailing rate for their work in that geographic area or in their area of practice.

Counsel emphasizes that the award is unopposed and is being paid in full by the defendant. The defendant is also agreeing to adhere strictly to G.L.c. 111 § 70 (it says the error was inadvertent to begin with) and is being forced to disgorge the full amount of any overcharges; there is therefore something to be said for the result obtained. Finally, because this is the first lawsuit of the series filed by this law firm to settle, and because the work put in on the instant action may also advance plaintiffs' position in those other cases, it could be argued that this is time well spent. These reasons all justify some award -- but certainly not in the amount requested.

This Court is very familiar with the legal principles that I apply in determining what constitutes a reasonable fee award. The lodestar method requires multiplying the total number of hours reasonable spent preparing and litigating a case by the fair market rate for those services, with the fee applicant bearing the burden of documenting the hours expended and establishing what is a reasonable rate. Fontaine v. Ebtec Corp.415 Mass. 309, 324, 613 N.E.2d 881 (1993). Hours that are excessive, redundant, duplicative or unproductive are not reasonable. See T & D Video, Inc. v. City of Revere, 66 Mass.App.Ct. 461, 476, 848 N.E.2d 1221 (2006), reversed on other grounds, 450 Mass. 107, 876 N.E.2d 842 (2007). Moreover, in determining the overall reasonableness of the amount requested, this Court may consider the difficulty of the legal and factual issues involved and ...

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