¨0¤q#6+*5 !i«0810322111021000000000001Docket #2311 Date ... · 327 F.3d 938, 55 Fed.R.Serv.3d 1299, 03 Cal. Daily Op. Serv. 3610, 2003 Daily Journal D.A.R. 4647 (Cite as: 327 F.3d

¨0¤q#6+*5 !i«

0810322111021000000000001

Docket #2311 Date Filed: 10/21/2011

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327 F.3d 938, 55 Fed.R.Serv.3d 1299, 03 Cal. Daily Op. Serv. 3610, 2003 Daily Journal D.A.R. 4647(Cite as: 327 F.3d 938)

© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

United States Court of Appeals,Ninth Circuit.

Eleanor STATON; Beverly Trotter; KevinBiglow, Plaintiffs-Appellants,

Solomon Williams; Shirley Miller; DeborahWoods; Wendy Kelly; Myron Knight; Mi-

chael Eckles; Donald Ballard; William Bell;Clarence Thompson; Doreen Ferguson;

Cynthia Evans; Willie Wilson; Mary Dean;Brian Todd; Tim Jones; David Brawley;

Mara Ferrari; Rhonda Capps; Charles Jones;David Roberts; Verlene Maholmes; TerryFisher; Carol Calender; Evalean Moore;

Ralph Wilson; Ronnie Mitchell; TheodeshiaKnauls; Michael Marion, Plain-

tiffs-Appellees,Nadine McClam-Brown; Carla Abraham;

Bertha Alexander; Shirley Allen; Billynda E.Anderson; Lawrence Andrews; Dorothy J.Ayers; Avis M. Banks; Jimmie L. Banks;

Joyce A. Bates; Ray A. Bates; Ida M. Battles;Marshall Battles, Sr.; Terri M. Bean; AlfredBeasley; Vivian Jean Bell; Marcia L. Ben-ford; Rosie J. Black; Adrienne Bland; The-resa Bozeman; Byron Breckenridge; John

Bridgewater; Maceo E. Bridgewater; AnnieBrooks; Johnnie Paul Brooks; Ronnie

Brown; Simon Brown, Jr.; Mark A. Bufford;William Bumpers; Wilbert G. Burgess, Sr.;

Henry F. Butler; Soloman C. Butts; EllisCameron; Harry Carlis; Tevis Carpenter;

Ford Carr; Tamu Chandler; Betty Childers;Michael Childers; Ronald Clarke; Melches-ter Clemons; Gunice Colvin; Kent Copridge;Paul L. Coston, Jr.; Debra F. Coulter; CephasL. Curtis; Angela C. Cravens; James Crump;Pauline Crump; Tracy Cunningham; GilbertO. Dace; Clarence Dancer; Charles Daniels;

Patricia Davis; Sam Davis; Charles L. Da-vison; Helen Marie Dean; Evonne W. Do-gan; James E. Donaldson; Tonia Dowell;

Alice Dunbar; Allen Dunbar; Throma AnnDyas; Terry Edwards; Belinda Ellis; BezleyEllison; Joseph Elmore; Abiodun Fanimo-kun; Sharon Fantroy; Archie Fields; HicksFrank; Sherline Franklin; Allen W. Frazier;Moses E. Greasham; Freddie L. Grisby; Ke-

vin C. Guice; Roderick W. Guice; Roy E.Hall; Charles H. Harden; Dennis Harris;

Dorothy Harris; Leon Harris; Robert L. Har-ris; Wylo Harvey; Rosemarie W. Hauck; EricD. Hayden; Fredrick Hightower, Jr.; CharlesH. Hill; Larry Hollins; Theodore Holt; De-lores Hood; Kay M. Horton; Verna J. Hou-ston; Phillip Bruce Hutchins; Hattie L. Irv-

ing; Della M. Jamison; Johnnie L. Jefferson;Reginald P. Jenkins; Constance Johnson;

Darla Johnson; Herbert G. Johnson; JamesJohnson; Kenneth Johnson; Sharon E.

Johnson; Lecester Jones; Phyllis J. Jones;Brooks S. Kimbrough; Claudette Lawson;Doris Lenox; Lynn B. Leufroy; Walter G.

Lewellen; Frederick Lipsey; Herbert E. Lo-gan, Jr.; Virginia G. Logan; Presley T. Lor-

ance; Anthony L. Lucas; Waymond Macone;Selicia Mallory; Mark D. Matthews; RainardC. Mayhew; Larry D. McIntosh; Alberto A.

McMiller; Helen D. Medcafe; GeraldineMoore; Tennie Moore; Wade Moore, Jr.;

Stephen R. Mundine; Katherine Neal; ArthurNewton; Jacqueline Osborne; Linda M. Ou-

ids; Ericka L. Owens; Lee E. Owens, Jr.;Leroy Parker; C. Eugene Paschal; Sandra L.Payne; Stacy Payne; Margaret Peach; Robert

J. Pearson; Douglas Pegues; Herman L.Poole; Isaac M. Porter, Jr.; Rhonda Randle;James Ranson, Sr.; Etha Reagans; Rance H.Reed, Jr.; Tressa Reed; Brenda J. Richard-

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son; Cynthia Ridge; Bettie Ridley; Melvin L.Ridley; Jackie Robinson; Robert L. RobinsonII; Les L. Rogers; Fred Roseborough; T.D.Sanders; Donna N. Scott; Huey L. Scott;

Vince E. Seymore; Maury J. Shaw; WilliamL. Sims; David E. Singleton; David Skill-

man; Cleo P. Smith; John Smith, Jr.; LucretiaSmith; David A. Stallworth; Michael Ste-vens; Octauia Stevens; Carl Stovall; Joyce

Sullivan; Idella Teague; Alphonso E.Thompson; Anthony Thompson; Donna

Thompson; John F. Thompson; Tywanna F.Thompson; W.R. Thompson; Benjamin F.

Tillman; David Tillman; Shomide Tokunbo;Anita Truitt; Michael Turner; Alan LaddTyson; Rachel Frazier-Vann; James L.Walker; Aaron Washington; Cecil R.

Washington; Eric C. Waters; Charles E.Webb; Shannon J. Weldon; Rozell Wheaton;

Leonardo R. White; Ernest M. Whitaker;Bobby L. Williams; Darryl Williams; DarylD. Williams; Glen D. Williams, Sr.; KennethWayne Williams; Lorry Williams; Sylvester

Williams, II; Wilbert Williams; PatriciaWilson; Alfred M. Woods; Martha Ybarra;

Jacquelyn L. Zeigler, Appellants,v.

BOEING COMPANY, Defendant-Appellee,and

Boeing North American, Inc., a DelawareCorp; McDonnell Douglas Corporation, a

Maryland Corporation, Defendants.

No. 99-36086.Argued and Submitted May 9, 2001.

Filed April 29, 2003.

In employment discrimination lawsuit byclass of African-American employees, groupof class members objected to proposed con-sent decree, arguing that class failed to meetcertification requirements and that settlementcontained in decree was unfair, inadequate

and unreasonable. The United States DistrictCourt for the Western District of Washing-ton, John C. Coughenour, J., approved decreedespite the objections. Objectors appealed.Superseding and withdrawing its prior opi-nion, 313 F.3d 447, on denial of rehearing,the Court of Appeals, Berzon, Circuit Judge,held that: (1) district court acted within itsdiscretion in certifying case as class action,based on numerosity, commonality, typical-ity, and adequacy of class representation re-quirements, and (2) district court should nothave approved settlement agreement becauseof several considerations relating to award ofattorney fees, which were included in set-tlement agreement as percentage of putativecommon fund which in turn was based in parton estimated value of injunctive relief, and tostructure of damage payments established bydecree, which resulted in large differential inamounts of damages between named andunnamed class members.

Reversed and remanded.

Trott, Circuit Judge, dissented and filedopinion.

Opinion, 313 F.3d 447, superseded andwithdrawn.

West Headnotes

[1] Federal Courts 170B 763.1

170B Federal Courts170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, andExtent

170BVIII(K)1 In General170Bk763 Extent of Review

Dependent on Nature of Decision Appealedfrom

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170Bk763.1 k. In General.Most Cited Cases

When parties have entered into settle-ment agreement before district court certifiesclass, reviewing courts must pay undiluted,even heightened, attention to class certifica-tion requirements. Fed.Rules Civ.Proc.Rule23(a), 28 U.S.C.A.

[2] Compromise and Settlement 89 59

89 Compromise and Settlement89II Judicial Approval

89k56 Factors, Standards and Con-siderations; Discretion Generally

89k59 k. Adequacy or Representa-tion; Collusion. Most Cited Cases

Concerns about fairness of class settle-ment agreements warrant special attentionwhen record suggests that settlement is dri-ven by fees, that is, when counsel receivedisproportionate distribution of settlement.Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A.

[3] Federal Courts 170B 817



170BVIII(K)4 Discretion of LowerCourt

170Bk817 k. Parties; Pleading.Most Cited Cases

Court of Appeals reviews under abuse ofdiscretion standard district court's decision tocertify case as class action. Fed.RulesCiv.Proc.Rule 23(f), 28 U.S.C.A.

[4] Federal Civil Procedure 170A 174

170A Federal Civil Procedure170AII Parties

170AII(D) Class Actions170AII(D)2 Proceedings

170Ak174 k. Consideration ofMerits. Most Cited Cases

Although some inquiry into substance ofcase may be necessary to ascertain satisfac-tion of commonality and typicality require-ments of federal civil rule, it is improper toadvance decision on merits to class certifi-cation stage. Fed.Rules Civ.Proc.Rule 23(a),28 U.S.C.A.

[5] Federal Civil Procedure 170A184.10


170AII(D) Class Actions170AII(D)3 Particular Classes

Represented170Ak184 Employees

170Ak184.10 k. Discrimi-nation and Civil Rights Actions in General.Most Cited Cases

District court did not abuse its discretionin finding that commonality requirement forclass certification was satisfied in employ-ment discrimination action on behalf of15,000 African-American employees ofaerospace manufacturer, notwithstandingobjections that common issues could not linkall those employees when two of employer'ssubsidiaries were recent acquisitions, thatsome class members were subject to collec-tive bargaining agreements that laid out ob-jective criteria for promotions, and that de-cisionmaking was too decentralized to permitclass that combined plaintiffs from different

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locales. Fed.Rules Civ.Proc.Rule 23(a)(2),28 U.S.C.A.



170AII(D) Class Actions170AII(D)1 In General

170Ak164 k. Representation ofClass; Typicality. Most Cited Cases

Typicality requirement for class certifi-cation does not mean that claims of classrepresentatives must be identical or substan-tially identical to those of absent classmembers. Fed.Rules Civ.Proc.Rule 23(a)(3),28 U.S.C.A.






District court did not abuse its discretionin finding that typicality requirement forclass certification was satisfied in employ-ment discrimination action on behalf of15,000 African-American employees ofaerospace manufacturer, notwithstandingobjection that class counsel did not provideclear documentation that each job categoryhad a class representative for each type ofdiscrimination claim alleged; that level ofspecificity was not necessary, and represent-

atives' claims could be found reasonablycoextensive with those of class members.Fed.Rules Civ.Proc.Rule 23(a)(3), 28U.S.C.A.



170AII(D) Class Actions170AII(D)1 In General

170Ak164 k. Representation ofClass; Typicality. Most Cited Cases

To determine, for class certificationpurposes, whether representative parties willfairly and adequately protect the interests ofclass, Court asks whether representativeplaintiffs and their counsel have any conflictsof interest with other class members, andwhether representative plaintiffs and theircounsel will prosecute action vigorously onbehalf of class. Fed.Rules Civ.Proc.Rule23(a)(4), 28 U.S.C.A.






District court did not clearly err in find-ing there was no overt collusion betweenclass counsel and employer and did not abuseits discretion in finding that adequacy of re-presentation requirement for class certifica-

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tion was satisfied in employment discrimi-nation action on behalf of 15,000 Afri-can-American employees of aerospacemanufacturer, notwithstanding objection thatconflict of interest arose from fact class cutacross levels of authority and, in particular,that some class members supervised others.Fed.Rules Civ.Proc.Rule 23(a)(4), 28U.S.C.A.

[10] Compromise and Settlement 8957



89k57 k. Fairness, Adequacy, andReasonableness. Most Cited Cases

To determine whether proposed settle-ment in class action is fundamentally fair,adequate, and reasonable, district court mustconsider number of factors, includingstrength of plaintiffs' case, risk, expense,complexity, and likely duration of furtherlitigation, risk of maintaining class actionstatus throughout trial, amount offered insettlement, extent of discovery completed,and stage of proceedings, experience andviews of counsel, presence of governmentalparticipant, and reaction of class members toproposed settlement. Fed.RulesCiv.Proc.Rule 23(e), 28 U.S.C.A.




170BVIII(K)4 Discretion of LowerCourt

170Bk813 k. Allowance ofRemedy and Matters of Procedure in Gener-al. Most Cited Cases

As practical matter Court of Appeals willrarely overturn approval of class actionconsent decree on appellate review forsubstantive reasons unless terms of agree-ment contain convincing indications thatincentives favoring pursuit of self interestrather than class's interests in fact influencedoutcome of negotiations and that districtcourt was wrong in concluding otherwise.




89k57 k. Fairness, Adequacy, andReasonableness. Most Cited Cases

Class action settlement taken as whole,rather than individual component parts, mustbe examined for overall fairness, and set-tlement must stand or fall in its entiretyFed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A.


170A Federal Civil Procedure170AXVII Judgment

170AXVII(A) In General170Ak2397 On Consent

170Ak2397.2 k. Form andRequisites; Validity. Most Cited Cases

Although court reviewing overall set-tlement of class employment discriminationaction against aerospace manufacturer was

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uneasy about extent of employer's releasefrom liability and limited scope of many ofinjunctive provisions of proposed consentdecree, it would not overturn district court'sdetermination to approve that settlement asfair on basis of those concerns; plaintiffs' riskof losing case on the merits was quite highgiven employer's unbroken history of pre-vailing in discrimination cases, maintainingclass action was not foregone conclusion,promotion considerations were primary fo-cus of litigation and were largely discretio-nary, discovery was likely to be extremelyexpensive for plaintiffs and class counselwhose resources were undoubtedly morelimited than those of employer, total mone-tary relief provided was not insubstantial,and injunctive provisions themselves did notraise any flags regarding favoritism for somemembers of class over others. Fed.RulesCiv.Proc.Rule 23(e), 28 U.S.C.A.



89k66 Proceedings89k68 k. Notice and Communica-

tions. Most Cited Cases

Federal Civil Procedure 170A 179


170AII(D) Class Actions170AII(D)2 Proceedings

170Ak177 Notice and Com-munications

170Ak179 k. Sufficiency.Most Cited Cases

Notice of amount of fees serves as ade-

quate notice of class counsel's interest inproposed settlement.


170A Federal Civil Procedure170AXIX Fees and Costs

170Ak2737 Attorney Fees170Ak2737.13 k. Class Actions;

Settlements. Most Cited Cases

To avoid abdicating its responsibility toreview agreement for protection of the class,district court must carefully assess reasona-bleness of fee amount spelled out in classaction settlement agreement. Fed.RulesCiv.Proc.Rule 23(e), 28 U.S.C.A.





Negotiation of class counsel's attorneys'fees is not exempt from truism that there is nosuch thing as a free lunch. Fed.RulesCiv.Proc.Rule 23(e), 28 U.S.C.A.



170Ak2737 Attorney Fees170Ak2737.4 k. Amount and

Elements. Most Cited Cases

Under fee-shifting statute, court must

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calculate awards for attorneys' fees using“lodestar method” which involves multiply-ing number of hours prevailing party rea-sonably expended on litigation by reasonablyhourly rate and, if circumstances warrant,adjusting lodestar to account for other factorswhich are not subsumed within it.

[18] Attorney and Client 45 155

45 Attorney and Client45IV Compensation

45k155 k. Allowance and Paymentfrom Funds in Court. Most Cited Cases

There is no preclusion on recovery ofcommon fund fees where fee-shifting statuteapplies.




Under “common fund” doctrine, litigantor lawyer who recovers common fund forbenefit of persons other than himself or hisclient is entitled to reasonable attorney's feefrom fund as whole.




Common fund doctrine ensures that eachmember of winning party contributes pro-portionately to payment of attorney fees and,in contrast to fee-shifting statutes which en-

able prevailing party to recover attorney feesfrom vanquished party, permits court toaward attorney fees from monetary paymentsthat prevailing party recovered in lawsuit; putanother way, in common fund cases, variantof usual rule applies and winning party payshis or her own attorney fees whereas infee-shifting cases, usual rule is rejected andlosing party covers the bill.




As in statutory fee-shifting case, districtcourt in common fund case can apply lodes-tar method to determine the amount of at-torneys' fees; in common fund cases, how-ever, court can apply risk multiplier whenusing lodestar approach.




In common fund case, district court candetermine amount of attorney fees to bedrawn from fund by employing percentagemethod; Ninth Circuit has established 25% ofcommon fund as benchmark award for at-torney fees.

[23] Civil Rights 78 1479

78 Civil Rights78III Federal Remedies in General

78k1477 Attorney Fees

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78k1479 k. Proceedings, Grounds,and Objections in General. Most Cited Cases

(Formerly 78k293)

Civil Rights 78 1587

78 Civil Rights78IV Remedies Under Federal Employ-

ment Discrimination Statutes78k1585 Attorney Fees

78k1587 k. Proceedings, Grounds,and Objections in General. Most Cited Cases

(Formerly 78k411)

Common fund doctrine could be appliedto settlement in employment discriminationclass action under Title VII and § 1981, po-tentially involving fee-shifting statutes. 42U.S.C.A. §§ 1981, 1988; Civil Rights Act of1964, § 706(k), as amended, 42 U.S.C.A. §2000e-5(k).




Parties to class action may not include insettlement agreement amount of attorneys'fees measured as percentage of actual orputative common fund created for benefit ofclass, conditioning merits settlement onjudicial approval of agreed-on fees; instead,in order to obtain fees justified on commonfund basis, class's lawyers must ordinarilypetition court for award of fees, separatefrom and subsequent to settlement. Fed.RulesCiv.Proc.Rule 23, 28 U.S.C.A.




Federal Civil Procedure 170A 2737.13




In class action involving both statutoryfee-shifting provision and actual or putativecommon fund, parties may negotiate andsettle amount of statutory fees along withmerits of case, and in course of judicial re-view amount of attorney fees can be ap-proved if they meet reasonableness standardwhen measured against statutory fee prin-ciples; alternatively, parties may negotiateand agree to value of common fund (whichwill ordinarily include amount representingestimated hypothetical award of statutoryfees) and provide that, subsequently, classcounsel will apply to court for award fromfund, using common fund fee principles andin those circumstances agreement as wholedoes not stand or fall on amount of fees andinstead after court determines reasonableamount of attorneys' fees, all remaining valueof fund belongs to class rather than revertingto defendant.




In order for attorneys to obtain award of

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fees from common fund, court must be ableto: (1) sufficiently identify the class of bene-ficiaries; (2) accurately trace benefits; and (3)shift fee to those benefiting with some exac-titude; criteria are satisfied when eachmember of certified class has undisputed andmathematically ascertainable claim to part oflump sum judgment recovered on his behalf.




In determining attorney fee award inclass employment discrimination actionagainst aerospace manufacturer, district courtabused its discretion in counting parties' es-timated value of injunctive relief towardsputative fund; only in unusual instance wherevalue to individual class members of benefitsderiving from injunctive relief could be ac-curately ascertained could courts includesuch relief as part of value of common fundfor purposes of applying percentage methodof determining fees.





In assessing reasonableness of fee awardin class action settlement, district court didnot abuse its discretion by including preset-tlement costs of litigation in amount attri-buted to fees or by including cost of provid-

ing notice to class of proposed consent de-cree as part of putative fund valuation, al-though cost of providing two notices ratherthan one should not have been included.




89k62 k. Employees, Actions In-volving. Most Cited Cases

District court abused its discretion infinding that settlement agreement in classemployment discrimination action againstaerospace manufacturer was fair, adequateand reasonable, in light of very large diffe-rential in amount of damages awards be-tween named and unnamed class members;individually identified recipients (IIRs) whohad not opted out would each receive, onaverage, sixteen times greater than each ofunnamed class members, and subgroup ofIIRs who were class representatives wouldreceive even more relative to class as whole.Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A.



170BVIII(L) Determination andDisposition of Cause

170Bk943 Ordering New Trial orOther Proceeding

170Bk945 k. Determination ofDamages, Costs or Interest; Remittitur. MostCited Cases

On remand to district court following

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determination it abused its discretion in ap-proving proposed consent decree settlingemployment discrimination class action,parties would have to attempt to justify pro-posed damages distribution and substantiatefee award using lodestar calculation underapplicable fee-shifting statutes rather than oncommon fund basis, or renegotiate ques-tionable aspects of agreement and presentrevised settlement agreement to district courtfor reassessment of fairness thereof.Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A.;42 U.S.C.A. § 1988; Civil Rights Act of1964, § 706(k), as amended, 42 U.S.C.A. §2000e-5(k).

*944 Alan B. Epstein,Spector Gadon & Ro-sen, P.C., Philadelphia, PA, for the Plain-tiffs-Objectors-Appellants.

Bruce A. Harrell and Oscar E. Desper III,Harrell, Desper, Connell & Roesch, Seattle,Washington, and Charles K. Wiggins, Bain-bridge, WA, for the Plaintiffs-Appellees.

C. Geoffrey Weirich and Maureen E. O'Neill,Paul, Hastings, Janofsky & Walker LLP,Atlanta, GA, for the Defendants-Appellees.

Appeal from the United States District Courtfor the Western District of Washington; JohnC. Coughenour, District Judge, Presiding.D.C. No. CV-98-00761-JCC.

Before: LAY,FN*TROTT and BERZON,Circuit Judges.

FN* The Honorable Donald P. Lay,Senior Circuit Judge for the EighthCircuit, sitting by designation.

Opinion by Circuit Judge BERZON. Dis-senting opinion by Circuit Judge TROTT.

BERZON, Circuit Judge.ORDER

The panel majority opinion filed No-vember 26, 2002, is withdrawn and the at-tached opinion is ORDERED filed.

With the filing of the attached opinion, amajority of the panel has voted to deny de-fendants/appellees' petition for rehearing.Judge Berzon has voted to deny the plain-tiffs/appellees' and defendants/appellees' pe-titions for rehearing en banc and Judge Layhas so recommended. Judge Trott has votedto grant the petition for rehearing and to grantthe petitions for rehearing en banc.

The full court was advised of the peti-tions for rehearing en banc. A judge of thecourt requested a vote on whether to rehearthe matter en banc. The en banc requestfailed to receive a majority of the votes of thenonrecused active judges in favor of en bancconsideration. Fed. R.App.P. 35.

The petition for rehearing and the peti-tions for rehearing en banc are DENIED.

OPINIONThis case involves a consent decree in an

employment discrimination class lawsuit.The action was brought in 1998 by a class ofapproximately 15,000 African-Americanemployees of the Boeing Company (“Boe-ing” or “the Company”) against the Com-pany. The decree requires Boeing to pay $7.3million in monetary relief to the class, lessreversions and an opt-out credit,FN1 and re-leases Boeing from race discrimina-tion-related and other claims. It further pro-vides for certain injunctive relief, althoughmuch of this relief appears to be largelyprecatory in nature. Finally, the decree *945

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awards to the lawyers for the class (“classcounsel”) $4.05 million in attorneys' fees.FN2

FN1. After applying the reversionand opt-out provisions, the damagesawarded by the decree amount toapproximately $6.5 million.

FN2. This amount includes $3.85million in fees and costs to classcounsel and $200,000 to objectors'counsel.

A group of class members objected to theproposed consent decree, arguing that theclass fails to meet the certification require-ments of Fed.R.Civ.P. 23(a) (“Rule 23(a)”)for class actions and that the settlement con-tained in the decree is unfair, inadequate andunreasonable under Fed.R.Civ.P. 23(e) (“Rule 23(e)”). The district court approvedthe decree despite the objections, and theobjectors appealed to this court. After oralargument, we requested supplemental briefsfrom the parties concerning the attorneys'fees issues.

We hold that the district court actedwithin its discretion in certifying the case as aclass action pursuant to Rule 23(a). We agreewith the objectors, however, that the districtcourt should not have approved the settle-ment agreement under Rule 23(e), because ofseveral considerations relating to the awardof attorneys' fees and because of the structureof the damages payments established by thedecree.

The parties negotiated the amount of at-torneys' fees as part of the settlement be-tween the class and the Company. They in-cluded as a term of the proposed decree theamount of attorneys' fees that class counsel

would receive. The action falls under theterms of two fee-shifting statutes. By nego-tiating fees as an integral part of the settle-ment rather than applying to the district courtto award fees from the fund created, Boeingand class counsel employed a procedurepermissible if fees can be justified as statu-tory fees payable by the defendant.

Boeing and class counsel did not, how-ever, seek to justify the attorneys' fees on thisbasis but instead made a hybrid argument:They maintained that the award is an appro-priate percentage of a putative “commonfund” created by the decree even thoughcommon funds, as opposed to statutoryfee-shifting agreements, usually do not iso-late attorneys' fees from the class award be-fore an application is made to the court. Thedistrict court approved the fees on thatcommon fund basis.

The incorporation of an amount of feescalculated as if there were a common fund asan integral part of the settlement agreementallows too much leeway for lawyersrepresenting a class to spurn a fair, adequateand reasonable settlement for their clients infavor of inflated attorneys' fees. We hold,therefore, that the parties to a class actionmay not include in a settlement agreement anamount of attorneys' fees measured as apercentage of an actual or putative commonfund created for the benefit of the class. In-stead, in order to obtain fees justified on acommon fund basis, the class's lawyers mustordinarily petition the court for an award offees, separate from and subsequent to set-tlement.

To assess the reasonableness of the at-torneys' fees awarded by the decree, the dis-trict court compared the amount of the fees to

Page 12



the amount of the putative common fund anddetermined what percentage of this fund thefee amount constituted. This comparison is apermissible procedure when a court is de-termining the reasonableness of fees takenfrom a genuine common fund. In conductingthe comparison, however, the district courtincluded in the value of the putative fund theparties' inexact, and quite probably inflated,estimate of the value of the proposed injunc-tive relief. Such relief should generally beexcluded from the value of a common fund*946 when calculating the appropriate at-torneys' fees award, as the benefit of thatrelief to the class members is most often notsufficiently measurable. The fact that counselobtained injunctive relief in addition tomonetary relief for their clients is, however, arelevant circumstance to consider in deter-mining what percentage of the fund is rea-sonable as fees. We hold further, therefore,that parties ordinarily may not include anestimated value of undifferentiated injunc-tive relief in the amount of an actual or puta-tive common fund for purposes of deter-mining an award of attorneys' fees.

Finally, the decree sets up a two-tieredstructure for the distribution of monetarydamages, awarding each class representativeand certain other identified class members anamount of damages on average sixteen timesgreater than the amount each unnamed classmember would receive. At least one personnot a member of the class was provided adamages award. The record before us doesnot reveal sufficient justification either forthe large differential in the amounts ofdamage awards or for the payment of dam-ages to a nonmember of the class. On thisground as well, the district court abused itsdiscretion in approving the settlement.

I. BACKGROUNDA. Lawsuit Filed and Settled

In September 1997, a group of Afri-can-American employees of the Companywho believed that they were victims of racediscrimination by Boeing consulted classcounsel. Prior to the filing of this lawsuit,forty-three African-American Boeing em-ployees filed a lawsuit in March 1998 infederal court in Seattle, Washington, allegingindividual claims of race discrimination inviolation of 42 U.S.C. § 1981 and the stateanti-discrimination law, Wash. Rev.Code §49.60 et seq. (the “Seattle individual ac-tion”). Several months later, in June 1998,sixteen Boeing employees, including twelveplaintiffs from the Seattle individual action,filed this class action in the same court. Theemployees again alleged violations of § 1981and the state anti-discrimination law butsought to represent both themselves andother similarly-situated African-AmericanBoeing employees. The action alleged thatBoeing's promotion, compensation, and ca-reer development decisions were systemati-cally discriminatory and that Boeing createdand permitted a racially hostile work envi-ronment.

The plaintiffs amended their complainton November 4, 1998. In the amended com-plaint thirty-two named plaintiffs seek torepresent all African-American Boeing em-ployees. The amended complaint alleges vi-olations of Title VII of the Civil Rights Actof 1964, 42 U.S.C. § 2000e et seq., as well asviolations of § 1981; it omits the state an-ti-discrimination claim but includes otherstate tort and contract causes of action. Thenamed plaintiffs and over two hundred otherBoeing employees each signed retaineragreements with class counsel. They agreedto pay class counsel an initial fee of $300 and

Page 13



to follow that payment with monthly pay-ments of $200 each; the record containsseveral letters from class counsel to theseindividuals urging that the payments bebrought up to date. Approximately $150,000was raised in this manner.

Meanwhile, in July 1998, seven namedplaintiffs filed a similar class action againstBoeing in Philadelphia (the “Philadelphiaclass action”). The plaintiffs in this casemoved in October 1998 to consolidate thetwo actions.

Soon thereafter, in early November,Boeing filed a motion to dismiss plaintiffs'class claims. Also in November, class *947counsel and Boeing began settlement nego-tiations. Class counsel had met with numer-ous African-American Boeing employeesbefore filing suit but almost no formal dis-covery had taken place by November. At thebeginning of December, class counsel indi-cated frustration to their clients about theCompany's lack of responsiveness, characte-rizing “much of what Boeing has providedthus far as ‘junk,’ ” and adding that “Boeinghas been unwilling to provide us with nu-merous documents we believe are pertinentto proving Boeing's unlawful treatment ofAfrican-Americans.” The negotiations non-etheless proceeded rapidly for such a largeclass action at this early stage of litigation,with the result that, in January 1999, Boeingand class counsel announced that they hadagreed to settle the lawsuit. The parties filedmotions in district court for class certificationand for preliminary approval of a consentdecree.

On January 25, 1999, the district courtprovisionally certified the class and preli-minarily approved the consent decree. The

preliminary approval order required theCompany to provide approved notice of theproposed decree to class members throughnewspaper publication, distribution using theCompany's payroll system for present em-ployees, and first-class mailings to formeremployees. Two distributions of the noticeswere ultimately required because the firstnotices published and mailed were improperand had to be corrected. The notices ex-plained that Boeing would pay the attorneys'fees and costs and reported the total sum ofmoney Boeing would pay under the decree,the amount to be paid for monetary awards tomembers of the class, and the amount as-cribed to injunctive relief. Neither versionexpressly identified the amount of attorneys'fees provided in the proposed decree.

B. Proposed Consent DecreeThe proposed consent decree purports to

resolve this case, the Seattle individual ac-tion, and the Philadelphia class action. Thedecree releases Boeing from liability forclaims brought by any of the Company'sAfrican-American employees in exchangefor certain monetary and injunctive relief. Inparticular, Boeing is released by all classmembers from all existing claims for racediscrimination (under any of the variousdiscrimination laws) and for “negligent mi-srepresentation, fraud, detrimental reliance,promissory estoppel, or breach of contract,”without regard to whether such claims are inany way related to the alleged race discrim-ination. The period covered by the release isset according to the statute of limitationsperiod of the state in which a class memberresides and extends until the preliminaryapproval date of the decree. As a result, anyclaims arising before January 25, 1999 (thepreliminary approval date) of the types cov-ered by the decree and timely under the re-

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levant state statute of limitations are barred.

The decree goes on to certify a settlementclass pursuant to Fed.R.Civ.P. 23(b)(2) forpurposes of equitable relief. That class con-sists of all African-Americans employed byBoeing from the beginning of the applicablelimitations periods until the expiration of thedecree (including new employees hired afterthe preliminary approval date of the decree).No opt-outs are allowed from the equitablerelief class. The effect of this provision maybe that no African-American employed byBoeing during the pertinent period, includingnew hires, can obtain any injunctive re-lief-reinstatement, promotion, or change inworking conditions, for example-even if heor she opts out of the class for purposes ofmonetary relief and proves race discrimina-tion in a separate*948 action.FN3

FN3. It is possible that new hires arenot so barred. The decree provides, ina separate provision, that nothing inthe decree “bars any claims ofmembers of the Settlement Class ...based on or arising out of events oc-curring after the Preliminary Ap-proval date.”

For purposes of monetary relief, the de-cree approves a Settlement Class pursuant toFed.R.Civ.P. 23(b)(3), consisting of Afri-can-American Boeing employees employedfrom the beginning of the applicable limita-tions periods until the preliminary approvaldate of the decree, and allows members ofthat class to opt out of the monetary reliefprovisions. By the cut-off date of April 30,1999, about 500 class members had optedout, including six named plaintiffs.

The class receives a total monetary award

of $7.3 million. Out of the approximately15,000-member class, a group of 264 indi-viduals FN4-less than two percent of theclass-made up of the named plaintiffs andother class members identified by classcounsel as having actively participated in thelitigation (together, the “individually identi-fied recipients” or “IIRs”) is to receive $3.77million, more than half the monetary award.The $3.77 million will be distributed amongthe IIRs in amounts established by classcounsel, who credit the assistance of an in-dependent claims adjuster for consultation onmany, but not all, of the claims. There isample evidence in the record that before re-taining this claims adjuster class counselextensively discussed specific awardamounts with some IIRs. Moreover, therecord indicates that class counsel made thefinal decisions concerning many of thesedesignated payments.

FN4. After opt-outs this group wasreduced to 237 persons.

The individual awards for the IIRs rangefrom $5,000 to $50,000, with most of theclass representatives receiving higher awardsthan the other IIRs, and average approx-imately $16,500. Based on our examinationof records relating to the Wichita-based IIRs,the individuals singled out for IIR settlementpayments are for the most part the samepeople who signed individual retainers withclass counsel that obligated them to paymonthly fees.

The remaining $3.53 million of monetaryrelief is to be distributed to the rest of theclass (the “unnamed class members”). Toreceive an award, unnamed class membersmust submit a claim form to an independentclaims arbitrator (hired by class counsel and

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approved by the district court), who will ve-rify the validity of the claims against Boe-ing's records and designate awards accordingto a detailed point system laid out in the de-cree and applicable only to the unnamedclass members. Some 3,400 class membersfiled claims, so the average payment eachunnamed class member would receive is ap-proximately $1,000.

Boeing also agreed to pay $3.75 millionto $3.85 million to class counsel for fees andexpenses, as follow:

-$3 million for attorneys' fees and costs (theparties agreed that class counsel had in-curred approximately $126,000 in costs asof the preliminary approval date);

-up to $100,000 for explaining the decreeto class members; FN5 and

FN5. The full $100,000 has alreadybeen paid to class counsel, by order ofthe district court.

-$750,000 for monitoring, administering,implementing, and defending the decree.The decree also grants $200,000 to objec-tors' counsel for their role in representing*949 the putative class in the Philadelphiaclass action.

Finally, within three years of receivingfinal judicial approval of the decree, Boeingmust spend an additional $3.65 million onexpenses related to the approval and imple-mentation of the decree. This $3.65 millionwould go toward the cost of providing noticeto class members of the proposed settlementand toward the injunctive relief provided forin the decree, discussed below. The decreefurther provides that:

Such credited expenditures shall also in-clude money spent by Boeing on diversitytraining and other programs designed toimprove the cooperation between membersof Boeing's diverse workforce, to facilitatethe advancement of African-Americansinto first-level and higher-level manage-ment positions at Boeing, to prevent and/orresolve racial harassment concerns amongthe workforce, and/or to otherwise advanceequal employment opportunity for Afri-can-American employees of Boeing.

Nothing in the decree requires that thecredited amount be in addition to any amountof money Boeing was already planning tospend on such matters. The timing of suchexpenditures is within Boeing's discretion,although the parties expressed the expecta-tion that half the funds would be spent be-tween the preliminary approval date and thefirst anniversary of the final approval.

The decree's injunctive provisions are tobe in effect for the three years following finaljudicial approval of the decree. The injunc-tive relief provided for in the decree is asfollows:

(1) Boeing will not discriminate based onrace or retaliate against employees for op-posing race discrimination or participatingin efforts to eradicate it. These generalprovisions mirror statutory prohibitions.However, “Court enforcement of this De-cree shall not be utilized as a method forclass members to litigate entitlement to in-dividual relief for claims of alleged RaceDiscrimination,” and individual complaintsof race discrimination “shall not be consi-dered to raise an issue of compliance ornon-compliance with this decree.”

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(2) Boeing will meet annually with athree-person advisory committee chosenfrom among the class members to discuss“Settlement Class members' viewpointsand concerns.” The members of the com-mittee will bear their own expenses for at-tending the meetings.

(3) Boeing will hire one or more consul-tants “to assist it in developing and as-sessing the success of alternative and/orsupplemental human resources systemsdesigned to accomplish the objectives inthis Section [describing the injunctive re-lief] of the Decree.” The consultant is to bechosen by Boeing and class counsel.FN6

The consultant is to investigate the degreeto which the decree successfully addressesvarious of the class members' concerns andto report back to Boeing and class counsel.Nothing in the decree requires Boeing totake any action in response to these reportsor otherwise to take any action suggestedby the consultant.

FN6. The decree appears to pro-vide-but is not lucid in this re-spect-that Boeing is to designate agroup of three nominees from whichthe consultant will be selected, takinginto consideration nominees pro-posed by plaintiffs.

(4) Boeing-unilaterally-will develop andimplement systems for providing informa-tion to hourly employees *950 about theCompany's promotion systems and willdevelop and “pilot” a program designed toenable hourly employees to learn who re-ceived a particular promotion. Boeing isrequired to meet and confer with classcounsel about the effectiveness of these

programs once implemented but is not re-quired to adopt any suggestions classcounsel make or, with regard to the “pilot”promotion information program, to do an-ything more than “determine the feasibilityof implementing that program, or compa-rable programs” throughout the Compa-ny.FN7

FN7. If Boeing decides that there are“significant impediments to imple-menting ... programs” providing in-formation about who received a par-ticular promotion, Boeing is to “meetand confer with Class Counsel re-garding alternative approaches.”Again, there is no requirement thatBoeing actually implement any suchalternative approaches.

(5) Similarly, Boeing will develop a systemwhereby qualified but unsuccessful candi-dates for discretionary promotions will re-ceive feedback and be directed to trainingor other steps that would make the candi-dates more competitive. Class counsel areto “monitor” this process, with no provi-sion for any dispute resolution mechanismshould class counsel conclude that thesystem is inadequate or ineffective.

(6) With regard to filling opportunities fortemporary promotions (useful in providingexperience relevant to desirable positions),Boeing “shall identify informal systems” topermit candidates to know about and beconsidered for such opportunities, and shall“meet and confer” with class counsel re-garding such informal systems and relatedcomplaints. There is no requirement thatBoeing change its behavior in response toany suggestions or objections by classcounsel or any class member.

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(7) Boeing “presently plans” to expand itsFirst Level Management Selection Process(FLMSP) to all its operations over the firsttwo years of the decree. The FLMSP, thusfar a pilot program at Heritage Boeing FN8

locations, attempts to create a standardized,fair process for selecting first-level man-agers. If “Boeing decides not to implementFLMSP in certain portions of the Compa-ny's operations, Boeing will advise ClassCounsel of the alternative selection me-thods which will be utilized in such opera-tions, and Class Counsel will providefeedback to Boeing regarding any systemicconcerns about such alternative methodswhich they believe may impact upon theSettlement Class members.” Boeing canmodify the FLMSP or eliminate it alto-gether; if it does so, Boeing must adviseclass counsel “and consider feedback pro-vided by Class Counsel regarding suchchanges.”

FN8. “Heritage Boeing” refers to theportion of the Company that existedbefore its purchase of the McDonnellDouglas Corporation and parts ofRockwell International.

(8) In 1998, in part in response to this liti-gation, Boeing developed new “Compa-ny-wide EEO Investigation Guidelines,”which, among other things, improve thetime period for addressing internal dis-crimination complaints. Boeing will accept“feedback” from class counsel on theguidelines generally and on any modifica-tions the company makes and “may” usethe consultant's services to refine theseprocedures.

*951 (9) Boeing will continue the provi-

sions of its existing harassment policyconcerning race, or implement amendedpolicies “reasonably designed to achievethe same effect” as the existing policy.Class counsel will have the opportunity toprovide “feedback” on any modificationsto that policy. However, “[i]ndividual [ha-rassment] complaints shall not be consi-dered to raise an issue of compliance ornoncompliance with this Decree.”

C. Objections and Their ResolutionIn April 1999, some members of the class

filed objections to the proposed consent de-cree. The district court allowed limited dis-covery by the objectors, reviewed motions byall parties, and held two fairness hearings(but did not take any evidence at thosehearings).

Among other matters, the objectorscomplained that class counsel could not havemeaningfully assessed the value of classclaims because of insufficient discovery; thatthe monetary relief was inadequate and un-fairly distributed; that the injunctive reliefwould not result in concrete benefits to theclass; that the court should not approve asingle broad class, since the members of theputative class have divergent interests; thatplaintiffs' counsel are not fairly representingthe plaintiffs because, inter alia, individualclass members were promised monetary re-lief in order to secure their support of thedecree; that the notice provided to classmembers was deficient; and that the feesawarded to class counsel are too high.

In partial response, most of the namedplaintiffs and Boeing submitted summariesof allegedly comparable average monetaryawards in other employment class actions;declarations of several experts, including the

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Reverend Jesse Jackson, praising the pro-posed decree (largely on the understandingthat the decree would provide individualclass members with free legal representationwith regard to their employment issues atBoeing); FN9 and evidence that Boeing hadvigorously contested race discriminationcases brought to trial against the Company,with victorious results that led class counsel,as stated in a declaration to the district court,to be “hard pressed to find anything thatwould support a nationwide victory overBoeing.”

FN9. Similarly, the district court readthe decree as providing that “free le-gal advice will be available to assistclass members who feel that theyhave been discriminated against bythe company.” In its memorandum insupport of class certification, Boeingwrote that it “does not subscribe to asexpansive an interpretation of ClassCounsel's post-decree monitoringresponsibilities.”

In September 1999, the district courtcertified a settlement class and approved thedecree. In its order approving the decree, thedistrict court concluded that “there are im-portant advantages to class-wide resolutionin this type of dispute.” The court citedBoeing's past success in defending againstindividual claims of race discrimination; thecourt's assessment of the effectiveness of theinjunctive relief; and the cooperative natureof the settlement. It found no merit to theobjectors' qualms over the class's certifica-tion. Plaintiffs' “allegations clearly raiseclass-wide legal and factual issues sufficientto satisfy the [commonality] requirement.”Moreover, typicality was assured by the“broadly selected cross-section ... of Boeing

employees” serving as named plaintiffs. Thecourt proceeded to certify the class.

Concerning the fairness of the decree, thedistrict court emphasized “a strong *952judicial policy favoring settlement of classactions,” noting the conservation of re-sources for all concerned that leaves “more todevote to the problems raised by the claim.”The court approved the notice procedurefollowed by the parties and then conductedan analysis of the fairness, adequacy andreasonableness of the decree.

The “heart of the matter” according to thedistrict court was the amount of the settle-ment; it reviewed the decree's componentsand found that the objectors “have not pre-sented any evidence to suggest that theamount of payments appear [sic ] inadequateor unfair when compared with the other cases[cited by Boeing].” Further, the court decidedthat “the awards to the named parties are notexcessive.” Without reviewing the proposeddecree in any detail in its order, the districtcourt concluded that the injunctive provi-sions are not “toothless,” but “present a noveland potentially effective response to theproblem of race discrimination.” After re-jecting categorically allegations of collusionbetween class counsel and Boeing, the courtconcluded, citing this court's precedent, that“the mere possibility of a better settlement isnot sufficient grounds for finding theagreement unfair.” As a final matter, thedistrict court found the award of attorneys'fees “to be reasonable given the nature of thecase, the risks to the plaintiffs' counsel's firm,and the amount of pre-filing andpost-settlement work performed.”

II. DISCUSSIONThis case presents difficult questions re-

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garding the appropriate role of the courts inapproving class action settlement decrees.The governing principles are clear, but theirapplication is painstakingly fact-specific andhampered by the much greater knowledge ofthe parties as to the give-and-take of thebargaining process. Judicial review alsotakes place in the shadow of the reality thatrejection of a settlement creates not only de-lay but also a state of uncertainty on all sides,with whatever gains were potentiallyachieved for the putative class put at risk. Weare mindful of the value dialogue and coop-eration have played in attempting to resolvethis litigation and in aspiring to foster a spiritof future goodwill in the wake of an allegedsystemic pattern of race discrimination.

[1][2] To vindicate the settlement of suchserious claims, however, judges have theresponsibility of ensuring fairness to allmembers of the class presented for certifica-tion. Especially in the context of a case inwhich the parties reach a settlement agree-ment prior to class certification, courts mustperuse the proposed compromise to ratifyboth the propriety of the certification and thefairness of the settlement. First, the districtcourt must assess whether a class exists;“[s]uch attention is of vital importance, for acourt asked to certify a settlement class willlack the opportunity, present when a case islitigated, to adjust the class, informed by theproceedings as they unfold.” Amchem Prods.Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct.2231, 138 L.Ed.2d 689 (1997). Second, thedistrict court must carefully consider“whether a proposed settlement is funda-mentally fair, adequate, and reasonable,”recognizing that “[i]t is the settlement takenas a whole, rather than the individual com-ponent parts, that must be examined foroverall fairness....” Hanlon v. Chrysler Corp.

150 F.3d 1011, 1026 (9th Cir.1998) (citationsomitted). When, as here, the parties haveentered into a settlement agreement beforethe district court certifies the class, reviewingcourts “must pay ‘undiluted, even heigh-tened, attention’ to class certification re-quirements....” Id. at 1019 (quoting*953Amchem, 521 U.S. at 620, 117 S.Ct.2231). Moreover, concerns about the fairnessof settlement agreements “warrant specialattention when the record suggests that set-tlement is driven by fees; that is, whencounsel receive a disproportionate distribu-tion of the settlement....” Id. at 1021.

[3] In this case, the objectors contend thatthe lawsuit does not qualify for class actionstatus under Rule 23(a). We review under theabuse of discretion standard a district court'sdecision to certify a case as a class action.Armstrong v. Davis, 275 F.3d 849, 867 (9thCir.2001). Although we have some concerns,largely relating to litigation management, asto whether the case could be maintained as aclass action if the litigation continues, thedistrict court did not abuse its discretion incertifying the case for settlement purposespursuant to Rule 23.

The objectors argue in the alternative thatthe district court should not have approvedthe settlement agreement under Rule 23(e).“We have repeatedly stated that the decisionto approve or reject a settlement is committedto the sound discretion of the trial judge be-cause he is exposed to the litigants, and theirstrategies, positions and proof.” Hanlon, 150F.3d at 1026 (citation and internal quotationmarks omitted). Nonetheless, the districtcourt did in this case abuse that discretion. Torepeat what this court had reason recently tostate: “Although we are always cautious toreverse the ... approval of a settlement

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agreement because of the time and effortdedicated by the parties and the district court,we are compelled to do so in this case be-cause of the unjust terms of the decree.”Molski v. Gleich, 318 F.3d 937, 956 (9thCir.2003).

We address first the propriety of the classcertification and then examine the districtcourt's decision to approve the settlementagreement.

A. Class CertificationRule 23(a) establishes four prerequisites

for class action litigation, which are: (1)numerosity, (2) commonality, (3) typicality,and (4) adequacy of representation. We ex-amine each of these requirements in turn.

1. NumerosityRule 23(a)(1) requires that “the class is so

numerous that joinder of all members is im-practicable.” There is no dispute that thenumerosity requirement is met in this case.The plaintiff class before us is approximately15,000 in number.

2. CommonalityRule 23(a)(2) requires that “there are

questions of law or fact common to theclass.” We stated in Hanlon that

Rule 23(a)(2) has been construed permis-sively. All questions of fact and law neednot be common to satisfy the rule. The ex-istence of shared legal issues with diver-gent factual predicates is sufficient, as is acommon core of salient facts coupled withdisparate legal remedies within the class.

150 F.3d at 1019.

The class in this case is broad and di-

verse. It encompasses some 15,000 em-ployees, from a wide range of positions bothsalaried and hourly, who are employed atBoeing facilities located in 27 differentstates. Class counsel argue, and the districtcourt found, that the large class is united by acomplex of company-wide discriminatorypractices against African-Americans.

Gen. Tel. Co. of Southwest v. Falcon,457 U.S. 147, 157, 159, 102 S.Ct. 2364, 72L.Ed.2d 740 (1982), emphasizes that the fact“that racial discrimination is by definitionclass discrimination,” cannot automatical-ly*954 convert a single allegation of racediscrimination into “an across-the-board at-tack.” Though the commonality claim in thiscase is ambitious and therefore especiallyworthy of scrutiny, it is far from the theoret-ical extrapolation sought in Falcon. Thatcase concerned only one named plaintiff whodid not identify any other plaintiffs subjectedto the treatment he claimed to have expe-rienced.

By contrast, the record indicates thatclass counsel interviewed more than 1,300Boeing employees from facilities across thecountry. Counsel have produced detaileddocumentation of discrimination experiencedby more than 200 of these employees. Thosenamed employees include salaried managersand hourly line-workers, union members andnon-union members, employees from all ofBoeing's major locations, and employeesfrom two firms that Boeing recently ac-quired. Appellees also point to the results ofan internal “survey of Boeing's affirmativeaction issues,” distributed in an e-mail toBoeing senior management. The e-mailidentified “racial bias” in the categories ofhiring practices and promotion practices and“race issues” in the category of peer working

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environment as issues of concern at theCompany.

[4] In fact, the named plaintiffs and ob-jectors share the contention that discrimina-tory practices at Boeing are widespread andentrenched. According to the district court,“both the supporters of the consent decreeand the objectors spoke forcefully of institu-tional problems with race discrimination.”The court may not go so far, of course, as tojudge the validity of these claims. “Althoughsome inquiry into the substance of a case maybe necessary to ascertain satisfaction of thecommonality and typicality requirements ofRule 23(a), it is improper to advance a deci-sion on the merits to the class certificationstage.” Moore v. Hughes Helicopters, Inc.,708 F.2d 475, 480 (9th Cir.1983), citing Ei-sen v. Carlisle & Jacquelin, 417 U.S. 156,177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732(1974). But the breadth and consistency ofclass counsel's initial evidence places thedistrict court's finding of commonality wellwithin that court's discretion.

[5] Objectors also dispute the finding ofcommonality on three more specific grounds.First, objectors claim that common issuescannot link all African-American Boeingemployees when two of Boeing's subsidiariesare recent acquisitions. Boeing acquired thedefense and space operations of RockwellInternational in December 1996 (renamingthem Boeing North America, hereinafter“BNA”), and the McDonnell Douglas Cor-poration (“MDC”) in August 1997. Em-ployees from both these subsidiaries areamong the class representatives. Their re-ported experiences are similar to the others'.

Boeing is responsible for the employmentpractices of all its sub-parts. The Company,

for example, issued an “Equal EmploymentOpportunity” policy in July 1998, applicableto all Boeing organizations. This documentstated that the “primary responsibility forimplementing this policy rests with the seniormanagement of the company.” Some of theclass's historical evidence from BNA andMDC employees may extend to before themergers, but the kernel of the class complaintis that a complex of discriminatory practicespervades Boeing today and in the recent past.The fact of the mergers does not bar a findingof commonality.

Objectors also contest commonality onthe ground that some class members weresubject to collective bargaining agreementsthat laid out objective criteria for promotions.Objectors point to a comment in a footnotefrom the Falcon opinion:

*955 Significant proof that an employeroperated under a general policy of dis-crimination conceivably could justify aclass of both applicants and employees ifthe discrimination manifested itself in hir-ing and promotion practices in the samegeneral fashion, such as through entirelysubjective decisionmaking processes. Inthis regard it is noteworthy that Title VIIprohibits discriminatory employmentpractices, not an abstract policy of dis-crimination.

Falcon, 457 U.S. at 159 n. 15, 102 S.Ct.2364. This hypothetical class in Falcon'sfootnote fifteen is both broader and narrowerthan the class before us. It is broader becausethe class here does not combine employeeswith applicants and does not allege discri-minatory hiring. It is narrower because theclass here complains of a complex of dis-criminatory practices that includes compen-

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sation, training, and work environment inaddition to promotions. Union employeesunder objective promotion systems may havebeen immune to discrimination in promotion,but they could still have been affected byother alleged axes of discrimination.

We understand footnote fifteen of Falconto present a demonstrative example ratherthan a limited exception to the overall skep-ticism toward broad discrimination class ac-tions.FN10 That is, as we read Falcon, it doesnot generally ban all broad classes but ratherprecludes a class action that, on the basis ofone form of discrimination against one or ahandful of plaintiffs, seeks to adjudicate allforms of discrimination against all membersof a group protected by Title VII, § 1981, or asimilar statute.

FN10. One Fifth Circuit opinion mayreflect the latter approach. In Vuya-nich v. Republic Nat'l Bank, 723 F.2d1195 (5th Cir.1984), that courtover-turned the certification of a classof women and African-Americanemployees and applicants (which wasdivided into five subclasses). Thedecision relied in part on the exis-tence of objective factors in the hiringprocess, referring to the comment infootnote fifteen as a “ ‘general policyof discrimination’ exception.” “Thedistrict court's finding that the Bankrelied on two objective in-puts-education and experience-in itsnecessarily subjective hiring process... precludes reliance on this ‘generalpolicy of discrimination’ exception.”Id. at 1199-1200.

Bouman v. Block, 940 F.2d 1211 (9thCir.1991), confirms our reading of Falcon.

Bouman was a post-Falcon case in which weupheld the certification of a class of femaleapplicants for a sergeant's position. Defen-dant Los Angeles County objected to the lackof an evidentiary hearing on the commonalityquestion, citing Falcon. We noted that thedistrict court had concluded “that there werecommon questions in that ‘plaintiff is at-tacking defendants' discriminatory practicesagainst females, and this is not just as it ap-plied to plaintiff only.’ This statement iden-tifies a common legal issue, discriminationagainst women, and a common factualproblem, discrimination as applied in theSheriff's Department.” Id. at 1232. We foundthe Falcon concern inapplicable becauseclass status was not sought on the basis of asingle discriminatory practice “as it appliedto plaintiff only.” Id. For similar reasons,Falcon does not bar a commonality findingin this case.

Third, objectors contend that decision-making at Boeing is too decentralized topermit a class that combines plaintiffs fromdisparate locales. Objectors rely for this ar-gument on Doninger v. Pac. Northwest Bell,564 F.2d 1304 (9th Cir.1977), in which weupheld a district court's denial of certificationto an attempted class of female employeesand applicants.

The primary reason class certificationwas inappropriate in Doninger was that theputative class would in large part have *956overlapped with the terms of a consent de-cree entered into by American Telephone andTelegraph and already applicable to PacificNorthwest Bell employees. “Substantialnumbers” of the individuals who would havebeen class members had waived their claimsand accepted relief under the preexisting de-cree. Id. at 1309.

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Additionally, plaintiffs in Doningerwanted to rely, in the style that Falcon laterrejected, on the experiences of a few indi-viduals. Ruling on the commonality ques-tion, we found it significant that PacificNorthwest Bell was divided into six “estab-lishments,” each with its own affirmativeaction program, while “[a]ll of the namedplaintiffs are employed in one of three es-tablishments....” Id. at 1310. We reasonedthat “[s]ince different affirmative actionprograms, and thus possibly different pat-terns and practices, exist in each establish-ment, appellants would have considerabledifficulty in adequately representing classmembers from the other three PNB estab-lishments.” Id. at 1311 (footnote omitted).

The case before us does not present theproblem of a preexisting consent decree.Moreover, its named plaintiffs come from awide array of Boeing's divisions.

As noted above, Boeing is responsible forthe employment practices of all its units.Class counsel introduced evidence of centra-lized decisionmaking. The unsurprising factthat some employment decisions are madelocally does not allow a company to evaderesponsibility for its policies. See, e.g., Batesv. United Parcel Serv., 204 F.R.D. 440, 446(N.D.Cal.2001); Morgan v. United ParcelServ. of Am., 169 F.R.D. 349, 356(E.D.Mo.1996).

We conclude that the district court waswithin its discretion to find the commonalityrequirement of Rule 23(a)(2) met in this case.In so holding, we stress that we are applyingan abuse of discretion standard. The districtcourt in all likelihood could, also withoutabusing its discretion, have declined to cer-

tify the overall class in favor of certifyingdiscrete sub-classes, so as to assure com-monality. As the district court noted, how-ever, the objectors in this case, while point-ing to many aspects of the consent decreewith which they disagree, did not demon-strate that the certification of a broad classrather than subclasses compromised the in-terests of one or more of the groups of em-ployees that might have had sufficiently co-hesive interests to have been certified as asubclass. We later conclude that the consentdecree did unfairly distribute the availablefunds among the members of the plaintiffclass. But that unfair distribution did not re-flect the same fault lines of potential conflictthat the objectors maintain undermined theclass action determination, namely the po-tential conflict among employees who workat different levels in the corporate hierarchy,among employees who work in different lo-cations, and among employees who work forHeritage Boeing as opposed to those whowork for the recently-merged units.

Although for the most part the samestandards apply under Rule 23 in judging thepropriety of a settlement class as apply indetermining whether a class for trial purposesis appropriate, Amchem, 521 U.S. at 620-21,117 S.Ct. 2231, in judging the propriety of asettlement class, “close inspection of the set-tlement in that regard [is] altogether proper.”Id. at 620, 117 S.Ct. 2231. The presence orabsence of settlement terms that differen-tially affect the sub-groups which objectorscontend have potentially diverging interestsis indicative of whether these alleged con-flicts are in fact pertinent to the issues in thelawsuit. Cf. id. at 626-27, 117 S.Ct. 2231(noting that in the asbestos products liabilitycase at issue “the terms of the settlement re-flect essential allocation decisions” *957

Page 24



regarding the distribution of funds, terms thatdid not take into account “[t]he disparitybetween the currently injured and expo-sure-only categories of plaintiffs” regardingthe relative desirability of immediate pay-ments versus “an ample, inflation-protectedfund for the future”); see also Molski, 318F.3d at 955-56 (looking at the consent decreeto determine likelihood of collusiveness).Consequently, the district court acted withinits discretion in declining to insist on sub-classes and thereby potentially undo the set-tlement for reasons unlikely to have affectedit.

3. TypicalityRule 23(a)(3) requires that “the claims or

defenses of the representative parties aretypical of the claims or defenses of the class.”Falcon noted that “[t]he commonality andtypicality requirements of Rule 23(a) tend tomerge.” 457 U.S. at 157 n. 13, 102 S.Ct.2364. In this case, the district court explainedthat:

The named plaintiffs ... include a verybroadly selected cross-section of the dif-ferent categories of Boeing employees.Salaried and hourly, management andline-worker, union and non-union are allrepresented, as are each of the major geo-graphic hubs of Boeing's operations andeach of the pre-merger companies. Partic-ularly in a case in which the requested re-lief applies evenly to the varioussub-groups, this cross-section of Boeingemployees suffices to insure that the in-terests of these sub-groups have beenadequately represented, and meets thetypicality requirement of Rule 23(a).

Objectors do not dispute the breadth ofrepresentation, but complain that class

counsel did not provide clear documentationthat each job category had a class represent-ative for each type of discrimination claimalleged.

[6][7] That level of specificity is not ne-cessary for class representatives to satisfy thetypicality requirement. In Hanlon, we statedthat “[u]nder the rule's permissive standards,representative claims are ‘typical’ if they arereasonably coextensive with those of absentclass members; they need not be substantiallyidentical.” 150 F.3d at 1020. Typicality“does not mean that the claims of the classrepresentative[s] must be identical or sub-stantially identical to those of the absent classmembers.” 5 Herbert B. Newberg & AlbaConte, Newberg on Class Actions, § 24.25 at24-105 (3d ed.1992); see also Armstrong,275 F.3d at 869. The district court here waswithin its discretion to find that the repre-sentatives' claims are “reasonably coexten-sive with those of absent class members.”Hanlon, 150 F.3d at 1020.

4. Adequacy of Representation[8] Rule 23(a)(4) permits the certification

of a class action only if “the representativeparties will fairly and adequately protect theinterests of the class.” To determine whetherthe representation meets this standard, weask two questions: (1) Do the representativeplaintiffs and their counsel have any conflictsof interest with other class members, and (2)will the representative plaintiffs and theircounsel prosecute the action vigorously onbehalf of the class? Hanlon, 150 F.3d at1020; see also Molski, 318 F.3d at 955(quoting Crawford v. Honig, 37 F.3d 485,487 (9th Cir.1995), and stating a similarstandard).

[9] Counsel conducted broad research,

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assertedly interviewed some 1,300 em-ployees, held many meetings with classmembers at various Boeing sites, andachieved some relief from a company thathas historically been successful in defendingagainst discrimination claims. See, e.g.,Croker v. Boeing Co., 662 F.2d 975 (3dCir.1981) (court found against class on all*958 issues of liability; nominal damagesgranted to individual plaintiffs; decisionoverruled on other, procedural grounds).Although we later question whether the set-tlement agreement, as opposed to classcounsel's pre-settlement activity, was theresult of disinterested representation, thatquestion is better dealt with as part of thesubstantive review of the settlement thanunder the Rule 23(a) inquiry. Otherwise, thepreliminary class certification issue cansubsume the substantive review of the classaction settlement.FN11 The district court alsopermitted discovery on the allegations ofoutright collusion between class counsel andBoeing and concluded that there was noproof that collusion had occurred.FN12 Thedistrict court neither abused its discretion infinding that counsel's representation wasappropriately vigorous for purposes of classcertification nor clearly erred in finding thatthere was no overt collusion.

FN11. In Molski, we found inade-quate representation under Rule23(a)(4) primarily because of thedifferent circumstances of the namedplaintiff and some members of theclass. We did look to the terms andcircumstances of the ultimate agree-ment as confirmation of inadequaterepresentation, but did not base thefinding of inadequacy of representa-tion on the substance of the agree-ment alone. 318 F.3d at 955-56.

FN12. Even when there is no directproof of explicit collusion, there isalways the possibility in class actionsettlements that the defendant, classcounsel, and class representativeswill all pursue their own interests atthe expense of the class. For thatreason, the absence of direct proof ofcollusion does not reduce the need forcareful review of the fairness of thesettlement, particularly those aspectsof the settlement that could constituteinducements to the participants in thenegotiation to forego pursuit of classinterests. See p. 960, infra.

With regard to the first of the two ade-quacy questions, objectors contend that aconflict arises from the facts that the classcuts across the levels of authority of Boeingemployees and that, in particular, some classmembers supervise some of their fellow classmembers. This concern about classes thatinvolve both supervisors and rank-and-fileworkers can be a valid one in some cir-cumstances. In Wagner v. Taylor, 836 F.2d578 (D.C.Cir.1987), for example, the courtaffirmed a district court's finding of inade-quate representation because a representativeplaintiff in a Title VII case purported torepresent a broad class that includednon-supervisory employees. Wagner wasboth a senior executive and the only repre-sentative of an attempted class of all gradeGS-9 and above African-American em-ployees of, and applicants to, the InterstateCommerce Commission. The court worriedthat “[s]upervisory employees are often in-appropriate representatives of nonsupervi-sory employees because the structure of theworkplace tends to cultivate distinctly dif-ferent interests between the two groups. Al-

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though each group shares the interest infreedom from discrimination, potential con-flicts may and do arise within a class in-cluding both.” Id. at 595 (footnotes omitted).

Wagner did not, however, adopt any perse rule concerning adequacy of representa-tion where the class includes employees atdifferent levels of an employment hierarchy.We decline to do so as well. The questionwhether employees at different levels of theinternal hierarchy have potentially conflict-ing interests is context-specific and dependsupon the particular claims alleged in a case.

Here, we do not find these workforcestructure concerns to be dispositive. Thenamed plaintiffs who are class representa-tives in this case include both supervisors andnon-supervisory employees. The districtcourt found that objectors fail

*959 to identify a substantive issue forwhich there is a conflict of interest betweentwo or more sets of employees. Given thatthe named plaintiffs include representativesof each major employee sub-group, andthat the requested relief applies equallythroughout the class, the Court finds thatthere are no conflicts between class mem-bers sufficient to defeat certification.

“Plaintiffs attempting representation ofnonsupervisory employees by supervisoryemployees ... must offer evidence of coex-tensive interests or at least allege the exis-tence of a general discriminatory policy.”Newberg and Conte, supra, § 24.42 at24-170-71. Class counsel have met this bur-den here. The finding of adequacy was withinthe district court's discretion.

B. The Settlement

1. General Principles

[10] “Fed.R.Civ.P. 23(e) requires thedistrict court to determine whether a pro-posed settlement is fundamentally fair, ade-quate, and reasonable.” Hanlon, 150 F.3d at1026 (citation omitted). The objectors con-tend that the settlement agreement fails tomeet Rule 23(e)'s standards.

To determine whether a settlementagreement meets these standards, a districtcourt must consider a number of factors, in-cluding: “the strength of plaintiffs' case; therisk, expense, complexity, and likely dura-tion of further litigation; the risk of main-taining class action status throughout thetrial; the amount offered in settlement; theextent of discovery completed, and the stageof the proceedings; the experience and viewsof counsel; the presence of a governmentalparticipant; and the reaction of the classmembers to the proposed settlement.” Mols-ki, 318 F.3d at 953 (citation omitted); seealso Officers for Justice v. Civil Serv.Comm'n of San Francisco, 688 F.2d 615, 625(9th Cir.1982) (noting that the list of factorsis “by no means an exhaustive list of relevantconsiderations, nor have we attempted toidentify the most significant factors”).

Despite this guidance, assessing thefairness, adequacy and reasonableness of thesubstantive terms of a settlement agreementcan be challenging. As “the very essence of asettlement is compromise, ‘a yielding of ab-solutes and an abandoning of highest hopes,’” id. at 624 (citation omitted), review of thesubstantive terms of a consent decree-thetotal amount of damages awarded for exam-ple, or the precise terms of injunctive provi-sions-is often not productive. Courts cannot

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know the strength of ex ante legal claims andso are not privy to the relative strengths of theparties at the bargaining table. Nor can courtsjudge with confidence the value of the termsof a settlement agreement, especially one inwhich, as here, the settlement provides forinjunctive relief.

At the same time, and critically forpresent purposes, there are real dangers in thenegotiation of class action settlements ofcompromising the interests of class membersfor reasons other than a realistic assessmentof usual settlement considerations such as thestrength of their legal claims, the desire forimmediate rather than delayed relief, and thecosts of litigation. Incentives inhere inclass-action settlement negotiations that can,unless checked through careful district courtreview of the resulting settlement, result in adecree in which “the rights of [class mem-bers, including the named plaintiffs] may not[be] given due regard by the negotiating par-ties.” Id. The class members are not at thetable; class counsel and counsel for the de-fendants are. Unlike in the non-class actioncontext, most of class counsel's clients can-not be consulted individually about the termsof the settlement, nor is the resulting decreesubmitted to the class *960 members for ap-proval (although there is an opportunity toobject).

That the class representatives are availa-ble for consultation and approval is no solu-tion, for two reasons: First, the class repre-sentatives have their own incentives to ad-vance their interests at the expense of theclass. Second, class counsel ultimately owetheir fiduciary responsibility to the class as awhole and are therefore not bound by theviews of the named plaintiffs regarding anysettlement. See In re GMC Pick-Up Truck

Fuel Tank Prods. Liab. Litig., 55 F.3d 768,801 (3d Cir.1995) (“Beyond their ethicalobligations to their clients, class attorneys,purporting to represent a class, also owe theentire class a fiduciary duty once the classcomplaint is filed.”).

We have characterized these inherentdangers of class settlements as encompassingthe possibility that “the agreement ... is theproduct of fraud or overreaching by, or col-lusion between, the negotiating parties....”Officers for Justice, 688 F.2d at 625; see alsoHanlon, 150 F.3d at 1027. By so stating, wedo not mean to indicate concern only withovert misconduct by the negotiators. Theincentives for the negotiators to pursue theirown self-interest and that of certain classmembers are implicit in the circumstancesand can influence the result of the negotia-tions without any explicit expression or se-cret cabals. That is why district court reviewof class action settlements includes not onlyconsideration of whether there was actualfraud, overreaching or collusion but, as well,substantive consideration of whether theterms of the decree are “fair, reasonable andadequate to all concerned.” Officers for Jus-tice, 688 F.2d at 625.

[11] Still, both the difficulties of judicialassessment of a compromise settlement,discussed above, and the rule that “[t]he dis-trict court's final determination to approvethe settlement should be reversed ‘only upona strong showing that the district court's de-cision was a clear abuse of discretion,’ ”Hanlon, 150 F.3d at 1027 (quoting In re Pac.Enters. Sec. Litig., 47 F.3d 373, 377 (9thCir.1995)), circumscribe our inquiry on ap-peal into the fairness question. As a practicalmatter we will rarely overturn an approval ofa class action consent decree on appellate

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review for substantive reasons unless theterms of the agreement contain convincingindications that the incentives favoring pur-suit of self-interest rather than the class'sinterests in fact influenced the outcome of thenegotiations and that the district court waswrong in concluding otherwise. See Molski,318 F.3d at 953-54.

[12] Our inquiry therefore most usefullyfocuses primarily upon whether the particu-lar aspects of the decree that directly lendthemselves to pursuit of self-interest by classcounsel and certain members of theclass-namely, attorneys' fees and the distri-bution of any relief, particularly monetaryrelief, among class members-strictly comportwith substantive and procedural standardsdesigned to protect the interests of classmembers. This is not to say that we do notconsider the remaining terms of the settle-ment agreement as well. “It is the settlementtaken as a whole, rather than the individualcomponent parts, that must be examined foroverall fairness,” and “[t]he settlement muststand or fall in its entirety.” Hanlon, 150 F.3dat 1026; see also Strong v. BellSouth Tele-comms., 137 F.3d 844, 848 (5th Cir.1998) (“To be enforceable, the Agreement require[s]the final approval of each federal court,pursuant to [Rule] 23(e). Any modification tothe Agreement, whether by a party or a court,would render the Agreement void.”).

Where the other terms of a settlementraise questions not recognized by the dis-trict*961 court concerning fairness andadequacy-as we conclude they do here-ourscrutiny of the fees and damages distributionprovisions should be all the more rigorous.But absent some glaring inequity in the re-maining terms of the agreement missed in thedistrict court's inquiry, it will be rare that we

will reverse a district court's approval of aclass action consent decree unless the feesand relief provisions clearly suggest thepossibility that class interests gave way toself-interest.

2. The Settlement as a Whole[13] In this case, we are somewhat un-

easy, reading the settlement as a whole, aboutwhether in reaching the settlement, classcounsel adequately pursued the interests ofthe class as a whole. Provisions giving rise tothis unease include the extent of Boeing'srelease from liability, which includes anybreach of contract action by any class mem-ber; the stipulation that the prohibition onrace discrimination cannot be enforced inindividual cases; the numerous instances inwhich Boeing is permitted to develop its ownremedial schemes (and, in some instances,unilaterally to abandon such schemes as in-feasible), with an obligation only to consultwith class counsel but with no obligation tosubmit to any enforcement or dispute reso-lution mechanism if the schemes are unsa-tisfactory; the limited role for the consultantBoeing is required to hire; and the incorpo-ration in the agreement of promotion andcomplaint programs Boeing had already de-veloped and implemented, with no obligationon the part of the Company to continue thoseprograms in their present form or alterna-tively to substitute programs of the sameefficacy. FN13

FN13. The racial harassment provi-sions of the proposed consent decreeilluminate the defects in many of theother remedial sections: Unlike thepromotion and complaint provisions,the section covering the harassmentpolicy does contain some enforceablestandards should Boeing choose to

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change its policy-“the amended pol-icy [must have] the same import asthe [present] Harassment Policy and[be] reasonably designed to achievethe same effect as the HarassmentPolicy in respect to preventing andremedying racial harassment.” Simi-lar language is noticeably absent fromall the other sections concerning theprograms Boeing is to develop or hasdeveloped to remedy discriminationagainst the class.

Further, the district court did not entirelyappreciate the limited scope of many of theinjunctive provisions of the decree. For ex-ample, the court opined that “changes will bemade in the procedure for resolving dis-crimination related complaints.” (Emphasisadded.) In fact, the changes in the complaintprocedure had already been implemented,and, while the agreement indicates that theimplementation appeared adequate, Boeingmade no commitment in the decree to con-tinue the same process in effect during theterm of the agreement (or even to assure thatany replacement process would be as effec-tive as the present one).

We also note that, unlike the districtcourt, we decline to rely in our assessment ofthe injunctive provisions upon “the approvalof several disinterested experts in race dis-crimination, the Reverend Jesse Jackson firstamong them.” The experts' positive assess-ments all rely heavily on the assertion that thedecree provides all members of the class withthree years of free legal assistance to, as onedeclaration put it, “review their employmenthistory, review proposed or actual job op-portunities, ... assist them with job applica-tions, and ... challenge the selection ofsomeone else for the jobs.” As noted above,

Boeing has expressed its skepticism that thedecree embodies any obligation on the part ofclass counsel to provide such free individua-lized*962 legal assistance or on the part ofBoeing to respond to such individualizedrepresentation by attorneys. Reading the de-cree carefully, we share that skepticism.

The attorneys' fees provision provides$750,000 to class counsel for “monitoring,administration, implementation and defenseof the Decree,” including, in particular,“Class Counsel's time and expenses involvedin the processing of claims under SectionXI(c)(4) and the distribution of all monetaryawards ... including expenditures by ClassCounsel in regard to compensating theClaims Arbitrator....” That language hardlyencompasses the individualized representa-tion for future claims of discrimination theexperts' declarations assume. Nor does anyprovision in the decree specifically requireBoeing to confer with class counsel aboutindividuals' promotion applications. It maybe that class counsel, commendably, intendto attempt to provide such individual repre-sentation, although nothing in the factualrecord indicates a commitment to do so. If so,$750,000 is unlikely to go very far in com-pensating class counsel for such representa-tion, given the size of the class and the otherrepresentational duties for which the decreespecifically earmarks the money. Since theexperts' understanding of the proposed set-tlement appears less than precise, the districtcourt should not have relied so heavily uponthose assessments, and we do not do so.

Despite all of the foregoing concerns, wewould not overturn the district court's de-termination to approve the settlement as fairwere the release and injunctive provisions theonly aspects of the decree that are trouble-

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some. As the district court noted, plaintiffs'risk of losing the case on the merits was quitehigh; Boeing had an unbroken history ofprevailing in discrimination cases; main-taining the class action was not a foregoneconclusion; promotion decisions, a primaryfocus of the litigation, are largely discretio-nary; and discovery was likely to be ex-tremely expensive for the plaintiffs and classcounsel, whose resources are undoubtedlymore limited than those of Boeing. The totalmonetary relief provided in the proposedsettlement agreement is not insubstantial,either in total or on a pro rata basis given thenumber of claimants, and the balance be-tween retrospective and prospective relief isusually one for the litigants to determine. Nordo the injunctive provisions themselves raiseany flags regarding favoritism for somemembers of the class over others. No classmember is assured a promotion or any otherfuture privilege not accorded to others, norare certain groups of class members treatedmore favorably than others for purposes offuture relief.

Additionally, we cannot say with the re-quisite certainty that the district court erred inconcluding that “the cooperative processwhich led to the agreement, and the provi-sions for oversight of the decree by inde-pendent observers ... will lead to genuineimprovements in Boeing's internal race rela-tions.” The district court was in a position toassess the level of good-will between theparties at the point of settlement, as we arenot.FN14

FN14. We stress once again that, asthis case has not been litigated, wehave no way of knowing whetherthere was in fact race discriminationin employment at Boeing.

Furthermore, we are told that the decreein large part incorporates already-existingBoeing programs rather than creating newones because Boeing determined once thelawsuit was filed to devise new, more effec-tive promotion and complaint policies so asto avoid similar charges in the future. Al-though the failure of the consent decree toassure continuation of these same or equallyeffective programs *963 in the future re-mains troubling, we cannot reject out of handthis explanation for crediting existent pro-grams as part of the prospective relief at-tained by the proposed decree.

[14] In short, the injunctive aspects of theproposed settlement neither directly reflectpursuit of self-interest by favored membersof the class nor, standing alone, strike us asbeing so beyond the pale as a compromise ofclaims to merit reversal of the district court'sfairness assessment. At the same time, thequestionable factors we have noted do sug-gest the possibility that class counsel and theIIRs could have agreed to relatively weakprospective relief because of other induce-ments offered to them in the course of thenegotiations. We therefore scrutinize withparticular care the aspects of the proposedsettlement that provide monetary benefitsdirectly to class counsel and to the IIRs: theattorneys' fees and damages distributionprovisions. FN15

FN15. Also contributing to our de-termination to scrutinize the attor-neys' fees provisions with specialcare is the nature of the notice to theclass with respect to fees. The classnotice did not break out the amount ofattorneys' fees provided for in thesettlement agreement, although an

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alert class member could have cal-culated those fees from the informa-tion provided.

Appellees admit that “with benefitof hindsight it would have beenpreferable if the formal notice to[the] class had included more spe-cificity with respect to the feeaward.” They have not explained,however, why the decision wasmade to leave out that particularfigure from the class notice whilespelling out the total fund availableto the class, the amount of monetaryrelief, and the value assigned to theinjunctive relief.

Notice of the amount of fees servesas “adequate notice of class coun-sel's interest in the settlement.”Torrisi v. Tucson Elec. Power Co.,8 F.3d 1370, 1375 (9th Cir.1993);see also Goldenberg v. MarriottPLP Corp., 33 F.Supp.2d 434, 441(D.Md.1998) (“Notice of the po-tential extent of attorneys feeawards is deemed essential becauseit allows class members to deter-mine the possible influence of thefees on the settlement and to makeinformed decisions about their rightto challenge the fee award.”).Where the class was informed ofthe amount of fees only indirectlyand where the failure to give moreexplicit notice could itself be theresult of counsel's self-interest, thecourts must be all the more vigilantin protecting the interests of classmembers with regard to the feeaward.

3. Attorneys' Fees[15] a. Necessity of Scrutiny: Attorneys'

fees provisions included in proposed classaction settlement agreements are, like everyother aspect of such agreements, subject tothe determination whether the settlement is“fundamentally fair, adequate, and reasona-ble.” Fed.R.Civ.P. 23(e). There is no excep-tion in Rule 23(e) for fees provisions con-tained in proposed class action settlementagreements. Thus, to avoid abdicating itsresponsibility to review the agreement for theprotection of the class, a district court mustcarefully assess the reasonableness of a feeamount spelled out in a class action settle-ment agreement. See, e.g., Piambino v. Bai-ley, 610 F.2d 1306, 1328 (5th Cir.1980) (“theDistrict Court abdicated its responsibility toassess the reasonableness of attorneys' feesproposed under a settlement of a class action,and its approval of the settlement must bereversed on this ground alone”); Strong, 137F.3d at 848-50; In re GMC, 55 F.3d at819-20; Jones v. Amalgamated WarbasseHouses, Inc., 721 F.2d 881, 884 (2dCir.1983) (holding with regard to attorneys'fees that “[t]he presence of an arms' lengthnegotiated agreement among the partiesweighs strongly in favor of approval, butsuch an agreement is not binding on thecourt.”).FN16

FN16. Jones held that a district courtcould, after reviewing the attorneys'fees awarded as part of a class actionsettlement, reduce the amount of fees,apparently while retaining the bind-ing nature of the remainder of theagreement. Such a procedure is notconsistent with Evans v. Jeff D., 475U.S. 717, 726-27, 106 S.Ct. 1531, 89L.Ed.2d 747 (1986), decided afterJones. Evans held that, with respect

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to attorneys' fees provisions as withrespect to any other provision, “thepower to approve or reject a settle-ment negotiated by the parties beforetrial does not authorize the court torequire the parties to accept a settle-ment to which they have not agreed....Rule 23(e) does not give the court thepower, in advance of trial, to modifya proposed consent decree and orderits acceptance over either party's ob-jection.” (Footnote omitted). See alsoHanlon, 150 F.3d at 1026 (stating,without exception, that “[t]he settle-ment must stand or fall in its entire-ty”).

*964 That the defendant in form agrees topay the fees independently of any monetaryaward or injunctive relief provided to theclass in the agreement does not detract fromthe need carefully to scrutinize the fee award.Ordinarily, “a defendant is interested only indisposing of the total claim asserted against it... the allocation between the class paymentand the attorneys' fees is of little or no inter-est to the defense....” In re GMC, 55 F.3d at819-20 (internal quotation marks and citationomitted); see also Evans v. Jeff D., 475 U.S.717, 732, 734, 106 S.Ct. 1531, 89 L.Ed.2d747 (1986) (recognizing that “the possibilityof a tradeoff between merits relief and at-torney's fees” is often implicit in class actionsettlement negotiations, because “[m]ostdefendants are unlikely to settle unless thecost of the predicted judgment, discounted byits probability, plus the transaction costs offurther litigation, are greater than the cost ofthe settlement package.”) (Emphasis added).

[16] Given these economic realities, theassumption in scrutinizing a class action set-tlement agreement must be, and has always

been, that the members of the class retain aninterest in assuring that the fees to be paidclass counsel are not unreasonably high. Iffees are unreasonably high, the likelihood isthat the defendant obtained an economicallybeneficial concession with regard to the me-rits provisions, in the form of lower monetarypayments to class members or less injunctiverelief for the class than could otherwise haveobtained. See Court Awarded Attorney Fees,Report of the Third Circuit Task Force, 108F.R.D. 237, 266 (1985) (“When a large at-torney's fee means a smaller recovery toplaintiff, a significant conflict of interestbetween client and attorney is created. Evenif the plaintiff's attorney does not consciouslyor explicitly bargain for a higher fee at theexpense of the beneficiaries, it is very likelythat this situation has indirect or subliminaleffects on the negotiations.”). In other words,the negotiation of class counsel's attorneys'fees is not exempt from the truism that thereis no such thing as a free lunch.

We have, in closely analogous contexts,recently so recognized. See Zucker v. Occi-dental Petroleum Corp., 192 F.3d 1323 (9thCir.1999); Lobatz v. U.S. West Cellular, 222F.3d 1142 (9th Cir.2000). In Zucker, forexample, we stated that “[i]n a class action,whether the attorneys' fees come from acommon fund or are otherwise paid, thedistrict court must exercise its inherent au-thority to assure that the amount and mode ofpayment of attorneys' fees are fair and prop-er,” 192 F.3d at 1328 (emphasis added); seealso id. at 1327 (“In a class action ... [t]heabsence of individual clients controlling thelitigation for their own benefit creates op-portunities for collusive arrangements inwhich defendants can pay the attorneys forthe plaintiff class enough money to inducethem to settle the class action for too little

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benefit to the class (or too much benefit to theattorneys, if the claim is weak but the risks tothe defendants high).”). Similarly, in Lobatz,where the defendant had agreed that it *965would not contest a fee request of $1 millionthat was apart from the settlement fund, wenoted that “[s]uch an agreement has the po-tential of enabling a defendant to pay classcounsel excessive fees and costs in exchangefor counsel accepting an unfair settlement onbehalf of the class.” 222 F.3d at 1148.

The district court was therefore obligatedto assure itself that the fees awarded in theagreement were not unreasonably high, so asto ensure that the class members' interestswere not compromised in favor of those ofclass counsel.

[17] b. Substantive Scrutiny of StatutoryFees: Generally, litigants in the United Statespay their own attorneys' fees, regardless ofthe outcome of the proceedings. In order toencourage private enforcement of the law,however, Congress has legislated that incertain cases prevailing parties may recovertheir attorneys' fees from the opposing side.When a statute provides for such fees, it istermed a “fee-shifting” statute. Under afee-shifting statute, the court “must calculateawards for attorneys' fees using the ‘lodestar’method,” Ferland v. Conrad Credit Corp.,244 F.3d 1145, 1149 n. 4 (9th Cir.2001),which involves “multiplying the number ofhours the prevailing party reasonably ex-pended on the litigation by a reasonablyhourly rate,” Morales v. City of San Rafael,96 F.3d 359, 363 (9th Cir.1996) and, “ifcircumstances warrant, adjust[ing] the lo-destar to account for other factors which arenot subsumed within it,” Ferland, 244 F.3d at1149 n. 4; see also Caudle v. Bristow OpticalCo., 224 F.3d 1014, 1029 (9th Cir.2000). The

rules governing both reduction and en-hancement have become increasingly refinedover time, and we have therefore requiredcareful explanations by district courts ofstatutory fee determinations.FN17

FN17. See, e.g., City of Burlington v.Dague, 505 U.S. 557, 112 S.Ct. 2638,120 L.Ed.2d 449 (1992) (prohibitingpure contingency enhancements ofthe lodestar under fee-shifting sta-tutes); Ferland, 244 F.3d at 1149,1151 (holding that where the districtcourt cuts substantially the number ofhours compensated because of per-ceived inefficiency, the court musteither “calibrate the number [ofhours] chosen to demonstrable inef-ficiency in carrying out particulartasks” or provide an explanation ofthe level of reduction chosen);Caudle, 224 F.3d at 1029, 1029 n. 11(finding an abuse of discretion wherethe district court did not “explicitlyfollow [lodestar] procedures” andnoting that a modest amount of re-covery cannot be used to reduce a feeaward below the lodestar); VanGerwen v. Guar. Mut. Life Co., 214F.3d 1041, 1049 (9th Cir.2000)(concluding that the district court didnot abuse its discretion in refusing toaward fees for hours spent on dis-covery unrelated to the record);Guam Soc'y of Obstetricians & Gy-necologists v. Ada, 100 F.3d 691, 697(9th Cir.1996) (“Dague left undis-turbed earlier Supreme Court caselaw allowing a fee applicant to re-cover more than the lodestar figurewhere the applicant has met the bur-den of showing that such an adjust-ment is necessary to the determina-

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tion of a reasonable fee.” (internalquotation marks and citations omit-ted)); Morales, 96 F.3d at 365 (va-cating attorneys' fee award becausethe exception to lodestar calculationfor nominal damages cases in whichthe plaintiff's success is de minimisdid not apply); Gates v. Deukmejian,987 F.2d 1392, 1398, 1400 (9thCir.1992) (rejecting the districtcourt's reduction of the lodestar basedon the absence of “concise but clear”explanatory language to show that itdid not “uncritically accept[ ] plain-tiffs' suggested reductions and fail [ ]independently to review the record”);Cunningham v. County of Los An-geles, 879 F.2d 481, 487, 489 (9thCir.1988) (holding four justificationsfor adjusting the lodestar improperbecause they are subsumed in thelodestar determination itself).

[6] Both Title VII, § 2000e, et seq., and §1981-the two federal statutes under whichthis suit was brought-have fee-shifting pro-visions. See § 2000e-5 (k) (“In any action orproceeding under this subchapter the court,in its discretion, may allow the prevailingparty ... a reasonable *966 attorney's fee....”); 42 U.S.C. § 1988 (“In any action orproceeding to enforce a provision of section[] 1981 ... the court, in its discretion, may al-low the prevailing party ... a reasonable at-torney's fee....”). The parties therefore couldhave negotiated an award of fees under §2000e-5(k) and § 1988. Had they done so, thedistrict court's review would have focused onthe reasonableness of the fee request underthe lodestar calculation method. Were theamount of fees Boeing agreed to pay in thesettlement agreement distinctly higher thanthe fees class counsel could have been

awarded by the district court using the lo-destar method, the court would almost surelyhave had to find the fees unreasonable. Ab-sent some unusual explanation, a defendantwould not agree in a class action settlementto pay out of its own pocket fees measurablyhigher than it could conceivably have to paywere the fee amount litigated, unless therewas some non-fee benefit the defendant re-ceived thereby.

In fact, no lodestar-based scrutiny of thefees awarded class counsel in the settlementagreement ever took place. Boeing and classcounsel did not attempt to explain the awardof fees provided in the consent decree asnegotiated under the applicable fee-shiftingstatutes. Further, the record as it standswould not have been sufficient for such aninquiry, as it contains only the barest estimateof hours expended, with no detail. Not even asummary of the billing records was submit-ted.

Of course, in the context of a settlement,the fees provided for in the agreement are assubject to compromise as are the merits pro-visions. Consequently, as Evans, 475 U.S. at734-35, 106 S.Ct. 1531, made clear, the feeamount in a class action settlement agree-ment can be less than would be awarded by acourt. And, since the proper amount of fees isoften open to dispute and the parties arecompromising precisely to avoid litigation,the court need not inquire into the reasona-bleness of the fees even at the high end withprecisely the same level of scrutiny as whenthe fee amount is litigated. But here, therewas no such inquiry at all. Nor is the recordadequate for an inquiry, even one employinga less-than-stringent standard that recognizesthe settlement context.

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We are therefore in no position to de-termine whether the fees Boeing agreed topay are reasonable lodestar fees under theapplicable fee-shifting statutes and do not doso. On remand, the parties are free to attemptsuch justification, based on the principlesoutlined in this opinion and in the extensivelodestar fees case law.

c. The Common Fund Justification: Ra-ther than justifying the attorneys' fees provi-sions of the settlement agreement on thestatutory fee-shifting basis that would prop-erly have applied, the parties sought to justifythe fee amount according to the principlesapplicable to common funds. They did so byconstructing a hypothetical “fund” by addingtogether the amount of money Boeing wouldpay in damages to members of the class un-der the agreement, the amount of fees pro-vided to various counsel, the cost of the classaction notices paid for by Boeing, and a grossamount of money ascribed to all the injunc-tive relief contained in the agreement. Forclarity, we will call the total of all thosemonetary amounts the “putative fund,” for,as we shall see, it is not properly viewed as acommon fund as that term is used in attor-neys' fees law. (We will continue, also forclarity, to call the doctrine by its usual name,“common fund.”) The parties portrayed thetotal fee award as 28% of the putative fund,and maintained that such a percentage is wellwithin the percentage permitted under ourcommon fund fee cases. The district court*967 viewed the fee award as the partiesrequested and approved it, and the consentdecree as a whole, on that basis. For severalreasons, that approval was not appropriate.

i. Availability of common fund fees[18] Before we can decide whether the

attempted common fund justification in this

case was adequate, we must resolve whetherthe existence of potentially applicablefee-shifting statutory provisions precludesclass counsel from recovering attorneys' feesunder the common fund doctrine. We con-clude, as have the two other circuits that haveaddressed the issue,FN18 that there is nopreclusion on recovery of common fund feeswhere a fee-shifting statute applies.

FN18. See Brytus v. Spang & Co.,203 F.3d 238, 246-247 (3d Cir.2000)(holding that common fund fees canbe appropriate in both settled and li-tigated cases where statutory fees areavailable); Cook v. Niedert, 142 F.3d1004 (7th Cir.1998) (approving feesmeasured by common fund ratherthan statutory principles where sta-tutory fees were available); Florin v.Nationsbank, 34 F.3d 560, 564 (7thCir.1994) (common fund principles“properly control a case which is in-itiated under a statute with a feeshifting provision, but is settled withthe creation of a common fund.”);Skelton v. General Motors Corp., 860F.2d 250, 256 (7th Cir.1988)(“[W]hen a settlement fund is createdin exchange for release of the defen-dant's liability both for damages andfor statutory attorneys' fees, equitablefund principles must govern thecourt's award of the attorneys' fees.”);1 Mary Francis Derfner and ArthurD. Wolf, Court Awarded AttorneyFees, ¶ 2.05[7] at 2-81 (2001) (“[T]hemere fact that a fee-shifting statute isimplicated in the action does not en-sure that fees will be awarded underthat statute.... [F]ees may be taxedagainst the [settlement] fund underthe common fund doctrine.” (citing

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Skelton and Florin )).

[19][20] Under the “common fund” doc-trine, “a litigant or a lawyer who recovers acommon fund for the benefit of persons otherthan himself or his client is entitled to a rea-sonable attorney's fee from the fund as awhole.” Boeing Co. v. Van Gemert, 444 U.S.472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676(1980). The Supreme Court explained:

The doctrine rests on the perception thatpersons who obtain the benefit of a lawsuitwithout contributing to its cost are unjustlyenriched at the successful litigant's ex-pense. Jurisdiction over the fund involvedin the litigation allows a court to preventthis inequity by assessing attorney's feesagainst the entire fund, thus spreading feesproportionately among those benefited bythe suit.

Id. (citation omitted). Thus, the commonfund doctrine ensures that each member ofthe winning party contributes proportionatelyto the payment of attorneys' fees. In contrastto fee-shifting statutes, which enable a pre-vailing party to recover attorneys' fees fromthe vanquished party, the common funddoctrine permits the court to award attorneys'fees from monetary payments that the pre-vailing party recovered in the lawsuit. Putanother way, in common fund cases, a va-riant of the usual rule applies and the winningparty pays his or her own attorneys' fees; infee-shifting cases, the usual rule is rejectedand the losing party covers the bill. Seegenerally Wininger v. SI Mgmt. L.P., 301F.3d 1115 (9th Cir.2002).

[21] The procedures used to determinethe amount of reasonable attorneys' feesdiffer concomitantly in cases involving a

common fund from those in which attorneys'fees are sought under a fee-shifting statute.As in a statutory fee-shifting case, a districtcourt in a common fund case can apply thelodestar method to determine the amount ofattorneys' fees. In common fund cases,however, the court can apply a risk multiplierwhen using the lodestar approach. See*968In re Wash. Pub. Power Supply Sys. Sec.Litig., 19 F.3d 1291, 1299 (9th Cir.1994)(“WPPSS” ) (“[The City of Burlington v.Dague, 505 U.S. 557, 112 S.Ct. 2638, 120L.Ed.2d 449 (1992) ] rationale for barringrisk multipliers in statutory fee cases does notoperate to bar risk multipliers in commonfund cases.”). A “multiplier” is a number,such as 1.5 or 2, by which the base lodestarfigure is multiplied in order to increase (ordecrease) the award of attorneys' fees on thebasis of such factors as the risk involved andthe length of the proceedings.

[22] Alternatively, in a common fundcase, the district court can determine theamount of attorneys' fees to be drawn fromthe fund by employing a “percentage” me-thod. See Hanlon, 150 F.3d at 1029 (“In‘common fund’ cases where the settlement oraward creates a large fund for distribution tothe class, the district court has discretion touse either a percentage or lodestar method.”).As its name suggests, under the percentagemethod, “the court simply awards the attor-neys a percentage of the fund....” Id. “Thiscircuit has established 25% of the commonfund as a benchmark award for attorneyfees.” Id.

That common fund fees can be awardedwhere statutory fees are available followsfrom the equitable nature of common fundfees. In Alyeska Pipeline Serv. Co. v. Wil-derness Soc'y, 421 U.S. 240, 95 S.Ct. 1612,

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44 L.Ed.2d 141 (1975), the Court explainedthat 28 U.S.C. § 1923, a version of which wasfirst enacted in 1853, limits the amount ofattorneys' fees that a prevailing party mayrecover from the loser, but does not prohibitthe award of fees under the common funddoctrine. The Court stated:

In Trustees v. Greenough, 105 U.S. 527, 26L.Ed. 1157 (1882), the 1853 Act was readas not interfering with the historic power ofequity to permit the trustee of a fund orproperty, or a party preserving or recover-ing a fund for the benefit of others in addi-tion to himself, to recover his costs, in-cluding his attorneys' fees, from the fund orproperty itself or directly from the otherparties enjoying the benefit. That rule hasbeen consistently followed.... These ex-ceptions are unquestionably assertions ofinherent power in the courts to allow at-torneys' fees in particular situations, unlessforbidden by Congress....

Alyeska Pipeline, 421 U.S. at 257-59, 95S.Ct. 1612. Thus, unless Congress has for-bidden the application of the common funddoctrine in cases in which attorneys couldpotentially recover fees under the type offee-shifting statutes at issue here, the courtsretain their equitable power to award com-mon fund attorneys' fees.

[23] Congress did not explicitly forbidthe use of the common fund doctrine in casespotentially involving § 2000e-5 and § 1988,and we see no reason to infer that it did soimplicitly. The intent of the fee-shifting pro-visions at issue here is not countered by theapplication of common fund principles.

The fees available under a fee-shiftingstatute are part of the plaintiff's recovery and

are not dependent upon any explicit fee ar-rangements between the plaintiffs and theircounsel. For that reason, contingent feeagreements between counsel and client arevalid in cases where statutory fees areavailable. See Venegas v. Mitchell, 495 U.S.82, 86-89, 110 S.Ct. 1679, 109 L.Ed.2d 74(1990). Common fund fees are essentially anequitable substitute for private fee agree-ments where a class benefits from an attor-ney's work, so the same general principlesoutlined in Venegas should apply.

Application of the common fund doctrineto class action settlements does not com-promise*969 the purposes underlyingfee-shifting statutes. In settlement negotia-tions, the defendant's determination of theamount it will pay into a common fund willnecessarily be informed by the magnitude ofits potential liability for fees under thefee-shifting statute, as those fees will have tobe paid after successful litigation and couldbe treated at that point as part of a commonfund against which the attorneys' fees aremeasured. Conversely, the prevailing partywill expect that part of any aggregate fundwill go toward attorneys' fees and so caninsist as a condition of settlement that thedefendants contribute a higher amount to thesettlement than if the defendants were to paythe fees separately under a fee-shifting sta-tute. FN19

FN19. The Seventh Circuit reasonedsimilarly in Florin:

The settlement agreement approvedby the court provides that the de-fendants are released from potentialliability for statutory attorney's feesand that class counsel may insteadpetition the court for an award of

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fees from the settlement fund. Thus,the settlement agreement seems toanticipate that the amount paid bythe defendants into the fund in-cludes an unspecified sum for classcounsel's fees. An award of attor-ney's fees from the fund wouldtherefore be consistent with thegoal of the fee-shifting provision toallow the offending party [to] bearthe costs of the award ... Further-more, an award of fees from thesettlement fund comports with thefee-shifting policy of enabling me-ritorious plaintiffs who would nototherwise be able to afford to bringa lawsuit ... to pursue their claims.

34 F.3d at 564. See also Brytus, 203F.3d at 246 (where there is a set-tlement in a case in which statutoryfees are available, “consideration ofthe attorney's fees was likely fac-tored into the amount of settle-ment”).

The district court did not, therefore, err intreating this case as one that could fall underthe common fund doctrine rather than underthe potentially applicable fee-shifting provi-sions, if the parties properly so agreed, theresulting fee was reasonable, and other re-quisites applicable to common fund feeswere met.

The possibility that a prevailing partycould recover fees either under the court'sequitable powers or under its statutory au-thority does not, however, give the parties orthe court free rein once either the commonfund or the statutory rubric is selected. Feessought or awarded under a fee-shifting sta-tute require the application of the standards

and procedures crafted for such statutes,discussed above. Similarly, if the parties in-voke common fund principles, they mustfollow common fund procedures and stan-dards, designed to protect class memberswhen common fund fees are awarded. Weturn next to the specific procedure employedin the negotiation and award of the attorneys'fees in this case.

ii. Inclusion in the settlement of the attor-neys' fees

[24] The parties negotiated the amount ofattorneys' fees awarded class counsel as aterm of the settlement agreement and thusconditioned the merits settlement upon judi-cial approval of the agreed-upon fees. SeeHanlon, 150 F.3d at 1026 (“Neither the dis-trict court nor this court ha[s] the ability to‘delete, modify or substitute certain provi-sions.’ The settlement must stand or fall in itsentirety.”) (citations omitted). By proceedingin this fashion with respect to attorneys' feesand then attempting to justify the fees not asstatutory fees but as common fund fees, theparties followed an irregular and, as we holdbelow, improper procedure.

Under regular common fund procedure,the parties settle for the total amount of thecommon fund and shift the fund to the court'ssupervision. The plaintiffs' lawyers then ap-ply to the court for a fee award from the fund.See *970Paul, Johnson, Alston & Hunt v.Graulty, 886 F.2d 268, 271 (9th Cir.1989) (ina common fund case, “a court has controlover the fund-even one created pursuant to asettlement, as here ... and assesses the litiga-tion expenses against the entire fund so thatthe burden is spread proportionally amongthose who have benefited.”) (citing VanGemert, 444 U.S. at 478, 100 S.Ct. 745); seealso Vizcaino v. Microsoft Corp., 290 F.3d

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1043, 1046 (9th Cir.2002) (after approval ofthe settlement, class counsel applied to thedistrict court for an award of attorneys' fees);Cook, 142 F.3d at 1011 (“In common fundcases, after attorneys obtain a settlement forthe class, they petition the court for com-pensation from the fund....”); Florin, 34 F.3dat 563 (in a common fund case, “the defen-dant typically pays a specific sum into thecourt, in exchange for a release of its liability.The court then determines the amount ofattorney's fees that plaintiffs' counsel mayrecover from this fund, thereby diminishingthe amount of money that ultimately will bedistributed to the plaintiff class.”).FN20

FN20. On one occasion, we permitteda carefully conceived procedure tosubstitute for completely independentjudicial determination of lodes-tar-based common fund fees. Hanlon,150 F.3d at 1029 (fees were nego-tiated only after the merits agreementwas concluded and a mediator presentat the negotiations provided assur-ance to the court “that the fee was notthe result of collusion or a sacrifice ofthe interests of the class” before thedistrict judge reviewed the awardusing the lodestar, not percentage,method, “requiring class counsel tosubmit detailed evidence of theirwork on behalf of the class”).

In setting the amount of common fundfees, the district court has a special duty toprotect the interests of the class. On this is-sue, the class's lawyers occupy a positionadversarial to the interests of their clients.The reason for the usual insistence uponjudge-conferred common fund fees is that, aswe have explained,

“Because in common fund cases the rela-tionship between plaintiffs and their attor-neys turns adversarial at the fee-settingstage, courts have stressed that whenawarding attorneys' fees from a commonfund, the district court must assume the roleof fiduciary for the class plaintiffs.”WPPSS, 19 F.3d at 1302. Accordingly, feeapplications must be closely scrutinized.Rubber-stamp approval, even in the ab-sence of objections, is improper.

Vizcaino, 290 F.3d at 1052. See also Inre Coordinated Pre-trial Proceedings in Pe-troleum Prods. Antitrust Litig., 109 F.3d 602,608 (9th Cir.1997) (“In a common fund case,the judge must look out for the interests ofthe beneficiaries, to make sure that they ob-tain sufficient financial benefit after thelawyers are paid. Their interests are notrepresented in the fee award proceedings bythe lawyers seeking fees from the commonfund”).

When the ordinary procedure is not fol-lowed and instead the parties explicitly con-dition the merits settlement on a fee awardjustified on a common fund basis, the ob-vious risk arises that plaintiffs' lawyers willbe induced to forego a fair settlement fortheir clients in order to gain a higher award ofattorneys' fees. That risk is, if anything, ex-acerbated where, as here, the agreementprovides for payment of fees by the defen-dant, as in a statutory fee-shifting situation,but the parties choose to justify the fee ascoming from a putative common fund.Where that is the case, courts have to be alertto the possibility that the parties haveadopted this hybrid course precisely becausethe fee award is in fact higher than could besupported on a statutory fee-shifting basis,yet the deal is so dependent upon class

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counsel receiving a greater-than-lodestaramount of fees that the parties were notwilling to give the court supervisory discre-tion to *971 determine the distribution of thetotal settlement package between counsel andthe class.

We recognize that in Evans, 475 U.S. at720, 106 S.Ct. 1531, the Court held that theparties to a class action may simultaneouslynegotiate merits relief and an award of at-torneys' fees under a fee-shifting statute, andmay condition the entire settlement upon awaiver of fees. The Court explained:

[A] general proscription against negotiatedwaiver of attorney's fees in exchange for asettlement on the merits would itself im-pede vindication of civil rights, at least insome cases, by reducing the attractivenessof settlement.

Id. at 732, 106 S.Ct. 1531; see also id. at733, 106 S.Ct. 1531 (“If defendants are notallowed to make lump-sum offers that would,if accepted, represent their total liability, theywould understandably be reluctant to makesettlement offers.”) (quoting Marek v.Chesny, 473 U.S. 1, 6-7, 105 S.Ct. 3012, 87L.Ed.2d 1 (1985)). Thus, to facilitate settle-ment by providing defendants with assur-ances as to the limits of their liability expo-sure, the parties to a lawsuit may, in con-junction with their merits negotiation, prop-erly negotiate statutory fees to be paid by thedefendant.

The concern motivating the decision inEvans-that prohibiting simultaneous negoti-ations and agreements as to merits and feeswill discourage settlements-simply does notexist, however, in a case, such as this one, inwhich the parties to the negotiations seek to

justify attorneys' fees as coming from a put-ative fund and to apply common fund prin-ciples. Usually, an agreement that provideslawyers fees on a common fund basis con-stitutes a “lump-sum” agreement, Evans, 475U.S. at 733, 106 S.Ct. 1531, one that enablesdefendants to know the precise extent of theirliability regardless of the amount of attor-neys' fees eventually awarded from the fund.Thus, the parties could have simply agreedupon the total amount of the putative fund, aswell as the damages and injunctive relief, andleft the division of that fund as between theclass and counsel to the district court, as isusual in common fund cases.FN21 Requiringthe parties to so proceed or, in the alternative,to agree to a fee award as part of the settle-ment agreement in an amount no higher thancould be justified by statutory fee-shiftingprinciples, fully serves the defendant's onlylegitimate interest in class counsel's feeaward. See In Re GMC, 55 F.3d at 819-20(“[A] defendant is interested only in dispos-ing of the total claim asserted against it ... theallocation between the class payment and theattorneys' fees is of little or no interest to thedefense.” (internal quotation marks and cita-tions omitted)); Florin, 34 F.3d at 562 n. 1(“The parties agreed that attorney's fees wereto come out of the settlement fund. Defen-dants have satisfied their obligation to payinto the settlement fund, and thus have nointerest in the amount of fees class counselwant to extract from the fund.”). That re-quirement thereby provides the requisiteimpetus to settlement on the defendant's partwhile protecting against a maldistribution ofthe total settlement package between theclass and its counsel.

FN21. The description of the totalamount of the fund need not take anyparticular form and could result from

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adding up separately-enumeratedamounts in the agreement.

Further, the effect of conditioning thesettlement on a set amount of attorneys' feesbased on an actual or putative common fundcan be to inhibit district courts from engagingin independent determinations of reasonablefees, as required by law. The parties'all-or-nothing approach imposes pressure toapprove otherwise acceptable*972 and de-sirable settlements in spite of built-in attor-neys' fees provisions. While this same dy-namic may exist where fees can be justifiedon a statutory fee basis, the more preciselodestar standards for adjudging the reason-ableness of such fees, summarized above,make the influence of such pressure muchless forceful.

[25] We hold, therefore, that in a classaction involving both a statutory fee-shiftingprovision and an actual or putative commonfund, the parties may negotiate and settle theamount of statutory fees along with the me-rits of the case, as permitted by Evans. In thecourse of judicial review, the amount of suchattorneys' fees can be approved if they meetthe reasonableness standard when measuredagainst statutory fee principles. Alternative-ly, the parties may negotiate and agree to thevalue of a common fund (which will ordina-rily include an amount representing an esti-mated hypothetical award of statutory fees)and provide that, subsequently, class counselwill apply to the court for an award from thefund, using common fund fee principles. Inthose circumstances, the agreement as awhole does not stand or fall on the amount offees. Instead, after the court determines thereasonable amount of attorneys' fees, all theremaining value of the fund belongs to theclass rather than reverting to the defendant.

The parties in this case did not followeither of these procedures, or any other thatadequately protected the class from the pos-sibility that class counsel were accepting anexcessive fee at the expense of the class.FN22

The district court therefore erred in approv-ing the consent decree.

FN22. By spelling out these alterna-tives, we do not mean to preclude allothers. Rather, the parties have flex-ibility in negotiating class action set-tlement agreements, including theattorneys' fee provisions. The alter-natives outlined in the text are para-digms. Any variants, to be reasona-ble, would have to provide equivalentassurance that the inherent tensionsamong class representation, defen-dant's interests in minimizing the costof the total settlement package, andclass counsel's interest in fees arebeing adequately policed by thecourt.

iii. Injunctive relief as part of the districtcourt's putative fund

Even if the fee award had been deter-mined in a procedurally proper way, ap-proval of the amount of the attorneys' fees oncommon fund principles would still havebeen mistaken as a matter of law, because theactual percentage award was much higherthan the 28% the district court recognized.

[26] In order for attorneys to obtain anaward of fees from a common fund, the courtmust be able to: (1) sufficiently identify theclass of beneficiaries; (2) accurately trace thebenefits; and (3) shift the fee to those bene-fiting with some exactitude. Van Gemert, 444U.S. at 478-79, 100 S.Ct. 745. “[T]he criteria

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are satisfied when each member of a certifiedclass has an undisputed and mathematicallyascertainable claim to part of a lump-sumjudgment recovered on his behalf,” whereasthey are not satisfied when “litigants simplyvindicate a general social grievance.” Id. at479, 100 S.Ct. 745.

Under these requirements, the monetaryrelief for the plaintiff class (including attor-neys' fees) provided for in the consent decreecould be converted as described above so asto qualify as a common fund from whichclass counsel could obtain an award of at-torneys' fees. The class consists of the ap-proximately 15,000 African-American Boe-ing employees and so is sufficiently identi-fiable. The benefits from the monetary reliefprovided for in the decree would be distri-buted according to *973 its terms and so canbe accurately traced. Finally, the fees couldbe shifted with exactitude to the benefitingclass if taken properly from the fund.

In approving the award of attorneys' feesprovided for in the consent decree, the dis-trict court employed the percentage methodto determine that the award was fair. Thecourt found that the fees constituted 28% ofthe putative fund, just above the 25%benchmark. To make this calculation, how-ever, the court included in the amount of theputative fund an estimated value of $3.65million for injunctive relief, the amount thatthe decree required Boeing to spend on ap-proval and implementation of this compo-nent.

[27] Although the injunctive relief fallssomewhere between the permissible and theprohibited bases for fees set forth in VanGemert-the relief neither produces “an un-disputed and mathematically ascertainable”

amount for each class member, nor merely“vindicate [s]” a general social griev-ance”-we have no difficulty here decidingthat the district court abused its discretion incounting the parties' estimated value of thatrelief towards the putative fund.

The injunctive relief included in theconsent decree requires Boeing only to “meetand confer” with class counsel or to discusscertain issues. Although Boeing must par-ticipate in such conferences and discussions,there is no requirement that Boeing take anyaction with respect to what the Companylearns. The conferences and discussions maynot result in tangible relief to class members.Moreover, a diversity consultant may notbenefit the class to a degree commensuratewith his or her cost.

Additionally, while the injunctive relief(along with the cost of obtaining approval ofthe decree) is to cost Boeing a fixed mini-mum amount, $3.65 million, some of theinjunctive relief described in the consent de-cree consists of steps Boeing had apparentlydecided to take on its own, even before itentered the settlement. The decree also per-mits Boeing to credit expenditures towardsthe injunctive relief amount without regard towhether such expenditures are in addition tothe cost of Boeing's prior outlays for admi-nistering similar programs. Thus, the truecost of the injunction to the defendant-andthe true benefit to the plaintiff class-is amatter of speculation and may be far less than$3.65 million. That amount of money cannotbe accurately traced to the decree, let alone tothe beneficiaries making up the class. With-out the estimated value of the injunctive re-lief, the fund is reduced to only $10.55 mil-lion, and the fee award of $4.05 millionconstitutes 38%-well above the 25%

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benchmark-of the putative fund.

We do not hold that a district court cannever consider the value of injunctive reliefin determining the reasonableness of acommon fund fee. For instance, in Hanlon,150 F.3d at 1029, we upheld the use of thecommon fund doctrine to award attorneys'fees after the parties reached a settlementagreement under which Chrysler would re-place defective latches on minivans that ithad manufactured. Although the replacementof latches is injunctive in nature, the agree-ment bestowed upon each beneficiary aclearly measurable benefit: one replacementlatch for each minivan owned. The courtcould therefore, with some degree of accu-racy, value the benefits conferred. Even so, inHanlon the district court used its valuation ofthe fund only as a cross-check of the lodestaramount, “reject[ing] the idea of a straightpercentage recovery because of its uncer-tainty as to the valuation of the settlement,”id., and it was on that basis that we affirmedthe fee award.

*974 Precisely because the value of in-junctive relief is difficult to quantify, itsvalue is also easily manipulable by over-reaching lawyers seeking to increase thevalue assigned to a common fund. We hold,therefore, that only in the unusual instancewhere the value to individual class membersof benefits deriving from injunctive relief canbe accurately ascertained may courts includesuch relief as part of the value of a commonfund for purposes of applying the percentagemethod of determining fees.FN23 See VanGemert, 444 U.S. at 478-79, 100 S.Ct. 745.When this is not the case, courts should con-sider the value of the injunctive relief ob-tained as a “relevant circumstance” in de-termining what percentage of the common

fund class counsel should receive as attor-neys' fees, rather than as part of the fund it-self. See Vizcaino, 290 F.3d at 1049. Alter-natively, particularly where obtaining in-junctive relief likely accounted for a signifi-cant part of the fees expended, courts can usethe common fund version of the lodestarmethod either to set the fee award or as across-check to assist in the determination ofhow the “relevant circumstance” of the in-junctive relief should affect a percentageaward. See id. at 1050 (“Calculation of thelodestar, which measures the lawyers' in-vestment of time in the litigation, provides acheck on the reasonableness of the percen-tage award.”).FN24

FN23. Appellees cite cases in whichfees have been awarded as a percen-tage of what they refer to as“non-monetary” benefits. But there isno appellate case cited that supportsthe fee award here. Two of the casescited concerned not a common fundbut the inapplicable common benefitdoctrine. Mills v. Electric Auto-LiteCo., 396 U.S. 375, 392, 90 S.Ct. 616,24 L.Ed.2d 593 (1970); Loring v. Cityof Scottsdale, 721 F.2d 274, 275 (9thCir.1983). And in Hanlon, supra, andWing v. Asarco Inc., 114 F.3d 986,990 (9th Cir.1997), attorneys' feeswere calculated (as opposed tocross-checked) not by a commonfund percentage approach but usingthe lodestar method.

FN24. As Vizcaino notes, where at-torneys' fees are awarded on a com-mon fund basis, “[t]he bar againstrisk multipliers ... does not apply,” sothe lodestar approach can include arisk multiplier. 290 F.3d at 1051; see

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also Florin, 34 F.3d at 564; WPPSS,19 F.3d at 1299-1300.

The district court did not employ either ofthese procedures here. Nor can we determineon the record before us that considering theinjunctive relief as a “relevant circumstance”or employing the common fund lodestarmethod would have justified the award of$4.05 million as a reasonable fee. On thisground, also, the district court erred in ap-proving the proposed attorneys' fees award.

iv. Treatment of Costs of Litigation[28] In assessing the reasonableness of

the fee award, the parties and the districtcourt (1) included the pre-settlement costs oflitigation-fairly low in this case, as the set-tlement occurred early in the lawsuit-as partof the fees awarded; but (2) included the costincurred by Boeing for providing notices tothe class of the settlement in the value of theinjunctive relief, and therefore as part of theputative fund against which the reasonable-ness of the fees was measured.

The parties to the proposed settlementagreed to the inclusion of costs in the amountattributed to fees and the objectors, unders-tandably, have not protested that inclusion.As all of those affected are content with thatmethod of calculation and no class member'sinterests are adversely affected, the districtcourt had no cause to disapprove the attribu-tion, nor do we.

The district court also did not abuse itsdiscretion by including the cost of provid-ing*975 notice to the class of the proposedconsent decree as part of its putative fundvaluation, although the cost of providing twonotices rather than one should not have beenincluded. We have said that “the choice of

whether to base an attorneys' fee award oneither net or gross recovery should not makea difference so long as the end result is rea-sonable. Our case law teaches that the rea-sonableness of attorneys' fees is not meas-ured by the choice of the denominator.”Powers v. Eichen, 229 F.3d 1249, 1258 (9thCir.2000). The post-settlement cost of pro-viding notice to the class can reasonably beconsidered a benefit to the class. Also, where,as here, it is the defendant who pays for thenotice, we may assume that the inherent in-centives to minimize the cost involved aresufficient. Additionally, the court's supervi-sion of the form of notice and the method ofcommunication assures that the costs ex-pended are contained. We conclude thatwhere the defendant pays the justifiable costof notice to the class-but not, as here, an ex-cessive cost-it is reasonable (although cer-tainly not required) to include that cost in aputative common fund benefiting the plain-tiffs for all purposes, including the calcula-tion of attorneys' fees.

4. Awards to Named and Unnamed ClassMembers

[29] One other aspect of the settlementagreement also raises serious concerns as toits fairness, adequacy and reasonableness.The 237 people who are IIRs (and have notopted out) would each receive, on average,sixteen times greater damages than each ofthe unnamed class members; the subgroup ofIIRs who are class representatives wouldreceive even more relative to the class as awhole. While a point-based formula is usedto distribute the damages fund among the restof the class members who make claims, nosuch objective standards were applied in de-termining who would be paid as an IIR or inwhat amount. We find no sufficient justifi-cation in the record for this differential in the

Page 45



amount of damage awards and the processfor awarding them.

The district court “considered this dis-parity carefully because excessive paymentsto named class members can be an indicationthat the agreement was reached through fraudor collusion.” Indeed, “[i]f class representa-tives expect routinely to receive specialawards in addition to their share of the re-covery, they may be tempted to accept sub-optimal settlements at the expense of theclass members whose interests they are ap-pointed to guard.” Weseley v. Spear, Leeds &Kellogg, 711 F.Supp. 713, 720(E.D.N.Y.1989); see also Women's Comm.for Equal Employment Opportunity v. Nat'lBroad. Co., 76 F.R.D. 173, 180(S.D.N.Y.1977) (“[W]hen representativeplaintiffs make what amounts to a separatepeace with defendants, grave problems ofcollusion are raised.”).

Although the district court expressedconcern about the differential in damageawards, the court ultimately concluded thatthe settlement was reasonable, explainingthat the named plaintiffs are “the group ofclass members identified by plaintiffs'counsel as having the strongest claims andthus as providing the strongest foundation forthe lawsuit. Because they have the strongestclaims it is fair that they would receive thelargest awards.” The record does not, how-ever, support this explanation.

Class counsel represent that an individualbecame an IIR due to his or her willingness tostep forward, risk retaliation, contribute tothe attorneys' costs, and assist *976 in coor-dination of the lawsuit.FN25 The contention isthat the individuals with the strongest claimswere the most likely to participate in this

manner. But that generalization greatlyoversimplifies. Some further, considerablymore direct evidence regarding the strengthof the IIRs' claims is necessary to justify thelarge disparities in damages.

FN25. For instance, a declaration byone of the class lawyers states that thenamed plaintiffs

were those who were willing to takethe risk of appearing as namedplaintiffs; being team leaders; as-sisting the regional groups in ga-thering documents, evidence, andidentifying other witnesses; coor-dinating the information flow toand from class counsel; assisting inefforts to raise sums to pay for thecost of this litigation; and/oragreeing to come forward with theirclaims and be witnesses. In ourminds, each of these people was ineffect a class representative or atleast prepared to be a class repre-sentative.

The need for direct evidence supportingthe representation that the IIRs had particu-larly strong claims is heightened because therecord suggests an alternative explanation forthe selection of particular individuals asIIRs-their presettlement retention of classcounsel and promise to contribute to coun-sel's costs. Without contrary proof, the pos-sibility that class counsel were simply re-warding with higher damages amounts thoseclass members who had promised to contri-bute toward their costs during the pendencyof the suit gains considerable plausibility.

Such special rewards for counsel's indi-vidual clients are not permissible when the

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case is pursued as a class action. Generally,when a person “join[s] in bringing [an] actionas a class action ... he has disclaimed anyright to a preferred position in the settle-ment.” Officers for Justice, 688 F.2d at 632.Were that not the case, there would be con-siderable danger of individuals bringingcases as class actions principally to increasetheir own leverage to attain a remunerativesettlement for themselves and then trading onthat leverage in the course of negotiations.

In In re Cont'l Ill. Sec. Litig., 962 F.2d566, 571 (7th Cir.1992) (hereinafter “Conti-nental Illinois ”), the Seventh Circuit ap-proved of “incentive fees” to compensatenamed plaintiffs for the risks they take andtheir vanguard role in the class action. See id.(“Since without a named plaintiff there canbe no class action, such compensation as maybe necessary to induce him to participate inthe suit could be thought the equivalent of thelawyers' nonlegal but essential case-specificexpenses, such as long-distance phone calls,which are reimbursable.”). Continental Illi-nois would not justify the damages distribu-tion in this case, as the much higher awards inthe consent decree went to a large group ofclass members, not only to the class repre-sentatives. The two hundred-odd IIRs whowere not class representatives were not es-sential to the litigation, although they mayhave been helpful to it.

We have, however, approved incentiveawards of $5,000 each to the two class rep-resentatives of 5,400 potential class membersin a settlement of $1.725 million. See In reMego Fin. Corp. Sec. Litig., 213 F.3d 454,463 (9th Cir.2000); see also In re U.S. Ban-corp Litig., 291 F.3d 1035, 1038 (8thCir.2002) (approving $2,000 incentiveawards to five named plaintiffs out of a class

potentially numbering more then 4 million ina settlement of $3 million); Cook, 142 F.3d at1016 (approving, in the context of a recoveryof more than $14 million, an incentive pay-ment of $25,000 to one named plaintiff who“spent hundreds of hours with his attorneysand provided them with ‘an abundance ofinformation’ ”); *977Continental Illinois,962 F.2d at 571-72 (upholding a districtcourt's rejection of a proposed $10,000 awardto a named plaintiff “for his admittedlymodest services”); In re SmithKline BeckmanCorp. Sec. Litig., 751 F.Supp. 525, 535(E.D.Pa.1990) (approving $5,000 awards forone named representative of each of nineplaintiff classes involving more than 22,000claimants in a settlement of $22 million). Inthe proposed consent decree in this case, 29named class representatives are designated toreceive payments totaling $890,000. Com-pared to the three cases just mentioned, thedifferent orders of magnitude in the presentcase concerning the number of named plain-tiffs receiving incentive payments, the pro-portion of the payments relative to the set-tlement amount, and the size of each pay-ment-here up to $50,000, with an average ofmore than $30,000-are obvious. Neverthe-less, named plaintiffs, as opposed to desig-nated class members who are not namedplaintiffs, are eligible for reasonable incen-tive payments. The district court must eva-luate their awards individually, using “rele-vant factors includ[ing] the actions theplaintiff has taken to protect the interests ofthe class, the degree to which the class hasbenefitted from those actions, ... the amountof time and effort the plaintiff expended inpursuing the litigation ... and reasonabl[e]fear[s of] workplace retaliation.” Cook, 142F.3d at 1016.

Additionally, class members can cer-

Page 47



tainly be repaid from any cost allotment fortheir substantiated litigation expenses, andidentifiable services rendered to the classdirectly under the supervision of classcounsel can be reimbursed as well from thefees awarded to the attorneys.FN26 See Mis-souri v. Jenkins, 491 U.S. 274, 285, 109 S.Ct.2463, 105 L.Ed.2d 229 (1989). Similarly, ifclass members other than the named plain-tiffs demonstrate that they were in fact reta-liated against-or at least make some credibleallegation of past or possible future retalia-tion-based on their role in the lawsuit, higherdamages awards for such individuals than forother members of the class would be justi-fied. But any plaintiff assumes the risk ofretaliation, and we hesitate to single outnon-named plaintiff IIRs as entitled to spe-cial payments simply for undertaking suchrisk.

FN26. According to class counsel,counsel will return to the IIRs themonies they paid under retaineragreements, so the damages awardsdo not cover those funds.

Further, singling out a large group ofnon-named plaintiff class members forhigher payments without regard to thestrength of their claims eliminates a criticalcheck on the fairness of the settlement for theclass as a whole. Such individual classmembers who have actively participated inthe litigation are the ones likely to be mostaware of the dynamic at the negotiating table,the strength of the class claims, and the costsof pursuing the litigation. If they support thesettlement agreement and are treated equallyin that agreement with other class membersmaking similarly strong claims, the likelih-ood that the settlement is forwarding theclass's interests to the maximum degree

practically possible increases. If, on the otherhand, such members of the class are providedwith special “incentives” in the settlementagreement, they may be more concerned withmaximizing those incentives than withjudging the adequacy of the settlement as itapplies to class members at large.

All these concerns about incentive or riskpayments to certain class members are ex-acerbated in this case by the allegation, andin one case (that of Cordell Bolder) the ap-parent reality, that IIR awards went to indi-viduals who were not proper *978 membersof the class.FN27 Again, if those individualsrendered compensable services to the law-yers, then the lawyers should pay for thoseservices from the amount of the fund prop-erly awarded for costs or fees, as appropriate.But if one or more of these individuals isclearly not a member of the class and there-fore not entitled to any damages award, anyproposed decree should be approved only ifthe provision awarding that person or thosepersons damages is deleted. If, alternatively,an individual's class membership is debata-ble, then the award to him or her can beconsidered an element of the compromise.

FN27. Cordell Bolder is the son of aclass representative whose support ofthe decree was important. Objectorsalso allege irregularities with respectto another IIR, Mr. Bolder's stepfa-ther, Jimmy Dean, as well as a classrepresentative, Charles Jones. Thedistrict court had a responsibility toaddress each of these individuals'proposed payments. Instead, itsanalysis did not go beyond statingthat the “award to Mr. Bolder [was]unfortunate,” but not fraudulent.Having found that “the parties now

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admit that he is not a member of theclass,” the court should have madeapproval of the decree contingent onits amendment to eliminate “this sin-gle error.”

We conclude that the aspects of the set-tlement agreement pertaining to the distribu-tion of the damages fund cannot stand on thepresent record. Because the very large dif-ferential in the amount of damage awardsbetween the named and unnamed classmembers is not justified on this record, thedistrict court abused its discretion in findingthe settlement agreement to be fair, adequateand reasonable under Rule 23(e). We there-fore reverse the judgment on this ground aswell.

III. CONCLUSIONHaving determined that reversal is ap-

propriate on several grounds, we need notconsider the other arguments of the objec-tors.

[30] On remand, the parties will have achoice concerning whether to attempt to jus-tify the present proposed agreement underthe principles outlined above or, instead, torenegotiate the aspects of the agreement wehave indicated are questionable. If theychoose the former course and are able tojustify the damages distribution (which onthe present record appears quite unlikely),they will then also have to substantiate thefee award using a lodestar calculation underthe applicable fee-shifting statutes rather thanon a common fund basis.FN28 For the reasonsstated, the fee as it stands cannot be justifiedon a common fund basis, and the court canonly approve or disapprove the presentagreement in its entirety. Thus, if the feecannot be justified on the fee-shifting statu-

tory basis, the entire agreement will have tobe renegotiated.

FN28. In that case, the limitation onrisk multipliers announced in Dague,supra, would apply.

If, alternatively (and more likely, giventhe seeming difficulty of justifying the cur-rent proposed decree), the parties decide torenegotiate and are able to present a revisedsettlement agreement to the district court, thecourt will of course need to reassess carefullythe fairness of the settlement in accord withthe standards we have explicated. If the par-ties negotiate a settlement fund and leave theattorneys' fees to be determined by the courton a common fund basis, then the districtcourt, upon petition by class counsel, willdetermine these fees under the common fundprinciples discussed above.

The decision of the district court ap-proving the proposed consent decree isREVERSED and REMANDED for pro-ceedings consistent with this opinion.

*979 TROTT, Circuit Judge, Dissenting.As they always do, my conscientious

colleagues display a thorough and scholarlygrasp of the issues that arise in the settlementof class lawsuits. With all respect, however, Isee this settlement and the district court'sapproval of it in a different light. Thus, Irespectfully dissent.

Three main worries, each of which in myview is just an illusion, appear to be drivingthe majority's decision to reverse the districtcourt's approval of this consent decree: (1)the “possibility” that class counsel couldhave betrayed their clients in favor of theirown fees; (2) that the “large differential” in

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the distribution of monetary awards betweenclass representatives and certain identifiedclass members, on one hand, and unnamedclass members on the other, indicates some-thing rotten in Denmark; and (3) that thedistrict court inflated the $3.65 million valueattached to the “largely precatory” injunctiverelief. As I read this record, and as I shallattempt to demonstrate, these concerns haveno foundation in fact or law.

CollusionThe Objectors correctly direct our atten-

tion to the rule that we have an obligation topolice the settlement of class actions forevidence of collusion. See Fed.R.Civ.P. 23(e)(“A class action shall not be dismissed orcompromised without the approval of thecourt....”) “The purpose of this salutary re-quirement is to protect the nonparty membersof the class from unjust or unfair settlementsaffecting their rights” as well as to minimizeconflicts that “may arise between the attor-ney and the class, between the named plain-tiffs and the absentees, and between varioussubclasses.” Piambino v. Bailey, 610 F.2d1306, 1327-28 (5th Cir.1980). We are to becognizant of the “ ‘danger ... that the lawyersmight urge a class settlement at a low figureor on a less-than-optimal basis in exchangefor red-carpet treatment for fees.’ ” In reGeneral Motors Corp. Pick-Up Truck FuelProducts Liab. Litig., 55 F.3d 768, 819 (3dCir.1995) (quoting Weinberger v. GreatNorthern Nekoosa Corp., 925 F.2d 518, 524(1st Cir.1991)). In fact, this is the preciserationale fueling the Objectors' challenge tothe attorneys' fees agreement: it suggests (1)that the attorneys “exploited the class actiondevice to obtain large fees at the expense ofthe class,” and (2) that the representation wasdeficient.

Given the purpose of this rule, it occurs tome that if a class action merits settlement isnot the product of collusion, the class et ce-tera has not been sold down the river in ex-change for fees, and if the representation ofthe plaintiffs has been adequate, then thereasonableness of the fees presents itself in adifferent light, especially if the award isseparate from the merits settlement of thecase, as it is here. Thus, the first question forus is whether a showing has been made thatthe merits settlement suffers from some in-firmity, suggesting in turn that the feesdemonstrate a quid pro quo red carpettreatment in return for a betrayal of the client.I answer this question “no.”

The “possibility” of collusion in this caseturns out under scrutiny to be a classic redherring. The district court carefully lookedinto this “possibility” and found nothing ofthe sort. The court allowed the Objectors todepose five individuals the Objectorsclaimed were participants in an alleged secretdeal. These depositions uncovered no evi-dence of collusion, and they supported theproponent's contention that there was no suchevidence. At the end of the day on this im-portant issue, the district court said:

Settlement agreements that are presentedprior to class certification are to be *980considered with particular care becausethey are more likely to be a product ofcollusion and because they have not beennegotiated by court-approved representa-tives. The Court has exercised this scrutinyand finds no evidence of collusion. In ad-dition, the Court notes that unlike manyother class actions, the plaintiffs here didnot file a complaint having already agreedto a settlement. On the contrary, this casewas contentiously litigated for a substantial

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period prior to the settlement negotiations.And the plaintiffs' counsel spent a greatamount of time preparing the case before itwas filed. The nature and quality of thiswork gives every indication that plaintiffs'counsel intended to pursue these claimsvigorously until they reached a satisfactoryresult; and is wholly inconsistent with thesuggestion that the attorneys planned tosacrifice the plaintiffs' claims in exchangefor a large fee award. It also indicates thatthe plaintiffs' counsel had obtained suffi-cient evidence to understand the strength ofthe claims despite the lack of formal dis-covery.

The majority is certainly correct whenthey conclude that “[t]he district court neitherabused its discretion in finding that counsel'srepresentation was appropriately vigorousfor purposes of class certification nor clearlyerred in finding that there was no overt col-lusion”; but then my colleagues erroneouslydecide this case on mere fears of the possi-bility of collusion-for which the district courtspecifically looked and found to benon-existent. What does collusion or thepossibility of collusion have to do with thiscase and this settlement? Nothing. But, themere specter of collusion in cases like thisends up almost as a neurosis undoing thissettlement-even though villainy is manifestlynon-existent.

Furthermore, this case, like all such cas-es, is unique in its facts and circumstances,and the district court's clear understanding ofall of its aspects, as expressed in the court'sOrder of approval, dated September 30,1999, explain away the “troublesome” di-mensions of the settlement over which mycolleagues-and the Objectors-fret. Three ofthese circumstances are covered by the first

three Hanlon factors the district courtmust-and did-independently verify to deter-mine that the consent decree is fair, adequate,and reasonable: (1) the strength of the plain-tiffs' case; (2) the risk, expense, complexity,and likely duration of further litigation; and(3) the risk of maintaining class action statusthroughout the trial. Hanlon v. ChryslerCorp., 150 F.3d 1011, 1026 (9th Cir.1998).The district court made the following find-ings and conclusions about these factors:

The Court reviews the first three factorstogether. The strengths of the plaintiffs'claims and the risks of future litigation areclearly related questions. Boeing has faceda series of individual race discriminationlaw suits in recent years and has won everyone. Although the number of named plain-tiffs in this case and the descriptions oftheir experiences lend credence to their al-legations, discrimination cases are noto-riously difficult to prove, particularly whenthey are based on failures to promote orother discretionary decisions. There is alsosome risk that the class certified by theCourt would not survive a challenge byBoeing, which might, for example, be ableto demonstrate after more extensive dis-covery that the class claims are too indi-vidual to meet the commonality and typi-cality requirements. Finally, there is nodoubt that continued litigation would beenormously burdensome and expensive forthe plaintiffs as well as for Boeing. Theprice of discovery *981 alone in a nation-wide class action such as this one is almostalways measured in millions of dollars. Theobjectors raise no serious challenges tothese points, and the Court finds that thesefactors all strongly favor adopting theconsent decree.

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The record provides ample support forthe district court's understanding of theseaspects of this complex litigation.

Accordingly, I conclude that there was nochicanery in this case, and the aspects of theconsent decree to which the Objectors pointas telltales of trouble are clearly dealt withand adequately explained by counsel and thedistrict court. Judge Berzon's scholarly opi-nion is an excellent discussion of that forwhich we must always be vigilantly on thelookout in these cases, but in the end, none ofit applies to this settlement. My conclusion inthis regard drives my analysis of the rea-sonableness of the attorneys' fees, as I laterexplain.

The Differences in Damage AwardsNext, there is my colleagues' problem

with the distribution of monetary awards.This, too, was addressed, explained, andadequately handled by the district court:

More problematic is the disparity be-tween the awards to the named plaintiffsand individually identified recipients andthe awards to absent class members. TheCourt has considered this disparity care-fully because excessive payments to namedclass members can be an indication that theagreement was reached through fraud orcollusion. After reviewing the record,however, the Court concludes that there isnothing improper about the damagesawards under the decree in this case. Thereare 264 named members of the class andindividually identified recipients who willreceive the larger awards. This is a verylarge group to have been brought in-linebehind an allegedly collusive agreement.More importantly, this is the group of classmembers identified by plaintiffs' counsel as

having the strongest claims and thus asproviding the strongest foundation for thelawsuit. Because they have the strongestclaims it is fair that they would receive thelargest awards. Also awards to named classmembers and others assisting in the pros-ecution of a class action are generally sig-nificantly larger than awards to unnamedclass members to compensate the firstgroup for the time and risks taken by in-volving themselves in the litigation. Forthese reasons, the Court concludes that theawards to the named parties are not exces-sive.

* * *

As a final factor supporting the damagesprovision of the consent decree, the Courtnotes that the opt-out provision allowedany member of the class to preserve an in-dividual claim. Notice was provided to allclass members by mail and by publicationof the effects of the suit, and informationabout the claims process was readilyavailable from the Clerk of the Court andfrom other sources. Any individual whobelieved that the damages he or she islikely to receive under the decree are in-adequate could opt-out and file an indi-vidual suit. The decree provides that thestatute of limitations period for such claimswould be tolled during the pendency of theclass action suit. This protection, as well asthe other factors described above, leads theCourt to conclude that the provisions formonetary relief in the decree are adequate,fair, and reasonable.

The Value of the InjunctionWith all respect, my colleagues inappro-

priately brush off a highly significant as-pect*982 of the record on which the district

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court explicitly relied in evaluating the valueof this settlement, starting with the informedDeclaration of Jesse Jackson who vouched instrong terms for its benefit to the affectedemployees. Here verbatim is what ReverendJackson offered the district court in this re-gard:

In June 1998, I was asked if I would re-view the racial issues pertaining to TheBoeing Company (“Boeing”) and, if I feltthere was a problem, if I could offer someassistance. Before agreeing to do so, I re-viewed a substantial number of documentsregarding promotional opportunities forAfrican-Americans at Boeing. I met manyof the named plaintiffs in the class action tohear, first hand, what they perceive to bethe roadblocks to equal opportunity atBoeing. I was impressed by the namedplaintiffs, their candor, and their ability toarticulate what they perceive to be thehurdles to equal opportunity. In conversa-tions with them it was clear they werepursuing this litigation not for monetarygain for themselves or to receive a sub-stantial monetary award for the class orparticular individuals with grievous dis-criminatory claims but, instead, they werecommitted to trying to find a mechanismwhich would over time permit qualifiedminorities to have the jobs they deservedbut only after full and fair competition withnon-minorities. They were not looking forfreebies but simply a fair opportunity to beconsidered and to be promoted on theirown merits. After listening to these namedplaintiffs, and after discussing the matterwith McKAY HUFFINGTON HARRELL& DESPER (“Plaintiffs' Class Counsel”), Iagreed to participate in the process. I con-tacted senior management at Boeing andscheduled several meetings with them. I

personally met with Phil Condit and othersenior management officials. We openlyand candidly discussed the racial issues atBoeing and they provided materials that Irequested so that I could review the signi-ficance and magnitude of the issues atBoeing. After these meetings, I met withand worked with Plaintiffs' Class Counseland the named plaintiffs in defining thegoals of this litigation, what could beachieved and how to achieve it. I have notbeen paid any compensation [for] my ser-vices and advice, nor have the organiza-tions with which I am affiliated been paidanything for my services, and there havebeen no promises of nor is there an expec-tation of payment in the future either forpast or future services regarding this liti-gation or Boeing.

The proposed settlement in the Boeinglitigation is, in my view, one that shouldmake Boeing and its African-Americanworkers proud. It not only provides signif-icant monetary relief, relative to the po-tential recovery for the class in this case,but advances the equal opportunity causeto a new and somewhat novel level. Onemight say that the proposed consent decreeis even bold. To my knowledge no otheremployer has agreed to provide to itsAfrican-American employees, free ofcharge for three years, an outside, unaffi-liated law firm with African-Americanpartners to review, assist, and advocateemployment opportunities for AfricanAmericans. I know from my personal ex-perience that there is no language in a pol-icy, no committee, or any other of the tra-ditional kinds of equitable relief in em-ployment consent decrees that can evenremotely come close to the efficacy of di-rect involvement by an independent advo-

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cate on behalf of a disenfranchised worker.Having a lawyer available to assist anAfrican-American worker to understandthe employment process, the *983 com-plaint process, and to challenge a failedpromotional bid will, in my opinion, sig-nificantly increase the chances that thatAfrican-American worker, and others likehim or her, will be fairly promoted in thefuture. This consent decree may well be-come the model or template for futureconsent decrees. Providing a truly inde-pendent advocate to champion the causefor African-American minority workers-asthis consent decree does-may become thebenchmark by which future employmentclass settlements are measured. I applaudBoeing for having the courage to providesuch an advocate for its workers andPlaintiffs' Class Counsel for taking on theobligation and the significant financialrisks that it entails.

As I said before, I've been involved inseveral race-related lawsuits including, butnot limited to Texaco. In those, I workedwith the African American workers, man-agement teams, and the lawyers to resolveequal opportunity issues. There, as in thiscase, I facilitated the negotiation processand the settlements. From that experience,and my general experience in working withbusinesses on racial issues, I can saywithout qualification that the proposedsettlement for the Boeing litigation is goodfor minority workers and I urge the Courtto approve it.

(Emphasis added).

The Reverend Jackson's opinion is justthe beginning. An impressive array of ex-perts also submitted declarations in favor of

this settlement, experts simply unnamed andignored by the majority.

Dr. Larry Davis, Ph.D., a chaired pro-fessor of racial and ethnic diversity atWashington University in St. Louis, Mis-souri, said about the proposed consent de-cree, and its forward-looking aspects:

This is truly a bold approach and, in myexperience, would do more in the long runto advance the career opportunities of in-dividual African-Americans at Boeing thanany added verbiage to existing programs,than simply increasing their existing wagesor salaries, or even giving them an auto-matic one-time promotion now. It providesa powerful enforcement device and infor-mation resource that is critically absent inmost corporate environments. I would notbe surprised if this aspect of the BoeingConsent Decree-that provides for a disin-terested outside law firm to assist the em-ployer's workers at no charge-becomes therole model or template for further em-ployment discrimination cases. I encouragethe Court to give favorable consideration tothis component of the Proposed ConsentDecree.

(Emphasis added)

Dr. Al Black, Ph.D., a senior lecturer ofsociology at the University of Washingtonagreed:

This seems to be a novel approach to ahistorical problem-affirmative plans de-signed to defeat discrimination without anactive enforcement division or monitoringgroup giving it real teeth. If such “monitor”provides free legal service to its constitu-ents, reviews their employment history and

Page 54



applications for job opportunities, assiststhem with job applications, and investi-gates problems should opportunities be-come unlawfully denied, then tremendousresults can occur. This can be a powerfulenforcement vehicle and a tremendousopportunity for African-American em-ployees at Boeing. Such approach can havethe effect of establishing real meaning tothe affirmative action rhetoric commonlyregurgitated by large corporations and notmonitored or enforced.

*984 Traditional affirmative action pro-grams have established the right frame-work with which to begin buildingprocesses that equalize employment con-ditions. The success of these programs islargely dependent upon how they are im-plemented and monitored. I believe that adedicated outside monitoring source wouldfurther tremendously the success of thesetypes of programs.

Gary Smith, a senior partner with the IvyPlanning Group, a management consultingfirm serving such clients as IBM, MorganStanley, Zerox, the U.S. Postal Service, andChase Manhattan Bank saw this settlement asdid his professional counterparts:

Based on my professional judgement,there is incredible value in the creation of asystem whereby employees have access toindependent counsel, willing to devotetheir time and resources to measuring andmonitoring the success of the employers'commitment to diversity issues, and whoare available to gather career related in-formation for the worker, to assist in themaze of varying application or promotioncriteria, and to confront the employer if theworker's job/promotion application iswrongly rejected.

The success of any diversity initiative isdependent on how much the employer po-lices itself. In today's corporate environ-ment, effective diversity efforts are beingmoved beyond H.R. organizations andmade the responsibility of line managers.Human Resources and EEO resources arenever sufficient. The management teamwill always choose to devote its limitedresources and money to activities that moredirectly generate income. Putting these twophenomenon [sic ] together means thateven the best affirmative action plan cannotachieve optimal results. However, if anorganization is willing to allow an outsidefirm to assist in these efforts, incrediblevalue is bestowed upon the employee, withbottom line improvements being passed onto the organization.

Kerby Collins, the Internal Civil RightsManager for the Washington State Depart-ment of Transportation was of a similarmind:

When and where internal complaintprocedures and adequate monitoring re-sponsibilities fail, as claimed by the Afri-can American employees at The BoeingCompany, I believe the most productiveand powerful tool available to complai-nants, would be access to independent legalcounsel charged with the responsibility ofmonitoring the organization's compliancewith the law, or in this case, a ConsentDecree. While many organizations may notwelcome this type of “policing” function, iforganizations are willing to demonstratethis commitment, in the long run it willresult in improved organizational behaviorand in turn, profitability.

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How my colleagues can choose to dis-miss the evidence regarding the importanceand real value of the injunctive relief againstfuture job discrimination is beyond me. Themajority seems simply-and inappropriate-ly-to disbelieve class counsel when they saythat “Boeing will also pay $750,000 to retainclass counsel for three years after the set-tlement becomes final to provide free legalassistance to African-American employeesseeking career advancement at Boeing.”There is absolutely nothing in this record, Irepeat, nothing to suggest that we should nottake class counsel at their word about theirpromises of free legal assistance to theseemployees, assistance paid for by Boeing.

My colleagues express similar concernabout attaching value to what they dismiss*985 as “changes already ... implemented,”as though matters in the works somehow donot count, or have no value. Yet, they over-look why the changes which they discountcame to pass. To quote Boeing in its brief tothis court:

Objectors also attack certain elements ofthe equitable relief as “illusory” becausethey allegedly were not brought aboutthrough the class action litigation. Thisstatement, however, is factually un-founded. The equitable relief provided bythe Consent Decree was carefully tailoredto address the concerns raised by plaintiffsin the two Seattle lawsuits, which also wereraised by many African-American em-ployees during the period of threatenedlitigation that led up to those lawsuits.Thus, while some of the equitable reliefmay have been “in the works” prior to theeffective date of the Consent Decree, thatrelief was clearly the result of the pressurebrought to bear on Boeing by the lawsuits.

Some background of the events leading upto the litigations helps illustrate this point.

In late 1996 and early 1997, two groupsof African-American employees fromBoeing's Everett, Washington and Auburn,Washington facilities came forward andexpressed concerns regarding alleged racediscrimination. Boeing agreed to intervieweach employee who raised a complaint,consider common issues raised, and takeappropriate action to address the concerns.These two groups grew to approximately165 employees, and a number of thoseemployees are now included in the SeattleClass Action as IIR's.

The concerns-and litigationthreats-expressed by the two groups cen-tered around perceived unfairness in pro-motions, especially: (1) the ERT (“Em-ployee Request for Transfer”) system usedby Boeing as an element of selecting per-sons for promotions within the hourlyranks; (2) perceived unfairness in the se-lection of entry-level managers; and (3)perceived ineffectiveness of the EEO in-vestigation and corrective action function.While Boeing did not believe that thesesystems were discriminatory, the companynevertheless began to develop improvedprocesses in response to these concerns andthreats of litigation. Equitable relief to ad-dress these concerns-as well as additionalrelief addressing other issues-is now foundin the Consent Decree. When a defendanttakes voluntary action to address claimsraised by plaintiffs in litigation, its actionsare hardly considered “illusory”-under ap-propriate circumstances plaintiffs in suchcases may be considered “prevailing par-ties” entitled to recover attorneys' fees. See,e.g., Stivers v. Pierce, 71 F.3d 732, 751 (9th

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Cir.1995) (citing Farrar v. Hobby, 506U.S. 103, 113 S.Ct. 566, 121 L.Ed.2d 494(1992)).

Attorneys' FeesMy colleagues' problems with the attor-

neys' fees stem from getting lost in unfami-liar trees and a consequent failure to see theforest for what it is. This settlement promisesclear future value to African-Americansworking for one of our nation's largest andmost important employers. Measured againstthis value, much of which is intangible, themodest attorneys' fees agreement appears tome on the record to be quite appropriate. As Ihave pointed out, it is a stand alone aspect ofthe settlement. In dollar terms, it does notsubtract from the value of the settlement,which is only a small part of what the set-tlement accomplishes. The merits settlementitself was (1) free of collusion and chicanery,(2) generous in its opt-out provisions, (3) fairin its monetary provisions,*986 (4) forth-coming in its look to the future, and (5) vi-gorously litigated. Nevertheless, the attor-neys' fees issue ends up as the proverbial tailwagging the dog to death, even though thedog is not a dog at all, but a viable solution toa serious problem demanding prompt reso-lution. If the settlement itself were truly sus-picious and indicative of a betrayal, then adifferent approach might be in order; but ifthe settlement stands, in my view, so do thesefees. It may not match up perfectly with othermethods of measuring whether fees are ap-propriate, but no matter whether fees here arelow or high, they do not subtract from therelief obtained by the plaintiffs. My col-leagues say that the method used in this caseto determine attorneys' fees “allows too muchleeway for lawyers representing a class tospurn a fair, adequate and reasonable set-tlement for their clients in favor of inflated

attorneys' fees.” This problem is not part ofthis case, and I do not see how something thatmight have happened but did not must tor-pedo this hard-bargained positive outcome.In the end, this case has been decided basedon possibilities, not realities.

ConclusionThe standard of review we are bound to

employ is highly deferential, as it should be.As the majority admits, “We have repeatedlystated that the decision to approve or reject asettlement is committed to the sound discre-tion of the trial judge because he is exposedto the litigants, and their strategies, positions,and proof. Hanlon, 150 F.3d at 1026 (citationand internal quotation marks omitted). Ac-cordingly, a district court's final determina-tion to approve the settlement should be re-versed ‘only upon a strong showing that thedistrict court's decision was a clear abuse ofdiscretion’ ...” Hanlon, 150 F.3d at 1026(quoting In re Pac. Enters. Sec. Lit., 47 F.3d373, 377 (9th Cir.1995)). Here, not only dothe majority fail to adhere to this deferentialstandard, adopting instead a standard of“somewhat uneasy with the settlement as awhole”; but in my view, they do so in a casewhere the district court's approval of the set-tlement and of the attorneys' fees was clearlyan appropriate exercise of discretion. Thedistrict court judge responsible for this caseis highly experienced, capable, and astute,one over whose eyes no one pulls the wool. Itis a rare settlement that will delight all par-ties, but this settlement has much to say for it.Accordingly, I dissent from a decision thatwill have the effect of unnecessarily delayingfull implementation of this efficacious solu-tion for four years-if not more-from the datethe district court found it to be appropriate.

C.A.9 (Wash.),2003.

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Staton v. Boeing Co.327 F.3d 938, 55 Fed.R.Serv.3d 1299, 03Cal. Daily Op. Serv. 3610, 2003 DailyJournal D.A.R. 4647

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¨0¤q#6+*5 !i«0810322111021000000000001Docket #2311 Date ... · 327 F.3d 938, 55 Fed.R.Serv.3d 1299, 03 Cal. Daily Op. Serv. 3610, 2003 Daily Journal D.A.R. 4647 (Cite as: 327 F.3d

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