Chapter § 5.18

• Jurisdiction: United States

§ 5.18 Attorneys’ Fees

Rule 23(h) permits a court, in a certified class action, to award “reasonable” attorneys’ fees and nontaxable costs that are authorized by law or by the parties’ agreement.³⁵⁵ The movant must file a claim for the award by motion under Rule 54(d)(2) at a time the court establishes, and notice of this motion must be served on all parties. For motions by class counsel, again, notice must be directed to class members in a reasonable manner.³⁵⁶ Both a class member and the parties from whom payment is sought may oppose the motion. The court may either hold a hearing pursuant to Rule 52(a) or refer issues related to the amount of award to a special master or magistrate judge as provided in Rule 54(d)(2)(D).³⁵⁷

Courts generally use one of two methods to arrive at an amount of attorneys’ fees—i.e., the percentage method (also known as the percentage-of-fund method) or lodestar method. We discuss each below.

[1] Percentage Method

For the percentage approach, a reasonable fee is based on a percentage of the fund bestowed on the class.³⁵⁸ This method is designed to “allow courts to award fees from the fund ‘in a manner that rewards counsel for success and penalizes it for failure.’ ”³⁵⁹ When considering the reasonableness of a fee request under this approach, courts consider the size of the fund created and the number of persons benefited, the presence or absence of substantial objections by class members to the settlement terms or the requested attorneys’ fees, the skill and efficiency of the attorneys involved, the complexity and duration of the litigation, the risk of nonpayment, the amount of time devoted to the case by plaintiffs’ counsel, and awards in similar cases.³⁶⁰ They may also consider (1) the value of benefits accruing to class members attributable to the efforts of class counsel as opposed to the efforts of other groups, (2) the percentage fee that would have been negotiated had the case been subject to a private contingent fee agreement when counsel was retained, and (3) any “innovative” terms of settlement.³⁶¹ Some courts have set a percentage “benchmark” (e.g., 25%) for the award of attorneys’ fees in common-fund cases.³⁶²

The court need not apply the factors listed above in a formulaic way; rather, what’s important is that, in all cases, the court engages in a “robust assessment[] of the fee award reasonableness factors.”³⁶³ Also, the common-fund doctrine provides that an attorney who recovers “a common fund for the benefit of persons other than...