Plaintiffs' Lead Counsel v. Life Time Fitness, Inc. , 847 F.3d 619 ( 2017 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-3976
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In re: Life Time Fitness, Inc., Telephone Consumer Protection Act (TCPA) Litigation
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Plaintiffs’ Lead Counsel; Plaintiffs’ Executive Committee
lllllllllllllllllllll Plaintiffs - Appellees
Lindsey Thut
lllllllllllllllllllllObjector - Appellant
v.
Life Time Fitness, Inc.
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: October 19, 2016
Filed: February 2, 2017
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Before RILEY, Chief Judge, WOLLMAN and BENTON, Circuit Judges.
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WOLLMAN, Circuit Judge.
Lindsey Thut appeals from the district court’s1 order awarding class counsel
$2.8 million in attorney’s fees and expenses in a class-action lawsuit against Life
Time Fitness, Inc. We affirm.
In 2014, four law firms filed four separate class-action complaints against Life
Time, each alleging that Life Time had violated the Telephone Consumer Protection
Act (TCPA), 47 U.S.C. § 227, by sending unsolicited text-message advertisements
to putative class members’ cellular telephones. The class actions were consolidated
at Life Time’s request and assigned to the District of Minnesota by the Judicial Panel
on Multidistrict Litigation. After informal discovery, mediation, and “lengthy, arm’s
length negotiations,” the parties entered into a settlement agreement in February
2015, under which Life Time agreed to pay a minimum of $10 million and a
maximum of $15 million to settle the TCPA claims, to cover the costs of settlement
administration, and to pay attorney’s fees and expenses “in the amount awarded by
the [c]ourt.” The agreement provided that each class member who submitted a valid
claim would be entitled to choose between a cash award of $100 or a Life Time
membership award—either a three-month single membership or a $250 credit on an
existing membership.2
The district court granted preliminary approval of the settlement agreement on
March 9, 2015, conditionally certifying the class for settlement purposes, appointing
class representatives and class counsel, and directing that notice be provided to the
class. Despite mediation and negotiation efforts, however, the parties were unable
1
The Honorable Joan N. Ericksen, United States District Judge for the District
of Minnesota.
2
The cash and membership awards were subject to a pro rata adjustment,
depending on the number of valid claims submitted. Based on the 29,843 valid claim
submissions, an upward adjustment of 60 percent was applied, which resulted in a
cash award of roughly $160 and a membership credit valued at roughly $400.
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to reach an agreement regarding attorney’s fees and expenses. Class counsel filed an
initial motion for an award of $4.2 million, submitting billing records to the district
court for in camera review in support of the motion. Thut filed the sole objection by
a class member. After the claims period closed, class counsel filed an amended
motion for attorney’s fees, requesting an award of $3 million, or 30 percent of the
guaranteed $10 million minimum payment Life Time was required to remit under the
settlement agreement. Class counsel attached declarations in support of the requested
fee amount, which documented the hours and various billing rates of the individuals
who had worked on the lawsuit and which resulted in a lodestar of $687,928.75.
On November 17, 2015, the district court conducted a hearing on the parties’
joint motion for final approval of the settlement agreement and on class counsel’s
amended motion for attorney’s fees and expenses. The parties and the court devoted
a significant portion of the hearing to the issue of attorney’s fees, discussing in detail
both the methods typically used for calculating fees. On December 1, 2015, the court
granted final approval of the settlement agreement. It also granted in part and denied
in part class counsel’s amended motion for attorney’s fees and expenses, applying
class counsel’s requested percentage-of-the-benefit method to calculate the fee
amount, rejecting Life Time’s argument for application of the lodestar method, and
overruling Thut’s objection to the fee request. The district court found that class
counsel had “expended substantial time and effort in their able prosecution” of the
lawsuit, which ultimately resulted in a good-faith settlement that provided a “fair,
reasonable, adequate[,] and certain result” for the class. The court awarded a total
sum of $2.8 million in attorney’s fees and expenses—28 percent of the minimum $10
million amount of the settlement fund—and authorized class counsel, “in their sole
discretion, . . . to allocate and distribute the fees among [themselves].”
Thut argues that the fee award was excessive and that the court improperly
delegated to the four class-counsel law firms the authority to allocate the award
among themselves. We review a district court’s award of attorney fees for abuse of
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discretion. See Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1156 (8th Cir. 1999)
(“Decisions of the district court regarding attorney fees in a class action settlement
will generally be set aside only upon a showing that the action amounted to an abuse
of discretion.”). In a certified class action, a district court “may award reasonable
attorney’s fees and nontaxable costs that are authorized by law or by the parties’
agreement.” Fed. R. Civ. P. 23(h). In exercising its discretion to award attorney’s
fees, a district court generally applies one of two methods to determine a reasonable
fee amount: the “lodestar” method, under which “the hours expended by an attorney
are multiplied by a reasonable hourly rate of compensation so as to produce a fee
amount which can be adjusted, up or down, to reflect the individualized
characteristics of a given action,” or the “percentage of the benefit” method, under
which the fee amount is “equal to some fraction of the common fund that the
attorneys were successful in gathering during the course of the litigation.” Johnston
v. Comerica Mortg. Corp., 83 F.3d 241, 244-45 (8th Cir. 1996); see also Petrovic, 200
F.3d at 1157 (noting well-established rule that a district court may use the percentage-
of-the-benefit method in a common-fund settlement case). “It is within the discretion
of the district court to choose which method to apply,” Johnston, 83 F.3d at 246, 247
(reiterating that “[t]he district court is free to utilize either the lodestar or the
percentage of the benefit method”); see also Galloway v. Kansas City Landsmen,
LLC, 833 F.3d 969, 972 (8th Cir. 2016) (same), as well as to determine the resulting
amount that constitutes a reasonable award of attorney’s fees in a given case, see
Travelers Prop. Cas. Ins. Co. v. Nat’l Union Ins. Co., 735 F.3d 993, 1002 (8th Cir.
2013).
The district court reviewed the parties’ submissions on the attorney’s fee issue,
heard extensive argument on the matter, and considered the fees awarded and the
methods used to calculate those fees in similar cases. The court engaged in a pointed
inquiry into class counsel’s requested percentage-of-the-benefit fee amount and Life
Time’s suggested lodestar and appropriate multipliers and considered in detail
argument from both parties. See Petrovic, 200 F.3d at 1157 (noting that use of
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lodestar method may be warranted to double-check the result of the percentage-of-
the-fund method). The district court also reviewed in camera the itemized daily time
records kept by each attorney and other legal professional who participated in
representing the class and ultimately accepted those records as additional evidence
that class counsel “expended substantial time and effort in their prosecution of claims
on behalf of” the class. Those efforts, the court found, led to an expeditious
settlement of the class claims and an agreement that was “fair, reasonable, and
adequate”; that achieved “substantial savings of time, money, and effort” for the court
and the parties; and that “further[ed] the interests of justice.” The court determined
that a percentage-of-the-benefit award of $2.8 million in attorney’s fees and expenses
was reasonable, finding specifically that “the requested award is typical of that
awarded in other class actions and TCPA settlements,” that class counsel “obtained
a substantial benefit for the class [and] assumed significant risk in taking on [the
lawsuit] on a contingency basis,” that the lawsuit “presented difficult legal
questions,” that class counsel “devoted significant time and effort” to the lawsuit, and
that “there was only one objection,” which was filed by Thut and was rejected by the
court as “not well founded.”
The district court’s analysis was thorough, its findings were amply supported,
and it did not abuse its significant discretion by electing to use the percentage-of-the-
benefit method to calculate the fee award or by determining that an award of
$2.8 million in attorney’s fees and expenses was reasonable. See Galloway, 833 F.3d
at 973 (observing that “[c]lass counsel can and invariably does propose that the court
choose a certain” fee-calculation method, but noting that “the court has discretion to
accept or reject that proposal”); Petrovic, 200 F.3d at 1157 (stating that “[i]t is well
established in this circuit that a district court may use the ‘percentage of the fund’
methodology to evaluate attorney fees in a common-fund settlement”); see also In re
U.S. Bancorp Litig., 291 F.3d 1035, 1038 (8th Cir. 2002) (concluding that district
court did not abuse its discretion by applying percentage-of-the-benefit method to
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award “36% of the guaranteed $3.5 million fund amount,” where class counsel
“obtained significant monetary relief on behalf of the class).
Likewise, the district court did not abuse its discretion by including
approximately $750,000 in fund administration costs as part of the “benefit” when
calculating the percentage-of-the-benefit fee amount. The Seventh Circuit has
indicated that district courts should scrutinize administrative costs to determine
whether they really confer a benefit on the class before including them in fee-award
calculations. See Redman v. RadioShack Corp., 768 F.3d 622, 630 (7th Cir. 2014).
The Ninth Circuit, however, leaves inclusion of administrative costs to the district
courts’ discretion, reasoning that “where the defendant pays the justifiable cost of
notice to the class[,] . . . it is reasonable (although certainly not required) to include
that cost in a putative common fund benefiting the plaintiffs for all purposes,
including the calculation of attorneys’ fees.” Staton v. Boeing Co., 327 F.3d 938, 975
(9th Cir. 2003). The Ninth Circuit’s approach is in keeping with the deference our
court affords district courts in awarding attorney’s fees. Since Thut makes no
showing that the administrative costs were unjustifiable, the district court did not
abuse its discretion by including them as part of the benefit.
Nor did the district court abuse its discretion by allowing class counsel
themselves to determine how to allocate the total $2.8 million attorney’s fee award
without further judicial oversight or approval.3 Thut argues that the court was
required to monitor the allocation of the award, and she cites the Fifth Circuit’s
decision in In re High Sulfur Content Gasoline Products Litigation, 517 F.3d 220, 227
(5th Cir. 2008), in support of her argument. Even if High Sulfur were controlling in
this Circuit, it is distinguishable, for that case involved a dispute among class counsel
3
In her opening brief, Thut argued that we should apply a de novo standard of
review to assess this claim of error, but she has conceded in her reply brief that an
abuse-of-discretion standard of review applies.
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over how to allocate a fee award. The Fifth Circuit noted a “district court’s duty to
scrutinize the allocation of a fee award when an attorney objects to his co-counsels’
fee recommendations,” and it remanded with instructions for the district court to
develop the record and determine the adequacy of the proposed allocation of the fee
award among class counsel. Id. at 233-35 (“It is one thing for all attorneys to come
to an agreement about dividing up fees, and quite another for five attorneys to declare
how an award will cover themselves and seventy-four other attorneys with no
meaningful judicial supervision or review.”). Here, by contrast, there is no dispute
among class counsel over how to allocate the award of attorney’s fees and expenses,
and the district court did not abuse its discretion by leaving the matter to class counsel
to resolve among themselves.
The judgment is affirmed.
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