The California Supreme Court said OK to percentage class-action compensation for attorneys, but it didn't go so far as to say that a pure percentage would be the end of the story. If we're reading the tone and tenor of the California Supreme Court's opinion correctly, percentage class-action suits involving a common fund will still have to be reigned in against reasonable lodestar guiding principles.
What does this mean for class action litigators? Contingency is not gone, but be prepared in the future to provide justification for your fees. The time of courts taking attorneys' accounting on faith may soon be coming to an end.
Lodestar Versus Contingency
In the recent decision Laffitte v. Robert Half International Inc., the California Supreme Court effectively affirmed the findings and issued final approval on about $6.33 million in attorneys' fees related to an employee-misclassification suit brought against the professional hiring agency, Robert Half. The settlement was a long time coming: the original plaintiff, Laffitte, sued Robert Half in 2004 and only settled in 2012, whereupon the attorneys' fee debacle became what it was.
The legal issue at hand questioned whether or not California courts can base reasonable attorneys' fee on a percentage of a common fund received in a class action settlement or award. For the greater part of nearly four decades, the answer to that question was essentially "yes." But, after the recent California Supreme Court decision, "yes" will simply not do at all.
The Current Standard
This state has a long standing tradition of relying on the percentage principle as generally addressed in Serrano v. Priest of 1977. However, the Ninth Circuit Court of Appeals held in subsequent cases that the lodestar method has "primacy ... in California."
For all practical matters, this latest development from the state's highest court allows class action attorneys to be compensated for their efforts via a percentage of the common fund recovered, but prudence demands that they have records of accounts and billed hours readily on hand. Who knows how much longer it will be before courts stop taking plaintiffs' attorneys at their word?