Artem V. Gelis v. BMW of North America LLC

U.S. COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 24-2721

ARTEM V. GELIS; BHAWAR PATEL; CHRIS WILLIAMS;

ASHKOCK PATEL; KENNETH GAGNON ET AL.,

v.

BMW OF NORTH AMERICA, LLC,

Appellant

_____________________________

Appeal from the U.S. District Court, D.N.J.

Magistrate Judge Cathy L. Waldor, No. 2:17-cv-07386

Before: KRAUSE, PHIPPS, and ROTH, Circuit Judges

Argued Nov. 3, 2025; Decided June 11, 2026

_____________________________

OPINION OF THE COURT

KRAUSE, Circuit Judge. Class action counsel serve a

valuable role in our legal system and deserve to be paid. But

not twice. To ensure counsel are paid only reasonable

attorneys’ fees, courts often calculate fees using the lodestar

method—the product of class counsel’s reasonable hours on a

case multiplied by their reasonable hourly rates. In certain

cases, however, courts may increase the resulting lodestar

using a “lodestar multiplier” to account for special

circumstances. In which cases is that permissible? The

Supreme Court has curtailed the use of lodestar multipliers to

calculate reasonable attorneys’ fees awarded under federal

fee-shifting statutes, see Perdue v. Kenny A. ex rel. Winn, 559

U.S. 542 (2010), but it has not addressed the use of multipliers

when fees are awarded under contractual fee-shifting

provisions. That is the question presented in this case, where

Appellant BMW appeals the District Court’s use of a lodestar

multiplier in awarding fees pursuant to a settlement agreement.

Because we conclude that the Supreme Court’s constraints on

the use of lodestar multipliers in statutory fee-shifting cases

also apply in contractual fee-shifting cases, we will vacate the

District Court’s fee award and remand for further proceedings.

I. FACTUAL & PROCEDURAL HISTORY

This appeal concerns the calculation of attorneys’ fees

following the settlement of a consumer class action. In

September 2017, Plaintiffs sued BMW of North America and

its German parent company in a putative class action for

allegedly selling cars with defective timing chains. BMW filed

a motion to dismiss that was granted in part, prompting

Plaintiffs to file an amended complaint that asserted 20 federal

and state causes of action on behalf of a nationwide class and

twelve state-specific subclasses. 1 The parties then engaged in

four months of paper discovery, totaling approximately 12,000

pages of documents, before reaching a settlement within one

1

The parties later agreed to dismiss BMW’s German parent

company as a defendant. Gelis v. BMW of N. Am., LLC, 49

F.4th 371, 375 n.1 (3d Cir. 2022).

2

day of mediation. Though that settlement resolved the merits

of the dispute, the parties could not agree on the amount of

attorneys’ fees. So they entered into another round of

mediation and landed on a fee arrangement that was then

incorporated into the final Settlement Agreement. Under that

Agreement, Class Counsel would apply to the District Court

for an award of “reasonable attorneys’ fees,” Supp. App. 104,

to be paid by BMW “separate and apart from any relief

provided to the Settlement Class,” Supp. App. 130. Although

the Settlement Agreement did not specify how the District

Court was to calculate those reasonable fees, it did provide two

guideposts for the District Court’s exercise of its discretion:

Class Counsel agreed to request no more than $3.7 million,

while BMW agreed not to oppose Class Counsel’s application

for fees if it requested up to $1.5 million.

Not surprisingly, after the District Court preliminarily

approved the class action settlement, Class Counsel applied for

the full $3.7 million, which BMW opposed. The District Court

then employed the lodestar method. It determined that Class

Counsel had reasonably expended the 2,713 hours they

claimed in litigating the case, which, multiplied by an average

rate of $716 per hour, produced a baseline lodestar of $1.9

million. The District Court, however, viewed that lodestar as

insufficient, so it proceeded to apply a lodestar multiplier. It

considered the factors we identified in Gunter v. Ridgewood

Energy Corp. as relevant in equitable common-fund cases

when courts calculate fees using the percent-of-fund method, a

circumstance in which “the attorneys’ fees and the clients’

3

award come from the same source and the fees are based on a

percentage amount of the clients’ settlement award.” 223 F.3d

190, 195 n.1 (3d Cir. 2000). Those factors include the size of

the fund, the skill and efficiency of the attorneys, the

complexity and duration of the litigation, and the risk of

nonpayment. Id.

Weighing these factors, the District Court settled on a

multiplier of 1.94. Perhaps not coincidentally, that multiplier

yielded a fee award of $3.7 million—which the District Court

ordered be paid to Class Counsel. That order led to BMW’s

first appeal and resulted in our vacatur of the fee award and

remand to the District Court. See Gelis v. BMW of N. Am., LLC

(Gelis I), 49 F.4th 371 (3d Cir. 2022).

As relevant to the issues before us today, we held in Gelis I

that the record was not then sufficient to support a $3.7 million

award. We agreed with BMW that because Class Counsel

submitted only three, single-page summary charts using vague

language to describe each biller’s hours, e.g., “discovery

activities,” we could not “discern . . . whether certain hours

[were] duplicative . . . or whether the total hours billed were

reasonable for the work performed.” Id. at 376-77, 380

(citation modified). BMW also argued that the District Court

had erred in applying a lodestar multiplier, but as we were

vacating and remanding in any event, we “decline[d] to decide

whether the District Court was bound by the strictures of

Perdue” and the federal statutory fee-shifting cases. Id. at 381.

We did observe, however, that “the parties’ focus on the

statutes under which named plaintiffs sued [was] misplaced”

4

because Class Counsel’s fees were awarded “pursuant to a

contract—the settlement agreement—not pursuant to a

statute.” Id. (quoting In re Home Depot Inc., 931 F.3d 1065,

1082 (11th Cir. 2019)). We also noted, for guidance on

remand, that the District Court’s justification for using a

multiplier lacked the detail necessary “to give us a sufficient

basis to review [the] fee enhancement.” Id. (citation modified).

On remand, Class Counsel supplemented the record with

detailed billing statements and again requested $3.7 million in

fees, this time claiming 2,877 hours (including an additional

164 hours accrued between the initial fee request and the

District Court’s fairness hearing) at a pre-multiplier average

rate of $726 per hour. Broken down by category, these hours

were attributed to pre-litigation investigation (92 hours),

drafting of complaints (262 hours), case

development/administration (279 hours), motion

practice/memoranda drafting/legal research (246 hours),

negotiation/settlement process (172 hours), discovery

(379 hours), court hearings/appearances (77 hours), post-filing

investigation (250 hours), class claims administration

(317 hours), communications with consultants/experts

(37 hours), settlement (247 hours), and the final approval

process (518 hours).

Despite finding that Class Counsel’s hours for certain

activities seemed “high,” the District Court ultimately

approved them in full on the ground that the case was “a

complex class action” featuring claims of a “technical nature.”

App. 17, 19. Class Counsel’s additional 164 hours and higher

5

average billing rate added approximately $144,000 for a new

baseline lodestar of about $2.1 million. As for the lodestar

multiplier, the District Court again considered the factors

discussed in Gunter along with those referenced in In re AT&T

Corp. Securities Litigation—another equitable common-fund

case calculating fees as a percent of the fund—including the

value of benefits flowing to class members as a result of the

settlement and the settlement’s “innovative terms.” 455 F.3d

160, 165 (3d Cir. 2006) (citation modified). This time,

however, the District Court reduced the multiplier from 1.94 to

1.75 which—yet again—produced an award of exactly $3.7

million. BMW then timely filed this second appeal, to which

we now turn.

II. JURISDICTION & STANDARD OF REVIEW

The District Court had jurisdiction under the Class Action

Fairness Act of 2005. 28 U.S.C. § 1332(d). We have

jurisdiction under 28 U.S.C. § 1291.

We review de novo the legal standards used by a district

court in calculating a fee award. Gelis I, 49 F.4th at 377. But

“‘so long as [the district court] employs correct standards and

procedures and makes findings of fact that are not clearly

erroneous,’ a district court has discretion to decide the amount

of an award.” Id. (citation modified) (quoting In re Rite Aid

Corp. Sec. Litig., 396 F.3d 294, 299 (3d Cir. 2005), as amended

(Feb. 25, 2005)). A district court must also “clearly set forth

[its] reasoning for fee awards so that we will have a sufficient

basis to review for abuse of discretion.” Id. (citation modified).

6

III. ANALYSIS

BMW argues that the District Court erred in awarding Class

Counsel $3.7 million in attorneys’ fees for three reasons:

(A) the Settlement Agreement did not authorize any lodestar

multiplier; (B) even if a multiplier were authorized, no

enhancement was justified in this case; and (C) the District

Court miscalculated the baseline lodestar because it erred in

finding all of Class Counsel’s requested hours reasonable. We

consider these arguments in turn.

A. Authorization of Lodestar Multipliers

As we observed in Gelis I, the District Court “awarded the

attorney’s fees pursuant to a contract—the [S]ettlement

[A]greement—not pursuant to a statute.” 49 F.4th at 381

(quoting In re Home Depot Inc., 931 F.3d at 1082). We

therefore look to the terms of that contract in the first instance.

The Settlement Agreement provides for the award of

“reasonable attorneys’ fees” without an accompanying

definition or direction as to methodology. Supp. App. 104.

But it does direct us to the relevant body of law to interpret the

term. While the Agreement states as a general matter that it is

to “be interpreted and enforced pursuant to New Jersey law,”

it provides specifically that “Class Counsel’s motion for

attorneys’ fees and expenses” is governed by “[f]ederal law.”

Supp. App. 137. Consistent with that choice-of-law provision,

both parties extensively rely on federal law in their briefing

before this Court, implicitly acknowledging that this appeal is

7

governed by federal law. 2 And under federal law, “reasonable

attorneys’ fees” is a term of art in the context of statutory

fee-shifting cases that has historically included the potential for

lodestar enhancements.

That history goes back decades. By way of example, 42

U.S.C. § 1988(b) entitles prevailing parties to “a reasonable

attorney’s fee,” that we and other courts have interpreted to

occasionally permit a lodestar multiplier. See, e.g.,

Institutionalized Juvs. v. Sec’y of Pub. Welfare, 758 F.2d 897,

921 (3d Cir. 1985); Perotti v. Seiter, 935 F.2d 761, 765 (6th

Cir. 1991). We have construed the Clean Water Act’s

authorization of “reasonable attorney and expert witness fees”

for prevailing parties in citizen suits to include the possibility

of a multiplier. 33 U.S.C. § 1365(d); see Student Pub. Int.

Rsch. Grp. of N.J., Inc. v. AT & T Bell Lab’ys, 842 F.2d 1436,

1452-54 (3d Cir. 1988). The same is true of many other federal

fee-shifting statutes that award prevailing parties reasonable

fees. See City of Burlington v. Dague, 505 U.S. 557, 562

(1992) (noting that “case law construing what is a ‘reasonable’

fee applies uniformly to all” similarly worded federal statutes);

2

Even absent an express choice-of-law provision, the parties

forfeited any argument that state law applies by failing to

object to the District Court’s reliance on federal law. See

Williams v. BASF Catalysts LLC, 765 F.3d 306, 316-17 (3d

Cir. 2014) (discussing forfeiture and waiver of choice of law);

Linneman v. Vita-Mix Corp., 970 F.3d 621, 629 n.2 (6th Cir.

2020) (calculating attorneys’ fees under federal law because

the parties assumed federal law applied).

8

Perdue, 559 U.S. at 553 (concluding that lodestar awards may

be enhanced in some situations); see also 42 U.S.C. § 7604(d)

(Clean Air Act); 42 U.S.C. § 2000e-5(k) (Title VII).

In the face of that precedent, there is no traction to BMW’s

contention that “reasonable attorneys’ fees” is an ambiguous

term and that this ambiguity, along with the Settlement

Agreement’s silence on lodestar multipliers, precludes them.

To the contrary, because the Agreement specified that federal

law governs Class Counsel’s motion for attorneys’ fees and

expenses, and federal law has long permitted the use of lodestar

multipliers to calculate reasonable attorneys’ fees, the District

Court was authorized under the Agreement to consider a

multiplier.

B. Propriety of a Lodestar Multiplier in this Case

We next address whether the District Court applied the

proper legal standard in awarding a 1.75 lodestar multiplier,

considering: (1) whether the Settlement Agreement contains a

fee-shifting provision; (2) Perdue’s guidance on the use of

multipliers in statutory fee-shifting cases; (3) whether the logic

of Perdue applies with equal force in contractual fee-shifting

cases governed by federal law; and (4) the implications of our

analysis for this case.

1. The Settlement Agreement’s Fee Provision

We begin by classifying the fee provision in the Settlement

Agreement. “The general rule in our legal system is that each

9

party must pay its own attorney’s fees and expenses,” Perdue,

559 U.S. at 550, leaving each side to negotiate a fee

arrangement with its own counsel. This “bedrock principle” is

known as the American Rule. Hardt v. Reliance Standard Life

Ins. Co., 560 U.S. 242, 253 (2010). But that Rule has

exceptions.

One is fee shifting. Under a fee-shifting regime, an

attorney’s fees are paid not by her client, but by the opposing

party. Fee shifting may occur “(1) when a statute grants courts

the authority to direct the losing party to pay attorney’s fees;

(2) when the parties agree in a contract that one party will pay

attorney’s fees; and (3) when a court orders one party to pay

attorney’s fees for acting in bad faith.” In re Home Depot Inc.,

931 F.3d at 1078.

Another exception is the “equitable common-fund”

doctrine. A common fund arises, typically in class actions,

when litigation generates economic value to a large and

defined class of beneficiaries without the promise of fees from

a fee arrangement. See Boeing Co. v. Van Gemert, 444 U.S.

472, 478-80 (1980). Where an agreement or court order creates

a common fund, the prevailing party’s attorney is generally

“entitled to a reasonable attorney’s fee from the fund as a

whole” even though the attorney has not negotiated a fee

arrangement with the client. 3 Id. at 478. This payment

3

For ease of reference, we and other courts have described

common funds as an “exception” to the American Rule. E.g.,

In re Wawa, Inc. Data Sec. Litig., 85 F.4th 712, 720 (3d Cir.

10

mechanism “reflects the traditional practice in courts of

equity” that “persons who obtain the benefit of a lawsuit

without contributing to its cost [should not be] unjustly

enriched at the successful litigant’s expense.” Id.

There is also a third, hybrid exception, known as a

“constructive common fund,” whereby courts sometimes treat

fee-shifting arrangements under the rules applicable to

equitable common funds. See, e.g., In re Gen. Motors Corp.

Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 820

(3d Cir. 1995); In re Home Depot Inc., 931 F.3d at 1080; In re

Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 943 (9th

Cir. 2011); Johnston v. Comerica Mortg. Corp., 83 F.3d 241,

245-46 (8th Cir. 1996). The constructive common-fund

doctrine recognizes the “practical realit[y]” that defendants are

concerned only with their aggregate liability, In re Gen. Motors

Corp., 55 F.3d at 819, and that, absent court supervision, a

defendant may “pay class counsel excessive fees and costs in

exchange for counsel accepting an unfair settlement,” Staton v.

Boeing Co., 327 F.3d 938, 965 (9th Cir. 2003) (citation

2023); In re Diet Drugs, 582 F.3d 524, 540 (3d Cir. 2009); In

re Syngenta AG MIR 162 Corn Litig., 61 F.4th 1126, 1191

(10th Cir. 2023); Camden I Condo. Ass’n, Inc. v. Dunkle, 946

F.2d 768, 771 (11th Cir. 1991). As a technical matter,

however, it is not an exception because the fees are ultimately

deducted from the class’s own recovery, so the client—the

class—is paying its own attorneys’ fees. See 5 William B.

Rubenstein, Newberg and Rubenstein on Class Actions § 15:25

(6th ed. 2025).

11

modified); see also In re Bluetooth Headset Prods. Liab. Litig.,

654 F.3d at 943. In such circumstances, courts may treat

contractual fee-shifting awards as common funds—and

therefore exercise greater scrutiny of attorneys’ fees—to

protect a class’s recovery.

There are important distinctions between common-fund

and fee-shifting cases. The “key distinction” is whether “the

attorney’s fees are paid by the client (as in common-fund cases)

or by the other party (as in fee-shifting cases).” In re Home

Depot Inc., 931 F.3d at 1079; see also Staton, 327 F.3d at 967.

Another difference is the presumptive methodology for

calculating attorneys’ fees, with the percent-of-fund method

preferred for common-fund cases and the lodestar method

preferred for fee-shifting cases. In re Prudential Ins. Co. Am.

Sales Prac. Litig. Agent Actions, 148 F.3d 283, 333 (3d Cir.

1998); In re Rite Aid Corp. Sec. Litig., 396 F.3d at 300. At the

same time, these correlations are not hard and fast. Rather, we,

like most of our sister circuits, allow district courts to

determine common-fund fees either as a percentage of the fund

or by performing a lodestar calculation. See, e.g., In re Wawa,

Inc. Data Sec. Litig., 85 F.4th 712, 722 & n.18 (3d Cir. 2023). 4

4

See, e.g., In re Syngenta, 61 F.4th at 1193; Fresno Cnty.

Emps.’ Ret. Ass’n v. Isaacson/Weaver Fam. Tr., 925 F.3d 63,

68 (2d Cir. 2019); Gascho v. Glob. Fitness Holdings, LLC, 822

F.3d 269, 279 (6th Cir. 2016); Stetson v. Grissom, 821 F.3d

1157, 1165 (9th Cir. 2016); Union Asset Mgmt. Holding A.G.

v. Dell, Inc., 669 F.3d 632, 644 (5th Cir. 2012); Cook v.

12

So how do we categorize the Settlement Agreement? By

its terms, “all attorneys’ fees and costs . . . will be paid by

[BMW],” and all fees “will be paid separate and apart from any

relief provided to the Settlement Class.” Supp. App. 129-30.

In other words, the Settlement Agreement does not force the

“winning party [to] pay[] his or her own attorneys’ fees.”

Staton, 327 F.3d at 967. Nor does it direct that fees be drawn

from the class settlement fund. See Van Gemert, 444 U.S. at

478. Instead, as part of the class action settlement, it shifts the

onus to BMW to “cover[] the bill.” Staton, 327 F.3d at 967;

see In re Home Depot Inc., 931 F.3d at 1079-80 (construing

nearly identical language as a fee-shifting provision). The

Settlement Agreement thus constitutes a fee-shifting

arrangement that arises in the context of a contractual case. 5

Niedert, 142 F.3d 1004, 1013 (7th Cir. 1998); In re Thirteen

Appeals Arising Out of San Juan Dupont Plaza Hotel Fire

Litig., 56 F.3d 295, 307 (1st Cir. 1995).

5

Neither party preserved an argument that this arrangement

constitutes a constructive common fund. In supplemental

briefing, Class Counsel asserted that it had not forfeited this

argument because it referred to the doctrine twice in the

District Court. But the first reference was, in context, merely

an assertion that the District Court may use “a percentage of

common fund . . . cross-check” to confirm the validity of Class

Counsel’s requested lodestar. App. 186-87. That does not

address the relevant issue—whether the fee arrangement itself

should be treated as a constructive common fund. The second

reference was a mention of New Jersey’s fund-in-court

doctrine. But New Jersey’s fund-in-court doctrine is

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2. Perdue’s Guidance in Statutory Fee-Shifting

Cases

Having established that the Settlement Agreement sets out

a fee-shifting arrangement and mindful that the Supreme Court

has constricted the use of multipliers in the statutory

fee-shifting context, we now briefly review the evolution of

that case law and the Supreme Court’s reasoning in Perdue to

determine whether Perdue applies in the context of contractual

fee-shifting cases.

We start with a brief background on the lodestar

methodology and the role of a multiplier. The concept of the

baseline lodestar to calculate attorneys’ fees—the product of

an attorney’s (reasonable) hours times her reasonable hourly

comparable to the equitable common-fund doctrine, not the

constructive common-fund doctrine. See Porreca v. City of

Millville, 16 A.3d 1057, 1065 (N.J. Super. Ct. App. Div. 2011)

(describing the “fund in court” doctrine as applying when

litigants “create . . . a fund for the benefit of a class of which

they are members” (citation modified)). Class Counsel also

notes that it and the District Court referenced common-fund

cases like Gunter v. Ridgewood Energy Corp., 223 F.3d 190

(3d Cir. 2000). But Gunter likewise dealt with an equitable

common fund, not a constructive common fund. Id. at 195 n.1

(noting that “the attorneys’ fees and the clients’ award come

from the same source”). Such passing and unreasoned

references are not sufficient to preserve an argument for

appeal. See Barna v. Bd. of Sch. Dirs., 877 F.3d 136, 145-46

(3d Cir. 2017).

14

billing rates—was “pioneered” by this Circuit in 1973, Perdue,

559 U.S. at 551 (citing Lindy Bros. Builders, Inc. of Phila. v.

Am. Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d

Cir. 1973)), and has since “achieved dominance in the federal

courts” in statutory fee-shifting cases, Gisbrecht v. Barnhart,

535 U.S. 789, 801 (2002). The lodestar method has two core

“virtues.” Perdue, 559 U.S. at 551. First, it awards attorneys

their “prevailing market rates in the relevant community,”

which satisfies “the aim of fee-shifting statutes.” Id. (citation

modified). Second, “the lodestar method is readily

administrable” and “objective,” thereby limiting discretion,

permitting judicial review, and producing predictable results.

Id. at 551-52 (citation modified).

In some cases, however, courts concluded that the lodestar

alone was not sufficient and sought to enhance it. The lodestar

multiplier historically filled that role and was applied by the

Supreme Court to account for such factors as:

(1) the time and labor required; (2) the novelty

and difficulty of the questions; (3) the skill

requisite to perform the legal service properly;

(4) the preclusion of employment by the attorney

due to acceptance of the case; (5) the customary

fee; (6) whether the fee is fixed or contingent;

(7) time limitations imposed by the client or the

circumstances; (8) the amount involved and the

results obtained; (9) the experience, reputation,

and ability of the attorneys; (10) the

“undesirability” of the case; (11) the nature and

15

length of the professional relationship with the

client; and (12) awards in similar cases.

Hensley v. Eckerhart, 461 U.S. 424, 430 n.3 (1983); see also

id. at 434 & n.9.

Yet even as the lodestar itself ascended in popularity, courts

began to shy away from multipliers in statutory fee-shifting

cases. In 1984, the Supreme Court held that one such

enhancement factor—the “novelty and complexity of the

issues”—could not justify an enhancement because it is “fully

reflected in the number of billable hours recorded by counsel”

or, in some circumstances, in counsel’s hourly rates. Blum v.

Stenson, 465 U.S. 886, 898 (1984). The Court also limited the

applicability of representation-quality enhancements,

cautioning against them unless supported by “specific

evidence” of superior performance and, even then, only in

“exceptional” circumstances. Id. at 899 (quoting Hensley, 461

U.S. at 435).

Two years later, the Court expressed skepticism of

multipliers more generally, noting a “strong presumption that

the lodestar figure . . . represents a ‘reasonable’ fee” and

instructing that, because the baseline lodestar already includes

“most, if not all, of the relevant factors” that courts may

consider in setting reasonable attorneys’ fees, using such

factors to justify enhancements could amount to “double

counting.” Pennsylvania v. Del. Valley Citizens’ Council for

Clean Air (Delaware Valley I), 478 U.S. 546, 565-66 (1986).

The Court reiterated that view the following year, expressing

16

doubt that contingency risk enhancements were permissible

under federal fee-shifting statutes. Pennsylvania v. Del. Valley

Citizens’ Council for Clean Air (Delaware Valley II), 483 U.S.

711, 720-23 (1987). And a few years later, in City of

Burlington v. Dague, the Court clarified that contingency risk

could never justify a multiplier. See 505 U.S. at 562, 567.

The Dague Court reasoned that contingency risk is a

product of “(1) the legal and factual merits of the claim, and

(2) the difficulty of establishing those merits.” Id. at 562.

Because the difficulty of establishing the merits is reflected in

the hours claimed by counsel or in the higher hourly-rate

charged by a sufficiently skilled litigator, the Court viewed

contingency risk as subsumed in the baseline lodestar. See id.

It also observed that awarding multipliers for taking cases with

weak merits would have the perverse effect of “provid[ing]

attorneys with the same incentive to bring relatively meritless

claims as relatively meritorious ones.” Id. at 563.

The Supreme Court’s gradual distancing from the use of

multipliers in cases through the 1990s became an unmistakable

rejection in all but the most exceptional circumstances in 2010

with its opinion in Perdue. Perdue held that the lodestar

typically subsumed not only factors like complexity and

contingency risk, but also superior results and performance.

While acknowledging that superior results “may be attributable

to superior performance and commitment of resources by

plaintiff’s counsel,” the Court also recognized that superior

results may be attributable to circumstances unrelated to

plaintiff’s counsel’s skill, like inferior performance by

17

opposing counsel, “an unexpectedly sympathetic jury, or

simple luck.” Perdue, 559 U.S. at 554. And even when there

has been superior performance, the Court emphasized, an

attorney’s skill is ordinarily reflected in her hourly rate. Id. at

553.

For these reasons, the Court deemed

performance-enhancements appropriate only when “superior

attorney performance is not adequately taken into account in

the lodestar calculation.” Id. at 554. Such circumstances

include: (1) where the lodestar is calculated using an hourly

rate that “does not adequately measure the attorney’s true

market value,” e.g., if the hourly rate is based on “only a single

factor (such as years since admission to the bar),” id. at 554-55,

(2) where “the attorney’s performance includes an

extraordinary outlay of expenses and the litigation is

exceptionally protracted,” id. at 555, and (3) where the

attorney has faced an “exceptional delay in the payment of

fees,” id. at 556. These circumstances, the Court cautioned,

will be “‘rare’ and ‘exceptional,’ and require specific evidence

that the lodestar fee would not have been ‘adequate to attract

competent counsel.’” Id. at 554 (quoting Blum, 465 U.S. at

897); see also id. at 555 (requiring district courts to link the

magnitude of the enhancement to objective evidence that

justifies the enhancement).

So what is the current law of the land in the statutory

fee-shifting context? District courts may still—at least in

theory—use lodestar multipliers to account for a small subset

of the factors outlined in Hensley. But they may do so only on

18

the rare occasion when those factors are not already subsumed

in the baseline lodestar, and only after overcoming the “‘strong

presumption’ that the lodestar figure is reasonable.” Id. at 554.

Even then, the lodestar enhancement must be supported by

“specific evidence” to ensure that the fee award is “capable of

being reviewed on appeal,” id. at 553 (citation modified), and

must be accompanied by “a reasonably specific explanation for

all aspects” of the court’s decision to apply a multiplier, id. at

558.

We and our sister circuits have adhered to this guidance,

reaffirming that the lodestar “carries a strong presumption of

reasonableness and includes most, if not all, of the relevant

factors constituting a reasonable attorney’s fee,” Souryavong

v. Lackawanna County, 872 F.3d 122, 128 (3d Cir. 2017)

(citation modified), and that enhancements are permissible

only in “the rare circumstances in which the lodestar does not

adequately take into account a factor that may properly be

considered in determining a reasonable fee,” Augustyn v. Wall

Twp. Bd. of Educ., 139 F.4th 252, 260 (3d Cir. 2025) (citation

modified); Parsons v. Ryan, 949 F.3d 443, 467 (9th Cir. 2020);

Black v. SettlePou, P.C., 732 F.3d 492, 502 (5th Cir. 2013);

Millea v. Metro-North R.R. Co., 658 F.3d 154, 168-69 (2d Cir.

2011). 6

6

Many of the factors we identified in Gunter as relevant in

equitable common-fund cases when awarding fees under the

percent-of-fund method overlap with the factors set forth in

Hensley v. Eckerhart, 461 U.S. 424 (1983). For example,

19

3. Perdue’s Application to Contractual

Fee-Shifting Cases

Although Perdue, as a statutory fee-shifting case, is not

strictly binding in contractual fee-shifting cases, a lack of

“technically binding” authority does not give us license to

“blithely disregard . . . precedent where its reasoning applies.”

In re Home Depot Inc., 931 F.3d at 1085. And we are

persuaded here that the reasoning of Perdue and its

predecessors applies with equal force to contractual

fee-shifting cases. After all, the Court’s primary rationale for

restricting multipliers in Perdue was simply that they

double-count factors already subsumed in the lodestar, thereby

Gunter’s consideration of the “size of the fund created and the

number of persons benefitted” and “the presence or absence of

substantial objections,” 223 F.3d at 195 n.1, is captured in

Hensley’s consideration of “the amount involved

and . . . results obtained,” 461 U.S. at 430 n.3. Similarly,

Gunter discusses “the skill and efficiency of the attorneys

involved,” 223 F.3d at 195 n.1, which corresponds to Hensley’s

discussion of “the experience, reputation, and ability of the

attorneys,” 461 U.S. at 430 n.3. And Gunter’s

“complexity . . . of the litigation,” 223 F.3d at 195 n.1, factor

is coextensive with Hensley’s “novelty and difficulty of the

questions” factor, 461 U.S. at 430 n.3. After Perdue, however,

at least in fee-shifting cases, these factors are now largely

subsumed in the baseline lodestar and therefore cannot serve

as the basis for a lodestar multiplier.

20

increasing the award beyond a presumptively “reasonable” fee.

559 U.S. at 553-54; Dague, 505 U.S. at 562-63.

We see no reason that the Supreme Court’s definition of a

“reasonable” fee—a fee sufficient to “enable private parties to

obtain legal help” without awarding attorneys a windfall—

would differ where the fee shifting happens to be contractual

rather than statutory. Delaware Valley I, 478 U.S. at 565. In

neither context is fee shifting “designed as a form of economic

relief to improve the financial lot of attorneys.” Id.; see also

Blum, 465 U.S. at 893-95 (recounting legislative history of 42

U.S.C. § 1988 and noting that fees should “not produce

windfalls to attorneys”). And in both contexts, the lodestar is

comprised of the same two factors—the number of hours that

similarly skilled attorneys would ordinarily devote to the

litigation and the “prevailing market rates” for “private counsel

of comparable experience, skill, and reputation.” Blum, 465

U.S. at 892 n.5. So, in both types of cases, the lodestar method

avoids a windful and “produces an award that roughly

approximates the fee that the prevailing attorney would have

received if he or she had been representing a paying client.”

Perdue, 559 U.S. at 551.

Most, if not all, of the other concerns articulated by the

Court in the statutory fee-shifting context also carry over. 7

7

At least one rationale arguably applies with more force in

statutory fee-shifting cases: As the Supreme Court observed

in Dague, contingency risk enhancements would “in effect pay

for the attorney’s time . . . in cases where his client does not

21

Compensating for contingency risk in contract cases likewise

could motivate attorneys to litigate unmeritorious cases,

Dague, 505 U.S. at 563, and produce “burdensome satellite

litigation” to determine counsel’s eligibility for enhancements,

id. at 566. In both contexts, compensating for superior results

risks enhancing fees based merely on “inferior performance by

defense counsel” or “simple luck.” Perdue, 559 U.S. at 554.

Also in both cases, attorneys “understand[] that payment of

fees will generally not come until the end of the case, if at all,”

so lodestar enhancements for the outlay of expenses and delays

in payment are reasonable only when such expenses or delays

are truly “exceptional.” Id. at 555-56. In short, where federal

law applies and fees are awarded under the lodestar method,

fees awarded by contract, no less than fees awarded by statute,

are subject to the strictures of Perdue.

In coming to this conclusion, we are in good company. No

Court of Appeals has held to the contrary, and the Sixth, Ninth,

and Eleventh Circuits all agree that Perdue and its predecessors

apply when a contractual fee-shifting provision is evaluated

under federal law. See Chambers v. Whirlpool Corp., 980 F.3d

645, 656, 665 (9th Cir. 2020); Linneman v. Vita-Mix Corp.,

970 F.3d 621, 629 n.2, 632 (6th Cir. 2020); In re Home Depot

Inc., 931 F.3d at 1079-80, 1086.

prevail.” 505 U.S. at 565. That result was unappealing, in part,

because federal statutes “bar[] a prevailing plaintiff from

recovering fees relating to claims on which he lost.” Id.

22

We pause, however, to emphasize the limits of our

decision. Our holding applies (1) to fees awarded under

contractual fee-shifting provisions, (2) where the contract calls

for the award of reasonable attorneys’ fees as defined by

federal law, and (3) where the district court employs the

lodestar method. We express no opinion on whether statutory

fee-shifting case law applies to fees awarded under state law,

which federal courts may be called upon to apply, e.g.,

Chieftain Royalty Co. v. Enervest Energy Institutional Fund

XIII-A, L.P., 888 F.3d 455, 461 (10th Cir. 2017); In re

Volkswagen & Audi Warranty Extension Litig., 692 F.3d 4,

14-17 (1st Cir. 2012), and which may authorize enhancements

more (or less) readily than federal law, see In re Apex Oil Co.,

297 F.3d 712, 719-20 (8th Cir. 2002) (affirming enhancement

under Texas law); Mangold v. Cal. Pub. Utils. Comm’n, 67

F.3d 1470, 1479 (9th Cir. 1995) (affirming enhancement under

California law).

Nor do we opine on whether Perdue applies to contractual

fee-shifting awards treated as constructive common funds, or

to equitable common-fund awards—an issue that neither this

Court nor the Supreme Court has directly addressed. 8 See

Brytus v. Spang & Co., 203 F.3d 238, 243-44 (3d Cir. 2000).

8

We observed in dictum that Dague’s limit on lodestar

enhancements applies to fees awarded pursuant to a

constructive common fund. In re Gen. Motors Corp., 55 F.3d

at 820, 822. But our sister circuits that have considered the

issue have uniformly held that Perdue and its predecessors’

23

Finally, our opinion does nothing to disrupt our existing

case law permitting district courts to employ a multiplier in the

context of a so-called “lodestar cross-check,” where the

lodestar method is used “to cross-check the reasonableness of

a percentage-of-recovery fee award.” In re Cendant Corp.

PRIDES Litig., 243 F.3d 722, 742 n.26 (3d Cir. 2001); see also

In re Rite Aid Corp. Sec. Litig., 396 F.3d at 306. As we have

explained, when the lodestar method is used for that purpose,

we require “neither mathematical precision nor

bean-counting,” and permit district courts to “rely on

summaries submitted by the attorneys,” In re Rite Aid Corp.

Sec. Litig., 396 F.3d at 306-07, without the need to abide by

Dague’s limits on lodestar enhancements, see In re Cendant

Corp. PRIDES Litig., 243 F.3d at 742 n.26. Of course, even

where “multipliers for risk or counsel’s expertise are

limits on lodestar multipliers do not apply to fees awarded

under the equitable common-fund doctrine. See, e.g., Florin v.

Nationsbank of Georgia, N.A., 34 F.3d 560, 564 (7th Cir.

1994); In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d

1291, 1300-01 (9th Cir. 1994); Swedish Hosp. Corp. v.

Shalala, 1 F.3d 1261, 1268 (D.C. Cir. 1993); see also

Isaacson/Weaver Fam. Tr., 925 F.3d at 69 (noting that

limitations on statutory fee-shifting cases are generally

inapplicable when lawyers seek fees from a common fund);

Brundle v. Wilmington Tr., N.A., 919 F.3d 763, 786 (4th Cir.

2019), as amended (Mar. 22, 2019) (implying that Dague’s

limits on risk enhancements do not apply in common-fund

cases); In re Dupont Plaza Hotel Fire Litig., 56 F.3d at 308

(noting generally that Dague does not apply in common-fund

cases).

24

appropriate in the lodestar cross-check” they still

“require . . . scrutiny and justification.” Brytus, 203 F.3d at

243 (citation modified).

4. Implications of Our Holding for this Case

The Settlement Agreement calls for the application of

federal law, awards fees under a contractual fee-shifting

arrangement, and assesses fees according to the lodestar

method. But without the benefit of our decision today, the

District Court applied a 1.75 lodestar multiplier that did not

account for Perdue’s limitations, including its “strong

presumption” that the unenhanced lodestar figure was

reasonable. 559 U.S. at 554.

We cannot say on this record that this error was harmless.

To the contrary, the District Court explicitly based the

enhancement on a number of factors we now recognize were

subsumed under the lodestar. Among other factors, it rested

on Class Counsel’s “risk of nonpayment” (because Class

Counsel took “the case on a contingency basis”), “the complex

and technical” issues in the case, “the size of the fund,” the

settlement’s “innovative terms,” and its observation that Class

Counsel was “highly regarded” and “highly skilled.” App.

28-32 (citation modified). But the first two factors are

improper considerations under Perdue and its predecessors

because they are always subsumed in the baseline lodestar, see

Perdue, 559 U.S. at 553, 558; Dague, 505 U.S. at 562

(contingency risk); Blum, 465 U.S. at 898-99 (complexity), and

the remainder boil down to attorney performance which,

25

following Perdue, can serve as the basis of lodestar

enhancements only in “rare” and “exceptional” circumstances,

559 U.S. at 554 (citation modified). Yet the District Court did

not explain how, if at all, this case qualifies as exceptional or

why the lodestar alone would not have attracted similarly

skilled counsel. The District Court also double-counted the

case’s technical complexity when setting fees, relying on that

complexity both to approve Class Counsel’s unusually high

number of hours and to approve the enhancement.

Nor was the enhancement in this case supported by any

specific record evidence that it was reasonable, or an

explanation of the “amount of the enhancement . . . attributable

to [each] factor.” Id. at 558. Yet Purdue teaches that “when a

trial judge awards an enhancement on an impressionistic basis,

a major purpose of the lodestar method—providing an

objective and reviewable basis for fees—is undermined.” Id.

(citation omitted). Given these defects in the enhancements,

the District Court’s fee award cannot stand.

C. Calculation of the Baseline Lodestar

We turn next to BMW’s argument that the baseline lodestar

itself was unreasonable because (1) over 80% of the 2,877

hours requested by Class Counsel were billed by partners at

partner rates, and (2) some of those hours were inefficient or

duplicative, including 262 hours for drafting complaints, 374

hours for discovery, and 172 hours for mediation, among

others.

26

When it comes to setting the baseline lodestar—

determining the reasonable number of hours and the reasonable

hourly rate—district courts have “substantial

discretion . . . because they are ‘better informed than an

appellate court about the underlying litigation and an award of

attorney fees is fact specific.’” United States ex rel. Palmer v.

C&D Techs., Inc., 897 F.3d 128, 137 (3d Cir. 2018) (quoting

Pub. Interest Rsch. Grp. of N.J., Inc. v. Windall, 51 F.3d 1179,

1184 (3d Cir. 1995)). But that discretion is not unlimited. See

Gelis I, 49 F.4th at 377. And here, given the number of hours

claimed by Class Counsel for the tasks in question, and the fact

that the vast majority were incurred by partners at partner

billing rates, we cannot conclude that the District Court acted

within those limits.

We begin by addressing the overall proportion of work

performed by partners—a startling 80% (more than 2,300

hours). We have no doubt that this proportion is unusual when

compared with other class actions and that, generally,

over-allocation of work to partners may justify reducing

attorneys’ fees. See Ursic v. Bethlehem Mines, 719 F.2d 670,

677 (3d Cir. 1983). After all, a “Michelangelo should not

charge Sistine Chapel rates for painting a farmer’s barn.” Id.

Here, the District Court gave Class Counsel “some leeway” in

the allocation of work to partners because of what it viewed as

the “uniquely complex nature of this case” such that only

partners, with specialized knowledge, could “adequately

perform [certain] tasks.” App. 24 (citation modified). Even

so, that specialized knowledge—as well as the years of

27

experience reflected in partners’ significantly higher billing

rates—is reasonably expected to produce commensurately

greater billing efficiencies in performing tasks. And where, as

here, hours are billed at partner rates because of the alleged

need for expert and specialized knowledge, but the number of

hours billed does not reflect any greater efficiency, there is

reason for concern about impermissible “[d]ouble-dipping.”

Ursic, 719 F.2d at 677.

That concern prompted us, in BMW’s first appeal, to vacate

and remand for the District Court to develop the record and to

address “whether certain hours [we]re duplicative . . . or

whether the total hours billed were reasonable for the work

performed.” Gelis I, 49 F.4th at 380. We appreciate the fuller

explanation the District Court has now provided. But we do

not view that explanation as justifying approval of the full

2,877 hours claimed by Class Counsel.

As for the 262 hours spent drafting complaints, 222 of

which were claimed by partners, the District Court

acknowledged that the hours were “excessive . . . at first

blush,” but nonetheless approved them on the ground that the

work was “deceptively substantial.” App. 16. As recounted

by the District Court, the complaints raised “over a dozen

claims” involving multiple different state consumer-protection

laws, required Class Counsel to “expend[] . . . time to vet

possible class representatives,” involved three separate

iterations, and dealt with issues that were “highly technical in

nature.” App. 16-17. Yet neither individually nor collectively

do these circumstances render 262 hours reasonable. The fact

28

that an inordinate number of hours spent drafting were

performed by partners—a fact not addressed by the District

Court—makes that number more, not less, problematic. The

number of claims raised in the complaints and the need to vet

class representatives are hardly unusual. Though Class

Counsel did draft three complaints, the first and second were

“largely . . . identical,” App. 16, and the third differed in only

minor respects, see Gelis v. BMW of N. Am., LLC, No.

2:17-cv-07386, Dist. Ct. Dkt. No. 45-2. And though technical

in nature, the alleged timing chain defect was not so complex

as to justify over six forty-hour workweeks of full-time

drafting. The requested hours are particularly unreasonable

when considering that the drafters were experienced partners

and that Class Counsel separately claimed nearly 100 hours for

“pre-litigation investigation” of the timing-chain defect—the

“bulk” of which were billed by a partner who was “trained as

a mechanic and therefore was uniquely positioned” to perform

an efficient investigation. App. 16.

The hours approved for discovery also appear excessive.

Class Counsel claimed approximately 100 hours (nearly all by

partners) for “reviewing BMW’s documents,” which included

“over 12,000 pages of largely technical materials produced by

BMW . . . without the benefit of an index or other

organization.” App. 20-21. The District Court found those

hours reasonable because Class Counsel reviewed documents

at a rate of “approximately thirty seconds per page” which

other courts have found “to be an ‘objectively reasonable

pace.’” App. 20-21 (quoting Scott Hutchison Enters. v.

29

Cranberry Pipeline Corp., 318 F.R.D. 44, 57 (S.D. W. Va.

2016)). But as with the hours spent drafting the complaints, it

is not clear that the District Court accounted for the expectation

that experienced partners with high billing rates will review

documents with greater efficiency and thus require fewer

hours.

The District Court also approved an additional 279 hours,

again almost all by partners, attributed to “production by

Plaintiffs, meet and confers, communication between Class

Counsel and their clients, and correspondence and conferences

with the Court.” App. 21. According to the District Court,

those hours were “reasonable given the circumstances of the

case.” Id. This explanation does not indicate that the District

Court factored in Class Counsel’s top-heavy staffing model,

does not identify any circumstances surrounding discovery—

such as the specifics of Plaintiffs’ productions or the frequency

of the parties’ meet and confers—that would render these hours

reasonable, and is not “a sufficient basis to review for abuse of

discretion,” Gelis I, 49 F.4th at 377 (citation modified).

Finally, the District Court concluded it was not

unreasonable for Class Counsel to bill 172 hours for

“negotiation and settlement,” including 97 hours for sending

three partners to mediation, so long as those partners “[we]re

not unreasonably doing the same work and [we]re being

compensated for the[ir] distinct contribution[s].” App. 19-20

(quoting Norman v. Hous. Auth. of Montgomery, 836 F.2d

1292, 1302 (11th Cir. 1988)). Fair enough. But the Court

made no findings, nor does the record reflect, that each partner

30

was indeed doing different work or making distinct

contributions.

In short, in addition to the problematic lodestar

enhancements, the errors here in calculating the baseline

lodestar also require us to vacate and remand the fee award.

We do not opine on what portion of Class Counsel’s time spent

drafting complaints, performing discovery, or mediating was

reasonable and will leave that to the District Court on remand.

With our additional guidance today, we have every confidence

that the District Court’s calculation of attorneys’ fees on this

remand will be reasonable in view of both Perdue and the

record.

IV. CONCLUSION

For the foregoing reasons, we will vacate the District

Court’s order awarding attorneys’ fees and will remand for

further proceedings consistent with this opinion.

31

Counsel for Appellant

Melissa Bayly

Christopher J. Dalton [Argued]

Argia J. DiMarco

BUCHANAN INGERSOLL & ROONEY

Counsel for Appellees

Gary S. Graifman

KANTROWITZ GOLDHAMER & GRAIFMAN

Bruce H. Nagel [Argued]

Robert H. Solomon

NAGEL RICE

32