Federal Judiciary

Fifth Exposes Secret Class Action Fee Award

By Robert Loblaw

In re High Sulfur Content Gasoline Products Liability Litigation, 07-30384 (5^th Cir., Feb. 4, 2008)

This Fifth Circuit appeal provides an interesting window into the strange and secretive world of class action attorneys. The appeal involves a New Orleans district court?s distribution of attorney fees in a class action suit over contaminated gasoline that had damaged consumers? fuel gauges. In addition to a voluntary repair program, defendant Shell Oil paid out $3.7 million to class members and, as is typical for many class actions, almost double that amount to cover the fees of the plaintiffs? attorneys.

Faced with the thorny task dividing almost $7 million among thirty-two firms and seventy-two lawyers, the district court appointed a five member Fee Committee to make a recommendation. Not only did the members of the Fee Committee recommend paying more than half the award to themselves, but they also recommended that the district court seal all records relating to the disbursement and require all of the recipients to keep the amount they received confidential.

Following the lead of at least one other district judge in Louisiana, the district court obliged this remarkable request. At that point, a few disgruntled attorneys broke rank and challenged the fee order, along with a class member and a newspaper, who had their own reasons for seeking disclosure.

On appeal, the Fifth Circuit vacates the award, concluding that the secretive nature of the proceedings below precludes meaningful review. The Court takes particular issue with the district court?s decision to seal the record, explaining

On a broad public level, fee disputes, like other litigation with millions at stake, ought to be litigated openly. Attorneys? fees, after all, are not state secrets that will jeopardize national security if they are released to the public. . . . From the perspective of class welfare, publicizing the process leading to attorneys? fee allocation may discourage favoritism and unsavory dealings among attorneys even as it enables the court better to conduct oversight of the fees. If the attorneys are inclined to squabble over the generous fee award, they are well positioned to comment?publicly ?on each other?s relative contribution to the litigation.

If litigating class action fees in secret really has become a trend ? as the Fee Committee suggested ? this opinion ought to put a stop to it.

Full post as published by Decision of the Day on February 04, 2008 (boomark / email).