Opinion ID: 1462959
Heading Depth: 2
Heading Rank: 1

Heading: Class Action Principles

Text: In a class action settlement, the district court has an independent duty under Federal Rule of Civil Procedure 23 to the class and the public to ensure that attorneys' fees are reasonable and divided up fairly among plaintiffs' counsel. See, e.g., Strong, 137 F.3d at 849 (To fully discharge its duty to review and approve class action settlement agreements, a district court must assess the reasonableness of the attorneys' fees.); Manual for Complex Litigation § 14.11 (4th ed. 2004) (The court must distribute the [fee award] among the various plaintiffs' attorneys, which may include class counsel, court-designated lead and liaison counsel, and individual plaintiff's counsel.). [9] The court's duty to review attorneys' fees is no less compelling in common fund cases, [10] like this case, where a separate fund to pay attorneys' fees is created as part of the class action settlement. See Strong, 137 F.3d at 849. The district court's close scrutiny of fee awards serves to protect the nonparty members of the class from unjust or unfair settlements affecting their rights as well as to minimize conflicts that may arise between the attorney and the class, between the named plaintiffs and the absentees, and between various subclasses. Id. (internal quotations and citations omitted). The court's review also guards against the public perception that attorneys exploit the class action device to obtain large fees at the expense of the class. Id. (citing In re GM Trucks, 55 F.3d at 820 (emphasizing that the court's oversight function serves to deflect the potential public misunderstandings that they may cultivate in regard to the interests of class counsel) (internal quotations and citations omitted); Foster v. Boise-Cascade, Inc., 420 F.Supp. 674, 680 (S.D.Tex.1976), aff'd, 577 F.2d 335 (5th Cir.1978) (explaining that the court has the obligation in any Rule 23 class action to protect [the class action device] from misuse because the most commonly feared abuse is the possibility that Rule 23 encourages strike suits promoted by attorneys who simply are seeking fat fees) (internal quotations and citations omitted)). To fulfill its duty, the district court must not cursorily approve the attorneys' fee provision of a class settlement or. delegate that duty to the parties. Strong, 137 F.3d at 850. Although exacting judicial review of fee applications may be burdensome, it is necessary to discharge the [court's] obligation to award fees that are reasonable and consistent with governing law. Manual for Complex Litigation § 14.231 (4th ed. 2004). This circuit requires district courts to use the lodestar method to assess attorneys' fees in class action suits. Strong, 137 F.3d at 850. The district court must first determine the reasonable number of hours expended on the litigation and the reasonable hourly rate for the participating attorney. Id. The lodestar is then computed by multiplying the number of hours reasonably expended by the reasonable hourly rate. Id. The district court may adjust the lodestar upward or downward after a review of the twelve factors set forth in Johnson. Forbush, 98 F.3d at 821. After the court calculates the lodestar, it must scrutinize a fee award under the Johnson factors and not merely ratify a pre-arranged compact. Piambino v. Bailey, 610 F.2d 1306, 1328 (5th Cir.1980) (holding that by summarily approving attorneys' fees presented in an unopposed settlement agreement, the district court abdicated its responsibility to assess the reasonableness of the attorneys' fees proposed under a settlement of a class action, and its approval of the settlement must be reversed on this ground alone). When a district court awards attorneys' fees it must explain how each of the Johnson factors affects its award. See Longden, 979 F.2d at 1099-1100. Its Johnson analysis need not be meticulously detailed to survive appellate review. Forbush, 98 F.3d at 823. If the district court has articulated and clearly applied the correct criteria, we will not require the trial court's findings to be so excruciatingly explicit in this area of minutiae that decisions of fee awards consume more paper than did the cases from which they arose. Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 331 (5th Cir.1995) (internal quotations and citations omitted). Nonetheless, the district court's findings and `reasons must be complete enough to assume a review which can determine whether the court has used proper factual criteria in exercising its discretion to fix just compensation. Brantley v. Surles, 804 F.2d 321, 325-26 (5th Cir.1986). In this case, although no objection had been filed, the district court independently assessed the reasonableness of the $6.875 million lump-sum attorneys' fee award and considered the Johnson factors when it approved the class action settlement. Unfortunately, it failed to fulfill its further duty to monitor legal fees by its perfunctory approval of the allocation determined by the Fee Committee. The record indicates that the court received the Fee Committee's proposed fee allocation and order around 11:30 a.m. a the ex parte hearing on January 22, 2007. During the ensuing, twenty minutes, the court questioned members of the Fee Committee about the allocation and order. No sworn testimony was taken, no depositions were offered, and no affidavits were filed attesting to the accuracy or fairness of the proposed fee allocation. Further, because the hearing was ex parte, other plaintiffs' attorneys, including Appellants, were not present to confirm or challenge the Fee Committee's statements about their contributions to the case. After the hearing ended, the court spent at most one afternoon considering the Fee Committee's proposed allocation and order before approving them. [11] The record speaks for itself. Instead of closely scrutinizing the Fee Committee's allocation, the court rubber-stamped the committee's recommendation. The court made matters worse when it sealed the exhibit listing the individual fees and the record entries pertaining to fees and placed a gag order on the plaintiffs' attorneys. These actions not only kept the public in the dark about each plaintiffs' attorney's award but also prevented counsel from communicating with each other and with their own clients on the subject. The lack of transparency about the individual fee awards supports a perception that many of these attorneys were more interested in accommodating themselves than the people they represent. [12] Two major errors pervade the court's process. First, despite the court's statements at the ex parte hearing that it considered the Johnson factors, the record offers little substantiation that the court actually reviewed the individual fee awards. The district court set forth no factual findings and reasons to support its awards of individual attorneys' fees. The court's order merely recites without application the twelve Johnson factors and a laundry list of other relevant considerations. [13] Moreover, the record is bereft of factual information essential to the conduct of a Johnson analysis as well as appellate review. The record lacks the attorneys' time and expense statements, [14] letters, comments, hourly billing rates, and other materials allegedly submitted by the Fee Committee to the district court on or before the ex parte hearing on January 22, 2007. See Manual for Complex Litigation § 14.223 (4th ed. 2004) (In advance of any fee-award hearing, counsel should submit time and expense records, to the extent not previously submitted with the motion and in manageable and comprehensible form....). Nor does the record contain a breakdown of the hours and rates claimed by each attorney or their respective lodestars. In other words, the record strongly suggests that at the time of the ex parte hearing the court possessed no documents, other than the Fee Committee's proposed fee allocation, upon which it could base factual findings for awards of individual attorneys' fees. This circuit, as will be discussed infra, does not forbid a district court to rely on fee allocation proposals submitted by attorneys. The proposals must, however, be factually supportable and consistent with the Johnson factors. Because the factual basis of the court's fee allocation remains unknown, this court cannot approve it. Second, a district court has the discretion to seal a record, but we think that this discretion should be used with care and exercised only where the justifications for doing so appear considerably stronger than those presented by the Fee Committee. In re Equal Employment Opportunity Commission, 709 F.2d 392, 402 n. 7 (5th Cir.1983). The only justification posited for sealing the record here is to discourage internecine fee sharing disputes among the plaintiffs' lawyers. This is a weak and unconvincing reason for dispensing with the public nature of our judicial proceedings. Sealing the record protects no legitimate privacy interest that would overcome the public's right to be informed. On a broad public level, fee disputes, like other litigation with millions at stake, ought to be litigated openly. Attorneys' fees, after all, are not state secrets that will jeopardize national security if they are released to the public. As the Third Circuit has noted, [p]ublic confidence [in our judicial system] cannot long be maintained where important judicial decisions are made behind closed doors and then announced in conclusive terms to the public, with the record supporting the court's decision sealed from public view. United States v. Cianfrani, 573 F.2d 835, 851 (3d Cir.1978). From the perspective of class welfare, publicizing the process leading to attorneys' fee allocation may discourage favoritism and unsavory dealings among attorneys even as it enables the court better to conduct oversight of the fees. If the attorneys are inclined to squabble over the generous fee award, they are well positioned to commentpubliclyon each other's relative contribution to the litigation.