Opinion ID: 1357701
Heading Depth: 3
Heading Rank: 1

Heading: Standards for Approving Attorneys' Fees

Text: Requests for awards of attorneys' fees in a class action settlement may be presented as either a percentage of the total recovery of a common fund or as a dollar amount that is not derivative of the settlement value. When a percentage of the total recovery of the settlement is requested, we have articulated several factors that a district court should consider for assessing the reasonableness of the fee. See Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir.2000). The Gunter factors are as follows: (1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs' counsel; and (7) the awards in similar cases. Id. at 195 n. 1. These factors need not be applied in a formulaic way ... and in certain cases, one factor may outweigh the rest. Id. We have instructed district courts that they are to engage in robust assessments of the fee award reasonableness factors when evaluating a fee request. In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 302 (3d Cir.2005). The alternative to requesting a percentage of the total recovery is to request a particular dollar amount in connection with class counsel's lodestar. The lodestar award is calculated by multiplying the number of hours reasonably worked on a client's case by a reasonable hourly billing rate for such services based on the given geographical area, the nature of the services provided, and the experience of the attorneys. The multiplier is a device that attempts to account for the contingent nature or risk involved in a particular case and the quality of the attorneys' work. Id. at 305-06 (footnote omitted). The reasonableness of the requested fee can be assessed by calculating the lodestar multiplier, which is equal to the proposed fee award divided by the lodestar (i.e., the product of the total hours and the blended billing rate). But the lodestar multiplier need not fall within any pre-defined range, provided that the District Court's analysis justifies the award. Id. at 307. The percentage-of-recovery method is generally favored in common fund cases because it allows courts to award fees from the fund `in a manner that rewards counsel for success and penalizes it for failure.' Id. at 300 (quoting In re Prudential Ins. Co., 148 F.3d at 333). The lodestar method is more typically applied in statutory fee-shifting cases, but [r]egardless of the method chosen, we have suggested it is sensible for a court to use a second method of fee approval to cross-check its initial fee calculation. Id. When the lodestar method is used only as a cross-check, it is appropriate to apply an abridged analysis, but courts should still explain how the application of a multiplier is justified by the facts of a particular case. In re Prudential Ins. Co., 148 F.3d at 340-41. The lodestar cross-check serves the purpose of alerting the trial judge that when the multiplier is too great, the court should reconsider its calculation under the percentage-of-recovery method, with an eye toward reducing the award. In re Rite Aid Corp. Sec. Litig., 396 F.3d at 306.