Nixes A 1.75 Positive Multiplier Based On Complexity And Class “Return.
Just to show you that class action fee awards are coming under increased appellate scrutiny, Circuit Judge Posner’s decision in In re Sears, Roebuck and Co. Front-Loading Washer Products Liability Litig., No. 16-3554 (7th Cir. Aug. 14, 2017) (published) on behalf of a Seventh Circuit panel demonstrates this quite emphatically.
The case involved allegations of control unit defects and mold problems associated with certain washers sold by Sears. A class action settlement was reached, with the parties agreeing to a provision whereby class counsel would not seek fees in excess of $6 million. Well, that is what they sought based upon a lodestar augmented by a 1.85 multiplier. The magistrate judge assigned to determine fees awarded a $2.7 million lodestar augmented by a 1.75 positive multiplier, for a total award of around $4.8 million. The judge credited that only about $900,000 would be received by the class and then gave puzzling indications of whether the case was really that complex so as to justify a multiplier.
The Seventh Circuit found the fee award was too much. After observing the equivocation on the complexity issue and the fact that a .88 multiplier is awarded nationwide for class recoveries less than $1.1 million, the federal appeals court determined that the $2.7 million lodestar awarded by the magistrate judge was the reasonable fee award—especially given that class counsel had to battle a large company.