Wanta Authors Law Review Article on Class Action Fees
May 01, 2018
May 1, 2018 – Last month, firm partner Shawn Wanta was published in the Mitchell Hamline School of Law’s Law Review. In his article, “How Do Lawyers Get Paid by a Class of Plaintiffs When There is No Fee Shifting Statute?,” Wanta examined how courts are given broad discretion under FRCP Rule 23(h) to determine reasonable attorney fee awards in class action litigation.
The article highlights the case of In re Life Time Fitness, Inc., MDL No. 2564, a group of class action lawsuits brought on behalf of current and former Life Time Fitness club members alleging the company violated the Telephone Consumer Protection Act (TPCA) by sending them unauthorized text-message advertisements. Baillon Thome Jozwiak & Wanta LLP served as Lead Class Counsel in the consolidated litigation.
Typically, attorneys and their clients agree to a fee arrangement that is either hourly, flat-fee, contingency, or some combination of the three. However, such arrangements are impractical when a lawyer represents a class of plaintiffs that can have dozens, hundreds or even thousands of class members. To address this issue, courts have developed rules for apportioning a class-wide recovery to compensate attorneys for their work and reimburse their expenses.
Following negotiations in In re Life Time, the parties entered into a settlement agreement for a total payment of “at least $10 million and no more than $15 million” to class members. However, the parties could not agree on the amount of attorney’s fees and expenses that would be paid to attorneys representing the class. The district court determined that it was appropriate to apply a percentage-of-the-benefit calculation method and awarded class counsel with “28% of the minimum Total Settlement Payment,” or $2.8 million for attorney’s fees. A lone class member objected to the fee award as excessive and appealed.
In upholding the district court’s award, the Eighth Circuit noted that trial courts have broad discretion to determine the reasonable amount of attorney’s fees in class action settlements under Rule 23(h) of the Federal Rules of Civil Procedure. Courts generally apply either a percentage of the benefit method or the lodestar method, which calculates fees by multiplying the number of hours the lawyers worked by a reasonable hourly rate and adjusting the final number based on the nature and difficulty of the class action.
Here, the Eighth Circuit found that the district court had applied the right calculation method and reached a fee award that was reasonable given: the average award in similar class actions; class counsel’s success in obtaining a “substantial benefit for the class;” the risk class counsel took by working on contingency; and the time and effort class counsel applied to the case, among other factors. Further, class counsel noted the policy arguments for applying a percentage-of-the-benefit method. In short, the percentage-of-the-benefit method awards fees based, in part, on the benefit the attorney is able to achieve for the client. This promotes early settlement and judicial efficiency. By contrast, the lodestar method can create a disincentive for early settlement by encouraging attorneys to spend more time working on the case in order to receive a larger fee award. This has the adverse effect of dragging out litigation to rack up more hours.
Shawn’s full law review article can be found here.
Click here for more information about the In re Life Time Fitness, Inc. class action settlement.
The lawyers of Baillon Thome Jozwiak & Wanta LLP are committed to protecting individuals whose rights have been violated by the unlawful practices of companies. For questions about the firm or your potential case, contact Shawn or any of our attorneys by clicking here or calling us at 612-252-3570.