You are an attorney and have just settled your wage/hour class action. Get ready to justify your fees, and make sure they are proportional both to the work expended and the benefits obtained for class members.
You should not assume that your court will agree that you are entitled to fees reflecting 40%, a third, or even 25% of the common fund in your wage/hour class action settlement. Of course, we believe that because we take the risk in wage/hour class litigation, we deserve a fair reward. This sometimes, particularly when there is an early resolution, would mean collecting a percentage of the common fund which results in a fee award many times larger than our lodestar fees tracked on a case. These big wins make up for cases where we have less success – working many hours for only a slim payout, no payout, or owing costs to a defendant at the end of the case. Yet, even in common fund cases, courts are looking critically at lodestar fees to determine the appropriateness of the multiplier that would result from using the common fund method, judged against the actual payout to the class members. Be ready!
The Ninth Circuit has long placed in its district courts’ discretion whether to use the common fund or lodestar method for calculating reasonable attorneys’ fees. See, e.g., Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002). Regardless, the Ninth Circuit recommends checking the value of fees as a percentage of the common fund against what fees would be using the lodestar method, to ensure that the fees awarded are based on an appropriate (i.e., not too high) multiplier. Id. at 1047, 1050-1051; Glass v. UBS Financial Services, Inc., 331 Fed.Appx. 452, 456-457 (9th Cir. 2009). While the district courts are entitled to weigh results achieved for the class and favorable settlement timing in giving a large multiplier (id. at 457; see also generally Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 26), after many years of seeing large wage/hour settlements, courts are becoming more reluctant to do so – i.e., having seen it all, they are less likely to be as impressed by your wage/hour settlement result than you might wish.
For example, in Tarlecki v. Bebe Stores, Inc., 2009 WL 1364340, **3-4 (N.D.Cal. May 14, 2009) (Patel, J.), Judge Patel reduced attorneys’ fees from the desired $290,000 award (a modest 21.3% of the common fund, and less than the attorneys’ lodestar of billed fees, of nearly $310,000) to $200,000, noting that the $290,000 sought would equal approximately 86.2% of the total actually recovered by the class in the claims-made settlement. 2009 WL 3720872, at *2. Judge Patel weighed the low response rate, the weak merits of the underlying case, and the rapidity with which the settlement was obtained in making a downward departure from the Ninth Circuit’s 25% benchmark for attorneys’ fees in a wage/hour class action, common fund case. Id. at *5. Judge Patel’s award was based on a finding regarding the “work that was actually done,” and a decision that “work in the amount of $200,000 is, or should have been, sufficient to accomplish what plaintiffs' counsel accomplished.” Id. at *5.
Judge Patel is not the only judge, when determining fee awards, willing to take a hard look at the work performed by plaintiffs’ counsel. Building upon (among others) the oft-cited decision in Lealao, 82 Cal.App.4th at 26, by Presiding Justice J. Anthony Kline of San Francisco’s 1st District Court of Appeal, California decisions (not necessarily in the wage/hour context) have suggested that your common fund fee award may be measured against the lodestar fees proven – and your lodestar award (in a case where there is no common fund established) may be measured against what it might be in a common fund case, i.e., as a reasonable percentage of the class recovery. See, e.g., In re Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 512 (trial court properly cross-checked the common fund attorneys’ fees against lodestar fees and determined whether the common fund percentage sought was reasonable based upon the fairness of the would-be lodestar multiplier); Lealao, 82 Cal.App.4th at 45 (common fund method may be used to cross-check the lodestar against the value of the class recovery); Chavez v. Netflix, Inc. (2008) 162 Cal.App.4th 43, 65 (same). See also generally, some examples of class cases in which the fees sought were substantially reduced, Chavez, 162 Cal.App.4th at 63-64 ($393,000 reduction in fees because document reviews by partners could have been done by associates or paralegals, excess time was spent responding to discovery, and court appearances did not need to be billed by two attorneys); EnPalm, LLC v. Teitler (2008) 162 Cal.App.4th 770 (permissible to reduce $50,000 fee to $5,000 because action could have been resolved earlier, in court’s opinion).
Thus, though it is true that detailed time sheets are not required of class counsel to support fee awards in class action cases in California (e.g., Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 254-255), as a plaintiffs' wage/hour class action lawyer, you will have much smoother sailing on fees if you are able to show that your lodestar is close to or exceeds what you hope to reap from attorneys fees in a common fund settlement. See, e.g., McPhail v. First Command Financial Planning, Inc., 2009 WL 839841, *8 (S.D. Cal. March 30, 2009) (“the proposed attorneys' fee award [in a common fund class action settlement] is less than Class Counsel's lodestar calculation, buttressing the Court's finding of reasonableness.”). In sum, be on notice: rather than rubber stamping your proposed fee award, the Court is likely to take seriously its obligation to “ensure that the fee awarded is within the range of fees freely negotiated in the legal marketplace in comparable litigation.” Lealao, 82 Cal.App.4th at 49-50.