The End Run Around the “No Multiplier” Rule in Fee-Shifting Cases

If a class action is based on a federal statute to which a fee-shifting provision applies and the result is a verdict in favor of the class, the defendant is responsible for the class's attorney fee. That fee, which is then typically awarded to the class counsel, is based on the lodestar. As noted, unlike common-fund cases, multipliers of the lodestar are virtually never allowed in these fee-shifting cases. This limitation, however, has been held not to apply to cases initiated under statutes with fee-shifting provisions and then settled through the creation of a common fund. In such cases, lawyers are permitted to seek a percentage of the common fund created for the class. There is a simple explanation why lawyers who have strong statutory violation cases do not litigate these cases to judgment but choose to settle them by the creation of a common fund: A percentage fee awarded under common-fund principles will often amount to multiples of the unaugmented lodestar that would be awarded if the case were successfully litigated.

Because of the high probability that lawyers will settle a case to obtain a higher fee than if they litigated it to a conclusion, courts purport to subject fee applications in this context to “thorough judicial review.” Indeed, courts repeatedly assert that in class actions, they are the guardians of the class – assiduous protectors of the fiduciary rights of class members.