“Entirely Impressionistic Reasoning Offered By District Court” Did Not Suffice.
A securities class action litigated over 2 years and involving many defendants in China was globally settled for $3.78 million. Class counsel then sought 25% of the common fund, or a fee award of $944,583. The district judge, however, used the lodestar analysis—which was proper—but reduced it on two counts, namely, applying a blended hourly rate and then further providing a negative adjustment downward, resulting in a 30% reduction from the original $666,488 lodestar and almost a 50% reduction from the fee request for an ultimate award of $466,038.
Class counsel, through a named plaintiff, appealed, winning a reversal and remand in Stanger v. China Electric Motor, Inc., No. 13-56903 (9th Cir. Jan. 15, 2016) (published).
The Ninth Circuit found that the district judge’s award did not demonstrate a detailed explanation required to justify the reduction which was ordered. The district judge also did not indicate why a positive enhancement was not appropriate under Kerr “reasonableness” factors, especially given contradictory impressions—saying the case was simple at the fee hearing but then saying it was somewhat complex in the order awarding fees. The district court also needed to factor in the contingency risk of the case as well as why a blended rate was ordered without considering delay in payment factors, which usually lead courts to either allow current, higher rates to be charged throughout the case or allow historical hourly rates to be used but with a prime rate enhancement “bump.” Back to district court level for a “re-do,” with the Ninth Circuit finding inadequate the “entirely impressionistic reasoning offered by the district court.”