In Fears v. Wilhelmina Model Agency, Inc., ___ F.3d ___ (2d Cir. Jan. 4, 2007), the Second Circuit affirmed an order granting final approval of an antitrust class action settlement, but reversed the order's distribution plan and attorneys' fees award, remanding for further consideration. The district court had awarded, as attorneys' fees, a percentage of the claims made from the settlement fund, rather than a percentage of the entire fund generated as a result of the litigation. Slip op. at 14-15. As authority for doing so, the district court cited the PSLRA and CAFA, reasoning that both statutes evinced congressional intent to curtail attorneys' fees awards in class action cases. Id. at 15.
The Second Circuit reversed. It rejected the notion that anything about either the PSLRA or CAFA suggested that attorneys' fees should be limited in class action cases generally:
Slip op. at 23-24.
The fee restrictions described in the PSLRA do not apply in any context other than securities class actions, and, even if they did, it is not clear how they would apply. The statute speaks in terms of a percentage of damages “actually paid to the class.” But the entire fund created by the efforts of counsel presumably is “paid to the class,” even if some of the funds are distributed under the Cy Pres Doctrine. The PSLRA would not allow for the computation of fees on the basis of such non-damages items as discounts on coupons received in settlement. A key consideration required by the PSLRA “is the result actually achieved for class members, a basic consideration in any case in which fees are sought on the basis of a benefit achieved for class members.” Advisory Comm. Notes to Fed. R. Civ. P. 23, 2003 Amendments. Arguably, the entire Settlement Fund is a “benefit achieved for class members.”
The District Court’s reliance on the CAFA is also misplaced. The CAFA recites as its purpose the following: “To amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes.” Class Action Fairness Act, Pub. L. No. 109-2, 119 Stat. 4 (2005). However, the only mention of fees to be allowed to class counsel deals with the award of fees in coupon settlement cases. See 28 U.S.C. § 1712(a)–(c).