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18-16213 (lead)
No. 18-16223
IN THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
SHAHRIAR JABBARI and KAYLEE HEFFELFINGER, et al.
Plaintiffs-Appellees,
BARBARA COCHRAN
Objector-Appellant,
v.
WELLS FARGO & COMPANY and WELLS FARGO BANK, N.A., et al.,
Defendants-Appellees.
On Appeal from the United States District Court
for the Northern District of California
Case No. 15-CV-02159 VC
Hon. Vince Chhabria
APPELLANT’S OPENING BRIEF
George W. Cochran, Esq. 1385 Russell Drive
Streetsboro, OH 44241
Tel.: 330.607.2187
Fax: 330.230.6136
Counsel to Objector-Appellant Barbara Cochran
18-16224, 18-16236, 18-16268, 18-16269, 18-16284
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TABLE OF CONTENTS
Table of Contents .............................................................................................................. i
Table of Authorities ......................................................................................................... ii
Jurisdictional Statement ........................................................................................... 1
Statement of the Issue .............................................................................................. 2
Statement of the Case .............................................................................................. 3
Statement of Facts.................................................................................................... 5
Summary of Argument ............................................................................................ 6
Standard of Review.................................................................................................. 7
Argument ................................................................................................................. 7
The District Court Abused Its Discretion By Awarding 15% Of A Megafund
Settlement In Attorneys’ Fees Without Properly Evaluating All Factors Relied Upon
By The Ninth Circuit For Determining What Is Reasonable Under The
Circumstances……………………………………………………………………..7
A. Because Plaintiffs’ Action Was Prompted By Governmental Action And
Buttressed With Insider Information, Class Counsel’s Litigation Risk Was
Significantly Lowered ……………………………………………………...11
B. Because Class Counsel Spent More Time Reviewing Public Information And
Finalizing Settlement Than Pursuing Substantive Discovery And Motions In
Preparation For Trial, Their Lodestar Should Have Been Reduced
Accordingly…………………………………………………………………14
C. Because Class Counsel Are Guaranteed Payment For Future Administrative
Tasks, They Should Have Been Awarded An Adjusted Lodestar For The
Actual Hours Submitted. ……………………………………………………15
D. A Lodestar Crosscheck Of Class Counsel’s Already Steep Hourly Rate
Confirms The Fee Award In This Megafund Settlement Is Excessive……..17
Conclusion………………………………………………………………………..19
Certificates of Compliance and Service……………………………………….….20
i
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TABLE OF AUTHORITIES
Cases Page
Blum v.Stenson, 465 U.S. 886 (1984)…………………………………………..16
Childress v. Darby Lumber, Inc., 357 F.3d 1000 (9th Cir.2004)………………. 2
City of Detroit v. Grinnell Corporation, 495 F.2d 448 (2d Cir. 1974)…………..8
Democratic Cent. Comm. of D.C. v. W.M.A.T.C., 38 F.3d 603 (D.C. Cir. 1994)..8
Evans v. Jeff D., 475 U.S. 717 (1986)……………………………………………8
Fischel v. Equitable Life Assurance Soc'y, 307 F.3d 997 (9th Cir. 2002)……….8
Florida v. Dunne, 915 F.2d 542(9th Cir.1990)………………………………….17
Fresh Kist Produce, LLC v. Choi Corp., Inc., 362 F. Supp. 2d 118
(D.D.C. 2005)……………………………………………………………15
Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000)…………………9,11,19
Gutierrez v. Wells Fargo, NA, No. 07-cv-05923 WHA, 2015 WL 2438274,
(N.D. Cal. May 21, 2015)………………………………………………..10
Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000)……………..10
In re Bluetooth Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011)…………….17,18
In re Continental Ill. Sec. Litig., 962 F.2d 566 (7th Cir. 1992)…………………10
In re Dry Max Pampers Litig., 724 F.3d 713 (6th Cir. 2013)……………………7
In re Fidelity/Micron Securities Litig., 167 F.3d 735 (1st Cir. 1999)……………9
In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465
(S.D.N.Y. 1998)………………………………………………………….15
ii
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Cases Page
In re Washington Pub. Power Supply Sys. Litig., 19 F.3d 1291
(9th Cir. 1994)………………………………………………………7,11,18
Laffitte v. Robert Half Int’l, 376 P.3d 672 (Cal. 2016)………………………….10
Lewis v. Silvertree Mohave Homeowners’ Ass’n, Inc., No. C 16-03581 WHA, 2017 WL
5495816 (N.D.Cal. Nov. 16, 2017)………………………………………..16
Mercury Interactive Corp. Securities Litigation, 618 F.3d 988 (9th Cir. 2010)….7
Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268 (9th Cir.1989)……..…17
Perdue v. Kenny A., 130 S. Ct. 1662 (2010)……………………………………..19
Piambino v. Bailey, 757 F.2d 1112 (11th Cir. 1985)…………………………….10
Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157 (9th Cir. 2013)………. 2
Rodriguez v. Disner, 688 F.3d 645 (9th Cir. 2012)…………………………….. 2
Rooths v. District of Columbia, 802 F. Supp.2d 56 (D.D.C. 2011)……………..16
Six (6) Mexican Workers v. Ariz. Citrus Growers,
904 F.2d 1301 (9th Cir. 1990)…………………………………………….9
Stetson v. Grissom, 821 F.3d 1157 (9th Cir. 2016)………………………………8
Swedish Hospital Corp. v. Shalala, 1 F.3d 1261 (D.C. Cir. 1993)………………13
United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv.
Workers Intern. Union, AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802
(9th Cir. 2010)…………………………………………………………… 2
Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9 Cir. 2002)………………………7
Wininger v. SI Mgmt. L.P., 301 F.3d 1115 (9th Cir. 2002………………………18
Yokoyama v. Midland Nat. Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010)……….2
iii
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Statutes and Rules Page
Civil Rule 23…………………………………………………………….……11,15
Articles
Barbara J. Rothstein & Thomas E. Willging, Managing Class Action
Litigation: A Pocket Guide for Judges. Federal Judicial Centre (2005)…11
John C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model
of the Lawyer as Bounty Hunter Is Not Working, 42 MD. L. REV. 215
(1983)……………………………………………………………………13
4 Newberg on Class Actions § 14.6 at 554 (4th ed. 2002)…………………..…10
Vaughn R. Walker & Ben Horwich, The Ethical Imperative of a Lodestar Cross-
Check: Judicial Misgivings About Reasonable Fees in Common Fund Cases,
18 GEO J. LEGAL ETHICS 1453 (2005)……………………………………..18
William B. Rubenstein, On What a “Private Attorney General” Is—
And Why it Matters, 57 VAND. L. REV. 2129 (2004)………………...13
iv
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1
Jurisdictional Statement
1. District Court’s Jurisdiction. The District Court had
diversity jurisdiction over this case under 28 U.S.C. § 1332
(a) and (d) because the amount in controversy for the class
exceeds $5,000,000, there are 100 or more Class members
nationwide, and Plaintiffs-Appellees and other putative
class members are citizens of a different state from
Defendants-Appellees.
2. Appellate Jurisdiction. This Court has jurisdiction under
28 U.S.C. § 1291. On June 14, 2018, the district court issued
orders granting final approval of the settlement and
Plaintiffs-Appellees’ motion for attorney’s fees. (ER 3).
Final judgment was entered July 24, 2018. (ER 1).
Objector-Appellant Cochran filed Notice of her Appeal on
July 27, 2018. (ER 33).
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2
STATEMENT OF THE ISSUE
Did the district court abuse its discretion by awarding 15% of a megafund
settlement as attorney’s fees without properly evaluating all factors relied upon by
the Ninth Circuit for determining what is reasonable under the circumstances?
[Raised pro se at ER 36; objections not specifically addressed by court].
Standard of Review. An award of attorneys' fees is reviewed for abuse of
discretion. Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1162 (9th Cir.
2013); Rodriguez v. Disner, 688 F.3d 645, 653 (9th Cir. 2012); Childress v. Darby
Lumber, Inc., 357 F.3d 1000, 1011 (9th Cir.2004); “An abuse of discretion occurs
when the district court, in making a discretionary ruling, relies upon an improper
factor, omits consideration of a factor entitled to substantial weight, or mulls the
correct mix of factors but makes a clear error of judgment in assaying them.” United
Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers
Intern. Union, AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802, 808 (9th Cir.
2010). The Ninth Circuit “accord[s] the decisions of district courts no deference
when reviewing their determinations of questions of law.” Yokoyama v. Midland
Nat. Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010). Findings of fact are
reviewed for clear error. Id.
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3
Statement of the Case
Plaintiffs-Appellees Shahriar Jabbari and Kaylee Heffelfinger (“Plaintiffs”)
filed a proposed nationwide class action against Defendants-Appellees Wells Fargo
& Company and Wells Fargo Bank, NA, et al. (“Defendants”) in mid-2015, alleging
Defendants had opened checking, savings, and credit card accounts without
customer consent. (ER 81). Shortly thereafter, Defendants moved to compel
arbitration, invoking an arbitration clause in an agreement Plaintiffs signed when
they opened legitimate accounts. The Court granted the motion and dismissed the
case in September 2015.
After Plaintiffs appealed, the parties began to exchange information with a
view toward settlement. Retired U.S. District Court Judge Phillips was then asked
to assist with further discussions. After negotiations hit an impasse on the amount in
March 2017, Judge Phillips made a mediator recommendation of $110 million that
both sides accepted. Under this agreement in principle, the Class Period was to run
from 2009 to 2017. Based on new information and confirmatory discovery, the
parties extended the Class Period to May 2002, expanding the fund to $142 million.
The parties sought preliminary approval of the settlement in April 2017. After
written questions from the Court, supplemental briefing, and a hearing with both
parties and objectors, the Court indicated it was inclined to grant the motion if the
parties modified the settlement agreement to address issues discussed at the
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4
Preliminary Approval Hearing. The parties submitted an amended settlement
agreement to which the Court gave preliminary approval in July 2017.
Upon moving for final approval of the settlement, Plaintiffs sought attorneys’
fees equal to 15% of the Settlement Fund. Among other class members, Objector-
Appellant Barbara Cochran (“Appellant”) challenged the fee motion on several
grounds: (1) that an inside whistleblower had triggered a flurry of lawsuits actually
lowered the risk of loss; (2) most pretrial time was spent negotiating a settlement;
(3) Class Counsel should not be credited with 2,500 hours of future administrative
work at the same multiplier as pretrial activities carrying the highest risk and
complexity; (4) a lodestar crosscheck of their already steep hourly rate proved that
the fee was excessive. (ER 36).
The district court approved the settlement and fee motion on June 14, 2018.
(ER 3-17). Noting “the Ninth Circuit’s “benchmark” for percentage-of-recovery
awards is 25%”, the Court found 15% fair and reasonable based on five factors: (1)
risk undertaken; (2) financial burden assumed; (3) superlative results obtained; (4)
non-monetary benefits achieved; and (5) similar awards. (ER 14). Having “carefully
considered objections to Class Counsel’s motion for attorneys’ fees,” the Court
overruled them all without comment because the award was “slightly lower than the
median and average”. (ER 15). The Court entered Final judgment on July 24, 2018.
(ER 1). Appellant filed Notice of Appeal on July 27, 2018. (ER 33).
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5
Statement of Facts1
Plaintiffs alleged Defendants had been opening accounts for customers about
which they were not aware and did not authorize. According to Plaintiffs’ complaint,
Defendants’ business model was based on enrolling customers in multiple banking
products called “solutions.” In order to maximize its profits, Defendants allegedly
opened customer accounts and issued credit cards without the customer’s
authorization or knowledge. Then, when customers failed to maintain mandatory
account balances, pay fees for accounts they did not know existed or comply with
some other undisclosed policy, Defendants charged a fee.
Defendants often collected the fee by taking money from the clients’ existing
accounts. Defendants allegedly promoted this system by imposing unrealistic sales
quotas on employees. Despite knowing about these practices for years, Defendants
had not stopped the “solutions” initiative. While class members fought excessive
fees and were hassled by collection agencies, Defendants became the world’s most
valuable bank.
1 All factual allegations are taken from Plaintiffs’ Consolidated Amended Class
Action Complaint (ER 81-113).
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6
Summary of Argument
The district court abused its discretion by awarding 15% of a megafund settlement
to Class Counsel without properly evaluating all factors relied upon by the Ninth Circuit
for determining a reasonable fee under the circumstances. In all, three of six factors set
forth in Goldberger were ignored or misapplied. Because the litigation was triggered by
governmental action and bolstered by reliable testimony from former employees with
internal documents, Class Counsel’s litigation risk was lower than most consumer class
actions. Moreover, in the few months preceding settlement talks, they spent more time
reviewing public information, finalizing terms and securing the Court’s approval than
pursuing substantive discovery and motions in preparation for trial. Since Class Counsel
is guaranteed payment for future administrative tasks, the Court should have only
awarded their adjusted lodestar for actual hours submitted—not given credit for 2,500
speculative hours at the highest possible premium.
Most importantly, a lodestar crosscheck of Class Counsel’s already steep hourly
rate confirms the award was excessive. To gloss over these critical factors in a megafund
settlement because the percentage-of-recovery happens to fall below this Circuit’s
benchmark was a clear abuse of the district court’s discretion.
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7
ARGUMENT
Standard of Review
A district court’s award of attorneys’ fees is reviewed for abuse of discretion.
Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1046 (9 Cir. 2002).
The District Court Abused Its Discretion By Awarding 15% Of A Megafund
Settlement In Attorneys’ Fees Without Properly Evaluating All Factors Relied
Upon By The Ninth Circuit For Determining What Is Reasonable Under The
Circumstances.
“Class-action settlements are different from other settlements. The parties to
an ordinary settlement bargain away only their own rights—which is why ordinary
settlements do not require court approval.” In re Dry Max Pampers Litig., 724 F.3d
713, 715 (6th Cir. 2013). Unlike ordinary settlements, “class-action settlements
affect not only the interests of the parties and counsel who negotiate them, but also
the interests of unnamed class members who by definition are not present during the
negotiations.” Id. “[T]hus, there is always the danger that the parties and counsel
will bargain away the interests of unnamed class members in order to maximize their
own.” Id. To guard against this danger, a district court must act as a “fiduciary for
the class [] with ‘a jealous regard’” for the rights and interests of absent class
members. Mercury Interactive Corp. Securities Litigation, 618 F.3d 988, 994 (9th
Cir. 2010) (quoting In re Washington Pub. Power Supply Sys. Litig., 19 F.3d 1291,
1302 (9th Cir. 1994).
This appeal seeks to reverse a disturbing trend among California’s district
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8
courts of approving class fee petitions based on whether they meet certain
“benchmarks” instead of scrutinizing all unique, relevant factors affecting
reasonableness. District courts must “appraise the reasonableness of particular class
action settlements on a case-by-case basis, in light of all the relevant circumstances.”
(emphasis added). Evans v. Jeff D., 475 U.S. 717, 742, (1986). The district court can
apply either the lodestar or percentage-of-the-fund method in calculating a fee
award. Stetson v. Grissom, 821 F.3d 1157, 1165 (9th Cir. 2016) (quoting Fischel v.
Equitable Life Assurance Soc'y, 307 F.3d 997, 1006 (9th Cir. 2002)). Either way, it
must scrutinize the fee provision with a jealous regard for the rights of those who
are interested in the settlement fund. City of Detroit v. Grinnell Corporation, 495
F.2d 448, 469 (2d Cir. 1974).
“In common fund cases, it is not the creation of the fund itself that entitles
the attorneys to be paid from the fund. Rather, any obligation that the fund incurs to
pay attorneys’ fees must result from the equitable power to assess fees against those
who stand to ultimately benefit from the fund.” Democratic Cent. Comm. of D.C. v.
W.M.A.T.C., 38 F.3d 603, 605 (D.C. Cir. 1994) (citation omitted). “Because the
benefit to the class is easily quantified in common-fund settlements,” the Ninth
Circuit permits district courts “to award attorneys a percentage of the common fund
in lieu of the often more time consuming task of calculating the lodestar.” Id.
“Applying this calculation method, courts typically calculate 25% of the fund
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9
as the ‘benchmark' for a reasonable fee award, providing adequate explanation in the
record of any ‘special circumstances' justifying a departure.” Id. (citing Six (6)
Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)).
However, “even a theoretical construct as flexible as a “benchmark” [may] offer an
all too tempting substitute for the searching assessment that should properly be
performed in each case.” Goldberger v. Integrated Res., Inc., 209 F.3d 43, 52 (2d Cir.
2000). Consequently, the benchmark should be adjusted if it is “too small or too large
in light of the hours devoted to the case or other relevant factors.” Six (6) Mexican
Workers, 904 F.2d at 1311.
Appellant’s fee objection in the present case called upon the district court to
exercise its special fiduciary role as guardian for the class. Once a tentative
settlement is reached, the relationship between class counsel and the class turns
directly and unmistakably adversarial because counsel’s “interest in getting paid the
most for its work representing the class [is] at odds with the class’ interest in securing
the largest possible recovery for its members.” Id. The court’s exercise of its
equitable power to award attorneys’ fees in common fund cases is particularly
important because “once a common fund is established, class members and class
counsel wind up playing a zero sum game, in which every dollar awarded to counsel
represents one less dollar that is available for distribution to class members.” In re
Fidelity/Micron Securities Litig., 167 F.3d 735, 738 (1st Cir. 1999). The existence
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10
of this zero sum game requires the Court to exercise its equitable power in a manner
that safeguards class members’ rights, which deserve “special protection.” Gunter v.
Ridgewood Energy Corp., 223 F.3d 190, 201 (3d Cir. 2000). Depending on the
manner in which the court exercises its discretion, percentage fee awards “may vary
greatly depending on the individual facts of the case.” 4 Newberg on Class Actions
§ 14.6 at 554 (4th ed. 2002).
Moreover, “in most common-fund cases, defendants have little interest in
challenging class counsel’s timesheets.” Gutierrez v. Wells Fargo, NA, No. 07-cv-
05923 WHA, 2015 WL 2438274, at *6 (N.D. Cal. May 21, 2015). No individual
class member has the financial incentive to object to an exorbitant fee request either;
“[h]is gain from a reduction, even a large reduction, in the fees awarded the lawyers
would be minuscule.” In re Continental Ill. Sec. Litig., 962 F.2d 566, 573 (7th Cir.
1992). Given this natural adversity, there can be no deference to class counsel’s
recommendation. The district court (and good-faith public-minded objectors) serve
as the last line of defense against overreaching fee requests.
“Public confidence in the fairness of attorney compensation in class actions
is vital to the proper enforcement of substantive law.” Laffitte v. Robert Half Int’l,
376 P.3d 672, 688-92 (Cal. 2016) (Liu, J., concurring). Exorbitant fees erode public
confidence in the class action device. To prevent that erosion, it is “it is important
that the courts avoid awarding ‘windfall fees’ and that they should likewise avoid
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11
every appearance of having done so.” Piambino v. Bailey, 757 F.2d 1112, 1144 (11th
Cir. 1985); see also In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d
1291, 1298 (9th Cir. 1994) (differentiating “reasonable” from “windfall” fees in
megafund cases). “Active judicial involvement in measuring fee awards is singularly
important to the proper operation of the class action process.” Advisory Committee
Notes on 2003 Amendments to Rule 23.
Accordingly, the Ninth Circuit insists on scrutinizing all of Goldberger’s criteria
for determining a reasonable common fund fee, regardless of the method employed.
These include: (1) time and labor expended by counsel; (2) magnitude and
complexities of litigation; (3) risk of litigation; (4) quality of representation; (5) fee
in relation to settlement; and (6) public policy considerations. Id. Appellant
respectfully submits the district court’s oversight of the Wells Fargo settlement falls
short of this Court’s careful scrutiny. Apparently swayed by class counsel’s
willingness to accept less than the benchmark, the final order overlooked or
misapplied no fewer than three of Goldberger’s criteria.
A. Because Plaintiffs’ Action Was Prompted By Governmental Action And
Buttressed With Insider Information, Class Counsel’s Litigation Risk
Was Significantly Lowered.
The Court’s first legal error was failing to consider all factors relevant to Class
Counsel’s litigation risk. The final order identifies two factors supporting its high
premium, while overlooking opposing indicia. Specifically, the court noted “the
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12
considerable risk at the outset of this case that Class Counsel would receive nothing,
given the presence of an arbitration agreement and attendant challenges that they
would face in securing and maintaining Class Certification.” (ER 14). By class
counsel’s own admission, however, their interest in the case was triggered by the
media frenzy over a lawsuit filed by the Los Angeles County Attorney’s Office. (ER
40). Moreover, the subsequent decision to file a complaint was grounded on
firsthand accounts of fraudulent practices from former employees with internal
documents to verify their story. (ER 41).
All of Class Counsel’s diligence was designed to reduce the risk of loss at
trial. According to Derek Loeher, a partner with Keller Rohrback:
1. The firm began investigating the case in response to “an article in the Los
Angeles Times describing Wells Fargo’s high-pressure sales environment and
resulting abuses, and a lawsuit by the Los Angeles City Attorney against
Wells Fargo on behalf of California victims.” (ER 40).
2. Next, the firm “interviewed more than twenty-two current and former Wells
Fargo employees with firsthand experience with Wells Fargo’s practices
related to Unauthorized Accounts, obtaining probative internal Wells Fargo
documents as a result.” (ER 41).
3. Finally, attorneys and paralegals “scoured public reports and dockets for
information and materials related to Wells Fargo’s cross-selling and incentive
practices that contributed to the Unauthorized Account scandal.” Id.
In quantifying the risk undertaken by plaintiffs’ counsel in bringing a class
action, the court must scrutinize such activities in order to adjust the stakes
accordingly. Barbara J. Rothstein & Thomas E. Willging, Managing Class Action
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13
Litigation: A Pocket Guide for Judges. Federal Judicial Centre (2005) at 24.
Professor Coffee describes the “spectacle, one resembling the Oklahoma land rush,
in which the filing of the public agency’s action serves as the starting gun for a race
between private attorneys, all seeking to claim the prize of lucrative class action
settlements, which public law enforcement has gratuitously presented them.” John
C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model of the Lawyer
as Bounty Hunter Is Not Working, 42 MD. L. REV. 215 (1983). In the most extreme
case, Professor Rubenstein spoke of ‘coattail’ class counsel who provide “no
independent search skills, no special litigation savvy, and no nonpoliticized
incentives.” William B. Rubenstein, On What a “Private Attorney General” Is—And
Why it Matters, 57 VAND. L. REV. 2129 (2004).
In the present case, Appellant concedes Class Counsel added value to the
ground broken in Los Angeles County. The existence of an arbitration agreement
also posed an early obstacle. Nonetheless, the district court failed to recognize that
a class action faces a reduced risk of loss when sparked by governmental action and
buttressed with insider information. A more thorough fee review would have
adjusted the award in proportion to this reduced risk. Swedish Hospital Corp. v.
Shalala, 1 F.3d 1261, 1272 (D.C. Cir. 1993) (“the court was within its discretion in
basing its fee calculation only on that part of the fund for which counsel was
responsible”).
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B. Because Class Counsel Spent More Time Reviewing Public Information
And Finalizing Settlement Than Substantive Discovery And Motions In
Preparation For Trial, Their Lodestar Should Have Been Reduced.
Another factor misunderstood in the court’s evaluation is Class Counsel’s real
contribution to the Settlement Fund. In the few months leading up to settlement talks,
class counsel appears to have spent more time reviewing publicly available
information and gearing toward settlement than initiating substantive discovery and
motions that yield probative evidence for trial. Soon after filing the complaint, class
counsel turned to reviewing “extensive additional information concerning the
Unauthorized Account scandal, including Congressional testimony, dockets,
pleadings and public information relating to the City of Los Angeles lawsuit,
information made available by the Consumer Finance Protection Bureau (“CFPB”)
and the Office of the Comptroller of the Currency (“OCC”) regarding their own
investigations of Wells Fargo and resulting settlements, news reports, filings in
related employee cases against Wells Fargo, and Wells Fargo’s own websites,
documents, and disclosures.” (ER 41).
By stipulation of the parties after multiple mediations, Defendants voluntarily
produced “confidential information and confirmatory discovery to Keller Rohrback
concerning the nature and extent of the Unauthorized Account scandal and resulting
losses and damages that we then carefully evaluated and reviewed.” Id. Once an
agreement in principle was reached, most of Class Counsel’s billable time focused
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on confirmatory discovery and securing court approval. Id. Along the way, they lost
the motion to compel arbitration and failed to certify their claims for class treatment.
Indeed, the record is devoid of prevailing on any critical issue. (ER 114-142).
Consequently, this is not a case where Class Counsel conducted extensive
discovery over a protracted amount of time or drafting lengthy motions that involved
difficult and novel legal questions. See Fresh Kist Produce, LLC v. Choi Corp., Inc.,
362 F. Supp. 2d 118, 130 (D.D.C. 2005); cf. In re NASDAQ Market-Makers Antitrust
Litig., 187 F.R.D. 465, 488 (S.D.N.Y. 1998) (finding class counsel faced formidable
opposition, surmounted defendants’ motion to dismiss, certified a broad class, and
developed evidence of liability and damages). Instead, the district court found the
lack of formal discovery “not a prerequisite to a fair settlement under Rule 23(e)
[since] Class Counsel had sufficient information to make an informed decision about
settlement.” (ER 12). In doing so, the court overrated Class Counsel’s litigation risk
and real contribution to the settlement. A more thorough review would have adjusted
the lodestar accordingly.
C. Because Class Counsel Are Guaranteed Payment For Performing Future
Administrative Tasks, They Should Have Been Awarded An Adjusted
Lodestar For The Actual Hours Submitted.
The same principle applies to Class Counsel’s inclusion of 2,500 hours in their
lodestar for future administrative tasks. A proper lodestar is calculated by multiplying
the “number of hours reasonably expended on the litigation by a reasonable hourly
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rate.” Lewis v. Silvertree Mohave Homeowners’ Ass’n, Inc., No. C 16-03581 WHA, 2017
WL 5495816, at *3 (N.D.Cal. Nov. 16, 2017). “The reasonableness of an hourly rate
should be determined based on the rates prevailing in the community for ‘lawyers of
reasonably comparable skill, experience and reputation.’” Id. (quoting Blum v.
Stenson, 465 U.S. 886, n.11 (1984)). Accordingly, a fee petition should delineate
the specific tasks covered by the lodestar, what level of skill and experience was
required, and which attorneys or paralegals performed them. See Rooths v. District
of Columbia, 802 F. Supp.2d 56, 61 (D.D.C. 2011).
These requirements were not met before the district court agreed to pad
Class Counsel’s itemized fee bill with 2,500 hours (25% of their lodestar) for
speculative administrative work. According to attorney Loeser’s prediction, these
tasks will be distributed among partners ($710-995/hour), associates ($400-
650/hour) and paralegals ($225-325/hour) and billed at a blended rate of $585 per
hour. (ER 73). In return, Class Counsel sought to apply the same multiplier it
hoped to receive for litigation activities carrying the highest risk and complexity.
The speculative nature of Class Counsel’s request alone should have raised
a red flag. Unknown at the time of approval were: (1) actual complexities faced (2)
actual time expended and (3) actual individuals performing the tasks. What was
known was the risks of litigation were now behind them. Had the court followed
Goldberger’s criteria, it would have excluded all future administrative work from
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Class Counsel’s lodestar for purposes of determining a reasonable fee (holding this
award in abeyance until the Court reviewed their itemized statement after completing
the work).2 In no case would it have agreed to pay a premium.
D. A Lodestar Crosscheck Of Class Counsel’s Already Steep Hourly Rate
Confirms The Fee Award In This Megafund Settlement Is Excessive.
Most importantly, a fee award must represent a reasonable percentage of the
overall value of the settlement—regardless of the method employed. In re
Bluetooth Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011) (sign of collusive
settlement is when class counsel receive a disproportionate share of settlement).
“[W]here awarding 25% of a ‘megafund' would yield windfall profits for class
counsel in light of the hours spent on the case, courts should adjust the benchmark
percentage or employ the lodestar method instead.” In re Bluetooth, 654 F.3d at
942. In Florida v. Dunne, 915 F.2d 542, 545 (9th Cir.1990), this Court explained:
Despite the recent ground swell of support for mandating a percentage-
of-the-fund approach in common fund cases, however, we require only
that fee awards in common fund cases be reasonable under the
circumstances. Accordingly, either the lodestar or the percentage-of-
the-fund approach "may, depending upon the circumstances, have its
place in determining what would be reasonable compensation for
creating a common fund." (quoting Paul, Johnson, Alston & Hunt v.
Graulty, 886 F.2d 268, 272 (9th Cir.1989)).
Several years later, this Court cautioned against the temptation to default to
2 Excluding future administrative tasks would increase the multiplier to 4.75.
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a percentage approach in a megafund settlement:
[T]here is no necessary correlation between any particular percentage
and a reasonable fee. With a fund this large, picking a percentage
without reference to all the circumstances of the case, including the size
of the fund, would be like picking a number out of the air *** A sizable
settlement can reflect a number of factors in addition to the prestige,
skill and vigor of Class counsel. Thus, it is imperative that the amount
of the settlement be viewed from the proper perspective and in the
context of all relevant circumstances.” (emphasis added)
In re Washington Public Power Supply System Securities Litigation, 19 F.3d
1291, 1297 (9th Cir. 1994). The lodestar cross-check should “confirm that a
percentage of recovery amount does not award counsel an exorbitant hourly rate.”
In Re Bluetooth, 654 F.3d at 945. “[I]n megafund cases, the lodestar cross-check
assumes particular importance.” Alexander, 2016 WL 3351017, at *2; see also In re
Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1298 (9th Cir. 1994)
(describing how percentage-based awards become particularly arbitrary in a
megafund context). The crosscheck helps uncover the “disparity between the
percentage-based award and the fees the lodestar method would support.” Wininger
v. SI Mgmt. L.P., 301 F.3d 1115, 1124 n.8 (9th Cir. 2002); Vaughn R. Walker & Ben
Horwich, The Ethical Imperative of a Lodestar Cross-Check: Judicial Misgivings
About Reasonable Fees in Common Fund Cases, 18 GEO J. LEGAL ETHICS 1453,
1454 (2005) (“[C]ourts making common fund fee awards are ethically bound to
perform a lodestar cross-check.”).
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In light of the foregoing considerations, awarding nearly four times Class
Counsel’s purported lodestar in a megafund settlement was clearly unwarranted. See
Perdue v. Kenny A., 130 S. Ct. 1662, 1667 (2010) (multipliers permitted only in most
rare or exceptional cases). As demonstrated above: (1) the litigation risk was
significantly reduced since Defendants’ liability was virtually established at the
outset; (2) much of Class Counsel’s time and labor was devoted to reviewing public
documents, finalizing settlement, and securing the Court’s approval; and (3)
Plaintiffs did not prevail on any critical issue, losing the motion to compel arbitration
and failing to certify their claims for class treatment. A proper application of all
Goldberger factors would have limited the fee award to no more than 10% of the
Settlement Fund—resulting in a 2.37 multiplier of Class Counsel’s lodestar at a
generous blended rate of $1,330 per hour.
CONCLUSION
For the foregoing reasons, this Court should reverse the district court's order
awarding 15% of the Settlement Fund in attorneys' fees and remand with
instructions to reevaluate class counsel’s fee request through the proper application
of all six criteria identified in Goldberger, giving special attention to the three
factors addressed by Appellants and the Settlement Fund’s significant size.
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Respectfully Submitted,
/s/ George W. Cochran
George W. Cochran, Esq.
1385 Russell Drive
Streetsboro, Ohio 44241
Phone: (330) 607-2187
Fax: (330) 230-6136
CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing with the
Clerk of the Court for the United States Court of Appeals for the Ninth
Circuit by using the appellate CM/ECF system on November 5, 2018.
I certify that all participants in the case are registered CM/ECF
users and that service will be accomplished by the appellate CM/ECF
system.
/s/ George W. Cochran
George W. Cochran
Appeal No. 18-16223
CERTIFICATE OF COMPLIANCE
I hereby certify that the foregoing brief complies with FRAP
32(a)(7)(B), in that it contains no more than 4,471 words as determined
by the word-count tool of the Microsoft Word 2007 word-processing
system used to create it, and that it is proportionally-spaced in 14-point
type.
/s/ George W. Cochran
George W. Cochran
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STATEMENT OF RELATED CASES
The following appeals are companion or related appeals:
18-16223
18-16224
18-16236
18-16268
18-16269
18-16284
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