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One of the primary catalysts for class action litigation both in the employment context and outside of it is the availability of attorney&rsquo;s fees.&nbsp; In many cases, plaintiffs can recover their &ldquo;reasonable&rdquo; attorney fees, and predictably fees are frequently a key topic in settlement negotiations. So, what is a &ldquo;reasonable&rdquo; attorney fee award? &nbsp;Many courts permit a percentage of the total recovery in so-called &ldquo;common fund&rdquo; settlements in which the settlement creates a pool of money to pay claims, administrative costs, and attorney fees. In <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2012/07/McKenzie-v.-Federal-Express-Corp.pdf">McKenzie v. Federal Express Corp.pdf</a>., Case No. CV 10-02420 GAF (PLAx) (C.D. Cal. July 2, 2012), the plaintiffs brought a California wage and hour claim against FedEx, contending that its wage statements did not comply with the requirements of California Labor Code 226(a).&nbsp; That provision of the California spells out what the information that a paystub must contain.&nbsp; The trial court granted summary judgment against the defendant, finding that its wage statements were overly confusing, and triggering penalties under California law.&nbsp; The parties settled the case for $8.25 million, and the plaintiffs&rsquo; attorneys sought 1/3 of that amount in attorney fees. According to the court, the plaintiffs&rsquo; attorneys spent slightly over 1,000 hours on the case at rates between $550 and $600 an hour.&nbsp; The total fee on an hourly basis would have been $640,695.&nbsp; One-third of $8.25 million, the amount the attorneys sought, is $2,749,725. The court was generally underwhelmed by the by the difficulty of the case, and found that the amount sought was excessive.&nbsp; It found that a 25% contingency was the &ldquo;benchmark&rdquo; in the Ninth Circuit in common fund cases, and, absent any genuine reason to depart from it, the court trimmed the award from 33% to 25% or to&nbsp; $2,062,500.&nbsp; The award was less than the amount sought, but still came to something in the neighborhood of $1,500 per hour on a case that, at least according to the court&rsquo;s rulings, presented little risk to the attorneys.&nbsp; The common fund theory was developed in equity, but one might genuinely question why it continues to apply in employment context, as well as in many others.&nbsp; Just two years ago, in Purdue v. Kenny A., 130 S. Ct. 1662 (2010), the United States Supreme Court considered a fee award in a class action civil rights case under 42 U.S.C. section 1983. The Kenny A. case involved a class of children in state-sponsored foster care. The court re-affirmed that under federal fee-shifting statutes, a reasonable fee is a lodestar amount, meaning a reasonable hourly rate times a reasonable number of hours.&nbsp; Indeed, according to the Court, there is a &ldquo;strong presumption&rdquo; that the lodestar calculation is the correct one.&nbsp; Only when, according to the Court, there are &ldquo;rare&rdquo; or &ldquo;exceptional&rdquo; circumstances should that amount be increased.&nbsp; One could question whether a common fund theory should be permitted to override what the court described as a &ldquo;strong&rdquo; presumption that the correct figure is essentially a reasonable hourly rate times the time reasonably expended.&nbsp; Even before Purdue, the Second Circuit affirmed a lodestar award in Arbor Hill v. County of Albany, 522 F.3d 182 (2d Cir. 2008). The Bottom Line:&nbsp; Courts will examine attorney fee awards in class action settlements, but 25% will still be the norm in the Ninth Circuit.&nbsp; &nbsp;At some point the question may arise why a rate times hours calculation is not more appropriate.&nbsp; &nbsp; &nbsp;

California District Court Rejects 33% Attorney Fee Award in Class Action Wage and Hour Case Under Common Fund Theory; Finds 25% Appropriate