CALIFORNIA ATTORNEY'S FEES

Class Action, Intellectual Property: $1.7 Million Fee Award To Class Counsel In A Case Netting $52,841.05 In Benefits, With No Meaningful Injunctive/Monetary Relief, Reversed And Remanded

True Benefit To The Class And Proportionality Of Fees Had To Be Scrutinized On Remand.

            The beginning paragraph in Lowery v. Rhapsody International, Inc., Case No. 22-15162 (9^th Cir. June 7, 2023) (published) is a doozy:

            “This case will likely make the average person shake her head in disbelief: the plaintiffs’ lawyers filed a class action lawsuit on behalf of copyright holders of musical compositions and ended up recovering a little over $50,000 for the class members. The lawyers then asked the court to award them $6 million in legal fees. And the court authorized $1.7 million in legal fees—more than thirty times the amount that the class received.”

            Followed by the start of the second paragraph: “We reverse and remand.”

            The facts showed that the putative copyright class action was dead in its tracks based on a settlement in another case which made very little compensation possible in the case.  The putative class and defendant agreed to a “claims made” settlement having a hypothetical value of $20 million but with defendant only paying $52,841.05 to satisfy class members’ claims.  No significant injunctive or nonmonetary relief was a component of the settlement.  Class counsel requested over $6 million in fees, a magistrate judge recommended about $860,000 in fees, and the district judge awarded $1.7 million in fees to class counsel.

            The Ninth Circuit reversed, following a trend in recent years to scrutinize class action fee awards more closely.  The problem here was two-fold:  there was a need to assess the fee award based on the real benefit to the class (not a hypothetical benefit, given there would not be many claims made based on a prior settlement in another matter) and the need to have a class action fee award—even in a Copyright Act case—to be proportional to the class benefits.  Reversed and remanded to reconsider the award based the proportionality/actual benefit standards articulated in the appellate opinion.

Class Actions: Federal Circuit Reverses $185 Million Class Counsel Award Because Claims Court’s Analysis Was Inconsistent With Class Opt-In Notice Terms And Did Not Justify A High 18-19 Positive Multiplier On The Lodestar

Fee Award Arose Out Of A $3.7 Billion Common-Fund Recovery In A Patient Protection And Affordable Care Act And Health Care And Education Reconciliation Act (ACA) Class Action.

            With some strong language indicating that lower federal courts must acts as fiduciaries when it comes to scrutinizing fee applications in common-fund class action situations, the Federal Circuit in Health Republic Ins. Co. v. Kaiser Foundation Health Plan, Inc., et al., No. 2022-1018 (Fed. Cir. Jan. 31, 2023) (precedential), reversed a Claims Court’s attorney’s fees award of $180 million to class counsel in an ACA case where a $3.7 billion common-fund recovery was obtained for two classes. 

            The fee award was for almost 10,000 hours of work on the two cases at a blended hourly rate of about $1,033 for partners and associates, plus 400 hours of work by support staff at an average $325 hourly rate.  The $180 million award by the Claims Court was based on 5% under a percentage of recovery methodology, with no lodestar “cross check” (although the award was actually the product of class counsel’s lodestar work augmented by a 18-19 positive multiplier). 

            The Federal Circuit found that the class opt-in notices expressly indicated a lodestar cross-check would be used, and it was not such that the “deal” for opting into the class action required reversal so this cross-check methodology could be used.  Beyond that, the federal appeals court expressed skepticism that a 18-19 multiplier was justified given the ranges in many decisions was more in the 1 to 4 positive range. 

Class Action: Uber Class Action Settlement Challenges Were Not Sustained On Appeal

Main Reason Was That The Settlement Was Not A “Coupon” Settlement.

            The Ninth Circuit, in McKnight v. Hinojosa (Uber Technologies, Inc.), Case Nos. 21-16623 et al. (9^th Cir. Nov. 30, 2022) (published), affirmed a class action settlement against Uber over certain objectors’ challenges. 

            The district court approved a class action settlement, after concluding that “coupon” settlement restrictions did not apply, by awarding class counsel close to $5.7 million, 17.5 of the face value of the settlement fund and 2.9 times the lodestar—even though they sought $8.125 million in fees (25% of face value of the settlement fund and a 4.4 multiplier on a $1.961 million lodestar).

            Objectors primarily argued this was too rich, because they argued that the settlement was a coupon settlement with stricter restrictions.

            The Ninth Circuit disagreed.  Two of the three factors on gauging a coupon settlement cut against such a determination—class members can claim their award upfront or get a passive cash payment and a reversionary payment feature provided a flexible alternative to using credits as well as saving administrative expenses.

Class Actions, Poof!: Ninth Circuit Vacates $310 – 500 Million Class Settlement Based On Objectors’ Arguments To Settlement Fairness

That Meant $80.6 Million Class Counsel Fee Award Went POOF!, And Whether Fees For Parallel State Litigation Was Appropriate Had To Be Considered Based On Its Impact On Lodestar Multiplier.

            In Named Plaintiffs, et al. v. Apple, Inc., Case Nos. 21-15758 et al. (9^th Cir. Sept. 28, 2022) (published), the Ninth Circuit, based on some objectors’ arguments, vacated a $300 – 500 million class action settlement and $80.6 class action fee award (out of a requested $87.73 million) in a case alleging that Apple secretly throttled system performance of certain iPhones to mask battery defects.  The district judge on remand needed to use the correct legal standard to gauge the fairness of the settlement.  The panel did address a specific fee issue:  the district judge, on remand, needed to consider $4 million in fees expended in parallel coordinated state litigation as far as appropriateness because it impacted the lodestar multiplier awarded (which would have gone up, even though the district judge thought the lower multiplier was pretty high).  The appellate court did observe that district judges can pick either the lodestar or percentage method, choosing to cross-check with the other method depending on what method is chosen. 

Class Actions: Lower Court Reduction Of Lodestar Fees From Preliminary Amount To A Lesser Reduced Amount In A Final Order Was No Abuse Of Discretion

Preliminary Approval Amount Was $1.04 Million, But Final Amount Sustained On Appeal Was $880,000.

            In Turman v. Parent, Case No. G060330 (4^th Dist., Div. 3 July 6, 2022) (unpublished), after a decade of litigation producing several appellate decisions, all things must come to rest, parties or counsel notwithstanding.  That finally occurred in this case, despite class counsel yet again wanting to maximize attorney’s fees for an additional amount—something which did not occur.

            What happened here is that a preliminary class action settlement order awarded class counsel $1.04 million in fees.   However, after more hearings, the fee award was reduced to $880,000.  Class counsel was not happy, appealing to no avail.

            Plaintiffs initially argued that a more detailed explanation of the fee award was required, but no statement of decision is required, no statement of decision was requested, and the advocated Kerkeles decision was a civil rights decision not apropos when it comes to California state court decisions.  The real problem for class counsel was a credibility problem:  they first proposed $1.04 million but then got greedy and said the real lodestar was $2.807 million.  Not a good idea, with neither the trial nor appellate courts buying the significant “pivot” in positions.  In fact, the $880,000 fee award equaled 40% of the $2.2 million gross settlement, with the $1.04 million prior amount being 47% of the gross settlement.  The end-all in this case was summarized this way: “Plaintiffs do not offer any authority that the trial court’s final attorney fee award, constituting 40 percent of a multimillion dollar class action gross settlement amount, is inappropriate, unreasonable, or arbitrary given the history and circumstances of this case.”  (Slip Opn., at p. 16.)  The award was no abuse of discretion. 

            Orange County Superior Court Judge Linda Marks, sitting by designation, authored the 3-0 decision by the 4/3 DCA.

Appealability, Class Actions: Ninth Circuit Decides It Has Pendent Appellate Jurisdiction To Review A Non-appealable Interim Fee Award Inextricably Intertwined With The Merits Of The Appealable Orders

Judicial Economy Seemed To Be The “Flavor” Here.

            In Bowerman v. Field Asset Services, Inc., Nos. 18-16303/18-17275 (9^th Cir. July 5, 2022) (published), a “first impression,” narrow appellate pendent jurisdictional issue was under consideration by the Ninth Circuit.  (Appellate practitioners might salivate, others not so much—but we post on it nevertheless.)  However, we can report that the Ninth Circuit lined up consistently with sister circuit courts on the issue.

            This was a situation where a district judge entered an interim $5 million fee award for the class after a class certification order and partial summary judgment orders in favor of the class, most of which were appealable.  Defendants appealed the non-fee appealable orders and the interim fee order.  Many of the appealable orders were reversed on appeal.

            So, could the Ninth Circuit also entertain the defense appeal of the interim fee order, which might be deemed non-appealable?  Answer:  You betcha.  Because the fee order was inextricably intertwined with other appealable district court orders, it only made sense that the Ninth Circuit could exercise pendent appellate jurisdiction in connection with the fee award.  The Ninth Circuit sided with other sister circuit courts coming to the same result.  Once this legal issue was decided, the federal Court of Appeals vacated the fee award to await what happens on later in the case in further proceedings—a result driven by judicial economy, we think.

Class Actions: Except For Initial Common Fund Award To Main Class Action Attorneys, Additional Fees Are Going To Be Capped At 25% Of Settlement Amount

Flint, Michigan Class Action Case Fee Issues Are Resolved At the District Court Level.

            District Judge Judith Levy of the USDC, E.D. Michigan, has issued her decision on how attorney’s fees should be allocated in the Flint, Michigan water class action.  The total settlement was for $626 million.  She decided that the main attorneys for the class should be awarded 6.33% out of the common fund, or $39.6 million.  However, depending on what is distributed to the class, additional attorney’s fees are going to be capped at 25%, which is less than the 27% requested by plaintiffs’ counsel.

Class Actions: Ninth Circuit Affirms 25% Class Action Fee Award Based On Cy Pres Payments/Injunctive Relief Settlements

Majority Author Affirms The Settlement, But—In A Concurrence—Writes It Is Time To Reconsider The Practice Of Cy Pres Awards.

            In In re Google Inc. Street View Electronic Communications Litig., Case No. 20-15616 (9^th Cir. Dec. 27, 2021) (published), the Ninth Circuit affirmed a district judge’s approval of a settlement in a 60-million member class action alleging that Google illegally collected members’ Wi-Fi data through its Street View program.  The parties reached a settlement involving injunctive relief, cy pres payments totaling $13 million to 9 Internet privacy advocacy groups, attorney’s fees to class counsel amounting to 25% of the settlement fund, and class representative service awards—but no direct monetary payments to class members based on the difficulty in determining distribution of funds to such a large class and the technical challenges to verifying class members’ claims.  The district judge approved the settlement, which was affirmed by the Ninth Circuit in a majority opinion authored by Circuit Judge Bade, who also penned a concurring opinion.

            The Court of Appeals rejected the argument that the district judge “blindly applied” a 25% benchmark for the fee award, determining cy pres payments could be considered a tangible settlement value and augmented by the tangible benefit from the injunctive relief.  However, Judge Bade in a concurrence did indicate that the Ninth Circuit should revisit the propriety of cy pres awards based on commentary indicating that it does not provide an indirect benefit to class members and that it is rife with conflicts between class members, class counsel, and the third party beneficiaries of the actual monetary distributions. 

Class Actions: Ninth Circuit Determines Vouchers Are Coupons, And Pre-Certification Settlement Must Be Reviewed With Heightened Scrutiny

Ninth Circuit Showing A Significant Trend To Review Class Action Settlements Closely, Especially Where Non-Cash Relief, Clear Sailing Provisions, And Reverter Features Are Involved.

            The Ninth Circuit certainly has taken a much closer scrutiny of coupon/voucher/non-cash relief settlements in a series of decisions we have posted on in the past under our category “Class Actions”—Kim (our Aug. 17, 2021 post); Briseno (our June 1, 2021 post); and Chambers (our Nov. 11, 2020 post).  Baerbel McKinney-Drobins v. Massage Envy Franchising, LLC, No. 20-15539 (9^th Cir. Oct. 20, 2021) (published) is another published opinion which exemplifies this trend.

            There, a pre-certification class action settlement was reached between class members (users of spa products and services through a membership arrangement) and defendant.  The settlement provided vouchers to class members, with there being a $10 million settlement “floor” such that the issued vouchers not requested by class members would be increased pro rata in value so as to reach this “floor” amount.  The settlement had a “clear sailing” provision by which the defense would not object to a $3.3 million fee request by class counsel.  It also had a reverter provision by which any fee amount awarded under $3.3 million would revert back to the defendant rather than the class.  6.2% of the class requested vouchers (under $3 million in value), so that those requesting them had their vouchers adjusted upward so the vouchers ranged from $36.28 - $180.68.  The district judge approved the settlement as fair and reasonable, finding this was not a CAFA “coupon” settlement.  However, he awarded class counsel $2,612,500, 25% of the $10 million face amount after making an adjustment for $450,000 in notice/class administration costs.

            The Ninth Circuit vacated and remanded the settlement, including the fee award. 

            Most crucial to its determination was that the vouchers were CAFA “coupons,” which required a different examination on the actual redemption rates of the issued vouchers—not the $10 million face value of the vouchers.  The Ninth Circuit panel (3-0, but with a concurring opinion) found that a de novo review analysis applied on whether a coupon was involved, determining a coupon was truly involved under its Online DVD opinion.  (The concurring justice wanted an en banc review of Online DVD.) That alone required a restudy.

            However, the panel also indicated that this pre-certification settlement needed heightened scrutiny, with certain “red flags” of collusion between class counsel and defendant potentially being present.  Specifically, the presence of non-cash relief, the clear sailing provision, and the reverter were indicia that defendant reached a settlement unduly benefiting class counsel rather than the interest of the class.  These factors needed to be looked at further on remand.

Class Action, Employment: Eighth Circuit Court Of Appeals Reverses $1 Fee Award To Class Counsel Where Some Work Was Done Despite Failing to Segregate Compensatory/Fee Negotiations And Despite Billing Problems

Dissenting Circuit Judge Would Have Affirmed District Judge Fee Award.

            Vines v. Welspun Pipes Inc., No. 20-2168 (8^th Cir. Aug. 18, 2021) is an interesting case which shows how appellate circuit judges can have differing perspectives on approaching class action fee awards.

            What happened in this one is that class action counsel on federal/state wage hour claims, after not much litigation and after limited success on some defendants, had to take three swings at a class action settlement of the wage/hour claims against the main defendant, failing to heed the Eighth Circuit’s prohibition of not settling the merits claims and fees award issue in FLSA cases in tandem.  For purposes of forging a settlement, class counsel basically insinuated to the defense that they would be subject to exposure in much more in unearned fees if the defense did not capitulate, which it did.  The settlement valuation eventually came to around $308,000 (but at least $270,000), with class counsel wanting $96,000 in fees.  The district judge granted only $1 in fees due to certain billing practices and class counsel’s conduct in not segregating merits/fees negotiations.  (If $1 was not the correct amount, the district judge indicated that it would only award $25,000.) 

            The Eighth Circuit, in a 2-1 opinion, reversed.  The majority found that reversal was required because the district judge failed to determine the lodestar (although ruling on the appropriate hourly rates, but not calculating the rest of the equation) and to opine that some amount over $1 was likely due based on class counsel’s efforts.   However, the majority did not hamstring the district judge as far as discounting for unprofessional conduct on the merits/fees negotiations snafu.

            The dissenting judge found the $1 award was no abuse of discretion based on the conduct of class counsel, not condoning those attorneys squeezing extra fees based on the leverage of obtaining future unearned fees from the defense and failing to segregate merits/fees negotiations.

            However, the appeals court refused a reassignment to a different district judge request, such that it will be interesting to see if this is little more than a pyrrhic victory for the plaintiffs’ side.

Class Actions: $1.2 Million Class Action Fee Award Remanded For Another Look Where Ninth Circuit Majority Was Convinced Settlement Valuation Was Overinflated And Clear Sailing Provision Indicated Possible Collusion With The Defense

Ninth Circuit Seems To Be Looking At Class Action Settlement Valuations Most Closely, Although Dissenting Circuit Judge Thought District Judge’s Decision Was Adequate.

            We are starting to discern a trend by the Ninth Circuit to scrutinize class action settlements and fee requests with more rigor, as Kim v. Allison (Tinder, Inc.), Case No. 19-55807 (9^th Cir. Aug. 17, 2021) (published) demonstrates, albeit a 2-1 decision.

            In this matter, the district judge approved a cash/redemption pre-class certification settlement which he valued at $24 million, $6 million for injunctive relief and the rest for the cash/redemption component.  He also approved $1.2 million in attorney’s fees to class counsel pursuant to a “clear sailing provision” agreed to by the defense. The Ninth Circuit, in a 2-1 majority decision penned by Judge Rakoff of the S.D.N.Y. (sitting by designation), sent this back for a restudy based on objectors’ challenges.  The majority found that the injunctive relief valuation had no support, and there was reason to believe that the claims rate valued the monetary component at closer to $45,000 rather than a possible $6 million dependent on a dubious 100% claims rate (with the $12 million in Super Likes incentives also not resonating as being achievable, according to the majority).  The clear sailing provision also was disturbing; in tandem with the overvaluation of the class action settlement, the entire thing—including attorney’s fees—needed a more intensive reexamination.

            In dissent, Circuit Judge Callahan found that the $6 million valuation of the cash/redemption component supported the $1.2 million fee award, although she did indicate that the overall settlement might have been overvalued. 

Appealability, Class Action, Common Fund: Ninth Circuit, In A Case Which Was Not A Classic Common Fund Case When Google Agreed To Pay Class Action Counsel Outside Of Fund, Determines Award Of $725,580.80 To Class Counsel Was Not Appealable

No Final Judgment/Settlement Occurred, With Google Agreeing To Pay Outside Of The Common Fund, And With The Collateral Order Doctrine Not Inapplicable Under The Circumstances.

            The Ninth Circuit, in AdTrader, Inc. v. Google, LLC, Case No. 20-15542 (9^th Cir. July 30, 2021) (published), faced an interesting fact pattern as evidenced by this passage near the end of the opinion:  “ . . . this case neither fits the situation under which the ‘common fund’ doctrine developed nor meets the requirement of unreviewability that is essential to the limited collateral order exception to finality.”  Because of these wrinkles, it dismissed an appeal for lack of appellate jurisdiction.

            AdTrader, individually and on behalf of a class, sued Google on behalf of advertisers who used Google advertising services but received no refunds for invalid traffic in line with Google policies.  As some point in the litigation, Google informed the district court that it would issue $65.7 million in refunds to advertisers using the platform DoubleClick Bid Manager but that it would continue to litigate the remaining AdTrader class claims, although agreeing to pay AdTrader’s fees, if awarded by the district court, out of Google’s own pocket rather than have the fees paid out from the common fund.  AdTrader’s counsel argued that they produced a benefit to DoubleClick advertisers, moving for fees under CCP § 1021.5 and from the common fund.  The district judge denied fees under the California statute but awarded class counsel fees of $725,580.80 (after downward reductions and after application of a 1.6 multiplier) under the common fund doctrine.  AdTrader, unsatisfied with the amount of fees awarded, appealed, even though the Google litigation was still ongoing.

            The Ninth Circuit dismissed the appeal given the peculiar circumstances of the case.  Although agreeing that some “common fund” awards (even though this was not a classic one) might be appealable (example:  class members distributions and interim fees were ordered to be distributed such that supplemental fee awards would be gone from the fund), this case did not fit into that logic because there was no final decision on the merits or no final settlement—with Google agreeing to pay fees outside the fund no matter what (as long as awarded by the district judge).  The collateral order doctrine did not apply, because it was not shown that the order is not effectively unreviewable upon appeal given Google’s commitment to pay the fees.

Class Action: Ninth Circuit Reverses And Remands Class Counsel Fee Award Where There Were “Red Flags” Of Collusion About Distribution Of Funds Between Class And Its Counsel

Inordinate Fee Distributions, Clear Sailing Provisions, And Reverter Of Reduced Fees Award To Defendant Were Storm Warnings In This Particular Case.

            Briseno v. Henderson (ConAgra Foods, Inc.), Case No. 19-56297 (9^th Cir. June 1, 2021) (published) is a must review for any clients and practitioners in the class action area.  It certainly shows the Ninth Circuit will use In re Bluetooth Headset Products Liab. Litig., 654 F.3d 535 (9^th Cir. 2011) [discussed in our August 25, 2011 post] to judge class action settlement fee terms at the post-certification stage (even though Bluetooth was at the pre-certification stage).  Numerous “red flags” led to a reversal and remand of the fee award in this case, with the Ninth Circuit indicating that the presence of these factors, singularly or in the aggregate, would not lead to a reversal unless the circumstances dictate otherwise—as they did in this case.

            The class action case involved a challenge to a natural labeling of Wesson Oil which was alleged to be deceptive.  The parties reached a small per unit of oil bottle settlement with the class, with the parties valuing the settlement at around $95 million, $67 million for cash payouts and $27 million for injunctive relief—with the Ninth Circuit determining that the injunctive relief valuation was virtually worthless later on in the published opinion.  However, the actual “redemption” results showed only $8 million was shelled out, with $7 million going to class counsel for fees and costs (net result:  $1 million to the class).  There were other areas of the settlement which showed a hefty settlement was reached with the defense at the largesse for class counsel, such that the result had to be overturned for a restudy.

            The Ninth Circuit, in strong terms, reversed and remanded.  Three factors primarily led to this result:  (1) plaintiffs’ counsel was going to receive a disproportionate distribution of the settlement, roughly 90%, despite the small “redemption rates” and the worthless injunction evaluation; (2) the parties agreed to a “clear sailing clause,” which could be neutral, but was not here given ConAgra’s settlement negotiations indicating they would not pay anywhere near the set upward “optics” established in the overall compromise (put another way, it was banking on a low “redemption” rate); and (3) the settlement contained a “reverter” where any reduced fees to class counsel went back to ConAgra, another indication of collusion. 

Class Actions: Class Action Objector’s Objection To Class Action Fees Was Sustained Until True Value Of Vouchers And Coupons Could Be Determined

Pragmatic Valuation of Class Action Settlement Is Key In Voucher/Coupon Cases.

            Rael v. The Children’s Place, Inc., 2021 U.S. Dist. LEXIS 63117 (S.D. Cal. Mar. 31, 2021) is a situation where class action counsel’s fee award was denied without prejudice until the true value of a voucher and coupon settlement could be determined under the Class Action Fairness Act (CAFA).

            What happened here is that a retail store consumer class action was settled by which vouchers and coupons would be issued to the class members, with one voucher being good for $6 off a future purchase (no minimum purchase necessary) and a coupon good for a 25% discount on the first $100 of a purchase.  Plaintiffs moved for final approval of the settlement and $1.08 million in attorney’s fees and costs, which defendant agreed to pay separately.  The fee motion was based on a settlement fund of about $5.614 million, which assumed 100% of the vouchers would be redeemed at the $6-off level.  Defendant did not oppose the motion under a “clear sailing” provision, but an objector challenged the settlement based on the true value of the redemption of vouchers and coupons.

            District Judge Curiel sided with the objector for now.  The district judge determined, based on the circumstances, that the $6-off vouchers and 25% off coupons were coupons under CAFA.  As such, the award of attorney’s fees had to be delayed until the true amount of recovery was determined for the vouchers and coupons.

Class Actions: Ninth Circuit Clarifies What Method Should Be Used To Calculate Attorney’s Fees Under CAFA In A Mixed Coupon/Non-Coupon Class Action Settlement

Percentage Of Value Governs Coupon Portion And Lodestar Governs Non-Coupon Portion, Articulating How To Calculate Lodestar In The Latter Situation; But …. Lodestar Can Be Applied In A Mixed Settlement If Adjustments Are Made For Coupon Portion Of Settlement.

            Practitioners and district judges in the Ninth Circuit should welcome the circuit court’s clarification of how to calculate attorney’s fees in class action settlements under the Class Action Fairness Act (CAFA) in mixed coupon/non-coupon relief cases.  That is what the Ninth Circuit did in Chambers v. Whirlpool Corp., No. 16-56666 (9^th Cir. Nov. 10, 2020 published). 

            There, using a lodestar methodology, a district judge awarded over $14.8 million to class counsel in a mixed relief settlement, using a lodestar methodology and sweetening it with a 1.68 multiplier where there were widely divergent valuations on the worth of the settlement--$4.2-6.8 million estimated settlement value by Whirlpool as opposed to the $55.7-116.7 million estimated value by class counsel.  Whirlpool appealed the fee award, given that it was the one agreeing to pay the fees to class counsel.

            The Ninth Circuit reversed and remanded, after initially determining as threshold matters that CAFA preempted state law methods of calculating the fees to be awarded and that the “rebate” mechanism of the settlement was a coupon settlement.

            The percentage-of-value approach governed the coupon aspect of the settlement, such that redemption values had to be considered, whether in a coupon-only or a mixed settlement.  In fact, bifurcation of the coupon-based fee component is a possible option were there are short redemption window time limits.  For extended redemption periods, a possible option is to “stagger” fee awards to reflect periodic redemption rates.  The lodestar methodology governs fee calculation for the non-coupon portion of the settlement.  The Ninth Circuit provided two ways to do so: (1) take the lodestar for the entire case and apply a negative multiplier for coupon work; or (2) apportion hours between coupon versus non-coupon work through analyses by counsel and their fee audit experts.  However, the circuit court indicated that a “cross check” of the non-coupon lodestar should be done through analyzing the lodestar for the entire case to make sure there is no “double dipping” and the results are fair for class counsel/the class/the defense—especially where there are widely divergent settlement valuation estimates.  Then, the sum of the two calculations would be the fee award “in most cases.”  A district judge nonetheless can rely solely on the lodestar methodology if he or she does so without reference to the dollar value of the coupon relief or if the coupon redemption rate is calculated into the settlement valuation analysis (although the redemption rate analysis normally applies only if it is too difficult to calculate fees). 

            The circuit court reversed the positive multiplier because (1) it cannot reflect credit for the coupon-oriented work, which the district judge did; (2) class counsel billed a lot for skeptical discovery efforts; (3) the failure to actually estimate the settlement value made it difficult to assess whether the settlement was an impressive result; and (4) no contingency risk was presented given the circumstance that Whirlpool was paying the fees to class counsel as opposed to common fund recovery.  It remanded to see if a downward multiplier was warranted for the results obtained (which awaited a valuation of the settlement by the district court). 

Class Action: Recent S.D. California District Judge Order In Mixed Coupon/Non-coupon Class Action Provides Guidance On Fee Motion Review Standards

For Noncoupon Relief, District Judge Bashant Grants $3.42 Million In Fees Based On Anticipated $10.5 Million Cash Fund Versus Class Counsel’s $5.7 Million Lodestar Request.

            U.S. District Judge Cynthia Bashant’s decision in In re Easysaver Rewards Litig., 2020 U.S. Dist. LEXIS 77483 (S.D. Cal. May 1, 2020) contains an excellent discussion of the methodology to use in awarding attorney’s fees to class counsel in a mixed coupon/non-coupon settlement case.

            In a mixed case, a district judge should more appropriately apply the percentage-of-recovery method to award fees for coupon relief and the lodestar method to award fees for only the non-coupon relief, citing CAFA, 28 U.S.C. § 1712 (which she labeled as having “puzzling” text).  What happened in this case is that class counsel only sought fees for the non-coupon relief based on an anticipated $10.5 million cash fund such that the lodestar was the primary methodology to utilize.  Class counsel requested a $5.7 million lodestar, plus an unspecified positive multiplier.  However, District Judge Bashant determined that $3.42 million would be the granted fee award with a negative .06 multiplier because (1) the requested $5.7 million would amount to 54% of the $10.5 million fund based on a percentage-of-recovery check often used in lodestar analysis, too rich for the benefit returned to the class; (2) the $3.42 million award was 32.5% of the anticipated cash fund; (3) the settlement’s value had actually diminished over time; and (4) a higher percentage of the cash fund over the Ninth Circuit’s 25% benchmark test was justified because the case was risky and involved novel issues when it was filed.  If the cash fund was more than $10.5 million, class counsel was allowed to return to the district court to file a request for a supplemental award of fees.   

Class Actions: Award Of $158,446, Out Of Requested $228,133.38 In Fees/Costs, To Non-Lead Plaintiff’s Counsel Affirmed On Appeal

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 (1^st 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. 

Class Actions: Ninth Circuit Holds That There Is No “Bright-Line Rule” For Percentage-Of-Recovery Benchmark In Megafund Class Action Settlements And That Variance Of Requested From Fees From A Class Counsel’s Upfront Bid In The Case Should Be Consi

Higher Fee Awards/Cost Award Remanded For Reconsideration.

            Class action attorneys, especially those representing the class, will want to read the Ninth Circuit’s opinion in In re Optical Disk Drive Products Antitrust Litig., Nos. 17-15065 et al. (9^th Cir. May 15, 2020) (published).  There, the Ninth Circuit remanded for reconsideration of some fee/costs awards to class counsel in megafund settlement situations.  Class counsel had moved in two cases, respectively, for 25% of the fund (with counsel’s sealed upfront bid for the case being 12-13% of the fund) and for 21% of the fund (with the sealed bid being 12% of the fund). In remanding the eventual awards by the district court (which largely adopted class counsel’s requests), the federal court of appeals held that (1) the size of the fund in megafund settlements is a relevant consideration for which there is no “bright-line” benchmark or sliding-scale approach, although the 25% benchmark for smaller cases is of little assistance in megafund cases; and (2) the variance between a competitive bid, upfront fee structure by class counsel and the requested fees is a relevant concern, with the bid becoming the starting point for determining a reasonable fee—with that bid amount subject to adjustment upward or downward depending on circumstances not contemplated at the time of the bid as long as the district court provides an adequate explanation for any variance.

Class Action, Ethics: One Counsel’s Failure To Disclose A Lack Of Professional Liability Insurance Invalidated Class Action Fee Division Agreement

However, Matter Was Remanded For Trial Judge To Consider Quantum Meruit Recovery.

            Hance v. Super Store Industries, Case No. F075852 (5^th Dist. Jan. 23, 2020) (published) is a very scholarly opinion exploring an ethics issue.  Briefly told, a plaintiff’s class action attorney was an experienced labor attorney, but he referred the matter to class action specialists under a fee division agreement.  At the end of the day, the case settled and $4.3 million was awarded to class counsel, with the lower court honoring a fee division agreement for the referring attorneys and other class attorneys.  On appeal, the fee division agreement was challenged as unenforceable on numerous grounds.

            The Fifth District agreed that it was unenforceable based on one ground.  Referring attorney had failed to disclose that he had no professional liability insurance, an ethics violation which did invalidate the fee division agreement.  (Rule of Professional Conduct, former Rule 3-410, now Rule 1.4.2).  However, not all was lost.  The matter was remanded for the trial judge to consider if quantum meruit recovery was allowable to the referring attorney, given that the record showed there was value in his referral services during the case.  The appellate court also agreed that the QM recovery was not necessarily limited to the lodestar hours billed by the referring attorney. 

Class Action, Substantiation Of Reasonableness Of Fees: District Judge Adequately Explained 25% Reduction In Lowered Lodestar Hours, Says The Ninth Circuit

Reasonableness Of Fee Award Confirmed By Percentage Of Recovery Cross-Check, Where Ultimate Award Was Beyond 25% Benchmark.

            Class counsel in a consumer protection class action, which was settled, sought an unopposed $350,000 fee recovery.   The district judge, after setting the reasonable hourly rate, then applied a 25% reduction to the lower lodestar determination based on some block billing, excessive time spent on law conferences that did not advance the case or the interests of the class, unreasonable travel time billed without any showing that substantive work was performed, duplicative work, unsupported identical conclusory statements of class counsel as the only explanation for why the hours requested were reasonable, and puffery in describing work performed.  The district judge ultimately awarded fees of $184,665 based on the lodestar approach, but also performed a cross-check using the percentage of recovery methodology.  This cross-check showed that much more than the 25% benchmark was being awarded through the $184,665 fee order, but that class counsel rather than the defendants should receive any class action settlement monetary excess.

            Plaintiff challenged that the district court did not adequately explain its award, but the Ninth Circuit disagreed in Johnson v. MGM Holdings, Inc., No. 18-35967 (9^th Cir. Dec. 2, 2019) (published).  No magic words are needed to explain a reduction, with the record in entirety showing an adequate explanation for the reduction.  The Ninth Circuit also was pleased that the district judge cross-checked through the percentage of recovery method, again encouraging district judges to do so when they can. 

Class Actions, Employment, POOF!: Class Action Win Of Labor Code Section 226 Penalties And Attorney Fees Against Employer Goes POOF! On Appeal

Employer’s Failure To Include Premium Pay On Wage Statements For “On Duty” Meal And Rest Periods Did Not Trigger Penalties Because Premium Pay Is A Statutory Remedy For An Employer’s Conduct – Not An Amount “Earned” By The Employee.

            A certified class of former and current non-exempt employees brought a lawsuit against their employer for meal break violations in Naranjo v. Spectrum Security Services, Inc., Case No. B256232 (2^nd Dist., Div. 4 September 26, 2019) (published).  They sought premium wages, Labor Code §§ 203 (waiting time penalties) and 226 (itemized wage statement penalties) derivative remedies, and attorney fees.  We focus on the attorney fees issues involved in this case.

            The employees were/are officers for a security company responsible for taking temporary custody of federal prisoners and ICE detainees for offsite travel for medical treatment, court appearances and other appointments.  Two such officers jointly provide continuous supervision until the prisoner/detainee is returned to his/her custodial location.  The officers are not permitted to leave the room or building where the prisoner/detainee is located, and are required to remain “on duty” during meal breaks. 

            With respect to one sub-class of the employee class members, employer had failed to: (1) provide an off-duty meal period; (2) obtain a mutually agreed-upon waiver if one hour or less would end the work shift; or (3) obtain written agreement to an on-duty meal period for shifts lasting longer than five hours.  This entitled these sub-class members to premium pay under Labor Code section 226.7 (an additional one hour of pay for each day an off-duty meal period is not provided without waiver or written agreement described above) – something the employer had failed to pay. 

            The parties stipulated that the sub-class was owed $1,393,314 in premium pay during a second trial phase in this action.  The third phase of trial, a bench trial, dealt with the employees’ requests for Labor Code §§ 203 and 226 penalties and attorney fees.  The section 203 requests were denied.  However, the trial court determined the sub-class was entitled to the section 226 penalties as the premium pay had not been reflected in the employees’ wage statements.  The parties stipulated to $399,950 for the section 226 penalties.  Based on the employees’ section 226 win, the trial court awarded attorney fees pursuant to section 226(e).  Employer appealed. 

            The 2/4 DCA reversed the trial court’s finding on the section 226 penalties because the penalties are triggered by an omission from the wage statement of “wages earned.”  Here, the premium pay served as a statutory remedy for an employer’s conduct.  The premium pay is not an amount the employee has “earned.”  Because the section 226 penalties were reversed, so too were the attorney fees awarded under section 226(e).  The award of attorney fees was contingent upon the award of section 226 penalties.

Class Actions: Summer 2019 Litigation News Article Tells What Class Action Issues Are Spiking In 2018-2019 With Respect To Frequency

Has Implications For Fees, Given Statute And Equitable Principles Allowing For Fee Recovery.

            An article by Daniel S. Wittenberg, “Class Action Spending Reaches 10-Year High” in the Summer 2019 edition of the ABA’s Litigation News, provides some interesting insights into the class action cases which are prevalent and frequently expose defendants to attorney’s fees/costs exposure in 2018-2019:

• • Labor/employment class action This topped the list.  For the first time in 15 years, plaintiffs posted a record high certification rate in wage/hour cases.  The #MeToo movement gained traction in this area, with an eight percent increase in the number of sexual harassment filings in 2018.
  • Securities litigation class actions. Securities class action filings reached their highest level since the dot-com. crash of 2000. 
  • Life science securities class actions. In 2018, roughly one out of every five securities fraud class actions suits were brought against a life sciences company. 
  • Food and beverage class actions. These class action cases, in 2018, reached their highest levels since 2015.  The big venue—California, of course, with almost half of the cases filed.  False labeling was the number one claim subject matter in this area as far as filings.
  • Data breach privacy and security class actions. This might be the next surge of class actions, notwithstanding a lot of standing and injury obstacles.  In California, the enactment of the Consumer Privacy Act, going into effect in 2020, might augment this possible future surge in class actions in the “Golden State.”

Class Actions: With Respect to Removed Matters From State Court, Prospective Attorney’s Fees Allowable Under A Statute Or Contract Are To Be Considered For Determining Amount In Controversy For Removal Purposes

Ninth Circuit So Holds, Even Though There Does Seem To Be A Split Among Other District Courts.

            In Arias v. Residence Inn by Marriott, No. 19-55803 (9^th Cir. Sept. 3, 2019) (published), defendant filed a notice of removal of a state court wage/hour class action case to federal court.  It did so under the Class Action Fairness Act based on its estimate of damages and prospective attorney’s fees allowed under various labor statutes.  The district judge sua sponte remanded back to state court based on its view that the CAFA removal amount-in-controversy requirement was not met.  The Ninth Circuit reversed, determining defendant should have had the opportunity to present some proof on the amount-in-controversy threshold.  It also found that, notwithstanding a split among district courts, it had, in a prior opinion, countenanced the inclusion of prospective attorney’s fees allowable under a statute of contract for purposes of determining the amount in controversy.  (Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 F.3d 785, 788, 794 (9^th Cir. 2018).) 

Class Action: Ninth Circuit Affirms Awarding Only 15% Settlement Fund Fee Recovery, Half That Requested By Class Counsel, Based On Deferential Abuse Of Discretion Standard

2-1 Majority Also Found Denying Motion For Reconsideration Did Not Require A Different Result; Dissenting Circuit Judge Thought The 50% Reduction Was Too Much Without More Explanation, And The Unopposed Reconsideration Request Should Been Considered.

           Schwartz (Kaplan Fox & Kilsheimer LLP) v. Arena Pharmaceuticals, Inc., et al., No. 18-55618 (9^th Cir. Aug. 20, 2019) (unpublished Memorandum Decision) is an interesting 2-1 Ninth Circuit decision showing how circuit judges apply the abuse of discretion standard to a reduced fee award even where there was a clear sailing clause in a class action settlement.

            A $24 million settlement was reached in a class action case in which the district judge acknowledged that excellent results were achieved in a difficult matter.  However, she only awarded 15% of the settlement fund as attorney’s fees rather than the 30% requested—awarding $3.6 million rather than the requested $7.2 million—even though the settlement agreement had a “clear sailing” provision.  The Ninth Circuit affirmed in a 2-1 decision, determining that the district court has wide discretion in determining the percentage-of-fund number in class actions, had no great lodestar “check” because class counsel failed to provide reliable evidence (rates or hours), and did discuss the relevant guidelines enough so that no more specificity was required. 

            Class Counsel filed an unopposed reconsideration motion with expert declarations and records to support the requested fees, unlike the presentation in the opening motion.  The Ninth Circuit majority found that the district court did not err in denying the reconsideration motion, because this same information was available for counsel to present earlier and the motion is not a substitute for presenting the right evidence in the first instance.  (Am. Ironworks & Erectors, Inc. v. N. Am. Const. Corp., 248 F.3d 892, 899 (9^th Cir. 2001); In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1306 (9^th Cir. 1994).) 

            Although not discussed in this Memorandum Decision, the district court also cut the claimed $251,313.10 in costs and expenses by $32,712.33 with respect to “Travel/Meals” and $65,095 with respect to “Experts/Consultants,” leaving $152,781.44 as the awarded costs.

            In dissent, Circuit Judge Rawlinson found that the 50% reduction was too much without a more detailed explanation.  (Stanger v. China Elec. Motor, Inc., 812 F.3d 734, 739 (9^th Cir. 2016).)  Also, she believed that it was error not to reconsider the request in light of the unopposed reconsideration motion with additional documentation.

Class Action, Multipliers: Eleventh Circuit Court Of Appeals Affirms Most Of Class Counsel Award In Home Depot Data Breach Case, But Reverses 1.3 Positive Multiplier Enhancement

Federal Appellate Court Provides Scholarly Analysis Of Differences Between Common Fund, Constructive Common Fund, And Contractual Fee-Shifting Cases.

            In In re:  Home Depot Inc. Customer Data Security Litig., No. 17-14741 (11^th Cir. July 25, 2019) (published), the Eleventh Circuit faced review of a $15.3 million fee award to class counsel in a class action stemming from Home Depot’s 2014 data security breach which exposed the credit card information to improper use for tens of millions of customers.  It eventually agreed to settle by paying $25 million into a settlement fund, paying smaller banks an additional $2.25 million (after paying about $134.5 million--$120 million set by the banks under contractual agreements with Home Depot and a $14.5 million premium to other banks on top of that--under a card-brand recovery process), and agreeing to data breach security measures of an on-going nature.  The settlement agreement also confirmed class counsel was entitled to reasonable attorney’s fees, but it set no amount for fees in the agreement and allowed this determination to be made by the district judge.  The fees would be paid by Home Depot separate from the other settlement payments.  The district judge awarded class counsel $15.3 million in fees, calculated this way:  (1) a lodestar of $11.7 million enhanced by a positive 1.3 multiplier based on risk; and (2) cross-checked by the percentage method, based on an addition of the $27.25 million settlement payments, the $14.5 bank premium, and about $700,000 in expenses (about a $42.5 million total “percentage”), with the award being slightly higher than a third of the “percentage” (which was close to the 20-30% generally allowed in the Eleventh Circuit).  Class counsel had asked for $18 million, while Home Depot suggested only $5.6 million should be the fee award.

            The Eleventh Circuit affirmed most of the fee award, although reversing the grant of the 1.3 positive enhancement.

            The key threshold determination was to decide whether the case was a constructive common fund or contractual fee-shifting case, with the latter being the characterization adopted by the federal appeals court.  The reason for this was that the settlement agreement had a fees clause, no fees were specified or capped as under clear sailing provisions, and the fee determination was left to the district court’s decision-making authority.  This smacked of a contract fee-shifting situation, unlike a common fund where fees are actually taken out of the class recovery such that they are paid by the “client” (the class). 

            The multiplier was infirm because federal precedents (such as Perdue and Dague) are hostile to enhancements, because it is assumed that the lodestar factors subsume the multiplier considerations for further enhancement.  Given that risk is not a factor to consider for enhancement in statutory fee-shifting cases, the appeals court found no reason that the same logic should not apply to contract fee-shifting cases. 

            The Eleventh Circuit also found that compensating class counsel for the card-brand recovery work and time spent in vetting class representatives was appropriate.  Clearly, the class litigation was a catalyst which drove Home Depot to pay the banks and narrow the class exposure in the overall sense. 

            The district judge’s decision did provide sufficient detail, especially given that Home Depot failed to make specific objections.

            The class cross-appealed.  It argued that it was error for the district judge to not include the attorney’s fees in the “percentage” cross-check total.  The appeals court disagreed, concluding that it would be impractical to guess what fees might have been awarded in a contract fee-shifting context.  It also found some balance here:  fees on fees are not awardable in common fund cases, but they are awardable in contract fee-shifting cases. 

            BLOG COMMENT—Same result in California state courts?  Likely no.  Although novelty, complexity, and counsel special skill lodestar factors cannot be counted twice for multiplier analysis, risk is a factor which can be considered separately.  (Ramos v. Countrywide Home Loans, 82 Cal.App.4^th 615, 625 (2000).)  Beyond that, California does not take the dim view that Perdue/federal precedents do on enhancements in statutory fee-shifting cases.  (Khazan v. Braynin (Khazan III), Case No. A128536 (1^st Dist., Div. 4 June 12, 2012), rev. den. [reviewed in our September 15, 2012 post].) 

Class Action: July 2019 Paper By Three Law Professors Study Fee Award Trends In Mega-Settlement Federal Class Action Securities Cases

Multiplier Trends And Attorney “Make Work” Conclusion Are Among The Takeaways.

            Right around July 16, 2019, three law professors—Stephen J. Choi, Jessica Erickson and A.C. Pritchard--published a paper exploring fee recovery in federal securities cases involving big company defendants which result in mega-settlements.  They surveyed 1,719 federal securities cases between 2005 and 2016.   We link their paper here and summarize the findings which we found to be of interest:

• Institutional investors have reduced fee percentage recovery by plaintiffs’ counsel over time, but they have not been the active watchdogs intended by Congress.
• Judges award the fees requested by plaintiffs’ counsel in 85% of the cases.
• Judges award larger fees when the lodestar cross-check is done, rather than just using the percentage of recovery method alone.
• Average hourly rate in these cases is $688.
• The median multiplier is 1.105.
• The largest securities cases with respect to settlement amounts receive more scrutiny by district judges.
• Multipliers show an upward trend with the defendant company size.
• Multipliers go up if the case is likely to settle.
• Courts generally award multipliers in more egregious fraud cases, based on the conduct of the defense rather than for risk (especially in cases where dismissal is unlikely).
• Because district judges tend to award lower percentages of recovery in mega-settlement cases, the professors found that there was a larger frequency of “make work”—hours billed not to advance the case but support a big fee award—especially where multiple lead counsel is involved.
• They conclude: “Overall, our results suggest that plaintiffs’ attorneys are receiving windfall fee awards from mega-settlement cases at shareholders’ expense.”

Class Action: 2/3 DCA, In A 2-1 Opinion, Reverses An Award Of $5,886.50 To Class Counsel In Wage Statement Class Action Where Parties Had Stipulated To $85,000 In Fees To Class Counsel Under Settlement Agreement “Clear Sailing” Provision

Dissent Found That Most Of Counsel’s Efforts Were Trivial On Wage Statement Claim, With Most Of Fees Expended On An Unsuccessful Meal/Rest Break Claim.

            Just to show you how class actions producing a lack of real-life benefits draw very different judicial reactions, one needs to go no farther than Ebo v. The TJX Companies, Inc., Case No. B285404 (2d Dist., Div. 3 June 28, 2019) (unpublished).

            There, a former employee/putative class representative sued clothing retailer TJ Maxx/Marshalls for meal/rest break alleged violations and failure to provide accurate itemized wage statements.  Class certification was denied on the meal/rest break claims, but certification on the wage statement claim was granted although limited to non-exempt employees of Marshalls.  Ultimately, with the help of a settlement judgment, the action was settled by which the defense agreed to a “clear sailing” provision to not challenge an $85,000 fee award to class counsel, given that the class counsel lodestar was $588,650 (obviously, quite a bit on the meal/rest break claims).  The trial court preliminarily approved the settlement agreement, but soon changed courses when the final fee approval hearing came to bat.

            Based on the claims experience, where no class member could prove any injury from the wage statement claim, the lower court thought there was zero value to the settlement and only awarded $5,886.50 in fees, a 99% reduction of the $588,650 lodestar. 

            Plaintiff appealed and, based on a 2-1 opinion, was granted another shot at it.  The majority determined there was value in the settlement, given that the defense changed its wage statement policies.  It also believed that the final approval fee reduction was contradictory of the prior preliminary approval determination finding the settlement was in good faith and reasonable. 

            Justice Egerton dissented and would have affirmed the fee award.  He observed that a lot of the lodestar time was consumed on the unsuccessful meal/rest break claims.  If one did some math on the amounts of the lodestar devoted to the wage statement claim, they supported what the trial court did in awarding fees, according to the dissenting justice.  Here are his ending thoughts: “But when courts reward lawyers who file class actions with little or no merit by awarding tens of thousands of dollars in attorney fees, the result will be more class actions with little or no merit.  The public will begin to view class actions with skepticism and cynicism.  Here, ultimately, the individuals who will pay the $92,500 Ebo and Van Vleck seek [i.e., fees for class counsel and a $7,500 enhancement fee for the class representative] are Marshalls shoppers—the teen buying a dress for the school dance, the single mother outfitting her three children for Easter.” 

Class Action: $41,732,889 Fee And $3,184,274.38 Expense Awards To Class Counsel In NCAA Grant-In-Aid Cap Antitrust Litigation Affirmed By Ninth Circuit

20% Settlement Fund Fee Award Was No Abuse Of Discretion, Cross-Checked By Lodestar.

           A class of college student athletes sued the NCAA over its capped maximum grant-in-aid prior policy which did not cover the full cost of school attendance. Both sides reached a settlement under which a mega-fund settlement of $208.664 million was reached, which would make payouts to 53,000 class members and, for students playing all four years in college, would produce a payout of $6,000 each. Class counsel moved for recovery of fees and expenses. The district judge supervising the case awarded $41,732,889 in fees and $3,184,274.38 in expenses. The fee award was 20% of the gross settlement fund and was the product of a 3.66 positive multiplier applied to a lodestar of about $11.4 million. One student objected in an appeal to the Ninth Circuit.

            On April 17, 2019, the Ninth Circuit affirmed in In re National Collegiate Athletic Assn. Athlete Grand-In-Aid Cap Antitrust Litig., No. 8-15054 (9^th Cir. April 17, 2019) (unpublished memorandum decision).

            Given that the Ninth Circuit follows a 25% percentage-of-recovery benchmark, the 20% award in this case was no abuse of discretion. It also was cross-checked by detailed billing records which justified an enhancement to the lodestar. Finally, with respect to expenses, the objector argued that those had to be subtracted from the gross settlement for purposes of the ultimate fee calculation. However, the Ninth Circuit rejected that argument because the district court had discretion to base the fee award on either the gross or net settlement funds figure.   (In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 953 (9^th Cir. 2015).)

Class Action, In The News: Class Attorneys In Chinese Drywall MDL Settlement Reap $111.4 Million

This Amount Awarded Even Though District Judge Chided Them For Vitriolic Fee Requests.

            We can report that a Louisiana federal district judge has given approval to a $111.4 million fees/expenses award to class counsel in the Chinese Drywall MDL litigation settlement, even though chiding class attorneys for “vitriolic” fee requests. If you want to know what attorneys got what, there is an article on Law360 today which can provide you that information.

Class Action: Non-Class Counsel Has Standing To Appeal Denial Of Fees, But Record Reflected That They Did Not Provide A Substantial Benefit To The Class Versus Individual Client Class Members

244 Non-Class Counsel Fee Motions Resolved On Appeal In The Volkswagen Class Action.

            In In re Volkswagen “Clean Diesel“ Litig., Case Nos. 17-16020 et al. (9th Cir. Jan. 22, 2019) (published), the Ninth Circuit was facing 244 fee motions by non-class counsel seeking fees in the settlement of the VW “clean diesel” action where the lower court had earlier approved a $10 billion settlement (not a common fund) and awarded class counsel $175 million in fees. Needless to say, the non-class counsel filed attorney’s liens on their individual class member recovery and initiated enforcement proceedings against individual clients, with the district court enjoining this at earlier stages of the matter. Eventually, a class action settlement was entered into, with specific provisions by which VW paid fees only to class counsel and under which individual clients would have to bear their own expenses if they utilized counsel other than class counsel. Because non-class counsel wanted to get paid, they moved to enforce attorney’s liens under retention agreements against individual class members, with the supervising district court enjoining those efforts, only to later remove the injunction later on during the case. Non-class counsel moved to recover fees, but the lower court denied them based on the ground their efforts did not result in a substantial benefit to the class.

            The Ninth Circuit affirmed.

            VW challenged the non-class counsel’s standing to appeal, but—in a first impression case—decided that non-class parties/counsel deprived of fees did show an injury worthy of standing to appeal the adverse fee denial order.

           However, that is as good as it got. After carefully analyzing the efforts of non-class counsel (especially calibrated to the settlement provisions on what VW would pay—only class counsel efforts), the federal court of appeals decided that the district did not err in concluding that the non-class counsel efforts did not result in a substantial benefit to the class. With respect to the attorney’s lien issues, this was moot because the lower court vacated the injunction such that individual class members will have to duke it out with their attorneys as what should (or should not) be paid.  

Class Action: Class Counsel Awarded Full Request In Requested Fees--$74,775,000—In Class Action Against Ford Motor Co. For Defective Takada Air Bags

Fee Award Was 25% Of The Common Fund, But A Lower 14% If Value Of Customer Support Was Factored Into The Analysis.

            In In re Takada Airbag Products Liab. Litig., Case No. 1:15-md-02599 (S.D. Fla. 2018), a $299 million settlement was approved by District Judge Federico Moreno in a class action against Ford Motor Co. for defective Takada air bags by which each class member will be reimbursed for documented out-of-pocket expenses, up to $500 in undocumented expenses, and provided with a rental car to bridge the gap when the car is being repaired. Also, free customer service is provided by Ford to class members. The district judge approved class counsel’s full fee request of $74.775 million, which was 25% of the common fund but was actually closer to 14% of the percentage of recovery if the value of customer service was factored into the analysis.

Class Action: Trial Judge’s Reduction Of Class Action Counsel Fees From $250,000 To $180,000 Was No Abuse Of Discretion

Lower Court Does Not Have To Agree To Maximum Amount Ceiling In “Clear Sailing” Provision Under Settlement Agreement And Does Not Have To Award Percentage of Recovery Fees.

            Orozco v. Pebble Beach Co., Case No. H044232 (6^th Dist. Dec. 14, 2018) (unpublished) demonstrates that lower courts do not have to award percentage of recovery class counsel fees in class action cases under Laffitte v. Robert Half Internat., Inc., 1 Cal.5th 480 (2016) [our Leading Case No. 17]. What happened here is that parties agreed to a “clear sailings” clause in a wage/hour class action settlement that the defense should not challenge fees “up to” $250,000, one-third of the gross settlement common fund. However, the trial court awarded only $180,000 based on hourly rates it deemed excessive and based on its perception that the hours claimed were not commensurate with work seen on like cases.   The Sixth District affirmed, because Laffitte does not mandate that a percentage-of-recovery fee recovery has to be made as a matter of law. The “clear sailings” provision did not require otherwise, given that only an award “up to” the $250,000 had to be considered—it did not hamper the trial judge from making a lower award. Lower fee award affirmed.

Class Action: New Amendments To F.R. Civ. P. 23 Became Effective 12/1/18

Among Others, District Judge Has To Approve Payment Or Consideration To Objectors Or Their Counsel For Withdrawing Objections Or Abandoning Appeals.

            Effective December 1, 2018, Federal Rules of Civil Procedure, rule 23 was amended in several respects to clarify notice requirements relating to class action settlements, bulk up “preliminary approval” standards with added clarity, amplify on “final approval” procedures, and iterate there are no appeals from preliminary approval orders.

            As it related to our blog, there were some amendments to rule 23(e)(5) relating to objectors in class action cases, inspired by concerns that some objectors (mainly professional objectors) try to “hold up” settlement distributions to the class in order to obtain payoffs to themselves and/or their counsel. To address these concerns, subdivision (e)(5) was amended to provide that any agreement where payment or consideration to an objector is involved (including payment to an attorney) such that an objection is withdrawn or an appeal is abandoned, the district judge must approve such an agreement even if the settlement occurred after an appeal was taken. In the latter situation, the district court must give an “indicative ruling” under F. R. Civ. P. 62.1. Some commentators along the way have suggested that objectors should be required to post an undertaking on appeal, but this reform was not adopted—even though district judges have ordered it in unusual circumstances.

            If you want to know more about these amendments, John M. Barkett of Shook, Hardy & Bacon L.L.P. of Miami, Florida has written a good article entitled “The 2018 Amendments to the Federal Class Action Rule,” which easily can be found for reading on the Internet.

Class Action, Costs, Lodestar, Reasonableness Of Fees, Section 998: Trial Judge Properly Awarded Class $333,000 In Attorney’s Fees Out Of Requested $780,845.62

However, Lower Court Did Properly Award Voluntary Mediation Expenses And Expert Fees Incurred By The Class After Rejection Of A CCP § 998 Offer.

            In Diaz v. Grill Concepts Service, Inc., Case No. B284146 (2d Dist., Div. 2 Oct. 19, 2018) (unpublished), former restaurant employees of a Daily Grill brought a class action for being paid less than a “living wage” and eventually won a judgment of $300,751.31 after restaurant admitted a major degree of liability. The trial judge awarded the class $9,775 in voluntary mediation expenses and $7,497.80 in expert witness fees incurred by the class after restaurant rejected a CCP § 998 offer of $499,999 inclusive of fees and costs. The class moved to recoup $780,845.62 in attorney’s fees (which included a 1.5 multiplier) under CCP § 1021.5 and Labor Code § 218.5. However, the lower court only awarded $333,000 in fees, after reducing for duplication and block billing, consisting of a $222,000 lodestar augmented by a 1.5 multiplier. As a cross-check, the lower court found the fees reasonable because they equaled 71% of the benefits obtained by the class (which was well above a 33% contingency threshold).

            The restaurant appealed the costs awards, while the class appealed the fee award.

            Nothing changed on appeal.

          The lower court had discretion to determine the voluntary mediation expenses were “reasonably necessary” to the litigation, and no discretion was abused in this case. With respect to the expert witness fees, restaurant did reject a 998 offer which did not outstrip the judgment plus total fees and costs awarded (given the wording of the 998 offer). The fact that the 998 offer was structured as a firm number plus future fees/costs did not make the offer uncertain, given there is some “estimation uncertainty” always present in such offers. (Elite Show Services, Inc. v. Staffpro, Inc., 119 Cal.App.4^th 263, 266-270 (2004).)

            That shifted attention to the class fee award. Here is what the appellate court had to say in affirming the lower court’s ruling:

• The lower court did not have to accept, carte blanche, the requested fees numbers by a fee applicant, with the court making sufficiently clear why it made certain reductions based on duplication, block billing, and unreasonable hourly rates;
• Although opposing counsel’s work effort can be probative, it was not error to fail to compare defense work to the class work because the opposition work was not reviewed by the lower court for duplication, inefficiencies, and block billing;
• Use of a “blended rate” for class counsel is not per se impermissible and was not so in this case;
• Class counsel’s use of declarations from fellow “friends” did not have to be automatically credited but could be discounted based on bias; and
• Although the lower court “cross-checked” by the class benefits (not including the fee recovery), no sole methodology is proper; but, in any case, even if the benefits plus fee recovery was used, the fee recovery was still 41% of the total recovery—well above a 33% contingency or percentage-of-recovery measure.

Class Action: Tenth Circuit Court Of Appeal Dismisses Challenge By Three Employee, Non-Equity Lawyers To Fee Allocations Made In Long-Time Class Action Case

They Lacked Standing, Federal Court Of Appeals Rules.

            In Roselle, et al. v. Berger & Montague, P.C., Case No. 17-1328 (10th Cir. Oct. 11, 2018) (nonprecedential), the Tenth Circuit dismissed an appeal by three attorney-employees of the now-defunct law firm of Waite, Schneider, Bayless & Chesley (WSBC) seeking personal compensation for work in a 27-year class action litigation. It concluded that the three attorneys lacked standing to challenge the fee allocation made by the district judge given they were only employees, not partners or equity-shareholders in the law firm.

Class Action: $8.7 Million Class Action Fee Recovery In Limited Credit Settlement Was Reversed And Remanded Because Coupons Were At Issue And Redemption Rate Needed To Be Factored In

CAFA Coupon Feature Needed To Be Analyzed.

            In re EasySaver Rewards Litig., No. 16-56307 (9^th Cir. Oct. 3, 2018) (published) involved a $12.5 million approved settlement by which “credits” would be provided by the defendant for a limited list of products, with $8.7 million allocated as fees to class counsel and $3.5 million available for class distributions through credits.   The district court valued the “credit” settlement at $38 million. The Ninth Circuit reversed the fee award for two reasons: (1) the “credit” was actually a “coupon” settlement such that it had to be reevaluated under the Class Action Fairness Act (CAFA); and (2) redemption rates had to be factored into valuation of what the settlement was worth.

Class Action: Attorneys’ Failure To Disclose Separate Settlement For Fee Recovery With Defendant W/O Court Approval Gave Lower Court Exclusive Concurrent Jurisdiction To Order Disgorgement Of $5M Court-Escrowed Fees To Class Members Rather Than Attys.

Class Action Fiduciary Duties and Court’s Continuing Equitable Authority To Do Justice Justified The Lower Court’s Decision To Award Attorneys Nothing.

            Lofton v. Wells Fargo Home Mortgage, Case No. A146282 (1^st Dist., Div. 3 Sept. 28, 2018) (published) is a stark reminder to attorneys that trial courts have broad jurisdiction to administer justice and make sure that “secret” fee deals of a separate nature are cut in a related class action context unless there is court approval.

            What happened in a prior appeal was that the appellate court affirmed a TRO by which attorneys were ordered to deposit into court over $5 million in settlement proceeds claimed as attorney’s fees in cases brought against Wells Fargo, based on the theory that the attorneys were compensating themselves out of a separate settlement without court approval which really related to representing a class action which was resolved through a separate $15 million settlement. The appellate court in that prior appeal also remanded, based on the trial court’s continuing jurisdiction under various grounds (including the equitable authority to administer justice), to gauge whether disgorgement of all or some of the $5 million was in order.

            The lower court decided that no fees should be awarded to attorneys; instead, it ordered the escrowed moneys paid to class members who filed claims in the settled class action matter.

            Attorneys’ appeal did not disrupt the trial judge’s injunctive relief/disgorgement orders. The reason was that the trial judge did have exclusive concurrent jurisdiction given that a common fund settlement was at issue, since the settlement money belonged to the class subject to fee allocation to attorneys to prevent unjust enrichment by the court. The attorneys did not ask for fees, but really only challenged jurisdiction. Coupled with their nondisclosure of the separate agreement not subject to court approval, plenty of equities justified the disgorgement ordered by the lower court.

Class Action: Seventh Circuit Court Of Appeals Determines, Unless Settlement Agreement Has A Bar, Settlement Agreement Should Not Be Read To Bar Objectors From Requesting Fees For Adding Value To Settlement Based On Equitable And Common Fund Principles

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 (7^th 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 (7^th 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.

Class Action, Private Attorney General: $100,000 CCP § 1021.5 Fee Award To Two Plaintiffs’ Counsel In Foreign Driver’s Case With Limited Success Affirmed On Appeal

Plaintiffs Sought $1.7 Million (Inclusive Of Multiplier), But Went Home With Much Less.

            Sancandi v. City of Los Angeles, Case No. B268839 (2d Dist., Div. 7 July 31, 2018) (unpublished) is a case which illustrates the principles that limited success in a non-certified class action, combined with an inflated request by the marginally-winning two plaintiffs, will result in a reduced fee award to plaintiffs’ counsel.

            In this one, three groups of plaintiffs appealed in a non-certified class action challenging a determination that driving with a foreign driver’s license should be recognized by California as a valid driver’s license. They had very limited success in federal and state court litigation, although somewhat vindicating a City of Los Angeles impound policy and obtaining an $8,000 recovery total for two plaintiffs, even though their class certification action was denied. Plaintiffs sought recovery of almost $1.7 million in attorney’s fees, inclusive of a two times positive multiplier, as against the defense based on the $8,000 victory. Instead, the trial judge awarded $100,000 in plaintiffs’ favor.

            Both sides appealed, but the fee award retained intact—plaintiffs wanted more; the defense wanted no fees ordered. Plaintiffs were entitled to private attorney general fees under the “catalyst theory,” because they did get Los Angeles to adopt a special order on foreign licenses and any settlement efforts would have been futile given Los Angeles’ position that a foreign license was irrelevant to the legal issues being adjudicated. Plaintiffs had limited success—no class certification; very limited success on the merits (at best, mixed). Given that the plaintiffs only got $4,000 each, no problem that attorney’s fees were limited to $100,000.

Class Action, Common Fund: Seventh Circuit Determines That “Up To” Dollar Amount Does Not Create Common Fund Such That District Court Can Base Fee Recovery On Claims Actually Made

Case May Suggest Drafting Tips For Class Counsel But Might Signal A More Ominous Trend, Although Facts Limited To Quick Settlement Achieved After A “Paucity Of Effort.”

            Although a federal case, class action practitioners involving smaller settlements resultant from little work may need to pay attention to the reasoning of Camp Drug Store, Inc. v. Cochran Wholesale Pharmaceutical, Inc., No. 17-2086 (7^th Cir. July 27, 2018), which suggests that a common fund might be somewhat of a “flexible” term depending on the results achieved and that using language such as “up to” for a potential common fund may present a basis to award reduced fees to class counsel, especially in the case of a quick settlement with a small expenditure of effort by class counsel.

            In this one, a class and defendant settled a Telephone Consumer Protection Act (TCPA) class action, relating to faxing unsolicited advertisements to class members, for “up to $700,000 available to settle the case,” subject to class members submitting a claim for $125 (with a pro-rata reduction if the claims exceeded the $700,000 ceiling), along with any unclaimed funds reverting to the defense, with an incentive award of $15,000 each to representative plaintiffs, and with class counsel to be paid one-third of the $700,000 settlement fund to the tune of $233,333.33 (with the actual lodestar being a claimed $156,000). The district judge was concerned with this settlement, but preliminarily approved the settlement. The settlement administrator garnered 1,765 class member returned claim forms out of a 17,000 member potential class, with no one filing objections and only 12 class members requesting to be excluded—in total, the total amount of funds that defendant paid to claimants was $220,625. At the final approval hearing, the district judge awarded $ 1,000 as an incentive award to the named plaintiffs and awarded $73,468.13 in fees to class counsel, with the fee award being one-third of the returned claims. The district judge did not feel there was a true common fund given the reversion and no guaranty that the “up to” $700,000 commitment was anything more than a security deposit.

            The Seventh Circuit affirmed the fees award, much to the chagrin of class counsel.

            The appellate court did not believe that a true common fund was involved based on the “up to” language in the settlement agreement (not a sum certain); rather, it was a “claims-made” settlement where funds should be gauged against what claims were actually returned. It distinguished Boeing Co. v. Van Gemert, 444 U.S. 472 (1980) on this basis, but then went further. Boeing does not dictate a percentage-of-recovery approach from a common fund because the fee award must still be reasonable. The problem here was that there was no real litigation in the case—no paper discovery; no depositions; no substantive motion, just an early settlement after the filing of a complaint. The “paucity of effort” expended by class counsel justified the district judge award, which is a key distinction we believe pro-class practitioners will embrace in the future but also highlights that fees, in the end, must be reasonable.