When the fees are awarded out of the amount of the settlement, the defendant will agree to a settlement only if the settlement reached by the parties is less than his total liability in the judgment. When the fees are awarded in addition to the amount of the settlement, the defendant will agree to a settlement only if the amount of the settlement and the fees together are less than his obligation. Either way, the higher the amount of the fees that will be awarded, the smaller the share of the represented class
- Both Shemesh and Clement's article indicate that in practice the rule is that the amount of remuneration and fees should be deducted from the amount awarded in favor of the represented group. In this regard, see also the words of the Honorable Justice R. Ronen in Civil Case (Tel Aviv) 1792/09 Menachem et al. v. Excellence Neshua Investment Management Ltd. (published in Nevo, December 29, 2013) according to which:
The defendant requests that the sums to which the representative plaintiffs and their counsel are entitled be reduced from the total sums that will be returned to the class members, and not be added to them – as the plaintiffs request. This approach arises from the Supreme Court's ruling in the Reichert case, which ruled that "prima facie, the members of the class represented may have an interest in supervising the fees. This is because the fees are paid, in fact, out of the amount awarded in their favor" (my emphasis – R.R.; see also A. Clement, "Guidelines for the Interpretation of the Class Actions Law, 5766-2006," Hapraklit 49 131, 164-165 (2007), which supports this approach). In other words, according to the Supreme Court's ruling, the rule is that the remuneration to the plaintiff and the attorney's fees to his counsel must be deducted from the amount awarded in favor of the represented class. Admittedly, the judgment in the Reichert case related to the approval of a settlement arrangement, but what was said in relation to the payment of the fees and remuneration from the award amount and not beyond it was said as it emerges from the aforesaid, as a general statement, and not with reference to a settlement arrangement in a class action. I am of the opinion that this approach is also consistent with the objectives of the class action mechanism, and the uniqueness of the class action proceeding and the fees and remuneration awarded by virtue of it, as opposed to fees awarded in favor of a party in a "regular" proceeding that wins it. The remuneration and fees awarded in favor of the representative plaintiff and his counsel do not reflect – in contrast to the situation in "regular" lawsuits – the actual expenses incurred by the plaintiff and his counsel in the course of the motion for certification and the class action itself. The remuneration and fees also reflect the incentive that the court seeks to give to plaintiffs and attorneys to file class actions on behalf of a large and silent group, which does not take any risk, and can enjoy – if the claim is accepted, its fruits... Since the remuneration and fees are intended to incentivize the representative plaintiff and his attorney to act in the "service" of the group, the fact that it is the class that actually bears these sums is reasonable. This is a payment that is a kind of "proper salary" for the representative plaintiff and his attorney, paid by the class members, for whom the representative plaintiff and his attorney acted. When this "service" went well, the fact that the salary is generally paid out of the total amount to which the class is entitled, is, as stated, reasonable and legitimate. ..
- It follows that the award of remuneration and fees out of the total compensation awarded to the class is also consistent with the objectives of the class action mechanism, and this is not an exception as aforesaid.
- This determination may also affect the amount of remuneration and fees that will be awarded by the court. In cases where the amount of remuneration and fees is awarded out of the amount of compensation to the group, the amounts awarded are at the lower level, in order not to detract from the amount of compensation to the group. In this regard, see Civil Case (Tel Aviv) 1953/04 Schechter Eliezer v. Carmel Mortgage and Investment Union Ltd. (published in Nevo, July 15, 2007), as well as the words of the Honorable President E. Barak (as he was then called) Other Municipality Applications 8430/99 Analyst EMS Trust Fund Management (1986) Ltd. v. Arad Investments and Industrial Development Ltd. IsrSC 56(2) 247:
... In those cases where the special compensation is deducted from the compensation to the rest of the class members, it is necessary to ensure that the rate of special compensation is not high in a way that is liable to erode the compensation for the rest of the class members, so that the purpose of the class action will be thwarted...
- Therefore, taking into account the amount of compensation to the class members and taking into account the purpose of the donation, I order that the remuneration for the applicants will be in the sum of NIS 10,000, while the fees for their counsel will be in the sum of NIS 60,000 together with VAT in accordance with the law. This amount will be derived from the amount of compensation to the group.
Conclusion
- In light of all of the above, I approve the settlement agreement and give it the force of a judgment.
- The Respondent will pay the Applicants compensation in the sum of NIS 10,000 as well as attorney's fees in the sum of NIS 60,000 plus VAT on the fee component. This amount will be derived from the compensation to the group.
- In addition, and taking into account what is stated in section 48.2.3. According to the judgment, the respondent will contribute to the fund for the distribution of funds in accordance with section 27A of the Class Actions Law, in the sum of NIS 50,000. I hereby designate the donation for consumer purposes, the donation will be made within 30 days from the date of the judgment.
- As to the manner of payment of the remuneration and legal fees, I order as follows:
- Upon the issuance of the judgment approving the settlement agreement, the Respondent will pay the Applicants' counsel 15% of the amount of the fees as well as half of the amount of the Applicants' remuneration.
- 30 days after the donation is made to the Fund for the Distribution of Funds in accordance with Section 27A of the Class Actions Law, and after confirmation is provided from the time of the Custodian General regarding the execution of the donation, the Respondent will pay the Applicants' counsel 45% of the legal fees. On this date, the balance of the remuneration will also be paid to the Applicants.
- 30 days after the transfer of 50% of the donation rate to the donated entities, the Respondent will pay the Applicants' counsel 30% of the legal fees.
- The balance of the 10% fee will be paid 30 days after the submission of a summary report on the completion of all of the Respondent's obligations in the framework of the Settlement (see clause 48.2.4.8 of the Settlement Agreement).
- I hereby order the publication of the second notice in accordance with section 25(a)(4) of the Class Actions Law in the newspapers "Yedioth Ahronoth" and "Israel Hayom". Prior to publication, the second notice will be amended so that it includes the changes that were made to the settlement agreement.
- The notice will detail the details listed in Section 19(c)(1) and (2) of the Class Actions Law, as well as a reference to the Class Actions Register, where it will be possible to review the judgment and the settlement arrangement, as stated in Section 25(d) of the Class Actions Law.
- The size of the letters in the publication of the second notice shall exceed by at least a third the minimum size set in Regulation 2 of the Consumer Protection Regulations (Letters in a Standard Contract and on the Condition Included in Other Information intended for the Consumer), 5755-1995.
- The Respondent will bear the costs of publication, as stated in clause 10.2 of the Settlement Agreement.
- The text of the second notice will be brought to the court for approval within 15 days from today.
- After the publication is made, the Respondent will send a copy of the second notice to the Director of Courts for registration in the Register, in accordance with Section 25(g) of the Class Actions Law.
- The parties shall provide a copy of the judgment together with the settlement and together with the second notice to the Director of Courts for registration in the Class Actions Register, in accordance with the provision of Section 19(e) of the Class Actions Law.
- In addition, a copy of the notice must be sent to the Attorney General in accordance with Regulation 16 of the Class Actions Regulations, 5770-2010.
Granted today, September 06, 2022, in the absence of the parties.