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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Dept. of Health & Social Services v. Okuley (06/26/2009) sp-6381

State, Dept. of Health & Social Services v. Okuley (06/26/2009) sp-6381

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
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     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


OF HEALTH AND SOCIAL SERVICES,) Supreme Court No. S- 12971
Appellant, ) Superior Court No. 3AN-05- 10788 CI
v. ) O P I N I O N
DENISE OKULEY, on behalf of herself ) No. 6381 June 26, 2009
and all those similarly situated, )
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Sen K. Tan, Judge.

          Appearances:   Joanne  M.  Grace,   Assistant
          Attorney  General, Talis J. Colberg, Attorney
          General, Anchorage, for Appellant.  James  J.
          Davis,  Jr., Goriune Dudukgian, Ryan Fortson,
          Northern  Justice  Project,  Anchorage,   for

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Carpeneti, and Winfree, Justices.

          MATTHEWS, Justice.

          This  appeal  involves  a  common  fund  fee  award  to
attorneys  who  represented, on a pro  bono  basis,  a  class  of
persons  wrongly denied Interim Assistance benefits by the  State
of  Alaska.  As a result of class counsels efforts, the State was
required  to  pay  $990,010  in  retroactive  Interim  Assistance
benefits  to 301 class members, as well as $91,575 in prejudgment
interest.    The  court  awarded  class  counsel  $46,131.70   in
prevailing party attorneys fees under Alaska Civil Rule 82.  Over
the  States  objection and without requiring  that  notice  of  a
common fund fee request be sent to class members, the court  also
awarded  class  counsel  fees  from  the  common  fund,  granting
counsels request for an amount equal to the prejudgment interest,
$91,575,  or  9.25% of the fund.  Class counsel thus  received  a
total fee award of around $137,707.  The State appeals the common
fund  fee  award  in  its parens patriae capacity.   Although  we
recognize  that  awarding fees from the fund  without  notice  to
class  members of the fee request was not the best procedure,  we
affirm  the award because it was fair and reasonable and  not  an
abuse of discretion.
     A.   Facts
          In  August  2005 the Northern Justice Project  filed  a
class  action  lawsuit against the State of Alaska on  behalf  of
Interim  Assistance (IA) benefits applicants,  alleging  that  an
internal  policy the state adopted in 2003 to save costs violated
the  Alaska Administrative Procedures Act (APA).  IA benefits are
available to Alaskans who have applied for Supplemental  Security
Income  (SSI)  benefits1 but who have not yet  received  a  final
decision  from the federal government on their SSI applications.2
To  qualify  for  IA  benefits,  a  state-approved  physician  or
psychiatrist must find the applicant disabled.3  If  the  federal
government  finds  the applicant qualifies for SSI  benefits  and
thus  begins paying such benefits, the applicant must  repay  the
state for the IA benefits she received;4 if she does not qualify,
she is not required to repay the state.5  To reduce the number of
applicants who are not required to repay the state and thus  save
costs,  the state implemented an internal policy change  in  2003
that  added  a secondary disability assessment.  Under  the  2003
policy, if the state-approved doctor found the applicant disabled
and  eligible  for  IA benefits but a secondary medical  screener
disagreed, the state denied the application.  The state  did  not
follow the APA in promulgating this policy.
          In   April   2005  Denise  Okuley,  the   named   class
representative, applied for IA benefits and though found eligible
by the state-approved physician, was denied benefits based on the
medical  screeners  secondary assessment.  The  Alaska  Pro  Bono
Program  (APBP)  referred Okuleys case to  the  Northern  Justice
Project.  APBP, Okuley, and the Northern Justice Project signed a
tripartite  retainer agreement, which provided that the  Northern
Justice  Project would represent Okuley on a pro bono  basis  and
that  any fees awarded by [the court] at the conclusion  of  this
case  [would]  be  retained  by APBP  and  the  Northern  Justice
     B.   Proceedings
          Okuley  moved for a preliminary injunction against  the
State, challenging the 2003 policys legality.  In September  2005
the  superior court converted the motion into a summary  judgment
motion  and ruled in Okuleys favor.6  Subsequently, Okuley  moved
to  certify  the  class under Alaska Civil Rule  23(b)(2).7   The
superior  court  certified two classes:  (1) IA applicants  whose
applications were denied by the State despite being found  to  be
disabled  by  a state-approved doctor, but whose SSI applications
          were still being processed by the federal government; and (2) IA
applicants  whose applications were denied by the  State  despite
being  found to be disabled by a state-approved doctor, and whose
SSI   applications  were  subsequently  denied  by  the   federal
          The parties reached an agreement as to the first class,
consisting  of  153  members, with  the  State  agreeing  to  pay
$759,930  in  retroactive IA benefits.8  Because Okuley  and  the
State  could not agree as to the second class, consisting of  237
members, Okuley moved for summary judgment, requesting that these
members  be awarded retroactive IA benefits.  The superior  court
granted  the  motion over the States opposition and  ordered  the
State  to  pay  $230,080 in retroactive IA benefits  to  the  167
members of this class who had responded to the States notices.
          As  a  result  of Okuleys class action, the  State  was
required  to  pay  301 class members $990,010 in  retroactive  IA
benefits.9   The  State  also agreed to pay  $91,575  (9.25%)  in
prejudgment interest.
            Class  counsel moved for prevailing party fees  under
Alaska  Civil  Rule 82, as well as for reasonable attorneys  fees
from  the  common  fund.  The State did not oppose  the  Rule  82
motion,  and  the  court awarded $46,131.70 in  prevailing  party
fees.  The  State did oppose counsels request for fees  from  the
common  fund, arguing that (1) the doctrine should not  apply  to
public benefits cases, and (2) the hourly rate claimed by counsel
was  unreasonable  as  compared to the  hourly  rate  the  States
attorneys  are  paid.   In  requesting common  fund  fees,  class
counsel urged the court to use the percentage of the fund method10
and to award fees in an amount equal to the prejudgment interest,
$91,575, or 9.25% of the fund.11
          The  court found the common fund doctrine applied under
the three-part test outlined in Edwards v. Alaska Pulp Corp.12  It
also  found the percentage of the fund method more desirable than
the lodestar method because there is a clearly established common
fund.   Having so determined, the court recognized  the  need  to
carefully   evaluate  the  award  of  fees  under   a   test   of
reasonableness.   It  listed  the  factors  courts  consider   in
determining  a  reasonable fee13 and discussed those  factors  it
found relevant.  Based on the fact that courts often use 25% as a
benchmark  and  on  the  courts  finding  that  this   case   was
undesirable,   had  substantial  risk  factors   (including   the
contingent  nature  of the representation and  the  risk  of  not
prevailing), and resulted in a favorable outcome for an  indigent
class,  the court granted counsels request for an award equal  to
the  prejudgment interest, or 9.25% of the fund.  Thus, the court
awarded counsel $91,575 in common fund fees, amounting to a total
award of around $137,707 in fees.14
          The  State, in its parens patriae capacity, appeals the
superior  courts  award  of $91,575 in attorneys  fees  from  the
common fund.15
          We  review  a  superior  courts  decision  to  use  the
percentage of the fund method to calculate a fee award for  abuse
of  discretion.16  Likewise, we review an attorneys fee award for
          abuse of discretion, reversing the award only if it is arbitrary,
capricious, manifestly unreasonable, or the result of an improper
motive.17   But we review the courts application of  the  law  in
determining an attorneys fee award de novo, applying the rule  of
law  that  is most persuasive in light of precedent, reason,  and
policy. 18  Similarly, whether a superior court has fulfilled its
fiduciary  duties in awarding class counsel attorneys fees  is  a
legal question reviewed de novo.19
          The   State  argues  the  superior  court  abused   its
discretion  in awarding class counsel fees from the  common  fund
for  a  variety of reasons; class counsel dispute each  of  these
reasons  and  argue the State has waived all of  its  claims  for
failure to raise them below.
     A.   The   Superior  Court  Did  Not  Fail  To  Fulfill  Its
          Fiduciary Duties to the Class in Awarding Class Counsel
          Fees from the Common Fund.
          The  State  argues  the  court failed  to  fulfill  its
fiduciary  duty  to the class by choosing the percentage  of  the
fund  method and by not considering the appropriate amount of  an
award based on the hours worked and rates charged.  We disagree.
          We have recognized the potential lack of adversity when
class  counsel  asks  the  trial court  to  impose  fees  on  the
benefitted  class  members  under  the  common  fund  doctrine.20
Because  of  this potential lack of adversity,  as  well  as  the
potential  for conflicts of interest between the class and  class
counsel,  we  have explained that [c]ourts should . .  .  closely
scrutinize applications for attorneys fees from a fixed fund.21
          Here, the court acknowledged its fiduciary duty to  the
class  when  it stated, this court should carefully evaluate  the
award  of  fees  under a test of reasonableness.  And  the  court
fulfilled its fiduciary duty to the class by so doing.  Regarding
the  method of fee calculation, the court discussed how fees  are
calculated under both the percentage of the fund and the lodestar
methods.   It  then concluded that because a clearly  established
fund  existed,  the  percentage  of  the  fund  method  was  more
appropriate.  The difficulty in calculating the fund is a  factor
courts   may  consider  in  determining  which  method   of   fee
calculation  to  apply.22  In relying on this factor,  the  court
properly  exercised  its discretion and fulfilled  its  fiduciary
duty to the class.
          Likewise,   the   court   carefully   evaluate[d]   the
reasonableness  of  the percentage and fee  awarded.   The  court
considered  the Johnson-Kerr factors,23  analyzed the factors  it
found supported upward or downward adjustment  risk of nonpayment
and loss, undesirability of the case, and results achieved on the
one  hand, and time and labor required and indigency of the class
on  the  other   and  calculated the lodestar fee  amount  (about
$60,000)  and  what the fee would be if it set the percentage  at
25%  versus  at  9.25%.   Thus, the  court  both  recognized  and
fulfilled its fiduciary duty to the class to scrutinize  the  fee
     B.   The  Superior  Court Did Not Abuse  Its  Discretion  in
     Applying the Percentage of the Common Fund Method.
          The State argues that the percentage of the fund method
is  inappropriate in SSI cases generally, asserting  that  basing
the  fee on the results achieved, as the percentage method  does,
would result in windfall fees because SSI benefits are fixed.
          Again,  Alaska courts have discretion to  apply  either
the  percentage  of the fund or the modified lodestar  methods.24
Under  the  percentage of the fund method the court determines  a
reasonable percentage based on a 25% baseline,25 which it modifies
based  on  factors such as the size of the fund and the  Johnson-
Kerr factors.26  On the other hand, a court following the modified
lodestar  method first determines the number of hours an attorney
reasonably  spent  on the case and multiplies that  number  by  a
reasonable hourly rate.27  The court may apply a multiplier to the
lodestar  amount  based  on  factors  such  as  the  Johnson-Kerr
factors,  the risk to counsel in taking the case, achievement  of
extraordinary   results,  the  quality  of  representation,   and
substantial delay in payment.28
          We  have stated that the percentage of the fund  method
may  be  inappropriate where the attorney quickly  negotiates  an
enormous  settlement  and thus stands to  receive  an  inordinate
windfall,29  where  there is any difficulty  in  calculating  the
common benefit,30 or where the fund is enormous;31 and the lodestar
method  may  be  inappropriate in a case  in  which  an  attorney
recovers   a   small   fund,   [causing]   application   of   the
lodestar . . . to devour most or all of the fund.32
            Advantages of the percentage method are that it tends
to  better  reflect the results achieved33 and  to  most  closely
approximate[]  the manner in which attorneys are  compensated  in
the marketplace.34  On the other hand, the lodestar method closely
tracks the amount, though not necessarily the value, of the  work
done.35   Regardless of which method a court chooses,  the  court
should explain the reasons behind its decision.36
          We  agree  with  class counsel that the court  did  not
abuse   its   discretion   in  finding  the   percentage   method
appropriate.  Here, the fund is definite  it consists of $990,010
in  retroactive IA benefits plus $91,575 in prejudgment interest.
The court found that because the fund is clearly established, the
percentage  method  was  more appropriate.   Again,  because  the
difficulty  in calculating the fund is an appropriate  factor  to
consider,  and because the record supports the courts conclusion,
the court did not abuse its discretion in choosing the percentage
of the fund method on this basis.37
     C.   The  Superior  Court Did Not Abuse  Its  Discretion  in
          Finding   a  Fee  Award  of  9.25%  of  the  Fund   Was
          The State contends that the court abused its discretion
in accepting class counsels request for common fund fees equal to
9.25% of the fund, arguing that the court should not have awarded
enhanced fees based on risk and undesirability.38
          Again, in deciding to award 9.25% of the fund to  class
counsel,  the  superior court considered the 25%  benchmark,  the
          need to ensure the fee was reasonable, factors supporting upward
and  downward adjustment, the actual fees incurred, and the risks
entailed.   Though acknowledging the classs indigency, the  court
also  emphasized  the results achieved: without  the  efforts  of
class  counsel,  the plaintiff class would have  been  worse  off
financially.  After considering all of these factors,  the  court
concluded the factors really do not call for a departure from the
benchmark of 25%.  Accordingly, the request for approximately  9%
is clearly justified.
          Though either the percentage or the lodestar method may
yield  fees exceeding fees calculated on a strict hourly basis,39
the  trial  court should exercise its discretion to avoid  unjust
enrichment  of either counsel or beneficiaries.40  Regardless  of
which  method  a court uses, a reasonable attorneys  fee  is  the
proper standard.41
          We  conclude awarding class counsel 9.25% of  the  fund
was  reasonable  and  not  an abuse of  discretion.   The  courts
decision  to  award  this percentage was  neither  arbitrary  nor
capricious: the court acknowledged its duty to carefully evaluate
the fee request for reasonableness and did so evaluate it, taking
into  account the relevant Johnson-Kerr factors supporting upward
and   downward   adjustment,  calculating  the  lodestar   figure
($60,000), and considering what the fee would be if it chose  the
25% benchmark ($247,502).  And though the award exceeded counsels
approximate  hourly  rates,  we  conclude  the  award   was   not
manifestly  unreasonable42 when considering the policy objectives
of  encouraging  pro bono representation and of using  the  class
action mechanism.
          We have permitted enhanced fees in both public interest
and class action cases because of the risk of nonpayment43 and the
sound  policy of encouraging  capable representation.44   In  the
context  of  workers compensation fee awards, we  have  explained
that  the  objective  of  ensuring  that  competent  counsel   is
available to represent injured workers would not be furthered  by
a  system  in which claimants counsel could receive nothing  more
than  an hourly fee when they win while receiving nothing at  all
when  they lose.45  We believe the same policy applies to a class
action case taken on a pro bono basis and conclude the court  did
not  abuse  its  discretion in finding  the  risk  of  nonpayment
justified a fee enhancement.
          We  also conclude the superior court did not abuse  its
discretion  in awarding enhanced fees based on the  risk  of  not
prevailing against the State.  We have explained that  where  the
probability  of  success  is  so great  at  the  outset  that  no
adjustment  in  the  base  award would  be  appropriate,  a  risk
multiplier  should  not  be applied.46   A  multiplier  might  be
appropriate when pertinent law is unclear at the outset of a case
or new law had to be forged or difficult burdens of proof met.47
          Here,  the  court  found  there  was  a  risk  of   not
prevailing  against  the  State, which  it  called  a  formidable
adversary, and that this risk supported enhancing the fee  award.
We  agree.   Though Okuley prevailed on the issue of whether  the
2003  policy was invalid on summary judgment within one month  of
filing  her  preliminary  injunction motion,  the  cases  success
          hinged on certifying the class.  Below, the State vigorously
opposed  class certification and much of the litigation concerned
this issue, with both parties filing extensive memorandums.  Even
the   State   acknowledged  that  its   motion   opposing   class
certification  was complicated.  Whether the court would  certify
the  class  was  not  certain.  Further,  even  after  the  court
certified  the  class,  the State refused to  settle  the  second
classs  claims, requiring litigation over the past-due  benefits.
On  these  facts,  the  court did not  abuse  its  discretion  in
enhancing   the  fee  award  on  the  basis  of  uncertainty   of
          The  court also did not abuse its discretion in finding
this case qualifies as undesirable, justifying a fee enhancement.
We have encouraged courts to consider the potential difficulty of
attracting  capable counsel in determining the compensable  value
of  counsels services and proper fee awards.48  Counsel may offer
affidavits asserting that it would be difficult or impossible  to
obtain  other  capable counsel absent the potential  recovery  of
enhanced fees.49  However, a court need not unquestioningly accept
assertions that absent enhanced fees, capable counsel  could  not
have  been retained, or cannot be obtained in the future, because
[s]uch assertions are potentially speculative and self-serving.50
          The  court found this case the type of case where there
are few attorneys who would represent clients who have no ability
to  pay,  concluding that without class counsel, it  is  doubtful
that  class  actions  such as this one would have  been  pursued.
Class counsel submitted affidavits attesting to the difficulty of
placing  cases  such  as this one with competent  counsel.   APBP
Executive   Director  Kara  Nyquist,  who  is   responsible   for
recruiting private attorneys to accept pro bono cases, stated  in
an  affidavit  that [i]t is beyond question that the  lawyers  in
this  state that handle pro bono cases will not and do not accept
class actions or other complex public benefits cases.  She stated
that  in  the  almost  three years that she  has  been  Executive
Director, she has been able to find only one firm that is willing
to  handle  class actions or other complex public benefits  cases
for APBPs clients, the Northern Justice Project.  Likewise, Lloyd
Benton  Miller,  a partner in a private law firm,  stated  in  an
               In  my  experience there is  an  extreme
          shortage  of  attorneys in  the  private  Bar
          willing to take on substantial commitments to
          plaintiffs  work in contingent  class  action
          litigation for indigent clients.  The paucity
          of  available attorneys is even more grave in
          the  public  benefits arena, where  extremely
          few  individuals in the private Bar have  any
          substantial expertise.
Based  on  this  evidence, the court could reasonably  find  that
attracting  capable  counsel to take this case  would  have  been
difficult and a fee enhancement was justified.
     D.   The  State Waived Its Argument That the Common Fund Fee
          Award Violated Okuleys Representation Agreement.
          The  State contends that because Okuleys representation
agreement stated she would not be charged for representation, and
because  class counsel received the case from APBP, whose website
promises  pro  bono clients will not have to pay attorneys  fees,
the  common  fund fee award contradicted Okuleys agreement.   The
State  also argues that the clause in the agreement stating  that
class counsel would retain court awarded fees was misleading.
          Okuleys  representation agreement is not  part  of  the
record; neither party asked the court to review the fee award for
compliance  with  the agreement and it did not do  so.   Attorney
Goriune  Dudukgian  claimed  in an affidavit  that  the  retainer
agreement signed by plaintiff Denise Okuley, the Northern Justice
Project, and APBP provides that any fees awarded by this Court at
the  conclusion of this case shall be retained by  APBP  and  the
Northern  Justice Project.  Insofar as this statement  accurately
describes  the retainer agreement, the agreement may be ambiguous
as  to  whether  a  common  fund fee award  was  contemplated  or
permitted.   But [a] party may not raise an issue for  the  first
time on appeal.51  Because the State failed to raise this argument
below  in its opposition to the fee request, leaving us  with  no
record  and no copy of the agreement to review, we consider  this
argument waived.
     E.   The  Fee Award Does Not Fail for Lack of Notice of  the
          Fee Request to the Class.
          The State claims the common fund fee award is unfair to
the  class members because they did not receive notice of the fee
request.   It argues that because prejudgment interest  had  been
awarded to the class members, they had vested property rights  in
that  interest  and constitutional due process  was  triggered.52
Class  counsel reply that Alaska Civil Rule 23 does  not  require
notice because the class was certified under Rule 23(b)(2).
          Alaska  Civil  Rule 23(c)(2) requires notice  of  class
certification and opt-out rights in Rule 23(b)(3) (damages) class
actions  but  not  in  Rule 23(b)(2) (injunctive  or  declaratory
relief)  or  Rule 23(b)(1) (limited fund) class actions.53   Many
federal  courts  have  held  that under  Federal  Rule  of  Civil
Procedure  23(c)(2), which like the Alaska rule does not  require
notice of opt-out rights to members of Rule 23(b)(2) classes, due
process  does  not require notice: [w]hen an action is  certified
under  Rule 23(b)(2) . . . absent class members are not  required
to  receive notice or to have the opportunity to opt-out  of  the
suit[;]  [d]ue  process requires only that the class  members  be
adequately represented.54  The rationale for this distinction lies
in  assumptions  of  cohesiveness underlying [Rule  23(b)(2)  and
(b)(3)] classes.55  The Eleventh Circuit has explained:
               At    base,   the   (b)(2)   class    is
          distinguished from the (b)(3) class by  class
          [cohesiveness]  .  . . .   Injuries  remedied
          through  (b)(2) actions are really group,  as
          opposed  to individual injuries.  The members
          of   a   (b)(2)  class  are  generally  bound
          together  through preexisting  or  continuing
          legal  relationships or by  some  significant
               common  trait  such as race  or  gender.
          Although   the  interests  of  the  different
          members  of  a (b)(2) class are by  no  means
          identical the substantial cohesion  of  those
          interests makes it likely that representative
          members   can   adequately   represent    the
          interests of absent members and that the need
          for and interest in individual representation
          will  be  minimal.  Under such circumstances,
          the  contribution that individual notice  can
          make  to  buttressing adequate representation
          is  not  great enough to warrant a  mandatory
          procedural or constitutional requirement.[56]
          Though due process generally does not require notice of
opt-out rights in 23(b)(2) actions, some federal courts have held
that  some  form of notice should be given if potential conflicts
of  interest between the class representatives and unnamed  class
members  arise.57   We  recognize that because  of  the  risk  of
conflicts  of  interest when class counsel  seek  fees  from  the
common  fund,  notice  to  class members  of  a  fee  request  is
desirable.58  We also note that under Alaska Civil Rule 23(d), the
court could have required notice of the fee request.59
          But  the  court was not required to order such  notice.
As class counsel point out, Alaskas Civil Rule 23 does not have a
provision mandating notice of counsels fee request.  By contrast,
Federal  Rule  of  Civil  Procedure 23(h)(1),  enacted  in  2003,
requires  [n]otice of a motion [for attorneys fees and nontaxable
costs]  . . . be served on all parties and, for motions by  class
counsel,  directed  to  class members in a  reasonable  manner.60
Responding  to  class counsels emphasis on this distinction,  the
State  asserts  that Alaskas procedural rules are  not  congruent
with  constitutional  due process.  But  Federal  Rule  of  Civil
Procedure 23(h) is not, at least explicitly, rooted in notions of
constitutional  due process.  The 2003 Advisory  Committee  Notes
explain  that  the  rule was designed to help courts  provide  an
early framework for an eventual fee award, or for monitoring  the
work  of class counsel during the pendency of the action.61   The
rule  was  also  promulgated to help courts meet  their  duty  to
ensure  that the amount and mode of payment of attorney fees  are
fair and proper whether the fees come from the common fund or are
otherwise  paid.62   We  are unaware of any  case  decided  under
Federal Rule of Civil Procedure 23 before the 2003 amendment that
holds that notice to class members is constitutionally required.
            Though  we believe awarding common fund fees  without
notice  to  class members of the fee request was unfortunate,  we
conclude   that   due   process  was  not  violated   under   the
circumstances  of this case.  We reach this conclusion  not  only
because due process generally does not require prejudgment notice
in  23(b)(2)  cases, but also because the process  employed  here
involved a formal request for fees that was energetically opposed
by  the State and closely scrutinized by the superior court.   In
light  of the relatively small deduction  in both percentage  and
absolute  dollars  to be made from each individual class  members
          recovery, this process in all likelihood protected the interests
of  the  class as well as if individual notice had been given  to
class  members, and did so without the added costs or delay  that
would  have resulted if notice had been given.  In light of these
considerations, we conclude that due process was satisfied.
          For  the  above reasons, we AFFIRM the superior  courts
judgment in all respects.
     1    The SSI program and application process are governed by
federal  statutes  and  regulations.  See  42  U.S.C.   1381-1385
(2006); 20 C.F.R.  416.101-416.2227 (2008).

     2     See  AS 47.25.455; 7 Alaska Administrative Code  (AAC)
40.375(a), 40.140(b), 40.170(b) (2008).

     3    See 7 AAC 40.180, 40.170(b), 40.050(c).  Assistance may
also  be  available based on age, blindness, or  financial  need.
See 7 AAC 40.090.  Persons found eligible for IA benefits receive
$280 per month.  AS 47.25.455(a).

     4    See 7 AAC 40.375(c).

     5    See 7 AAC 40.480(b).

     6     The State subsequently rescinded the 2003 policy  and,
as required by the APA, noticed and held a public comment hearing
prior to adopting the policy.  The new regulations took effect in
January 2006.  See 7 AAC 40.180 (am. 1/11/2006, Reg. 177).

     7    Alaska Civil Rule 23(b)(2) provides that a class may be
certified  if  the four prerequisites in Rule 23(a)  (numerosity,
commonality,  typicality, and adequacy) have  been  met  and  the
party  opposing the class has acted or refuses to act on  grounds
generally  applicable  to the class, thereby  making  appropriate
final injunctive relief or corresponding declaratory relief  with
respect to the class as a whole.

     8    Payment was conditioned on the class members continuing
to meet other eligibility requirements for the IA program.

     9     Apparently  $135,000  to $150,000  in  retroactive  IA
benefits  were  never paid or claimed because class  members  had
since  died,  moved  out-of-state, or failed to  respond  to  the
States notices.

     10    Alaska courts may use either the percentage of the fund
method or the modified lodestar method to calculate fees from the
common fund.  See Edwards v. Alaska Pulp Corp., 920 P.2d 751, 758
(Alaska   1996).   The  former  method  involves  determining   a
reasonable  percentage using a 25% baseline that the trial  court
can  modify depending on various factors, such as the size of the
fund, the time required to reach a settlement, and any objections
by  class  members  to the settlement.  Id.   The  latter  method
involves calculating a lodestar figure by multiplying the  number
of hours reasonably spent on the case by a reasonable hourly rate
and  then  applying a multiplier to that figure based on  various
factors,  such as the risk in taking the case and the quality  of
representation.  Id. at 757.

     11      Because  class  counsel  are  both  public  interest
attorneys,  neither  normally  bills  clients  nor  has  standard
billing  rates.  However, attorney Goriune Dudukgian provided  in
an  affidavit that the fair market rate for his services would be
at  least $200.00 per hour, and the other attorney, James  Davis,
stated in an affidavit that his would be $275 per hour.  At these
rates, counsel would be owed a total of $57,727.50. Setting  this
as  the lodestar, a multiplier of about 2.4 would result in a fee
award closely approximating the full amount awarded here.  If the
lodestar figure is $45,060.75, as the State argues it should  be,
the actual total fees awarded would reflect a multiplier of about

     12     920  P.2d  at 756 n.9 ([T]he common fund doctrine  is
properly  applied  .  . . if (1) the class  of  beneficiaries  is
sufficiently  identifiable, (2) the benefits  can  be  accurately
traced,  and  (3) the fee can be shifted with some exactitude  to
those  benefitting.  (quoting Paul, Johnson,  Alston  &  Hunt  v.
Graulty,  886 F.2d 268, 271 (9th Cir. 1989)) (internal  quotation
marks  omitted)).   Here,  the court found  (1)  two  classes  of
beneficiaries had been identified, the first class consisting  of
153  persons and the second of 237, of which 167 responded to the
notice  of  retroactive  payments;  (2)  the  benefits  could  be
accurately  traced because the first class received  a  total  of
$759,930 and the second group of 167 received $230,080;  and  (3)
the   fee  could  be  shifted  with  some  exactitude  to   those

     13    According to Johnson v. Georgia Highway Express, Inc.,
488  F.2d  714  (5th  Cir. 1974), courts should  consider  twelve
factors  in determining reasonable fee awards: (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 other employment by the attorney  due  to
acceptance of the case, (5) the customary fee, (6) [w]hether  the
fee is fixed or contingent, (7) [t]ime 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  length  of  the professional relationship  with  the
client,  and (12) [a]wards in similar cases.  Id. at 717-19.   In
Kerr  v. Screen Extras Guild, Inc., 526 F.2d 67 (9th Cir.  1975),
the  Ninth  Circuit adopted the Johnson guidelines.  Id.  at  70.
The  parties  refer to these as the Johnson-Kerr factors  and  we
adopt this usage.  These factors are largely found in Alaska  Bar
Rule 35(a).

     14     The State argues the combined awards amount to hourly
rates  of $727.31 and $528.95, whereas the attorneys fair  market
rates are $275 and $200 per hour.

     15    APBP has joined in Northern Justice Projects brief.

     16    See Edwards, 920 P.2d at 758.

     17     See  Hughes v. Foster Wheeler Co., 932 P.2d 784,  793
(Alaska  1997) (citing Mt. Juneau Enters., Inc. v. Juneau Empire,
891 P.2d 829, 834 (Alaska 1995)).

     18      Glamann  v.  Kirk, 29 P.3d 255,  259  (Alaska  2001)
(quoting  Philbin v. Matanuska-Susitna Borough,  991  P.2d  1263,
1266 (Alaska 1999)).

     19    See In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 307-
08  (3d  Cir. 2005) (appearing to use de novo standard to  review
the  trial  courts  behavior as a fiduciary in evaluating  a  fee
request in a class action settlement).

     20    Municipality of Anchorage v. Gentile, 922 P.2d 248, 267
n.28 (Alaska 1996).

     21     Edwards v. Alaska Pulp Corp., 920 P.2d 751,  756  n.7
(Alaska 1996).

     22    Municipality of Anchorage v. Gallion, 944 P.2d 436, 447
(Alaska 1997) (citing Gentile, 922 P.2d at 266).

     23    See supra note 13 for the Johnson-Kerr factors.

     24    Edwards, 920 P.2d at 758.

     25    Id. at 758 & n.14 (noting percentages ranging from 10%
to 50% have been accepted but that the consensus seems to be that
20%  to 30% (or 19% to 33%) is normally reasonable and the median
and the most common figure seems to be 25% of the fund).

     26     Id.  at 758 (also listing as factors to consider  the
time  required to reach a settlement, whether class members  have
substantial  objections  to  the  settlement  terms  or  the  fee
request,  non-monetary benefits conferred by the settlement,  the
economies  of scale involved in a class action, and the structure
of the settlement).

     27    Id. at 757.

     28     Id.  (citing In re Wash. Pub. Power Supply Sys.  Sec.
Litig., 19 F.3d 1291, 1301-05 (9th Cir. 1994)).

     29    Id. at 758.

     30    Municipality of Anchorage v. Gallion, 944 P.2d 436, 447
(Alaska  1997) (citing Municipality of Anchorage v. Gentile,  922
P.2d 248, 266 (Alaska 1996)).

     31     See Edwards, 920 P.2d at 758 (discussing In re  Wash.
Pub.  Power Supply Sys. Secs. Litig., 19 F.3d at 1297,  in  which
the percentage method was inappropriate because the fund amounted
to  $685 million); see also In re Cedant Corp. PRIDES Litig., 243
F.3d  722,  737 nn.19 & 22 (3d Cir. 2001) (stating  $100  million
seems  to  be the informal marker of a very large settlement  and
citing  several cases with settlements exceeding $100 million  in
which  courts  used the lodestar method (internal quotation  mark
omitted) (citation omitted)).

          Also,  at  least  one  court has noted  the  percentage
method may be inadequate if multiple firms represented the class.
See In re Superior Beverage/Glass Container Consol. Pretrial, 133
F.R.D. 119, 124 (N.D. Ill. 1990).

     32     Edwards,  920 P.2d at 758 n.13 (quoting  Rawlings  v.
Prudential-Bache Props., Inc., 9 F.3d 513, 516 (6th Cir. 1993)).

     33    Id. (quoting Rawlings, 9 F.3d at 516).

     34    Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1269 (D.C.
Cir. 1993).

     35    See Edwards, 920 P.2d at 758 n.13 (quoting Rawlings, 9
F.3d at 516).

     36    Id. at 759.

     37    Cf. Municipality of Anchorage v. Gallion, 944 P.2d 436,
447 (Alaska 1997) (stating that [t]he superior courts observation
about  the  difficulty of determining the value of  the  judgment
remains  relevant and valid, and holding the common fund doctrine
did not apply).

          The  courts  failure  to  discuss  the  other  relevant
factors  is  harmless  error  because  all  the  factors  support
choosing the percentage method: (1) the size of the fund is  just
over $1 million and thus is clearly not a mega-fund; (2) the case
did  not settle, so there is no risk counsel pushed an early  and
large  settlement to receive higher fees; and (3) only  one  firm
represented the class.

     38     The State also argues that class counsels hourly fees
were  unreasonable  due  to failure to  deduct  certain  entries.
Because  the State did not raise this argument below, we conclude
the  State  has  waived  this  argument  on  appeal.   Cf.  State
Commercial  Fisheries Entry Commn v. Carlson, 65  P.3d  851,  873
(Alaska 2003).

     39    Municipality of Anchorage v. Gentile, 922 P.2d 248, 266
(Alaska 1996).

     40     Edwards,  920  P.2d  at 759; see  also  MacDonald  v.
Weinberger, 512 F.2d 144, 146-47 (9th Cir. 1975) (noting that  in
determining   a   reasonable  fee,  courts  face  the   competing
considerations  of  ensuring  the  attorneys  compensation   [is]
sufficient   to  encourage  members  of  the  bar  to   undertake
representation  of disability claimants while acknowledging  that
the  disability award, from which the attorneys fee is  paid,  is
normally  an  already-inadequate  stipend  for  the  support  and
maintenance of the claimant and his dependents).

     41     Edwards,  920 P.2d at 756; see also id. at  758  n.15
(Trial  courts  which elect to follow a percentage approach  must
exercise  their independent discretion in arriving at a fair  and
reasonable fee award under the common fund doctrine.).

     42    See Municipality of Anchorage v. Gallion, 944 P.2d 436,
447  (Alaska 1997) (explaining the compensable value of  counsels
services  may  exceed  the hours worked times  the  hourly  rates
(citing  Municipality of Anchorage v. Gentile, 922 P.2d 248,  264
(Alaska 1996))); Gentile, 922 P.2d at 266.

          In common fund cases in other jurisdictions, court have
tended to award multipliers of two to four times the lodestar and
as  high  as five in some circumstances. See, e.g., In re  NASDAQ
Market-Makers  Antitrust Litig., 187 F.R.D.  465,  489  (S.D.N.Y.
1998) (noting multipliers of between 3 and 4.5 have become common
(internal quotation mark omitted) (citation omitted)); Ressler v.
Jacobson,  149  F.R.D. 651, 654 n.4 (M.D. Fla. 1992)  (explaining
courts  regularly  award  multipliers  of  2  to  3  times  [the]
lodestar); Kuhnlein v. Dept of Revenue, 662 So. 2d 309, 315 (Fla.
1995)  (setting the maximum multiplier available in  common  fund
cases  at five).  If we consider the award in this case as though
it  were  calculated as a modified lodestar, the multiplier  here
would  be  between 2.4 and three; thus, it cannot be regarded  as
unreasonable by that measure.

     43     See Era Aviation, Inc. v. Lindfors, 17 P.3d 40, 51-52
(Alaska  2000)  (citing examples to support  the  statement  that
[t]his  court  has  affirmed  . . . risk-enhanced  fees  only  in
exceptional  circumstances,  where  there  was  a  strong  public
interest   involved,  or  the  attorneys  stood  to  receive   no
compensation  other  than  the fees granted  by  the  court,  and
refusing  to award risk-enhanced fees where, among other  things,
the party had not shown that counsel would not be paid other than
by  court-awarded fees); see also In re Contl Ill.  Sec.  Litig.,
962  F.2d 566, 573 (7th Cir. 1992) (discussing the importance  of
risk  multipliers in class actions because [i]n  a  class  action
suit,  .  . . there is no contract between lawyer and client   no
source  other than the judicial award of fees to which the lawyer
can look for compensation for risk of loss).

     44    See Era Aviation, Inc., 17 P.3d at 51-52 (explaining we
have  permitted risk-enhanced fees in cases that involve the risk
of  discouraging capable counsel, and refusing to award such fees
where,  among other things, the party had not shown her case  was
of  the  type  that  would make it difficult to  attract  capable
counsel  without  the potential of enhanced fees);  Gentile,  922
P.2d  at  264  (directing  the court on remand  to  consider  the
potential difficulty of attracting capable counsel in setting the
class  action fee award); cf. Wise Mech. Contractors v.  Bignell,
718  P.2d  971, 975 (Alaska 1986) (explaining that the contingent
nature  of  representation  in workers compensation  cases  makes
awarding enhanced fees necessary to ensure that competent counsel
are available to represent injured workers).

     45    Wise Mech. Contractors, 718 P.2d at 975.

     46     Thomas  v.  Bailey, 611 P.2d 536, 542  (Alaska  1980)
superseded by statute on other grounds, ch. 86,  1-4, SLA 2003.

     47    Id.

     48    Gentile, 922 P.2d at 264.

     49    Id. at 264 n.25.

     50    Id.

     51    Brandon v. Corr. Corp. of Am., 28 P.3d 269, 280 (Alaska
2001)  (citing Preblich v. Zorea, 996 P.2d 730, 736 n.17  (Alaska

     52     Constitutional due process requires notice reasonably
calculated,  under  all the circumstances, to apprise  interested
parties  of  the  pendency  of the  action  and  afford  them  an
opportunity  to  present  their  objections.   Mullane  v.  Cent.
Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).

     53     Alaska  R.  Civ.  P. 23(c)(2) (In  any  class  action
maintained  under subdivision (b)(3), the court shall  direct  to
the  members of the class the best notice practicable  under  the
circumstances, including individual notice to all members who can
be  identified  through reasonable effort.); see also  Alaska  R.
Civ. P. 23(b)(1)-(3).

     54     Pate v. United States, 328 F. Supp. 2d 62, 70 (D.D.C.
2004) (quoting EEOC v. Gen. Tel. Co. of Nw., Inc., 599 F.2d  322,
334  (9th  Cir.  1979),  affd,  446 U.S.  318  (1980))  (internal
quotation marks omitted) (alterations and omissions in original);
see  also Eubanks v. Billington, 110 F.3d 87, 92 (D.C. Cir. 1997)
(stating  [a]  number  of courts have held  that,  as  a  general
matter, due process does not require that (b)(1) or (b)(2)  class
members be given an opportunity to opt out and citing cases  from
the Second, Fifth, Sixth, and Ninth Circuits).

     55    Holmes v. Contl Can Co., 706 F.2d 1144, 1156 (11th Cir.

     56    Id. at 1155 n.8 (citation omitted); see also Van Gemert
v.  Boeing  Co.,  590 F.2d 433, 439 n.14 (2d Cir. 1978)  ([C]lass
actions  certified  under 23(b)(2) or .  .  .  23(b)(1),  do  not
contain  an  opt-out privilege.  This reflects the conclusion  of
those  who  drafted the Rules that individual  choice  should  be
subordinated  to the interests of the class as a whole  to  avoid
inconsistent  judgments  or prejudice to  absent  class  members.
Because  class  certification represents a judicial determination
that the absentees are adequately represented, it would frustrate
the  Rule  if  we  were  to  require an investigation  into  each
plaintiffs   willingness   to  accept   the   benefits   of   the
litigation.); cf. Woodward v. Rogers, 344 F. Supp. 974, 980  n.10
(D.D.C.   1972)   (holding  that  where  the  adequacy   of   the
representation  of the class interests by the  named  parties  is
clear,  where  no apparent purpose would be served by  notice  to
this  wide-ranging class even if notice were at all  practicable,
and  where,  indeed,  judgment is in  favor  of  the  class,  the
essential requisites of due process have been met without further
notice (citations omitted)).

     57    See, e.g., Holmes, 706 F.2d at 1159-60 (holding notice
of  opportunity to opt-out of settlement was required in 23(b)(2)
Title VII case because the settlement included a lump-sum damages
award  and  each  class members claim to back pay  was  based  on
unique  injuries,  defying  the assumption  of  cohesiveness  and
generating   the  possibility  of  antagonistic   interests   and
conflicting concerns); cf. Eubanks, 110 F.3d at 96 (holding  when
a   (b)(2)  class  seeks  monetary  as  well  as  injunctive   or
declaratory relief the trial court may either certify  the  class
as  a  hybrid (b)(2)/(b)(3) class or conclude that the claims  of
particular class members are unique or sufficiently distinct from
the  claims  of  the class as a whole such that  opt-out  notices
should be permitted on a selective basis); Elliott v. Weinberger,
564  F.2d  1219,  1229 (9th Cir. 1977) (Only  when  necessary  to
provide   class   members  an  opportunity  to  signify   whether
representation  by named plaintiffs is fair and  adequate  or  to
intervene to present additional claims or to otherwise come  into
the  action  to, for example, submit views as amici curiae,  does
due  process  require the direction of some  sort  of  notice  to
absent members of a (b)(2) class.), affd in part and revd in part
on  other  grounds sub nom. Califano v. Yamasaki,  442  U.S.  682

     58     See  Goldenberg v. Mariott PLP Corp., 33 F. Supp.  2d
434,  441  (D.  Md.  1998)  (Notice of the  potential  extent  of
attorneys fee awards is deemed essential because it allows  class
members  to determine the possible influence of the fees  on  the
settlement  and to make informed decisions about their  right  to
challenge  the  fee award. (citations omitted));  cf.  Staton  v.
Boeing  Co.,  327 F.3d 938, 963 n.15 (9th Cir. 2003)  (Where  the
class  was  informed  of the amount of fees only  indirectly  and
where  the  failure to give more explicit notice could itself  be
the  result of counsels self-interest, the courts must be all the
more  vigilant in protecting the interests of class members  with
regard to the fee award.).

     59    See Alaska R. Civ. P. 23(d) (permitting courts to make
appropriate orders . . . (2) requiring, for the protection of the
members  of  the class or otherwise for the fair conduct  of  the
action,  that  notice be given in such manner as  the  court  may
direct  to some or all of the members of any step in the  action,
or  of the proposed extent of the judgment, or of the opportunity
of  members  to  signify whether they consider the representation
fair  and  adequate, to intervene and present claims or defenses,
or  otherwise  to  come  into the action);  Larionoff  v.  United
States,  533  F.2d 1167, 1186 n.44 (D.C. Cir. 1976) (noting  that
Federal  Rule of Civil Procedure 23(d)(2) operates  as  a  safety
valve under which the court has discretion . . . to direct notice
to be given in any class action).

     60     Fed.  R. Civ. P. 23(h)(1) & advisory committee  note,
subdiv. (h) (2003).

     61    Fed. R. Civ. P. 23 advisory committee note, subdiv. (h)

     62     Id.; see also Cobell v. Norton, 407 F. Supp. 2d  140,
147  (D.D.C.  2005)  (stating the rule was promulgated  for  this

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