18-16224, 18-16236, 18-16268, 18-16269, 18-16284 in the ... · shahriar jabbari and kaylee...

18-16213 (lead)

No. 18-16223

IN THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

SHAHRIAR JABBARI and KAYLEE HEFFELFINGER, et al.

Plaintiffs-Appellees,

BARBARA COCHRAN

Objector-Appellant,

v.

WELLS FARGO & COMPANY and WELLS FARGO BANK, N.A., et al.,

Defendants-Appellees.

On Appeal from the United States District Court

for the Northern District of California

Case No. 15-CV-02159 VC

Hon. Vince Chhabria

APPELLANT’S OPENING BRIEF

George W. Cochran, Esq. 1385 Russell Drive

Streetsboro, OH 44241

Tel.: 330.607.2187

Fax: 330.230.6136

Counsel to Objector-Appellant Barbara Cochran

18-16224, 18-16236, 18-16268, 18-16269, 18-16284

Case: 18-16317, 11/06/2018, ID: 11072893, DktEntry: 38, of 26

TABLE OF CONTENTS

Table of Contents .............................................................................................................. i

Table of Authorities ......................................................................................................... ii

Jurisdictional Statement ........................................................................................... 1

Statement of the Issue .............................................................................................. 2

Statement of the Case .............................................................................................. 3

Statement of Facts.................................................................................................... 5

Summary of Argument ............................................................................................ 6

Standard of Review.................................................................................................. 7

Argument ................................................................................................................. 7

The District Court Abused Its Discretion By Awarding 15% Of A Megafund

Settlement In Attorneys’ Fees Without Properly Evaluating All Factors Relied Upon

By The Ninth Circuit For Determining What Is Reasonable Under The

Circumstances……………………………………………………………………..7

A. Because Plaintiffs’ Action Was Prompted By Governmental Action And

Buttressed With Insider Information, Class Counsel’s Litigation Risk Was

Significantly Lowered ……………………………………………………...11

B. Because Class Counsel Spent More Time Reviewing Public Information And

Finalizing Settlement Than Pursuing Substantive Discovery And Motions In

Preparation For Trial, Their Lodestar Should Have Been Reduced

Accordingly…………………………………………………………………14

C. Because Class Counsel Are Guaranteed Payment For Future Administrative

Tasks, They Should Have Been Awarded An Adjusted Lodestar For The

Actual Hours Submitted. ……………………………………………………15

D. A Lodestar Crosscheck Of Class Counsel’s Already Steep Hourly Rate

Confirms The Fee Award In This Megafund Settlement Is Excessive……..17

Conclusion………………………………………………………………………..19

Certificates of Compliance and Service……………………………………….….20

i


TABLE OF AUTHORITIES

Cases Page

Blum v.Stenson, 465 U.S. 886 (1984)…………………………………………..16

Childress v. Darby Lumber, Inc., 357 F.3d 1000 (9th Cir.2004)………………. 2

City of Detroit v. Grinnell Corporation, 495 F.2d 448 (2d Cir. 1974)…………..8

Democratic Cent. Comm. of D.C. v. W.M.A.T.C., 38 F.3d 603 (D.C. Cir. 1994)..8

Evans v. Jeff D., 475 U.S. 717 (1986)……………………………………………8

Fischel v. Equitable Life Assurance Soc'y, 307 F.3d 997 (9th Cir. 2002)……….8

Florida v. Dunne, 915 F.2d 542(9th Cir.1990)………………………………….17

Fresh Kist Produce, LLC v. Choi Corp., Inc., 362 F. Supp. 2d 118

(D.D.C. 2005)……………………………………………………………15

Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000)…………………9,11,19

Gutierrez v. Wells Fargo, NA, No. 07-cv-05923 WHA, 2015 WL 2438274,

(N.D. Cal. May 21, 2015)………………………………………………..10

Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000)……………..10

In re Bluetooth Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011)…………….17,18

In re Continental Ill. Sec. Litig., 962 F.2d 566 (7th Cir. 1992)…………………10

In re Dry Max Pampers Litig., 724 F.3d 713 (6th Cir. 2013)……………………7

In re Fidelity/Micron Securities Litig., 167 F.3d 735 (1st Cir. 1999)……………9

In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465

(S.D.N.Y. 1998)………………………………………………………….15

ii


Cases Page

In re Washington Pub. Power Supply Sys. Litig., 19 F.3d 1291

(9th Cir. 1994)………………………………………………………7,11,18

Laffitte v. Robert Half Int’l, 376 P.3d 672 (Cal. 2016)………………………….10

Lewis v. Silvertree Mohave Homeowners’ Ass’n, Inc., No. C 16-03581 WHA, 2017 WL

5495816 (N.D.Cal. Nov. 16, 2017)………………………………………..16

Mercury Interactive Corp. Securities Litigation, 618 F.3d 988 (9th Cir. 2010)….7

Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268 (9th Cir.1989)……..…17

Perdue v. Kenny A., 130 S. Ct. 1662 (2010)……………………………………..19

Piambino v. Bailey, 757 F.2d 1112 (11th Cir. 1985)…………………………….10

Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157 (9th Cir. 2013)………. 2

Rodriguez v. Disner, 688 F.3d 645 (9th Cir. 2012)…………………………….. 2

Rooths v. District of Columbia, 802 F. Supp.2d 56 (D.D.C. 2011)……………..16

Six (6) Mexican Workers v. Ariz. Citrus Growers,

904 F.2d 1301 (9th Cir. 1990)…………………………………………….9

Stetson v. Grissom, 821 F.3d 1157 (9th Cir. 2016)………………………………8

Swedish Hospital Corp. v. Shalala, 1 F.3d 1261 (D.C. Cir. 1993)………………13

United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv.

Workers Intern. Union, AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802

(9th Cir. 2010)…………………………………………………………… 2

Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9 Cir. 2002)………………………7

Wininger v. SI Mgmt. L.P., 301 F.3d 1115 (9th Cir. 2002………………………18

Yokoyama v. Midland Nat. Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010)……….2

iii


Statutes and Rules Page

Civil Rule 23…………………………………………………………….……11,15

Articles

Barbara J. Rothstein & Thomas E. Willging, Managing Class Action

Litigation: A Pocket Guide for Judges. Federal Judicial Centre (2005)…11

John C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model

of the Lawyer as Bounty Hunter Is Not Working, 42 MD. L. REV. 215

(1983)……………………………………………………………………13

4 Newberg on Class Actions § 14.6 at 554 (4th ed. 2002)…………………..…10

Vaughn R. Walker & Ben Horwich, The Ethical Imperative of a Lodestar Cross-

Check: Judicial Misgivings About Reasonable Fees in Common Fund Cases,

18 GEO J. LEGAL ETHICS 1453 (2005)……………………………………..18

William B. Rubenstein, On What a “Private Attorney General” Is—

And Why it Matters, 57 VAND. L. REV. 2129 (2004)………………...13

iv


1

Jurisdictional Statement

1. District Court’s Jurisdiction. The District Court had

diversity jurisdiction over this case under 28 U.S.C. § 1332

(a) and (d) because the amount in controversy for the class

exceeds $5,000,000, there are 100 or more Class members

nationwide, and Plaintiffs-Appellees and other putative

class members are citizens of a different state from

Defendants-Appellees.

2. Appellate Jurisdiction. This Court has jurisdiction under

28 U.S.C. § 1291. On June 14, 2018, the district court issued

orders granting final approval of the settlement and

Plaintiffs-Appellees’ motion for attorney’s fees. (ER 3).

Final judgment was entered July 24, 2018. (ER 1).

Objector-Appellant Cochran filed Notice of her Appeal on

July 27, 2018. (ER 33).


2

STATEMENT OF THE ISSUE

Did the district court abuse its discretion by awarding 15% of a megafund

settlement as attorney’s fees without properly evaluating all factors relied upon by

the Ninth Circuit for determining what is reasonable under the circumstances?

[Raised pro se at ER 36; objections not specifically addressed by court].

Standard of Review. An award of attorneys' fees is reviewed for abuse of

discretion. Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1162 (9th Cir.

2013); Rodriguez v. Disner, 688 F.3d 645, 653 (9th Cir. 2012); Childress v. Darby

Lumber, Inc., 357 F.3d 1000, 1011 (9th Cir.2004); “An abuse of discretion occurs

when the district court, in making a discretionary ruling, relies upon an improper

factor, omits consideration of a factor entitled to substantial weight, or mulls the

correct mix of factors but makes a clear error of judgment in assaying them.” United

Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers

Intern. Union, AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802, 808 (9th Cir.

2010). The Ninth Circuit “accord[s] the decisions of district courts no deference

when reviewing their determinations of questions of law.” Yokoyama v. Midland

Nat. Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010). Findings of fact are

reviewed for clear error. Id.


3

Statement of the Case

Plaintiffs-Appellees Shahriar Jabbari and Kaylee Heffelfinger (“Plaintiffs”)

filed a proposed nationwide class action against Defendants-Appellees Wells Fargo

& Company and Wells Fargo Bank, NA, et al. (“Defendants”) in mid-2015, alleging

Defendants had opened checking, savings, and credit card accounts without

customer consent. (ER 81). Shortly thereafter, Defendants moved to compel

arbitration, invoking an arbitration clause in an agreement Plaintiffs signed when

they opened legitimate accounts. The Court granted the motion and dismissed the

case in September 2015.

After Plaintiffs appealed, the parties began to exchange information with a

view toward settlement. Retired U.S. District Court Judge Phillips was then asked

to assist with further discussions. After negotiations hit an impasse on the amount in

March 2017, Judge Phillips made a mediator recommendation of $110 million that

both sides accepted. Under this agreement in principle, the Class Period was to run

from 2009 to 2017. Based on new information and confirmatory discovery, the

parties extended the Class Period to May 2002, expanding the fund to $142 million.

The parties sought preliminary approval of the settlement in April 2017. After

written questions from the Court, supplemental briefing, and a hearing with both

parties and objectors, the Court indicated it was inclined to grant the motion if the

parties modified the settlement agreement to address issues discussed at the


4

Preliminary Approval Hearing. The parties submitted an amended settlement

agreement to which the Court gave preliminary approval in July 2017.

Upon moving for final approval of the settlement, Plaintiffs sought attorneys’

fees equal to 15% of the Settlement Fund. Among other class members, Objector-

Appellant Barbara Cochran (“Appellant”) challenged the fee motion on several

grounds: (1) that an inside whistleblower had triggered a flurry of lawsuits actually

lowered the risk of loss; (2) most pretrial time was spent negotiating a settlement;

(3) Class Counsel should not be credited with 2,500 hours of future administrative

work at the same multiplier as pretrial activities carrying the highest risk and

complexity; (4) a lodestar crosscheck of their already steep hourly rate proved that

the fee was excessive. (ER 36).

The district court approved the settlement and fee motion on June 14, 2018.

(ER 3-17). Noting “the Ninth Circuit’s “benchmark” for percentage-of-recovery

awards is 25%”, the Court found 15% fair and reasonable based on five factors: (1)

risk undertaken; (2) financial burden assumed; (3) superlative results obtained; (4)

non-monetary benefits achieved; and (5) similar awards. (ER 14). Having “carefully

considered objections to Class Counsel’s motion for attorneys’ fees,” the Court

overruled them all without comment because the award was “slightly lower than the

median and average”. (ER 15). The Court entered Final judgment on July 24, 2018.

(ER 1). Appellant filed Notice of Appeal on July 27, 2018. (ER 33).


5

Statement of Facts1

Plaintiffs alleged Defendants had been opening accounts for customers about

which they were not aware and did not authorize. According to Plaintiffs’ complaint,

Defendants’ business model was based on enrolling customers in multiple banking

products called “solutions.” In order to maximize its profits, Defendants allegedly

opened customer accounts and issued credit cards without the customer’s

authorization or knowledge. Then, when customers failed to maintain mandatory

account balances, pay fees for accounts they did not know existed or comply with

some other undisclosed policy, Defendants charged a fee.

Defendants often collected the fee by taking money from the clients’ existing

accounts. Defendants allegedly promoted this system by imposing unrealistic sales

quotas on employees. Despite knowing about these practices for years, Defendants

had not stopped the “solutions” initiative. While class members fought excessive

fees and were hassled by collection agencies, Defendants became the world’s most

valuable bank.

1 All factual allegations are taken from Plaintiffs’ Consolidated Amended Class

Action Complaint (ER 81-113).


6

Summary of Argument

The district court abused its discretion by awarding 15% of a megafund settlement

to Class Counsel without properly evaluating all factors relied upon by the Ninth Circuit

for determining a reasonable fee under the circumstances. In all, three of six factors set

forth in Goldberger were ignored or misapplied. Because the litigation was triggered by

governmental action and bolstered by reliable testimony from former employees with

internal documents, Class Counsel’s litigation risk was lower than most consumer class

actions. Moreover, in the few months preceding settlement talks, they spent more time

reviewing public information, finalizing terms and securing the Court’s approval than

pursuing substantive discovery and motions in preparation for trial. Since Class Counsel

is guaranteed payment for future administrative tasks, the Court should have only

awarded their adjusted lodestar for actual hours submitted—not given credit for 2,500

speculative hours at the highest possible premium.

Most importantly, a lodestar crosscheck of Class Counsel’s already steep hourly

rate confirms the award was excessive. To gloss over these critical factors in a megafund

settlement because the percentage-of-recovery happens to fall below this Circuit’s

benchmark was a clear abuse of the district court’s discretion.


7

ARGUMENT

Standard of Review

A district court’s award of attorneys’ fees is reviewed for abuse of discretion.

Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1046 (9 Cir. 2002).

The District Court Abused Its Discretion By Awarding 15% Of A Megafund

Settlement In Attorneys’ Fees Without Properly Evaluating All Factors Relied

Upon By The Ninth Circuit For Determining What Is Reasonable Under The

Circumstances.

“Class-action settlements are different from other settlements. The parties to

an ordinary settlement bargain away only their own rights—which is why ordinary

settlements do not require court approval.” In re Dry Max Pampers Litig., 724 F.3d

713, 715 (6th Cir. 2013). Unlike ordinary settlements, “class-action settlements

affect not only the interests of the parties and counsel who negotiate them, but also

the interests of unnamed class members who by definition are not present during the

negotiations.” Id. “[T]hus, there is always the danger that the parties and counsel

will bargain away the interests of unnamed class members in order to maximize their

own.” Id. To guard against this danger, a district court must act as a “fiduciary for

the class [] with ‘a jealous regard’” for the rights and interests of absent class

members. Mercury Interactive Corp. Securities Litigation, 618 F.3d 988, 994 (9th

Cir. 2010) (quoting In re Washington Pub. Power Supply Sys. Litig., 19 F.3d 1291,

1302 (9th Cir. 1994).

This appeal seeks to reverse a disturbing trend among California’s district


8

courts of approving class fee petitions based on whether they meet certain

“benchmarks” instead of scrutinizing all unique, relevant factors affecting

reasonableness. District courts must “appraise the reasonableness of particular class

action settlements on a case-by-case basis, in light of all the relevant circumstances.”

(emphasis added). Evans v. Jeff D., 475 U.S. 717, 742, (1986). The district court can

apply either the lodestar or percentage-of-the-fund method in calculating a fee

award. Stetson v. Grissom, 821 F.3d 1157, 1165 (9th Cir. 2016) (quoting Fischel v.

Equitable Life Assurance Soc'y, 307 F.3d 997, 1006 (9th Cir. 2002)). Either way, it

must scrutinize the fee provision with a jealous regard for the rights of those who

are interested in the settlement fund. City of Detroit v. Grinnell Corporation, 495

F.2d 448, 469 (2d Cir. 1974).

“In common fund cases, it is not the creation of the fund itself that entitles

the attorneys to be paid from the fund. Rather, any obligation that the fund incurs to

pay attorneys’ fees must result from the equitable power to assess fees against those

who stand to ultimately benefit from the fund.” Democratic Cent. Comm. of D.C. v.

W.M.A.T.C., 38 F.3d 603, 605 (D.C. Cir. 1994) (citation omitted). “Because the

benefit to the class is easily quantified in common-fund settlements,” the Ninth

Circuit permits district courts “to award attorneys a percentage of the common fund

in lieu of the often more time consuming task of calculating the lodestar.” Id.

“Applying this calculation method, courts typically calculate 25% of the fund


9

as the ‘benchmark' for a reasonable fee award, providing adequate explanation in the

record of any ‘special circumstances' justifying a departure.” Id. (citing Six (6)

Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)).

However, “even a theoretical construct as flexible as a “benchmark” [may] offer an

all too tempting substitute for the searching assessment that should properly be

performed in each case.” Goldberger v. Integrated Res., Inc., 209 F.3d 43, 52 (2d Cir.

2000). Consequently, the benchmark should be adjusted if it is “too small or too large

in light of the hours devoted to the case or other relevant factors.” Six (6) Mexican

Workers, 904 F.2d at 1311.

Appellant’s fee objection in the present case called upon the district court to

exercise its special fiduciary role as guardian for the class. Once a tentative

settlement is reached, the relationship between class counsel and the class turns

directly and unmistakably adversarial because counsel’s “interest in getting paid the

most for its work representing the class [is] at odds with the class’ interest in securing

the largest possible recovery for its members.” Id. The court’s exercise of its

equitable power to award attorneys’ fees in common fund cases is particularly

important because “once a common fund is established, class members and class

counsel wind up playing a zero sum game, in which every dollar awarded to counsel

represents one less dollar that is available for distribution to class members.” In re

Fidelity/Micron Securities Litig., 167 F.3d 735, 738 (1st Cir. 1999). The existence


10

of this zero sum game requires the Court to exercise its equitable power in a manner

that safeguards class members’ rights, which deserve “special protection.” Gunter v.

Ridgewood Energy Corp., 223 F.3d 190, 201 (3d Cir. 2000). Depending on the

manner in which the court exercises its discretion, percentage fee awards “may vary

greatly depending on the individual facts of the case.” 4 Newberg on Class Actions

§ 14.6 at 554 (4th ed. 2002).

Moreover, “in most common-fund cases, defendants have little interest in

challenging class counsel’s timesheets.” Gutierrez v. Wells Fargo, NA, No. 07-cv-

05923 WHA, 2015 WL 2438274, at *6 (N.D. Cal. May 21, 2015). No individual

class member has the financial incentive to object to an exorbitant fee request either;

“[h]is gain from a reduction, even a large reduction, in the fees awarded the lawyers

would be minuscule.” In re Continental Ill. Sec. Litig., 962 F.2d 566, 573 (7th Cir.

1992). Given this natural adversity, there can be no deference to class counsel’s

recommendation. The district court (and good-faith public-minded objectors) serve

as the last line of defense against overreaching fee requests.

“Public confidence in the fairness of attorney compensation in class actions

is vital to the proper enforcement of substantive law.” Laffitte v. Robert Half Int’l,

376 P.3d 672, 688-92 (Cal. 2016) (Liu, J., concurring). Exorbitant fees erode public

confidence in the class action device. To prevent that erosion, it is “it is important

that the courts avoid awarding ‘windfall fees’ and that they should likewise avoid


11

every appearance of having done so.” Piambino v. Bailey, 757 F.2d 1112, 1144 (11th

Cir. 1985); see also In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d

1291, 1298 (9th Cir. 1994) (differentiating “reasonable” from “windfall” fees in

megafund cases). “Active judicial involvement in measuring fee awards is singularly

important to the proper operation of the class action process.” Advisory Committee

Notes on 2003 Amendments to Rule 23.

Accordingly, the Ninth Circuit insists on scrutinizing all of Goldberger’s criteria

for determining a reasonable common fund fee, regardless of the method employed.

These include: (1) time and labor expended by counsel; (2) magnitude and

complexities of litigation; (3) risk of litigation; (4) quality of representation; (5) fee

in relation to settlement; and (6) public policy considerations. Id. Appellant

respectfully submits the district court’s oversight of the Wells Fargo settlement falls

short of this Court’s careful scrutiny. Apparently swayed by class counsel’s

willingness to accept less than the benchmark, the final order overlooked or

misapplied no fewer than three of Goldberger’s criteria.

A. Because Plaintiffs’ Action Was Prompted By Governmental Action And

Buttressed With Insider Information, Class Counsel’s Litigation Risk

Was Significantly Lowered.

The Court’s first legal error was failing to consider all factors relevant to Class

Counsel’s litigation risk. The final order identifies two factors supporting its high

premium, while overlooking opposing indicia. Specifically, the court noted “the


12

considerable risk at the outset of this case that Class Counsel would receive nothing,

given the presence of an arbitration agreement and attendant challenges that they

would face in securing and maintaining Class Certification.” (ER 14). By class

counsel’s own admission, however, their interest in the case was triggered by the

media frenzy over a lawsuit filed by the Los Angeles County Attorney’s Office. (ER

40). Moreover, the subsequent decision to file a complaint was grounded on

firsthand accounts of fraudulent practices from former employees with internal

documents to verify their story. (ER 41).

All of Class Counsel’s diligence was designed to reduce the risk of loss at

trial. According to Derek Loeher, a partner with Keller Rohrback:

1. The firm began investigating the case in response to “an article in the Los

Angeles Times describing Wells Fargo’s high-pressure sales environment and

resulting abuses, and a lawsuit by the Los Angeles City Attorney against

Wells Fargo on behalf of California victims.” (ER 40).

2. Next, the firm “interviewed more than twenty-two current and former Wells

Fargo employees with firsthand experience with Wells Fargo’s practices

related to Unauthorized Accounts, obtaining probative internal Wells Fargo

documents as a result.” (ER 41).

3. Finally, attorneys and paralegals “scoured public reports and dockets for

information and materials related to Wells Fargo’s cross-selling and incentive

practices that contributed to the Unauthorized Account scandal.” Id.

In quantifying the risk undertaken by plaintiffs’ counsel in bringing a class

action, the court must scrutinize such activities in order to adjust the stakes

accordingly. Barbara J. Rothstein & Thomas E. Willging, Managing Class Action


13

Litigation: A Pocket Guide for Judges. Federal Judicial Centre (2005) at 24.

Professor Coffee describes the “spectacle, one resembling the Oklahoma land rush,

in which the filing of the public agency’s action serves as the starting gun for a race

between private attorneys, all seeking to claim the prize of lucrative class action

settlements, which public law enforcement has gratuitously presented them.” John

C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model of the Lawyer

as Bounty Hunter Is Not Working, 42 MD. L. REV. 215 (1983). In the most extreme

case, Professor Rubenstein spoke of ‘coattail’ class counsel who provide “no

independent search skills, no special litigation savvy, and no nonpoliticized

incentives.” William B. Rubenstein, On What a “Private Attorney General” Is—And

Why it Matters, 57 VAND. L. REV. 2129 (2004).

In the present case, Appellant concedes Class Counsel added value to the

ground broken in Los Angeles County. The existence of an arbitration agreement

also posed an early obstacle. Nonetheless, the district court failed to recognize that

a class action faces a reduced risk of loss when sparked by governmental action and

buttressed with insider information. A more thorough fee review would have

adjusted the award in proportion to this reduced risk. Swedish Hospital Corp. v.

Shalala, 1 F.3d 1261, 1272 (D.C. Cir. 1993) (“the court was within its discretion in

basing its fee calculation only on that part of the fund for which counsel was

responsible”).


14

B. Because Class Counsel Spent More Time Reviewing Public Information

And Finalizing Settlement Than Substantive Discovery And Motions In

Preparation For Trial, Their Lodestar Should Have Been Reduced.

Another factor misunderstood in the court’s evaluation is Class Counsel’s real

contribution to the Settlement Fund. In the few months leading up to settlement talks,

class counsel appears to have spent more time reviewing publicly available

information and gearing toward settlement than initiating substantive discovery and

motions that yield probative evidence for trial. Soon after filing the complaint, class

counsel turned to reviewing “extensive additional information concerning the

Unauthorized Account scandal, including Congressional testimony, dockets,

pleadings and public information relating to the City of Los Angeles lawsuit,

information made available by the Consumer Finance Protection Bureau (“CFPB”)

and the Office of the Comptroller of the Currency (“OCC”) regarding their own

investigations of Wells Fargo and resulting settlements, news reports, filings in

related employee cases against Wells Fargo, and Wells Fargo’s own websites,

documents, and disclosures.” (ER 41).

By stipulation of the parties after multiple mediations, Defendants voluntarily

produced “confidential information and confirmatory discovery to Keller Rohrback

concerning the nature and extent of the Unauthorized Account scandal and resulting

losses and damages that we then carefully evaluated and reviewed.” Id. Once an

agreement in principle was reached, most of Class Counsel’s billable time focused


15

on confirmatory discovery and securing court approval. Id. Along the way, they lost

the motion to compel arbitration and failed to certify their claims for class treatment.

Indeed, the record is devoid of prevailing on any critical issue. (ER 114-142).

Consequently, this is not a case where Class Counsel conducted extensive

discovery over a protracted amount of time or drafting lengthy motions that involved

difficult and novel legal questions. See Fresh Kist Produce, LLC v. Choi Corp., Inc.,

362 F. Supp. 2d 118, 130 (D.D.C. 2005); cf. In re NASDAQ Market-Makers Antitrust

Litig., 187 F.R.D. 465, 488 (S.D.N.Y. 1998) (finding class counsel faced formidable

opposition, surmounted defendants’ motion to dismiss, certified a broad class, and

developed evidence of liability and damages). Instead, the district court found the

lack of formal discovery “not a prerequisite to a fair settlement under Rule 23(e)

[since] Class Counsel had sufficient information to make an informed decision about

settlement.” (ER 12). In doing so, the court overrated Class Counsel’s litigation risk

and real contribution to the settlement. A more thorough review would have adjusted

the lodestar accordingly.

C. Because Class Counsel Are Guaranteed Payment For Performing Future

Administrative Tasks, They Should Have Been Awarded An Adjusted

Lodestar For The Actual Hours Submitted.

The same principle applies to Class Counsel’s inclusion of 2,500 hours in their

lodestar for future administrative tasks. A proper lodestar is calculated by multiplying

the “number of hours reasonably expended on the litigation by a reasonable hourly


16

rate.” Lewis v. Silvertree Mohave Homeowners’ Ass’n, Inc., No. C 16-03581 WHA, 2017

WL 5495816, at *3 (N.D.Cal. Nov. 16, 2017). “The reasonableness of an hourly rate

should be determined based on the rates prevailing in the community for ‘lawyers of

reasonably comparable skill, experience and reputation.’” Id. (quoting Blum v.

Stenson, 465 U.S. 886, n.11 (1984)). Accordingly, a fee petition should delineate

the specific tasks covered by the lodestar, what level of skill and experience was

required, and which attorneys or paralegals performed them. See Rooths v. District

of Columbia, 802 F. Supp.2d 56, 61 (D.D.C. 2011).

These requirements were not met before the district court agreed to pad

Class Counsel’s itemized fee bill with 2,500 hours (25% of their lodestar) for

speculative administrative work. According to attorney Loeser’s prediction, these

tasks will be distributed among partners ($710-995/hour), associates ($400-

650/hour) and paralegals ($225-325/hour) and billed at a blended rate of $585 per

hour. (ER 73). In return, Class Counsel sought to apply the same multiplier it

hoped to receive for litigation activities carrying the highest risk and complexity.

The speculative nature of Class Counsel’s request alone should have raised

a red flag. Unknown at the time of approval were: (1) actual complexities faced (2)

actual time expended and (3) actual individuals performing the tasks. What was

known was the risks of litigation were now behind them. Had the court followed

Goldberger’s criteria, it would have excluded all future administrative work from


17

Class Counsel’s lodestar for purposes of determining a reasonable fee (holding this

award in abeyance until the Court reviewed their itemized statement after completing

the work).2 In no case would it have agreed to pay a premium.

D. A Lodestar Crosscheck Of Class Counsel’s Already Steep Hourly Rate

Confirms The Fee Award In This Megafund Settlement Is Excessive.

Most importantly, a fee award must represent a reasonable percentage of the

overall value of the settlement—regardless of the method employed. In re

Bluetooth Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011) (sign of collusive

settlement is when class counsel receive a disproportionate share of settlement).

“[W]here awarding 25% of a ‘megafund' would yield windfall profits for class

counsel in light of the hours spent on the case, courts should adjust the benchmark

percentage or employ the lodestar method instead.” In re Bluetooth, 654 F.3d at

942. In Florida v. Dunne, 915 F.2d 542, 545 (9th Cir.1990), this Court explained:

Despite the recent ground swell of support for mandating a percentage-

of-the-fund approach in common fund cases, however, we require only

that fee awards in common fund cases be reasonable under the

circumstances. Accordingly, either the lodestar or the percentage-of-

the-fund approach "may, depending upon the circumstances, have its

place in determining what would be reasonable compensation for

creating a common fund." (quoting Paul, Johnson, Alston & Hunt v.

Graulty, 886 F.2d 268, 272 (9th Cir.1989)).

Several years later, this Court cautioned against the temptation to default to

2 Excluding future administrative tasks would increase the multiplier to 4.75.


18

a percentage approach in a megafund settlement:

[T]here is no necessary correlation between any particular percentage

and a reasonable fee. With a fund this large, picking a percentage

without reference to all the circumstances of the case, including the size

of the fund, would be like picking a number out of the air *** A sizable

settlement can reflect a number of factors in addition to the prestige,

skill and vigor of Class counsel. Thus, it is imperative that the amount

of the settlement be viewed from the proper perspective and in the

context of all relevant circumstances.” (emphasis added)

In re Washington Public Power Supply System Securities Litigation, 19 F.3d

1291, 1297 (9th Cir. 1994). The lodestar cross-check should “confirm that a

percentage of recovery amount does not award counsel an exorbitant hourly rate.”

In Re Bluetooth, 654 F.3d at 945. “[I]n megafund cases, the lodestar cross-check

assumes particular importance.” Alexander, 2016 WL 3351017, at *2; see also In re

Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1298 (9th Cir. 1994)

(describing how percentage-based awards become particularly arbitrary in a

megafund context). The crosscheck helps uncover the “disparity between the

percentage-based award and the fees the lodestar method would support.” Wininger

v. SI Mgmt. L.P., 301 F.3d 1115, 1124 n.8 (9th Cir. 2002); Vaughn R. Walker & Ben

Horwich, The Ethical Imperative of a Lodestar Cross-Check: Judicial Misgivings

About Reasonable Fees in Common Fund Cases, 18 GEO J. LEGAL ETHICS 1453,

1454 (2005) (“[C]ourts making common fund fee awards are ethically bound to

perform a lodestar cross-check.”).


19

In light of the foregoing considerations, awarding nearly four times Class

Counsel’s purported lodestar in a megafund settlement was clearly unwarranted. See

Perdue v. Kenny A., 130 S. Ct. 1662, 1667 (2010) (multipliers permitted only in most

rare or exceptional cases). As demonstrated above: (1) the litigation risk was

significantly reduced since Defendants’ liability was virtually established at the

outset; (2) much of Class Counsel’s time and labor was devoted to reviewing public

documents, finalizing settlement, and securing the Court’s approval; and (3)

Plaintiffs did not prevail on any critical issue, losing the motion to compel arbitration

and failing to certify their claims for class treatment. A proper application of all

Goldberger factors would have limited the fee award to no more than 10% of the

Settlement Fund—resulting in a 2.37 multiplier of Class Counsel’s lodestar at a

generous blended rate of $1,330 per hour.

CONCLUSION

For the foregoing reasons, this Court should reverse the district court's order

awarding 15% of the Settlement Fund in attorneys' fees and remand with

instructions to reevaluate class counsel’s fee request through the proper application

of all six criteria identified in Goldberger, giving special attention to the three

factors addressed by Appellants and the Settlement Fund’s significant size.


20

Respectfully Submitted,

/s/ George W. Cochran

George W. Cochran, Esq.

1385 Russell Drive

Streetsboro, Ohio 44241

Phone: (330) 607-2187

Fax: (330) 230-6136

[email protected]

CERTIFICATE OF SERVICE

I hereby certify that I electronically filed the foregoing with the

Clerk of the Court for the United States Court of Appeals for the Ninth

Circuit by using the appellate CM/ECF system on November 5, 2018.

I certify that all participants in the case are registered CM/ECF

users and that service will be accomplished by the appellate CM/ECF

system.


George W. Cochran

Appeal No. 18-16223

CERTIFICATE OF COMPLIANCE

I hereby certify that the foregoing brief complies with FRAP

32(a)(7)(B), in that it contains no more than 4,471 words as determined

by the word-count tool of the Microsoft Word 2007 word-processing

system used to create it, and that it is proportionally-spaced in 14-point

type.


George W. Cochran


mailto:[email protected]

21

STATEMENT OF RELATED CASES

The following appeals are companion or related appeals:

18-16223

18-16224

18-16236

18-16268

18-16269

18-16284


18-16224, 18-16236, 18-16268, 18-16269, 18-16284 in the ... · shahriar jabbari and kaylee...

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