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Class Action Fee Objectors Face Set Back in New York Courts

October 29, 2010 | Posted in : Expenses / Costs, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Reduction, Fees for Fees / Fees on Fees

A recent New York Law Journal story, “Judges Deny Attorney’s Fees to Challenger in Class Action” reports that the state Court of Appeals in New York said lawyers who successfully challenge class counsel fees on behalf of individual plaintiffs are not entitled to reimbursement for their attorney fees.  The majority in a 5-2 decision held that “comprehensive” 1975 reforms to class actions in New York by the state Legislature authorized payment of fees only to the “representatives of the class” and not the “award of counsel fees to any party, individual or counsel, other than class counsel.”  Judge Eugene F. Pigott, Jr. wrote for the majority in Flemming v. Barnwell Nursing Home and Health Facilities Inc. 

The “general rule” in New York is that attorney’s fees are considered incidental to litigation and that a lawyer is not entitled to fees from anyone other than his clients merely because other individuals benefitted by his services, Pigott wrote.  In dissent, Judge Robert S. Smith said the Court codified the “common fund” rule in Woodruff v. New York, Lake Erie & W.R.R. Co.  “This result is bad policy,” Smith said.  Individuals in a class who object to the fees paid to class counsel are useful in checking the “inflation” of attorney’s fees and, in light of this ruling, will only seek to do so out of “philanthropic motives,” Smith wrote.

The class action involved medical malpractice and wrongful death claims at Barnwell Nursing Home.  The case settled for $950,000, including $448,000 for counsel fees and expenses, $35,000 to Mr. Flemming as an incentive award and $40,000 to the settlement administrator Paul Macari.  Caroline Ahlfors Mouris, the executor of one class member’s estate, objected to the class counsel’s fees.  Class counsel’s fees were ultimately reduced to $425,000 and eliminated the fees for Flemming and Macari.  Mouris had sought between $35,000 and $50,000 in fees, but the appeals court refused Mouris’ fee request finding that unless there was a specific statute allowing the payments or that the parties had a contract providing for them, each party is responsible for its own attorney fees.