The Seventh Circuit last week settled a battle over a fee award to class counsel by lifting a cap that, the court held, the district court set for no good reason.  But only one lawyer got the benefit of the rising tide. In re Trans Union Corp. Privacy Litig., No. 10-1154 (7th Cir. Jan. 14, 2011) (Posner, J.).

The case involved claims that Trans Union broke the Fair Credit Reporting Act.  It had settled fairly quickly for $40 million.   The pot of money resulted from the efforts of firms that the district court had chosen as lead counsel for a class of credit reportees. But non-lead lawyers — Dawn Wheelahan and "Texas counsel" — demanded a better deal.  And the class got one.  Thanks to the lawyers' meddling, the settlement near-trebled to $110 million.

The ensuing fee petition prompted the district court to appoint a special master.  Citing data from securities class actions and deeming the case an easy low-risk one, the master chose to cap the total fee at 12 percent of the $110 million common fund.  He also split the resulting $13.2 million award 63 percent to lead counsel and 22 percent and 15 percent, respectively, to the pesky Wheelahan and Texas counsel. The district court adopted the master's report.

The court of appeals panel found the master's thought process faulty and his award stingy. Class counsel — with Trans Union's support — had asked for 17 percent of the common fund, but the master gave no sound excuse for cutting them back to 12 percent.  The court said:

The 12 percent figure was plucked out of a hat, and a hat with three holes in it:  the unresolved comparison with securities class actions, the arbitrary reduction in attorneys' fees for the [$35 million in] nonpecuniary relief, and the perfunctory (less than a page) consideration, also left unresolved, of the relative risk of loss in the present case and in [In re] Synthroid [Marketing Litig., 324 F.3d 974 (7th Cir. 2003)].

Id., slip op. at 10-11.  The panel went on to uphold the division between lead and non-lead counsel. As a result, Wheelahan's award rose by $1.425 million to $4.125 million. The cuts of the other class lawyers stayed the same; they hadn't appealed.

Blawgletter's main thoughts?  First, you seldom, if ever, see objectors adding so much value — almost tripling the common fund — to a class action settlement.  Second, the fuzzy thinking of the master and the district court happens more often that you'd think.  Third, Judge Posner's review of the dynamics of class action settlements and fee awards makes interesting, and enlightening, reading.