Nicklos Ciolino v. Theodore Frank

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: HP INKJET PRINTER No. 11-16097
LITIGATION,
D.C. No.
5:05-cv-03580-
NICKLOS CIOLINO, individually and JF
on behalf of all those similarly
situated; DANIEL FEDER,
Plaintiffs-Appellees, OPINION
v.
THEODORE H. FRANK; KIMBERLY
SCHRATWIESER,
Objectors-Appellants,
v.
HEWLETT-PACKARD COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Jeremy D. Fogel, District Judge, Presiding
Argued and Submitted
November 5, 2012—San Francisco, California
Filed May 15, 2013
2 IN RE: HP INKJET PRINTER LITIGATION
Before: Ronald M. Gould, Marsha S. Berzon,
and Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Milan D. Smith, Jr.;
Dissent by Judge Berzon
SUMMARY*
Class Action Fairness Act / Attorneys’ Fees
The panel reversed the district court’s orders granting
final approval to a class action settlement between Hewlett-
Packard Company and a nationwide class of consumers who
purchased certain HP inkjet printers, and awarding attorneys’
fees.
The panel held that the attorneys’ fee award to class
counsel violated the Class Action Fairness Act (“CAFA”),
and specifically 28 U.S.C. § 1712(a)-(c), which governs the
calculation of attorneys’ fees in class action cases containing
a coupon component. The panel held that when a settlement
provides for coupon relief, either in whole or in part, any
attorneys’ fee that is “attributable to the award of coupons”
must be calculated using the redemption value of the
coupons. The panel reversed and remanded, because the
district court awarded fees that were “attributable to” the
coupon relief, but failed to first calculate the redemption
value of those coupons.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE: HP INKJET PRINTER LITIGATION 3
Judge Berzon dissented, and would hold that there was no
violation of § 1712 of CAFA, where the district court did not
award a contingency fee calculated as a percentage of the
purported value of the total class recovery, but instead chose
to award a lodestar fee, calculated on the basis of hours
worked and rates charged, carefully limited by a fair estimate
of the amount of the benefit received by the class. Judge
Berzon would affirm the district court because the fee award
was consistent with CAFA.
COUNSEL
Theodore H. Frank (argued), Center for Class Action Fairness
LLC, Washington, D.C., for Objectors-Appellants.
Niall P. McCarthy (argued), Justin T. Berger and Eric J.
Beuscher, Cotchett, Pitre & McCarthy, LLP, Burlingame,
California; Steven N. Berk, Berk Law PLLC, Washington,
D.C., for Plaintiffs-Appellees.
Peter Sullivan, Samuel G. Liversidge (argued), and
Christopher Chorba, Gibson, Dunn & Crutcher LLP, Los
Angeles, California, for Defendant-Appellee.
OPINION
M. SMITH, Circuit Judge:
Objectors Kimberly Schratwieser and Theodore Frank
(Objectors) appeal the district court’s orders granting final
approval to a class action settlement between Hewlett-
Packard Company (HP) and a nationwide class of consumers
4 IN RE: HP INKJET PRINTER LITIGATION
who purchased certain HP inkjet printers between September
6, 2001 and September 1, 2010. The district court approved
a settlement that provides both coupon and injunctive relief
to the class members. The district court also approved an
award of attorneys’ fees in the amount of $1,500,000 and
costs in the amount of $596,990.70.
Objectors argue that the settlement is neither fair,
reasonable, nor adequate, as required by Federal Rule of Civil
Procedure 23(e)(2) and Section 3 of the Class Action Fairness
Act (CAFA), codified at § 28 U.S.C. 1712(e). Objectors
contend that the settlement is the product of tacit collusion
between class counsel and HP. Objectors also challenge the
fee award, arguing it too violates CAFA, and specifically
§ 1712(a)–(c), which govern the calculation of attorneys’ fees
in class action cases containing a coupon component.
Because we agree that the fees award violates CAFA, we do
not address any of Objectors’ other contentions. See Hanlon
v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)
(holding that a class action settlement “must stand or fall in
its entirety”); see also In re Bluetooth Headset Prods. Liab.
Litig., 654 F.3d 935, 945–46 (9th Cir. 2011) (noting that
vacatur of a fees award necessitates invalidation of a
settlement approval order where the parties “expressly
negotiated” a potentially unreasonable amount of fees).
When a settlement provides for coupon relief, either in whole
or in part, any attorney’s fee “that is attributable to the award
of coupons” must be calculated using the redemption value of
the coupons. § 1712(a). Since the district court awarded fees
that were “attributable to” the coupon relief, but failed to first
calculate the redemption value of those coupons, we reverse
the orders of the district court and remand for further
proceedings consistent with this opinion.
IN RE: HP INKJET PRINTER LITIGATION 5
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs filed three putative class actions in the Northern
District of California alleging that HP engaged in unfair
business practices relating to its inkjet printers’ use of ink
cartridges.1 Each of the three actions was aggressively
litigated, and attorneys for both sides engaged in extensive
motions practice and discovery. Ultimately, however,
plaintiffs suffered numerous setbacks including dismissal of
several claims on the pleadings, denial of nationwide class
certification in one of the actions, and a determination by the
district judge presiding over all of the lawsuits that the
plaintiffs’ evidence of injury and causation was “weak.”
In August 2010, more than five years after the first action
was filed, the parties agreed to a global settlement. In
exchange for the plaintiffs’ release of all claims against it, HP
agreed to: (1) provide eligible class members with up to $5
million in “e-credits” redeemable for printers and printer
supplies on HP’s website; (2) make additional disclosures on
its website, in its user manuals, or in its software interfaces to
explain its business practices to future purchasers of HP
printers and ink; (3) pay up to $950,000 for class notice and
settlement administration costs; and (4) pay up to $2,900,000
1
The first action, Ciolino, was filed on June 16, 2005, and alleged that
HP misled consumers into believing that replacement of an ink cartridge
was necessary when the cartridge was not empty, and was capable of
additional printing. The Rich action was filed on May 22, 2006, and
alleged that HP failed to disclose that its color printers use color ink to
print black and white text and images, a process known in the printing
industry as “underprinting.” The Blennis action was filed on January 17,
2007, and alleged that HP concealed that certain of its ink cartridges
contained an “expiration date,” after which time the cartridges would no
longer work regardless of how much ink remained in the cartridge.
6 IN RE: HP INKJET PRINTER LITIGATION
in attorneys’ fees and expenses. The “e-credits”—a
euphemism for coupons—expire six months after issuance,
are non-transferable, and cannot be used with other discounts
or coupons.2 By the express terms of the settlement, no
coupons may issue until after all appeals are resolved.
On October 1, 2010, the district court consolidated the
three putative class actions for settlement, granted
preliminary settlement approval, provisionally certified a
nationwide settlement class, and directed that the parties
provide notice of the settlement. In compliance with the
court’s order, the parties provided notice via email,
publication, and online advertisements, reaching
approximately 74 percent of potential class members. Of the
millions of class members who received notice, three filed
formal objections, 458 submitted informal comments, 810
opted out of the settlement, and 122,000 filed claims.
On January 28, 2011, the district court held a fairness
hearing at which Objectors appeared. During the hearing, the
district judge noted that the underlying actions had been
litigated heavily and that there were several motions “where
the Court had an opportunity to evaluate the strength of the
claims.” Based on its previous evaluation, the court
concluded that “[t]he claims are not particularly strong” and
weighed in favor of settlement.
2
The face value of the coupons varies depending on class membership.
Under the settlement approved by the district court, the Ciolino class
members are to receive $5 coupons for each affected HP printer they own,
Rich class members are to receive $2 coupons, and Blennis class members
are to receive $6 coupons.
IN RE: HP INKJET PRINTER LITIGATION 7
On March 29, 2011, the district court granted final
settlement approval and certified a nationwide settlement
class. The court determined that the settlement was fair,
reasonable, and adequate because: (1) “the settlement was
arrived at as a result of arms-length, non-collusive
negotiations”; (2) due to the complexity, expenses, and
duration of the litigation, class members would receive
“meaningful benefits on a much shorter time frame than
otherwise possible”; (3) class counsel supported the
settlement; (4) there was “no reason to believe that the
posture of any of the cases would improve through further
litigation”; and (5) the number of class members
disapproving of the settlement is “miniscule by any measure.”
The court also issued a separate ruling on class counsels’
request for fees and expenses. Although the plaintiffs
submitted bills for over $7 million in fees and expenses, class
counsel requested only the portion of its lodestar HP agreed
to pay—$2.3 million in fees and roughly $600,000 in costs.
Citing its independent duty to determine the reasonableness
of any fees award, the court meaningfully reduced the
proposed award. The court held that the lodestar method was
applicable under section 1712(b)(1) of CAFA and that the
“key consideration” in determining the appropriate fees is
reasonableness in light of the results actually achieved.
Analyzing those results, the court acknowledged that while
the e-credits were worth significantly less than their face
value, the injunctive relief would confer some benefit on class
members, although nothing close to the $16–41 million
estimated by plaintiffs.3 The court estimated the “ultimate
3
We agree with our dissenting colleague that the district court could
reasonably assume that “injunctive relief would be of benefit to some
number of class members, because the groups of present and future
8 IN RE: HP INKJET PRINTER LITIGATION
value” of the settlement to the class at roughly $1.5 million.
Recognizing that it would be improper to award fees that
outstrip the calculated class benefit, the court ordered HP to
pay a reduced lodestar amount of $1.5 million and
$596,990.70 in costs. Objectors timely appealed both the
Approval and Fees Orders.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under 28 U.S.C. § 1291. We review
a district court’s award of fees and costs to class counsel, and
its method of calculation, for abuse of discretion. In re
Bluetooth, 654 F.3d at 940 (citing Lobatz v. U.S. W. Cellular
of Cal., Inc., 222 F.3d 1142, 1148–49 (9th Cir. 2000)).
DISCUSSION
Congress passed CAFA “primarily to curb perceived
abuses of the class action device.” Tanoh v. Dow Chem. Co.,
561 F.3d 945, 952 (9th Cir. 2009). One such perceived abuse
is the coupon settlement, where defendants pay aggrieved
class members in coupons or vouchers but pay class counsel
in cash. See generally Sarah S. Vance, A Primer on the Class
Action Fairness Act of 2005, 80 Tul. L. Rev. 1617, 1632–33
(2006); Geoffrey P. Miller & Lori S. Singer, Nonpecuniary
Class Action Settlements, 60 Law & Contemp. Probs. 97, 102,
107–12 (1997). Congress was rightfully concerned with such
consumers of HP printer products overlap.” Dissent at 32–33 n.4; see also
Kwikset Corp. v. Superior Court, 246 P.3d 877, 895 (Cal. 2011) (re-
affirming that injunctions “are the primary form of relief available under
[California’s unfair competition laws] to protect consumers from unfair
business practices,” while monetary awards are a “type of ancillary
relief”).
IN RE: HP INKJET PRINTER LITIGATION 9
settlements: by decoupling the interests of the class and its
counsel, coupon settlements may incentivize lawyers to
“negotiate settlements under which class members receive
nothing but essentially valueless coupons, while the class
counsel receive substantial attorney’s fees.”4 S. Rep. 109-14,
at 29–30 (2005); see also Christopher R. Leslie, A Market-
Based Approach to Coupon Settlements in Antitrust and
Consumer Class Action Litigation, 49 UCLA L. Rev. 991,
991 (2002) (“Because class counsel are paid in cash, the
attorneys have insufficient interest in ensuring that the
settlement coupons confer value on the class.”).
Section 1712 codifies Congress’s effort to regulate
coupon settlements. That regulation takes two forms. The
first invites increased judicial scrutiny of coupon settlements
generally. § 1712(e); see also Synfuel Techs., Inc. v. DHL
Express (USA), Inc., 463 F.3d 646, 653–54 (7th Cir. 2006);
True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052, 1069
(C.D. Cal. 2010); S. Rep. No. 109-14, at 27 (stating that
CAFA “requires greater scrutiny of coupon settlements”).
The second involves a series of specific rules that govern the
award of attorneys’ fees in coupon class actions.
4
Although we recognize that coupon settlements are generally
disfavored, we do not mean to cast aspersions on all coupon settlements.
The legislative history of CAFA makes clear that Congress did “not intend
to forbid all non-cash settlements.” S. Rep. No 109-14, at 31. Indeed,
coupon or other in-kind settlements may be particularly appropriate in
situations “where they provide real benefits to consumer class members.”
Id. For instance, coupon settlements may be appropriate where a
defendant is in financial distress or where class members have repeat-
business relationships with the defendant. See Lisa M. Mezzetti &
Whitney R. Case, The Coupon Can Be the Ticket: The Use of “Coupon”
and Other Non-Monetary Redress in Class Action Settlements, 18 Geo. J.
Legal Ethics 1431, 1433–34 (2005).
10 IN RE: HP INKJET PRINTER LITIGATION
§ 1712(a)–(d); see also Vance, supra, at 1632–33. Our sole
task on this appeal is to interpret and apply the attorneys’ fees
provisions of § 1712.
I.
Class counsel are duty bound to represent the best
interests of class members. Staton v. Boeing Co., 327 F.3d
938, 960 (9th Cir. 2003). Still, because the interests of class
members and class counsel nearly always diverge, courts
must remain alert to the possibility that some class counsel
may “urge a class settlement at a low figure or on a less-than-
optimal basis in exchange for red-carpet treatment on fees.”5
Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 524
(1st Cir. 1991).
Typically, courts try to ensure faithful representation by
tying together the interests of class members and class
counsel. That is, courts aim to tether the value of an
attorneys’ fees award to the value of the class recovery. See,
e.g., Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)
(explaining that “the most critical factor [in determining an
appropriate attorneys’ fee] is the degree of success
obtained”); McCown v. City of Fontana, 565 F.3d 1097,
1103–05 (9th Cir. 2008). Where both the class and its
attorneys are paid in cash, this task is fairly effortless. The
district court can assess the relative value of the attorneys’
fees and the class relief simply by comparing the amount of
5
See generally Leslie, supra, at 1042–52 (describing how agency
costs—which “exist when a principal hires an agent to perform a task but
the agent’s remuneration is not directly tied to the principal’s gain such
that the agent may increase her payoff by being faithless”—create a risk
of collusion between defendants and class counsel).
IN RE: HP INKJET PRINTER LITIGATION 11
cash paid to the attorneys with the amount of cash paid to the
class. The more valuable the class recovery, the greater the
fees award. Hensley, 461 U.S. at 436. And vice versa.
But where class counsel is paid in cash, and the class is
paid in some other way, for example, with coupons,
comparing the value of the fees with the value of the recovery
is substantially more difficult. Unlike a cash settlement,
coupon settlements involve variables that make their value
difficult to appraise, such as redemption rates and restrictions.
See Miller & Singer, supra, at 111. For instance, a coupon
settlement is likely to provide less value to class members if,
like here, the coupons are non-transferable, expire soon after
their issuance, and cannot be aggregated.6 See Leslie, supra,
at 1014–27; see also James Tharin & Brian Blockovich,
6
Objectors presented evidence that the prices charged at HP.com—the
only retailer that will accept the settlement coupons—are higher than those
charged by other retailers. For instance, Objectors presented evidence that
the same HP “Combo Pack Ink Cartridge” sells for $42.99 on HP.com,
while selling for $36.99 on Amazon.com. The $6 price difference is equal
to the face value of the e-credits to be awarded to Blennis class members,
and is greater than the face value of the e-credits to be awarded to the Rich
and Ciolino class members. Thus, with the possible exception of the
Blennis class members, Objectors have presented evidence that tends to
show that the redemption rate of the e-credits may be very low;
presumably Rich and Ciolino class members will prefer to allow their
coupons to expire rather than pay a higher price solely to gain the
satisfaction of using their coupons. Considered together with the
numerous other restrictions on the offered e-credits, we strongly disagree
with the dissent’s assessment that “[g]iven the effort involved in obtaining
the coupons, it was fair [for the district court] to assume that most of the
individuals who had applied for the e-credits would redeem them.”
Dissent at 32–33 n.4; see also Leslie, supra, at 1030–32 (describing how
a defendant “can render settlement coupons worthless by simply
increasing the base price of their product by the face value of the
coupon.”).
12 IN RE: HP INKJET PRINTER LITIGATION
Coupons and the Class Action Fairness Act, 18 Geo. J. Legal
Ethics 1443, 1445 (2005). Of course, consideration of these
variables necessarily increases the complexity of the district
court’s task—comparing the ultimate “value” of the coupon
relief with the value of a proposed fees award. And perhaps
more importantly, the additional complexity also provides
class counsel with the opportunity to puff the perceived value
of the settlement so as to enhance their own compensation.7
As one commentator succinctly put it, “[p]aying the class
members in coupons masks the relative payment of the class
counsel as compared to the amount of money actually
received by the class members.” Leslie, supra, at 1049.
Congress was well aware of these problems when it
passed § 1712 of CAFA. See, e.g., S. Rep. 109-14, at 16–20
(listing dozens of examples of coupon settlements “in which
most—if not all—of the monetary benefits went to the class
counsel, rather than the class members those attorneys were
supposed to be representing”). Indeed, if the legislative
history of CAFA clarifies one thing, it is this: the attorneys’
fees provisions of § 1712 are intended to put an end to the
“inequities” that arise when class counsel receive attorneys’
fees that are grossly disproportionate to the actual value of
the coupon relief obtained for the class. See id. at 29–32.
This point cannot be overemphasized, for we can only
properly interpret CAFA’s text if we keep the statute’s
purposes clearly in mind. See Dolan v. U.S. Postal Serv.,
7
We do not mean to suggest any intentional fiduciary breach by class
counsel here. But “[e]ven if the plaintiff’s attorney does not consciously
or explicitly bargain for a higher fee at the expense of the beneficiaries, it
is very likely that this situation has indirect or subliminal effects on the
negotiations.” Staton, 327 F.3d at 964 (quoting Court Awarded Attorney
Fees, Report of the Third Circuit Task Force, 108 F.R.D. 237, 266
(1985)).
IN RE: HP INKJET PRINTER LITIGATION 13
546 U.S. 481, 486 (2006) (“Interpretation of a [statutory]
word or phrase depends upon reading the whole statutory
text, considering the purpose and context of the statute, and
consulting any precedents or authorities that inform the
analysis.”). We now turn to that interpretation.
II.
Objectors argue that the attorneys’ fees award in this case
violates § 1712(a)–(c), which govern the calculation of
attorneys’ fees in coupon class action cases.8 Those sections
provide in full:
(a) Contingent fees in coupon settlements.–
If a proposed settlement in a class action
provides for a recovery of coupons to a class
member, the portion of any attorney’s fee
award to class counsel that is attributable to
the award of the coupons shall be based on the
value to class members of the coupons that are
redeemed.
(b) Other attorney’s fee awards in coupon
settlements.–
8
Section 1712(d) also relates to the calculation of attorneys’ fees in
coupon class actions. Specifically, subsection (d) provides that a district
court may “receive expert testimony from a witness qualified to provide
information on the actual value to the class members of the coupons that
are redeemed.” § 1712(d). That is, subsection (d) allows the district court
to receive expert testimony relevant to calculating the redemption value
of the coupons, as required by § 1712(a). See, Parts II.A, II.B and II.C,
infra. Because the district court here did not attempt to calculate the
redemption value of the coupons under § 1712(a), § 1712(d) plays little
role in our analysis.
14 IN RE: HP INKJET PRINTER LITIGATION
(1) In general.– If a proposed settlement
in a class action provides for a recovery of
coupons to class members, and a portion
of the recovery of the coupons is not used
to determine the attorney’s fee to be paid
to class counsel, any attorney’s fee award
shall be based upon the amount of time
class counsel reasonably expended
working on the action.
(2) Court approval.– Any attorney’s fee
under this subsection shall be subject to
approval by the court and shall include an
appropriate attorney’s fee, if any, for
obtaining equitable relief, including an
injunction, if applicable. Nothing in this
subsection shall be construed to prohibit
application of a lodestar with a multiplier
method of determining attorney’s fees.
(c) Attorney’s fee awards calculated on a
mixed basis in coupon settlements.– If a
proposed settlement in a class action provides
for an award of coupons to class members and
also provides equitable relief, including
injunctive relief–
(1) that portion of the attorney’s fee to be
paid to class counsel that is based upon a
portion of the recovery of the coupons
shall be calculated in accordance with
subsection (a); and
IN RE: HP INKJET PRINTER LITIGATION 15
(2) that portion of the attorney’s fee to be
paid to class counsel that is not based
upon a portion of the recovery of coupons
shall be calculated in accordance with
subsection (b).
§ 1712(a)–(c).
In construing the provisions of a statute, we first analyze
its language to determine whether its meaning is plain.
Satterfied v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th
Cir. 2009) (citing McDonald v. Sun Oil Co., 548 F.3d 774,
780 (9th Cir. 2008)). “The preeminent canon of statutory
interpretation requires us to presume that the legislature says
in a statute what it means and means in a statute what is says
there. Thus, our inquiry begins with the statutory text, and
ends there as well if the text is unambiguous.” Id. (internal
alteration omitted) (quoting BedRoc Ltd., LLC v. United
States, 541 U.S. 176, 183 (2004)). Where the statutory text
is ambiguous, however, we may “look to other interpretive
tools, including the legislative history” in order to determine
the statute’s best meaning. Exxon Mobil Corp. v. Allapattah
Servs., Inc., 545 U.S. 546, 567 (2005).
Both the majority of our panel and our dissenting
colleague agree that CAFA is poorly drafted. We have
previously commented on the “clumsy” and “bewildering”
wording of other provisions of CAFA. See, e.g., Abrego
Abrego v. The Dow Chem. Co., 443 F.3d 676, 681, 686 (9th
Cir. 2006) (per curiam). Unfortunately, § 1712 fares no
better. After all, CAFA “resulted from years of intense
lobbying . . . partisan wrangling, and, following two
successful filibusters, fragile compromises.” Stephen B.
Burbank, The Class Action Fairness Act of 2005 in Historical
16 IN RE: HP INKJET PRINTER LITIGATION
Context: A Preliminary View, 156 U. Pa. L. Rev. 1439, 1441
(2008). Still, when § 1712(a)–(c) are “interpreted collectively
and in context, and read together with the statute’s purpose
and legislative history,” Dissent at 38, we believe their
meaning is clear.
A.
Subsection 1712(a) states, in relevant part, that “the
portion of any attorney’s fee award to class counsel that is
attributable to the award of coupons shall be based on the
value to class members of the coupons that are redeemed.”
Congress’s use of the words “any” and “shall” indicate that
subsection (a) is not permissive. See Alabama v. Bozeman,
533 U.S. 146, 153 (2011) (“The word ‘shall’ is ordinarily ‘the
language of command.’”) (quoting Escoe v. Zerbst, 295 U.S.
490, 493 (1935)).9 If the district court awards “any”
attorney’s fees, and those attorney’s fees are “attributable to
the award of coupons,” then the fees award must be
calculated in the manner prescribed by § 1712(a) (i.e., using
the redemption value of the coupons). The crucial question,
therefore, is what it means for an attorneys’ fees award to be
“attributable to” the award of coupons.
Congress did not define the term “attributable to”
anywhere in CAFA. Where a statute does not define a key
term, we look to the word’s ordinary meaning. See Schindler
Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885,
1891 (2011) (citations omitted); see also Scalia & Garner,
9
See also Antonin Scalia & Bryan A. Garner, Reading Law:
The Interpretation of Legal Texts 112 (2012) (“The traditional,
commonly repeated rule [of statutory interpretation] is that ‘shall’ is
mandatory . . . .”).
IN RE: HP INKJET PRINTER LITIGATION 17
supra, at 69 (“The ordinary-meaning rule is the most
fundamental semantic rule of interpretation.”). Fortunately
for our purposes, the meaning of the term “attributable to” is
plain. “Attributable to” means “to explain as caused or
brought about by: regard as occurring in consequence or on
account of.” Webster’s Third New International Dictionary
(2002). Alternatively, it means “to regard as arising from a
particular cause or source; ascribe.” American Heritage
Dictionary of the English Language (5th ed. 2011). Thus,
applying the dictionary definition, an attorneys’ fees award is
“attributable to” an award of coupons where the attorneys’
fees award is a “consequence” of the award of coupons. Or,
put differently, attorneys’ fees are “attributable to” an award
of coupons where “the [singular] award of the coupons” is the
condition precedent to the award of attorneys’ fees.10
§ 1712(a) (emphasis added).
10
Congress used the term “award” twice in § 1712(a); first in the phrase
“any attorney’s fee award to class counsel” and again in the phrase “the
award of the coupons.” The dissent claims that the word “award” as used
in § 1712(a) necessarily refers to the “monetary value” of the fees and
coupons. Dissent at 42–43. But this interpretation ignores the plain
meaning of the statutory language. An “award” is “something that is
conferred or bestowed upon a person.” Webster’s Third New
International Dictionary (2002); see also American Heritage Dictionary
of the English Language (4th ed. 2000) (defining an “award” as
“[s]omething awarded or granted, as for merit”). Hence, the equivalent of
the phrase “the award of coupons” is “the grant of coupons” or the
“conferral” of coupons. Similarly, the equivalent of the phrase “the
portion of any attorney’s fee award to class counsel” is “the portion of any
attorney’s fee granted to class counsel.” Taken together, the plain
language of § 1712(a) commands that “the portion of any attorney’s fee
granted to class counsel that is attributable to the grant of the coupons
shall be based on the value to class members of the coupons that are
redeemed.”
18 IN RE: HP INKJET PRINTER LITIGATION
Were this conclusion in any doubt, a simple hypothetical
confirms the majority’s understanding of § 1712(a). Consider
a settlement that only provides for coupon relief. In such a
case, the portion of any attorneys’ fees award that is
attributable to the award of the coupons must be one hundred
percent. Because the settlement contains only coupons, the
fees award cannot be “attributable to” anything but the
coupons.
Of course, one might argue that the fees award in this
hypothetical case is “attributable to” the work of class
counsel on the action, rather than the coupons. But one
would be mistaken. Attorney’s fees are never “attributable
to” an attorney’s work on the action. They are “attributable
to” the relief obtained for the class. See Class Plaintiffs v.
Jaffe & Schlesinger, P.A., 19 F.3d 1306, 1308 (9th Cir. 1994).
An attorney who works incredibly hard, but obtains nothing
for the class, is not entitled to fees calculated by any method.
For although class counsel’s hard work on an action is
presumably a necessary condition to obtaining attorney’s
fees, it is never a sufficient condition. Plaintiffs attorneys
don’t get paid simply for working; they get paid for obtaining
results. Because it is the class relief that is both a necessary
and a sufficient condition to an award of attorney’s fees, it
follows that an attorney’s fees award can only be “attributable
to,” or the consequence of, the class relief, not the attorney’s
hard work. Hence, returning to the language of § 1712(a),
where the “portion” of the attorneys’ fees that are
“attributable to the award of the coupons” is necessarily one
hundred percent—as in a case where the settlement provides
only coupon relief—“any attorney’s fee award to class
counsel . . . shall be based on the value to class members of
the coupons that are redeemed.” § 1712(a); see also S. Rep.
109-14, at 30 (“[I]n class action settlements in which it is
IN RE: HP INKJET PRINTER LITIGATION 19
proposed that an attorney fee award be based solely on the
purported value of the coupons awarded to class members,
the fee award should be based on the demonstrated value of
coupons actually redeemed by the class members.”).
Our dissenting colleague disagrees and argues that “[i]n
some cases, no portion of the attorney’s fees will be
‘attributable to’ the coupon award in the sense of calculated
as a percentage of the coupon value, and therefore § 1712(a)
will not apply.” Dissent at 43 (emphasis added). Put simply,
the dissent is premised on the argument that Congress
understood the term “attributable to” in § 1712(a) to mean
“calculated as a percentage of” and the term “award” to be
synonymous with “value.” But the dissent points to no
dictionary, case, or any other source that supports that view.
Not one. Nor does the dissent provide any principled reason
for ignoring the plain and ordinary meaning of the statutory
text.11 And if we accept, as we must, that Congress meant to
give the terms “attributable to” and “award” their ordinary
(dictionary) definitions, the dissent’s analysis is rendered
untenable. For instance, as discussed above, in a case where
the class receives only coupon relief, it simply cannot be true
that “no portion of the attorney’s fees will be ‘attributable to’
the coupon award.” Dissent at 43. We decline to join the
dissent’s attempt to render § 1712(a) a nullity. See Duncan
v. Walker, 533 U.S. 167, 174 (2001) (explaining that courts
11
The dissent relies on the headings of the various subsections of § 1712
in order to create artificial uncertainty about the otherwise plain language
of § 1712(a). But “the Supreme Court has cautioned that ‘the title of a
statute and the heading of a section cannot limit the plain meaning of the
text.’” Northstar Financial Advisors, Inc. v. Schwab Investments, 615 F.3d
1106, 1120 (9th Cir. 2010) (quoting Bhd. of R.R. Trainmen v. Baltimore
& O.R. Co., 331 U.S. 519, 528–29 (1947)); see also Intel Corp. v.
Advanced Micro Devices, Inc., 542 U.S. 241, 256 (2004).
20 IN RE: HP INKJET PRINTER LITIGATION
are “reluctant to treat statutory terms as surplusage in any
setting” particularly where the terms occupy a “pivotal place
in the statutory scheme”) (internal alterations and citations
omitted); see also Robert H. Klonoff & Mark Herrmann, The
Class Action Fairness Act: An Ill-Conceived Approach to
Class Settlements, 80 Tul. L. Rev. 1695, 1699 (2006)
(observing that § 1712(a) is “[t]he principal provision”
Congress passed to address abusive coupon settlements).
B.
Whereas § 1712(a) governs cases where the class obtains
only coupon relief, § 1712(b) applies in situations where a
coupon settlement also provides for non-coupon relief, such
as equitable or injunctive relief. Specifically, subsection (b)
requires that if “a portion of the recovery of the coupons is
not used to determine the attorney’s fee to be paid to class
counsel, any attorney’s fee shall be based upon the amount of
time class counsel reasonably expended working on the
action.” § 1712(b)(1) (emphasis added). Like § 1712(a), the
language of § 1712(b) is not permissive—if class counsel
wants to be paid “any” fees, and the “recovery of the coupons
is not used to determine” those fees, the entirety of the
payment “shall be” calculated “based upon the amount of
time class counsel reasonably expended working on the
action,” i.e., using the lodestar method. Section 1712(b)(2)
further confirms that a court may, in its discretion, apply an
appropriate multiplier to any lodestar amount it awards under
subsection (b)(1) for obtaining non-coupon relief.12
12
The dissent argues that the “use of the word ‘include,’ and the phrases
‘if any’ and ‘if applicable,’” in § 1712(b)(2) make clear that the “lodestar
fee provided for in subsection (b)(1) is not limited to equitable relief.”
Dissent at 47. Not so. The better reading of subsection (b)(2) is that only
IN RE: HP INKJET PRINTER LITIGATION 21
Despite the statutory language indicating that § 1712(b)
only applies where “the recovery of the coupons is not used
to determine the attorney’s fee to be paid to class counsel,”
the dissent argues that a district court can award lodestar fees
under § 1712(b) to compensate class counsel for obtaining
either coupon relief or non-coupon relief.13 To reach that
conclusion, however, our dissenting colleague must entirely
ignore the language of § 1712(a). As we have already
explained, the unambiguous command of § 1712(a) requires
that “any attorney’s fee” awarded for obtaining coupon relief
be calculated using the redemption value of the coupons. The
dissent’s interpretation of § 1712(b) would read § 1712(a)
“appropriate” lodestar fees should be awarded under § 1712(b)(1). Just
because the class obtains equitable or injunctive relief does not mean
attorneys’ fees are necessarily appropriate. The phrases “if any” and “if
applicable” confirm that a district court may refuse to award any lodestar
fees for obtaining equitable or injunctive relief if such fees would not
otherwise be warranted. For instance, a district judge might refuse to
award any lodestar fees where the value of the equitable or injunctive
relief obtained for the class is de minimis.
13
The dissent cites to a smattering of district court cases that hold that
subsection (b) “allows the calculation of fees in a coupon settlement on
the basis of [the] hours class counsel worked.” Dissent at 48 n. 11. Of
course, that is hardly controversial, as we now hold the same. Our
dissenting colleague does not cite any cases, however, that hold what she
otherwise would—that the lodestar method may be used to award fees in
exchange for class counsel obtaining exclusively coupon relief. We
further note that a number of academics who have considered the issue
have rejected the dissent’s interpretation. See, e.g., Vance, supra, at
1632–33 (noting that “any portion of the attorneys’ fee that is based on the
coupon award must be based on the value of the coupons redeemed”);
Klonoff & Herrmann, supra, at 1703–04 (observing that CAFA “makes
clear that the coupon-related fee award in settlements that include both
coupon and noncoupon components will be calculated based on the
coupons that are redeemed. The portion of fees based on the equitable
relief portion of the settlement must be based on lodestar principles.”).
22 IN RE: HP INKJET PRINTER LITIGATION
completely out of the statute. “Under accepted canons of
statutory interpretation, we must . . . mak[e] every effort not
to interpret a provision in a manner that renders other
provisions of the same statute inconsistent, meaningless or
superfluous.” Boise Cascade Corp. v. United States EPA,
942 F.2d 1427, 1432 (9th Cir. 1991); see also Scalia &
Garner, supra, at 180 (“[I]t is invariably true that intelligent
drafters do not contradict themselves . . . .”).
The dissent’s interpretation of § 1712(b) is also belied by
that subsection’s legislative history. For instance, the Senate
Report from the Committee on the Judiciary states that
“Section 1712(b) confirms the appropriateness of determining
attorney’s fees on [a lodestar] basis in connection with a
settlement based in part on coupon relief.” S. Rep. 109-14,
at 30 (emphasis added). The Committee Report does not say
that § 1712(b) “confirms the appropriateness” of awarding
lodestar fees in cases based “solely” on coupon relief. As
already noted, if the Committee Report did say that, it would
nullify the command of § 1712(a). Rather, the legislative
history of § 1712(b) confirms the majority’s understanding of
§ 1712(b)—a district court may award lodestar fees under
subsection (b)(1) but only where the settlement is based “in
part” on coupon relief. Id.
C.
To the extent that § 1712(a) and (b) leave any ambiguity
regarding the meaning of CAFA’s attorneys’ fees provisions,
§ 1712(c) eliminates that doubt. Section 1712(c) begins by
defining its scope: subsection (c) applies whenever a
IN RE: HP INKJET PRINTER LITIGATION 23
settlement provides both coupon and equitable relief.14 In
such “mixed” settlements, § 1712(c) serves to ensure that
class counsel get paid for all of the benefits they secure for
the class. Specifically, the statutory language in § 1712(c),
which in part incorporates the standard of § 1712(a),
establishes this general rule: If a settlement gives coupon and
equitable relief and the district court sets attorneys’ fees
based on the value of the entire settlement, and not solely on
the basis of injunctive relief, then the district court must use
the value of the coupons redeemed when determining the
value of the coupons part of the settlement.
The practical effect of § 1712(c) is that the district court
must perform two separate calculations to fully compensate
class counsel. First, under subsection (a), the court must
determine a reasonable contingency fee based on the actual
redemption value of the coupons awarded.15 Second, under
subsection (b), the court must determine a reasonable lodestar
amount to compensate class counsel for any non-coupon
relief obtained.16 This lodestar amount can be further
adjusted upwards or downwards using an appropriate
multiplier. § 1712(b)(2). In the end, the total amount of fees
14
Specifically, the first phrase of § 1712(c) reads: “If a proposed
settlement in a class action provides for an award of coupons to class
members and also provides for equitable relief, including injunctive
relief—.”
15
Section 1712(c)(1) states: “that portion of the attorney’s fee to be paid
to class counsel that is based upon a portion of the recovery of the
coupons shall be calculated in accordance with subsection [1712](a)[.]”
16
Section 1712(c)(2) provides: “that portion of the attorney’s fee to be
paid to class counsel that is not based upon a portion of the recovery of the
coupons shall be calculated in accordance with subsection [1712](b).”
24 IN RE: HP INKJET PRINTER LITIGATION
awarded under subsection (c) will be the sum of the amounts
calculated under subsections (a) and (b).
Although we believe the language of § 1712(c) is clear,
we note that the legislative history confirms our
understanding of § 1712(c). Describing that section, the
legislative history states:
In some class action settlements, the terms
may be a combination of coupon relief, plus
some form of equitable relief, including an
injunction. In such circumstances, the
settlement may also include fees for obtaining
the equitable relief. Thus, if a proposed
settlement provides for both coupons and
equitable relief, then the portion of the award
that is a contingent fee based on the value of
the coupons must be calculated based on the
value of the redeemed coupons, and the
portion not based on the value of the coupons
should be based on the time spent by class
counsel on the case.
S. Rep. 109-14, at 31(emphasis added). The above-quoted
passage makes clear that CAFA only permits district courts
to award lodestar fees when those fees are “not based on the
value of the coupons.” Id. That is, § 1712(c) confirms that
lodestar fees may only be awarded in exchange for obtaining
non-coupon relief. Indeed, it can be no other way. If a
settlement contains only equitable relief, then it is not a
coupon settlement and § 1712 simply does not apply. If a
settlement contains only coupon relief, however, § 1712(a)
must apply, because the attorneys’ fees awarded in such a
case must necessarily be “based on the value of the coupons.”
IN RE: HP INKJET PRINTER LITIGATION 25
Id; see supra Part II.A. Section 1712(b), therefore, can only
come into play when a settlement contains both coupon relief
and equitable relief—precisely the situation described in
§ 1712(c).
The dissent attempts to explain away the meaning of
§ 1712(c), but is once again tripped up by the language of
§ 1712(a). For instance, our dissenting colleague argues that
“[n]othing in the text of either subparagraph [of § 1712(c)]
excludes the possibility that, in cases involving both coupon
and equitable relief, no portion of the fee award is to be paid
in the manner addressed by that paragraph.” Dissent at 49.
Our colleague is mistaken. Section 1712(c) directs the
district court to calculate fees in mixed settlements “in
accordance with” subsections (a) and (b). And the language
of § 1712(a) does “exclude the possibility” that lodestar fees
may be awarded in exchange for coupon relief. By
incorporating the standard of § 1712(a) into its own, then,
§ 1712(c) dictates that lodestar fees may only be awarded
where class counsel obtains non-coupon relief.
Finally, we note that in addition to its other flaws, the
dissent’s interpretation of § 1712 runs counter to one of the
main purposes of CAFA: discouraging coupon settlements—
particularly those where presumably valuable (but actually
worthless) coupons form some part of the basis for an
attorneys’ fees award. See supra Part I. By tying attorney
compensation to the actual value of the coupon relief,
Congress aimed to prevent class counsel from walking away
from a case with a windfall, while class members walk away
with nothing. See S. Rep. 109-14, at 30 (“[T]he fee award
should be based on the demonstrated value of coupons
actually redeemed by the class members. Thus, if a
settlement agreement promises the issuance of $5 million in
26 IN RE: HP INKJET PRINTER LITIGATION
coupons to the putative class members, but only 1/5 of
potential class members actually redeem the coupons at issue,
then the lawyer’s contingency fee should be based on a
recovery of $1 million—not a recovery of $5 million.”). The
dissent, however, would apparently allow district courts to
award attorneys’ fees based entirely on the perceived value of
the coupons. Indeed, our dissenting colleague argues that we
should permit district courts to award lodestar fees in
exchange for coupon relief without ever requiring the district
court to consider the actual value of the class relief, as
measured by the coupons’ redemption value.17 Thus, in spite
of Congress’s clear intention to tie class counsels’
compensation to that of the class, the dissent asks us to
tolerate the precise abuse § 1712 set about to eliminate.18 We
decline to do so.
17
If § 1712(a) means anything, it means that Congress has determined
that the best way to appraise the size of the benefit class members receive
from a coupon settlement is to calculate the redemption value of the
coupons.
18
It is worth noting that the dissent’s proposed approach would violate
not only CAFA, but the Supreme Court’s established attorneys’ fees
jurisprudence as well. Even under the lodestar method, the district court
must adjust the amount of any fees award “to account for the degree of
success class counsel attained.” In re Bluetooth, 654 F.3d at 944; see also
Hensley, 461 U.S. at 436. But a court cannot judge counsels’ success
without first calculating the value of the class relief. And in a coupon
class action, the court cannot value the class relief without knowing the
redemption value of the coupons. Thus under Hensley and its progeny,
any lodestar cross-check should be performed in reference to the
redemption value of the coupons—something our dissenting colleague
apparently would not require. It is the dissent’s approach, not the
majority’s, that “ignores the safeguards that exist independent of CAFA
to prevent” class action abuse. Dissent at 51.
IN RE: HP INKJET PRINTER LITIGATION 27
III.
We now return to the Objectors’ contention that the
district court erred when it awarded $1.5 million in attorneys’
fees using solely the lodestar method, without first calculating
the redemption value of the coupons. We agree with
Objectors that the district court erred. The district court
awarded lodestar fees based on its supposition that the
“ultimate value” of this settlement is $1.5 million. This $1.5
million figure included the court’s valuation of both the
injunctive and coupon relief. But § 1712(a) and (c) required
the district court to calculate the redemption value of the
coupons before awarding any attorneys’ fees that were
“attributable to” the coupon relief. See supra Part II. Hence,
the district court abused its discretion where it made a rough
estimate of the ultimate value of this settlement, and then
awarded fees in exchange for obtaining coupon relief without
considering the redemption value of the coupons.
We note, however, that the responsibility for this error
lies principally with the parties. Because the settlement
agreement specifies that no coupons may issue until after
entry of a final judgment, it would have been impossible for
the district court to calculate the redemption value of the
coupons as required by § 1712(a). By structuring the
settlement in this way, the parties essentially invited the error
here. Of course, had the settlement been structured so that
the redemption value of the coupons was ascertainable before
final settlement approval, plaintiffs’ attorneys would have
been entitled to seek compensation for both the coupon and
28 IN RE: HP INKJET PRINTER LITIGATION
the injunctive relief obtained for the class.19 See § 1712(c).
Because the parties did not do so, however, we are required
to reverse.
CONCLUSION
Under § 1712 of CAFA, a district court may not award
attorneys’ fees to class counsel that are “attributable to” an
award of coupons without first considering the redemption
value of the coupons. A district court may, however, award
lodestar fees to compensate class counsel for any non-coupon
relief they obtain, such as injunctive relief. Because the
19
For example, a fees award can be bifurcated or staggered to take into
account the speculative nature of at least a portion of a class recovery.
See, e.g., In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions,
148 F.3d 283, 334 (3d Cir. 1998) (“The district court’s plan [to bifurcate
the fees award was a sound exercise of its discretion that] was designed
to overcome the speculative nature of the tentative and imprecise
settlement valuations. It took into account the settlement’s more definite
terms by providing an immediate payment based on a percentage of the
guaranteed minimum recovery of $410 million, while requiring future
payments to be based on actual results in recognition that the ultimate
class recovery is not quantifiable at this point.”); In re AT&T Corp.,
455 F.3d 160, 175 (3d Cir. 2006) (recognizing that a bifurcated fees
structure “obviate[d] the need to guesstimate the value of the
settlement.”); see also Foster v. Bd. of Sch. Comm’rs, 810 F.2d 1021,
1024 (11th Cir. 1987) (noting district court’s decision to award attorney’s
fees to prevailing parties after each stage of a bifurcated trial). We leave
open the question how best to award attorneys’ fees under § 1712. See
Klonoff & Herrmann, supra, at 1701–02 (discussing procedures district
courts might employ to award attorneys’ fees based on the redemption
value of coupon relief).
IN RE: HP INKJET PRINTER LITIGATION 29
attorneys’ fees award in this case violates § 1712, we reverse
and remand to the district court for further proceedings
consistent with this opinion.
REVERSED, VACATED AND REMANDED.
BERZON, Circuit Judge, dissenting:
I respectfully dissent. I decidedly disagree with the
majority’s analysis of the fee award’s compliance with
28 U.S.C. § 1712,1 the coupon settlement provision of the
Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No.
109-2, 119 Stat. 4 (codified in scattered sections of
28 U.S.C.).
The majority interprets CAFA as requiring that any
attorney’s fees awarded for work done toward a coupon
settlement be calculated as a percentage of the value of
coupons redeemed. That interpretation of § 1712 would
allow lodestar fees for work resulting in injunctive relief, but
not for work resulting in coupons. As to the latter, the
majority insists that the district court must award fees as a
percentage of the coupons actually redeemed, rather than
calculating fees on the basis of hourly rates for time
reasonably expended, under a lodestar approach. See Lane v.
Facebook, Inc., 696 F.3d 811, 818 (9th Cir. 2012). That is
not what the statute says.
1
All further references to § 1712 are to 28 U.S.C. § 1712.
30 IN RE: HP INKJET PRINTER LITIGATION
On my reading of the statute, CAFA allows the use of a
lodestar to calculate attorney’s fees on the basis of hours
reasonably expended on the class action as a whole, rather
than as a percentage of the value of the class recovery. That
permission applies whether the relief obtained for the class
involves, in whole or in part, coupons, or whether it does not.
The limit CAFA imposes with regard to cases in which there
is a coupon recovery is a limit on the district court’s method
of calculating percentage-of-recovery fees, should it choose
that approach. So viewed, § 1712(a) regulates how a
percentage-of-recovery fee should be calculated, if that
method is used to award attorney’s fees for a coupon
settlement; it does not dictate whether a percentage- of-
recovery method must be used. Subsections 1712(b) and (c),
in turn, provide that a lodestar method may be used either as
an alternative to, or in combination with, a percentage-of-
recovery calculation.
I
To begin, it is helpful to review the process the district
court used to determine the fee award in this case, as that
account helps to illuminate the impracticalities of the
majority’s CAFA interpretation. The starting point for the
court’s analysis was the plaintiffs’ asserted lodestar figure of
$7,109,247.09, representing more than 17,000 hours of time
“spent on litigation.” Of that total, the plaintiffs requested
thirty-two percent, or $2.3 million plus $600,000 in costs,
recognizing that the settlement represented at best a very
partial vindication of the class claims. See Hensley v.
Eckerhart, 461 U.S. 424, 436 (1983). The plaintiffs in their
submission did not distinguish between hours worked toward
IN RE: HP INKJET PRINTER LITIGATION 31
the coupon portion of the settlement and hours worked
toward the injunctive relief.2
Nor could they have. The record indicates that the bulk
of the approximately 17,000 hours worked were spent on the
merits of the lawsuit. The relief agreed upon was determined
in the course of negotiating the settlement, but was not the
subject of the discovery disputes, motions, briefs, and
arguments that constituted the underlying litigation.3
2
The settlement left the district court full authority to determine a
reasonable fee. The defendants promised only not to contest an award of
$2,900,000 or less.
3
The district court docket sheets for the three consolidated actions
indicate that there was fairly extensive motion practice between January
2006 and March 2010, including, inter alia, motions to dismiss, motions
for class certification, motions for summary judgment, and motions to
compel discovery responses. An April 2008 status report on the discovery
motions in the Ciolino action indicates that the plaintiffs had reviewed 179
Hewlett Packard (HP) “i-Care” entries (customer complaints to HP).
According to the declaration submitted on behalf of class counsel in
support of their motion for attorney’s fees, the investigation into the facts
and law relating to the complaints included:
(1) the depositions of approximately a dozen witnesses;
(2) the review of hundreds of thousands of pages of
documents; (3) more than 100 written discovery
requests; (4) the inspection of several of the HP Inkjet
printers at issue; (5) consultations with industry
personnel; (6) extensive work with experts including
the design and implementation of independent testing;
(7) numerous interviews of witnesses and putative
members of the classes; (8) the evaluation of
information provided by current or former employees
of HP (including the HP engineers with primary
32 IN RE: HP INKJET PRINTER LITIGATION
Just as the plaintiffs did not differentiate fees according
to the relief obtained, so, too, the district court considered the
reasonableness of the attorney’s fees in light of the benefit
conferred on the class by both the e-credits and the injunctive
relief. The court found the actual cash value of the e-credits
to be “significantly less than [the] $1.5 million” face value of
the credits approved as of the date of the order. After
acknowledging that “the discount in the cash value of the e-
credits is mitigated by [the] value of the injunctive relief
achieved by the settlement,” but finding that “no precise
value can be placed on the settlement in light of the many
uncertainties involved,” the court concluded that “the
ultimate value of the settlement to the class is roughly $1.5
million.”4 To that ballpark estimate of the total value of the
responsibility for the design of some of the HP inkjet
printer models at issue and matters related thereto); and
(9) legal research as to the sufficiency of the claims.
In January 2010, the parties to the three actions filed stipulations
continuing the adjudication of pending motions to allow for mediation and
settlement discussions to proceed. From that point—four years into the
litigation—counsel expended time in mediation, working toward a
settlement. It thus appears that the vast majority of the fees were incurred
prior to the commencement of settlement negotiations. And although
some portion of the 17,000 hours represents work done toward negotiating
the coupon and injunctive relief, given how settlement negotiations
ordinarily proceed, sorting out hours applicable to one kind of relief or the
other is likely to be exceedingly difficult.
4
Notably, although it was not yet known at the time of settlement how
many e-credits would be redeemed, many class members had already
taken affirmative steps to obtain e-credits. Unlike the typical coupon
settlement in which the defendants automatically send coupons to all
eligible class members, in this case, class members were required to apply
before the settlement approval for the e-credits, using an online claim
form. At the time of the district court’s approval of the fee award, “the
IN RE: HP INKJET PRINTER LITIGATION 33
coupon and equitable relief, combined, the court compared
the plaintiffs’ requested lodestar figure, adjusting the fees
downward to $1.5 million plus costs to ensure the fee award
reflected the class members’ limited recovery.
Precisely because the value of the award obtained by the
class members here—e-credits and injunctive relief—is
difficult to quantify, it made sense for the court to calculate
the fee amount as a function of the hours counsel worked on
the case, rather than a percentage of the class recovery. See
Staton v. Boeing Co., 327 F.3d 938, 974 (9th Cir. 2003). As
in Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998),
the district court used its approximate valuation of the coupon
and injunctive relief “only as a cross-check of the lodestar
amount, reject[ing] the idea of a straight percentage recovery
because of its uncertainty as to the valuation of the
settlement.” Staton, 327 F.3d at 973 (alteration in original)
settlement administrator had received 122,410 claims for 202,176
printers.” Given the effort involved in obtaining the coupons, it was fair
to assume that most of the individuals who had applied for the e-credits
would redeem them. The court, therefore, reasonably looked to the
number of coupons applied for as of the date of settlement, and used, as
a rough cross-check on lodestar-based fees, their collective face value of
$1,465,629.00, discounted in light of the additional steps necessary to
obtain the credits and the restrictions placed on their use.
In addition, in valuing the relief obtained, the district court could
reasonably assume the injunctive relief would be of benefit to some
number of class members, because the groups of present and future
consumers of HP printer products overlap. As printers are quasi-durable
goods, their owners who purchase HP printer supplies and accessories
today are also likely to purchase those products in the future, and therefore
likely to benefit from improvements in the accuracy of information and
instructions disclosed by HP online, in user manuals, and on product
packaging.
34 IN RE: HP INKJET PRINTER LITIGATION
(quoting Hanlon, 150 F.3d at 1029) (internal quotation marks
omitted).
This approach—CAFA aside for the moment—was
entirely appropriate. There are no statutory fees at issue here,
as there are in some civil rights class actions. So the
attorney’s payment had to come from a constructive or
“putative” common fund. Cf. id. at 966 (referring to the
hypothetical “fund” constructed by adding together the
amount defendants agreed to pay in damages, attorney’s fees,
and costs, and a gross amount of money ascribed to the
injunctive relief, as a “putative fund”). Our uniform case law,
both before and after CAFA, affords district courts discretion
to calculate attorney’s fees in common fund cases either on a
percentage-of-recovery basis, according to which the court
sets fees as a percentage of the overall fund, or on a lodestar
basis.5 See In re Bluetooth Headset Prods. Liab. Litig.,
654 F.3d 935, 942 (9th Cir. 2011) (recognizing that courts
have discretion to choose either method as a primary basis for
calculation, provided they exercise their discretion “so as to
achieve a reasonable result”); In re Mercury Interactive Corp.
Secs. Litig., 618 F.3d 988, 992 (9th Cir. 2010) (citing Powers
v. Eichen, 229 F.3d 1249, 1256 (9th Cir. 2000)); Staton,
327 F.3d at 967–68; Hanlon, 150 F.3d at 1029; In re Wash.
5
As we explained in Staton, where parties seek an attorney’s fee award
calculated as a percentage of the value of a common fund—whether
putative or actual—they may agree on a total fund amount and then “class
counsel will apply to the court for an award from the fund, using common
fund fee principles,” to ensure sufficient judicial checks on the
reasonableness of the fee award. Staton, 327 F.3d at 972. “In those
circumstances, the agreement as a whole does not stand or fall on the
amount of fees. Instead, after the court determines the reasonable amount
of attorney’s fees, all the remaining value of the fund belongs to the class
rather than reverting to the defendant.” Id.IN RE: HP INKJET PRINTER LITIGATION 35
Pub. Power Supply Sys. Secs. Litig., 19 F.3d 1291, 1295–96
(9th Cir. 1994).
Although a lodestar figure is “presumptively reasonable,”
Cunningham v. Cnty. of L.A., 879 F.2d 481, 488 (9th Cir.
1989), district courts have an independent obligation under
Federal Rule of Civil Procedure 23(h) to ensure the
reasonableness of fees. See Hensley, 461 U.S. at 440; In re
Bluetooth, 654 F.3d at 941 (citing Staton, 327 F.3d at963–64). To meet this obligation, our case law specifies, the
fairness of the lodestar amount should be gauged against the
overall class recovery, see In re Bluetooth, 654 F.3d at 942,
adjusting the lodestar fees upward or downward as necessary
to ensure their reasonableness, see Hanlon, 150 F.3d at 1029;
see also Kerr v. Screen Actors Guild, Inc., 526 F.2d 67, 70
(9th Cir. 1975) (enumerating factors that bear on whether a
court should deviate from the lodestar figure). In doing so,
the district court must weigh the requested lodestar figure
against a variety of factors, foremost among them the results
obtained for the class, monetary and non-monetary alike. See
Hensley, 461 U.S. at 434–36; McCown v. City of Fontana,
565 F.3d 1097, 1102 (9th Cir. 2009).
In settled cases involving constructive common funds, we
have encouraged district courts to review the reasonableness
of lodestar fees by cross-checking the lodestar calculations
against a percentage fee, thereby “guard[ing] against an
unreasonable result” and “assur[ing] that counsel’s fee does
not dwarf class recovery.” In re Bluetooth, 654 F.3d at944–45 (citations and internal quotation marks omitted). “If
the lodestar amount overcompensates the attorneys according
to the 25% benchmark standard, then a second look to
evaluate the reasonableness of the hours worked and rates
claimed is appropriate.” In re Coordinated Pretrial
36 IN RE: HP INKJET PRINTER LITIGATION
Proceedings in Petrol. Prods. Antitrust Litig., 109 F.3d 602,
607 (9th Cir. 1997).
Notably, our cases do not suggest that the fee award must
be equally justifiable under both the lodestar and the
percentage methods, or that the percentage method, when
used as a cross-check, must be precise. For example, in
Torrisi v. Tucson Electric Power Company, 8 F.3d 1370,
1376–77 (9th Cir. 1993), we upheld as reasonable a
percentage fee award of nearly $8 million, although the
lodestar amount came to only $3 million. An equal
justification requirement would defeat the purpose of
affording district courts the choice to employ one method
when the other is impracticable, such as when the value of
class relief is difficult to quantify.
Here, the district court did the comparison and took the
requisite second look: The court explicitly calculated “a
reasonable lodestar amount”; compared “the settlement’s
attorney’s fee award and the benefit to the class or degree of
success in the litigation”; and adjusted the lodestar amount
accordingly. See In re Bluetooth, 654 F.3d at 943. In the
end, the district court reduced the fee award considerably
below the requested amount, 32% of the lodestar figure, even
though there was “no reason at all to doubt that counsel put
in the hours they claim.” By doing so, the district court here
conscientiously did “assure itself—and us—that the amount
awarded [to counsel] was not unreasonably excessive in light
of the results achieved.”6 In contrast, the district court in
6
Anything more than nominal or de minimis relief can justify lodestar
fees, especially where the fees awarded are only a small fraction of the
lodestar request. See Farrar v. Hobby, 506 U.S. 103, 116–18 (1992)
(O’Connor, J., concurring). “The Farrar exception, which would allow
IN RE: HP INKJET PRINTER LITIGATION 37
Bluetooth simply accepted the fee amount requested by the
plaintiffs and not contested by the defendants.
According to the majority, the district court’s approach,
even if fully compliant with the methodology for determining
fees for settled class action cases laid out in our precedent,
was all wrong under § 1712 of CAFA. That statute, the
majority maintains, mandates that the district court: (1) could
not determine the fee award at all until after the e-credits
were redeemed; (2) was required to award a large part of the
fees by the percentage method rather than as lodestar fees;
and (3) was required somehow to separate out the fees
traceable to the e-credit relief from the fees traceable to the
injunctive relief, even though nearly all of the time spent by
the lawyers dealt with liability issues and not with relief.
the court to dispense with the calculation of a lodestar and simply
establish a low fee or no fee at all, is limited to cases in which the civil
rights plaintiff ‘prevailed’ but received only nominal damages and
achieved only ‘technical’ success.” Morales v. City of San Rafael, 96 F.3d
359, 362–63 (9th Cir. 1996), as amended on denial of reh’g, 108 F.3d 981(9th Cir. 1997); accord Mahach-Watkins v. Depee, 593 F.3d 1054, 1059
(9th Cir. 2010).
It is true that the e-credits offered by Hewlett Packard are worth
somewhat less than their face value, and that the injunctive relief is worth
far less than the plaintiffs’ estimate of $16–$41 million. But the
settlement achieved here is not a merely “technical” or “de minimis”
victory like that of the plaintiffs in Farrar, who were awarded only one
dollar out of the $17 million they sought. See Farrar, 506 U.S. at 108.
The district court’s estimate of the total value of the relief as $1.5 million
is supported by the record; the majority does not suggest otherwise.
38 IN RE: HP INKJET PRINTER LITIGATION
II
I turn now to whether, as the majority supposes, the
CAFA provisions concerning coupon settlements outlaw the
district court’s approach to determining fees, and substitute
instead the majority’s rigid approach, just outlined. They do
not. The CAFA provisions on which the majority relies
permit lodestar-based fees for coupon settlements, and they
do not withdraw that permission when, as our precedents for
fee settlements require, the district court considers an
estimate of the total benefit conferred in determining the
amount of a reasonable lodestar-based fee.
The majority insists that § 1712 (a) is perfectly clear, and
can only mean that any attorney’s fees for litigation that
results in a settlement including coupons must be calculated,
at least in part, as a percentage of the coupon recovery, rather
than as traditional lodestar fees. Not so. When the pertinent
subsections of § 1712 are interpreted collectively and in
context, and read together with the statute’s purpose and
legislative history, it becomes clear that the provisions permit
two methods—not one—of calculating attorney’s fees in
cases involving coupon settlements: the percentage-of-
recovery method, referred to in the statute as “contingent
fees,” see § 1712(a) (“Contingent fees in coupon
settlements”), and the lodestar, payment-for-reasonable-time-
worked method, discussed in § 1712(b) (“Other attorney’s fee
awards in coupon settlements”). The dichotomy addressed in
§ 1712 as a whole is between these two approaches to
awarding attorney’s fees in coupon settlements—not, as the
majority suggests, between two types of class relief: coupons
and injunctions. Section 1712 provides for the use of either
fee calculation method, as alternatives or in combination,
IN RE: HP INKJET PRINTER LITIGATION 39
regulating how each method should be applied, not which
method a court should use.
A
Section 1712 is titled “Coupon settlements,” indicating
that the section applies generally to such settlements, whether
coupons represent the totality of a class award or a
component thereof.7 As relevant here, subsections (a)
through (c) discuss attorney’s fees in such actions.8 The
7
Although the title of a statute or section heading cannot limit the plain
meaning of the statutory text or create ambiguity where none exists, see
Bhd. of R.R. Trainmen v. Baltimore & Ohio R.R., 331 U.S. 519, 528–29
(1947); UMG Recordings, Inc. v. Shelter Capital Partners LLC, – F.3d –,
2013 WL 1092793, at *11 n.13 (9th Cir. Mar. 14 2013); Northstar Fin.
Advisors, Inc. v. Schwab Invs., 615 F.3d 1106, 1120 (9th Cir. 2010); Pike
v. United States, 340 F.2d 487, 489 (9th Cir. 1965), “statutory titles and
section headings are tools available for the resolution of a doubt about the
meaning of a statute.” Fla. Dep’t of Revenue v. Piccadilly Cafeterias,
Inc., 554 U.S. 33, 47 (2008) (quoting Porter v. Nussle, 534 U.S. 516, 528
(2002)) (internal quotation marks omitted); see also Almendarez-Torres
v. United States, 523 U.S. 224, 234 (1998); Frankl v. HTH Corp.,
650 F.3d 1334, 1351 (9th Cir. 2011). Thus, “[a]lthough statutory titles are
not part of the legislation, they may be instructive in putting the statute in
context.” Singh v. Gonzales, 499 F.3d 969, 977 (9th Cir. 2007).
Here, the section title and all of the subheadings of the CAFA
provision codified at 28 U.S.C. § 1712 were included in the original bill.
See CAFA, Pub. L. No. 109-2, 119 Stat. 4 (2005). Where that is so, and
particularly where a section title or heading is reinforced by legislative
history, it can be presumed that it “does not reflect careless, or mistaken,
drafting.” See Almendarez-Torres, 523 U.S. at 234.
8
Subsections 1712(d) and (e), not discussed in the majority opinion,
provide for, respectively, the court’s receipt of expert testimony regarding
the actual value to the class members of coupons redeemed and the
holding of a hearing to determine whether the settlement is fair,
40 IN RE: HP INKJET PRINTER LITIGATION
majority asserts that subsection (a) of § 1712 “governs cases
where the class obtains only coupon relief,” while section (b)
addresses cases in which the settlement includes mixed forms
of relief. Maj. Op. at 20. But nothing in the text of either
subsection (a) or (b) turns its application on the composition
of the class relief. Rather, subsections (a) through (c) all
address remuneration of attorneys in cases involving coupon
relief; what distinguishes them is the methodologies of fee
calculation that they describe, not the type of relief to which
they apply.
I begin, as does the majority, with § 1712(a), entitled
“Contingent fees in coupon settlements,” which states: “If a
proposed settlement in a class action provides for a recovery
of coupons to a class member, the portion of any attorney’s
fee award to class counsel that is attributable to the award of
the coupons shall be based on the value to class members of
the coupons that are redeemed.” § 1712(a). The language of
the subsection, the term “contingent fee” in the heading, and
the legislative history of CAFA all comfortably support a
reading of “attributable to the award of the coupons” as
denoting “derived from” or “calculated as a percentage of”
the coupons’ value. And, as I explain in Parts B and C, infra,
only with that understanding can § 1712(a) coexist sensibly
with the other pertinent provisions, § 1712(b) and (c).
reasonable, and adequate. Although both concern fee calculations, neither
is directly relevant here.
IN RE: HP INKJET PRINTER LITIGATION 41
The phrase “contingent fees” is a term of art in the
attorney’s fee realm9: “Contingency fee arrangements . . . are
arrangements where an attorney’s fee is based on a
percentage of the amount recovered by his client.” Chalmers
v. City of L.A., 796 F.2d 1205, 1212 n.4 (9th Cir. 1986), as
amended on denial of reh’g, 808 F.2d 1373 (9th Cir. 1987).
Similarly, Black’s Law Dictionary defines “contingent fee”
as: “A fee charged for a lawyer’s services only if the lawsuit
is successful or is favorably settled out of court. Contingent
fees are usu[ally] calculated as a percentage of the client’s net
recovery (such as 25% of the recovery if the case is settled,
and 33% if the case is won at trial).” Black’s Law Dictionary
362 (9th ed. 2009). In contrast to lodestar fees, then,
contingent fees hinge on the outcome for the clients, rather
than the input of the attorneys, and ordinarily are calculated
as a percentage of the clients’ recovery.10 In short, as used in
9
“[W]here Congress borrows terms of art in which are accumulated the
legal tradition and meaning of centuries of practice, it presumably knows
and adopts the cluster of ideas that were attached to each borrowed word
in the body of learning from which it was taken and the meaning its use
will convey to the judicial mind unless otherwise instructed.” INS v. St.
Cyr, 533 U.S. 289, 312 n.35 (2001) (quoting Morissette v. United States,
342 U.S. 246, 263 (1952)).
10
Commentators have interpreted CAFA’s provision on “contingent
fees,” § 1712(a), as regulating the use of the percentage method of
calculating fees where the class award includes coupons. See, e.g., Report
on Contingent Fees in Class Action Litigation, 25 Rev. Litig. 459, 473
(2006) (describing how CAFA changed the application of the “percentage
fee method” for coupon settlements in federal court); Charles W. “Rocky”
Rhodes, Attorneys’ Fees in Common-Fund Class Actions: A View from the
Federal Circuits, 35 The Advoc. (Texas) 56, 60 (2006) (explaining that
“CAFA authorizes employing the percentage method” whereby fees are
“based on the value of the coupons actually redeemed rather than
estimating a redemption rate in percentage cases”).
42 IN RE: HP INKJET PRINTER LITIGATION
the heading for § 1712(a), the term “contingent fees” is best
understood as a synonym for “percentage-of-recovery fees.”
Consistent with that understanding, § 1712(a) refers to
“the portion of any attorney’s fee award attributable to the
award of the coupons . . . ” (emphasis added). The majority’s
discussion of § 1712(a) downplays the word “portion,” (and,
as we shall see, the majority entirely elides the term “portion”
in its discussion of subsections (b) and (c)). Maj. Op. at
16–20. But “[c]ourts must aspire to give meaning to every
word of a legislative enactment.” Miller v. United States,
363 F.3d 999, 1008 (9th Cir. 2004). And the word “portion”
is an aid in understanding the meaning of the entire
“contingent fee” provision in CAFA.
A “portion” means a “share” or “allotted part,” a fraction.
See Black’s Law Dictionary 1280 (9th ed. 2009).
Accordingly, the phrase “a portion of an attorney’s fee
award” only makes sense if the word “award” refers to a
divisible item or amount—here, the monetary sum awarded
to counsel. If “award” in this context referred only to a “final
judgment or decision,” Black’s Law Dictionary 157 (9th ed.
2009), rather than the actual value of the fees assessed, it
would make little sense to speak of a “portion” of the award.
The word “award” appears again in the same section, in
reference to the “award of the coupons.” § 1712(a). “[I]t is
a ‘normal rule of statutory construction’ that ‘identical words
used in different parts of the same act are intended to have the
same meaning.’” Taniguchi v. Kan Pac. Saipan, Ltd., 132
S. Ct. 1997, 2004–05 (2012) (quoting Gustafson v. Alloyd
Co., Inc., 513 U.S. 561, 570 (1995)); see also Sun v. Ashcroft,
370 F.3d 932, 939 (9th Cir. 2004). Thus, just as the
“attorney’s fee award” refers to the monetary value of the
IN RE: HP INKJET PRINTER LITIGATION 43
fees assessed, the “award of the coupons” refers to the
monetary value of the coupons. The words “attributable to,”
in the phrase “the portion of any attorney’s fee award . . .
attributable to the award of the coupons,” therefore describe
the relationship between these values—that of a portion of the
attorney’s fees and that of the coupons. In other words, the
term “attributable” supplies the connection between two
measures of value, indicating that the section is concerned
with those situations in which the value of fees, in whole or
in part, is derived from the value of the coupons provided.
It follows, then, that the mandatory language in § 1712(a),
“shall be based on the value to class members of the coupons
that are redeemed,” applies only to that portion of any
attorney’s fee award that is calculated as a percentage of the
coupon-based relief. In some cases, no portion of the
attorney’s fees will be “attributable to” the coupon award in
the sense of calculated as a percentage of the coupon value,
and therefore § 1712(a) will not apply.
The majority assumes, contrary to this analysis, that “the
portion of any attorney’s fee award to class counsel that is
attributable to the award of the coupons” means any fee for
obtaining coupon relief. But the text of § 1712(a) does not
refer to fees “for obtaining coupon relief” (emphases added).
See Maj. Op. at 21. Instead, as noted, it refers to
circumstances where the fee is “attributable” to the coupon
“award,” where, in context, “award” connotes a measure of
value. Moreover, as will shortly appear, the majority’s
construction would deprive § 1712 (b) and (c) of their role as
alternative approaches to the calculation of attorney’s fees.
Statutory interpretation cannot be sensibly accomplished by
isolating closely interrelated subsections from each other.
Instead, each such subsection may throw light on the
44 IN RE: HP INKJET PRINTER LITIGATION
others—and, as I shall soon discuss, subsections (b) and (c)
expressly contemplate lodestar-based fees where coupons are
awarded.
Moreover, the legislative history cited by the majority
fully confirms my understanding of § 1712(a). See Maj. Op.
at 24. The Senate Report from the Committee on the
Judiciary provides that attorney’s fees should be “based on
the demonstrated value of coupons actually redeemed” when
“it is proposed that an attorney fee award be based solely on
the purported value of the coupons.” S. Rep. No. 109-14, at
30 (emphases added). This language confirms that § 1712(a)
was concerned with fees calculated based on the value of
coupons—that is, traditional or percentage “contingent”
fees—and not with all fees in class actions that result in
coupon settlements, even if calculated on a lodestar basis.
This passage from the legislative history also confirms that
class counsel retain, under § 1712, the option to decide
whether to seek attorney’s fees based on the value of the
coupon relief or not. If the majority were correct, and some
portion of the fee award would always be “attributable to” the
coupon award in settlements involving coupon relief, then
counsel would have no such flexibility.
In short, § 1712(a) requires only that if fees are calculated
as a percentage of the value of coupons awarded, that value
must comprise only redeemed coupons. The subsection does
not mandate that whenever coupons are awarded, the
percentage method—or “contingent fee” method—must be
used.
IN RE: HP INKJET PRINTER LITIGATION 45
B
Subsection 1712(b) strongly reinforces—indeed,
compels—this understanding of § 1712(a), by directly and
comprehensively addressing the use of the lodestar technique
for attorney’s fee awards in coupon settlements. The title of
§ 1712(b), “Other attorney’s fee awards in coupon
settlements” (emphasis added), refers without limitation to
fees “in coupon settlements” (emphasis added), not to fees for
equitable relief only, indicating that § 1712(b) contemplates
an alternative method of calculating attorney’s fees “in
coupon settlements” generally.
Subsection (b) goes on to specify that if “a portion of the
recovery of the coupons is not used to determine the
attorney’s fee to be paid to class counsel,” then “any
attorney’s fee award shall be based upon the amount of time
class counsel reasonably expended working on the action.”
§ 1712(b)(1) (emphases added). Again, “a portion” means a
percentage, which is, of course, just another way of
expressing a fraction. So, to determine fees using a “portion
of the recovery of the coupons” means to calculate fees as a
percentage of the value of the coupons—in other words, to
calculate a “contingent fee,” in attorney’s fee lingo.
Subsection (b)(1) thus applies whenever a proposed
settlement includes recovery of coupons, whether exclusively
or in part, but does not calculate fees as a percentage of the
coupons provided by the settlement; § 1712(b)(1) specifies
that in that instance, a lodestar fee should be awarded. In
other words, if the percentage-of-recovery method described
in § 1712(a) is not used, then the lodestar method should be
used instead. And that directive applies to “any” attorney’s
fee award “in coupon settlements,” not only to fees tied to
equitable relief.
46 IN RE: HP INKJET PRINTER LITIGATION
The majority insists on a contrary interpretation—that the
lodestar method set forth in § 1712(b) is applicable only in
situations in which a coupon settlement also provides for non-
coupon relief, pertains only to that non-coupon relief, and is
mandatory for any fees for obtaining non-coupon relief. Maj.
Op. at 20. But nothing in § 1712(b)(1) limits the application
of the lodestar method to fees for hours worked on obtaining
equitable or other non-coupon relief. Rather, the heading of
subsection (b)(1), “[i]n general,” and the reference to “any
attorney’s fee” (emphasis added), both indicate that it applies
whenever the settlement “provides for a recovery of coupons”
and the percentage-of-recovery method described in
§ 1712(a) is not used.
The majority comes to a contrary conclusion only by
repeatedly truncating the language of § 1712(b), as if it
applied whenever “recovery of the coupons is not used to
determine” the fee (a grammatically incoherent phrase, I
note), see Maj. Op. at 21, as opposed to whenever “a portion
of the recovery of the coupons is not used to determine the
attorney’s fee,” § 1712(b) (emphasis added). But, once again,
the “portion” term is essential here, indicating that the
distinction is between percentage fees and lodestar fees, not
between fees for coupons and fees for equitable relief. Once
one places the word “portion” back where it belongs in
§ 1712(b), the majority’s accusation that my reading of
§ 1712(b) renders § 1712(a) a nullity, Maj. Op. at 19, falls
flat: Subsection 1712(a), on my reading, covers
circumstances in which fees are calculated, in whole or part,
as a “portion”—a percentage—of the coupons awarded, while
§ 1712(b) covers circumstances in which the percentage
method is not the one used.
IN RE: HP INKJET PRINTER LITIGATION 47
This conclusion is reinforced by the phrase “used to
determine” in § 1712(b)(1). That phrase indicates that the
circumstances excluded from § 1712(b) are those in which
the percentage method “determine[s]” the fee, and not simply
those in which fees are awarded in whole or part “for
obtaining coupon relief.” Maj. Op. at 21.
Moreover, § 1712(b) does not isolate the type of class
relief for which counsel is compensated. Instead, subsection
(b)(1) refers to work done “on the action” (emphasis added),
thereby permitting the use of a lodestar method to calculate
fees based on time spent on the case as a whole—including
time spent obtaining coupon relief. Subsection (b)(2)
reinforces this directive, by specifying that a lodestar fee
under subsection (b) “shall include an appropriate attorney’s
fee, if any, for obtaining equitable relief, including an
injunction, if applicable.” § 1712(b)(2) (emphases added).
The use of the word “include,” and the phrases “if any” and
“if applicable,” to refer to equitable relief confirm that the
lodestar fee provided for in subsection (b)(1) is not limited to
equitable relief.
Last, the actual distinction drawn by § 1712(b), rather
than the one the majority invents, makes perfect sense in the
context of the concerns that motivated § 1712—namely, the
potential for huge fees through a percentage approach, where
the percentage was of all coupons that could be redeemed,
even though few were. See S. Rep. No. 109-14, at 30.
In sum, from its title to its substantive reach to its
operative text, § 1712(b) evidences that lodestar fees are an
available method of calculating fees for settlements that
48 IN RE: HP INKJET PRINTER LITIGATION
include coupon awards, whether or not the settlement also
includes equitable relief.11
C
Finally, § 1712(c)—titled “Attorney’s fee awards
calculated on a mixed basis in coupon settlements”—builds
upon § 1712(a) and (b), addressing how the percentage-of-
recovery and lodestar methods described in each of those
preceding subsections may be used in combination to award
fees for a coupon settlement. Nothing in subsection (c)
requires that both methods of fee calculation be used when
the settlement includes both coupon and non-coupon relief.
As is evident from the subsection’s title, what is mixed in
instances covered by § 1712(c) is the method for calculating
fees, not the nature of the settlement award (i.e., coupons,
equitable or monetary relief). Although the first phrase of
subsection (c) refers to mixed types of class
relief12—settlements involving both coupon and equitable
relief—the substantive provisions, subsections (c)(1) and
(c)(2), break out the application of the preceding subsections,
11
There is little case law interpreting § 1712(b), but courts that have
addressed the issue recognize that the subsection allows the calculation of
fees in a coupon settlement on the basis of hours class counsel worked.
See, e.g., True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052, 1077
(C.D. Cal. 2010) (“[T]he lodestar method of awarding fees is permissible
under CAFA . . . .”); Fleury v. Richemont N. Am., Inc., No. C-05-4525
EMC, 2008 WL 4680033, at *5 (N.D. Cal. Oct. 21, 2008) (unpublished);
Perez v. Asurion Corp., No. 06-20734-CIV, 2007 WL 2591180, at *1–2
(S.D. Fla. Aug. 8, 2007) (unpublished) (citing S. Rep. No. 109-14, at 31).
12
That phrase reads: “If a proposed settlement in a class action provides
for an award of coupons to class members and also provides for equitable
relief, including injunctive relief—.” § 1712(c).
IN RE: HP INKJET PRINTER LITIGATION 49
§ 1712 (a) and (b), based not on the relief granted but on the
fee methodology used. Thus, each subparagraph refers to
“that portion of the attorney’s fee” calculated in a certain
manner—either “based upon a portion of the recovery of the
coupons” or “not based upon a portion of the recovery of the
coupons” (emphasis added). Nothing in the text of either
subparagraph excludes the possibility that, in cases involving
both coupon and equitable relief, no portion of the fee award
is to be paid in the manner addressed by that paragraph. That
is, even when there is a mixed class remedy, it may be the
case—as it was here—that the only fees assessed are those
calculated in accordance with § 1712(b), as lodestar fees.
The majority yet again goes wrong by ignoring the word
“portion,” which appears twice in both § 1712(c)(1) and
§ 1712(c)(2). In both instances, the first use of the term
refers to the “portion” of the fee award, but the second refers
to the calculation of fees as “a portion of the recovery of the
coupons” (emphasis added)—that is, contingent or percentage
fees. So, once again, the distinction between the application
of § 1712(a) and § 1712(b) is drawn on the basis of the
methodology used, not the relief obtained. And the
legislative history the majority quotes is similar, explaining
the distinction as one between “the portion of the award that
is a contingent fee based on the value of the coupons” and
“the portion not based on the value of the coupons.” S. Rep.
No. 109-14, at 31 (emphasis added); see Maj. Op. at 24.
Lodestar fees are based on hours worked and rates charged,
not on the value of recovery, and so are not the “contingent
fee” to which the history quoted refers.
50 IN RE: HP INKJET PRINTER LITIGATION
D
Looked at as a whole, then, § 1712(a), (b), and (c) set
forth three approaches to calculating fees in coupon awards:
as a percentage of the value of redeemed coupons; as a
function of hours reasonably worked on the action; or as a
combination of the two approaches. In a settlement involving
coupons, if attorneys are, in whole or in part, awarded
contingent fees—that is, fees equal to a percentage of the
purported monetary value of the class relief—CAFA requires
federal courts to assess those fees based on the value of the
coupons actually redeemed. § 1712(a). But where a district
court opts not to award fees on a percentage basis, CAFA
requires the fees to be based on hours reasonably expended
working on the action, using a lodestar approach.
§ 1712(b)(1)–(2).
My understanding of the statute, but not the majority’s,
comports with long-established principles underlying
attorney’s fees in class actions generally. “[A] mechanical or
formulaic application of either [the lodestar or the
percentage-of-the-fund] method, where it yields an
unreasonable result, can be an abuse of discretion.” Fischel
v. Equitable Life Assur. Soc’y of the U.S., 307 F.3d 997, 1007
(9th Cir. 2002) (quoting In re Coordinated Pretrial, 109 F.3d
at 607) (internal quotation marks omitted). The majority
supposes that, in CAFA, Congress broadly mandated such a
mechanical, potentially unreasonable approach where a
settlement includes coupons. Under the majority’s
interpretation, for example, if a coupon settlement were
reached after plaintiffs’ attorneys did very little work, the
attorneys would nonetheless be statutorily entitled to receive
a fee equivalent to up to the benchmark twenty-five percent
of the value of the redeemed coupons, instead of a lodestar
IN RE: HP INKJET PRINTER LITIGATION 51
fee based on hours worked, which could amount to much less.
For all the reasons already surveyed, Congress did not intend
such unreasonable results, but instead left district courts with
the discretion to calculate fees using either approach.
The majority warns that allowing class counsel to obtain
lodestar fees for an entire class settlement, including coupon
relief, would enable counsel to “walk[] away from a case with
a windfall, while class members walk away with nothing,”
thereby “run[ning] counter to one of the main purposes of
CAFA: discouraging coupon settlements—particularly those
where presumably valuable (but actually worthless) coupons
form some part of the basis for an attorneys fees award.” Maj.
Op. at 25–26. But this scenario ignores the safeguards that
exist independent of CAFA to prevent such outcomes. As I
have explained, district courts have an obligation to ensure
that attorney’s fees are reasonable by cross-checking lodestar-
based awards against a variety of factors, including the
estimated benefit obtained by the class, just as courts must
cross-check percentage-based fees against a lodestar
calculation.
Moreover, the problem of excessive attorney’s fees is not
limited to coupon settlements in which class members receive
“scrip” while attorneys receive cash; the risk is also present
in settlements providing a small cash award to each class
member. In cases involving such cash relief, attorney’s fees
could be greatly disproportionate to the benefit received by
class members, whether calculated as a lodestar or a
percentage-of-recovery, depending on a variety of
factors—including, inter alia, the speed of settlement, the
size of the class, and the strength and complexity of the
plaintiffs’ claims. Nothing in CAFA addresses fee awards in
such cases. Instead, the limited concern addressed in § 1712
52 IN RE: HP INKJET PRINTER LITIGATION
of CAFA is the overvaluing of a coupon recovery to boost a
percentage-of-fund fee award.
E
Although legislative history has been downplayed in
recent years as a useful tool for statutory interpretation, I
continue to find it helpful when properly used. Of course,
“[e]xtrinsic materials have a role in statutory interpretation
only to the extent they shed a reliable light on the enacting
Legislature’s understanding of otherwise ambiguous terms.”
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546,
568 (2005). As I have stated elsewhere, see James v. City of
Costa Mesa, 700 F.3d 394, 409 n.2 (9th Cir. 2012) (Berzon,
J., concurring in part and dissenting in part), self-conscious
congressional declarations of interpretive or application
precepts are indeed manipulable and may reflect an attempt
to enforce principles that would not have been adopted if
incorporated into the statute. See Exxon Mobil, 545 U.S. at
568. But clues discernable from legislative materials, such as
the Senate Report on which I here rely, concerning how the
legislators considering the bill were speaking about the
statute at hand, aid rather than impede statutory
interpretation. The manner in which language was used when
the bill was under consideration may illuminate apparent
imprecisions in the later-enacted statute.
Here, the legislative history of CAFA confirms that courts
are not obliged to base attorney’s fees on the value of
coupons, but rather retain the choice to use either of the
traditional methods, subject to the qualifications set forth in
§ 1712. I have already quoted some of the relevant language.
In addition, the “purpose” section of the Senate Judiciary
Committee Report indicates that CAFA’s Consumer Class
IN RE: HP INKJET PRINTER LITIGATION 53
Action Bill of Rights, codified at 28 U.S.C. §§ 1711–1713,
contains provisions
specify[ing] the methods for calculating
attorney’s fees in class settlements in which
coupons constitute all or part of the relief
afforded to claimants to ensure that such fee
awards are consistent with the benefits
afforded class members or the amount of real
work that the class counsel have performed in
connection with the litigation.
S. Rep. No. 109-14, at 5 (emphases added). The Report goes
on to describe the flexibility class counsel retains:
In some cases, the proponents of a class
settlement involving coupons may decline to
propose that attorney’s fees be based on the
value of the coupon-based relief provided by
the settlement. Instead, the settlement
proponents may propose that counsel fees be
based upon the amount of time class counsel
reasonably expended working on the action.
Id. at 30 (emphasis added).
So, as described in the Senate Report, § 1712 retained
rather than replaced district courts’ discretion to choose
between percentage-of-recovery and lodestar fees for coupon
settlements. The concern reflected in § 1712(a), in other
words, was with how a contingency fee should be calculated,
not with whether only contingency fees—that is, percentage-
of-recovery fees—should be allowed.
54 IN RE: HP INKJET PRINTER LITIGATION
As I have explained, § 1712 (a), (b), and (c), especially
when read in light of one another rather than in isolation,
accomplish exactly what the Committee indicated the statute
set out to do. They leave to district judges the flexibility to
choose between the two primary fee calculation
methodologies that they had available to them before CAFA
and continue to have after CAFA in common fund cases
involving monetary relief. Section 1712 did not disturb our
case law requiring that fees be adjusted to reflect the benefits
actually obtained, in part through a cross-check with the other
methodology. But § 1712 did restrict the calculation of
contingency fees, by requiring that a percentage-of-recovery
fee be based on redeemed coupons, not on hypothetically
available coupons.
Conclusion
Here, the district court proceeded exactly as required by
our class action settlement case law and as permitted by
§ 1712: It did not award a contingency fee, calculated as a
percentage of the purported value of the total class recovery.
Instead, it chose to award a lodestar fee, calculated on the
basis of hours worked and rates charged, carefully limited by
a fair estimate of the amount of the benefit received by the
class. There was no violation of § 1712 of CAFA.
As I would hold the fee award consistent with CAFA,
§ 1712, I respectfully dissent.13
13
Because the majority does not do so, I do not address the other
challenges the objectors mount to the settlement.