On September 14, 2017, the Northern District of California entered its order awarding attorneys’ fees to plaintiffs’ class action counsel in Ridgeway v. Walmart Stores, Inc., No. 08-cv-05221-SI, 2017 WL 4071293 (N.D. Cal. Sept. 14, 2017). In the order, the court required the defendant to pay $12,983,324.25 in fees to plaintiffs’ counsel in addition to the $60.8 million damages award in the case. The court’s analysis highlights a number of issues that defendants facing potential class action liability should consider.
First, the posture of the case can impact whether attorneys’ fees increase the total final judgment amount. In many instances, a defendant can settle a class action on court-approved terms that require plaintiffs’ counsel to recover their fees from the total settlement amount. In that situation, the defendants’ total payout is limited. If, however, a case proceeds to judgment under a statute that permits fee-shifting, then the defendant can be required to pay some or all of the class’ counsel fees in addition to the amount it must pay as damages to the class.
Second, when a case reaches judgment, there is no clear bright line rule establishing how statutory fee-shifting and the common fund doctrine should interact, and courts have broad discretion in determining the fee award. Most courts tend to analyze the issue the same way the Ridgeway court has, by awarding a percentage of the class’ recovery to class counsel under the common fund doctrine and requiring the defendant to reimburse the class for the amount of the statutory-fee shifting award. For example, in Ridgeway, the court awarded class counsel twenty-five percent of the $60.8 million recovery, or $15,200,002.90, which the court offset by statutory fee award of $12,983,324.25, such that the class’ recovery was reduced only by the $2,216,678.65 difference. We recently handled a case in which class counsel requested that the fees be considered part of the judgment to the class (based on the language of a particular fee-shifting statute), which would have increased the amount of the award from the common fund. The court declined to adopt that approach and instead used the same approach as the Ridgeway court. Dijkstra v. Carenbauer, No. 5:11-CV-152, 2015 WL 12750449, at *6–7 (N.D.W. Va. July 29, 2015).
Third, the court’s discretion concerning the fee award to class counsel is broad, even if the case does not reach final judgment. Rule 23(h) provides that “[i]n a certified class action, the court may award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the parties’ agreement.” As Ridgeway demonstrates, that discretion includes not only the source of the fees (common fund, statutory fee-shifting, or both), but also the percentage of the common fund, the multiplier to be applied to the statutory lodestar analysis, and whether a particular billing entry or set of entries is reasonable and should be awarded.
Fourth, when considering a defendant’s challenges to fee petitions by class counsel, courts are not necessarily inclined to hold plaintiffs’ counsel to the same rules that many defendants have for their outside counsel. In Ridgeway, the court declined to significantly cut class counsel’s lodestar award based on arguments that class counsel had: (1) performed unnecessary discovery work, (2) failed to write detailed time entries, (3) made multiple 0.1- and 0.2-hour entries, (4) block-billed, (5) billed for travel time, (6) assigned multiple firms or attorneys to work on the same issue, (7) failed to shift work to timekeepers with lower rates, (8) billed for clerical tasks, (9) failed to keep contemporaneous time logs, (10) billed for continuing legal education related to the causes of action, and (11) billed for time interviewing witnesses who did not ultimately testify in the case. The court did make some reductions for travel time, clerical work, and unnecessary duplication, but these reductions were far less than the defendant requested.
Key Takeaways. Often, a class action defendant does not have a plan for addressing or opposing class counsel’s attorneys’ fees until the end of a case. Given the potential for fees to increase a final judgment, and the broad discretion courts possess in ruling on class counsel’s fee petitions, defendants and their counsel would be wise to: (1) analyze how statutory fee shifting may impact the case, and (2) bring fee-related considerations to the presiding judges’ attention early in, and throughout, the case. Doing so will not only allow for insight into a defendant’s potential liability for attorneys’ fees, but it will also offer opportunities to decrease the likelihood that the court will award certain fees requested by class counsel.