Source: https://mitchellhamline.edu/law-review/2018/04/05/how-do-lawyers-get-paid-by-a-class-of-plaintiffs-when-there-is-no-fee-shifting-statute/
Timestamp: 2019-04-19 14:17:44+00:00

Document:
How Do Lawyers Get Paid by a Class of Plaintiffs When There is No Fee Shifting Statute?
In most cases, parties are responsible for paying their own costs and fees. Lawyers and their clients typically agree that the client will pay the lawyer on an hourly basis, flat-fee, contingency, or some combination of the three. But when a lawyer represents a class of plaintiffs, individual fee agreements are impractical and often impossible. To address the need for lawyers to be compensated for working on behalf of a plaintiff class, courts have developed rules for apportioning a class-wide recovery to reimburse class counsel for their costs and compensate them for their work.
In the case of In re Life Time Fitness, Inc., the parties had entered into a settlement agreement, on behalf of all class members, with the defendant, Life Time Fitness, Inc., for a total payment of “at least $10 million and no more than $15 million.” The parties could not, however, agree on the amount of attorney’s fees and expenses that would be paid to the lawyers representing the class. Due, in part, to the size of the award conferred on the class, the district court determined that it was appropriate to award class counsel with “28% of the minimum Total Settlement Payment.” A settlement class member, Lindsay Thut, objected to the fee award, and she appealed the district court’s decision. On February 2, 2017, the United States Court of Appeals for the Eighth Circuit affirmed the judgment of the district court in electing to apply the percentage-of-the-benefit method to determine a reasonable award for attorney’s fees. In doing so, the Eighth Circuit affirmed the trial courts’ broad discretion to determine the reasonable amount of attorney’s fees in class action settlements that create a common benefit.
In In re Life Time Fitness, Inc., the Eighth Circuit found that the district court supported its determination to apply the percentage-of-the-benefit method on its extensive review of each parties’ briefs, oral arguments, and similar cases. Similarly, the Eighth Circuit affirmed that the district court’s findings that (1) class counsel spent a significant amount of time and effort on behalf of the Class, (2) class counsel’s efforts led to a fair and efficient settlement, (3) the parties’ settlement saved the court system a great deal of money and time, and (4) the parties’ settlement “furthered the interests of justice” all justified the use of the percentage-of-the-benefit method. Next, the court had to consider whether an award of $2.8 million for attorney’s fees was similarly justified.
The Eighth Circuit affirmed the judgment of the district court in determining that a $2.8 million award for attorney’s fees and expenses was reasonable. The Eighth Circuit affirmed the district court determination based on (1) the average award in other class actions, (2) class counsel’s success at obtaining a “substantial benefit for the class,” (3) the major risk class counsel took on by working on contingency, (4) the difficulty of the legal questions presented, (5) the time and effort the case required, and (5) the fact that only one class member objected. In sum, the Eighth Circuit held that based on the district court’s ample support and thorough analysis, the district court did not abuse its discretion by ordering a $2.8 million award for attorney’s fees.
Similarly, class counsel argued that the district court appropriately considered many of the Johnson factors to arrive at the award of 28% of the minimum settlement benefit. In Johnson v. Georgia Highway Exp., Inc., the Fifth Circuit Court of Appeals laid out twelve factors for courts to consider in determining an attorney’s fee award, and other circuit courts have since adopted them. In In re Life Time Fitness, Inc., the district court considered factors like time and labor required of the attorneys, the substantial benefit conferred on the class, risks posed by litigation, the lack of objections to the merits of the settlement, and whether the award was consistent with awards granted in similar cases. Ultimately, the award for attorney’s fees purely reflected the significant settlement class counsel negotiated on behalf of the class. Moreover, the district court found that class counsel poured many hours into this class action and bore all the financial risks by working on contingency. Therefore, the district court recognized the importance of encouraging good lawyering.
In addition, class counsel offered a few policy arguments. First, attorneys should be encouraged to help judicial efficiency by demonstrating that the parties were able to come to an early settlement by participating in mediation and negotiations, and thus, the parties were able to save the court system time and money. Second, prolonging litigation should not be incentivized. The unfortunate consequence of the lodestar method is that it creates a disincentive for early settlement because the award of attorney’s fees would be based on actual hours spent working on the case, rather than it being based on whatever benefit the attorney is able to procure for his or her client. When the reasonable fee amount is based on the number of hours the lawyers spent working on the case, there is an incentive for attorneys to drag litigation out to rack up more hours. Thus, the percentage-of-the-benefit method serves to “encourage early settlements by not penalizing efficient counsel,” which also encourages good lawyers to continue to take on challenging and complex litigation.
In affirming the judgment of the district court, in In re Life Time Fitness, Inc., the Eighth Circuit again recognized the significant discretion given to the district courts to award attorney’s fees under Rule 23(h) of the Federal Rules of Civil Procedure. When there is no fee-shifting provision in the underlying claim of a common fund case, courts may award attorney’s fees to the prevailing party whose litigation efforts directly benefit others. The percentage of the fund method encourages attorneys to work towards early settlement, and thus, to help judicial efficiency and discourage prolonged litigation.
 See Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991); accord Brian R. Walding, Common Fund Cases: How and When Should Attorneys Be Paid?, 27 J. Legal Prof. 265 (2003).
 Chambers v. NASCO, Inc., 501 U.S at 45.
 In re Life Time Fitness, Inc., Tel. Consumer Prot. Act (TCPA) Litig., No. 14-MD-2564 (JNE/SER), 2015 WL 7737335, at *1 (D. Minn. 2015), aff’d sub nom., 847 F.3d 619 (8th Cir. 2017).
 In re Life Time Fitness, Inc., Tel. Consumer Prot. Act (TCPA) Litig., 847 F.3d 619, 623 (8th Cir. 2017).
 Id. at 622 (citing Fed. R. Civ. P. 23(h)).
 Id. Moreover, the court held that it was not an abuse of discretion for the district court to include fund administration costs of nearly $750,000 in its calculation of the percentage-of-the-benefit attorney’s fee amount. Id.
 Id. (referencing the district court’s language).
 See generally Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714 (5th Cir. 1974), abrogated by Blanchard v. Bergeron, 489 U.S. 87 (1989).
 Id. at 717. These factors include time and labor required, novelty and difficulty of the questions, skill required, attorney’s preclusion of other employment, customary fee, fixed or contingent fee basis, time limitations, amount involved, and results obtained, experience and reputation of attorneys, undesirability of the case, nature and length of the relationship with client, and awards in similar cases. Id.
 See generally In re Xcel Energy, Inc., Sec., Derivative & “ERISA” Litig., 364 F. Supp. 2d 980, 993 (D. Minn. 2005) (citing Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714, 717–19 (5th Cir. 1974), abrogated by Blanchard v. Bergeron, 489 U.S. 87 (1989)).
 In re Life Time Fitness, Inc., 847 F.3d at 623. Also, note that the application of the lodestar method has been found to be burdensome on the courts. See § 1803.1 Attorney Fees—Standards for Assessing, 7B Fed. Prac. & Proc. Civ. § 1803.1 (3d ed. 2017).
 Federal Judicial Center, Manual for Complex Litigation § 14.121 Percentage–Fee Awards, 2004 WL 258734, at 3 (4th ed. 2004).
 In re Life Time Fitness, Inc., 847 F.3d at 623.
Who Is the Real Beneficiary of Your 401(k) Plan – You or Your Employer?

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 1803
 § 1803
 § 14