These days it seems like nearly every data breach results in a multitude of class action filings. Some of these cases settle quickly with minimal litigation. In such a case, the Eighth Circuit recently reversed an attorneys’ fees award of $78.75 million, finding it excessive.

In re T-Mobile Customer Data Security Breach Litigation, Nos. 23-2744, 23-2798, __ F.4th __, 2024 WL 3561874 (8th Cir. July 29, 2024), involved a data breach that occurred when cybercriminals hacked into computer systems of T-Mobile. Over 40 putative class actions were filed and centralized by the Judicial Panel on Multidistrict Litigation in the Western District of Missouri. Less than a month after a consolidated amended complaint was filed, a settlement was reached providing for a $350 settlement fund and for T-Mobile to spend an additional $150 million on data security. Out of the fund, class members could recover actual out-of-pocket losses or a $25 payment ($100 in California), as well as obtain free credit monitoring services. Class counsel sought $78.75 million in attorney’s fees (22.5% of the fund) and thirteen class members objected. The district court awarded the full amount requested.

The district court struck some of the objections as not made in good faith by “serial” objectors and revoked their counsel’s pro hac vice admission. The Eighth Circuit reversed that ruling because there was no evidence of misconduct in this case and the objection was meritorious. Another objection was struck because the objecting class member refused to sit for a deposition ordered by the court. That ruling was affirmed because the objector did not challenge the discovery ruling in the district court.

Addressing the attorneys’ fees award, the Eighth Circuit reversed. It declined to adopt a special rule for “megafund” class actions involving more than $100 million. Instead, it concluded that the usual factors governing fee awards are sufficient for big cases too. Applying those factors, the lodestar was about $8.17 million, which seems shockingly high to me for a case that, as the Eighth Circuit described it, “had barely gotten off the ground before it settled.” Using that lodestar amount, the multiplier was 9.6 – effective hourly rates were in the range of $7,000 to $9,500 per hour. While class counsel argued that reversal would penalize them for settling quickly, the court noted that “[r]educing the fee award to say, half of what was requested (resulting in fees of $3,500 to $4,750 per hour) could hardly be considered a penalty.” The court noted that other big class actions had settled with much smaller lodestar multipliers.

This opinion and others like it seem likely to have some impact in reducing the overall cost of class action settlements for defendants in large cases that settle quickly. We may also see courts and objectors digging in more deeply to the lodestar amounts as well as the multiplier. It’s hard to imagine the defendant incurring fees in the range of $8 million for a case resolved within a month, and the same should be true on the plaintiffs’ side.