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Judges approving class action attorneys’ fee awards must clearly define their reasons should they depart from the benchmark, the 9th U.S. Circuit Court of Appeals ruled Friday. The three-judge panel’s ruling also allows unnamed class-member objectors to appeal fee awards without going through a more cumbersome process of intervening in the suit as a named party. “Assuring fair and adequate fee awards outweighs the danger that allowing appeals by non-intervening unnamed parties will complicate the settlement process,” wrote Judge Kim Wardlaw. She was joined by Thomas Nelson and Alex Kozinski. The ruling in Powers v. Eichen not only gave objectors standing to appeal, but also provided a survey of governing law and appropriate practices for judges meting out fee awards. The fee award challenge was brought by Wilfred George, a stockholder of Proxima Corp. When the company settled stock fraud litigation marshaled by Milberg Weiss Hynes Bershad & Lerach, notices sent to class members gave them an opportunity to object to attorneys’ fees totaling 30 percent of the settlement. The benchmark in such cases is 25 percent. George was represented by Berkeley solo Lawrence Schonbrun, a frequent critic of large class action fee awards. Schonbrun attacked the award, alleging that it was too large; that the judge didn’t explain why he chose the percentage method rather than the lodestar method of calculating fees. He also attacked the award for being based on a gross rather than net recovery. The 9th Circuit agreed that U.S. District Judge Rudi Brewster should have fully explained why he had approved the larger than normal award and remanded the case to the Southern District for the judge to further explain his reasons. It did so despite quoting at length Brewster’s from-the-bench ruminations on the complications of securities cases as he mulled the fee request. “Many of the factors discussed at the hearing may have supported the fee award, but the district court never stated the ground on which it ultimately relied,” Wardlaw wrote. Schonbrun said he was happy with the decision. “I think the 9th Circuit was positively telling judges, ‘Don’t just sign a form that the class action lawyers put in front of you,’ ” Schonbrun said. The attorney who argued the case for Milberg Weiss could not be reached, but another member of the plaintiffs’ bar had a different take on Schonbrun’s win. “A Pyrrhic victory, at best,” said Solomon Cera of San Francisco’s Gold Bennett Cera & Sidener, who predicted the fee award would remain intact. “If you’re someone in Schonbrun’s position and you want to object to a fee award, you have to do it right,” Cera said. “That’s all they’re saying.” The dispute in this case was over a relatively small amount of money for securities cases — a few hundred thousand dollars, or the difference between a 25 percent and 30 percent fee award. Brewster seemed swayed that Milberg Weiss had taken the case on a contingency basis. “It’s one thing to charge a rate that’s going to be paid,” Brewster said while considering the fee request. “You can go to the bank with it. But it’s another thing to work long hours, hoping that someday they’re going to win because, if they win, they’re going to get paid handsomely, and if they lose, they just soak it up.” But in his final order, Brewster stated simply that the award was “fair and reasonable under the ‘percentage of recovery’ method.”

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