Judge Posner of the Seventh Circuit continues to be prolific in authoring class action-related opinions. I enjoy blogging about these decisions because they are entertaining to read and usually relatively short and to the point, making them easy to get through and summarize here. This opinion, once again, concluded that an award of attorneys’ fees to plaintiffs’ counsel was too high. The message these decisions seem to send is that plaintiffs’ lawyers will simply have to accept less in settling class actions in federal courts, at least in the Seventh Circuit, and probably elsewhere too. The fees will need to be commensurate with the actual benefit to the class and the actual time reasonably spent on the case. The days of plaintiffs’ class action lawyers flying around in their private jets may soon end (at least unless they are really good, and bring cases that are truly meritorious and result in a large benefit to a class).
Pearson v. NBTY, Inc., 2014 U.S. App. LEXIS 21874 (7th Cir. Nov. 19, 2014) involved a settlement of a class action alleging that the defendants made false claims about the efficacy of glucosamine pills. The district court approved an award of $1.93 million in attorneys’ fees (reduced from the $4.5 million that was requested), where the actual benefits paid to class members was $865,284 (in checks refunding $3 per bottle purchased, with maximum limits of $12 per person without receipts or $50 with receipts). Here are some key points made in the opinion:
- Although the settlement had a maximum potential value of $20.2 million, Judge Posner wrote that this was “based on the contrary-to-fact assumption that every one of the 4.72 million class members who had received postcard rather than publication notice of the class action would file a $3 claim . . . .” Id. at *7.
- A fee award that amounted to $538 per hour for all lawyer and paralegal work on the case would be excessive. Id. at *10.
- “[T]he presumption should we suggest be that attorneys’ fees awarded to class counsel should not exceed a third or at most a half of the total amount of money going to class members and their counsel.” Id. at *12.
- A cy pres award to an orthopedic foundation was found inappropriate because it was “hopelessly speculative” that it would actually benefit the class, and such an award “is supposed to be limited to money that can’t feasibly be awarded to the intended beneficiaries . . . .” Id. at 17. Here, the parties easily could have paid more money to the class members rather than to a foundation.
- An injunction requiring certain changes to statements made on packaging for the product for what amounted to a 24-month period had no real value to the class for purposes of evaluating the fee award. Id. at *20-23.
Should defendants be concerned that these decisions will make it harder to settle cases? Perhaps, but I don’t think so. Most class action plaintiffs’ lawyers do not want to spend a lot of time litigating a case that they might well lose on class certification, or on the merits. They will probably be willing to accept smaller fees that a court will perceive as more reasonable. That is especially true when you have more than one group of plaintiffs’ lawyers pursuing the same issue against a defendant.