Kevin Barnes, et al v. Sears, Roebuck and Co.
Filed opinion of the court by Judge Posner. We therefore reverse the judgment of the district court and remand with directions to award $2.7 million no more, no less in fees to the class counsel. Richard A. Posner, Circuit Judge; Kenneth F. Ripple, Circuit Judge and David F. Hamilton, Circuit Judge. [6861155-1]  [16-3554]
United States Court of Appeals
For the Seventh Circuit
IN RE SEARS, ROEBUCK AND CO. FRONT-LOADING WASHER
PRODUCTS LIABILITY LITIGATION,
APPEALS OF SEARS, ROEBUCK AND CO. and WHIRLPOOL CORP.
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
Nos. 06 C 7023, 07 C 412, 08 C 1832
Mary M. Rowland, Magistrate Judge.
SUBMITTED MARCH 22, 2017 — DECIDED AUGUST 14, 2017
Before POSNER, RIPPLE, and HAMILTON, Circuit Judges.
POSNER, Circuit Judge. Sears, the principal defendant/appellant in this class action suit, challenges the district
court’s decision to award the plaintiffs’ attorneys (class
counsel) 1.75 times the fees they originally had charged for
their work on the case. The judge's reasoning was that the
case was unusually complex and had served the public interest and that the attorneys had obtained an especially favorable settlement for the class, even though the fees they
sought—$4.8 million with the 1.75 multiplier, versus $2.7
million without—greatly exceeded the likely award of damages to the class.
The suit was based on two defects in washing machines
sold by Sears (and Whirlpool, but to simplify the opinion
we’ll confine discussion to Sears): a control unit defect and a
problem of mold. The case moved slowly but in 2013 two
plaintiff classes were certified, one ultimately consisting of
owners of machines manufactured between 2004 and 2006
that had been affected by the control unit defect, the other of
owners of machines affected by the mold. Sears settled with
both classes; its appeal is limited to challenging the fees
awarded to class counsel by the district court, because the
settlement left it to the court to determine the fees. Oddly,
the amount of damages that the class will receive has not yet
been determined; to that important extent the settlement is
incomplete. The district court, however, accepted Sears' estimate that the class members would receive no more than
$900,000 from the settlement.
Class counsel agreed to seek no more than $6 million in
attorneys’ fees. They claimed to have incurred $3.16 million
in fees but asked the court to multiply this figure by 1.9 to
account for what they claimed to be their extraordinary effort in the case. They subsequently increased their base fee
estimate to $3.25 million, having discovered additional billable time, but at the same time reduced their multiplier request from 1.9 to 1.85. Under either calculation class counsel
were seeking approximately $6 million. The district court,
however, concluded that they were entitled to a base fee of
only $2,726,191, which the court multiplied by 1.75, making
the total fee award $4,770,834.
Class counsel defend the large fee award on the basis of
“the novelty/complexity of the legal issues involved, the degree of success obtained, the public interest advanced by the
litigation, the fact that fees were contingent on the outcome
of the case, and to a lesser extent the preclusion of certain
class counsel from working on other cases.” Although the
district court rejected the last two factors, it deemed the first
three (novelty/complexity, degree of success, and public interest) adequate to warrant the 1.75 multiplier. That was
questionable, because novelty and complexity influence the
base fee—the more novel and complex a case, the more
hours will be billed and the higher the hourly billing rates
will be. See Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 553
(2011). The district court, comparing the hourly rates sought
by class counsel with the complexity of their work, concluded that for the most part the case wasn’t very complex—it
was just about whether or not Sears had sold defective
washing machines. This conclusion leaves us puzzled about
the court’s decision nevertheless to allow a multiplier.
What is true is that the average multiplier in this circuit
when the court awards a multiplier has been 1.85, making
the judge’s 1.75 multiplier in line with past practice, though
in the nation as a whole that average falls to .88 in cases in
which the class receives less than $1.1 million in compensation, Theodore Eisenberg & Geoffrey P. Miller, “Attorney
Fees and Expenses in Class Action Settlements: 1993–2008,”
7 J. Empirical Legal Studies 248, 272, 273-74 (2010), as may turn
out to be the case here.
In two class action cases, Pearson v. NBTY, Inc., 772 F.3d
778, 780–81 (7th Cir. 2014) and Redman v. RadioShack Corp.,
768 F.3d 622, 630–31 (7th Cir. 2014), we’ve said that a district
court should compare attorney fees to what is actually recovered by the class and presume that fees that exceed the
recovery to the class are unreasonable. See Pearson, 772 F.3d
at 782. The presumption is not irrebuttable, however, and in
this case the extensive time and effort that class counsel had
devoted to a difficult case against a powerful corporation
entitled them to a fee in excess of the benefits to the class.
But they failed to prove that a reasonable fee would exceed
$2.7 million—the pre-multiplier figure sought by class counsel and already thrice the damages awarded the class. We
therefore reverse the judgment of the district court and remand with directions to award $2.7 million—no more, no
less—in fees to the class counsel.
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