Hawaii Supreme Court: Reviews Maui Wildfire Attorney Fees Cap

• The Hawaii Supreme Court is reviewing a Maui judge's order to allocate $222 million from a $4 billion wildfire settlement to an attorney Common Benefit Fund.
• Four attorneys are appealing, arguing the circuit court lacked authority to create the fund after cases settled and that the process violated due process.
• The Common Benefit Fund caps attorney fees at 3% or 8%, significantly lower than the standard 25% allowed by Hawaii law.
• Proponents of the fund argue it was necessary for coordinated fee resolution and within the court's inherent powers.
• The decision will establish critical precedent on judicial authority over attorney fees and common benefit funds in large-scale settlements, impacting future mass tort cases.

The outcome of this appeal carries significant implications beyond the Maui wildfires, potentially setting a precedent for how attorney fees are managed in large-scale settlements across Hawaii and possibly other jurisdictions.

The Hawaii Supreme Court is currently reviewing a circuit court order that allocated $222 million from a $4 billion settlement for Maui wildfire victims to a Common Benefit Fund for attorneys. This fund, established by a Maui judge who approved the overall settlement, is intended to compensate legal professionals whose efforts benefited all of the approximately 21,750 plaintiffs involved in the extensive litigation. The legal proceedings have shifted from the devastated landscapes of Maui to a courtroom in downtown Honolulu, focusing on the financial structure of the compensation for survivors of the August 8, 2023, fires that ravaged the island, including the historic town of Lahaina.

The Common Benefit Fund not only provides a tiered schedule for attorney fees but also imposes a cap on what attorneys can charge their clients, limiting fees to either 8% or 3%. This represents a significant reduction from the 25% contingency fee typically permitted under Hawaii law. The settlement itself addresses only a fraction of the total damages claimed by victims, which range from $12 billion to $15 billion, with various attorneys—including those representing subrogation interests, class actions, and individual plaintiffs—expected to receive a portion.

Four attorneys—Michael Bates, Anthony Ranken, Alex Edrenkin, and John Thickstun—have appealed the circuit court's decision to the Hawaii Supreme Court. Represented by Samuel Shnider, they argue that the circuit court exceeded its authority by creating the Common Benefit Fund after the underlying cases had already been settled and dismissed. Shnider emphasized that the appeal is not aimed at securing higher fees for his clients, but rather to address fundamental issues of due process, equal protection, and to safeguard the integrity of settlements and access to justice in future disaster-related litigation. He also contended that the process unfairly excluded his clients.

During the hearing, Justice Todd Eddins questioned whether the circuit court was truly overstepping its bounds or merely exercising its equitable powers to manage a special proceeding it had initiated. Associate Justice Sabrina McKenna inquired about the potential consequences if the fee order were to be overturned, to which Shnider responded that attorneys and clients would then revert to their original contingency-fee agreements and negotiate their fees directly. Conversely, Michael Lam, representing the state of Hawaii, asserted the necessity of the circuit court's coordinated process for resolving fees across thousands of claims, warning that a lack of such an integrated ruling would have resulted in "chaos."

Cynthia Wong, representing one group of plaintiffs, supported the circuit court's actions, stating that no liaison counsel or steering committee member had specifically requested a common benefit fee. Instead, she argued, the court granted and ordered the fund as part of its inherent powers, exercising full discretion in its decision. Wong also highlighted that the $4 billion settlement only partially covers the extensive damages claimed by victims.

Another group of plaintiffs, represented by attorney Lance Collins, agreed that the circuit court possessed the authority to oversee attorney fees but proposed an alternative distribution method. Collins suggested that all attorneys should be compensated at their designated tier, with any excess funds then returned to the main settlement fund for distribution to claimants, without incurring additional attorney fees. Justice Lisa Ginoza questioned how this proposal would differ in practical application from the Common Benefit Fund already established by the court.

The outcome of this appeal carries significant implications beyond the Maui wildfires, potentially setting a precedent for how attorney fees are managed in large-scale settlements across Hawaii and possibly other jurisdictions. Samuel Shnider cautioned that the ruling could have far-reaching effects, citing a California case involving Southern California Edison and the Eden Fire. He suggested that utility companies facing similar mass tort claims might hope for the Hawaii Supreme Court to uphold the current fee order, characterizing the order as a "wolf in sheep's clothing" that is ultimately "harmful for the people of Hawaii."

The August 8, 2023, fires on Maui, which included the destruction of Lahaina, resulted in the loss of 102 lives and over 2,000 structures. The remains of buildings destroyed in the Lahaina wildfire can still be seen near the intersection of Front and Dickenson streets. The justices did not indicate when they would issue their ruling, leaving the legal community and wildfire victims awaiting a decision that will shape future compensation structures and the management of mass litigation in the state.

Lawyers involved in mass tort or class action litigation in Hawaii should closely monitor this decision. It will establish critical precedent on the extent of judicial authority to create common benefit funds and cap attorney fees in large-scale settlements, directly impacting future compensation structures and litigation management.

Source: Original reporting via Courthouse News Service