Every lawyer can divide by three

Lawyers need to put food on the table. Which means that when they win a case, they start thinking about recovering attorneys' fees. In certain claims, the fees are paid by the losing defendant. You might even have a separate round of litigation over the fees. That's what happened here.

The case is Munter v. Hickey, a summary order decided on February 22. The Second Circuit does not tell us what this class action was about, but someone was suing someone else for God knows what, and there was a settlement fund from which the prevailing attorneys would draw their fees. They wanted 33 percent of the settlement fund, the usual contingency rate. But the district court crossed that out and only gave plaintiffs 20.3 percent of the settlement fund, stating that "the Court finds that the amount of fees awarded is fair and reasonable in light of the time and labor required, the novelty and difficulty of the case, the skill required to prosecute the case, the experience and ability of the attorneys, awards in similar cases, the contingent nature of the representation and the result obtained for the Class." The district court provided no other explanation for reducing the lawyers' share of the settlement fund.

Under the case law, when judges reduce attorneys' fees awards, they have to provide a detailed reason. The above quotation from the district court, while lengthy, tells us very little. So the Court of Appeals (Kearse, Pooler and Sack) sends it back to the district court to again determine if 33 percent or 20.3 percent is the right amount taking into account the following Goldberger factors:

The Goldberger factors include: (1) counsel’s time and labor; (2) the litigation’s magnitude and complexity; (3) the risk of the litigation; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations.

A look at the district court docket sheet tells us why the case went to the Court of Appeals. Defendants were sued under the Securities Exchange Act, over workers' compensation trusts. The case settled for $1.950 million. As counsel for the plaintiffs argued to the district court in attempting to reverse the initial fee award, the difference between a one-third fee award and a one-fifth fee award was quite substantial:

Plaintiffs requested a fee award of 33% of the Settlement Fund, which would amount to an award of $643,500 – a negative multiplier of 0.60. Under the Court’s Order however, the award of attorneys’ fees would be $395,850 and would result in a negative multiplier of 0.37. Lead Counsel respectfully submits that an attorneys’ fee award that amounts to a negative multiplier of 0.37 does not “adequately compensate counsel for the risks of pursuing such litigation and the benefits which would not otherwise have been achieved but for their persistent and diligent efforts.”