Friday, August 12, 2016
S.C. Upholds $6.33 Million Fee Award in Class Action
Unanimous Court Says Lodestar Approach Need Not Be Applied in Common Fund Cases
By KENNETH OFGANG, Staff Writer
A trial court may award attorney fees in a class action as a percentage of the total recovery, where payment is coming from a common fund, the state Supreme Court ruled yesterday.
The court unanimously affirmed a $6.333 million award, one-third of the settlement of a wage-and-hour lawsuit brought against Robert Half International, Inc. on behalf of a class of about 4,000 employees.
The case settled in 2012, with an agreement that class counsel from the Law Offices of Kevin T. Barnes would be awarded no more than one-third of the total as attorney fees. Los Angeles Superior Court Judge Mary Strobel awarded the maximum amount, rejecting arguments from class member David Brennan that the amount was excessive.
Brennan argued that Serrano v. Priest (1977) 20 Cal.3d 25, or Serrano III, requires—at least in dicta—that courts use the lodestar method in order to calculate fees in class actions. Under that method, the court multiplies the number of hours reasonably devoted to the case by counsel times a reasonable hourly rate, then determines whether to use a multiplier based on additional factors, such as the complexity of the case, whether the attorneys took the case on contingency, and the significance of the issues.
Strobel rejected the argument, holding that the Serrano III language cited by the objector does not apply to common fund cases. She also applied the lodestar method as a “double check,” concluding that the award was a little more than double the value of the lawyers’ time and that “the novelty and difficulty of the questions involved, the skill displayed in presenting them, the extent to which the litigation precluded other employment by the attorneys and the inherent risk whenever there is a fee award that is contingent” justified the multiplier.
The Court of Appeal affirmed, and the Supreme Court agreed that the lower courts were correct.
There is a significant difference, Werdegar wrote, between awarding fees from a common fund—or “fee spreading”—and the more common fee shifting from a non-prevailing to a prevailing party.
She cited the work of a 1985 federal Third Circuit task force and of the American Law Institute, both of which advocated the percentage method of fixing fees in common fund cases. The task force suggested the use of a sliding scale, so that the larger the fund, the smaller the percentage.
The Ninth Circuit has adopted a “benchmark” approach, under which the presumptively correct fee is 25 percent of the common fund, but adjustments are permitted based on the facts of the specific case.
“We join the overwhelming majority of federal and state courts in holding that when class action litigation establishes a monetary fund for the benefit of the class members, and the trial court in its equitable powers awards class counsel a fee out of that fund, the court may determine the amount of a reasonable fee by choosing an appropriate percentage of the fund created. The recognized advantages of the percentage method—including relative ease of calculation, alignment of incentives between counsel and the class, a better approximation of market conditions in a contingency case, and the encouragement it provides counsel to seek an early settlement and avoid unnecessarily prolonging the litigation…convince us the percentage method is a valuable tool that should not be denied our trial courts.”
While all of the other justices joined Werdegar’s opinion, Justice Goodwin H. Liu added a separate concurrence suggesting that setting a benchmark fee award early in the litigation “may help to promote accuracy, transparency, and public confidence.”
Attorneys on Appeal
The appeal was argued in the Supreme Court by Kevin Barnes in defense of the fee award, Lawrence W. Schonbrun for the objector, and Michael Rubin of Altshuler Berzon for the Impact Fund, the Western Center on Law and Poverty, Bet Tzedek, Public Counsel, and other organizations arguing as amici that the plaintiffs’ approach would discourage attorneys from taking on risky public interest cases.
A separate amicus brief supporting the lower court rulings was signed by eight law professors, including UC Irvine law dean Erwin Chemerinsky; NYU’s Arthur Miller, reporter for the Third Circuit task force; and Charles Silver of the University of Texas, reporter for the ALI study.
The case is Lafitte v. Robert Half International Inc., 16 S.O.S. 4055.
Copyright 2016, Metropolitan News Company