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Wednesday, July 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

Lowered Attorney Fees a Fail, 9th Circ. Rules

PASADENA, Calif. (CN) - Calling a federal judge's award of attorneys' fees "a near total failure," the Ninth Circuit Friday vacated the award in a securities class action that ended in a $3.7 million global settlement.

Lead plaintiff Mike McGee appealed the attorneys' fees award, claiming that the judge's calculation of about $666,000 was arbitrary, and the Circuit agreed in a per curiam opinion.

The class counsel had requested 25 percent - about $944,000 - of the plaintiff investors' settlement with China Electric Motor, but the judge instead applied the lodestar calculation method to determine the attorneys' fees amount. Under the lodestar method, the court multiplies a reasonable number of hours by a reasonable hourly rate.

After using the lodestar method, the judge then made a downward adjustment - reducing the calculated hours by 30 percent - stating that a review of the billing records disclosed "numerous examples of legal tasks being inappropriately [lumped] together."

But the judge did not explain the reasoning, according to the Ninth Circuit's three-judge panel, and "merely asserted that the case was 'a very simple case.'"

"While the court noted one or two considerations that might have supported its decision, it failed to explain how it weighed those considerations when calculating the final award," the 12-page opinion said.

"A 30 percent reduction is large enough that the parties were entitled to a more detailed explanation of the court's reasoning."

The Circuit remanded to the district court for recalculation of the award.

"We recognize that the district court had a difficult task in balancing the interests of the class against the need to award a fee that adequately compensates class counsel for their representation in this case," the opinion said.

"Yet, this difficulty does not relieve the district court of its responsibility, not only to consider carefully class counsel's fee application, but also to explain fully its reasoning in arriving at its award."

Neither side's lead counsel immediately responded to an email requesting comment on Friday morning.

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