A bit of clarity added to lodestar fee applications

I've had a long-running debate going with several of the judges in the complex litigation program regarding fee awards in class actions.  I contend that California has long recognized contingent fee awards, and there is nothing about class actions that justifies a "lodestar first" approach that seems to be a trend.  A decision issued yesterday didn't settle the debate (it's a decision in a lodestar award situation, not a common fund recovery), but it adds a bit of clarity in other respects.  If you are a plaintiff-side practitioner, you need to know about this one.  In Concepcion v. Amscan Holdings, Inc. (February 18, 2014), the Court of Appeal (Second Appellate District, Division Seven) considered a defendant's appeal of a $350,000 fee award following settlement of a Song-Beverly Credit Card Act suit.

Counsel for plaintiffs submitted declarations describing, in general terms, the categories of work they performed.  The trial court then required the in camera submission of billing records that were not provided to the defendant's attorneys. On appeal, the defendant argued that class counsel failed to submit sufficient evidence to justify the fee award and, in particular, did not demonstrate the time expended by the six law firms involved was reasonably necessary and nonduplicative.  The defendant also argued that the trial court’s in camera review of class counsel’s billing records to support the award was fundamentally unfair and denied it due process.  The Court agreed that it was improper for the court to rely upon billing information not provided to the defendant, preventing any opportunity to challenge it.

Upon learning that the Court rejected in camera review of billing records, you might be tempted to conclude that this means that detailed billing records must be provided to the defendant.  That is not required, and it is also why this case is important.

As the Court explained, it is not necessary to provide detailed billing records in order to support a fee award:

It is not necessary to provide detailed billing timesheets to support an award of attorney fees under the lodestar method. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 254 [affirming lodestar fee award based on “declarations evidencing the reasonable hourly rate for [the attorneys’] services and establishing the number of hours spent working on the case”; “California case law permits fee awards in the absence of detailed time sheets”]; see Mardirossian & Associates v. Ersoff (2007) 153 Cal.App.4th 257, 269 [“there is no legal requirement that an attorney supply billing statements to support a claim for attorney fees”].) Declarations of counsel setting forth the reasonable hourly rate, the number of hours worked and the tasks performed are sufficient. (Steiny & Co. v. California Electric Supply Co. (2000) 79 Cal.App.4th 285, 293 [“[a]n attorney’s testimony as to the number of hours worked is sufficient to support an award of attorney fees, even in the absence of detailed time records”].) “‘Although a fee request ordinarily should be documented in great detail, it cannot be said . . . that the absence of time records and billing statements deprive[s] [a] trial court of substantial evidence to support an award . . . .’” (City of Colton v. Singletary (2012)
206 Cal.App.4th 751, 784-785.)

Slip op., at 17.  The Court then noted that, while the declarations of counsel provided total hours, the declarations, for the most part, did not break out the total number of hours each attorney spent on each type of work in a category.  This spartan showing was found to be insufficient by the Court:

As discussed, class counsel had the burden of proving the reasonable number of hours they devoted to the litigation, whether through declarations or redacted or unredacted time sheets or billing records. (See, e.g., Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 883; El Escorial Owners’  Assn. v. DLC Plastering, Inc., supra, 154 Cal.App.4th at p. 1366.) “A trial court may not rubberstamp a request for attorney fees, but must determine the number of hours reasonably expended.” (Donahue v. Donahue (2010) 182 Cal.App.4th 259, 271.)

Slip op., at 18.  The clear message is that, while it is proper for counsel to decline to submit billing sheets, the "reasonable" fees must be supported with a detailed declaration as an alternative approach.  It would appear that, to be definitely safe, a declaration for this purpose must include a thorough summary of the number of hours spent on various categories of work in the case.  But the practice of requiring the submission of detailed billing records is improper.  Whether you want to go that route and tell the trial court it is improper is another story.

Next, the Court considered the argument that the review of billing records in camera denied defendant a due process right to challenge the records.  The Court swiftly concluded that it did: "Under our adversarial system of justice, once class counsel presented evidence to support their fee request, Party City was entitled to see and respond to it and to present its own arguments as to why it failed to justify the fees requested."  Slip op., at 18.)

The Court essentially held that, while billing records weren't necessary to support a fee request, once provided, they had to be shared.  The Court dismissed the argument that the records were likely to contain a large volume of privileged information, suggesting that redaction would suffice.  The Court also found that cursory declarations with total numbers of hours were insufficient.  So, sufficient lies somewhere between billing records and cursory declarations with total hours listed.  Now you know what you can't do, what you don't have to do, and what you probably ought to do.