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In re Southwest Airlines Voucher Litigation

United States Court of Appeals, Seventh Circuit

August 2, 2018

In Re: Southwest Airlines Voucher Litigation
Southwest Airlines Company, Defendant-Appellee. Adam J. Levitt and Herbert C. Malone, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, Appeal of: Gregory Markow, Objector-Appellant.

          Argued May 31, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11-CV-8176 - Matthew F. Kennelly, Judge.

          Before Flaum, Manion, and Hamilton, Circuit Judges.

          Hamilton, Circuit Judge.

         This is the third appeal regarding attorney fees to stem from a class action against Southwest Airlines after it stopped honoring in-flight drink vouchers for customers who bought "Business Select" fares. We thought the case was over after the first appeal, In re Southwest Airlines Voucher Litigation (Southwest I), 799 F.3d 701 (7th Cir. 2015), because the settlement made the customers whole by giving them a replacement voucher. At least, it made whole the small group of customers who submitted claims.

         After the appeal, class counsel-Siprut PC-requested additional fees. The district court awarded them. Markow, the objector, appealed but dismissed the appeal after Southwest tripled the relief to the class-by giving two additional vouchers for every one claimed-to narrow the gap between the amount of supplemental fees Siprut would receive and the value of the relief the class would actually receive. The district court approved that agreement. Objector Markow then moved for fees and an incentive award. The district court denied the motion, reasoning that requiring Siprut to pay Markow's fees out of Siprut's supplemental fee award "undoes the settlement." In re Southwest Airlines Voucher Litigation (Southwest II), 2017 WL 5295372, at *5 (N.D. Ill. Nov. 13, 2017). Markow has appealed. We reverse and remand. Unless the parties to a class action settlement agreement, including objecting parties, expressly agree otherwise, settlement agreements should not be read to bar objectors from requesting fees for their efforts in adding value to a settlement.

         I. Factual and Procedural Background

         In the first appeal, we held that 28 U.S.C. § 1712, enacted as part of the Class Action Fairness Act allowed the district court to award Siprut an attorney fee based on the lodestar method rather than the value of the redeemed vouchers. Southwest I, 799 F.3d at 710. We affirmed the district court's approval of the settlement. Id. at 713. Siprut cross-appealed, arguing that the district court abused its discretion by awarding less in fees for Siprut ($1, 649, 118) than the amount that Southwest agreed not to oppose ($3 million). We affirmed but modified the judgment to reduce one Siprut lawyer's individual share of the fee award because he failed to disclose a potential conflict of interest resulting from the fact that he and one of the class representatives were co-counsel in another pending class action. Id. at 714-16.

         Back in the district court, Siprut made an astonishing request for supplemental fees. For its work on the motion to amend the fee award and the prior appeal, Siprut essentially requested the difference between the $3 million Southwest agreed not to oppose and the amount we affirmed as reduced in the prior appeal: $1, 365, 882. Siprut got to that number by requesting the same 1.5 multiplier for its post-judgment time as for the initial fee award and by claiming 572 hours in attorney time for the motion to amend and more than 970 hours of attorney time for the appeal-totals that the district court rightly called "grossly excessive." The district court also noted its impression that "some of the originally hoped-for $3, 000, 000 that Southwest agreed not to oppose is still on the table, and plaintiffs' counsel are trying to find a way to get the rest of it." In re Southwest Airlines Voucher Litigation, 2016 WL 1623191, at *5 (N.D. Ill. Apr. 25, 2016). The district court declined to award a multiplier for the post-judgment work but nevertheless awarded Siprut one-third of the requested amount: $455, 294 plus expenses. Id.

         Markow moved for reconsideration under Rule 59 and, alternatively, for vacatur of the settlement approval and accompanying fee orders under Rule 60(b). The district court granted the motion for reconsideration and vacated the additional fee award so that the class would receive notice of and a chance to object to it. In re Southwest Airlines Voucher Litigation, 2016 WL 3418565, at *2 (N.D. Ill. June 22, 2016). Markow appealed.

         Before the parties even briefed the second appeal on the merits, they reached a deal. In exchange for Markow dismissing his appeal, Siprut agreed to take half of the supplemental fee award ($227, 647 plus $3, 529.68 in expenses) and Southwest agreed to triple the relief to the class (two additional vouchers for every one claimed). Nevertheless, the district court was also told-apparently for the first time-that the correct number of vouchers claimed under the original settlement was less than one third what the parties had told the district court earlier about the original settlement it had approved. The district court approved the new settlement. Southwest distributed the vouchers and paid Siprut.

         Markow then moved for $80, 000 in attorney fees and an incentive award of $1, 000 to come out of the more than $1.8 million attorney fee award to Siprut. Markow describes his request as "a fraction of his lodestar and less than 5% of class counsel's total award." The district court denied the motion. Southwest II, 2017 WL 5295372, at *5. Markow has appealed that denial.

         II. Analysis

         We review attorney fee awards in class actions for abuse of discretion. Birchmeier v. Caribbean Cruise Line, Inc., ___ F.3d ___, ___, 2018 WL 3545146, at *3 (7th Cir. July 24, 2018), citing Silverman v. Motorola Solutions, Inc., 739 F.3d 956, 958 (7th Cir. 2013). The deferential standard of review stems from the fact that "[d]istrict courts are far better suited than appellate courts to assess a reasonable fee in light of the case's history." Harman v. Lyphomed, Inc., 945 F. 2 d 969, 973 (7th Cir. 1991). A district court abuses its discretion when it "reaches an erroneous conclusion of law, fails to explain a reduction or reaches a conclusion that no evidence in the record supports as rational," id., and "we review a district court's legal analysis and methodology de novo," Anderson v. AB Painting & Sandblasting Inc., 578 F.3d 542, 544 (7th Cir. 2009), citing Jaffee v. Redmond, 142 F.3d 409, 412-13 (7th Cir. 1998), and Montgomery v. Aetna Plywood, Inc., 231 F.3d 399, 408 (7th Cir. 2000). When the facts are undisputed (as here, where neither ...

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