High Percentage Of Common Fund That Is Much Lower Than Lodestar Is Reasonable Way To Calculate Fee Award In Class Action.
A fee award to plaintiffs’ attorneys of 37.5% of the settlement fund may seem generous. Indeed, it seemed too generous to objectors in Roos v. Honeywell International and Rogers, A142156 (1/1 Nov. 11, 2015) (Humes, Margulies, Banke) (published).
However, the following facts were crucial to the Court of Appeal’s affirmance of the judgment and fee award. While the award in fact amounted to 37.5% of the settlement fund, it only amounted to 20% of the lodestar. Thus, plaintiffs’ attorneys presented evidence that they had done in excess of $15M worth of work – a lodestar based on 36,000 hours of work times a reasonable hourly rate. The evidence was not contested. However, they were only seeking 20% of the lodestar amount – approximately $3M. Furthermore, the award was not based on an agreement to receive 37.5% of the settlement fund. Instead, 37.5% was an agreed-upon cap on fees, and the lodestar of $15M greatly exceeded the fee cap, which amounted to $3,056.250
The Court summarized its view:
“[A] trial court acts appropriately – and it certainly does not abuse its discretion – when it accepts in a common-fund case a cap on fees, even a cap that is phrased in terms of a percentage of the recovery, when the application of the cap results in a lower award than would be authorized under the lodestar method. The lodestar method is, after all, the primary means of calculating the reasonableness of attorney fees in California.”
COMMENT: The Court notes that most federal courts embrace a percentage of recovery analysis for awarding fees, California courts prefer a lodestar analysis, and each approach has its pros and cons. However, both federal and California courts are pragmatic, as most “allow the reasonableness of a fee request to be cross-checked by comparing one method against the other.”