Briggs v. United States of America et al, No. 3:2007cv05760 - Document 180 (N.D. Cal. 2010)
Court Description: ORDER GRANTING FINAL APPROVAL OF SETTLEMENT, ATTORNEY'S FEES AND COSTS, AND PAYMENT TO CLASS REPRESENTATIVE by Judge Alsup granting in part and denying in part 151 Motion for Attorney Fees; granting 157 Motion for Settlement (whalc1, COURT STAFF) (Filed on 4/30/2010)
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Briggs v. United States of America et al Doc. 180 1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 11 For the Northern District of California United States District Court 10 12 13 JULIUS BRIGGS, on behalf of himself and all others similarly situated, 14 Plaintiffs, 15 16 17 No. C 07-05760 WHA CLASS ACTION v. ORDER GRANTING FINAL APPROVAL OF SETTLEMENT, ATTORNEY’S FEES AND COSTS, AND PAYMENT TO CLASS REPRESENTATIVE UNITED STATES OF AMERICA, Defendant. / 18 INTRODUCTION 19 20 In this certified class action involving government-issued credit cards and unlawful debt- 21 collection practices, plaintiff Julius Briggs moves, on behalf of himself and all others similarly 22 situated, for final approval of the settlement agreement reached between the parties. Additionally, 23 class counsel move for an award of attorney’s fees in the amount of two million dollars. For the 24 reasons explained below, this order finds that the settlement is fair, reasonable, adequate, and in 25 the best interests of the class, and therefore final approval of the class settlement is GRANTED. 26 Class counsel are awarded reasonable attorney’s fees in the amount of $1,120,000 and costs in the 27 amount of $52,000. Class representative Briggs is entitled to $3,300 for representing the interests 28 of absent class members. Dockets.Justia.com For the Northern District of California United States District Court 1 STATEMENT 2 The facts of this case have been set forth in numerous prior orders, and will only be 3 summarized in brief below (see Dkt. Nos. 47, 61, 91). The Army and Air Force Exchange 4 Service (“AAFES”) issues credit cards to military personnel to purchase uniforms and other 5 merchandise from post-exchange stores on our military bases. Class representative Julius Briggs 6 is a U.S. Army veteran, and began using an AAFES credit card in 1993. Within one month, 7 Briggs had incurred charges totaling $1,857.08. He made no further charges on the credit card, 8 but he failed to repay his debt. 9 In this lawsuit, plaintiff Briggs and members of the certified class challenged a 10 government debt-collection practice whereby the government withheld tax refunds and other 11 benefits for class members and used those withholdings to offset delinquent AAFES credit card 12 debt. See 31 U.S.C. 3716, 3720A (authorizing such withholding and offsetting). This was done 13 through a centralized government debt collection effort called the Treasury Offset Program, or 14 “TOP.” The problem, however, was that this was done to class members after a statutory ten-year 15 limitations period for such administrative offsets had expired. See 31 U.S.C. 3716(e) (2004) 16 (since amended). 17 This action was filed in November 2007. In the class action complaint, two claims were 18 originally asserted, the first targeting the practice by TOP outlined above, and the second 19 involving alleged interest overcharges (which is the subject of a separate but related action). In 20 February 2008, the United States answered and asserted a counterclaim to recover the balance 21 remaining on plaintiff Briggs’ AAFES debt. The government then filed a motion for judgment on 22 the pleadings or for partial dismissal. An April 2008 order dismissed the second claim as moot, 23 concluded that subject-matter jurisdiction arose from the Little Tucker Act rather than the 24 Administrative Procedure Act, and dismissed the claims against AAFES as a distinct party, 25 leaving only the TOP claim against the United States (Dkt. No. 34). 26 In August 2008, the United States moved for summary judgment both on plaintiff’s 27 remaining TOP claim and on its own counterclaim to recover the amount due on plaintiff’s debt 28 (Dkt. No. 47). An October 2008 order denied both motions, finding that (1) the government’s 2 1 litigation setoff rights — its right to offset any recovery plaintiff may achieve in this action 2 against the balance remaining on plaintiff’s debt to the government — was not a proper ground to 3 dispose of the entire action before reaching the merits of plaintiff’s claim, and (2) defendant’s 4 counterclaim to recover the full balance due on plaintiff’s debt did not arise from the same 5 “transaction or occurrence” as plaintiff’s illegal collection claim and therefore, under 28 U.S.C. 6 2415(f), it may be asserted “only by way of offset . . . in an amount not to exceed the amount of 7 the opposing party’s recovery” (ibid.). 8 9 11 For the Northern District of California United States District Court 10 12 13 14 In December 2008, counsel moved for class certification. A January 2009 order granted the motion and certified the following class (Dkt. No. 61 at 3–4, 15): All natural persons (1) who have been subjected to TOP collection of an AAFES type E1 or E2 debt claim, after November 13, 2001; (2) from whom a portion of that TOP collection was for debt that became delinquent more than ten years before the offset and (3) whose amount of net offset payments was less than $10,000, or who are willing to waive their claim with respect to offsets that would bring their refund claim above $10,000. The order also concluded that the Little Tucker Act permitted this nationwide class action 15 to be brought in this judicial district so long as the claims of individual class members were 16 capped at $10,000. 17 In January 2009, both sides filed motions for summary judgment. An April 2009 order 18 granted in part plaintiffs’ motion, entitling the class to recover approximately 7.4 million dollars 19 in illegal offsets (Dkt. No. 91). The order, however, also granted in part the government’s 20 motion, finding that the United States did have litigation setoff rights. Thus, while the class was 21 entitled to recover as much as 7.4 million dollars in refunds, the April 2009 order left the door 22 open for the government to prove at trial a litigation setoff amount to reduce the total class 23 recovery. This was an important opportunity that will be reiterated later in this order. 24 Following an unsuccessful last-minute effort by the government to decertify the class as to 25 damages calculations, the parties entered into a settlement agreement and class counsel — on the 26 eve of trial — filed for preliminary approval of the settlement on December 24, 2009 (Dkt. No. 27 139). On February 1, 2010, preliminary approval of the settlement agreement, class notice, and 28 dissemination plan were granted (Dkt. Nos. 148, 149). The settlement notice also included “opt3 1 in” waiver forms for the seven class members whose claims exceeded $10,000 in value (see Dkt. 2 No. 61). By opting in, these individuals would waive their right to any recovery over $10,000. 3 After notice of the settlement, the right to opt out (or opt in, if applicable), the right to 4 object, and the right to be present at the final approval hearing was provided to class members, a 5 final hearing on the class settlement — as required under the Federal Rules of Civil Procedure — 6 was held on April 29, 2010. For the Northern District of California United States District Court 7 ANALYSIS 8 Three issues are addressed in this order. First, this order will explain why the pending 9 settlement agreement is, as the order granting preliminary approval of the settlement noted, “a 10 good one for the class,” and is fair, reasonable, and adequate under FRCP 23(e) and Hanlon v. 11 Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (setting forth the factors to be considered 12 when evaluating class action settlements) (Dkt. No. 148). Second, this order will explain why the 13 attorney’s fees and costs awarded herein are reasonable. Third, this order will explain why class 14 representative Briggs should receive an appropriate payment for representing the interests of 15 absent class members. 16 1. 17 Under FRCP 23(e), court approval is required for any settlement agreement that will bind THE SETTLEMENT AGREEMENT IS FAIR, REASONABLE, AND ADEQUATE. 18 absent class members. When a proposed settlement agreement is presented, the court must 19 perform two tasks: (1) direct notice in a reasonable manner to all class members who would be 20 bound by the proposal, and (2) approve the settlement only after a hearing and on finding that the 21 terms of the agreement are fair, reasonable, and adequate. FRCP 23(e)(1)–(2). Additionally, for 22 classes certified under Rule 23(b)(3) (as is the case here), the court may order that class members 23 be afforded a new opportunity to request exclusion from the class. FRCP 23(e)(4). 24 With respect to class notice and a second opt-out opportunity, the form of notice for the 25 class settlement has already been scrutinized and approved by the undersigned (Dkt. No. 149). 26 Pursuant to the plan set forth in the order granting preliminary approval, class members were 27 individually informed, by first-class mail, of their right to opt-out of the settlement, so long as 28 they exercised this right by March 31, 2010 (ibid.). The seven class members with claims 4 1 exceeding $10,000 were provided opt-in waiver forms. All seven of these class members signed 2 and returned the waiver form to class counsel, thereby “opting-in” to the settlement (Dkt. No. 3 160, Exh. A). No timely requests for exclusion were made, and no objections to the terms of the 4 settlement or the amount of requested attorney’s fees were received by class counsel (see Dkt. 5 No. 160 at 2; Dkt. No. 163).1 For the Northern District of California United States District Court 6 In light of the above, this order finds that the individualized notice sent by first-class mail 7 to class members met the procedural requirements of FRCP 23(c)(2)(B) (for the notice of class 8 certification) and FRCP 23(e)(1) (for the notice of the settlement) as well as the requirements of 9 due process. Indeed, the fact that certain class members were required to take affirmative steps to 10 “opt-in”, and all of these class members did so, supports this finding. As such, all that remains is 11 determining whether the terms of the settlement agreement are fair, reasonable, and adequate. 12 The instant settlement — taking into account the reasonable attorney’s fees, costs, and 13 class-representative payment authorized herein — easily meets these requirements. The Ninth 14 Circuit in Hanlon set forth various factors that a court must “explore[] comprehensively” and 15 balance when making this determination: 16 17 18 19 [T]he strength of the plaintiffs’ case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement. 20 Hanlon, 150 F.3d at 1026. These factors, however, are not exclusive, and a court must consider 21 whether the settlement “taken as a whole” is fair to absent class members. Ibid. 22 On balance, these factors support final approval of the proposed settlement. First, 23 plaintiffs prevailed on the merits at summary judgment, proving the government’s liability for 24 approximately 7.4 million dollars in illegal offsets. Given this result, strength of plaintiffs’ case 25 is confirmed, at least as to liability. Second, the government has offered to pay the full 7.4 million 26 27 28 1 One class member, Mr. Charles Davidson, made an untimely request to opt out of the class. This request was made in an administrative motion, and was addressed in a separate order (Dkt. No. 177). Additionally, one letter was received from a class member asking that the government pay all attorney’s fees and costs. It did not, however, ask that final approval of the settlement be denied. 5 For the Northern District of California United States District Court 1 dollars in illegal offsets, or 100% of the calculated class damages.2 Third, the government has 2 agreed to pay — in addition to the 7.4 million dollars — $80,000 in notice and related class 3 administration costs, $52,000 towards litigation costs of class counsel, and up to $500,000 in 4 attorney’s fees under the Equal Access to Justice Act, 28 U.S.C. 2412. In other words, the 5 government has offered to pay above and beyond the total amount of illegal offsets; as much as 6 $632,000 in fees and costs that might otherwise have been deducted from the settlement checks of 7 class members will be covered by the United States under the settlement. Fourth, the settlement 8 agreement does not require class members to file claims and contains robust procedures for 9 locating class members to increase the likelihood that they will receive their settlement checks 10 (Br. 6–8). Fifth, there have been no objections to the proposed settlement received by class 11 counsel (with the exception of one letter that asked for the government to pay for all fees and 12 costs). Sixth, the release is both narrowly tailored and fairly counterbalanced by a reciprocal 13 waiver by the government (Dkt. No. 139, Exh. 1 at 7).3 In its reciprocal waiver, the United States 14 waives any right to recollect the amounts that will be refunded to class members. Seventh, the 15 distribution plan prioritizes the distribution of settlement checks to class members, and provides a 16 lengthy period within which class members may redeem them. By any measure, this is a good 17 settlement for the class. 18 The only remaining issues are whether the amount of attorney’s fees and costs to be 19 awarded to class counsel, which will be taken out of the common fund for the class, is fair and 20 reasonable, and whether plaintiff Briggs is entitled to a reasonable payment for representing class 21 The exact amount being refunded to class members under the settlement is $7,404,944.19. At the final approval hearing, counsel noted that this amount is actually $1,533.86 less than a 100% refund, due to an error by the government in totaling the illegal offsets for the class (see Dkt. No. 178 ¶ 8). This order is confident, however, that there will be a sufficient residue in the class fund to cover this $1,533.86 shortfall (due to the high probability that not all class members will be located), and that distributions to class members should be based upon a 100% refund. If the stars align and a $1,533.86 shortfall does arise, the government represented at the hearing that it would cover the difference. 2 22 23 24 25 26 27 28 The release in the settlement agreement states: “As of the Effective Date, Plaintiff and each member of the Class shall be deemed to have jointly and severally released and discharged UNITED STATES, from any and all actions, causes of action, suits, obligations, costs, expenses, attorney’s fees, damages, losses, claims, rights, liabilities, and demands, of whatever character, to the date hereof, arising out of, relating to, or in connection with the Action (‘Released Claims’)” (Dkt. No. 139, Exh. 1 at 7). 3 6 1 members. As explained in detail below, this order has ensured that these awards meet the Ninth 2 Circuit’s requirements under Hanlon. For the Northern District of California United States District Court 3 Having considered the full scope of the settlement agreement, this order finds that the 4 terms of the settlement, the award of attorney’s fees and costs, a reasonable payment to the class 5 representative, the distribution plan, and the notice provided to class members of their rights 6 under the settlement are “fair, reasonable, and adequate” under FRCP 23(e). Based upon this 7 finding, the motion for final approval of the settlement is GRANTED. 8 2. 9 As part of the analysis under Hanlon, a court must ensure that attorney’s fees and costs COUNSEL ARE ENTITLED TO REASONABLE ATTORNEY’S FEES AND COSTS. 10 awarded to class counsel are “fair, reasonable, and adequate.” See Staton v. Boeing Co., 327 F.3d 11 938, 963–64 (9th Cir. 2003) (citing Hanlon). Under this analysis, the first question a court must 12 ask is whether the settlement agreement is contingent upon the Court awarding the full amount of 13 counsel’s requested attorney’s fees and costs. Ibid. This is not the case here. The settlement 14 agreement makes clear that the agreement merely authorizes counsel’s requested attorney’s fees; 15 it specifically notes that the actual amount awarded is subject to court approval (Dkt. No. 139, 16 Exh. 1 at 3). 17 The second question a court must ask is whether the fees are a product of a fee-shifting 18 statute or are grounded in principles applicable to common funds. Id. at 965–67. The former is 19 an exception to the “American Rule” (i.e., that each party pays for its own litigation expenses), 20 where the losing party must pay attorney’s fees to the prevailing party pursuant to a fee-shifting 21 statute. The latter is an equitable rule — consistent with the “American Rule” — that “a litigant 22 or a lawyer who recovers a common fund for the benefit of persons other than himself or his 23 client is entitled to a reasonable attorney’s fee from the fund as a whole.” Boeing Co. v. Van 24 Gemert, 444 U.S. 472, 478 (1980). Here, counsel’s requested fees present the unusual situation 25 of being derived from (or, perhaps more accurately, justified under) both a fee-shifting statute and 26 common-fund principles. 27 28 The details are as follows: Class counsel request two million dollars in attorney’s fees and $52,000 in litigation costs. Of the two million dollars, $500,000 can be attributed to the 7 1 government’s offer of EAJA attorney’s fees. The remaining 1.5 million dollars, however, would 2 come from the approximately 7.4 million dollars belonging to the veterans. As to litigation costs, 3 counsel seek $52,000, which the government has offered to contribute under the EAJA (in other 4 words, the costs requested would not come out of the 7.4 million dollars). 5 6 addressed: (1) whether it is proper for attorney’s fees to be awarded under both a fee-shifting 7 statute (here, the EAJA) and common-fund principles, (2) whether the $500,000 EAJA award 8 negotiated between counsel and the government is “fair, reasonable, and adequate,” and (3) if 9 permissible, whether additional attorney’s fees awarded under common-fund principles are “fair, 10 11 For the Northern District of California United States District Court Given this backdrop, with respect to the requested fees, three important issues must be reasonable, and adequate.” A. Attorney’s Fees May be Awarded Under Common-Fund Principles When Statutory Fees are Available. 12 When a class action settlement is reached, the parties may simultaneously negotiate merits 13 relief and an award of attorney’s fees under a fee-shifting statute (if such a statute is applicable), 14 and condition the entire settlement upon the prevailing party’s waiver of seeking attorney’s fees 15 under the statute. See Evans v. Jeff D., 475 U.S. 717, 720 (1986). In such situations, the parties 16 may present a court with separate settlement amounts for the merits relief and attorney’s fees, or 17 may simply present one “lump sum” settlement amount that subsumes the negotiated attorney’s 18 fees. If the latter situation presents itself, a court generally has the power to award attorney’s fees 19 using common-fund principles. See Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 20 240, 257-59 (1975) (holding that unless Congress has expressly forbidden the application of 21 common-fund principles where counsel could potentially recover fees under a fee-shifting statute, 22 courts retain their equitable power to award common-fund attorney’s fees). This is because in 23 settlement negotiations, the defendant’s determination of the amount it will pay into a common 24 fund will necessarily be informed by the magnitude of its potential liability for fees under an 25 applicable fee-shifting statute. Staten, 327 F.3d at 968–69. 26 In a proposed class action settlement where a fee-shifting statute applies, counsel usually 27 present only one of the above grounds for attorney’s fees. In other words, either attorney’s fees 28 under the fee-shifting statute are negotiated and presented separately from the merits award, or 8 1 the fees are subsumed within a single “lump sum” settlement offer. This is because these two 2 approaches are generally seen as alternative means of awarding reasonable and appropriate 3 attorney’s fees to class counsel. Indeed, as explained by the Ninth Circuit: 4 [I]n a class action involving both a statutory fee-shifting provision and an actual or putative common fund, the parties may negotiate and settle the amount of statutory fees along with the merits of the case, as permitted by Evans. In the course of judicial review, the amount of such attorneys’ fees can be approved if they meet the reasonableness standard when measured against statutory fee principles. Alternatively, the parties may negotiate and agree to the value of a common fund (which will ordinarily include an amount representing an estimated hypothetical award of statutory fees) and provide that, subsequently, class counsel will apply to the court for an award from the fund, using common fund fee principles. 5 6 7 8 9 10 The settlement agreement in the instant case presents the situation where attorney’s fees For the Northern District of California United States District Court Staton, 327 F.3d at 972 (emphasis added). 11 12 under the EAJA have been negotiated separately from the merits relief (in the amount of 13 $500,000), but counsel nevertheless seek additional attorney’s fees under common-fund 14 principles. While it is true that “parties have flexibility in negotiating class action settlement 15 agreements, including the attorneys’ fee provisions,” the Ninth Circuit has cautioned that “[a]ny 16 variants, to be reasonable, would have to provide equivalent assurance that the inherent tensions 17 among class representation, defendant’s interests in minimizing the cost of the total settlement 18 package, and class counsel’s interest in fees are being adequately policed by the court.” Ibid. 19 With these concerns in mind, this order will now address whether the government’s EAJA 20 settlement offer is fair, reasonable, and adequate, and — following that determination — whether 21 counsel are entitled to additional fees from the class fund. 22 B. The EAJA Award is Fair and Reasonable. 23 The reasonableness of counsel’s requested attorney’s fees — including the government’s 24 offer to pay $500,000 in fees under the EAJA — must be viewed with an eye towards how this 25 litigation has unfolded. Following the parties’ cross-motions for summary judgment, the only 26 issue that remained for trial was whether and to what extent the government could prove litigation 27 28 9 1 offsets to reduce its 7.4 million dollar liability.4 Had the government chosen to proceed to trial on 2 this issue rather than settle the case, it is entirely possible that the class award would have been 3 reduced substantially. Instead, the government decided to settle the matter. 4 This procedural backdrop explains why the government, when negotiating the settlement, 5 offered to pay 100% of the 7.4 million dollars in class-wide damages into the class fund plus 6 statutory attorney’s fees and costs under the EAJA. Given that plaintiffs had already prevailed at 7 summary judgment in proving the government’s liability for the illegal offsets, they would likely 8 have been entitled to fees under the EAJA. See 28 U.S.C. 2412. For the Northern District of California United States District Court 9 Under a fee-shifting statute like the EAJA, the court must evaluate reasonableness by 10 reference to the ‘lodestar’ method, which involves “multiplying the number of hours the 11 prevailing party reasonably expended on the litigation by a reasonabl[e] hourly rate[.]” Staton, 12 327 F.3d at 965 (citations omitted). Some fee-shifting statutes — especially those like the EAJA 13 where the government must foot the bill — place a cap on the hourly rates used to determine the 14 lodestar. Under the EAJA, “attorney or agent fees shall not be awarded in excess of $125 per 15 hour unless the agency determines by regulation that an increase in the cost-of-living or a special 16 factor, such as the limited availability of qualified attorneys or agents for the proceedings 17 involved, justifies a higher fee.” See 28 U.S.C. 2412(d)(2)(A)(ii). 18 Based upon the detailed time and billing records provided by class counsel (submitted 19 with their motion for attorney’s fees in accordance with the instructions set forth in a prior order), 20 the number of hours expended by the prevailing party was 2,524.89 hours (Visher Decl. Exhs. F, 21 G). Due to the exercise of “billing judgment” by class counsel, this total does not include time 22 attributable to the claim for improper interest that was dismissed early in this litigation, or time 23 spent by class counsel on their motion for intervention by a new plaintiff (pertaining to the 24 dismissed claim) and their administrative motion on related cases (Visher Decl. ¶ 12). After a 25 review of these records, this order finds that counsel’s exercise of billing judgment was both 26 reasonable and proper. 27 As explained earlier, plaintiffs prevailed at summary judgment in proving that the government was liable for 7.4 million dollars on the remaining TOP claim. The government, however, also prevailed in showing their entitlement to proving litigation offsets at trial. 4 28 10 1 2 amounts to approximately $315,625 in statutory attorney’s fees. Adjusted for cost-of-living 3 increases, which is proper under Ninth Circuit caselaw, the statutory rate becomes approximately 4 $173 per hour, and the total statutory attorney’s fees rises to approximately $435,834. See, e.g., 5 United States v. Real Property Known as 22249 Dolorosa Street, 190 F.3d 977, 984 (9th Cir. 6 1999) (using the regional CPI-U to calculate the cost-of-living adjustment).5 For the Northern District of California 7 United States District Court Using the $125 per hour rate set forth in the EAJA and the hours reported by counsel, this This, however, does not end the EAJA inquiry. Under certain circumstances, the Ninth 8 Circuit has also authorized enhanced EAJA rates (above and beyond inflation-adjusted rates) 9 where there was a “limited availability of qualified attorneys for the proceedings involved” and 10 the attorneys possessed “distinctive knowledge” and “specialized skill” that was “needful to the 11 litigation in question” and “not available elsewhere at the statutory rate.” Nadarajah v. Holder, 12 569 F.3d 906, 912 (9th Cir. 2009) (citations omitted). Under this rule, EAJA enhancements have 13 been awarded in disputes involving environmental law, immigration law, and social security law 14 (see Br. 6) (listing cases). As an example, in Nadarajah, which involved immigration law, the 15 Ninth Circuit awarded a $500 hourly rate for the most experienced attorney representing the 16 prevailing party, and rates between $300 to $335 per hour for supporting attorneys. The Ninth 17 Circuit justified this rate due to the fact that few immigration lawyers carry the expertise in 18 constitutional immigration detention issues that the case required. Id. at 912–15. 19 Given the subject matter of the instant case, there is little basis to conclude that such 20 enhanced awards would be justified. While class counsel tout their experience in class action 21 litigation, this is not a rare skill in the legal profession to warrant market-rate attorney’s fees 22 under the EAJA. Additionally, the nature of the claim in this litigation is not one that has 23 traditionally garnered enhanced statutory attorney’s fees — a fact that Attorney Visher himself 24 admits (see Visher Decl. ¶ 9 (“I am not aware of any EAJA case that has specifically allowed 25 market rates for the kind of expertise Class Counsel possess[.]”)). 26 27 28 5 In this order, the cost-of-living increase was calculated using the national consumer price index for all urban consumers (CPI-U) in March 1996 (when the $125 hourly rate was established) and the average CPI-U in 2008 and 2009 (when the bulk of the work in this action transpired). While regional CPI-U figures could have been used, the differences between the national and regional figures were not material to these calculations. 11 1 2 warranted had plaintiffs moved for such rates in an EAJA application. With that in mind, the 3 settlement agreement provides for negotiated EAJA attorney’s fees of $500,000. Based upon the 4 reported 2,524.89 hours of work performed by class counsel, this amounts to an average hourly 5 rate of approximately $198/hour, which is about $25 per hour above the statutory hourly rate 6 (after cost-of-living adjustments). Given that class counsel would likely have not received an 7 enhanced award under Nadarajah, this order finds that the $500,000 negotiated fee award under 8 the EAJA is a fair and reasonable award. Indeed, it is more than what would be authorized using 9 an inflation-adjusted statutory rate, and falls within the range of attorney’s fees that would likely For the Northern District of California 10 United States District Court Based upon these findings, this order will not assume that enhanced rates would have been have been awarded had the Court been tasked with such a determination. 11 C. 12 Given that reasonable EAJA attorney’s fees have been awarded to class counsel, the next An Award Measured by the Lodestar is Reasonable and Fair to the Class. 13 question is whether additional attorney’s fees can and should be awarded from the 7.4 million 14 dollars offered to class members. This is an important inquiry, since any additional attorney’s 15 fees would reduce settlement payments to the veterans who comprise the certified class. 16 In Staton v. Boeing, the Ninth Circuit observed that “[t]he fees available under a 17 fee-shifting statute are part of the plaintiff’s recovery and are not dependent upon any explicit fee 18 arrangements between the plaintiffs and their counsel. For that reason, contingent fee agreements 19 between counsel and client are valid in cases where statutory fees are available.” Staton, 327 20 F.3d at 968 (citing Venegas v. Mitchell, 495 U.S. 82, 86-89 (1990)). As such, the court reasoned 21 that “[c]ommon fund fees are essentially an equitable substitute for private fee agreements where 22 a class benefits from an attorney’s work, so the same general principles outlined in Venegas 23 should apply.” Ibid. In other words, there seems to be no bar to awarding fees both under the 24 EAJA and from the common fund. 25 The final question, therefore, is whether and to what extent attorney’s fees should be 26 awarded from the remaining 7.4 million dollar fund. Courts in the Ninth Circuit may use two 27 different approaches to gauge the reasonableness of a requested fee award under the traditional 28 common-fund approach. The first is the aforementioned “lodestar” calculation, which — in the 12 1 common-fund context — may include a “risk multiplier” to enhance the fees under certain 2 circumstances. The Ninth Circuit, however, also allows a calculation based upon a percentage of 3 the common fund. See id. at 967–68. The benchmark percentage is supposedly 25 percent. 4 Hanlon, 150 F.3d at 1029. For the Northern District of California United States District Court 5 “[T]he choice between lodestar and percentage calculation depends on the circumstances, 6 but . . . ‘either method may . . . have its place in determining what would be reasonable 7 compensation for creating a common fund.’” Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 8 268, 272 (9th Cir. 1989). Indeed, the Ninth Circuit has made clear that “[t]he benchmark 9 percentage should be adjusted, or replaced by a lodestar calculation, when special circumstances 10 indicate that the percentage recovery would be either too small or too large in light of the hours 11 devoted to the case or other relevant factors.” Six (6) Mexican Workers v. Arizona Citrus 12 Growers, 904 F.2d 1301, 1311 (9th Cir. 1990). Here, class counsel argue that the percentage-of- 13 the-fund approach justifies their two million dollar attorney’s fees request (based upon a class 14 fund of 7.4 million dollars plus the government’s EAJA contributions). As explained below, 15 however, the two million dollar request exceeds reasonable fees justifiable under the lodestar. 16 Having considered the unique attributes of this litigation, this order finds that reasonable 17 attorney’s fees should be measured by an appropriate lodestar calculation and should not utilize a 18 percentage-of-the-fund approach. This finding is grounded in the following points and 19 observations. First, due to the existence of the EAJA, counsel’s risk of non-payment of 20 attorney’s fees was significantly reduced as compared to common-fund cases where no fee- 21 shifting statute applies. To be sure, even with a fee-shifting statute like the EAJA, counsel are at 22 risk of recovering nothing if they do not prevail (assuming they were working on a contingency 23 basis, as they were here). That said, when a fee-shifting statute like the EAJA is available, this 24 presents an independent source of potential attorney’s fees for counsel should they obtain a 25 favorable result. This is significant. Without a fee-shifting statute, counsel would be limited 26 solely to a percentage of the plaintiffs’ recovery, which could have been much less than the 27 lodestar. Yet under the EAJA, even if counsel recovered one dollar for the class, they would still 28 be entitled to seek reasonable attorney’s fees and costs from the government. Citizens for Better 13 1 Forestry v. U.S. Forest Serv., 567 F.3d 1128, 1131 (9th Cir. 2009) (a prevailing party entitled to 2 fees under the EAJA is “a party in whose favor a judgment is rendered, regardless of the amount 3 of damages awarded.”) (emphasis added). The risk of a pyrrhic victory — at least, from 4 counsel’s perspective — is greatly tempered in such situations. For the Northern District of California United States District Court 5 Second, while it is true that counsel obtained a good result for the class, this cannot be 6 attributed solely to the performance of counsel. As explained above, it was the government who 7 decided to forego the presentation of the “litigation offset” affirmative defense at trial. Had it not 8 chosen to do so, the recovery for the class might have been substantially reduced from the 7.4 9 million dollars offered at settlement (thereby reducing the basis for counsel’s percentage-of-the- 10 fund fee request). As alluded to at the recent April 14 hearing in the related action of Russell v. 11 United States of America (CV 09-03239 WHA), during which the pending settlement in the 12 instant action was discussed, this decision by the government was grounded in practical 13 considerations. Stated differently, it was not counsel’s superior performance at trial that 14 preserved the full 7.4 million dollar merits recovery. Rather, it was the government who 15 voluntarily withdrew it’s affirmative defense prior to trial, leaving class members with 100% of 16 their requested damages. Given these facts, it would be unfair to the class to allow counsel to 17 profit from the government’s decision to offer class members generous refunds above and beyond 18 the amounts to which they might have otherwise been entitled. 19 Third, this order notes that during the course of the litigation, counsel sometimes 20 presented unhelpful arguments on difficult legal issues. Counsel’s arguments with respect to 21 nationwide jurisdiction and the Little Tucker Act are but one example (see, e.g., Dkt. No. 61). On 22 this and other complex questions, counsel failed to present narrower ways to reach their intended 23 result. Eventually, the Court cut through the fog and made a clear ruling that happened to favor 24 plaintiffs. In sum, while counsel did a better-than-average job in prosecuting this action on behalf 25 of the certified class, the path to this result was not always illuminated by counsel’s arguments. 26 For these reasons, this order will award attorney’s fees based upon a reasonable lodestar 27 calculation. As noted above, 2,524.89 hours were expended by class counsel on this litigation 28 (Visher Decl. ¶ 12, Exhs. F, G). This total reflects the exercise of “billing judgment” by class 14 For the Northern District of California United States District Court 1 counsel (id. at ¶ 12). As stated, based upon a review of over 100 pages of spreadsheets 2 documenting the individual tasks performed by counsel, this order finds that the hours reported 3 are well-documented and reasonably justified. No reductions in the reported hours are necessary. 4 A more difficult question, however, is presented with respect to “reasonable hourly rates.” 5 See Staton, 327 F.3d at 965. Under Ninth Circuit caselaw, these rates are determined according to 6 the prevailing market rates in the relevant legal community, based upon “similar work performed 7 by attorneys of comparable skill, experience, and reputation.” Gates v. Deukmejian, 987 F.2d 8 1392, 1405 (9th Cir. 1992) (citing Blum v. Stenson, 465 U.S. 886, 895 (1984)); Barjon v. Dalton, 9 132 F.3d 496, 502 (9th Cir.1997). The general rule is that the rates of attorneys practicing in the 10 forum district are used. Barjon, 132 F.3d at 500. “[R]ates outside the forum may be used if local 11 counsel was unavailable, either because they are unwilling or unable to perform because they lack 12 the degree of experience, expertise, or specialization required to handle properly the case.” Ibid. 13 Here, class counsel have provided various resources to “assist” the Court in gauging what 14 is a “reasonable” hourly rate for the attorneys who worked on this matter, including: (1) the 15 Laffey Matrix, which is the primary guide used in Baltimore and Washington, D.C. to determine 16 market rates for attorneys (and is used, in modified form, by certain judges in the Northern 17 District of California), (2) the supposed actual hourly rates of counsel between 2007 and 2009, 18 and (3) sources from other lawsuits and law-related publications in the San Francisco area (Suppl. 19 Visher Decl. ¶¶ 3–9). 20 These resources advocate a wide range of hourly billing rates. For example, under the 21 Updated Laffey Matrix (which is “updated” because it has been adjusted for cost-of-living 22 differences between San Francisco and Washington, D.C.), Attorney Visher — who graduated 23 law school in 1970 — would be entitled to an hourly rate of $763 per hour. By contrast, his 24 supposed actual billing rates from 2007, 2008, and 2009 were $520 per hour, $590 per hour, and 25 $620 per hour. Curiously, Attorney Kathryn Anderson, who graduated from law school thirteen 26 years after Attorney Visher, would also bill at $763 per hour under the Updated Laffey Matrix. 27 This contrasts greatly with her actual billing rates from 2008 and 2009 (respectively, $450 per 28 hour and $475 per hour). This discrepancy repeats itself with Attorney Marie Noel Appel, who 15 For the Northern District of California United States District Court 1 graduated law school in 1996. Under the Updated Laffey Matrix, Attorney Appel would be 2 entitled to the rate of $633 per hour. This is in stark contrast to her actual billing rates in 2007, 3 2008, and 2009 of $275 per hour, $375 per hour, and $395 per hour. All these figures are 4 transparently set forth by Attorney Visher in his supplemental declaration (id. at ¶ 10). With 5 respect to all other attorneys and paralegals who worked on this action, the differences between 6 the rates set forth in the Updated Laffey Matrix and the actual rates associated with these 7 individuals were similarly disparate. 8 Having considered the full range of these proposed hourly rates, this order will not rely 9 upon the rates set forth in the Updated Laffey Matrix as counsel suggest. As illustrated above, 10 these rates are consistently much higher than the actual rates charged by the attorneys and staff 11 who worked on this matter. Additionally, the Laffey Matrix does not adequately distinguish 12 between attorneys with different qualifications. Indeed, under the Updated Laffey Matrix, 13 Attorney Visher and Attorney Anderson would be entitled to the same extraordinarily high 14 hourly rate, despite Attorney Visher having over thirteen years more legal experience. To adopt 15 such inflated (and seemingly arbitrary) rates would be neither fair nor reasonable to the class. 16 Instead, this order will use the actual billing rates purportedly used by counsel and 17 supporting paralegals, since it is a fair assumption that counsel set their rates based upon a 18 reasonable evaluation of the market rates of comparably experienced attorneys and staff members 19 in this district. Additionally, since this action was filed in late 2007 and extended into early 2010, 20 this order will use the average of the billing rates for the two middle years — 2008 and 2009 — to 21 estimate the actual hourly rate for each attorney and paralegal. This is a reasonable approach to 22 simplify the math required to calculate an appropriate lodestar. 23 24 The table below shows the average actual hourly rates of counsel and paralegals (using the average of their 2008 and 2009 actual hourly rates) and the resulting lodestar: 25 26 27 28 16 1 ATTORNEY/PARALEGAL HOURS AVG. 2008/2009 HOURLY RATE TOTAL 2 S. Chandler Visher, Esq. 1237.70 $605.00 / hr $748,808.50 3 Kathryn Anderson, Esq. 45.63 $462.50 / hr $21,103.88 4 Brian Wolfman, Esq. 63.80 $465.00 / hr $29,667.00 5 Marie Noel Appel, Esq. 451.45 $385.00 / hr $173,808.25 Deepak Gupta, Esq. 269.95 $270.00 / hr $72,886.50 Margaret Kwoka, Esq. 126.80 $225.00 / hr $28,530.00 Vanessa Powers 186.92 $135.00 / hr $25,234.20 Le Duong 142.64 $135.00 / hr $19,256.40 TOTAL LODESTAR: $1,119,294.73 6 7 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 As shown, the lodestar is just over 1.1 million dollars. For the reasons already set forth above justifying the use of a lodestar calculation rather than a percentage-of-the-fund approach, this order finds that no departure — upward or downward — from this figure is warranted. See Hanlon, 150 F.3d at 1029 (holding that a court may consider “the quality of the representation, the benefit obtained for the class, the complexity and novelty of the issues presented, and the risk of nonpayment” in deciding whether a multiplier or a downward adjustment is appropriate). Counsel will therefore be AWARDED a total of $1,120,000 in reasonable attorney’s fees, based upon the lodestar calculation shown above. This award is fair, reasonable, and adequate under the factors set forth in Hanlon and related Ninth Circuit caselaw. Moreover, this award is in accord with the recent United States Supreme Court decision in Perdue v. Kenny A. ex rel. Winn, --- S.Ct. ----, 2010 WL 1558980, at *6 (2010), which emphasized the longstanding rule that “the lodestar method yields a fee that is presumptively sufficient to achieve th[e] objective[s]” underlying federal fee-shifting statutes and that upward departures from the lodestar are warranted only in “rare” and “exceptional” circumstances. See also Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546, 565 (1986). Finding no such circumstances here, the fee award ordered herein is proper. D. Counsel’s Requested Costs are Reasonable. Determining whether counsel’s requested litigation costs are reasonable and fair is a more straightforward matter. Counsel have provided a detailed accounting of costs totaling $55,391.62 17 For the Northern District of California United States District Court 1 (Visher Decl. Exh. E). Having reviewed the spreadsheets provided by counsel to ensure that all 2 documented costs are reasonable and appropriate, this order finds that an award of the requested 3 amount of $52,000 (over $3,000 less than the documented costs) is fair and reasonable. 4 Accordingly, a payment to counsel from the class fund of litigation costs in the amount of 5 $52,000 shall be AWARDED. 6 3. CLASS REPRESENTATIVE BRIGGS IS ENTITLED TO A REASONABLE PAYMENT. 7 Class counsel seek an additional $5,000 payment to class representative Briggs. As 8 explained in a recent class action settlement approved by the undersigned, class actions have 9 produced excellent results for many decades without ever awarding “incentive payments” to class 10 representatives. See Adderley v. National Football League Players Ass’n, 2009 WL 4250792, at 11 *8 (N.D. Cal. 2009). While, in theory, these payments compensate the representative for time and 12 effort expended in support of the class, there is often a huge risk that these payments are an 13 incentive to entice a representative to support a marginal settlement. See Staton, 327 F.3d at 975. 14 In other words, if the settlement payment is not good enough for the representative, it is likely not 15 good enough for the class. 16 Here, however, that risk is not present since the class obtained a 100% recovery. Given 17 this result, while the Court is always reluctant to award a class representative more than his fellow 18 class members, the length of this litigation and the approximately 185 hours plaintiff Briggs spent 19 in meetings, telephone calls, preparing and appearing for his deposition, and reviewing pleadings 20 and settlement documents warrant a reasonable payment to plaintiff Briggs for representing 21 absent class members (Briggs Decl. ¶¶ 4–8). Consistent with the payment awarded by the 22 undersigned in the above-mentioned NFL Players Association case, an additional payment of 23 $3,300 from the class fund to compensate Mr. Briggs is hereby APPROVED. 24 25 CONCLUSION For the reasons set forth above, final approval of the class action settlement is GRANTED. 26 This order finds that the settlement (including the distribution plan set forth therein) is fair, 27 reasonable, and adequate, and in the best interests of the certified class. Counsel will be awarded 28 $1,120,000 IN ATTORNEY’S FEES and $52,000 IN LITIGATION COSTS, which are both reasonable 18 1 and fair in light of the circumstances of this action. Of the total amount of fees awarded, 25 2 percent may be paid to counsel after the “effective date” as defined in the settlement agreement. 3 Similarly, litigation costs may only be paid to counsel after the “effective date” has passed. The 4 remaining 75 percent of attorney’s fees can be paid only after counsel certifies that all class 5 members have received and cashed their checks, no problems with the distribution have been 6 reported for a period of 30 days, and there is nothing left to do. Finally, this order approves a 7 payment for class representative Julius Briggs in the amount of $3,300. 8 Judgment will be entered accordingly. 9 IT IS SO ORDERED. 11 For the Northern District of California United States District Court 10 12 Dated: April 30, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19
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