Opinion ID: 2711586
Heading Depth: 3
Heading Rank: 2

Heading: Methodology in This Case

Text: This court has never attempted to assess the appropriate methodology to be applied to common fund and statutory fee-shifting cases generally. Nor have the parties done so in this case. Rather, as they did at trial and on appeal to the Court of Appeals, the parties have assumed that the lodestar methodology is the appropriate one to use for both the statutory fee-shifting and the common-fund awards; likewise, the trial court and the Court of Appeals, without discussing the correct methodology, used the lodestar approach for both the common fund and fee-shifting awards. Strawn, however, invites something of a blended approach through his arguments to this court. In particular, in assessing the reasonableness of the lodestar fee and the adjustments to it that he proposes, Strawn compares the overall fee that he requests to the amount that his attorneys would have received under his contingent fee agreement with them, which was based on a percentage of the damages awarded. Cite as 353 Or 210 (2013) 221 The lodestar approach that the parties have used is at least a permissible one under the statutes involved.7 Because the parties have structured their principal arguments around that approach, we begin there as well. We also conclude, however, that a percent-of-fund methodology is a helpful cross-check on the lodestar calculation, for two reasons. First, this case is a “hybrid” one—that is, it is a class action that resulted in a significant common-fund award, even though it was brought at least partially pursuant to a statute authorizing a fee-shifting award.8 A percent-of-fund methodology fits with the nature of the relief that plaintiff and the class recovered in this case. See Strunk, 343 Or at 246 (in cases that result in a common fund recovery, the “fund itself is a primary measure of success”). 7 Neither a lodestar or a percent-of-fund approach is mandated by the statutes involved, although both are potentially permissible. ORS 20.075 sets out criteria to assess the reasonableness of all court-awarded attorney fees. That statute does not specify any particular methodology for the award, but it does instruct the court to consider the amount of time required by the case, given the difficulty of the questions involved and the skill necessary. ORS 20.075(2)(a). The emphasis is expressly on the time required by the issues involved, not the time actually spent; the lodestar method initially measures the latter. Actual time spent, however, is at least relevant to assessing the time required. At the same time, the statute also looks to the “amount involved in the controversy and the results obtained,” ORS 20.075(2)(d), which the percent-of-fund approach more directly measures in a common fund case or other case involving a significant monetary award. We therefore conclude that the statute, although not mandating either a lodestar or percent-of-fund methodology, does not foreclose either. The same is true of the provision governing fee awards in class actions. Among other factors, the applicable rule explicitly considers “[t]he time and effort expended by the attorney,” as well as the “[r]esults achieved and benefits conferred upon the class,” ORCP 32 (M)(1)(e)(i) and (ii). The rule suggests that either or both a lodestar and percent-of-fund method of fee calculation can be appropriate, depending on which methodology best arrives at a fair award given the circumstances of the particular case. 8 Worth noting in that regard is that ORS 742.061(1) applies to actions brought on insurance policies of any kind. The statute thus provides for an award of attorney fees in essentially private contractual disputes whether they involve a modest loss to an automobile owner, a massive loss to a corporation, or a dispute between insurers. Unlike many statutorily authorized fee-shifting awards, the award authorized by ORS 742.061(1) is not designed to ensure the availability of counsel to pursue socially desirable policies in cases that counsel might otherwise not be willing to pursue. The statute instead serves the different purpose of encouraging settlement of insurance claims without litigation. Compare Chalmers v. Oregon Auto. Ins. Co., 263 Or 449, 452, 502 P2d 1378 (1972) (identifying that as the purpose for the statutory predecessor to ORS 742.061(1)) with Honeywell v. Sterling Furniture Co., 310 Or 206, 213, 797 P2d 1019 (1990) (fees available in unlawful trade practices cases assure that wronged consumers can obtain counsel to prosecute claims that would otherwise be impractical to bring). 222 Strawn v. Farmers Ins. Co. Second, plaintiffs prevailed on two independent, if related, types of claims: contract-based and fraud. Both are fee-generating claims, but each looks to a different source for the fee. As we have already described, for the contract claims, Strawn’s attorneys are entitled to a fee-shifting award to be paid by Farmers. For the fraud claim and the punitive damages component of the case, the attorney fee award comes from the common fund itself. In a case involving both a fee-shifting award and a common-fund award, counsel appropriately should be paid reasonable fees from both authorized sources to further the purpose of each award; conversely, “allowing recovery under only one partially thwarts the object of the other.” Honeywell v. Sterling Furniture Co., 310 Or 206, 213, 797 P2d 1019 (1990). Because this case generated a significant monetary recovery on both types of claims, some of which ($900,000 in compensatory damages) is attributable equally to both, but much of which ($8 million in punitive damages) is attributable only to one (the fraud claim), a percent-of-fund method is particularly appropriate to test the reasonableness of the attorney fee awards to be made. Quite simply, it would overlook the realities of this litigation—in which the incentive to pursue the litigation was the potential monetary recovery—to not account for the amount of the fund recovered in determining, or at least cross-checking, the total amount of attorney fees that Strawn’s attorneys will receive.9