This appeal arises from an order overruling objections to a settlement of several wage and hour class actions, and approving the settlement. We hold that rule 3.769 of the California Rules of Court, not rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.), establishes the requirements in California for settlement notices to class members. We also confirm that the percentage of recovery method for calculating an award of attorneys' fees is still viable in common fund cases. Finally, we hold that the presence of a
Plaintiff Mark Laffitte, on behalf of himself and other class members, settled a class action lawsuit against defendants Robert Half International Inc., Robert Half of California, Inc., Robert Half Incorporated, and Robert Half Corporation doing business as RHC (collectively Robert Half or the Robert Half defendants) for $19 million. David Brennan, a member of the class, objected to the settlement. The trial court overruled his objections and approved the settlement, which included an award of attorneys' fees to class counsel of one-third of the settlement, or approximately $6.3 million. Brennan appeals from the order approving the settlement and entering final judgment, challenging both the class action settlement notice regarding the award of attorneys' fees and the amount of attorneys' fees awarded. Laffitte asks that we affirm the trial court's order. The Robert Half defendants state that the attorneys' fees issue does not affect them directly because class counsel will receive their fees from the common fund the Robert Half defendants agreed to pay to settle the case, but they ask that we affirm the order "in order to bring this lawsuit to closure." We affirm.
On September 10, 2004, Laffitte filed a wage and hour class action suit against Robert Half. The complaint alleged five causes of action based on violations of the Labor Code: misclassification of staffing professionals as exempt and failure to pay statutorily mandated wages, failure to provide adequate meal periods (premium wages), failure to provide rest periods, failure to furnish timely and accurate wage statements, and "waiting time" penalties. The complaint also alleged unfair business practices in violation of Business and Professions Code section 17200 et seq.
On March 13, 2006, the trial court denied Robert Half's motion for summary judgment or in the alternative for summary adjudication. On September 18, 2006, the court denied Robert Half's motion to strike the class allegations, and granted Laffitte's motion for class certification with respect to the wage, wage statements, waiting time, and unfair business practices causes of action. The court denied Robert Half's subsequent motion for reconsideration of the class certification order.
The parties participated in mediation. After a second session of the mediation on June 18, 2012, Laffitte and the class representatives in two other
On September 5, 2012, the class representatives filed a joint motion for conditional certification of the class and preliminary approval of the settlement. The trial court, after relating the three class actions, granted the motion, conditionally certified the class, and preliminarily approved the settlement. The court also approved the proposed class notice and related materials, appointed a settlement administrator, and scheduled a hearing for final approval on October 19, 2012.
On November 13, 2012, the trial court granted the parties' ex parte application for an order amending the settlement agreement, class notice, and claim form. Among other things, the amended settlement agreement provided that Robert Half would pay a gross settlement amount of $19 million. Subject to court approval, the settlement agreement provided that the following payments would be made from the gross settlement amount: class counsel attorneys' fees of not more than $6,333,333.33 (33.33 percent of the gross settlement amount) and costs not to exceed counsel's actual costs, class representative payments not to exceed $80,000, settlement administrator fees not to exceed $79,000, civil penalties owed to California's Labor and Workforce Development Agency, and applicable payroll taxes on the employees' recovery. The amended settlement agreement also included a "clear sailing" provision stating that class counsel would apply for their attorneys' fees "and Robert Half will not oppose their request."
On January 28, 2013, Brennan objected to the proposed settlement. Relying in part on rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.), Brennan made the following objections: (1) the attorneys' fee request was excessive; (2) "[m]oney to charity should not be a part of the Court's attorneys' fee award calculation"; (3) information necessary for class members to intelligently object to or comment on the proposed settlement was missing from the notice and the pleadings; (4) the clear sailing provision warranted the appointment of a class guardian; (5) the notice to the class was deceptive regarding the responsibility for payment of attorneys' fees; (6) class counsel and counsel for Robert Half had not filed a report, as required by the
On February 28, 2013, the class representatives and Robert Half filed a joint motion for final approval of the class action settlement and a response to Brennan's objections. The class representatives reported that they had sent class notices to 3,996 class members and had received only two objections: an objection from Brennan and an "objection" that was actually a dispute over the amount the individual class member was to receive. The class representatives also filed a motion for attorneys' fees, costs, and class representative enhancements. The motion requested $6,333,333.33 in attorneys' fees for class counsel, $127,304.08 in costs, $79,000 in settlement administrator expenses, and $80,000 in class representative enhancement payments. The class representatives explained that class counsel were requesting as attorneys' fees one-third of the gross settlement, which constituted a common fund for the benefit of class members, and argued that this amount was reasonable and appropriate. Class counsel asserted that their hourly rates and number of hours worked were fair and reasonable and that the successful result, the difficulty of the issues in the case, the quality of their representation, the contingency risk, and the preclusion of other employment justified a lodestar multiplier.
In support of their motion for attorneys' fees, class counsel submitted declarations from the attorneys in each of the three law firms serving as class counsel. The attorneys did not submit detailed time records. The declarations stated that Kevin T. Barnes, who served as lead counsel and supervised and handled all aspects of the litigation, worked 2,259.5 hours on the case at an hourly rate of $750, and his partner, Gregg Lander, worked 807.3 hours at an hourly rate of $600. Joseph Antonelli worked 709.3 hours on the case at an hourly rate of $750, and his partner, Janelle Carney, worked 14.4 hours at an hourly rate of $600. Finally, Mika Hilaire worked 423 hours on the case at her hourly rate of $500. Barnes determined that class counsel worked a total of 4,213.5 hours on the case (and anticipated working 200 hours on the appeal) and, using the hourly rate for each attorney, calculated that the total lodestar amount was $2,931,120 ($3,118,620 including the appeal). Class counsel requested a lodestar multiplier of between 2.03 to 2.13 for a total requested attorneys' fee award of $6,333,333.33.
Barnes also described the contentious nature of the litigation and summarized the work class counsel had performed: "The settlement that has been reached is the product of tremendous effort, and a great deal of expense by the parties and their counsel. The parties' assessment of the matter is based on one of the most heavily litigated cases I have ever been a part of and the
On March 22, 2013, the trial court held a hearing on the motion for approval of the settlement and the motion for attorneys' fees. The court stated in a tentative ruling that the requested fee amount "amounts to 33 1/3[] percent of the gross settlement amount, and is not an atypical contingency agreement in a class action. The primary factor for determining whether an attorney fee award is fair is whether the fee bears a reasonable relationship to the value of the attorney's work." The court stated that the 4,213.5 attorney hours spent by class counsel litigating this action "is a fairly reasonable number of hours to have billed on a class action matter that was heavily litigated for 8.5 years ...." The court noted that "Class Counsel billed $2,968,620 on this amount of time, based on hourly rates of $750/hour for Barnes and Antonelli, $600/hour for Lander and Carney, and $500/hour for Hilaire.... This rate is justified by the high level of Class Counsel's experience in litigating wage and hour claims/class actions." The court stated that, "[b]ased on the reasonable number of hours billed and the legitimate hourly rate, Class Counsel's lodestar is $2,968,620." The court acknowledged Brennan's objections to the proposed settlement but stated that rule 3.769 of the California Rules of Court, not rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.), governed the requirements of a class action settlement notice. The court stated that "[t]he Parties' method of calculation of attorneys' fees is supported under California law. The court in Lealao v. Beneficial California Inc. (2000) 82 Cal.App.4th 19, 27 [97 Cal.Rptr.2d 797] approved of the use of a common fund whereby attorneys' fees are calculated as a percentage of the amount recovered."
During the hearing the court found that the class action notice "that was given fully complies with California law, with due process and is not misleading." The court also found that "the tasks that were performed by class counsel and the number of hours that they spent on those tasks were reasonable and that ... [t]he hourly fees, if you're looking at lodestar, are within the range of what is reasonable for this type of work in this community." Nevertheless, the court also asked for further briefing on (1) "how the attorneys' fees are to be allocated" among the three law firms serving as class counsel "and whether named Plaintiffs have signed a fee sharing agreement"; (2) "the amount that is [in] controversy and how it is calculated, estimates as to realistic ranges of outcomes" if the case were to go to trial, "and why the risks of litigation make the settlement fair, reasonable and adequate"; and (3) support for a multiplier of two on "the lodestar
Barnes subsequently submitted an 18-page supplemental declaration responding to the court's questions and providing additional information regarding the work class counsel had performed during the eight and one-half years of the litigation. Barnes calculated, based on the average number of hours per week and the number of workweeks of the class members, that "the total amount in controversy in the Laffitte class is approximately $90,690,000 and the total amount in controversy in the Apolinario class is approximately $25,800,000." Barnes stated, however, "there were numerous risks in both cases related to both class certification and the merits," including loss of class certification in Laffitte, changes in the law "as to certification in exempt misclassification cases (making it much harder today to obtain and/or maintain class certification)," the United States Supreme Court's recent decision in Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. ___ [180 L.Ed.2d 374, 131 S.Ct. 2541] and California Supreme Court's decision in Harris v. Superior Court (2011) 53 Cal.4th 170 [135 Cal.Rptr.3d 247, 266 P.3d 953] and decision to grant review in Duran v. U.S. Bank National Assn.
The trial court held another hearing on Brennan's objections on April 10, 2013. The trial court overruled Brennan's objections and concluded that it had "sufficient information at this point to determine that this is a fair and reasonable settlement." The court stated that "[t]he supplemental declaration from Mr. Barnes has addressed the court's question about how the attorneys fees are to be allocated between the firms representing plaintiffs, whether the named plaintiffs have signed a fee sharing agreement, and addressed the requirement under the California Rules of Court that the terms of any attorneys fees agreement be set forth in full." The court also stated that it "received sufficient information to evaluate the strength of plaintiffs' case, detailed information about the factual and legal risks involved, the valuation on a claim by claim basis and the discount factor that plaintiff[s] applied in coming up with a reasonable range of outcomes." The court further acknowledged receipt of "significant information on the risk, expense, complexity and likely duration of further litigation; the risk of maintaining a class action status throughout trial; the extent of discovery completed; the experience and views of counsel; and the views of the class members." The court found that "[t]hese three actions have a lengthy procedural history including one class certification, a motion to decertify in another case, a class certification not yet having been granted, [and] the uncertainties introduced by case law in this area ... throwing into significant doubt the maintenance of the certification...."
Turning to the amount of attorneys' fees, the court stated it "considers in this case that there is a contingency case, and so I do a double check on the attorneys fees by looking at the lodestar amount. I do believe I have sufficient information on the number of hours that were present and that the hourly rates charged therefore were within the norm and not overstated. Given the lodestar, I then also find I have information in the record which supports the multiplier that would be applied to lodestar if you're looking at a strict lodestar calculation, which we're not, we're looking at a contingency calculation, the amount of the contingency is not unreasonable. I'm considering the novelty and difficulty of the questions involved, the skill displayed in presenting them, the extent to which the litigation precluded other employment by the attorneys and the inherent risk whenever there is a fee award that is contingent. On that basis, I am granting final approval." The trial court granted final approval of the class action settlement and awarded
Laffitte served a notice of ruling on the parties on April 12, 2013. Brennan timely filed a notice of appeal on June 10, 2013.
Brennan argues that the notice to the class members denied them due process because the nature and timing of the settlement approval procedure set forth in the notice was unfair, and because the language in the notice describing a class member's financial responsibility for attorneys' fees was misleading. Brennan also argues that, in reviewing the class counsel's request for attorneys' fees, the trial court erred by using the percentage of fund method and then made mistakes when performing lodestar calculations. Finally, Brennan contends that class counsel breached their fiduciary duty to the class members by including a collusive clear sailing provision in the amended settlement agreement.
The class notice describing the preliminarily approved settlement included the proposed attorneys' fees award for class counsel, a schedule for final approval, and the procedure for making objections. The notice stated: "Class Counsel, consisting of Law Offices of Kevin T. Barnes, Law Office of Joseph Antonelli, and Appell | Hilaire | Benardo LLP, will seek approval from the Court for the payment in an amount not more than $6,333,333.33 for their attorneys' fees in connection with their work in the Actions, and an amount not more than $200,000 in reimbursement of their actual litigation expenses that were advanced in connection with the Actions. Class Counsel's attorneys' fees and litigation expenses as approved by the Court will be paid out of the Gross Settlement Amount." The trial court did not require class counsel to file, and they did not file, their motion for attorneys' fees until February 28, 2013, which was after the January 28, 2013, deadline stated in the notice for class members to file their objections.
Brennan argues that requiring class members to file objections to the proposed settlement and request for attorneys' fees before class counsel filed their motion for attorneys' fees was a violation of due process and a breach of fiduciary duty. Brennan asserts that the statement in the notice that class
Under rule 23 class counsel must file a motion for attorneys' fees prior to the time class members must file objections to the settlement (rule 23(h)(1)-(4)), and the motion must include not only the settlement agreement's provisions but also the actual amount sought or a "fair estimate" (rule 54(d)(2)(B)(iii)). In Mercury the Ninth Circuit, interpreting rule 23(h), held that, with respect to the timing of a motion for attorneys' fees, "a schedule that requires objections to be filed before the fee motion itself is filed denies the class the full and fair opportunity to examine and oppose the motion that Rule 23(h) contemplates." (In re Mercury Interactive Corp. Securities Litigation, supra, 618 F.3d at p. 995.)
The notice given to the class members complied with California Rules of Court, rule 3.769 by apprising them of the agreement concerning attorneys' fees. The notice told the class members that class counsel could receive up to $6.3 million in attorneys' fees. The notice also advised the class members of
The notice of settlement states: "The Court will also be asked to approve Class Counsel's request for attorneys' fees and costs and the class representative payments. A Class Member who does not request exclusion from the settlement may, but is not required to, enter an appearance through counsel. As a Class Member, you will not be responsible for the payment of attorneys' fees ... unless you retain your own counsel, in which event you will be responsible for your own attorneys' fees and costs." (Italics added.) Brennan argues that the statement "you will not be responsible for ... attorneys' fees" is deceptive and misleading because class counsel were to receive their attorneys' fees from the common fund and each class member is economically responsible for his or her share of the attorneys' fees award out of the gross settlement amount. Brennan also argues that the phrase "you will be responsible for your own attorney's fees" is "(1) wrong as a matter of law; and (2) had the effect of discouraging class members from seeking the assistance of their own counsel."
Brennan also argues that the "misinformation" about responsibility for attorneys' fees "is compounded by the fact that the Notice failed to advise class members that they even had a right to object to Class Counsel's attorneys' fee request." The notice, however, states: "If you are dissatisfied with any of the terms of the Settlement you may object to the Settlement." The notice also states: "The Court will hold a final approval hearing ... to determine whether the Settlement should be finally approved as fair, reasonable, and adequate. The Court will also be asked to approve Class Counsel's request for attorneys' fees and costs and the Class Representative payments...." The notice advises the class members that settlement will be reduced by "Class Counsel's fees not to exceed $6,333,333.33 ...." The notice, read reasonably and considered in its entirety, sufficiently advises class members of the amount of attorneys' fees class counsel were requesting and of the class members' right to object to the request.
We review an award of attorneys' fees in a class action settlement under an abuse of discretion standard. (Carter v. City of Los Angeles (2014) 224 Cal.App.4th 808, 819 [169 Cal.Rptr.3d 131]; Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 1004 [156 Cal.Rptr.3d 26].)
In Consumer Privacy Cases, supra, 175 Cal.App.4th 545 the court explained that "[r]egardless of whether attorney fees are determined using the lodestar method or awarded based on a `percentage-of-the-benefit' analysis
Finally, contrary to Brennan's assertion, the trial court's use of a percentage of 33 1/3 percent of the common fund is consistent with, and in the range of, awards in other class action lawsuits. In Chavez v. Netflix, Inc., supra, 162 Cal.App.4th 43 the court held that attorneys' fees of 27.9 percent of the class benefit awarded was "not out of line with class action fee awards calculated using the percentage-of-the-benefit method: `Empirical studies show that, regardless whether the percentage method or the lodestar method is used, fee awards in class actions average around one-third of the recovery.' [Citation.]" (Id. at p. 66, fn. 11; see Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 726 [9 Cal.Rptr.3d 544] ["the court awarded to [class] counsel attorney fees in the amount of 25 percent of the total damages fund recovered for the class ..."]; Fischel v. Equitable Life Assur. Society of U.S. (9th Cir. 2002) 307 F.3d 997, 1006 [recognizing "a 25 percent `benchmark' in percentage-of-the-fund cases that can be `adjusted upward or downward to account for any unusual circumstances involved in [the] case'"].)
Class counsel's proposed lodestar was $2,968,620 without an appeal and $3,118,620 including an appeal. Class counsel asked the court to apply a multiplier of 2.03 to 2.13 to the lodestar cross-check to support the total fee request of $6,333,333.33. Brennan acknowledges that "[m]ultipliers can range from 2 to 4 or even higher." (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 255; accord. In re Lugo (2008) 164 Cal.App.4th 1522, 1546 [80 Cal.Rptr.3d 521]; see Chavez v. Netflix, Inc., supra, 162 Cal.App.4th at p. 66 [multiplier of 2.5 was not "out of line with prevailing case law"].)
Brennan contends the trial court's use of 2012 hourly rates "for work done between 2005 and 2011 amounted to a de facto multiplier." Brennan's contention is based on a misreading of the record. The trial court did not mistakenly apply 2012 hourly rates to work performed in prior years. The trial court determined that the hourly rates for the attorneys who worked on the case were reasonable for all years of the litigation. And the trial court had ample basis for making that determination, including evidence of hourly rates from 2002 to 2012. Barnes's declaration included a report based on a survey by the National Law Journal showing hourly rates for 2002 ranging from $500 to $850. The supporting declaration of Richard M. Pearl, an expert on hourly rates and attorneys' fees in California, included a review of hourly rates approved by California courts ranging from $750 to $875. He also reported the result of surveys for 2009 showing hourly rates ranging from $775 to $950. The trial court did not abuse its discretion by using the hourly rates of the attorneys serving as class counsel, nor did the court's use of those rates constitute a de facto multiplier.
Brennan argues that the inclusion of a clear sailing provision in the settlement agreement was a breach of the fiduciary duty by class counsel in the negotiation of the settlement. This provision states: "Class Counsel will apply to the Court for an award of not more than $6,333,333.33 (33.33 [percent] of the Gross Settlement Amount) as their Class Counsel Fees Payment ..., and Robert Half will not oppose their request...." Brennan relies on the Ninth Circuit's opinion in Bluetooth, supra, 654 F.3d 935, which includes this statement: "One inherent risk [in class action settlements] is that class counsel may collude with the defendants, `tacitly reducing the overall settlement in return for a higher attorney's fee.' [Citations.]" (Id. at p. 946.) One sign of such collusion is "when the parties negotiate a `clear sailing' arrangement providing for the payment of attorneys' fees separate and apart from class funds, which carries `the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class' [citations] ...." (Id. at p. 947.) There is, however, no prohibition on clear sailing provisions, nor is there any evidence that the clear sailing provision in this case reflected any collusion between Laffitte and Robert Half.
"While it is true that the propriety of `clear sailing' attorney fee agreements has been debated in scholarly circles [citations], commentators have also noted that class action `settlement agreement[s] typically include[] a "clear sailing" clause ....' [Citation.] In fact, commentators have agreed that such an agreement is proper. `[A]n agreement by the defendant to pay such sum of reasonable fees as may be awarded by the court, and agreeing also not to object to a fee award up to a certain sum, is probably still a proper and ethical practice. This practice serves to facilitate settlements and avoids a
Unlike Bluetooth, where the "settlement agreement included all three of these warning signs" (Bluetooth, supra, 654 F.3d at p. 947), the settlement agreement here contains none of them. As discussed, class counsel received a percentage of the recovery commensurate with percentages awarded in other cases, and the class members received a significant monetary distribution. The clear sailing agreement did not provide for a payment of attorneys' fees separate and apart from the common fund but provided for a payment of attorneys' fees out of the fund. Finally, there was no arrangement that fees not awarded would revert to the Robert Half defendants. (See In re Toys "R" Us-Delaware, Inc. — Fair and Accurate Credit Transactions Act (FCTA) Litigation (C.D.Cal. 2014) 295 F.R.D. 438, 458 ["despite the clear sailing provision," the "absence of a `kicker provision' in the parties' settlement and the fact that the class is receiving reasonable value reduces the likelihood that plaintiffs and [the defendant] colluded to confer benefits on each other at the expense of class members"]; Larsen v. Trader Joe's Company (N.D.Cal., July II, 2014, No. 11cv-051880-WHO) 2014 WL 3404531, p. *8 ["clear sailing
The order entering final judgment is affirmed. The Laffitte class plaintiffs and the Robert Half defendants are to recover their costs on appeal.
Woods, Acting P. J., and Zelon, J., concurred.
Rule 54(d)(2) provides in part: "Costs; Attorney's Fees. [¶] ... [¶] (2) Attorney's Fees. [¶] (A) Claim to Be by Motion. A claim for attorney's fees and related nontaxable expenses must be made by motion unless the substantive law requires those fees to be proved at trial as an element of damages. [¶] (B) Timing and Contents of the Motion. Unless a statute or a court order provides otherwise, the motion must: [¶] (i) be filed no later than 14 days after the entry of judgment; [¶] (ii) specify the judgment and the statute, rule, or other grounds entitling the movant to the award; [¶] (iii) state the amount sought or provide a fair estimate of it; and [¶] (iv) disclose, if the court so orders, the terms of any agreement about fees for the services for which the claim is made."