Class action lawyers deserve to be paid, a court just said. Not twice.

A case that keeps coming back

In September 2017, a group of car owners sued BMW of North America over allegedly defective timing chains, in a putative class action in the District of New Jersey. After four months of paper discovery totaling roughly 12,000 pages of documents, the parties settled within a single day of mediation. The merits were resolved quickly. The fee was not.

The settlement agreement did not specify how to calculate class counsel's fees, only two guideposts: counsel would request no more than $3.7 million, and BMW would not oppose a request up to $1.5 million. Class counsel requested the full $3.7 million. BMW opposed.

How the district court got to $3.7 million

The district court used the lodestar method, reasonable hours multiplied by a reasonable rate. It found that class counsel's 2,713 claimed hours, at an average rate of $716 per hour, produced a baseline lodestar of about $1.9 million. Viewing that as insufficient, the court applied a lodestar multiplier of 1.94, borrowing factors from Gunter v. Ridgewood Energy Corp., a Third Circuit case about common-fund settlements, where the fee and the class recovery are paid from the same pool of money. The multiplier brought the award to exactly $3.7 million.

BMW appealed. In 2022, the Third Circuit vacated that first award, holding the record could not support it: class counsel had submitted only three single-page summary charts using vague descriptions like "discovery activities," making it impossible to tell whether billed hours were duplicative or reasonable. The court sent the case back without deciding whether the Supreme Court's limits on lodestar multipliers even applied.

What the Supreme Court had already said, elsewhere

In Perdue v. Kenny A. ex rel. Winn (2010), the Supreme Court held that a lodestar figure is presumed to already reflect a reasonable fee, and that multipliers should be reserved for rare and exceptional circumstances not already accounted for in the baseline calculation. That case involved a federal fee-shifting statute. Whether the same limit applies when a fee-shifting arrangement comes from a private contract, not a statute, was the open question class counsel and BMW disagreed about.

On remand, the district court approved the same hours and rates, applied a reduced multiplier of 1.75, and arrived, again, at $3.7 million. BMW appealed a second time.

What the Third Circuit held

On June 11, 2026, a unanimous panel, Judges Krause, Phipps, and Roth, vacated the fee award again. Writing for the court, Judge Krause opened directly:

"Class action counsel serve a valuable role in our legal system and deserve to be paid. But not twice."

The court held that Perdue's constraints on lodestar multipliers apply with equal force to contractual fee-shifting arrangements, not only statutory ones. It also found the district court had leaned on the wrong framework: the Gunter factors used to justify the multiplier were built for common-fund cases, a different arrangement than the fee-shifting settlement BMW and class counsel had struck, where fees were paid "separate and apart from any relief provided to the Settlement Class." The court remanded once more, this time for the district court to reassess whether the baseline lodestar itself was reasonable, before any question of a multiplier arises again.

Three consequences for practicing attorneys

What changes, in practice, for anyone negotiating or defending a class action fee award: