Multidistrict litigation (MDL) functions similar to class action lawsuits, with several key differences, including how courts address attorneys’ fees.  However, as more mass tort cases are being directed toward MDL instead of class action lawsuits, courts are encouraging that attorneys’ fees in MDL should be handled in a quasi-class action manner.  According to Jeremy Hays, in his article, “The Quasi-Class Action Model for Limiting Attorneys’ Fees in MDL Litigation,” despite some drawbacks in using the quasi-class action approach in determining attorneys’ fees in aggregate multidistrict tort litigation, the quasi-class action approach might be the best option for courts at this time.

Courts are favoring MDL over class action litigation as a way to resolve mass tort cases.  Courts have held that the interests and injuries of the potential members of a class make certification inappropriate, and the class action lawsuits may result in a limited fund for reimbursing victims of the torts, which means class action litigation is not the superior vehicle for achieving a just outcome for the parties.  Also, changes to Rule 23 of the Federal Rules of Civil Procedure have made class certification more difficult in mass tort cases.

However, unlike in class action lawsuits, courts do not have control over attorneys’ fees in MDL.  Attorneys take the cases in a contingency basis, but the plaintiffs often have to do much of the paperwork for the case.  In contrast, Rule 23(h) allows the courts to award “reasonable” attorneys’ fees in class action litigation.  Because the attorneys’ fee issues create inefficiencies in MDL, the quasi-class action lawsuit was created.

Instead of discarding the idea of quasi-class actions, courts should allow the quasi-class action model to evolve.  The quasi-class action was proposed principally to bring the protections of Rule 23(h) into the MDL context.  The quasi-class action, which is still developing, will present a more efficient approach for dealing with attorneys’ fees, but the quasi-class action may not be accepted by all courts as it continues its development.

A recent article in the State Bar of California’s California Litigation, “When the American Rule Doesn’t Apply: Attorney’s Fees as Damages in California Litigation (pdf),” by Marc Alexander and William (Mike) Hensley looks at attorney fees in the context of damages in California litigation.  

The article discusses three judicially created exceptions under California law to the American Rule: The “tort of another” doctrine, Brandt recovery, and damage recovery in malicious prosecution/false imprisonment cases.  Where these exceptions apply, prevailing parties can be made whole by being compensated for attorney’s fees – but the relief, rather than being treated as fees, per se, is given as an item of damages.

Marc Alexander and William (Mike) Hensley are shareholders at Alvarado Smith in Santa Ana.  They run California Attorney’s Fees Blog located at www.calattorneysfees.com

In a new academic paper, “An Empirical Study of Class Action Settlements and their Fee Awards” (pdf), Law Professor Brian T. Fitzpatrick of Vanderbilt University Law School examines attorney fee awards in class action litigation in federal court.

The following is a brief synopsis of the 42-page paper:

"This article is a comprehensive empirical study of class action settlements in federal court.  Although there have been prior empirical studies of federal class action settlements, these studies have either been confined to securities cases or have been based on samples of cases that were not intended to be representative of the whole (such as those settlements approved in published opinions).  By contrast, in this article, I attempt to study every federal class action settlement from the years 2006 and 2007.  As far as I am aware, this study is the first attempt to collect a complete set of federal class action settlements for any given year. 

I find that district court judges approved 688 class action settlements over this two-year period, involving nearly $33 billion.  Of this $33 billion, roughly $5 billion was awarded to class action lawyers, or about 15% of the total.  Most judges chose to award fees by using the highly discretionary percentage-of-the-settlement method, and the fees awarded according to this method varied over a broad range, with the mean and median around 25%.  Fee percentages were strongly and inversely associated with the size of the settlement.  The age of the case at settlement was positively associated with fee percentages.  There was some variation in fee percentages depending on the subject matter of the litigation and the geographic circuit in which the district court was located, with lower percentages in securities cases and in settlements from the Second and Ninth Circuits.  There was no evidence that fee percentage were associated with whether the class action was certified as a settlement class of with the political affiliation of the judge who made the award."

Aashish Y. Desai of Mower, Carreon & Desai, LLP in Irvine, California was a panelist at the ABA’s Labor and Employment Law Conference held on November 5, 2010 in Chicago.  His article, “Attorney Fees: Ethical Issues, When and How to Negotiate, and Fee Petitions” (pdf) discusses attorney fee awards in Fair Labor Standards Act (FLSA) actions.  Desai writes:

“This paper will discuss practical theories surrounding fee applications and some of the common conflict scenarios that can arrive in negotiating attorney’s fees in a class environment.  In particular, the attorney’s loyalty to the client may be compromised by the attorney’s desire to secure compensation for services.  This, naturally, gives rise to a potential conflict in the class action context.  But as will be shown, the conflict is more theoretical than practical.”

A recent article, “The Beginning of the Demise of the American Rule” in the DRI’s For the Defense, written by Jodie Steinberg of Ericksen Arbuthnot in Oakland, California advises counsel to consider whether an award of attorneys’ fees though the “tort of another” doctrine might apply to their case. 

The article concludes, “Since most state courts across the nation have been willing to award attorneys’ fees as damages under the “tort of another” doctrine, counsel should consider pleading the “tort of another” doctrine as a cause of action in their lawsuits.  Especially when dealing with professional liability cases, counsel should carefully consider whether an award of attorneys’ fees through the “tort of another” doctrine might apply.  If you believe that the doctrine might apply, this will greatly impact how you evaluate a case for your client.

Lastly, give forethought to some other significant implications of pleading the “tort of another” doctrine.  First, an insurance company involved in defending a case may not consider attorneys’ fees under the doctrine covered under the terms of the applicable insurance policy.  Also, if a party seeks attorneys’ fees in a cause of action through the “tort of another” doctrine, then arguably the attorney’s billing records would become discoverable during litigation and subject to attack.  Counsel should take care in deciding whether to plead the “tort of another” doctrine and may want to agree to stipulate to post-judgment consideration by the judge to protect billing from discovery until after a trial.”

Disclaimer:  This article is provided for informational purposes only.  Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your own unique circumstances.

An article, “Jury Trials-Reasonable Attorney Fees and Expenses” in the DRI’s For the Defense written by Gene F. Zipperle and Timothy D. Martin of Martin Ogburn & Zipperle in Louisville, Kentucky raises this question.  The article concludes, “Although entitlement to attorneys’ fees may be a jury issue, most courts considering the right to a jury determination on the amount of attorneys’ fees pursuant to a contract have found the issue to be one traditionally viewed as equitable in nature and particularly appropriate for determination by the court”.

In a recent New York Times Blog, "When Legal Bills Become a Cause for Dispute" by Peter J. Henning, professor at Wayne State Law School reports that Lloyd's of London is now responsible for paying up to nearly $100 million for the defense of R. Allen Stanford who was charged with conspiracy, securities fraud, and money laundering at Stanford Financial Group. White collar defense is an enormous expensive to defend, requiring a "staffing with a phalanx of partners, associates, and paralegals" and "defense costs can reach the ten of millions of dollars fairly quickly."

In the Stanford case, the court rejected the Lloyd's argument it did not have to pay the costs of defending criminal and civil cases because the policy included an exclusion from coverage when the officers are charged with committing money laundering. The blog reports that the decision by U.S. District Court Judge David Hittner in Houston "is one in a growing line of cases requiring the payment of attorney's fees for corporate directors, officers, and employees accused of wrongdoing."