Federal Appeals Court Ordered An End To The Litigation, With Class Counsel To Pay Objector’s Fees Adding Value To Class Settlement.
We like the near conclusion to the next federal circuit court case we post on: “Despite our remand [ordering a class objector’s fees paid from class counsel fee recovery], our message is clear: we expect this case to end ‘so that the tail can stop wagging the dog.’” (Quoting Estate of Enoch v. Tienor, 570 F.3d 821, 823 (7th Cir. 2009).) This sounds a lot like the quote from our blog Mission Statement: "All too often attorney fees become the tail that wags the dog in litigation." Deane Gardenhome Assn. v. Dentkas, 13 Cal.App.4th 1394, 1399 (1993). Who says federal and state jurists do not agree on issues? Not us, although it may depend on the issue.
What happened in In re Southwest Airlines Voucher Litig., No. 17-3541 (7th Cir. Aug. 2, 2018) was that an objector had some challenges to supplemental class counsel fees which were found meritorious and led to a rejiggling of the settlement in favor of the class in an airline drink voucher case. The objector wanted a modest $80,000 in fees, less than 5% of class counsel’s total award. Nothing in the settlement agreement addressed objectors’ fees.
The Seventh Circuit agreed the litigation should end, with objector’s fees paid by class counsel—reversing a district judge’s denial of fees to objector. Unless something in the settlement agreement said otherwise, settlement agreement should not be read to bar attorney’s fees for objectors adding genuine value to a class action settlement, all the more so based on equitable and common fund principles which would support the award of fees in this situation.
BLOG OBSERVATION—This does raise a gnarly question as to whether settlement agreements will address objector’s fee claims. It is our experience that this is not addressed and only addressed depending upon the result of approval hearings/subsequent appeals on a pragmatic, negotiated basis. Although we are aware of “blow” provisions for excessive opt-outs, maybe there can be a threshold “blow” provision which nullifies the settlement if claimed objector fees reach a certain level. We doubt this will happen, but this opinion does seem to indicate that counsel in class actions can negotiate what happens with respect to the “objector fee” possibilities if they wish to do so in class settlement agreements.