We Provide Our List of Pointers That Have Been Cited by California Appellate Courts In Reversing/Remanding Class Action Fee Awards.
We hope everyone had a happy, restful July 4thHoliday.
This post, while not meaning to be exhaustive, provides a distillation of issues for class action plaintiff attorneys to scrutinize closely when crafting their fee applications. They are issues that frequently crop up as reasons for reversal and reconsideration on remand, providing important feedback on the “psychological anchors” that appellate jurists often lock onto when looking at the reasonableness of fee applications at the end of class action cases.
Here is our list of “do’s” and “don’ts”:
- Do not request excessive hourly rates and provide specific evidence of reasonable hourly rates gauged by the local community (or explain why higher hourly rates by traveling counsel should be paid). See, e.g., In re Vitamin Cases, 110 Cal.App.4th 1041, 1057, 1061 (2003) [expressly remanding, among other reasons, to consider “whether $1,000 per hour for the attorney claiming that sum is appropriate under the circumstances”]; Graciano v. Robinson Ford Sales, Inc., 144 Cal.App.4th 140, 154-156 (2006) [reversing a trial court reduction in the lodestar where lower court disregarded attorney declarations and applied inappropriate fees under local court rules relating to expert witnesses rather than attorneys].
- Do not misrepresent the risks involved in the case. If the defense caved early on or if there were outside influences such as guilty pleas in criminal proceedings that inspired a quicker resolution, be candid with the court and explain why there were other uncertainties to justify the sought-after fees. See, e.g., Thayer v. Wells Fargo Bank, N.A., 92 Cal.App.4th 819, 835 (2001) [defendant never contested plaintiffs’ legal claim or right to reasonable fees]; In re Vitamin Cases, supra, 110 Cal.App.4th at 1056-1059 [plaintiffs overplayed risks of the case; defendants settled early on and there no risks of trial; much of the liability established through guilty pleas in other litigation; plaintiffs faced no certification motion]. BLOG NOTE—Promptness of settlement, in the right circumstances, can cut the other way, so as to present a factor for lodestar enhancement. See Lealao v. Beneficial California, Inc., 82 Cal.App.4th 19, 52 (2000).
- Do not overplay the novelty or complexity of the case, but focus instead on the heavily contested nature of the action. Thayer, supra, 92 Cal.App.4th at 835-836 [litigation was not novel or complicated, but more akin to a simple anticipatory breach of contract admitted by defendant in early phases of the litigation].
- Avoid excessive duplication; although multi-firm involvement is to be expected, substantiate distinct role involvements and explain that your involvement was not as a mere “tag alone” counsel. See, e.g., Vitamin Cases, supra, 110 Cal.App.4th at 1054-1055, 1060 [where numerous firms involved, non-executive committee members need to specially justify fees and negate “tag along” factor]; Thayer, supra, 92 Cal.App.4th at 830-831, 840-845 [negative multiplier may be appropriate where two attorneys duplicated other counsel’s work as well as their own].
- Make sure the trial judge makes sufficiently detailed findings to justify the fee award. See, e.g., Vitamin Cases, supra, 110 Cal.App.4th at 1052-1054; Ramos v. Countrywide Home Loans, Inc., 82 Cal.App.4th 615, 627-629 (2000) [awards reversed where record unclear on whether applicable legal principles were followed; terse, generalized conclusions unhelpful to appellate court]. It would be prudent if the fee claimant enclosed a proposed order in which detailed findings, made after analyzing the Serrano/Ketchum factors, are expressly made by the trial court.
- Avoid having the trial court simply “rubber stamp” a negotiated fee award number or one arrived at through a“baseball” mediation/arbitration process. See, e.g., Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 254 (2001) [lower court did not endorse the parties’ use of a “baseball arbitration” to reach a fee award; appellate court affirmed trial court’s independent review of reasonableness of requested fees].
- Substantiate the fee through detailed attorney declarations describing litigation activity with specificity or through lightly redacted time records containing daily entries. See, e.g., Wershba, supra, 91 Cal.App.4th at 254-255 [California law does not require detailed time sheets, but fees were established through detailed attorney declarations evidencing the reasonable hourly rate for their services and establishing the number of hours spend working on the case]; see also our posts of June 30, 2008 on the Gregg I and Gregg II decisions [level of redactions appropriate for submission of time records as fee substantiation] and July 2, 2008 on Kurz v. Wizbowski, Case No. F053776 (5th Dist. June 30, 2008) (unpublished) [attorney declarations and supporting bills are “the type of evidence upon which attorneys’ fees awards are normally based.”].
- If counsel themselves determine the appropriate internal allocation of fees, make sure the trial court retains jurisdiction to resolve disagreements. Compare Vitamin Cases, supra, 110 Cal.App.4th at 1055-1056, 1061 [case remanded for trial court to determine whether plaintiffs’ co-liaison counsel should have any power to adjust or revise the fee awards to any counsel] with Flat Glass Cases, Case No. A118478 (1st Dist., Div. 5 June 30, 2008) (unpublished) [court in Vitamin Cases did not disapprove class counsel allocating fees among themselves, citing numerous federal cases to the same effect and approving inter se distribution method where trial court retained jurisdiction to resolve disagreements between counsel].
- Justify the fee award by using both the lodestar and percentage of recovery (or modified percentage of benefit) approaches and by cross-referencing against similar settlements in published/unpublished decisions or jury verdict/settlement summaries.