Opinion ID: 2266285
Heading Depth: 1
Heading Rank: 8

Heading: Fee Award History Common Fund Doctrine

Text: The equitable nature of awarding attorney's fees from a common fund requires a court to exercise broad discretion by applying a reasonableness standard. The appropriate method a court should use to determine a reasonable attorney's fee to be awarded from a common fund has been the subject of considerable debate. Originally, fees were calculated and awarded as a reasonable percentage of the common fund. Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1881). Thereafter, the percentage approach was used to make fee awards in common fund cases for almost one hundred years. In the 1970s, courts began to use the lodestar approach to calculate fee awards in common fund cases. Lindy Bros. Builders, Inc. of Phila. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 167-68 (3d Cir.1973). See Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237, 242 (1985). That method requires a court to calculate the product of an attorney's reasonable hours expended on the litigation and reasonable hourly rate to arrive at the lodestar. [8] Swedish Hosp. Corp. v. Shalala, 1 F.3d at 1266. That lodestar calculation can then be adjusted, through application of a multiplier or fee enhancer, to account for additional factors, e.g., the contingent nature of the case and the quality of an attorney's work. Lindy Bros. Builders, Inc. of Phila. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 112 (3d Cir.1976); Swedish Hosp. Corp. v. Shalala, 1 F.3d at 1266. During the 1970s, the lodestar/multiplier method of awarding fees was frequently invoked in common fund cases, instead of determining a reasonable percentage of recovery from the fund, based upon a multifactor analysis. Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 716-19 (5th Cir.1974) ( Johnson factors); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d at 164-69 ( Lindy factors). In the 1980s, however, two events led to a reconsideration of the lodestar method of calculating common fund fee awards. First, in 1984, the Supreme Court distinguished the calculation of awards under fee-shifting statutes from the calculation of attorney's fees under the common fund doctrine. In doing so, the Supreme Court suggested that an award in a common fund case should be based upon a percentage of the fund: Unlike the calculation of attorney's fees under the common fund doctrine, where a reasonable fee is based on a percentage of the fund bestowed on the class, a reasonable fee under [42 U.S.C.] § 1988 reflects the amount of attorney time reasonably expended on the litigation. Blum v. Stenson, 465 U.S. 886, 900 n. 16, 104 S.Ct. 1541, 1550 n. 16, 79 L.Ed.2d 891 (1984). Footnote 16 in Blum has been cited for the proposition that the Supreme Court's approval of the lodestar method in the fee-shifting context was not intended to overrule decisions which had approved percentage of the fund awards of attorney's fees in common fund cases. Swedish Hosp., 1 F.3d at 1268. See, e.g., Sprague v. Ticonic National Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939); Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885). That interpretation of Blum did not change when the Supreme Court held that the lodestar should not be enhanced through the use of a multiplier in statutory fee-shifting cases. City of Burlington v. Dague, 505 U.S. 557, 565-67, 112 S.Ct. 2638, 2642-44, 120 L.Ed.2d 449 (1992). The second significant event in the 1980s was the report issued in 1985 by a Task Force the Third Circuit had appointed to evaluate the practical effectiveness of the lodestar method in making attorney fee awards. See Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237 (1985). The Task Force recommended continued use of the lodestar technique in statutory fee-shifting cases. Id. See also City of Burlington v. Dague, 505 U.S. at 562, 112 S.Ct. at 2641 (acknowledging, in the statutory fee-shifting context, a strong presumption that the lodestar represents the reasonable fee). The Task Force concluded, however, that all attorney fee awards in common fund cases should be structured as a percentage of the fund. Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. at 255. At the present time, the majority of federal courts use a reasonable percentage of the fund method when making attorney fee awards in common fund cases. See Swedish Hosp. Corp. v. Shalala, 1 F.3d at 1266 (chronicling history of the methodologies). See also FEDERAL JUDICIAL CENTER, AWARDING ATTORNEYS' FEES AND MANAGING FEE LITIGATION 63-64 (1994) (canvassing case law.) [9] The Third Circuit has recently held that the percentage of the fund is generally the preferable method for awarding fees in common fund cases, but noted that a lodestar analysis might be used to cross check the propriety of the award (a hybrid approach). [10] See In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d at 821. Ultimately, however, the Third Circuit permits the trial court to exercise its discretion in choosing either the percentage method or the lodestar method, or some combination or hybrid, as the circumstances warrant, in making common fund fee awards. Id.