Paul Liles v. Macomb County Employees, 2013 U.S. App. LEXIS 16878

Class action against Motorola alleging false statements in 2006 about its ability to deliver 3G-capable phones; stock fell when problems became public.
After >4 years of litigation and denial of Motorola’s summary-judgment motion, the parties settled for $200 million; class counsel sought 27.5% in fees.
District court approved the $200 million settlement and awarded counsel 27.5% of the common fund; two class members objected on appeal.
Paul Liles filed a late objection and did not file a claim to any portion of the fund; court dismissed his appeal for lack of an interest in the fee outcome.
Edward Falkner argued the fee award was improper because fees should be set ex ante (ideally by auction) and that a flat 27.5% of a large fund is excessive; he also urged market-based, tiered percentages.
The district court relied on expert evidence showing high litigation risk and counsel’s unreimbursed expenses; the Seventh Circuit reviewed for abuse of discretion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing of Liles to appeal fee award	Liles objected to fee size	Motorola/class reps argued Liles lacks economic interest because he didn’t claim any recovery	Dismissed Liles’ appeal for lack of a justiciable controversy (no interest)
Whether ex ante fee schedules or auctions are required	Falkner: fees should be set at outset, preferably by auction	Class/counsel: impractical to recreate ex ante conditions after years of litigation; auctions unsuitable for legal services	Auctions/ex ante schedules are desirable but not required; no abuse of discretion here given case circumstances
Whether 27.5% of $200M is excessive	Falkner: 27.5% is well above norms for large funds; structure should have declining marginal rates	Counsel: high contingency risk and sunk costs justified substantial percentage	Although 27.5% is unusually high for a large fund, court did not abuse discretion because of the suit’s extraordinary risk and litigation history
Fee-structure form (flat % vs. declining tiers)	Falkner: market-based tiered percentages better reflect costs and marginal incentives	Counsel/district court: did not consider tiers; issue not raised below	Court emphasized that tiered/declining rates are common and often preferable but declined to reverse where the district court didn’t consider it and class representatives (institutional investors) did not object

Harman v. Lyphomed, 945 F.2d 969 (7th Cir.) (standard: abuse of discretion review for fee awards)
In re Continental Illinois Securities Litigation, 962 F.2d 566 (7th Cir.) (market-approximation principle for class-action fees)
In re Synthroid Marketing Litigation, 264 F.3d 712 (7th Cir.) (discussing desirability of ex ante fee structures)
In re Synthroid Marketing Litigation, 325 F.3d 974 (7th Cir.) (endorsing declining-percentage tiers and limits of auctions)
Kirchoff v. Flynn, 786 F.2d 320 (7th Cir.) (contingent-fee awards compensate for risk of nonpayment)