Case Name: David KUHNLEIN, et al., Appellants, v. DEPARTMENT OF REVENUE, et al., Appellees
Court: Florida Supreme Court
Jurisdiction: Florida
Decision Date: 1995-10-12
Citations: 662 So. 2d 309
Docket Number: No. 85618
Parties: David KUHNLEIN, et al., Appellants, v. DEPARTMENT OF REVENUE, et al., Appellees.
Judges: GRIMES, C.J., and OVERTON and ANSTEAD, JJ., concur.
Reporter: Southern Reporter, Second Series
Volume: 662
Pages: 309–322

Head Matter:
David KUHNLEIN, et al., Appellants, v. DEPARTMENT OF REVENUE, et al., Appellees.
No. 85618.
Supreme Court of Florida.
Oct. 12, 1995.
Christopher K. Kay and Michael J. Beau-dine of Foley & Lardner, Orlando; W. Gordon Dobie, Bruce R. Barun and Jennifer J. Demmon of Winston & Strawn, Chicago, IL; and Raymond Ehrlich of Holland & Knight, Jacksonville, for Appellants on behalf of Class Plaintiffs.
Robert A. Butterworth, Attorney General; Eric J. Taylor, Assistant Attorney General, Tax Section, and George L. Waas, Assistant Attorney General, Civil Section, Tallahassee, for Appellees on behalf of the Department of Revenue.
Andrew Kayton, Legal Director, Miami, Amicus Curiae on behalf of American Civil Liberties Union Foundation of Florida, Inc.

Opinion:
WELLS, Justice.
We have on appeal a final order on class counsel's petition for fees and expenses and a final order on class counsel's motion for distribution of residual funds. The trial court held a hearing and issued orders on these motions within the time prescribed by our decision in Kuhnlein v. Department of Revenue, 659 So.2d 248 (Fla.1995) (Kuhnlein II). In that case we decided the issues pertaining to interest owed to class members and relinquished jurisdiction to the trial court to consider applications for and enter orders on attorney fees and costs. We also reserved jurisdiction to review the court's orders on fees and costs if any party petitioned this Court for review within ten days of their entry. Additionally, we reserved jurisdiction to take such further action as necessary to implement the circuit court's refund plan. We therefore have jurisdiction pursuant to article V, section 3(b)(5) of the Florida Constitution based upon our reservation of jurisdiction in Kuhnlein II.
In a common-fund case like the one before us, the defendant pays a specified sum for the benefit of class members. The class attorneys can then petition the court to obtain fees from the fund although contingency fee agreements were entered by only a small number of class members. In their petition for fees and expenses in the instant case, class plaintiffs' counsel requested an award of fees based on a percentage of the entire common fund created when we held section 319.231, Florida Statutes (1991), violative of the Commerce Clause of the United States Constitution. See Department of Revenue v. Kuhnlein, 646 So.2d 717 (Fla.1994) (Kuhnlein I), clarified by Department of Revenue v. Kuhnlein, 646 So.2d 717 (Fla.1994), cert. denied, - U.S. -, 115 S.Ct. 2608, 132 L.Ed.2d 853 (1995). Class counsel further alleged that 14 percent of the common fund provided for a reasonable fee. The Attorney General, on behalf of the Department of Rev enue, argued that class counsel's request for fees failed to take into account the hours reasonably expended as well as other lodestar factors that should be considered in awarding fees from a common fund.
The trial court found that the percentage method of calculating fees was appropriate and awarded class counsel 10 percent of the common fund, which was estimated at $188.1 million. The court held that this fee was reasonable in light of the risks involved in the case and the magnitude of the benefit counsel conferred on the class. The court also determined that the factors enumerated in Camden I Condominium Ass'n v. Dunkle, 946 F.2d 768 (11th Cir.1991), demonstrated that 10 percent was an appropriate fee for the results achieved.
In a separate order responding to class counsel's motion for distribution of residual funds, the court directed that unclaimed fees be divided among class members in a second distribution to offset or partially offset the fees and costs awarded to class counsel. Class counsel would then receive the remaining funds up to 10 percent of the entire residual fund. Finally, the court ordered that the State receive any remaining funds.
The Attorney General timely filed a petition with this Court for review of the trial court's orders awarding class counsel attorney fees and funds not claimed by absent class members. In response, class plaintiffs' counsel filed a motion to dismiss the State's appeal. As grounds for dismissal, class counsel alleged that the issues presented did not merit review by this Court, the need to exper dite the refund process, and the State's lack of standing to contest the reasonableness of the attorney fees awarded. We reject class counsel's grounds for dismissal because we expressly provided for our review of these orders in Kuhnlein II.
Furthermore, as the trial court did, we reject class counsel's contention that the State, through the Attorney General, lacks standing in this case. In class actions that result in the creation of a common fund the interest of class counsel in obtaining fees is adverse to interests of the class. See Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 613 (6th Cir.1993). Class counsel's role in these eases essentially changes from one of fiduciary for the class to claimant against the clients' fund created for the clients' benefit. Court Awarded Attorney Fees, Report of the Third Circuit Task Force, 108 F.R.D. 237 (1985). Accordingly, class counsel is not in a position to effectively represent the interests of the class in respect to the assessment of attorney fees and costs.
It is self-evident, however, that the State has an interest in protecting its citizens from excessive fees or costs which would diminish the amount of the tax refund they are entitled to receive from the common fund in this case. We conclude that this interest provides an adequate basis for standing and that the Attorney General is the proper representative of that interest. See Art. IV, § 4, Fla. Const.; § 16.01(4), Fla.Stat. (1993).
The question we must now answer is whether the trial court erred in this common-fund case by awarding fees using a percentage approach rather than the lodestar approach which must be applied in statutory fee-shifting cases pursuant to our decisions in Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla.1985), and Standard Guaranty Insurance Go. v. Quanstrom, 555 So.2d 828 (Fla.1990). We find, as we did in In re Estate of Platt, 586 So.2d 328 (Fla.1991), that the decision as to which approach is to be used is an issue of law. We conclude that the court made an error of law in applying the percentage rather than the lodestar approach and reverse the attorney-fee award.
In the instant case, the trial court found that to determine a reasonable fee in common-fund cases, courts apply the "percentage" approach, in which a reasonable fee is calculated as a percentage of the common fund. The percentage is first chosen by the trial court and then applied to the fund in order to calculate the fees to be awarded. In support of this conclusion, the trial court cited to Camden I, in which the United States Court of Appeals for the Eleventh Circuit mandated the percentage approach in all common-fund cases. 946 F.2d at 774. We note, however, that the Camden I approach is not uniformly accepted in the federal courts. Rather, a number of federal courts continue to use the federal lodestar analysis to determine the amount of attorney fees which are reasonable under the circumstances of a particular ease. See Florin v. Nationsbank of Georgia, N.A., 34 F.3d 560 (7th Cir.1994); Rawlings, 9 F.3d at 517; Longden v. Sunderman, 979 F.2d 1095 (5th Cir.1992); Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir.1991); Florida v. Dunne, 915 F.2d 542 (9th Cir.1990); In re Agent Orange Product Liability Litigation, 818 F.2d 226 (2d Cir.1987); City of Detroit v. Grinnell Corp., 560 F.2d 1093 (2d Cir.1977).
We have carefully considered the reasons stated by the Camden I court for adopting the percentage approach. We find, however, that our decisions in Rowe and Quan-strom, which employ the factors enumerated in the Florida Bar Code of Professional Responsibility as an initial basis for determining reasonable attorney fees, provide a more consistent and objective structure for determining reasonable fees in common-fund as well as fee-shifting cases. As we stated in Platt, " '[rjeasonable' also means that the fee should be consistent with other fees set in similar cases." 586 So.2d at 336.
We conclude that objectivity and consistency in setting fees are best achieved by beginning the attorney-fee analysis with a lodestar amount based on the hours expended on legal services and rates charged for similar services. As we stated in Rowe:
[Pjartially because of the substantial increase in the number of matters in which courts have been directed by statute to set attorney fees, great concern has been focused on a perceived lack of objectivity and uniformity in court-determined reasonable attorney fees. Some time ago, this Court' recognized the impact of attorneys' fees on the credibility of the court system and the legal profession when we stated:
There is but little analogy between the elements that control the determination' of a lawyer's fee and those which determine the compensation of skilled craftsmen in other fields. Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that. It brings the court into disrepute and destroys its power to perform adequately the function of its creation.
Baruch v. Giblin, 122 Fla. 59, 63, 164 So. 831, 833 (1935).
Although the amount of an attorney fee award must be determined on the facts of each case, we believe that it is incumbent upon this Court to articulate specific guidelines to aid trial judges in the setting of attorney fees. We find the federal lodestar approach . provides a suitable foundation for an objective structure.
Rowe, 472 So.2d at 1149-50. We rely on time expenditures multiplied by a customary rate as a base fundamental value because we conclude that reasonableness is directly related to how the market values legal services for which clients negotiate rates and scrutinize the hours expended at those rates. Additionally, the lodestar amount provides the court with an evidentiary basis to use in evaluating what is a reasonable fee.
On the other hand, to begin the assessment by arbitrarily picking a percentage amount without any reliance on a cognizable structure invites decisions that are nonobjective and inconsistent. What constitutes a reasonable percentage may differ from one judge to another depending on each judge's predilections, background, and geographical location in the state.
We recognize that Camden I states that the reasonableness of the percentage is to be evaluated on the basis of the factors used in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974). We also recognize that those factors are similar to the factors enumerated in rule 4-1.5 of the Rules Regulating the Florida Bar. We conclude, however, that the approach adopted in Camden I lends itself to fee-setting in which a percentage may be arbitrarily chosen and thereafter justified by a boiler-plate recitation of the factors enumerated in that decision.
Class counsel contend that the lodestar approach is not appropriate in common fund eases because it places too heavy an emphasis on the time expended by counsel in the case and insufficient emphasis on the contingency risk and the results obtained for the class. This contention is supported by the decision in Camden I as well as several other federal decisions which have adopted the percentage approach. These courts have concluded that a common fund is itself the measure of success and is thus the benchmark by which a reasonable fee should be measured. See, e.g., Camden I, 946 F.2d at 774; Swedish Hasp. Corp. v. Shalala, 1 F.3d 1261, 1269 (D.C.Cir.1993). We reject this reasoning because we believe that the contingency risk factor, the results obtained, and the other lodestar factors are more equitably taken into consideration by accepting or adjusting the base lodestar calculation and by permitting the use of multipliers. Multipliers were specifically designed to enhance the amount of attorney fees awarded based on the contingency risk factor and the results obtained. See Rowe, 472 So.2d at 1151. Additionally, multipliers which are capped and evaluated on the grounds set forth in Quanstrom ensure that the enhancement is not so substantial that the fees become excessive and thereby unreasonable.
Class counsel and the trial court in its order awarding fees both rely on Tenney v. City of Miami Beach, 152 Fla. 126, 11 So.2d 188 (Fla.1942), as providing precedential support for the contention that in common-fund cases in Florida a percentage approach should be used to determine the amount of fees class counsel receives from the common fund. Specifically, class counsel alleges that as in Tenney, a percentage approach is appropriate because the named parties agreed to pay attorney fees on a percentage basis.
In Tenney, this Court recognized those who received the benefit of the creation of a common fund through a class action should share equitably in the burden of paying attorney fees and costs necessary to the creation of the common fund. Id. at 190. To insure that each class member paid his or her equitable share of the fees, the Court approved the payment of the amount of the attorney fees based upon a percentage contingency fee contract which the court stated was "agreed to freely and voluntarily by those who benefited." Id. at 190. In that class action, however, unlike the class action presently before us, there were 232 claimants, of which 170 contracted on a contingent basis for one-third of the amount recovered. The Tenney Court found that there was ample evidence to support the reasonableness of the contract relative to those who executed the contract. Id. at 190. The case was remanded for the chancellor to determine whether that contract was also reasonable for the 62 claimants who had not agreed to it. Id. at 193 (Chapman, J., concurring specially). In light of our more recent decisions in Rowe and Quanstrom, we find that Tenney only remains viable for the generally accepted rule cited by the trial court that under the "common fund doctrine" lawyers who recover a common fund for the benefit of others are entitled to reasonable attorney fees from the fund.
Furthermore, there is a compelling similarity between common-fund and fee-shifting eases which causes us to disagree with counsel's contention that the fee agreement between class counsel and the named parties should control the approach used to set a reasonable fee. In both cases the court is setting a fee that binds individuals or entities who have not entered a fee agreement. In fee-shifting cases the party paying the fee has not participated in the fee agreement between the prevailing party and that party's attorney. Rowe, 472 So.2d at 1151. Consequently, the fee agreement does not control the amount of the fee. Id. We noted in Rowe that " '[w]ere the rule otherwise, courts would find themselves as instruments of enforcement, as against third parties, of excessive fee contracts.'" Id. at 1151 (quoting Trustees of Cameron-Brown Inv. Group v. Tavormina, 385 So.2d 728 (Fla. 3d DCA 1980)).
Similarly, in common-fund cases brought pursuant to the classification procedure of Florida Rule of Civil Procedure 1.220, most class members do not enter into written contingency fee agreements with class counsel. As in this case, contingency fee agreements in common-fund cases generally are entered only by the named plaintiffs who are a small portion of the class. Consequently, if the court allowed the written fee agreements to control the fee to be awarded from the common fund, it would be enforcing fee agreements to which the vast majority of class members did not consent. Thus, the fact that class counsel and the named parties agreed that attorney fees would be calculated on a percentage basis cannot control what approach the court should use in exercising its inherent power to determine reasonable attorney fees to be paid from the common fund.
Although we conclude that the trial judge erroneously used the percentage approach, we find that the record supplies a sufficient basis to determine a reasonable fee using the lodestar approach. At the hearing before the trial court, class counsel submitted de tailed time records reflecting the total number of hours expended on the case. Further, evidence was submitted as to the usual hourly rates charged by class counsel's firms for those hours. The State presented no evidence upon which it could be concluded that the hours expended were not reasonably necessary or that the hourly rates were not usual and customary for the services rendered. Accordingly, based on the circumstances of this case and the record before us, we accept $1,295,493.50 as the lodestar figure. We believe that the full acceptance of class counsel's hours and rates is justified on the basis of an evaluation of all the factors enumerated in rule 4-1.5 of the Rules Regulating the Florida Bar except for the contingency risk factor and the results obtained for the benefit of the class. These two factors are accounted for in determining the applicability and amount of a multiplier.
We have considered whether a multiplier is needed in this case to give effect to the contingency factor and in recognition of the substantial benefit class counsel conferred upon the class members. First, we find that the instant case presents another distinct class of attorney-fee cases, in addition to those presented in Quanstrom, in which a multiplier is appropriate. Next, we set the maximum multiplier available in this common-fund category of cases at 5. By allowing for this increased maximum multiplier, we recognize that it is appropriate in common-fund eases, as differentiated from fee-shifting cases where the multiplier is capped at a 2.5 multiplier pursuant to Quan-strom, to place greater emphasis on the monetary results achieved. Furthermore, a multiplier which increases fees to five times the accepted hourly rate is sufficient to alleviate the contingency risk factor involved and attract high level counsel to common fund eases while producing a fee which remains within the bounds of reasonableness. We emphasize that 5 is a maximum multiplier, and what multiplier, if any, applies depends on the particular case. Based upon the record before us, we conclude that class counsel in this case is entitled to the maximum multiplier available.
Accordingly, we determine that the reasonable attorney fees are $6,477,467.50. This amount plus cost in the amount of $73,529.70 is to be deducted from the total amount of the common fund. The fees and costs as we have calculated them shall be paid as soon as practical to class counsel and in no event should the payment be made more than thirty days from the date this opinion is filed. The amount of the common fund minus the attorneys fees and cost shall then be paid to class members in accord with the plan for distribution approved by the trial court in its order on refund plan dated July 31,1995, and its order amending refund plan and approving press release dated August 16, 1995. The State is ordered to pay to class counsel the costs taxed by the trial court's cost judgment dated July 13, 1995, and to pay all further costs of administration of the refund.
Finally, we reverse in part the trial court's order on class counsel's motion for distribution of residual funds. We affirm only the portion of the order directing the use of the residual funds for a second distribution to partially or wholly offset the amount paid by each class member for attorney fees and costs. Any residual funds remaining after the second distribution to class members shall become part of the State's general fund.
It is so ordered.
GRIMES, C.J., and OVERTON and ANSTEAD, JJ., concur.
KOGAN, J., concurs in part and dissents in part with an opinion, in which SHAW, J., concurs.
HARDING, J., concurs in part and dissents in part with an opinion.
NO MOTION FOR REHEARING WILL BE ALLOWED.
. In addition to 10 percent of the common fund, the court awarded counsel $73,529.70 in costs and expenses.
. The factors enumerated in Camden I are the same factors provided for in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974).
.Rowe and Quanstrom are fee-shifting cases. In a fee-shifting case the adverse party is required by statute or contract to pay attorney fees of the prevailing party. Fee-shifting cases differ from common-fund cases in that attorney fees in common-fund cases are paid out of the common fund rather than by the adverse party.
. Because we reject the percentage approach as a matter of law, our review of this case is not limited by the abuse-of-discretion standard. The abuse-of-discretion standard would have applied if we had accepted the percentage approach and we were deciding whether the percentage picked by the trial judge was within the boundaries of reasonableness.
. Rowe, 472 So.2d at 1150; Quanstrom, 555 So.2d at 830 and n. 3. These factors are now located in rule 4-1.5(b) and (c) of the Rules Regulating the Florida Bar;
(b) Factors to Be Considered in Determining Reasonable Fee. Factors to be considered as guides in determining a reasonable fee include;
(1) the time and labor required, the novelty, complexity, and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee, or rate of fee, customarily charged in the locality for legal services of a comparable or similar nature;
(4) the significance of, or amount involved in, the subject matter of the representation, the responsibility involved in the representation, and the results obtained;
(5) the time limitations imposed by the client or by the circumstances and, as between attorney and client, any additional or special time demands or requests of the attorney by the client;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, diligence, and ability of the lawyer or lawyers performing the service and the skill, expertise, or efficiency of effort reflected in the actual providing of such services; and
(8) whether the fee is fixed or contingent, and, if fixed as to amount or rate, then whether the client's ability to pay rested to any significant degree on the outcome of the representation.
(c) Consideration of All Factors. In determining a reasonable fee, the time devoted to the representation and customary rate of fee need not be the sole or controlling factors. All factors set forth in this rule should be considered, and may be applied, in justification of a fee higher or lower than that which would result from the application of only the time and rate factors.
. We note that under the lodestar approach, a court can also find that an enhanced or a diminished fee is reasonable on the basis of the results obtained or the circumstances of the particular case. There may be circumstances in which the attorney fees would so substantially reduce the fund that the fees would have to be equitably diminished.
. Neither Rowe, Quanstrom, nor this decision limits the enforcement of fee agreements negotiated between counsel and clients. See Searcy, Denney, Scarola, Barnhart & Shipley, P.A. v. Poletz, 652 So.2d 366, 368-69 (Fla.1995). These contracts are regulated by rule 4-1.5 of the Rules Regulating The Florida Bar.
. 555 So.2d at 834.
. Accordingly, we find that in all common-fund cases in which attorney fees have not been assessed by a trial court using the lodestar approach as of the date of this opinion and in which a multiplier is determined to be appropriate, the maximum multiplier can be as much as 5. The criteria set forth in Quanstrom are to be used to determine initially whether a multiplier is needed and thereafter to set the amount of the multiplier. See Quanstrom, 555 So.2d at 834.
.The total amount then to be paid in fees and costs from the common fund is $6,550,997.20.