In Gelis, the Third Circuit resolved a question left open by the Supreme Court, and by its own prior precedent: whether the stringent limits placed by the Supreme Court on lodestar multipliers in statutory fee-shifting cases under Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010), extend to contractual fee-shifting arrangements governed by federal law. Writing for a panel that included Judges Phipps and Roth, Judge Krause held that they do—vacating a $3.7 million attorneys’ fee award for the second time and remanding for further proceedings. The decision carries significant implications for practitioners litigating class action fee disputes in the Third Circuit and beyond.
The case arose from a consumer class action alleging that BMW sold vehicles equipped with defective timing chains. After the parties settled the merits, they could not agree on attorneys’ fees and entered mediation, ultimately incorporating a fee arrangement into the Settlement Agreement. That Agreement provided that BMW would pay Class Counsel’s “reasonable attorneys’ fees” separate and apart from any class relief, with federal law governing the fee application. Class Counsel sought $3.7 million.
In assessing the propriety of that request, the district court used the lodestar method. The lodestar method calculates reasonable attorney fees by multiplying the number of hours reasonably spent on a case by a reasonable hourly rate. That figure can then be adjusted upward or downward for certain factors known as multipliers, such as the level of risk undertaken, the complexity of the work, or an exceptional legal result, to arrive at a final fee.
Using the lodestar method, the district court calculated a baseline lodestar of approximately $1.9 million, then applied a 1.94 multiplier to reach the requested sum. The Third Circuit vacated the award on appeal, finding the billing records too vague and the multiplier insufficiently justified, but expressly declining to decide whether Perdue governed contractual fee-shifting provisions. On remand, after Class Counsel supplemented the record, the district court recalculated a baseline lodestar of roughly $2.1 million—then applied a reduced 1.75 multiplier that (perhaps not coincidentally) once again produced a fee award of exactly $3.7 million. BMW appealed, and the Third Circuit vacated again.
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"Third Circuit Extends Perdue’s Limits on Lodestar Multipliers to Contractual Fee-Shifting," by Thomas F. Brier Jr. was published in the Third Circuit Bar Association's On Appeal newsletter.