| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Dept. of Health & Social Services v. Okuley (06/26/2009) sp-6381
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| STATE OF ALASKA, DEPARTMENT | ) |
| OF HEALTH AND SOCIAL SERVICES, | ) Supreme Court No. S- 12971 |
| ) | |
| Appellant, | ) Superior Court No. 3AN-05- 10788 CI |
| ) | |
| v. | ) O P I N I O N |
| ) | |
| DENISE OKULEY, on behalf of herself | ) No. 6381 June 26, 2009 |
| and all those similarly situated, | ) |
| ) | |
| Appellees. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sen K. Tan, Judge.
Appearances: Joanne M. Grace, Assistant
Attorney General, Talis J. Colberg, Attorney
General, Anchorage, for Appellant. James J.
Davis, Jr., Goriune Dudukgian, Ryan Fortson,
Northern Justice Project, Anchorage, for
Appellees.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Carpeneti, and Winfree, Justices.
MATTHEWS, Justice.
I. INTRODUCTION
This appeal involves a common fund fee award to
attorneys who represented, on a pro bono basis, a class of
persons wrongly denied Interim Assistance benefits by the State
of Alaska. As a result of class counsels efforts, the State was
required to pay $990,010 in retroactive Interim Assistance
benefits to 301 class members, as well as $91,575 in prejudgment
interest. The court awarded class counsel $46,131.70 in
prevailing party attorneys fees under Alaska Civil Rule 82. Over
the States objection and without requiring that notice of a
common fund fee request be sent to class members, the court also
awarded class counsel fees from the common fund, granting
counsels request for an amount equal to the prejudgment interest,
$91,575, or 9.25% of the fund. Class counsel thus received a
total fee award of around $137,707. The State appeals the common
fund fee award in its parens patriae capacity. Although we
recognize that awarding fees from the fund without notice to
class members of the fee request was not the best procedure, we
affirm the award because it was fair and reasonable and not an
abuse of discretion.
II. FACTS AND PROCEEDINGS
A. Facts
In August 2005 the Northern Justice Project filed a
class action lawsuit against the State of Alaska on behalf of
Interim Assistance (IA) benefits applicants, alleging that an
internal policy the state adopted in 2003 to save costs violated
the Alaska Administrative Procedures Act (APA). IA benefits are
available to Alaskans who have applied for Supplemental Security
Income (SSI) benefits1 but who have not yet received a final
decision from the federal government on their SSI applications.2
To qualify for IA benefits, a state-approved physician or
psychiatrist must find the applicant disabled.3 If the federal
government finds the applicant qualifies for SSI benefits and
thus begins paying such benefits, the applicant must repay the
state for the IA benefits she received;4 if she does not qualify,
she is not required to repay the state.5 To reduce the number of
applicants who are not required to repay the state and thus save
costs, the state implemented an internal policy change in 2003
that added a secondary disability assessment. Under the 2003
policy, if the state-approved doctor found the applicant disabled
and eligible for IA benefits but a secondary medical screener
disagreed, the state denied the application. The state did not
follow the APA in promulgating this policy.
In April 2005 Denise Okuley, the named class
representative, applied for IA benefits and though found eligible
by the state-approved physician, was denied benefits based on the
medical screeners secondary assessment. The Alaska Pro Bono
Program (APBP) referred Okuleys case to the Northern Justice
Project. APBP, Okuley, and the Northern Justice Project signed a
tripartite retainer agreement, which provided that the Northern
Justice Project would represent Okuley on a pro bono basis and
that any fees awarded by [the court] at the conclusion of this
case [would] be retained by APBP and the Northern Justice
Project.
B. Proceedings
Okuley moved for a preliminary injunction against the
State, challenging the 2003 policys legality. In September 2005
the superior court converted the motion into a summary judgment
motion and ruled in Okuleys favor.6 Subsequently, Okuley moved
to certify the class under Alaska Civil Rule 23(b)(2).7 The
superior court certified two classes: (1) IA applicants whose
applications were denied by the State despite being found to be
disabled by a state-approved doctor, but whose SSI applications
were still being processed by the federal government; and (2) IA
applicants whose applications were denied by the State despite
being found to be disabled by a state-approved doctor, and whose
SSI applications were subsequently denied by the federal
government.
The parties reached an agreement as to the first class,
consisting of 153 members, with the State agreeing to pay
$759,930 in retroactive IA benefits.8 Because Okuley and the
State could not agree as to the second class, consisting of 237
members, Okuley moved for summary judgment, requesting that these
members be awarded retroactive IA benefits. The superior court
granted the motion over the States opposition and ordered the
State to pay $230,080 in retroactive IA benefits to the 167
members of this class who had responded to the States notices.
As a result of Okuleys class action, the State was
required to pay 301 class members $990,010 in retroactive IA
benefits.9 The State also agreed to pay $91,575 (9.25%) in
prejudgment interest.
Class counsel moved for prevailing party fees under
Alaska Civil Rule 82, as well as for reasonable attorneys fees
from the common fund. The State did not oppose the Rule 82
motion, and the court awarded $46,131.70 in prevailing party
fees. The State did oppose counsels request for fees from the
common fund, arguing that (1) the doctrine should not apply to
public benefits cases, and (2) the hourly rate claimed by counsel
was unreasonable as compared to the hourly rate the States
attorneys are paid. In requesting common fund fees, class
counsel urged the court to use the percentage of the fund method10
and to award fees in an amount equal to the prejudgment interest,
$91,575, or 9.25% of the fund.11
The court found the common fund doctrine applied under
the three-part test outlined in Edwards v. Alaska Pulp Corp.12 It
also found the percentage of the fund method more desirable than
the lodestar method because there is a clearly established common
fund. Having so determined, the court recognized the need to
carefully evaluate the award of fees under a test of
reasonableness. It listed the factors courts consider in
determining a reasonable fee13 and discussed those factors it
found relevant. Based on the fact that courts often use 25% as a
benchmark and on the courts finding that this case was
undesirable, had substantial risk factors (including the
contingent nature of the representation and the risk of not
prevailing), and resulted in a favorable outcome for an indigent
class, the court granted counsels request for an award equal to
the prejudgment interest, or 9.25% of the fund. Thus, the court
awarded counsel $91,575 in common fund fees, amounting to a total
award of around $137,707 in fees.14
The State, in its parens patriae capacity, appeals the
superior courts award of $91,575 in attorneys fees from the
common fund.15
III. STANDARD OF REVIEW
We review a superior courts decision to use the
percentage of the fund method to calculate a fee award for abuse
of discretion.16 Likewise, we review an attorneys fee award for
abuse of discretion, reversing the award only if it is arbitrary,
capricious, manifestly unreasonable, or the result of an improper
motive.17 But we review the courts application of the law in
determining an attorneys fee award de novo, applying the rule of
law that is most persuasive in light of precedent, reason, and
policy. 18 Similarly, whether a superior court has fulfilled its
fiduciary duties in awarding class counsel attorneys fees is a
legal question reviewed de novo.19
IV. DISCUSSION
The State argues the superior court abused its
discretion in awarding class counsel fees from the common fund
for a variety of reasons; class counsel dispute each of these
reasons and argue the State has waived all of its claims for
failure to raise them below.
A. The Superior Court Did Not Fail To Fulfill Its
Fiduciary Duties to the Class in Awarding Class Counsel
Fees from the Common Fund.
The State argues the court failed to fulfill its
fiduciary duty to the class by choosing the percentage of the
fund method and by not considering the appropriate amount of an
award based on the hours worked and rates charged. We disagree.
We have recognized the potential lack of adversity when
class counsel asks the trial court to impose fees on the
benefitted class members under the common fund doctrine.20
Because of this potential lack of adversity, as well as the
potential for conflicts of interest between the class and class
counsel, we have explained that [c]ourts should . . . closely
scrutinize applications for attorneys fees from a fixed fund.21
Here, the court acknowledged its fiduciary duty to the
class when it stated, this court should carefully evaluate the
award of fees under a test of reasonableness. And the court
fulfilled its fiduciary duty to the class by so doing. Regarding
the method of fee calculation, the court discussed how fees are
calculated under both the percentage of the fund and the lodestar
methods. It then concluded that because a clearly established
fund existed, the percentage of the fund method was more
appropriate. The difficulty in calculating the fund is a factor
courts may consider in determining which method of fee
calculation to apply.22 In relying on this factor, the court
properly exercised its discretion and fulfilled its fiduciary
duty to the class.
Likewise, the court carefully evaluate[d] the
reasonableness of the percentage and fee awarded. The court
considered the Johnson-Kerr factors,23 analyzed the factors it
found supported upward or downward adjustment risk of nonpayment
and loss, undesirability of the case, and results achieved on the
one hand, and time and labor required and indigency of the class
on the other and calculated the lodestar fee amount (about
$60,000) and what the fee would be if it set the percentage at
25% versus at 9.25%. Thus, the court both recognized and
fulfilled its fiduciary duty to the class to scrutinize the fee
request.
B. The Superior Court Did Not Abuse Its Discretion in
Applying the Percentage of the Common Fund Method.
The State argues that the percentage of the fund method
is inappropriate in SSI cases generally, asserting that basing
the fee on the results achieved, as the percentage method does,
would result in windfall fees because SSI benefits are fixed.
Again, Alaska courts have discretion to apply either
the percentage of the fund or the modified lodestar methods.24
Under the percentage of the fund method the court determines a
reasonable percentage based on a 25% baseline,25 which it modifies
based on factors such as the size of the fund and the Johnson-
Kerr factors.26 On the other hand, a court following the modified
lodestar method first determines the number of hours an attorney
reasonably spent on the case and multiplies that number by a
reasonable hourly rate.27 The court may apply a multiplier to the
lodestar amount based on factors such as the Johnson-Kerr
factors, the risk to counsel in taking the case, achievement of
extraordinary results, the quality of representation, and
substantial delay in payment.28
We have stated that the percentage of the fund method
may be inappropriate where the attorney quickly negotiates an
enormous settlement and thus stands to receive an inordinate
windfall,29 where there is any difficulty in calculating the
common benefit,30 or where the fund is enormous;31 and the lodestar
method may be inappropriate in a case in which an attorney
recovers a small fund, [causing] application of the
lodestar . . . to devour most or all of the fund.32
Advantages of the percentage method are that it tends
to better reflect the results achieved33 and to most closely
approximate[] the manner in which attorneys are compensated in
the marketplace.34 On the other hand, the lodestar method closely
tracks the amount, though not necessarily the value, of the work
done.35 Regardless of which method a court chooses, the court
should explain the reasons behind its decision.36
We agree with class counsel that the court did not
abuse its discretion in finding the percentage method
appropriate. Here, the fund is definite it consists of $990,010
in retroactive IA benefits plus $91,575 in prejudgment interest.
The court found that because the fund is clearly established, the
percentage method was more appropriate. Again, because the
difficulty in calculating the fund is an appropriate factor to
consider, and because the record supports the courts conclusion,
the court did not abuse its discretion in choosing the percentage
of the fund method on this basis.37
C. The Superior Court Did Not Abuse Its Discretion in
Finding a Fee Award of 9.25% of the Fund Was
Reasonable.
The State contends that the court abused its discretion
in accepting class counsels request for common fund fees equal to
9.25% of the fund, arguing that the court should not have awarded
enhanced fees based on risk and undesirability.38
Again, in deciding to award 9.25% of the fund to class
counsel, the superior court considered the 25% benchmark, the
need to ensure the fee was reasonable, factors supporting upward
and downward adjustment, the actual fees incurred, and the risks
entailed. Though acknowledging the classs indigency, the court
also emphasized the results achieved: without the efforts of
class counsel, the plaintiff class would have been worse off
financially. After considering all of these factors, the court
concluded the factors really do not call for a departure from the
benchmark of 25%. Accordingly, the request for approximately 9%
is clearly justified.
Though either the percentage or the lodestar method may
yield fees exceeding fees calculated on a strict hourly basis,39
the trial court should exercise its discretion to avoid unjust
enrichment of either counsel or beneficiaries.40 Regardless of
which method a court uses, a reasonable attorneys fee is the
proper standard.41
We conclude awarding class counsel 9.25% of the fund
was reasonable and not an abuse of discretion. The courts
decision to award this percentage was neither arbitrary nor
capricious: the court acknowledged its duty to carefully evaluate
the fee request for reasonableness and did so evaluate it, taking
into account the relevant Johnson-Kerr factors supporting upward
and downward adjustment, calculating the lodestar figure
($60,000), and considering what the fee would be if it chose the
25% benchmark ($247,502). And though the award exceeded counsels
approximate hourly rates, we conclude the award was not
manifestly unreasonable42 when considering the policy objectives
of encouraging pro bono representation and of using the class
action mechanism.
We have permitted enhanced fees in both public interest
and class action cases because of the risk of nonpayment43 and the
sound policy of encouraging capable representation.44 In the
context of workers compensation fee awards, we have explained
that the objective of ensuring that competent counsel is
available to represent injured workers would not be furthered by
a system in which claimants counsel could receive nothing more
than an hourly fee when they win while receiving nothing at all
when they lose.45 We believe the same policy applies to a class
action case taken on a pro bono basis and conclude the court did
not abuse its discretion in finding the risk of nonpayment
justified a fee enhancement.
We also conclude the superior court did not abuse its
discretion in awarding enhanced fees based on the risk of not
prevailing against the State. We have explained that where the
probability of success is so great at the outset that no
adjustment in the base award would be appropriate, a risk
multiplier should not be applied.46 A multiplier might be
appropriate when pertinent law is unclear at the outset of a case
or new law had to be forged or difficult burdens of proof met.47
Here, the court found there was a risk of not
prevailing against the State, which it called a formidable
adversary, and that this risk supported enhancing the fee award.
We agree. Though Okuley prevailed on the issue of whether the
2003 policy was invalid on summary judgment within one month of
filing her preliminary injunction motion, the cases success
hinged on certifying the class. Below, the State vigorously
opposed class certification and much of the litigation concerned
this issue, with both parties filing extensive memorandums. Even
the State acknowledged that its motion opposing class
certification was complicated. Whether the court would certify
the class was not certain. Further, even after the court
certified the class, the State refused to settle the second
classs claims, requiring litigation over the past-due benefits.
On these facts, the court did not abuse its discretion in
enhancing the fee award on the basis of uncertainty of
prevailing.
The court also did not abuse its discretion in finding
this case qualifies as undesirable, justifying a fee enhancement.
We have encouraged courts to consider the potential difficulty of
attracting capable counsel in determining the compensable value
of counsels services and proper fee awards.48 Counsel may offer
affidavits asserting that it would be difficult or impossible to
obtain other capable counsel absent the potential recovery of
enhanced fees.49 However, a court need not unquestioningly accept
assertions that absent enhanced fees, capable counsel could not
have been retained, or cannot be obtained in the future, because
[s]uch assertions are potentially speculative and self-serving.50
The court found this case the type of case where there
are few attorneys who would represent clients who have no ability
to pay, concluding that without class counsel, it is doubtful
that class actions such as this one would have been pursued.
Class counsel submitted affidavits attesting to the difficulty of
placing cases such as this one with competent counsel. APBP
Executive Director Kara Nyquist, who is responsible for
recruiting private attorneys to accept pro bono cases, stated in
an affidavit that [i]t is beyond question that the lawyers in
this state that handle pro bono cases will not and do not accept
class actions or other complex public benefits cases. She stated
that in the almost three years that she has been Executive
Director, she has been able to find only one firm that is willing
to handle class actions or other complex public benefits cases
for APBPs clients, the Northern Justice Project. Likewise, Lloyd
Benton Miller, a partner in a private law firm, stated in an
affidavit:
In my experience there is an extreme
shortage of attorneys in the private Bar
willing to take on substantial commitments to
plaintiffs work in contingent class action
litigation for indigent clients. The paucity
of available attorneys is even more grave in
the public benefits arena, where extremely
few individuals in the private Bar have any
substantial expertise.
Based on this evidence, the court could reasonably find that
attracting capable counsel to take this case would have been
difficult and a fee enhancement was justified.
D. The State Waived Its Argument That the Common Fund Fee
Award Violated Okuleys Representation Agreement.
The State contends that because Okuleys representation
agreement stated she would not be charged for representation, and
because class counsel received the case from APBP, whose website
promises pro bono clients will not have to pay attorneys fees,
the common fund fee award contradicted Okuleys agreement. The
State also argues that the clause in the agreement stating that
class counsel would retain court awarded fees was misleading.
Okuleys representation agreement is not part of the
record; neither party asked the court to review the fee award for
compliance with the agreement and it did not do so. Attorney
Goriune Dudukgian claimed in an affidavit that the retainer
agreement signed by plaintiff Denise Okuley, the Northern Justice
Project, and APBP provides that any fees awarded by this Court at
the conclusion of this case shall be retained by APBP and the
Northern Justice Project. Insofar as this statement accurately
describes the retainer agreement, the agreement may be ambiguous
as to whether a common fund fee award was contemplated or
permitted. But [a] party may not raise an issue for the first
time on appeal.51 Because the State failed to raise this argument
below in its opposition to the fee request, leaving us with no
record and no copy of the agreement to review, we consider this
argument waived.
E. The Fee Award Does Not Fail for Lack of Notice of the
Fee Request to the Class.
The State claims the common fund fee award is unfair to
the class members because they did not receive notice of the fee
request. It argues that because prejudgment interest had been
awarded to the class members, they had vested property rights in
that interest and constitutional due process was triggered.52
Class counsel reply that Alaska Civil Rule 23 does not require
notice because the class was certified under Rule 23(b)(2).
Alaska Civil Rule 23(c)(2) requires notice of class
certification and opt-out rights in Rule 23(b)(3) (damages) class
actions but not in Rule 23(b)(2) (injunctive or declaratory
relief) or Rule 23(b)(1) (limited fund) class actions.53 Many
federal courts have held that under Federal Rule of Civil
Procedure 23(c)(2), which like the Alaska rule does not require
notice of opt-out rights to members of Rule 23(b)(2) classes, due
process does not require notice: [w]hen an action is certified
under Rule 23(b)(2) . . . absent class members are not required
to receive notice or to have the opportunity to opt-out of the
suit[;] [d]ue process requires only that the class members be
adequately represented.54 The rationale for this distinction lies
in assumptions of cohesiveness underlying [Rule 23(b)(2) and
(b)(3)] classes.55 The Eleventh Circuit has explained:
At base, the (b)(2) class is
distinguished from the (b)(3) class by class
[cohesiveness] . . . . Injuries remedied
through (b)(2) actions are really group, as
opposed to individual injuries. The members
of a (b)(2) class are generally bound
together through preexisting or continuing
legal relationships or by some significant
common trait such as race or gender.
Although the interests of the different
members of a (b)(2) class are by no means
identical the substantial cohesion of those
interests makes it likely that representative
members can adequately represent the
interests of absent members and that the need
for and interest in individual representation
will be minimal. Under such circumstances,
the contribution that individual notice can
make to buttressing adequate representation
is not great enough to warrant a mandatory
procedural or constitutional requirement.[56]
Though due process generally does not require notice of
opt-out rights in 23(b)(2) actions, some federal courts have held
that some form of notice should be given if potential conflicts
of interest between the class representatives and unnamed class
members arise.57 We recognize that because of the risk of
conflicts of interest when class counsel seek fees from the
common fund, notice to class members of a fee request is
desirable.58 We also note that under Alaska Civil Rule 23(d), the
court could have required notice of the fee request.59
But the court was not required to order such notice.
As class counsel point out, Alaskas Civil Rule 23 does not have a
provision mandating notice of counsels fee request. By contrast,
Federal Rule of Civil Procedure 23(h)(1), enacted in 2003,
requires [n]otice of a motion [for attorneys fees and nontaxable
costs] . . . be served on all parties and, for motions by class
counsel, directed to class members in a reasonable manner.60
Responding to class counsels emphasis on this distinction, the
State asserts that Alaskas procedural rules are not congruent
with constitutional due process. But Federal Rule of Civil
Procedure 23(h) is not, at least explicitly, rooted in notions of
constitutional due process. The 2003 Advisory Committee Notes
explain that the rule was designed to help courts provide an
early framework for an eventual fee award, or for monitoring the
work of class counsel during the pendency of the action.61 The
rule was also promulgated to help courts meet their duty to
ensure that the amount and mode of payment of attorney fees are
fair and proper whether the fees come from the common fund or are
otherwise paid.62 We are unaware of any case decided under
Federal Rule of Civil Procedure 23 before the 2003 amendment that
holds that notice to class members is constitutionally required.
Though we believe awarding common fund fees without
notice to class members of the fee request was unfortunate, we
conclude that due process was not violated under the
circumstances of this case. We reach this conclusion not only
because due process generally does not require prejudgment notice
in 23(b)(2) cases, but also because the process employed here
involved a formal request for fees that was energetically opposed
by the State and closely scrutinized by the superior court. In
light of the relatively small deduction in both percentage and
absolute dollars to be made from each individual class members
recovery, this process in all likelihood protected the interests
of the class as well as if individual notice had been given to
class members, and did so without the added costs or delay that
would have resulted if notice had been given. In light of these
considerations, we conclude that due process was satisfied.
V. CONCLUSION
For the above reasons, we AFFIRM the superior courts
judgment in all respects.
_______________________________
1 The SSI program and application process are governed by
federal statutes and regulations. See 42 U.S.C. 1381-1385
(2006); 20 C.F.R. 416.101-416.2227 (2008).
2 See AS 47.25.455; 7 Alaska Administrative Code (AAC)
40.375(a), 40.140(b), 40.170(b) (2008).
3 See 7 AAC 40.180, 40.170(b), 40.050(c). Assistance may
also be available based on age, blindness, or financial need.
See 7 AAC 40.090. Persons found eligible for IA benefits receive
$280 per month. AS 47.25.455(a).
4 See 7 AAC 40.375(c).
5 See 7 AAC 40.480(b).
6 The State subsequently rescinded the 2003 policy and,
as required by the APA, noticed and held a public comment hearing
prior to adopting the policy. The new regulations took effect in
January 2006. See 7 AAC 40.180 (am. 1/11/2006, Reg. 177).
7 Alaska Civil Rule 23(b)(2) provides that a class may be
certified if the four prerequisites in Rule 23(a) (numerosity,
commonality, typicality, and adequacy) have been met and the
party opposing the class has acted or refuses to act on grounds
generally applicable to the class, thereby making appropriate
final injunctive relief or corresponding declaratory relief with
respect to the class as a whole.
8 Payment was conditioned on the class members continuing
to meet other eligibility requirements for the IA program.
9 Apparently $135,000 to $150,000 in retroactive IA
benefits were never paid or claimed because class members had
since died, moved out-of-state, or failed to respond to the
States notices.
10 Alaska courts may use either the percentage of the fund
method or the modified lodestar method to calculate fees from the
common fund. See Edwards v. Alaska Pulp Corp., 920 P.2d 751, 758
(Alaska 1996). The former method involves determining a
reasonable percentage using a 25% baseline that the trial court
can modify depending on various factors, such as the size of the
fund, the time required to reach a settlement, and any objections
by class members to the settlement. Id. The latter method
involves calculating a lodestar figure by multiplying the number
of hours reasonably spent on the case by a reasonable hourly rate
and then applying a multiplier to that figure based on various
factors, such as the risk in taking the case and the quality of
representation. Id. at 757.
11 Because class counsel are both public interest
attorneys, neither normally bills clients nor has standard
billing rates. However, attorney Goriune Dudukgian provided in
an affidavit that the fair market rate for his services would be
at least $200.00 per hour, and the other attorney, James Davis,
stated in an affidavit that his would be $275 per hour. At these
rates, counsel would be owed a total of $57,727.50. Setting this
as the lodestar, a multiplier of about 2.4 would result in a fee
award closely approximating the full amount awarded here. If the
lodestar figure is $45,060.75, as the State argues it should be,
the actual total fees awarded would reflect a multiplier of about
three.
12 920 P.2d at 756 n.9 ([T]he common fund doctrine is
properly applied . . . if (1) the class of beneficiaries is
sufficiently identifiable, (2) the benefits can be accurately
traced, and (3) the fee can be shifted with some exactitude to
those benefitting. (quoting Paul, Johnson, Alston & Hunt v.
Graulty, 886 F.2d 268, 271 (9th Cir. 1989)) (internal quotation
marks omitted)). Here, the court found (1) two classes of
beneficiaries had been identified, the first class consisting of
153 persons and the second of 237, of which 167 responded to the
notice of retroactive payments; (2) the benefits could be
accurately traced because the first class received a total of
$759,930 and the second group of 167 received $230,080; and (3)
the fee could be shifted with some exactitude to those
benefitted.
13 According to Johnson v. Georgia Highway Express, Inc.,
488 F.2d 714 (5th Cir. 1974), courts should consider twelve
factors in determining reasonable fee awards: (1) the time and
labor required, (2) the novelty and difficulty of the questions,
(3) the skill requisite to perform the legal service properly,
(4) the preclusion of other employment by the attorney due to
acceptance of the case, (5) the customary fee, (6) [w]hether the
fee is fixed or contingent, (7) [t]ime limitations imposed by the
client or the circumstances, (8) the amount involved and the
results obtained, (9) the experience, reputation, and ability of
the attorneys, (10) the undesirability of the case, (11) the
nature and length of the professional relationship with the
client, and (12) [a]wards in similar cases. Id. at 717-19. In
Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (9th Cir. 1975),
the Ninth Circuit adopted the Johnson guidelines. Id. at 70.
The parties refer to these as the Johnson-Kerr factors and we
adopt this usage. These factors are largely found in Alaska Bar
Rule 35(a).
14 The State argues the combined awards amount to hourly
rates of $727.31 and $528.95, whereas the attorneys fair market
rates are $275 and $200 per hour.
15 APBP has joined in Northern Justice Projects brief.
16 See Edwards, 920 P.2d at 758.
17 See Hughes v. Foster Wheeler Co., 932 P.2d 784, 793
(Alaska 1997) (citing Mt. Juneau Enters., Inc. v. Juneau Empire,
891 P.2d 829, 834 (Alaska 1995)).
18 Glamann v. Kirk, 29 P.3d 255, 259 (Alaska 2001)
(quoting Philbin v. Matanuska-Susitna Borough, 991 P.2d 1263,
1266 (Alaska 1999)).
19 See In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 307-
08 (3d Cir. 2005) (appearing to use de novo standard to review
the trial courts behavior as a fiduciary in evaluating a fee
request in a class action settlement).
20 Municipality of Anchorage v. Gentile, 922 P.2d 248, 267
n.28 (Alaska 1996).
21 Edwards v. Alaska Pulp Corp., 920 P.2d 751, 756 n.7
(Alaska 1996).
22 Municipality of Anchorage v. Gallion, 944 P.2d 436, 447
(Alaska 1997) (citing Gentile, 922 P.2d at 266).
23 See supra note 13 for the Johnson-Kerr factors.
24 Edwards, 920 P.2d at 758.
25 Id. at 758 & n.14 (noting percentages ranging from 10%
to 50% have been accepted but that the consensus seems to be that
20% to 30% (or 19% to 33%) is normally reasonable and the median
and the most common figure seems to be 25% of the fund).
26 Id. at 758 (also listing as factors to consider the
time required to reach a settlement, whether class members have
substantial objections to the settlement terms or the fee
request, non-monetary benefits conferred by the settlement, the
economies of scale involved in a class action, and the structure
of the settlement).
27 Id. at 757.
28 Id. (citing In re Wash. Pub. Power Supply Sys. Sec.
Litig., 19 F.3d 1291, 1301-05 (9th Cir. 1994)).
29 Id. at 758.
30 Municipality of Anchorage v. Gallion, 944 P.2d 436, 447
(Alaska 1997) (citing Municipality of Anchorage v. Gentile, 922
P.2d 248, 266 (Alaska 1996)).
31 See Edwards, 920 P.2d at 758 (discussing In re Wash.
Pub. Power Supply Sys. Secs. Litig., 19 F.3d at 1297, in which
the percentage method was inappropriate because the fund amounted
to $685 million); see also In re Cedant Corp. PRIDES Litig., 243
F.3d 722, 737 nn.19 & 22 (3d Cir. 2001) (stating $100 million
seems to be the informal marker of a very large settlement and
citing several cases with settlements exceeding $100 million in
which courts used the lodestar method (internal quotation mark
omitted) (citation omitted)).
Also, at least one court has noted the percentage
method may be inadequate if multiple firms represented the class.
See In re Superior Beverage/Glass Container Consol. Pretrial, 133
F.R.D. 119, 124 (N.D. Ill. 1990).
32 Edwards, 920 P.2d at 758 n.13 (quoting Rawlings v.
Prudential-Bache Props., Inc., 9 F.3d 513, 516 (6th Cir. 1993)).
33 Id. (quoting Rawlings, 9 F.3d at 516).
34 Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1269 (D.C.
Cir. 1993).
35 See Edwards, 920 P.2d at 758 n.13 (quoting Rawlings, 9
F.3d at 516).
36 Id. at 759.
37 Cf. Municipality of Anchorage v. Gallion, 944 P.2d 436,
447 (Alaska 1997) (stating that [t]he superior courts observation
about the difficulty of determining the value of the judgment
remains relevant and valid, and holding the common fund doctrine
did not apply).
The courts failure to discuss the other relevant
factors is harmless error because all the factors support
choosing the percentage method: (1) the size of the fund is just
over $1 million and thus is clearly not a mega-fund; (2) the case
did not settle, so there is no risk counsel pushed an early and
large settlement to receive higher fees; and (3) only one firm
represented the class.
38 The State also argues that class counsels hourly fees
were unreasonable due to failure to deduct certain entries.
Because the State did not raise this argument below, we conclude
the State has waived this argument on appeal. Cf. State
Commercial Fisheries Entry Commn v. Carlson, 65 P.3d 851, 873
(Alaska 2003).
39 Municipality of Anchorage v. Gentile, 922 P.2d 248, 266
(Alaska 1996).
40 Edwards, 920 P.2d at 759; see also MacDonald v.
Weinberger, 512 F.2d 144, 146-47 (9th Cir. 1975) (noting that in
determining a reasonable fee, courts face the competing
considerations of ensuring the attorneys compensation [is]
sufficient to encourage members of the bar to undertake
representation of disability claimants while acknowledging that
the disability award, from which the attorneys fee is paid, is
normally an already-inadequate stipend for the support and
maintenance of the claimant and his dependents).
41 Edwards, 920 P.2d at 756; see also id. at 758 n.15
(Trial courts which elect to follow a percentage approach must
exercise their independent discretion in arriving at a fair and
reasonable fee award under the common fund doctrine.).
42 See Municipality of Anchorage v. Gallion, 944 P.2d 436,
447 (Alaska 1997) (explaining the compensable value of counsels
services may exceed the hours worked times the hourly rates
(citing Municipality of Anchorage v. Gentile, 922 P.2d 248, 264
(Alaska 1996))); Gentile, 922 P.2d at 266.
In common fund cases in other jurisdictions, court have
tended to award multipliers of two to four times the lodestar and
as high as five in some circumstances. See, e.g., In re NASDAQ
Market-Makers Antitrust Litig., 187 F.R.D. 465, 489 (S.D.N.Y.
1998) (noting multipliers of between 3 and 4.5 have become common
(internal quotation mark omitted) (citation omitted)); Ressler v.
Jacobson, 149 F.R.D. 651, 654 n.4 (M.D. Fla. 1992) (explaining
courts regularly award multipliers of 2 to 3 times [the]
lodestar); Kuhnlein v. Dept of Revenue, 662 So. 2d 309, 315 (Fla.
1995) (setting the maximum multiplier available in common fund
cases at five). If we consider the award in this case as though
it were calculated as a modified lodestar, the multiplier here
would be between 2.4 and three; thus, it cannot be regarded as
unreasonable by that measure.
43 See Era Aviation, Inc. v. Lindfors, 17 P.3d 40, 51-52
(Alaska 2000) (citing examples to support the statement that
[t]his court has affirmed . . . risk-enhanced fees only in
exceptional circumstances, where there was a strong public
interest involved, or the attorneys stood to receive no
compensation other than the fees granted by the court, and
refusing to award risk-enhanced fees where, among other things,
the party had not shown that counsel would not be paid other than
by court-awarded fees); see also In re Contl Ill. Sec. Litig.,
962 F.2d 566, 573 (7th Cir. 1992) (discussing the importance of
risk multipliers in class actions because [i]n a class action
suit, . . . there is no contract between lawyer and client no
source other than the judicial award of fees to which the lawyer
can look for compensation for risk of loss).
44 See Era Aviation, Inc., 17 P.3d at 51-52 (explaining we
have permitted risk-enhanced fees in cases that involve the risk
of discouraging capable counsel, and refusing to award such fees
where, among other things, the party had not shown her case was
of the type that would make it difficult to attract capable
counsel without the potential of enhanced fees); Gentile, 922
P.2d at 264 (directing the court on remand to consider the
potential difficulty of attracting capable counsel in setting the
class action fee award); cf. Wise Mech. Contractors v. Bignell,
718 P.2d 971, 975 (Alaska 1986) (explaining that the contingent
nature of representation in workers compensation cases makes
awarding enhanced fees necessary to ensure that competent counsel
are available to represent injured workers).
45 Wise Mech. Contractors, 718 P.2d at 975.
46 Thomas v. Bailey, 611 P.2d 536, 542 (Alaska 1980)
superseded by statute on other grounds, ch. 86, 1-4, SLA 2003.
47 Id.
48 Gentile, 922 P.2d at 264.
49 Id. at 264 n.25.
50 Id.
51 Brandon v. Corr. Corp. of Am., 28 P.3d 269, 280 (Alaska
2001) (citing Preblich v. Zorea, 996 P.2d 730, 736 n.17 (Alaska
2000)).
52 Constitutional due process requires notice reasonably
calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an
opportunity to present their objections. Mullane v. Cent.
Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).
53 Alaska R. Civ. P. 23(c)(2) (In any class action
maintained under subdivision (b)(3), the court shall direct to
the members of the class the best notice practicable under the
circumstances, including individual notice to all members who can
be identified through reasonable effort.); see also Alaska R.
Civ. P. 23(b)(1)-(3).
54 Pate v. United States, 328 F. Supp. 2d 62, 70 (D.D.C.
2004) (quoting EEOC v. Gen. Tel. Co. of Nw., Inc., 599 F.2d 322,
334 (9th Cir. 1979), affd, 446 U.S. 318 (1980)) (internal
quotation marks omitted) (alterations and omissions in original);
see also Eubanks v. Billington, 110 F.3d 87, 92 (D.C. Cir. 1997)
(stating [a] number of courts have held that, as a general
matter, due process does not require that (b)(1) or (b)(2) class
members be given an opportunity to opt out and citing cases from
the Second, Fifth, Sixth, and Ninth Circuits).
55 Holmes v. Contl Can Co., 706 F.2d 1144, 1156 (11th Cir.
1983).
56 Id. at 1155 n.8 (citation omitted); see also Van Gemert
v. Boeing Co., 590 F.2d 433, 439 n.14 (2d Cir. 1978) ([C]lass
actions certified under 23(b)(2) or . . . 23(b)(1), do not
contain an opt-out privilege. This reflects the conclusion of
those who drafted the Rules that individual choice should be
subordinated to the interests of the class as a whole to avoid
inconsistent judgments or prejudice to absent class members.
Because class certification represents a judicial determination
that the absentees are adequately represented, it would frustrate
the Rule if we were to require an investigation into each
plaintiffs willingness to accept the benefits of the
litigation.); cf. Woodward v. Rogers, 344 F. Supp. 974, 980 n.10
(D.D.C. 1972) (holding that where the adequacy of the
representation of the class interests by the named parties is
clear, where no apparent purpose would be served by notice to
this wide-ranging class even if notice were at all practicable,
and where, indeed, judgment is in favor of the class, the
essential requisites of due process have been met without further
notice (citations omitted)).
57 See, e.g., Holmes, 706 F.2d at 1159-60 (holding notice
of opportunity to opt-out of settlement was required in 23(b)(2)
Title VII case because the settlement included a lump-sum damages
award and each class members claim to back pay was based on
unique injuries, defying the assumption of cohesiveness and
generating the possibility of antagonistic interests and
conflicting concerns); cf. Eubanks, 110 F.3d at 96 (holding when
a (b)(2) class seeks monetary as well as injunctive or
declaratory relief the trial court may either certify the class
as a hybrid (b)(2)/(b)(3) class or conclude that the claims of
particular class members are unique or sufficiently distinct from
the claims of the class as a whole such that opt-out notices
should be permitted on a selective basis); Elliott v. Weinberger,
564 F.2d 1219, 1229 (9th Cir. 1977) (Only when necessary to
provide class members an opportunity to signify whether
representation by named plaintiffs is fair and adequate or to
intervene to present additional claims or to otherwise come into
the action to, for example, submit views as amici curiae, does
due process require the direction of some sort of notice to
absent members of a (b)(2) class.), affd in part and revd in part
on other grounds sub nom. Califano v. Yamasaki, 442 U.S. 682
(1979).
58 See Goldenberg v. Mariott PLP Corp., 33 F. Supp. 2d
434, 441 (D. Md. 1998) (Notice of the potential extent of
attorneys fee awards is deemed essential because it allows class
members to determine the possible influence of the fees on the
settlement and to make informed decisions about their right to
challenge the fee award. (citations omitted)); cf. Staton v.
Boeing Co., 327 F.3d 938, 963 n.15 (9th Cir. 2003) (Where the
class was informed of the amount of fees only indirectly and
where the failure to give more explicit notice could itself be
the result of counsels self-interest, the courts must be all the
more vigilant in protecting the interests of class members with
regard to the fee award.).
59 See Alaska R. Civ. P. 23(d) (permitting courts to make
appropriate orders . . . (2) requiring, for the protection of the
members of the class or otherwise for the fair conduct of the
action, that notice be given in such manner as the court may
direct to some or all of the members of any step in the action,
or of the proposed extent of the judgment, or of the opportunity
of members to signify whether they consider the representation
fair and adequate, to intervene and present claims or defenses,
or otherwise to come into the action); Larionoff v. United
States, 533 F.2d 1167, 1186 n.44 (D.C. Cir. 1976) (noting that
Federal Rule of Civil Procedure 23(d)(2) operates as a safety
valve under which the court has discretion . . . to direct notice
to be given in any class action).
60 Fed. R. Civ. P. 23(h)(1) & advisory committee note,
subdiv. (h) (2003).
61 Fed. R. Civ. P. 23 advisory committee note, subdiv. (h)
(2003).
62 Id.; see also Cobell v. Norton, 407 F. Supp. 2d 140,
147 (D.D.C. 2005) (stating the rule was promulgated for this
reason).
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
