McShan v. Hotel Valencia Corporation

Background

Class Counsel moved for attorneys’ fees after the parties reached a class-action settlement. The court held a hearing on April 8, 2021, and Class Counsel later filed a supplemental declaration about the fees.

Class Counsel requested:

- $91,250 in attorneys’ fees, equal to 25% of the settlement fund; - $6,673.02 in litigation expenses and $7,499 in settlement-administration fees; - a $2,500 service award for Class Representative Morgan McShan; and - approval of a payment for releasing the class’s claims under California’s Private Attorneys General Act (PAGA).

Legal standard

For settlements creating a common fund for a class, courts may calculate attorneys’ fees using either a percentage of the fund or the lodestar method. The lodestar method generally multiplies the reasonable hours worked by reasonable hourly rates. The court used the percentage-of-recovery method and checked that result against the lodestar method.

The court explained that 25% of a common fund is a starting point that is often presumed reasonable, but the court must consider the circumstances of the case. Because fees come from a fund benefiting the class, the court must closely review the request rather than approve it automatically.

Attorneys’ fees

The court granted Class Counsel’s request for $91,250, or 25% of the settlement fund. It considered Class Counsel’s skills, the risks taken, and the result achieved for the class.

Class Counsel reported a lodestar of $197,395 for 354.7 hours, which would produce a multiplier of 0.46 when compared with the requested $91,250 fee. The court found that the reported lodestar was inflated. The work included interviewing five class members, filing a wage-and-hour class-action complaint, serving written discovery, reviewing informal discovery, attending mediation, settling the case, seeking preliminary approval twice, seeking final approval, and seeking fees and costs.

The court noted that Class Counsel did not produce documents; the defendants did not provide formal discovery responses or document productions; the parties did not take depositions; and no motion to dismiss, motion for class certification, or motion for summary judgment was filed. The court also found excessive weekly meetings involving five to seven billers, including some billing as much as $950 per hour. Those meetings continued after settlement and after preliminary approval.

The court further noted that Class Counsel had to seek preliminary approval twice because the first settlement agreement’s class release was overbroad under Ninth Circuit precedent. Even after accounting for potentially excessive meetings and time spent correcting the settlement, the court concluded that Class Counsel had performed enough work to justify the 25% fee. It therefore awarded $91,250.

Expenses

The court found the requested expenses reasonable. The $6,673.02 in litigation expenses included $6,000 in mediation fees, $462 in filing fees, and most of the remainder in copying fees. The $7,499 in settlement-administration fees covered sending class notices, processing settlement checks, creating a website, and communicating with class members.

The court ordered $6,673.02 in litigation expenses and $7,499 in settlement-administration fees paid to Class Counsel from the settlement fund.

Service award

The court approved a $2,500 service award for Morgan McShan. The court relied on McShan’s full-day deposition, participation in mediation, efforts to have former coworkers contact Class Counsel, and provision of factual background for the lawsuit.

PAGA payment

The court approved a $4,000 PAGA payment for releasing claims under California’s Private Attorneys General Act. It cited the absence of an objection from California’s Labor and Workforce Development Agency and noted that the payment represented about 5% of the estimated recovery on the PAGA claim. The court ordered $3,000 remitted to the agency and $1,000 left in the settlement fund.

Disposition

Judge Lucy Koh granted the motion for attorneys’ fees. The order required payment of $91,250 in attorneys’ fees, $6,673.02 in litigation expenses, and $7,499 in settlement-administration fees to Class Counsel; a $2,500 service award to Morgan McShan; and the specified distribution of the $4,000 PAGA payment.