Fears v. Wilhelmina Model Agency, Inc. , 315 F. App'x 333 ( 2009 )

SUMMARY ORDER

The plaintiffs-appellants and their counsel appeal from a decision of the United States District Court for the Southern District of New York (Baer, J.), upon remand from this Court, awarding residual funds from the settlement of the plaintiffs-appellants’ class action to charities pursuant to the doctrine of ay pres and awarding attorneys’ fees equal to approximately 20% of the total settlement fund. We assume the parties’ familiarity with the facts, the procedural history of the ease, and the issues on appeal.

Our review of the issues on appeal is hampered by the district court’s failure to explain sufficiently the basis for its decision on remand not to award further attorneys’ fees. In its initial decision, the district court chose to award fees by the ‘percentage of the fund’ method, using counsel’s lodestar as a “crosscheck,” and made findings with respect to three of the six Goldberger factors that were favorable to plaintiffs’ counsel. See Fears v. Wilhelmina Model Agency, Inc., No. 02 Civ. 4911, 2005 WL 1041134, at *5-8 (S.D.N.Y. May 5, 2005) (“Fears I ”) (discussing Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir.2000)). The sole determinations disfavoring counsel were the district court’s decisions to calculate fees as a percentage of the claims filed and to reduce the award to reflect conduct for which counsel already had been sanctioned. Id. at *4, 8. This Court reversed both of those determinations on appeal. Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 437 (2d Cir.2007). On remand, the district court noted this Court’s decision, but adhered to its initial fee award without explaining why, given that all six Goldberger factors now favored plaintiffs’ counsel, the unchanged fee award remained reasonable.¹ See generally Fears v. Wilhelmina Model Agency, Inc., No. 02 Civ. 4911, 2007 WL 1944343 (S.D.N.Y. July 5, 2007) (“Fears IF’).

The district court certainly was not required on remand to increase its fee award. But it was required to explain adequately its reasons for determining that the unchanged award was reasonable, and the explanation it provided on remand was incomplete. In particular, the district court gave no indication that it had reconsidered the size of the requested fee in relation to the settlement fund, but instead simply referenced its initial analysis of that Goldberger factor, Fears II, 2007 WL 1944343 at *4-5, even though this Court had held that analysis to be based upon an error of law because it measured the award against only part of the overall settlement fund, Masters, 473 F.3d at 436-37. With respect to counsel’s lodestar, the district court on remand cited cases allowing a “negative multiplier” when an award of the lodestar might “swallow up” settlement funds, Fears II, 2007 WL 1944343 at *5, but did not explain how that danger was presented by this case, in which significant funds remained after payment of all filed claims. Nor did the district court revisit any of its findings that were favorable to counsel and which established that counsel had performed a valuable public service by taking on extensive litigation with significant risks and had obtained a substantial settlement allowing full payment of every claim that was filed. Fears I, 2005 WL 1041134 at *5-8. Because of these deficiencies in the district court’s explanation, we have no basis to determine whether it was an abuse of discretion for the district court to adhere to its initial award (as increased to reflect subsequent work) of fees equal to only around 20% of the fund and less than half of counsel’s lodestar, and therefore must remand to the district court for reconsideration of the appropriate award of attorneys’ fees. Cf. In Design v. K-Mart Apparel Corp., 13 F.3d 559, 568 (2d Cir.1994) (holding district court abused discretion by changing characterization of defendant’s conduct “without a reasoned explanation”) overruled on other grounds by Fogerty v. Fantasy, Inc. 510 U.S. 517, 533, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994).

Our decision regarding the district court’s award of attorneys’ fees requires us also to vacate that court’s decision to award residual funds to charities pursuant to the doctrine of cy pres. We nevertheless address this issue, because excess funds may remain after the district court reconsiders the fee award on remand, and hold that the district court did not err in awarding the residual funds to charities rather than to the plaintiffs as treble damages or pursuant to the plaintiffs’ other alternatives. Although the district court on remand noted a potential legal obstacle to awarding treble damages under the Clayton Act without a finding of actual injury, it expressly assumed that it could award such damages, and based its decision to make a cy pres distribution instead on equitable grounds. That decision was a permissible exercise of the district court’s discretion, and was not based upon any error of law. See Masters, 473 F.3d at 436 (reviewing allocation of residual funds for abuse of discretion).

Accordingly, the decision of the district court awarding fees to plaintiffs’ counsel, and awarding the residual settlement funds to charities pursuant to the doctrine of cy pres, is VACATED and the case is REMANDED to the district court for further proceedings consistent with this decision.

1 . The District Court increased the fee award slightly to reflect additional work performed subsequent to its initial decision. Fears II, 2007 WL 1944343, at *6.