Opinion ID: 755571
Heading Depth: 4
Heading Rank: 2

Heading: The Appropriate Percentage Recovery

Text: We are also troubled by the district court's calculation of the appropriate percentage award. The district court actually examined two distinct percentages in connection with its bifurcated fee award. First, it awarded class counsel approximately 11% of the Minimum Fund of $410 million created by the settlement, resulting in an initial award of $45 million. Second, based on the submission of at least 330,000 election forms, the court awarded class counsel an additional $45 million. Assuming the threshold were met and the full $90 million fee were awarded, the court found this fee constituted 6.7% of the common fund created under the settlement, 117 a figure the district court concluded was fair and reasonable ... [and] comport[ed] with the Fee examiner's recommendation of an award of 7-8%. Fee Opinion, 962 F.Supp. at 587-88. The district court considered several factors in order to determine the appropriate percentage award, including the size of the award, fee percentages applied in other class actions, the quality of class counsel, and the fee percentage that would likely have been negotiated between private parties. While we agree these factors offer some guidance, in cases of this magnitude they should receive less weight. In considering the size of the expected recovery under the proposed settlement, the district court observed that percentage awards generally decrease as the amount of the recovery increases. Fee Opinion, 962 F.Supp. at 580 (citations omitted). The basis for this inverse relationship is the belief that [i]n many instances the increase [in recovery] is merely a factor of the size of the class and has no direct relationship to the efforts of counsel. In re First Fidelity Bancorporation Securities Litigation, 750 F.Supp. 160, 164 n. 1 (D.N.J.1990). The district court concluded that some reduction is appropriate in this case where the recovery will equal at least $410 million. Fee Opinion, 962 F.Supp. at 585. We agree with the district court's analysis, but question whether the reduction implemented adequately adjusted the fee in relation to the size of this settlement. Compared to the other large settlements examined by the district court, the size of this settlement exceeds all of them by a considerable margin. 118 Yet the 6.7% fee the court awarded was actually higher than some of the smaller cases it used as a benchmark. The district court also examined the fee awards in class actions with recoveries exceeding $100 million and found the fee percentages ranged from 4.1% to 17.92%. Id. at 585. The court reasoned the enormous settlements in those cases made them comparable, and provided some guidance as to an appropriate percentage. Id. at 586 n. 32. While we agree this is an appropriate factor to consider in most class actions, we believe in this instance the size of the class and the settlement render such comparisons unreliable. As noted, the fee percentage awarded by the court was actually higher than some of the fee awards in these large class actions, despite the court's finding that the common fund here would be at least $410 million and could increase to more than $1 billion. The district court also found class counsel's representation and the results achieved were nothing short of remarkable. Id. at 585-86. Among the factors it examined were the innovative terms of the settlement, including the availability of full compensatory relief, the extensive and comprehensive outreach, and the multi-tiered review process designed to ensure fair scoring of claims; the approval given to the settlement by insurance regulators from all fifty states and the District of Columbia; and the standing and skill of class counsel. We agree. As discussed, the settlement is a fair and reasonable resolution of this class action. Furthermore, there is no doubt as to class counsel's skill and reputation. All agree class counsel added value to the Task Force plan. 119 The district court then noted the fee examiner's conclusion that were this case the subject of a private contingent fee agreement at the time of engagement, counsel might well have demanded and received ... upward of 20%, and even as high as 40%, of any future recovery. Id. at 587 (quoting Fee Examiner's Report at 60). While the court did not give great weight to this hypothetical exercise, it nonetheless agreed with the fee examiner's conclusion that class counsel would have negotiated a fee of at least 10 to 15% of the recovery. Id. (quoting Fee Examiner's Report at 61). We question the significance of this inquiry to class action lawsuits of this magnitude. While such private fee arrangements might be appropriate in smaller class actions or litigation involving individual plaintiffs, we do not believe they provide much guidance in cases involving the aggregation of over 8 million plaintiffs and a potential recovery exceeding $1 billion. Because the district court's basis for, and calculation of, the appropriate fee percentage was unclear in light of the facts and cases it referenced, and because it should set forth a reasoned basis and conclusion regarding the proper percentage applicable in this case, we will remand for a more thorough examination and explication of the proper percentage to be awarded to class counsel in this case, in light of the magnitude of the recovery.