Court Opinion

ID: 9781664
Source: CourtListenerOpinion
Date Created: 2023-08-30 17:01:11.014238+00
Date Added: 2024-06-11T12:13:38.927508
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 22-2889

IN RE: BROILER CHICKEN ANTITRUST LITIGATION
END USER CONSUMER PLAINTIFF CLASS,
                                                  Plaintiff-Appellee,

                                v.

FIELDALE FARMS CORPORATION, et al.,
                                                         Defendants,

APPEAL OF: JOHN ANDREN,
                                                Objector-Appellant.
                    ____________________

        Appeal from the United States District Court for the
          Northern District of Illinois, Eastern Division.
           No. 16 C 8637 — Thomas M. Durkin, Judge.
                    ____________________

     ARGUED MAY 23, 2023 — DECIDED AUGUST 30, 2023
                ____________________

   Before SYKES, Chief Judge, and BRENNAN and PRYOR, Circuit
Judges.
2                                                              No. 22-2889

    BRENNAN, Circuit Judge. Several class action lawsuits have
been filed alleging price fixing in the broiler chicken market.
In this case the district court awarded class counsel fees after
a class of plaintiffs settled with a subset of defendants. Class
member John Andren challenges the fee award and the dis-
trict court’s consideration of certain expert reports. Under our
circuit’s law, the district court’s task was to award fees in ac-
cord with a hypothetical ex ante bargain. In doing so, the court
did not consider bids made by class counsel in auctions in
other cases as well as out-of-circuit fee awards. So, we vacate
and remand for proceedings consistent with this opinion.
                                      I.
    This case involves three sets of plaintiﬀs. One class con-
sists of end users, deﬁned as persons and entities who indi-
rectly purchased certain types of broilers from the defendants
or alleged co-conspirators for personal consumption in cer-
tain jurisdictions during the class period. 1 This class settled
their claims with a subset of the defendants for a total of $181
million, and the district court entered judgment under Fed-
eral Rule of Civil Procedure 54(b) as to the settling parties.
    Class counsel was subsequently awarded one-third of the
settlement—excluding expenses and incentive awards—
amounting to $57.4 million. 2 Class member John Andren

    1 The second class of plaintiffs consists of direct purchasers of fresh or

frozen, raw broilers from the defendants or their respective subsidiaries
or affiliates. The third class consists of entities that purchased broilers in-
directly from a defendant or an alleged co-conspirator in certain jurisdic-
tions for their own use in commercial food preparation. All three classes
are described in general terms.
    2 The district court ordered a fee award in the amount of “33 percent

of the settlement fund after deducting the expenses and incentive
No. 22-2889                                                                   3

challenges this fee award. 3 He argues the district court erred
in discounting bids made by class counsel in auctions in other
cases and in suggesting this court has rejected the use of de-
clining fee scale award structures. He also contends the dis-
trict court erred in discounting fee awards to class counsel in
the Ninth Circuit. Andren further submits the district court
erred in crediting expert reports in setting the award.
    In setting the fee award, the district court considered three
categories of information: (1) actual agreements between the
parties and fee agreements reached in the market for legal ser-
vices, (2) the risk of nonpayment at the outset of the case and
class counsel’s performance, and (3) fee awards in compara-
ble cases.
    On the ﬁrst category, the court observed that class coun-
sel’s agreement with the named plaintiﬀs did not specify any
percentage of recovery that would be allocated toward fees.
The court also acknowledged that class counsel had bid a de-
clining fee scale award structure in at least three cases in the

awards.” But the award amount of $57.4 million is actually 33.3 percent,
or one-third, of the net settlement. Andren concedes $57.4 million was
awarded. For our analysis, therefore, we consider one-third of the net set-
tlement to have been awarded.
    3 We have jurisdiction over this appeal. The district court entered

judgment under Federal Rule of Civil Procedure 54(b) as to the settling
defendants. Where a fee order issues after the resolution of the merits, that
order is appealable so long as it is final. See Birchmeier v. Caribbean Cruise
Line, Inc., 896 F.3d 792, 795 (7th Cir. 2018) (citing Budinich v. Becton Dickin-
son & Co., 486 U.S. 196 (1988)). Even an interim award of fees can be final
“if the district court lays out a formula for calculating the award’s
amount.” Id. Because that occurred here, “as a practical matter the district
court is finished with the litigation about class counsel’s fees, so the award
is final for purposes of § 1291.” Birchmeier, 896 F.3d at 796.
4                                                    No. 22-2889

past ten years. It did not give great weight to these bids in
setting the fee in part because the most recent was more than
seven years old. In the district court’s view, this court had cast
doubt on whether it is appropriate to award declining fee
scale award structures in In re Synthroid Marketing Litigation
(Synthroid I), 264 F.3d 712 (7th Cir. 2001), and Silverman v.
Motorola Solutions, Inc., 739 F.3d 956 (7th Cir. 2013).
    Turning to the second category, risk of nonpayment and
class counsel’s performance, the district court observed that
declining fee scale award structures may be appropriate in
cases in which settlement is likely and in which the marginal
cost of increasing the amount of recovery is low. But accord-
ing to the district court, settlement in a complex antitrust case
like this is not a foregone conclusion, and no government in-
vestigation preceded the complaint, which may have aided
counsel. Opposing counsel are prominent U.S. law ﬁrms, and
on the motions to dismiss the district court termed its decision
a relatively close call. The district court also viewed class
counsel’s performance to date as exemplary.
    As to the third category, fee awards in comparable cases,
the district court agreed with an expert retained by another
class of plaintiﬀs that fee awards from other circuits do not
attempt to capture how clients pay lawyers in markets like the
Seventh Circuit. To the district court these fee awards “are in-
fected by default rules recommending smaller attorney fee
award percentages for ‘megafunds.’” It observed that “[t]he
Seventh Circuit … expressly rejected a megafund rule” in
Synthroid I because it creates a perverse incentive. That is,
“[c]lients generally want to incentivize their counsel to pursue
every last settlement dollar, and a declining percentage award
operates to the contrary.” The district court thus concluded
No. 22-2889                                                       5

that “to the extent that courts in other circuits have awarded
percentages smaller than what Appointed Counsel seek here,
the Court ﬁnds those awards and their reasoning relatively
unpersuasive.”
    What carried more weight for the district court was the
“large number of antitrust cases in this circuit that have
awarded one-third of the common fund as attorney’s fees.”
The court reasoned, “[t]he fact that fee awards in antitrust
cases in this circuit are almost always one-third is a strong in-
dication that this should be considered the ‘market rate.’” It
also found this percentage in accord with fees that class coun-
sel have been awarded in cases of similar magnitude. The
court rested this ﬁnding on data submitted by class counsel
on fees they have been awarded in other antitrust cases since
the inception of this case. The district court reviewed the in-
formation and “discounted awards from the Ninth Circuit
due to its megafund rule … .” It also observed that “in large
cases like this, the only available evidence of the ‘market rate’
is past awards.”
    We “review de novo whether the district court’s legal anal-
ysis and method conformed to circuit law” in determining a
fee award. In re Stericycle Sec. Litig., 35 F.4th 555, 559 (7th Cir.
2022). As a matter of method, “courts must do their best to
award counsel the market price for legal services, in light of
the risk of nonpayment and the normal rate of compensation
in the market at the time.” Synthroid I, 264 F.3d at 718. That is,
a “district court must estimate the terms of the contract that
private plaintiﬀs would have negotiated with their lawyers,
had bargaining occurred at the outset of the case (that is,
when the risk of loss still existed).” Id. It should “recognize[]
that its task was to assign fees in accord with a hypothetical
6                                                     No. 22-2889

ex ante bargain,” “weigh[] the available market evidence,”
and “assess[] the amount of work involved, the risks of non-
payment, and the quality of representation.” Williams v. Rohm
& Haas Pension Plan, 658 F.3d 629, 636 (7th Cir. 2011).
    Where the district court has followed the appropriate
methodology, “[w]e review class action fee awards deferen-
tially, for abuse of discretion, recognizing that the district
court is closer to the case than we are, and that a reasonable
fee will often fall within a broad range.” Stericycle, 35 F.4th at
559. But “[a] district court abuses its discretion … if it ‘reaches
an erroneous conclusion of law, fails to explain a reduction or
reaches a conclusion that no evidence in the record supports
as rational.’” Id. (quoting In re Sw. Airlines Voucher Litig., 898
F.3d 740, 743 (7th Cir. 2018)). Because the district court fol-
lowed the appropriate methodology in determining the fee
award, we review its decision for an abuse of discretion.
                                II.
    We decide whether the district court appropriately consid-
ered what bargain would have been struck ex ante as to attor-
neys’ fees. The district court is close to this complex litigation,
which it has done a ﬁne job of shepherding. Still, even under
our deferential standard of review, we conclude that its eval-
uation fell short in two areas: the consideration of bids made
by class counsel in auctions, and the weight assigned to out-
of-circuit decisions.
    A. Bids in Auctions
   Andren contends that the district court should not have
discounted bids made by one of the two ﬁrms serving as class
counsel in other cases. In his view, the bids were not too old
because the ex ante approach to assessing fees requires courts
No. 22-2889                                                    7

to examine the bargain that would have been struck at the
outset of the litigation. The litigation began in September
2016, nearly seven years ago, so to Andren the bids were
highly probative. Class counsel responds that the district
court considered the bids but properly assigned them little
weight. According to class counsel, that is because this court
has viewed auctions with skepticism. The bids Andren refers
to were not successful, class counsel also contends, and only
successful bids are relevant to determining what bargain
would have been struck ex ante. Further, the bids here were
made by only one of the two law ﬁrms serving as class coun-
sel in this case.
    Requiring auctions to set fee schedules ex ante and consid-
ering auction bids in awarding fees ex post are two separate
concepts. Cf. Silverman, 739 F.3d at 957–58; Synthroid I, 264
F.3d at 721. We have previously rejected the idea that district
courts are required to conduct auctions at the outset of litiga-
tion to set fees. Silverman, 739 F.3d at 957–58 (explaining that
no decision “holds that fee schedules set ex ante are the only
lawful means to compensate class counsel in common-fund
cases”). Nevertheless, we have explained that auction bids are
properly considered when deciding what bargain the parties
would have struck ex ante. See Synthroid I, 264 F.3d at 721 (“[A]
court can examine the bids and the results to see what levels
of compensation attorneys are willing to accept in competi-
tion.”). Bids that class counsel made in auctions around the
time this litigation began in September 2016 would ordinarily
be good predictors of what ex ante bargain would have been
negotiated.
   The district court also discounted these bids, however, be-
cause they had declining fee scale award structures. In the
8                                                           No. 22-2889

district court’s view, this court has explained that these
awards do not reﬂect market realities and impose a perverse
incentive insofar as they ensure that attorneys’ opportunity
cost will exceed the beneﬁts of seeking a larger recovery, even
when the client would otherwise beneﬁt.
    Yet, this court has never categorically rejected considera-
tion of bids with declining fee scale award structures. Rather,
the nature of the typical costs in litigation must be assessed in
determining whether counsel and plaintiﬀs would have bar-
gained ex ante for such a structure. Although this court previ-
ously acknowledged that declining fee scale award structures
“create declining marginal returns to legal work,” this court
also observed that such a fee structure can present certain ad-
vantages. Synthroid I, 264 F.3d at 721. Fees do not always de-
cline for securing a larger recovery, and in those instances,
counsel will have an incentive to seek more. Id. Notably, this
court awarded a declining fee scale award structure in In re
Synthroid Marketing Litigation (Synthroid II), 325 F.3d 974, 980
(7th Cir. 2003). And in Silverman, this court explained that
“[m]any costs of litigation do not depend on the outcome; it
is almost as expensive to conduct discovery in a $100 million
case as in a $200 million case.” 739 F.3d at 959. At least in se-
curities litigation, we have explained that “[m]uch of the ex-
pense must be devoted to determining liability, which does
not depend on the amount of damages.” Id. Accordingly, the
appropriateness of a declining fee scale award structure may
depend on the particulars of the case. It was an abuse of dis-
cretion to rule that bids with declining fee structures should
categorically be given little weight in assessing fees. 4

    4 The district court later acknowledged that in some cases, a declining

fee scale structure may be appropriate, but not in this complex antitrust
No. 22-2889                                                               9

    It is not dispositive that the bids here were not ultimately
successful or that they were made by only one of the two ﬁrms
appointed in this case. In Synthroid II, we considered the
weight accorded to prior negotiations between class counsel
and plaintiﬀs in setting a fee award. 325 F.3d at 976–77. Those
negotiations had occurred in response to a class’s representa-
tion that they would opt out, which was “a step that would
have prevented class counsel from recovering any fees on
their account.” Id. at 977. This court observed that “until a con-
tract is signed—and, in class litigation, approved by the court
under Fed. R. Civ. P. 23(e)—no one is bound by any of the
proposed terms.” Id. The negotiations were therefore not pro-
bative in determining the fee award. See id. But this discussion
in Synthroid II is distinguishable, as those negotiations oc-
curred while the parties were brokering a settlement. See id. at
976–77. This court explained that the negotiations were not
signiﬁcant in determining the ultimate fee award because
they were “designed to bring closure.” Id. at 977. That is,
“class counsel may have been willing to accept less than their
legal entitlement in order to increase the chance that they
would be paid then and there.” Id. Here, however, the bids
were made in pursuit of appointment and reﬂect the price of
co-class counsel’s legal services in antitrust litigation.
    Other aspects of the cases in which the bids were made
may show the bids to be poor indicators of what bargain
would have been struck ex ante. But it was error to suggest
that this court has cast doubt on the consideration of declining
fee scale bids in all cases. We also reject class counsel’s sug-
gestion that bids by one ﬁrm cannot be used to determine the

litigation in which settlement was not a foregone conclusion. Yet that eval-
uation was not linked to the decision to discount the auction bids.
10                                                         No. 22-2889

ex ante bargain that would have been struck by the two ﬁrms
appointed here. On remand, the district court may accord ap-
propriate weight to these bids, recognizing that they may be
probative of the price of only one ﬁrm’s legal services.
     B. Out-of-Circuit Awards
   Andren also contends the district court incorrectly ex-
cluded fee awards to class counsel in cases within the Ninth
Circuit. That was mistaken, he says, because class counsel reg-
ularly bids for appointment in the Ninth Circuit, contradict-
ing the idea that those few awards are below market rate.
Class counsel responds that the district court properly dis-
counted fee awards from the Ninth Circuit because “circuit
law is not homogenous” and that circuit has declined to adopt
the market rate approach to calculate fee awards.
    When determining the market rate, data about ex post fees
awarded to class counsel in other cases should receive less
weight, as those prices are set at the end of the litigation. They
are therefore less probative in assessing the bargain that
would have been struck ex ante. Cf. Synthroid I, 264 F.3d at 719
(explaining that “only ex ante can the costs and benefits of par-
ticular systems and risk multipliers be assessed intelli-
gently”).
    Even so, the district court should not have categorically
assigned less weight to Ninth Circuit cases in which counsel
was awarded fees under a megafund rule. 5 It is true that this
court has rejected the application of a megafund rule. See id.
at 717–18. Yet continued participation in litigation in the

     5 A megafund rule caps fees when the recovery exceeds a given value.

See Synthroid I, 264 F.3d at 718.
No. 22-2889                                                   11

Ninth Circuit is an economic choice that informs the price of
class counsel’s legal services and the bargain they may have
struck. Ex post fees awarded to class counsel by district courts
within the Ninth Circuit were set by the court and not chosen
by class counsel. But as rational actors, class counsel assess
the risk of being awarded fees below the market rate of their
legal services when they seek to represent plaintiﬀs in the
Ninth Circuit. Although a limited number of representations
in other markets may suggest fees below counsel’s market
price were awarded there, continued participation in the mar-
ket may reveal something about the price for class counsel’s
legal services, and therefore counsel’s bargaining position.
The district court should have considered where class coun-
sel’s economic behavior falls on this spectrum and assigned
appropriate weight to fees awarded in out-of-circuit litiga-
tion.
                        *       *      *
    Before concluding, we address Andren’s contention that
the district court should not have relied on expert reports in
resolving the fee motion without permitting him to obtain dis-
covery from those experts. Discovery rulings are reviewed for
an abuse of discretion. Stericycle, 35 F.4th at 567. The district
court did not provide a rationale for declining to order addi-
tional discovery, so we remand that issue to permit the district
court to evaluate Andren’s request. Cf. Dolin v. Glax-
oSmithKline LLC, 951 F.3d 882, 889 (7th Cir. 2020) (explaining
that a district court may abuse its discretion by failing to ex-
ercise discretion).
12                                                No. 22-2889

                             III.
    We recognize that the district court has lived with this
complex litigation for a long time. It reviewed and considered
our court’s complicated law in this area, and it was correct to
invite brieﬁng on close questions. Ordinarily, this would
place its decisions within the zone of discretion to which we
would defer. But given the record as considered under our
admittedly intricate law, the arrived-upon ﬁgure of one-third
of the net settlement warrants greater explanation and consid-
eration of the information described above.
    So, we VACATE the fee award and REMAND for another
evaluation of the bargain the parties would have struck ex
ante; we express no preference as to the amount or structure
of the award. We also remand for consideration of the request
for expert discovery.