U.S. COURT OF APPEALS FOR THE THIRD CIRCUIT No. 24-2721 ARTEM v. Gelis

U.S. C OURT OF A PPEALS FOR THE THIRD C IRCUIT
No. 24-2721
A RTEM V. G ELIS ; BHAWAR PATEL ; CHRIS W ILLIAMS ;
A SHKOCK PATEL ; KENNETH G AGNON ET AL .,
v.
BMW OF N ORTH A MERICA , LLC,
Appellant
_____________________________
Appeal from the U.S. District Court, D.N.J.
Magistrate Judge Cathy L. Waldor, No. 2:17-cv-07386
Before: K RAUSE , PHIPPS , and R OTH , Circuit Judges
Argued Nov. 3, 2025; Decided June 11, 2026
_____________________________
OPINION OF THE COURT
K RAUSE , 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

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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).

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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’

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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”

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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

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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. J URISDICTION & 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).

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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

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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).

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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

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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.

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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).

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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.

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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).

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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

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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

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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

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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

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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,

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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.

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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

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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.

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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’

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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).

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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,

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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.

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27
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

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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

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29
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.

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30
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

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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.

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Counsel for Appellant
Melissa Bayly
Christopher J. Dalton [Argued]
Argia J. DiMarco
B UCHANAN INGERSOLL & ROONEY
Counsel for Appellees
Gary S. Graifman
K ANTROWITZ G OLDHAMER & GRAIFMAN
Bruce H. Nagel [Argued]
Robert H. Solomon
NAGEL RICE

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