A federal judge has slashed by more than half the plaintiffs fees in a closely watched consumer class action involving Bluetooth headsets, concluding that “no reasonable paying client” would pay such an amount.

U.S. District Judge Dale Fischer in Los Angeles on July 31 approved a settlement in the litigation, resolving claims that the headsets should have carried warnings about hearing loss. But she lowered the plaintiffs fees and costs to nearly $283,000 from the $800,000 figure she originally approved.

On August 19, the U.S. Court of Appeals for the Ninth Circuit, reviewing an appeal of the original settlement brought by objector counsel Ted Frank, founder of the Center for Class Action Fairness in Washington, rejected the deal, concluding that Fischer had not adequately tested whether the fees were excessive. The settlement awards $100,000 in cy pres, or charitable, contributions, but no money for the class.

On remand, Fischer admitted she had “stopped too soon” during her first evaluation of the billing records.

“No reasonable paying client, and certainly not a sophisticated client paying out of its own pocket, would pay the amount of fees billed for some of the tasks performed in this case,” she wrote.

The multidistrict litigation combined 26 prospective class actions alleging that the technology company defendants had failed to publicize the risk of hearing loss associated with prolonged use of Bluetooth headsets. In addition to the cy pres award, the settlement provided injunctive relief in the form of warning labels on headset packaging.

The Ninth Circuit, in rejecting the deal, cited potentially excessive fees and numerous “red flags” including a “clear sailing” provision, under which the defendants agreed not to object to the fees, and a reversion agreement, under which the fees not awarded would revert to the defendants rather than to a cy pres fund or the class.

Following the Ninth Circuit’s decision, Motorola Inc. and the other defendants reviewed billing records for the seven plaintiffs firms from April 1, 2006 through July 31, 2009. They estimated that the justified payment was closer to $1.3 million – far in excess of the $800,000 requested. Plaintiffs attorneys had submitted an estimate of $1.6 million. But the defense also cited concerns about some of the bills.

Mark Cramer, a partner in the Los Angeles office of Kirkland & Ellis who represents Motorola and Plantronics Inc., another defendant, did not return a call for comment.

Fischer spent most of her ruling addressing the plaintiffs billing records.

She concluded that the actual “lodestar” amount — calculated by multiplying the number of hours reasonably spent on the case by a reasonable hourly rate — came to about $930,000, even with numerous deductions taken into account.

But the fees, she deduced, weren’t reasonable in light of what plaintiffs attorneys actually achieved.

She took particular aim at Pearson, Simon, Warshaw & Penny and Wasserman Comden Casselman & Esensten, whose billing submissions indicated that no “lower level attorneys” had assisted the partners on the case.

“Had the Court known that neither firm had the proper staffing available, it likely would not have found them to be appropriate as class counsel,” she wrote. “Certainly no reasonable paying client would find this to be justification for billing a partner rate for paralegal or secretarial work.”

Daniel Warshaw, name partner at Sherman Oaks, Calif.-based Pearson Simon, did not return a call for comment. Robert Esensten, name partner at Wasserman Comden in Tarzana, Calif., attributed the partner billings to growth in its class action department at the time.

Addressing the defense’s deductions, Fischer agreed that the bills warranted a further cut of $206,000 for reasons including vague or mistaken time entries, multiple attendance at events, unnecessary travel time, overstaffing and billing for summer associate time. “No reasonable paying client will pay for ‘training’ summer associates,” she wrote.

As for one firm, Wyly-Rommel in Texarkana, Texas, defense counsel had recommended that its fee request be cut by 30 percent across the board — about $62,000 — mostly due to vague descriptions of the tasks performed. Fischer concluded that such a reduction was “generous.”

“I’m never going to question a judge, but obviously there was some dissatisfaction,” said James Wyly, founding partner of Wyly-Rommel. “We lost a lot of time and money, but we’re going to move on.”

The judge also criticized the fees charged by Wasserman Comden and Los Angeles-based Kirtland & Packard for preparing some of the earlier complaints in the case. Billings from Wasserman Comden and Garcia, Artigliere & Schadrack of Long Beach, Calif., for “court hearings/case administration” also were “excessive” compared to the other firms, she wrote.

Esensten said: “The criticisms of the court relating to our firm do not take into consideration the fact that there are multiple firms, this was nationwide class, and there’s got to be, and there are in all these cases, some duplication of work in that there are documents that have to be reviewed by the various firms.”

Kirtland & Packard partner Michael Kelly and Stephen Garcia, senior partner in Garcia Artigliere, did not return calls for comment.

Fischer slashed $175,000 related to the settlement conference, plus $50,000 for work associated with approving the settlement.

“While some success was obtained in this case, it was minimal and did not match the level of time and effort that Plaintiffs’ counsel put into the case,” she wrote. “The actual results certainly fell far short of the original goals of the case both for monetary and injunctive relief.” She noted that class members received no money and the cy pres award was “minimal.”

“The success actually obtained,” she added, “could (and should) have been achieved at far lower cost.”

To account for the settlement’s failings, she cut the fees to $233,000 — about 25 percent of her revised lodestar calculation — and $50,000 in costs.

A call to Scott Henry, a shareholder at Chicago’s Segal McCambridge Singer & Mahoney, another plaintiffs firm on the case, was not returned.

Despite the criticisms, Fischer approved the settlement, finding no evidence of collusion.

“Because the suit could not be dismissed and might well have survived both class certification and summary judgment, yet had relatively little likelihood of achieving anything more than injunctive relief, the Court concludes the settlement was fair, adequate, and reasonable,” Fischer wrote. “There is no evidence (or even any serious argument) that the class had any realistic possibility of achieving a better result than that obtained by Plaintiffs’ counsel.”

Contact Amanda Bronstad at abronstad@alm.com.