Laguna v. Coverall North America

An award of attorney’s fees in a settlement agreement reached before class certification is fair, reasonable, and adequate under the lodestar method, if: (1) the relief sought is mostly injunctive and a fee-shifting statute exists; (2) the amount of the award is significantly less than the lodestar amount; and, (3) the reviewing court cross-checks the amount of the award against an alternative percentage-of-recovery method.

Plaintiff franchisees brought a class action suit against a janitorial franchising company, Coverall North America, Inc. (“Coverall”), in 2009. Plaintiffs alleged that Coverall (1) engaged in fraudulent and unfair practices and breached its franchising agreements; and (2) misclassified its franchisees as independent contractors, skirting labor law protections for franchisees. After two years of intensive litigation, in August 2011, the parties agreed to settle. One plaintiff objected to the proposed settlement, untimely filing on November 14, 2011. The district court nonetheless accepted the filing, in order to determine the issues on the merits. In addition to contesting the settlement agreement, generally, the lone objector contested the $994,800 fee awarded to plaintiffs’ attorneys. On November 21, 2011, the district court held a fairness hearing before approving the settlement agreement pursuant to Federal Rule of Civil Procedure 23(e) on February 23, 2012. The district court used the lodestar method to gauge whether or not the attorney’s fees were fair, noting that plaintiffs’ counsel had billed over 4,500 hours between six attorneys, a law clerk, and a paralegal. Considering this, the lodestar amount of fees was almost $3 million and plaintiffs’ counsel’s fees were roughly a third of that amount. The district court also considered the value of the injunctive relief, cross-checking its calculations against another method. The Ninth Circuit held that an award of attorney’s fees in a settlement agreement reached before class certification is fair, reasonable, and adequate under the lodestar method, if: (1) the relief sought is mostly injunctive and a fee-shifting statute exists; (2) the amount of the award is significantly less than the lodestar amount; and, (3) the reviewing court cross-checks the amount of the award against an alternative percentage-of-recovery method. AFFIRMED.