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CLASS ACTION APPROVAL - STANDARD OF REVIEW - ATTORNEY FEES: LAWLER, ET AL. V. SAM JOHNSON AND CITY OF BIRMINGHAM RETIREMENT AND RELIEF SYSTEM

Lawler, et al. v. Sam Johnson and City of Birmingham Retirement and Relief System, [Ms. 1151347, 1160049, 1160158, Oct. 20, 2017] __ So. 3d __ (Ala. 2017). This decision by Chief Justice Stuart (Shaw, Wise, and Sellers, JJ., concur; Parker, J., concurs in the result) vacates the trial court’s award of a $124 million attorney fee in the Johnson v. Caremark RX, LLC class action. The trial court had overruled some of the objections on the ground that they were untimely and others on the ground that the objectors failed to present adequate evidence contesting the award of attorney fees and expenses.

In regard to the trial court’s ruling that the Lawler objection was untimely, the Court held that

Lawler’s action in waiting to file an objection until after the July 22, 2016, deadline set by the trial court was consistent with the short form notice he was sent telling him he could object to the proposed settlement “by filing a written objection and/or by appearing at the settlement hearing.”

Ms. *21. The Court found a due process violation, explaining

[T]hat due process is fundamentally about fair play. See, e.g., Industrial Chem. and Fiberglass Core v. Chandler, 547 So. 2d 812, 835 (Ala. 1988)(on application for rehearing), and it would hardly be fair of this Court or comport with notions of due process to punish Lawler for acting in accordance with the notice actually provided to him.

It is notable, moreover, that the relevant language and the short-form notice sent to Lawler was not the language approved by the trial court; rather, it is language that was unilaterally added to the short-form notice by class counsel.

Ms. *21-22.

The Court also concluded that requiring objectors to file objections to class counsel’s application for attorney’s fees and expenses before class counsel’s filing of its attorney-fee application “deprives objecting class members of a full and fair opportunity to contest class counsel’s fee motion.” Ms. *25, quoting In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 994 (9th Cir. 2010).

The Court also held that in applying for attorney’s fees, class counsel, otherwise a fiduciary for the class, becomes a claimant against the fund. “Because the relationship between plaintiffs and their attorneys turns adversarial at the fee-setting stage, courts have stressed that when awarding attorneys’ fees from a common fund, the district court must assume the role of fiduciary for the class plaintiffs.” Ms. *28, quoting Mercury, 618 F.3d at 994-95. The Court vacated the attorney-fee award because “class members were not afforded due process inasmuch as they were not allowed to view, consider, and respond to class counsel’s attorney-fee application before they were required to file any objections to that application.” Ms. *31.

Class counsel argued that any error was harmless because subsequent to the filing of the fee application, the objectors filed supplemental pleadings with the trial court objecting to the fee application. The Court declined to find the error harmless, noting “that the interval between class counsel’s filing of its application for attorney fee and the subsequent fairness hearing was only ten days – five business days.” Ms. *34. The Court also declined to find the error harmless because it noted that the objectors were never provided with detailed records on the amount of time spent by class counsel on the case. Ms. *35-36. The Court noted the amount of time expended on behalf of the class, though not dispositive, is “a relevant factor that should be considered when determining a reasonable attorney fee in a class-action case. Accordingly, class members are entitled to basic information in that regard so they can adequately argue any objections they have, as is their due process right.” Ms. *38-39, citing Edelman & Combs v. Law, 663 So. 2d 957, 959 (Ala. 1995). The Court required that on remand, the trial court direct a process where objectors are provided with detailed information on the time spent on the case and are subsequently provided adequate time to supplement their objections after review of that information. Ms. *39.

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