Attorney Fees in a Class Case

In a certified class action the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement. The award is not a private arrangement between counsel and a client. It is a judicial determination made on motion, after notice to the class, with an opportunity for members to object and with findings stated on the record.

The procedure the rule sets

A claim for an award must be made by motion at a time the court sets, and notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner. A class member, or a party from whom payment is sought, may object. The court may hold a hearing and must find the facts and state its legal conclusions, and it may refer issues related to the amount to a special master or a magistrate judge.

Timing is the part most often mishandled. Where the fee motion is filed after the deadline for objections has passed, members are asked to decide whether to object to a settlement without knowing what counsel will request from it. Courts increasingly set the fee motion deadline before the objection deadline so that the request is part of what members evaluate, and notice programs describe the request rather than merely stating that one will be made.

Percentage and lodestar

Where the litigation produces a common fund, the dominant method is a percentage of that fund, justified on the reasoning that those who benefit from the creation of a fund should bear the cost of creating it. Percentages are set with reference to the size of the fund, the risk assumed, the complexity of the matter, the quality of the result and awards in comparable cases, and they typically decline as the fund grows, since effort does not scale with recovery.

Constructing the fund is itself contested in some settlements. Where a defendant agrees to pay claims as they are made, with no cap, there is no fund in the ordinary sense and a percentage has nothing to attach to until administration closes. Where a defendant agrees to a fixed sum, the fund exists on day one whatever happens afterward. The structure chosen therefore determines the method available, which is why fee terms and settlement architecture are negotiated together rather than in sequence.

Where no fund is created, as in a case producing injunctive relief or where a statute shifts fees, the lodestar governs: reasonable hours multiplied by reasonable rates, adjusted where the circumstances justify it. The computation depends on contemporaneous records, and courts reduce for block billing, for duplication across firms in a leadership structure, and for work that was administrative rather than legal.

The statutory rules on coupon relief

Where a proposed settlement provides for recovery of coupons, the portion of any attorney's fee award attributable to that relief must be based on the value to class members of the coupons that are redeemed. The provision addresses a specific mismatch: coupons issued have a nominal face value, coupons redeemed have an actual one, and paying counsel on the former rewards a structure that delivers the latter.

Related provisions constrain the terms themselves. A settlement may not be approved where the sums to be paid to counsel would result in a net loss to class members, unless the court finds in writing that non-monetary benefits substantially outweigh that loss. Where a portion of the recovery is not in coupons, the fee attributable to that portion may be determined in the ordinary way, so mixed settlements require the award to be built in parts.

Terms that attract heightened scrutiny

Three structures recur. A clear-sailing provision commits the defendant not to oppose a request up to a stated figure, which removes the only likely adversary. A segregated fee payment, described as separate from the class fund, is examined on the reasoning that a defendant negotiating a total exposure is indifferent to how the total is divided. A reversion clause returning unclaimed money to the defendant sits alongside a fee measured against the whole, so counsel is paid on a sum the class never receives.

Expense claims receive less attention than they deserve. Nontaxable costs are recoverable where authorized, and in aggregated litigation they can be substantial: expert work, document review platforms, notice administration and travel. Courts examine whether the expenses were reasonably incurred for the class rather than for the firm, whether they were billed at cost or with a markup, and whether items properly treated as overhead have been shifted into the claim.

None of these is prohibited, and each has legitimate uses. What they share is that they weaken the adversarial testing on which the ordinary fee process relies, which is why courts examining them ask for more explanation rather than less. The related question of what the representative personally receives is examined alongside the conflicts described in adequacy of the named plaintiff and counsel.

Who is left to contest the request

By the time a fee motion is filed the defendant has usually agreed not to oppose it, the named representative has an interest in approval, and absent members have small individual stakes. The practical adversary is an objecting member, and the court itself. That structure is the reason the rule requires findings rather than an order, since a reasoned decision is what an appellate court reviews and what makes the award defensible.

It also explains why courts have awarded fees to objectors whose participation reduced a request or improved the terms. The mechanics of that participation, including the constraint on paying an objector to withdraw, are set out in objectors and the rule that curbed their leverage, and the approval framework in which the fee decision sits is described in judicial approval of a class settlement.