Lodestar Check Or Other Means Can Be Used To “Cross Check” Reasonableness of Percentage Fee Numbers Chosen By The Trial Judge In Common Fund Cases.
In a much awaited decision, the California Supreme Court in Laffitte v. Robert Half International Inc., Case No. S222996 (Cal. Supreme Court Aug. 11, 2016) gave trial judges considerable discretion in fashioning fee awards to class counsel in common fund cases.
Our state Supreme Court’s basic holding was that it is reasonable for trial judges to use the percentage fee approach for purposes of awarding fees in a common fund case. However, it was careful to note this only applies to “true” common fund cases, not cases where a fund is created by the defendant’s agreement to pay claims made by class members and to separately pay class counsel a reasonable fee as determined by the trial court. The Court further encouraged trial judges to utilize a lodestar “cross check” on percentage fee reasonableness, but did not rule out that other means could be used to ultimately determine the reasonableness of this approach.
So, in the end, lots of flexibility is given to trial judges, but there is an eloquent discussion of federal cases preferring the percentage fee approach. Justice Werdegar wrote the 7-0 opinion, with Justice Liu penning a concurring opinion suggesting practices to promote transparency in awarding class action fees (such as review of preliminary fee agreements early on in the case and appointment of a class guardian “devil’s advocate” to make arguments for/against the reasonableness of a fee arrangement before the trial judge).