How Class Action Fees Work in the Eleventh Circuit

• Publication year: 2022

How Class Action Fees Work in the Eleventh Circuit

Jeffrey G. Casurella

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How Class Action Fees Work in the Eleventh Circuit

Jeffrey G. Casurella^*

I. Introduction

Litigating the reasonableness of attorney's fees in a Federal Rule 23 class action is no picnic. Usually, payment of legal fees is set from a contractual arrangement between attorney and client. That is often quick and easy. Conversely, payment of class action legal fees is set by a district court. That process can be drawn out and labor intensive. In this latter situation, a district court must be persuaded, ultimately, that the amount of the award is reasonable.¹ But what does "reasonable" mean? It is a tricky question—class action math always is—and litigating it can become contact sport.

The parties must be ready for potential opposition, objectors, and a skeptical court as attorney's fees are a part of the entire settlement package. And then there is the perception problem: in an age when a melting pot of television talking heads, newspapers, and social media cast more and more influence on the national dialogue—in this case, this influence is anything anti-lawyer—will a court shut out such platitudes and greenlight paying lawyers gazillions of dollars? Even the late-night comedians have joined the fray, often ridiculing lawyers in their monologues. But such a mentality is not anything new. In David

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Copperfield,² Dickens described a lawyer named Uriah Heep as one whose "lank forefinger followed up every line as he read and made clammy tracks along the page . . . like a snail."³ All of this negativism, even entrenched historical negativism, is a lot to overcome.

Significant time and money are usually spent by the lawyers to land ongoing class action case. But it is often a bumpy landing. Preparing a fee application, on top of all of the other filings that accompany it—settlement papers that include motions, briefs, declarations or affidavits, evidentiary documents, studies, notices, and the like—must be carefully choreographed. And nevermind the fact that "professional" objector attorneys can be awaiting offshore, often perceived by the litigation counsel as circling sharks hunting for their next meal. These waters can be difficult to navigate.⁴

Mindful of this, the Supreme Court has cautioned that a fee fight should not turn into a "second major litigation."⁵ That caution, however, is more aspirational than it is reality. In the bob and weave of a big money brawl, the amount of attorney's fees sought can often be much larger than the amount of relief collectively obtained by individual class members.⁶ Attorneys, like everyone else, can and will fight hard when the fight comes down to their fees. It has always been this way, and a fight over attorney's fees can last for years.⁷ But all of this is not

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difficult to imagine. The on-the-hook defendant is primarily concerned with its entire monetary burden, mindful of not just the settlement amount, but the enormous outlays of fees and expenses it also must pay its own attorneys and experts.⁸ Class counsel, too, is naturally motivated to maximize their award as a piece of the settlement pie.⁹ There is a lot at stake.

Enter the district court. Once a settlement is achieved or a judgment is taken, the district court has a "significant supervisory role" in the settlement process.¹⁰ This was recently expanded and clarified by the United States Court of Appeals for the Eleventh Circuit to mean "a type of a fiduciary role for the class" to ensure that the entire settlement is "fair, adequate, and reasonable."¹¹ As part of the settlement, the district

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court must be satisfied that the amount of attorney's fees to be awarded is reasonable.¹²

So, is it legally proper for attorneys to make millions while an individual class member may only receive a few dollars? And, do the rules create a "divided loyalty" ethical problem when class counsel, presumably self-interested, becomes a claimant to the common-fund that necessarily reduces class members' compensation?¹³ These are difficult ethical issues often considered in the approval of a settlement, and more specifically, in an application for attorney's fees.

All of this has not escaped the watchful eye of the United States Court of Appeals for the Seventh Circuit, Judge Richard Posner, who, in a trio of widely cited opinions issued in 2014, lambasted the fee harvesting process as "outlandish," "questionable," and "scandalous."¹⁴ Such language seemingly gilds the popular perception that it is the lawyers, not the victims, who make the lion-share of the money. But on the other hand, fundamental fairness dictates that skilled legal counsel should be incentivized to earn a reasonable fee, even a big fee, for successfully representing a group of similarly-situated individuals who suffer a harm, even a small harm.¹⁵ And there is the rub.

No matter whether the award being sought is from a common-fund or from a statutory entitlement, all courts within the Eleventh Circuit must determine that the amount of the fee is reasonable and likewise be assured that it is not a product of unfair collusion between the

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parties.¹⁶ This Article will drill down what constitutes a "reasonable" attorney fee. The discussion here will get into the practical elements of making fee applications. Likewise, there is discussion about some of the problems that may drag down a settlement, such as, "clear sailing provisions" and "kicker clauses." These dark holes are often the product of varying negotiation strengths or weaknesses that can sometimes jeopardize the timely final approval of a settlement package, especially in large class action cases that can attract lots of objectors.

For context, this article begins with some history of how attorneys charged fees in early America. Readers may be surprised to find that the challenges regarding fees that faced lawyers 200 years ago are not unlike the challenges that lawyers face today. Such a lookback is helpful as it demonstrates exactly how attorneys charged their clients from long ago, and thereafter traces the evolution of attorney's fees and how such fees were charged through the modern standards of contingent fees and hourly rates used today. In a sense, it demonstrates the evolving nature of what the word "reasonable" means as it modifies the phrase "attorney's fees."

To keep things practical, the scope is limited to controlling authority for federal cases situated in Georgia, Florida, and Alabama. The discussion here emphasizes fee applications that seek a percentage from a pool of money, often called a common-fund fee award, that is created out of a settlement. This is the type of fee award that is sought in most class action cases.¹⁷ This contrasts with fee applications that seek a statutory-fee award in which a defendant pays attorney's fees, known as a "lodestar,"¹⁸ directly to class counsel. The lodestar—a word that does not naturally roll off the tongue in normal conversation—has been

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defined as "the number of hours worked multiplied by the prevailing hourly rates" under a federal fee-shifting statute.¹⁹ The basic difference between these two payment schemes is that the common-fund method comes from a pot of money created for absent class members, while the fee-shifting method comes from the opposing party.

The analysis here starts with two rules, the "English Rule" and the "American Rule," that are the center of the universe of this discussion. Understanding these rules, and where they come from, underpins any rationale that either justifies or criticizes an attorney fee award.

II. The English and the Americans: Two Peoples Divided by a Simple Rule Over Attorney's Fees

A. Historical Development

Under the "English Rule," as explained by the Supreme Court in Hensley v. Eckerhart,²⁰ "the losing party, whether plaintiff or defendant, pays the winner's fees."²¹ In England, the Rule had its origins from early statutes created by Parliament.²² The rule is simply triggered by demonstrating the objective fact of a party's complete defeat.²³ It was part of a larger and more elaborate payment costs system in which the loser would have to pay the winner all legal costs, not just attorney's fees, but other expenses too.²⁴ This would provide the winner full and fair compensation.²⁵ The sentiment during these early times was that a victory was not totally complete without the inclusion of all out-of-pocket monies spent in prosecuting the prevailing party's cause.²⁶ This

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same sentiment today, popularly known as "loser-pays," provides fuel to tort reform agendas promoted by various conservative groups.²⁷

Initially, the English Rule flourished in pre-Revolutionary War America. At that time, and much like it is now, anti-lawyer sentiment was intense and universal. Occasionally, there were calls to ban lawyers entirely—that was always unsuccessful—but what often followed was restrictive attorney fee regulations imposed by colonial legislatures.²⁸ Essentially, lawyers had to stick to a fee schedule based on various tasks performed, such as "perusing" pleadings, making court appearances, and arguing causes.²⁹ This meant that lawyers could only charge their clients what the legislatures said they could charge.³⁰

Such fee restrictions were highly unpopular with lawyers and were considered draconian. John Adams' recorded diary entry for July 28, 1766, tells of a meeting of his local bar at a coffee house where one of the speakers "rail'd about the lowness of the fees," this being a "common [p]lace Topick."³¹ This situation incentivized grumbling lawyers to take on higher volumes of work and to also search for creative ways around these legislative curbs.³²

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Concomitant with this, legislation was also enacted to include loser-pays rules.³³ This continued through the American Revolution, when many of the colonies adopted "reception statutes" to receive at least some English...