Sixth Circuit Rejects “Categorical” Approach To Class Action Settlements and Class Counsel Fees
Last week in Gascho, et al. v. Global Fitness Holdings, LLC, the Sixth Circuit addressed a laundry list of objections to a class action settlement on behalf of gym members who had been allegedly incorrectly charged certain fees. The settlement made ~$15.5 million available to class members and awarded fees of $2.39 million to class counsel. Among other things, objectors claimed that the settlement was unfair because counsel’s fees were disproportionately high compared to the benefits actually received by class members under the “claims made” approach. A split panel rejected this argument, pointing out that the “fundamental fairness of the amount the class itself received” was not disputed, and that the district court properly used two established methods of calculation: the lodestar method and the “percentage of the fund” method.
The district court had approved class counsel’s lodestar figure based on declarations, despite noting that “more detailed records” would have been “best practice.” The Sixth Circuit said that this approval would have been “a close question” given the “minimal billing information provided,” but upheld the district court’s decision because the district court cross-checked the amount by calculating the percentage of the benefit to the class that the fee represented: ~21%. Objectors argued that the lodestar billing information was inadequate and that the percentage of the fund should have been calculated based on the amount class members claimed, which ended up being ~$1.6 million. By that reasoning, the fee would have been a far greater percentage of the benefit to the class. Both the majority and the dissent highlighted the differences among approaches in other circuits, and ultimately the panel majority rejected any “categorical rule,” choosing to “leave the determination of how to value the benefit . . . to a district court’s discretion.”
Judge Clay dissented, stating that “the district court should not have been so trusting” towards “counsel’s uncorroborated sworn statements,” and that “the district court should have used the $1,593,240 actually paid as the benefit to the class for the calculation of its fee.”