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Monday, August 19, 2019

Attorney fees in class-action suit upheld by California Supreme Court

By Kristin Danley-Greiner | Oct 10, 2016

SAN FRANCISCO (Legal Newsline) -- The California Supreme Court has upheld the attorney fees awarded in an employment class action lawsuit, stating the award was not unreasonable because it is calculated as a percentage of the common fund instead of using a lodestar calculation.

In Lafitte v. Robert Half International Inc., the class action lawsuit was settled before trial for $19 million with no more than one-third of the recovery given to class counsel as attorney's fees. 

Class counsel, however, sought the maximum fee amount of $6,333,333.33, which the trial court approved minus the objection of one class member who contended that the trial court's award of attorney fees as a percentage of the total settlement amount violated the California Supreme Court's holding in Serrano v. Priest. In that case, the objector reasoned that every class action fee award must be calculated on the basis of time spent by counsel on the case and that awarding attorney's fees based upon a percentage of recovery is impermissible.

The Supreme Court then clarified, in an appeal, that the case did not preclude an award of a percentage fee in a common fund case. The court reached its decision by analyzing the history of attorney fee awards in class actions, comparing the percentage of recovery award approved by the court and the lodestar award method that was popular in the 1970s and '80s. The lodestar method calculates the fee by multiplying the number of hours reasonably expended by counsel by a reasonably hourly rate. 

The court did distinguish in the Serrano case that the attorney fee calculation was made under the “private attorney general” doctrine and did not involve payment from a common fund.

The court upheld that the percentage of fund method can be used in California class action cases and the trial court did not abuse its discretion by using it to approve the fee request in the class action suit.  

Jonathan Moss, an attorney with Sheppard Mullin, said he didn’t think the objection would be successful.

“As the Supreme Court noted in its opinion, the majority of federal and state courts permit attorney fee awards to be calculated as a percentage of a class action common fund,” Moss told Legal Newsline.

Moss said the Supreme Court leaned toward the prevailing opinion versus California law.

“The Supreme Court clarified that it was effectively joining in the prevailing opinion approving percentage-based awards, as opposed to distinguishing California law on this issue,” he said.

Percentage fee awards are fairly standard for class action settlements where attorney fees are awarded from a common fund, Moss said.

“However, courts often apply a ‘lodestar cross check’ to assure the reasonableness of the percentage fee,” he said. “Here, the objector [David Brennan] seems to have been motivated by the belief that the percentage award method provides too much compensation to attorneys rather than class members.” 

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