A recent The Recorder story, “Second District Casts Aside Fee Award in Party City Case,” reports that a $350,000 attorney fee award divided among six law firms in a consumer class action has been thrown out because the defendant never got a chance to see the billing records.  Class counsel recovered $300,000 in merchandise certificates from Party City after accusing the retailer of violating the Song-Beverly Credit Card Act by requiring customer zip codes to process credit card transactions.

In the underlying action, no formal discovery was taken, and all of the cases settled following a one-day mediation before Edward Infante of JAMS.  But when class counsel moved for fees, Party City complained that the various law firms had duplicated each others’ work, and were asking for more in aggregate than the face value of the recovery.  An award of $137,000—the amount billed by Party City’s counsel at Fox Rothschild and equal to about 40 percent of the recovery—would be more appropriate, the retailer argued.

Los Angeles Superior Court Judge Kenneth Freeman said while the hourly rates being claimed were reasonable, the 720 hours billed “seems to be very high.” Moreover, block billing entries, which didn’t specify hours spent on individual tasks, didn’t make clear whether all the work was necessary, Freeman said.

Class counsel led by Gene Stonebarger of Stonebarger Law—who helped win the Supreme Court case—offered to make individual billing records available for review in camera.  After accepting the offer, Freeman stated that “everything is in order” and signed off on the award.

Although failing to object at trial, Party City argued on appeal that it should have had an opportunity to challenge the billing records.  A Second District panel led by Justice Dennis Perluss agreed.  “Under our adversarial system of justice, once class counsel presented evidence to support their fee request, Party City was entitled to see and respond to it and to present its own arguments as to why it failed to justify the fees requested,” Perluss wrote in Concepcion v. Amscan Holdings.

Class counsel argued the billing records contained privileged material, but Perluss was skeptical.  Freeman made no such finding, and the records could have been redacted to maintain confidentiality, he wrote.  “To the extent class counsel made the judgment they needed to offer their full, unredacted billing records to support their request for fees, they may well have impliedly waived any privilege that otherwise protected them,” Perluss added.

UC Hastings law professor Morris Ratner, a former partner at Lieff Cabraser, said in camera inspection of billing records happens from time to time, but is not common, and that privilege issues are usually handled by redaction.  “Courts do not normally need to go beyond materials submitted with the fee petition to spot and correct for inefficiency, or to know if time was spent in a way that did not benefit the class members,” he said.