Will SCOTUS Review High Counsel Fees in Low-Value Cases?

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By Perry Cooper

March 9 — The proper method for determining attorneys' fees for class counsel in low-value consumer settlements will be reviewed by the U.S. Supreme Court if one high-profile objector gets his way.

The justices will consider at their March 18 conference a petition for review filed by frequent class settlement objector Theodore H. Frank, in a case involving claims that Duracell Ultra Advanced batteries were improperly touted as longer lasting than regular batteries.

Frank argues a class payout of only $345,000 in the case can't justify the attorneys' fee award of $5.68 million.

Less than one percent of all battery purchasers filed claims for cash reimbursement in the case, receiving a payout of up to $12 each, according to Frank, of the Competitive Enterprise Institute for Class Action Fairness in Washington.

Frank raises two controversial issues that have received a significant amount of attention in the courts recently: high class counsel fees in small dollar litigation, and low claims rates by class members .

Circuit Split?

In this case, the U.S. Court of Appeals for the Eleventh Circuit approved the battery deal over Frank's objections in an unpublished ruling.

The Eleventh Circuit found that the $6 that could be claimed without proof of purchase exceeded the damages an average class member would have received at trial .

It also held that the deal's nonmonetary relief—requiring Duracell to change its labels and donate $6 million worth of batteries to charity—provided actual benefits to the class and was properly considered when calculating attorneys' fees.

Frank argues here that the decision creates a circuit split with the Seventh Circuit because that appeals court requires the fee award to be a fraction of the amount actually realized by the class.

He says that class counsel justified its disproportionate payout by arguing that claims rates are always less than one percent in small-claims consumer suits.

That means they knew the class payout would be low, but still argued that their cut should be based on the $50 million value of the deal if every class member were reimbursed, he says.

Frank also challenges the distribution to charity, which he says was designed to be paid out from the start because the defendants couldn't identify members of the class.

But that runs counter to the Third, Fifth, Seventh and Eighth circuits, which require cy pres distributions to be used only as a last resort if money can't be distributed to class members, he says.

Full Compensation, No Cy Pres

Class counsel argue in their opposition brief that no circuit splits exist, and that this is just a run-of-the-mill dispute about a deal that was overseen by a neutral, respected mediator.

The class members who submitted claims actually got more than their total estimated damages, that is, the price premium they paid for the allegedly longer-lasting batteries, they say.

And the promised donations were an original part of the deal, not a cy pres distribution of left over funds.

Defendant Procter & Gamble, which owns Duracell, adds in its opposition brief that if Frank's challenge to the excessiveness of counsel fees has merit, that means the fee amount requested by class counsel was excessive and Duracell shouldn't have to pay it.

It doesn't mean that class members should get a windfall when they are already fully compensated for their injuries, it says.

Frank says in his reply brief that the parties are trying to direct attention away from where the money actually landed—in the attorneys' laps—to focus on the potential benefits the deal offered overall.

Members that received payments may have been fully compensated but less than one percent of the class actually received relief, he says.

CEI and Goldstein & Russell P.C. represent the objectors.

The Lowe Law Firm LLC, Wiggins Childs Pantazis Fisher Goldfarb LLC and Schubert Jonckheer & Kolbe LLP represent the class.

Jones Day represents the defendants.

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

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