Rule 23. Class Actions

Text of Rule 23

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

     (1) the class is so numerous that joinder of all members is impracticable;

     (2) there are questions of law or fact common to the class;

     (3) the claims or defenses of the representative partes are typical of the claims or defenses of the class; and

     (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if:

     (1) prosecuting separate actions by or against individual class members would create a risk of:

          (A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or

          (B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;

     (2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or

     (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:

          (A) the class members' interests in individually controlling the prosecution or defense of separate actions;

          (B) the extent and nature of any litigation concerning the controversy already begun by or against class members;

          (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and

          (D) the likely difficulties in managing a class action.

(c) Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses.

     (1) Certification Order.

          (A) Time to Issue. At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.

          (B) Defining the Class; Appointing Class Counsel. An order that certifies a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g).

          (C) Altering or Amending the Order. An order that grants or denies class certification may be altered or amended before final judgment.

     (2) Notice.

          (A) For (b)(1) or (b)(2) Classes. For any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.

          (B) For (b)(3) Classes. For any class certified under Rule 23(b)(3)—or upon ordering notice under Rule 23(e)(1) to a class proposed to be certified for purposes of settlement under Rule 23(b)(3)—the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice may be by one or more of the following: United States mail, electronic means, or other appropriate means. The notice must clearly and concisely state in plain, easily understood language:

               (i) the nature of the action;

               (ii) the definition of the class certified;

               (iii) the class claims, issues, or defenses;

               (iv) that a class member may enter an appearance through an attorney if the member so desires;

               (v) that the court will exclude from the class any member who requests exclusion;

               (vi) the time and manner for requesting exclusion; and

               (vii) the binding effect of a class judgment on members under Rule 23(c)(3).

     (3) Judgment. Whether or not favorable to the class, the judgment in a class action must:

          (A) for any class certified under Rule 23(b)(1) or (b)(2), include and describe those whom the court finds to be class members; and

          (B) for any class certified under Rule 23(b)(3), include and specify or describe those to whom the Rule 23(c)(2) notice was directed, who have not requested exclusion, and whom the court finds to be class members.

     (4) Particular Issues. When appropriate, an action may be brought or maintained as a class action with respect to particular issues.

     (5) Subclasses. When appropriate, a class may be divided into subclasses that are each treated as a class under the rule.

(d) Conducting the Action.

     (1) In General. In conducting an action under this rule, the court may issue orders that:

          (A) determine the course of proceedings or prescribe measures to prevent undue repetition or complication in presenting evidence or argumenB) require—to protect class members and fairly conduct the action—giving appropriate notice to some or all class members of:

               (i) any step in the action;

               (ii) the proposed extent of the judgment; or

          (iii) the members' opportunity to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or to otherwise come into the action;

          (C) impose conditions on the representative parties or on intervenors;

          (D) require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly; or

          (E) deal with similar procedural matters.

     (2) Combining and Amending Orders. An order under Rule 23(d)(1) may be altered or amended from time to time and may be combined with an order under Rule 16.

(e) Settlement, Voluntary Dismissal, or Compromise. The claims, issues, or defenses of a certified class--or a class proposed to be certified for purposes of settlement--may be settled, voluntarily dismissed, or compromised only with the court's approval. The following procedures apply to a proposed settlement, voluntary dismissal, or compromise:

     (1) Notice to the Class.

          (A) Information That Parties Must Provide to the Court. The parties must provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class.

          (B) Grounds for a Decision to Give Notice. The court must direct notice in a reasonable manner to all class members who would be bound by the proposal if giving notice is justified by the parties' showing that the court will likely be able to:

               (i) approve the proposal under Rule 23(e)(2); and

               (ii) certify the class for purposes of judgment on the proposal.

     (2) Approval of the Proposal. If the proposal would bind class members, the court may approve it only after a hearing and only on finding that it is fair, reasonable, and adequate after considering whether:

          (A) the class representatives and class counsel have adequately represented the class;

          (B) the proposal was negotiated at arm's length;

          (C) the relief provided for the class is adequate, taking into account:

               (i) the costs, risks, and delay of trial and appeal;

               (ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-members claims;

               (iii) the terms of any proposed award of attorney's fees, including timing of payment; and

               (iv) any agreement required to be identified under Rule 23(e)(3); and

          (D) the proposal treats class members equitably relative to each other.

     (3) Identifying Agreements. The parties seeking approval must file a statement identifying any agreement made in connection with the proposal.

     (4) New Opportunity to Be Excluded. If the class action was previously certified under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so.

     (5) Class-Member Objections.

          (A) In General. Any class member may object to the proposal if it requires court approval under this subdivision (e). The objection must state whether it applies only to the objector, to a specific subset of the class, or to the entire class, and also state with specificity the grounds for the objection.

          (B) Court Approval Required for Payment in Connection with an Objection. Unless approved by the court after a hearing, no payment or other consideration may be provided in connection with:

               (i) forgoing or withdrawing an objection, or

               (ii) forgoing, dismissing, or abandoning an appeal from a judgment approving the proposal.

          (C) Procedure for Approval After an Appeal. If approval under Rule 23(e)(5)(B) has not been obtained before an appeal is docketed in the court of appeals, the procedure of rule 62.1 applies while the appeal remains pending.

(f) Appeals. A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule but not from an order under Rule 23(e)(1). A party must file a petition for permission to appeal... with the circuit clerk within 14 days after the order is entered or within 45 days after the order is entered if any party is the United States, a United States agency, or a United States officer or employee sued for an act or omission occurring in connection with duties performed on the United States' behalf. An appeal does not stay proceedings in the district court unless the district judge or the courts of appeals so orders.

(g) Class Counsel.

     (1) Appointing Class Counsel. Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court:

          (A) must consider:

               (i) the work counsel has done in identifying or investigating potential claims in the action;

               (ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action;

               (iii) counsel's knowledge of the applicable law; and

               (iv) the resources that counsel will commit to representing the class;

          (B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class;

          (C) may order potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney's fees and nontaxable costs;

          (D) may include in the appointing order provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and

          (E) may make further orders in connection with the appointment.

     (2) Standard for Appointing Class Counsel. When one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4). If more than one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the class.

     (3) Interim Counsel. The court may designate interim counsel to act on behalf of a putative class before determining whether to certify the action as a class action.

     (4) Duty of Class Counsel. Class counsel must fairly and adequately represent the interests of the class.

(h) Attorney's Fees and Nontaxable Costs. In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement. The following procedures apply:

     (1) A claim for an award must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision (h), at a time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner.

     (2) A class member, or a party from whom payment is sought, may object to the motion.

     (3) The court may hold a hearing and must find the facts and state its legal conclusions under Rule 52(a).

     (4) The court may refer issues related to the amount of the award to a special master or a magistrate judge, as provided in Rule 54(d)(2)(d).

As amended, Apr. 30, 2007, eff. Dec. 1, 2007;1 March 26, 2009, eff. Dec. 1, 2009;2 Apr. 26, 2018, eff. Dec. 1, 2018.

(a) Prerequisites. This rule applies when one or more shareholders or members of a corporation or an unincorporated association bring a derivative action to enforce a right that the corporation or association may properly assert but has failed to enforce. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation or association.

(b) Pleading Requirements. The complaint must be verified and must:

     (1) allege that the plaintiff was a shareholder or member at the time of the transaction complained of, or that the plaintiff's share or membership later devolved on it by operation of law;

     (2) allege that the action is not a collusive one to confer jurisdiction that the court would otherwise lack; and

     (3) state with particularity:

          (A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and

          (B) the reasons for not obtaining the action or not making the effort.

(c) Settlement, Dismissal, and Compromise. A derivative action may be settled, voluntarily dismissed, or compromised only with the court's approval. Notice of a proposed settlement, voluntary dismissal, or compromise must be given to shareholders or members in the manner that the court orders.

(d)

(1) In this subsection—

     (A) the term “class” means all of the class members in a class action;

     (B) the term “class action” means any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action;

     (C) the term “class certification order” means an order issued by a court approving the treatment of some or all aspects of a civil action as a class action; and

     (D) the term “class members” means the persons (named or unnamed) who fall within the definition of the proposed or certified class in a class action.

(2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which—

     (A) any member of a class of plaintiffs is a citizen of a State different from any defendant;

     (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

     (C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.

(3) A district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under paragraph (2) over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of—

     (A) whether the claims asserted involve matters of national or interstate interest;

     (B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;

     (C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;

     (D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;

     (E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and

     (F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed.

(4) A district court shall decline to exercise jurisdiction under paragraph (2)—

     (A)

          (i) over a class action in which—

               (I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;

               (II) at least 1 defendant is a defendant—

                    (aa) from whom significant relief is sought by members of the plaintiff class;

                    (bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and

                    (cc) who is a citizen of the State in which the action was originally filed; and

               (III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and

          (ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons; or

     (B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.

(5) Paragraphs (2) through (4) shall not apply to any class action in which—

     (A) the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief; or

     (B) the number of members of all proposed plaintiff classes in the aggregate is less than 100.

(6) In any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.

(7) Citizenship of the members of the proposed plaintiff classes shall be determined for purposes of paragraphs (2) through (6) as of the date of filing of the complaint or amended complaint, or, if the case stated by the initial pleading is not subject to Federal jurisdiction, as of the date of service by plaintiffs of an amended pleading, motion, or other paper, indicating the existence of Federal jurisdiction.

(8) This subsection shall apply to any class action before or after the entry of a class certification order by the court with respect to that action.

(9) Paragraph (2) shall not apply to any class action that solely involves a claim—

     (A) concerning a covered security as defined under 16(f)(3) [1] of the Securities Act of 1933 (15 U.S.C. 78p(f)(3) [2]) and section 28(f)(5)(E) of the Securities Exchange Act of 1934 (15 U.S.C. 78bb(f)(5)(E));

     (B) that relates to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized; or

     (C) that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and the regulations issued thereunder).

(10) For purposes of this subsection and section 1453, an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized.

(11)

     (A) For purposes of this subsection and section 1453, a mass action shall be deemed to be a class action removable under paragraphs (2) through (10) if it otherwise meets the provisions of those paragraphs.

     (B)

          (i) As used in subparagraph (A), the term “mass action” means any civil action (except a civil action within the scope of section 1711(2)) in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a).

          (ii) As used in subparagraph (A), the term “mass action” shall not include any civil action in which—

               (I) all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State;

               (II) the claims are joined upon motion of a defendant;

               (III) all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action; or

               (IV) the claims have been consolidated or coordinated solely for pretrial proceedings.

     (C)

          (i) Any action(s) removed to Federal court pursuant to this subsection shall not thereafter be transferred to any other court pursuant to section 1407, or the rules promulgated      thereunder, unless a majority of the plaintiffs in the action request transfer pursuant to section 1407.

          (ii) This subparagraph will not apply—

               (I) to cases certified pursuant to rule 23 of the Federal Rules of Civil Procedure; or

               (II) if plaintiffs propose that the action proceed as a class action pursuant to rule 23 of the Federal Rules of Civil Procedure.

     (D) The limitations periods on any claims asserted in a mass action that is removed to Federal court pursuant to this subsection shall be deemed tolled during the period that the action is pending in Federal court.

(a) When civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings. Such transfers shall be made by the judicial panel on multidistrict litigation authorized by this section upon its determination that transfers for such proceedings will be for the convenience of parties and witnesses and will promote the just and efficient conduct of such actions. Each action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated: Provided, however, That the panel may separate any claim, cross-claim, counter-claim, or third-party claim and remand any of such claims before the remainder of the action is remanded.

(b) Such coordinated or consolidated pretrial proceedings shall be conducted by a judge or judges to whom such actions are assigned by the judicial panel on multidistrict litigation. For this purpose, upon request of the panel, a circuit judge or a district judge may be designated and assigned temporarily for service in the transferee district by the Chief Justice of the United States or the chief judge of the circuit, as may be required, in accordance with the provisions of chapter 13 of this title. With the consent of the transferee district court, such actions may be assigned by the panel to a judge or judges of such district. The judge or judges to whom such actions are assigned, the members of the judicial panel on multidistrict litigation, and other circuit and district judges designated when needed by the panel may exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions in such coordinated or consolidated pretrial proceedings.

(c) Proceedings for the transfer of an action under this section may be initiated by—

     (i) the judicial panel on multidistrict litigation upon its own initiative, or

     (ii) motion filed with the panel by a party in any action in which transfer for coordinated or consolidated pretrial proceedings under this section may be appropriate. A copy of such motion shall be filed in the district court in which the moving party’s action is pending.

The panel shall give notice to the parties in all actions in which transfers for coordinated or consolidated pretrial proceedings are contemplated, and such notice shall specify the time and place of any hearing to determine whether such transfer shall be made. Orders of the panel to set a hearing and other orders of the panel issued prior to the order either directing or denying transfer shall be filed in the office of the clerk of the district court in which a transfer hearing is to be or has been held. The panel’s order of transfer shall be based upon a record of such hearing at which material evidence may be offered by any party to an action pending in any district that would be affected by the proceedings under this section, and shall be supported by findings of fact and conclusions of law based upon such record. Orders of transfer and such other orders as the panel may make thereafter shall be filed in the office of the clerk of the district court of the transferee district and shall be effective when thus filed. The clerk of the transferee district court shall forthwith transmit a certified copy of the panel’s order to transfer to the clerk of the district court from which the action is being transferred. An order denying transfer shall be filed in each district wherein there is a case pending in which the motion for transfer has been made.

(d) The judicial panel on multidistrict litigation shall consist of seven circuit and district judges designated from time to time by the Chief Justice of the United States, no two of whom shall be from the same circuit. The concurrence of four members shall be necessary to any action by the panel.

(e) No proceedings for review of any order of the panel may be permitted except by extraordinary writ pursuant to the provisions of title 28, section 1651, United States Code. Petitions for an extraordinary writ to review an order of the panel to set a transfer hearing and other orders of the panel issued prior to the order either directing or denying transfer shall be filed only in the court of appeals having jurisdiction over the district in which a hearing is to be or has been held. Petitions for an extraordinary writ to review an order to transfer or orders subsequent to transfer shall be filed only in the court of appeals having jurisdiction over the transferee district. There shall be no appeal or review of an order of the panel denying a motion to transfer for consolidated or coordinated proceedings.

(f) The panel may prescribe rules for the conduct of its business not inconsistent with Acts of Congress and the Federal Rules of Civil Procedure.

(g) Nothing in this section shall apply to any action in which the United States is a complainant arising under the antitrust laws. “Antitrust laws” as used herein include those acts referred to in the Act of October 15, 1914, as amended (38 Stat. 730; 15 U.S.C. 12), and also include the Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C. 13, 13a, and 13b) and the Act of September 26, 1914, as added March 21, 1938 (52 Stat. 116, 117; 15 U.S.C. 56); but shall not include section 4A of the Act of October 15, 1914, as added July 7, 1955 (69 Stat. 282; 15 U.S.C. 15a).

(h)Notwithstanding the provisions of section 1404 or subsection (f) of this section, the judicial panel on multidistrict litigation may consolidate and transfer with or without the consent of the parties, for both pretrial purposes and for trial, any action brought under section 4C of the Clayton Act.

(Added Pub. L. 90–296, § 1, Apr. 29, 1968, 82 Stat. 109; amended Pub. L. 94–435, title III, § 303, Sept. 30, 1976, 90 Stat. 1396.)

     Class Actions in Comparative Context

     Class actions are another exceptional aspect of American litigation. They allow numerous plaintiffs – sometimes as many as millions – to join together into a single action, represented by a plaintiff who asserts the rights of the entire class (defendant classes are also possible, but less common). The significance of class actions goes far beyond merely aggregating many claims into one lawsuit. They provide a vehicle for challenging governmental and private policy that violate the rights of a wide class of people. They also extend the regulatory reach of private litigation – and remember, that one theme of this course has been the American system of after-the-fact regulation through litigation – by collecting many small claims into one lawsuit that is so sizable it cannot be ignored.

     While the US remains an outlier in terms of aggregate litigation, other international jurisdictions increasingly have some form of procedures for aggregate claims. See generally, Deborah R. Hensler, The Future of Mass Litigation: Global Class Actions and Third-Party Litigation Funding, 79 Geo. Wash. L. Rev.  306 (2011) (Listing countries with some form of group or class litigation). See also  Ellen C. Campbell & Shanshan Zhao, The Mountains Are High and the Courts Are Far Away, Inaccessibility of Remedy for Small-Claim Chinese Plaintiffs in a Globalizing World, 30 N.Y. Int'l L. Rev. 1 (2017) (Discussing differences in aggregate process in US and China). Few, if any, other jurisdictions allow the scope of class actions that the US does. Some require governmental approval or involvement. Others limit the causes of actions that might be addressed on a class basis, or only allow certain kinds of remedies. Others require class members to affirmatively opt in, which greatly limits the practical utility of collective action, while others put limits on how class action attorneys can be paid. See generally, 2 Waller, Antitrust & American Bus. Abroad § 20:7 (4th ed.)

     Even within the US, class actions are controversial. Because the plaintiffs are not personally involved in the lawsuit, the attorneys have much more de facto control over the course of the litigation. This creates the risk of agency issues, where the attorneys put their interest ahead of the members of the class. Aside from that, plaintiffs might resent having no real control over litigation that intimately affects their lives. There is also the issue of whether the representative plaintiff really can represent the members of the class. In some cases, the named representative may not be a proper party to take on that responsibility. There also is the issue of whether the claims asserted in any given suit are of a type that can be efficiently and properly resolved through class litigation. The court must deal with whether the common issues really do predominate. Because absent parties can be bound by the result of the class litigation, the court also must deal with making sure those affected by the lawsuit have been given notice, and in cases where opting out of the result as possible, have been given a chance to opt out of the litigation and bring their own separate lawsuit.

     Class action procedures attempt to address some of the special problems that arise in class litigation. The court must test whether the representative plaintiff is well-suited to represent the class, and also determine whether the claims are such that class proceedings are appropriate. At the time of resolution of the lawsuit, the court must approve any settlement, in contrast to the normal practice of letting the parties reach any settlement that is mutually agreeable, and also must approve attorneys’ fees, again in contrast to the normal practice of letting the parties and the attorneys work it out for themselves.

     In class actions the certification of the class is often the determinative moment in the litigation. Because of this, a right to appeal exist after the determination of whether a class can be certified. In most cases, class action lawsuits do not go to trial, but settle if the class certification has been granted.

     Prerequisites

     The four prerequisites for a Rule 23 class action set forth in Rule 23 (a). The first requirement is numerosity. The class action only is proper when there are so many parties that normal joinder is impractical. There is no set number, and this depends on context. Second comes the requirement of commonality. This requires more than common issues, and seems to require that resolution of the issue for the representative will lead to the resolution for the other class members.

     The next two requirements deal with the class representative. The class representatives' claim must be typical. This means that the injury suffered in the relief sought by the class representative conforms with that of the class as a whole. A plaintiff who has not suffered financial injury, for example cannot represent a class seeking compensation for financial injury. Next comes the requirement of adequacy. The class representative must be able to fairly and adequately represent the class as a whole. This requirement is extended to the lawyers through rule 23(g), as the lawyer in practice drives the class litigation. Note that while lawyers will be retained by clients, the class counsel that drives the litigation will be appointed by the court. 

     These requirements seek to establish that the litigation is brought not on the half of some vague collective, but on the half of a class with identifiable common claims and remedies. It is essential that the court be able to order relief that addresses the claims of all, and this can only happen with a coherent class.

     In the opinion that follows, note closely how the court applies these prerequisites to the facts.

     Type of Class Actions

     There are three types of class actions set forth in Rule 23 (b). The first, set forth in Rule 23 (b)(1), looks to “inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class." These kinds of class actions rarely arise and will not be part of our abbreviated examination of class actions. The second, set forth in Rule 23 (b)(2), looks to situations where resolution of an issue and the grant of relief would effectively determine the options of nonparties. You might wonder in what kind of situation this would occur. Consider a situation where a litigant is suing to require that a school district conform with the Constitution with regard to racial discrimination or seeking to have a state prison system alter inhumane practices to, again, avoid violating the Constitution. The remedy ordered by the court will have an impact on all students in the case of the school setting, and all prisoners in the case of the prison setting. Requiring these actions to be brought as class actions provides a level of procedural protection for those not directly involved in the lawsuit. This kind of litigation and class action is been important in the United States in areas such as civil rights and environmental litigation. The third type of class action, set forth in Rule 23 (b)(3), mainly arises when many small claims are being aggregated into one action, and requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.” This is the kind of class action that was involved in the Chinese drywall cases. This type of class action has elements not found in the other two kinds, including a right of individual class members to opt out of the class action after receiving notice. We will discuss this a bit more below, and also read a case that involves this kind of class action.

     Certification and Process

     In most class actions, the most important decision the court makes is whether to certify the class at all. Class certification has significant importance for the name parties, the absent class members, the defendant(s), and the court itself. In many cases, the class certification leads to settlement of the litigation, as the risk of taking a certified class action to trial is substantial given the potential size of the damages.

     When an attorney files a lawsuit in class action form, the not-yet certified class is referred to as a 'putative' class. Even though the class is not yet certified, the court may nonetheless designate lead counsel if - as is often the case - there are competing candidates for the role, each representing a different individual plaintiff, and allow discovery to proceed on both jurisdictional and merits issues. The putative class only becomes binding on absent class members when it is certified and notice is given.

     To certify a class, the court first must determine that the suit meets the requirements as set out in Rule 23(a)(1) in order to maintain a class action. It also must determine which of the three categories of class action lawsuit the suit fits into. The court must also look to the adequacy of the class representative and counsel to make sure that they can carry forward the litigation appropriately. One thing the certification decision is not supposed to look to is whether or not the merits of the case are strong – that is, whether the plaintiffs are likely to prevail at trial.

     In some cases the court may certify what is called a partial class action for example, the court may grant class status as to a determination of liability, but leave assessment of damages to individual actions.

     The trial court has broad discretion with regard to whether to certify the class, and appeals are addressed on an abuse of discretion standard. Notwithstanding, any order with regard to class certification is, in an exception to the rule of finality, appealable after the certification decision is made. This exception recognizes the significance of the certification decision.

     If the class is certified, the members of the class must be given notice of the class certification. In a (b)(3) class action, they also are given a chance in response to the notice to “opt out” of the litigation. In some cases, if the opt outs are substantial, a new class of those who opted out might arise. The requirements of notice are complex, but in general must conform with the principles of Constitutional notice we studied in Q1.

     Rule 23(b)(3) Class Actions

     There are special aspects to (b)(3) class actions. For example, when notice is given, putative members of the class must be allowed a chance to “opt out” so that they can pursue their claims in another way – by themselves or in another class action.  Because this kind of class action is more fact-dependent, the court must also find that a class action is the best way to proceed and that the common issues 'predominate.’ To determine this, the court must also make additional inquiries, above and beyond those requires by (a)(1). The court must take into account the interest of class members in controlling the litigation themselves, the existence and nature of any other litigation addressing the same matters, the desirability of concentrating the claims in one forum, and the difficulties in managing a class action. Because this kind of class action is more fact-dependent, the court must also find that the common issues ‘predominate.’

     Subject Matter Jurisdiction

     For purposes of subject matter jurisdiction, only the domiciles of the named plaintiffs are taken into account. See Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356 (1921). For example, if there is a nationwide class, and the representative plaintiffs are from New York and New Jersey, but the other 48 states are each represented by members in the class, for diversity purposes only New York and New Jersey matter.

     With regard to amount in controversy, section 1367 applies. So long as  one plaintiff meets the amount in controversy requirement, any additional plaintiffs can be joined under supplemental jurisdiction. See Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005)

     The Class Action Fairness Act provides a different way to establish subject matter jurisdiction. This statute provides federal subject matter jurisdiction for kinds of class actions a previously were relegated to state courts. If the aggregate damages of the class exceed $5 million, and if there is minimal diversity among the parties, subject matter jurisdiction exists under CAFA.

     Settlement and Attorneys’ Fees

     In an exception to normal practice, the court must approve any settlement or voluntary dismissal. This is to protect the members of the class against self-serving actions by the class counsel. In the case of settlement, the trend has been for courts to give increasingly searching inquiry into whether the class members receive any real benefit from the class settlement.

     The court also must approve any award of attorneys’ fees, which typically are awarded from either the defendant or the damages obtained. Again, this is to protect the class members against self-dealing by the attorneys. That said, the fees awarded often are substantial – for example, the attorneys who obtained a $250 million settlement in securities litigation against Alibaba and related defendants were awarded $62.5 million in fees. This fee award reflected both the work done and the result achieved for the class.

     Other Aggregate Litigation and Responses

     There are other forms of aggregrate litigation besides Class Actions and multidistrict proceedings. See generally, Alexandra D. Lahav, Essay, The Continuum of Aggregation, 53 Ga. L. Rev. 1393 (2019). For example, large bankruptcy proceedings often include an aggregate aspect as a large body of creditors contend for their share of a limited pool of assets. In a similar way, common fund litigation or disbursement can present similar aggregation issues as a pool of claimants seeks recovery.

     The general problem of Rule 23(b)(3) litigation - many small claimants whose claims cannot be litigated individually economically - is increasingly being addressed outside the formal judicial system. Since the rise of the internet, internet marketplaces have had to provide dispute resolution processes for small claims. Some of these have evolved into sophisticated online dispute resolution systems capable of handling many small claims at low cost. One such company, Modria, was spun off from eBay, and markets its platform to users including both corporations and governmental units. Other platforms have spun off or are being used by other large e-commerce vendors. More generally, there is a push to empower online dispute resolution as a way to drive down costs and complexity so that litigants can handle their own disputes directly. See, e.g., https://remotecourts.org/.  For a listing of companies involved in the online dispute resolution space see: http://techindex.law.stanford.edu/companies?category=6 

     Derivative Actions. Derivative actions, while not necessarily class actions, involve some commonalities with class actions. As you will have studied in business associations, a derivative action allows shareholders to sue the management of a corporation for breaches of fiduciary duties, with the proceeds to be paid to the corporation. Rule 23.1 sets forth special procedures for derivative actions, including that any complaint be verified by the party bringing the claim. Because the agency issues inherent in derivative actions are similar to those of class actions, Rule 23.1 also requires that any settlement, voluntary dismissal, or compromise received the approval of the court, and that notice be given to the shareholders who are members of the corporate entity.

     PSLRA Class Actions. You may recall that in the pleading chapter we briefly touched on the very enhanced pleading standards the Private Securities Litigation Reform Act of 1995 (“PSLRA”) imposes on plaintiffs in securities litigation. While it is beyond the scope of what we will study hear, the PSLRA also has provision that bear on class actions. In particular, the PSLRA creates a rebuttable presumption that the ‘lead plaintiff’ will be the party with the greatest economic stake in the outcome, and that their attorney will be the lead counsel. This has the intended effect of shifting lead control over the litigation from the first to file to the largest investor, generally a large institutional investor.

     Multidistrict Litigation. Multidistrict litigation panels fall somewhere between class actions and individual actions. In many mass torts, of which the Chinese drywall litigation would be an example, hundreds or thousands of lawsuits may be filed on behalf of the plaintiffs. Many of these lawsuits will involve common issues of law and fact, such as personal jurisdiction, the standard of law to be applied to the claim, and so on. To avoid repetition and to achieve efficiency and speed in the handling of these claims, a federal statute allows these claims to be joined together in a pretrial proceeding before one judge. This judge will determine the pretrial issues and supervise discovery, but will then return the lawsuits to the original forum for any trial. A key difference between multidistrict litigation and class actions is that each plaintiff remains in control of its claim. The multidistrict claims need not be joined into one action, either by Rule 20 or Rule 23, but instead can proceed as parallel but independent actions. Nonetheless, consolidating the cases in one location for pretrial matters can achieve substantial efficiencies with regard to both motion practice and discovery, and can also on occasion provide a more convenient platform for settlements.

     Once somewhat rare, today more than half of all federal cases are included in multidistrict litigation. As was true in the Chinese Drywall Litigation, a multidistrict proceeding can include both individual and class actions. We will not go into depth on the ins and outs of multidistrict practice, but you should be aware that this process has gained increasing prominence.

424 F.Supp.3d. 456 (2020)

IN RE: CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION

Civil Action No. 09-4115 (E.D. La.)

CIVIL ACTION MDL NO. 2047

ORDER AND REASONS

Eldon E. Fallon, United States District Judge

     Pending before the Court is Settlement Class Counsel’s Motion for Entry of an Order and Judgment (1) Granting Final Approval of the Class Settlement with Taishan and (2) Certifying the Settlement Class. R. Doc. 22397. Defendants have filed a supplemental memorandum in support thereof. R. Doc. 22393. Settlement Class Counsel has also filed a Motion for an Award of Attorney Fees and Costs. R. Doc. 22380. Because the award of attorney fees is relevant to the fairness, reasonableness, and adequacy of the Settlement, the Court will address both issues in this Order and Reasons. The Court heard oral argument from counsel at a Final Fairness Hearing on December 11, 2019, and, having considered the arguments of counsel and the objectors, as well as the parties’ submissions, now rules as follows.

Table of Contents

1. BACKGROUND
2. PROCEDURAL HISTORY
3. The Knauf Defendants
4. The Chinese Defendants
5. The Taishan Settlement Agreement

III. MOTION FOR FINAL APPROVAL

1. Objections to the Motion
2. Law & Discussion
3. Class Action Settlement Prior to Class Certification
4. Rule 23 Criteria
5. Numerosity
6. Commonality
7. Typicality
8. Adequacy of Representation
9. Predominance of Common Questions of Law & Fact
10. Fairness, Reasonableness, and Adequacy
11. Adequacy of Representation
12. Arm’s Length Negotiation
13. Adequacy of Relief
14. The Complexity, Expense, and Likely Duration of the Litigation
15. The Stage of the Proceedings

                    iii. Plaintiffs’ Probability of Success on the Merits

1. Range of Possible Recovery
2. Opinion of Class Counsel, Class Representatives, and Absent Class Members
3. Equitable Treatment of Class Members
4. The Objections
5. The Size of the Settlement and Adequacy of the Funds
6. Disparate Treatment of Amorin and Brooke Plaintiffs

                    iii. Effect of Product Identification

1. Inclusion of Attorney Fees
2. Notice
3. The Settlement Agreement is Fair, Reasonable, and Adequate
4. MOTION FOR ATTORNEYS’ FEES AND COSTS
5. Law and Analysis
6. Methodology for Determining Common Benefit Fees
7. Lodestar Method
8. Percentage Method
9. Blended Method
10. Valuation of Benefit Obtained and Determination of a Benchmark Percentage
11. Johnson Factors
12.     The time and labor required
13. The novelty and difficulty of the questions
14.    The skill required to properly perform the necessary legal services
15. The preclusion of other employment by the attorneys due to acceptance of this case
16.                 The customary fee
17. Whether the fee is fixed or contingent
18. Time limitations imposed by circumstance
19. The amount involved and the result achieved
20.             Experience, reputation and ability of common benefit counsel
21. The “undesirability” of the case
22. The nature and length of the professional relationship with the client
23.     Fee awards in similar cases

                    iii. Lodestar Analysis

2. Costs
3. Incentive Awards
4. CONCLUSION

1. BACKGROUND

     From 2004 through 2006, the housing boom in Florida and rebuilding efforts necessitated by Hurricanes Rita and Katrina led to a shortage of construction materials, including drywall. As a result, drywall manufactured in China was brought into the United States and used to construct and refurbish homes in coastal areas of the country, notably the Gulf Coast and East Coast. Sometime after the installation of the Chinese drywall, homeowners began to complain of emissions of foul-smelling gas, the corrosion and blackening of metal wiring, surfaces, and objects, and the breaking down of appliances and electrical devices in their homes. See  In re Chinese Manufactured Drywall Prods. Liab. Litig., 894 F. Supp. 2d 819, 829–30 (E.D. La. 2012), aff’d,  742 F.3d 576 (5th Cir. 2014).

     In an attempt to recoup their damages, these homeowners began to file suit in various state and federal courts against homebuilders, developers, installers, realtors, brokers, suppliers, importers, exporters, distributors, and manufacturers who were involved with the Chinese drywall. Because of the commonality of facts in the various cases, this litigation was designated as a multidistrict litigation in accordance with 28 U.S.C § 1407. Pursuant to a Transfer Order from the United States Judicial Panel on Multidistrict Litigation on June 15, 2009, all federal cases involving Chinese drywall were transferred and consolidated for pretrial proceedings in MDL 09-2047 before this Court.

     The Chinese drywall at issue was largely manufactured by two groups of defendants: (1) the Knauf Entities and (2) the Taishan Entities. The litigation has focused upon these two entities and their downstream associates and has proceeded on strikingly different tracks for the claims against each group.

1. PROCEDURAL HISTORY
2. The Knauf Defendants

     The Knauf Entities are German-based, international manufacturers of building products, including drywall, whose Chinese subsidiary, Knauf Plasterboard (Tianjin) Co., Ltd. (“KPT”), advertised and sold its Chinese drywall in the United States. The Knauf Entities are named defendants in numerous cases consolidated with the MDL litigation and litigation in state courts.

     The Knauf Entities first entered their appearance in the MDL litigation on July 2, 2009 and discovery quickly ensued. Thereafter, the Court presided over a bellwether trial in Hernandez v. Knauf Gips KG, Case No. 09-6050, involving a homeowner’s claims against KPT for defective drywall. The Court found in favor of the plaintiff family in Hernandez, issued a detailed Findings of Fact and Conclusions of Law, and entered a Judgment in the amount of $164,049.64, including remediation damages in the amount of $136,940.46—which represented a remediation cost of $81.13 per square foot based on the footprint square footage of the house.

     Subsequently, the Knauf Entities agreed to institute a pilot remediation program utilizing the remediation protocol formulated by the Court from the evidence in Hernandez. The pilot program included about fifty homes. At the Court’s urging, the parties began working together to monetize this program and make it available to a broader class of plaintiffs.

     On December 20, 2011, the Knauf Entities and the PSC entered into a global, class Settlement Agreement (“Knauf Settlement Agreement”), which was designed to resolve all Knauf-related, Chinese drywall claims. Under the terms of the Knauf Settlement, homeowners had the choice of a sum certain or having the house totally remediated in addition to receiving reasonable costs and attorney fees. Furthermore, after a jury trial in a bellwether case, numerous defendants in the chain-of-commerce with the Knauf Entities entered into class settlement agreements, the effect of which settles almost all of the Knauf Entities’ chain-of-commerce litigation. The total amount of the Knauf Settlement is estimated at $1.1 billion.

     Although the Court occasionally has to deal with settlement administration and enforcement issues, the Knauf portion of this litigation is now resolved.

1. The Chinese Defendants

     The litigation against the Chinese entities has taken a different course. The Chinese Defendants in the litigation include the principal Chinese-based Defendant, Taishan, namely, Taishan Gypsum Co. Ltd. (“TG”) and its wholly-owned subsidiary, Taian Taishan Plasterboard Co., Ltd. (“TTP”) (collectively “Taishan” or “Taishan Entities”). Other Chinese-based Defendants include the CNBM and BNBM Entities.

     The Court’s initial inquiry regarding Taishan involved four cases in this MDL: (1) Germano v. Taishan Gypsum Co. (Case No. 09-6687); (2) The Mitchell Co. v. Knauf Gips KG (Case No. 09-4115); (3) Gross v. Knauf Gips KG (Case No. 09-6690); and (4) Wiltz v. Beijing New Building Materials Public Ltd. (Case No. 10-361).

     The first issues involving Taishan arose when Taishan failed to timely answer or otherwise enter an appearance in Mitchell and Germano, despite the fact that it had been properly served in each case. Thus, after an extended period of time, the Court entered preliminary defaults against Taishan in both of these cases.

     Thereafter, the Court moved forward with an evidentiary hearing in furtherance of the preliminary default in Germano on the Plaintiffs’ claimed damages. At this hearing, the Plaintiffs presented evidence specific to seven individual properties, which served as bellwether cases. Following this hearing on February 19 and 20, 2010, the Court issued detailed Findings of Fact and Conclusions of Law. On May 10, 2010, the Court issued a Default Judgment against Taishan in Germano and in favor of the Plaintiffs in the amount of $2,609,129.99. R. Doc. 2380, 3013. On June 10, 2010, the last day to timely appeal, Taishan filed a Notice of Appeal of the Default Judgment in Germano and entered its appearance in Germano and Mitchell. Taishan challenged this Court’s jurisdiction over the Defendants. As a result, because this was the first instance where Defendants raised jurisdictional issues, the Fifth Circuit remanded the case to this Court to determine whether the Court indeed has jurisdiction over Taishan.

     After Taishan entered its appearance in the MDL, it quickly sought to have the Default Judgment in Germano and the Preliminary Default in Mitchell vacated for lack of personal jurisdiction. In the fall of 2010, the Court directed the parties to commence the personal jurisdiction discovery necessary to resolve Taishan’s motions to vacate. Sometime after the initial discovery, the parties agreed to expand the discovery beyond the Germano and Mitchell cases to other cases in which Taishan had been served, including Gross and Wiltz.

     Formal personal jurisdiction discovery of Taishan began in October 2010. Discovery included the production of both written and electronic documents, as well as depositions of Taishan’s corporate representatives, with each type of discovery proceeding in a parallel fashion. This discovery has often been contentious, requiring close supervision by the Court. The Court has presided over regularly-scheduled status conferences to keep the parties on track and conducted hearings and issued rulings to resolve numerous discovery-related disputes.

     The first Taishan depositions were held in Hong Kong on April 4-8, 2011. Thirteen attorneys traveled to Hong Kong and deposed several Taishan witnesses. However, upon return to the United States, several motions were filed seeking to schedule a second round of Taishan depositions as a result of problems during the depositions and seeking discovery sanctions against Taishan. The Court, after reviewing the transcripts from the depositions, concluded that the depositions were ineffective because of disagreement among interpreters, counsel and witnesses, translation difficulties, speaking objections, colloquy among counsel and interpreters, and in general, ensuing chaos.

     In view of the foregoing, the Court scheduled the second round of Taishan depositions for the week of January 9, 2012 in Hong Kong. Due to the problems experienced during the first depositions, the Court appointed a Federal Rule of Evidence 706 expert to operate as the sole interpreter at the depositions, and the Court decided to travel to Hong Kong to preside over the depositions. Counsel for the interested parties and the Court traveled to Hong Kong for these depositions. Because the Court was present at the depositions, objections were ruled upon immediately and the majority of problems that plagued the first round of depositions were absent. Also, the Court was able to observe the comments, intonation, and body language of the deponents. Upon return from Hong Kong, the parties informed the Court that minimal further discovery was necessary before briefing could be submitted on Taishan’s personal jurisdiction challenges.

     In April 2012, Taishan filed various motions, including its motions to dismiss for lack of personal jurisdiction. On June 29, 2012, over three years since the creation of this MDL, and after a year-and-a-half of personal jurisdiction discovery on Taishan, the Court presided over a hearing on Taishan’s motions. The Court coordinated its hearing with the Honorable Joseph Farina of the Florida state court, who had a similar motion involving Taishan’s challenge to personal jurisdiction.

     On September 4, 2012, this Court issued a 142-page Order regarding Taishan’s motions in Germano, Mitchell, Gross, and Wiltz, in which the Court denied the motions to dismiss and held that it maintained personal jurisdiction over Taishan.  In re Chinese Manufactured Drywall Prods. Liab. Litig., 894 F. Supp. 2d 819 (E.D. La. 2012). The Court also ruled that Taishan was operating as the alter ego of TG and TPP. The Court certified an interlocutory appeal, and the Fifth Circuit granted permission to appeal.

     In January and May of 2014, two different panels of the Fifth Circuit affirmed this Court’s ruling and held that this Court maintained personal jurisdiction over Taishan, TG and TPP.  In re Chinese-Manufactured Drywall Prods. Liab. Litig., 753 F.3d 521 (5th Cir. 2014);  In re Chinese-Manufactured Drywall Prods. Liab. Litig., 742 F.3d 576 (5th Cir. 2014). The time for writ of certiorari passed, and the issue of personal jurisdiction over Taishan became firmly and finally settled. Nevertheless, Taishan refused to pay the Germano judgment or voluntarily participate in this litigation.

     On June 20, 2014, the Court ordered Taishan to appear in open court on July 17, 2014 to be examined as a judgment debtor. Taishan failed to appear for the July 17, 2014 Judgment Debtor Examination, and the Court held Taishan in contempt and ordered that Taishan pay $15,000.00 in attorney’s fees to Plaintiffs’ counsel; that Taishan pay $40,000.00 as a penalty for contempt; that Taishan and any of its affiliates or subsidiaries be enjoined from conducting any business in the United States until or unless it participated in this judicial process; and that if Taishan violated the injunction, it would be obligated to pay a further penalty of 25-percent of the profits earned by the Company or its affiliate who violate the Order for the year of the violation.

     On July 23, 2014, Plaintiffs filed their Omnibus Motion for Class Certification pursuant to Rule 23(b)(3). Taishan did not appear and, on September 26, 2014, this Court certified a class of all owners of real properties in the United States, who are named Plaintiffs on the complaints in Amorin, Germano, Gross, and/or Wiltz (i.e., not an absent class member), asserting claims for remediated damages arising from, or otherwise related to Chinese Drywall manufactured, sold, distributed, supplied, marketed, inspected, imported or delivered by the Taishan Defendants.

     Taishan finally entered an appearance with the Court in February 2015, and, to satisfy the contempt, Taishan paid the judgment and both the sum of $15,000.00 in attorney’s fees to Plaintiffs’ counsel and the contempt penalty of $40,000.00 in March 2015. On March 17, 2015, the Court ordered Taishan and the BNBM and CNBM Entities to participate in expedited discovery related to “the relationship between Taishan and BNBM/CNBM, including whether affiliate and/or alter ego status exists.”

     In March 2016, this Court granted CNBM Group’s motion to dismiss, finding it was an “agent or instrumentality of a foreign state” within the meaning of the Foreign Sovereign Immunities Act (“FSIA”), and therefore outside the jurisdiction of this Court under  28 U.S.C. § 1603(b). The Court determined that the tortious activity exception did not apply because the alleged tortious conduct did not occur within the United States under 28 U.S.C. § 1605(a)(5). Further, the Court found that the commercial activity exception did not apply in this case, as CNBM Group did not directly manufacture, inspect, sell, or market drywall in the United States. Because Plaintiffs failed to present evidence sufficient to overcome the presumption that CNBM Group was entitled to independent status for purposes of the FSIA, the Court granted the motion and dismissed CNBM Group from the present litigation.

     On April 21, 2017, the Court issued a 100-page opinion related to jurisdictional challenges being raised in four separate motions filed by Defendants. The Court found that Taishan was an agent of BNBM under Florida and Virginia law, such that Taishan’s contacts in Florida and Virginia are imputed to BNBM. This Court further found that CNBM, BNBM Group, and BNBM were part of a single business enterprise with Taishan under Louisiana law, such that Taishan’s contacts in Louisiana may be imputed to Defendants, and the Court has jurisdiction over Defendants in relation to Plaintiffs’ claims based on Louisiana law.

     Also on April 21, 2017, the Court issued its Findings of Fact and Conclusions of Law related to the June 9, 2015 damages hearing, and adopted Plaintiffs’ damage calculations methodology related to remediation of properties.

     On May 22, 2017, Defendants filed a motion pursuant to 28 U.S.C. § 1292(b) to certify interlocutory appeal from this Court’s jurisdiction order. Because the Court found that its Order and Reasons involved a controlling question of law as to which there is substantial ground for difference of opinion, and because the Court further found that an interlocutory appeal from that Order and Reasons could materially advance the ultimate termination of this MDL, on August 4, 2017, the Court certified an interlocutory appeal to the Fifth Circuit pursuant to 28 U.S.C. § 1292(b).

     On August 1, 2017, Defendants filed a motion to dismiss for lack of personal jurisdiction following the recent U.S. Supreme Court case of Bristol–Myers Squibb v. Superior Court of California. Based on Bristol–Myers Squibb, Defendants contested this Court’s findings of personal jurisdiction, class certification, and agency relationship. On August 14, 2017, Defendants filed a petition for permission to appeal pursuant to 28 U.S.C. § 1292(b) in the Fifth Circuit, in which they argued that the Bristol–Myers Squibb opinion impacts questions raised on appeal. On August 24, 2017, this Court vacated its 28 U.S.C. § 1292(b) certification order to avoid piecemeal litigations. The Court noted its duty to address the effect of Bristol–Myers Squibb on the jurisdictional issue before certifying the matter to the Fifth Circuit. Subsequently, on November 30, 2017, the Court denied Defendants’ motion to dismiss, holding that Bristol–Myers Squibb does not change this Court’s jurisdictional findings and class certification.

     On January 2, 2018, the Court denied Defendants CNBM Company, BNBM Group, and BNBM PLC’s motion to vacate the default judgments against them. On March 5, 2018, the Court reinstated its order to certify interlocutory appeal of its April 2017 jurisdiction opinion arising from the Chinese Defendants’ agency relationship. The Court, nevertheless, denied Defendants’ request to certify the interlocutory appeal of its opinion involving Bristol–Myers Squibb’s impact (or lack thereof) on the Court’s personal jurisdiction analysis. The Court noted that the Supreme Court’s opinion in Bristol–Myers Squibb did not address class actions and therefore was inapplicable to this MDL. Additionally, two separate panels on the Fifth Circuit had already reaffirmed the Court’s original personal jurisdiction analysis in 2014. Any further litigation on the issue of personal jurisdiction for the Chinese Defendants would cause needless delay and waste judicial resources. BNBM and CNBM petitioned the Fifth Circuit for permission to appeal this Court’s jurisdictional order, and the jurisdictional appeal is currently pending.

     In 2018, the Court suggested to the Judicial Panel on Multidistrict Litigation that the Florida and Virginia Amorin actions be remanded to the transferor courts. R. Docs. 21242, 21695. In 2019, the Court issued a suggestion of remand with respect to the Florida and Virginia Brooke actions as well. R. Doc. 22138, 22139.

     A significant development in the Taishan aspect of this litigation occurred in the spring of 2019. On May 22 and 23, 2019, the parties underwent mediation with the goal of resolving the entirety of the Amorin and Brooke matters pending in the Eastern District of Louisiana, the Southern District of Florida, and the Eastern District of Virginia. On May 23, 2019, the parties agreed to a Term Sheet, and negotiations continued in person and by telephone for three months. All matters in the Amorin and Brooke actions were accordingly stayed by the remand courts and this Court, pending the execution of a Settlement Agreement between the parties. The stay was extended several times and preliminary approval of the Settlement Agreement was granted by the Court on August 29, 2019. R. Doc. 22314.

1. The Taishan Settlement Agreement

     The proposed Taishan Settlement Agreement is the result of over a decade of litigation and a complex negotiation process. Specifically, it obligates Taishan to pay $248,000,000 to fully resolve all claims of the Amorin class, the plaintiffs named in the Brooke complaints, and any other property owners with Chinese drywall attributable to Taishan (“Absent Class Members”). The settlement funds are “intended to provide compensation for all property and remediation damages as well as Other Losses.” R. Doc. 22305-2 at 21. The Settlement specifically excludes 498 Florida Amorin Plaintiffs who received a separate settlement from Taishan (the “Parker Waichman Settlement”), the plaintiffs involved in the Mitchell action, and plaintiffs whose claims were previously voluntarily dismissed or dismissed for failure to complete a Supplemental Plaintiff Profile Form. R. Doc. 22305-2 at 5. If the Settlement is approved, Class Members who have not opted out will be deemed to have fully released any and all claims, as defined by the Settlement Agreement, against Taishan and the Additional Released Parties, and will be barred from bringing or continuing suit on a released claim against these entities. R. Doc. 22305-2 at 19-2

     The amount a plaintiff stands to receive under the Settlement Agreement is determined by a Court-appointed Allocation Neutral. R. Doc. 22305-2 at 20-21. Mr. J. Cal Mayo, Jr., the Allocation Neutral, has developed an allocation model to determine the proper allocation and distribution of settlement funds among all the affected properties and eligible class members. R. Doc. 22304. This model attempts to “strike a balance between property-specific allocation, on the one hand, and efficient and effective allocation, on the other hand.” R. Doc. 22304-1 at 2. To that end, the allocation model considers a number of “objective allocation criteria,” including square footage of the Affected Property, whether the claimant was an Amorin plaintiff, a Brooke plaintiff, or an Absent Class Member, product identification, and the prior receipt of settlement funds. R. Doc. 22304-1. The allocation model does not consider the national average construction cost based on zip codes, ownership status, remediation status, or the value of other losses. R. Doc. 22304-1. The Settlement provides for a single allocation for each Affected Property, such that settlement awards may need to be divided among eligible class members with competing claims to the same property. The allocation model does not consider, nor does the Settlement provide compensation for personal injury claims, but such claims shall nevertheless be released pursuant to the Agreement. R. Doc. 22397-1 at 23.

     Following preliminary approval, Class Members were able to access the allocation model on the Settlement website and on the Court’s docket. A Master Spreadsheet of Known Class Member Claims was also posted and filed, providing class members who had submitted sufficient proof of covered Chinese drywall with the ability to review the objective criteria used to calculate the value of their claim. Class Members had the opportunity to dispute the information on the Master Spreadsheet by October 3, 2019. One hundred and nine challenges were made, and a Revised Master Spreadsheet was filed with the Court on October 31, 2019. R. Doc. 22355-1. It was also posted on the Settlement Website, and a Challenge Determination Notice was sent to each affected Class Member. Under the terms of the Settlement, the review, determination, and approval of the allocation model by the Court shall be final and binding.

     The parties undertook a significant effort to notify all Class Members, including Absent Class Members, of the proposed Settlement Agreement. A website (ChineseDrywallSettlement.com) was published to provide Class Members with up to date information about the settlement and the litigation. A notice of the proposed settlement was posted in every courthouse in which a Chinese drywall related case was pending. Working with Kinsella Media, the parties implemented a Media Notice Program to publish notice of the Settlement in print and online/mobile ads in relevant markets. Critically, each known Class Member was notified of the Settlement by mail and provided with a gross estimate of their award under the Settlement as calculated by the allocation model.

     The Taishan Settlement Agreement binds all Class Members save those who formally opt-out from its terms. The Settlement involved a ninety-day period during which plaintiffs could opt-out by personally signing and mailing a request to do so to Settlement Class Counsel. Parties who choose not to opt-out but nevertheless were displeased with the Settlement could submit a formal objection within the same ninety-day period. The opt-out and objection period closed on November 27, 2019. The objections were collected by Settlement Class Counsel and submitted to the Court for consideration at the Final Fairness Hearing on December 11, 2019. Settlement Class Counsel received ninety-two opt-out requests, although not all were compliant with the Settlement Agreement’s opt-out procedure. Of the compliant requests, seventy-eight were from known Class Members,5 and twelve were from Absent Class Members. Settlement Class Counsel received twenty-two objections.

     The Taishan Settlement Agreement is a historic achievement. It is, however, critically different from the Settlement Agreement reached in the Knauf aspect of this litigation. While the Knauf Settlement Agreement obligated Knauf to pay a designated amount to cover reasonable costs and attorney fees for both contract counsel and common benefit counsel in addition to completely remediating the affected properties, the Taishan Settlement Agreement provides $248,000,000 to resolve all claims and pay all attorney fees and costs. Taishan is not involved in the allocation of funds. Therefore, while the Knauf aspect of the litigation required the Court to fairly allocate designated funds among common benefit counsel and individually retained attorneys, the Court has a much more difficult task here. First, the Court must determine what percentage of the total settlement fund is appropriately allocated to attorney fees and costs. Second, the Court must determine how to allocate that amount between common benefit counsel and individually retained attorneys. Third, the Court must individually allocate a specific portion of those fees to each attorney entitled to such an award. Furthermore, this is a time sensitive inquiry because the allocation of attorney fees and costs necessarily reduces the amount of settlement funds available for distribution to the individual plaintiffs in this matter. Settlement Class Counsel has requested an award of attorney fees for both contract counsel and common benefit counsel totaling 30% of the settlement funds, and a 3% award for expenses. The Court first addresses final approval in Section III of this opinion and turns to the issue of attorney fees in Section IV.

     III. MOTION FOR FINAL APPROVAL

     Settlement Class Counsel seeks certification of the Settlement Class and final approval of the class settlements with Taishan Gypsum Company Ltd. f/k/a Shandong Taihe Dongxin Co., Ltd. and Taian Taishan Plasterboard Co. Ltd. R. Doc. 22397. In support of its motion, Settlement Class Counsel argues that the settlement is fair, reasonable, and adequate in light of the specific requirements of Rule 23(e) and the Fifth Circuit’s Reed factors. Further, Settlement Class Counsel stresses that notice to the class complied with due process and that the overwhelming majority of class members support the settlement. At the Final Fairness Hearing, Class Counsel stressed that the Settlement will provide significant benefits to almost 4,000 plaintiffs and that the Settlement is an historic and substantial achievement in light of the procedural posture of the litigation, factual issues, the challenges of service, jurisdiction, and appeals, and the significant uncertainty of collecting on a potential judgment if the case went to trial.

1. Objections to the Motion

     Class counsel received and filed into the record twenty-seven objections to the settlement. Twenty-two objections were made by Class Members. The Court summarizes the objections below and addresses the arguments in its analysis. [The court discusses the 27 objectors one by one. The majority objected to the total amount of the settlement. Others objected to the amount they individually were to receive and/or the way the distribution was calculated. Others objected to disparate treatment among certain groups of plaintiffs due to statute of limitations issues. A few objected not the settlement, but to being excluded from it. The court addresses the objections below.]

      Law & Discussion

1. Class Action Settlement Prior to Class Certification

     While the Amorin class was certified by the Court, the Brooke class has not as yet been certified. Accordingly, it is necessary to consider the requirements for class certification for the proposed Brooke class and also evaluate the reasonableness, fairness, and adequacy of the proposed Settlement for the entire Settlement Class, which includes both the Amorin and Brooke classes, as well as absent Class Members.

     "Before an initial class ruling, a proposed class settlement may be effectuated by stipulation of the parties agreeing to a temporary settlement class for purposes of settlement only.” William B. Rubenstein, Alba Conte, and Herbert B. Newberg, 4 Newberg on Class Actions § 11:22 (4th ed. 2010). “[A]pproval of a classwide settlement invokes the requirements of Rule 23(e).” Id. Rule 23(e) provides that “[t]he claims ... of a certified class may be settled ... or compromised only with the court’s approval.”  Fed. R. Civ. P. 23(e);  Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). “Settlement classes—cases certified as class actions solely for settlement—can provide significant benefits to class members and enable the defendants to achieve final resolution of multiple suits.” Manual for Complex Litigation § 21.612. However, “[c]ourts have held that approval of settlement class actions under  Rule 23(e) requires closer judicial scrutiny than approval of settlements reached only after class certification has been litigated through the adversary process.”

     Rule 23 of the Federal Rules of Civil Procedure, governing class actions, sets forth certain requirements that must be satisfied in order for a proposed class to be certified. In particular, the “subsection (a) and (b) requirements insure that a proposed class has ‘sufficient unity so that the absent class members can fairly be bound by decisions of the class representatives.’ ”  Under  Rule 23(a),

     One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

     (1) the class is so numerous that joinder of all members is impracticable;

     (2) there are questions of law or fact common to the class;

     (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

     (4) the representative parties will fairly and adequately protect the interests of the class.

     Fed. R. Civ. P. 23(a). As courts within this district have recognized,

     The first two requirements focus on the characteristics of the class; the second two focus instead on the desired characteristics of the class representatives. The rule is designed “to assure that courts will identify the common interests of class members and evaluate the named plaintiffs’ and class counsel’s ability to fairly and adequately protect class interests.”

     Additionally, class certification requires that at least one of the specific provisions of  Rule 23(b) must be met. Relevant here,  Rule 23(b)(3) requires that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”  Fed. R. Civ. P. 23(b)(3). “To succeed under  Rule 23(b)(3), plaintiffs must sufficiently demonstrate both predominance of common class issues and that the class action mechanism is the superior method of adjudicating the case.” 

2. Rule 23 Criteria

     To determine whether a settlement class should be certified for the Brooke claimants and absent class members, the Court will review the applicable law on Rule 23 and evaluate each criterion.

1. Numerosity

     Rule 23(a)(1) provides that a class action is maintainable only if “the class is so numerous that joinder of all members is impracticable.”  Fed. R. Civ. P. 23(a)(1). To demonstrate numerosity, Settlement Class Counsel must establish that joinder is impracticable through “some evidence or reasonable estimate of the number of purported class members.”   Rule 23 does not provide a clear formula for determining whether the numerosity requirement has been met; thus, courts evaluate numerosity based upon the facts, circumstances, and context of the case. 1 William B. Rubenstein, Newberg on Class Actions § 3:12 (5th ed. 2019). Indeed, “[t]here is enormous disparity among the decisions as to the threshold size of the class that will satisfy the  Rule 23(a)(1) prerequisites.” Id. Although the plaintiffs bear the burden of showing that joinder is impracticable, “a good-faith estimate should be sufficient when the number of class members is not readily ascertainable,” and the numerosity requirement “ordinarily receives only summary treatment ... and has often gone uncontested.” Id.

     Here, the class includes under 4,000 individual plaintiffs. Notably, over 2,800 of these plaintiffs have already been certified as a class in the Amorin matter. The Court concludes that the numerosity requirement is satisfied in this case.

1. Commonality

     The commonality requirement under Rule 23(a)(2) requires for maintenance of a class action that there be “questions of law or fact common to the class.”  Fed. R. Civ. P. 23(a)(2). Commonality “does not require that all questions of law or fact raised in the litigation be common. The commonality standard is more qualitative than quantitative.” Indeed, “[t]he commonality requirement is satisfied if at least one issue’s resolution will affect all or a significant number of class members.” The  Rule 23(a)(2) commonality “requirement is easily met in most cases.”  Id.

     Commonality is easily satisfied in the instant case, because the Judicial Panel on Multidistrict Litigation ordered the subject cases consolidated in this MDL based upon commonality of facts. Further, the various underlying claims all involve common questions about the defectiveness of the drywall and damages caused by the drywall. The Court finds that the commonality requirement is satisfied in this case     

1. Typicality

     Rule 23(a)(3) provides that a class action may be maintained only if “the claims or defenses of the representative parties are typical of the claims or defenses of the class.”  Fed. R. Civ. P. 23(a)(3). “The inherent logic of the typicality requirement is that a class representative will adequately pursue her own claims, and if those claims are ‘typical’ of those of the rest of the class, then her pursuit of her own interest will necessarily benefit the class as well.”

     Here, the typicality requirement is satisfied because each Class Member seeks to recover for the same type of property damage, caused by the same type of drywall, manufactured by the same entities. Additionally, the claims all involve similar questions involving property damage and the need for and scope of remediation. Accordingly, the Court finds that the typicality requirement is satisfied in this case.

1. Adequacy of Representation

     Rule 23(a)(4) requires that “the representative parties will fairly and adequately protect the interests of the class.”  Fed. R. Civ. P. 23(a)(4). This criterion, which aims to protect the rights of absent class members, requires courts to consider the adequacy of the proposed class representatives and the adequacy of class counsel. “The central component of class representative adequacy is the absence of conflicts of interest between the proposed representatives and the class.” Id. In contrast, “[a]dequacy of counsel asks whether the attorneys who seek to represent the class are competent to do the job.” Id.; see also  Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 n. 13, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) (“[T]he adequacy of representation requirement ...also raises concerns about the competency of class counsel and conflicts of interest.”). With regard to the former, a court must consider whether any proposed class representative has an interest “materially adverse to some of the class” and whether he or she “is properly qualified to assume the role of class representative.” 1 Rubenstein, supra, § 3:54. As to the latter requirement, “courts consider the competence and experience of class counsel, attributes which will most often be presumed in the absence of proof to the contrary.” 1 William B. Rubenstein, Alba Conte, and Herbert B. Newberg, Newberg on Class Actions § 3:24 (4th ed. 2010).

     David Griffin, Lillian Eyrich, Michelle Geramo, Virginia Tiernan, Debra Williams, and Judd Mendelson act as Class Representatives. Each Class Representative owns property allegedly damaged by covered Chinese drywall and has a high degree of knowledge regarding the litigation. They do not possess any interests antagonistic to the Class as a whole. Further, Class Counsel has extensive experience with complex litigation in general and this litigation specifically, which has been active for more than ten years. The Court concludes that the Class Representatives and Class Counsel adequately represent the entire class.

1. Predominance of Common Questions of Law & Fact

     Rule 23(b)(3) provides that a class action is maintainable if all the prerequisites of subsection (a) are satisfied and “the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.”  Fed. R. Civ. P. 23(b)(3). Factors for the Court to consider in its determination include:

     (A) the class members’ interests in individually controlling the prosecution or defense of separate actions;

     (B) the extent and nature of any litigation concerning the controversy already begun by or against class members;

     (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and

     (D) the likely difficulties in managing a class action.

 Fed. R. Civ. P. 23(b)

     There is “considerable overlap” between commonality and the predominance of common questions of law and fact. See 1 Rubenstein, supra, § 3:27. However, “the predominance test is ‘far more demanding’ than the commonality test.”  “In order to ‘predominate,’ common issues must constitute a significant part of the individual cases.”  “As the predominance test is meant to help courts identify cases in which aggregate treatment would be efficient, it focuses on the extent to which the issues in the cases are common as opposed to individual—the more common the issues, the more likely it is that the case will be processed efficiently in the aggregate; the less common the issues, the less likely efficient resolution will be furthered by aggregation.”

     This requirement is satisfied because the common questions of liability substantially outweigh any questions pertinent to individual Class Members alone. Further, the relevant evidence necessary to establish plaintiffs’ claims is common to all Class Members who would seek to prove entitlement to damages based on Taishan’s allegedly wrongful conduct. Lastly, as Class Counsel argues, the “resolution of thousands of claims in one action is far superior to individual lawsuits, because it promotes consistency and efficiency of adjudication.” R. Doc. 22397-1 at 52. The Court concludes that common questions of law and fact predominate in this case, and that a class action is a superior method of adjudication than consideration of several thousand individual claims. It is now appropriate to consider the fairness, reasonableness, and adequacy of the Settlement Agreement with respect to the claims of both the Amorin and Brooke claimants, as well as absent class members.

3. Fairness, Reasonableness, and Adequacy

     Under  Rule 23, “[r]eview of a proposed class action settlement generally involves two hearings,” the first of which is a “preliminary fairness” evaluation made by the Court. Manual for Complex Litigation § 21.632 (4th ed. 2004). Indeed, within the Fifth Circuit it is routine to conduct a preliminary fairness evaluation prior to the issuance of notice. During this evaluation, the Court must “make a preliminary determination that the proposed class satisfies the criteria set out in  Rule 23(a) and at least one of the subsections of  Rule 23(b).” Manual for Complex Litigation § 21.632. Additionally, the Court “must make a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms and must direct the preparation of notice of the certification, proposed settlement, and date of the final fairness hearing.” Id. After having granted preliminary approval and allowed the notice process to move forward, the Court conducts a more thorough and rigorous analysis of the same factors in order to determine the appropriateness of granting final approval. Id. § 21.6. “Counsel for the class and the other settling parties bear the burden of persuasion that the proposed settlement is fair, reasonable, and adequate.” Manual for Complex Litigation § 21.631. The Court granted preliminary approval of the Taishan Settlement on August 29, 2019. R. Doc. 22314. Accordingly, the Court now considers whether final approval is warranted.

     The Court is required to render a determination on the fairness, reasonableness, and adequacy of the Settlement Agreement. Courts may consider a large number of factors in order to determine whether these requirements are satisfied. Traditionally, courts in the Fifth Circuit have considered the following six factors, from Reed v. General Motors Corp., in making this determination: (1) the existence of fraud or collusion; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings; (4) plaintiffs’ probability of success; (5) the range of possible recovery; and (6) the opinions of class counsel, class representatives, and absent class members. 703 F.2d 170, 172 (5th Cir. 1983).

     Additionally, in 2018,  Rule 23 was amended to provide uniform guidance regarding this determination.  Rule 23(e)(2) instructs courts to consider whether:

     (A) the class representatives and class counsel have adequately represented the class;

     (B) the proposal was negotiated at arm’s length;

     (C) the relief provided for the class is adequate, taking into account:

         (i) the costs, risks, and delay of trial and appeal;

         (ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims;

         (iii) the terms of any proposed award of attorney’s fees, including timing of payment; and

         (iv) any agreement required to be identified under  Rule 23(e)(3); and

     (D) the proposal treats class members equitably relative to each other.

 Fed. R. Civ. P. 23(e)(2). The Advisory Committee’s notes to the 2018 amendments, however, clearly indicate that the changes to the rule are meant to “focus the court and the lawyers on the core concerns of procedure and substance that should guide the decision whether to approve the proposal,” rather than “displace any factor” sanctioned by the circuit courts. Id. Accordingly, the Court will consider the  Rule 23 requirements as informed by the Reed factors.

1. Adequacy of Representation

     The adequacy requirement mandates an inquiry into “the zeal and competence of the representative[s’] counsel and ... the willingness and ability of the representative[s] to take an active role in and control the litigation and to protect the interests of absentees.”

     Settlement Class Counsel have been intimately involved with the litigation for over a decade and strongly support this Settlement. Class Counsel suggests it has the experience and institutional knowledge to effectively resolve these claims “meaningfully and intelligently.” R. Doc. 22397-1 at 56.

     The Court finds that the Class Representatives and Settlement Class Counsel have diligently and zealously represented the plaintiffs. In the face of legal complexities, procedural hurdles, and inherent uncertainty, Class Counsel has coordinated discovery efforts, conducted depositions both in this country and abroad, filed thousands of pleadings and other documents into the record, and represented the parties before this Court, the remand courts, and appellate courts, for over a decade. Class Counsel additionally succeeded in securing a Settlement Agreement with a formidable opponent that, at various points in this litigation, refused to so much as acknowledge this Court’s jurisdiction. Further, the Class Representatives are capable of fairly and adequately protecting the interests of the Class because they have been involved in this litigation for years and raise claims that are factually and legally analogous to those of other Class Members.

1. Arm’s Length Negotiation

     A strong presumption exists in favor of settlement if the district court determines that the settlement resulted from arms-length negotiations between experienced counsel and was not tainted by fraud or collusion. Fraud or collusion, either actual or perceived, may be suspected when the attorneys have made agreements amongst themselves regarding the allocation of attorney fees, especially when the common benefit fee is deducted directly from the settlement fund. Courts must be particularly diligent when evaluating a proposed settlement in which the fee award has been negotiated by class counsel because pecuniary self-interest has long been cited by courts and scholars as a threat to the performance of counsel’s professional and fiduciary obligations to class members.

     The presumption in favor of settlement is warranted here. First, the Settlement is the product of arms-length negotiations between sophisticated parties with the guidance of an experienced, professional mediator. The process involved a global demand on Taishan, followed by the exchange of detailed damage calculations, arguments, responses, offers, and counter offers. The mediation lasted several days, followed by a three-month negotiation period. The negotiation was conducted by highly skilled attorneys with extensive experience in complex litigation and specific knowledge of the facts and legal issues presented in this MDL. Counsel on both sides have zealously advocated for their clients for some ten years, as evidenced by the extensive discovery, motions practice, and significant resources expended in this case. The parties entered the negotiation with the experience and institutional knowledge necessary to successfully negotiate on behalf of their clients, and the settlement was accordingly achieved as a result of the adversarial process.

     Second, the prospect of fraud or collusion is substantially lessened where, as here, the settlement agreement leaves the determination and allocation of attorney fees to the sole discretion of the trial court. Because the parties have not agreed to an amount of attorney fees and instead have merely petitioned the Court for an award they believe is appropriate, there is no threat of the issue tainting the fairness of the settlement negotiations. Accordingly, the Court finds that the proposed Settlement is the product of an arms-length negotiation untainted by fraud or collusion.

1. Adequacy of Relief

     Determining whether the proposed relief is adequate requires the Court to consider several of the Reed factors, namely, (1) the complexity, expense, and likely duration of the litigation, (2) the stage of the proceedings, (3) plaintiffs’ probability of success on the merits, (4) the range of possible recovery, and (5) the opinions of class counsel, class representatives, and absent class members. Here, these factors all indicate that the proposed relief is adequate. The Court discusses each factor in turn.

1. The Complexity, Expense, and Likely Duration of the Litigation

     This factor requires courts to compare the benefits and risks of the proposed settlement as well as the potential future relief in light of the uncertainties of the litigation. This litigation has been procedurally complex, expensive, and extremely lengthy. The case has been active for over ten years, during which significant resources have been expended to serve Taishan, conduct discovery, undertake extensive motion practice, try bellwether trials, and file over 20,000 documents into the record. Each day the case continues is another day during which homeowners are unable to commit necessary financial resources to the remediation of their homes.

     Additionally, the burden of this litigation cannot be understated. This settlement affects the claims of nearly 4,000 plaintiffs. Although the Amorin claims have been vigorously prosecuted, the Brooke claims remain in an early stage of litigation. Taking these 1,200 Brooke cases to trial would take years, require additional discovery and motion practice, and generate significant expenses. Further, if a favorable judgement were obtained, the prevailing party would likely encounter formidable hurdles in collecting on the judgment. In all cases, the determination of individual damages could take years to resolve, and would greatly increase the cost, fees, and time associated with this already-expansive litigation. Despite the PSC’s diligent efforts, there is no certainty as to the outcome of these trials. Success on the merits is not guaranteed, and even if a judgment favorable to plaintiffs is rendered, Taishan would be certain to appeal it, as it has other substantive directives from this Court. Because the settlement provides monetary relief for class members now, as opposed to potential relief in the future, the Court finds that this factor supports approval of the Settlement.

1. The Stage of the Proceedings

     The stage of the proceedings and the nature and extent of discovery can be significant factors in evaluating the fairness of a settlement. This factor requires courts to consider “whether the parties have obtained sufficient information to evaluate the merits of the competing positions.” “Thus, the question is not whether the parties have completed a particular amount of discovery, but whether the parties have obtained sufficient information about the strengths and weaknesses of their respective cases to make a reasoned judgment about the desirability of settling the case on the terms proposed ....”

     For the past ten years, the parties in this matter have conducted significant discovery, engaged reputable experts, litigated bellwether trials, and negotiated other settlements. In doing so, they have developed and honed a particularly thorough understanding of the facts of the case, its legal theories, and the strength and weaknesses of the parties’ positions. Considering the work that has been done in this case and the expertise of counsel on all sides, the Court is convinced that the parties were fully informed of the factual and legal obstacles that could influence the decision to settle the matter before trial. Accordingly, this factor weighs in favor of approving the settlement.

     iii. Plaintiffs’ Probability of Success on the Merits

     This factor requires the Court to compare the relief offered by the proposed Settlement with the likely recovery if the case were to proceed to trial. Absent fraud or collusion, the probability of success on the merits has been hailed as the most important Reed factor. See Parker v. Anderson, 667 F.2d 1204, 1209 (5th Cir. 1982). In evaluating the probability of success, “the Court must compare the terms of the settlement with the rewards the class would have been likely to receive following a successful trial.”  DeHoyos v. Allstate Corp., 240 F.R.D. 269, 287 (W.D. Tex. 2007).

     The Amorin and Brooke complaints raise various claims aimed at holding Taishan responsible for property damage allegedly caused by defective Chinese drywall. Taishan has stipulated to manufacturing certain kinds of drywall, and there is no serious contention that the drywall itself was not defective.

     This fact, however, must be weighed against the significant legal hurdles that could substantially impair the probability of success on the merits. The obstacles to achieving a favorable result and collecting on any potential judgment are significant. The Taishan Defendants have challenged this Court’s rulings at every turn, and a challenge to this Court’s jurisdiction over Defendants BNBM, BNBM Group, and CNBM is currently set for oral argument before the Fifth Circuit in February 2020. Additionally, a large number of Florida Amorin claims risk being dismissed if Judge Cooke adopts the Florida Special Master’s Report and Recommendation, which found insufficient evidence to attribute certain types of drywall to Taishan. Although the PSC filed an opposition to the report, there is no guarantee that Judge Cooke will entertain the objection and adopting the report would leave plaintiffs with non-attributable drywall without further recourse. Further, this Court has previously indicated that the applicable statutes of limitation pose a substantial bar to the Brooke claims. Lastly, and perhaps most importantly, even if plaintiffs were to secure a judgment in their favor at trial, there is absolutely no guarantee of solvency and collectability. At the very least, a judgment would inevitably trigger an appeal, creating additional costs and delays. Even if a judgment were affirmed, there are significant questions regarding the enforcement of a judgment against a Chinese company that contests the jurisdiction of the American courts. Taishan has limited or no assets in this country. Thus, any enforcement would have to be pursued in China, a country that has no treaty with the United States governing enforcement of judgment. See Enforcement of Judgments, U.S. Dep’t of State, https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/internl-judicial-asst/Enforcement-of-Judges.html (last visited Jan. 9, 2019). Accordingly, the Court considers the finality of the Settlement and the immediate cash benefit it provides to be superior to the possibility of achieving a larger judgment at a future trial without any mechanism to enforce it.

1. Range of Possible Recovery

     “[I]n any case there is a range of reasonableness with respect to a settlement—a range which recognizes the uncertainties of law and fact in any particular case and the concomitant risks and costs necessarily inherent in taking any litigation to completion ....”  Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972). Thus, after determining if any legal or factual obstacles exist, a district court must inquire whether the settlement’s terms fall within a reasonable range of recovery, given the likelihood of the plaintiffs’ success on the merits. When considering this factor, the Court must remain aware that

[c]ompromise is the essence of settlement and the court should not make the proponents of a proposed settlement justify each term of settlement against a hypothetical or speculative measure of which concessions might have been gained; inherent in compromise is a yielding of absolutes and an abandoning of highest hopes.

Nelson v. Waring, 602 F. Supp. 410, 413 (N.D. Miss. 1983) (quoting  Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977).

     Like all settlements, the Taishan Settlement Agreement is a compromise. It is not designed to provide complete and total relief to every single claimant. Without re-hashing the inherent risks and uncertainties associated with this litigation, the Court stresses that many plaintiffs risk recovering nothing if the case proceeds to trial, whether due to the Florida Special Master’s determination regarding product identification, the effect of the statutes of limitation on Brooke claims, or the vagaries of collecting on any judgment. For these plaintiffs whose claims are in tenuous positions, the Settlement provides immediate monetary relief that is firmly in the range of possible recovery. The settlement award is also in the range of possible recovery even for the plaintiffs whose claims are not subject to dismissal for these reasons. As explained above, the inherent risks and uncertainties involving jurisdiction, appeals, and collectability render every claim subject to a possible recovery of zero dollars. Even though a larger recovery than the one offered by the Settlement is a possibility, the value of the settlement award represents a fair compromise when considering the risks associated with this litigation. Taking into consideration the legal and factual obstacles discussed above, the Court finds that the Taishan Settlement provides class members with a sum of money that falls within the reasonable range of recovery. It will not make every plaintiff whole, but the Court urges litigants to remember that, as cited above, “inherent in compromise is a yielding of absolutes and an abandoning of highest hopes.”  Id.

1. Opinion of Class Counsel, Class Representatives, and Absent Class Members

         Class Counsel are intimately familiar with the case and the Settlement, and therefore the Court will give weight to class counsel’s opinion regarding the fairness of settlement. Class counsel’s opinion should be presumed reasonable because they are in the best position to evaluate fairness due to an intimate familiarity with the lawsuit. However, the Court’s deference must not be so great that it blindly follows class counsel’s recommendations. Rather, the Court must give class counsel’s recommendations appropriate weight in light of all the factors surrounding the settlement.

     Settlement Class Counsel has filed a 110-page brief in support of final approval of the Settlement. R. Doc. 22397-1. The Settlement is additionally supported by Defendants. R. Doc. 22393. As explained above, this Settlement was achieved through an arms-length negotiation between sophisticated and experienced counsel who developed a thorough understanding of the relative strengths and weakness of the case through extensive motion practice, discovery, and experience with complex litigation. Although the Court affords deference to their views, its consideration of this factor does not end there. All of the Class Representatives in this matter—David Griffin, Lillian Eyrich, Mary Michelle Germano, Virginia Tiernan, Debra Williams, and Judd Mendelson—have declined to opt-out or object to the Settlement. The Class Representatives have all filed affidavits in support of the Settlement, explaining that they “strongly support this Settlement, believe it is fair, reasonable and adequate, and urge the Court to grant final approval to the Settlement and certify the Settlement Class.” R. Doc. 22397-16, 22397-17, 22397-18, 22397-19, 22397-20, 22397-21.

     Further, the attitude of Absent Class Members, expressed either directly or indirectly by their failure to object after notice and the high level of participation in the proposed settlement program, is an additional factor on which district courts generally place heavy emphasis. See In re Microstrategy, Inc. Sec. Litig., 150 F. Supp. 2d 896 (E.D. Va. 2001) (stating that class reaction is perhaps the most significant factor in determining whether a settlement is adequate). The Taishan Settlement affects 3,948 known class members. Of those 3,948 plaintiffs, 22 objected to the settlement and 92 opted out.10 Additionally, five non-class members filed objections to the Settlement, but two of these objectors in fact object to their status as non-class members and seek to join the Settlement Class and recover settlement funds. Thus, approximately 97% of proposed class members have accepted the Settlement, and the Court accordingly finds that this factor weighs in favor of final approval. 

1. Equitable Treatment of Class Members

This  Rule 23 factor requires the Court to consider whether “the proposal treats class members equitably relative to each other.”  Fed. R. Civ. P. 23(e)(2)(d). This inquiry involves a determination of “whether the apportionment of relief among class members takes appropriate account of differences among their claims.”  Rule 23 (e)(2)(C), (D), Advisory Committee Notes to 2018 Amendments. 

The Taishan Settlement is designed to distribute settlement funds among the thousands of plaintiffs on an equitable basis. To assist in this endeavor, the parties enlisted the help of an Allocation Neutral, who considered a variety of factors and ultimately developed an allocation model to guide the process. The allocation model assigns relative values to a handful of objective criteria that collectively determine each individual award. The Court finds that the allocation model is specifically designed to efficiently and effectively distribute funds on an equitable basis that considers relevant, objective factors. Accordingly, this factor weighs in favor of final approval.

1. The Objections

Any class member who does not opt out may object to the settlement under  Rule 23(e)(4). The absence or small number of objections may provide a helpful indication that the settlement is fair, reasonable, and adequate. However, a court may approve a class action settlement even if opposition exists. Nevertheless, courts must independently examine all objections to determine if they have merit and whether they raise questions regarding the fairness of settlement.  

Courts have held that objections must be sufficiently clear and unambiguous for court consideration; otherwise the party will be deemed to have waived their objection. Moreover, objectors must comply with procedural requirements stipulated in the settlement agreement, such as filing a written statement of objection with the court in advance of the hearing and giving notice of intent to appear at the fairness hearing. However, the court has discretion to permit objections at the fairness hearing even if the party wishing to voice an objection has not filed a written statement in advance. Objections ought to focus on the fairness, reasonableness, and adequacy of the agreement, rather than “renegotiate terms of the settlement based on individual preferences.”  

As explained above, the Court has received twenty-seven objections to the Settlement Agreement, twenty-two of which were filed by Class Members. Having detailed each above, the Court finds that the objections primarily involve the following issues: (1) the size of the settlement and adequacy of the funds, (2) the disparate treatment of Amorin and Brooke plaintiffs, (3) the effect of product identification on the award estimate, and (4) the inclusion of attorney fees. In addition, one objector challenges the sufficiency of the Notice Program. The Court will discuss each of these issues in turn.

1. The Size of the Settlement and Adequacy of the Funds

 Several Class Members object to the Settlement on the grounds that it simply does not provide enough money to make them whole again or to allow them to fully remediate their homes. Additionally, some Class Members object to the disparity between the Taishan Settlement and the Knauf Settlement, which provided for complete remediation of affected properties in addition to attorney fees.

     The Court acknowledges that this Settlement is smaller than the Knauf Settlement and does not provide 100% of the funds necessary to completely remediate each Affected Property. However, the Court urges the parties to remember that settlements do not usually make claimants completely whole. This Settlement aims to resolve claims on an aggregate basis to provide the greatest total recovery for the greatest number of people and was negotiated in light of the complexities that exist in the Taishan aspect of the litigation that were absent from the Knauf matters. Many of these objections focus on the value of individual claims, but do not actually target the fairness or adequacy of the Settlement as a whole. While these may be reasons to opt out, they are not reasons to unravel the entire Settlement, which 97% of class members apparently support.

     The court urges litigants to recognize that a settlement is, at its core, a compromise. What Class Members are missing in terms of dollars they make up for by guaranteed recovery and an end to a decade of litigation. The fact that Class Members wish Taishan was willing to pay more to settle these claims does not warrant unraveling the entire Agreement. The objectors who are unhappy with the amount of their estimated allocation had the right to opt-out of the Settlement and pursue their claims against Taishan in court. In not opting out, these objectors apparently recognize the inherent difficulties and uncertainties associated with pursuing this option, and their actions suggest that final approval of the Settlement is warranted.

1. Disparate Treatment of Amorin and Brooke Plaintiffs

     Several objectors raise concerns with the methodology used by the Allocation Neutral to determine the value of each claimant’s recovery. The Court begins by noting that fairness is not synonymous with equality. See  Ortiz v. Fibreboard Corp., 527 U.S. 815, 855–56, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) (“[A] settlement must seek equity by providing for procedures to resolve the difficult issues of treating such differently situated claimants with fairness as among themselves.”). Indeed, “[i]t is perfectly fair and reasonable, and indeed common and accepted, for settlement benefits to turn on the strength of class members’ claims.”  In re Oil Spill by Oil Rig Deepwater Horizon, 910 F. Supp. 2d at 948. There is no elusive or magical way to distribute the funds among differently situated claimants in a manner that would make every single claimant completely satisfied with their recovery. The Allocation Neutral, who has no financial interest in this litigation, was appointed to determine the fairest, most equitable way of doing so. This methodology was designed to be efficient and cost effective, as is in the best interest of the class because it minimizes the expenses that will be deducted from the recovery.

     With respect to the disparate treatment of Amorin and Brooke plaintiffs, the Court notes that this distinction may appear to be ambiguous line-drawing without good reason. However, as explained at the Final Fairness Hearing, the effect of a Class Member’s claim status has a significant impact on the value of their claim and likelihood of success on the merits. As the Allocation Neutral explained, the Amorin class has gone through a significant amount of litigation—a default judgment has been entered with respect to liability and a class has been certified. The Florida and Virginia remand courts have adopted this Court’s rulings with respect to such matters. The last step of the Amorin litigation, albeit a very complex one, is to calculate the individual measure of damages suffered by each plaintiff. In stark contrast, the Brooke claims are in the nascent stages of litigation. Several complaints have been filed, but the Defendants have not answered, no discovery has occurred nor has a class been certified. Developing these claims in a manner that resembles the Amorin litigation would entail significant time and expense. Furthermore, many of these claims are jeopardized by applicable statute of limitations defenses potentially available to Defendants. Accordingly, the Brooke claims are inherently riskier and less valuable than the Amorin claims. The Amorin and Brooke groups have very different chances of success on the merits, and it is equitable to treat claimants with more fully developed cases as better situated than those facing more substantial obstacles to recovery. In so finding, the Court does not intend to suggest that the hardship suffered by Amorin and Brooke plaintiffs is not comparable. To the contrary, the Court recognizes that the hardship of living with Chinese drywall has been shared equally by all Affected Property owners. That fact, however, does not justify the equal distribution of funds among class members because fairness requires that claimants be treated in an equitable fashion that considers, among other things, the strength and status of their individual claims.

     iii. Effect of Product Identification

     The same logic applies to the discounts for product identification issues. The allocation model assigns certain discounts to claims arising from the installation of types of drywall the Florida Special Master determined were not attributable to Taishan. Taishan admits it manufactured the following brand of drywall: (E) DUN, (H) TAIAN TAISHAN and Taihe Edge Tape, (K) Venture Supply. BNBM admits it manufactured (A) BNBM and Dragon Board. Accordingly, affected properties with these brands of drywall are not discounted. However, claims involving (D) Crescent City Gypsum, (I) MADE IN CHINA MEET[S] OR EXCEED[S], and (J) various drywall dimensions, including 4feet[x/*]12feet[x/*]1/2 inch, are discounted by 25% because Taishan admits it manufactured some, but not all of this drywall. An 80% discount is applied to drywall categories (B) C&K, (C) Chinese Manufacturer #2 (purple stamp), (F) IMT Gypsum, (G) Prowall, and (L) White Edge Tape, boards with no markings or boards with no markings other than numbers of letters, because, as the Florida Special Master found, there is insufficient evidence linking these boards to Taishan. With respect to product identification, the applicable discounts reflect the fact that if the class were to forego settlement and proceed to trial, the claimants with drywall falling into a discounted category would likely recover substantially less, or nothing at all, than a claimant with drywall clearly attributable to the Taishan Entities.

1. Inclusion of Attorney Fees

     The Court recognizes that the reduction of individual awards for an as-of-yet undetermined amount of attorney fees may seem, to some plaintiffs, like an unfair penalty. Nevertheless, the Court finds that a reduction of some amount for attorney fees is both absolutely necessary and well-deserved. Plaintiffs’ attorneys typically work on a contingency arrangement, and the Court assumes that the majority, if not all, of the plaintiffs in this litigation were prepared to allocate approximately one-third of any recovery at trial to their attorney. Here, Settlement Class Counsel has requested an award of 30% for attorney fees, to include both contract counsel and common benefit counsel, and 3% for costs, which approximates a typical contingency arrangement. Further, an award of attorney fees is necessary in all settlements of this nature both to reward the attorneys for their years of hard work and to encourage other attorneys to take on complex, challenging, and meaningful cases in the future. As noted above, both common benefit counsel and the individually retained attorneys have been actively litigating this case for over a decade to the benefit of individual clients and the entire class. This case has been exceedingly complex. It has been remarkably expensive. It has been taxing on the attorneys’ time and financial resources. To simply deny them compensation from the settlement fund is inconceivable. The appropriate amount of attorney fees has not yet been established. The Court will deal with this issue in section IV of this opinion.

1. Notice

     One objector alleges that due process has been violated because media outreach was insufficient. Although the Court notes that a generalized allegation is insufficient to stage an actual attack on a settlement,  it will nevertheless address the argument.

     Certification of a class settlement under  Rule 23(b)(3) requires that the proposed class receive adequate notice of the settlement.  Rule 23(c)(2)(b) requires that class members receive “the best notice that is practicable under the circumstances.”  Fed. R. Civ. P. 23(c)(2)(b). This notice must include: (1) “the nature of the action,” (2) “the definition of the class certified,” (3) “the class claims, issues, or defenses,” (4) “that a class member may enter an appearance through an attorney if the member so desires,” (5) “that the court will exclude from the class any member who requests exclusion,” (6) “the time and manner for requesting exclusion,” and (6) “the binding effect of a class judgment on members.”  Fed. R. Civ. P. 23(c)(2)(b)(i)-(vii). Further, under  Rule 23(e)(1), notice must be directed “in a reasonable manner to all class members who would be bound by the proposal.”  Fed. R. Civ. P. 23(e)(1).  Rule 23’s notice requirement implicates due process concerns, because “[n]otice of a mandatory class settlement ... will deprive class members of their claims” and “therefore requires that class members be given information reasonably necessary for them to make a decision whether to object to the settlement.”  In re Katrina Canal Breaches Litig., 628 F.3d 185, 197 (5th Cir. 2010).

     Here, the Court is satisfied that the Notice Program complied with Rule 23. During the Class Notice Period, the Claims Administrator mailed a long-form notice to all known Class Members. This notice was written in plain, understandable English, and advised class members of their rights and obligations under the Settlement. It explained the subject matter of the litigation, defined the class, advised Class Members of their right to representation and their right to object or opt-out, the procedure for doing so, and explained the binding effect of the Settlement on Class Members who chose not to opt-out. Each known Class Member was additionally provided with an estimate of their award and allowed to challenge that estimate. To notify Absent Class Members, the Court mailed notices to all courthouses in which Chinese drywall-related matters were pending. A website was published, and a call center established, to provide individuals with information about the litigation and the Settlement.

     Class Counsel also worked with Kinsella Media to develop a Media Notice Program. Shannon Wheatman, a specialist in the design and implementation of class action notification programs, testified as a representative of Kinsella Media at the Final Fairness Hearing. As she explained, the Notice Program consisted of individual mailings to each known Class Member, paid media advertising in English and Spanish-language newspapers, lifestyle websites, national magazines, and digital media outlets. The digital media campaign resulted in twenty-five million gross impressions, and the settlement website has been viewed over 121,000 times. The notices and advertisements were written in plain English and designed to capture a reader’s attention. Ms. Wheatman testified, and the Court agrees, that the Notice Program satisfies the best notice practicable standard under  Rule 23(c) and the requirements for class notification under  Rule 23(e)(1).

1. The Settlement Agreement is Fair, Reasonable, and Adequate

     Considering the foregoing, none of the objections warrant denial of final approval. Accordingly, the Court concludes that the Taishan Settlement Agreement is fair, reasonable, and adequate. The Court concedes that this Settlement will not provide every plaintiff with sufficient funds to completely remediate their homes. However, considering the significant expenses, delays, risks of continued litigation, risks of collectability, and the overwhelming support of Class Counsel and Class Members, the Court finds that it is fair to monetarily compensate plaintiffs immediately rather than continuing this litigation for, at minimum, several more years. Class Counsel, Defense Counsel, and over 97% of Class Members appear to agree. Accordingly, the Court confirms its previous decision preliminarily approving the Settlement and certifying the Settlement Class.

1. MOTION FOR ATTORNEYS’ FEES AND COSTS

     At this juncture, the Court turns to the issue of attorney fees and costs. Settlement Class Counsel seeks an award of attorney fees for common benefit counsel and contract counsel, and cost reimbursements for common benefit counsel. R. Doc. 22380. As mentioned, Settlement Class Counsel requests an award representing 30% of the aggregate amount of the Settlement for attorney fees and 3% for costs, totaling $74,400,000 in fees and approximately $7,074,830.15 in costs.

1. Law and Analysis

     “[U]nder the ‘American Rule,’ the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.”  Likewise, the attorney for the prevailing litigant must generally look to his or her own client for payment of attorneys’ fees. Since the nineteenth century, however, the Supreme Court has recognized an equitable exception to this rule, known as the common fund or common benefit doctrine, that permits the creation of a common fund in order to pay reasonable attorney fees for legal services beneficial to persons other than a particular client, thus spreading the cost of the litigation to all beneficiaries. This equitable common fund doctrine was originally, and perhaps still is, most commonly applied to awards of attorney fees in class actions.

     But the common fund doctrine is not limited solely to class actions. As class actions morph into multidistrict litigation, as is the modern trend, the common benefit concept has migrated into the latter area. The theoretical bases for the application of this concept to MDLs are the same as for class actions, namely equity and her blood brother, quantum meruit. However, there is a difference. In class actions the beneficiary of the common benefit is the claimant; in MDLs the beneficiary is the individually retained attorney (contract counsel). See Eldon E. Fallon, Common Benefit Fees in Multidistrict Litigation, 74 La. L. Rev. 371, 375 (2014).

     MDL courts have consistently cited the common fund doctrine as a basis for assessing common benefit fees in favor of attorneys who render legal services beneficial to all MDL plaintiffs.

     In addition to judicial precedent the Court also finds authority to assess common benefit attorney fees in its inherent managerial authority, particularly in light of the complex nature of this MDL. The Fifth Circuit has long recognized that a court’s power to consolidate and manage litigation necessarily implies a corollary authority to appoint lead or liaison counsel and to compensate them for their work. Further, the Fifth Circuit has explained that a district court has inherent authority “to bring management power to bear upon massive and complex litigation to prevent [the litigation] from monopolizing the services of the court to the exclusion of other litigants.”  This policy seeks to avoid the unjust enrichment of those who profit from a common fund at the expense of those whose labors produced the fund, and it serves to encourage attorneys to accept the considerable risks associated with prosecuting complex, multi-plaintiff matters for the benefit and protection of all plaintiffs’ rights.

1. Methodology for Determining Common Benefit Fees

     Attorney fees and costs, authorized by law or the agreement of the parties, must be reasonable.  Fed. R. Civ. P. 23(h). “The decision of an award of attorney fees in a common-fund case is committed to the sound discretion of the trial court, which must consider the unique contours of the case.” Manuel for Complex Litigation § 14.121 (4th ed. 2004).

     Courts have employed various methods for determining the reasonableness of an award of common benefit fees. These methods include: (1) the lodestar method, which entails multiplying the reasonable number of hours expended on the litigation by an adjusted reasonable hourly rate; (2) the percentage method, in which the court compensates common benefit attorneys based on a percentage of the amount recovered; or (3) the blended method, a combination of both methods, in which the percentage is selected and cross checked for reasonableness by utilizing the lodestar method. It is appropriate to consider each of these methods in turn in an effort to determine a fair common benefit fee.

     [The court’s detailed discussion of the ways to set appropriate attorneys’ fees is omitted].

     Ultimately, the Court finds it reasonable to award $47,120,000 to compensate both common benefit counsel and individually retained attorneys in light of the circumstances in this case, namely that the case involves property damage claims and that the attorney fees come out of the overall recovery available to claimants, unlike in the Knauf Settlement. As previously mentioned, sixty percent of this award shall compensate common benefit counsel, and forty percent shall compensate contract counsel. The Court will determine the appropriate division of the common benefit fee among those counsel who performed common benefit work at a later date.

2. Costs

     “Typically, class action counsel who create a common fund for the benefit of the class ... are entitled to reimbursement of reasonable litigation expenses from that fund.” In re Pool Prod. Distribution Mkt. Antitrust Litig., MDL 2328, 2015 WL 4528880, at *18 (E.D. La. July 27, 2015). The reimbursement of costs and expenses seeks not to reward attorneys for their work but restore the status quo. However, the requested expenses may not “cannibalize the entire ... settlement.”  In re Katrina Canal Breaches Litig., 628 F.3d at 196. Accordingly, the Court must review the estimated expenses for which reimbursement is sought and determine whether the total requested sum is fair to the settlement class.

     Settlement Class Counsel seeks 3% for costs, which includes shared expenses, held costs, and a $500 stipend per Affected Property. According to detailed records kept by the Court-appointed CPA pursuant to PTO 9 and 9A, Settlement Class Counsel, the PSC, and common benefit counsel incurred $1,166,418.88 in held costs and $1,669,824.00 as cash assessments, for a total of $2,836,242.88. R. Doc. 22380-4. These costs were generated between January 1, 2014 and August 31, 2019.

     In view of the nature and circumstances of this case, the Court concludes that an award of $2,836,242.88 is appropriate to cover the costs and expenses of common benefit counsel. This award is in addition to the attorney fee award of 19% of $248,000,000, or $47,120,000, to cover the fees of both common benefit and contract counsel. Although this total award is less than the thirty percent sought by Class Counsel, plus three percent for costs, the Court finds that it strikes a fair balance between the diligent and commendable effort exerted by the attorneys and the limited funds available to compensate Class Members for their property damage.

3. Incentive Awards

     Lastly, courts “commonly permit payments to class representatives above those received in settlement by class members generally.” Smith v. Tower Loan of Miss., Inc., 216 F.R.D. 338, 367-68 (S.D. Miss. 2003); see In re Catfish Antitrust Litig., 939 F. Supp. 493, 503-04 (N.D. Ms. 1996). Eisenberg and Miller have performed an empirical study of incentive payments to class representatives and have identified several justifications. See Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 UCLA L. Rev. 1303 (2006). In particular, class representatives must be familiar with the case in order to be adequate representatives and are often deposed. In this case, certain plaintiffs participated in additional, individualized discovery and made themselves available for depositions. The Class Representatives also submitted affidavits demonstrating familiarity with the Settlement Agreement and expressing their approval of it. Accordingly, Settlement Class Counsel seeks an award of $10,000 for each Priority Plaintiff in Florida13 and each Select Claimant in Louisiana14 to “recognize their efforts in participating in additional individualized discovery,” and $2,500 for Settlement Class Representatives.15 R. Doc. 22397-1 at 41.

     The Court agrees that the Priority Plaintiffs, Select Claimants, and Class Representatives have been significantly involved in this matter to the benefit of the entire class and finds that an incentive award is justified. However, the Court recognizes that this Settlement provides a limited fund for recovery and that any additional award to one claimant necessarily reduces the available funds for all other claimants. Accordingly, in the interest of justice and fairness to all class members, the Court will award each Priority Plaintiff and Select Claimant an additional $5,000, and each Class Representative an additional $2,500.

1. CONCLUSION

     Considering the foregoing,

     IT IS ORDERED that Settlement Class Counsel’s Motion for Entry of an Order and Judgment (1) Granting Final Approval of the Class Settlement with Taishan and (2) Certifying the Settlement Class is GRANTED and that the Taishan Settlement Agreement is hereby APPROVED.

     IT IS FURTHER ORDERED that Settlement Class Counsel’s Motion for an Award of Attorneys’ Fees and Cost Reimbursements for Common Benefit Counsel and Individually Retained Attorneys is GRANTED IN PART. Counsel are awarded 19% of the Settlement funds, or $47,120,000 for attorney fees, for both common benefit counsel and contract counsel. Common benefit counsel are entitled to 60% of this amount, or $28,272,000, and contract counsel are entitled to 40% of the this amount, or $18,848,000. Common benefit counsel are also awarded $2,836,242.88 for costs. The allocation of contract counsel’s fees will be allocated in accordance with the standard set forth in PTO 28(f) and applied in the Knauf matter. R. Doc. 20282. The Court will address the allocation and distribution of common benefit fees among those attorneys who performed common benefit work at a later date. 

[All Footnotes are Omitted]

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