The case, an employment class action lawsuit filed against the staffing firm, settled before trial for $19 million. There was an agreement that class counsel would receive no more than one-third of the settlement amount in attorney fees, but counsel sought the maximum fee amount.
A class member objected to the fee as excessive, but the trial court approved the settlement and the intermediate appellate court affirmed. The California Supreme Court likewise affirmed, reasoning that the trial court had discretion to use the percentage of fund method in a class action fee request. The court also approved the trial court’s discretion in utilizing the lodestar method as a check on the percentage of fund method.
From the Opinion:
The American Law Institute has also endorsed the percentage method‘s use in common fund cases, with the lodestar method reserved mainly for awards under fee shifting statutes and where the percentage method cannot be applied or would be unfair due to specific circumstances of the case. (ALI, Principles of the Law of Aggregate Litigation (2010) § 3.13.) “Although many courts in common-fund cases permit use of either a percentage-of-the-fund approach or a lodestar (number of hours multiplied by a reasonable hourly rate), most courts and commentators now believe that the percentage method is superior. Critics of the lodestar method note, for example, the difficulty in applying the method and cite the undesirable incentives created by that approach—i.e., a financial incentive to extend the litigation so that the attorneys can accrue additional hours (and thus, additional fees). Moreover, some courts and commentators have criticized the lodestar method because it gives counsel less of an incentive to maximize the recovery for the class.” (Id., com. b.)