Plaintiff’s Counsel Failed To Demonstrate That It Conferred A Benefit On The Class Beyond The $158,446 In Incurred Fees For Some Authorized Document Review.
Attorney fee awards in class actions are wholly contingent on achieving benefit for the class – a requirement applying to both lead and non-lead counsel, with each required to demonstrate their work actually benefited the class. As such, duplicative efforts by non-lead counsel are generally not recoverable out of the class’s recovery unless those efforts increased the recovery to the class.
In Wheeler v. King Digital Entertainment PLC, Case No. A158660 (1st Dist., Div. 5 August 21, 2020) (unpublished), the trial court consolidated six putative class actions seeking damages, pursuant to §§ 11, 12(a)(2), and 15 of the Securities Act of 1933 (15 U.S.C. §§ 77k, 771(a)(2) and 77o), for misstatements and omissions made in connection with defendant’s initial public offering. The trial court also appointed a firm to serve as lead counsel, and appointed plaintiff’s counsel to serve with two other firms as an executive committee – with lead counsel responsible for authorizing the work of the other firms in order to avoid duplicative or unproductive efforts.
About a year later, the parties settled – with defendant agreeing to pay $18.5 million, plus accrued interest, into a settlement fund. The trial court granted preliminary approval and set a schedule for final approval and the filing of an attorney fees application. Plaintiffs’ counsel sought $225,799.50 in fees, plus $2,333.88 in costs – submitted to lead counsel in the form of a declaration. When lead counsel filed its fees application, it did not include the declarations submitted by the other executive committee firms. Rather, it submitted only its own declarations of time and expenses – seeking 29.5% of the $18.5 million recovery, or $5,457,500, which equated to an approximate 1.5 lodestar multiplier. The trial court granted, but based the fee award on 29.5% of the recovery rather than using the lodestar/multiplier method. Afterward, lead counsel allocated only $124,000 to plaintiff’s counsel without discussion – ultimately leading plaintiff’s counsel to seek relief from the trial court.
Lead counsel argued that the payment of fees to plaintiff’s counsel reflected the contributions to the litigation and settlement plaintiff’s counsel had made – not a calculation of hours and rates – and that plaintiff’s counsel had performed work not authorized by lead counsel. The trial court concluded that plaintiff’s counsel was entitled to $158,446 for authorized work it had performed.
On appeal, the 1/5 DCA affirmed – finding plaintiff’s counsel did not meet its burden to show it conferred a benefit on the class that went beyond the $158,446 in fees incurred for some authorized document review it performed.
Comments