Duane Morris Class Action Review - 2023 - Report - Page 321
Since the plaintiff and the defendant consented to the magistrate judge presiding over
the fairness hearing, the Fourth Circuit rejected the objector’s jurisdictional argument. In
addition, it considered the objector’s argument that the class notice was inadequate.
The parties disputed the standard of review, and the Fourth Circuit recognized that
there was a circuit split as to whether the abuse of discretion or de novo standard of
review applied. The Fourth Circuit did not decide which standard applied, but opined
that “even assuming de novo review is proper, the class notice was adequate.” Id. at
157. Specifically, it found that estimating the class members’ recovery from the common
fund would be difficult, if not impossible, because the number of claims was not known;
and it was sufficient to include the amount of attorneys’ fees being requested and the
method of distribution in the long form notice, even if that information was not included
in the email or postcard notice.
D.
Rulings On Attorneys’ Fee Issues In Class-Wide Settlements
Attorneys’ fee awards often spike criticism on the grounds that plaintiffs’ lawyers
litigated the case to line their own pockets as opposed to seeking a reasonable recovery
for the class. As a result, requests for awards of attorneys’ fees typically receive
extensive scrutiny during the settlement approval process.
This is especially apparent in class-wide settlement where coupons - rather than cash is obtained for class members. The Fourth Circuit addressed this situation in 2022 in
Cantu-Guerrero, et al. v. Lumber Liquidators, Inc., 27 F.4th 291 (4th Cir. 2022). In that
case, objectors to the settlement of two multidistrict lawsuits involving the defendant’s
alleged sale of defective laminate flooring products appealed the initial attorneys’ fee
award, and the Fourth Circuit vacated the district court’s order because it failed to
calculate fees properly in accordance with the “coupon” settlement provisions of the
Class Action Fairness Act (CAFA). On remand, the district court again awarded
plaintiffs’ counsel fees of $10.08 million to be paid from the $22 million cash fund. The
objectors again appealed. The Fourth Circuit initially considered the objectors’ argument
that the lodestar method was improper for adjudicating fees in a coupon settlement
under 28 U.S.C. § 1712. It noted that, although there was a split of authority, the CAFA
gives a district court the discretion to use either the percentage-of-recovery or lodestar
method when calculating attorneys’ fees in a coupon settlement. Hence, the Fourth
Circuit held that the district court’s use of the lodestar method was proper. The objectors
also challenged the district court’s analysis of the degree of success obtained, insofar
as it included the face value of the coupons without considering their actual value based
upon redemption rates. The Fourth Circuit rejected this argument. It opined that
although the CAFA requires a district court to consider the redemption rate of coupons
when calculating fees pursuant to the percentage-of-recovery method, the lodestar
method in § 1712(b) contains no such directive. It reasoned that a district court applying
the lodestar approach must carefully analyze the settlement in deciding whether the
calculated lodestar award is reasonable, and that analysis is committed to the district
court’s sound discretion. On the record before it, the Fourth Circuit determined that the
district court did not abuse its discretion when it performed this analysis. Finally, the
Fourth Circuit rejected the objectors’ argument that the attorneys’ fee award was
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Duane Morris Class Action Review – 2023
