WILLHITE, J.
Plaintiffs and their counsel appeal from an order appointing attorney Donald Brigham as "Class Judgment Enforcement Counsel" under terms and conditions to which he did not agree, and allocating an award of attorney fees between Brigham and class counsel Barritt Smith based upon factual conclusions that are contrary to the record. We reverse the order and remand for further proceedings.
This is the fourth appeal in this case — a class action against West Coast Digital GSM, Inc. (WCD), brought by employees alleging wage and hour claims. Our brief summary of the facts leading up to the third appeal is based in large part on our prior opinions.
The class action complaint was filed in November 2004 against WCD and Victor Chapron, a director, officer, and managing agent of WCD.
Plaintiffs and WCD jointly requested a stay of the trial on the individual named plaintiffs' claims pending resolution of the appeal from the denial of certification, but the trial court denied that request and the trial went forward. The named plaintiffs prevailed on all but one of their claims.
Plaintiffs moved for attorney fees under Labor Code sections 218.5 and 1194, subdivision (a), for fees related to prosecution of their individual claims; they did not seek fees for work that related solely to class action issues, including time devoted to the class certification motion. The trial court disallowed certain categories of the fees requested, including $16,807 in fees for trial preparation and trial, and awarded plaintiffs attorney fees in the amount of $49,393. The basis for the court's disallowance of fees for trial and trial preparation was the court's conclusion that two of the plaintiffs had rejected an informal settlement offer that exceeded their recovery at trial. Plaintiffs appealed from the portion of the court's order that disallowed fees for trial and trial preparation.
Shortly after plaintiffs filed their second notice of appeal (from the attorney fee order) we issued our decision in the first appeal (case No. B188151, filed Nov. 15, 2006), in which we reversed the trial court's denial of class certification. Several months later, in June 2007, plaintiffs filed another motion for class certification. The hearing on the motion, which was set for June 29, 2007, was continued to September 13, 2007, at WCD's request. On August 30, 2007, WCD filed an opposition to the certification motion, challenging the adequacy of the named plaintiffs and their attorneys to represent the class. On September 13, 2007, the trial court granted plaintiffs' motion, certified the class, and appointed plaintiffs' counsel, Perry G. Smith and Douglas A. Barritt of Barritt Smith LLP, to represent the class.
In the meantime, we issued our decision in the second appeal, case No. B193619, on June 25, 2007. We concluded that the trial court erred in disallowing fees for trial and trial preparation. Plaintiffs moved for their attorney fees for work on the appeal; the trial court awarded them $13,328.75 on November 29, 2007.
A few days later, Chapron filed a declaration in his capacity as an officer of WCD, regarding WCD's production of a class list. Chapron stated in the declaration that WCD "sold its assets to a third party and ceased its operations" on August 3, 2007.
In February 2008, upon stipulation by plaintiffs and WCD and approval by the trial court, plaintiffs filed a first amended complaint that did not change the causes of action but simply added specifics to the prayer for damages; WCD waived its right to answer the amended complaint, allowing plaintiffs to take a default against WCD. Plaintiffs submitted evidence of damages sustained by the class, and the trial court entered judgment in favor of the class and against WCD in September 2008. The court awarded aggregate damages in the amount of $4,105,262 and prejudgment interest in the amount of $1,669,955, plus class representative enhancements to each of the three named plaintiffs. The court also awarded "reasonable attorneys' fees . . . pursuant to statute," to be determined upon the timely filing of a motion for fees.
Plaintiffs timely filed their motion for fees in November 2008. They sought statutory fees under Labor Code sections 218.5 and 1194, subdivision (a), in the amount of $136,152. The motion stated that this amount did not include the fees they had already been awarded following the trial of the individual named plaintiffs' claims and the second appeal.
Shortly before the scheduled hearing on the attorney fee motion, plaintiffs asked the trial court to continue the hearing until the class members were notified of both the judgment and the motion, to give them an opportunity to be heard. The court granted plaintiffs' request and continued the hearing to April 8, 2009.
In February 2009, plaintiffs submitted a proposed notice to the class for approval by the trial court. The proposed notice informed the class of the judgment, but noted that WCD had sold its assets, ceased operations, and claimed it would eventually declare bankruptcy. The proposed notice also gave notice of the motion for attorney fees, noting that the motion seeks a fee of 20 percent of the total judgment, and stated that class counsel no longer had any obligation to pursue the matter (including enforcement of the judgment) on behalf of the class.
The trial court rejected the proposed notice based upon the statement that class counsel had no further obligation to pursue the matter. The court concluded "that by assuming the responsibility of pursuing claims on behalf of the class, class counsel assumed the obligation to pursue it until the end (i.e., enforcement of the judgment) and not just until judgment."
Plaintiffs and class counsel filed a notice of appeal from the trial court's order (the third appeal). That same day, plaintiffs filed a motion seeking approval of a new proposed notice to the class. The new proposed notice, like the original, informed the class of the judgment, WCD's sale of assets and financial position, and the motion for attorney fees. The section regarding class counsel's further obligations was modified, however, to reflect the trial court's ruling that class counsel has continuing obligations and plaintiffs' appeal from that ruling.
Plaintiffs filed an ex parte application to advance the hearing date on their motion to approve the new proposed notice, and to continue the hearing date on the attorney fee motion. The trial court did not rule on the application, but instead ordered plaintiffs' counsel to brief whether the action should be stayed pending the appeal from the court's earlier ruling on class counsel's continuing obligations. In their brief, counsel argued that the proceedings at issue — hearing the motion for attorney fees and providing notice to the class of the judgment and the hearing on the attorney fee motion — would not impact the effectiveness of the pending appeal, and therefore they should not be stayed. The trial court disagreed, finding that "[t]he issues raised [in the appeal] will necessarily affect all remaining issues before the court." Therefore, the court stayed all proceedings pending resolution of the appeal.
In November 2009, we issued our decision in the third appeal (case No. B215454, published at 179 Cal.App.4th 540). We affirmed the trial court's order, finding that "class counsel's job — to represent the class in resolving class issues — is not yet done" in light of the unusual circumstances of this case, in which the defendant/judgment debtor may not have sufficient recoverable assets to pay all or even part of the judgment and fees. We acknowledged that class counsel may need to associate in counsel with expertise in enforcing judgments due to the complexity of this matter, but we noted that "the cost of that association can be paid by the class from any recovery achieved."
After our decision was issued, class counsel endeavored to find an attorney with sufficient knowledge and experience to handle the complex enforcement issues that are likely to arise, who would be willing to associate into the case. Class counsel interviewed four attorneys, only one of whom was willing to take on the enforcement matter on a contingency basis. Because that attorney — Donald Brigham — anticipated that enforcement would require significantly more work and attention than would be required in an ordinary enforcement action, he required a 40 percent contingency fee. Class counsel asked two of the other enforcement counsel he interviewed whether 40 percent was a reasonable fee under the circumstances of this case, and they agreed that it was.
Having found qualified enforcement counsel, class counsel filed a motion asking the trial court to lift the stay on proceedings pending appeal, to preliminarily approve the appointment of Brigham as enforcement counsel, to set a hearing date for final approval of the appointment and for a hearing on the previously-filed motion for attorney fees, and to approve a proposed notice to the class regarding the judgment and the hearing on the final approval of Brigham and the attorney fee motion. The trial court granted the motion, approved the notice to be sent to the class, and set a date for the final approval of Brigham's appointment and a hearing on class counsel's motion for attorney fees.
Class counsel sent the approved notice to the class. That notice informed the class about entry of the judgment, the proposed association of Brigham as enforcement counsel and the fees he will be paid, class counsel's motion for attorney fees seeking a fee award of 20 percent of the total value of the judgment, and class members' right to be heard regarding the appointment of Brigham and the fees to be paid to him and to class counsel.
No members of the class appeared at the hearing on the appointment of Brigham and the fee motion, and the court took the matter under submission. A few days later, the trial court issued its ruling.
In its ruling, the court first noted that plaintiffs' counsel was awarded $49,393 in attorney fees after trial of the individual named plaintiffs' claims, that the award was increased by $16,807 as a result of the second appeal, and that counsel was awarded an additional $13,328 for work on that appeal, for a total of $79,528. The court also noted that plaintiffs' motion for class certification was granted on September 13, 2007 and "was largely unopposed by [WCD]," that defense counsel subsequently was relieved as counsel and WCD's default was entered, and that judgment was entered "following a non-contested default proceeding." The court then appointed Brigham as enforcement counsel, but under terms and conditions set by the court, and turned to the issue of attorney fees.
The court summarized class counsel's "request for additional attorney's fees," stating that counsel sought $136,152, plus $1,182,273 under the common fund doctrine, which "when combined with his prior awards" would result in a total award of $1,397,953. The court observed that, in the alternative, counsel sought $735,708 based upon a lodestar and multiplier of four, which when added to the prior awards would result in a total award of $815,236. The court faulted both class counsel and Brigham for failing to consider in their fee requests the amount of fees sought by the other, and for making little mention of the amounts the class members would receive. Finally, the court commented that class counsel could not justify the fees sought because (1) "[h]e has already been awarded his reasonable fees through and including his first [sic] appeal in this case"; (2) "[m]inimal work was required to file the class [certification] motion because, as noted, it was not really opposed by defense counsel, who were seeking to abandon the case in any event"; (3) "[t]he default prove-up required some attorney time, but no difficult or novel issues were involved in that uncontested proceeding"; and (4) class counsel's "second [sic] appeal, seeking to withdraw from this case, was not well-advised and not successful."
In light of these factors, the court devised a fee award to be based upon the amounts actually recovered. It ruled that, for the first $200,000 recovered, after a deduction for uncompensated costs actually incurred, $20,000 would be awarded to Brigham and the remainder would be distributed to the class (the court stated that class counsel would be awarded $50,000 "of the $79,528 previously awarded to him"). Of the next $100,000, Brigham would be awarded $20,000 and class counsel would be awarded the remainder of the $79,528 previously awarded. For any additional amounts recovered, Brigham and class counsel would jointly be awarded 40 percent, "to be shared by them in any manner to which they can agree."
A timely notice of appeal from the court's order was filed by plaintiffs, class counsel, and Brigham.
Plaintiffs and their counsel challenge the trial court's fee order on several grounds, including that it (1) improperly conflates class counsel's fee motion and the request to appoint Brigham at a 40 percent contingency rate for his work to enforce the judgment;
In making its order on class counsel's attorney fee motion, the trial court assumed that the attorney fees for work done to enforce the judgment should be considered when determining the amount of fees awarded for obtaining the judgment. It is understandable, particularly in light of class counsel's request for fees under the common fund doctrine equal to 20 percent of the judgment, that the court was concerned about the effect on the class members' recovery if it granted that request and also approved Brigham's appointment under a 40 percent contingency agreement. But the attorney fees for obtaining the judgment are mandated by statute, and are separate from the fees involved in enforcing the judgment.
Under Labor Code sections 218.5 and 1194, the trial court is required to award reasonable attorney fees to any plaintiff who prevails in an action for nonpayment of wages or legal overtime compensation.
If this were an ordinary case, in which the entire amount of the judgment (including statutory attorney fees) was easily recoverable, there would be little concern about the cost of enforcement and its effect on the class members' recovery. But this is not an ordinary case, because the cost of enforcement will be significant (see section B., post), and there is no way to know how much, if any, of the judgment ultimately will be recovered. That is not, however, a reason not to determine the reasonable attorney fees to be awarded for class counsel's work. Therefore, on remand, the trial court must determine the reasonable statutory attorney fees (see section C., post), and devise a schedule for distributing the amounts collected (after payment of enforcement counsel's fees) that is fair to both class members and class counsel in the event the full amount of the judgment cannot be recovered. This schedule could be based upon percentages of the amounts recovered (after costs and enforcement counsel's fees are paid), or specific amounts at various milestones (similar to the method used by the court in the order on appeal), or any other method that assures fairness to class members and class counsel.
In moving to have Brigham appointed as enforcement counsel, class counsel provided evidence that Brigham agreed to associate into the case only if he were paid 40 percent of the amounts recovered on the judgment after costs were deducted. Although the trial court appointed Brigham, it ordered that he be paid 10 percent of the first $200,000 recovered, 20 percent of the next $100,000, and that he and class counsel share in 40 percent of any remaining amounts recovered. Plaintiffs argue that the trial court abused its discretion by appointing Brigham under terms to which he did not agree.
We acknowledge that, in changing the terms of Brigham's appointment, the trial court was attempting to exercise its "duty, independent of any objection, to assure that the amount and mode of payment of attorney fees are fair and proper, and [to] not simply act as a rubberstamp for the parties' agreement." (Consumer Privacy Cases (2009) 175 Cal.App.4th 545, 555.) But the evidence did not support the trial court's determination as to the fair and proper amount of attorney fees.
The evidence before the court showed that class counsel interviewed several enforcement attorneys, and that only one of those attorneys — Brigham — was willing to take the case on a contingency basis. Due to the unusual circumstances of this case and the amount of work it would require, however, Brigham would agree to associate into the case only if he were paid 40 percent of any amounts he was able to collect, after costs were deducted. Class counsel also stated that two of the other enforcement attorneys he interviewed agreed that 40 percent was an appropriate contingency fee under the circumstances. In light of this evidence, and the lack of any evidence that qualified enforcement counsel could be retained for less than the fee to which Brigham had agreed, we conclude the trial court abused its discretion by changing the terms of Brigham's appointment.
The trial court's order explaining the basis for its fee award to class counsel was not entirely accurate, no doubt owing to the long and tortured history of the case. We must address the inaccuracies here, to assist the trial court in making a determination of the reasonable fees to be awarded to class counsel upon remand.
First, the trial court's order stated that class counsel had already been awarded $79,528 in attorney fees, and was seeking additional fees. While the trial court was correct that counsel had been awarded those fees, they were awarded for counsel's work on the individual named plaintiffs' claims. No portion of those fees was for work related solely to class issues, such as the class certification motion. And to the extent some of those fees awarded were for work that benefitted both the individual named plaintiffs and the class, counsel did not request those fees in the motion at issue here. Thus, when determining the reasonable attorney fees to be awarded upon remand, the trial court should consider all of the hours reasonably spent on this case for which fees have not yet been awarded.
Second, the trial court's order stated that class counsel sought $136,152 in statutory fees plus $1,182,273 under the common fund doctrine. That is mistaken. While not a model of clarity, the motion for attorney fees explained that plaintiffs sought $136,152 in statutory fees — based upon the numbers of hours spent on the matter, other than hours for which fees previously were awarded — and asked the court to add those fees to the judgment and award class counsel 20 percent of that entire amount under the common fund doctrine, for a total of $1,182,273. In the alternative, plaintiffs asked the court to award class counsel statutory fees under the lodestar and multiplier method, and requested a multiplier of 4, for a total fee of $735,708.
Although the order misconstrued plaintiffs' request under the common fund doctrine, we note that plaintiffs' request that the statutory fee be added to the judgment and that class counsel be awarded a percentage of the total amount is flawed. We have not been directed to, nor have we found in our independent research, any case in which the common fund award is computed in this manner. Rather, the award from the common fund is made separately from the award of statutory fees, and the statutory fee award is offset against the common fund award. (See, e.g., Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 726.) This is because the statutory fee award is paid by the defendant, while fees awarded under the common fund doctrine are paid by the plaintiffs from the common fund.
The common fund doctrine is an equitable doctrine, providing "that one who expends attorneys' fees in winning a suit which creates a fund from which others derive benefits, may require those passive beneficiaries to bear a fair share of the litigation costs." (Quinn v. State of California (1975) 15 Cal.3d 162, 167.) The Supreme Court summarized some of the considerations behind this doctrine in Estate of Stauffer (1959) 53 Cal.2d 124: "fairness to the successful litigant, who might otherwise receive no benefit because his recovery might be consumed by the expenses; correlative prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery; encouragement of the attorney for the successful litigant, who will be more willing to undertake and diligently prosecute proper litigation for the protection or recovery of the fund if he is assured that he will be promptly and directly compensated should his efforts be successful." (Id. at p. 132; accord, Quinn v. State of California, supra, 15 Cal.3d at p. 168.) To qualify for an award under the doctrine, the plaintiffs must show that their efforts have "effected the creation or preservation of an identifiable `fund' of money out of which they seek to recover their attorneys fees." (Serrano v. Priest (1977) 20 Cal.3d 25, 37-38.)
On remand, the trial court must determine, in its discretion, whether an award under the common fund doctrine is warranted. Regardless of its determination on this issue, however, the court must award class counsel's statutory fees by applying the lodestar and multiplier method to determine counsel's reasonable fees. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131-1132.)
As the Supreme Court explained, to calculate reasonable attorney fees, the trial court must begin with the "lodestar figure, based on the `careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case.' [Citation.]" (Ketchum v. Moses, supra, 24 Cal.4th at pp. 1131-1132.) This lodestar figure "is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including, as relevant herein, (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services." (Id. at p. 1132.)
We emphasize, as did the Supreme Court, that statutory fee awards "should be fully compensatory." (Ketchum v. Moses, supra, 24 Cal.4th at p. 1133.) While the trial court is not required to apply a multiplier to the lodestar, the Supreme Court observed that the multiplier is "primarily to compensate the attorney for the prevailing party at a rate reflecting the risk of nonpayment in contingency cases as a class," since "market-level compensation for [attorney services under a contingency fee agreement] . . . typically includes a premium for the risk of nonpayment or delay in payment of attorney fees." (Id. at p. 1138.)
The order setting attorney fees is reversed. On remand, the trial court is directed to (1) determine class counsel's reasonable attorney fees under Labor Code sections 218.5 and 1194; (2) determine, in its discretion, whether class counsel is entitled to fees under the common fund doctrine; (3) determine a schedule for distributing the amounts collected. Plaintiffs shall recover their costs on appeal.
We concur:
EPSTEIN, P. J.
MANELLA, J.
Labor Code section 1194, subdivision (a) provides: "Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit."
