Supreme Court of California Approves Common Fund Fees

Jocelyn Larkin - Executive Director, The Impact Fund

In a unanimous decision this morning, the California Supreme Court affirmed that attorneys’ fees in a class action may be calculated as a percentage of the common fund created by a settlement or judgment. Laffitte v. Robert Half Int’l, S222996 (August 11, 2016).  

In determining the appropriate percentage, the trial court may -- but is not required to – conduct a lodestar cross-check.  The trial court also has the discretion, in the first instance, to determine which fee calculation methodology to use (i.e. common fund or lodestar-multiplier) in any particular case.  The decision has a useful discussion of the history and criticisms of each method. 

The Court did not adopt any specific benchmark percentage for common fund fees, as the Ninth Circuit has done. The Court also declined to address if and when a fee award may be calculated based on a “constructive” common fund, such as in a claims-made settlement or one with a reversion of unclaimed funds to the defendant.  

It may come as a surprise to many of you that the common fund issue was even an open question under California law as the proposition is well- accepted under federal law and common fund fees have been routinely awarded in California courts for decades.  But, a serial objector successfully petitioned for review, arguing that common fund fees were precluded by language in the Court’s 40-year old decision in Serrano v. Priest  (1977) 20 Cal.3d 25, 48 n.23. The Court’s decision today firmly rejected that gambit.

Justice Liu wrote a concurring opinion in which he urged the parties “to negotiate, and the court [to] review and conditionally approve, the terms of attorney compensation at the start of litigation” subject to “revisit[ing] the arrangement when the litigation concludes.”

The Impact Fund and Western Center on Law and Poverty filed an amicus brief on behalf California legal services groups and were ably represented at oral argument by Michael Rubin of Altshuler Berzon.

Read Jocelyn D. Larkin's 04.19.16 opinion editorial about the case in the San Francisco Chronicle, here.