OKLAHOMA CITY (Legal Newsline) – A $19 million award to class action lawyers was much too high, the Oklahoma Supreme Court has ruled in a decision that is still good news for the class action bar.
That’s because the court on April 20 held judges can use the contingency fee agreements between lawyers and their clients when determining the amount of fees they can take out of class settlements or verdicts.
The alternative was to force fees to be determined by a lodestar, which would have meant less profit for the lawyers in big cases. Judges will now be permitted to use either method as long as they arrive at a rational amount.
“The goal in every attorney fee case is not to select a methodology but to arrive at a reasonable fee,” Justice James Winchester wrote.
“Both attorney fee methods can have their shortcomings in arriving at a reasonable fee. While a percentage computation can lead to an excessive award out of proportion with the attorney's time and labor, a lodestar computation can lead to an excessive award out of proportion with the results in the case.
“As a result, courts should ensure the reasonableness of the fee award involving a common fund by comparing the fee based on a percentage calculation to what the lodestar approach would produce.”
Still, the decision is costly for lawyers at Burns & Stowers, of Norman, who would have made $2,500-per-hour under the initial $19 million award that was based on a 40% contingency fee. Their case involved alleged underpayment of oil and gas royalties and sought to certify a class of almost 34,000 royalty owners.
An objector spoke up after the fees were approved in district court and took the issue to the Court of Civil Appeals, which ruled a lodestar method, which produced a figure of $6.3 million, was needed because the contingency fee took too much from class members.
The objector – Daniel McClure – was also not permitted to review billing records, which was done in secret. The decision orders the district court to use the lodestar method to calculate fees while also letting the class see the billing records.
“The district court had a fiduciary duty to give full adversarial scrutiny to the attorney's fees requested based on its trust relationship with the class. Instead, the district court deprived McClure--standing in the shoes of the other 33,890 royalty owners--of the opportunity to review or meaningfully challenge the very fees he and the other class members are required to pay from their own royalty interests,” Winchester wrote.
“Denying McClure the opportunity to review these records by withholding the descriptive time records in their entirety was improper and an abuse of discretion.”
The court also struck a $4,000 incentive award to the lead plaintiff it said was not supported by any evidence of work performed.