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Percentage Method Upheld in Class Action Fee Award in California

December 5, 2014 | Posted in : Billing Practices, Contingency Fees / POF, Fee Award, Fee Issues on Appeal, Fee Jurisprudence, Fee Request, Hourly Rates, Lodestar

A recent Law 360 story, “Calif. Panel OKs $6M Fee Award in Robert Half Settlement,” reports that a California appeals court affirmed a $6.3 million fee award in staffing firm Robert Half International Inc.’s $19 million labor violations settlement, ruling that the trial court did not err in using a percentage, instead of a lodestar, to calculate the fee award.

Dissenting class member David Brennan had appealed the attorneys’ fees, which amount to one third of the total class settlement, arguing that the fee award constituted a breach of fiduciary duty to class members.  The trial judge awarded the fees based first and foremost on a percentage of the $19 million settlement, and only later gave cursory consideration to the lodestar method, Brennan contended.  Brennan was represented by professional fee objector Lawrence W. Schonbrun.

In an unpublished opinion, a three-judge panel rejected Brennan’s arguments, ruling that although the lodestar method may be preferred, the percentage method may still be used, especially where the settlement – like the one at issue – is a common fund with attorneys’ fees coming out of the same pool of money as the class award.  Los Angeles Superior Court Judge John Segal, writing for the panel, said that the California Court of Appeals, First District’s 2000 ruling in Richard Lealao v. Beneficial California Inc., does not mandate the use of one formula or the other.

“While Brennan is correct that, as a general rule, the lodestar method is the primary method for calculating attorneys’ fees, the percentage approach may be proper where, as here, there is a common fund,” Judge Segal wrote.  “Contrary to Brennan’s assertion, the trial court’s use of a percentage of 33 and 1/3 percent of the common fund is consistent with, and in the range of, awards on other class action lawsuits.”

During oral arguments in Los Angeles, Schonbrun urged the three-judge panel to overturn the fee award, arguing that the trial judge had “put the cart before the horse,” and saying that some of the class attorneys charged $1,500 per hour and didn’t specify what services they were performing.

The panel also rejected those arguments, ruling that the trial court did not need to require the settling class’ attorneys to submit detailed time records for the lodestar cross-check conducted by the court.  “The trial court did not abuse its discretion by relying on the hours worked and hourly rates provided by each of the class attorneys, and the description of the work the attorneys performed, in calculating a lodestar cross-check on the award,” Judge Segal wrote.

The case is Laffitte v. Robert Half International Inc. in the Court of Appeal for the State of California, Second Appellate District.