Fouks v. Red Wing Shoe Company, Inc.

Filing 50

ORDER: Plaintiffs' Renewed Motion for Attorney's Fees and Costs [ECF No. 46 ] is GRANTED. (Written Opinion) Signed by Judge Joan N. Ericksen on December 12, 2014. (CBC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Britt M. Fouks and Brian F. Hupperts,
on behalf of themselves and all others
similarly situated,
Plaintiffs,
Case No. 12-cv-2160 (JNE/FLN)
ORDER

v.
Red Wing Hotel Corporation
d/b/a St. James Hotel, Veranda, Clara’s Gift
Shop, Jimmy’s Pub, Port Restaurant, and Shoe
Box Café,

Defendant.

One year ago, the Court granted final approval to the parties’ class action settlement, with
modifications to the awards for the class representatives. Order of November 21, 2013, ECF No.
43. At the time that final approval was granted, the Plaintiffs also sought an award of attorney’s
fees and costs in the amount of $65,000. Pursuant to a so-called “clear sailing” provision 1 in the
parties’ settlement agreement, the Defendant did not oppose that motion. Nonetheless, in
fulfillment of its obligation to award only a “reasonable” amount in fees and costs, Fed. R. Civ.
P. 23(h), the Court denied the motion without prejudice.
The Plaintiffs have now renewed their motion for attorney’s fees and costs, including
information on the modest benefits the settlement actually provided to the class and seeking a
reduced award of $27,722.86. ECF No. 46. True to the terms of the settlement, this renewed
motion is unopposed as well. The Court will grant it, bringing this case to its full completion.

1

“[A] clear sailing agreement is one where the party paying the fee agrees not to contest
the amount to be awarded by the fee-setting court so long as the award falls beneath a negotiated
ceiling.” Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 520 n.1 (1st Cir. 1991).

As a coda, it bears emphasizing that “the inclusion of a clear sailing clause in a fee
application should put a court on its guard, not lull it into aloofness.” Weinberger, 925 F.2d at
525. Indeed, federal courts across the country have long recognized that rote approval of the sort
of negotiated fee arrangement with which the Court was presented here can lead to “excessive or
undeserved fee awards in the class action environment.” Id. at 524. See also Malchman v.
Davis, 761 F.2d 893, 908 (2nd Cir. 1985) (Newman, J., concurring) (“It is unlikely that a
defendant will gratuitously accede to the plaintiffs’ request for a ‘clear sailing’ clause without
obtaining something in return. That something will normally be at the expense of the plaintiff
class.”); Johnston v. Comerica Mortg. Corp., 83 F.3d 241, 246 n.11 (8th Cir. 1996) (“The district
court appropriately noted that the potential for abuse is heightened by the defendants’ agreement
not to contest fees up to a certain point.”); In re Bluetooth Headset Products Liability Litigation,
654 F.3d 935, 948 (9th Cir. 2011) (placing a “heightened duty” on district courts “to peer into [a
clear sailing] provision and scrutinize closely the relationship between attorneys’ fees and benefit
to the class” in order that the courts “avoid awarding ‘unreasonably high’ fees simply because
they are uncontested”). But see Waters v. Intern. Precious Metals Corp., 190 F.3d 1291, n.4
(11th Cir. 1999) (observing that “clear sailing agreements have been the subject of some
controversy in the class action arena,” with some courts finding that they have “adverse effects”
while “[o]ther[s] have not been as suspicious” where they are “reached after arms-length
negotiations”).
The Seventh Circuit has explained why “clear sailing” fee arrangements are deserving of
judicial scrutiny:
[C]lass counsel, un-governed as a practical matter by either the named plaintiffs
or the other members of the class, have an opportunity to maximize their
attorneys’ fees—which (besides other expenses) are all they can get from the class
action—at the expense of the class. The defendant cares only about the size of the

settlement, not how it is divided between attorneys’ fees and compensation for the
class. From the selfish standpoint of class counsel and the defendant, therefore,
the optimal settlement is one modest in overall amount but heavily tilted toward
attorneys’ fees. As we said in Creative Montessori Learning Centers v. Ashford
Gear LLC, 662 F.3d 913, 918 (7th Cir. 2011), “we and other courts have often
remarked the incentive of class counsel, in complicity with the defendant's
counsel, [is] to sell out the class by agreeing with the defendant to recommend
that the judge approve a settlement involving a meager recovery for the class but
generous compensation for the lawyers—the deal that promotes the self-interest
of both class counsel and the defendant and is therefore optimal from the
standpoint of their private interests.
Eubank v. Pella Corp., 753 F.3d 718, 720 (7th Cir. 2014).
Furthermore, the “friendly presentation” of the fee motion for which class counsel has
bargained, id. at 729 – the “red-carpet treatment on fees,” Weinberger, 925 F.2d at 522 – can
deprive the court of information essential to determining the reasonableness of the amount
sought that would typically come to light through adversarial testing. In re Bluetooth, 654 F.3d
at 949 (noting that clear sailing provisions “by their nature deprive the court of the advantages of
the adversary process in resolving fee determinations and are therefore disfavored”).
Such was the case here.

Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. Plaintiffs’ Renewed Motion for Attorney’s Fees and Costs [ECF No. 46] is GRANTED.

Dated: December 12, 2014

s/Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge