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Ninth Circuit Affirms $98M Fee Award in Facebook Class Action

March 17, 2022 | Posted in : Class Fee Objector, Class Incentive Awards, Contingency Fees / POF, Expenses / Costs, Fee Award, Fee Award Factors, Fee Calculation Method, Fee Issues on Appeal, Fees & Judicial Discretion, Historic / Landmark Case, Hourly Rates, Lodestar, Lodestar Crosscheck, Lodestar Multiplier, Practice Area: Class Action / Mass Tort / MDL, Settlement Data / Terms

A recent Law 360 story by Dorothy Atkins, “9th Circ. Oks Facebook Class’s $98M Fee Win in Privacy Fight” reports that the Ninth Circuit affirmed class counsel's $97.5 million fee award for striking a $650 million deal that resolves claims Facebook's facial recognition technology violated Illinois users' biometric privacy rights, rejecting objectors' arguments that the award is "outrageous" and the trial judge abused his discretion in awarding it.  In a five-page unpublished opinion, a unanimous three-judge panel held that U.S. District Judge James Donato did not breach his fiduciary duty to the class by awarding class counsel 15% of the total $650 million settlement in fees.

Objectors' counsel had argued that the fees were too high and inappropriate because class counsel told Judge Donato they would not seek fees for an additional $100 million added to the settlement fund after the judge had rejected an initially proposed $550 million deal, which forced Facebook and class counsel back to the negotiating table.  Instead, Judge Donato should have awarded class counsel 10% of the initial $550 million proposed settlement, or $55 million, which would have been reasonable and in line with case law on other mega settlements, according to objectors' counsel, Kendrick Jan.

But the Ninth Circuit panel concluded that the 15% award is in line with 11 similarly sized settlements, which ranged between $400 million and $800 million and averaged around 16% in fees, and Judge Donato adequately explained why this was a reasonable fee based on the facts of this case.  Additionally, the panel said the trial judge appropriately cross-checked the fee award based on the 4.71 lodestar multiplier, which is the number of times the hourly rate would be multiplied to get the total fee award.  Although lodestar multipliers tend to average between 2.39 and 4.50, the Ninth Circuit said the multipliers tend to increase as the size of the class' recovery increases and the 4.71 multiplier in this case is reasonable based on the risks trial would have presented.

The Ninth Circuit also rejected the objectors' arguments that the fee lodestar was based on hours that included attorneys' lobbying activities, which cannot be included in contingency fees under both California and Illinois statutes.  The panel said the objectors waived their arguments on the matter because they didn't raise them before the trial judge.  But even if they had not done so, the fee award still would be affirmed, the panel added.

"To the extent that appellants did not waive the general argument that lobbying fees should not be included in the lodestar calculation, the district court did not abuse its discretion because its primary calculation tool was the percentage-of-recovery method," the opinion says.

The objectors' appeal challenged multiple aspects of Facebook's revised $650 million deal resolving claims the social media giant breached the Illinois Biometric Information Privacy Act by using facial recognition technology without users' consent to fuel its photo tag suggestion feature.  After years of hotly contested litigation, the case was headed to a jury trial, but the parties struck an initial $550 million settlement in 2020, which class counsel hailed as the largest amount ever doled out to resolve a privacy-related lawsuit.

But Judge Donato tore into the initial proposal, which he noted gave users just 1.25%, or $300 at most, of what they could be entitled to under BIPA, even though the state statute comes with a $1,000-per-violation fine and a $5,000 enhancement for intentional or reckless violations.  At the time, Judge Donato told the parties that the enhancement appeared to be a potentially viable claim in light of the $5 billion fine Facebook agreed to pay the Federal Trade Commission in 2019 for violations of a 2012 consent decree over its privacy practices.

Roughly a month later, the parties filed a motion asking the judge to preliminarily approve a revised $650 million deal, which attempted to address Judge Donato's concerns by narrowing the release provision and increasing class members' potential recoveries to up to $400.  At the time, class counsel said it would seek up to $110 million in fees plus expenses based on the initial settlement amount.

In February 2021, Judge Donato signed off on the revised deal, calling it a "landmark result," but trimmed the $110 million requested attorney fees to $97.5 million, which reflected a 15% portion of the settlement.  He also slashed the requested incentive awards to three class representatives from $7,500 each to $5,000 each.