Opinion ID: 770820
Heading Depth: 2
Heading Rank: 2

Heading: Explanation of the Fee Award

Text: 32 George next argues that the district court abused its discretion by failing to specify reasons for approving the fee award and for allowing attorneys' fees in an amount greater than the benchmark of twenty-five percent. We have explained that the district court must specify its reasons for approving a particular attorneys' fees award so that we may conduct meaningful review. See Chalmers v. City of Los Angeles, 796 F.2d 1205, 1213 (9th Cir. 1986) (Without some indication or explanation of how the district court arrived at the amount of fees awarded, it is simply not possible for this court to review such an award in a meaningful manner.). We have also established twenty-five percent of the recovery as abenchmark for attorneys' fees calculations under the percentageof-recovery approach. See Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993); Paul, Johnson, Alston & Hunt v. Graulty , 886 F.2d 268, 272 (9th Cir. 1989). A district court may depart from the benchmark but, [i]f such an adjustment [to the benchmark] is warranted, . . . it must be made clear by the district court how it arrives at the figure ultimately awarded. Graulty, 886 F.2d at 272. The district court need not explain its decision in a written order of the court, but such explanation must be in the record. See In re Pacific Enters. Sec. Litig., 47 F.3d 373, 377 (9th Cir. 1995) (stating that the district court's conclusory statement [that the settlement was fair and reasonable] alone would not be satisfactory, but the record reflects that [the judge ] also held an extensive settlement hearing where he responded to .. . objections and explained why the derivative settlement is fair). In this case, we conclude that the district court did not adequately explain its reasons for approving the fee award. 33 The district court exceeded the benchmark by awarding attorneys' fees of thirty percent of the settlement amount. Although the court provided a lengthy explanation of some of the considerations involved in determining a reasonable fee, it did not indicate how those different considerations should be weighed. Near the end of the hearing, the court said: 34 [Y]ou have to take into consideration so many things. I mean, are you sure of payment? Can you go to the bank with your accounts receivable, or is it on the come or is your client insolvent? Is it a contingent fee? Was it a slam-dunk case or did it involve a lot of sweat and strain, a lot of hours at night, a lot of sleepless nights? 35 I mean, all of these things have to be taken into consideration. I know there was a lot of that in this case. I know there was a great deal of concern about payment. I know there was a great concern about winning. I know there was a great concern about losing. 36 There were complications of insurance coverage that would drive a wise man crazy in trying to separate it. I'm sure that the lawyers could never really figure it all out. But each one of them could potentially involve a lawsuit. 37 I mean, it's incredible what happens in these class actions. I don't think the public has any idea the complications of a class action. I don't think they have any idea. 38 When discussing why it might be appropriate to award more than the twenty-five percent benchmark, the district judge noted that the litigation presented difficult issues, as many problems as porcupines have quills. In an exchange with George's counsel, the court explained that counsel for the plaintiffs took a risk by taking the case on a contingency basis: 39 It's one thing to charge a rate that is going to be paid. You can go to the bank with it. But it's another thing to work on a case and log hours, hoping that someday they're going to win because, if they win, they're going to get paid handsomely, and if they lose, they just soak it up. 40 At other points in the hearing, however, the district court seemed to favor decreasing the award below the benchmark. For example, the court noted that [j]ust because you don't have a flood of objections doesn't mean that everybody loves this fee request. The court also questioned whether a higher fee would provide greater incentive to the lawyers, telling the named plaintiffs' counsel: I think you still would have done your very, very best to get the very best settlement you could, even though you got a little less fee. Finally, the district court questioned the validity of the lodestar calculation the named plaintiffs used to verify that thirty percent was reasonable, asking, Is it a load [sic] star or a loaded star? Although two issues were decided at the end of the hearing, the district court reserved the issue of the proper amount of attorneys' fees, stating that it would issue a ruling after doing additional reading. 41 The written order of the court, issued three days after the hearing, did little to clarify how the court decided to award a fee of thirty percent. After announcing the fee award, the court simply stated that the amount . . . is fair and reasonable under the `percentage of recovery' method. Although we recognize the district court's discretion in this area, we conclude that in this case the fee award was not sufficiently explained. Many of the factors discussed at the hearing may have supported the fee award, but the district court never stated the grounds on which it ultimately relied. The court never explained -either at the hearing or in the written order -exactly why it chose to exceed the benchmark and award a thirty percent fee. As a result, we cannot conduct meaningful appellate review. Because the district court failed to specify adequately the basis for its decision, it abused its discretion. 42