The U.S. Court of Federal Claims has cut in half the $185 mn legal fee sought by Quinn Emanuel Urquhart & Sullivan LLP from a $3.7 bn class action settlement over the government’s failure to make risk corridor payments under the Affordable Care Act (ACA), according to BestWire.
Initially requesting 5% of the settlement, the court reduced the fee to 2.5%, totaling $92.42 mn.
The firm had worked 9,630.6 hours on the case, which began in February 2016. The ACA’s risk corridor program was designed to limit financial risks for insurers on the exchanges, compensating for losses due to high medical costs while requiring insurers to return excess profits.
In 2018, a federal judge certified the class action due to the government’s failure to make these payments. Critics argued that the original legal fee was excessive given the case did not require discovery or go to trial, and the firm improperly supported its lodestar (legal fee calculation method).
The court determined that while Quinn Emanuel documented its hours, 15% of those hours were related to a separate cost-sharing claim and fee-approval motions.
Additionally, the court ruled that the firm should have used 2020 rates for fee calculations instead of 2023 rates, as they had already received part of their fee in 2021.
This case revolves around the Affordable Care Act’s (ACA) risk corridor program, which was designed to mitigate financial losses for insurers who participated in the ACA exchanges.
The government created the program to help insurers balance the risk of covering a new pool of consumers, many of whom had high medical costs.
Under this program, insurers that experienced large losses would receive payments from the government, while those that made excessive profits would pay into the system. The idea was to provide a financial buffer during the early years of the ACA’s implementation.
However, Congress later blocked the allocation of funds necessary to make these risk corridor payments, leading to significant financial shortfalls for insurers.
Insurers sued the government, arguing that the payments were mandated by Section 1342 of the ACA, which required the government to compensate qualified health plans that incurred higher-than-expected medical costs, regardless of whether funds were appropriated by Congress.
In 2016, Quinn Emanuel Urquhart & Sullivan LLP, representing a class of insurers, initiated a lawsuit against the U.S. government to recover these unpaid risk corridor payments. After years of litigation, a settlement was reached in which the government agreed to pay $3.7 bn to the insurers.
The risk corridor program’s failure to make full payments sparked numerous legal battles, and this case represents one of the largest settlements related to those claims. The decision to reduce legal fees underscores the court’s effort to balance fair compensation for legal work with the need to avoid excessive charges in class action settlements.
The United States Court of Federal Claims is a court of record with national jurisdiction. The United States Court of Federal Claims was recreated in October 1982 by the Federal Courts Improvement Act pursuant to Article 1 of the United States Constitution.
The court consists of sixteen judges nominated by the President and confirmed by the Senate for a term of fifteen years. After 1982, the court retained all the original jurisdiction of the Court of Claims and continues, uninterrupted, a judicial tradition more than 140 years old.
The court has since been given new equitable jurisdiction in the area of bid protests, as well as jurisdiction in vaccine compensation.
The Court of Federal Claims is authorized to hear primarily money claims founded upon the Constitution, federal statutes, executive regulations, or contracts, express or implied in fact, with the United States. Many cases before the court involve tax refund suits, an area in which the court exercises concurrent jurisdiction with the United States district courts.
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