Third Circuit Sustains Using Percentage of Recovery Method, “Cross Checked” By Lodestar Analysis, In Setting Class Action Counsel Fees.
In Dewey v. Volkswagen of America Inc., Case Nos. 13-1123/1124 (3d Cir. Feb. 12, 2014) (not published/not precedential), the Third Circuit Court of Appeals sustained a $9,207,248 attorney’s fees award to class action counsel representing plaintiffs in a class action against V.W. resulting in a $69,277,430 settlement over leaky sunroofs. The district judge primarily used the percentage of recovery method, using 15.38% to get to a $10,967,773 “base line.” However, she “cross-checked” the result based on the lodestar analysis, determining that the percentage of recovery figure was inclusive of a 2.38 multiplier. However, because the case was not that complex, she reduced the multiplier to 2.0 and awarded $9,207,248, 13.3% percentage of settlement recovery as fees. Some objectors challenged the result, arguing that New Jersey law required the district judge to use the lodestar analysis. However, the Third Circuit rejected the notion that federal law could not be used, with the percentage of recovery being the main index applied among federal circuits in normal circumstances.
Seventh Circuit Affirms District Court’s Use of Lodestar in Fixing Class Counsel Fees Where Class Action Claims Rate Was Low.
Well, apparently normal circumstances were not in play for a district judge fixing class action counsel fees in Americana Art China Co., Inc. v. Foxfire Printing & Packaging, Inc., 743 F.3d 243 (7th Cir. Feb. 18, 2014). There, in a “FAX blasting” (also known as junk FAX) class action, a district court used a lodestar rather than a percentage of recovery method for purposes of awarding attorney’s fees to class counsel. The settlement was $6.1 million and, using a one-third percentage of recovery standard, fees would have been $2,033,333.33. However, because the class action claim rate to the settlement fund was only around 7%, the district judge utilized the lodestar analysis and augmented it with a 1.5 positive multiplier, producing a fee award of $1,147,698.70, a $855,634.63 reduction from the percentage of recovery result. Plaintiffs appealed, but the Seventh Circuit affirmed. It especially liked the district judge doing some “equitable balancing”—something, the federal appeals court remarked, district courts should do--by making the fees have some proportionality to the actual amount paid to the class.