Opinion ID: 2708888
Heading Depth: 2
Heading Rank: 1

Heading: Lodestar Methodology

Text: Americana’s first argument is that, by factoring in the amount actually recovered by the fax-blast victims when calculating an appropriate fee award under the lodestar method, the district court improperly engaged in ex post facto 6 No. 13-2569 rationalization for a fee reduction. Americana claims, “This Circuit’s decisions have repeatedly stated that the process for determining a reasonable attorney fee in a class action requires an ex ante analysis[.]” (Appellant’s Br. at 11.) That is essentially true. We have said, for example, that “[o]nly ex ante can bargaining occur in the shadow of the litigation’s uncertainty; only ex ante can the costs and benefits of particular systems and risk multipliers be assessed intelligently.” In re Synthroid Mktg. Litig., 264 F.3d 712, 719 (7th Cir. 2001). The reality, of course, is that fees often are not determined ex ante. But because we always seek to replicate the market value of an attorney’s services—and because the market would assign value up front—a district court that leaves the matter of fees until the end of the litigation process “must set a fee by approximating the terms that would have been agreed to ex ante, had negotiations occurred.” Id. That said, Americana’s argument is a non-starter. Why? Because the district court did not consider the ultimate outcome at all in calculating at a reasonable fee under the lodestar method. It considered only the lodestar amount submitted by counsel and the risk multiplier warranted by the contingent nature of the case. It did consider the paucity of the class recovery as compared to the requested fee award when deciding whether to apply the lodestar method, as opposed to the percentage method, in the first place. But that is exactly what we have suggested a district court should do. See Harman, 945 F.2d at 974 (explaining that the lodestar method has an advantage over the percentage method in that it alleviates “concerns that a percentage approach resulted in over-compensation for attorneys”). Moreover, the choice of No. 13-2569 7 methods is discretionary. Id. at 975 (citing Kirchoff v. Flynn, 786 F.2d 320, 329 n. 1 (7th Cir. 1986)). As we will explain hereafter, in our circuit, it is legally correct for a district court to choose either. Doing so is obviously not an abuse of discretion. We also note that it would not be legal error if the district court did consider the actual amount recovered. Attorneys and clients negotiating fee schedules ex ante often, and in some practice contexts almost exclusively, consider the litigation’s ultimate degree of success. That is how a contingency fee works. To our knowledge, we have never forbidden district courts from considering the outcome when engaging in a simulated ex ante analysis. We have certainly discouraged district courts from relying solely on the degree of success in determining fee awards, see Sutton v. Bernard, 504 F.3d 688, 692 (7th Cir. 2007), but not from considering it at all. And, to be frank, if the district court in this case truly had solely considered the ultimate benefit to class members, we doubt very much that it would have awarded roughly seventy-five percent of the final payout to Americana’s attorneys, which is the current state of affairs.