Opinion ID: 770820
Heading Depth: 2
Heading Rank: 3

Heading: Percentage of Gross or Net?

Text: 43 George also argues that the district court erred by awarding attorneys' fees calculated on a percentage of the gross recovery rather than a percentage of the recovery minus expenses. Under the Private Securities Litigation Reform Act of 1995, [t]otal attorneys' fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class. 15 U.S.C. 78u4(a)(6). According to George, the phrase the amount . . . actually paid to the class only includes the net amount received after expert fees, litigation costs, and other expenses have been subtracted. Thus, George argues, the attorneys' fees should be calculated as a percentage of net recovery rather than as a percentage of gross recovery. 44 We disagree. Although the new provision requires reasonable fees and expenses, it does not mandate a particular approach to determining fees. The legislation's primary purpose was to prevent fee awards under the lodestar method from taking up too great a percentage of the total recovery. See, e.g., H. R. Conf. Rep. No. 104-369 (1995). The new provision, however, does not eliminate the use of the lodestar approach, nor does it require that fees be based on a percentage of net recovery. It simply requires that the fees and expenses ultimately awarded be reasonable in relation to what the plaintiffs recovered. 45 We note that the choice of whether to base an attorneys' fee award on either net or gross recovery should not make a difference so long as the end result is reasonable. Our case law teaches that the reasonableness of attorneys' fees is not measured by the choice of the denominator. See, e.g., Washington Public Power Supply Sys. Sec. Litig., 19 F.3d at 1294 n.2 (Because a reasonable fee award is the hallmark of common fund cases, and because arbitrary, and thus unreasonable, fee awards are to be avoided, neither [the lodestar nor the percentage] method should be applied in a formulaic or mechanical fashion.). If twenty-five percent of gross is reasonable, perhaps thirty-five percent of net would be reasonable. 46 On remand, the district court may calculate the fee award using the gross settlement amount.