LAFFITTE v. ROBERT HALF INTERNATIONAL (BRENNAN)

Appellant’s Reply Brief on the Merits

Cal.November 12, 2015

SUPREME COURT ED NOV 12 2015 NO. 8222996 IN THE SUPREME COURT Frank A. McGuire Clerk OF THE STATE OF CALIFORNIA Deputy MARK LAFFITTE,etai., Plaintiffs and Respondents, VS. ROBERT HALF INTERNATIONAL,INC., et al., Defendants and Respondents, 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 REPLY BRIEF ON THE MERITS LAWRENCEW. SCHONBRUN (SB 454519) 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 EEE S NO. 8222996 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA MARK LAFFITTE,etal, Plaintiffs and Respondents, VS. ROBERT HALF INTERNATIONAL,INC., et al., Defendants and Respondents, DAVID BRENNAN, PlaintiffandAppellant. After a Decision of the Court ofAppeal, 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 REPLY 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 EEE TABLE OF CONTENTS Page Table of Authorities...........aseceseceesceesssecscesasesneccuateesessessueeeeestenesateessessusessaeens ili INTRODUCTION..00..eeesesscessesseetsessceseeeeecnsceeaeeeseeeesseeseesesaescatesaeeeseeessees 1 ARGUMENT 0.0. eecceceneseecseescecsseessecssesessceseesseaeesseeesessenssssecsesenesensesaeesseeeees 2 I. The Court's Decision in Serrano III Requiresthat Judicial Awards of Reasonable Attorneys' Fees from Class Action Common Funds Must Be Anchored to the Lodestar-Multiplier Approach................:0008 2 A. Serrano III's Requirements Are Clear and Unambiguous...eceeeceseceeceessececssessseseessesseeesesensesens 2 B. The Arguments Raised by Class Counselin Support of Their Contention that Serrano III Permits the Anchoring of a Reasonable Attorneys’ Fee Award to the Percentage Approach Are,at Best, Misguided 0.0... cesssssccssssseccessessssessessesssessceeseeeeees 5 C. The Most Class Counsel Can ArgueIs That in 1977, This Court Relied on Two Federal Cases That Banned Percentages in Common Fund Cases, Which Cases Have Been Overruled..........cccccccsseessee: 16 Il. The Cases Cited by Class Counsel to Refute Class Member Brennan's Arguments Are Being Misrepresented 20.0.0... ccescessssssesseeesecessssesesseessessssssesessessseeseeases 17 A. Class Counsel Misunderstandthe Significance of the Cases They Cite ...........ccssssccstssssssessssscsesscscsecssees 17 Ii. This Court Should Preserve the Principles upon Which Its Serrano ITT Decision Is Based...........cccscccsscccsseccetseesesseseees 25 A. This Court's Serrano ITT Instructions Are Being Thwarted... eecseesssecessscseeseessscssseseeesseseeseees 25 B. Serrano III's Choice of the Lodestar Is Still SOUNoo.eeeeeec ccc cccceccceesscececceecsscccesecoesseeesaseesesers 28 C. This Court Should Not Adopt the Fee Jurisprudence of the Federal Circuits...eeeesreeeee 30 D. The 33-1/3% Contingency Fee Must Firmly Be Rejected by This Court........ cee cesesceseesecteeseseesseerees 36 CONCLUSION 00.eeercesecseccsececesseesnsseesaesnssseseseessasessssseesssssseseseresoneetenses 37 CERTIFICATE OF WORD COUNT......ce cecescscsseceerscseeneeeeeseesesnevees Post -1 CERTIFICATE OF SERVICE..00... ce sesesseecsesessnceseecneeceteseeneceeeaseeeesees Post - 2 il 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) oo...ccc cceeesceseeeeeeeees 18 Chavez v. Netflix, Inc., 162 Cal.App.4th 43 [75 Cal.Rptr.3d 413] (1st App. Dist. Apr. 21, 2008)..........cece 22, 23, 24 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)........ccscssccscssssesseserseeees 23 Consumer Privacy Cases, 175 Cal.App.4th 545 [96 Cal.Rptr.3d 127] (1st App. Dist. June 30, 2009) oo...eeeeseeeeeeceeeees 21 Dunk v. Ford Motor Co., et al., 48 Cal.App.4th 1794 [56 Cal.Rptr.2d 483] (4th App. Dist. Aug. 30, 1996) uo... 17, 19, 20 Jutkowitz v. Bourns, Inc., et al., 118 Cal.App.3d 102 [173 Cal.Rptr. 248] (2d App. Dist. Apr. 16, 1981)...eccsssseesssesscssessesscsssssessssavscesseceenspassim Ketchum v. Moses, 24 Cal.4th 1122 [104 Cal.Rptr.2d 377] (Feb. 26, 2001) ou... eccscssccsscssessssessssssssssceceseeees 24, 26 Laffitte v. Robert HalfInt'l, Inc., et al.; David Brennan, Plaintiffand Appellant("Laffitte"), 231 Cal.App.4th 860 [180 Cal.Rptr.3d 136]; 2014 Cal.App. LEXIS 1059 (2d App. Dist. Oct. 29, 2014) occcccscsessesscsseseecsscsssssssesscsevsecsesseeneesspassim Lealao v. Beneficial California, Inc., 82 Cal.App.4th 19 [97 Cal.Rptr.2d 797] (Ast App. Dist., Div. 2, July 10, 2000)..........ccesscesssssssscscsscsssssecseereeeesPassim ill TABLE OF AUTHORITIES State Cases Page 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)... 7, 17, 18, 19 Serrano v. Priest, et al. ("Serrano III"), 20 Cal.3d 25 [141 Cal.Rptr. 315] (Oct. 4, 1977).eeeeeeeeneeeseeenespassim Sonic-Calabasas A., Inc. v. Moreno, 57 Cal.4th 1109 [163 Cal.Rptr.3d 269] (Oct. 17, 2013) eeeeeeeeeeees 1] Strawn v. Farmers Ins. Co. ofOregon, 353 Ore. 210, 297 P.3d 439 (Feb. 22, 2013) oeiececccensesecseeeseeeneensseeeees 13 Thayer v. Wells Fargo Bank N.A., 92 Cal. App. 4th 819 [112 Cal.Rptr.2d 284] (Ist App. Dist. Oct. 2, 2001)...eeeeecesecseeceesesesceseeseescssceeseseseeesseeeesesseeesees 21 The People ex rel. Department ofTransportation v. Yuki, et al. ("Yuki"), 31 Cal.App.4th 1754 [37 Cal.Rptr.2d 616] (6th App. Dist. Jan. 6, 1995)... 7, 17, 18, 19, 28 Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 [110 Cal.Rptr.2d 145] (6th App. Dist. July 31, 2001)...eeeeeeeeteeees 24 Federal Cases Page Brytus v. Spang & Co., 203 F.3d 238 (3d Cir. Feb. 7, 2000)...ee eeeeeeeee 18 City ofDetroit v. Grinnell Corp. ("Grinnell"), 495 F.2d 448 (2d Cir. Mar. 13, 1974)...eeeceeececcseeseeeeeeeeeeneseeenseseenspassim Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 50 (2d Cir. Mar. 28, 2000)...ceeeesecsssreesseeeseeesecssessessenees 15. iv TABLE OF AUTHORITIES Federal Cases Page In re Cendant Corp. PRIDESLitig., 243 F.3d 722 (3d Cir. Mar. 21, 2001)... ccccesesescsseesessescsseesesscsscssscscsssscssees 15 In re Prudential Insurance Co. America Sales Practice Litigation Agent Actions, 148 F.3d 283 (3d Cir. July 23, 1998)...ccc eccccscsescssesesscssccssesscsesesseseacenes 37 Lindy Bros. Builders, Inc. ofPhila. v. American Radiator & Standard Sanitary Corp., et al., 487 F.2d 161 (8d Cir. Oct. 31, 1973) ececcecssssssssseessesscsssessesscsscessseespassim Swedish Hospital Corp. v. Donna E. Shalala, Secretary ofHealth and Human Services, 1 F.3d 1261 (D.C. Aug. 10, 1993)...ec cccceccsessccseccssessssscsssssssecsscsscnsecaceees 13 Trustees v. Greenough, 105 U.S. 527, 536 (May 8, 1882) ou... cecceeeeeeeee 28 Zucker v. Occidental Petroleum Corp., et al., 968 F. Supp. 1396 (C.D. Cal. June 4, 1997)...ee eceecsscsesessscsscssssscseseeseeens 24 Statutes, Codes and Rules Page California Business and Professions Code, § 6068 ..........ccccccccccsssssscssessesees 34 Texts, Treatises, and Other Page Baker, Lynn A., Michael A. Perino & Charles Silver, Is the Price Right? An Empirical Study ofFee Setting in Securities Class Actions, 115 Colum. L. Rev. 1371 (October 2015)...cescescessscescsseesserecens 31, 36 TABLE OF AUTHORITIES Texts, Treatises, and Other Page Pearl, Richard M., California Attorney Fee Awards, 3d ed. (CEB Mar. 2014 Update) ......cceeeccscesssecsecsessecsecssssesscnssesssseseessseeeesenes 30, 33 Reportofthe Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237 (1985) ("Task Force Report") .........ceescscesssssecseeeneeeeeenspassim vi INTRODUCTION It is clear from the parties' briefing that there is no agreement about the standard that this Court established in Serrano III! regarding the methodology required for judicial calculations of the amount reasonable attorneys' fee awards to be paid from class action commonfundrecoveries. The simple direct answer to the Court's question, Doesthis Court's seminal decision in Serrano III 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? is No. But for reasons explained herein, answering that question does not address the fact that the federal case authorities cited in support of this Court's 1977 decision are no longer valid precedent. Thusly,this Court has the opportunity to reconsider Serrano III andestablish a fee calculation methodologyfor class actions in the 21st century. 1 Serrano v. Priest (hereinafter Serrano III), 20 Cal.3d 25 [141 Cal.Rptr. 315] (Oct. 4, 1977). THIS COURT'S DECISION IN SERRANO ITT REQUIRES THAT JUDICIAL AWARDS OF REASONABLE ATTORNEYS' FEES FROM CLASS ACTION COMMON FUNDS MUST BE ANCHORED TO THE LODESTAR-MULTIPLIER APPROACH A. Serrano IT's Requirements Are Clear and Unambiguous. Appellant Brennanis firmly convincedthat this Court will cometo the conclusion that his analysis is correct, and that Serrano III stands for the following propositions: l. California recognizes the prevailing attorneys’ fee jurisprudence of the American rule — the general policy regarding each party's responsibility for the paymentofhis or her attorneys' fees. 2. California also recognizes three equitable exceptionsto the American rule: the commonfund theory, the substantial benefit theory, and the private attorney general concept (Serrano ITI, 20 Cal.3d at 42-43). These exceptions permit a court to award a reasonable attorneys’ fee to a successful plaintiff for his or her counsel's efforts. 3. SerranoIII instructs that the awarding of reasonable attorneys' fees is a two-step process. (a) First, the court must determine whether counsel has establishedthe eligibility of the plaintiffs for an award under one of the three recognized equitable exceptions. SerranoIIT, supra, at 31-32. (b) Second,thetrial court. using its historic powerin equity, must calculate the amountofthe fee to be awarded. 4, SerranoITI instructs how the amountofthe fee must be calculated. It holds that California courts, in calculating a reasonable attorneys' fee, must "anchor the fee award"to the "attorneys' services" provided to the client, in other words, it must use the lodestar- multiplier approach. ["The starting point of every fee award,] [once it is recognized that the court's role in equityis to provide just compensation for the attorney,] [must be a calculation of the attorney's services in terms of the time he has expendedonthecase.] [Anchoring the analysis to this concept is the only way of approaching the problem that can claim objectivity, a claim which is obviously vital to the prestige of the bar and the courts." Serrano IIT, 20 Cal.3d at 49 n.23 (citation omitted). (a) Incalculating the amountof a reasonable attorneys' fee, Serrano III requires: [A] careful compilation of the time spent and reasonable hourly compensation of each attorney... Ibid. at 48. (b) The Court explained why this anchoring to attorneys’ services is required: (i) Objectivity: "Anchoring the analysis to this concept [actual time expended] is the only way of approaching the problem that can claim objectivity..." Ibid. at 49 n.23, citing City ofDetroit v. Grinnell Corp., 495 F.2d 448, 470 (2d Cir. 1974). (ii) |The prestige of the bar and the courts: "[O]bjectivity, a claim which is obviously vital to the prestige of the bar and the courts." Ibid. (emphasis added). As restated in Jutkowitz v. Bourns, Inc., et al., 118 Cal.App.3d 102 [173 Cal-Rptr. 248] (2d App.Dist. Apr. 16, 1981): [Favorable public perception and the prestige of the legal profession and our system ofjustice... Id. at 111 (emphasis added), relying on Serrano III, supra. (iii) Just compensation. "[T]he court's role in equity is to provide just compensation for the attorney... in terms of the time he has expended on the case." Serrano IIT, 20 Cal.3d at 49 n.23 (citation omitted; emphasis added). (c) Insupport of this methodology, Serrano IIT references two federal common fund cases, City ofDetroit v. Grinnell Corp. (hereinafter Grinnell),2 and Lindy Bros. Builders, Inc. of Philadelphia v. American Radiator and Standard Sanitary Corp., et al. (hereinafter Lindy Bros.),3 of which the formerspecifically rejects the calculation of an award of reasonable attorneys' fees based on contingency principles of the percentage-of-the-benefit approach. 2 495 F.2d 448 (2d Cir. Mar. 13, 1974). 3 487 F.2d 161 (3d Cir. Oct. 31, 1973). 4 Because wefeel that this fee ... displayed too muchreliance upon the contingent fee syndrome... Grinnell, 495 F.2d at 468. B. The Arguments Raised by Class Counsel in Support of Their Contention that Serrano II Permits the Anchoring of a Reasonable Attorneys' Fee Award to the Percentage ApproachAre,at Best, Misguided. 1. Appellant Brennan believes he can persuasively demonstrate why Class Counsel's analysis is wrong and why Serrano Zils instructionsare clear and includeall equitable circumstances, not just the private attorney general exception. The language usedbythe Court, (a) "Thestarting point4 of every fee award," and (b) "once it is recognized that the court's role in equity..." (Serrano ITT, 20 Cal.3d at 49 n.23 (citation omitted; emphasis added)), compels this conclusion. 4 Class Counselcriticize Appellant Brennan for a "myopic focus on the 'starting point'" language (Class Plaintiff and Respondent Mark Laffitte's Answer Brief on the Merits (hereinafter "ABM"), at 46). Mr. Brennan does not apologize for seeking to enforce Serrano III's holding by referencing the language used by this Court. But the true myopia exhibited in the briefing is not Mr. Brennan's, but rather Class Counsel's mantra that such and such a case "is not a common fund case." 2. Class Counsel's argumentis that the holding in Serrano III does not apply to the calculation of a reasonable attorneys' fee under the common fund exception because "Serrano III was not a common fund case" (Class Plf's ABM at 19), and that Serrano II only applied to the private attorney general exception. Their argument, indeed mantra,> that Serrano III (and other cases cited by Appellant Brennan) did not involve a fee award under the common fund doctrine is an attempt to obfuscate the issue. However,this argumentfails, as not one ofthe authorities on which Mr. Brennanrelies is a commonfundcase. (Class PIf's ABM at 25.) Mr. Brennan responds: (a) Class Counsel provide no case support or legal authority that has ever adopted an interpretation that there is a difference in how equitable principles are applied in awarding reasonable attorneys' fees, depending on whetherentitlement to the reasonable fee is being awarded under the commonfundtheory or under the private attorney generaltheory. (b) The words ofSerrano III's instructions cover the general topic ofthe equitable powerofthe court in awarding reasonable attorneys' fees without respect to which exception entitles the plaintiffs to a fee award: 5 "Dunk v. Ford Motor Co. is not acommon fund case"; Jutkowitz v. Bourns is not a commonfund case" (Class Plf's ABM at 27 and 28 respectively); "Mr. Brennan's reliance on Ketchum is misplaced,asit was not a commonfund case." (Class Plf's ABM at 23 n.7; emphasis in original.) "[O]nce it is recognized that the court's role in equity is to provide just compensation for the attorney...." Serrano III, 20 Cal.3d at 49 n.23 (emphasis added). (c) The fact that Serrano III (and Lealaov. Beneficial California, Inc.;6 Jutkowitz v. Bourns, Inc., et al.;7 Salton Bay Marina, Inc., et al. v. Imperial Irrigation Dist.;8 The People ex rel. Department ofTransportation v. Yuki, et al.,9 cited by Appellant), is not itself a case in which the court found entitlement to a fee award under the common fund exception is simply not germane to Serrano III's larger discussion ofa court's use of its equitable power. (d) There is simply nothing in SerranoIII that even hints that the method ofcalculation of the amount of a reasonable attorneys’ fee depends on whetherentitlement is found under the commonfundorprivate attorney general theories. On the contrary, the broad language ofSerranoIII's "The starting point of every fee award," and "the court's role in equity," suggests just the opposite. Serrano III, 20 Cal.3d at 49 n.23 (citation omitted; emphasis added). (ec) Class Counsel provide absolutely no rationale that explains why the awarding of a reasonable attorneys' fee © 82 Cal.App.4th 19 [97 Cal.Rptr.2d 797] (1st App. Dist. July 10, 2000). 7118 Cal.App.3d 102 [173 Cal.Rptr. 248] (2d App. Dist. Apr. 16, 1981). 8 172 Cal.App.3d 914 [218 Cal-Rptr. 839] (4th App. Dist. Sept. 30, 1985). 9 31 Cal.App.4th 1754 [37 CalRptr.2d 616] (6th App.Dist. Jan.6, 1995) (hereinafter Yuki). underthe equitable commonfund exception or the equitable substantial benefit exception should be any different than the calculation of the amount of a reasonable attorneys' fee under the equitable private attorney general exception. There is no explanation, for example, of why the principles of Serrano III — the importance of objectivity, the public's respect for the prestige of the judiciary, the integrity of the bar, and just compensation — would apply to one circumstance,the private attorney general theory, but not to the other, the common fund doctrine. The doctrines are similar. Both provide compensation when groupsofpeople other than the immediate parties are benefitted bylitigation. 3. Class Counsel make muchofthe fact that the anchor-the- fee to the lodestar discussion appears in Section V of the Serrano IIT opinion (SerranoIII, 20 Cal.3d at 48-49) regarding the private attorney general exception. But this is unremarkable; it follows from the fact that it was that exception which the Court ruled entitled Class Counsel to a fee award. Nothing in the discussion in Section V suggests that its anchoring instruction applies only whenthefeeis awarded underthe private attorney general theory. 4. The commonbenefit, commonfund, and private attorney general exceptions are entitlement questions. They are unrelated to the methodto be used to calculate the amountof the attorneys' fee. Class Counsel confuse Step 2, the methodto calculate the amount of the fee, with Step 1, entitlement to a fee: [D]espite numerous appellate courts acknowledging the viability of the common fund - theory (whereby fees may be awarded pursuantto the percentage method).... (Class Plf's ABM at 24-25.) Contrary to Class Counsel's argument, the common fund doctrine is not shorthand for the percentage approach. 5. It is true that Serrano III can be distinguished from Laffitte! based on the distinction that two different exceptions are involved. But whetherit is the common fund, private attorney general, or substantial benefit exception is not a significant circumstance as regardsthe court's equitable power. Class Counsel's argument, Thus, the Court made its statement concerning the "starting point" for fee awards in the context of analyzing the amount of the award pursuant to the private attorney general theory. This statement was not made in connection with the common fund theory. (Class Plf's ABM at 22), is incorrect. The context was awarding a fee pursuant to the equitable exceptions to the Americanrule. By the samelogic, Class Counsel could argue that SerranoIII's "the starting point" language was "madein connection with" a public school financing" case while Laffitte involves employment law. Or, that SerranoIII's instruction, "the starting point," was "made in connection" with public interest law firms seeking fees, while in Laffitte the law firmsare private. 10 Laffitte v. Robert HalfInt'l, Inc., et al.; David Brennan, Plaintiff andAppellant (hereinafter Laffitte), 231 Cal.App.4th 860 [180 Cal.Rptr.3d 136], 2014 Cal.App. LEXIS 1059 (2d App.Dist. Oct. 29, 2014). The Court's answer regarding the observation that Lindy Bros., supra, and Grinnell, supra, were antitrust cases applies to Class Counsel's argument regarding the common fund theory vs. the private attorney general theory: [A]lthough uttered in the context of an antitrust class action, are wholly apposite here [in the context of school financinglitigation]... Serrano ITT, 20 Cal.3d at 49 n.23, 1.e., "although uttered in the context of" the application of the private attorney general exception, are wholly apposite to the commonfund exception. 6. If Class Counsel's argument were correct and Serrano III's anchoring language refers only to fees awarded underthe private attorney general exception: Thus, SerranoIII did not preclude courts from utilizing the percentage method in commonfund cases. (Class Plf's ABM at 21), it would have made no sense for this Court to cite to fee awards from Lindy Bros. and Grinnell, both made pursuant to the common funddoctrinal exception. Appellant Brennan believes this Court would not have relied upon commonfund cases to support its instructionsif it had meant to exclude common funds from Serrano III's reach. Andifit had meant to exclude common fundsettlements from its instructions, the Court certainly would have expressly stated so in its opinion. 7. Class Counsel argue that the anchoring instruction mandated in Serrano III (and numerousother courts of appeal cases) is dicta as regards fee awards under the commonfund exception. 10 That dicta, however, did not apply to common fund cases. (Class Plf's ABM at 2.) (... [T]he "starting point" for fee awards) was madein the context of analyzing the amount of an award pursuantto the private attorney general theory. That statement was not made in connection with the common fundtheory....) (Class Plfs ABM at33, referencing SerranoIII, Section V.) To begin with, Class Counsel's Answer Briefmakes numerousclaimsofdicta (Class Plf's ABM at2, 10, 31, 32, 34, 35), but provides nocitation to case law or legal authority on what constitutes dicta. Class Counsel just assert the term without legally defining it. This Court has explained: Statements by appellate courts "responsive to the issues raised on appealand... intended to guide the parties andthetrial court in resolving the matter following ... remand"are notdicta. Sonic-Calabasas A., Inc. v. Moreno, 57 Cal.4th 1109, 1158 [163 Cal.Rptr.3d 269] (Oct. 17, 2013) (citation omitted). Becausethis Court's seminal Serrano III decision was instructing courts on how to exercise their equitable powergenerally to calculate a fee under an equitable exception,the instruction is not dicta as applied to the equitable common fund exception. For example, imagine three housesthat are involved in a construction defectlitigation: one is painted green, oneis painted blue, and the third is painted white. All are part of a subdivision. 11 A homeownerclaimsa construction defect for his house, which is painted white. The court concludesthat there is a construction defect. Could the defendant-home builder then argue that the construction defect holding is dicta regarding the houses painted green and blue? 8. Last but not least, when examined closely, Class Counsel's arguments make nosense. The very cases cited by Class Counsel acknowledgethat from an historical perspective at the time Serrano III was decided, the lodestar approach replaced the percentage approach in common fund cases! (a) Class Counsel's AnswerBriefcites to Lealao, supra, which acknowledgesthis historical context as follows: In this context, this Court issued its decision in Serrano IIT in 1977. (Class Plf's ABM at 10 n.2.) _And, the context being referred to was common fund cases: Adoption of the lodestar methodologyin the early 1970s was stimulated by the view that awards based on a reasonable percentage of the fund,historically the preferred method of fee setting in common fund cases, was yielding fee awards that were excessive and unrelated to the work actually performed by counsel. Lealao, 82 Cal. App. 4th at 28 n.2 (emphasis added). 12 (b) Class Counsel cite to Swedish Hospital Corp.v. DonnaE. Shalala, Secretary ofHealth and Human Services, | F.3d 1261 (D.C. Aug. 10, 1993), which acknowledgesan historical shift at the time of Serrano II from the percentage approachto the lodestar approach: "{S]hifted the emphasis from a fair percentage of recovery to the value of the time expendedby counsel." (Class Plf's ABM at 10, citing Swedish Hosp., 1 F.3d at 1266.) (c) Class Counselcite to Strawn v. Farmers Ins. Co. ofOregon, 353 Ore. 210, 297 P.3d 439 (Feb. 22, 2013), which acknowledges that commonfundcases, state and federal, were returning to the percentage approach from the lodestar approach, which was prominentat the time ofLindy Bros., Grinnell, and SerranoIII. "In commonfund cases,... federal and state courts alike have increasingly returned to the percent-of-fund approach..." (Class Plf's ABM at 15, citing Strawn v. Farmers Ins. Co. ofOregon, supra, 353 Ore. at 219.) The return to the percentage approach wasfrom theprevailing lodestar methodology. (d) Class Counsel's AnswerBrief includes an alphabetical list of states that permit or require the percentage approach — Arizonais followed by Colorado, and Connecticut (Class Plfs ABM at 16). Noticeably absent from Class Counsel'slist is the state of California. If Serrano III permitted the percentage approach 13 to be used in commonfundcases, as Class Counsel contendit had, why havethey not have included California in their list? (e) Class Counsel's AnswerBrief asks this Court to follow the "nearly universal trend" (Class Plf's ABM at 5) that permits percentage fee calculations. Why wouldit be necessary to ask this Court to follow a federal andstate trend if this Court had permitted use of the percentage calculation in Serrano III in 1977? (f) Class Counsel's Answer Brief acknowledges the significance ofLindy Bros., supra, and Grinnell, supra, as relevant to common fund fee awards, but their position in this case contradicts those cases. Lealao states: [W]hose 1973 opinion in Lindy J, supra, 487 F.2d 161, which was relied upon in Serrano IIT (20 Cal.3d at p. 49, fn. 23)... Lealao, supra, 82 Cal.App.4th at 28. Similarly, in Lindy Bros., the Third Circuit initially set forth the lodestar method as the means to determine reasonable attorneys' fees. Thus, to the extent City ofDetroit and Lindy Bros. previously adopted the lodestar method in common fund cases, (Class Pif's ABM at 23; emphasis added.) (g) Class Counsel argue that Serrano III's instruction, whichreferences federal case law,i.e., Lindy Bros. and Grinnell, has changed since 1977 and now permits percentage fee calculations. 14 u e s They acknowledgethat federal court cases relied upon by Serrano III did not change until the year 2000: In 2000, however, the Second Circuit abrogated City ofDetroit [v. Grinnell] and expressly approved the percentage method... (Class Plfs ABM at 23, the Third Circuit's Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 50 (2d Cir. Mar. 28, 2000).!1) And in 2001, In re Cendant Corp. PRIDESLitig., 243 F.3d 722, 734 (3d Cir. Mar. 21, 2001), approved the percentage-of-recovery method, invalidating Lindy Bros. (Class Plf's ABM at 23 and 13.) These subsequent changesin federal law did not change what Lindy Bros. and Grinnell held in 1977 when SerranoIII adopted them. Thusly, Class Counsel concluding statementis a non sequitur. Forall these reasons,it is evident that Serrano ITI did not and does not bar California courts from applying the percentage method in commonfundcases. (Class Plf's ABM at 23.) In conclusion,while it is true that Serrano II found an entitlement to an award of reasonable attorneys' fees under the private attorney general theory and not the commonfund doctrine, Serrano III's language and the context of the Court's decision are not limited to a fee calculation underthe private attorney general exception. 11 Note that although permitting the percentage approach,the fee approved by the court was 4%: "Nor does the award ofa fee of about 4% constitute an abuse ofdiscretion." Goldberger, 209 F.3d at 53. 15 SerranoIII relates generally to a broad judicial exercise of a court's equitable power when any oneofthe three exceptions exists. Thereis no indication in Serrano III that the equitable poweris exercised differently, depending upon which exceptionentitles a plaintiff to a fee award. C. |The Most Class Counsel Can ArgueIs That in 1977, This Court Relied on Two Federal Cases That Banned Percentages in Common Fund Cases, Which Cases Have Been Overruled. In the intervening years since Serrano III, the Third Circuit (Grinnell) and the Second Circuit (Lindy Bros.) have reconsidered and reversed those decisions. Thusly, Class Counsel could legitimately argue that this Court may chooseto reconsiderits SerranoIII decision. Thefact, in Class Counsel's words, that these "decisionsthat are no longerreliable" (Class Plf's ABM at2), says nothing about what these decisions held in 1977 when they were reliable and adopted by SerranoII. The "no longerreliable" argumentis irrelevant to the fact that in 1977 Serrano III forbade (following the Second and Third Circuits in 1977) the anchoring of a reasonable fee award in a commonfund case to the percentage approach. Whatthe federal courts (and other state courts) have done in the 40 years since the Serrano III decision is not relevant to what this Court ruled in 1977, whichisstill California law. Class Counsel's observation: In short, the time has comefor this Court to fully endorse the percentage method in common fundcases. 16 (Class Plf's ABMat 3), could not be more misleading. Since 1977, this Court has never endorsed the percentage method as an anchorfor judicial awards of reasonable attorneys' fees. Just the opposite! I. THE CASES CITED BY CLASS COUNSEL TO REFUTE CLASS MEMBER BRENNAN'S ARGUMENTSARE BEING MISINTERPRETED A. Class Counsel misunderstandthe significance of the cases theycite. It is true that SerranoII], supra, Dunk v. Ford Motor Co.,'2 Lealao, supra, Yuki, supra, Salton Bay, supra, and Jutkowitz, supra, among others, were not cases in which a fee was ultimately awarded based on the commonfund doctrine exception. However, the language in these cases clearly demonstrates that each of these courts understood that Serrano III's instruction was not limited to fee awards underthe private attorney general exception. Rather, that Serrano IIT was applicable whenevera reasonable attorneys' fee was sought under -an equitable exception to the Americanrule. Appellant Brennan will briefly commenton each ofthe cases cited by Class Counsel. As most of these cases werecited in the Second District's Laffitte decision (231 Cal.App.4th 860, 2014 Cal.App. LEXIS 1059), they have been covered in Appellant Brennan's Petition for Review (hereinafter "Appellant's PR") and 12 Dunk v. Ford MotorCo., et al., 48 Cal.App.4th 1794 [56 Cal.Rptr.2d 483] (4th App. Dist. Aug. 30, 1996). 17 Opening Brief on the Merits (hereinafter "Appellant's OBM"). Rather than restating whatis in the these earlier briefs, Appellant Brennan will refer the Court to his prior pleadings for more detailed responses. l, Apple Computer, Inc. Apple Computer, Inc. v. The Superior Court ofLos Angeles County, et al. 126 Cal.App.4th 1253 [24 Cal.Rptr.3d 818] (2d App. Dist. Feb. 17, 2005), did not involve an actual calculation of a reasonable attorneys' fee. The statement: [A]ttorneys' fees awarded under the common fund doctrine are based on a 'percentage-of-the-benefit' analysis....,13 is truly dicta. The issue in Apple was a defendant's attemptto disqualify a law firm from acting as class counsel. There is no citation to or discussion of Serrano IIT, Indeed, Apple Computercites to federal fee jurisprudence. (Apple Computer at 1270,citing to Brytus v. Spang & Co., 203 F.3d 238, 247 (3d Cir. Feb. 7, 2000).) For a more thorough discussion on Apple Computer, see Appellant's PR at pages 23 and 24. 2. Yuki and Salton Bay. It is true that neither The People ex rel. Department of Transportation v. Yuki, supra, 31 Cal.App.4th 1754, nor Salton Bay, supra, 172 Cal.App.3d 914, involve the application of the percentage approach to a commonfund. However, the quotations from Yuki and Salton Bay arise out of Serrano III's instructions and makeit clear that those courts 13 Class Plfs ABM at 24, citing Apple Computer, supra, at 1270. 18 believed Serrano III appliedto all fee awards, i.e., common fund and private attorney general, class action and non-class action. For a more thorough discussion on Yuki, see Appellant's PR at 21. For a more thorough discussion on Salton Bay, see Appellant's PR at 21, and Appellant's OBMat 13. 3. Jutkowitz. In reading Jutkowitz v. Bourns, supra, 118 Cal.App.3d 102, it is clear that the question of whether the fee was being awarded pursuant to the common fund exception was not germane to Serrano III's anchoring instruction. Significantly, in none of the "common fund"cases, whetherclass actions or nonclass actions... is there any suggestion that the size ofthefund controls the determination ofwhatis adequate compensation. Jutkowitz, supra, 118 Cal.App.3d at 110 (underline added). Class Counsel's summation ofJutkowitz cannot be squared with whatthat court actually held: In short, the Jutkowitz Court did not categorically reject the common fund theory (or the percentage method). (Class Plf's ABM at 30.) For a more complete discussion ofJutkowitz, see Appellant's PR at 20, and Appellant's OBMat 13. 4. Dunk. Class Counsel acknowledge that Dunk v. Ford Motor Co., supra, 48 Cal.App.4th 1794, held: 19 (1) "The award of attorney fees based on a percentage of a ‘commonfund!recovery is of questionable validity in California"; and (2) "Later cases have cast doubt on the use of the percentage method to determine attorney fees in California class actions." (Class Plf's ABMat34, citing Dunk, 48 Cal.Rptr.4th at 1809; emphasis added.) Yet, Class Counsel arguethat: Dunk was not a commonfundcase.... (Class Plf's ABMat 34). Dunk was a class action. Its holdingis directly relevant to the issue before this Court. For a more complete discussion ofDunk, see Appellant's OBMat 14. 5. Lealao. Lealao v. Beneficial California, Inc., 82 Cal.App.4th 19 [97 Cal.Rptr.2d 797] (1st App. Dist., Div. 2, July 10, 2000), is similar to Serrano IIT in that: The plaintiffs' counsel moved for reasonable attorney fees, resting not on statute but on the inherent equitable powers of the court. In support of their claim they relied on three theories: the common fund, substantial benefit, and private attorney general exceptionsto the general rule disfavoring fees. Lealao at 38 (footnote omitted; emphasis added). Class Counsel point to the court's statementthat: Despite its primacy, the lodestar methodis not necessarily utilized in common fundcases. 20 (Lealao at 27.) This sentenceis either meant to be anhistorical reference (and "was" would have been a better choice than "is") or refers to "under federal law" in the paragraph that follows: Under federal law, the amount of fees awarded in a commonfund case may be determined under either the lodestar method or the percentage-of- the-benefit approach.... Lealao, supra, at 27 (citation omitted). Otherwise the sentence contradicts the whole thrust ofLealao, which is that the lodestaris the starting point of any calculation of a reasonable attorney's fee. For a more complete discussion ofLealao, see Appellant's PR at 12, 13, 19 and 21, and Appellant's OBMat 15-16. «6. Thayer. Thayer v. Wells Fargo Bank N.A., 92 Cal. App. 4th 819 [112 Cal.Rptr.2d 284] (1st App. Dist. Oct. 2, 2001), supports Appellant Brennan's argumenton the lodestar as anchor. "[T]he primary method for establishing the amount of 'reasonable' attorney fees is the lodestar method...." Id. at 833 (citations omitted). For a more complete discussion on Thayer, see Appellant's PR at 20. 7. Consumer Privacy. Consumer Privacy Cases, 175 Cal.App.4th 545 [96 Cal.Rptr.3d 127] (1st App. Dist. June 30, 2009), supports Appellant Brennan's argument on the lodestar as an anchor. 21 Thetrial court then used a lodestar analysis to determinethe base fee, and applied a multiplier to calculate the final award. ""[T]he primary method for establishing the amount of 'reasonable' attorney fees is the lodestar method....""" Id. at 556-57 (citations omitted) (emphasis added). Class Counsel's argument: Moreover, since Serrano III, California appellate courts routinely apply the percentage method to award attorneys' fees in commonfund cases. See, e.g., In re Consumer Privacy Cases,.... (Class Pif's ABM at 24, citing Consumer Privacy Cases, 175 Cal.App.4th at 558), is a misunderstandingofthe use of the term percentage method, which wasactually a part of the court's multiplier analysis. The "method" being referenced in Consumer Privacy is referring to the calculation of an enhancementto the lodestar. For a more complete discussion on Consumer Privacy, see Appellant's PR at 22 and 23. 8. Chavez. Class Counsel's assertion that Chavez v. Netflix, Inc., 162 Cal.App.4th 43 [75 Cal.Rptr.3d 413] (1st App. Dist. Apr. 21, 2008), supports their interpretation ofSerrano III is based on a misunderstanding of Chavez. Class Counsel's reference to the statement in Chavez: It is not an abuse of discretion to choose one method over anotheras long as the method chosen is applied consistently using percentage figures that accurately reflect the marketplace. (Chavez, 162 Cal.App.4th at 65-66), 22 misunderstands Chavez's discussion. Chavez does not challenge Serrano III's primacy ofthe lodestar approach. To establish a benchmark for determining the enhanced lodestar amount, the court used the percentages that a hypothetical enhancedfee would represent of the sum ofthe fee plus the aggregate value of the benefits claimed by class members underthe Original Agreement... Chavez, 162 Cal.App.4th at 64-65. Chavez does use the words "method" and "formula," but it is not referring to the methodology ofthe lodestar vs. the percentage approaches. The methodology being referred to in Chavez concerns how percentage-of-the-fund evidence may be used an enhancementfactor. For a more complete discussion on Chavez v. Netflix, see Appellant's PR at 9 n.7, 24, 25, and 26. 9. Consumer Cause. 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), does not support Class Counsel's argument. Consumer Cause was not a case involving the actual calculation of a reasonable attorneys' fee. It concerned whether an objector who succeedsin defeating the approval of a proposed class action settlementis entitled to an attorneys' fee for his efforts. There wasno discussion of SerranoIIT. For a more thorough discussion on Consumer Cause,see Appellant's PR at 11, 26, 27. 23 10. Wershba. Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 [110 Cal.Rptr.2d 145] (6th App. Dist. July 31, 2001), does not address the issue of the Serrano III's instruction on the primacyofthe lodestar-multiplier approach. The Wershba decision involves a misreading of Chavez. What is more, Wershba relies on federal jurisprudence (namely Zucker v. Occidental Petroleum Corp., et al., 968 F. Supp. 1396, 1400 (C.D. Cal. June 4, 1997), cited in Wershba at 254), not SerranoIII. For a more thorough discussion on Wershba, see Appellant's PR at 27 and 28. 11. Regarding Class Counsel's referenceto the statementin Ketchum v. Moses, 24 Cal.4th 1122 [104 Cal-Rptr.2d 377] (Feb. 26, 2001): "W]e are not mandating a blanket ‘lodestar only' approach; every fee-shifting statute must be construed on its own merits and nothing in Serrano jurisprudence suggests otherwise...." (Class Plf's ABM at 23 n.7, citing Ketchum, 24 Cal.4th at 1136), it should be noted that the context of the statement is a "fee-shifting statute."14 14 For Class Counsel, whose constant refrain is that such and such case was "not a commonfundcase," it is surprising that they cite this statement, referring to a statutory fee-shifting case. 24 Ii. THIS COURT SHOULD PRESERVE THE PRINCIPLES UPON WHICHITS SERRANO ITI DECISION IS BASED A. This Court's Serrano I] Instructions Are Being Thwarted. Appellant Brennan believes that the Serrano I// instructions should be strengthened, not jettisoned in favor of federal fee jurisprudence as Class Counsel argue. Unfortunately, the question posed by this Court, even when answeredin the negative, is not sufficient to ensure that the goals of Serrano III continue into the 21st century. This Court hadit right in 1977 regarding the need to anchorthe fee awardsto the lodestar approach. Thelegal principles on which SerranoIII is based, "objectivity," "just compensation, attorneys' services," "the prestige of the judiciary," and "the prestige of the bar," are sound values and should continueto be the focus of the fee award process. This case presents an historic occasion for this Court to make the policy choices expressed in Serrano II a reality in the context ofmodern classaction litigation. For Appellant Brennan,revisiting the issue would require this Court to confront the fact that over the 40 years that Serrano IIT has been in effect, plaintiffs' class counsel, with the acquiescence of defendants' counsel and the judiciary, have watered down Serrano III's instructions and have turned the requirement of "a careful compilation of the time spent and reasonable hourly compensation of each attorney...." (Serrano III, 20 Cal.3d at 48); the requirementthat courts "carefully review attorney documentation of hours expended," 25 and the requirementthat "padding'in the form ofinefficient or duplicative efforts is not subject to compensation" (Ketchum, 24 Cal.4th at 1131-32), into a cursory exercise with percentage calculations as a hidden guiding principle. Thetrial and appellate court findings in Laffitte, supra, reflect this phenomenon: Objection [by Class Member Brennan]: Class Counsel's declarations are unhelpful and self-serving. "The settlement that has been reachedis the product of tremendouseffort, and a great deal of expenseby the parties and their counsel. The parties' assessmentofthe matter is based on one of the most heavily litigated cases I have ever been a part of and the extensive research andlitigation 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, 231 Cal.App.4th at 867-68 (quoting Decl. of Kevin Barnes, see Appellant's Appendix ("AA") at 30:4-11). Thetrial court's findings: Class Counsel has spent 4,263.5 attorney hours on the instant matter. (Barnes Decl... ¢ 14.) This is a fairly reasonable numberofhours to havebilled on a class action matter that was heavily litigated for 8.5 years... (AA at 149; emphasis added.) 26 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 experiencein litigating wage and hour claims/class actions. (AA 149; AOB 27-28.) The appellate court's findings: "Wesee no reason why [the trial court] could not acceptthe declarations of counselattesting 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, 231 Cal.App.4th at 880 (brackets in original) (citation omitted). "[T]asks that were performed by class counsel and the numberofhours that they spent on those tasks were reasonable...." "[R]Jeasonable for this type of work in this community." (Class Plfs ABM,at 6 and 7, respectively (RT 32, statementbytrial court at 3/22/13 hr'g).) Thetrial court's lodestar finding of a fungible 2.13 multiplier was accepted: The Laffitte Court also held that thetrial court's “use of a multiplier of 2.13 was not an abuse of discretion," (Class Plfs ABM at8,citing Laffitte, 231 Cal.App.4th at 881 [180 Cal.Rptr.3d at 151].) 27 The appellate court's finding on the multiplier: "[I]ncluding the difficulty of the issues in this case, the skill of class counsel, the contingent nature of the case, and the preclusion of other employment." (Class Plf's ABM at8, citing Laffitte, 231 Cal.App.4th at 881 [180 Cal.Rptr. at 151].) The Laffitte court fell into the trap that Yuki warned against: [I]t is improperfor the trial court to start with the amount of the contingency fee and then work backwards, applying the variousother factors in orderto justify that amount. Yuki, 31 Cal.App.4th at 1771. B. Serrano III's Choice of the LodestarIs Still Sound. Serrano III can be adapted to 21st century class action litigation while preserving the important guiding principles upon whichits jurisprudenceis based. (1) Preserving the common fund doctrine and the concept of quantum meruit (see Appellant's PR at 11) as originally intended. It cautioned judges that attorneys' fee awards must be made "with moderation and jealous regard to the rights of those whoare interested in the fund. Trustees v. Greenough, 105 U.S. 527, 536 (May 8, 1882) (emphasis added). 28 (2) Preserving the public's respect for the prestige of the judiciary. (3) Preserving the public's interest in the integrity of the bar. (4) Ensuring that attorneys' fees awarded by courts do not exceed the "just compensation" for the "attorneys' services" rendered to the client. Class Counsel, in seeking to replace the lodestar with the percentage approach, would have the magnitude ofthe fee unrelated to the work performed on the case. Such a result is inconsistent with the concept of "just compensation," as well as the exercise of equitable discretion. Class Counsel's references to a marketplace fee (Class Plfs ABM at 24, 38, 39)is also inconsistent with the concept of "just compensation." In the first place, there is no working private marketplace with regardto class action litigation. If there were, it would not have been necessary for the judiciary to create the class action mechanism. Furthermore, the marketplace to which Class Counsel refer permits an attorney to collect a fee from a client, for which anything short of an unconscionable fee is an enforceable agreement. Appellant Brennan understandsthe attraction of the percentage-of-the-recovery approach to both attorneys and judges. However, the shortcomings in the implementation of the lodestar approachin class actionsare self-inflicted and are easily correctable. The lodestar deficiencies identified in the Report ofthe Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237 (1985) ("Task Force Report"), are easily rectifiable by the suggestions 29 contained in Appellant's Opening Brief on the Merits at Argument IV, commencing at page 45. Ashasalready been pointed out, the reforms suggested by Mr. Brennan addno additional burdensthat attorneys and judges do not already assumein carrying out their duties and responsibilities in traditional litigation. C. This Court Should Not Adopt the Fee Jurisprudence of the Federal Circuits. Class Counsel would have this Court discard the fundamental principles of SerranoIII and substitute a percentage-of-the-recovery approach because, amongotherthings, percentages are easy to administer, conserve judicial resources, reduce judicial appellate workloads, and encourage attorneysto file class action lawsuits. (Class Plf's ABMat3.) Ease and convenience!should not take precedence over the legal rights of class membersandthe legal responsibilities of 15 Argumentsin favor of this change are mainly focused on what benefits class action plaintiffs' lawyers and the judiciary will receive: (a) less work for attorneys; (b) less work for courts in general; (c) less work for judges; (d) and left unsaid — less money for class members and more moneyfor the attorneys: Commonfund fees, however, can sometimes be calculated using a percentage-of-the-fund method, which can result 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, p. 5-11 (emphasis added). 30 attorneys and judges. The public interest should be the predominant consideration. [H]eavily burdened with the class and derivative actions that give rise to the need to adjudicate fee issues, [judges] becamedisillusioned with the lodestar method. Lealao, 82 Cal. App. 4th at 28. Class Counsel, in their call to abandon Serrano III and the lodestar approach and adopt federal percentage-of-the-recovery jurisprudence, rely heavily on the Task Force Report and casesciting to it. (Class Plf's ABM at 10.) This Court should not make major policy decisions about future California class action attorneys' fee jurisprudence based on the Task Force Report for the following reasons. The 1985 Task Force Report is 30 years old! (a) In fact, a recent study of federal fee jurisprudence, Is the Price Right? An Empirical Study ofFee Setting in Securities Class Actions, by Lynn A. Baker, Michael A. Perino, and Charles Silver, 115 Colum. L. Rev. 1371 (October 2015), should be reviewed by this Court if it is inclined to consider Class Counsel's suggestion. This recent study portrays a very flawed federal attorneys' fee jurisprudence: Even moretroubling are our findings regarding the role of the courts in the fee-setting process. We found no evidencethat the actions taken by the courts moveclass counsel's fees closer to the "right price." Instead, the data showedthatthe courts facilitate, rather than prevent, the exploitation of market imperfections by class counsel, enabling them systematically to obtain 31 higher fees from courts and judgesthat see securities class actions less frequently than from more experienced courts. And although judges do sometimescut class counsel's fees, those decisions were unpredictable. That is, judicial fee cuts are as likely to result in fees that are further from the "right price" as they are to move them closerto that ideal. In sum,thereis little to celebrate in the current state of affairs, and reason to think that even small improvements in the fee-setting process might yield significantly better results. Id. at 1424. California should lead in the reform ofthe class action attorneys’ fee award process, not follow flawed federal jurisprudence. (b) The Task Force Report is clearly a self-interested study. It focuses on the needs and concernsofplaintiffs’ lawyers, judges, and the judicial system, and notthe interests of class members and the general public. The method offee calculation should not be overhauled to accommodate the needsofattorneys and judges. (c). The Task Force Report lacks any input from persons!6 representing class members'interests in maximizing their recovery. (d) What argumentsare proffered as purported benefits to the class are attempts to rationalize the self-serving 16 "The attorneys'fee at issue here does not directly concern the respondent/defendant Robert Half entities." Respondent Robert Half's AnswerBriefon the Merits, "Brief of Respondents Robert Half Int'l Inc. and Affiliates," at 1. 32 interests, financial and otherwise,of the other participants in class action litigation. Most importantly, in commonfund recoveries, the percentage approachdoesnot align the interests ofjudges and attorneys with class members. (See page 30, supra, Pearl, note 15.) (e) The assertion that a lodestar approachis "cumbersome, enervating, and often surrealistic process... that now plagues the Bench and Bar" (Class Plf's ABM at 11, citing Lealao at 29), is without foundation. The lodestar approachis currently the system that all federal courts use in statutory fee-shifting cases. With the notable exception of contingent fee personal injury litigation, the practice of law primarily involves billings based on hours expended. Indeed, the lodestar — the calculation of attorneys' fees by calculating the attorneys’ hourly rate for necessary services provided — continuesto be the predominant method by which attorneys are compensatedin the legal marketplace. (f) Appellant Brennanbelieves that this Court should not give any credenceto arguments that Serrano III and the lodestar approach should be abandoned becauseit encourages abuses by lawyers and judges. The Task Force Report states: (4) "is subject to manipulation by judges whoprefer to calibrate fees in terms of percentagesofthe settlement fund or the amounts recoveredbythe plaintiffs or of an overall dollar amount"; (5) is subject to abuses as it "encourages lawyers to expend excessive hours,and... engage in duplicative and unjustified work"; 33 (Class Plf's ABM at 11, citing Lealao, supra, 82 Cal.App.4th at 29 (quoting Task Force Report at 246-49.) Attorney responsibilities should be enforced, not ignored, through the implementation of the percentage approach. It is already a provision of the California Business and Professions Code, § 6068,that: It is the duty of an attorney to doall of the following: (g) Not to encourage... the continuance of an action or proceeding from anycorrupt motive of passion orinterest. Changing the compensation methodology because it motivates improper behavior onthe part of attorneys is an affront to the professionalism ofthe bar. (g) There is no marketplace compensation that regulates class action plaintiffs' attorneys’ fees. The private marketplace is irrelevant to the class action mechanism. The reasonthe class action mechanism exists is because there is no market for the prosecution of small claims by individuals. The example cited by Class Counsel: "A surgeon whoskillfully performs an appendectomy in seven minutesis entitled to no smaller fee than one whotakes an hour; many a patient would think heis entitled to more." (Class Plfs ABM,at 37, citing In re King Resources Co. Sec. Litig., 420 F.Supp. 610, 631 (D. Colo. 1976)), 34 supports Appellant Brennan's position. The fee-for-service model in medicinehasstrongparallels to the lodestar method,not to a results- based methodology. A doctor is not permitted to charge for an operation based on a percentage of the wealth of the patient. In asserting that the so-called lodestar cross-check used by the Superior Court is discretionary (Class Plf's ABMat1), meansthat California courts may ignore entirely the work the lawyers did in the case and focussolely on thesize of the class's recovery. This contradicts the basic principle of class action fee jurisprudence that has existed for nearly 40 years. Any argument by Class Counselthat a so-called lodestar cross-check will rein in excessive fees does not square with the facts. The methodology used by the Laffitte court shows how any lodestar cross-checkis easily manipulatable to accommodate a preconceived percentage calculation (see pages 26, 27, 28, supra). This point is addressed in the Baker, Perino & Silver study: Finally, this Article finds that so-called "lodestar cross-checks," which are supposed to help judges moderate fee awards, have unintended effects. All else equal, fee awardsare significantly higher when fee requests include cross-checks than when lawyers use only the percentage method. A plausible explanation is that lawyers are anticipating judges' reactions to fee requests and acting strategically. They include lodestar information whentheir requests may appear excessive and they omit it either whenthey expect judgesto granttheir requests or they think that the lodestar data will not help their cause. 35 This is likely true for all class actions, because the doctrines and proceduresthat govern fee awards are largely the same across different substantive areas of the law. Baker,et al., Is the Price Right? supra, at Highlight and 1423, respectively. Stripped of the rationalizations of the Third Circuit Task Force Report, Class Counsel's replacementofthe lodestar approach with the percentage approach permits windfall fees as part of a reasonable attorneys’ fee analysis. D. The 33-1/3% Contingency Fee Must Firmly Be Rejected by This Court. This Court should also explicitly reject in its entirety class action attorneys’ fee jurisprudencethat arises out ofthe traditional individualclient, single lawyer/law firm contingent fee model. The contingent fee model is inappropriate. The risks of individualtort litigation are inapposite. The class action mechanism accommodates the problem ofrisk. (See Appellant's PR at 12, 13.) Although 33-1/3% has been engrafted as a contingency percentage from traditional single-plaintiff, single-attorney/law firm tort litigation, that model has nothing in common with common fund class action litigation. The paradigm of the percentage fee should not be the 33-1/3% that an individual whohires a lawyerpaysin theretail legal marketplace. Class actionsare different. Fee cutting in aggregate mass torts can usually be justified because the aggregation of claims lessens the 36 force of the traditional justifications for contingency fees -- enabling access, providing legal services and rewardingrisk. In re Prudential Insurance Co. America Sales Practice Litigation Agent Actions, 148 F.3d 283, 334 n.109 (3d Cir. July 23, 1998). Even federal law, which Class Counselpoint to, does not approve of 33-1/3% from a class action common fund. Class Counsel ignore the fact that the Task Force Report mentionsa sliding scale percentage rather than the fixed fee of 33-1/3% proposed by Class Counsel. "In mostinstances,it will involve a sliding scale dependent uponthe ultimate recovery, the expectation being that, absent unusual circumstances, the percentage will decrease as the size of the fund increases." Lealao, supra, 82 Cal. App. 4th (at 29, n.4, citing Task Force Report at 255-56). CONCLUSION This Court should take the opportunity presented by Laffitte to ensure that the seminal instructions in SerranoIII are adapted to the modern demandsof21st century litigation. At present, plaintiffs' class action lawyers dominate the process and are reaping an excessive share of their clients' recoveries. Class Counsel's suggestion to adopt federal fee jurisprudence will only make the 37 situation worse. Strengthening SerranoIII's protectionsis the right answerfor California's class action attorneys' fee jurisprudence. Dated: November 12, 2015 Respectfully submitted, Aarons WOXQendew Lawrence W. Schonbrun Attorney for Plaintiff Class Member/Objector and Appellant David Brennan 38 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 Reply Brief on the Merits contains 8,188 words of proportionally spaced Times New Roman14-point type as recorded by the word count of the Microsoft Office 2007 word processing system, and is in compliance with the type-volume limitations permitted by the rules of court. Counsel relies on the word count of the computer program used to prepare this Petition. Dated: November12, 2015 Lgurrencetr) Sader. 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 not party to the within action. I am employedin the law firm of Lawrence W. Schonbrun, whose business address is 86 Eucalyptus Road, Berkeley, California 94705, County of Alameda. On November12, 2015, I caused to be served a copyofthe following document: APPELLANT'S REPLY 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 thereof in a sealed envelope, with postage thereon fully prepaid, and depositing the same in the United States Mail in Berkeley, California, to the addresses set forth below: Kevin T. Barnes, Esq. M.Kirby C. Wilcox, Esq. Law Offices ofKevin T. Barnes Paul Hastings LLP 5670 Wilshire Blvd., Ste. 1460 55 Second Street, 24th FI. Los Angeles, CA 90036 San Francisco, CA 94105-3441 Tel: (323) 549-9100 Tel: (415) 856-7000 Fax: (323) 549-0101 Fax: (415) 856-7100 E-mail: Barnes@kbarnes.com E-mail: Attorneysfor Plaintiffs KirbyWilcox@paulhastings.com Attorneysfor Defendants Barry M. Appell, Esq. Judith M. Kline, Esq. Mika M.Hilaire, Esq. Paul Hastings LLP Appell, Hilaire, Benardo LLP 515 So. Flower St., 25th FI. 15233 Ventura Blvd., Ste. 420 Los Angeles, CA 90071 Sherman Oaks, CA 91403 Tel: (213) 683-6000 Tel: (818) 788-2300 Fax: (213) 627-0705 Fax: (818) 788-2464 E-mail: E-mail: Mika@ahblegal.com JudyKline@paulhastings.com Attorneysfor Plaintiffs 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 County of Los Angeles Stanley Mosk Courthouse 111 North Hill Street Los Angeles, CA 90012 Clerk, Court of Appeal Second Appellate District 300 South Spring Street Second Floor, North Tower Los Angeles, CA 90013 I declare under penalty of perjury under the laws ofthe State of California that the foregoing is true and correct. Executed on November12,2015, at Berkeley, California. Huda \ vei Sandra Norris Post - 3