A recent NLJ story, “9th Circuit Tosses Bluetooth Settlement, Citing Attorney Fees” reports that a federal appeals court has tossed out a settlement of hearing loss claims involving Motorola’s Bluetooth headsets ruling that the trial judge failed to adequately test whether the attorney fees were excessive. In its published decision (pdf), the U.S. Court of Appeals for the 9th Circuit on Aug. 19 reversed and remanded the settlement, which provided $800,000 to the plaintiffs’ lawyers. The plaintiffs received no economic recovery other than $12,000 allocated for nine class representatives.
Several fee objectors appealed U.S. District Judge Dale Fischer’s approval of the deal and the fee award on the ground that they appear disproportionate – essentially, that the lawyers received eight times more than the potential class members. “We agree that the disparity between the value of the class recovery and class counsel’s compensation raises at least an inference of unfairness, and that the current record does not adequately dispel the possibility that class counsel bargained away a benefit to the class in exchange for their own interests,” wrote Senior Circuit Justice Michael Hawkins. The court stopped short of concluding that the deal was unfair or unreasonable.
The panel concluded that Fischer, who found that the fees charged by attorneys in the case “substantially exceeds” $800,000 under the lodestar method, failed to explicitly calculate that figure other than to deduce that it was less than $1.6 million. “With neither a lodestar figure nor a sense of what degree of success this settlement agreement achieved, we have no basis for affirming the fee award as reasonable under the lodestar approach,” the panel concluded.
Fischer also failed to compare the lodestar amount to what the attorneys would have received had their fees been based on a percentage of the settlement, the court said. In fact, the fees amounted to a 83.2% of the total defendants agreed to pay, it said, and if that amount had been structure as a common fund instead, attorney fees, based on 25% of the settlement, would have been $240,500.
Daniel Warshaw, a partner of Pearson, Simon, Warshaw & Penny in Sherman Oaks, Calif., one of the plaintiffs’ firms in the case and the firm that handled the appeal, said the panel failed to account for Fischer’s extensive in camera review of lawyers’ time records. “We feel Judge Fischer got it right the first time,” he said. She’ll get it right the second time and find that the settlement is fair, adequate, and reasonable, and the attorney fees are appropriate in the case.”