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California Supreme Court Clarifies Proper Methodologies for Awarding Attorney’s Fees in Class Action Cases

New-Development-IconBy Jeremy M. Creelan

On August 11, the California Supreme Court issued a ruling in Lafitte et al. v. Robert Half Int’l, Inc., that clarified the proper methodologies for awarding attorney’s fees in class action cases. In a class action alleging employment law violations under California law, the trial court approved a settlement of $19 million after a class had been certified, and a fee award of $6.3 million (which was one third of the settlement).  The trial court approved that fee award based upon not only the percentage of the common fund settlement, but also after performing a reasonableness “cross-check” of the amount against the information provided by the plaintiffs’ counsel using a lodestar method.  That calculation revealed that the proposed amount would mean a multiplier over lodestar of 2.03 to 2.13.  Given the complexity, duration, and contingency risk involved in the matter, the trial court (and the intermediate Court of Appeal) found the requested amount to be reasonable.  The Supreme Court affirmed, and provided a lengthy discussion of the two methods of calculating a fee award in class actions.  The Court made clear that its earlier opinion in Serrano v. Priest (1977) requiring use of the lodestar method, rather than a percentage of common fund method, applied only to cases brought under the “private attorney general” doctrine.  In other cases involving a common fund for recovery by class members, the Court found that using a percentage method would not be per se unreasonable, particularly where the court performs a cross-check based on the lodestar method to confirm the reasonableness of the award.  Interestingly, Judge Liu wrote a separate concurrence to encourage courts to improve the reasonableness of attorney fee awards by using several measures recommended by the Task Force on Selection of Class Counsel convened by the Court of Appeals for the Third Circuit.  Those measures include reviewing and conditionally approving the terms of attorney compensation at the start of a litigation, and in larger cases that do not involve sophisticated plaintiffs, appointing “class guardians” to play “devil’s advocate” and present arguments to the court concerning the reasonableness of requested fees.  Click here to view the opinion.