The over $40 million attorneys’ fees and costs that Betty Johnson’s four lawyers are billing the CNMI government—prompting howls of protest across the community—ballooned to stratospheric heights due to the application of what these lawyers call the lodestar method and multiplier of 15.
Yet the issue of lodestar and multi-million attorneys’ fees and costs awarded to lawyers as a result of a class action are not new to the CNMI. The class action against the islands’ garment manufacturers more than a decade ago is a good example.
The issue has caused some panic in the community and some retirees are now talking about opting out of Johnson’s class action global settlement.
To that, veteran lawyer Michael W. Dotts has some calming words. He says there is no need to panic or overreact.
“I would recommend that the retirees and the community trust the judge on the fee issue. The judge knows what is going on,” Dotts told Saipan Tribune.
If a multiplier is justified, Dotts said, U.S. District Court for the NMI designated judge Frances Tydingco-Gatewood will explain why and, even if a multiplier of 15 is awarded, the judge will not let an award of attorneys’ fees hurt the retirees or the community.
The lodestar method
Lodestar refers to a method adopted for calculating attorneys’ fees where the court multiplies a reasonable hourly rate by a reasonable number of hours expended.
According to Dotts, this method comes up when a party who wins a lawsuit is entitled to recover their attorneys’ fees.
Citing a wage case for unpaid overtime as an example, Dotts said federal law awards the employees their reasonable attorneys’ fees as well as their unpaid overtime wages.
In an unpaid overtime case, the court determines what is “reasonable attorneys’ fees” by looking at what other attorneys in the same community and performing the same sort of work charge as an hourly rate.
The court also looks at the actual work the attorney performed for the employees and determines if the work was justified.
“Not all work may be justified such as in a situation where the employees lost on some claims. The time the attorneys spent on claims that were lost is generally not counted,” Dotts said.
The total hours determined to be justified, Dotts said, are then multiplied with the community standard hourly rate to determine the “reasonable attorneys’ fees” to award.
In Johnson’s case, Dotts said, if Judge Tydingco-Gatewood uses the lodestar method, she should ask what other attorneys on Saipan and Hawaii charge.
Dotts believes it is fine to consider Hawaii as it seems to have been necessary for Johnson to go to Hawaii to find attorneys willing to represent her.
The lawyer said all the hours the attorneys worked should be reviewed.
Dotts said that most of the work that Johnson’s attorneys performed is probably justified, but the CNMI government should be given a chance to comment on all of it.
“Then the total hours found justified should then be multiplied by the applicable hourly rates. That should be the fee awarded to Betty Johnson’s attorneys,” he said.
Dotts explained that a multiplier can be awarded if the court action took a significantly long period of time, involved a great deal of risk, was novel, prevented the attorneys from taking other work, or resulted in a community’s benefit.
Dotts said the purpose of a multiplier is to both reward the attorneys for their success in the case and to encourage other attorneys to take other such cases.
In Johnson’s request for a multiplier of 15, Dotts said he has never heard of such a multiplier but then he has not read the filings of Johnson’s attorneys.
Dotts does not believe that multipliers are commonly given but when done, they are probably most commonly given in the range of 2 or 3 times the lodestar.
“I am sure that Judge Tydingco-Gatewood will look at what multiplier to award [if any] very carefully,” he said.
Dotts said a judge normally approves a request for attorneys’ fees and costs using the lodestar method in cases where attorneys’ fees are awarded pursuant to a statute or a contract clause.
He said class action cases pretty much always require that the fees of the class attorneys be approved by a court and the lodestar is one method used.
Dotts, however, pointed out that there are other methods and one is a “percentage” approach that is sometimes used in class actions.
“If percentages are applied the value of the recovery has to be determined and then the attorneys are awarded a percentage of that value,” he said.
Johnson counsels’ computation
Under the settlement agreement, the CNMI government agrees to pay Johnson’s attorneys’ fees and costs, and a $7,500 service award for bringing the lawsuit against the government and the Fund on behalf of the class members.
Bronster Hoshibata, a Honolulu-based law firm that is one of the counsels for Johnson, stated in its petition that the value of the benefit obtained for the class by the settlement is at least $591.22 million.
Under a percentage-of-the-fund approach, 5 percent of this amount is $29.56 million, according to attorney Robert M. Hatch of the Bronster Hoshibata law firm.
Hatch said if the court were to determine that Bronster’s contribution to the benefit provided to the class were only half of this already very low percentage, it would still be $14.78 million.
Hatch said that given the enormous risk undertaken in this case and the excellent results for the class, their law firm believes that a multiplier of 15 is very reasonable and that under the lodestar analysis, this yields “a reasonable fee” for their firm of $15.09 million.
Aside from Bronster Hoshibata, the other counsels for Johnson—Timothy Lord, Bruce Jorgensen, and local counsel Stephen C. Woodruff—also submitted applications that would bring the total attorney’s fees and costs to at least $40.6 million.
Class action vs garment factories
In the class action against the garment manufacturers on Saipan, the federal court approved the plaintiffs’ request for attorneys’ fees in the amount of $3.15 million and expenses totaling $5.6 million, as agreed to by the parties in the settlement.
Dotts said the attorneys’ fees were agreed as part of the settlement and then approved by the court using the lodestar method.
In that class action, Dotts said the plaintiffs’ attorneys sought only 14 percent of what they would have collected if they charged their normal hourly rates for all of the hours they worked.
“They did not seek a multiplier. They reduced the lodestar amount by 86 percent,” Dotts added.
The class action against the garment factories ended up with a settlement after almost four years of hard-fought and high-risk litigation in federal court. The court preliminarily approved in October 2002 the settlement in which the centerpiece was approximately $20 million settlement fund and a monitoring program.
Then U.S. District Court for the NMI Chief Judge Alex R. Munson approved the settlement agreement in April 2003.
The litigation in this case happened in three different actions in Los Angeles, San Francisco, Honolulu, and Saipan, against more than four dozen defendants.
Attorney Joyce C.H. Tang of the Guam-based law firm of Teker Civille Torres & Tang prepared the plaintiffs’ memorandum in support of application for attorneys’ fees and expenses in March 2003.
The plaintiffs’ counsel, Milberg Weiss law firm based in San Diego, California, retained several local counsels to help mainland lawyers with the litigations in federal court. Among the local counsels were Tang’s law firm and Pamela Brown.
Tang was also involved in the settlement negotiations in Johnson’s case as her law firm served as the Fund trustee ad litem.
In the class action against the garment manufacturers, Tang claimed that the sometimes crushing demands of the cases required plaintiffs’ counsels to spend almost 70,000 hours prosecuting the cases, representing a lodestar of over $21 million for time through February 2003.
Tang said the plaintiffs’ counsel spent nearly $6 million of their own money on litigation expenses, yet several of the lawyers representing plaintiffs waived their fees entirely for purposes of the settlement, and sought reimbursement of less than their total litigation expenses.
Tang said the amount requested for attorneys’ fees represents just 14 percent of the total lodestar of the plaintiffs’ law firms—which is $21.4 million.