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9th Cir. Affirms 25% Reduction in Plaintiff’s Attorneys Fee Award

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court’s order reducing the amount of attorneys’ fees requested by class counsel by cutting the number of hours expended by class counsel by 25%.

In so ruling, the Ninth Circuit concluded that the trial court’s order explanation of the lodestar calculation it conducted and application of the percentage-of-recovery analysis as a cross-check for reasonableness adequately explained its reasoning and did not abuse its discretion.

A copy of the opinion in Johnson v. Metro-Goldwyn-Mayer Studios is available at:  Link to Opinion.

A plaintiff consumer filed a putative class action lawsuit against an entertainment studio and distributor (“defendants”) who marketed James Bond DVD and Blu-ray boxsets purportedly containing “all the Bond films,” but did not include two such films.  The suit alleged violations of Washington’s Consumer Protection Act, breach of express warranties, and breach of the implied warranty of merchantability on behalf of a nationwide class of consumers.

The parties settled, and as part of the settlement, the defendants agreed to pay attorneys’ fees and costs to class counsel as determined by the trial court and in an amount not exceeding $350,000 and an incentive award of $5,000 to the named class plaintiff. 

The plaintiff moved, unopposed, for fees and costs and an incentive award consistent with the agreement.  However, the trial court awarded only $184,655 in attorneys’ fees after conducting its own lodestar calculation, and applying a 25% across the board cut to class counsel’s requested hours to “reflect a more reasonable representation of the work required.” Class counsel appealed.

Reviewing an award of attorneys’ fees, an appellate court’s abuse of discretion standard affirms a trial court’s award unless the trial court “applied the wrong legal standard or its findings were illogical, implausible, or without support in the record.” Gonzalez v. City of Maywood, 729 F.3d 1196, 1201–02 (9th Cir. 2013) (quoting v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011)). 

To determine the reasonableness of the award at issue, the Ninth Circuit cited its ruling in In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011), which reversed and remanded the fee award where the trial court provided “(1) no explicit calculation of a reasonable lodestar amount; (2) no comparison between the settlement’s attorneys’ fees award and the benefit to the class or degree of success in the litigation; and (3) no comparison between the lodestar amount and a reasonable percentage award.”  In re Bluetooth, 654 F.3d at 943.

On appeal, the plaintiff argued that the entire award was arbitrary because the trial court failed to provide an explanation as to why it chose a 25% cut, primarily relying on the Ninth Circuit’s opinion in Gonzalez v. City of Maywood, 729 F.3d 1196 (9th Cir. 2013), which reversed and remanded the trial court’s reduced fee award in a civil rights case, where the lodestar method is typically used.

Following the procedures it established in In re Bluetooth, the Ninth Circuit observed that in this case, the trial court provided an explicit lodestar calculation in determining the reasonable hourly rate and number of reasonable hours expended by class counsel and six reasons why a 25% reduction was appropriate. 

In addition, the Ninth Circuit noted, the trial court performed a percentage-of-recovery analysis as a cross-check, and observed that its lodestar calculation ($184,665) exceeded its 25% benchmark for percentage-of-recovery awards of the benefit achieved for the class ($138,600).  See In re Bluetooth, 654 F.3d at 945 quoting In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 n.40 (3d Cir. 1995) (percentage-of-recovery method can be used to ensure that “counsel’s fee does not dwarf class recovery.”). 

Because the trial court provided a clear explanation for its lodestar calculation and reasonableness cross-check allowing the appellate court to determine that the fee award was reasonable based on the record before it, its case law required nothing more. See, e.g., McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009) (“[The district court] must explain how it arrived at its determination with sufficient specificity to permit an appellate court to determine whether the district court abused its discretion in the way the analysis was undertaken.”).

The Ninth Circuit further distinguished the case at bar with its opinion in Gonzalez, noting that the trial court in that case provided an explanation that seemed arbitrary and “irreconcilable” with some of its conclusions,  Gonzalez, 729 F.3d 1196 at 1204-1205 (9th Cir. 2013).  By contrast here, the trial court provided a detailed explanation of the lodestar calculation and a percentage cross-check that demonstrated that even with the 25% cut to class counsel’s hours, the fee award was higher than the percentage-of-recovery benchmark amount of 25% of the recovery to the class.

Accordingly, the trial court’s substantially reduced attorneys’ fee award was affirmed.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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