A panel of federal judges found that a seven-figure attorneys fee award to the lawyers representing several financial institutions suing Home Depot over a breach was inappropriate. The Eleventh Circuit vacated at $15.3 million fee award, remanding it to the lower court with instructions to reduce the fee award. The underlying lawsuit involved a 2014 data breach that affected 56 million customers of Home Depot.

The Court’s Decision

According to the Eleventh Circuit, the fee award granted to counsel should have only included the attorneys’ hourly rates and not financial enhancement. The court held legal fees were part of a contract that was separate and apart from the final settlement. Accordingly, the appeals court found the lower court abused its discretion when it used a multiplier to account for risk in a fee-shifting case.

Calculating Attorney’s Fees

The legal fees in dispute in the case were calculated not just on the lawyers’ hourly rate and time but also includes a financial enhancement to compensate those attorneys for the risk assumed when they decided to take the case to litigation. This manner of calculating attorneys fees is known as lodestar. In the legal industry, the lodestar method is the manner in which attorney’s fees must be calculated. The trial court multiplies the number of hours reasonably spent by the attorneys by a reasonable multiplier. This can include contingency as well as the quality of work performed in order to calculate the final attorney’s fee award. Under this method, the multipliers that are most heavily weighed include the time and labor required in the case.

The Lawsuit Against Home Depot

The underlying lawsuit, which sought damages resulting from the data breach settled for $25 million in 2017. The trial court set the fee award after plaintiffs’ attorneys agreed – upon the request of Home Depot’s defense counsel – to negotiate the details on reasonable fees, costs, and expenses after the settlement. Home Depot reserved the right, however, to object to any fee request and did so after plaintiffs’ attorneys requested $18 million. Home Depot’s counsel agreed that $5.6 million was a reasonable fee instead.

When lawyers on both sides could not come to an agreement, the trial court stepped in and found the total to be $15.3 million, based on plaintiffs’ counsel’s lodestar of $11.7 million. Home Depot objected, arguing that class counsel was not entitled to a multiplier.

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