Invoking The Simpsons, U.S. District Judge Brantley Starr on Thursday issued an opinion denying a request from plaintiffs’ lawyers who represented Fluor Corporation shareholders in a securities class action to tack a 1.9 multiplier on their fee award in the lawsuit that resulted in a $33 million settlement.
“The Simpsons poke fun at a great many things, including lawyers’ love of money,” Judge Starr wrote. “Consider this exchange when Apu’s wife approaches a lawyer for help with a divorce:
Manjula Nahasapeemapetilon: I have to warn you. Apu does not have much money.
Lawyer: Are you absolutely sure? Because legally, I am allowed to shake him by the ankles and see what falls out. It’s established in the case of Lawyers v. Justice.
“While The Simpsons is fiction, there’s an ankle-shaking development in the law that is both non-fiction and nonsense: attorney’s-fees-awards multipliers in common-fund cases.”
As Judge Starr explains, multipliers are requested by attorneys who “think their performance was special” and, if granted, entitles them to more fees than what they billed.
Most of his 25-page opinion takes aim at the 12 prongs of a test district courts within the Fifth Circuit are required to apply in calculating attorney’s fees, the so-called Johnson factors, outlined in the appellate court’s 1974 ruling in Johnson v. Georgia Highway Express Inc.
In this case, lawyers representing about 201,000 claimants were seeking to recover $88 million in damages from Fluor for alleged violations of securities laws stemming from false and misleading statements the company made regarding its bidding and construction of four gas-fired power plants in Virginia, South Carolina and Florida.
The settlement reached was for $33 million.
While the lodestar method for calculating attorney fees (hours worked on a case multiplied by the hourly rates of attorneys involved) shows the attorneys in this litigation are entitled to about $5.17 million in fees, Judge Starr explained that under Fifth Circuit precedent he’s required to “infect” that objective figure with the “subjectivity” of the Johnson factors.
The lodestar method would entitle the attorneys to about 16 percent of the settlement fund, but had Judge Starr granted their multiplier request the attorneys would have pocketed $9.9 million — 30 percent of the settlement fund, plus interest, leaving about $114.93 in damages for each claimant in the class.
Judge Starr called the plaintiffs’ lawyers request for “an additional 90 percent of fees for work they didn’t perform … unreasonable.”
“The lawyer’s fee request in terms of the hours billed makes sense,” Judge Starr wrote. “But even using the hopelessly amorphous Fifth Circuit factors, the court cannot justify the plaintiffs’ attorneys taking more from their client than fees for work actually performed.”
The 12 Johnson factors, which a court must consider to increase or decrease the lodestar calculation, are:
- the time and labor required,
- the novelty and difficulty of the questions,
- the skill requisite to perform the legal service properly,
- the preclusion of employment by the attorney due to acceptance of the case,
- the customary fee,
- whether the fee is fixed or contingent,
- time limitations imposed by the client or the circumstances,
- the amount involved and the results obtained,
- the experience, reputation, and ability of the attorneys,
- the “undesirability” of the case,
- the nature and length of the professional relationship with the client, and
- awards in similar cases.
Judge Starr noted that the U.S. Supreme Court “pulled no punches” and “mercilessly undercut the rationale behind the Johnson factors” in its 2010 opinion in Perdue v. Kenny, in which the court said the lodestar calculation, unlike the Johnson factors, “is objective, and thus cabins the discretion of trial judges, permits meaningful judicial review, and produces reasonably predictable results.”
But the Fifth Circuit in the past 14 years since that ruling has “held Perdue at the margins” and continues to encourage courts to use the Johnson factors, Judge Starr wrote.
“The Supreme Court’s scathing critique of the Johnson test in Perdue was not contextual. Two years after Perdue, the Fifth Circuit conceded that ‘the Johnson factors are personae non gratae in Perdue’s eyes’ and had been ‘cast[] in a negative light’ by Perdue,” Judge Starr wrote. “Nevertheless, that same year, the Fifth Circuit insisted again that district courts must subject common-fund cases to the Johnson test.”
Writing that he was bound to do so by Fifth Circuit precedent, Judge Starr proceeded to consider each of the 12 Johnson factors in turn but seemed less than pleased about it.
“A faulty yardstick is faulty, regardless of what it’s aiming to measure,” he wrote. “Layering Johnson over the lodestar adds nothing to the analysis that can justify the instability it inevitably introduces.”
As to the “time and labor required” prong, Judge Starr determined that the amount of work that went into achieving the settlement was significant, “but not when compared to the settlement award and weighed against the lodestar amount, which is designed to account for the hours expended on the case.”
Because the case did not present an issue of first impression and wasn’t otherwise “novel nor difficult,” Judge Starr determined a multiplier wasn’t merited under the second Johnson factor, either.
Addressing the skill required to achieve the result, Judge Starr wrote that the work of the attorneys in this case was “good but not extraordinary,” which also weighed against applying a multiplier.
“While the Court believes the work of counsel was sufficient to compensate them for the work they performed, the work was not so extraordinary as to warrant taking money from the plaintiffs to line the lawyers’ pockets even more,” he wrote.
The fourth prong instructs the court to consider whether the attorneys who took the case were precluded from taking other cases as a result and, if so, assess a value to that.
“The court notes that this opportunity cost has been, is now, and forever will be true of any employment arrangement for which one person pays another in exchange for their time,” he wrote. “The court sees no justification in this case for multiplying the award based on this completely unremarkable feature common to any lawyer in any case.”
The fee arrangement in this case was contingent, and the plaintiffs’ attorneys argued to the court they should be entitled to a multiplier on this prong because of the risk they took on in possibly getting zero earnings for their work.
“The court acknowledges that the contingent nature of the representation might bear on the attorneys’ ‘expectations when [they] accepted the case,’ but the law and reasonableness, not attorney expectations, must inform the court’s ultimate decision,” the judge wrote in rejecting that argument.
The seventh prong instructs a court to consider whether the prevailing attorneys’ decision to take the case delayed the lawyer’s other legal work and assess a premium if so.
“Here, the attorneys’ claimed time limits aren’t of the type especially pertinent to this factor,” Judge Starr wrote. “And the court can’t help but note that all work delays other work.”
Moving on to the amount involved and the results obtained in the case, Judge Starr explained the result here “does not amount to the extraordinary success that would warrant extra fees or make this one of the ‘rare and exceptional cases’ in which enhancement under this factor is warranted.”
And Judge Starr said he wasn’t “persuaded that these attorneys possess extraordinary experience, reputation, or ability in this area of law sufficient to warrant an enhancement” under the ninth factor, either.
He said the plaintiffs’ attorneys in arguing for a multiplier under that prong had made “conclusory assertions,” describing themselves as “highly experienced” and “well-regarded.”
“And they say they ‘skillfully navigated’ this case through a variety of events the court sees as normal and largely unremarkable” he wrote. “Thus, while these attorneys may possess great experience in this area of law, they fail to show why it warrants an enhancement beyond the high rates already reflected in the lodestar.”
On the tenth prong, Judge Starr concluded that this case wasn’t undesirable but instead “appears extremely desirable for any law firm within this practice area.”
“Unlike the civil rights attorneys Johnson envisioned, these attorneys will not ‘face hardships in their communities’ as a result of taking this case,” Judge Starr wrote. “An angry mob came after Atticus Finch because he was a hero fighting for a then-socially unpopular cause. The court sees no markings of an angry mob coming after these class-action securities litigators.”
The attorneys conceded the 11th factor — the nature and length of the professional relationship with the client — doesn’t apply to this case. The 12th factor — awards in similar cases — is optional for the court to consider.
“As discussed above, similar cases have yielded results all over the map,” he wrote. “The court declines Johnson’s invitation to base its guess off of other guesses when the lodestar yields a predictable result and no Johnson factor compels a departure.”
Fluor is represented by Mike Raiff, Brian M. Lutz, Lissa Percopo, Meryl L. Young and Robert C. Walters of Gibson, Dunn & Crutcher.
The plaintiffs are represented by lead counsel with the law firms Robbins Geller Rudman & Dowd, Pomerantz LLP, Kendall Law Group and Briscoe Law Firm.
The case number is 3:18-cv-01338.