Court Opinion

ID: 9779637
Source: CourtListenerOpinion
Date Created: 2023-08-30 00:30:13.584965+00
Date Added: 2024-06-11T07:33:37.214637
License: Public Domain

Smith, J. (dissenting).
A class action lawyer who recovers
money for the class is, of course, entitled to apply to the court for a fee to be paid out of the class’s recovery. But the majority today holds that a class member’s lawyer who opposes the fee application, even if he does so successfully, must work for free or be paid entirely from the resources of the person who hired him. This result is bad policy; it is contrary to New York’s common law; and it is not required by any statute. I therefore dissent.
Whatever the faults and virtues of the class action device, no one disputes the need to control class counsel’s fees—and nothing furnishes so effective a check on those fees as an objecting lawyer. Even in the many cases where no objection to the fee application is ever filed, the possibility of an objection is one of the few restraints on class counsel’s ambitions. And usually, class counsel can be sure that no one will object to a fee application if a class member does not. The party opposing the class *381has no incentive to object to a payment that will come out of pockets other than its own; indeed, in the vast majority of class actions that are settled, the party that has settled with the class will be anxious to see the settlement approved without a hitch.
It is true that courts have the duty to scrutinize class counsel’s fee applications, whether objected to or not, but it is hard for them to do so effectively without the help of a lawyer who has an incentive to point out the application’s flaws. Objectors, of course, cannot replace the court or diminish its role. It is the court that must authorize both class counsel’s fee and a successful objector’s; it must do so only where the lawyers have conferred an actual benefit on the class, and then only in proportion to the benefit. But courts that hear an advocate for only one side of the issue are handicapped in making their judgments. Class counsel who submit unopposed fee applications, like most lawyers without adversaries, often get what they ask for.
Today’s decision greatly lessens the likelihood that fee applications submitted by class counsel will ever be opposed. Opposition will be filed only where a lawyer or client is willing to act from philanthropic motives, or in the few cases where a member of the class has a large enough interest in the size of the fee to justify bearing the expense of objecting to it. The problem of excessive fees in these cases is well known (see e.g. Coffee, Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum L Rev 1343, 1348 [1995]; Hensler, The Globalization of Class Actions: An Overview, 622 Annals of Am Acad of Pol & Soc Sci [No. 1] 7, 19 [2009]). Today’s decision makes it more difficult to cure that problem.
Not only are there excellent reasons to permit fee awards to lawyers who have successfully objected to class counsel’s fees; such awards are supported by the same common-law principles on which class counsel’s applications are based. The common fund rule, going back at least to Trustees v Greenough (105 US 527, 536 [1882]), permits “those who have instituted proceedings for the benefit of a general fund” to receive “proper allowances,” including attorneys’ fees, out of the fund. We adopted this rule in Woodruff v New York, Lake Erie & W. R.R. Co. (129 NY 27, 30-31 [1891]), saying “that one who successfully conducts a litigation . . . for the benefit of a fund, shall be protected in the distribution of such fund for the expenses necessarily incurred by him in the performance of his duty.”
It has long been commonly understood that fees may be awarded both to a class counsel who benefits a class by winning *382or settling a lawsuit and to an objector’s counsel who benefits the class by reducing the amount of class counsel’s fee. That is a simple corollary of the common fund rule. In each case, those who benefit from the lawyer’s efforts should bear the cost. While there seems to be no New York case directly in point, federal cases decided before the adoption of rule 23 (h) of the Federal Rules of Civil Procedure in 2003 assumed that counsel fees could be awarded to objectors to class action settlements under common fund principles (Frankenstein v McCrory Corp., 425 F Supp 762, 767 [SD NY 1977] [“where the objections filed produced a beneficial effect upon the progress of the litigation, an award of fees is appropriate”]; In re Anchor Sec. Litig., 1991 WL 53651, *1, 1991 US Dist LEXIS 4573, *2 [ED NY 1991] [“attorney’s fees are available to counsel for objectors who make the proper showing”]).
The majority holds, in effect, that New York’s class action statute, adopted in 1975, changed the common law by limiting the scope of the common fund doctrine. The relevant statute is CPLR 909, which says:
“If a judgment in an action maintained as a class action is rendered in favor of the class, the court in its discretion may award attorneys’ fees to the representatives of the class based on the reasonable value of legal services rendered and if justice requires, allow recovery of the amount awarded from the opponent of the class.”
The majority reads “representatives of the class” to mean the named plaintiffs in a class action, an interpretation I assume is correct. It also reads the statute to forbid the awarding of attorneys’ fees to all those who are not “representatives of the class,” an interpretation I think is incorrect.
The majority’s interpretation would be defensible if the Legislature had enacted a systematic codification of the common fund doctrine as it related to class actions, and left objectors’ fees out of that codification. But I see no evidence that the Legislature did anything of the kind. CPLR 909 consists of one sentence. The first half of it does reflect the common fund doctrine in saying that “the court . . . may award attorneys’ fees to the representatives of the class”—no doubt meaning, though it does not say, that it may award them out of the class’s recovery; the thrust of the statute, however, is to extend the court’s power beyond what the common fund doctrine would *383permit, authorizing “recovery of the amount awarded from the opponent of the class.” I think the authors of the statute would have been surprised at the suggestion that, by briefly restating one conspicuous aspect of the common fund doctrine, they were abolishing the rest of it in the class action context. I see nothing in the background of the statute or its legislative history to suggest an intention to make any such change in the law. And I can think of no reason why the Legislature would have wanted to make that change.
Thus, the majority opinion gives to CPLR 909 the unintended consequence of partially repealing the common fund doctrine and discourages class members from monitoring the inflation of attorneys’ fees. I would not follow that course. I would reverse the Appellate Division’s order and direct Supreme Court to consider the objector’s fee application.
Judges Ciparick, Graffeo, Read and Jones concur with Judge Pigott; Judge Smith dissents in a separate opinion in which Chief Judge Lippman concurs.
Judgment appealed from and order of the Appellate Division brought up for review affirmed, with costs.