Yesterday, in Laffitte v. Robert Half International Inc., ___ Cal.4th ___ (Aug. 11, 2016), the Supreme Court confirmed that the law is what we thought it was all along:
We therefore agree with the Court of Appeal below that “[t]he percentage of fund method survives in California class action cases, and the trial court did not abuse its discretion in using it, in part, to approve the fee request in this class action.” We hold further that trial courts have discretion to conduct a lodestar cross-check on a percentage fee, as the court did here; they also retain the discretion to forgo a lodestar cross-check and use other means to evaluate the reasonableness of a requested percentage fee.
Slip op. at 31. And, if the trial court does choose to conduct a lodestar cross-check, it may rely on "counsel declarations summarizing overall time spent," and need not "demand and scrutiniz[e] daily time sheets in which the work performed [is] broken down by individual task." Id. at 30.
Justice Werdegar's carefully drafted opinion catalogs the history of the percentage method and the lodestar-multiplier method, both nationally (id. at 8-18) and in California (id. at 18-27). Notably, the opinion did not adopt any "benchmark" for percentage awards, even after observing that the Ninth Circuit had "approved" a 25% benchmark. Id. at 15 (citing Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002)). Instead, the Court affirmed an award of one third (33.33%) of the common fund. See id. at 2-5.
In fact, given that the Supreme Court declined to adopt a 25% benchmark, it would seem that such a benchmark should no longer apply in federal court, either, in cases in which California law governs the fee motion. In Vizcaino, the lead Ninth Circuit decision adopting the 25% benchmark, both the claims and the fee motion were governed by Washington law, and the Ninth Circuit relied on a Washington Supreme Court decision in which a 25% benchmark was adopted. Vizcaino, 290 F.3d at 1047 (citing Bowles v. Dep't of Ret. Sys., 847 P.2d 440, 451 (Wash. 1993)). After Laffitte, there is no reason for the Ninth Circuit to continue to apply this benchmark in cases governed by California law.
The Laffitte opinion also definitively rebuffs any suggestion that the percentage method was rejected for common fund cases in Serrano v. Priest, 20 Cal.3d 25 (1977) ("Serrano III"):
For his claim that Serrano III mandates primary use of the lodestar method in every case, the objector relies on ... our allusions to “ ‘the court’s role in equity’ ” in awarding fees, a role that includes awards in common fund cases, and to the lodestar as the “ ‘starting point of every fee award.’ ” (Serrano III, supra, 20 Cal.3d at p. 48, fn. 23, italics added.) The quoted text and footnote, however, concern calculation of a fee awarded under the private attorney general theory. In Serrano III, this court simply did not address the question of what methods of calculating a fee award may or should be used when the fee is to be drawn from a common fund created or preserved by the litigation. For this reason, the passages quoted cannot fairly be taken as prohibiting the percentage method’s use in a common fund case.
.... Had we meant, in our later discussion of the lodestar calculation of a private attorney general fee, to disapprove the percentage method of calculation used in these common fund cases, we would have said so.
Slip op. at 20-21.
I think Laffitte will, as a practical matter, change little about the way percentage fees are calculated and awarded in state court cases. It may end up having a broader impact in federal cases governed by California law, so many of which land in federal court due to CAFA. An argument might be made that we (the plaintiffs' bar) dodged a bullet with this opinion, but I don't think the Supreme Court ever planned to fire one when it decided to take up this case. I believe it wished to forestall misreadings of Serrano III and to prevent erosion of the law confirming the vitality of the percentage method in common fund cases in California.