Commercial Division Blog

Posted: November 9, 2015 / Categories Commercial, Class Actions

Court Preliminarily Approves Class Certification and Settlement; Questions Fee Award

On October 27, 2015, Justice Bransten of the New York County Commercial Division issued a decision in Matter of HSBC Bank U.S.A. N.A. Checking Account Overdraft Litigation, 2015 NY Slip Op. 51582(U), preliminarily approving class certification and settlement but questioning the fee award, explaining:

Generally speaking, attorneys' fees in New York may not be recovered unless provided for by statute, court rule or agreement between the parties. Under CPLR Article 9, which governs class actions,

If a judgment in an action maintained as a class action is rendered in favor of the class, the court in its discretion may award attorneys' fees to the representatives of the class and/or to any other person that the court finds has acted to benefit the class based on the reasonable value of legal services rendered and if justice requires, allow recovery of the amount awarded from the opponent of the class.

(CPLR § 909) In determining reasonable value of legal services, the court computes the reasonable numbers of hours spent by counsel multiplied by the reasonable hourly rate for counsel's services. Since the burden lies on the claimant to show reasonableness of the fees, the claimant must provide the court with an objective and detailed breakdown by the attorney of the time and labor expended, together with other factors he or she feels supports the fee requested.

Here, the Settlement Agreement provides for attorneys' fees of up to 25% and a $5,000 award for the class representatives. However, Plaintiffs' have not provided a breakdown, much less a detailed breakdown, of the services provided by counsel in support of the award. Given Plaintiffs' counsel stands to earn up to $7.5 million, far greater than any plaintiff—named or otherwise—stands to recover, counsel's request will not be considered without a showing as to the reasonable value of services provided. Therefore, the Court concludes that a decision on the appropriateness of fees at this time is premature. See id.

As for the $5,000 service awards requested by the Class Representatives . . . , CPLR § 909 does not authorize such so-called incentive awards. Since the awards are not available as a matter of New York law, Plaintiffs' requests for awards are "deemed warranted to the extent that they seek reasonable compensation for time and effort expended on behalf of the class.

In the light of the above observations, incentive awards . . . are not foreclosed, but any award will be limited to the time and effort each expended in litigating the matter. . . . However, a decision on this issue is premature until [the class representatives] make some showing of the time and effort each expended on behalf of the Settlement Class.

(Internal quotations and citations omitted).