313 F.3d 447 (9th Cir. 2002), 99-36086, Staton v. Boeing Co.

Docket Nº:99-36086.
Citation:313 F.3d 447
Party Name:Eleanor STATON; Beverly Trotter; Kevin Biglow, Plaintiffs-Appellants, Solomon Williams; Shirley Miller; Deborah Woods; Wendy Kelly; Myron Knight; Michael Eckles; Donald Ballard; William Bell, Clarence Thompson; Doreen Ferguson; Cynthia Evans; Willie Wilson; Mary Dean; Brian Todd; Tim Jones; David Brawley; Mara Ferrari; Rhonda Capps; Charles Jones;
Case Date:November 26, 2002
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 447

313 F.3d 447 (9th Cir. 2002)

Eleanor STATON; Beverly Trotter; Kevin Biglow, Plaintiffs-Appellants,

Solomon Williams; Shirley Miller; Deborah Woods; Wendy Kelly; Myron Knight; Michael Eckles; Donald Ballard; William Bell, Clarence Thompson; Doreen Ferguson; Cynthia Evans; Willie Wilson; Mary Dean; Brian Todd; Tim Jones; David Brawley; Mara Ferrari; Rhonda Capps; Charles Jones; David Roberts; Verlene Maholmes; Terry Fisher; Carol Calender; Evalean Moore; Ralph Wilson; Ronnie Mitchell; Theodeshia Knauls; Michael Marion, Plaintiffs-Appellees,

Nadine McClam-Brown; Carla Abraham; Bertha Alexander; Shirley Allen; Billynda E. Anderson; Lawrence Andrews; Dorothy J. Ayers; Avis M. Banks; Jimmie L. Banks; Joyce A. Bates; Ray A. Bates; Ida M. Battles; Marshall Battles, Sr.; Terri M. Bean; Alfred Beasley; Vivian Jean Bell; Marcia L. Benford; Rosie J. Black; Adrienne Bland; Theresa Bozeman; Byron Breckenridge; John Bridgewater; Maceo E. Bridgewater; Annie Brooks; Johnnie Paul Brooks; Ronnie Brown; Simon Brown, Jr.; Mark A. Bufford; William Bumpers; Wilbert G. Burgess, Sr.; Henry F. Butler; Soloman C. Butts; Ellis Cameron; Harry Carlis; Tevis Carpenter; Ford Carr; Tamu Chandler; Betty Childers; Michael Childers; Ronald Clarke; Melchester Clemons; Gunice Colvin; Kent Copridge; Paul L. Coston, Jr.; Debra F Coulter; Cephas L. Curtis; Angela C. Cravens; James Crump; Pauline Crump; Tracy Cunningham; Gilbert O. Dace; Clarence Dancer; Charles Daniels; Patricia Davis; Sam Davis; Charles L. Davison; Helen Marie Dean; Evonne W. Dogan; James E. Donaldson; Tonia Dowell; Alice Dunbar; Allen Dunbar; Throma Ann Dyas; Terry Edwards; Belinda Ellis; Bezley Ellison; Joseph Elmore; Abiodun Fanimokun; Sharon Fantroy; Archie Fields; Hicks Frank; Sherline Franklin; Allen W. Frazier; Moses E. Greasham; Freddie L. Grisby; Kevin C. Guice; Roderick W. Guice; Roy E. Hall; Charles H. Harden; Dennis Harris; Dorothy Harris; Leon Harris; Robert L. Harris; Wylo Harvey; Rosemarie W. Hauck; Eric D. Hayden; Fredrick Hightower, Jr.; Charles H. Hill; Larry Hollins; Theodore Holt; Delores Hood; Kay M. Horton; Verna J. Houston; Phillip Bruce Hutchins; Hattie L. Irving; Della M. Jamison; Johnnie L. Jefferson; Reginald P. Jenkins; Constance Johnson; Darla Johnson; Herbert G. Johnson; James Johnson; Kenneth Johnson; Sharon E. Johnson; Lecester Jones; Phyllis J. Jones; Brooks S. Kimbrough; Claudette Lawson; Doris Lenox; Lynn B. Leufroy; Walter G. Lewellen; Frederick Lipsey; Herbert E. Logan, Jr.; Virginia G. Logan; Presley T. Lorance; Anthony L. Lucas; Waymond Macone; Selicia Mallory; Mark D. Matthews; Rainard C. Mayhew; Larry D. McIntosh; Alberto A. McMiller; Helen D. Medcafe; Geraldine Moore; Tennie Moore; Wade Moore, Jr.; Stephen R. Mundine; Katherine Neal; Arthur Newton; Jacqueline Osborne; Linda M. Ouids; Ericka L. Owens; Lee E. Owens, Jr.; Leroy Parker; C. Eugene Paschal; Sandra L. Payne; Stacy Payne; Margaret Peach; Robert J. Pearson; Douglas Pegues; Herman L. Poole; Isaac M. Porter, Jr.; Rhonda Randle; James Ranson, Sr.; Etha Reagans; Rance H. Reed, Jr.; Tressa Reed; Brenda J. Richardson; Cynthia Ridge; Bettie Ridley; Melvin L. Ridley; Jackie Robinson; Robert L. Robinson II; Les L. Rogers; Fred Roseborough; T.D. Sanders; Donna N. Scott; Huey L. Scott; Vince E. Seymore; Maury J. Shaw; William L. Sims; David E. Singleton; David Skillman; Cleo P. Smith; John Smith, Jr.; Lucretia Smith; David A. Stallworth; Michael Stevens; Octauia Stevens; Carl Stovall; Joyce Sullivan; Idella Teague; Alphonso E. Thompson; Anthony Thompson; Donna Thompson; John F. Thompson; Tywanna F. Thompson; W.R. Thompson; Benjamin F. Tillman; David Tillman; Shomide Tokunbo; Anita Truitt; Michael Turner; Alan Ladd Tyson; Rachel Frazier-Vann; James L. Walker; Aaron Washington; Cecil R. Washington; Eric C. Waters; Charles E. Webb; Shannon J. Weldon; Rozell Wheaton; Leonardo R. White; Ernest M. Whitaker; Bobby L. Williams; Darryl Williams; Daryl D. Williams; Glen D. Williams, Sr.; Kenneth Wayne Williams; Lorry Williams; Sylvester Williams, II; Wilbert Williams; Patricia Wilson; Alfred M. Woods; Martha Ybarra; Jacquelyn L. Zeigler, Appellants,

v.

BOEING COMPANY, Defendant-Appellee,

and

Boeing North American, Inc., a Delaware Corp; McDonnell Douglas Corporation, a Maryland Corporation, Defendants.

No. 99-36086.

United States Court of Appeals, Ninth Circuit

November 26, 2002

Argued and Submitted May 9, 2001

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Alan B. Epstein, Spector Gadon & Rosen, P.C., Philadelphia, PA, for the plaintiffs-objectors-appellants.

Bruce A. Harrell and Oscar E. Desper III, Harrell, Desper, Connell & Roesch, Seattle, WA, and Charles K. Wiggins, Bainbridge, WA, for the plaintiffs-appellees.

C. Geoffrey Weirich and Maureen E. O'Neill, Paul, Hastings, Janofsky & Walker LLP, Atlanta, GA, for the defendants-appellees.

Appeal from the United States District Court for the Western District of Washington; John C. Coughenour, District Judge, Presiding. D.C. No. CV-98-00761-JCC.

Before LAY, [*] TROTT and BERZON, Circuit Judges.

OPINION

BERZON, Circuit Judge.

This case involves a consent decree in an employment discrimination class lawsuit.

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The action was brought in 1998 by a class of approximately 15,000 African-American employees of the Boeing Company ("Boeing" or "the Company") against the Company. The decree requires Boeing to pay $7.3 million in monetary relief to the class, less reversions and an opt-out credit, 1 and releases Boeing from race discrimination-related and other claims. It further provides for certain injunctive relief, although much of this relief appears to be largely precatory in nature. Finally, the decree awards to the lawyers for the class ("class counsel") $4.05 million in attorneys' fees. 2

A group of class members objected to the proposed consent decree, arguing that the class fails to meet the certification requirements of Fed.R.Civ.P. 23(a) ("Rule 23(a)") for class actions and that the settlement contained in the decree is unfair, inadequate and unreasonable under Fed.R.Civ.P. 23(e) ( "Rule 23(e)"). The district court approved the decree despite the objections, and the objectors appealed to this court. After oral argument, we requested supplemental briefs from the parties concerning the attorneys' fees issues.

We hold that the district court acted within its discretion in certifying the case as a class action pursuant to Rule 23(a). We agree with the objectors, however, that the district court should not have approved the settlement agreement under Rule 23(e), because of several considerations relating to the award of attorneys' fees and because of the structure of the damages payments established by the decree.

The parties negotiated the amount of attorneys' fees as part of the settlement between the class and the Company. They included as a term of the proposed decree the amount of attorneys' fees that class counsel would receive. The action falls under the terms of two fee-shifting statutes. By negotiating fees as an integral part of the settlement rather than applying to the district court to award fees from the fund created, Boeing and class counsel employed a procedure permissible if fees can be justified as statutory fees payable by the defendant.

Boeing and class counsel did not, however, seek to justify the attorneys' fees on this basis but instead made a hybrid argument: They maintained that the award is an appropriate percentage of a putative "common fund" created by the decree even though common funds, as opposed to statutory fee-shifting agreements, usually do not isolate attorneys' fees from the class award before an application is made to the court. The district court approved the fee on that common fund basis.

The incorporation of an amount of fees calculated as if there were a common fund as an integral part of the settlement agreement allows too much leeway for lawyers representing a class to spurn a fair, adequate and reasonable settlement for their clients in favor of inflated attorneys' fees. We hold, therefore, that the parties to a class action may not include in a settlement agreement an amount of attorneys' fees measured as a percentage of an actual or putative common fund created for the benefit of the class. Instead, in order to obtain fees justified on a common fund basis, the class's lawyers must ordinarily petition the court for an award of fees, separate from and subsequent to settlement.

In order to assess the reasonableness of the attorneys' fees awarded by the decree,

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the district court compared the amount of the fees to the amount of the putative common fund and determined what percentage of this fund the fee amount constituted. This comparison is a permissible procedure when a court is determining the reasonableness of fees taken from a genuine common fund. In conducting the comparison, however, the district court included in the value of the putative common fund the inexact and easily manipulable value of injunctive relief. Such relief should generally be excluded from the value of a common fund when calculating the appropriate attorneys' fee award, although the fact that counsel obtained injunctive relief in addition to monetary relief for their clients is a relevant circumstance to consider in determining what percentage of the fund is reasonable as fees. We hold further, therefore, that parties may not include an estimated value of injunctive relief in the amount of an actual or putative common fund for purposes of determining an award of attorneys' fees.

Finally, the decree sets up a two-tiered structure for the...

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