Court Opinion

ID: 4420109
Source: CourtListenerOpinion
Date Created: 2019-07-25 16:00:43.541195+00
Date Added: 2024-06-11T07:49:59.014624
License: Public Domain

Case: 17-14741   Date Filed: 07/25/2019   Page: 1 of 55

                                                                    [PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                            No. 17-14741
                      ________________________

                 D.C. Docket No. 1:14-md-02583-TWT

In Re: THE HOME DEPOT INC., CUSTOMER DATA SECURITY BREACH
LITIGATION.
__________________________________________________________________

NORTHEASTERN ENGINEERS FEDERAL CREDIT UNION,
PITTSFIELD COOPERATIVE BANK,
PHENIX-GIRARD BANK,
KELSEY O'BRIEN,
FIRST FINANCIAL CREDIT UNION,
FIRST CHOICE FEDERAL CREDIT UNION,
SOUTHERN CHAUTAUQUA FEDERAL CREDIT UNION,
GARY LOWENTHAL,
SARA SAFFRAN,
BARBARA SAFFRAN, et al.,
                                   Plaintiffs-Appellees
                                   Cross Appellants,
HOWARD STERN, et al.,

                                                     Plaintiffs,

                                 versus

HOME DEPOT, INC. (THE),
THE HOME DEPOT U.S.A., INC.,
                                              Defendants-Appellants
                                              Cross Appellees.
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                           ________________________

                   Appeals from the United States District Court
                       for the Northern District of Georgia
                          ________________________

                                   (July 25, 2019)

Before TJOFLAT, WILLIAM PRYOR, and GILMAN, * Circuit Judges.

TJOFLAT, Circuit Judge:

      Following a data breach at Home Depot, the information for tens of millions

of credit cards was stolen, and a class of banks who issued the cards sued Home

Depot to recover their resulting losses. Home Depot eventually settled with the

class. As part of the settlement, Home Depot agreed to pay the reasonable

attorney’s fees of Class Counsel. The agreement specified that the attorney’s fees

would be paid separate from and in addition to the class fund, but the parties left

the amount of those fees undetermined.

      The District Court awarded Class Counsel $15.3 million in fees. It reached

this award using the lodestar method, finding Class Counsel’s hours to be

reasonable and applying a multiplier of 1.3 to account for the risk the case

* Honorable Ronald Lee Gilman, United States Circuit Judge for the Sixth Circuit,
sitting by designation.

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presented. The Court also used the percentage method as a cross-check to ensure

the amount of fees was reasonable.

      On appeal, Home Depot argues that the District Court abused its discretion

by applying a multiplier and by compensating Class Counsel for certain time spent

on the case—namely, the substantial time spent litigating about a private dispute-

resolution process separate from the litigation. Home Depot also says that the

District Court’s order is not capable of meaningful review. For its part, Class

Counsel brings a conditional cross-appeal taking issue with how the District Court

conducted the percentage cross-check.

      The main issue underlying the appeal is whether the fee arrangement

outlined in the settlement should be characterized as a constructive common fund

or as a fee-shifting contract. We hold that this is a contractual fee-shifting case,

and the constructive common-fund doctrine does not apply. Once we identify the

proper legal framework, the parties’ challenges are more easily resolved. We

affirm the District Court’s decision in all respects except one: it was an abuse of

discretion to use a multiplier to account for risk in a fee-shifting case.

                                           I.

      Disputes over attorney’s fees are fact-intensive inquiries. As such, a

thorough review of the facts is necessary to decide this case.

                                           3
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                                                 A.

       In 2014, Home Depot experienced a massive data breach. It started when

hackers installed malware on Home Depot’s self-checkout kiosks. The malware

would siphon off the personal financial information of customers who paid at the

kiosks using a credit or debit card. The hackers then made this information,

including names, card numbers, expiration dates, and security codes, available for

sale on a black-market website. Approximately fifty-six million cards were

compromised. It did not take long for a large number of fraudulent transactions to

occur using the stolen information.

       A flood of lawsuits followed. Consumers whose personal information was

stolen and banks that issued the compromised cards filed over 50 class actions.

The United States Judicial Panel on Multidistrict Litigation consolidated these

cases in the Northern District of Georgia, where the District Court split the

litigation into two tracks: one for the consumers and one for the banks. This appeal

arises from the bank track.1 The District Court appointed Class Counsel to manage

the sprawling litigation and ordered Class Counsel to submit quarterly reports to

the Court in camera showing the hours billed and expenses incurred.

       1
         The class also included credit unions and other financial institutions, not just banks.
But for style and simplicity, we refer to this as the bank track.

                                                 4
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      The banks filed a consolidated complaint accusing Home Depot of failing to

secure its data. They brought claims for negligence and negligence per se on

behalf of a national class, and for violations of state consumer-protection statutes

on behalf of eight state-specific subclasses. They alleged that, as a result of the

data breach, they were forced to cancel and reissue the compromised cards,

investigate claims of fraudulent activity, and reimburse customers for fraudulent

charges (among other things). The banks sought monetary damages for the cost of

these responses, as well as declaratory and injunctive relief to force Home Depot to

improve its security measures.

      Home Depot moved to dismiss the complaint on numerous grounds. In the

interim, and at the urging of the District Court, the parties proceeded with

preliminary discovery. After the District Court ruled on the motion to dismiss,

denying it in part, Home Depot answered the complaint. Shortly afterwards, the

District Court stayed further action in the case pending settlement negotiations.

                                          B.

      While the litigation unfolded, another process played out that is central to

this appeal: the card-brand recovery process. The card brand recovery process is

essentially a private dispute-resolution arrangement between Home Depot, the

banks, and the card brands (e.g., Visa and Mastercard). It’s separate from the

litigation, and instead is based on contracts with merchants (like Home Depot) that

                                           5
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outline the terms for accepting credit and debit cards as payment. The process is

relevant to this appeal because Class Counsel took issue with events that occurred

in the card-brand recovery process that affected the class action, and Home Depot

argues that Class Counsel should not be compensated for the substantial time spent

pursuing the matter.

       Here’s how the card-brand recovery process works: The card brands, Visa

and MasterCard, have contracts with the banks that issue their branded cards to

customers. In turn, the banks have contracts with the merchants who accept the

cards as payment. 2 These contracts include regulations for protecting payment-

card data against the threat of a data breach. The contracts also establish

procedures for merchants to reimburse the banks for losses in the event that card

information is compromised in a data breach. As part of the procedure, the card

brands investigate to determine if a breach occurred and the financial impact of the

breach. The card brands then impose assessments on the merchant to reimburse

the banks for their losses.

       2
          This description of the relationship between the card brands, the banks, and the
merchants is an oversimplification. Frequently, there are more layers, so that the card brands
contract with larger banks who contract with smaller banks who contract with merchants. Thus,
not all banks contract with the card brands, and not all banks contract with the merchants. But
ultimately, through the web of contracts, all of the parties agree to the same rules governing the
card-brand recovery process (at least for our purposes). For a more detailed explanation of the
card-brand recovery process, see Sovereign Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162,
164–65 (3d Cir. 2008).

                                                 6
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       That process is what happened in this case. Following the breach, Visa and

Mastercard together assessed $120 million against Home Depot to be paid to

banks. 3 Home Depot had the option to challenge the assessment and possibly pay

a reduced amount. In fact, Mastercard could not recall when a merchant had ever

paid the full amount. But instead of fighting the assessments, Home Depot offered

to pay the full amount plus a premium.

       Home Depot did so in exchange for the banks releasing their claims against

Home Depot. Normally, when a merchant pays these assessments, it does not

include a release from liability. In Home Depot’s view, if it was going to pay the

assessments, it ought to be released from liability too. So Home Depot reached out

to Visa, Mastercard, and some of the larger banks to negotiate a deal. These banks

were putative class members, who represented up to 80% of the compromised

payment cards.

       These parties worked out a deal in which Home Depot would pay the full

amount of the assessment, plus about a 10% premium payable to the banks that

released their claims against Home Depot. Visa and Mastercard then sent the

       3
         At that time, all of these banks, large and small alike, were members of the putative
class. The complaint defined the putative class as:

       All banks, credit unions, financial institutions, and other entities in the United States
       . . . that issued payment cards (including debit or credit cards) used by customers
       to make purchases from Home Depot during the period from April 1, 2014 to the
       present.
                                                  7
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release offers to some of the larger banks, who had been part of the negotiations

with Home Depot. Some of these larger banks then forwarded the release offers to

smaller banks that were affiliated with the card brands only through their

relationship with the larger banks and had not been involved in the release

negotiations. The release offers specifically referenced the ongoing multidistrict

litigation (“MDL”), making clear that any banks who accepted the terms would

release their claims in that litigation.

       Class Counsel objected. Home Depot had earlier moved the District Court

for permission to reach out to putative class members to propose release offers.

Because the District Court had not yet ruled on that motion, Class Counsel accused

Home Depot of charging ahead without the Court’s permission. 4 Class Counsel

also complained that the release offers were misleading and coercive. Specifically,

the offers did not say how much the banks would receive from the settlement or

whether the banks would still receive their share of the assessments even if they

did not agree to the settlement. Moreover, the offers were sent during the

Thanksgiving holidays, and banks were given only a few days to respond. Class

Counsel moved the District Court to vacate the releases, to send curative notices to

       4
         Home Depot adamantly denied being involved with sending the release offers to the
smaller banks. Home Depot’s contacts with the larger banks were not at issue, ostensibly
because the larger banks were represented by their own counsel during these negotiations. The
merits of this dispute are not material to our decision.

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class members, and to protect class members from misleading settlement attempts

going forward.

      The District Court agreed that the release offers were misleading and

coercive. But the Court refrained from ruling on Class Counsel’s request for

relief—vacating the releases, etc.—until it had more information. To that end, the

Court allowed Class Counsel to pursue discovery relating to the release offers.

The parties clashed repeatedly over the scope of the discovery, leading to a flurry

of motions to compel and other discovery disputes. The Court never resolved

whether to vacate the release offers; it stayed discovery pending settlement

negotiations before the issue came to a head.

      Ultimately, but before Home Depot settled with the class, a significant

number of banks accepted the releases, including most of the larger ones. These

banks represented 70–80% of the compromised payment cards. In exchange for

the releases, Home Depot paid these banks a total of $14.5 million (a premium on

top of the $120 million in assessments).

                                           C.

      Returning to the litigation, after the District Court stayed discovery, the

parties participated in three rounds of mediation, resulting in a preliminary

settlement agreement that the parties presented to the District Court for approval.

      The settlement agreement defined the class as follows:

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       All banks, credit unions, financial institutions, and other entities in the
       United States . . . that issued Alerted-on Payment Cards. 5 Excluded
       from this class are entities that have released all of their claims against
       Home Depot, but not excluded from the class are independent
       sponsored entities whose claims were released in connection with [the
       release offers] made by Mastercard.

As one would expect, the class definition excludes those banks that released their

claims against Home Depot by accepting the release offers. However,

“independent sponsored entities”—smaller banks who did not contract directly

with the card brands—are not excluded from the class. They are not excluded

because Class Counsel contests the validity of their releases, maintaining that these

smaller banks were misled and coerced by the offers.

       In exchange for settling the case, Home Depot agreed to provide the

following relief. First, Home Depot agreed to pay $25 million into a settlement

fund. The fund would be used to pay any taxes due and to pay any service awards

to class representatives that the District Court approved.6 The remainder of the

fund would be distributed to class members who had not released their claims. No

money in the fund would revert to Home Depot. Second, Home Depot agreed to

pay up to $2.25 million to some of the smaller banks (the “independent sponsored

       5
          An “Alerted-on Payment Card” is any card “that was identified as having been at risk as
a result of the Data Breach.”
       6
        The settlement agreement stipulated that Class Counsel would request, and Home Depot
would not oppose, $2,500 in service awards to each of the class representatives. The District
Court approved the requested service awards.

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entities”). To be eligible, these banks must certify that they did not have sufficient

time or information to appropriately consider the release offers—i.e., that they

were misled and/or coerced. Home Depot did not create a fund for these

payments; if less than $2.25 million was claimed, Home Depot would pay only the

amount claimed.

      Finally, Home Depot agreed to adopt security measures to protect its data.

These measures include developing a “risk exception” process to identify risks in

its data security; designing safeguards to manage any risks identified; monitoring

its service providers and vendors to ensure compliance with those safeguards; and

implementing an industry recognized security control framework.

      On the matter of attorney’s fees, the settlement agreement provided that

Home Depot would pay the “reasonable attorneys’ fees, costs and expenses” of

Class Counsel. 7 But the agreement left the amount of fees undetermined. Pursuant

to the agreement, Class Counsel would submit to the District Court a requested

      7
          Here is what the settlement agreement said about attorney’s fees in relevant part:
      Home Depot agrees to pay the reasonable attorneys’ fees, costs and expenses of
      counsel for the Financial Institution Plaintiffs separate from and in addition to the
      Settlement Fund. Class Counsel will make its application for such attorneys’ fees,
      costs and expenses pursuant to a Fee Request at least 30 days before the Final
      Approval Hearing. Home Depot reserves the right to object to Class Counsel’s
      request for attorneys’ fees and to appeal any Order granting Class Counsel’s request
      for attorneys’ fees. . . . The finality or effectiveness of the Settlement will not be
      dependent on the Court awarding Class Counsel any particular amount on their Fee
      Request or costs and expenses request and shall not alter the Effective Date.

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amount in fees and expenses, to which Home Depot was free to object. While each

party reserved its right to appeal the District Court’s decision on attorney’s fees,

the amount awarded—no matter how large or how small—would not affect the

“finality or effectiveness” of the settlement. Notably, the agreement stated that

Home Depot’s payment of attorney’s fees would be “separate from and in addition

to” the settlement fund. In other words, payment would not come from the $25

million set aside for class members.

      The District Court approved the settlement agreement, noting that the issue

of attorney’s fees would be decided separately.

                                           D.

      After the terms of the settlement were approved, the dispute over attorney’s

fees began.

      Courts calculate attorney’s fees using one of two methods: the percentage

method or the lodestar method. Under the percentage method, courts award

counsel a percentage of the class benefit. See Camden I Condo. Ass’n v. Dunkle,

946 F.2d 768, 774 (11th Cir. 1991). The class benefit generally includes any

benefits resulting from the litigation that go to the class. Id. In this Circuit, courts

typically award between 20–30%, known as the benchmark range. Id.

      Under the lodestar method, courts determine attorney’s fees based on the

product of the reasonable hours spent on the case and a reasonable hourly rate.

                                           12
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Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The product is known as the

lodestar. Sometimes courts apply to the lodestar a multiplier, also known as an

enhancement or an upward adjustment, to reward counsel on top of their hourly

rates. See 5 William B. Rubenstein, Newberg on Class Actions § 15:91, p. 353

(5th ed. 2015).

      Class Counsel advised the District Court that it had discretion to choose

either the lodestar or the percentage method. Under either approach, Class

Counsel requested $18 million in fees. In contrast, Home Depot argued that the

District Court had to use the lodestar method, and based on its calculations, a

reasonable fee would be about $5.6 million.

      After entertaining a hearing on the motion for attorney’s fees and reviewing

the parties’ briefings, the District Court issued a five-page decision. Following

Home Depot’s recommendation, the District Court adopted the lodestar approach.

The District Court accepted the lodestar proposed by Class Counsel—about $11.7

million—as “an appropriate measure of the time expended by the plaintiffs in this

case.” Next, it applied the same multiplier used in the consumer-track settlement,

1.3, to arrive at a reasonable fee of $15.3 million.

      Home Depot argued that Class Counsel was not entitled to a multiplier.

Home Depot did not suggest that a multiplier was prohibited, only that it was not

warranted. In Home Depot’s view, Class Counsel did not achieve a great result,

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the case was not more complex than the consumer track, and Class Counsel did not

face greater risks than counsel for the consumer class faced. But the District Court

disagreed, finding that a multiplier of 1.3 was “appropriate and justified in light of

the exceptional litigation risk that class counsel took in litigating this case.”

      While the District Court agreed with Home Depot on using the lodestar

method, it declined to adopt the lodestar proposed by Home Depot: about $5.6

million. It rejected the argument that Class Counsel’s lodestar should be the same

as the one used for counsel in the consumer track:

      The Court accepts that the lawyers for the [banks] have expended more
      effort than the lawyers who represented consumers, that they had to
      expend more effort than did the consumer lawyers in arriving at a
      settlement, and that dealing with [banks] rather than consumers added
      difficulty to the process of litigating this case, such as finding adequate
      class representatives, and thus required more time and effort.

The District Court also rejected the argument that Class Counsel should not be

compensated for the time spent litigating about the card-brand recovery process,

finding that the issues relating to the release offers “were appropriate for plaintiffs

to address in this case.”

      Finally, the District Court employed the percentage method as a cross-check

on the lodestar. The parties agreed that the class benefit should include the $25

million settlement fund, the $2.25 million Home Depot agreed to pay to some

smaller banks (the sponsored entities), and $710,000 in expenses. The parties did

not agree on two other potential inputs into the class benefit.
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      Class Counsel thought the class benefit should include the $14.5 million

premiums that Home Depot paid to banks in exchange for releases as part of the

card-brand recovery process. Home Depot urged the District Court not to include

the $14.5 million for three reasons. First, the premiums did not go to class

members; they went to former putative class members who were no longer part of

the class (because they accepted the premiums). Second, the premiums were not

prompted by the litigation. And third, Class Counsel tried to stop the premiums, so

they should not now receive compensation for them. The District Court sided with

Class Counsel and included the premiums, finding that they were “substantially

motivated by the pendency of this litigation.”

      Class Counsel also asked the District Court to include the $18 million in

requested fees in the class benefit. Home Depot objected to including a self-

selected fee in the class benefit, pointing out that allowing Class Counsel to

determine the size of the benefit by selecting the size of the fee is circular. Instead,

Home Depot effectively made the same circular request, proposing that the District

Court use the lodestar amount as the fees to include in the benefit. The District

Court declined to follow either recommendation, and did not include any

attorney’s fees in the class benefit, because this was not a “true common fund

analysis.”

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       Thus, adding the $25 million settlement fund, the $2.25 million that Home

Depot agreed to pay to the sponsored entities, the $710,000 in expenses, and the

$14.5 million premiums, the class benefit equaled about $42.5 million. 8 As an

attorney’s fee of $15.3 million is slightly more than a third of the class benefit, the

District Court concluded that the percentage cross-check supported the

reasonableness of the fee award.

       In sum, the District Court ordered Home Depot to pay Class Counsel $15.3

million in fees. It reached this award using the lodestar method, under which it

accepted the lodestar proposed by Class Counsel and applied a multiplier of 1.3 to

account for risk. The Court also used a percentage cross-check, which, after

including the $14.5 million premiums in the class benefit and excluding any

attorney’s fees, showed that the fee award was slightly more than a third of the

class benefit, which the Court found to be reasonable.

                                                 E.

       Home Depot appeals the award of attorney’s fees, raising four issues for our

consideration. First, whether it was an abuse of discretion for the District Court to

       8
         Class Counsel also suggested that the class benefit should include the value of the
enhanced security measures Home Depot agreed to implement, and the portion of the $120
million assessments that Home Depot would not have paid but for the pending litigation.
However, Class Counsel made no attempt to quantify the value of the security measures or the
portion of the assessments attributable to the litigation, and the District Court declined to include
them. The inclusion of these aspects of the settlement is not at issue on appeal.

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apply a multiplier. Second, whether it was an abuse of discretion to compensate

Class Counsel for time spent litigating about the card-brand recovery process.

Third, whether it was an abuse of discretion to compensate Class Counsel for time

spent soliciting class representatives. And fourth, whether the District Court’s

order fails to provide sufficient detail for meaningful appellate review.

       Class Counsel also brings a cross-appeal—conditioned on the outcome of

Home Depot’s appeal. Class Counsel asks us to reach their cross-appeal only if, in

response to Home Depot’s appeal, we reverse or modify the attorney’s fee award

and remand to the District Court for reconsideration. In that event, Class Counsel

challenges the District Court’s decision not to include attorney’s fees in the class

benefit when it conducted the percentage cross-check. Thus, if we remand the

case, Class Counsel asks us to instruct the District Court to include attorney’s fees

in the class benefit when it performs the percentage method—either as a cross-

check or in the first instance.9 Necessarily, then, we address the issues raised in

Home Depot’s appeal first.

       9
          To be clear, neither Home Depot nor Class Counsel challenges the District Court’s use
of the lodestar method. Class Counsel maintains that the District Court had discretion to use
either the percentage or the lodestar method in the proceedings below. See infra part II.A.3.
Class Counsel simply notes that, absent a decision from us to the contrary, the District Court
continues to have such discretion on remand.

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                                           II.

        We review a district court’s award of attorney’s fees for abuse of discretion.

Muransky v. Godiva Chocolatier, Inc., 922 F.3d 1175, 1194 (11th Cir. 2019). “An

abuse of discretion occurs if the judge fails to apply the proper legal standard or to

follow proper procedures in making the determination, or bases an award upon

findings of fact that are clearly erroneous.” ACLU of Ga. v. Barnes, 168 F.3d 423,

427 (11th Cir. 1999) (quotation omitted). “Under this standard, district courts have

great latitude in setting fee awards in class action cases.” Muransky, 922 F.3d at

1194.

                                           A.

        Before tackling the specific issues raised in Home Depot’s appeal, we

address a preliminary question on which much of the subsequent analysis turns:

whether this is a common-fund or fee-shifting case. Different rules and principles

govern common-fund cases and fee-shifting cases. Because this fee arrangement

defies easy categorization, we start with some background on these concepts.

                                           1.

        In the American legal system, each party is traditionally responsible for its

own attorney’s fees. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 253

(2010) (“Each litigant pays his own attorney’s fees, win or lose, unless a statute or

contract provides otherwise.”); see also Alyeska Pipeline Serv. Co. v. Wilderness

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Soc’y, 421 U.S. 240, 247 (1975) (“In the United States, the prevailing litigant is

ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.”). This

principle is known as the American Rule. Hardt, 560 U.S. at 253.

       There are three exceptions to the American Rule: (1) when a statute grants

courts the authority to direct the losing party to pay attorney’s fees; (2) when the

parties agree in a contract that one party will pay attorney’s fees; and (3) when a

court orders one party to pay attorney’s fees for acting in bad faith. 10 See

Rubenstein, supra § 15:25, p. 59–60; see also Alyeska Pipeline, 421 U.S. at 257–

59. These exceptions—when one party pays for the other’s attorney’s fees—

describe fee-shifting cases.

       Some courts, including this one, have described common-fund cases as an

exception to the American Rule. See Camden I, 946 F.2d at 771 (“One of the

recognized exceptions to the American Rule is the ‘common fund’ case.”). That is

incorrect.11 And it is important to understand why.

       10
          It’s not always necessarily the “losing” party who pays. While most fee-shifting
statutes have a “prevailing party” requirement, not all of them do. See Hardt, 560 U.S. at 252.
And in the case of a settlement where the parties agree that one side will pay the attorney’s fees,
it would belie the concept of settlements to label one side as losing.
       11
             Though understandable. Confusingly, the Supreme Court has said both that the
common-fund doctrine is and is not an exception to the American Rule—in the same case.
Compare Boeing Co. v. Van Germert, 444 U.S. 472, 478 (1980) (“The common-fund doctrine
. . . stands as a well-recognized exception to the general principle that requires every litigant to
bear his own attorney’s fees.” (citations omitted)), with id. at 481 (“The common-fund doctrine
. . . is entirely consistent with the American rule against taxing the losing party with the victor’s
attorney’s fees.”).

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        A common-fund case is when “a lawyer who recovers a common fund for

the benefit of persons other than himself or his client is entitled to a reasonable

attorney’s fee from the fund as a whole.” Boeing, 444 U.S. at 478. This is typical

in class actions, where the class might receive a large payout, from which the

attorney derives his fees. Common-fund cases are consistent with the American

Rule, because the attorney’s fees come from the fund, which belongs to the class.

In this way, the client, not the losing party, pays the attorney’s fees. See

Rubenstein, supra, § 15:25, p. 60 n.3 (“Occasionally courts state that common fund

fee awards are, too, an exception to the American Rule. But that is not quite right:

when fees are extracted from the common fund to pay class counsel, the class

members’ recoveries are reduced accordingly and hence those class members

themselves are paying their own fees.” (citation omitted)).

        Thus, the key distinction between common-fund and fee-shifting cases is

whether the attorney’s fees are paid by the client (as in common-fund cases) or by

the other party (as in fee-shifting cases).12

        Part of the reason for this confusion, we think, is that with some common funds, the
money belongs to third parties, not clients. In that scenario, someone other than the client is
effectively paying the attorney’s fees. Still, it’s not the other party, so it’s not accurate or helpful
to think of common funds as an exception.
        12
          A word on terminology. Throughout this opinion, we focus on the difference between
a common-fund case and a fee-shifting case. It would arguably be more helpful to describe the
difference as between fee-shifting (where the fee shifts to the other party) and fee-spreading
(where the fee is spread among the benefited party). Commentators often use the terms “fee-
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                                           2.

      Applying this understanding of attorney’s fees, we are convinced that this is

a fee-shifting case.

      On its face, the settlement agreement provides that Home Depot will pay the

attorney’s fees. The agreement states that “Home Depot agrees to pay the

reasonable attorneys’ fees, costs and expenses of counsel for the Financial

Institution Plaintiffs.” Even more explicit, the agreement goes on to state that

“[a]ny award of attorneys’ fees, costs, and expenses shall be paid separate from

and in addition to the Settlement Fund.” That sounds like fee shifting. Indeed, it is

hard to imagine how the settlement agreement could be any clearer that Home

Depot will pay the attorney’s fees, and that payment will not come out of the class

fund. A settlement agreement is a contract, which we construe “to effectuate the

intent of the parties,” Pottinger v. City of Miami, 805 F.3d 1293, 1298 (11th Cir.

2015), and the parties’ intent seemed to be for the fees to be paid separately by

Home Depot—i.e., a fee-shifting arrangement.

      Still, Class Counsel insists that we should treat this arrangement as a

constructive common fund. Where class action settlements are concerned, courts

will often classify the fee arrangement as a “constructive common fund” that is

spreading” and “common fund” synonymously, but our Court has always said common fund, so,
for consistency, we stick with the common-fund terminology too.

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governed by common-fund principles even when the agreement states that fees will

be paid separately. See, e.g., In re Heartland Payment Sys., Inc., 851 F. Supp. 2d
1040, 1072 (S.D. Tex. 2012) (providing an overview of the constructive common-

fund doctrine). Based on a proper understanding of the doctrine of constructive

common funds, we find that it does not apply to this case.

      The rationale for the constructive common fund is that the defendant

negotiated the payment to the class and the payment to counsel as a “package

deal.” Id. (quoting Johnston v. Comerica Mortg. Corp., 83 F.3d 241, 246 (8th Cir.

1996)). The defendant is concerned, first and foremost, with its total liability. See

In re Gen. Motors Corp., 55 F.3d 768, 819–20 (3d Cir. 1995). Thus, courts have

recognized that, as a practical matter, defendants undoubtedly take into account the

amount of attorney’s fees when they agree on an amount to pay the class. See id.;

see also Brytus v. Spang & Co., 203 F.3d 238, 246 (3d Cir. 2000)

(“[C]onsideration of the attorney’s fees was likely factored into the amount of

settlement.”). By taking the amount of attorney’s fees into account, the defendant

effectively reduces the class’ recovery accordingly. Commentators have endorsed

this reasoning:

      It is fair to assume that the class members’ recoveries have been
      indirectly reduced already in that the settling defendant, in agreeing to
      pay the class, say, $8 million and class counsel an additional $2 million,
      is effectively agreeing to pay the class $10 million and to not contest
      class counsel’s pursuit of a 20% fee from the $10 million recovery.

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Rubenstein, supra, § 15:76, p. 267 n.7; see also Manual for Complex Litigation

(Fourth) § 21.7 (2004) (“If an agreement is reached on the amount of a settlement

fund and a separate amount for attorney fees and expenses, . . . the sum of the two

amounts ordinarily should be treated as a settlement fund for the benefit of the

class, with the agreed-on fee amount constituting the upper limit on the fees that

can be awarded to counsel.”)13

       But this package-deal reasoning does not apply here. Put simply, there was

no package: Home Depot did not negotiate the attorney’s fees simultaneously with

the settlement fund. The fees were left entirely to the District Court’s discretion.

The parties did not even agree to a cap, often referred to as a “clear-sailing

agreement.”14 So it cannot be said that Home Depot took into account the amount

of attorney’s fees when it negotiated the size of the class award, because the

amount of attorney’s fees was completely undetermined.

       13
           Some courts have said that settlements should be treated as a constructive common
fund because the amount paid to the class and the amount paid to counsel ultimately come from
the same source—the defendant. See Johnston, 83 F.3d at 246 (“Although under the terms of the
settlement agreement, attorney fees technically derive from the defendant rather than out of the
class’ recovery, in essence the entire settlement amount comes from the same source.”). This
explanation misses the mark. In every fee-shifting and common-fund case, the payments can be
traced, in the end, to the defendant. For this reason, the same-source logic would utterly fail to
distinguish between the two types of cases. Rather, the key is whether the attorney’s fees
effectively reduce the class’ recovery.
       14
          A clear-sailing agreement is a provision sometimes included in class action settlements
in which the defendant promises not to contest the amount of attorney’s fees so long as it falls
beneath a negotiated cap. See Waters v. Int’l Precious Metals Corp., 190 F.3d 1291, 1293 n.3
(11th Cir. 1999). Defendants use these provisions to provide “a more definite idea of their total
exposure.” Id.

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       Usually, when courts have applied the constructive common-fund doctrine,

the parties at least agreed to a cap on the attorney’s fees. See, e.g., Johnston, 83
F.3d at 243–44; Dennis v. Kellogg Co., 697 F.3d 858, 863 (9th Cir. 2012). But see

In re Gen. Motors Corp., 55 F.3d at 781, 821 (characterizing the fee arrangement

as a common fund even though the fees were paid separately and left completely

undetermined). In that scenario, the constructive common fund makes more sense

because the defendant used the cap to determine its total exposure and

(theoretically) limited the class’ recovery accordingly. Class Counsel argues that

whether the amount is agreed-to or capped is immaterial: the amount of attorney’s

fees is always unsettled because it is subject to the court’s approval. True enough.

In reality, though, a defendant can make a much more reliable estimate of its

liability when the parties make a joint recommendation than when the parties

present widely divergent proposals.

       Admittedly, a defendant could (and probably does) make an educated guess

concerning the amount of attorney’s fees, even when the amount is left

undetermined. 15 But if this were enough to create a constructive common fund, it

would be virtually impossible to contract for fee-shifting. The purported rule

would be that any class settlement—no matter whether the fees are paid by the

       15
         If accepted, the educated-guess theory would also be exceeding difficult for courts to
apply. See infra part III.A.

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defendant or out of the class award, or whether the fees are negotiated separately or

as part of the settlement—should be treated as a common fund. As a result,

construing the agreement here as a constructive common fund would effectively

eliminate the ability to contract for fee-shifting absent perhaps some magic-word

requirement.

      In sum, we hold that the constructive common fund does not apply when the

agreement provides that attorney’s fees will be paid by the defendant separately

from the settlement fund, and the amount of those fees is left completely

undetermined. We construe the settlement agreement here as a fee-shifting

arrangement.

                                          3.

      Ordinarily, after classifying the fee arrangement, the next question would be

which method the court should use to calculate the attorney’s fees. In common-

fund cases, we have directed courts to use the percentage method. Camden I, 946
F.2d at 774 (“Henceforth in this circuit, attorneys’ fees awarded from a common

fund shall be based upon a reasonable percentage of the fund established for the

benefit of the class.”). In statutory fee-shifting cases, the Supreme Court has said

that courts should use the lodestar method. See City of Burlington v. Dague, 505
U.S. 557, 562 (1992) (“The ‘lodestar’ figure has, as its name suggests, become the

guiding light of our fee-shifting jurisprudence.”). This case, however, is a

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contractual fee-shifting case, and the appropriate method for such a case is not

clearly governed by any binding precedent.

       But the parties do not challenge the District Court’s selection of the lodestar

method. Even though Class Counsel believes this is a common-fund case, they say

the District Court had discretion to choose either the percentage or the lodestar

method because several of the claims raised in the complaint were under state

statutes with fee-shifting provisions. Class Counsel may be right that the District

Court had discretion to choose, but the proper method here has nothing to do with

the state statutes. The District Court awarded the attorney’s fees pursuant to a

contract—the settlement agreement—not pursuant to a statute. See Brytus, 203
F.3d at 246 (“Where there has been a settlement, the basis for the statutory fee has

been discharged, and it is only the fund that remains.”); see also Florin v.

Nationsbank of Ga., N.A., 34 F.3d 560, 563 (7th Cir. 1994) (finding that “the terms

of [the statute’s] fee-shifting provision do not purport to control fee awards in

cases settled with the creation of a common fund”). Nevertheless, because the

parties do not challenge the District Court’s use of the lodestar method, we do not

question it.16

       16
           One of Class Counsel’s arguments for not classifying this as a fee-shifting case is that
it would create bad incentives for parties. Namely, one party will always refuse to agree on a fee
amount in the settlement if the party knows that by doing so the agreement will be cast as fee-
shifting, and the court will thus use the lodestar method, under which that party will either
receive more or pay less. But this argument assumes that the court will use the lodestar method
in a fee-shifting case, and we do not decide that. It also assumes that parties will know for sure
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       With these preliminary matters decided, we resume with the issues raised by

Home Depot on appeal.

                                            B.

       First, Home Depot argues that the District Court abused its discretion by

applying a multiplier to Class Counsel’s lodestar. Home Depot bases its argument

on Supreme Court precedent outlining the use of multipliers in statutory fee-

shifting cases. Although we are not bound in a contractual fee-shifting case by

statutory fee-shifting cases, we agree that it was error for the District Court to

enhance Class Counsel’s lodestar based on risk.

                                            1.

       We begin by summarizing the Supreme Court’s precedent on statutory fee-

shifting cases. Fee-shifting statutes allow counsel for the prevailing party to

recover a reasonable fee. Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550

(2010). A reasonable fee is one sufficient to attract competent counsel to represent

the case, but not one that provides a windfall for attorneys. Id. at 552. There is a

strong presumption that the lodestar yields a reasonable fee for this purpose. Id.

Because the lodestar is presumed to be sufficient, a multiplier will be appropriate

only in “rare and exceptional” cases. Id. (quotations omitted). To warrant a

how much the court would award under the different methods—a questionable assumption to say
the least.

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multiplier, the fee applicant must produce “specific evidence” that an enhancement

is necessary to provide a reasonable fee. Id. at 553 (quotation omitted). An

enhancement may be necessary if the lodestar does not reflect the true value of

counsel’s work. Id. at 554.

       The question becomes, what specific evidence would satisfy this standard.

The Supreme Court has made it plain that “most, if not all,” of the factors used to

determine a reasonable fee are already subsumed in the lodestar, and it is not

permissible to enhance a fee based on a factor that is subsumed. Id. at 553. That

would be “double counting”—i.e., a windfall. Dague, 505 U.S. at 563. In a series

of cases, the Court has expanded on which factors are subsumed and why. 17

       For example, the novelty and complexity of the issues are reflected in the

number of hours spent on the case, as complicated litigation will demand more

time. Blum v. Stenson, 465 U.S. 886, 898 (1984). Similarly, the skill and

       17
         The factors the Court refers to are found in Johnson v. Ga. Highway Express, Inc., 488
F.2d 714 (5th Cir. 1974), where the Fifth Circuit articulated twelve factors for courts to consider
in determining a reasonable attorney’s fee. Id. at 717–19. Those factors are:
       (1) The time and labor required; (2) The novelty and difficulty of the questions; (3)
       The skill requisite to perform the legal service properly; (4) The preclusion of other
       employment by the attorney due to acceptance of the case; (5) The customary fee;
       (6) Whether the fee is fixed or contingent; (7) Time limitations imposed by the
       client or the circumstances; (8) The amount involved and the results obtained; (9)
       The experience, reputation, and ability of the attorneys; (10) The undesirability of
       the case; (11) The nature and length of the professional relationship with the client;
       and (12) Awards in similar cases.
Id.

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experience of the attorneys will be reflected in the hourly rates. Id. Thus, courts

should not use these factors to justify a multiplier. Id. at 898–99.

       As for the results obtained, this factor should be folded into the quality-of-

representation factor.18 Perdue, 559 U.S. at 554. This is so because the results

obtained are relevant to attorney’s fees only if those results are attributable to

counsel’s performance, rather than, say, the other side dropping the ball. Id. And

the quality of representation should be used to enhance the fee only in the rare

cases where the fee applicant demonstrates that the “superior attorney performance

is not adequately taken into account in the lodestar calculation.” Id.

       The Court offered three examples of when the lodestar may not adequately

capture counsel’s superior performance. First, “where the method used in

determining the hourly rate . . . does not adequately measure the attorney’s true

market value.” Id. at 554–55. “This may occur if the hourly rate is determined by

a formula that takes into account only a single factor (such as years since

admission to the bar) or perhaps only a few similar factors.” Id. at 555 (footnote

omitted). Second, if counsel incurs an “extraordinary outlay of expenses” in the

       18
          This is a far cry from the Court’s original position on the results obtained. In Hensley
v. Eckerhart, the Court specifically mentioned that the lodestar could be adjusted upward based
on the results obtained, indeed emphasizing that “the most critical factor is the degree of success
obtained.” 461 U.S. at 434, 436.

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case. Id. Third, if there is an “exceptional delay in the payment of fees.” Id. at

556.

       Finally, the Court determined that risk is not an appropriate basis for a

multiplier in statutory fee-shifting cases. The Court explained that the “risk of loss

. . . is the product of two [inputs]: (1) the legal and factual merits of the claim, and

(2) the difficulty of establishing those merits.” Dague, 505 U.S. at 562. The

second input is subsumed in the lodestar—“either in the higher number of hours

expended to overcome the difficulty, or in the higher hourly rate of the attorney

skilled and experienced enough to do so.” Id. While the first input is not reflected

in the lodestar, “there are good reasons” not to enhance fees for the risk presented

by meritless claims. Id. at 563.

       Namely, if fees are enhanced for contingency fee cases as a class—rather

than based on a risk assessment of each case—it would inevitably overcompensate

some cases and undercompensate others. Id. at 564–65. Conversely, if fees are

enhanced based on the riskiness of each particular case, it would reward lawyers

for taking cases with relatively little merit and incentivize bad claims. 19 Id. at 563.

       19
            The Court provided a helpful explanation:
       [T]he consequence of awarding [a risk] enhancement to take account of this
       “merits” factor would be to provide attorneys with the same incentive to bring
       relatively meritless claims as relatively meritorious ones. Assume for example, two
       claims, one with underlying merit of 20%, the other of 80%. Absent any
       contingency enhancement, a contingent-fee attorney would prefer to take the latter,
       since he is four times more likely to be paid. But with a contingency enhancement,
       this preference will disappear: the enhancement for the 20% claim would be a
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For this reason, not adjusting fees for risk is consistent with fee-shifting statutes.

Id. at 565. These statutes limit fees to prevailing parties, and adjusting fees for risk

effectively subsidizes the attorney’s losing cases—a result at odds with the

prevailing party requirement. Id. Plus, enhancing for risk “would make the setting

of fees more complex and arbitrary, hence more unpredictable, and hence more

litigable.” Id. at 566. For all of these reasons, the Supreme Court decreed that

courts could not use a multiplier in statutory fee-shifting cases to account for risk.

Id. at 567.

        If these precedents apply, it was an abuse of discretion for the District Court

to apply a multiplier. The District Court’s only stated reason for using a multiplier

was the exceptional risk taken by counsel in litigating the case. 20 And risk,

according to the Supreme Court, is not an appropriate basis for enhancing an

attorney’s fee in statutory fee-shifting cases. But this is a contractual fee-shifting

        multiplier of 5 (100/20), which is quadruple the 1.25 multiplier (100/80) that would
        attach to the 80% claim. Thus, enhancement for contingency . . . would encourage
        meritorious claims to be brought, but only at the social cost of indiscriminately
        encouraging nonmeritorious claims to be brought as well.
Id. at 563.
        20
           In its fee application, Class Counsel also cited its investment in the case and the
success achieved to justify a multiplier. Though the Supreme Court has not categorically barred
these factors from justifying a multiplier, see Perdue, 559 U.S. at 554–55 (discussing statutory
fee-shifting cases), the District Court did not rely on these factors in its order awarding fees, and
Class Counsel did not press them on appeal, so we do not consider them.

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arrangement. As such, we must consider whether and to what extent these

precedents apply.

                                           2.

      There is no question that the Supreme Court precedents stretching from

Hensley to Perdue are specific to fee-shifting statutes. See Perdue, 559 U.S. at 552

(“Our prior decisions concerning the federal fee-shifting statutes have established

six important rules that lead to our decision in this case.”). These cases were about

interpreting statutory language. See Blum, 465 U.S. at 893 (“Resolution of these

two arguments [about the proper way to calculate attorney’s fees] begins and ends

with an interpretation of the attorney’s fee statute.”); see also Dague, 505 U.S. at

562 (“This language is similar to that of many other federal fee-shifting statutes . . .

[and] our case law construing what is a ‘reasonable’ fee applies uniformly to all of

them.” (citation omitted)). Thus, these precedents are not binding outside of the

statutory context.

      For this reason, we have held that the Supreme Court precedent requiring the

use of the lodestar method in statutory fee-shifting cases does not apply to

common-fund cases. Muransky, 922 F.3d at 1194–95 (“Perdue addresses fee-

shifting statutes and says nothing about the award of attorney’s fees from a

common fund.”). And other circuits have held that the Supreme Court’s

jurisprudence restricting the use of multipliers in statutory fee-shifting cases does

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not apply to common-fund cases. See Florin, 34 F.3d at 564–65 (“[W]e conclude

that the holding in Dague . . . forbidding risk multiples in statutory fee-shifting

cases . . . has no application to common fund cases.”); see also In re Wash. Pub.

Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1299 (9th Cir. 1994) (“Dague’s

rationale for barring risk multipliers in statutory fee cases does not operate to bar

risk multipliers in common fund cases.”). But see In re Gen. Motors Corp., 55 F.3d

at 822 (suggesting that even in a common-fund case, the “pertinence” of Supreme

Court precedent on the use of multipliers in lodestar analysis is “patent”).

      But this is a contractual fee-shifting case, not a common-fund case. As such,

it is more closely related to the Supreme Court precedent governing fee-shifting

statutes. And just because precedent is not technically binding does not mean we

should blithely disregard it. To promote consistency in the law, we should adhere

to precedent where its reasoning applies.

      For example, it makes sense to draw a clear line between fee-shifting cases

and common-fund cases. The common-fund doctrine serves a different purpose—

preventing unjust enrichment—and the fees are paid by the client, rather than by

the opposing party. See Rubenstein, supra, § 15:53, p. 181–83 (explaining the

purpose of the common fund doctrine). In contrast, the Supreme Court cases

reviewed above and the present case are all fee-shifting arrangements, where the

fees are paid by the other party and the purpose is to fairly compensate counsel for

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the value of their work. The only difference is that the Supreme Court cases are

fee-shifting by statute, and this one is fee-shifting by contract. Thus, while the

statutory cases are not binding on contractual arrangements, we will not lightly cast

aside the statutory fee-shifting precedent if its reasoning applies with full force.

Obviously, the reasoning does not apply if it is specific to statutory interpretation.

      With that in mind, we consider whether the Supreme Court’s reasons for

limiting the use of multipliers in statutory fee-shifting cases apply to contractual

fee-shifting cases. The Court’s reasons largely turn on the point that most of the

factors used to justify an enhancement are already subsumed in the lodestar, so it

would result in a windfall to count them again with a multiplier. See, e.g., Perdue,
559 U.S. at 553. This reasoning makes it just as unreasonable to double-count in a

contractual fee-shifting case as it is in a statutory fee-shifting case.

      Here, the District Court used a multiplier to account for risk. The Supreme

Court forbade adjusting for risk for a number of reasons. Dague, 505 U.S. at 562–

67. To start, the Court said that risk was partly reflected in the lodestar. Id. at 562.

For the part of risk that is not reflected in the lodestar, the Court gave one reason

for not using it to justify an enhancement that is specific to statutes—subsidizing

losing claims contrary to the prevailing-party requirement found in most fee-

shifting statutes. Id. at 565; see also infra part II.C. But the Court gave other

reasons that apply equally in contractual fee-shifting settings, such as incentivizing

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meritless claims and making fees less predictable. Thus, on the whole, we find that

the Court’s prohibition on enhancements for risk applies to contractual fee-shifting

cases when courts use the lodestar method.

         Because it is inappropriate to enhance a lodestar in a fee-shifting case to

account for risk, the District Court abused its discretion in applying a multiplier on

the basis of the “exceptional litigation risk that class counsel took in litigating this

case.”

                                            3.

         Class Counsel insists, however, that Home Depot waived the multiplier

issue. It’s a close call, but we do not think Home Depot waived the issue.

         We generally will not review issues raised for the first time on appeal. Blue

Martini Kendall, LLC v. Miami Dade County, 816 F.3d 1343, 1349 (11th Cir.

2016). But there is a difference between raising new issues and making new

arguments on appeal. If an issue is “properly presented, a party can make any

argument in support of that [issue]; parties are not limited to the precise arguments

they made below.” Yee v. City of Escondido, 503 U.S. 519, 534 (1992); see also

Sec’y, U.S. Dep’t of Labor v. Preston, 873 F.3d 877, 883 n.5 (11th Cir. 2017)

(“Parties can most assuredly waive positions and issues on appeal, but not

individual arguments . . . . Offering a new argument or case citation in support of a

position advanced in the district court is permissible—and often advisable.”

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(citation omitted)). This principle begs the question: does Home Depot raise a new

argument or a new issue?

       Home Depot argued below that the District Court should not apply a

multiplier to Class Counsel’s lodestar. In support of this position, Home Depot

argued that Class Counsel did not achieve a great result, the case was not more

complex than the consumer case, and Class Counsel did not face greater risk than

counsel for the consumers. Now, on appeal, Home Depot makes a different pitch:

it’s not that the level of risk did not justify a multiplier; it’s that the District Court

cannot use a multiplier to account for risk, period. The new argument is based on a

different line of precedents, see supra part II.B.1., and is inconsistent with the old

argument, which seemed to accept that multipliers for risk could be appropriate in

the right circumstances.

       Nevertheless, in the final analysis, we think this is a new argument, not a

new issue. Home Depot asked the District Court not to apply a multiplier. On

appeal, Home Depot makes the same request, albeit for different (and

contradictory) reasons. The issue was not waived.

                                            C.

       The second issue Home Depot raises in its appeal is whether the District

Court abused its discretion by compensating Class Counsel for the time spent

litigating about the card-brand recovery process.

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      Home Depot says that it was an abuse of discretion because our precedent

requires courts to “deduct time spent on discrete and unsuccessful claims.”

Norman v. Hous. Auth. of Montgomery, 836 F.2d 1292, 1302 (11th Cir. 1988).

And the time spent litigating about the card-brand recovery process—whether the

release offers were misleading and coercive, whether Home Depot improperly

directed the releases, and whether the releases should be vacated—was, in Home

Depot’s view, discrete and unsuccessful. However, the rule that Home Depot

relies on does not apply here.

      The rule against compensating counsel for time spent on discrete and

unsuccessful claims comes from fee-shifting statutes. Specifically, this rule

derives from language commonly found in such statutes that limits recovery to a

“prevailing party.” See Hensley, 461 U.S. at 433, 435 (“A plaintiff must be a

‘prevailing party’ to recover an attorney’s fee under § 1988. . . . The congressional

intent to limit awards to prevailing parties requires that these unrelated claims be

treated as if they had been raised in separate lawsuits, and therefore no fee may be

awarded for services on the unsuccessful claim.”). Notably, some fee-shifting

statutes do not contain the prevailing-party language, in which case, as you would

expect, the prevailing-party limitation does not apply. See Hardt, 560 U.S. at 252

(“The words ‘prevailing party’ do not appear in this provision. . . . We therefore

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hold that a fee claimant need not be a ‘prevailing party’ to be eligible for an

attorney’s fees award.”).

        Here, of course, the fees are awarded pursuant to a contract, not a statute,

and there is no prevailing-party limitation in the settlement agreement. 21

Accordingly, the prevailing-party limitation does not apply, and the District Court

did not need to deduct time spent on discrete and unsuccessful claims. Instead, the

question is simply whether the time spent was reasonable, which is the standard set

in the agreement.

        Time spent is reasonable, and thus compensable, if it would be proper to

charge the time to a client. See Norman, 836 F.2d at 1301. As with a client,

counsel should not include in the lodestar hours that are “excessive, redundant or

otherwise unnecessary.” Id. (quoting Hensley, 461 U.S. at 434). In other words,

counsel must exercise “billing judgment.” Id. If counsel does not exercise billing

judgment, “courts are obligated to do it for them.” Barnes, 168 F.3d at 428. Thus,

“[i]n the final analysis, exclusions for excessive or unnecessary work on given

tasks must be left to the discretion of the district court.” Norman, 836 F.2d at

1301.

        21
          It would be a contradiction in terms to identify one side as the prevailing party in a
settlement, especially when, as here, the defendant does not admit to liability. That aside, the
key point is that the terms of the agreement do not contain a prevailing-party requirement.

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      In this case, it was firmly within the District Court’s discretion to

compensate Class Counsel for time spent challenging the release offers. To be

clear, the release offers were effectively settlement offers: they promised additional

payment in exchange for releasing the class claims. Indeed, institutions

representing around 70–80% of the compromised payment cards settled their

claims through the release offers. Class Counsel thought these were lousy

settlement offers and that the class could recover more from the litigation.

Moreover, Class Counsel was concerned that the offers were misleading and

coercive. It was perfectly reasonable for Class Counsel to take action to ensure

that class members’ releases were voluntary and informed, especially since Class

Counsel thought the terms were unfavorable. To hold otherwise would be to say,

as a matter of law, that it is unreasonable for Class Counsel to ever oppose a

settlement.

      We also note that the District Court specifically authorized Class Counsel to

conduct discovery into the card-brand recovery process. The District Court agreed

that the release offers were misleading and coercive, and it approved the discovery

in order to determine whether to vacate the releases. We are not willing to say that

time spent on court-sanctioned discovery was unreasonable.

      It was not an abuse of discretion to compensate Class Counsel for time spent

on the card-brand recovery process.

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                                          D.

      The third issue Home Depot raises in its appeal is whether the District Court

abused its discretion by compensating Class Counsel for time spent soliciting class

representatives.

      A significant chunk of Class Counsel’s lodestar included time spent

selecting and vetting class representatives. Class Counsel wanted to ensure that if

the proposed national class was not certified, there would be state-specific classes

as an alternative. To that end, Class Counsel needed to find and select a class

representative from each state. Ultimately, Class Counsel secured representatives

from 44 states. This is a sound (and not uncommon) strategy. It is also a time-

consuming process.

      In Barnes, we said that “hours spent looking for and soliciting potential

plaintiffs should not have been included in the time billed.” 168 F.3d at 435. We

explained that, based on fee-shifting statutes, counsel is entitled to compensation

for time reasonably spent “on the litigation.” Id. (emphasis and quotation omitted).

Thus, “time spent procuring potential plaintiffs” is not compensable, “because until

the attorney has a client, there is no case to litigate.” Id. This reasoning made

sense in Barnes; it does not apply to this case.

      As an initial matter, it is questionable whether the formal limit on

compensation to time spent “on the litigation” even applies, since this case is not

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governed by a fee-shifting statute and the settlement agreement says only that

Class Counsel should be compensated with a reasonable attorney’s fee. That aside,

in a class action (which Barnes was not), it is not true that a case does not exist

until the class names a representative. Here, for example, numerous cases were

filed across the country before being consolidated as an MDL. As a fact, then, the

litigation existed before naming class representatives.

      Furthermore, it would be seriously misguided to say that Class Counsel

cannot be paid for time spent vetting class representatives. Selecting proper class

representatives is an important part of what class counsel does. And counsellors

should be paid for work reasonably done on behalf of their clients. See Norman,
836 F.2d at 1305 (“The law seeks to compensate attorneys for work reasonably

done actually to secure for clients the benefits to which they are entitled.”). There

is no question that Class Counsel’s efforts in this instance meet that standard.

      For these reasons, we hold that it was not an abuse of discretion to pay Class

Counsel for their time spent finding and vetting class representatives.

                                          E.

      Finally, Home Depot argues that the District Court’s order does not allow

for meaningful review.

      As noted earlier, a district court has ample discretion in awarding fees—and

with good reason. See Hensley, 461 U.S. at 437 (“We reemphasize that the district

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court has discretion in determining the amount of a fee award. This is appropriate

in view of the district court’s superior understanding of the litigation and the

desirability of avoiding frequent appellate review of what essentially are factual

matters.”). But “that discretion is not without limits.” Norman, 836 F.2d at 1304.

A district court’s “order on attorney’s fees must allow meaningful review—the

district court must articulate the decisions it made, give principled reasons for

those decisions, and show its calculation.” Id. In other words, the court must

“provide a concise but clear explanation of its reasons for the fee award.” Hensley,
461 U.S. at 437. Home Depot contends that the District Court failed to satisfy this

requirement. We disagree.

      The District Court explained that it would use the lodestar method to

calculate fees, agreeing with Home Depot’s argument that the percentage method

was not appropriate in this case because it was not a common fund. The District

Court then accepted the lodestar proposed by Class Counsel and explained why it

rejected the lodestar proposed by Home Depot. It disagreed with Home Depot’s

argument that the lodestar should be the same as the one used for counsel in the

consumer track, finding that the financial track “required more time and effort.” It

also disagreed with Home Depot’s argument that Class Counsel should not be

compensated for time spent litigating the card-brand recovery process, finding that

such issues “were appropriate for plaintiffs to address in this case.” Finally, the

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District Court decided to enhance the lodestar with a multiplier of 1.3, which it

said was “appropriate and justified in light of the exceptional litigation risk that

class counsel took in litigating this case.” In short, we are not left in doubt about

what the District Court decided and why.

      Home Depot raises two alleged deficiencies in the order. First, Home Depot

complains that the District Court did not deduct a single hour from Class Counsel’s

lodestar. Home Depot suggests that it was unreasonable for the District Court to

accept more than 21,000 hours without showing any analysis of those hours

specifically. While it is the obligation of district courts to ensure that the hours

claimed are reasonable, see Barnes, 168 F.3d at 428, we have said that courts

“need not engage in an hour-by-hour analysis” when “the fee motion and

supporting documents are so voluminous” that “an hour-by-hour review is simply

impractical and a waste of judicial resources,” Loranger v. Stierheim, 10 F.3d 776,

783 (11th Cir. 1994).

      The level of specificity required by district courts is proportional to the

specificity of the fee opponent’s objections. See Barnes, 168 F.3d at 428–29

(“[W]here specific objections are made a court’s order should consist of more than

conclusory statements. . . . The more specific the objections to a fee application

are, the more specific the findings and reasons for rejecting those objections can

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be.”). Put differently, if a party objects to a subset of hours as unreasonable, the

court should respond to that objection.

       The problem for Home Depot is that it did not make specific objections to

Class Counsel’s lodestar. 22 Instead, Home Depot offered two general reasons why

Class Counsel’s hours were excessive: first, because Class Counsel spent more

than twice as many hours as counsel in the consumer track; second, because it was

unreasonable to spend time litigating the card-brand recovery process. The District

Court responded to both arguments. It found that it was reasonable to spend more

time in the financial track:

       The Court accepts that the lawyers for the financial institutions have
       expended more effort than the lawyers who represented consumers, that
       they had to expend more effort than did the consumer lawyers in
       arriving at a settlement, and that dealing with financial institutions
       rather than consumers added difficulty to the process of litigating this
       case, such as finding adequate class representatives, and thus required
       more time and effort.

       22
         At least one reason Home Depot’s objections were not specific is that Home Depot
never requested Class Counsel’s billing records.
        Class Counsel posits that Home Depot decided not to request these records because, if it
had, Class Counsel would have been entitled to see Home Depot’s billing records as well, which
Class Counsel speculates would have shown that Home Depot paid its lawyers more than Class
Counsel was requesting. And courts can take into account the opposing party’s billing to
determine reasonable fees. See David F. Herr, Ann. Manual for Complex Litigation § 14:13 (4th
ed. 2018) (“Where a party challenges the reasonableness of fees sought by an adversary, a useful
source of relevant information in the form of a reference point may be the fees incurred by the
objecting party. . . . Reciprocal discovery is often a useful measure of what reasonable rates are
and what litigation actions were necessary in the case.”).

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And it determined that the “issues relating to the card brand recovery processes

were appropriate for plaintiffs to address in this case.” The latter response is a

little conclusory, but Home Depot’s argument below for why this time was not

reasonably spent was equally conclusory: “The Court should not compensate

Plaintiffs for this time,” accompanied by a citation stating that only hours

reasonably expended are included in the lodestar. Given the lack of specificity of

Home Depot’s objections, the District Court’s response was adequate.

      The second deficiency raised by Home Depot is that the District Court did

not address the Johnson factors in its order. 23 Essentially, Home Depot asks us to

declare that, in order to allow for meaningful review, an order awarding attorney’s

fees must explicitly consider the Johnson factors. We have never announced such

a rule, and we decline to do so now. Such a rule would be especially misguided in

cases using the lodestar method.

      With the percentage method, courts use the Johnson factors to help

determine what percentage of the fund to award to counsel. See Camden I, 946
F.2d at 775. But the Johnson factors have a much more limited role in determining

fees under the lodestar method.

      In Hensley, the Supreme Court opted to use the lodestar method instead of

the Johnson factors to calculate a reasonable attorney’s fee under fee-shifting

      23
           See footnote 16 for a list of the Johnson factors.

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statutes.24 See Hensley, 461 U.S. at 429–34. Nonetheless, the Court said that the

Johnson factors could be used to determine whether an upward (or downward)

adjustment, i.e., a multiplier, was warranted. Id. at 434 & n.9. In other words, the

Court consigned the Johnson factors to the adjustment stage. Since then, the Court

has explained that “most, if not all,” of the Johnson factors are subsumed in the

lodestar. Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478
U.S. 546, 566 (1986). As a result, the Johnson factors are largely redundant, and

an enhancement will be warranted only in the rare and exceptional case where the

fee applicant provides specific evidence showing that the lodestar does not

adequately reflect the true market value of the attorney’s performance. See

Perdue, 559 U.S. at 553–54.

       Our precedent puts this a little differently. We have said that courts may use

the Johnson factors to determine “what is a ‘reasonable’ hourly rate and what

number of compensable hours is ‘reasonable.’” Bivins v. Wrap It Up, Inc., 548
F.3d 1348, 1350 (11th Cir. 2008) (per curiam). But that does not mean that courts

should march through the Johnson factors—considering the time and labor

required, the novelty and difficulty of the issues, the results obtained, etc.—to

arrive at an hourly rate. Instead, after counsel proposes an hourly rate based on the

       24
          We discern no reason why the use of the Johnson factors in the lodestar method would
be different in statutory fee-shifting cases than in contractual fee-shifting cases.

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prevailing market rate in the community, courts may consider the Johnson factors

to determine if the proposed rate accurately reflects the true worth of counsel. See

Norman, 836 F.2d at 1299–1300 (“We still believe that at least some of the

Johnson factors have utility in establishing the hourly rate. In evaluating the

comparability of the market rates being attested to, the district court may wish to

consider any of the Johnson factors to the extent that they suggest that comparables

offered may not be relevant to the issues before the court or as they may affect the

weight to be given to the comparables being offered the court.”).

      While the Supreme Court reserves this analysis—whether the market rate is

an accurate reflection of counsel’s true worth—for the adjustment stage, the result

is the same. We use the Johnson factors to adjust the hourly rate, the Supreme

Court uses the Johnson factors to adjust the overall lodestar. Either way, the

Johnson factors are relevant only in the rare cases where they are not fully

captured in the lodestar.

      The crucial point, under both line of precedents, is that the Johnson factors

are largely redundant to the lodestar analysis because they are almost always

subsumed in the lodestar. Consequently, it would be inefficient, to say the least, to

require district courts to slog through the Johnson factors when those factors have

little independent bearing on the analysis.

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       For all of these reasons, there is no merit to Home Depot’s contention that

the District Court’s order does not allow for meaningful review.

                                               III.

       Because we held that the District Court abused its discretion by applying a

multiplier to account for risk, we reach Class Counsel’s conditional cross-appeal.

       Fittingly, the cross-appeal challenges the way the District Court performed

the cross-check. Courts often use a cross-check to ensure that the fee produced by

the chosen method is in the ballpark of an appropriate fee. See In re Gen. Motors

Corp., 55 F.3d at 820 (“[I]t is sensible for a court to use a second method of fee

approval to cross check its conclusion under the first method.”). 25 Accordingly,

after calculating a fee using the lodestar method, the District Court cross-checked

the fee with the percentage method. As the percentage method awards class

counsel a percentage of the class benefit, the first step is to determine what

constitutes the class benefit.

       It is with this step that each party finds error. Class Counsel maintains that

the District Court should have included the attorney’s fees in the class benefit. For

its part, Home Depot argues that the District Court should not have included in the

class benefit the $14.5 million premiums that Home Depot paid to banks in

       25
           We do not mean to suggest that a cross-check is required. A lodestar cross-check is a
time-consuming exercise. And “the percentage cross-check is rarely utilized” because, in most
fee-shifting cases, the percentage method is not viable. Rubenstein, supra, § 15:52, p. 178–80.

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exchange for releases as part of the card-brand recovery process. We take up each

claim in turn.

                                         A.

      While Class Counsel is correct that attorney’s fees are generally included in

the class benefit in common-fund cases, it does not make sense to do so in fee-

shifting cases. In typical common-fund cases, attorney’s fees are necessarily

included in the class benefit, see, e.g., Gascho v. Global Fitness Holdings, LLC,

822 F.3d 269, 282 (6th Cir. 2016) (stating that the class benefit includes attorney’s

fees), because the defendant pays a lump sum of cash, a percentage of which is

awarded to class counsel. The analysis is straightforward because there is no need

to determine the amount of attorney’s fees to include in the class benefit—it all

comes from the same lump sum, so the class benefit is obvious.

      In constructive common-fund cases, the parties may designate the attorney’s

fees to be paid separately, but at the same time they agree on the amount of

attorney’s fees or at least set a cap on the amount. Courts, of course, are not bound

by the parties’ agreement on fees. Waters, 190 F.3d at 1296 n.9. So the agreed-

upon fees, or the agreed-upon cap, are better thought of as the expected attorney’s

fees. Courts have included the expected attorney’s fees in the class benefit,

reasoning that the payment to the class and the payment to counsel were negotiated

as a package deal, so that the defendant reduced the payment to the class to

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account for the expected payment to counsel. See In re Sw. Airlines Voucher

Litig., 898 F.3d 740, 745 (7th Cir. 2018) (“Fee awards for class counsel are part of

a constructive common fund because they are a benefit to the class.”). In

mathematical terms, the equation for the percentage method in constructive

common-fund cases effectively works like this: the actual payment to counsel is

the product of (1) the percentage the court decides to award, and (2) the payment to

the class plus the expected payment to counsel (together, the class benefit).26

       As we explained in part II.A.2, there is no constructive common fund in this

case because the parties left the amount of attorney’s fees completely

undetermined. Instead, they negotiated a pure fee-shifting arrangement. For this

reason, Class Counsel’s argument to include attorney’s fees in the class benefit

fails. Conceptually, if the fees are paid separately, they never belonged to the

class, so they should not be included in the class benefit. Class Counsel maintains

that the class benefit is reduced indirectly by the amount of attorney’s fees—

essentially the same argument we rejected for classifying this arrangement as a

constructive common fund. We acknowledge, again, that there is some truth to

this argument, but it simply does not work as a practical matter.

       26
         The formula would read like this: (percentage) x (payment to class + expected payment
to counsel) = actual payment to counsel.

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      It would be impossible for us to determine the expected payment to counsel

to plug into the math formula. Undoubtedly, Home Depot made an educated guess

about the amount it might have to pay. As should be clear by now, though,

calculating an attorney’s fee is not an exact science—there are many variables

subject to discretion—and an educated guess would at best produce a range. What

are we supposed to do with that? We couldn’t even replicate the range with any

confidence. How could we possibly account for all the unknowns? Unlike a

constructive common fund, there is no agreed-upon amount or cap to identify the

amount the class benefit was reduced by.

      What happened below illustrates the problem. Class Counsel told the

District Court that the amount of attorney’s fees to be included in the class benefit

should be $18 million—the amount that Class Counsel was requesting in fees.

Home Depot responded that this was unfair: by requesting an inflated figure for

fees, Class Counsel inflated the size of the class benefit, thus increasing the final

payout. Of course, Home Depot’s proposal below did the same thing in reverse. It

told the District Court that the amount of fees to be included in the class benefit

should be $5 million. By proposing a deflated figure for fees, Home Depot

deflated the size of the class benefit, thus reducing the final payout. Either way,

the reasoning was circular. And it always will be when the attorney’s fees are left

completely undetermined.

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       Thus, the District Court properly excluded the attorney’s fees from the class

benefit.

       Class Counsel complains that this ruling unfairly reduces their

compensation. But Class Counsel fails to account for a trade-off. In common-fund

cases, attorney’s fees are included in the class benefit, but class counsel is not

entitled to fees incurred for time spent litigating about the amount of fees (known

as fee-on-fees). See Rubenstein, supra, § 15:93, p. 367 (“[T]o permit counsel to

collect for hours spent seeking that fee would effectively reward them for reducing

the size of the common fund, or diminishing their client’s return.”). In contrast, in

fee-shifting cases, though the attorney’s fees are not included in the class benefit,

counsel can recover for the time reasonably spent pursuing fees in the case. See id.

at § 15:93, p. 366. So we think the law fairly balances things out.

                                                 B.

       Home Depot also takes issue with the calculation of the class benefit. It says

the District Court should not have included the $14.5 million premiums it paid to

banks in exchange for releases.

       Counsel is entitled to compensation for its efforts that create, enhance,

preserve, or protect a common fund. 27 Rubenstein, supra, § 15:59, p. 195–96 (“In

       27
         While this is a fee-shifting case, this standard for calculating the class benefit, which is
about common funds, is appropriate in the highly unusual circumstances of this case: where there
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assessing the question of whether the attorney’s efforts generated the common

fund, courts look to whether counsel’s work creates, enhances, preserves, or

protects the fund.”); see also Mashburn v. Nat’l Healthcare, Inc., 684 F. Supp.
679, 686 (M.D. Ala. 1988). Thus, the question is whether Class Counsel deserves

credit for the $14.5 million premiums that Home Depot paid to putative class

members to settle their class claims.

       Home Depot argues that the releases were unrelated to the class litigation.

We’re not buying. Following the data breach, there was an established card-brand

recovery process that would have taken place regardless of whether a class action

or any other litigation was filed. Typically, the process results in assessments that

the merchant would pay (at least partially). But the assessments usually do not

include a release from liability. In this case, after numerous lawsuits were filed

and consolidated in an MDL, not only did Home Depot pay the assessments in full,

which Mastercard could not recall ever happening before, but Home Depot offered

to pay certain banks a premium on top of those assessments in exchange for

releases from the exact liability faced in the class action. Home Depot would have

us believe that payments that effectively settled the class claims had nothing to do

with the class. We are not ostriches with our heads in the sand. The District Court

is a contractual fee-shifting arrangement and the court employs a percentage cross-check. This
also demonstrates why the fee-spreading, as opposed to common fund, distinction is helpful.

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was well within its discretion to conclude that the release payments were

“substantially motivated by the pendency of this litigation.”

      Home Depot further argues that Class Counsel is not entitled to

compensation for benefits that did not go to class members. And the banks who

received the release payments are excluded from the class. This argument is shaky

from the start. Cf. Boeing, 444 U.S. at 478 (“[T]his Court has recognized

consistently that a litigant or a lawyer who recovers a common fund for the benefit

of persons other than himself or his client is entitled to a reasonable attorney’s fee

from the fund as a whole.” (emphasis added)). Of course, these banks were

putative class members at the time, and they are excluded from the class now

because they accepted the release payments and thus already settled their claims.

A rule establishing that class counsel can get no credit for settlements with putative

class members done before the class as a whole settles would entrench the very

unjust enrichment and collective-action problem that class actions are designed to

solve. Plus, “[t]here is no question . . . that federal courts may award counsel fees

based on benefits resulting from litigation efforts even where adjudication on the

merits is never reached, e.g., after a settlement.” Kopet v. Esquire Realty Co., 523
F.2d 1005, 1008 (2d Cir. 1975); see also Rubenstein, supra, § 15:57, p. 190 (“[A]

fee may be sought regardless of whether a formal judgment, a settlement, or some

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other disposition—such as the mooting of a suit—created the common fund.”

(footnotes omitted)).

       In sum, the District Court did not abuse its discretion by including the $14.5

million premiums in the class benefit. 28

                                               IV.

       For the foregoing reasons, we affirm the judgment of the District Court in

part, vacate in part, and remand for further proceedings consistent with this

opinion.

       AFFIRMED in part, VACATED in part, and REMANDED.

       28
           Home Depot also protests that the premiums should not have been included in the class
benefit because Class Counsel should not be compensated for efforts that were against the class’
interests. As we explained in part II.C., it was not against the class’ interests for Class Counsel
to challenge an attempt to settle that it thought was coercive, misleading, and would result in a
worse deal for class members than they would get through this litigation.

                                                55