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Ronald Drazin, et al v. Horizon Blue Cross Blue Shield of New Jersey

December 28, 2011

RONALD DRAZIN, ET AL., PLAINTIFFS,
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Faith S. Hochberg, U.S.D.J.

FOR PUBLICATION

OPINION

HOCHBERG, District Judge:

This dispute illustrates both the lofty side and the seamy side of the class action industry. It involves two of four related class actions filed in this District against insurance providers who had denied health insurance coverage for the treatment of eating disorders. Both of the instant cases were filed against Horizon Blue Cross Blue Shield of New Jersey, Inc. ("Horizon") and Magellan Health Services, Inc. ("Magellan") (together, "Defendants"), and both alleged essentially identical claims on behalf of the identical class. Despite their identity of issues, claims, parties, and classes, the two matters were filed separately by two attorneys who had been partners in the same firm; when that firm imploded, each filed the identical case on behalf of "his" Named Plaintiff and the same class. Where there should have been a single case requiring the expenditure of judicial time and resources, there were two. The matters were not consolidated because of the extreme hostility between the warring attorneys' respective new firms: Nagel Rice, LLP ("Nagel Rice") and Mazie Slater Katz & Freeman, LLC ("Mazie Slater").

The case litigated by Nagel Rice ultimately settled on terms that provided class members with very valuable relief. The case litigated by Mazie Slater was not settled. The settlement secured by Nagel Rice was approved by the Court and virtually all members of the class joined the settlement. Left with no class, Mr. Mazie dismissed his case. He found nothing objectionable about the settlement filed by Mr. Nagel, except that he wanted a piece of the attorneys' fee. The venom between these two attorneys was so strong that the absence of any objection by Mr. Mazie to the substance of Mr. Nagel's settlement speaks eloquently that it was fair and in the best interests of the class suffering from eating disorders. Presently before the Court are applications from both firms for an award of attorneys' fees and costs. This Court permitted extensive briefing*fn1 and an evidentiary hearing on the fee petitions to permit each firm to file documentation in the record in support of its position.

I. BACKGROUND

In October 2006, Bruce Nagel, Esq., was contacted by the parent of a patient afflicted with an eating disorder who wished to file a class action lawsuit against her insurance carrier for denials of coverage. After investigating potential causes of action and consulting with experts, Nagel Rice filed one of the instant actions, Drazin v. Horizon (06-cv-6219) (the "Drazin action"), on December 26, 2006. Nagel Rice also filed suit against Aetna on January 26, 2007. DeVito v. Aetna (07-cv-418) (the "DeVito action"). The gravamen of Plaintiffs' claims in both cases was that the defendant insurance provider improperly denied Plaintiffs coverage for eating disorder treatment by improperly classifying eating disorders as "non-Biologically Based Mental Illnesses" ("non-BBMIs"). Plaintiffs alleged that the insurance providers' treatment of eating disorders as non-BBMIs improperly limited the amount of coverage to which they were entitled under their policies. Plaintiffs sought damages based upon past denials of coverage, and injunctive relief to alter the business practices relating to non-BBMI coverage limitations. Plaintiffs' claims were brought under ERISA for those insureds with ERISA plans and under New Jersey's Parity Law and the New Jersey Consumer Fraud Act, for those insureds with nonERISA plans.

At substantially the same time, the identical action against Horizon on behalf of the same class was filed by David Mazie, Esq. Beye v. Horizon (06-cv-5337) (the "Beye action"). At the time, Messrs. Nagel and Mazie were embroiled in a bitter dispute over the dissolution of their law firm partnership, then known as Nagel Rice & Mazie LLP. In September 2006, Mr. Mazie had been asked to leave the partnership. The Beye action was filed by Mr. Mazie during a "phase-out" period before Mr. Mazie started his own firm, Mazie Slater, in January 2007.

Prior to the filing of the Beye and Drazin actions, Mr. Nagel wrote to Mr. Mazie suggesting that they work together on the case against Horizon. See Ex. H to Nagel Cert. (Docket # 269-1) ("I think we should avoid a fight and jointly do this case."). Mr. Mazie declined Mr. Nagel's invitation for cooperation, and countered by threatening Mr. Nagel with a lawsuit for "tortiously interfering" with his purported "right" to be lead counsel in the Horizon litigation. Nagel Cert. ¶ 9 (Docket # 269-1).

Because of this intense, palpable hostility between Messrs. Mazie and Slater, the Beye and Drazin actions against Horizon were filed as two separate cases. The result was an enormous and unnecessary duplication of work and expense as the two firms litigated the same case in parallel actions. Judicial economy took a back seat to the law firm war. The time of this Court and Magistrate Judge Shwartz was wasted on spurious motions, some of which were really just warfare tactics between law firms. Mr. Nagel testified that in his estimation, "you could have cut that [work] literally in half" had there been greater coordination between the two law firms. In his view, "there was no need to do . . . duplicative work, duplicative experts, duplicative fees." Drazin 10/7/09 Tr. 31-32; see also Nagel Rice Opp. 9 (Docket # 284-2) (the lack of cooperation "resulted in duplicative, costly and unnecessary work and was extremely harmful to the progress of the case"). Numerous disputes between Nagel Rice and Mazie Slater arose because of the duplication of efforts. For example, the two firms battled over who "owned" certain experts that both had retained; at one point, Mazie Slater demanded that Nagel Rice "cease and desist from contacting" its experts. See Exs. I-L to Nagel Cert. (Docket # 269-1). The firms also wrestled over who would take the lead at which depositions. See Ex. N to Nagel Cert. (Docket # 269-1). There was also an absurd fight about which attorney had "publicity rights" in the case. Aspects of the docket and transcript in this trio of cases*fn2 became textbook examples of what happens when certain attorneys seemed to forget that their clients were the litigating parties, and not themselves.

In order to protect third parties from burdensome duplicative depositions and other discovery demands, Magistrate Judge Shwartz ordered that there be some cooperation between the two firms during the pretrial period. The extent of that cooperation is fiercely contested. Compare Nagel Rice Opp. 9 (Docket # 284-2) (Mazie Slater "elected to litigate the Beye case with utmost secrecy and elected not to share the experts, theories, damage analysis, or any other material aspect of their work product"), with Mazie Slater Reply 4 (Docket # 287) ("We routinely cooperated with Nagel Rice on all aspects of discovery, sharing our strategy, our experience and our sophisticated and unique product."). It is clear from the firms' billing records that Beth Baldinger of Mazie Slater and Randee Matloff of Nagel Rice were in frequent contact, exchanging over 1000 emails during the litigation. Baldinger Cert. ¶ 5 (Docket # 287-1). It is also clear that the time they spent "coordinating" might well have been entirely unnecessary had the two cases been litigated as one case from the outset. The fact that they were not is solely attributable to the distasteful war that the two firms waged against each other; this Court's need to endure the waste of time and ugly incivility was a casualty of this war.

At the end of the day, the clients benefitted from a highly valuable settlement negotiated by Nagel Rice that secured important protections for those suffering from eating disorders now and in the future. On November 18, 2008, Nagel Rice and Defendants notified the Court that they had reached a settlement in the Drazin action (the "Class Settlement"). The Class Settlement was modeled on the settlement achieved by Nagel Rice in the DeVito action against Aetna,*fn3 with certain alterations. It provided for approximately $1.2 million in reimbursements for past denied claims based upon non-BBMI policy limitations, parity status for eating disorder treatment in the future, and the option for certain class members to elect review by an eating disorder specialist to resolve disputes arising from the denial of claims for eating disorder treatment based upon determinations about medical necessity. The Defendant insurers, Horizon and Magellan, also agreed not to object to the payment of up to $2.45 million in attorneys' fees and costs.*fn4

The Class Settlement was the result of five months of extensive and arduous arms-length negotiations between Nagel Rice and counsel for Defendants. Mazie Slater was not asked to enter these negotiations by either side. As Philip R. Sellinger, Esq., counsel for Defendant Horizon explained, the decision to negotiate with Nagel Rice rather than Mazie Slater was a "pragmatic one."*fn5 Horizon Br. 4 (Docket # 244). First, Mr. Nagel approached Defendants to discuss settlement, whereas attorneys from Mazie Slater did not. Second, counsel for Horizon was keenly aware that "the Mazie firm and Nagel Rice cannot play nice in the sandbox," and felt that inviting Mazie Slater to join settlement negotiations "would prove disastrous to the settlement process." Id.; see also Drazin 10/7/09 Tr. 19 (Mr. Nagel: "I thought it was in the worst interest of the class . . . to engage [Mazie Slater] in the negotiations. . . . These cases could not be tied up in . . . fighting among potential plaintiffs' counsel."). Finally, Mr. Nagel had already developed a successful framework for settlement in the DeVito action, which was found by this Court to be fair, reasonable, and adequate. Although Mazie Slater did not represent any member of the DeVito class, Mazie Slater had opposed preliminary approval of the DeVito settlement in defamatory language, calling the settlement "woefully inadequate," "patently unfair," and "nothing short of a sham -- a sweetheart deal designed to get the Nagel Rice firm a fee in turn for selling out the class."*fn6 Letter to Court from Mazie Slater dated 6/2/08 (attached as Ex. E to Nagel Cert. (Docket # 269-1)). Indeed, Eric Katz, Esq., a partner at Mazie Slater, appeared at the DeVito preliminary approval hearing despite having no client with standing in that case, and, with gestural theatrics, lambasted the settlement as a "very poor settlement" and certainly not one that he would ever even consider. DeVito 6/24/08Tr. 56. As counsel for Horizon noted, "Mr. Katz made it quite clear that any efforts to negotiate a similar settlement with his clients in the [Beye action] would be fruitless, stating that he 'would never settle the Beye case on those terms. Never, ever.'"*fn7 Horizon Br. 4 (Docket # 244) (quoting Mr. Katz in DeVito 6/24/08Tr. 56 ("I can say for the record now, I would never settle the Beye case on these terms. Never, ever.")).

By Order entered November 25, 2008, Magistrate Judge Shwartz granted Mazie Slater leave to file an application for appointment as lead counsel if they decided notto support the Class Settlement and wished to continue litigating. In the midst of the proceedings to approve the Class Settlement negotiated by Nagel Rice, Mazie Slater filed a "Motion To Enforce Settlement [of a purported side deal involving a publicity and fee battle between the firms] . . . ." By this motion, Mazie Slater sought this Court's enforcement of a side deal (purporting to resolve what was dubbed the "Attorney Fee/Publicity battle" at oral argument on January 7, 2009)that the two law firms had been negotiating with the help of a state court mediator.*fn8 This Court had neither involvement in nor jurisdiction over that side ...


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