When parties to a class action reach a settlement agreement and include a clause that defendant will not oppose class counsel’s attorney fee award, they may expect that the unopposed fee will be approved by the court. But a recent decision from the Southern District of New York reminds us that courts have an interest in ensuring the reasonableness of attorney fees and protecting the members of the class. Courts are particularly wary of reversionary clauses, which allow the defendant to recoup portions of the settlement fund not claimed during a claims process.
In Grice v. Pepsi Beverages Co., No. 17-CV-8853 (JPO), 2019 WL 340714 (S.D.N.Y. Jan. 28, 2019), after reaching a class action settlement, class counsel sought approval of their attorney fees. The court reduced the attorney fee award by more than one-third based primarily on the reversionary clause in the settlement agreement.
This article first appeared in the New York Law Journal on April 24, 2019. Sarah A. Sheridan, an associate at the firm, assisted with the preparation of this article.