There should be little wonder why many plaintiffs’ lawyers hate CAFA: By and large, federal district courts take their obligation under Federal Rule of Civil Procedure 23(e) to police class settlements seriously, which generally means lower fee awards for plaintiffs’ lawyers. The most recent example is Ko v. Natura Pet Products, Inc. (N.D. Cal. Sept. 10, 2012).

Ko is a putative nationwide class action alleging that a pet-food maker misrepresented that the ingredients it uses are fit for human consumption. The parties eventually reached a settlement under which the defendant would alter its advertising and pay the class $2,150,000—from which $400,000 would be deducted for the cost of notice, $20,000 would go to the plaintiff as an incentive payment, and 35% of the remainder would be awarded as attorneys’ fees.

The district court (Saundra Armstrong, J.) upheld the settlement, but slashed the award of attorneys’ fees and the incentive payment. The court reasoned that, although class counsel had achieved “acceptable” results—a payment of roughly $35 per class member, which is equivalent to the value of one bag of pet food—the outcome was not “superior.” The court also refused to take at face value class counsel’s assertion that settlement of the case “required the work of highly skilled and specialized attorneys,” that their “work on the case was exemplary,” and that they “litigated this action with great efficiency.” Instead, it rejoined: “The quality of work with respect to the motion for final approval of class action settlement and the motion for attorneys’ fees, costs and an incentive award to Plaintiff is not consistent with Class Counsel’s claim that highly skilled attorneys efficiently litigated this case in an exemplary manner.” Ouch.

Judge Armstrong also rejected class counsel’s exhortation to calculate their lodestar using billing rates of large law firms, expressing the view that “[l]arge law firms, such as the ones identified by Class Counsel in support of the hourly rates charged, typically hire individuals that graduate at the top of their class from top law schools. They also generally have Fortune 500 companies as their clients and provide defense-side litigation services. There is no showing that the work performed by the large law firms identified by Class Counsel or the credentials and reputation of their attorneys are in any way comparable to Class Counsel and the attorneys that worked on this case or to small plaintiff-side law firms located in this district and their attorneys.” Ouch again.

The district court accordingly cut the fee request from 35% to 25%, which it indicated is consistent with the benchmark typically used in cases within the Ninth Circuit. The court likewise rejected class counsel’s request to award the named plaintiff an incentive payment of $20,000, deeming that figure to be unjustifiable when compared to the roughly $35 per-class-member recovery. The court instead allowed an award of $5,000, which is consistent with other incentive awards in the Ninth Circuit.

Although most of the court’s opinion was devoted to the fee award, there is one other interesting tidbit. Two class members objected to the settlement on the ground that the lawsuit itself was “frivolous,” “unbelievably nitpicking,” and “severe[ly] unfair” to the defendant. The court disregarded these objections, explaining: “[A]n objection based on a concern for the Defendants and an apparent non-substantive assessment of the frivolity of the action are not germane to the issue of whether the settlement is fair. [The objectors’] apparent concern for the Defendants is inapposite, since the purpose of Rule 23(e)’s final approval process is the protection of absent class members, and not the Defendants.” Nevertheless, I can’t help but suspect that the aspersions cast on the merits of the case by these objectors reinforced the court’s determination not to reward class counsel with an atypically large fee award.

The post Ko v. Natura Pet Prods., Inc.: District Court Approves Settlement, But Slashes Attorneys’ Fees And Incentive Award appeared first on Class Defense Blog.

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