IN RE: WELLS FARGO & COMPANY SHAREHOLDER DERIVATIVE LITIGATION (2021)

United States Court of Appeals, Ninth Circuit.2021-04-16No. No. 20-15898

Summary · law.co

Holding. The court affirmed the district court's award of attorneys fees at 22% of the recovery, finding no abuse of discretion in the lower court's methodology and reasoned consideration of the circumstances.

In a shareholder derivative action against Wells Fargo, the district court awarded attorneys fees equal to 22% of the recovery (approximately $52 million), reducing the initial request from 25% down from counsel's proposed 28.33%. The objecting shareholder appealed, arguing the court should have applied a lower percentage benchmark, either around 11% or 17.5%. The appellate court reviewed the fee award for abuse of discretion and examined whether the district court properly considered the circumstances of the case, including the results achieved, the risks undertaken, and comparable litigation outcomes.

The court rejected the objector's proposed benchmarks. The 11% figure derived from historical fee data in unrelated cases lacked relevance without a competitive bidding process. The 17.5% benchmark, based on industry studies about mean recovery percentages, had already been considered and weighed by the district court in its analysis. The district court properly exercised its discretion by considering all relevant circumstances and reaching a reasonable percentage, rather than being mechanically bound by any single benchmark percentage.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a district court abuses its discretion by using the 25% benchmark in calculating attorneys fees in a megafund shareholder derivative settlement
Whether alternative fee benchmarks (11% or 17.5%) should have been applied instead of the benchmark used
The proper methodology for determining reasonable attorneys fees when considering case-specific circumstances, risk, and comparable outcomes

Procedural posture

The objecting shareholder appealed the district court's award of attorneys fees in a shareholder derivative action settled on behalf of Wells Fargo shareholders.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

MEMORANDUM **

Objector-Appellant Edward Cochran appeals the district courts award of attorneys fees in a shareholder derivative action brought on behalf of Wells Fargo & Company against the companys management. The district court revised downwards from a 25% benchmark to grant attorneys fees of 22% ($52 million) after considering the results achieved, risk and burden endured, and similar cases, then performed a lodestar cross-check for reasonableness. We affirm.

We review “the district courts award of attorneys fees and costs ․ as well as its method of calculating the fees” for abuse of discretion. In re Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 556 (9th Cir. 2019) (en banc).

Cochran argues that the district court “erroneously anchor[ed] its fee award to the Circuits 25% benchmark and Co-Lead Counsels 28.33% request.”

Instead, he says the court should have used a lower percentage as a benchmark, such as around 11% or 17.5%.

The district court is required only to reach a reasonable percentage after “consider[ing] all the circumstances of the case.” Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1048 (9th Cir. 2002). While we have repeatedly held the 25% benchmark “is of little assistance in megafund cases,” such as this one, we have required a different benchmark in only one instance. In re Optical Disk Drive Prods. Antitrust Litig., 959 F.3d 922, 934 (9th Cir. 2020). When counsel “propos[es] a fee structure in a competitive bidding process, that bid,” not a percentage benchmark, “becomes the starting point for determining a reasonable fee.” Id. But there were no fee structures proposed here.

Cochran bases his 11% benchmark on a 2016 document in an unrelated case that purportedly showed how much the rejected counsel candidate charged ex ante in 2005 in yet another case. Because there was no competitive fee-based bidding process here, Optical Disk Drive’s benchmark requirement does not apply here and Cochrans 11% benchmark is inapt. See id.

Cochran proposes a 17.5% benchmark based on a study reflecting that the mean percentage of recovery in connection with settlements of this size is 17.9%. But the district court had already reasonably considered this study (and others) in analyzing the circumstances and found they “weigh[ed] in favor of” a slightly reduced award.

The district court considered the circumstances––including the results achieved, the risk and burden endured, and similar cases––in reaching a reasonable percentage. “We have affirmed fee awards totaling a far greater percentage of the ․ recovery than the fees here,” including fees of 28% and 33%. Hyundai, 926 F.3d at 571 (citations omitted).

There was no abuse of discretion here.

AFFIRMED.

FOOTNOTES

. We assume cases dealing with attorneys fees in class action settlements generally apply to attorneys fees in shareholder derivative action settlements due to shared common fund doctrine principles. See In re Pac. Enters. Sec. Litig., 47 F.3d 373, 379 (9th Cir. 1995); Lewis v. Anderson, 692 F.2d 1267, 1270 (9th Cir. 1982); see also Powers v. Eichen, 229 F.3d 1249, 1255–56 (9th Cir. 2000); Sugarland Indus., Inc. v. Thomas, 420 A.2d 142, 149 (Del. 1980).

. Cochran also challenges the district courts factual findings, including its valuation of the results and assessment of the risk, and argues the district court should have used the lodestar method. Both arguments were waived as Cochran failed to raise them before the district court. See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010).

. The district court erred when performing a cross-check for reasonableness using the lodestar method because it summarily dismissed objections to the rates of staff attorneys without analysis or reasoning. See In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 954–55 (9th Cir. 2015). However, even accepting Cochrans calculations, the 3.8 lodestar multiplier cross-check does not show the final percentage was unreasonable. See Vizcaino, 290 F.3d at 1052 (finding six out of 24 lodestar cases listed had a multiplier of 3.6 or greater); see also McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004) (we “may affirm on any ground supported by the record”).