Incorrect Legal Standards Used by Lower Court in Fixing Fees/Incentive Award.
Clear Sailing? S.S. Vestris disaster. c1928. Library of Congress.
Ruiz v. Calif. State Auto. Assn. Inter-Ins. Bureau, Case Nos. A136275/A136395 (1st Dist., Div. 4 Dec. 20, 2013) (partially published; discussion of why fee/incentive awards reversed, not published) involved a class action settlement under B&P § 17200 for alleged disguised false premium recovery by which the parties agreed to a “clear sailing” settlement provision: the defense would not oppose requested attorney’s fees of $3.2 million or under (with the actual requested amount being $2.32 million) a requested class representative incentive award of $10,000. However, the lower court only awarded a fraction of the requests, fixing fees at $350,000 and the incentive award at $1,250. The settlement did provide that the class would accept the lower of the clear sailing-dictated requests or whatever amounts the trial court ordered. Class representative and class counsel appealed the fee/incentive award determinations.
They won on appeal.
The first issue was one of standing: did class counsel have standing to appeal? Yes, the reviewing court said, finding the reasoning of Lindelli v. Town of San Anselmo, 139 Cal.App.4th 1499 (2006) persuasive despite the lack of formal intervention by class counsel through a motion to intervene.
Then, the appellate court found in the unpublished portion of the decision that the fee and incentive awards were wrong, with the court using incorrect legal standards in fixing the amounts. The $350,000 actual fee award was found lacking because (1) the lower court failed to credit substantial nonmonetary benefits with an agreed-upon party value of $3 million such that the percentage of recovery analysis was skewed; and (2) the trial court used a wholesale percentage reduction for partially successful claims which is not condoned under California jurisprudence. Here is a quote for fee claimants to focus on, although it is unfortunately in the unpublished portion of the opinion: “. . . our research has not revealed any published California case in which an appellate court has approved a trial court’s wholesale elimination of otherwise compensable attorney hours, reducing the fee award to a small fraction of what would otherwise be the lodestar, on the ground that counsel took the case on a contingency and achieved only partial success. We decline to be the first court to do so.” (Slip Opn., at p. 23.)