A recent post in Baker Hostetler’s Employment Class Action Blog, “California District Court Rejects FLSA Settlement Due to 78% Fee Award,” written by Greg Mersol, reflects on the fee decision in Villa v. United Sites Services of California Inc.  In that case, the parties settled state and federal wage and hour claims involving claimed missed rest periods for a total of just short of $350,000.  The plaintiffs’ attorney fees were $220,000, and they had an additional $50,000 or so in expenses, leaving the class with only about $80,000, or 22 percent of the settlement fund.

But, setting percentages aside, did the plaintiffs’ attorneys earn a $220,000 fee?  OK, it is a large percentage to be sure, but $220,000 also does not seem unreasonable given the work and successes by the plaintiffs’ attorneys.  And, what if the $80,000 for the class was a fair estimate of the amounts they might have recovered had the case proceeded to trial?

This is one of the problems of using percentages as a yardstick for attorneys’ fees in class action litigation.  At one extreme; litigated cases with relatively small amounts in dispute per claimant and complex issues in which set percentage may not be enough.  At the other; larger cases with greater amounts that settle quickly that may result in a windfall.  Of course, few courts analyze the reasons why a defendant might settle – including the ever-increasing cost of litigation holds, e-discovery, and its own attorney fees, but when a court refuses to approve a settlement on a percentage basis, both sets of parties become hostage to the litigation.

Class actions can be complicated things.  So, too, their settlements.  It’s easy to scoff at an award such as that in Villa (I did, too, before I started delving into the facts), but the real issue is whether, under the circumstances, the fee is reasonable.  Percentages are easy, but they are a rough yardstick at best, particularly at the extremes.

This blog post was written by Greg Mersol, Partner at Baker Hostetler in Cleveland.  This artice was re-printed with permission.