For many commentators, a class action settlement that awards more to the class counsel than the class members is questionable on its face. But the Ninth Circuit recently allowed such an award in the Nutella false advertising class settlement. In re: Ferrero Litigation, No. 12-56469 (9th Cir. July 16, 2014) (Get decision here).
The Nutella settlement arises from claims that Defendant falsely advertised Nutella as healthy. The class settlement consisted of a $550,000 monetary fund and injunctive relief requiring the company to change its advertising and report additional nutritional information on the Nutella label. The attorneys’ fees in the case — $985,920 — far exceeded the monetary fund, leading to objections to the settlement on that basis.
In affirming the fee award, the Ninth Circuit recognized that the fees were not the more typical 25 percent of the class award, but held that the fees were borne out under the “lodestar” method of calculating fees, which looks at fees based on attorney hours spent on a matter, multiplied by rates. Significantly, there was no objection to the number of hours spent or the rates. In addition, the Ninth Circuit held that the injunctive relief obtained was substantial, further justifying the fee, and there was no indication of collusion.
What to make of the decision? While at first blush it is surprising to see fees that exceed a class award approved, one can see courts approving such fees under the circumstances here. After all, why would counsel bring cases that offer mostly injunctive relief if they could not make back their investment? Thus, to the extent courts want to promote class actions (or, more specifically, class settlements), the affirmance makes sense. For those who want to question such fees in the future, the clear message from the Ninth Circuit is that any such objection should specifically question the hours and the rates used to calculate the fee.