## Facts

- BioScrip shareholders brought a consolidated federal securities class action in the Southern District of New York.
- The district court appointed Fresno County Employees’ Retirement Association as lead plaintiff and Bernstein Litowitz Berger & Grossmann LLP as class counsel.
- The parties settled, creating a $10.9 million common fund for the class, from which any attorneys’ fees would be paid.
- Class counsel sought attorneys’ fees equal to 25% of the fund (about $2.75 million) plus over $130,000 in expenses.
- A class member, the Isaacson/Weaver Family Trust, objected on the ground that because the claims were brought under statutes with fee-shifting provisions, the court had to apply a lodestar approach and treat the unenhanced lodestar as a presumptive ceiling.
- The district court rejected the objection and approved the requested percentage-of-the-fund fee as reasonable.
- The Trust appealed, challenging the fee framework used for a common-fund settlement tied to fee-shifting claims.

## Issues

1. In a class action brought under fee-shifting statutes that settles through a common fund, do common-fund principles or fee-shifting principles govern attorneys’ fees paid from the fund?
2. If common-fund principles govern, may a district court award fees as a percentage of the fund (or by lodestar) without treating the unenhanced lodestar as a presumptive cap?

## Decision

- The Second Circuit affirmed the district court’s fee order.
- The court held that when fees are paid from a common settlement fund, common-fund principles govern, even if the underlying claims arise under fee-shifting statutes.
- The court held that a common-fund fee may be calculated either by the percentage-of-the-fund method or by the lodestar method, in the district court’s discretion.
- The court rejected the argument that fee-shifting doctrine requires using an unenhanced lodestar as a ceiling in common-fund settlements.
- The court found no abuse of discretion in awarding 25% of the fund and approving the requested expenses.

## Legal Principles

- The controlling question for fee doctrine is the source of payment: fees assessed against a defendant implicate fee-shifting principles, while fees taken from a recovery for beneficiaries implicate common-fund principles.
- In a common-fund settlement, the district court allocates attorneys’ fees from the fund under equitable common-fund doctrine, regardless of whether the claims include fee-shifting provisions.
- In common-fund cases, district courts may choose either the percentage method or the lodestar method to set fees and are not required to treat the unenhanced lodestar as a presumptive maximum.
- Compensation in common-fund cases may reflect counsel’s contingent risk and the benefit conferred on the class, subject to reasonableness review and abuse-of-discretion appellate review.

## Conclusion

The Second Circuit held that attorneys’ fees paid out of a common settlement fund are governed by common-fund doctrine, not by fee-shifting limits tied to the underlying statutes, and that district courts may award reasonable fees using either a percentage-of-the-fund or lodestar approach without a lodestar cap.


Fresno Cnty. Emps.’ Ret. Ass’n v. Isaacson/Weaver Fam. Tr., 925 F.3d 63 (2d Cir. 2019)