*1 S222996. Aug. [No. 2016.] al.,
MARK LAFFITTE et Plaintiffs and v. Respondents, INC., al., HALF ROBERT INTERNATIONAL et Defendants and Respondents; BRENNAN,
DAVID Plaintiff and Appellant.
Counsel Law Office of Lawrence W. Schonbrun and Lawrence W. Schonbrun for Plaintiff and Appellant. Barnes, Barnes, Lander;
Law Offices of Kevin T. Kevin T. Law Offices Gregg Antonelli, Antonelli, Janelle Hilaire McGriff and Joseph Joseph Carney; Mika M. Hilaire for Plaintiffs and Respondents.
Paul Judith M. Kline and M. C. Wilcox for Defendants and Hastings, Kirby Respondents. Berzon, Rubin; Larkin,
Altshuler Michael D. Robert Jocelyn Schug; Fund, Richard Rothschild for Western Center on Law and Impact Poverty, Caucus, Tzedek, Asian Americans Justice-Asian Law Bet Centro Advancing *6 Raza, Foundation, de la California Rural Assistant Legal Legal Disability Fund, Center, Education and Defense East Law Rights Bay Community Justice Law Foundation of Silicon Aid Association of Aging, Valley, Legal California, Advocates, Aid of San Mateo Public Public Legal Society County, Counsel, The Public Interest Law and Worksafe as Amici Curiae on Project behalf of Plaintiffs and and Defendants and Respondents Respondents. Bernstein, Cabraser, Selbin; Lieff Cabraser Heiman & Elizabeth J. Jonathan D. Bartholomew, Girard Gibbs and Jordan Elias for Professor Christine Professor Coffee, Jr., Davis, Erwin Professor John C. Professor Joshua P. Chemerinsky, Professor Nora Freeman Professor Brian T. Professor Engstrom, Fitzpatrick, Arthur R. Miller and Professor Charles Silver as Amici Curiae on behalf of Plaintiffs and and Defendants and Respondents Respondents. Law, Glenn A. Danas and H. Wu for Wardrobes as
Capstone Ryan Working Anticus Curiae on behalf of Plaintiffs and and Defendants and Respondents Respondents. Kellner,
Kabateck Brown Richard L. Kellner and Brian S. Kabateck for Consumer of California as Anticus Curiae on behalf of Plaintiffs and Attorneys and Defendants and Respondents Respondents.
Law Offices of Martin N. Buchanan and Martin N. Buchanan for Professor William B. Rubenstein as Amicus Curiae.
Opinion WERDEGAR, A classaction lawsuit settled before trial for employment J. million, $19 with the that no more than a third of that agreement recovery would to class counsel as fees. the trial court’s go attorney seeking settlement, amount, class counsel the maximum fee approval sought $6,333,333.33. After information from class counsel on the hours considering case, fees, had worked on the the course of the they applicable hourly pretrial and the risks involved litigation, potential recovery the trial court—over of one class objection member—approved settlement and awarded counsel the fee. requested
The
class member contends the trial court’s award of an
objecting
fee calculated as a
of the settlement amount violates a
holding
Serrano v. Priest
this court
Factual and Procedural Three related class action lawsuits were filed Robert wage-and-hour against Inc., firm, (hereafter Half International a and related staffing companies Halt) in Robert Los Court. collectively Angeles County Superior Septem- 2012, ber moved for an order parties jointly conditionally certifying settlement class and a settlement. The trial court preliminarily approving the motion and the settlement. With the granted preliminarily approved court’s settlement was amended November 2012. permission, proposed amended, Under the settlement as Robert Half would agreement pay $19 settlement amount of million. It was class counsel would gross agreed $6,333,333.33 (one-third fees of not more than request attorney gross amount), settlement to be from the settlement amount. Robert Half paid amount, if would not a fee to that a smaller amount oppose request up was the court the remainder would be retained the settlement approved by claimants, amount for distribution to rather than to Robert Half. The reverting settlement further that unclaimed of the net agreement provided any portion settlement amount for from class members not (resulting, example, choosing to make claims or to for would be reallocated failing qualify compensation) claimants rather than returned to Robert Half or to qualified given any third party.
Class member David Brennan
to the
settlement on
objected
proposed
$6,333,333.33
several
that the
grounds, including
projected
attorney
to be excessive and class counsel had not
informa-
appeared
provided enough
tion to evaluate it.
(1971)
(Serrano I)
Cal.Rptr.
In Serrano v. Priest
Serrano v. Priest
Class counsel made the subsequently anticipated request in Afees. fee to one-third of the settlement fund recovered for attorney equal class, asserted, counsel is within a historical of 20 to 50 of range percent in a common fund and is also within the fee range provided contingent the named of fee was contin- agreements signed by plaintiffs. Recovery any on success “and the case far more risk than gent litigation, presented fee, asserted, the usual fee case.” The counsel also is contingent requested method, in also under the “lodestar” which an fee is appropriate attorney rate, based on the hours worked and an sometimes hourly billing adjusted by or The firms as class counsel would positive negative multiplier. acting 4,263 4,463 hours, between and on collectively expend attorney depending whether the of the settlement. objector appealed approval Multiplying individual hours rates tied to their skill and attorneys’ by assertedly experi- ence, $2,968,620 counsel calculated a lodestar fee amount of between $3,118,620. The needed to reach the fee of multiplier requested $6,333,333.33 would thus be 2.03 to 2.13.
The totals of hours common fund expended, range percentages cases and the fee and the rates to agreements, range hourly applicable class counsel were data the fee motion and supported by supporting declarations. Class Counsel Kevin T. Barnes described the work generally I “one of the most cases have ever been a performed heavily litigated part of and the extensive research and for the 8½ This litigation past years. included extensive written extensive law and motion discovery, three Motions for a Class practice, depositions, Summary Judgment, Motion, Certification Reconsideration Motion and then another subsequent Motion to numerous consultation with an economist Decertify, experts, and two full mediations.” regarding potential damage exposure day While the settlement and fee the trial court tentatively approving request, asked counsel for additional information and discussion on certain points. that, in Barnes submitted a declaration the calcu- supplemental part, argued 2.13) (2.03 lated over the lodestar amount was reasonable multiplier of counsel’s “hard work and determination” a difficult case and the light “enormous” risks of counsel undertook. Barnes’s declaration nonpayment detailed the risks that the actions would fail at the certification would stage, be deemed barred arbitration or would fail on the merits agreements, because of the class members were findings exempt employees. 10, 2013,
On the trial court overruled Brennan’s April objections gave the settlement and its final its oral request approval. ruling fees, court stated: “On the amount of the the court considers this attorneys I case that there is a and so do a double check on the contingency I I fees at the lodestar amount. do believe have sufficient attorneys by looking *9 information on the number of hours that were and that the present hourly rates therefore were within the norm and not overstated. Given charged [¶] lodestar, I I the then also find have information the record which supports if the that would be to lodestar at a strict multiplier applied you’re looking calculation, not, lodestar which we’re we’re at a calcula- looking contingency tion, I’m the amount of the is not unreasonable. the contingency considering involved, of the the skill novelty difficulty questions displayed them, the extent to which the other presenting litigation precluded employ- ment the and the inherent risk whenever there is a fee award that by attorneys basis, I is On that am final contingent. granting approval.” [¶] settlement, On Brennan’s from the entered on the objector appeal judgment III the Court of affirmed. The Court of held Serrano did not Appeal Appeal award of a a common fund that an award of preclude percentage one-third the common fund was the set other class action range lawsuits, and that the trial court did not abuse its discretion by cross-checking the reasonableness of the award a lodestar fee and by calculating a over lodestar of 2.03 to 2.13. approving multiplier We review on the which granted objector’s petition, presented single III issue: whether Serrano a trial court to calculate an permits attorney fund, fee award from a class action common fund as a while method as a cross-check of the selected using lodestar-multiplier percentage.2
Discussion We review fee awards on an abuse of discretion standard. ‘“The attorney trial is the best of the value of services ‘experienced judge judge professional court, review, rendered his and while his is of course it judgment subject will not be disturbed unless the court is convinced that it is appellate clearly ” III, (Serrano 20 Cal.3d at ‘“Fees the trial wrong.’ approved by reasonable, court are to be and the must show error presumed objectors (Consumer award.” Cases Privacy Cal.App.4th 127].) We consider here whether a trial court abuses its discre- Cal.Rptr.3d tion, when a fee from a common fund created or awarding preserved by the fee as a of the fund and litigation, by calculating checking reasonableness of the fee with a lodestar calculation.
California has as an to the Ameri long recognized, exception general can rule that bear the costs of their own parties attorneys, propriety an fee to a who has recovered or awarding party preserved Brennan, 22, 2015, request judicial by objector July granted. The notice filed on is
489 In fund for the benefit of himself or herself and others. a monetary awarding fee from the fund or from the other benefited the trial court acts parties, within its to the other enrichment. equitable power prevent parties’ unjust IV, 627; III, (Serrano 32 Cal.3d at Serrano 20 Cal.3d at p. supra, 35; 601, (1936) Farmers etc. Nat. Bank v. Peterson 5 Cal.2d 607 P.2d p. [55 475, 867]; (1895) Fox v. Hale & Norcross S. M. Co. 108 Cal. 476-477 P. [41 19, 328]; Lealao v. Inc. California, Cal.App.4th Beneficial (Lealao).) Cal.Rptr.2d 797] Because it distributes the cost of an all the hiring attorney among parties benefited, a common fund fee award has sometimes been referred to as “fee contrast, “fee refers to an award under which a spreading.” shifting” party that did not is ordered to fees incurred prevail litigation pay by 26; (Lealao, I at Camden prevailing party. Cal.App.4th 1991) 774.) (11th Condominium Assn. v. Dunkle Cir. 946 F.2d California law fee favor of the on certain permits shifting prevailing party statutory Code, 12974, 12989.2), (b), causes of action Gov. subd. when (e.g., §§ a has acted as a an plaintiff private attorney general by enforcing important Proc., 1021.5), (Code interest Civ. and contract right affecting public § cases where the contract for an award of fees to the provides prevailing party Code, 1717). (Civ. §
Class action can result an fee award to litigation attorney pursuant when, a fee or the common fund doctrine statutory shifting provision through inas this a class settlement establishes a relief fund from agreement which the fee is to be drawn. Two methods of attorney primary determining reasonable class action have and been emerged elaborated recent decades. The method calculates the fee as a share of a recovered common fund or the value of monetary method, The lodestar or more the lodestar- plaintiffs’ recovery. accurately method, calculates the fee the number of hours multiplier “by multiplying counsel a reasonable rate. Once the court reasonably expended by hourly lodestar, has fixed the it increase or decrease that amount by applying factors, or to take into account a of other positive negative ‘multiplier’ variety of the including quality representation, novelty complexity issues, obtained, (Lealao, the results and the risk contingent presented.” Cal.App.4th
The two a fee contrast their foci: approaches determining primary done, “The lodestar method better accounts for the amount of work while the of the fund method more reflects the results achieved.” accurately 1993) (6th v. Prudential-Bache Inc. Cir. 9 F.3d (Rawlings Properties, 516.) Each has been and criticized for its championed respective advantages The lodestar method has been as better disadvantages. praised providing *11 490 in and to
accountability encouraging plaintiffs’ attorneys pursue marginal in creases but criticized for settlement and recovery, discouraging early in too an amount of resources its at consuming large judicial application. {Id. 516-517; Rubenstein, 2015) (5th on Class Actions ed. pp. Newberg 15:65, Actions).) (hereafter 225-226 on Class The Newberg percentage § calculate; method “is it establishes reasonable on the easy expectations part of as to their and it plaintiffs’ attorneys expected recovery; encourages early settlement, However, which avoids award protracted litigation. percentage also incentives to to settle for too low a may provide attorneys recovery because an settlement them with a fee terms of the early provides larger Inc., time invested.” v. Prudential-Bache (Rawlings Properties, amount, 516.) Where the class settlement is for a p. very large be criticized as counsel a windfall relation to the providing Bank, amount of work v. Glendale Federal F.S.B. performed. (Brundidge 563, 909]; (1995) 168 Ill.2d Ill.Dec. 659 N.E.2d on Newberg Actions, 15:65, Class § California,
Before method’s use we review the discussing of the two fee calculation class action history approaches nationally.
I.
v.
Lodestar-multiplier Percentage
Recovery
of
The
fee awards
class actions has been one of reaction
history
counterreaction,
Horwich,
(See
divisible into three
eras.
Walker &
major
The Ethical
a Lodestar Cross-check: Judicial
About
Imperative
Misgivings
(2005)
“Reasonable
Fees in Common Fund Cases
18 Geo. J.
Percentage”
Horwich).)
(hereafter
Ethics
1453-1454
Walker &
Legal
In the first
from the 1966 amendments to rule 23 of the Federal
period,
U.S.C.),
(28
Rules of Civil Procedure
which “heralded the advent of the
Horwich,
(Walker
modern class action”
&
18 Geo. J.
Ethics at
Legal
1970s,
1453), to the middle of the
awards based on a
were common:
relied on a
of factors
recovery
“Judges
variety
setting
awards,
reasonable amounts for fee
but most
was the size
heavily emphasized
of the fund or the amount of benefit
for the class. Awards often
produced
reflected what the court believed was a ‘reasonable
of the amount
percentage’
recovered, with the
from case to case.
percentages varying considerably
However,
sometimes resulted
percentage-of-recovery system
strikingly
awards,
fee awards
a number of cases. Press reaction to these
large
criticism from within the
that the fees were
to the
profession
disproportionate
actual efforts
to shift
expended by
attorneys, generated pressure
away
(Court
from the
Awarded
Fees:
percentage-of-recovery approach.”
Attorney
(hereafter
the Third Circuit Task Force
108 F.R.D.
Report of
*12
1985 Task Force
see In re Thirteen
Out
San Juan
Report);
Appeals Arising
of
295,
1995)
(1st
Hotel Fire
Cir.
56 F.3d
Dupont
Litigation
Plaza
in
counsel fees
common fund cases were
as a
[“Traditionally,
computed
per-
fund,
course,
reasonableness.”].)
of
to considerations of
centage
subject,
in
The second
ran from the Third Circuit’s
decisions
the
period
Lincly
Builders,
mid-1970s
Bros.
Inc. v. American Radiator & Standard
(Lindy
Builders,
1973)
I)
(3d Cir.
The third which continues the mid-1980s. period, today, began calculation, in a case statutory shifting involving lodestar-multiplier *13 United States Court common fund cases and indicated Supreme distinguished in a different method would be used such a case: “Unlike the calculation of doctrine,’ fees under the ‘common fund where a reasonable fee is attorney’s class, based on a of the fund bestowed on the a reasonable fee under United States Code 1988 reflects the amount of attorney [42 section] (Blum time on the v. Stenson 465 U.S. reasonably expended litigation.” 886, 900, 1541].) fn. 16 L.Ed.2d 104 S.Ct.
The next the Chief of the Third Circuit convened a “task force” year, Judge academics and from around the to address judges, attorneys country in deficiencies and abuses” that had arisen “perceived application (1985 lodestar method. Task Force 108 F.R.D. at Lindy Report, supra, 253.) The task force noted the main that had been complaints lodged the lodestar method of an fee award. Promi- against determining appropriate nent these were that the on the number of hours worked among emphasis creates a disincentive for the settlement of cases and early encourages hours; excessive that the need for documentation and lawyers expend examination of detailed records had increased the time and billing greatly matters; effort devoted to fee and that the method was lodestar-multiplier because, neither as nor as as it objective precise appears facially example, basis, work on a fee many plaintiffs’ attorneys usually contingency making of a rate for lodestar assignment customary billing purposes problematic. (1985 Task Force 108 F.R.D. at Report, supra, pp. in between fee cases which the fee award is to be
Distinguishing spreading taken from a common fund a class action settlement fund involv- (including members), in absent class fee cases which the ing statutory shifting award is a of an between the product adversary proceeding prevailing (1985 Task Force 108 F.R.D. at nonprevailing parties Report, supra, 250-251), the task force recommended courts use a pp. generally percentage- in of-the-fund method common fund cases and a method lodestar-multiplier in fee cases. the Task Force recommends that shifting “Accordingly, traditional common-fund situation and those fee cases that are statutory to result a settlement fund from which counsel fees can be likely adequate court, the district on motion or its own initiative and at the earliest paid, moment, should to establish a practicable attempt arrangement to the Bench and to counsel. fee cases the agreeable plaintiff’s statutory settlement; fee would be the event of all negotiated applied fully fee cases the award would continue to be determined an litigated statutory manner under the basic with modifica- adversary Lindy approach,” suggested 255-256, omitted.) tions. fn. {Id. (which fee award the task force envisioned
By making being set a common fund and all inducement early proceedings) “any
493 reduced, or inclination to increase the number of hours will be since Lincly the amount of work will not be to alter the performed permitted contingent 258.) (1985 fee.” Task Force 108 F.R.D. at Plaintiffs’ Report, supra, p. counsel will have ‘“a substantial inducement ... to settle the matter quickly, since the fee scale will have been established and counsel’s compensation Moreover, (Ibid.) will not be enhanced method delay.” percentage cumbersome, ‘“willeliminate the and often surrealistic of enervating, process fee that now the Bench and Bar preparing evaluating petitions plagues would, (Ibid.) under The lodestar method under the task force Lindy.” recommendations, continue to be used fee cases which no statutory benefit, common economic or a fund insufficient to a reasonable only yield fee, 259.) (Id. has been or is to be likely produced. released,
In the since the 1985 Task Force was the views years Report it have federal and state courts. expressed gained general acceptance Horwich, (See Walker & 18 Geo. J. Ethics at Legal pp.
The Third Circuit itself holds that while both methods of
a fee
calculating
used,
be
method is
favored
percentage-of-recovery
generally
‘“[t]he
‘in
common fund cases because it allows courts to award fees from the fund
” (In
manner that rewards counsel for success and
it for failure.’
re
penalizes
294,
2005)
(3d
Rite Aid
Securities
Cir.
396 F3d
Corp.
Litigation
all the circuit courts either mandate or allow their district courts to
Currently,
cases;
use the
method
common fund
none
sole use of
percentage
require
Actions,
15.66,
(5
the lodestar method.
on Class
Newberg
supra, §
228-231.)3
Most state courts to consider the
recent decades
question
3
Appeals Arising
Dupont
Litigation,
See In re Thirteen
Out
San Juan
Hotel Fire
Plaza
of
Cir.;
(1st
method);
page
permitting
County
have also concluded the method of a fee award is percentage calculating either or within the trial court’s discretion a common fund case.4 preferred Thus, since the Third Circuit’s . . . federal and state years report ‘“[i]n courts alike have returned to the increasingly percent-of-fund approach [in use, cases], common fund either it as the to or endorsing only approach that a court should have to choose between it and a agreeing flexibility lodestar on which method will result the fairest approach, depending (Strawn determination the circumstances of a case.” v. Farmers particular Ins. Co. 297 P.3d at Oregon, supra, of
The American Law Institute has also endorsed the method’s use percentage cases, in common fund with the lodestar method reserved for awards mainly under fee statutes and where the method cannot be shifting percentage (ALI, or would be unfair due to circumstances of the case. applied specific 3.13.) (2010) of the Law of Principles Aggregate Litigation ‘“Although § courts common-fund cases use of either a many permit percentage-of-the- (number fund or a lodestar of hours a reasonable approach multiplied by rate), most courts and commentators now believe that the hourly percentage note, method is Critics of the lodestar method superior. example, the method and cite the undesirable incentives created difficulty applying that a financial incentive to extend the so that the approach—i.e., thus, Moreover, fees). (and can accrue additional hours additional attorneys some courts and commentators have criticized the lodestar method because it counsel less of an incentive to maximize the for the class.” gives recovery {Id., b.) com.
While the
method has been
com
percentage
generally approved
cases,
mon fund
courts have
to ensure the
fee is reasonable
sought
the choice of a
or
result
by refining
by checking
1261,
sum,
(D.C.
1993)
(“In
join
Shalala
Cir.
1 F.3d
1271
we
the Third Circuit Task Force and
Circuit,
others,
among
concluding
percentage-of-the-fund
the Eleventh
that a
method is the
cases.”)
appropriate
determining
mechanism for
fees award in common fund
4 See,
751, 758;
(Alaska 1996)
e.g.,
Pulp
Brody
Edwards v. Alaska
Co.
920 P.2d
v. Hellman
192, 201-202;
2007)
(Colo.App.
Employees’
167 P.3d
Chun v. Board
Trustees
Retirement
of
of
432,
(2000)
127];
System
Brundidge
State Hawaii
92 Hawaii
P.2d
v. Glendale
[992
of
of
Bank,
913-914;
supra.
pages
Flemming
Nursing
Federal
659 N.E.2d at
v. Barnwell
F.S.B..
Facilities,
162,
2008)
(N.Y.App.Div.
Home and Health
Inc.
56 A.D.3d
N.Y.S.2d
[865
937,
(2010)
706],
504];
affirmed
495 Horwich, (Walker a calculation. & 18 against lodestar-multiplier 1458-1461; Actions, Geo. J. Ethics at 5 on Class Legal pp. Newberg 15:72, §
Some courts have a benchmark with or employed percentage, upward downward a multifactor The Ninth Circuit adjustments justified by analysis. (See (9th has a 25 benchmark. v. approved percent Corp. Vizcaino Microsoft 1043, 2002) Cir. 290 F.3d 28 fee as a [approving percent justified by circumstances]; benchmark of 25 case percent adjusted according specified accord, 2011) (9th In re Bluetooth Headset Products Cir. Liability Litigation 935, in 654 F.3d courts the circuit calculate 25% of “typically [district award, the fund as the ‘benchmark’ for a reasonable fee providing adequate in the record of circumstances’ a explanation any ‘special justifying depar- Circuit, ture”].) in The Eleventh stated 1991 that “district courts are similarly, i.e., 25%, to view the median of this 20% to 30% as a beginning range, in ‘bench mark’ fee award which be accordance may adjusted (Camden I with the individual circumstances of each case . . . .” Condominium Dunkle, 775; Assn. v. 946 F.2d at see also v. American Home Faught 1233, 2011) (11th Shield Cir. 668 F.3d court has often Corp. [“this stated that the of fees these cases are reasonable where fall majority they claims.”].) between 20-25% of the
Other courts have mandated or a scale an idea suggested sliding approach, force, in the Third Circuit’s 1985 task which the award cases suggested by recoveries is limited to a lower to account for larger supposed (1985 economies of scale claims. Task Force litigating larger Report, supra, 256; see, (3d 108 F.R.D. at In re Cendant PRIDES Cir. e.g., Corp. Litigation 2001) 243 F.3d courts fees cases setting attorneys’ [“[Dfistrict settlements must avoid their awards on involving large basing percentages smaller.”].) derived from cases where the settlement amounts were much As Solutions, 2013) (7th the court Silverman v.Motorola Inc. Cir. 739 F.3d $100 “it is almost as to conduct put theory, expensive discovery $200 million case as million case. . . . There be some costs marginal million, $100 $200 from million to but as a bumping recovery of the incremental these costs are bound to be low. It is recovery hard to counsel as much of the second hundred accordingly justify awarding million as of the first.” scale,
A further refinement of the the Seventh sliding championed Circuit, the lower to the amounts of the award applies percentages marginal over each counsel a step point. “Awarding decreasing percentage tiers of enables them to recover the costs of higher recovery principal award, from the first bands of the while the clients to allowing reap more of the benefit at the still some incentive for margin (yet preserving *17 496 Solutions, awards).” (Silverman to strive for these v. Motorola
lawyers
higher
Inc.,
959.)
739 F.3d at
Even without a
scale
supra,
well-developed sliding
some courts have
fee awards
a small
approach,
approved
representing
settlements,
of the fund
cases
the so-called
percentage
involving very large
in view of the ‘“windfall”that would otherwise accrue to counsel.
megafunds,
Stores,
U.S.A.,
2005)
(See,
(2d
Wal-Mart
Inc. v. Visa
Inc.
Cir.
396 F.3d
e.g.,
billion,
$3.05
123
settlement fund was worth
“the sheer size of
[where
the instant fund makes a smaller
In re Bluetooth
percentage appropriate”];
Headset Products
Many encourage Actions, (5 lodestar cross-check on a fee award on Class Newberg 15:88, 343-344),6 and studies show the pp. empirical § method with a lodestar cross-check “is the most form of fee prevalent method, giving background development this on we do not mean to sliding percentage endorse the use of a scale. That issue is not before us and is not without Actions, 15:80, (See controversy. Newberg supra. on Class § 6 See, e.g.. Appeals Arising Dupont In re Thirteen Out San Juan Hotel Fire Plaza Resources, (1st Cir.); (2d Litigation, supra, Goldberger Integrated 56 F.3d v. Inc. Cir. 43, 50; 160, 164; 2000) (3d 2006) Corp. 209 F.3d In re AT & T Cir. 455 F.3d Petrovic v.Amoco Co., (8th Cir.); page Corp., supra, Oil 200 F.3d at v. 290 F.3d at Vizcaino Microsoft (9th Cir.). page 1050
497 15:89, 348; Horwich, in method” see also Walker & practice. (Newberg, p. § 1461-1463.) 18 Geo. J. Ethics at We will return to the supra, Legal pp. later, in in of lodestar cross-checks the fee calculation this subject reviewing First, which included such a cross-check. we address the use of the in method to calculate class action fee awards California courts. percentage III II. Law Serrano California After III,
“Prior to when the California Court decided Serrano Supreme in 20 Cal.3d California courts could award a fee a supra, (See, (1975) common fund case. Melendres v. Los e.g., City Angeles III, 713].) After Serrano it is not clear Cal.App.3d Cal.Rptr. [119 (See whether this still be done. Dunk v. Ford Motor Co. 1794, 1809 award of fees Cal.App.4th Cal.Rptr.2d 483] [‘The based on a of a “common fund” is of recovery questionable Below, California.’].)” 27.) (Lealao, at validity Cal.App.4th p. III we that Serrano does not award of a clarify preclude common fund case. III,
In Serrano we reviewed an award of fees to who had attorneys decision, II obtained a affirmed our Serrano that reform judgment, required of California’s school it into constitutional public financing system bring III, (Serrano 20 Cal.3d at The trial court had compliance. pp. made the award on a reliance on the private attorney general theory, rejecting (Id. 33.) common fund and substantial benefit theories. at p. This court first addressed the common fund under which theory,
“
fund,
‘when a number of
are entitled
common to a
persons
specific
an action
or
for the benefit of all results
brought by plaintiff
plaintiffs
fund,
creation or
of that
such
or
be
preservation
plaintiff
plaintiffs may
”
III,
(Serrano
awarded
fees out of the fund.’
20 Cal.3d at
attorney’s
34.) We
with the trial court that this
was
p.
agreed
equitable theory
not,
to the case because the
had
their successful
inapplicable
plaintiffs
efforts, “created or
‘fund’ of
to which
preserved any
money
they
(Id.
36.)
should be allowed recourse for their fees.”
at
To the extent the
allocated additional
education
order to
Legislature
moneys
public
reforms, such
were not
implement
expenditures
required by
judgment
itself and counsel did not
their fee be
out of
such increased
propose
paid
any
(Id.
36—37.)
at
We went on to
expenditures.
reject
theory
substantial benefit on similar
that “concrete ‘benefits’can
grounds, explaining
accrue to the state or its citizens
the wake of Serrano &
insofar
only
[I
II]
as the
its
of the command of
which
Legislature,
implementation
equality
(Id.
that case
chooses to bestow them.”
represents,
*19
award, however,
We
the fee
under the
approved
private attorney general
We held that a fee award was within the trial court’s
theory.
equitable powers
in
at least where the
had vindicated a
the
public policy grounded
Constitution,
Californians,
California
the benefits flowed to a
number of
large
and the nature of the
the
efforts.
litigation justified subsidizing
plaintiffs’
46-47;
III,
Proc.,
(Serrano
20 Cal.3d at
see also Code Civ.
1021.5
supra,
§
doctrine].)
the
[codifying
private attorney general
fee,
the amount of the
we
the contention
one of the
Considering
rejected
in
firms
the
that it was
of the
representing
plaintiffs
inadequate
light
circumstances. We
that the trial court had considered the relevant
explained
fee,
in
circumstances
a reasonable
what would now be
calculating
using
called a
method: “Fundamental to its determination—and
lodestar-multiplier
so—was a careful
of the time
and reasonable
properly
compilation
spent
of each
and certified law student involved
hourly compensation
III,
48,
(Serrano
of the case.”
20 Cal.3d at
fn.
presentation
p.
omitted.)7
23),
In the omitted footnote
numbered
we further
(originally
addressed fee calculation: “We are of the view that the
sentiments
following
Circuit,
of the United States Court of
for the Second
uttered
Appeals
although
action,
in the context of an antitrust class
are
here: ‘The
wholly apposite
award,
of
fee
once it is
that the court’s role
starting point
every
recognized
is to
for the
must be a calculation
equity
provide just compensation
attorney,
of the
services
terms of the time he has
on the case.
attorney’s
expended
to this
is the
of
Anchoring
analysis
concept
only way
approaching
that can claim
a claim which is
vital to the
problem
objectivity,
obviously
(2d
of the bar and the courts.’
Detroit v. Grinnell
Cir.
prestige
(City
Corp.
of
448, 470;
Bldrs.,
1974) 495 F.2d
see also
Bros.
Inc.
Phila. v.
Lindy
161, 167-169;
1973)
(3d
American R. & S. San.
Cir.
487 F.2d
see
Corp.
Dawson,
Clients
Public Interest
generally
Lawyers
Involuntary
Litiga-
849,
III,
925-929.)”
[(1975)]
(Serrano
tion
88 Harv. L.Rev.
especially pp.
23.)
20 Cal.3d at
fn.
p.
III
For his claim that Serrano mandates
use of the lodestar method
primary
relies on these
our allusions
every
objector
passages,
particular
“
”
fees,
to ‘the court’s role
a role that includes awards
equity’
awarding
“
cases,
in common fund
and to the lodestar as the
‘starting point
every
”
III,
added.)
(Serrano
award.’
20 Cal.3d at
fn.
italics
The
footnote, however,
text and
concern calculation of a fee awarded
quoted
III,
under the
Serrano
this court
did
private attorney general theory.
simply
not address the
of what methods of
a fee award
or
question
calculating
should be used when the fee is to be drawn from a common fund created or
figure
The trial court had then increased that “touchstone”
to account for a number of
factors, including
novelty
difficulty
questions
contingent
involved and the
nature
III,
(Serrano
supra.
of the fee award.
20 Cal.3d at
*20
reason,
the
For this
the
cannot
preserved by
litigation.
passages quoted
fairly
in
be taken as
method’s use
a common fund case.
prohibiting
percentage
doctrine,
in
To the
its earlier discussion of the common fund
contrary,
III
in
Serrano
cited with
several decisions
which a
approval
Co.,
In
was awarded.
Fox v. Hale & Norcross S. M.
108 Cal. at
supra,
page
476,
award,
our first case
a common fund fee
the award
apparently
approving
In
was for 25
of the
had collected.
Farmers etc.
percent
moneys
plaintiff
Peterson,
607,
in
Nat. Bank v.
5 Cal.2d at
we held the
supra,
page
plaintiff
suit for an
was
awarded “5
cent of the
accounting
properly
per
moneys
in
received and recovered herein as an
fee.” And
Glendale
attorney’s
City
Assn.,
Inc. v.
Glendale
supra,
typical
I, ante, that
is considered to have
with the Third Circuit’s
part
period
begun
I,
1973 decision
487 F.2d
which we cited
the footnote
Lindy
above.)
III
Because the award
Serrano
was not made from
passage quoted
a common fund and did not rest on the common fund
we had no
theory,
occasion there to consider the
of the lodestar-
comparative disadvantages
method that have since led the vast
of courts nationwide
multiplier
majority
favor,
allow,
to instead
or at least to
use of the
method
percentage-of-the-fund
I, ante,
common fund cases. As
both the Second and
explained
part
endorsements,
Third Circuits
retreated from their
subsequently
City of
I,
Detroit v. Grinnell
495 F.2d
487 F.2d
Corp., supra,
Lindy
161—the two decisions cited
Serrano Ill’s footnote 23—of the lodestar
method as the
or exclusive means of
a reasonable fee.
preferred
calculating
Resources, Inc.,
(See
v.
500 III, times, cases, Since Serrano we have several endorsed the shifting fee award; lodestar or method of an fee lodestar-multiplier calculating attorney none of our decisions involved a case where the fee was to be awarded from (See a common fund created or Graham v. preserved by litigation. 553, 331, (2004) 34 Cal.4th DaimlerChrysler Corp. Cal.Rptr.3d [21 Proc., 1021.5]; 101 P.3d under Code Civ. Ketchum v. Moses 140] [award § 1122, 377, (2001) 24 Cal.4th 1131-1132 17 P.3d Cal.Rptr.2d [104 735] Proc., §425.16, (c)]; under Code Civ. subd. PLCM Inc. v. Group, [award 1084, 198, (2000) 22 Drexler Cal.4th 1094-1095 997 P.2d Cal.Rptr.2d [95 Code, 1717]; (1987) under Civ. Maria P. v. Riles 43 Cal.3d 511] [award § 1281, 872, 1294-1295 743 P.2d under Code Civ. Cal.Rptr. [240 932] [award Proc., Stores, 1021.5]; (1983) Press v. Inc. 34 Cal.3d 321-322 Lucky § [same].) 667 P.2d And even with to such Cal.Rptr. regard [193 704] cases, fee we have noted the method of statutory shifting lodestar-multiplier a reasonable fee is not exclusive: “We determining necessarily emphasize, however, that we are that the lodestar although persuaded adjustment ap should be to fee awards under Code of Civil Procedure section proach applied 425.16, we are not a blanket ‘lodestar mandating only’ approach; every statute must be construed on its own merits and fee-shifting nothing Moses, (Ketchum Serrano otherwise.” v. at jurisprudence suggests decisions, The relies on several Court of the first objector Appeal being Bourns, v. Inc. Cal.App.3d Cal.Rptr. 248] Jutkowitz (Jutkowitz). A shareholder who had filed a class minority plaintiff putative stock, action over a proposed purchase corporate leading buyer offered, increase the an fee based on the price sought augmented attorney value he had created for shareholders who sold at the increased even price, 106-109.) most of them were not members of the class. at though pp. {Id. based his fee increase on the common fund Although plaintiff request he neither showed that fund had been created from which the theory, any nor, indicates, increased fee could be awarded as far as the appellate opinion (See of the asserted fund as fee. id. at sought any particular percentage to have the amount of his rejecting plaintiffs attempt attorney enhanced, the court observed: “While the size of the class may Jutkowitz affect the of counsel’s task and the size of the fund created complexity work, reflect the of his the correct amount cannot be quality compensation (Jutkowitz, arrived at that objectively by simply taking percentage of find.” added.) italics Given that no fund had fact Cal.App.3d taken, been created from which an fee could be the italicized remark need not be read as method of a fee award barring calculating in a true common fund case. To the extent it could be read as broadly
501 rule, however, Bourns, such a we v. expressing general disapprove Jutkowitz 118 102. supra, Cal.App.3d Marina, (1985)
Salton Inc. v. Dist. 172 Bay Imperial Irrigation Cal.App.3d action, (Salton 914 an inverse condemnation also Cal.Rptr. Bay), [218 839] involved no common fund. For its conclusion that the was plaintiff only entitled to reimbursement of a reasonable fee measured time attorney by the without to the fee expended by attorney, regard contingency agreement client, in between and court relied on the above attorney appellate part 953-954.) (Salton III from Serrano and at passages Bay, supra, pp. Jutkowitz. in The decision does not to how a fee award should be calculated speak class action settlement or other common fund case. Nor does ex rel. People 1754, (1995) v. Yuki 31 1767-1771 Dept. Transportation Cal.App.4th (Yuki), an eminent domain case Salton Cal.Rptr.2d following Bay 616] direct use of a fee to determine a fee disapproving contingency agreement award, address the issue before us today. Co., 1794, (Dunk), Dunk v. Ford Motor 48 1809 supra, Cal.App.4th settlement,
the context of a class action the court an disapproved attorney award the to as a small of the settle plaintiff attempted justify percentage “(1) ment’s value. The court two reasons: The award of fees gave attorney based on a of a ‘common fund’ is of percentage recovery questionable California; valid, if even it is the true value of the fund validity (Ibid.) must be calculated.” On the second the court easily point, explained that because the settlement at issue class members with provided coupons vehicles, discounts on of new its real value could not be ascer purchases first, (Ibid.) tained until the end of the On the coupon redemption period. Jutkowitz, 102; court cited Salton 172 supra, Cal.App.3d Bay, supra, Yuki, as “cast doubt Cal.App.3d Cal.App.4th having on the use of the method to determine fees California {Dunk, court, class actions.” at The Dunk while finding method to the settlement before it due to the lack of a inapplicable fund, valued common did not to bar its readily purport usage generally common fund cases. was, turn,
Dunk cited as the doubt over use of the illustrating California, Lealao, method from at passage Cal.App.4th Lealao, at the of this a consumer class action page quoted beginning part. lender, over was settled the lender’s prepayment penalties charged by class members who filed claims 77 agreement pay percent penalties $15 if had a settlement worth almost million class member they paid, every (Id. filed a claim. class counsel Though requested percent million, ($3.5 $1.76 as a fee modified to million after claims of recovery court, filed), $7.35 million were the trial itself from only believing precluded *23 502 a fee where no fund had been established from
awarding percentage separate drawn, $425,000, which the fee could be a fee of calculated as a granted only (Id. lodestar without at multiplier. pp. III, 25, on Serrano 20 Cal.3d the Lealao court
Relying supra, appellate when, it, held a fee is as the case before pure percentage improper settlement does not establish a fund from which the fee is to be separate paid. 37-39.)8 (Lealao, 82 at But the trial court’s lodestar Cal.App.4th pp. fee could be enhanced a based on a of properly through multiplier percentage 39-50), (Lealao, the benefit obtained at “the common federal pp. employing of the lodestar the value of the class practice ‘cross-checking’ against (Id. III, 45.) at Such a cross-check is not Serrano recovery.” p. prohibited by 44-45) (Lealao, or Dunk at to determine a reasonable pp. helps Jutkowitz fee because a a credible measure percentage-of-the-benefit analysis “provides (id. 49). of the market value of the services at legal provided” p. The Lealao court doubt as to the wisdom of expressed considering only award, amount of the a fee but that recovery determining acknowledged federal teaches that the ‘reasonableness’ of a fee judicial experience “[t]he action will often some consideration of the amount to representative require (Lealao, be awarded as a of the class 82 percentage recovery.” decision, 53.) at Since that several other Court of Cal.App.4th p. Appeal (See have some form of fee calculation. Consumer panels approved percentage Cases, 175 at 558 of method Privacy Cal.App.4th [use under common fund doctrine “is not an abuse of discretion ... as as the long method chosen is that applied consistently using percentage figures accurately 43, (2008) Netflix, reflect the v. Inc. 162 marketplace.”]; Cal.App.4th Chavez Lealao, 63 calculation Cal.Rptr.3d reasoning [75 413] [under be used to determine a lodestar it was not an abuse of multiplier; discretion “for the trial court to at the low end of apply percentage figure (21.8 contractual to calculate typical contingency arrangement percent) settlement”]; the context of this Inc. v. multiplier Apple Computer, (2005) Court 126 1270 Superior Cal.App.4th Cal.Rptr.3d [24 818] that fees awarded under the common fund doctrine are [observing “attorney based on a Wershba v. ‘percentage-of-the-benefit’analysis”]; Apple Computer, Inc. Cal.App.4th Cal.Rptr.2d recog- 145] [“Courts nize two methods for fees civil class actions: the calculating attorney method.”].) method and the lodestar/multiplier recovery III, holding, only supra. For this Lealao cited not footnote 23 from Serrano 20 Cal.3d at page objectivity, which extolled the lodestar method’s but also our earlier discussion finding theory inapplicable “plaintiffs’ the common fund because the efforts have not effected preservation money they the creation or of an identifiable ‘fund’ of out of which seek to III, 37-38; Lealao, (Serrano attorneys supra. Cal.App.4th recover their' fees.” see at
503 III California decisions from Serrano forward have shown summary, some as to the role a calculation uncertainty percentage-of-the-recovery may fees, in court-ordered but have not established play determining attorney any rule such a calculation when the fee is to be drawn from a prohibiting common fund created by litigation. A
III. Calculation with Lodestar Cross-check Is Permitted Percentage
in a Common Fund Case. III, Whatever doubts have been created Serrano may by supra, followed, Cal.3d or the Court of cases that we that Appeal clarify today case, in use of the method to calculate a fee a common fund where the award serves to all the beneficiaries spread among fund, of the does not itself constitute an abuse of discretion. We join of federal and state courts that when class overwhelming majority holding action establishes a fund for the benefit of the class litigation monetary members, and the trial court its awards class counsel a equitable powers fund, fee out of that the court determine the amount of a reasonable fee may an of the fund created. The by choosing appropriate percentage recognized calculation, relative ease of advantages percentage method—including class, of incentives between counsel and the a better alignment approximation of market conditions and the it contingency encouragement counsel to seek an settlement and avoid provides early unnecessarily prolong 48-49; I, ante, Lealao, (see at ing pt. supra, Cal.App.4th pp. Inc., 516)— v. Prudential-Bache 9 F.3d at Rawlings Properties, supra, convince us the method is a valuable tool that should not be denied our trial courts.
We do not address here whether or how the use of a method be when there is no conventional common fund out of which the applied “ ” award is to be made but a ‘constructive common fund’ created only by and, defendant’s to claims made class members agreement pay by separately, Lealao, (see to class counsel a reasonable fee as determined the court pay by 23-24, 28), or when a settlement Cal.App.4th pp. agreement establishes a fund but that not distributed claims revert to provides portions state, the defendant or be distributed to a third or the the fund’s party making (See value to the class on how claims are made and allowed. depend many Actions, 15:70, on Class The settlement Newberg § million, $19 in this case for a true common fund fixed at agreement provided without reversion to defendant and with all settlement net of any proceeds, costs, fees and claims class members. specified going pay The trial court this case thus did not violate established principles III, discretion, Serrano 20 Cal.3d or otherwise abuse its using *25 method for its calculation of the fee award. The choice percentage primary of a fee calculation method is one within the discretion of the trial generally court, under either the or lodestar goal percentage approach being (Consumer award of a reasonable fee to counsel for their efforts. compensate Cases, Before Privacy supra, Cal.App.4th pp. approving settlement fee award this the trial court agreement percentage its own with the case additional supplemented familiarity by obtaining information from class counsel on the risks and value of the potential the court considered that information on litigation; carefully contingency, counsel, with the skill shown the number of novelty difficulty together rates, hours worked and the asserted which the court found were not hourly basis, overstated. On that the trial court determined the fee was for a request reasonable of the settlement fund. percentage
Nor do we an abuse of discretion the court’s decision to double perceive check the reasonableness of the a lodestar calculation. percentage through earlier, As noted lodestar method better accounts for the amount of ‘“[t]he done, work while the of the fund method more reflects accurately Inc., the results achieved.” v. Prudential-Bache (Rawlings Properties, 516.) A 9 F.3d at lodestar cross-check thus a mechanism for provides an measure of the work into the calculation of a bringing objective performed If reasonable fee. between the and lodestar comparison calculations an far outside the normal produces imputed multiplier range, that the fee will reward counsel for their services at an indicating rate even for the factors used to en extraordinary accounting customarily fee, hance a lodestar the trial court will have reason to reexamine its choice Horwich, (Walker of a & 18 Geo. J. Ethics at percentage. Legal The of a lodestar cross-check has been on the it utility questioned ground tends to reintroduce the drawbacks the 1985 Task Force identified Report method, use of the lodestar the undue primary especially consumption resources and the creation of an incentive to judicial prolong litigation. Actions, 15:86, (See 5 on Class 330-334 Newberg [describing, § Friedman, cross-check]; but Gilles & largely rejecting, objections Explod the Class Action Costs The Social ing Agency Myth: Utility Entrepreneur method, ial 155 U.Pa. L.Rev. 140-142 of lodestar Lawyers [use cross-check, even as limits deterrent of certain undesirably potential large- settlement].) class actions We tend to damages by incentivizing pretrial agree with the amicus curiae brief of Professor William B. Rubenstein that these concerns are overstated and the benefits of the lodestar cross likely having check available as a tool its use could cause outweigh problems individual cases.
505 resources, With to of we note that trial regard expenditure judicial courts lodestar cross-checks have not been to conducting generally required scrutinize each claimed but have instead used informa closely attorney-hour, tion on time to “focus on the of whether the spent general question fee award reflects the of time and effort the appropriately degree expended by Actions, 15:86, 331; see, (5 on Class attorneys.” Newberg p. e.g., § Resources, Inc., Cir.; v. 209 F.3d at Goldberger Integrated [2d cross-check, “where used as a mere the hours documented counsel need by court”]; not be scrutinized the district In re Prudential Ins. Co. exhaustively by 1998) (3d America Sales Practice Actions Cir. 148 F.3d Litigation Agent with district court that “detailed time summaries were unneces [agreeing where, here, as it was the lodestar calculation to double sary merely using award.”]; (E.D.Cal. check its fee Barbosa v. Meat Solutions Cargill Corp. 2013) 297 F.R.D. the lodestar method is used as a [“Where method, cross-check to the it can be with a less percentage performed hours.”].) exhaustive and review of counsel’s The trial court cataloguing manner, case exercised its discretion this present performing cross-check counsel declarations overall time rather using summarizing spent, than time sheets which the work demanding scrutinizing daily course, was broken down individual task. Of trial courts retain performed by calculation, the discretion to consider detailed time sheets as of a lodestar part even when as a cross-check on a calculation. performed percentage
As to the incentives a lodestar cross-check create for class might counsel, calculation, manner, we the lodestar when used this emphasize does not override the trial court’s determination of the fee as a primary of the common fund and thus does not an absolute percentage impose If maximum or minimum on the fee award. calculated potential multiplier low, means of a lodestar cross-check is or the trial by extraordinarily high court should consider whether the used should be so as to percentage adjusted within a but the court is not bring imputed multiplier justifiable range, to make such an Courts necessarily required adjustment. using method have the time counsel on the case as an generally weighed spent (5 factor a reasonable to on important choosing apply. Newberg Actions, 15:86, 332-333; see, Class In re Thirteen e.g., Appeals § Out San Juan Hotel Fire 56 F3d at Arising Dupont Litigation, supra, Plaza method, under the time records tend to [percentage [“even fund] fund, and, thus, illuminate the role the creation of the inform the attorneys’ A court’s into the reasonableness of a inquiry particular percentage.”].) lodestar cross-check is method for a measure simply quantitative bringing of the time counsel into the trial court’s reasonableness determina spent by tion; such, as it is not alter the incentives created likely radically court’s use of the method.
We therefore with the Court of below that agree Appeal ‘“[t]he cases, in of fund method survives California class action and the percentage it, trial court did not abuse its discretion to the fee using part, approve in this class action.” We hold further that trial courts have discretion request fee, here; to conduct a lodestar cross-check on a as the court did also retain the discretion to a lodestar cross-check and use other they forgo means to evaluate the reasonableness of a fee. requested percentage
Disposition The of the Court of is affirmed. judgment Appeal J., Chin, J., J., Liu, J., Cuéllar, J., C. and Cantil-Sakauye, Corrigan, J., concurred. Kruger,
LIU, J.,
David Brennan devotes the lion’s share of
Concurring.—Appellant
his
to issues
that trial courts
use the
briefing
beyond today’s holding
may
method instead of the lodestar method to award
fees
attorneys’
from a common fund. He
that the lodestar method as
does not
argues
applied
with Serrano v. Priest
Although arguments, separately that to and suggest practices may help promote accuracy, transparency, confidence fees class action public awarding attorneys’ litigation. foremost, First and over fees often arise although disputes attorneys’ context of a settlement as this courts and need not proposed litigants should not wait until the end of to set the terms of generally litigation Whenever should attorney compensation. possible, parties negotiate, the court should review and the terms of conditionally approve, at the start of The and the court revisit compensation litigation. parties may concludes, when the and the court make arrangement if unusual or unforeseen circumstances render the initial terms adjustments *28 unreasonable or unfair. But initial clearly general, parties’ bargain should be substantial the reasonableness of a fee given weight determining award.
The Task Force on Selection of Class Counsel convened the United States Court of for the Third Circuit has endorsed a version of this Appeals While that “a ex ante determination of fees approach. acknowledging precise unworkable,” is the task force recommended that ‘“the of usually topic fees should be addressed at the of the case as well as attorney early stages case, of the case. At the outset of the the court throughout prosecution be well-advised to direct counsel to the terms for a propose potential fees; award of fees be established within with the potential might ranges, court it clear to the that the fee remains for further making parties open A review for reasonableness. preliminary arrangement may provide structure for the court when it conducts its reasonableness review at helpful Force, (Third the end of the case.” Circuit Task Selection Class Counsel of 340, 420-421, (2002), (Task 208 F.R.D. fns. omitted Force see Report); al., Baker et Is the Price An Right? Empirical Study Fee-Setting al.) (2015) (Baker Securities Class Actions 115 Colum. L.Rev. et ex ante fee for class actions [recommending arrangements governed by (PSLRA; federal Private Securities Reform Act of 1995 Pub.L. Litigation 22, 1995) 737) (Dec. No. 104-67 109 Stat. that ‘“thedistrict court urging should terms unless unforeseen have rendered apply agreed developments unfair”].) those terms excessive or clearly
This has doctrinal and virtues. a court’s approach practical Doctrinally, to award fees from a common fund stems from its authority attorneys’ (See (1982) to enrichment. Serrano v. Unruh equitable power prevent unjust 32 Cal.3d 652 P.2d ‘“central Cal.Rptr. theory 985] [the “ fee awards from a common fund is of an unfair underlying” ‘prevention to the others who are entitled to share the fund and who should advantage III, ”]; bear their share of the burden of its Serrano 20 Cal.3d recovery’ at ‘one who fees a suit which creates a expends attorneys’ winning [““ benefits, fund from which others derive those beneficia- may require passive ”].) ries to bear a fair of the costs’ But a claim for sharing unjust enrichment lies where it is to ex ante for a typically impractical bargain good or service an it is feasible for arms-length negotiation. parties “[W]hen restitution is denied to who confer benefits bargain, typically providers (Silver, A without for advance.” negotiating payment Restitutionary Theory 656, 667.) Fees in Class Actions 76 Cornell L.Rev. ‘“The Attorneys’ effect of contexts where can is to withholding compensation parties bargain (Id. demonstrate a preference voluntary exchange.” matter, As a best time to determine rate of practical “[t]he [the (when is the not the end alters compensation] beginning hindsight *29 riskiness, of the suit’s and sunk costs make it for perception impossible low). if to walk the fee is too This is what actual lawyers away happens markets. Individual clients and their never wait until after is lawyers recovery secured to contract for fees. strike their before work They bargains begins. this, must do but the same markets for Ethically lawyers thing happens no) (or other services with different ethical codes. . . . ex professional Only ante can occur the shadow of the bargaining litigation’s uncertainty; only ex ante can the costs and benefits of and risk be particular systems multipliers occurs, assessed Before the a can a fee intelligently. judge design structure that emulates the incentives a client would At private put place. time, the same both counsel and class members can decide whether it is (In worthwhile to with that re proceed compensation system place.” 2001) (7th Cir. 264 F.3d Synthroid Marketing Litigation evidence that ex ante fee is a mechanism Empirical suggests negotiation key (See costs between counsel and the class reducing agency they represent. al., Baker et 115 Colum. L.Rev. at 431 securities p. [studying class action settlements from 2007 that ‘“fee through finding at the of cases have a substantial agreements negotiated beginning moderating effect on fee where funds act as lead requests” public pension plaintiffs].)
Moreover, ex ante fee do not the conflict of interest arrangements present that arises when seek fees from a common fund inherently attorneys compris- their clients’ “At the start of there is no ing recovery. litigation, money divide. There is venture between a client only prospect forming joint and a that seeks to maximize the wealth lawyer parties’ joint by offering terms that will motivate the to work hard on lawyer compensation lawyer contrast, behalf of the client. When fees are set at the end of litigation, by [¶] the amount to be recovered is known. This the conflict already heightens between the client and the because additional dollar for one every al., (Baker means a dollar less for the other.” et 115 Colum. L.Rev. at of ex ante fee the class action context have Opponents agreements (1) that there is no market” for argued “functioning plaintiffs’ representation and thus no reliable benchmarks that can solution to the provide “general (ABA of market failure class counsel fees” Tort Trial and problem setting Section, Insurance Practice on Fees in Class Action Report Contingent 459, 481, 482); (2) at the of class Litigation Rev.Litig. early stages (id. action there are too uncertainties for to occur litigation, many bargaining defendants, 482); (3) if are disclosed to this arrangements might al., (Baker in settlement et disadvantage plaintiffs negotiations 1436). Colum. L.Rev. at p.
As to the first courts ex ante fee use “a point, evaluating arrangements may benchmark: the or simple range percentages prevailing *30 (Silver, market similar Dissent private contingent representations.” 497, 499.) Ex Recommendation to Set Fees Post 25 Rev.Litig. from cases, ‘“Plaintiffs have formed mass accident voluntary groups pollution cases, cases, cases, defective securities fraud and cases of other product Associations, associations, kinds. homeowners’ interest including groups, unions, and have sued on behalf of their members partnerships, corporations All or owners thousands of times. ... of these lawsuits are examples and all of them fees have been set ex ante via aggregate litigation, lawyers’ (Id. 499-500; at see In re negotiations.” pp. Synthroid Marketing Litigation, 264 F.3d at court can learn about similar That is supra, p. bargains. [‘“[A] at least a starting point.”].)
As to the second virtue of an ex ante fee is point, principal arrangement its allocation of risk between and client in the face of At the end of when the amount of and the uncertainty. litigation, recovery known, outcomes of all other uncertainties are of risk are perceptions likely al., (Baker to be distorted bias. et 115 Colum. L.Rev. at by hindsight is the reason it is for pp. Uncertainty very why appropriate over fees to occur at the start of the market for negotiations litigation; price services can be more derived behind the legal accurately through bargaining (In veil of re 264 F.3d at ignorance. Synthroid Marketing Litigation, supra, Moreover, 719.) the initial terms set p. by parties approved by stone; noted, if court are not etched as the court make adjustments unusual or unforeseen circumstances render the initial arrangement clearly unreasonable or unfair.
As to the third concerns about disclosure can be alleviated point, and class counsel to submit their fee to the allowing plaintiffs arrangements court under seal or fees with class counsel chambers on an “by discussing al., 1437.) (Baker ex basis.” et 115 Colum. F.Rev. at Such parte defendants, no unfairness to who “are indifferent to fee approaches pose (Id. because the fees are out of the common fund.” requests paid above, Quite from the concerns apart significant practical challenge actions, fees class whether at the start or end negotiating attorneys’ many is the lack of an active and interested class who litigation, representative can with and monitor counsel. Some class effectively bargain plaintiffs’ actions, such as securities have to attract institu- litigation, managed large role, tional investors as lead that evaluate and plaintiffs. they closely choose for favorable fee high-quality lawyers, they actively bargain structures and secure ex ante fee more often than do other lead arrangements al., 1393-1394; (Baker et 115 Colum. F.Rev. at see 15 plaintiffs. 78u-4(a)(3) U.S.C. of lead [establishing process appointment plaintiff § contrast, PSFRA].) class actions consumer class actions governed by By *31 and often lack a class with sufficient wage-and-hour disputes representative incentive, resources, Moreover, or with class counsel. expertise negotiate Brennan came forward this case as an class are although objector, objectors too rare to be relied to monitor class counsel. & generally upon (Eisenberg Miller, The Role in Class Action Opt-Outs Objectors Litigation: (2004) Theoretical and Issues 57 Vand. L.Rev. Empirical all case ... the median rate is zero and the mean is types, objection [“Across members.”].) 1.1 of class And the few who do have had little percent object (Id. to no demonstrable on fees or settlement amounts. impact attorneys’ found no association between the number of significant [“We dissenters and either the fee or the fee as a of class gross recovery.”].) trial courts can exercise to ensure fairness
Although vigilance so of “a negotiations, doing puts judge position fiduciary guarding (In (3d of absent class members” re Cendant Cir. rights Corp. Litigation 2001) 231) 264 F.3d while at the same time as a neutral arbiter serving of counsel’s claims the reasonableness of a award. As concerning proposed it, Brennan the trial is asked “to assume the puts judge simultaneously roles of and class advocate.” conflicting impartial judge cases, In trial courts have no choice but to walk the fine fine many may between the interests of absent class members and protecting impartially the reasonableness of a fee award. cases evaluating proposed involving sums, however, substantial trial courts take to insulate themselves may steps from conflicts a class or “devil’s advocate” apparent by appointing guardian so that for and the reasonableness of a fee arguments against arrangement Rubenstein, (Cf. be adversarial The presented genuinely process. Fairness Adversarial and 53 UCLA Hearing: Regulatory Approaches L.Rev. to serve as “devil’s [proposing court-designated attorney settlements].) advocate” class action The class would evaluating guardian to class counsel’s the risks and provide counterpoints arguments concerning the case. most the class difficulty litigating Perhaps importantly, guardian or a fee retained would information on expert guardian provide market rates for similar The of a prevailing litigation. appointment guardian (from and a full-dress adversarial would cost the common process money costs, fund) and time. But these which would serve to enhance the accuracy awards, of fee would to the legitimacy “pale[] comparison significant amounts of to be divided between and counsel money” plaintiffs high- (Id. value cases. at p.
[*] The above reflect the of fairness and reasonable- suggestions importance in in ness attorney compensation. Ensuring “objectivity” attorney compensa- “ ” (Serrano III, tion ‘is vital to the of the bar and the courts.’ obviously prestige Moreover, 23.) 20 Cal.3d at fn. to a p. “[pjrobably unique degree, American law relies to enforce substantive upon private litigants provisions of law that other are left to the discretion of legal systems largely public enforcement . . . The rules that make the agencies. key legal private attorney a American law . . . those rules that establish the general reality today [are] under which these are arrangements plaintiffs attorneys compensated. these rules create an incentive structure that either or Inevitably, encourages (Coffee, chills enforcement of law.” private Understanding Plaintiff’s The Economic Private Attorney: Implications Theory Enforcement of Law Class and Derivative Actions 86 Colum. L.Rev. Through 669-670, low, (Coffee).) fns. omitted fees too or too “By setting high judges would incentivize to too class actions or too few. lawyers bring many desirable; Excessive would over-deter conduct that is litigation primary insufficient would under-deter conduct that is unwanted.” primary al., (Baker et 115 Colum. L.Rev. at p.
It must be that “there is a acknowledged perception among significant and even and that part non-lawyer population among lawyers judges the risk is too class action cases and that class action premium high (Task are for the work that do.” plaintiffs’ lawyers overcompensated they 343-344.) I Force 208 F.R.D. at no view on the Rep., supra, express to which this is anchored Task Force degree perception reality. (Compare 208 F.R.D. at there is a reaction to an Rep., supra, public [“When case, fee award is unaware of what the given public usually did, took, made, what risks what investment and lawyers actually they they Coffee, how their was to for the with important lawyering victory class.”] worst, 86 Colum. L.Rev. at its the settlement process may [“At amount to a covert of a settlement for a award of exchange cheap high fees.”].) But the itself some attorney’s perception may prompt judges to substantive or policymakers respond by narrowing legal protections mechanisms of enforcement. curtailing procedural Public confidence the fairness of class actions attorney compensation is vital to the enforcement of substantive law. there be proper Although no answer” to how much class counsel should earn each single “right ex ante fee with the of ex modification for arrangements possibility post unusual circumstances a useful market may provide approach estimating rates, bias, the distortive effects of reducing hindsight aligning interests of counsel and the class Courts and should they represent. litigants *33 be alert to this and other that approaches may help promote greater public confidence a form of on which to obtain many people rely effective access to justice.