Lower Court Overfixated On Two Factors In Awarding Just 10% Of The Children’s Funds As Fees Rather Than The 31% Requested By Children’s Counsel.
Schulz v. Jeppesen Sanderson, Inc., Case No. B277493 (2d Dist., Div. 1 Sept. 5, 2018) (unpublished) was a complicated aviation wrongful death action against aircraft manufacturers and on behalf of father’s children (who were minors), wife, and two adult daughters from father’s previous marriage based on father’s death in a plane he was piloting in Germany. Plaintiff’s counsel, operating under a 40% contingency arrangement, obtained a settlement of over $18 million in a case that was risky. Two of plaintiff’s attorneys were pilots themselves such that they brought unique insights into the case. After the trial court allocated virtually all of the settlement proceeds to the minor children, children’s counsel requested 31% of the allocation as fees for their success. The lower court only awarded 10%, citing the extensive medical needs of the children (they were born prematurely and had serious, permanent disabilities), the fact the case was not tried, and the fact counsel should have notified the adult daughters of the case earlier in the process.
The Second District, Division 1, in an opinion authored by Presiding Justice Rothschild, reversed and remanded. The appellate panel believed that the 10% award was an abuse of discretion because the lower court overfixated on the three factors rather than considering all of the nonexclusive factors required under California Rules of Court, rule 7.955(b). Using analogies to class action common fund cases, the Court of Appeal found that 25% was a presumptive Judicial Council-endorsed percentage in the minor’s compromise area and that percentages in class action cases frequently can go up to one-third of a settlement fund. Too little consideration was given to plaintiff’s counsel’s own contingency arrangement, with overwhelming weight being given to the children’s medical needs. This would result in a “chilling effect”—“If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court, rule 7.955, it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases.” (Slip Op., p. 13.) Also important was the fact that plaintiff’s counsel had advanced more than $300,000 in costs on the case, including almost $84,000 which would have borne by the attorneys had no recovery been obtained. The settlement was a good one, with the fact there was no trial and delayed notification of adult daughters being fairly insubstantial considerations in the appellate court’s thought process. Reversed and remanded for a “re-do,” with the appellate court not willing to just set a percentage itself.