Opinion ID: 3011727
Heading Depth: 3
Heading Rank: 4

Heading: Checking Against Lodestar

Text: The District Court's abuse of discretion in this case is magnified when one looks at the lodestar multiplier. As we stated above, we have . . . suggested that district courts cross-check the percentage award at which they arrive against the `lodestar' award method. Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000); see also In re Prudential, 148 F.3d at 333 (stating that  `it is sensible for a court to use a second method of fee approval to cross check' its initial fee calculation). Even when the lodestar method is used only as a cross-check,courts must take care to explain how the application of a multiplier is justified by the facts of a particular case.26 In re Prudential, 148 F.3d at 340-41. _________________________________________________________________ 25. We should note that the award actually amounted to more than 5.7% of the total recovery. The fund had a value of $341.5 million, but any unclaimed portion of the fund returned to Cendant. As of August 1999, only 22,502,782 Rights, with a monetary value of $263.5 million, were claimed. Taking this amount as the total r ecovery, Kirby's attorneys' fees constituted 7.3% of the total fund. 26. We observed in In re GM Trucks that [t]he Supreme Court . . . has rejected the use of multipliers to enhance the lodestar's hourly rate 32 In this case, the lodestar multiplier is 7 at a minimum (using Kirby's senior partner rate as the rate for all hours), and the Trust calculates the lodestar multiplier as 10.27 Either of these multipliers (Kirby's multiplier of 7 or the Trust's multiplier of 10) is substantially higher than any of the multipliers in the cases charted above, which range from 1.35 to 2.99, and is also significantly higher than the large 5.1 multiplier in In r e Prudential, which we questioned because the court offer[ed] little explanation as to why a multiplier was necessary or appropriate. 148 F.3d at 340-41. In allowing such a high multiplier in this case without even calculating it, much less explaining how it is justified, the District Court strayed from all responsible discretionary parameters in the awarding of Kirby's attorneys' fees. In all the cases in which high percentages wer e applied to arrive at attorneys' fees, the courts explained the extensive amount of work that the attorneys had put into the case, and appropriately the lodestar multiplier in those cases never exceeded 2.99. This range is consistent with the principle that  `[m]ultiples ranging from one to four are frequently awarded in common fund cases when the lodestar method is applied.'  In r e Prudential, 148 F.3d 283, 341 (3d Cir. 1998) (quoting 3 Herbert Newber g & Alba Conte, Newberg on Class Actions, S 14.03 at 14-5 (3d ed. 1992)). In this case, the District Court judge made clear that he wanted to reward Kirby for Kirby's quick and beneficial settlement of the case, and that may be a good reason for the fee award to exceed the lodestar, but not to the exclusion of all other factors. On remand of this case to the District Court, we strongly suggest that a lodestar multiplier of 3 (the highest multiplier of the cases reviewed above) is the appropriate ceiling for a fee award, although _________________________________________________________________ amount. 55 F.3d 768, 822 (3d Cir. 1995) (citing City of Burlington v. Dague, 505 U.S. 557 (1992)). However, as stated above, calculation of the lodestar multiplier is still appropriate when used to cross-check the reasonableness of a percentage-of-r ecovery fee award. 27. The Trust calculates the lodestar multiplier as 10 because it assesses the appropriate lodestar fee as $1.9 million, 1/10 of the $19.3 million awarded. (See Trust's Brief at 25-26.) 33 a lower multiplier may be applied in the District Court's discretion. The 3 multiplier would result in an award of no more than $8.3 million for Kirby (calculating the lodestar at $495/hour).