LAFFITTE v. ROBERT HALF INTERNATIONAL (BRENNAN)

Appellant’s Opening Brief on the Merits

Cal.May 27, 2015

NO. 8222996 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA MARK LAFFITTE,et al, oe SUPREME COURT Plaintiffs and Respondents, F | L E D VS. MAY 2 7 2015 ROBERT HALF INTERNATIONAL,INC.,e¢ al., Frank A. McGuire Clerk Defendants and Respondents, Deputy DAVID BRENNAN, Plaintiffand Appellant. After a Decision of the Court of Appeal, Second Appellate District, Div. Seven, No. B249253; Los Angeles Superior Court, Stanley Mosk Courthouse, Case No. BC 321317 [related to BC 455499 and BC 377930], Hon. Mary H.Strobel, Presiding Judge, Dept. 32 APPELLANT'S OPENING BRIEF ON THE MERITS LAWRENCE W. SCHONBRUN (SB #54519) Law Office of Lawrence W. Schonbrun 86 Eucalyptus Road Berkeley, CA 94705 Tel: (510) 547-8070 Fax: (510) 923-0627 Attorneyfor PlaintiffClass Member/Objector and Appellant David Brennan NO. 8222996 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA MARK LAFFITTE,et ai., Plaintiffs and Respondents, Vs. ROBERT HALF INTERNATIONAL,INC., et al., Defendants and Respondents, DAVID BRENNAN, PlaintiffandAppellant. After a Decision ofthe Court of Appeal, Second Appellate District, Div. Seven, No. B249253; Los Angeles Superior Court, Stanley Mosk Courthouse, Case No. BC 321317 [related to BC 455499 and BC 377930], Hon. Mary H.Strobel, Presiding Judge, Dept. 32 APPELLANT'S OPENING BRIEF ON THE MERITS LAWRENCEW. SCHONBRUN (SB #54519) Law Office of Lawrence W. Schonbrun 86 Eucalyptus Road Berkeley, CA 94705 Tel: (510) 547-8070 Fax: (510) 923-0627 Attorneyfor PlaintiffClass Member/Objector and Appellant David Brennan NS TABLE OF CONTENTS Page Table of Authorities 00.0... ccceccececseessssesessesesseesesecsscseeessecsescscsessescecesceasesoreees iv ISSUE PRESENTED 000.eeccecceecccssssessesesseesasssessussaseceuesssscssssecssacecssevaveaeaees 1 INTRODUCTION...ce cceesseceeeessssssesseceeeseessesssenseeeeeseessssssscsecsevessessssrseaes 1 STATEMENTOF THE CASE uu... cccccecsessessssseessessseceesesesecseeseesstecesscsssesenens 2 STATEMENT OF FACTS AND PROCEDURALHISTORY........ccceee 4 ARGUMENT...eeccccesessseeeseeeeceeaeceecsesseeesaeessessesssesacecescsessecsssccsenersessssaevaes 7 I. This Court's Serrano II Decision Does Not Permit California Trial Courts to Calculate an Award of Reasonable Attorneys' Fees Anchoredto the Percentage- Of-the-Recovery Approach... ccceesessssssessseseeeeseeesecscsecesseescscesesenenees 7 A. Serrano III Clearly Holds That Judicial Calculations of Reasonable Attorneys' Fees Must Start with the LOdeStar ooo... eee scesececeeeseeeeseeeesseeaesseesssaeesseecseseessseceessesesscneses 7 B. ‘This Court Reaffirmed Serrano II in Ketchum v. Moses......... 12 C. Numerous Courts of Appeal over the Years Have Interpreted Serrano IIT As Requiring the Anchoring of a Judicial Award of a Reasonable Attorneys’ Fee to the Lodestar ...... ee ceeeecsesesseeseceseeseeseeeesseaeecseseeseseecesscsssesenss 12 D. The Laffitte Decision Contradicts the Common Fund DOCtrine 0... eceeeeeneceseeceeeeseesceeseeseeseesessecseesseesseseecesssesscarsass 16 E. The Laffitte Decision Contradicts Class Action Attorneys’ Fee Jurisprudence ..........c.ccsscsscessesscsssesscecceesensesneees 17 II. Anchoring the Fee Award to the Lodestar Approach Is No Longer the Central Issue in Judicial Awards of Reasonable Attorneys’ Fees from Class Action Common Funds...........ccccceeeeeee 17 A. The Litigation Landscape Has Changed Since SOYVANO LID oie eecceeessescessccsceseeseseseseesssseessseseasessssesessesseecesnsesscaseaes 17 Il. IV. TABLE OF CONTENTS Page B. The Significance of the Choicer of the Lodestar Approach Has Been Neutralized in the Context of the Modern Class Action .....cccccccscssssscsssssssssseseesscerecseeucseeseas 18 C. Confirming the Lodestar Approach Asthe Starting Point Is Insufficient to Ensure Enforcement of Serrano [II's Requirements ........ccccccccscsssscessceececsstessecesseecseens 19 D. Avoiding the Requirements of Serrano II] and Ketchum Has Resulted in a Set of Holdings Antithetical to Serrano ITI/Ketchum's Judicial Responsibilities...ee ceesessecessecescsscsessesscseasssseeseveceussecaeeass 24 The Laffitte Decision Exemplifies How Courts Disregard the Serrano III and Ketchum Requirement...........ecccssssssssssseccececsecees 37 A. No Careful Compilation of Time .........ccccccceesescscesesssseeesceees 37 No Time Records Were Filed............ccccccccsscssscssescsesesstesseseeaes 38 C. Inadequate Declarations ........cccccecssscseceececesssesescscsesecsccseseees 39 D. — Improper Delegation... cccccsccsscsssssessesesssssestssseestsceseesees 40 BE. Overstaffingecceessesssssssesessssssscsssssesssssessasecsusestecsessesseeees 4] F. — Improper Multiplier... ccccssssscsscessssssscseecacactseseessesacsaseees 4] G. No Finding of the Reasonableness of Effective Hourly Rates oo... ecescescsssssssescsssescsecsscssssececaseatecevsescaucacesensees 42 The Judicial System Must Adaptto Present Day Realities to Fulfill Serrano III's Intent of Avoiding Excessive Attorneys’ Fees in Class Actions and Maintaining the Integrity of the Bar and the Public's Respect for the Judicial System oo... ecccsssesssscsessssesesessscssessscsesececsessessesssssssscesevsees 43 A. Serrano III Established the Lodestar Approach As Fundamental Because of Concerns That Courts Using the Percentage Approach Were Overpaying Lawyers............. 43 B. Appointment of a Class Guardian is Necessary .........ceccsesesees 45 ii TABLE OF CONTENTS iii Page C. Thayer v. Wells Fargo Bank Represents a Serrano II[-Compliant Lodestar AnalySis.......ccccessseceseeeees 47 D. Reformsin the Documentation Presented in Support of Fee Requests Are Necessary to Meet Serrano III/ Ketchum Requirement.........cccccscsssscesesscesecsssssesversrccescreaeeseers 49 V. Related Class Action Fee Issues That the Court Could Address NOW.......ccscssssssssesesseesesessescsscscssssssseescesssscuscesssevasseseetaceesaceaees 54 A. Public Policy Provides a Strong Basis for This Court to Consider Ancillary Issues That Affect Attorneys' Fees........... 54 B. Extend the Scope of the Court's Laffitte Decision Beyond the Pure Common Fund Doctrine to Include So-Called Separately Negotiated Fee Payments... 55 C. Prohibit Discussion of Fees between Class Counsel and Defendants 0... cecssssssesesessssessessensesssesecsssesesesvevseseceeceass 56 D. Changethe Reasonable Hourly Rate Standard to a Competent or Capable Attorneys’ Standard .........ccceeeeeeees 57 E. Eliminate Multipliers Altogether or Modify Multipliers for Contingent Risk in Class Actions ..........cccccscsecsceseseeeeeess 58 F. Limit Enhancementfor Quality of Performance and Results Obtained to an Enforceable Standard of What Constitutes "Extraordinary".......cccccccsccsscescescsssscssssscescesseseees 59 CONCLUSION2...cececcsseseseseessssesessesseasscsesesssssscesesscsucsssacesarsesessesusateasanses 60 CERTIFICATE OF WORD COUNT......cccccssescsscsecsesecsscectesssestessess Post - | CERTIFICATE OF SERVICE.......ccccesscsssscsescsssscescssssseveceesaceestsaeears Post — 2 TABLE OF AUTHORITIES State Cases Page Apple Computer, Inc. v. The Superior Court of Los Angeles County, et al., 126 Cal.App.4th 1253 [24 Cal.Rptr.3d 818] (2d App. Dist. Feb. 17, 2005).............. 23, 55, 56 Chavez v. Netflix, Inc., 162 Cal.App.4th 43 [75 Cal.Rptr.3d 413] (1st App. Dist. Apr. 21, 2008)........0..... 26, 27, 32 City and County ofSan Francisco v. Sweet, 12 Cal.4th 105 [48 Cal.Rptr.2d 42] (Dec. 18, 1995)... escccccsssccesseescssessecstscsersesaees 16 City ofColton v. Singletary, 206 Cal.App.4th 751 [142 Cal.Rptr.3d 74] (4th App. Dist., Div. 2, May 30, 2012)............ 31 Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Market, Inc., 127 Cal.App.4th 387 [25 Cal.Rptr.3d 514] (2d App. Dist. Mar. 7, 2005) ......ecccesscsessssessseeseeesseessesecsessesecsessecseeeees 16 Consumer Privacy Cases, 175 Cal.App.4th 545 [96 Cal.Rptr.3d 127] (1st App. Dist. June 30, 2009)...eee 47 Dover Mobile Estates v. Fiber Form Products, Inc., 220 Cal.App.3d 1494, 1501 [270 Cal.Rptr. 183] (6th App. Dist. May 31, 1990)... ceescssetessesseesseccsscsssececssssrssensaes 28 Dunk v. Ford Motor Co., et al., 48 Cal.App.4th 1794 [56 Cal.Rptr.2d 483] (4th App. Dist. Aug. 30, 1996)...eee 14 Duran v. U.S. Bank Nat'l Assoc., 59 Cal.4th 1 [172 Cal.Rptr.3d 371) (May 29, 2014)...ccccecsscescssessessessetsseeaes 58 G.R. v. Intelligator, 185 Cal.App.4th 606 [110 Cal.Rptr.3d 559] (4th App. Dist., Div. 3, June 10, 2010).......... 28 Horsford v. The Board ofTrustees ofCalifornia State Univ., etal., 132 Cal.App.4th 359 (Sth App. Dist. Aug. 31, 2005) wo...cee 30 Jutkowitz v. Bourns, Inc., et al., 118 Cal.App.3d 102 {173 Cal.Rptr. 248] (2d App. Dist. Apr. 16, 1981)... 11, 13 Ketchum v. Moses, 24 Cal.4th 1122 [104 Cal.Rptr.2d 377] (Feb. 26, 2001)weeccsssssesseseseeeeespassim iv TABLE OF AUTHORITIES State Cases Page Laffitte v. Robert HalfInt'l, Inc., et al.; David Brennan, Plaintiffand Appellant, No. B249253, 2014 Cal.App. LEXIS 1059 (2d App. Dist. Oct. 29, 2014)........passim Lealao v. Beneficial California, Inc., 82 Cal.App.4th 19 [97 Cal.Rptr.2d 797] (1st App. Dist. July 10, 2000) wo...eeepassim Longv. Griffin, et al., No. 11-1021, 2014 Tex. LEXIS 304; 57 Tex. Sup. J. 470 (Supreme Ct., Tex. Apr. 25, 2014) (PET CULIAM)0... eee eeecesesessescscsessscsesssecsssevsvessvesarssssssesecacsesssavesssesseeees 51 Nightingale v. Hyundai Motor America, 31 Cal.App.4th 99 [37 Cal.Rptr.2d 149] (1st App. Dist., Div. 3, Dec. 27, 1994) wu... 28 Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assoc., 163 Cal.App.4th 550 [77 Cal.Rptr.3d 695] (2d App. Dist., Div. 4, May 30, 2008)............. 29 Robbins v. Alibrandi, 127 Cal.App.4th 438 [25 Cal.Rptr.3d 387] (1st App. Dist., Div. 1, Feb. 4, 2005)... 17 Salton Bay Marina, Inc., et al. v. Imperial Irrigation Dist., 172 Cal.App.3d 914 [218 Cal.Rptr. 839] (4th App. Dist. Sept. 30, 1985)... ccccscccssececesesesesscatscsececeesees 13,14 Sommers v. Erb, 2 Cal.App.4th 1644 [4 Cal.Rptr.2d 52] (4th App. Dist., Div. 1, Jan. 29, 1992) oes. 28 Syers Properties ITI, Inc. v. Rankin, 226 Cal.App.4th 691 [172 Cal.Rptr.3d 456] (1st App. Dist., Div. 2, May 5, 2014)...ccecsesesseseseesees 26, 27, 38 Serranov. Priest, et al. (Serrano II), 18 Cal.3d 728 [135 Cal.Rptr. 345] (Dec. 30, 1976)....ccccccecccescsccsscscessscsssesereeeeees 17 Serrano v. Priest, et al. (Serrano III), 20 Cal.3d 25 [141 Cal.Rptr. 315] (Oct. 4, 1977) voccccccsececesesssecsssesececeeeseeespassim Serrano v. Unruh, 32 Cal.3d 621 [186 Cal.Rptr. 754] (Oct. 28, 1982) ooo cescsscscescessscsececsesecees 16, 57 TABLE OF AUTHORITIES State Cases Page Sutter Health Uninsured Pricing Cases, 171 Cal.App.4th 495 [89 Cal.Rptr.3d 615] (3d App. Dist. Jan. 27, 2009)...eee 30, 39 Thayer v. Wells Fargo Bank N.A., 92 Cal. App. 4th 819 [112 Cal.Rptr.2d 284] (1st App. Dist. Oct. 2, 2001)... 47, 48 Vasquez v. State ofCalifornia, 45 Cal.4th 243 [85 Cal.Rptr.3d 466] (Nov. 20, 2008) oo... eccsccsescsessssesescceseesseeeees 52 Weber v. Langholz, 39 Cal.App.4th 1578 [46 Cal.Rptr.2d 677] (2d App.Dist., Div. 4, Nov. 13, 1995)....... 30, 31 The People ex rel. Department ofTransportation v. Yuki, et al., 31 Cal.App.4th 1754 [37 Cal.Rptr.2d 616] (6th App. Dist. Jan. 6, 1995) oo... 13, 18,19 Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 [110 Cal.Rptr.2d 145] (6th App. Dist. July 31, 2001)... 28, 33 Federal Cases Page Central Railroad & Banking Co. ofGeorgia v. Pettus & Others, 113 U.S. 116, 128 (Jan. 5, 1885)oeecccescsceeeseeseeseecesseccevescensvaaes 36 City ofDetroit v. Grinnell Corp. 495 F.2d 448 (2d Cir. Mar. 13, 1974) ooo cceeccsesessesenseessssececssscsesesecesesssesesseeses 7, 8,9 Goldbergerv. Integrated Resources, Inc., 209 F.3d 43 (2d Cir. Mar. 28, 2000) 0... eeecsscssesessesscessessessessens 24, 46, 47, 50, 58 Haas v. Pittsburgh National Bank, et al., 77 F.R.D. 382 CW.D. Pa. Dec. 7, 1977)... eeccecsccsssscssstcessecssessessseesssssssecensceaceenes 21, 46 In re Superior Beverage/Glass Container Consol. Pretrial, 133 F.R.D. 119 (N.D.Ill., Eastern Div., Nov. 5, 1990) wo... 35 Vi TABLE OF AUTHORITIES Federal Cases Page In re Trans Union Corp. Privacy Litig., 629 F.3d 741 (7th Cir. Jan. 14, 2011) occecececesessessseseseceescsscseesseeseessscsseesesseceseees 24 Levine v. The Entrust Group, Inc., No. C 12-03959, 2013 U.S. Dist. LEXIS 6715, at *6 (N.D. Cal. Jan. 15, 2013)... 57 Lindy Bros. Builders, Inc. ofPhila. v. American Radiator & Standard Sanitary Corp., etal., 487 F.2d 161 (3d Cir. Oct. 31, 1973) oo... ecescesseteeee 9, 10, 38, 39, 40 McDaniel v. County ofSchenectady,et al., 595 F.3d 411 (2d Cir. Feb. 16, 2010)... cc cccccecccssccsssseeccsescsscsssssesssecsssecsaceseaeeates 54 Perdue v. Kenny A., et al., 559 U.S. 542 (Apr. 21, 2010)wee50, 57 Trustees v. Greenough, 105 U.S. 527 (May 8, 1882) .....ccecccssseseseeeceeneeeees 43 Statutes, Codes and Rules Page 29 U.S.C. §§ 201, et seg. (Fair Labor Standards Act) .......cccccecesseceerseeceeeee 2 29 U.S.C. §§ 1001, et seg. (Employee Retirement Income Security Act of 1974)... ccccscessssessesssessseecssseesssessenesessessees veeeteneeneess 2 California Business & Professions Code, Section 6148 oo... ccccssssccssscccseessessscesseecesseassescsssscssssseeceetarseeecenseaes 52 Sections 17200, et seq. (Unfair Competition Law)..........cccseeeeene 2 California Code of Civil Procedure, Section OOL ccecsssscccesecssscessesessesssseessscecseceesssesssssscsssseessecceneneeereceeees 3 SeCtiOn 904 ocecessssssessesseessssssesesacenssceesecccssecsesessssessssesescerseeeeeeacensans 3 California Labor Code, SeCHON 203 oo. ccscccssssssssecsscsseescsssssessseceesseeecessscsesssssessescesaeesacececeesvans 2 Sections 2698, et seq. (Private Attorneys General Act) ........c cece 2 California Rules of Court Rule 8.100(a) occeecceccsscsssesessssssesessessessneeeseeesscsssecscsssssccssescerecseeacaeans 3 Rule 8.204(a)(2)(B) 0... sceeeccsesssessssesesseeesecsssessescassessessessescsssesevscasecntes 3 Vii TABLE OF AUTHORITIES Texts, Treatises, and Other Page A.B.A. Standing Committee on Ethics and Professional Responsibility, Formal Opinion 93-379, "Billing for Professional Fees, Disbursements and Other Expenses," Dec. 6, 1993 oescscsscsssssesesessecesseesseessessessessecesseeeesssecessessesssssssasesasessesceaseres 53 Brandeis, Louis D. OTHER PEOPLE'S MONEY (Stokes Publ., New York, 1914), at Ch. 5, p. 92......ccccccscscceseeeseceseeeees 49 California State Bar, Arbitration Advisory 1995-02, "Standards for Attorney Fee Billing Statements," June 9, 1995.00... 53 Grady, John F., Reasonable Fees: A Suggested Value-Based Analysisfor Judges, 184 F.R.D. 131 (1998)... cccccssescssesssscsesssecersecneeeceees 35 Issacharoff, Samuel, Class Action Conflicts, 30 U.C. DAVIS L. REV. 805 (Spring 1997)... cccscesseesssessescsstsssceeeesscseees 22 Macey, Jonathan R. & Geoffrey P. Miller, The Plaintiffs’ Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendationsfor Reform, 58 UNIV. CHic. L. REV. 1 (No. 1, Winter 1991)...cece 22, 26, 35, 59 Pearl, Richard M., CALIFORNIA ATTORNEY FEE AWARDS, 3d ed. (CEB Mar. 2014 Update)... cccccccsccssssessccssscssecssscssssessecesecenseereaes 36 Report on Contingent Fees in Class Action Litigation, January 11, 2006, 25 The Review ofLitigation 458 (No. 3, Summer 2006).........00000.. 58 Walker, Vaughn R. & Ben Horwich, The Ethical Imperative ofa Lodestar Cross-Check: Judicial Misgivings about "Reasonable Percentage" Fees in Common Fund Cases, 18 GEO. J. OF LEGAL ETHICS 1453 (No.4, Fall 2005)cccccesesessssssseessscesscessssceeveees 34, 46, 55, 59 Vili ISSUE PRESENTED Theissue certified for review is "Does this Court's seminal decision in Serrano v. Priest (Serrano ITI), 20 Cal.3d 25 [141 Cal.Rptr. 315] (Oct. 4, 1977), permit a trial court to anchorits calculation of a reasonable attorney's fees award in a class action on a percentage of the common fund recovered?" INTRODUCTION Asthis brief will make clear, the answer to the question posed by the Court is clearly "No." The essential problem this Court confronted in 1977 was excessive attorneys’ fee awards. As the First Appellate District's Lealao court explained, Serrano III's purpose wasto correct the problem of attorneys' fee awards that were "excessive and unrelated to the work actually performed by counsel." Lealao v. Beneficial California, Inc., 82 Cal.App.4th 19, 28 n.2 [97 Cal.Rptr.2d 797] (1st App.Dist. July 10, 2000) (citation omitted). In 1977, the lodestar approach and the percentage-of-the- recovery approach wereradically different methodologies. Almost forty years later — and manythousandsofclass actions later — the lodestar has been morphedinto a surrogate for a desired percentage- of-the-recovery fee. Not only defendants buttrial and appellate courts as well have acquiescedto this rejection of Serrano IIIjurisprudence. Appellant Class Member Brennan (hereinafter "Class Member Brennan") respectfully suggests that now, nearly four decadeslater, this Court should focus on the ending point as well as the starting point of the fee calculation process. The Laffitte case presents a critical test for this state's judiciary. Will this Court: 1. Recognize that the class action fee award process — the lodestar as well as the percentage-of-the-recovery approaches — have been reshaped since Serrano III to promote lawyers' financial interests at the expense of class members? 2. Institute a fee award process that ensuresthat attorneys’ fee requests are evaluated according to Serrano III standards? STATEMENT OF THE CASE On January 10, 2004, Plaintiff Mark Laffitte filed a class action complaint in the Los Angeles Superior Court against Defendant Robert Half International, Inc., a Delaware corporation, and related companies (No. BC 321317). The complaint alleged that class members were misclassified as exempt employees andalleged the following breachesoftheirrights: (i) failure to pay statutorily mandated wages;(ii) failure to provide adequate meal periods (Premium Wages); (iii) failure to provide adequate rest breaks (Premium Wages);(iv) failure to furnish timely and accurate wage statements, and (v) penalties. It alleged that the misclassifications were violations of California Labor Code, § 203; California Business & Professions Code §§ 17200, et seg. (Unfair Competition Law); California Labor Code §§ 2698,et seq. (Private Attorneys General Act of 2004); Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq.; and the Employee Retirement Income Security Act of 1974, 29 U'S.C. §§ 1001, et seq. Plaintiff Van Williamsonfiled a class action complaint against the same Defendants, Williamson v. Robert HalfInternationalInc., et al. (BC 377930) in September 2007. In February 2011, Plaintiff Isabel Apolinario filed a class action complaint against Defendants, asserting the same claimsat issue in the Laffitte action, but on behalf of a class of staffing professionals employed after February 23, 2007 (BC 455499). In March 2011, the court found the Laffitte action related to the Apolinario action. In September 2012, the court found the Laffitte case and the Apolinario case related to the Williamson action. On January 28, 2013, in response to a Notice of Class Action Settlement (Appellant's Appendix ("AA") at 1) of the above- referenced actions, Class Member David Brennanfiled his Objection (AA 7) and appeared at the March 22, 2013, and April 10, 2013, fairness hearings to present his objections before the trial court (see ArgumentIII, pages 37-42, infra). On April 10, 2013, the trial court entered an Order Granting Final Approval of Class Action Settlement and Judgment Thereon (AA 188), which granted Class Counsel $6,333,333.33 (33-1/3% of the gross settlement amount) in attorneys' fees and $127,304.08 in litigation expenses (AA 191:23, 27). Said Order and Judgmentfinally disposedofall issues between the parties. (California Rules of Court, Rules 8.100(a) and 8.204(a)(2)(B), and Code of Civil Procedure §§ 901 and 904.) On June 10, 2013, Brennanfiled a timely Notice of Appeal (AA 195) to the final Order and Judgment. Appellate briefs were thereafter filed in the Court of Appeal, Second Appellate District; oral argument took place on October2, 2014, and on October 29, 2014, the appellate court issued its subsequently published opinion, Laffitte v. Robert HalfInt'l, Inc., et al.; David Brennan, Plaintiffand Appellant, No. B249253, 2014 Cal.App. LEXIS 1059 (2d App.Dist., Div. 7, Oct. 29, 2014) (hereinafter "Laffitte decision"). A Petition for Review wasfiled in this Court on December23, 2014, and granted on February 25, 2015. STATEMENT OF FACTS AND PROCEDURAL HISTORY This class action involves a wage and hour dispute by employees ofRobert Half International, Inc. In October 2012, the court entered an Orderin the related Laffitte, Apolinario, and Williamson actions, granting Plaintiffs and Defendants' joint motion for preliminary approval of the settlement and conditionalcertification of the settlement class defined as: All persons whoare or were employed in California as exempt "Staffing Professionals"... at any time from September 10, 2000 throughthe date of Preliminary Approvalofthe Settlement [October 19, 2012]. The settlement created a common fund of $19 million. The settlement agreement negotiated between Class Counsel and Defendants reads: Class Counsel will apply to the Court for an award of not more than $6,333,333.33 (33.33%) of the Gross Settlement Amount).... (Respondents' Appendix ("RA"), Vol. 1, Tab 6 at 72, ¢ IILC.2.) The amended settlement agreementalso included a "clear sailing" provision stating that class counsel would apply for their attorneys' fees "and Robert Halfwould not oppose their request." Laffitte decision, supra, 2014 Cal.App. 1059, at *4-*5 (footnote omitted). On January 28, 2013, in responseto receipt of the Notice of Class Action Settlement (AA 1), Class Member David Brennan filed his Objection (AA 7), and a supplementary objection on April 8, 2013 (AA 174). Fairness hearings were held on March 22 and April 10, 2013. (Rep. Tx. on Appeal (hereinafter "RT"), 3/22/13 and 4/10/13 hr'gs.) On April 10, 2013, the trial court approvedthe settlement and awarded Class Counsel $6,333,333.33 (or 33.33% ofthe class's settlement fund). (AA 191.) On June 10, 2013, Brennan appealed the trial court's Order Granting Final Approval of Class Action Settlement and Judgment Thereon to the Second District Court of Appeal. (AA 195.) On October 29, 2014, the Court ofAppeal for the Second Appellate District issued its unpublished opinion, overruling Brennan's objections and affirming thetrial court's award of 33-1/3 percent ofthe class's recovery as a reasonable attorneys' fee to Class Counsel. On November21, 2014, after a request for publication from the ConsumerAttorneysofCalifornia,! the Second District issued an order that modified its opinion andcertified it for publication, with no change in judgment(see Laffitte decision, supra). The Second District's decision became final on November 28, 2014. A Petition for Review wasfiled in the California Supreme Court on December23, 2014. Review wasgranted on February 25, 2015. 1 A professional association of attorneys (formerly California Trial Lawyers Association), www.caoc.org. ARGUMENT I. THIS COURT'S SERRANOIDECISION DOES NOT PERMIT CALIFORNIA TRIAL COURTS TO CALCULATE AN AWARD OF REASONABLE ATTORNEYS' FEES ANCHORED TO THE PERCENTAGE-OF-THE-RECOVERY APPROACH A. Serrano II Clearly Holds That Judicial Calculations of Reasonable Attorneys' Fees Must Start with the Lodestar. Noreasonable reading of Serrano HI would permit an attorneys’ fee award in a class action to be anchoredto the percentage ofthe common fund, and an extensive body of case law as well as public policy supports this position. l. Serrano III states: "The starting point of every fee award, ... must be a calculation of the attorney's services in terms of the time he has expendedonthe case." Serrano ITT, 20 Cal.3d at 49 n.23 (emphasis added), citing City of Detroit v. Grinnell Corp. 495 F.2d 448, 470 (2d Cir. Mar. 13, 1974). The language of SerranoIII clearly states "every fee award." The languageis all encompassing. It creates no exception for attorneys' fees awarded from class action commonfunds. The Laffitte decision, however, implies that "every" applies to fee-shifting settlements and not commonrecoveries, and that Serrano III supports that interpretation. The Supreme Court in Serrano even recognized the viability of the "percentage of the common fund" method. Laffitte decision, supra, 2014 Cal.App. LEXIS 1059, at *31 n.8. In so arguing, Laffitte conflates the common fund doctrine exception to the American Rule with a so-called "percentage- of-the-common-fund method." 2. SerranoIII states: "Anchoring the analysis to this concept [calculation of the attorneys’ services in terms of time expendedonthe case] is the only way of approaching the problem that can claim objectivity, a claim which is obviouslyvital to the prestige of the bar and the courts." Serrano III, supra,, 20 Cal.3d at 49 n.23, citing City ofDetroit v. Grinnell, supra, 495 F.2d at 470 (emphasis added). The language of Serrano III makesit clear that the lodestar is the only permissible starting point. The languageis exclusive. It says nothing about the percentage-of-the-recovery approach anchoring a judicial award of reasonable attorneys' fees. 3. SerranoIII states: Fundamental to its [the trial court's] determination — and properly so — was a careful compilation of the time spent and reasonable hourly compensation of each attorney ... involved in the presentation of the case. Serrano III, supra, 20 Cal.3d at 48 (emphasis added; footnote omitted). The Serrano ITI opinionstates three times in three different ways its instruction on the exclusivity of the lodestar approachas the anchorfor judicial awards of a reasonable attorneys' fee. There is no language in Serrano II] that permits an award of a reasonable attorneys' fee anchored to a percentageofthe class's common fund recovery. 4, Not only does Serrano ITT makeno reference to the use of the percentage-of-the-recovery approach, but the legal authorities it relies upon specifically reject the use of a percentage-of-the-recovery methodology. The decision relies upon two federal antitrust class actions, City ofDetroit v. Grinnell, supra, and Lindy Bros. Builders, Inc. ofPhila. v. American Radiator & Standard Sanitary Corp., et al., 487 F.2d 161 (3d Cir. Oct. 31, 1973), that were fee awards from common funds. Bothtrial courts awarded reasonable attorneys' fees based uponan entitlement to an award under the common fund doctrine. Jn each case, the appellate court specifically rejected the trial court's use of a percentage-of-the-recovery methodology and held that a reasonable fee must be calculated using the lodestar method. (a) [Rejection of a district court's award of 15% of a $10 million settlement fund in Grinnell:] Because wefeel that this fee [the District Court's de facto reliance on the contingent fee approach] was excessive and displayed too much reliance upon the contingent fee syndrome ... we reverse and remand [the fee award.... City ofDetroit v. Grinnell, supra, 495 F.2d at 468 (emphasis added). (b) [Rejection of a district court's 20% of a $26 million settlement fund in Lindy:] In detailing the standards [under the equitable fund doctrine] that should guide the award of fees to attorneys successfully concluding class suits, by judgment or settlement, we muststart from the purpose of the award: to compensate the attorney for the reasonable value ofservices benefiting the unrepresented claimant. Before the value of the attorney's services can be determined, the district court must ascertain just what were thoseservices. To this end the first inquiry of the court should be into the hours spent by the attorneys — how many hours were spent in what manner by which attorneys. Lindy Bros., supra, 487 F.2d at 167 (emphasis added). The Serrano I/I court would not haverelied on common fund cases that rejected the use of the percentage-of-the- recovery approachif it had intended to allow the percentage approach in commonfundrecoveries. 5. "(O]nce it is recognized that the court's role in equity is to provide just compensation for the attorney...." Serrano III, supra, 20 Cal.3d at 49 n.23 (citation omitted) (emphasis added). This statement further undermines any argumentthat fees awarded from a commonfundwere not covered by Serrano LIT. Serrano III explains that its holding applies whenevera court is exercising its equitable powers. Because the common fund doctrine rests squarely upon a court's equitable powers, fees awarded from common fundsfall under Serrano IIT. 10 6. The Laffitte decision never addresses why Serrano III's rationale, justifying its lodestar requirement, "[A] claim [of objectivity] which is obviously vital to the prestige of the bar and the courts." (Serrano IIT, supra, 20 Cal.3d at 49 n.23 (citation omitted) (emphasis added)), does not apply as well to attorneys' fee awards under the common fund and substantial benefits doctrines. There is no reason whythese rationales: "[Flavorable public perception and the prestige of the legal profession and our system ofjustice..." (Jutkowitz v. Bourns, Inc., et al., 118 Cal.App.3d 102, 111 [173 Cal.Rptr. 248] (2d App. Dist. Apr. 16, 1981) (relying on SerranoIII, supra, 20 Cal.3d 25) (emphasis added)), would not also apply to the common fund and the substantial benefit doctrines. 7. Under SerranoIII, attorneys' fees are compensation for legal services provided to the client. This Court's Serrano IT decision rests on the principle that the awarding of a reasonable attorneys’ fee compensates lawyers for providing "attorneys' services"to clients: [T]he starting point ... must be a calculation ofthe attorney's Services... Serrano ITT, supra, 20 Cal.3d at 49 n.23 (emphasis added). 1] This principle is entirely distinguishable from the awarding of attorneys' fees based on a percentage ofthe class's monetary recovery. B. This Court Reaffirmed Serrano III in Ketchum v. Moses. This Court's decision in Ketchum v. Moses, 24 Cal.4th 1122 [104 Cal.Rptr.2d 377] (Feb. 26, 2001), supports the interpretation of Serrano III as requiring the lodestar as the first step and says nothing about limiting Serrano III's instructions to fee awards underfee- shifting statutes. UnderSerranoIIT, a court assessing attorney fees begins with a touchstoneor lodestar figure, based on the "careful compilation ofthe time spent and reasonable hourly compensation of each attorney involvedin the presentation of the case." Ketchum, supra, 24 Cal.4th at 1131-32, citing Serrano III, supra, 20 Cal.3d at 48 (emphasis added). C. Numerous Courts of Appeal over the Years Have Interpreted Serrano IIT As Requiring the Anchoringof a Judicial Award of a Reasonable Attorneys' Fee to the Lodestar. These cases make no mention of basing an award of reasonable attorneys' fees on the percentage-of-the-recovery approach,orlimiting Serrano II's instructions to an award under fee-shifting statutes. Indeed, other than Laffitte, no reported case of which Class Member Brennan is aware holds that Serrano III's instructions only apply to fees sought under fee-shifting statutes. 12 1. Jutkowitz v. Bourns, Inc., et al., supra, holds that under Serrano III, not only must the lodestar approach bethefirst step in the calculation, but that percentage-based contingent fee principles cannot be part of a judicial determination of a reasonable attorneys' fee. Significantly, in none of the "commonfund"cases, whether class actions or nonclassactions... is there any suggestion that the size ofthefund controls the determination ofwhat is adequate compensation. In our opinion, the clear thrust of the holding in Serrano, supra, and the cases upon whichthat holding relied, is a rejection of any "contingent fee" principle in cases involving equitable compensation for lawyers in class actions or other types of representativesuits. Jutkowitz, supra, 118 Cal.App.3d at 110 (emphasis added). 2. Salton Bay Marina, Inc., et al. v. Imperial Irrigation Dist., 172 Cal.App.3d 914 [218 Cal.Rptr. 839] (4th App. Dist. Sept. 30, 1985), rejects the use of a percentage-of-the-recovery approach as well: "While the size of the class may affect the complexity of counsel's task and the size ofthe fund created mayreflect the quality of his work, the correct amount of compensation cannot be arrived at objectively by simply taking a percentage of that fund." Id. at 954, citing Jutkowitz, supra, 118 Cal.App.3d at 111 (emphasis added). Accord, The People ex rel. Department of Transportation v. Yuki, et al., 31 Cal.App.4th 1754, 1769 [37 Cal.Rptr.2d 616] (6th App. Dist. Jan. 6, 1995). On remand,the court should begin its analysis with a calculation of the attorney services in terms 13 of time the attorneys actually expended onthe case. (Serrano v. Priest [Serrano III] ... 20 Cal.3d 25, 48, fn. 23.), Salton Bay, supra, 172 Cal.App.3d at 957-58. 3. Dunk v. Ford Motor Co., et al., 48 Cal.App.4th 1794 (4th App.Dist., Div. 3, Aug. 30, 1996), supports Class MemberBrennan's contention that SerranoITI rejected the anchoring of the judicial award of reasonable attorneys' fees to the percentage-of-the-recovery approach. The award of attorney fees based on a percentage of a "common fund" recovery is of questionable validity in California.... Later cases have cast doubt on the use of the percentage method to determine attorneyfees in California class actions. Dunk, supra, 48 Cal.App.4th at 1809 (citations omitted) (emphasis added). The Dunk decision also specifically ruled that the percentage-of-the-recovery approach was not available in common fund cases. [Class Counsel claim that] $1 million attorney fees ... were only a tiny percentage of the potential settlement value of over $26 million. This argument suffers from two flaws: (1) The award of attorney fees based on a percentage ofa “common fund" recovery is of questionable validity in California.... Ibid. at 1809 (emphasis added). 14 4, Lealao, supra, supports Class MemberBrennan's contention that Serrano IIT held that the lodestar must be the anchoring analysis of a reasonable fee in common fundcases. The primacy of the lodestar method in California was established in 1977 in Serrano III, supra, 20 Cal. 3d 25. Adopting the view at that time ofthe Second and Third Circuits, our Supreme Court declared: "'The starting point of every fee award, onceit is recognized that the court's role in equity is to provide just compensation for the attorney, must be a calculation of the attorney's services in terms of the time he has expended onthe case." The reason the fee analysis must be "anchored"to the time spent on the case and a reasonable hourly rate, the [Serrano ITT| court declared,is that "this conceptis the only way of approaching the problem that can claim objectivity, a claim which is obviously vital to the prestigeof the bar and the courts." [Serrano ITI, 20 Cal.3d at 48 n.23.] This statement, which arguably renders it questionable whether a pure percentage fee can be awarded even in a conventional commonfundcase (see Dunk v. Ford Motor Co. ... 48 Cal.App.4th atp. 1809)... Lealao, supra, 82 Cal.App.4th at 26 (citations omitted; emphasis added), and at 39 (emphasis added). There is no support in Lealaofor the holding in Laffitte that Serrano ITI does not apply to attorneys' fees awarded from common funds. The attorneys in Lealao had sought a fee award under all three exceptions to the American Rule. Theplaintiffs' counsel moved for reasonable attorney fees, resting not on statute but on the inherent equitable powers ofthe court. In support 15 of their claim they relied on three theories: the common fund, substantial benefit, and private attorney general exceptions to the general rule disfavoring fees. (Lealao, supra, 82 Cal.App.4th at 38 (footnote omitted; emphasis added).) Nowhere does Lealao suggest that Serrano ITI only applies in fee- shifting circumstances. D. ~The Laffitte Decision Contradicts the Common Fund Doctrine. The awarding of reasonable attorneys' fees under the common fund doctrine is an exception to the American Rule. The common fundcases... are exceptions to the general rule applicable in this country that each party to the litigation must bear the expense ofits own attorney fees. (City and County ofSan Francisco v. Sweet, 12 Cal.4th 105, 115 [48 Cal.Rptr.2d 42] (Dec. 18, 1995) (emphasis added).) The doctrine is based on the concept of quantum meruit. An award of fees under the equitable common fund doctrine is "'analogous to an action in quantum meruit: The individual seeking compensationhas, by his actions, benefited another and seeks paymentfor the value of the service performed." Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Market, Inc., 127 Cal.App.4th 387, 397 [25 Cal.Rptr.3d 514] (2d App. Dist. Mar. 7, 2005), citing Serrano v. Unruh, 32 Cal.3d 621, 628 [186 Cal.Rptr. 754] (Oct. 28, 1982) (emphasis added). 16 An attorneys’ fee award based on a percentage of the amount of the settlement would violate the very principle — guantum meruit — upon which the commonfund doctrine was established. E. The Laffitte Decision Contradicts Class Action Attorneys’ Fee Jurisprudence. To allow attorneys’ fee awards to be based on a percentage of the class settlement fund is inconsistent with California class action attorneys’ fee jurisprudence: Nonetheless, the plaintiffs' attorneys owean ethical and fiduciary duty to their clients ... to limit fees to an amountthat represents the value of the work done. Robbins v. Alibrandi, 127 Cal.App.4th 438, 444 [25 Cal.Rptr.3d 387] (1st App. Dist., Div. 1, Feb. 4, 2005) (emphasis added). I. ANCHORING THE FEE AWARD TO THE LODESTAR APPROACHIS NO LONGER THE CENTRAL ISSUE IN JUDICIAL AWARDS OF REASONABLE ATTORNEYS' FEES FROM CLASS ACTION COMMON FUNDS A. The Litigation Landscape Has ChangedSince Serrano LT. In 1977, the Serrano IT court was presented with two public interest plaintiffs' law firms, who were each awarded $400,000 in attorneys’ fees by the trial court. They were subsequently awarded $74,254 in connection with their services in defending the judgment on the appeal of Serrano v. Priest, et al. (Serrano IT), 18 Cal.3d 728 [135 Cal.Rptr. 345] (Dec. 30, 1976), and $39,560 in connection with 17 defending the fee award on appeal in Serrano IIT, supra, 20 Cal.3d 25 (Oct. 4, 1977).2 Attorneys' fees sought nowadaysbyplaintiffs' class action lawyers are vastly different in scale.3 B. The Significance of the Choice of the Lodestar Approach Has Been Neutralized in the Context of the Modern Class Action. The distinction between the lodestar approach and the percentage-of-the-recovery approachasthe starting point of a fee calculation was meaningful in 1977. In the intervening years since SerranoIII, the approachatthe start of fee setting is less important than the methodology one ends with. Whether usedasa starting point or as a cross-check,? the lodestar analysis can be manipulated to produce a predetermined dollar amount that would haveresulted from use of the percentage-of-recovery method. Thusly, a fee award can appear to be based on the lodestar approach, whenit actually represents a backdoor method for awarding a defacto percentage fee. Indeed, the warning of the Yuki court on this point has been disregarded: [I]t is improperfor the trial court to start with the amount of the contingency fee and then work backwards, 2 See Serrano v. Unruh, 32 Cal.3d 621, 625 [186 Cal.Rptr. 754] (Oct. 28, 1982). 3 The Laffitte litigation spannedeightand one-half years. (Laffitte decision, supra, 2014 Cal.App. LEXIS 1059, at *11.) Serrano LI covered a period of almost ten years, 1968 through 1977. 4 As far as Class Member Brennanis aware, this Court has never accepted the concept of the lodestar as a cross-check. 18 applying the various otherfactors in orderto justify that amount. The People ex rel. Dep't ofTransp. v. Yuki, supra,, 31 Cal.App.4th at 1771. C. Confirming the Lodestar Approach Asthe Starting Point Is Insufficient to Ensure Enforcement of SerranoIII's Requirements. Sending this case back to the the trial court with the instruction to commence the fee award process with a lodestar calculation will not accomplish SerranoIII's goals of (i) assuring the fee award is based on the work reasonably performed by class counsel; (ii) protecting the class's recovery against excessive attorneys' fee claims, and (iii) preserving the respect of the bench andthe integrity of the bar. The Laffitte decision is merely one example, albeit a good example, ofhow the lodestar instructions in Serrano ITI and Ketchum have been ignored. (See ArgumentIII, pages 37-42, infra.) 1. Confirming the lodestar approachasthestarting point will not address the Lealao decision. Lealao, supra, held that Serrano ITT permits consideration of contingent fee percentage principles borrowed from traditional individualclienttort litigation, whilestill using the lodestar as the starting point. It did so by holding that contingency fee percentages could be considered as part of the multiplier/enhancement phase of a lodestar analysis. [A] trial court has discretion to adjust the basic lodestar through the application of a positive or 19 negative multiplier where necessary to ensure that the fee awarded is within the range offees freely negotiated [as a percentage of the recovery] in the legal marketplace in comparablelitigation. Lealao, supra, 82 Cal.App.4th at 49-50 (bracket added). Lealao’s introduction of contingent fee percentage principles countermands Serrano III's rejection of the percentage-of- the-recovery method. Importing contingent fee principles from traditional single client, single lawyer/law firm tort litigation into the multiplier phase of a lodestar analysis effectively eliminates the primacyofthe lodestar method. For this Court to reaffirm Serrano III's primacy of the lodestar but permit Lealao's percentage-of-the-recovery enhancement of the lodestar would nullify the significance of the lodestar as a starting point. Lealao allows a completed lodestar analysis to become the functional equivalent of a percentage-of-the-recovery fee. Lealao has rewritten Serrano III's rejection of percentages on the groundthat: As wehavesaid, the California Supreme Court has never prohibited adjustment of the lodestar on this basis. Lealao, supra, Cal.App.4th at 49 (emphasis added). 2. Apart from the Lealao holding, judicial calculations of the lodestar as reflected in Laffitte exemplify the rejection of this Court's Serrano III and Ketchum instructions. The lodestar calculation is no longer an effort to determine whetherall hours claimed were necessary; whether hours 20 have been padded; or whether specific legal services have been performedat a reasonablerates. (a) Class actions have placed unique pressure on the judiciary to find waysto circumvent Serrano IIl/Ketchum-compliant lodestar calculations. Theclass action experimentof delegating to the trial court judge the dualroles of fiduciary protector of the class's recovery and neutral fact finder has not workedin the real world. It places impossible demandsonthetrial court judge to simultaneously assumethe conflicting roles of impartial judge and class advocate. Although this problem was recognized early in the developmentofthe class action experiment, it has been ignored. The dilemmathereby created for the Court finds the judge playing "devil's advocate" on behalf of the disinterested defendants, while at the same time attempting to exercise his impartiality in making a just determination of reasonable fees. To require the judge to occupy an adversary position during the fee proceedingsis highly inconsistent with his acknowledged duty to act as an impartial arbitrator. Haas v. Pittsburgh National Bank, et al., 77 F.R.D. 382, 383 (W.D. Pa. Dec. 7, 1977) (emphasis added). (b) Overworked judges and understaffed trial courts exacerbate the problem. The increasing demands onthe judiciary in an increasingly litigious society have made Serrano III/Ketchum- compliant lodestar calculations unworkable for busy trial court judges. 21 The lodestar approach is a time-intensive procedure andtrial court time is a limited commodity. It adds to the work load of already overworked district courts. (Lealao, supra, 82 Cal.App.4th at at 31; emphasis added.) The integrity ofthe fee award process has given wayto clearing the court's docket. No matter how virtuousthe judge, the fact remains that courts are overworked, they have limited access to quality information, and they have an overwhelming incentiveto clear their docket. They cannotreliably police the day-to-day interests of absent class members. Samuel Issacharoff, Class Action Conflicts, 30 U.C. DAVIS L. REV. 805, 829 (Spring 1997) (emphasis added). (i) Trial court judgesare not equippedto handle the review of millions of dollars of legal bills from multiple law firms and lawyers claiming thousands(indeed tens of thousands) of hours of legal services rendered. The way it works now,the largerthe fee, practically speaking,thelesslikely it is that the fee request will be scrutinized by the court. Yet the typical judicial inquiry into these matters is superficial at best. Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs’ Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendationsfor Reform, 58 Univ. Chic. L. Rev. 1, 52 (No. 1, Winter 1991). 22 (ii) Lodestar scrutiny of the highest quality can be done without imposing a burden on busy courts. (See pages 48 through 49, infra.) (c) The theory of the representative class plaintiff as protector ofthe class's interest: A better safeguard for protecting the interests of the putative class is the ongoing supervision of an independentclass representative. "In this way the representative can watch out for the interests of the class should the attorney be blinded by moreselfish motives." (Apple Computer, Inc. v. The Superior Court ofLos Angeles, 126 Cal.App.4th 1253, 1268, 1272-73 (citation omitted) [24 Cal.Rptr. 3d 818] (2d App. Dist., Div. 1, Feb. 17, 2005)), has not succeededin practice. The representative plaintiffs' role is merely the person in whose namethe class action complaint is filed. Indeed, oftentimesit is the lawyer who seeks out a client rather than the other way around. The representative plaintiff, although formally retaining the law firm, has no incentive to monitor legal services since the class will pay the bill. Asone court has noted, the representative plaintiffis, in reality, a "cat's paw"for the plaintiffs' lawyers. [The special master] placedlittle weight on the contingent fee agreements between the lawyers 23 and the "clients" (the namedplaintiffs in the class actions), recognizing that namedplaintiffs are usually cat's pawsofthe class lawyers. In re Trans Union Corp. Privacy Litig., 629 F.3d 741, 744 (7th Cir. Jan. 14, 2011) (emphasis added). D. Avoiding the Requirements of Serrano II and Ketchum Has Resulted in a Set of Holdings Antithetical to Serrano I/Ketchum's Judicial Responsibilities. 1. The no "second majorlitigation" rationale. Despite the fact that millions, tens of millions, and even hundreds of millions of dollars in attorneys’ fees are being sought by plaintiffs' class lawyers, the class action system has seized upon a remark from the 1983 concurrence of United States Supreme Court Justice William J. Brennan Jr. in Hensley v. Eckerhart, 461 U.S. 424 (May 16, 1983), that disputes over attorneys' fee issues are not worthy of significant judicial attention: [T]he admonition of the Supreme Court in Hensley v. Eckerhart, supra, 461 U.S. 424, 437 [103 S. Ct. 1933, 1941] that a request for attorney fees should not result in a "second majorlitigation." Lealao, supra, 82 Cal.App.4th at 31 n.5. Litigation over fees, in spite of the fact that it involves protection of the class's recovery from attorneys' overreaching, has been characterized as a "waste ofjudicial resources." Goldbergerv. Integrated Resources, 209 F.3d 43, 49-50 (2d Cir. Mar. 28, 2000). A class action, for example, against a title company for "overcharging" customers would be majorlitigation, with the plaintiff class entitled to 24 every available litigation tool, i.e., motions, experts, and discovery. Class members have noneofthese normallegal protections when the allegation is that it is the class's counsel who are doing the overcharging. 2. The "no time records necessary"rationale: "It is well established that 'California courts do not require detailed time records, and trial courts have discretion to award fees based on... the court's own view of the number of hours reasonably spent...."" Laffitte decision, supra, 2014 Cal.App. LEXIS 1059,at *34(citation omitted). (a) Supporting documentation in the form of time records has been heldto be no longer necessary for a court to fulfill its Serrano III and Ketchum responsibilities. Indeed, in Laffitte, the court found 4,263.5 hours reasonable without supporting documentation other than a claim by Class Counsel regarding the individual hours of each attorney (see page 37, infra). This, in spite of this Court's instructions requiring: [A] careful compilation of the time spent and reasonable hourly compensation... Serrano III, supra, 20 Cal.3d at 48 (emphasis added; footnote omitted). [That the court] must carefully review attorney documentation of hours expended. Ketchum. supra, 24 Cal.4th at 1132. [That] "padding"in the form ofinefficient or duplicative efforts is not subject to 25 compensation. (See [Serrano LIT, 20 Cal.3d] at p. 48.) Ketchum, supra, 24 Cal.4th at 1132. Onecannot carefully compile a lodestar, carefully review documentary support, and eliminate padded time without detailed information about which timekeepers performed whatlegal services, when, and for how long. (b) This "no time records necessary" rationale has been adopted, in spite of the factthat: The working of excessive hours and inflation of time sheets [are] reported to be commonabusesin class actionlitigation. Macey & Miller, The Plaintiffs' Attorneys' Role in Class Action and Derivative Litigation, etc., supra, at 56 n.146. (And that was 35 years ago — one can only imagine a muchlarger problem today.) (c) The "no time records necessary" rationale has been accomplished through a misapplication of case law to nullify Serrano II and Ketchum requirements. . The Laffitte court relied on Syers Properties ITI, Inc. v. Rankin, 226 Cal.App.4th 691, 698 [172 Cal.Rptr.3d 456] (1st App. Dist., Div. 2, May 5, 2014), and Chavez v. Netflix, 162 Cal.App.4th 43 [75 Cal.Rptr.3d 413] (1st App. Dist., Div. 1, Apr. 21, 2008) (see Laffitte decision, supra, 2014 Cal.App. LEXIS 1059, at *34). [A] court may award fees based on time estimates for attorneys who do not keep time records. 26 Syers Properties, supra, 226 Cal.App.4th at 699 n.4 (emphasis added), relying in Chavez v. Netflix, supra, 162 Cal.App.4th at 64. This no-time-records-necessary rule was (mis)applied by the Laffitte court because the attorneys claimed to have kept meticulous time records downto the tenth of an hour. {T]he Antonelli law firm reportedits time downto the .7 of an hour (723.7 hrs.); Attorney Barnesreported his time down to the .5 of an hour (2,259.5 hrs.), and Gregg Lander (Barnes's partner) reported his time downto the .3 of an hour (807.3 hrs.). (Appellant's Opening Brief ("AOB")at 25.) (i) The "no time records necessary"rationale initially permitted trial courts to award reasonable attorneys’ fees wherethe attorneys kept no time records(i.e., contingent personal injury litigation). Chavez v. Netflix, Inc., 162 Cal.App.4th 43 [75 Cal.Rptr.3d 413] (1st App. Dist., Div. One, Apr. 21, 2008): The court may award fees based on time estimates for attorneys who do not keep time records. (Margolinv. Regional Planning Com. (1982) 134 Cal.App.3d 999, 1006-1007 [185 Cal.Rptr. 145].) Chavez, supra, at 64 (emphasis added). (11) The no time records necessary rule — for attorneys whodo not keep time records — has morphedinto a time records are not necessary, even where time recordsare relied upon by class counsel. 27 California case law permits fee awards in the absence of detailed time sheets. (Sommers v. Erb (1992) 2 Cal. App. 4th 1644, 1651 [4 Cal. Rptr. 2d 52]; Dunk, supra, 48 Cal.App.4th at 1810; Nightengale v. Hyundai Motor America (1994) 31 Cal.App.4th 99, 103 [37 Cal.Rptr.2d 149].) Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 255 [110 Cal.Rptr.2d 145] (6th App. Dist. July 31, 2001). (iii) The "no time records necessary" rule has been extended beyondits original context to multimillion-dollar fees in spite of the fact that the cases relied upon involve much more modest sums of money ($38,333, the amountofthe fee award in Sommers v. Erb5); ($7,255.95, the amount of the fee award in Dover Mobile Estates v. Fiber Form Products, Inc.®); ($6,840, the amount of the fee award in G.R. v. Intelligator’); ($113,853, the amountofthe fee award in Nightingale v. Hyundai Motor America®). In Laffitte, Class Counsel were not seeking $6,840, but $6,333,333.33 in fees and kept time records to the tenth of an hour. 52 Cal.App.4th 1644, 1651 [4 Cal.Rptr.2d 52] (4th App.Dist., Div.1, Jan. 29, 1992). 6 220 Cal.App.3d 1494, 1501 [270 Cal.Rptr. 183] (6th App. Dist. May 31, 1990). 7185 Cal.App.4th 606, 621 [110 Cal.Rptr.3d 559] (4th App. Dist., Div. 3, June 10, 2010). 8 31 Cal.App.4th 99, 1031 [37 Cal.Rptr.2d 149] (1st App. Dist., Div. 3, Dec. 27, 1994). 28 3. SerranoIII's recognition of appeals of court-awarded attorneys' fees has been nullified. The[trial court's] ..."judgment[in awarding attorneys' fees] is of course subject to review...." Serrano ITI, supra, 20 Cal. 3d at 49 (citation omitted). Lastly, but by no meansleast, the "no time records necessary" holding makes appeal of the reasonableness of the number of hours claimed by Class Counsel impossible. Appellate rules prohibit appeals of fee awards on a claim of excessive or unnecessary time spent by the attorneys unless specific references to specific instances of excess are identified. In challenging attorney fees as excessive because too many hours of work are claimed,it is the burden of the challenging party to point to the specific items challenged, with a sufficient argument andcitations to the evidence. General arguments that fees claimed are excessive, duplicative, or unrelated do notsuffice. (See Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1248 [132 Cal.Rptr.2d 57] [argumentthatbilling is duplicative and unreasonable, unsupported by citation to record or explanation of which fees were challenged gives no basis to disturb trial court's discretionary fee ruling];....) Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assoc., 163 Cal.App.4th 550, 564 and 562 [77 Cal.Rptr.3d 695] (2d App. Dist., Div. 4, May 30, 2008). 29 The court's failure to require time records denies class memberstheir basic due process right to appeal the court's approval of the reasonablenessofthe time spent. 4. The "declarations in lieu of time records are permissible" rationale. "We see no reason why[the trial court] could not accept the declarations of counsel attesting to the hours worked...." Laffitte, supra, 2014 Cal.App. LEXIS 1059, at *35 (brackets in original), citing Sutter Health Uninsured Pricing Cases, 171 Cal.App.4th 495, 512 [89 Cal.Rptr.3d 615] (3d App. Dist. Jan. 27, 2009). (a) Appellate court decisions in class actions have permittedtrial courts to award multimillion-dollar attorneys' fees without the submission of time records on the justification that the claimed numberof hours were submitted by the attorneys "under penalty of perjury,"9 or as “officers of the court."10 (i) Allowing declarations in the place of time records assumesa leveloftrust that this Court specifically held must not be accorded to attorneys seeking fees. Rather than merely relying on the declaration of an attorney who seeks a court-awarded reasonable attorney's fee, this Court required careful scrutiny of supporting documentation. The padding of time is misconduct, 9 Weber v. Langholz, 39 Cal.App.4th 1578, 1587 [46 Cal.Rptr.2d 677] (2d App.Dist., Div. 4, Nov. 13, 1995) ("made under penalty of perjury") 10 Horsford v. The Board ofTrustees ofCalifornia State Univ., et al., 132 Cal.App.4th 359, 396 (Sth App. Dist. Aug. 31, 2005) ("as officers of the court"). 30 unethical, and even illegal in some instances. One cannot expect a declaration by an attorney to disclose instances of padded time. If attorneys' declarations were sufficient, then Serrano III's and Ketchum's instructions would never havebeen required. (ii) The trial and appellate court decisionsthat permit trial courts to award reasonable attorneys’ fees based solely on attorneys’ declarations have been misapplied because those declarations include specific time references to specific tasks or small amounts of time ("30.4 hours in ... defeating the fourth and sixth causesof action" and "9.3 hours working on the motion for attorney's fees...."11) ("three hours’ worth of time to attend and participate in the hearing"!2) ("the numberofhours was between 90 and 103"!3), The attorneys' fee declarations in Laffitte only provided the total time of each attorney. (See page 37,infra.) 5. The (mis)application of federal law!4 by Californiatrial and appellate courts to California class action attorneys’ fee jurisprudenceis a clear rejection of Serrano I/I and Ketchum. 11 City ofColton v. Singletary, 206 Cal.App.4th 751, 785 [142 Cal.Rptr.3d 74] (4th App. Dist., Div. 2, May 30, 2012). 2GR.vy. Intelligator, supra, 185 Cal.App.4th at 621 (emphasis added). 13 Weber v. Langholz, supra, 39 Cal.App.4th at 1587. 14 Federal law regarding the primacyofthe lodestar analysis has changed since California relied on federal practice in the late 1970s. In the federal system, most, if not all circuits, permit courts to choose either the lodestar or percentage approaches. 31 Ignoring Serrano IIT and Ketchum requirements, California trial and appellate courts cite to federal practice rather than California precedent. (a) From the Laffitte decision: In Chavez v. Netflix, Inc., supra, 162 Cal.App.4th 43 the court held that attorneys’ fees of 27.9% ofthe class benefit awarded was “not out of line with class action fee awards calculated using the percentage-of- the-benefit method... Laffitte, supra, 2014 Cal.App. LEXIS at 1059, at *32. (i) Chavez is in fact based on federal fee Jurisprudence that directly contradicts SerranoIII's rejection of the use of percentages to calculate a reasonable attorneys'fee. "Empirical studies show that, regardless whether the percentage methodor the lodestar methodis used, fee awardsin class actions average around one-third of the recovery." (Shaw v. Toshiba America Information Systems, Inc. (ED. Tex. 2000) 91 F. Supp. 2d 942, 972.) Chavez, supra, 162 Cal.App.4th at 66 n.11 (italics in original; underline added). Gi) Laffitte again relies on federal fee Jurisprudence regarding percentages,citing: (Fischel v. Equitable Life Assur. Society of U.S. (9th Cir. 2002) 307 F.3d 997, 1006 [recognizing "a 25 percent "benchmark'in percentage-of-the-fund cases..."].) 32 Laffitte, supra, 2014 Cal.App. LEXIS at 1059, at *32-*33. (b) Other examples of reliance on federal law: Wershba v. Apple Computer ignores SerranoIII, andinstead cites to federal law. Courts recognize two methods for calculating attorney fees in civil class actions: the lodestar/multiplier method and the percentage of recovery method. (Zucker v. Occidental Petroleum Corp. (C.D.Cal. 1997) 968 F. Supp. 1396, 1400.) Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 254 [110 Cal.Rptr.2d 145] (6th App. Dist. July 31, 2001). 6. The misapplication of traditional single-plaintiff, single- lawyer/law firm contingency fee model. (a) California courts have not merely adopted federal fee jurisprudence on the use of percentages, but have adopteda totally inapposite market to guide percentage fee awardsin class actions. They have accepted the individualplaintiff's, single lawyer/law firm's contingent percentage fee model from tort litigation and (mis)applied it to class action common fund fee awards. From Laffitte: {C]ontrary to Brennan's assertion,thetrial court's use of a percentage of 33 1/3 percent of the commonfund is consistent with, and in the range of, awardsin other class action lawsuits. Laffitte, supra, 2014 Cal.App. LEXISat 1059,at *32. 33 However, as noted by Retired U.S. District Court Judge Vaughn R. Walker and Ben Horwich, It might be that our notionsof a "fair" percentage have been imported uncritically from the one-plaintiff contingent fee context into the class action world, where economics of scale reign. By contrast, a percentage fee represents an arbitrary percentage apparently drawn from personal injury practice on behalf of individuals rather than a class, adjusted by factors idiosyncratic to the particular case. Walker, Vaughn R. & Ben Horwich, The Ethical Imperative ofa Lodestar Cross-Check: Judicial Misgivings about "Reasonable Percentage" Fees in Common Fund Cases , 18 GEO. J. OF LEGAL ETHICS 1453, 1469 (No. 4, Fall 2005). (i) Economiesof scale referred to in Lealao have been largely ignored. "In a contingent fee case involving a small numberofplaintiffs, a percentage of the recovery, even a fairly large percentage such as 331/3 percent, will frequently yield a result that is fair to both the attorney and the client in light of the value provided to the client by the attorney. But wherethe size of the settlement is due to the fact thatit resolves not just one claim, but large numbersofidentical claims, and the services of the attorney are essentially the same as would have been requiredif there had been only one claim, it makes no sense to gear the fee award to the total dollar amount of the settlement..." 34 Lealao, supra, 82 Cal.App.4th at 49 n.16, citing John F. Grady, Reasonable Fees: A Suggested Value-Based Analysisfor Judges, 184 F.R.D. 131, 141-142 (1998) (footnote omitted) (emphasis added). The class action mechanism provides the financial incentives necessary to encourage attorneys to pursue class litigation. The aggregation of large numbers of claimsinto a class action producesvery large potentialliability, creating a sufficient fee and a strong pressure on defendantsto settle. (ii) Not surprisingly, the individual contingent fee percentage modelas usedin the class action context overpays attorneys. {T]he percentage methodis also subject to serious deficiencies. First, as we have already demonstrated, the percentage methodresults in systematic excess profits for plaintiffs' attorneys — returns beyond what the attorney would earn in an efficiently functioning market. Macey & Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation, etc., supra, at 59 (emphasis added). Fixedpercentages will drastically overcompensate lawyers in some cases and drastically undercompensate them in others. Twenty-five or thirty percent might be an appropriate award on a recovery of a million dollars. It is likely, on the other hand,to result in a windfall in a case where the recoverytotals many millions of dollars. In re Superior Beverage/Glass Container Consol. Pretrial, 133 F.R.D. 119, 124 (N.D.Til., Eastern Div., Nov. 5, 1990) (emphasis added). 35 Confirming that percentages have a tendency to overpay lawyers, Richard Pearl (coincidently the expert that submitted a declaration in support of Class Counsel's fee petition in Laffitte) has observed: Commonfund fees, however, can sometimesbe calculated using a percentage- of-the-fund method, which canresult in fees that the courts might be reluctant to grant under the lodestar-adjustment method. Richard M. Pearl, CALIFORNIA ATTORNEY FEE AWARDS, 3d ed. (CEB Mar. 2014 Update), at § 5.18, pp. 5-11 (emphasis added). (b) When the commonfund doctrine wasfirst implemented in 1885 in Central Railroad v. Pettus, the percentages referred to were 5 to 10 percent. The decree gave them an amountequal to ten per cent, upon the aggregate principal and interest of the bonds and couponsfiled in the cause... It is shown that appellees had with the complainants contracts for small retainers and five per cent, upon the sumsrealized by the suit. Central Railroad & Banking Co. ofGeorgia v. Pettus & Others, 113 U.S. 116, 128 (Jan. 5, 1885) (emphasis added). 36 Il. THE LAFFITTE DECISION EXEMPLIFIES HOW COURTS DISREGARD THE SERRANO IIT AND KETCHUMREQUIREMENTS The Laffitte fee award did not determine whetherall hours claimed were necessary; whether hours had been padded; or whether legal services had been performed at reasonablerates. A. No Careful Compilation of Time. Thelodestar total time of 4,263.5 hours was found reasonable based on the total hours claimed by the individual attorney. (AOB at 23.) Kevin Barnes reported 2,259.5 hrs. (at $750/hr.), and his partner, Gregg Lander, reported 807.3 hrs. (at $600/hr.) (App. 33:12- 13). Jeanelle Carney, Joseph Antonelli's partner, reported 14.40 hours (at $600/hr.), and Joseph Antonelli reported 709.3 hrs. (at $750/hr.).15 MikaHilaire reported 423 hrs. (at $500/hr.).16 Objection: It is not permissible under California attorneys’ fee jurisprudenceto take the total numberofhours claimed by a law firm and ignore the amountoftime spent on specific services performedby the individual attorneys. (AOBat23.) 13 Decl. J. Antonelli in Support of Plfs' Mot. for Final Approval of Class Settlement, filed 2/28/13, at 9:16-18. 16 Decl. M. Hilaire in Support of Final Approval of Class Action Settlement and Award for Attorneys' Fees, Costs, and Class Representative Enhancements, filed 2/28/13, at 3:6-7. 37 Laffitte answer: Thetrial court did not abuseits discretion by relying on the hours work and hourly rates provided by each ofthe class attorneys, and the description of the work the attorneys performed in calculating the lodestar cross- check on the award. Laffitte decision, supra, 2014 Cal. App. LEXIS 1059, at *34-*35. B. No Time Records WereFiled. Objection: Although each attorney recorded their time down to the tenth of an hour(see page 27, supra), time records supporting their claimed time were notfiled. Laffitte answer: "It is well established that "California courts do not require detailed time records, andtrial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court's own view of the numberofhours reasonably spent...." Laffitte decision, supra, 2014 Cal. App. LEXIS 1059, at *34, citing Syers Properties, supra, 226 Cal.App.4th at 698 (internal citations omitted). Ironically, but perhapsnot surprisingly, the basis for the Laffitte court's holding wasstrikingly similar to the district court's findingsin Lindy Bros., supra, and Grinnell, supra, that wascriticized by the appellate court decisions upon which SerranoIIT was based. [T]he only information furnished to the district judge regarding the time spent by Kohn, Bergerand their associates wasthat they had spent "in excess of 6,000 hours in connection with this litigation." 341 F.Supp. at 38 1090. This information was insufficient to support the award of fees to Kohn and Berger. Lindy Bros., supra, 487 F.2d at 167. C. Inadequate Declarations. Objection: Class Counsel's declarations are unhelpful andself- serving. A sample: "The settlement that has been reachedis the product of tremendouseffort, and a great deal of expense by the parties and their counsel. The parties' assessmentofthe matter is based on one of the most heavily litigated cases I have ever beena part of and the extensive research and litigation for the past 8 % years. This litigation included extensive written discovery, extensive law and motion practice, 68 depositions, three Motions for Summary Judgment, a Class Certification Motion, subsequent Reconsideration Motion and then another Motion to Decertify, numerous experts, consultation with an economist regarding potential damage exposure and two full day mediations." Laffitte decision, supra, at 2014 Cal.App. LEXIS 1059,at *8 (citing Decl. of Kevin Barnes, AA 30:4-11). Laffitte answer: "Wesee no reason why[thetrial court] could not accept the declarations of counsel attesting to the hours worked, particularly as [the court] was in the best position to verify those claims by reference to the various proceedingsin the case." Laffitte decision, supra, 2014 Cal. App. LEXIS 1059, at *35 (brackets in original), citing Sutter Health Uninsured Pricing Cases, supra, 171 Cal.App.4th at 512. 39 Again, not surprisingly, this kind of non-specific description that wascriticized in Lindy Bros., which Serrano III relied on when rejecting the percentage approach. [B]ut without somefairly definite information as to the hours devoted to various general activities, e.g., pretrial discovery, settlement negotiations, and the hours spent by various Classes ofattorneys, e.g., senior partners, junior partners, associates, the court cannot know the nature of the services for which compensation is sought. Lindy Bros., supra, 487 F.2d at 167. Generalized descriptions of the work are useless for the purpose of detecting padding. Such declarations cannot be used to disclose inefficient staffing, excessive consultation, and any other of the myriad attorney padding techniques. The court's finding avoidsits judicial responsibility to assure itself that, for example, "extensive" written discovery or "extensive" law and motion practice did not reflect padding or duplication of effort. Terms such as "extensive" and "numerous" do not connote specific periods oftime. D. ImproperDelegation. Objection: No legal services were chargedto the class atless than $500 an hour (see Laffitte decision, 2014 Cal.App. LEXIS 1059, at *7-*8), and with the multiplier, at hourly rates of $1,065 to $1,597.50. The following examplesstrongly suggest a failure to delegate properly: e Legal research by partner-level attorney at $600 per hour. e Brief writing by partner-level attorney at $600 per hour. 40 e Partner-level involvement at $750 per hourin "all aspects of this case" and [partners] "actively involved in every step ofthis litigation." (AA 170:18-19). E. Overstaffing. Objection: This case did not require staffing by five attorneys highly experiencedin the field of wage and hourclass actions. e A third highly experienced attorney, charging $500 per hour, was "actively involved"in the case after she had referred it to two attorneys with an even higher level of experience, and whocharged the class $750 an hour. Trial court's response: Class Counsel billed $2,968,620 on this amount of time, based on hourly rates of $750/hour for Barnes and Antonelli, $600/hour for Lander and Carney, and $500/hourfor Hilaire.... This rate is justified by the high level of Class Counsel's experience in litigating wage and hourclaims/class actions. (AA 149; AOB 27-28.) F. Improper Multiplier. Objection: Traditional factors used to justify a multiplier of 2.13 were inadequate as a matter of law. (AOBat 43, 44, 47.) Class Counsel asked for a multiplier of between 2.03 and 2.13, andthetrial judge awarded 2.13 for a requested fee of 33-1/3 percentofthe class's recovery ~ $6,333,333.33. 4] Laffitte answer: In reviewing a challenged award of attorney fees and costs, we presumethatthe trial court consideredall appropriate factors in selecting a multiplier and applying it to the lodestar figure." Laffitte decision, supra, 2014 Cal.App. LEXIS 1059,at *37, citing Taylor v. Nabors Drilling USA, LP, 222 Cal.App.4th 1228, 1249 [166 Cal.Rptr.3d 676] (2d App. Dist., Div. 6, Jan. 13, 2014) (internal citation omitted). G. No Finding of the Reasonablenessof Effective Hourly Rate. Objection: The court in Laffitte made no finding about the reasonableness of awarding a fee of approximately $1,485.65 an hour for each hour claimed. Laffitte answer: [S]Jee also In re Bluetooth Headset Products Liability Litigation (9th Cir. 2011) 654 F.3d 935, 944, 945 (Bluetooth) ["we have also encouraged courts to guard against an unreasonableresult by cross-checking their calculations against a second method," and "the lodestar methodcan'confirm that a percentage of recovery amountdoes not award counsel an exorbitant hourly rate'"].... Laffitte decision, supra, 2014 Cal. App. LEXIS 1059, at *33-*34. 42 IV. THE JUDICIAL SYSTEM MUST ADAPT TO PRESENT DAY REALITIES TO FULFILL SERRANO III'S INTENT OF AVOIDING EXCESSIVE ATTORNEYS' FEES IN CLASS ACTIONS AND MAINTAINING THE INTEGRITY OF THE BAR AND THE PUBLIC'S RESPECT FOR THE JUDICIAL SYSTEM A. Serrano IIT Established the Lodestar Approach As Fundamental Because of Concerns That Courts Using the Percentage Approach Were Overpaying Lawyers. Overthe intervening years, it has become uncommonto see reflected in fee decisions Serrano III's concerns about the general public's perception ofthe integrity of the bar and respect for the judicial system. References to economies of scale in class actions warranting lower fees have fallen by the wayside. The common fund doctrine's instruction, "moderation and a jealous regard for the rights of those interested in the fund" (Trustees v. Greenough, 105 U.S. 527, 536-37 (May 8, 1882)), has given wayto a focus on the necessity of awarding attorneys' fees sufficient to incentivize entrepreneurial lawyersto file class action lawsuits. The current system tolerates overpaying attorneys and denies class members adequate representation (and information) during the fee-setting stage of the class action settlement approval process. 1. Theinstant case gives this Court the opportunity to implement Serrano III policies in the context of modern class action litigation: (a) attorneys’ fees awarded by courts must not exceed reasonable compensation; 43 (b) the reasonableness of court-awarded attorneys' fee compensation is essential to the public's trust ofthe judiciary and the integrity of the bar; (c) lawyers are professionals who renderlegal services to clients, and their compensation must be anchoredto the lodestar method. 2. This Court should continue to enforce Serrano II with a specific rejection of the percentage-of-the-recovery approach. It should also explicitly reject in its entirety class action attorneys’ fee jurisprudencethatarises outof the traditional individual client, single lawyer/law firm contingent fee model. 3. This Court would next explicitly state the requirements of the lodestar methodology. The implementation of a lodestar calculation cannot be left to each trial court judge's subjective sense of what constitutes "a careful compilation of time spent" (SerranoIl supra, 20 Cal.3d at 48); "[a careful] review [of] attorney documentation of hours expended" (Ketchum, supra, 24 Cal.4th at 1132); and the investigation sufficient to eliminate padded time (Ketchum, supra, 24 Cal.4th at 1132). Consistency across California courtroomsis necessary to establish the objectivity required by Serrano III. Courts are public institutions. The legitimacy of the exercise ofjudicial power to award millions, tens of millions, and even hundredsofmillions of dollars in attorneys’ fees to lawyers requires the utmost transparency. 44 B. Appointment of a Class Guardian Is Necessary. Class Member Brennan acknowledgesthe burden ontrial courts, when judges themselvestry to perform lodestar analyses involving multiple law firms and lawyers, claims of thousands and tens of thousands of hours of legal services provided, and fee requests in the millions, tens of millions and even hundredsofmillions of dollars. These burdens should not and need notbe placed onthetrial court judges. The class action mechanism currently does not provide adequate representation to theclass at the fee-setting stage. There is a need for an adversarial process. The class needs a representative to advocate onits behalf. l. This Court should acknowledge that the trial court judge's roles as fiduciary protector of the class's financial interests and impartial jurist places the court in hopelessly conflicting roles. 2. Beyondthat, meeting Serrano III's/Ketchum's requirementsis unlikely when judges do notlike performing lodestar analyses: But the primary source ofdissatisfaction wasthat it resurrected the ghost of Ebenezer Scrooge, compelling district courts to engage in a gimlet- eyed review ofline-item fee audits. See Union Carbide, 724 F.Supp. at 167-168. {W]e see no need to compeldistrict courts to undertake the "cumbersome, enervating, and often surrealistic process" of lodestar computation. Savoie, 166 F.3d at 461 n.4 (quoting Court AwardedAttorney Fees, 108 F.R.D. at 258). 45 Goldberger v. Integrated Resources, supra, 209 F.3d at 48-49 and 49- 50, respectively. Courts havelittle patience for the tedium of the lodestar method and many award fees without demanding a time accounting and thus are simply less scrutinizing... Walker & Horwich, The Ethical Imperative ofa Lodestar Cross- Check, etc., supra, at 1469. 3. Our system ofjustice is adversarial, but the class action fee-setting processis not. Class membersareentitled to the samelitigation protections available in a $6 million dispute regarding attorneys' fees as any other person involved in a fee dispute. 4. The necessity of the appointment of a class guardian was recognized long ago. The appointment of a guardian for the class, therefore, provides representation for the class membersat a stage of the proceedings wheretheir interests could only be unprofitably protected, and where,not surprisingly, there is normally no class memberparticipation. (Haas v. Pittsburgh National Bank, supra, 77 F.R.D,at 383; emphasis added).) The present presumption that thetrial court judge acts as class fiduciary when it comes to implementing SerranoIII's fee award jurisprudence ignoresreality. [W]e presume that ourtrial judges are well awareoftheir responsibilities as 46 "fiduciaries" for the protection of absent class members... Consumer Privacy Cases, 175 Cal.App.4th 545 [96 Cal.Rptr.3d 127] (1st App. Dist., Div. 5, June 30, 2009) (citation omitted). 5. This adversarial process should not beleft to class member/objectors. [Class members] have noreal incentive to mount a challenge that would result in only a "minuscule" pro rata gain from a fee reduction. Continental Illinois, 962 F.2d at 573. Goldberger v. Integrated Resources, supra, 209 F.3d 43 at 53. 6. Fairness should guide the fairness hearing process. Appointment of an expert for the class should be required in all cases where class counsel retain an expert. In Laffitte, class counsel introduced an expert's declaration to support their hourly rates. The supporting declaration of Richard M.Pearl, an expert on hourly rates and attorneys' fees in California, included a review ofhourlyrates.... Laffitte decision, 2014 Cal.App. LEXIS 1059, at *38. If class counsel retain an expert, the class should have an expert appointed by the court to represent its interests. C. Thayer v. Well Fargo Bank Represents a Serrano LIII- Compliant Lodestar Analysis. Thayer v. Wells Fargo Bank N.A., 92 Cal. App. 4th 819 [112 | Cal. Rptr. 2d 284] (1st App. Dist. Oct. 2, 2001), is an excellent example ofhow the scrutiny called for in Serrano III and Ketchum 47 can be achieved while making minimal demandsontrial court time. Through an adversarial proceeding, the defendant's attorneys in Thayeridentified billing improprieties that resulted in the court's determination that: 1. Excessive time was spentontasks. Alioto and Kassof respectively sought and received compensation for almost 10 hours for work performed on April 16 in connection with this conference, which appears to have lasted about an hour. Thayer, supra, 92 Cal.App.4th at 843. 2. Work wasduplicated by the attorneys. This is not an isolated example of the mannerin which Kassof and Alioto not only duplicated the work of counsel for plaintiffs in other cases but duplicated each other's work. Ibid. at 844. 3. Class counsel consulted excessively. For example, as the Bank points out, plaintiffs’ counsels' time records show that 384 hours (approximately 20% of the total hours claimed) were spent in correspondence and phonecalls between and amongthe nine law firms representing the various plaintiffs, which is more than twice the numberofhours plaintiffs' counsel spent communicating with the Bank andthetrial court. Ibid. at 841. 48 D. Reforms in the Documentation Presented in Support of Fee Requests Are Necessary to Meet Serrano III/Ketchum Requirements. Class MemberBrennan respectfully suggests that this Court identify the following documents as required submissionsin a fee application in order to ensure Serrano III and Ketchum compliance. The decision as to what documentation is necessary should notbeleft up to individualtrial court judges. Objectivity and consistency would not allow each judgeto opine: "I do believe I have sufficient information on the numberofhours that were present and that the hourly rates charged therefore were within the norm and not overstated." Laffitte decision, 2014 Cal.App. LEXIS 1059, at *15 (citing RT 4/10/13, at 64:4-7). 1. Time records must be filed by class counsel. (a) Original time slips by which lawyers keep track of their time must be filed with the court (b) The very process of requiring disclosure of original time recordsin and ofitself will act as a discipline on attorneys. "Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." Justice Louis D. Brandeis, OTHER PEOPLE'S MONEY(Stokes Publ., New York, 1914), at Ch. 5, p. 92. (c) Lawyers working in today's marketplace(the context in whichplaintiff class action lawyers justify their hourly rates 49 ~ in Laffitte, as high as $750 an hour) are required to submit theirbills for scrutiny by clients. Today,all lawyers, even those in the more traditional corporate practice, must submitto the "nitpicking" of fee review. Goldberger v. Integrated Resources, supra, 209 F.3d at 51 (emphasis added). Chief Justice Roberts: [J]ust because youbill a client doesn't mean that they are going to pay or that they are going to pay at what you billed them. [G]eneral counsel do that all the time when they get a bill from a law firm. They cutit down. Perdue v. Kenny A., et al., 559 U.S. 542 (Apr. 21, 2010), Transcript of Oral Argument, No. 08-970, Oct. 14, 2009. at 51:12-14, and 53:24-25 (emphasis added). Class membersin class actions are entitled to the same "nitpicking" (to "cut down the bill") on their behalf. (d) Other documentary evidence. (i) Retainer agreements. Retainer agreements disclose essential information about how the class will be charged for the attorneys' services,e.g., billing increments, the billing of multiple clients and how costs will be handled. Plaintiffs' class action lawyers should be held, at a minimum,to the standard the bar imposes upon every attorney in California. 50 [Regarding] [a]n attorney who contracts to represent a client on a contingency fee basis ... [t]he contract shall be in writing and shall include....: California Business and Professions Code § 6147(a) (emphasis added). (ii) Declarations in support of fee applications must include necessary information to allow the court to evaluate Serrano ITl/Ketchum requirements. Declarations filed by class counsel must contain detailed information sufficient to calculate a lodestar consistent with SerranoIII's and Ketchum's instructions. As recently as last year, the Supreme Court of Texas required as follows: Sufficient evidence includes, at a minimum, evidence "of the services performed, who performed them andat what hourlyrate, when they were performed, and how much time the work required." Id. at 764. Long v. Griffin, et al., No. 11-1021, 2014 Tex. LEXIS 304; 57 Tex. Sup. J. 470 (Supreme Ct., Tex. Apr. 25, 2014) (per curiam) (citation omitted). (iii) Documentation reflecting class counsel's prelitigation efforts to settle the dispute. Correspondencereflecting efforts of plaintiffs’ counsel to settle the dispute with the defendantprior to commencinglitigation is necessary. In making this determination [under CCP 1021.5], one that implicates the court's equitable discretion concerning attorney fees, the court properly considersall 51 circumstances bearing on the question whetherprivate enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation. Vasquez v. State ofCalifornia, 45 Cal.4th 243, 247-48 [85 Cal.Rptr.3d 466] (Nov. 20, 2008) (emphasis added). (iv) Post-litigation settlementefforts. Documentary evidence demonstrating when settlement discussionsfirst took place after litigation commenced are essential as they disclose whenrisk was reduced. Theissue ofrisk is significant as it can turn a $750 an hourfee to a $1,300 hourly fee. (v) Monthly billing statements to the Representative Plaintiff and to the court underseal. The information provided by Class Counsel in Laffitte would be deemed inadequate under California Business and Professions Code § 6148 with regardto billing information required to be provided to clients in California. Like any client in California, class membersshould haveaccessto specific information ofhow the case progressed from a month-to-month perspective. For example, producing a computer- generated statement that simply has columns for "Total Services" and "Total Expenses" with dollar amounts and no itemization whatsoever, does not comply with the statute [Business & Professions Code 6148(b)].... A billing that lists a detailed itemization of services by date but fails to reveal which attorney or paralegal performed the services, 52 fails to reveal how much time was expended, andfails to reveal hourly rates, also does not apply (see Example 2). California State Bar, Arbitration Advisory 1995-02, "Standards for Attorney Fee Billing Statements," June 9, 1995 (emphasis added), citing A.B.A. Standing Committee on Ethics and Professional Responsibility, Formal Opinion 93-379, "Billing for Professional Fees, Disbursements and Other Expenses," Dec. 6, 1993. (vi) Documentation filed by class counsel on the agreements amongst lawyers andlaw firms that make up class counsel on how work wasdelegated. Agreements regarding allocation of responsibilities among law firms, attorneys, and timekeepersis directly relevant. There is a duty upon attorneys to assign work in the most efficient way to benefit the client. Class membersare entitled to that information in evaluating reasonableness of class counsel's fee application. (vii) Previous lodestar reductions. Declarationsfiled by class counsel should inform the court and class members whethertheir lodestar fee applications have been reducedby other courts in previous class action litigation. 53 V. RELATED CLASS ACTION FEE ISSUES THAT THE COURT COULD ADDRESS NOW A. Public Policy Provides a Strong Basis for This Court to Consider Ancillary Issues That Affect Attorneys' Fees. Class Member Brennan recognizes that these issues go beyond the question this Court certified. However, becauseoftherarity of parties, both capable and willing, to protect class members' and the public's interest, it could take many years to resolve these issues. That rarity can be gauged by the numberof amicusbriefsthat are filed on behalf of class members' interests in this case. With regard to the last Goldberger factor, public policy, the district court took note of "the compelling public policy reasons for keeping an eye on attorneys' fees in class action cases." McDaniel v. County ofSchenectady,et al., 595 F.3d 411, 415 (2d Cir. Feb. 16, 2010) (citation omitted). 1. These issues are unlikely to receive this Court's review for reasons similar to the delay in resolving the issue certified by the Court. There are no special interests standing up for the class members' interests. 2. Attorneys'fees are costs that affect the entire economy. Those costs are simply passed downthechain to consumers and society generally, adding meaningfully to the cost of everyday goodsandservices. 54 3. The judiciary has a proprietary responsibility to ensure public confidence in its invention — the class action mechanism. With the millions of dollars and the very credibility of the class action device — seen by someas a socially useful law enforcementtool but seen by others as a lawyers' machineto print money... Walker & Horwich, The Ethical Imperative ofa Lodestar Cross- Check, etc., supra, at 1475. B. Extend the Scopeof the Court's Laffitte Decision Beyond the Pure Common Fund Doctrine to Include So-Called Separately Negotiated Fee Payments. These are fee arrangements in which Class Counsel choose to not seek court approval of a fee from the common fund, but instead structure the settlement to include a separately negotiated attorneys’ fee, paid not out of the commonfund but directly by the Defendants. Although underthe termsof[a] settlement agreement, attorney fees technically derive from the defendantrather than out of the class'[s] recovery, in essence the entire settlement amount comes from the same source. The awardto the class and the agreementon attorney fees represent a package deal. Even if the fees are paid directly to the attorneys, those fees are still best viewed as an aspectofthe class'[s] recovery....'" Apple Computer, Inc. v. The Superior Court ofLos Angeles, supra, 126 Cal.App.4th at 1269, citing Lealao, supra, 82 Cal.App.4th at 33 (emphasis added). "... Even where... the parties do not specifically agree to the amountof attorney fees, the defendant usually has a fairly good idea of the range of fees that will be sought 55 and the approximate amountlikely to be awarded. The value of the benefit a settling defendantis willing to confer on the class — eitherthrough the establishment of a separate fund or in some other way — will therefore invariably be influenced by the amountoffees it would be obliged, or estimates it would be obliged, to pay class counselifit did so directly." (Lealao, supra, 82 Cal.App.4th at pp. 33-37, 97 Cal.Rptr.2d 797, italics in original.) Apple Computer, Inc. v. The Superior Court ofLos Angeles, supra, 126 Cal.App.4th at 1269 (underline added). Because these fee arrangements harm theclass's ability to limit its attorneys' fee paymentto no more than a reasonable fee, the court should include them in its holding on common funds. C. Prohibit Discussion of Fees between Class Counsel and Defendants. The Defendants havenojustification for providing a "clear sailing" agreement to Class Counsel (see Laffitte decision, "the propriety of 'clear sailing’ attorney fee agreements has been debated in scholarly circles...."!7) or approving the attorneys’ fees to be taken from the class's recovery. Indeed, Class Counsel breachedtheir fiduciary duty in doing so. Acknowledgmentof this problem has been corrected in a recent federal court decision. Attorney's Fees. To avoid collusive settlements, the Court prefers thatall settlements avoid any agreementas to attorney's fees and 17 Laffitte decision, 2014 Cal.App. LEXIS 1059,at *41, citing Consumer Privacy Cases, supra, 175 Cal.App.4th at 553 (internal citations omitted). 56 leave that to the judge. If the defense insists on an overall cap, then the Court will decide how muchwill go to the class and how muchwill go to counsel, just as in common fund cases. Please avoid agreement on any division, tentative or otherwise. Levine v. The Entrust Group, Inc., No. C 12-03959, 2013 U.S.Dist. LEXIS 6715,at *6 (N.D. Cal. Jan. 15, 2013). D. Change the Reasonable Hourly Rate Standard to a Competent or Capable Attorneys' Standard. The Laffitte legal team was highly experienced, and arguably far more experienced than needed for many ofthe tasks performed. (See pages 40 and 41, supra). Presently, a lawyer's hourly rate is based on the individual attorney's accomplishments and years of experience. [R]ates from those prevailing for private attorneys of comparable skill, experience, and stature conducting noncontingentclasslitigation in the Los Angelesarea. Serrano v. Unruh, supra, 32 Cal.3d at 625. The United States Supreme Court, in its recent fee decision, identified an alternative and more quantum meruit-oriented standard. [Fee awards] require specific evidence that the lodestar fee would not have been "adequate to attract competent counsel..." Perdue v. Kenny A., et al., supra, 559 U.S. at 554 (citation omitted; emphasis added). 57 E. Eliminate Multipliers Altogether or Modify Multipliers for Contingent Risk in Class Actions. 1. The notion of significant risk in class actionsis a legal fiction. The actual evidenceis that almostall these cases settle. The risk ofnonpaymentofa fee, particularly after class certification, is near zero. Indeed, this Court recently noted: Weencounter here an exceedingly rare beast: a wage andhourclass action that proceeded through trial to verdict. Duran v. U.S. Bank Nat'l Assoc., 59 Cal.4th 1, 12 [172 Cal.Rptr.3d 371) (May 29, 2014). High among the concerns about excessive multipliers is the treatment of contingentrisk: [T]here is a perception amonga significant part of the nonlawyer population and even among lawyers and judgesthat the risk premium is too high in class action cases Report on Contingent Fees in Class Action Litigation, January 11, 2006, 25 The Review of Litigation 458, 466 n.17 (No. 3, Summer 2006). That concern is amplified by our nagging suspicion that attorneys in these casesare routinely overcompensated for such things as contingency risk. Goldberger v. Integrated Resources, supra, 209 F.3d at 57. 2. California court holdings that multipliers can range from 2 to 4 or even higher should be revisted. 58 It is through the use of the multiplier that courts award percentage fees under the mantle of the lodestar approach. Class counsel asked the court to apply a multiplier of 2.03 to 2.13.... "[M]Jultipliers can range from 2 to 4 or even higher." (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 255.....) Laffitte decision, 2014 Cal.App. LEXIS 1059, at *35-*36. Commentators have noted the defects in the multiplier concept: [T]he multiplier calculation is all but standardless. Macey & Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation, etc., supra, at 52. [What fee is "reasonable"is easily affected by counsel's self-promoting accountofthe difficulty and risk ofthelitigation. Walker & Horwich, The Ethical Imperative ofa Lodestar Cross- Check, etc., supra, at 1455 (footnote omitted). F. Limit Enhancement for Quality of Performance and Results Obtained to an Enforceable Standard of What Constitutes "Extraordinary." Like risk and difficulty, "quality of performance"and "results achieved"are easily affected by class counsel's self-promoting accountofthelitigation. 59 CONCLUSION Bothtrial and appellate courts have a fiduciary duty to class members, and this duty is not fulfilled when the trial courts defer to class counsel, and then the appellate courts defer to the trial courts. For the reasons stated herein, we urge this Court to take a comprehensive look at how trial courts (and appellate courts) should determine whetherto approve attorneys' fee requests in class actions. The solutions adopted by this Court should notlose sight that our legal system is meantto serve clients, and that their concerns should not be superseded by the interests of lawyers and courts. Dated: May 27, 2015. Respectfully submitted, Lawrence W. Schonbrun Attorney for Plaintiff Class Member/Objector and Appellant David Brennan 60 CERTIFICATE OF WORD COUNT Counsel of Record hereby certifies that pursuant to Rule 8.504(d)(1) of the California Rules of Court, the attached Appellant's Opening Brief on the Merits contains 12,673 words of proportionally spaced Times New Roman 14- point type as recorded by the word count of the Microsoft Office 2007 word processing system,andis in compliance with the type-volumelimitations permitted by the rules of court. Counselrelies on the word countof the computer program usedto prepare this Petition. Dated: May 27, 2015 Lawrence W. Schonbrun Attorney for Plaintiff Class Member/ Objector and Appellant David Brennan Post - 1 CERTIFICATE OF SERVICE I declare that: I am overthe age of 18 years and notparty to the within action. I am employedin the law firm of Lawrence W. Schonbrun, whosebusiness addressis 86 Eucalyptus Road, Berkeley, California 94705, County of Alameda. On May 27, 2015, I caused to be served a copy of the following document: APPELLANT'S OPENING BRIEF ON THE MERITS _x__ by mail on the below-namedparties in said action, in accordance with CCP § 1013, by placing a true and accurate copy thereofin a sealed envelope, with postage thereon fully prepaid, and depositing the samein the United States Mail in Berkeley, California, to the addresses set forth below: Kevin T. Barnes, Esq. Law Offices of Kevin T. Barnes 5670 Wilshire Blvd., Ste. 1460 Los Angeles, CA 90036 Tel: (323) 549-9100 Fax: (323) 549-0101 E-mail: Barnes@kbarnes.com Attorneysfor Plaintiffs Barry M. Appell, Esq. Mika M.Hilaire, Esq. Appell, Hilaire, Benardo LLP 15233 Ventura Blvd., Ste. 420 Sherman Oaks, CA 91403 Tel: (818) 788-2300 Fax: (818) 788-2464 E-mail: Mika@ahblegal.com Attorneysfor Plaintiffs M.Kirby C. Wilcox, Esq. Paul Hastings LLP 55 Second Street, 24th FI. San Francisco, CA 94105-3441 Tel: (415) 856-7000 Fax: (415) 856-7100 E-mail: KirbyWilcox@paulhastings.com Attorneysfor Defendants Judith M. Kline, Esq. Paul Hastings LLP 515 So. Flower St., 25th FI. Los Angeles, CA 90071 Tel: (213) 683-6000 Fax: (213) 627-0705 E-mail: JudyKline@paulhastings.com Attorneysfor Defendants Post - 2 Joseph Antonelli, Esq. Janelle Carey, Esq. Law Office of Joseph Antonelli 14758 Pipeline Ave., Ste. E Chino Hills, CA 91709 Tel: (909) 393-0223 Fax: (909) 393-0471 E-mail: JAntonelli@antonellilaw.com Attorneysfor Plaintiffs Clerk, Superior Court Clerk, Court of Appeal County of Los Angeles Second Appellate District Stanley Mosk Courthouse 300 South Spring Street 111 North Hill Street Second Floor, North Tower Los Angeles, CA 90012 Los Angeles, CA 90013 I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on May 27, 2015, at Berkeley, California. Sandra Norris Post - 3