United States: Attorney's Fees: Seventh Circuit Disapproves Increase In Fees Award Based On Case's Novelty Or Complexity

The Seventh Circuit recently cut a $4.8 million attorney's fees award in a class action nearly in half, finding no justification for an award significantly higher than the $2.7 million actually billed and the $900,000 awarded to the class.

The case, In Re: Sears, Roebuck and Co Front-Loading Washer Products Liability Litigation, was litigated for nearly a decade and appealed up to the Seventh Circuit and the US Supreme Court before settling in 2015. Although the amount to be paid to the class has not yet been finalized, the parties estimated that class members would receive approximately $900,000. Class counsel billed a total of $2,726,191 on the matter, but requested a much heftier $6 million in fees, citing the appeals and lengthy litigation. Sears and Whirlpool argued that the award should be less than the amount paid to the class, in this case, $900,000.

A magistrate judge in the Northern District of Illinois awarded class counsel $4,770,834, or 1.75 times the amount actually billed. The extra fees award, according to the magistrate, compensated for the novelty and complexity of the case and the benefit to the public. Sears and Whirlpool appealed the fees award in September 2016.

Writing for a unanimous Seventh Circuit panel, Judge Posner wrote that class counsel failed to prove that the attorney's fees award should exceed the amount actually expended, which was already three times the damages awarded to the class. The court questioned the magistrate's methodology for calculating the fees award, noting that novelty and complexity require no additional multiplier because those factors 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." The court also reaffirmed that although normally a fees award should not exceed what the class has been awarded, where "extensive time and effort" have been invested in a "difficult case against a powerful corporation," parties may be entitled to a fees award in excess of the benefits to the class.

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