In re Trans Union Corp. Privacy Litig.

• Decision Date: 14 January 2011
• Docket Number: No. 10-1154,10-1154
• Parties: In re TRANS UNION CORPORATION PRIVACY LITIGATION. Appeal of Dawn Adams Wheelahan.
• Court: U.S. Court of Appeals — Seventh Circuit

629 F.3d 741

In re TRANS UNION CORPORATION PRIVACY LITIGATION.

Appeal of Dawn Adams Wheelahan.

No. 10-1154.

United States Court of Appeals,Seventh Circuit.

Argued Sept. 17, 2010.

Decided Jan. 14, 2011.

Eric A. Isaacson (argued), Attorney, Robbins Geller Rudman & Dowd, San Diego, CA, Jon W. Borderud, Attorney, Prongay & Borderud, Los Angeles, CA, Christopher T. Micheletti, Attorney, Zelle Hofmann Voelbel & Mason, San Francisco, CA, Michael A. Caddell, Attorney, Caddell & Chapman, Houston, TX, for Plaintiffs-Appellees.

Vashon McIntyre, Bronx, NY, pro se.

Dawn A. Wheelahan (argued), Attorney, Dawn A. Wheelahan, New Orleans, LA, pro se.

Brian P. Brooks, Attorney, O'Melveny & Myers LLP, Washington, DC, Amy Lee Stewart, Attorney, Rose Law Firm, Little Rock, AK, for Defendants-Appellees.

Before POSNER, KANNE, and WOOD, Circuit Judges.

POSNER, Circuit Judge.

It is a curiosity of class action litigation that often there is greater ferocity in combat among the class lawyers over the allocation of attorneys' fees than there isbetween the class lawyers and the defendants. The contest among the lawyers is a zero-sum game. But the contest between them and the defendants is a positive-sum game because the class lawyers are naturally very interested in the fee component of any settlement, while the defendants care only about the size of the settlement, including fees. So the lawyers may be willing to settle for less for the class if the defendants will help them obtain a generous fee award, and the defendants will be happy to help them if the sum of the fee award and the relief granted to the class is smaller than it would be if the class lawyers pressed for more generous relief for the class. E.g., Thorogood v. Sears, Roebuck & Co., 624 F.3d 842, 848-49 (7th Cir.2010); Vollmer v. Selden, 350 F.3d 656, 660 (7th Cir.2003); Reynolds v. Beneficial National Bank, 288 F.3d 277, 282 (7th Cir.2002); In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 778, 802 (3d Cir.1995); Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 524 (1st Cir.1991).

Indeed, class lawyers may try to fend off interlopers who oppose a proposed settlement as insufficiently generous to the class; and given the role of such interlopers in preventing cozy deals that favor class lawyers and defendants at the expense of class members, their requests for fees must not be slighted. Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 782-83 (7th Cir.2006); Vollmer v. Selden, supra, 350 F.3d at 659-60; Crawford v. Equifax Payment Services, Inc., 201 F.3d 877, 880-82 (7th Cir.2000); In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, supra, 55 F.3d at 803.

One such objecting lawyer in the present case, the appellant, Dawn Wheelahan, was awarded $2.7 million in attorneys' fees by the district court for her contribution to the generous settlement of the Trans Union Corporation Privacy Litigation. She contends that she's entitled to three times as much as she was awarded, both because the total attorneys' fees awarded to class counsel were too little and because her share of them was too small. She is not opposed by the class action defendant, Trans Union, because this is a "common fund" suit; attorneys' fees come out of the amount of damages awarded the class, and so Trans Union has no stake in the dispute over fees. Wheelahan's only opponents are some of the other class lawyers, who fear that an increase in the amount of fees awarded to her would come at their expense. They don't object to an increase in the total fees awarded, or indeed to an increase in the share awarded to her that would not reduce their fees. With the class members unrepresented and the defendant indifferent to the overall award of attorneys' fees, we must decide the appeal with limited assistance from an adversary presentation. But this is a standard dilemma in class action adjudication, as we noted at the outset, and may be unavoidable without elongating the litigation disproportionately to the stakes in the fee dispute.

The other lawyers for the class (with one exception) were prepared to settle the case for $40 million, consisting of $20 million in cash plus relief in kind valued at $20 million. Wheelahan opposed the settlement, and as a result solely of her opposition (she argues) the case was eventually settled for a little under $110 million (we'll ignore the little under), of which $75 million was in cash and the other $35 million was the estimated value of the relief in kind included in the settlement. At the oral argument Wheelahan told us that she should receive at least 20 percent of the added value of $70 million as her fee. That would be $14 million, rather than the $2.7 million that she was awarded. Herbrief, however, asks for only $8.4 million. As that amount is, as we'll see, excessive, the $14 million is pie in the sky and can be ignored.

The dispute over fees grows out of a litigation that began in 1998 with the filing of a number of class actions charging Trans Union, a large credit-reporting agency, with violating the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq., by selling information in its consumer credit files to advertisers without the consumers' authorization. The actions were consolidated for pretrial proceedings in the Northern District of Illinois. In 2006 lawyers referred to by the parties to the appeal as "MDL Counsel," who had filed the earliest cases, agreed with Trans Union to a $40 million settlement. Wheelahan, who had filed her own class action in 2005, opposed the proposed settlement, and her opposition, together with that of class counsel in a case filed against Trans Union in Texas, persuaded the district judge to rescind his preliminary approval.

He approved the final settlement of $110 million in 2008. The settlement placed a ceiling of $18.75 million on attorneys' fees for the class lawyers (remember that the fees come out of the common fund created by the settlement). The lawyers urged the district court to award this amount—17 percent of the estimated value of the settlement. The district judge, however, thought $18.75 million excessive and reduced it to $10.83 million, but later reconsidered and referred the issue of fees to a special master, who recommended an award of $13 million, of which about two-thirds ($7.8 million) would go to the MDL counsel and most of the rest to Wheelahan and to the Texas counsel. The district judge accepted the recommendation.

The special master arrived at these figures by first determining the total amount of attorneys' fees that would be reasonable to award and then allocating that amount among the lawyers. He placed little weight on the contingent fee agreements between the lawyers and the "clients" (the named plaintiffs in the class actions), recognizing that named plaintiffs are usually cat's paws of the class lawyers. In re Cavanaugh, 306 F.3d 726, 737-38 (9th Cir.2002); Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 53 (2d Cir.2000); John C. Coffee, Jr., "The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action," 54 U. Chi. L.Rev. 877, 885-86 (1987). That's especially true when, as in this case, the prospective relief for an individual class member is minuscule: the class has 190 million members!—though most have not filed claims and the deadline for filing is past. The special master recognized that his task was to estimate the contingent fee that the class would have negotiated with the class counsel at the outset had negotiations with clients having a real stake been feasible. In re Synthroid Marketing Litigation, 264 F.3d 712, 718-20 (7th Cir.2001); see also Missouri v. Jenkins, 491 U.S. 274, 285-86, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989); but see Goldberger v. Integrated Resources, Inc., supra, 209 F.3d at 51-52.

Such estimation is inherently conjectural, and what the special master mainly did was examine data on awards of attorneys' fees in other class actions. He relied heavily on an academic study which had found that between 1993 and 2002 the average awards of attorneys' fees in common fund consumer class actions had been either 16.2 or 24.3 percent of the amount of the settlement, depending on which of two datasets of such awards were consulted. Theodore Eisenberg & Geoffrey P. Miller, "Attorney Fees in Class Action Settlements: An Empirical Study," 1 J. Empirical Legal Stud. 27, 51 (tab.1) (2004). The average award declined in percentage terms as the size of the settlement increased,in recognition of the fixed-cost component of a lawyer's activity in a case—there is an irreducible minimum of lawyer activity that must be undertaken if the client is to have a reasonable chance of prevailing, no matter how small the stakes in the case. In the case of settlements of between $79 million and $190 million (the range within which the settlement in this case fell), the study found that the average attorneys' fee awards were 17.6 or 19.5 percent of the settlement, again depending on the dataset. Id. at 73 (tab.7). The award that the parties to the settlement in the present case recommended—$18.75 million—was just below that range: 17 percent of $110 million, as we said.

The special master then looked at a group of securities cases and from the fee awards made in them estimated that if the settlement in such a case had as in this case been $110 million the fee award would have been between 3.8 percent and 23.2 percent. He thought this range relevant because plaintiffs' discovery costs tend to be higher in securities class actions than in consumer class actions. But he did not indicate how one might adjust the fee award in this case to reflect the presumed lower cost of discovery.

He then considered the noncash portion of the settlement: a choice, valued as we said at $35 million, between two "free" credit monitoring services that Trans Union would offer each class member who...