CALIFORNIA ATTORNEY'S FEES

Class Actions/In The News: Prof. Fitzpatrick, At A Recent Washington, D.C. Panel Seminar, Contends That Class Action Lawyers Get “A Bad Rap” On Fee Awards

 

He Has Empirical Evidence to Support His Position.

     In Washington, D.C., there was an interesting recent panel discussion at the National Lawyers Convention of the Federalist Society, discussing whether attorney’s fees in class actions are too low, too high, or just right. Some panelists cited class action abuses, but an unlikely panelist for some--Professor Brian T. Fitzpatrick of Vanderbilt University Law School--had a more empirical perspective that somewhat indicated class action attorneys may be getting a “bad rap” when it comes to fee awards.

     Professor Fitzpatrick was somewhat of a surprising spokesman with such a view, given his clerkships with such conservative leaning jurists as Ninth Circuit Judge Diarmuid O’Scannlain and U.S. Supreme Court Justice Antonin Scalia, as well as his status as a Federalist Society favorite. (The Federalist Society is an organization of conservatives seeking reform of the current American legal society according to a textualist and/or originalist interpretation of the U.S. Constitution, according to Wikipedia.)

     Based on his empirical study of the class action world in the past few years, Professor Fitzpatrick’s conclusion is that “class action lawyers get a bad rap.” Instances of misconduct should not be viewed as representative of the entire class action bar, Professor Fitzpatrick opined during the panel discussion.

     On the whole, class action lawyers do not receive excessive compensation, he concluded. Professor Fitzpatrick reviewed two years of class action settlements and found that the plaintiffs’ lawyers received fees equal to approximately 15 percent of the total settlement money — an amount that is “not that opulent” in quotes made to public sources reporting on the panel. Of the $33 billion in settlement value for this two-year period, only 4 percent was attributable to the value of injunctions, and well over 75 percent of the amount was distributed to class members (e.g., pro rata distribution in shareholder class action suits).

Class Actions: Legislation Pending For Governor Approval Would Allow Trial Courts Discretion To Award Attorney’s Fees To Successful Class Action Settlement Objectors

 

Bill Would Abrogate Flemming v. Barnwell Nursing Decision.

     In our October 22, 2010 post, we reported on the New York Court of Appeals’ decision in Flemming v. Barnwell Nursing, which denied awarding attorney’s fees to a class action settlement objector whose efforts helped reduce requested class counsel fees of $448,000 down to $425,000 in a $950,000 settlement.

     Now, a New York bill is pending for Governor Andrew Cuomo’s approval that would reverse the 1975 law that Flemming relied on in denying the fee award to the objector. The bill would allow trial courts discretion to allow attorney’s fees to a successful class action settlement objector who increased the amount of a settlement or the benefits for a class. Governor Cuomo does not comment on pending legislation, but some like the bill while others say that it will promote spurious objections to class action settlements.

     More details on this bill can be found at the September 21, 2011 post at thomsonreuters.com.

In the News: In the Headlights – Judge Shines Real Bright Light on Attorney’s Fees Issue in Toyota Prius Class Actions.

District Court Judge Manuel Real Has “Big Problem” with Estimated Fees of $4.7 M.

     Writing in the August 29, 2011 online edition of The National Law Journal, Amanda Bronstad reports U.S. District Judge Manuel Real “put the brakes” on a $4.7 M fee request for plaintiffs’ firms in class action litigation.  The litigation concerns nearly 300,000 owners and lessees of Prius hybrids claiming headlights were defective because they intermittently shut off. 

     Toyota’s attorney, Michael Mallow, a partner with Loeb & Loeb, contends the fee request equals at least 101% of the settlement value, and that the work was inefficient. 

      As reported by Amanda Bronstad, plaintiffs’ attorneys argue a cross-check of the lodestar amount against an estimated percentage of the settlement is inappropriate, because this is not litigation in which a common fund is available.  Also, plaintiffs’ attorneys argue that a comparison of work done by plaintiffs’ attorneys with the amount of work done by outside defense attorneys underestimates actual costs, because it excludes work done by Toyota’s in-house attorneys. 

     A fairness hearing has been rescheduled for October 17, 2011. 

      Will plaintiffs’ counsel avoid the clutches of defense arguments, or will counsel be ground up fine by the gears of justice?  Will fees be stripped bare to the chassis?  Stay tuned.

In the News: (1) 9th Circuit Reverses and Remands Class Action Settlement and (2) MGA Turns on Its Lawyers

Fees in Bluetooth Class Action Settlement Must Be Scrutinized More Closely.

     Under the heading, “9th Circuit tosses Bluetooth settlement, citing attorney fees,” Amanda Bronstad, writing in the August 22, 2011 online edition of The National Law Journal, reports on the reversal and remand of a district court’s approval of a settlement providing for $100,000 in cy pres awards, $800,000 to plaintiffs’ lawyers, and $12,000 allocated for class representatives.  The Court of Appeals has not determined that the settlement was unfair or unreasonable, but wants the district court to calculate a lodestar figure and illuminate what degree of success the settlement achieved for the class members.  The case is In re:  Bluetooth Headset Products Liability Litigation, and concerns claims that risks about hearing loss associated with prolonged use of Bluetooth headsets were insufficiently disclosed.

Bratz Bills Brouhahahaha Brewing.

     Also in the August 22, 2011 online edition of The National Law Journal, Amanda Bronstad reports on the fight over who gets a chunk of the $310 million judgment in favor of MGA and against Mattel, one-third of which is for attorney’s fees.  Ms. Bronstad reports that O’Melveny has sued for $10.2 million in unpaid fees, MGA alleges malpractice and overbilling, and O’Melveny is seeking heavy-duty discovery sanctions.  And Orrick withdrew its representation from a related copyright action because of a fee dispute. 

Class Actions: Pennsylvania Wal-Mart Fee Award Remanded On “Double Dip” Issue

 

Trial Court Cannot Double Count Contingent Risk in Both the Lodestar and Enhancement Analyses.

     In Braun v. Wal-Mart Stores, Inc., 2011 Pa.Super. 121 (June 10, 2011) (per curiam), the Pennsylvania Superior Court affirmed the major portions of $187.65 million judgment in a plaintiffs’ class action against Wal-Mart for certain state wage/hour violations. (This judgment included Wal-Mart having to pay plaintiffs’ attorneys about $33.8 million in fees.)

     The plaintiffs’ attorneys requested and were awarded $12.34 million in fees and $3.6 million in expenses, which was then enhanced with a 3.7 multiplier so that fees and expenses totaled $45.6 million or 31% of the value of the total monetary recovery of about $151 million when the fee award assessed against Wal-Mart was backed out. Interestingly enough, the court ordered Wal-Mart to produce its defense expenses, which totaled about $10 million in fees and $7 million in expenses--which actually showed that plaintiffs‘ counsel was under defense expenses for lodestar purposes. The fee award was apportioned this way: $33.8 million payable by Wal-Mart; about $11 million payable by the common fund.

     On appeal, the Pennsylvania Superior Court reversed the fee award to two of plaintiffs’ firms because the lower court appears to have “double counted” the contingency risk factor in setting the lodestar and in awarding a multiplier enhancement. In reaching this conclusion, it relied on Perdue v. Kenny A., 130 S.Ct. 1662, 1672 (2010) and other like-minded cases for remand purposes to correct the “double dip” concern.

Class Actions: Attorney’s Fee Recovery Percentages In Mega-Class Action Settlements.

BIG:

Above:  Elephant Calisthenics

     For those of you who are interested in the percentage of fee recoveries in mega-class action settlements, here is an excellent summary we share from National Association of Legal Fee Analysis’ (NALFA’s) June 22, 2011 post on its attorney’s fees website:

LARGEST CLASS ACTION FEE AWARDS IN U.S. HISTORY

Class Action Case

1. Multi-State Tobacco Litigation

$206 Billion Settlement; ?? Fee Award Percentage of Settlement

2. Enron

$7.272 Billion Settlement; 9.52% Fee Award Percentage

3. World Com

$6.133 Billion Settlement; 5.48% Fee Award Percentage

4. Vioxx (Merck)

$4.85 Billion Settlement; 6.49% Fee Award Percentage

5. Cobell (Dept. of the Interior)

$3.4 Billion Settlement; 3.40% Fee Award Percentage

6. Tyco

$3.2 Billion Settlement; 14.50% Fee Award Percentage

7. Cendant (2000)

$3.166 Billion Settlement; 1.73% Fee Award Percentage

8. AOL Time Warner

$2.5 Billion Settlement; 5.90% Fee Award Percentage

9. Nortel I

$1.142 Billion Settlement; 3.00% Fee Award Percentage

10. Royal Ahold

$1.1 Billion Settlement; 11.88% Fee Award Percentage

11. Nortel II

$1.074 Billion Settlement; 7.74% Fee Award Percentage

12. McKesson

$1.042 Billion Settlement; 7.64% Fee Award Percentage

13. Countrywide/KPMG

$624 Million Settlement; 7.59% Fee Award Percentage

14. Cardinal Health

$600 Million Settlement; 18.00% Fee Award Percentage

15. Lucent

$517 Million Settlement; 17.00% Fee Award Percentage

16. Bank America

$490 Million Settlement; 18.00% Fee Award Percentage

17. Dyengy, Inc.

$474 Million Settlement; 8.73% Fee Award Percentage

18. Adelphia

$460 Million Settlement; 21.40% Fee Award Percentage

19. Raytheon

$460 Million Settlement; 9.00% Fee Award Percentage

20. Waste Management II

$457 Million Settlement; 7.93% Fee Award Percentage

21. Global Crossing

$447.8 Million Settlement; 16.04% Fee Award Percentage

22. Health South

$445 Million Settlement; 15.25% Fee Award Percentage

23. Freddie Mac

$410 Million Settlement; 20.00% Fee Award Percentage

24. Qwest

$400 Million Settlement; 15.00% Fee Award Percentage

25. Cendant (2006)

$374 Million Settlement; 7.71% Fee Award Percentage

Source: NALFA Research Library

Class Actions: Attorney’s Fees Before Cy Pres Payments?

 

No Way, Said Appellate Court in Affirming Decision Interpreting Scope of Class Action Settlement.

     Here is a post on a case demonstrating that the trial court is the ultimate gatekeeper as far as determining that a class action settlement is fair, including the attorney’s fees award under a settlement.

     In In re General Chemical Cases, Case Nos. A126881/A127769 (1st Dist., Div. 5 June 14, 2011) (unpublished), a $6.25 million settlement was reached in a sulfuric acid company chemical release class action by which attorney’s fees of $2.25 million were paid in common benefit fees with a cy pres feature for unclaimed funds. After a claimant calculation error was discovered, attorneys requested more fees and argued a lower court was mistaken in ordering the unclaimed settlement payment to be paid to the cy pres-designated charity.

     Not so, said the appellate court. The settlement agreement was clear on this aspect, and there was no mutual mistake of fact justifying equitable relief. Beyond that, the court properly played its gatekeeper role with respect to fees (with such an award being reviewed for abuse of discretion). The lower court was within its province to not award more contingent fees when the result would be that attorneys would have garnered more than 51% of the settlement amount considering the fees previously awarded and paid.

Class Actions: Class Member Not Arguing Constructive Common Fund Has No Standing To Challenge Fee Recovery Paid By Settling Defendant

 

Ninth Circuit So Rules In Recent Decision.

     In Glasser v. Volkswagen of America, Inc., Case No. 09-56618 (9th Cir. May 17, 2011) (for publication), VW settled with plaintiff in a class action after it consented to new disclosures relating to its smart-key replacement technology (but paid no money to the class), agreeing nevertheless to negotiate fees and costs but not contesting that Plaintiff prevailed and that his attorneys were entitled to something. VW agreed to pay fees and costs awarded by the court, which eventually did award fees of $417,663.73 and costs/expenses of $16,614.40. An objecting class member whose objections were overruled appealed the fee award.

     The Ninth Circuit here found that objecting class member lacked standing such that his appeal should be dismissed. Where fees are paid by the defendant rather than out of a common fund, the only basis to allow standing to an objecting class member is on a “constructive common fund” theory--namely, the claim that class counsel breached their fiduciary duty to the class by agreeing to an unfair settlement. Objector was not relying on this theory, but on an attenuated injury theory that was easily rejected by the appeals court.

1949 VW with split-rear window.  Source:  Wikipedia.

Class Action/Common Fund: Appellate Court Reverses Attorney’s Fees Award In Class Action Where Defendant May Be Insolvent

 

Setting Fees Under Wage/Hour Statutes Different From Collectibility of Fees, Remand to Award Fees Under Common Fund Doctrine With Directions.

     Barboza v. West Coast Digital GSM, Inc., Case No. B227692 (2d Dist., Div. 4 Mar. 24, 2011) (unpublished) has a tortured history, with this being the fourth appeal--with many of the past ones involving attorney’s fees issues.

     Boiled down to its essence, the lower court had previously awarded certain fees to plaintiffs’ attorneys in a wage/hour class action for successfully prevailing on individual claims after initially denying class certification. After the class certification decision was reversed, the lower court granted certification and then awarded fees to plaintiff’s class counsel fees based on a percentage of collection of certain amounts because defendant looked to be impecunious. (Plaintiffs had requested fees to be paid on a percentage of the common fund or based on a 4 times multiplier.) Plaintiffs had to engage special special postjudgment enforcement counsel, finding that a 40% contingency was the norm here, but the lower court thought the deal should be changed to align with the milestone recovery order for regular class counsel’s fees. Plaintiffs, class counsel, and special enforcement counsel appealed.

Class Action/Lodestar/Multiplier: First District, Division 1 Affirms $1,664,777.48 Fee Award, Using A 1.4 Multiplier, When Total Damages/Interest Award Was About $1.2 Milliion

 

Requested 2.0 Multiplier Scaled Back to 1.4.

     Just to show you how class action fee awards can often be larger than the damages awards in protracted, contentious cases, we now digest Alcoser v. Thomas, Case Nos. A124848 et al. (1st Dist., Div. 1 Feb. 16, 2011) (unpublished).

     There, a tenant successfully won a case against a landlord about withholding rent deposits on behalf of a class. After post-trial motions, the total damages/interest award came to about $1.2 million. The lower court, noting landlord’s “scorched earth manner of defending the case,” awarded plaintiffs $1,664,777.48 in attorney’s fees and costs, applying a 1.4 multiplier to the lodestar (a little lower than the 2.0 requested by plaintiffs).

     Landlord’s challenges to the fee award were rejected on appeal, in a 3-0 opinion authored by Justice Dondero. CCP § 1021.5 allowed for recovery of fees in this class action context. Winning plaintiffs presented contemporaneous time records and task-based summaries, sufficient substantiation for fee petition purposes. The 1.4 multiplier was justified based on the “scorched earth” defense of landlord, among other factors.

Class Actions/Civil Rights/Private Attorney General/Settlements: California Lawyer Article Explores Negotiation Of Attorney’s Fees In Public Agency Cases

 

Concurrent Negotiation of Substantive Relief and Fees in Public Agency Cases Is Allowable.

     Adam W. Hofmann, an attorney in the San Francisco office of Hanson Bridgett, has written an article entitled “Negotiating Attorneys Fees” in the January 2011 edition of The California Lawyer. In it, he explains that California cases expressly reject any blanket prohibition against concurrent negotiation of substantive relief and fees, citing Ramirez v. Sturdevant, 21 Cal.App.4th 904, 919-920 (1994) and applying it to civil rights/private attorney general cases. He does write that many plaintiffs’ counsel appear to split substantive relief and fee negotiations, but suggests that in settlements with public agencies negotiations should proceed concurrently on both these issues. He ends with this paragraph: “And don’t forget: In a case where the court must approve a settlement, a fairness hearing may be the best protection of all, and for all.”

Year End Wrap-Up: Mike & Marc’s Top 20 Attorney’s Decision Fees Decisions--Part 2 of 2.

     Here is the second installment of our top 20 decisions.

     10. Jankey v. Lee, 181 Cal.App.4th 1173 (1st Dist., Div. 4 2010), review granted, No. S180890 (May 12, 2010) -- authored by Presiding Justice Ruvolo; discussed in our Feb. 6, 2010 post.

     Attorney’s fees are awardable to a prevailing defendant under Civil Code § 55 without the necessity of showing a plaintiff’s action was “frivolous, unreasonable, or groundless,” disagreeing with Ninth Circuit’s Hubbard decision. This has been accepted for review by the California Supreme Court and is not published anymore, but available for reading in the California Reporter or research databases.

     9. Plummer v. Day/Eisenberg, LLP, 184 Cal.App.4th 38 (4th Dist., Div. 3 2010) -- authored by Justice Ikola; discussed in our Apr. 30, 2010 post.

     Contingency fee agreement-driven case with an attorney charging lien is not subject to the disclosure/consent requirements of Fletcher v. Davis, 33 Cal.4th 61, 71-72 (2004).

     8. Conservatorship of Whitley, 50 Cal.4th 1206 (Cal. Sup. Cto. 2010) -- authored by Justice Moreno; discussed in our Dec. 22, 2010 post on Pappas v. Farr (2d Dist., Div. 6 2010) (unpublished).

     Litigant’s personal pecuniary interests may not be used to disqualify the litigant from obtaining fees under California’s private attorney general statute (CCP § 1021.5); rather, the deciding court must focus on the financial burdens and incentives involved in bringing the lawsuit.

     7. PNEC Corp. v. Meyer, 190 Cal.App.4th 66 (4th Dist., Div. 3 2010) -- authored by Justice Ikola; discussed in our Nov. 18, 2010 post.

     Defendant successfully obtaining dismissal of action based on forum non conveniens is a prevailing party under Civil Code section 1717, extending the reasoning from Profits Concepts Mgt., Inc. v. Griffith, 162 Cal.App.4th 950 (2008) (an earlier case determining that a defendant successfully moving to quash service for lack of personal jurisdiction is a prevailing party, authored by Justice Fybel of the 4th Dist., Div. 3).

     6. Lockton v. O’Rourke, 184 Cal.App.4th 1051 (2d Dist., Div. 4 2010) -- authored by Presiding Justice Epstein; discussed in our Apr. 24, 2010 post.

     Contractual clause in retainer agreement allows attorney parties to recover for their efforts in collecting fees against clients, avoiding application of the Trope bar.

     5. In re Mercury Interactive Corp., 618 F.3d 988 (9th Cir. 2010) -- authored by Circuit Judge Tashima (with a dissent by Circuit Judge Bybee); discussed in our Aug. 18, 2010 post.

     Although refusing to articulate a bright-line rule, F.R.Civ. P. 23(h) does not contemplate that class members’ objections to class counsel fee requests have to be filed before the fee motion itself is filed, which denies the class the full and fair opportunity to examine and oppose the motion.

     4. Estate of Manuel, 187 Cal.App.4th 400 (2d Dist., Div. 3 2010) -- authored by Acting Presiding Justice Croskey; discussed in our Aug. 11, 2010 post.

     Costs of proof sanctions for failure to admit requests for admissions under Code of Civil Procedure § 2033.420(a) can only be assessed against a party, not the party’s counsel.

     3. Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC, 185 Cal.App.4th 1050 (4th Dist., Div. 3 2010) -- authored by Justice Moore; discussed in our June 23, 2010 post.

     Expert witness fees awardable under contract clause can be recovered under routine costs memorandum approach, disagreeing with Carwash’s approach that the fees must be pled and proven at trial.

     2. Donahue v. Donahue, 182 Cal.App.4th 259 (4th Dist., Div. 3 2010) -- authored by Justice Aronson; discussed in our Feb. 27, 2010 post.

     Extensive discussion of factors that are probative in gauging the reasonableness of fees requested in probate trust litigation involving multiple attorneys, billings with duplicative entries, litigation inefficiencies, and block billing time entries.

     1. Chavez v. City of Los Angeles, 47 Cal.4th 970 (Cal. Sup. Ct. 2010) -- authored by Justice Kennard; discussed in our Jan. 14, 2010 post.

     Trial courts have discretion to deny or reduce fee requests to winning plaintiffs in FEHA cases where a plaintiff’s success is minimal or there is a grossly inflated fee request.

Class Actions: NY Court of Appeals Rules that Common Fund Doctrine Does not Allow Award of Counsel Fees and Expenses to an Objectant in a Class Action

Court Rules in 5 –2 Decision that 1975 Statutory Reforms to Class Actions in NY Allow Fees Only to Class Representative.

     This next one is a bit off our beat, since it involves NY law, but we think it will be of interest to class action attorneys.  New York’s highest court has ruled, in a divided decision, that a successful objectant to a fee award in a class action is not entitled to fees, because he was not a class representative, just the representative of a class member.  Flemming v. Barnwell Nursing Home & Health Facilities, Inc., 2010 NY Slip Op 07414 (October 21, 2010).

     Judge Pigott, writing for the majority, summarized:  “Simply put, although a class may at times benefit from an objectant's actions, the Legislature did not provide recompense for those efforts.”

     Not surprisingly, the dissent, in which Chief Judge Lippman concurred, considered policy.  The author of the dissent, Judge Smith, wrote:  “Whatever the faults and virtues of the class action device, no one disputes the need to control class counsel's fees — and nothing furnishes so effective a check on those fees as an objecting lawyer. . . . . Today's decision greatly lessens the likelihood that fee applications submitted by class counsel will ever be opposed. Opposition will be filed only where a lawyer or client is willing to act from philanthropic motives, or in the few cases where a member of the class has a large enough interest in the size of the fee to justify bearing the expense of objecting to it.”

     The lines are clearly drawn, and it looks like it will take further legislative action in NY, if the rule is to be changed in future class action cases brought in that state.

     Joel Stashenko has reported on the case in the October 22, 2010 NYLJ.

Trio Of Cases: Class Action Fee Distribution, Anti-SLAPP Fees To State Bar, And Reach Of Arbitrator Disclosures Highlighted California Appellate Court Thinking

Declaratory Relief Action Denial Reversed re Class Action Fee Distribution.

     In Carder v. Patten, Faith & Sandford, Case No. B221940 (2d Dist., Div. 5 Oct. 12, 2010) (certified for publication), the appellate court reversed judgment entered against a plaintiff class action lawyer in a declaratory relief action he brought against other class action co-counsel having differences over the distribution of awarded attorney’s fees in a successfully concluded class action. Declaratory relief under CCP § 1060 was found to be proper because there was a justiciable controversy over what proportion of fees were due to each set of attorneys and whether defendants were barred by accord and satisfaction after cashing a settlement check sent by plaintiff. The judge hearing the declaratory relief action also found exclusive jurisdiction was with a different superior court blessing the class action fee award, but the earlier ruling did not back that up and continuing jurisdiction rests with the court (rather than a particular superior court)--although the reviewing court noted “it generally makes sense for enforcement matters to return to the judge originally assigned the case” unless there are changed judicial assignments, retirement, or other unavailability.

California State Bar Entitled to Recovery of anti-SLAPP Fees.

     The second one, Henschel v. State Bar of California, Case No. B213595 (2d Dist., Div. 7 Oct. 12, 2010) (unpublished), involved an attorney’s challenge to an anti-SLAPP fee award of $7,751 against him and in favor of the State Bar. The primary challenge, outside of rebuffed challenges to the amount of the fee award, was that State Bar was barred under the Witte rule precluding fee recovery to self-represented attorneys. This argument did not prevail, according to the appellate court, because the attorney representing the State Bar is more analogous to an in-house counsel, who can be awarded anti-SLAPP fees. (Musaelian v. Adams, 45 Cal.4th 512, 520 (2009).) The result was that the fee award was affirmed.

Arbitrator Representing Law Firms In Fee Disputes Must Disclose His Practice Background to Client Being Chased for Fees by Law Firm in an Arbitration.

     Finally, Benjamin, Weill & Mazer v. Kors, Case No. A125732 (1st Dist., Div. 2 Oct. 12, 2010) (certified for publication) involved a disgruntled client’s challenge of a $102,287.39 contractual arbitration award for claimed delinquent fees owed to a law firm representing client in former expensive, acrimonious civil litigation. The main challenge was that the chief arbitrator failed to disclose that he had represented law firms in challenges by clients to fee awards and had an extensive practice base in this area. The appellate court agreed that this disclosure might be material under the ethical standards that are incorporated into the CCP arbitration disclosure requirements. For our readers who eschew arbitration, there is also an interesting discussion about why disclosure is heightened for arbitrators, given the deference accorded awards and the possible bias arising from an arbitrator’s economic self-interest in deferring to “repeat clients.”

In The News . . . . Class Counsel Gets $500,000 Fee Award On Reconsideration As The BAR/BRI Saga Continues

 

U.S. District Judge Real Awards this Amount for Over 3 Years of Work.

     If you have read our “In the News” category (which you can search at our home page by using the search function on the left hand side), you know we have reported on McGuireWoods efforts to recover legal fees as class counsel in the BAR/BRI litigation. Well, another part of this continuing saga has come to rest.

     Last year, the Ninth Circuit Court of Appeals upheld the settlement in the case, but reversed U.S. District Judge Manuel Real’s decision on incentive payments to class representatives. Judge Real, on remand, decided no fees should be awarded based upon the firm violating California professional conduct rules in failing to notify other class members about the incentive award feature of the retention agreement.

     McGuireWoods, which had about $5.6 million in fees and more than $1.25 million in expenses into the case, moved for reconsideration of the “no fee” ruling. Recently, Judge Real did award the firm $500,000 in fees for the July 19, 2007-September 10, 2010 period in a decision read from the bench in connection with the reconsideration motion.

     According to a September 28, 2010 post by Amanda Bronstad, the roller-coaster ride isn’t over yet. McGuireWoods is disappointed at the recent ruling and will appeal the decision to the Ninth Circuit. So, stay tuned for more in this modern courtroom drama involving the essence of our blog—attorney’s fees.

Class Actions: New York’s Highest Court Hears Interesting Case On Whether Objector Entitled To Fees Under Common Fund Doctrine

 

Appellate Division Held Objector Not Entitled to Fees.

     Though we do not venture out of California often, we do report on an interesting case that was just argued in the class action area in front of the New York Court of Appeals (which, for those of you unfamiliar with the New York system, is the equivalent of California’s supreme court).

     In Flemming v. Barnwell Nursing Home and Health Facilities, 56 A.D.3d 162 (2008) (N.Y. Ct. of Appeal No. 149), the intermediate appellate court prohibited a class member objector from recovering her attorney’s fees for successfully challenging (partially) an award of attorney’s fees to class counsel. The intermediate court could find no statute or contract allowing for such an award. On appeal to the higher New York court, objector’s attorney will argue that the common fund doctrine does prove a basis for recovery of fees—if it works for class counsel, it would also apply to objectors in the fee area. We shall have to wait and see on who prevails on this one.

     For more on this case, see Joel Stashenko’s September 13, 2010 post at the New York Law Journal.

     Hat Tip to appellate specialist Ben Shatz who let us know about this interesting case.

Class Actions: Ninth Circuit Determines That Class Counsel Fee Motions Cannot Be Set For Hearing Before Persons Can File Objections To Fee Requests

 

No Bright-Line Rule Is Set, But Timing of Motions Must Take into Account Timing of Objections to Actual Fee Request Submissions on Due Process Grounds.

     This next case should be of keen interest to class action practitioners.

     The Ninth Circuit, in In re Mercury Interactive Corp. Sec. Litig., Case No. 08-17372 (9^th Cir. Aug. 18, 2010) (for publication), ruled that a district judge abused its discretion under Federal Rule of Civil Procedure 23(h) in setting an objection deadline for class members regarding a fee request on a date before the deadline for lead class action counsel to file their fee motion.

    

     [Above:  “I object! The gentleman from Pennsylvania objects, the gentleman will reduce his objection to writing.”  American cartoon, between 1800-1840.  Library of Congress.]

     The district judge approved a 25% percentage of recovery from a common fund amounting to class action attorney’s fees of $29,375,000 in a stock option backdating securities case, when the supporting fee submissions showed class counsel expended a lodestar value of $8,396,593.20. The problem was that two objectors lobbied for a lower 18% percentage of recovery, even though they objected before seeing the class action attorneys’ fee submissions. The fee award was challenged.

     The appealing parties were successful and the fee award reversed, because Circuit Judge Tashima (on behalf of the majority) found that Rule 23(h) requires a district court to set the deadline for objection to class counsel’s fee request on a date after the fee submissions have been filed, a rationale further bolstered on due process grounds. This was especially justified where a common fund was involved. Although the majority refused to adopt a “bright-line rule” with respect to Rule 23(h) fee motion timing, the schedule at least requires that any objections be filed after the fee motion itself is filed.

     Circuit Judge Bybee agreed that the district judge erred with respect to the scheduling, but dissented because he found that the scheduling challenge had been waived.

Section 998: Lump Sum 998 Offer Made To Class Representative of Multiple Classes Found To Be Invalid

Fourth District, Division 1 So Rules, Assuming 998 Offers Are Valid in a Certified Class Situation.

     Nelson v. Pearson Ford Co., Case No. D054369 (4^th Dist., Div. 1 July 15, 2010) (certified for publication) is an interesting decision where significant fees were awarded in a class action involving a California consumer-shifting fee statute. However, because there were some partial reversals, that fee award had to be revisited. Nevertheless, the discussion of the Code of Civil Procedure section 998 issue deserves our attention.

     Following certification of the matter as a class action, defendant sent a 998 offer to the class representative for a sum certain, even though the representative represented two classes. After assuming (but not deciding) that 998 offers can be made in a certified class action, the appellate court agreed with the lower court that the defense pretrial settlement offer was invalid. The reason? The lump sum offer was made to a class representative of two classes. By analogy to cases invalidating lump sum offers to separate parties in normal actions, the Fourth District, Division 1 found no logical reason foreclosed extending this analogous jurisprudence to a 998 offer made to multiple but separate classes. That meant the class representative faced the same uncertainty confronting separate parties in conventional litigation. 998 offer found invalid.

     BLOG UNDERVIEW—We will note the absence of California case law on how 998 offers are to be treated in putative and certified class actions. Nelson assumed 998 offers are valid in class actions, but this premise needs to be fleshed out in future cases.

Class Actions: Wage/Hour Attorneys Do Get $93,161 In Fees . . . But Not Their Requested $210,000 In Fees

Second District, Division 2 Finds No Higher Award is Warranted.

     In Knik v. Marriott International, Inc., Case No. B220529 (2d Dist., Div. 2 July 14, 2010) (unpublished), plaintiff’s attorneys in a wage/hour class action obtained an award of $93,161 in attorney’s fees in a case where the gross settlement amount was $700,000. They wanted $210,000 instead, even though aggregate fees were $117,401.5--requesting a 2.05 multiplier to get to the magic number. After disallowing some minimal costs, the trial court granted the $93,161 in fees based on a 1.1 multiplier.

     Plaintiff appealed, ostensibly because their attorneys wanted more.

     C’mon, everybody, said the appellate court. 

You received fees for about 230 hours of work, over $3,240 per day or $405 per hour for 28 eight-hour days of work over the course of one year. Given this minimal investment of time, do not complain. No abuse of discretion in this one.

Equity: Common Fund Debate . . . . Lodestar Or Percentage Of Recovery . . . . U.S. District Court Opts For Lodestar

USDJ Chooses Lodestar in Wage/Hour Class Action Fee Recovery Settlement.

     Our friend and fellow blogger H. Scott Leviant has reported on Anderson v. Nextel Retail Stores in his June 30, 2010 post at The Complex Litigator website.

     There, U.S. District Judge Stephen Wilson, in a common fund wage/hour class action settlement, chose the lodestar fee recovery methodology over the percentage-of-recovery method (presumptive in the Ninth Circuit). District Judge Wilson found that the case was “run of the mill”—a proposition vigorously disputed by Mr. Leviant in his  June 30 post—and rejected awarding plaintiffs’ attorneys a 1.64 lodestar multiplier, the result if the percentage-of-recovery method has been adopted.

Class Actions: Pro Bono Settlement Fees/Costs Up To $750,000 In Food Stamp Processing Class Action

O’Melveny and Western Center on Law & Poverty Reap Award, With O’Melveny Donating a Portion to Non-Profit Causes.

     O’Melveny & Myers LLP and the Western Center on Law & Poverty teamed up to prosecute a class action against Orange County’s Social Services Agency with respect to more expeditious processing and approval of food stamp applications.

     Above:  First Food Stamp.  1939.  Library of Congress.

     In Blackstar v. Orange County, which was assigned to US. District Court Judge Dale S. Fischer, preliminary settlement approval was given to a consent decree establishing guidelines and deadlines with which the SSA must comply.

     The upside for the attorneys? The settlement provides for an award of attorney’s fees and costs of up to $750,000, with O’Melveny indicating it will donate a portion of its award to non-profit community services providers. Nice ending for a pro bono case with some challenging legal issues.

     For more on this story, see Teri Sforza’s June 9, 2010 post “Class action attorneys’ full statement on food stamp settlement,” available for reading online at The Orange County Register’s website.

Class Actions: Lodestar/Multiplier Determinations Remanded In Private Attorney General Statute Fee Award

Court of Appeal Also Decides Prejudgment Interest Not Allowable on Fee Awards.

     Okay, so who says we don’t try to give you readers a synopsis of decisions (even though some might be a little wordy)? The next decision—Woosley v. State of California, Case No. B209890 (2d Dist., Div. 5 Apr. 16, 2010) (unpublished)—involves some interesting class action fee award issues. We have, in this post, summarized a 51-page decision, unless you desire to read it yourself.  What a deal!

In The News . . . . McCourts’ Divorce Fees Pile Up, Large “Lemon Law” Award Against Mercedes-Benz In Wisconsin, And Class Member Objects To Class Action Settlement Garnering Only Fees For Class Counsel

$19 Million in Fee Spent in McCourt’s Divorce.

     Frank McCourt has estimated his divorce-related expenses at $5-$10 million, while Jamie McCourt has estimated her expenses as $9 million (with Jamie asking Frank to pay them), all in the on-going and apparently acrimonious divorce proceeding between Los Angeles Dodger owner Frank and former officer Jamie.

     In an article “High cost of McCourts’ divorce: $19 million in fees” posted by Bill Shaikin on March 5, 2010’s Los Angeles Times Website, several family law experts said they could not recall a divorce costing $19 million. One expert estimated a total cost of $5 million as being “consistent with high-profile” divorce cases. The article indicated that divorce lawyers generally charge from $250 to $750 per hour in the Southland. In comparison, the Britney Spears-Kevin Federline divorce cost $835,000, and former NFL quarterback Berne Kosar spent more than $4 million on attorney’s fees in his divorce.

     The $19 million in fees is more than the Dodgers will spend on their starting infield this season, according to Mr. Shaikin’s article.

Mercedes-Benz Hit With Large “Lemon Law” Judgment by Wisconsin Judge.

     A Wisconsin judge has ordered Mercedes-Benz USA LLC to pay $482,000 in damages and legal fees to a Wisconsin customer who was sold a defective car and not given a timely refund under Wisconsin’s stringent “lemon law.” The judgment broke down to $168,000 in damages plus $314,000 in costs and legal fees for plaintiff’s lawyers. For more information on this case, see Ryan J. Foley’s March 5, 2010 article.

Schering-Plough/Merck Merger Class Action Settles, With All The Money Going To Pay Class Counsel’s Fees.

     As reported in Charles Toutant’s article “Shareholders Cry Conflict of Counsel in Class Action Over Merck Merger” (posted March 8, 2010 on Law.com), some class members are not happy about a settlement in the Shering-Plough/Merck merger class action in which all the money (about $3.5 million) goes to class counsel rather than providing any monetary recovery to shareholders. Objectors cite this result as a reason tort reform is being called for, while class counsel says the objection is “entirely devoid of merit.”

In The News . . . . Class Action Attorneys For Black Farmers May Get A Substantial Fee Recovery

$1.25 Billion Settlement Yields Potential Fee Recovery of 4 to 7 %

     The U.S. Government announced a tentative $1.25 billion ($1,250,000,000) settlement to resolve a racial discrimination action by black farmers who were denied access to USDA loan programs and denied participation in an earlier class action settlement. Although still subject to congressional authorization by March 31, 2010, the attorney’s fees recovery in this suit—if authorized—is not bad at all: somewhere between 4-7% of the potential recovery, which translates to a range of $49-89 million for the class action attorneys.

     For more on this story, see the article entitled “Government Announces $1.25 Billion Settlement in Black Farmers Litigation,” posted February 18, 2010 at The Blog of Legal Times.

  Farmers at soil conservation meeting, Vernon, Oklahoma, February 1940.  Lee Russell, photographer.  Library of Congress.

In The News . . . . Lawyers Having Conflicts With Class Representatives Over Incentive Payments Denied Fees In Entirety in BAR/BRI Settlement

 

Nonconflicted Attorneys Get Award of Fees; Conflicted Attorneys Do Receive Reimbursement of Over $1.2 Million in Expenses.

     In our April 26, 2009 post, we reported on Rodriguez v. West Publishing Co., 563 F.3d 948 (9^th Cir. 2009), where class representative incentive agreements creating conflicts of interests required reconsideration of fee awards to both objectors and class counsel in the BAR/BRI bar review class action case. (The incentive arrangement provided that five named plaintiffs would get payments on a sliding scale basis—the amount went up depending on the ultimate settlement, but incentive payments were capped if the settlement figure reached $10 million. This arrangement had never been disclosed to the class or the district judge during the class certification stage of the case.)

     Now, U.S. District Judge Manuel L. Real has reconsidered the fee issues and determined that the conflicted lead class counsel was entitled to no fees at all, although awarding lead conflicted counsel over $1.2 million in reimbursable expenses. District Judge Real found that this ethical violation was serious enough, despite the fairness of the overall settlement, to result in the forfeiture of attorney’s fees altogether on both contractual and quantum meruit claims. (Image Technical Service, Inc. v. Eastman Kodak, 136 F.3d 1354 (9^th Cir. 1998); Huskinson & Brown, LLP v. Wolfe, 32 Cal.4^th 453 (2004).)

     Judge Real did award substantial fees to nonconflicted attorneys representing the class, although reducing the lodestar by 10% in order to account for excessive fees and noncompensable work (and denying the multiplier requests). He also awarded $8,125 respective fees to two of objectors’ attorneys.

     It has been reported that McGuireWoods LLP (counsel awarded nothing) have asked Judge Real to reconsider his ruling.

     Judge Real’s order was filed February 3, 2010 in Rodriguez, and can be found on-line (as well with other background on the case) at The Wall Street Journal website. See the February 12, 2010 article entitled “The Class Gets $49 Million, But the Lawyers Get Nothing.”

Class Action And Arbitration Crossover: Appellate Court Affirms Arbitrator Computational Error Correction In Class Action Attorney’s Fee Allocation Dispute

First District, Division 1 Addresses Claimed Conflict Between JAMS Rules and CCP Arbitration Correction Provision.

     Here is a decision that involves consideration of class action and arbitration crossover issues.

     Two attorneys deserving of attorney’s fees in a substantial class action settlement entered into an agreement among themselves on the allocation of fees, calling for binding JAMS arbitration to resolve any allocation dispute. A lot was at stake—over $9.4 million in fees were subject to division.

     The case—Thierman v. Kelson, Case No. A124367 (1^st Dist., Div. 1 Feb. 5, 2010) (unpublished)—is interesting in its discussion on the rules that govern JAMS arbitration proceedings. The JAMS arbitrator made a post-award computational error correction, and the aggrieved party argued over whether JAMS rule 24(j) or Code of Civil Procedure section 1284 applied. The appellate court found no conflict between the two rules, but has a nice discussion on what parties can contractually agree to in an arbitration agreement. Also, the appellate court reversed an approximate $10,000 fee award arising out of the allocation dispute, finding no fee clause that allowed such entitlement in the allocation agreement.

Class Action And Equity: Shareholder Obtaining Minor Changes To Proxy Statement Not Entitled To Substantial Benefit Fee Recovery In The Absence of Presuit Notification To Defending Public Company

 

Fourth District, Division 3 Uses Equitable Maxims in Reaching Result.

     Our favorite line in the decision we next review is this: "Since delay defeats equity, we will hold our applause."

       Above:  Cartoon showing blinded "Justice" trying to drag the "Letter of the Law" through obstacles of "delay, postponement, re-trial, and technicality".   1912.  Library of Congress.

 

      Justice Aronson, the author of that sentence on behalf of a 3-0 panel in Pipefitters Local No. 636 Defined Benefit Plan v. Oakley, Inc., Case No. G040727 (4^th Dist., Div. 3 Jan. 13, 2010) (certified for publication), eventually ruled that a shareholder in a publicly traded company—who sought to recoup attorney's fees in the range of $325,000-$375,000—was properly denied a fee recovery under the "substantial benefit" equitable theory where the shareholder provided no presuit notification to the company and achieved fairly immaterial changes in a challenged proxy statement.

     The appellate panel found that the equities did not favor shareholder, who did not provide any presuit notification in an effort to work out the proxy statement issues. The Court of Appeal refused to limit application of Abouab v. City and County of San Francisco, 141 Cal.App.4^th 643 (2006)—which did impose a presuit notification requirement where fees were sought under a substantial benefit theory—just to public entities. Rather, its reasoning did extend to this shareholder private dispute. The panel also endorsed Abouab, refusing the invitation to part company from the decision.

     Because plaintiff shareholder's victory was largely pyrrhic, See our earlier post today for an image of King Pyrrhus.  Justice Aronson found it unreasonable to award exorbitant fees, especially in a situation where "a lion produced a mouse."

     We are considering opening a new category in our sidebar, "Pyrrhic Victories."

     BLOG UNDERVIEW—Also, the opinion reminds us that we all need to proofread carefully our pleadings before filing them. Justice Aronson dropped a footnote indicating that shareholder's complaint was identically copied from prior complaints filed against other corporations, even containing a typo that named one of the other corporations rather than Oakley. That typo did not help plaintiff when it sought fees before the trial court and then tried to obtain reversal of the fee denial on appeal.

Class Actions: Trial Court’s Error In Not Enforcing Arbitration Provision On Attorney’s Fees Range Was Not Prejudicial Where Lower Court Found Fees Were Reasonable And Not Collusive In Nature

First District, Division 5 Faces First Impression Issue in Reviewing Trial Court’s Refusal to Enforce Arbitration Provision In Class Action Fee Resolution Arena.

     Well, we kick off our 2010 review of jurisprudence with an interesting decision from the First District, Division 5 in the class action area.

     In Cellphone Termination Fee Cases, Case Nos. A122765/A122768 (1^st Dist., Div. 5 Dec. 31, 2009) (certified for partial publication—but not posted until Jan. 4, 2010), the Court of Appeal decided that the lower court erred in failing to approve an arbitration fee provision calling for arbitration of attorney’s fees in the aftermath of a class action settlement where the lower court had already determined that the settlement was reasonable with respect to the range of fee recovery and was not collusive in nature. Although the parties to a class action agreed to a floor and ceiling in fee recovery, the lower court determined that the arbitration provision was void in entirety because it improperly excluded absent class members from the fee application process, a ruling found infirm on appeal. The trial court went ahead and later awarded plaintiffs fees of $2.3 million and costs of approximately $200,000 after invalidating the arbitration provision. However, there is the rub: the appellate court determined that no reasonable arbitrator would have reached a different result (a Watson type of no prejudice standard applied to a hypothetical arbitration), given that the fee award was within the proverbial ballpark and was noncollusive.

     Fascinating decision, we might say, in many respects. A key to the result was that the class objectors were not impacted by any fee decision because it did not come out of a common fund—rather, class members still obtained the same relief no matter what the decision by the arbitrator or the court; only the defendant was aggrieved and had a real stake in the fee controversy. Objectors were allowed to weigh in on the reasonableness determination, and that was sufficient.

Class Actions: Class Action Fee Settlement Remanded Because Trial Judge Failed To Use Lodestar Method

 

$20,000 Fee Award Reversed Where Class Action Attorney Requested $263,606 in Fees.

     The next case illustrates that California courts generally require use of the lodestar method in non-common fund cases. Trial judges cannot simply use the common fund method in a case that really isn’t a fund case; in these instances, the lodestar method must be used.

     That is exactly what the Fourth District, Division 3 ruled in Worley v. Storage USA, Inc., Case No. G041170 (4^th Dist., Div. 3 Dec. 21, 2009) (unpublished), a 3-0 decision authored by Acting Presiding Justice Bedsworth.

     There, 437 claims were ultimately paid out of a class action settlement involving a class of 2,103 individuals. Plaintiff’s main attorney requested $263,606 in fees and $2,615 in costs. The trial judge only awarded $20,000 in fees.

     The appellate panel reversed. It found that the lower court had used the common fund approach for setting fees, even though settlement agreement provided fees would be paid in addition to the class recovery. Instead, the trial judge should have used the lodestar method, with the record being unclear that the correct methodology was used. Defendant argued that a court may depart from the lodestar method in exceptional cases, but Justice Bedsworth disagreed by observing “[t]he cases relied on do not recognize an exceptional circumstances exception to the lodestar requirement.” (Slip Opn., p. 9.) Defendant also argued the lower court had discretion to reduce the lodestar by 90% based on the results obtained, but the appellate panel found that this type of reduction only occurred where there were extraordinary circumstances (such as finding the prevailing party lied about material matters). None of the cases cited by defendant showed that a percentage fee is the be-all-and-end all approach. (BLOG OBSERVATION—There are California cases endorsing use of the percentage fee method as at least a “cross check” on the lodestar approach.)

Three-Fer From Recent California And ABA Monthly Magazines/Papers

 

No. 1: Ellen Peck Reviews “Fees, Fee Agreements & Arbitrations” in December 2009 Edition of CALIFORNIA BAR JOURNAL.

     Ellen R. Peck, an Escondido sole practitioner and former State Bar Court judge, made these points in her recent California Bar Journal article:

• Except in limited circumstances, most private attorneys have to notify clients they do not carry legal malpractice insurance or that it has lapsed/been terminated (Cal.Rule Prof. Conduct 3-410);
• Incentive awards to class action representatives are discretionary and should not be a bargain point in a fee or retainer agreement (Rodriguez v. West Publishing Corp., 563 F.3d 948, 958-959 (9^th Cir. 2009));
• Interest calculations for collecting attorneys must be based on a 365 or 366 day year, not a 360 year, under penalty of being a False Advertising Act violation (Karton v. Dougherty, 171 Cal.App.4^th 133, 138 n.1 (2009));
• A retainer agreement’s predispute agreement for binding fees/costs arbitration is enforcement after Mandatory Fee Arbitration Act requirements are exhausted, with the State Bar website having a good sample form for such an arbitration clause (Schatz v. Allen Matkins Leck Gamble & Mallory LLP, 45 Cal.4^th 557, 574-575 (2009));
• A lawyer must consider withdrawing from representation or making disclosures to clients if he/she contemplates including a Civil Code section 1542 waiver in a settlement agreement with a client over a fee dispute, based on the legal malpractice waiver repercussions flowing from the release (State Bar Standing Comm. on Prof. Responsibility & Conduct Formal Opinion No. 2009-178)); and
• Lawyers are generally prohibited from charging, collecting, or receiving any advance fees or other compensation in connection with loan modification legal services (Bus. & Prof. Code, sec. 6106.3(a); Civ. Code, sec. 2944.6).

No. 2: Hon. Edward G. Weil Indicates Prior Settlement Communications In Fee Disputes May Be Admissible in His Article, “Are Settlement Talks Confidential?”, Published in the December 2009 Edition of CALIFORNIA LAWYER.

     Hon. Edward G. Weil, a Contra Costa County Superior Court Judge and former California deputy attorney general, cautions that prior settlement communications may be admissible in fee dispute litigation, especially private attorney general fee hearings, fee “catalyst” cases, and ambiguous settlement agreement disputes. He also has a nice compendium about the confidentiality and admissibility of settlement discussions in other contexts.

No. 3: Four Substantive Legal Practice Areas Dominate Malpractice Claims Since 1985, Reports James Podgers in “Practice Pitfalls,” Found In the December 2009 Edition of the ABA JOURNAL.

     The ABA Journal article confirms that, between 1985 and 2007 (based on information published in the ABA Standing Committee on Lawyers’ Professional Liability’s annual Profile of Legal Malpractice Claims), four practice field areas have been and still are at the top of the list: plaintiffs personal injury; real estate; family law; and estate, trust and probate. The percentage of all claims reported in the ABA study for 2007 in these top four practice fields break down this way:

• Plaintiffs personal injury – 21.56% (pretty steady, with 21.65% in 1995);
• Real estate – 20.05% (up the most in the top 4, with 14.35% in 1995);
• Family law—10.33% (up slightly, with 9.13% in 1995); and
• Estate, trust and probate – 9.68% (up some, with 7.59% in 1995).

Class Actions: Class Counsel Have Obligations To Enforce Judgment And Report To Supervising Court On Uncollectibility

Class Counsel’s Obligations Do Not End With Entry of Judgment.

     Class actions have heightened obligations for class counsel, with fiduciary obligations that transcend those owed to non-class clients. The next case shows that the obligations extend beyond mere entry of judgment.

     Barboza v. West Coast Digital GSM, Inc., Case No. B215454 (2d Dist., Div. 4 Nov. 19, 2009) (certified for publication) involved a situation where class counsel obtained a stipulated judgment against a defendant, but then argued he had no obligation to enforce any judgment on behalf of the class after the attorney’s fees motion was heard.

     Not so, said the appellate court. Class counsel’s obligations do not end with entry of judgment, but continue until all issues are resolved (which may include enforcement of judgment). If need be, class counsel may have to associate in specialized judgment collections counsel (which must be paid by the class from any recovery achieved). If no recoverable assets are found to exist after a diligent inquiry, class counsel should present such findings to the supervising trial court and should then obtain a ruling that counsel is relieved of any further obligations to the class.

In The News . . . . Wal-Mart Settles Many Federal Unpaid Wages Lawsuits For Between $65-85 Million

Plaintiffs’ Attorneys Stand To Be Awarded One-Third of Final Recovery Up to An Estimated $28 Million Ceiling.

     Wal-Mart Stores Inc., the world’s largest retailer, recently won approval of a settlement of over 30 federal lawsuits alleging the retailer did not pay all required wages to workers. The settlement, which was blessed on November 2, 2009 by U.S. District Judge Philip M. Pro in Las Vegas, calls for a settlement payment of between $65-85 million.

     What about the plaintiffs’ attorneys? Not a bad recovery either. As reported in Bloomberg.com, the attorneys will be paid one third of the recovery up to an estimated ceiling of $28 million depending on the claims actually made by class members.

     The settled cases were combined in In re Wal-Mart Wage & Hour Employment Practices Litig., MDL 1735 (U.S. Dist. Ct., D. Nev.). For more reaction on this settlement, see Margaret Cronin Fisk’s November 3, 2009 article “Wal-Mart Wins Final Approval of Workers’ Wage Suit Settlement,” available for reading at Bloomberg.com.

Attorney's Fees in the News: Objectors' Attorneys Get Awards on Remand in BAR/BRI Class Action

 The Ninth Circuit Having Spoken, Trial Judge Awards Token. 

     In an April 26, 2009 post, we reported that class representative incentive agreements that created conflicting interests required new consideration of fee awards to objectors and class counsel.  The case was Rodriguez v. West Publishing, Case Nos. 07-56643 et al. (9^th Cir. Apr. 23, 2009) (for publication), involving the $49 million class action settlement between BAR/BRI class members and West Publishing/Kaplan Inc.  The trial judge was the Hon. Manny Real.

     In a July 22, 2009 on-line article appearing on law.com, Amanda Bronstad reports for The National Law Journal under the headline, "Federal Judge Grants Attorney Fees in BAR/BRI Case but Slashes Amount."

     Do the math:  Judge Real awarded $8,125 to one attorney, and $16,250 to the other attorney.  According to Ms. Bronstad's article, the first attorney had requested $42,655 in fees, and $884 in costs.  The second attorney had requested $108,000 in fees.

     Thus, the objectors' attorneys reaffirmed the principle that incentive awards should not be structured in a way that creates a conflict of interest between the class members and the incentive award plaintiffs.  The reversal of the incentive awards led to savings for the class as a whole.  The objectors' attorneys received fee awards in recognition of their contribution, but a tad less (actually, more than a tad less) than they had requested.  So everyone must be delighted with the outcome, right?   Right?   

Class Action: Settlement Order Vacated in Wage/Hour Class Action Settlement, Including Cost Award

Second District, Division 8 Finds That Class Notice Capping Costs Would Not Allow For Higher Settlement Costs Award.

     In Clark v. American Residential Services LLC, Case No. B203476 (2d Dist., Div. 8 July 6, 2009) (certified for publication), a trial court approved a wage/hour class action settlement for a total of $2 million, inclusive of attorney's fees and costs. The settlement provided for incentive awards of $25,000 to each of the two named putative class representative, with the other 2,360 class members receiving an average payment of $561.44. The settlement approved by the lower court also awarded $600,000 as attorney's fees as well as total litigation costs and claims administrator fees of $44,574.27. Earlier, a class notice had gone out to class members about the proposed settlement stating that plaintiffs' counsel would request reimbursements "of costs of up to $40,000." Some objectors appealed, arguing that the costs had been capped..

     Their appeal was successful.

[See below:  Hill's Genuine Magnetic Anti-Headache Cap - A Boon  to All Brain Workers.   c1880-1910.  Library of Congress.] 

Class Actions: $3 Million Fee/Costs Award Affirmed in B&P Section 17200 Consumer Privacy Class Action Against Bank of America

First District, Division 5 Rejects Clear Sailing Clause/Class Counsel Conflict Challenges to Fee Award.

     In the next case that we review, the Court of Appeal dealt with “clear sailing clauses” in class action settlements and the claim that class counsel conflicts in obtaining fees need “structural” review. The appellate panel found that these clauses are very customary and that the trial court can easily make sure that attorney’s fees are reasonable in class action settlements—in fact, that is the charge of the lower courts.

     In re Consumer Privacy Cases, Case Nos. A120591 et al. (1^st Dist., Div. 5 June 30, 2009) (certified for partial publication, with the fee award portions published) dealt with the class action settlement of a Business & Professions Code section 17200 case against Bank of America alleging that it violated customer privacy by providing customer information to third party and direct telemarketers for a fee. A settlement was reached by which Bank guaranteed it would provide aggregate benefits to the class of $10.75 million, plus additionally providing financial privacy kits to requesting customers and paying $3.25 million to a privacy-related cy pres fund. In the settlement agreement, Bank agreed that it would not oppose class counsel’s application for an award of attorney’s fees and costs to be determined by the court as long as the amount did not exceed $4 million (this is known as a “clear sailing clause” in class action nomenclature). Later, the trial court awarded class counsel $2,907,982 in fees (based on a $1,671,704 lodestar with a 1.75 multiplier) and $110,373 in costs. Fees were awarded under the “private attorney general statute” (Code of Civil Procedure section 1021.5) and the “common fund doctrine.” The lower court actually denied almost $1 million in claimed fees and costs to class counsel. Certain objectors appealed the fee/cost orders.

Attorney’s Fee Awards And Fee Requests In The News … Redwood City Gets Tagged, E*TRADE Financial Will Seek Large Fees, and Bluetooth Class Action Plaintiffs’ Lawyers Seeks Fees Drawing Numerous Objections

Redwood City Assessed About $260,000 Under Private Attorney General Statute.

     Redwood City lost a CEQA challenge by local attorney Joe Carcione (son of Joe Carcione, the Green Grocer) who sued arguing that the EIR

was inadequate for the “Downtown Precise Plan,” a plan with a vision for up to 2,500 new high-rise housing units in a pedestrian-friendly shopping district of the City. Specifically, San Mateo County Superior Court Judge Marie Weiner ruled that (1) the EIR failed to have a “shadow study,” i.e. examining whether allowing buildings up to 12 stories high could cause shadowing on shorter downtown buildings (including Mr. Carcione’s law offices); and (2) the City inadequately studied how historic buildings in downtown Redwood City might be impacted by a development swell.

     Mr. Carcione apparently moved for attorney’s fees under California’s private attorney general statute, Code of Civil Procedure section 1021.5, asking for reimbursement of his full $350,000 in legal fees. On May 28, 2009, Judge Weiner awarded Mr. Carcione $260,000 in fees, apportioning out the fees for the “shadow study” issue (because his law offices had a personal stake in the issue) and awarding full fees for the historic resources issue (because he had no personal stake in defending this issue).

     Redwood City had paid an outside attorney about $107,000 over three years to defend it in the Carcione suit. It has been projected that redoing the plans for the project with the help of outside consultants may cost roughly $250,000. Adding all these expenses (plus the fees award to Mr. Carcione), the Downtown Precise Plan will cost more than $600,000 just for litigation-oriented fees and redo costs.

     For more information on this situation, see Shaun Bishop’s story, “Redwood City’s tab for defending flawed downtown plan grows,” which was posted on June 4, 2009 at the San Jose Mercury News website.

             Library of Congress photograph.  The Courthouse, Redwood City.

E*TRADE Financial Will Seek Large Fees After Winning Over $18 Million In Contractual Breach/Interest Damages.

     Following a three-week bench trial before United States District Judge Robert Sweet of the Southern District of New York federal court, E*TRADE Financial Corporation was awarded over $18 million in contractual breach damages and prejudgment interest in a four-year lawsuit against Deutsche Bank AG.

     Importantly, the district judge ordered Deutsche Bank to pay E*TRADE attorney’s fees in an amount to be determined in a postjudgment proceeding.

     We will keep you apprised on the fee proceeding in this case—although it is likely to be large.

Bluetooth Headset Proposed Class Action Settlement Draws Lots Of Objections When Class Attorneys Seek Over $800,000 Even Though Class Members (Other than Representatives) Receive No Payout.

     In In re Bluetooth Headset Products Liability Litigation, Case No. 2:07-ML-01822-DSF-E (C.D. Cal., assigned to U.S. District Judge Dale S. Fischer), seven law firms represented plaintiffs in a putative class action over economic losses purportedly caused by inadequate warnings of the need for volume control in Bluetooth headsets.

     The law firms, on behalf of the class, seek to obtain final approval to a proposed, pre-certification settlement in which nothing will be paid to the absent class members, $800,000 will be paid to the class attorneys, $100,000 paid to charities that are neither class members nor have suffered any injuries, and $12,000 will be paid to the representative plaintiffs. Also, class members retain the right to pursue claims for physical injury and the right to seek future injunctive relief, with defendants apparently making their use warnings more definite in nature.

     This proposed settlement has drawn a firestorm of protests from many, many objectors. Based on several cases from different federal appellate courts, objectors have argued that the proposed settlement is essentially “self dealing”—either a “sellout” of the attorneys’ and class representatives’ fiduciary duties to the class or a mertiless lawsuit brought to only obtain leverage for the representatives’ benefit. See, e.g., Murray v. GMAC, 434 F.3d 948, 952 (7^th Cir. 2006); Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 785 (7^th Cir. 2004); Crawford v. Equifax Payment Services, Inc., 201 F.3d 877 (7^th Cir. 2000); Molski v. Gleich, 318 F.3d 937, 953 (9^th Cir. 2003).

     The fairness hearing on the proposed settlement and objections is slated for July 6, 2009.

     If you would like to see a representative objection, see Ted Frank’s objection referenced in a post of his at overlawyered.com.  Mr. Frank is a resident fellow at the American Enterprise Institute and a frequent contributor to overlawyered.com.

 

Class Actions: Plaintiff’s Amicus Curiae Work In Related Action Was Proper Basis For Additional Fee Award

Sixth District Also Finds No Abuse In Fee Award In Previous Action Under Private Attorney General Statute.

     The next case involves the extent to which successful attorneys in a plaintiff’s class action should be awarded fees for amicus curiae work in another action that dealt with the same issues and eventually led to a recovery in the particular class action at issue. The trial court denied awarding these fees, but the Sixth District reversed.

     In Ramon v. County of Santa Clara, Case No. H032542 (6^th Dist., May 4, 2009) (certified for partial publication), putative class action representative’s attorneys spent $81,539.10 for fees in opposing the County’s amicus efforts in a prior proceeding that resulted in a favorable plaintiffs’ ruling in a published appellate decision on the crucial issue in controversy. The trial court denied awarding the amicus fees to plaintiff’s attorney under Code of Civil Procedure section 1021.5 based on Connerly v. State Personnel Bd., 37 Cal.4^th 1169 (2006), where the state supreme court refused to penalize amicus advisory groups with 1021.5 fees because they were not the equivalent of opposing parties. Plaintiff appealed, and won.

Class Action: Class Representative Incentive Agreements That Created Conflicting Interests Required New Consideration Of Fee Award To Objectors And Class Counsel

Ninth Circuit Requires Reexamination of Fee Denial to Objector’s Counsel and Fee Award to Class Counsel.

     For the plaintiff class action practitioners out there which follow our blog, the next decision is must reading. Not only does it highlight the fiduciary and ethical duties involved in the process, but counsels that incentive agreements should not be structured in an attorney-client retainer agreement in such a way that they create conflicts between the class representatives and the rest of the class. That is what happened in the next case, with potentially wide-ranging repercussions. Fortunately, it did not tank the class action settlement. However, the situation did require reconsideration of the fee denial to objectors pointing out the issue and the fee award to class counsel caught up in the conflict.

     Rodriguez v. West Publishing, Case Nos. 07-56643 et al. (9^th Cir. Apr. 23, 2009) (for publication) involved the $49 million class action settlement between BAR/BRI class members and West Publishing/Kaplan Inc. Lawyers for the class were set to collect up to $12.25 million in fees (calculated on a lodestar, enhanced by a 1.75 multiplier, up to 25% of the settlement fund). (BLOG OBSERVATION—In the Ninth Circuit, class counsel can be awarded attorney’s fees under either a lodestar or straight percentage of settlement fund approach. Powers v. Eichen, 229 F.3d 1249, 1256 (9^th Cir. 2000).) However, several objectors challenged the settlement on various grounds. Their objections on the incentive agreements to 5 class representatives hit a receptive chord with the Ninth Circuit.

Class Actions: Third District Publishes Sutter Health Uninsured Pricing Case

 

Decision Discussed in Our January 28, 2009 Post.

     In our January 28, 2009 post, we discussed Sutter Health Uninsured Pricing Case, where the Third District affirmed a $4 million class action fee award that represented 1.4% of the settlement fund recovery and a 2.52 multiplier enhancement on a $1.4 million lodestar.

     Yesterday, the Third District certified this decision for publication; it was originally issued as a unpublished opinion.

Federal Class Actions: Fee Reversionary Settlement Clauses And Percentage Of Recovery Considered By Ninth Circuit In Unpublished Decision

Court of Appeals Sustains Validity of Fee Reversion Clause Based on Exceptional Results and Affirms Percentage of Recovery Fee Award.

     The Ninth Circuit Court of Appeals recently considered two attorney’s fees issues in the context of a class action, albeit in an unpublished memorandum decision. Glass v. UBS Financial Services, Inc., Case No. 07-15278 (9^th Cir. Feb. 9, 2009) (unpublished mem.) is a very interesting decision for practitioners on both sides of class actions. We thank Michael Rubin of San Francisco’s Altshuler Berzon LLP for a great “heads up” on class action pointers from this case.