Labor Law Class Action Settlement Providing Class Members with Gift Cards Worth $67.50 found Fair and Reasonable but California Federal Court Reduces Attorney Fee Award from 39.4% to 34% of Class Action Settlement Value
Plaintiffs filed a class action against Victoria’s Secret alleging labor law violations; specifically, the class action complaint “alleg[ed] that Victoria’s Secret requires job applicants to participate in a ‘sales tryout’ during which they are trained and directed to work in Victoria’s Secret stores without pay.” Fernandez v. Victoria’s Secret Stores, LLC, ___ F.Supp.2d ___ (C.D. Cal. July 21, 2008) [Slip Opn., at 1]. The final version of the amended class action complaint asserted claims for “(1) failure to pay wages, (2) unfair trade practices, (3) unfair competition, and (4) conversion.” Id. The district court certified the litigation as a class action, id., at 1-2, and the parties reached a settlement of the class action, id., at 2. Under the settlement agreement, Victoria’s Secret would pay a maximum of $10 million, with $3.5 million going toward attorney fees. Id., at 4. The class members would receive gift cards valued at $67.50, id. The federal court found that the notice to class members was adequate, id., at 5-7, and that the settlement of $67.50 per class member was fair, id., at 7-14, particularly since out of the 77,000 notices sent to class members only 3 people filed objections to the settlement and only 29 opted out of the settlement, id., at 13. The majority of the district court’s order was devoted to a consideration of whether the attorney fees requested were appropriate.
The district court explained that, in the Ninth Circuit, a court considering attorney fee awards in “common fund” class actions “‘has discretion to use either a percentage or lodestar method.’” Fernandez, at 14 (citation omitted). Further, “The Ninth Circuit has established 25% of the common fund as a benchmark to use in awarding fees under the percentage-of-fund method.” Id., at 15 (citations omitted). But the lodestar method should be used if a 25% award “‘would be either too small or too large in light of the hours devoted to the case or other relevant factors.’” Id., at 15-16 (citation omitted). The fee requested – $3.5 million less $150,000 in costs, or $3.35 million in attorney fees – represented 33½% of the class action settlement’s common fund. Id., at 17. Plaintiffs’ counsel approximated the lodestar at about $1.6 million, so a multiplier in excess of 2.1 would be required to justify the fee award requested, id. And because the class action settlement involved gift cards, the court reduced the actual cash value of the settlement to $8.5 million. Id., at 18-19. The valuation makes the attorney fee request 39.4% of the total settlement value, id., at 20. The district court concluded that this percentage was too high, but awarded almost $2.9 million in attorney fees, representing 34% of the value of the class action settlement. Id., at 27-28.