Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_02-cv-04546/USCOURTS-cand-3_02-cv-04546-6/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TONI YOUNG, individually and on

behalf of all others similarly

situated,

Plaintiffs,

v

POLO RETAIL, LLC, et al, 

Defendants. /

No C-02-4546 VRW

ORDER

As described in this court’s preliminary approval order

of October 25, 2006 (Doc #149), the plaintiff in this class action,

Toni Young, has reached settlement with Polo Retail, LLC, Polo

Ralph Lauren Corp and Ralph Lauren Footwear, Inc. In that order,

the court preliminarily approved the proposed settlement, certified

the settlement class pursuant to FRCP 23, preliminarily approved

the proposed plan of allocation, approved (subject to certain

modifications) a form of notice to be sent to class members and

preliminarily approved the plaintiff’s application for an award of

attorney fees and expenses. Notice having been disseminated to the

class under the terms of the court’s order, see Doc #152, ¶ 9 and

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For the Northern District of California

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Ex 1, the parties now move for final approval of the proposed

settlement and the plan of allocation and plaintiff moves for final

approval of an award of attorney fees and expenses. Doc #150. 

The court held a final settlement approval hearing on

January 25, 2006. For the reasons that follow, the court GRANTS

final approval of the proposed settlements, GRANTS final approval

of the plan of allocation and GRANTS an award of attorney fees and

expenses. The court will discuss each of the above issues in turn. 

Because the court’s previous order addressed many of the issues

presented here for final approval, the court assumes familiarity

with the October 25, 2006, order and the definition of terms

therein.

I

It suffices at present to note that plaintiff filed on

October 1, 2002, a first amended complaint (FAC) in this diversity

case on behalf of herself and a class of current and former

employees of defendants’ retail stores in California. FAC at 3, ¶

7. The FAC alleged that defendants violated several California

laws: (1) the Cartwright Act, Cal Bus & Prof § 16700 et seq, (2)

California’s Unfair Competition Law (UCL), Cal Bus & Prof § 17200

et seq, (3) Cal Labor Code § 2802, (4) Cal Labor Code § 450 and (5)

Cal Labor Code § 201. See FAC 9-14, ¶¶ 33-64. For these alleged

violations, the FAC sought declaratory relief, injunctive relief,

compensatory damages, treble damages (under the Cartwright Act),

punitive or exemplary damages and an award of attorney fees and

costs. See id at 14-15, Prayer.

//

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For the Northern District of California

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The FAC identified two putative classes on whose behalf

plaintiff proposes to prosecute this action: (1) the main class,

defined as “[a]ll persons who are and were employed by [d]efendants

in the State of California and who were required to purchase Ralph

Lauren clothing and accessories as a condition of their employment

at any time” and (2) the Labor Code § 201 sub-class, defined as

“[a]ll persons within [t]he [m]ain [c]lass who have participated in

[d]efendants’ [s]pecial [p]urchase [p]rogram [described below] (and

any predecessor wage-withholding program).” Id at 7, ¶ 26.

Plaintiff alleged that the dress code for employees

working in retail sales for defendants, as implemented by managers

at defendants’ retail stores, constituted an unlawful uniform

policy. According to the FAC, defendants’ retail employee handbook

for 2002 required all sales staff of Polo Ralph Lauren retail

stores to wear Polo Ralph Lauren merchandise while at work. Id at

3, ¶ 8. In furtherance of this policy, plaintiff alleged that

managers employed by defendants subjected plaintiff and other

members of the main class to “improper and demeaning inspections”

and even “strip searches” to ensure compliance with the uniform

policy. Id at 3, ¶ 8, 4, ¶ 10. Plaintiff alleged that defendants’

employees were threatened with termination if they failed to dress

as required. Id at 4, ¶ 11. The core allegation of the FAC is

that members of the main class were required by their employer to

purchase clothing manufactured by their employer on a seasonal

basis. As a practical matter, plaintiff alleged, this policy

forced defendants’ employees to buy high-priced clothing and

accessories directly from defendants.

//

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In addition, plaintiff alleged that defendants’ “PRC

Special Purchase Program” violates state law. Id at 5, ¶ 16. 

Through this program, plaintiff alleges, “[d]efendants ‘advance’

Polo Ralph Lauren products to their employees * * * and then

withhold wages from their employees to pay for the apparel and

accessory purchases.” Id. Although the program offered clothing

to defendants’ employees for purchase at a substantial discount,

plaintiff alleged that “[t]he program is designed to create a

captive, dependent, vulnerable and profitable customer base, i e,

[d]efendants’ sales associates, who must purchase Polo Ralph Lauren

apparel and accessories as a condition of employment.” Id.

On March 18, 2003, defendants filed a notice of pendency

of another action, informing the court that a class action alleging

the same wrongful conduct had been filed in San Francisco County

superior court under the name Esteen, et al v Polo Ralph Lauren

Corp, et al, CGC-03-418019. Doc #11. On June 30, 2003, plaintiff

moved to dismiss the FAC for lack of jurisdiction. Doc #21. The

next day, defendants separately moved for (1) summary adjudication

on plaintiff’s claim under the Cartwright Act and contingent claims

for unfair competition and declaratory relief and (2) judgment on

the pleadings on plaintiff’s remaining claims. Docs ##12, 13, 16. 

On August 1, 2003, the court denied plaintiff’s motion to dismiss. 

Doc #66. On August 11, 2003, defendants moved for sanctions

pursuant to FRCP 11, contending that plaintiff’s counsel

frivolously moved to dismiss the FAC. Doc #74. On August 18,

2003, the court granted defendants’ motion for summary judgment

(Doc #81 at 4-8) but denied defendants’ motion for judgment on the

pleadings on the remaining claims. Id at 8-18.

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On October 27, 2003, the court granted defendants’ motion

for monetary sanctions, noting that plaintiff’s motion to dismiss

“was made in objective bad faith and was therefore frivolous” (Doc

#100 at 25) and that “plaintiff has engaged in a pattern of serving

harassing and vexatious motions and papers, apparently for the

purpose of facilitating the litigation of the claim in state court,

rather than federal court.” Id at 28-29. Accordingly, the court

concluded that “plaintiff’s motion to dismiss violates both the

frivolousness and improper purpose components of Rule 11” and

“reserve[d] the question of the amount of sanctions until the

conclusion of this case.” Id at 29-30. The court observed,

however, that “[i]t is possible that the inconvenience caused to

defendants warrants sanctions in an amount more than the costs and

fees associated with [plaintiff’s motion to dismiss and defendants’

motion for sanctions.]” Id at 30.

On January 12, 2006, plaintiff filed a motion for

preliminary approval of settlement, Doc #114, and the parties

stipulated to amend the FAC so that Roy Esteen, Raeshon Graham and

Janika Goff would be added as named plaintiffs and RL Footwear and

Fashions Outlet of America, Inc would be added as defendants. Doc

#116. On January 31, 2006, the court granted the parties’

stipulation. Doc #123.

 On October 25, 2006, the court granted plaintiff’s motion 

for provisional certification of the settlement class and confirmed

Rosenthal & Company as the claims administrator, Patrick Kitchin,

Daniel Feder and Freeborn & Peters as class counsel and Toni Young

as class representative. Doc #149. The court also set a schedule

for further proceedings. Id. Plaintiff filed a motion for final

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approval of settlement on January 17, 2007. Doc #150. 

II

The court first takes up the issue of the fairness of the

settlement, which, in the aggregate, consists of $1 million in cash

and $500,000 in gift cards for Polo merchandise (which the court

estimated to have a resale value of $400,000). In assessing

whether a settlement is “fair, reasonable and adequate” under FRCP

23(e)(1)(C), this court is to consider several factors:

(1) the strength of the plaintiffs’ case; (2)

the risk, expense, complexity, and likely

duration of further litigation; (3) the risk of

maintaining class action status throughout the

trial; (4) the amount offered in settlement

[presumably in comparison to comparable cases];

(5) the extent of discovery completed and the

stage of the proceedings; (6) the experience

and views of counsel; (7) the presence of a

governmental participant; and (8) the reaction

of class members to the proposed settlement.

Churchill Village v General Electric, 361 F3d 566, 575 (9th Cir

2004) (citing Hanlon v Chrysler Corp, 150 F3d 1011, 1026 (9th Cir

1998)). To these factors, the court adds (9) the procedure by

which the settlements were arrived at, see Manual for Complex

Litigation (Fourth) § 21.6 (2004), and (10) the role taken by the

plaintiff in that process.

Factor (1) somewhat favors settlement: although

plaintiff appears to have a strong legal claim, several issues

render the outcome uncertain. For instance, Polo argued that, even

if its policy violated the “uniform” laws of California, the

overwhelming majority of purchases made by its employees of Polo

merchandise were made on their own accord. To support this

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contention, Polo demonstrated that employee purchasing levels

increased after Polo discontinued its mandatory uniform requirement

in December of 2002. See Doc #147, Ex B. Hence, plaintiff may

have had trouble establishing causation with respect to the amount

of damages in the case. See In re Veritas Software Corp Sec Litig,

2005 US Dist LEXIS 30880 at *14-15 (ND Cal 2005) (challenges in

proving damages and other litigation risks supported approval of

settlement). Additionally, by changing its policies in December

2002, Polo minimized potential damages and precluded plaintiff from

obtaining injunctive relief. 

Because this litigation has terminated before the

commencement of trial preparation, factor (2) also militates in

favor of the settlement. The next step in this case would likely

have been expert discovery and trial preparation. Considerably

more risk, to say nothing of effort and expense, would be entailed

in taking these next steps.

Factor (3) weighs in favor of settlement because class

treatment is generally appropriate in such litigation.

The amount of settlement consideration, which is

addressed in factor (4), supports the settlement. The court will

not rescribe plaintiff’s argument on this point, see Doc #150 at 9-

12, but does note that the settlement here appears to represent an

average to better-than-average recovery in comparison to like

cases. See Doc #136 at 3; Doc #137 at 4-5 (describing settlements

in similar suits concerning wardrobe policy against The Gap, Banana

Republic and Chico’s Fas). Moreover, Polo provided to plaintiff

verified purchase history data in connection with the mediation in

this case. These data enable the court to compare the average

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actual costs incurred by Polo employees to the projected settlement

award, as depicted by the following two tables. 

Retail Store Cash and Gift Card Allocation

Cash: $300,000

Gift Cards: $375,000

Time Worked

(Weeks)

Total Value Actual Damages

(Mean) 

Cash Cash Value of

Card

1-26 $888 $344.40 $440 $448

26-52 $1,332 $689.80 $660 $672

52-104 $1,776 $1,034.20 $880 $896

104-156 $2,220 $2,064.40 $1,100 $1,120

>156 $2,664 $2,759.20 $1,320 $1,134

Factory Outlet Store Cash and Gift Card Allocation

Cash: $100,000

Gift Cards: $125,000

Time Worked

(Weeks)

Total Value Actual Damages

(Mean) 

Cash Cash Value of

Card

1-26 $88.80 $120.540 $44.00 $44.80

26-52 $177.60 $240.14 $88.00 $89.60

52-104 $266.40 $480.24 $132.00 $134.40

104-156 $355.20 $720.34 $176.00 $179.20

>156 $444.00 $960.44 $220.00 $224.00

The primary downside of the proposed settlement is the

use of product vouchers in the settlement award. The federal rules

instruct that “[s]ettlements involving nonmonetary provisions for

class members * * * deserve careful scrutiny to ensure that these

provisions have actual value to the class.” Advisory Committee

note for FRCP 23(2)(C)(h). In its preliminary approval order, the

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court asked “why would former employees, who allegedly were forced

to buy a great deal of unwanted Polo products, desire product

vouchers so that they could purchase even more clothes?” In

response, plaintiff notes that Polo sells a broad array of

merchandise other than clothes, such as sheets, towels, perfume and

paint. Doc #152, Ex 9. More compelling than the availability of

alternative items like Polo brand paint or perfume is the

transferability of the gift cards; this enables class members to

obtain cash — something all class members will find useful.

Within the confines of this litigation, factor (5) also

supports settlement. By the time the settlement was reached, the

litigation had proceeded to a point in which both plaintiff and

defendants “ha[d] a clear view of the strengths and weaknesses of

their cases.” In re Warner Communications Sec Litig, 618 F Supp

735, 745 (SDNY 1985) aff’d 798 F2d 35 (2d Cir 1986). At the time

of the mediation, plaintiff had been litigating the action for more

than four years and had conducted extensive informal investigation

and discovery. As a result, the true value of the class’ claims

was well known. 

The views of counsel, factor (6), support settlement. 

While some courts have indicated that such views are entitled to

deference, see, e g, Williams v Vukovich, 720 F2d 909, 922-23 (6th

Cir 1983), the court is reluctant to put much stock in counsel’s

pronouncements, given their obvious pecuniary interest in seeing

the settlement approved.

Factor (7) does not support settlement, inasmuch as there

is no government participant present.

//

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Factor (8) supports settlement because, as of yet, there

have been no objectors to the settlement. The response to the

notice mailed to 5,112 potential class members on December 22,

2006, has been positive. The claims administrator has not received

any objections or requests for exclusion. See Doc #152, ¶ 9. See

also In re Pain Webber Ltd Partnerships Litig, 171 FRD 104, 126

(SDNY), aff’d 117 F3d 721 (2d Cir 1997).

The court has previously discussed how factor (9)

supports the settlement here. See Doc #149. The extended and

difficult negotiations (with the assistance of an experienced

mediator) culminated in a settlement that was reached in a

procedurally sound manner.

Finally, factor (10) supports the settlement because lead

plaintiff was intimately involved in the settlement negotiations,

see Doc #142 (Young decl), ¶6.

For the reasons discussed above and in its October 25,

2006, order, the court finds that, on balance, the settlement is

fair, reasonable and adequate to the class within the meaning of

FRCP 23(e)(1)(C). Accordingly, the court GRANTS the motion for

final approval of the settlement and allocation plan.

III

Plaintiff seeks an award of attorney fees in the amount

of $438,188.70 to be paid from the settlement fund, which

represents 31% of the settlement amount (accounting for the actual

cash value of the gift cards). Compared to what has been described

as “benchmark” percentage awards in this Circuit, a percentage of

31% is at the high end of the range. As noted elsewhere, the court

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has serious reservations about the adequacy of such a comparison to

test the reasonableness of a fee award. See generally Vaughn R

Walker & Ben Horwich, The Ethical Imperative of a Lodestar

Cross-Check: Judicial Misgivings About “Reasonable Percentage” Fees

in Common Fund Class Actions, 18 Georgetown J Legal Ethics 1453

(2005).

Indeed, the court’s independent research into fee award

practice in other courts convinces it that the best practice is to

assess a percentage fee award not only by using the usual litany of

factors bearing on the reasonableness of a fee, see, e g, Vizcaino

v Microsoft Corp, 290 F3d 1043, 1047-50 (9th Cir 2002), but also by

cross-checking the percentage fee award against a rough fee

computation under the lodestar method. See, e g, In re GMC Pick-Up

Tuck Fuel Tank Prods Liability Litig, 55 F3d 768, 820-21 & n40 (3d

Cir 1995) (Becker, J). See also Vizcaino, 290 F3d at 1050-51

(approving district court’s use of a lodestar cross-check); In re

HPL Techs, Inc, Sec Litig, 366 F Supp 2d 912 (ND Cal 2005).

In contrast to the use of the lodestar method as a

primary tool for setting a fee award, the lodestar cross-check can

be performed with a less exhaustive cataloging and review of

counsel’s hours. See In re Rite Aid Corp Sec Litig, 396 F3d 294,

306 (3d Cir 2005) (“The lodestar cross-check calculation need

entail neither mathematical precision nor bean-counting.”);

Goldberger v Integrated Resources, Inc, 209 F3d 43, 50 (2d Cir

2000) (“Of course, where [the lodestar method is] used as a mere

cross-check, the hours documented by counsel need not be

exhaustively scrutinized.”). All that should be required is sworn

declarations from the attorney(s) in charge of billing records for

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the case attesting to (1) the experience and qualifications of the

attorneys who worked on the case; (2) those attorneys’ customary

billing rates during the pendency of the case; and (3) the hours

reasonably expended (reduced if necessary in the exercise of

professional billing judgment) by those attorneys in prosecuting

the case.

Three figures are salient in a lodestar calculation: (1)

counsel’s reasonable hours, (2) counsel’s reasonable hourly rate

and (3) a multiplier thought to compensate for various factors

(including unusual skill or experience of counsel, or the ex ante

risk of nonrecovery in the litigation). In performing a lodestar

cross-check, however, the multiplier is implied by the ratio of the

proposed percentage fee to the computed lodestar fee. For example,

for a proposed percentage fee of $250,000 and a corresponding

lodestar fee of $100,000, the implied multiplier is 2.5. This

implied multiplier may be assessed for reasonableness. 

Accordingly, the court need only consider counsel’s reasonable

hours and counsel’s reasonable hourly rate in computing the

lodestar.

For hourly rates, the court uses 2005 hourly rates; doing

so simplifies the calculation and accounts for the time value of

money in that counsel has not been paid contemporaneously with

their work in this case. See Vizcaino v Microsoft Corp, 290 F3d

1043, 1051 (9th Cir 2002) (citing Gates v Deukmejian, 987 F2d 1392,

1406 (9th Cir 1992) (“Calculating fees at prevailing rates to

compensate for delay in receipt of payment was within the district

court’s discretion.”); Fischel v Equitable Life Assurance Society,

307 F3d 997 (9th Cir 2002) (citing In re Coordinated Pretrial

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Proceedings in Petroleum Products Antitrust Litigation, 109 F3d

602, 609 (9th Cir 1997)) (district court has discretion to

compensate for delayed payment by either applying current rates or

applying historical rates with a prime rate enhancement). 

The Fogel, Feder and Kitchin declarations provide lineby-line billing reports of the hours expended by counsel in this

litigation. Doc ##135, 136, 137. Upon review of these reports,

the court concludes that counsel spent a reasonable number of hours

on this litigation. One aspect is notable: the bulk of the hours

expended (more than 80%) were devoted by experienced attorneys. 

This captures the importance to this case of settlement

preparations and discussions.

The unusually large fraction of senior attorney time

devoted to settlement is also relevant to counsel’s hourly rate. 

Billing all attorney time at a “blended” hourly rate is probably

appropriate in most lodestar cross-check computations for two

reasons. First, it simplifies calculations. Second, it encourages

economically efficient allocation of work within class counsel’s

firm. But the central role of settlement negotiations in this

litigation -- and the central role of senior attorneys in those

negotiations -- suggest that typical blended hourly rates (perhaps

in the $200 per hour neighborhood) are inappropriate here. Cf

Allen v Bay Area Rapid Transit District, 2003 WL 23333580 at *7 (ND

Cal) (concluding in a civil rights case on which two attorneys

worked that “the court has no basis for employing a reasonable

hourly billing rate in its lodestar calculation either greater or

lower than the approximate local average of $150 discernible from

publicly available data”); Albion Pacific Property Resources, LLC v

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Seligman, 329 F Supp 2d 1163, 1178 (ND Cal 2004) (holding, on a

successful motion to remand, “plaintiff is entitled to an

above-average hourly rate if it can demonstrate that its counsel

were more efficient than reasonably competent counsel would have

been” but that “[p]laintiff has made no such showing” and

accordingly awarding “a reasonable attorney fee at an hourly rate

of $190/hr for attorneys”); Yahoo!, Inc v Net Games, Inc, 329 F

Supp 2d 1179, 1185, 1188 (ND Cal 2004) (explaining that “the

average market rate in the local legal community as a whole is a

better approximation of the hourly rate that would be charged by

reasonably competent counsel than the actual billing rate charged

by a single attorney” and that “[f]ocusing on the requested number

of hours as a whole rather than the requested hourly rates of

individual attorneys produces better attorney fee decisions”).

The court understands that such blended rates typically

depend on the overall billing mix including substantial time

expended in discovery by junior attorneys with relatively low

billings rates. Here, a large fraction of overall time was spent —

and necessarily so, it seems — by senior attorneys in settlement

discussions and preparation. Accordingly, the court concludes that

use of a blended hourly rate is a poor fit for this case.

 It is the practice of the undersigned judge to rely on

official data to determine appropriate hourly rates. One reliable

official source for rates that vary by experience levels is the

Laffey matrix used in the District of Columbia. See http://www.us

doj.gov/usao/dc/Divisions/Civil_Division/Laffey_Matrix_4.html

(citing Laffey v Northwest Airlines, Inc, 572 F Supp 354 (D DC

1983), aff’d in part, rev’d in part on other grounds, 746 F2d 4 (DC

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(126.39 - 115.98) / 115.98 = 0.08976, or about 9%.

15

Cir 1984)).

Under the 2005 Laffey matrix, attorneys with 20 or more

years of experience bill $390/hour; attorneys with 11-19 years of

experience bill $345/hour; attorneys with 8-10 years of experience

bill $280/hour; attorneys with 4-7 years of experience bill

$225/hour; attorneys with 3 or fewer years of experience bill

$185/hour; and paralegals bill $110/hour. These figures are,

however, tailored for the District of Columbia, which has a

somewhat lower cost of living than the San Francisco Bay area (in

which two of plaintiff’s firms operate); the court will adjust

these figures accordingly. The locality pay differentials within

the federal courts -- which, like law firms, employ lawyers and

legal support staff -- approximates this difference. See

http://jnet.ao.dcn/Human_Resources/Pay_Tables/2005_Pay_Tables/

Judiciary_Salary_Plan_Pay_Tables_2005.html. The WashingtonBaltimore area has a +15.98% locality pay differential; the San

Francisco-Oakland-San Jose area has a +26.39% locality pay

differential. Thus, adjusting the Laffey matrix figures upward by

approximately 9% will yield rates appropriate for the Bay area.1

Applying this adjustment and rounding, the court obtains

the following rates: Attorneys with 20 or more years of experience

bill $425/hour; attorneys with 11-19 years of experience bill

$376/hour; attorneys with 8-10 years of experience bill $305/hour;

attorneys with 4-7 years of experience bill $245/hour; attorneys

with 3 or fewer years of experience bill $200/hour; and paralegals

bill $120/hour. Reproducing the table above, but substituting

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these values and recomputing the totals yields:

Attorney Experience 2005 Billing

Rate (per hr)

Total

Hours

Total

lodestar

Kitchin 14 years $376 850.00 $319,600.00

Feder 20 years $425 530.00 $225,250.00

Fogel 21 years $425 173.20 $73,610.00

Albritton 12 years $376 2.90 $1,090.40

Atteberry 3 years $200 12.10 $2,420.00

Benjamin paralegal $120 .90 $108.00

Foster 8 years $360 67.00 $24,120.00

Gandhi 3 years $200 4.40 $880.00

Helton 6 years $245 165.00 $40,425.00

Hwong accountant $120 41.00 $4,920.00

Holt 1 year $200 28.70 $5,740.00

Kirkpatrick paralegal $120 59.70 $7,164.00

Kramer 3 years $200 11.50 $2,300.00

Levy 17 years $376 168.00 $63,168.00

Wise paralegal $120 .40 $48.00

Totals 2130.80 $770,843.40

The court now turns to the lodestar cross-check, which

entails evaluation of the multiplier implied by counsel’s requested

fee (31% percent of a $1.4 million settlement, or $434,188.70) and

counsel’s lodestar fee (computed above as $770,843.40). These data

imply a multiplier of 0.56. This so-called negative multiplier

suggests that, despite exceeding the 25% benchmark used by some

courts, the fees sought here are reasonable based on the time and

effort expended by plaintiff’s counsel. This outcome also shows

that relying on percentages without reference to these other

factors can be, like blind reliance on benchmarks, an “all too

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tempting substitute for the searching assessment that should

properly be performed.” Goldberger, 209 F3d at 52. Here, a

lodestar cross-check supports the fee sought by counsel. 

One issue concerning the settlement amount remains: the

discrepancy between the total settlement and the amount actually

claimed by the class. On February 2, 2007, the court ordered

plaintiff’s counsel to submit a memorandum describing “(1) the

number and percentage of class members who have submitted claim

forms and (2) the total payout those class members will receive.” 

Doc #158. In response, plaintiff’s counsel stated that 949 claims

have been filed by class members, representing 18.6% of the class. 

Doc #159, ¶ 12. Based on the settlement agreement, the total

dollar value of these claims is $459,000 or approximately 48% of

the total settlement fund. Id, ¶ 14. 

The fact that the class will recover about half of the

total settlement gives the court pause. The Ninth Circuit,

however, bars consideration of the class’s actual recovery in

assessing the fee award, drawing on an expansive reading of Boeing

Co v Van Gemert, 444 US 472 (1980). See Williams v MGM-Pathe

Communications Co, 129 F3d 1026 (ruling that a district court

abused its discretion in basing attorney fee award on actual

distribution to class). But see Strong v BellSouth Telecomms, Inc,

137 F3d 844, 852 (5th Cir 1998) (finding no abuse of discretion

where district court based fee award on actual payout rather than

total fund). It is worth noting that the Supreme Court appears to

be poised to revisit Boeing. See International Precious Metals

Corp v Waters, 530 US 1223 (2000) (O’Connor, J) (denying writ of

certiorari but noting that fund settlements that allow attorney

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fees to be based upon the total fund may “potentially undermine the

underlying purposes of class actions by providing defendants with a

powerful means to enticing class counsel to settle lawsuits in a

manner detrimental to the class” and, in turn, “could encourage the

filing of needless lawsuits”). Although the court shares Justice

O’Connor’s concerns, it follows Ninth Circuit case law and declines

to reduce the award of attorney fees based on the actual

distribution to class. Accordingly, the court awards plaintiff’s

counsel expenses of $65,811.30 and fees of $438,188.70.

IV

Finally, of course, remains the issue of sanctions, which

the court granted on October 27, 2003. Doc #100. In its order,

the court concluded that plaintiff’s motion to dismiss “was made in

objective bad faith and was therefore frivolous” (Doc #100 at 25)

and that “plaintiff has engaged in a pattern of serving harassing

and vexatious motions and papers, apparently for the purpose of

facilitating the litigation of the claim in state court, rather

than federal court.” Id at 28-29. Accordingly, the court

determined that “plaintiff’s motion to dismiss violates both the

frivolousness and improper purpose components of Rule 11” and

“reserve[d] the question of the amount of sanctions until the

conclusion of this case.” Id at 29-30. 

After the court entered its October 27, 2003, order, the

parties entered into a settlement agreement. As part of the

settlement, defendants agreed to waive the claim of sanctions

against plaintiff and her counsel. Doc #115, ¶ 6(b). This

agreement does not, however, let plaintiff’s counsel off the hook.

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Monetary sanctions under Rule 11 aim to deter rather than

compensate. Hence, permitting parties to contract around the

court’s issuance of sanctions would blunt the rule’s deterring

force. 

Turning to the question of the amount that should be

awarded, the court’s order provided the following guidance: 

The court * * * reserves the question of the amount

of sanctions until the conclusion of this case. 

Although the court herein decides that sanctions of

some amount are indeed warranted, it nevertheless

finds that the exact amount of those sanctions

should not be determined until more is known about

the long-term impact of plaintiff’s unwarranted

filings on the case. It is possible that the

inconvenience caused to defendants warrants

sanctions in an amount more than the costs and fees

associated with the two motions. It is also

possible that the impact of the improper filing on

the further proceedings in the case will be

minimal. In any event, the question is best

evaluated at the close of the case, and the court

hereby RESERVES the question until then.

Doc #100 at 30. 

Rule 11 deters by forcing counsel to bear the social

costs of their actions. Here, those costs include expenses

needlessly incurred by defendants in litigating plaintiff’s

frivolous motion; the court will fashion a sanction on this basis. 

The court does not suggest, however, that unnecessary legal fees

are the only social consequences of carelessly invoking the

judicial process.

With the benefit of defendants’ submissions, the court

turns to quantifying the burden that was unjustifiably imposed upon

defendants by the filing of frivolous motion. Defendants seek

compensation for 27.2 hours of attorney time in connection with

plaintiff’s motion, including researching, drafting and revising

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defendants’ opposition to plaintiff’s motion. Doc #76 (Miller

decl), ¶ 2; Doc #77 (Frazier decl), ¶ 7. Defendants also seek

compensation for 10.5 attorney hours in preparing their motion for

sanctions and its accompanying declarations. Id. The court finds

the claimed time reasonable. Defendants’ counsel’s work product

was at least of the quality of a reasonably skilled attorney, and

the number of hours expended are reasonable in light of the fairly

simple -- but not utterly trivial -- nature of the papers that

defendants needed to file. 

The court further finds the claimed rates of $325/hour

for Mr Miller and $240/hour for Mr Frazier reasonable because they

comport with adjusted rates from the Laffey matrix set forth above. 

In particular, the rate for Miller (with 22 years of experience) is

lower than the Laffey amount and Frazier’s rate is equal to the

amount projected for a mid-level associate. Accordingly, the court

determines that the requested amount, $11,011.50, is a reasonable

sanction for plaintiff’s frivolous motion. Given the unitary

nature of counsel’s conduct in this case, they are jointly and

severally liable for the full amount of the Rule 11 sanctions. 

Kona Enterprises, Inc v Estate of Bishop, 229 F3d 877, 888-89 (9th

Cir 2000); see also Pekarsky v Ariyoshi, 575 F Supp 673, 676-77 (D

Hawaii 1983) (Schwarzer, J). Finally, the court determines that

the award of sanctions should be paid to defendants, as plaintiff’s

frivolous motion caused “needless increase in the cost of

litigation.” See FRCP 11(b)(1); See also 11(c)(1)(A) (“If

warranted, the court may award to the party prevailing on the

motion the reasonable expenses and attorney[] fees incurred”)

//

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V

The court GRANTS the motion for final approval of the

settlements and plan of allocation. Doc ##135, 146. The court

also GRANTS plaintiff’s motion for an award of attorney fees and

costs. Out of the settlement fund, the court awards plaintiff’s

counsel expenses of $65,811.30 and fees of $438,188.70. 

Additionally, pursuant to Rule 11, plaintiff’s counsel are ORDERED

to pay sanctions in the amount of $11,011.50 to defendants on or

before May 1, 2007. The clerk is DIRECTED to close the files and

terminate all motions. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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