Common Fund (Common Fund Doctrine)

A common fund is a single pot of money that a defendant pays to resolve a class action, from which class members, lawyers, and administration costs are paid. The related common fund doctrine is the legal rule that lets courts award attorneys' fees out of that pool, so that everyone who benefits from the lawyers' work shares its cost.

The U.S. Supreme Court endorsed the doctrine in Boeing Co. v. Van Gemert (1980). In that case, the Court held that the common fund doctrine rests on the idea that people who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense, and it approved fees drawn from the entire judgment fund, including the portion class members never claimed.

In practice, judges set fees in common fund cases either as a percentage of the fund or by the "lodestar" method, which multiplies reasonable hours by reasonable hourly rates, sometimes checking one method against the other. Percentages commonly fall in the 20s to low 30s, though they vary by court and case size, and judges cut requests that seem excessive. Settlement notices state the maximum fee class counsel will request, and class members may object to it.

The common fund structure explains why individual payouts shrink: fees, administration costs, and service awards are taken out first, and the rest is split among valid claims. The alternative is a "claims-made" settlement, where the defendant pays only for claims actually filed and pays fees separately. See how class action money is divided and who pays lawyers in a class action.