California Justices Reluctant to Change Class Fee Calculus

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By Perry Cooper

May 27 — The California Supreme Court seemed hesitant May 27 about the idea of limiting trial judges' authority to use the percentage method for calculating class counsel fees in common fund cases ( Laffitte v. Robert Half Int'l Inc., Cal., No. S222996, argued 5/27/16 ).

But the justices also pressed class counsel on how well the interests of absent class members are protected after a class settlement is agreed to and the talk turns to attorney compensation.

Class member David Brennan objected to the attorneys' fee award approved in a $19 million settlement resolving alleged worker misclassification claims against Robert Half International Inc., a professional staffing agency (16 CLASS 1092, 10/9/15).

He argued that a 1977 California Supreme Court case, Serrano v. Priest, 20 Cal.3d 25 (1977), requires California courts to use the lodestar method when calculating fees.

It doesn't allow judges, he said, to base fees in common fund cases on a percentage of the total amount recovered for the class.

The lodestar is calculated by multiplying the hours counsel reasonably expended by a reasonable hourly rate. That figure may be adjusted up or down at the court's discretion.

The trial judge here went with the percentage method.

Chief Justice Tani Gorre Cantil-Sakauye seemed to argue in favor of keeping trial judge discretion, pointing out that California has courts in several counties that specialize in complex litigation.

“These cases aren't given to general interest judges,” she said.

“But you can't just rely on judges,” said Brennan's attorney Lawrence W. Schonbrun, a solo practitioner in Berkeley, Calif. “You have to make this a transparent process because there are millions of dollars at stake. It's done too perfunctorily now.”

‘Seems Like Dicta.'

Some justices said Serrano is distinguishable because there was no common fund involved in that case.

“This is a completely different circumstance,” Justice Kathryn Mickle Werdegar said.

And the admonition in Serrano that courts should use the lodestar method is in a footnote. “That seems like dicta,” Werdegar said.

Schonbrun argued that the Serrano decision referred to cases that involved a common fund, showing that the court meant for its ruling to apply to all class cases.

Werdegar also pointed out that the percentage method is prevalent among federal and state courts.

But Schonbrun said California “shouldn't settle for the current state of affairs.”

He argued that using the percentage method overcompensates plaintiffs' counsel and abandons the interests of the class.

Hourly Rate Makes Sense

Counsel for the plaintiffs and their amici argued that trial court judges should have discretion to determine which fee calculating method is right for the case before them.

The trial judge had been involved in this case for eight and a half years, they argued.

“She didn't have to ask for detailed time records,” plaintiffs' counsel Kevin Barnes in Los Angeles said. “She knew the case. She knew the risks.”

While most justices seemed skeptical of the lodestar being the sole method of calculating fees, one justice questioned the appropriateness of the percentage of the fund method.

“A layperson would expect his attorney to get paid by the hour,” Justice Goodwin Liu said.

Michael Rubin of Altshuler Berzon LLP in San Francisco said the public expects that class attorneys will take a percentage of what they recover because of the difficulty and risk involved in these cases.

Rubin argued for the Impact Fund in Berkeley and other legal service providers in support of the plaintiffs.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com