Determining Fair Attorneys' Fees
The Challenge. A Fair Credit Reporting Act (FCRA) class action alleging Company’s failure to comply with FCRA reporting and notice requirements for background checks had been in hard-fought litigation for a number of years. By the time of the mediation, Company had succeeded in narrowing the claims but was found liable on others. A class settlement followed, and the only issue left to resolve was Plaintiffs’ attorneys’ fees, with both sides holding firmly to their positions.
Overcoming the Challenge. Before the mediation, Plaintiffs’ counsel had sent a demand that included their full lodestar (all hours worked, multiplied by their desired hourly rates), as well as a 2x multiplier, resulting in a demand well over $2 million.
In Company’s room, we talked about how to get the negotiations off to a productive start. They suggested starting with a low-ball number. We talked through that option’s pros (Company would be holding back most of its authority) and cons (a possible negative reaction and halt to negotiations), and I encouraged Company to consider other possibilities. I suggested starting high enough to get the mediation off to a productive start -- for example, they could make an offer well into six figures, still hold back a lot, and then educate Plaintiffs’ over a series of moves about their actual range. Company decided to go with that strategy.
When I sat down in Plaintiffs’ counsels’ room, I asked them to guess where Company started. They predicted Company would start at “a ridiculous $200,000 and end up at $600,000,” adding unequivocally, “and that will not do it – we’d rather take our chances with a fee petition.” This was helpful information.
After making initial progress on both ends, the negotiations stalled with over $600,000 separating the sides. I then worked with Company’s counsel to predict hourly rates that would be approved, the degree to which hours would be cut, possible multipliers to and reductions from the lodestar, and likely fees spent on the fee dispute. The exercise allowed Company’s counsel to see that its own “realistic prediction” was more than twice the amount it already had on the table, and higher than Plaintiffs’ attorneys’ most recent demand.
The Result. Armed with the realization that, if it did not settle, Company had a high likelihood of ending up worse off than Plaintiffs’ attorneys’ current demand, Company concluded that any number in the range between the parties’ current proposals was a sound business decision. Company’s counsel was then able to get more authority. At the parties’ request, I made a mediator’s proposal for an amount in the range both parties were likely to accept. By week’s end, both sides accepted my proposal, which ended the possibility of further litigation.