In Re: San Juan v. Nachman
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In Re: San Juan v. Nachman, (1st Cir. 1995).
Opinion
USCA1 Opinion
July 7, 1995 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
Nos. 94-1156, 94-1164, 94-1409, 94-1414, 94-1422, 94-1423,
94-1426, 94-1427, 94-1430, 94-1438, 94-1439, 94-1440,
94-1442
IN RE: THIRTEEN APPEALS ARISING OUT OF THE
SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
_________________________
ERRATA SHEET
The opinion of this Court issued May 31, 1995, is ammended
as follows:
Delete cases #94-1430 and #94-1442 from the Court's opinion
and judgement of May 31, 1995.
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
Nos. 94-1156, 94-1164, 94-1409, 94-1414, 94-1422, 94-1423,
94-1426, 94-1427, 94-1438, 94-1439, 94-1440
IN RE: THIRTEEN APPEALS ARISING OUT OF THE
SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Raymond L. Acosta, U.S. District Judge] ___________________
_________________________
Before
Selya, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Cyr, Circuit Judge. _____________
_________________________
Judith Resnik, with whom Dennis E. Curtis, Richard A. ______________ _________________ ___________
Bieder, and Koskoff, Koskoff & Bieder, P.C., were on brief, for ______ ________________________________
appellants Bieder, et al.
Jose E. Fernandez-Sein on brief for appellant Nachman. ______________________
Steven C. Lausell, with whom Jimenez, Graffam & Lausell was _________________ __________________________
on brief, for appellee Jimenez, Graffam & Lausell.
Will Kemp, with whom Stanley Chesley, Wendell Gauthier, John _________ _______________ ________________ ____
Cummings, David Indiano and Harrison, Kemp & Jones, Chtd. were on ________ _____________ _____________________________
brief, for remaining appellees.
_________________________
May 31, 1995
_________________________
SELYA, Circuit Judge. These appeals require us to SELYA, Circuit Judge. _____________
revisit the war zone where two groups of plaintiffs' lawyers have
struggled over the proposed allocation of roughly $68,000,000 in
attorneys' fees. One camp, dissatisfied with the district
court's latest formula for distributing the fees, attacks the
court's order on three fronts. The disgruntled lawyers contend
that the district court (1) violated their due process rights,
(2) used an improper method to determine the awards, and (3)
divided the available monies in an arbitrary and unreasonable
manner. We find appellants' first two plaints to be without
merit, but we agree with them that allocating 70% of the fees to
the appellees constituted an abuse of the trial court's
discretion. And, because we are reluctant to prolong a matter
that, like the proverbial cat, seems to have nine lives, we take
matters into our own hands and reconfigure the fee awards.
I. BACKGROUND I. BACKGROUND
The lay of the land is familiar. We explored much the
same terrain in an earlier encounter, see In re Nineteen Appeals ___ ______________________
Arising Out of San Juan Dupont Plaza Hotel Fire Litig., 982 F.2d _______________________________________________________
603 (1st Cir. 1992), and a plethora of opinions describing the
details of the underlying litigation pockmark the pages of the
Federal Reports, see, e.g., id. at 605 n.1 (offering partial ___ ____ ___
listing). Thus, a brief overview of the litigation will suffice.
In 1987, the Judicial Panel on Multidistrict Litigation
consolidated over 270 cases arising out of the calamitous
conflagration that had ravaged the San Juan Dupont Plaza Hotel on
3
the evening of December 31, 1986. See In re Fire Disaster at ___ ________________________
Dupont Plaza Hotel, 660 F. Supp. 982 (J.P.M.L. 1987) (per ____________________
curiam). The designated trial judge, Hon. Raymond L. Acosta,
handpicked certain attorneys, denominated collectively as the
Plaintiffs' Steering Committee (PSC), to act as lead and liaison
counsel for the plaintiffs. In Nineteen Appeals, we summarized ________________
the roles played by the PSC and the individually retained
plaintiffs' attorneys (IRPAs), respectively:
The PSC members looked after the big picture:
mapping the overarching discovery, trial, and
settlement strategies and coordinating the
implementation of those strategies. The
IRPAs handled individual client communication
and other case-specific tasks such as
answering interrogatories addressed to
particular plaintiffs, preparing and
attending the depositions of their clients,
and taking depositions which bore on damages.
The IRPAs also worked with Judge Bechtle [the
"settlement judge"] on a case-by-case basis
in his efforts to identify and/or negotiate
appropriate settlement values for individual
claims. When Judge Acosta determined that
the plaintiffs should try twelve
representative claims as a means of
facilitating settlement, a collaborative
Free access — add to your briefcase to read the full text and ask questions with AI
USCA1 Opinion
July 7, 1995 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
Nos. 94-1156, 94-1164, 94-1409, 94-1414, 94-1422, 94-1423,
94-1426, 94-1427, 94-1430, 94-1438, 94-1439, 94-1440,
94-1442
IN RE: THIRTEEN APPEALS ARISING OUT OF THE
SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
_________________________
ERRATA SHEET
The opinion of this Court issued May 31, 1995, is ammended
as follows:
Delete cases #94-1430 and #94-1442 from the Court's opinion
and judgement of May 31, 1995.
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
Nos. 94-1156, 94-1164, 94-1409, 94-1414, 94-1422, 94-1423,
94-1426, 94-1427, 94-1438, 94-1439, 94-1440
IN RE: THIRTEEN APPEALS ARISING OUT OF THE
SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Raymond L. Acosta, U.S. District Judge] ___________________
_________________________
Before
Selya, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Cyr, Circuit Judge. _____________
_________________________
Judith Resnik, with whom Dennis E. Curtis, Richard A. ______________ _________________ ___________
Bieder, and Koskoff, Koskoff & Bieder, P.C., were on brief, for ______ ________________________________
appellants Bieder, et al.
Jose E. Fernandez-Sein on brief for appellant Nachman. ______________________
Steven C. Lausell, with whom Jimenez, Graffam & Lausell was _________________ __________________________
on brief, for appellee Jimenez, Graffam & Lausell.
Will Kemp, with whom Stanley Chesley, Wendell Gauthier, John _________ _______________ ________________ ____
Cummings, David Indiano and Harrison, Kemp & Jones, Chtd. were on ________ _____________ _____________________________
brief, for remaining appellees.
_________________________
May 31, 1995
_________________________
SELYA, Circuit Judge. These appeals require us to SELYA, Circuit Judge. _____________
revisit the war zone where two groups of plaintiffs' lawyers have
struggled over the proposed allocation of roughly $68,000,000 in
attorneys' fees. One camp, dissatisfied with the district
court's latest formula for distributing the fees, attacks the
court's order on three fronts. The disgruntled lawyers contend
that the district court (1) violated their due process rights,
(2) used an improper method to determine the awards, and (3)
divided the available monies in an arbitrary and unreasonable
manner. We find appellants' first two plaints to be without
merit, but we agree with them that allocating 70% of the fees to
the appellees constituted an abuse of the trial court's
discretion. And, because we are reluctant to prolong a matter
that, like the proverbial cat, seems to have nine lives, we take
matters into our own hands and reconfigure the fee awards.
I. BACKGROUND I. BACKGROUND
The lay of the land is familiar. We explored much the
same terrain in an earlier encounter, see In re Nineteen Appeals ___ ______________________
Arising Out of San Juan Dupont Plaza Hotel Fire Litig., 982 F.2d _______________________________________________________
603 (1st Cir. 1992), and a plethora of opinions describing the
details of the underlying litigation pockmark the pages of the
Federal Reports, see, e.g., id. at 605 n.1 (offering partial ___ ____ ___
listing). Thus, a brief overview of the litigation will suffice.
In 1987, the Judicial Panel on Multidistrict Litigation
consolidated over 270 cases arising out of the calamitous
conflagration that had ravaged the San Juan Dupont Plaza Hotel on
3
the evening of December 31, 1986. See In re Fire Disaster at ___ ________________________
Dupont Plaza Hotel, 660 F. Supp. 982 (J.P.M.L. 1987) (per ____________________
curiam). The designated trial judge, Hon. Raymond L. Acosta,
handpicked certain attorneys, denominated collectively as the
Plaintiffs' Steering Committee (PSC), to act as lead and liaison
counsel for the plaintiffs. In Nineteen Appeals, we summarized ________________
the roles played by the PSC and the individually retained
plaintiffs' attorneys (IRPAs), respectively:
The PSC members looked after the big picture:
mapping the overarching discovery, trial, and
settlement strategies and coordinating the
implementation of those strategies. The
IRPAs handled individual client communication
and other case-specific tasks such as
answering interrogatories addressed to
particular plaintiffs, preparing and
attending the depositions of their clients,
and taking depositions which bore on damages.
The IRPAs also worked with Judge Bechtle [the
"settlement judge"] on a case-by-case basis
in his efforts to identify and/or negotiate
appropriate settlement values for individual
claims. When Judge Acosta determined that
the plaintiffs should try twelve
representative claims as a means of
facilitating settlement, a collaborative
composed of three PSC members and four IRPAs
bent their backs to the task.
Nineteen Appeals, 982 F.2d at 605. ________________
The combined efforts of all concerned generated a
settlement fund approximating $220,000,000. The district court
computed the payments due under the various contingent fee
agreements, deducted the total (roughly $68,000,000) from the
overall settlement proceeds, and placed that sum in an attorneys'
4
fee fund (the Fund).1 In his initial attempt to disburse the
Fund, Judge Acosta used an enhanced lodestar to compute the PSC's
fees, and awarded some $36,000,000 (52% of the Fund) to PSC
members in their capacity as such, leaving the balance to be
distributed among the IRPAs. A group of lawyers (mostly, but not
exclusively, "non-PSC" IRPAs)2 succeeded in vacating this award
on the ground that the proceedings were procedurally flawed. See ___
id. at 610-16. ___
The victory proved to be illusory. On remand, the
district court abandoned the lodestar approach, adopted the
percentage of the fund (POF) method, and recalculated the fees
based on what it termed "the relative significance of the labor
expended by the IRPAs and PSC members in instituting, advancing,
or augmenting the plaintiffs' settlement fund." Using this
____________________
1In addition to attorneys' fees, the lawyers are seeking
reimbursement of certain costs and expenses from the plaintiffs'
share of the settlement proceeds. The district court has yet to
make a final determination relative to costs, and we have not
considered that aspect of the matter. Thus, our opinion is
without prejudice to the parties' claims and objections in
respect to costs.
2Since each PSC member is also an IRPA in the sense that he
or she has been individually retained by one or more plaintiffs,
the PSC members will receive payments in both capacities.
Nevertheless, due to the wide disparity in the number of clients
that each PSC member represents, a generous PSC award stands to
benefit certain PSC members who have relatively few individual
clients and to disadvantage those who represent many claimants.
See Nineteen Appeals, 982 F.2d at 607. Similarly, an oversized ___ ________________
PSC award is even more detrimental to the interests of those
IRPAs who are not members of the PSC, as each dollar that is paid
to the PSC shrinks the pot that otherwise will be divided among
the IRPAs. See id. Due to this phenomenon, some PSC members ___ ___
were among the lawyers who fought to overturn the original
allocation.
5
methodology, the court awarded 70% of the Fund to PSC members in
their capacity as such, thereby increasing their share of the __________
fees by some $11,000,000, while simultaneously reducing the ________
IRPAs' share of the Fund by the same amount. These appeals
ensued.
II. ADEQUACY OF THE PROCEEDINGS II. ADEQUACY OF THE PROCEEDINGS
In a virtual echo of the claims advanced in Nineteen ________
Appeals, appellants (all of whom are IRPAs) characterize the _______
proceedings by which the district court determined the allocation
of the Fund as unfair. Specifically, appellants assert that the
revamped procedural framework violated their rights to due
process, and that, in all events, the court abused its discretion
in erecting the framework. We consider these assertions in
sequence.
A. Due Process. A. Due Process. ___________
In Nineteen Appeals, 982 F.2d at 610-16, we discussed _________________
the due process considerations implicated in the fee-setting
aspect of this litigation. We again use the triangular construct
of Mathews v. Eldridge, 424 U.S. 319 (1976), to determine whether _______ ________
the district court afforded the IRPAs "the opportunity to be
heard `at a meaningful time and in a meaningful manner.'" Id. at ___
333 (quoting Armstrong v. Manzo, 380 U.S. 545, 553 (1965)). _________ _____
The first Mathews factor involves a specification of _______
"the private interest that will be affected by the official
action . . . ." Id. at 335. Rehashing this point would serve no ___
useful purpose. We conclude, for precisely the same reasons
6
articulated in our earlier opinion, that the IRPAs have a salient
private interest in the fees due them for services rendered. See ___
Nineteen Appeals, 982 F.2d at 612. ________________
The second Mathews factor requires us to examine the _______
risk of error presented by the district court's procedures. See ___
Mathews, 424 U.S. at 335. The last time around we determined _______
that the hearing format invited error. See Nineteen Appeals, 982 ___ ________________
F.2d at 612-13. Appellants urge us to find that the proceedings
on remand represented no real improvement and again presented an
intolerable risk of error this time because the district court
refused to hold an evidentiary hearing, to allow free-form
discovery, or to permit cross-examination of PSC members. We
conclude, for reasons described more fully in Part II(B), infra, _____
that the format revisions cured the infirmities that led us to
invalidate the district court's earlier effort.
The third Mathews factor necessitates an assessment of _______
the public interest, including "the fiscal and administrative
burdens" that improved procedural requirements would entail.
Mathews, 424 U.S. at 335. Here, too, past is prologue: we _______
studied this point in the course of the first appeal and remarked
the "substantial governmental interest in conserving scarce
judicial resources." Nineteen Appeals, 982 F.2d at 614. We also ________________
recognized the reasonableness of keeping tight controls on the
fee dispute in light of the large number of lawyers involved, the
lengthy shelf life of the litigation, and the Supreme Court's
admonition that "[a] request for attorney's fees should not
7
result in a second major litigation." Hensley v. Eckerhart, 461 _______ _________
U.S. 424, 437 (1983). This important public interest remains
intact.
To sum up, the district court reformed its ways,
significantly moderating the restrictions originally imposed on
the IRPAs. The court levelled the playing field by permitting
the IRPAs to present their case in precisely the same manner as
their litigation adversaries. Moreover, the court gave both
camps adequate notice and a meaningful opportunity to be heard.
From a procedural standpoint, then, the adjudicative process
employed on remand met the test of fundamental fairness and gave
appellants the process that was due.
B. Abuse of Discretion. B. Abuse of Discretion. ___________________
Appellants strive to convince us that Judge Acosta
abused his discretion in authoring three procedural rulings,
namely, (1) denying appellants' entreaty that an evidentiary
hearing be held; (2) denying the bulk of their discovery
requests; and (3) denying them the privilege of cross-
examination. We are not persuaded.
1. Lack of an Evidentiary Hearing. We need not tarry 1. Lack of an Evidentiary Hearing. ______________________________
over the supposed error in refusing to hold an evidentiary
hearing.3 A district court is not obliged to convene an
____________________
3The lower court did not make this decision casually. After
reminding the protagonists of his "detailed first hand knowledge
of the proceedings," Judge Acosta observed that "any meticulous
fact-finding regarding the contemporaneous time records of the
PSC is unnecessary because the lodestar method has been
abandoned; and both parties have been granted the opportunity to
file extensive pleadings describing their contributions to the
8
evidentiary hearing as a means of resolving every attorneys' fee
dispute. See Nineteen Appeals, 982 F.2d at 614; Weinberger v. ___ ________________ __________
Great N. Nekoosa Corp., 925 F.2d 518, 528 (1st Cir. 1991). ________________________
Because evidentiary hearings in fee disputes are not mandatory,
the decision not to convene one is reviewed deferentially, using
an abuse-of-discretion standard. See Weinberger, 925 F.2d at ___ __________
527. In conducting that review, appellate tribunals cannot
woodenly apply a preconceived matrix. Rather, flexibility is the
watchword. Because a district court has available to it a "wide
range of procedures" through which it can "bring a sense of
fundamental fairness to the fee-determination hearing while at
the same time husbanding the court's resources," Nineteen ________
Appeals, 982 F.2d at 614, flexibility implies substantial _______
discretion. Therefore, when the court chooses among the
available options, it can mix and match.
This emphasis on flexibility is heightened when an
evidentiary hearing is requested. Even in situations far more
inviting than fee disputes, we have been chary about mandating
such hearings. See, e.g., Aoude v. Mobil Oil Corp., 862 F.2d ___ ____ _____ _______________
890, 894 (1st Cir. 1988) (observing that matters often "can
adequately be `heard' on the papers"). We favor a "pragmatic
approach" to the question of whether, in a given situation, an
evidentiary hearing is required. Id. at 893. The key ___
____________________
litigation process." He also stated that, "for the most part,"
the fee controversy presented "no material factual disputes
regarding the tasks undertaken by the PSC as contrasted to those
undertaken by the IRPAs."
9
determinant is whether, "given the nature and circumstances of
the case . . . the parties [had] a fair opportunity to present
relevant facts and arguments to the court, and to counter the
opponents' submissions." Id. at 894. Taking this approach in ___
Aoude, we upheld the issuance of a preliminary injunction without _____
an evidentiary hearing, noting, inter alia, that the judge was _____ ____
"obviously familiar" with the facts and had afforded the parties
several opportunities to make written submissions. Id. ___
The Aoude model can readily be adapted to requests for _____
hearings anent attorneys' fees. Appellants' protest cannot
survive the resultant comparison. Judge Acosta knew the case
inside and out. He gave the protagonists ample opportunity to
present both factual data and legal arguments. He set no page
restrictions on written submissions, permitting the IRPAs to
proffer thousands of pages of documents both in opposition to the
PSC's requisitions and in support of their own fee requests.4
These filings allowed the IRPAs to go into painstaking detail
both as to their own contribution to the litigation and as to the
reasons why the PSC members deserved a relatively modest slice of
____________________
4To give the reader a taste of what transpired, we note
that, on remand, the IRPAs' initial submission, filed June 10,
1993, included a memorandum of law regarding attorneys' fees and
expenses (110 pages, with a 40-page appendix), an affidavit by
the IRPAs' accountant, William Torres, detailing the results of
his analysis of the PSC's claims (approximately 650 pages), a
memorandum giving an overview of the efforts and contributions
made by the IRPAs (33 pages), and individual IRPA assessments of
efforts and contributions made on behalf of clients
(approximately 2700 pages). The IRPAs also filed a reply to the
PSC's main submission, again unhampered by page restrictions,
that totalled approximately 430 pages.
10
the pie for their services in that capacity.
To be sure, this is a high-stakes dispute, but that
fact, in and of itself, does not warrant handcuffing the trial
court. Matters of great consequence are often decided without
live testimony. See, e.g., id. at 893-94 (holding that an ___ ____ ___
evidentiary hearing is not obligatory in respect to an
application for preliminary injunction); United States v. ______________
DeCologero, 821 F.2d 39, 44 (1st Cir. 1987) (same, regarding __________
criminal defendant's motion to reduce his sentence); Amanullah v. _________
Nelson, 811 F.2d 1, 16-17 (1st Cir. 1987) (same, regarding habeas ______
review of asylum applicant's detention during exclusion
proceedings). In the last analysis, what counts is not the prize
at stake, but whether particular parties received "a
fundamentally fair chance to present [their] side of the story."
Nineteen Appeals, 982 F.2d at 611. ________________
The controlling legal principle, then, is that parties
to a fee dispute do not have the right to an evidentiary hearing
on demand. When the written record affords an adequate basis for
a reasoned determination of the fee dispute, the court in its
discretion may forgo an evidentiary hearing. Here, it is
pellucid that the litigants' extensive written submissions
comprised an effective substitute for such a hearing
particularly since the judge had lived with the litigation from
the start and had an encyclopedic knowledge of it. Under these
circumstances, the court did not err in refusing to hold yet
another hearing. See, e.g., Norman v. Housing Auth., 836 F.2d ___ ____ ______ ______________
11
1292, 1303 (11th Cir. 1988) (upholding propriety of awarding
attorneys' fees without an evidentiary hearing "based solely on
affidavits in the record"); Bailey v. Heckler, 777 F.2d 1167, ______ _______
1171 (6th Cir. 1985) (explaining that an evidentiary hearing is
not required so long as the record is sufficient to permit
meaningful review); National Ass'n of Concerned Veterans v. ________________________________________
Secretary of Defense, 675 F.2d 1319, 1330 (D.C. Cir. 1982) ______________________
(holding that district court may in its discretion decline to
convene a fee hearing where information generated by
"documentation accompanying the fee application and through
appropriate discovery . . . provides an adequate factual basis
for an award"); Konczak v. Tyrrell, 603 F.2d 13, 19 (7th Cir. _______ _______
1979) (indicating that "depth of the briefing" can render a
hearing on fees unnecessary), cert. denied, 444 U.S. 1016 (1980); _____ ______
see also ___ ____
DeJesus v. Banco Popular de P.R., 951 F.2d 3, 7 (1st Cir. 1992) _______ _____________________
(finding no error in lack of an evidentiary hearing regarding
counsel fees absent some "special issue as to which the court
needed the assistance of counsel or witnesses").
2. Restrictions on Discovery. Apart from the refusal 2. Restrictions on Discovery. _________________________
to convene a full-scale hearing, appellants also complain that
the court demonstrated too great an aversion to discovery
initiatives. But unlimited adversarial discovery is not a
necessary or even a usual concomitant of fee disputes, see ___
National Ass'n of Concerned Veterans, 675 F.2d at 1329 (noting _____________________________________
that, in general, fee contests should not involve "the type of
12
searching discovery that is typical where issues on the merits
are presented"), and, in the circumstances of this case, we think
that the court acted well within the province of its discretion
in refusing to allow more elaborate discovery.
The Due Process Clause does not require freewheeling
adversarial discovery as standard equipment in fee contests. See ___
Nineteen Appeals, 982 F.2d at 614. This case exemplifies the ________________
wisdom of the rule. The district court did not shut off all
discovery, and the procedures that the court employed
especially the compelled exchange of documentation minimized
the need for additional discovery by giving the IRPAs the raw
material that they needed to sift through the particulars of the
PSC's fee application. In other words, the court ensured that
the IRPAs had access to all the data reasonably necessary to
formulate their objections,5 including all the PSC members'
time-and-expense submissions, summaries thereof, detailed
accounts of the procedures used by the PSC to gather, review, and
audit time records, and the working papers, correspondence, and
documentation generated by the PSC's accountants during the
compilation process. With this banquet of information spread
before them, appellants then partook of the court's liberality in
allowing them to formulate extensive written submissions.
Furthermore, the court below also had a right to
____________________
5The proof of the pudding is in the record. The IRPAs'
initial submission to the district court highlighted specific
objections to the PSC's fee request, and, following the PSC's
rejoinder, the IRPAs' reply took precise aim at the accuracy of
the supporting materials.
13
consider the extent to which appellants' request for discovery
threatened to multiply the proceedings and turn the fee dispute
into a litigation of mammoth proportions. Judge Acosta
characterized the IRPAs' discovery foray which encompassed,
inter alia, production of tax returns for employees of all PSC _____ ____
members' firms and details anent fringe benefits (including
vacations, maternity leaves, and the provision of training
programs) as "a discovery scheme of needless and unreasonable
proportions." It is surpassingly difficult to fault this
characterization.
The sweeping nature of appellants' request, coupled
with the fact that the focus of the hearings had shifted away
from the lodestar and toward a task-oriented assessment of the
lawyers' participation in the litigation, give substance to the
district court's fears that granting appellants' supplication
would have started the parties on the road to a wasteful and
time-consuming "satellite litigation." On this ramified record,
appellants can demonstrate neither a high level of need for
incremental discovery nor preponderant equities in favor of their
request. Hence, we cannot say that the district court's denial
of further discovery constituted an abuse of the court's
considerable discretion. See, e.g., National Ass'n of Concerned ___ ____ ___________________________
Veterans, 675 F.2d at 1329 (holding that district court "retains ________
substantial discretion based on its view of the submissions as a
whole" to limit further discovery).
3. Lack of Cross-Examination. As a subset of their 3. Lack of Cross-Examination. _________________________
14
claims regarding the supposed necessity for both an evidentiary
hearing and additional discovery, appellants contend that the
district court should have allowed them to cross-examine the PSC
members concerning the hours that they logged and their
contribution to the creation of the Fund. This is merely a back-
door attempt to rekindle an extinguished flame and satisfy
appellants' thwarted desire for either an evidentiary hearing or
extensive depositions.
In Chongris v. Board of Appeals, 811 F.2d 36 (1st ________ _________________
Cir.), cert. denied, 483 U.S. 1021 (1987), we held that, in the _____ ______
context of an administrative hearing, lack of cross-examination
did not work a violation of due process. See id. at 41-42. So ___ ___
it is here. Moreover, because the lower court could reasonably
conclude that its liberal policy with regard to written
submissions, in conjunction with the IRPAs' access to PSC
documentation, obviated the need for further probing via cross-
examination, pretermitting cross-questioning did not constitute
an abuse of discretion. Cf. Copeland v. Marshall, 641 F.2d 880, ___ ________ ________
905 n.57 (D.C. Cir. 1980) (en banc) (noting that a live hearing
is not necessary if "the adversary papers filed by plaintiff and
defendant . . . adequately illuminate the factual predicate for a
reasonable fee").
Appellants' attempt to anchor their claimed right to
cross-question PSC members on language excerpted from our earlier
opinion, see, e.g., Nineteen Appeals, 982 F.2d at 615, leaves ___ ____ ________________
them adrift. We flatly reject the suggestion, noting that
15
appellants, to their discredit, have pieced the argument together
by cutting words loose from their logical and contextual
moorings, and ignoring limiting language that contradicts their
interpretation.
The bottom line is that the district court did not err
in refusing to convene an evidentiary hearing, declining to
permit more wide-ranging discovery, and barring cross-
examination. Thus, whether the issue is cast in a constitutional
mold or considered under an abuse-of-discretion rubric,
appellants' challenge fails. Either way, the adjudicative
process employed on remand passes muster.
III. APPROPRIATENESS OF THE METHODOLOGY III. APPROPRIATENESS OF THE METHODOLOGY
Appellants claim that the district court erred as a
matter of law in embracing the POF method, rather than the
lodestar method, during the fee-setting pavane. The issue of
whether a district court may use a given methodology in
structuring an award of attorneys' fees is one of law, and, thus,
is subject to de novo review. See Liberty Mut. Ins. Co. v. __ ____ ___ _______________________
Commercial Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992). _________________________
A. Historical Perspective. A. Historical Perspective. ______________________
A few introductory comments may lend a sense of
perspective. Traditionally, under what has come to be known as
the "American Rule," litigants bear their own counsel fees. See ___
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 245 __________________________ ________________
(1975). This rule is not without exceptions. Fee-shifting
statutes comprise one category of exceptions. See, e.g., 42 ___ ____
16
U.S.C. 1988, 2000e-5(k). So, too, certain equitable doctrines
furnish a basis for departing from the American Rule. See ___
Nineteen Appeals, 982 F.2d at 606. ________________
When statutory exceptions pertain, we have directed
district courts, for the most part, to compute fees by using the
time-and-rate-based lodestar method. See, e.g., United States v. ___ ____ _____________
Metropolitan Dist. Comm'n, 847 F.2d 12, 15 (1st Cir. 1988); Segal _________________________ _____
v. Gilbert Color Sys., Inc., 746 F.2d 78, 85-86 (1st Cir. 1984); ________________________
see also City of Burlington v. Dague, 112 S. Ct. 2638, 2641 ___ ____ ___________________ _____
(1992) (acknowledging, in the statutory fee-shifting context, "a
strong presumption that the lodestar represents the reasonable
fee") (citation and internal quotation marks omitted). A court
arrives at the lodestar by determining the number of hours
productively spent on the litigation and multiplying those hours
by reasonable hourly rates. See Blum v. Stenson, 465 U.S. 886, ___ ____ _______
896-902 (1984); Hensley, 461 U.S. at 433; Lipsett v. Blanco, 975 _______ _______ ______
F.2d 934, 937 (1st Cir. 1992).
Although the lodestar method is entrenched in the
statutory fee-shifting context, a growing number of courts have
looked elsewhere in "common fund" cases a category that
encompasses cases in which "a litigant or lawyer who recovers a
common fund for the benefit of persons other than himself or his
client is entitled to a reasonable attorney's fee from the fund
as a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478 __________ __________
17
(1980).6 The POF method represents one such alternative
approach to fee-setting. This method functions exactly as the
name implies: the court shapes the counsel fee based on what it
determines is a reasonable percentage of the fund recovered for
those benefitted by the litigation. See, e.g., Camden I Condo. ___ ____ ________________
Ass'n, Inc. v. Dunkle, 946 F.2d 768, 771 (11th Cir. 1991). ___________ ______
Contrary to popular belief, it is the lodestar method,
not the POF method, that breaks from precedent. Traditionally,
counsel fees in common fund cases were computed as a percentage
of the fund, subject, of course, to considerations of
reasonableness. See, e.g., Central R.R. & Banking Co. v. Pettus, ___ ____ __________________________ ______
113 U.S. 116, 127-28 (1885). It was not until the mid-1970s that
judicial infatuation with the lodestar method started to spread.
See Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1266 (D.C. Cir. ___ ___________________ _______
1993) (chronicling history of the debate). Many courts embraced
the new approach, and a wall of cases soon arose. See, e.g., ___ ____
Copeland, 641 F.2d at 890-91; Furtado v. Bishop, 635 F.2d 915, ________ _______ ______
919-20 (1st Cir. 1980); City of Detroit v. Grinnell Corp., 560 ________________ ______________
F.2d 1093, 1098 (2d Cir. 1977); Grunin v. International House of ______ ______________________
Pancakes, 513 F.2d 114, 128 (8th Cir.), cert. denied, 423 U.S. ________ _____ ______
864 (1975); Lindy Bros. Builders, Inc. v. American Radiator & ___________________________ ____________________
____________________
6The common fund doctrine is founded on the equitable
principle that those who have profited from litigation should
share its costs. While class actions furnish the most fertile
ground for the doctrine, its reach is not limited to such cases.
See Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 167 (1939) ___ _______ ___________________
(holding that "the absence of an avowed class suit . . . hardly
touch[es] the power of equity in doing justice as between a party
and the beneficiaries of his litigation").
18
Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973). _______________________
A crack in the wall appeared in 1984 when the Supreme
Court took pains to distinguish the calculation of counsel fees
under fee-shifting statutes from the calculation of counsel fees
under the common fund doctrine. The court described the latter
group as comprising cases in which "a reasonable fee is based on
a percentage of the fund bestowed on the class." Blum, 465 U.S. ____
at 900 n.16. Since Blum involved the application of the lodestar ____
under a fee-shifting statute, footnote 16 is dictum. Yet, it can
hardly be dismissed as a slip of the pen, and considered dictum
emanating from the High Court carries great persuasive force.7
See Dedham Water Co. v. Cumberland Farms Dairy, Inc., 972 F.2d ___ ________________ _____________________________
453, 459 (1st Cir. 1992) (stating general rule that courts should
give "considerable weight" to dictum that appears "considered as
opposed to casual"); McCoy v. Massachusetts Inst. of Technology, _____ _________________________________
950 F.2d 13, 19 (1st Cir. 1991) (same), cert. denied, 112 S. Ct. _____ ______
1939 (1992).
Hard on the heels of footnote 16, the Third Circuit,
which had been in the forefront of the movement toward the
lodestar method, see, e.g., Lindy Bros., supra, sounded a note of ___ ____ ___________ _____
caution. Its blue-ribbon task force, although recommending
continued use of the lodestar technique in statutory fee-shifting
____________________
7For this reason, we find it unsurprising that other courts
have cited footnote 16 as evidence that the Blum Court's ____
"approval of the lodestar method in the fee-shifting context was
not intended to overrule prior common fund cases. . . ." Swedish _______
Hosp., 1 F.3d at 1268; see also Brown v. Phillips Petroleum Co., _____ ___ ____ _____ ______________________
838 F.2d 451, 454 (10th Cir.), cert. denied, 488 U.S. 822 (1988). _____ ______
19
cases, concluded that all fee awards in common fund cases should
be structured as a percentage of the fund. See Report of the ___
Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. ___________________________
237, 255 (1985) (hereinafter "Third Circuit Report").
Together, footnote 16 and the Third Circuit Report led
to a thoroughgoing reexamination of the suitability of using the
lodestar method in common fund cases. This reexamination, in
turn, led to more frequent application of the POF method in such
cases. See Federal Judicial Center, Awarding Attorneys' Fees and ___ ____________________________
Managing Fee Litigation 63-64 (1994) (hereinafter "FJC Report") _______________________
(canvassing case law). Today, the D.C. Circuit and the Eleventh
Circuit require the use of the POF method in common fund cases,
see Swedish Hosp., 1 F.3d at 1271; Camden I, 946 F.2d at 774, and ___ _____________ ________
four other circuits confer discretion upon the district court to
choose between the lodestar and POF methods in common fund cases,
see In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d ___ ____________________________________________________
1291, 1295 (9th Cir. 1994); Rawlings v. Prudential-Bache Props., ________ ________________________
Inc., 9 F.3d 513, 516 (6th Cir. 1993); Harman v. Lymphomed, Inc., ____ ______ _______________
945 F.2d 969, 975 (7th Cir. 1991); Brown v. Phillips Petroleum _____ __________________
Co., 838 F.2d 451, 454 (10th Cir.), cert. denied, 488 U.S. 822 ___ _____ ______
(1988). We have yet to pass upon the legitimacy of the POF
method in common fund cases.8
____________________
8Of course, we alluded to the trend in Weinberger, stating: __________
We are aware of the tendency exhibited by
some courts, particularly in common fund
cases, to jettison the lodestar in favor of a
`reasonable percent of the fund' approach.
Because the absence of any true common fund
20
B. Computing Fees in Common Fund Cases. B. Computing Fees in Common Fund Cases. ___________________________________
We have previously classified this as a common fund
case.9 Appellants do not dispute this taxonomy, but, rather,
they insist that Judge Acosta erred in using the POF method
because the lodestar technique should hold sway in all attorneys' ___
fee determinations.10 Though appellants concede that this
____________________
renders the percentage approach inapposite
here, we cannot fault the district court's
implied premise that the lodestar is the
soundest available alternative.
Weinberger, 925 F.2d at 526 n.10 (citations omitted). This __________
statement has been interpreted as conferring discretion upon
district courts to use the POF method in common fund cases, see, ___
e.g., Wells v. Dartmouth Bancorp, Inc., 813 F. Supp. 126, 129 ____ _____ ________________________
(D.N.H. 1993), and, in some quarters, as indicating a preference
for the use of that method, see, e.g., FJC Report, supra, at 64 & ___ ____ _____
n.305.
9We reached this conclusion because the Fund emanates from
"the disproportionate strivings of a few (the PSC members) to the
benefit of a much larger number (the plaintiffs and,
derivatively, the IRPAs)," Nineteen Appeals, 982 F.2d at 610, and ________________
possesses each of the three distinguishing characteristics
identified by the Boeing Court: ______
First, the . . . beneficiaries can be
determined with complete assurance. Second,
while the extent to which each individual
plaintiff and each IRPA benefitted from the
PSC's efforts cannot be quantified with
mathematical precision, it is possible to
study the PSC's contribution to the overall
success of the litigation and approximate the
incremental benefits with some accuracy.
Finally, the district court controls [the
Fund], and, therefore, possesses the ready
ability to prorate the cost of achieving the
incremental benefits in an equitable manner.
Id. (citing Boeing, 444 U.S. at 478-79). ___ ______
10In a sermon that is difficult to reconcile with this
display of newfound religion, appellants preach intermittently
that Judge Acosta's initial suggestion that the PSC's fees
21
court has not yet decided what method(s) of fee allocation
appropriately may be invoked in common fund cases, they assert
that the lodestar is a far better alternative and that its use
should be mandated in this circuit.
We think that a more malleable approach is indicated.
Thus, we hold that in a common fund case the district court, in
the exercise of its informed discretion, may calculate counsel
fees either on a percentage of the fund basis or by fashioning a
lodestar. Our decision is driven both by our recognition that
use of the POF method in common fund cases is the prevailing
praxis and by the distinct advantages that the POF method can
bring to bear in such cases.
In complex litigation and common fund cases, by and
large, tend to be complex the POF approach is often less
burdensome to administer than the lodestar method. See Swedish ___ _______
Hosp., 1 F.3d at 1269 (finding POF approach "less demanding of _____
scarce judicial resources"). Rather than forcing the judge to
review the time records of a multitude of attorneys in order to
determine the necessity and reasonableness of every hour
expended, the POF method permits the judge to focus on "a showing
that the fund conferring a benefit on the class resulted from"
the lawyers' efforts. Camden I, 946 F.2d at 774. While the time ________
____________________
would probably be computed using the POF method and would
probably aggregate "less than 10%" should be enshrined and
enforced by us. We have already ruled that this suggestion "did
not bind the district court to a ten percent cap," Nineteen ________
Appeals, 982 F.2d at 612, and appellants have proffered nothing _______
that prompts us to revisit this ruling.
22
logged is still relevant to the court's inquiry even under the
POF method, time records tend to illuminate the attorneys' role
in the creation of the fund, and, thus, inform the court's
inquiry into the reasonableness of a particular percentage11
the shift in focus lessens the possibility of collateral disputes
that might transform the fee proceeding into a second major
litigation.
For another thing, using the POF method in a common
fund case enhances efficiency, or, put in the reverse, using the
lodestar method in such a case encourages inefficiency. Under
the latter approach, attorneys not only have a monetary incentive
to spend as many hours as possible (and bill for them) but also
face a strong disincentive to early settlement. See Third ___
Circuit Report, 108 F.R.D. at 247-48 (finding that, in common
fund cases, the lodestar method "encourag[es] lawyers to expend
excessive hours" and "creates a disincentive for the early
settlement of cases"); see also FJC Report, supra, at 310. If ___ ____ _____
the POF method is utilized, a lawyer is still free to be
inefficient or to drag her feet in pursuing settlement options
but, rather than being rewarded for this unproductive behavior,
she will likely reduce her own return on hours expended.
Another point is worth making: because the POF
technique is result-oriented rather than process-oriented, it
____________________
11For this reason, and because the district court in any
given case may eschew the POF method in favor of the lodestar
method, we urge attorneys to keep detailed, contemporaneous time
records in common fund cases.
23
better approximates the workings of the marketplace. We think
that Judge Posner captured the essence of this point when he
wrote that "the market in fact pays not for the individual hours
but for the ensemble of services rendered in a case of this
character." In re Continental Ill. Sec. Litig., 962 F.2d 566, ___________________________________
572 (7th Cir. 1992). In fine, the market pays for the result
achieved.
Let us be perfectly clear. We do not pretend that the
POF approach is foolproof, or that it suffers from no
disadvantages. For example, it may result in the
overcompensation of lawyers in situations where actions are
resolved before counsel has invested significant time or
resources. See Six Mexican Workers v. Arizona Citrus Growers, ___ ___________________ _______________________
904 F.2d 1301, 1311 (9th Cir. 1990) (counselling use of the
lodestar method rather than the POF method when "the percentage
recovery would be either too small or too large in light of the
hours devoted to the case or other relevant factors"); see also ___ ____
Third Circuit Report, 108 F.R.D. at 242 (noting "criticism from
within the profession" that fees under the POF method sometimes
are "disproportionate to actual efforts expended by the
attorneys"). The converse is also true; law firms may be less
willing to commit needed resources to common fund cases, even
those for the public benefit, if the likely recovery is
relatively small. It can also be argued that the percentage
method may lend itself to arbitrary fee awards by some courts.
See generally Washington Pub. Power, 19 F.3d at 1294 n.2 ___ _________ _______________________
24
(counselling that, to avoid arbitrary fee awards, neither the POF
nor the lodestar method "should be applied in a formulaic or
mechanical fashion"); cf. Laffey v. Northwest Airlines Inc., 746 ___ ______ _______________________
F.2d 4, 12-13 (D.C. Cir. 1984) (attributing widespread adoption
of lodestar method to desire to reduce "arbitrariness
characteristic of court awards of attorneys fees" under other
methods), cert. denied, 472 U.S. 1021 (1985). Given the _____ ______
peculiarities of common fund cases and the fact that each method,
in its own way, offers particular advantages, we believe the
approach of choice is to accord the district court discretion to
use whichever method, POF or lodestar, best fits the individual
case. We so hold, recognizing that the discretion we have
described may, at times, involve using a combination of both
methods when appropriate. Cf. Metropolitan Dist. Comm'n, 847 ___ __________________________
F.2d at 15 (advocating flexible approach to determining fee
awards because an overly mechanical rule "sacrifice[s] substance
on the altar of form").
In arriving at this decision, we reject appellants'
suggestion that Dague, a case in which the Court barred the use _____
of contingency enhancements in respect to fee-shifting statutes,
compels a different conclusion. Although the Dague Court stated _____
that "[t]he `lodestar' figure has, as its name suggests, become
the guiding light of our fee-shifting jurisprudence," 112 S. Ct.
at 2641, and remarked that it had "generally" abjured "the
contingent-fee model which would make the fee award a
percentage of the value of the relief awarded in the primary
25
action [in favor of] the lodestar model," id. at 2643 ___
(citations, footnotes, and internal quotations omitted), these
statements were made in the course of a discussion of statutory
fee-shifting cases. The Court's reasoning reflected this
environment; the opinion stressed the limiting effects of
statutory language in fee-shifting cases, see id., and set out "a ___ ___
number of reasons for concluding that no contingency enhancement
is compatible with the fee shifting statutes at issue," id. This ___
case, unlike Dague, involves a common fund rather than a _____
statutory fee-shifting scheme. Since Dague, fairly read, does _____
not require abandonment of the POF method typically used in
common fund cases, it is not controlling here. Accord Swedish ______ _______
Hosp., 1 F.3d at 1267-70 (concluding that Dague does not bar use _____ _____
of the POF method in common fund cases).
C. Applying the Rule. C. Applying the Rule. _________________
Having placed our imprimatur on a decisional model that
maximizes flexibility, we move from the general to the specific
and turn next to the order under review. In this connection, we
rule that the court below did not err in purposing to allocate
fees based on the POF method, emphasizing the attorneys'
"relative contribution" to the creation of the Fund. In the
first place, Judge Acosta had originally stated an intent to
compensate the PSC members under a percentage approach. See ___
supra note 10. In "justifiable reliance" on this statement, see _____ ___
Nineteen Appeals, 982 F.2d at 614 n.19, the majority of the IRPAs ________________
did not maintain time records. The difficulties inherent in
26
implementing the lodestar under these circumstances militate in
favor of sticking to the POF method. In the second place, as we
have explained above, the POF approach offers significant
structural advantages in common fund cases, including ease of
administration, efficiency, and a close approximation of the
marketplace. Finally, a further case-specific factor counsels
against using the lodestar here. Unlike the prototypical common
fund case, this case involves a subdivision of a fee fund amassed ___________
by the operation of sundry contractually determined percentages.
Thus, using the POF method to effectuate the subdivision of the
Fund brings a sort of elemental symmetry to the fee-setting
process. Relatedly, because this case calls for a subdivision of
a fee fund, rather than a unitary award of fees, "a trier who
attempted punctiliously to follow the classic lodestar formula,
to the exclusion of all else, could theoretically wind up
awarding the entire fee pool to the PSC, leaving nothing for the
IRPAs." Id. at 614 n.20. Use of the POF method negates any ___
possibility of this totally indefensible result.
IV. APPROPRIATENESS OF THE ALLOCATION IV. APPROPRIATENESS OF THE ALLOCATION
In allocating counsel fees, the district court assigned
70% of the Fund to the PSC, leaving 30% to be split among the
IRPAs.12 Appellants object. We review this allocation for
abuse of discretion, see, e.g., Foley v. City of Lowell, 948 F.2d ___ ____ _____ ______________
10, 18 (1st Cir. 1991), mindful that, in respect to fee awards,
____________________
12The PSC members will, of course, share ratably in the
latter portion of the award as well. See supra note 2. ___ _____
27
the trial court's latitude is "extremely broad," Lipsett, 975 _______
F.2d at 937. After scrutinizing the Brobdingnagian record in
this case, we are convinced that the court below erred in
weighing and synthesizing the factors relevant to a division of
the fees, and in settling upon so lopsided a split.
A. Cutting the Pie. A. Cutting the Pie. _______________
In the proceedings on remand, Judge Acosta lavished
praise on all the plaintiffs' lawyers, lauding the "high caliber
legal representation" provided by both the PSC and the IRPAs. He
then summarized the tasks undertaken by the two sets of attorneys
in the course of the litigation. In the judge's view, the PSC's
most significant accomplishments included (1) performing a
comprehensive on-site investigation of the accident scene, (2)
"identif[ying] the manufacturers and suppliers of many . . .
products and services . . . and develop[ing] theories of
liability against each opponent," (3) drafting plethoric
pleadings, including the master complaint, weekly agendas, and
several pretrial memoranda, (4) filing "literally hundreds of
motions . . . on numerous topics, including many novel and
creative issues," (5) orchestrating extensive pretrial discovery,
(6) conducting the nine-week Phase I trial and the fifteen-month
Phase II trial (in the course of which the PSC called 313
witnesses and offered 1,455 exhibits), and (7) "aggressively
pursu[ing] settlement negotiations." The court visualized the
IRPAs' main accomplishments as comprising (1) maintaining direct
client communication, counselling clients, and keeping them
28
abreast of developments in the litigation, (2) carrying out the
factual investigation incident to individual cases, with especial
emphasis on issues pertaining to damages, (3) retaining experts,
including physicians, economists, and actuaries, and, once the
experts had been located, collaborating with them to establish
damages, (4) researching client-specific legal issues (e.g., ____
standing, assumption of risk), (5) representing individual
plaintiffs in connection with ancillary matters, including
probate, inheritance, insurance, and domestic relations matters,
(6) meeting with Judge Bechtle "as part of the settlement scheme
to negotiate settlement values for [individual] cases," and (7)
assisting clients in reaching informed decisions (including
decisions about whether to accept or reject proffered
settlements). Moreover, certain selected plaintiffs were used as
exemplars for purposes of the Phase II trial, and the IRPAs who
represented those plaintiffs actually presented the evidence
pertaining to their clients' damages.
Having made these ledger entries, the district court
then tabulated the columns. It concluded that "reasonable
compensation for the work undertaken requires recognition of the
massive undertaking of the PSC in terms of the organizational and
financial requirements, the overwhelming amount of work
performed, the significant time constraints, and the numerous
complex and novel issues addressed during the proceedings . . .
." Contrasting this workload "with the IRPAs' efforts in client
communication and counseling, client preparation for settlement,
29
and handling of the damages issues," the court awarded the PSC
70% of the fee due under each individual contingency agreement,
thus permitting each IRPA to retain only 30% of the fee promised
by the client.
B. Evaluating the Court's Handiwork. B. Evaluating the Court's Handiwork. ________________________________
We are uneasy with the way in which the lower court cut
the fee pie, and with the size and shape of the resultant wedges,
for several reasons.
First, we are troubled by the implications of a scheme
in which the trial judge selects a chosen few from many lawyers
who volunteer, assigns legal tasks to those few (thereby
dictating, albeit indirectly, the scope of the work remaining to
be done by the many), and then, in awarding fees, heavily
penalizes the very lawyers to whom he has relegated the "lesser"
duties. Courts must recognize that while such an arrangement may
be a necessary concomitant to skillful case management of mass
tort suits, it nevertheless significantly interferes with an
attorney's expectations regarding the fees that his or her client
has agreed to pay. Conversely, lead counsel are typically
volunteers, as in this case, and, as such, they have no right to
harbor any expectation beyond a fair day's pay for a fair day's
work if a fee fund develops. Cf. Matthew 20:1-16 (recounting ___ _______
parable of the laborers in the vineyard). We believe that trial
courts should take these differing expectations into account in
allocating fees. Here, the judge's rescript does not suggest
that he factored these expectations into the decisional calculus.
30
Courts must also be sensitive to a second facet of
economic reality: the power to appoint lead counsel gives the
trial judge an unusual degree of control over the livelihood of
the lawyers who practice before the court. Though such
appointments are often an administrative necessity in complex
litigation, and disproportionate fees are at times an unavoidable
consequence of the classic common fund "free rider" problem, see ___
generally Mancur Olson, Jr., The Logic of Collective Action _________ _________________________________
(1971), the judge must attempt to avoid any perception of
favoritism. This need is especially acute in mass tort
litigation where, as this case illustrates, free rider concerns
are minimized by the important nature of the work to be done by
claimants' individually retained attorneys. In this case,
moreover, free rider concerns are also lessened by the fact that
most of the IRPAs applied for appointment to the PSC, see ___
Nineteen Appeals, 982 F.2d at 605 (noting that over 40 of the 56 ________________
IRPAs volunteered to serve on the PSC), thus signifying their
willingness to pay full fare. The record does not contain any
clue intimating that Judge Acosta considered these factors in
ordering that 70% of the fees be paid to the PSC.
Third, and relatedly, this case required the IRPAs not
merely to go along for a free ride but to earn their keep. They
exhibited great versatility, counseling clients, researching
medical histories, arranging for specialists to evaluate
injuries, preparing the damages aspect of each case (including
extensive work with physicians, psychologists, actuaries,
31
vocational specialists, and other witnesses), obtaining evidence
needed to prove losses of earnings and earning capacity,
responding to client-specific discovery, preparing for and
attending clients' depositions, negotiating settlement values
before Judge Bechtle, assisting clients with probate, insurance,
and tax matters, and handling a bewildering array of
idiosyncratic problems as they developed. This is a far cry from
the paradigmatic common fund case say, a securities class
action in which class counsel do virtually all the work, and
other counsel piggyback on their efforts. See, e.g., In re Ivan ___ ____ __________
F. Boesky Sec. Litig., 948 F.2d 1358, 1364-65 (2d Cir. 1991); see _____________________ ___
also Randall S. Thomas & Robert G. Hansen, Auctioning Class ____ _________________
Action and Derivative Lawsuits: A Critical Analysis, 87 Nw. U. _____________________________________________________
L. Rev. 423, 429 (1993) (explaining that, in general, lead
counsel in class actions have "substantial authority to conduct
the litigation, even to the exclusion of other counsel");
Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' ________________
Attorney's Role in Class Action and Derivative Litigation: _________________________________________________________________
Economic Analysis and Recommendations for Reform, 58 U. Chi. L. _________________________________________________
Rev. 1, 3 (1991) (observing that plaintiffs' class action
attorneys have "nearly plenary control over all important
decisions in the lawsuit" because of the absence of monitoring by
clients). We see no sign that the district court gave
significant weight to this reality.
This leads directly to a fourth point. We have
carefully considered the IRPAs' compendious submissions and are
32
of the view that Judge Acosta undervalued the worth of the client
contact/counseling aspect of this litigation. Such services are
labor-intensive and frequently low in visibility at least in
visibility from the bench. Thus, they are susceptible to being
overlooked, leading to an overemphasis on the relative value of
the court-related work. Despite their lack of visibility,
however, the mundane chores incident to client representation are
particularly critical in a mass tort common fund case. We
explain briefly.
In a securities class action many of the victims do not
participate in the lawsuit, and are aware of their loss dimly, if
at all. See, e.g., Macey & Miller, supra, at 30 (noting that ___ ____ _____
"[i]n the large-scale, small-claim class action context . . .
[plaintiffs] are typically unaware that they even have a claim
against the defendant"). The mass tort context supplies a
stunning contrast. In a mass tort action, the victims' losses
(whether of life, limb, or loved ones) are almost always keenly
felt, and are usually not amenable to computation by a simple
arithmetic formula. As a result, the individual plaintiffs
typically require a multitude of services, many of which cannot
be satisfied by an impersonal steering committee. In such
circumstances, the attention of the individually retained
attorneys becomes crucial to the success of the overall
enterprise.13 That important contribution demands appropriate
____________________
13One IRPA, now deceased, made this point in a submission to
the district court:
33
recognition.
Fifth, although we do not dispute the district court's
assessment of the quality of the PSC's work, this factor cancels
itself out to some extent. After all, the district court
repeatedly commented upon "the excellence of the work performed
by all attorneys" (emphasis supplied), and left no doubt but that ___
both sets of plaintiffs' lawyers had rendered exemplary service.
Given these widespread plaudits, it seems manifestly unfair to
reward excellence on the part of one group and not the other.
Sixth, the district court failed to advance any
reasoned explanation as to why it boosted the PSC's share of the
Fund from 52% in the initial go-round to 70% on remand.14
____________________
In the course of representing these clients,
the attorneys and staff did hundreds of hours
of work that was not separately billed but
that is a part of the work of competent and
dedicated [IRPAs]. For example we helped to
arrange the shipping of bodies from Puerto
Rico to their homes, counseled families . . .
to help them function as witnesses, obtained
[hard to locate] records, investigated
possible criminal activity, searched for
heirs, negotiated with creditors, and with
law enforcement agencies, and researched
legal issues such as the rights to awards
from the State insurance fund.
14This discrepancy cannot be brushed aside with the glib
reminder that, on remand, the district court abandoned the
lodestar in favor of the POF method. The court had originally
arrived at the 52% figure through an enhancement of the lodestar
to account for "the extraordinary results" achieved by the PSC.
In re San Juan Dupont Plaza Hotel Fire Litig., 768 F. Supp. 912, _____ _______________________________________
932 (D.P.R. 1991). Thus, the court premised the original award,
in large measure, on its assessment of the role that the PSC
played in creating the Fund.
34
Though we have great confidence in Judge Acosta, his silence on
this subject leaves the award open to a perception that
appellants have been penalized for successfully prosecuting their
previous appeals. Cf. North Carolina v. Pearce, 395 U.S. 711 ___ _______________ ______
(1969) (discussing importance of dispelling any appearance of
vindictiveness when a judge imposes a more severe sentence upon a
criminal defendant after the defendant wins a new trial).
Seventh, the district court erred in failing to
compensate the representative trial counsel those IRPAs who,
though not members of the PSC, prepared and/or tried the so-
called "representative" cases for their work in that capacity.
Just as the PSC members deserved compensation for their endeavors
on behalf of the whole, the IRPAs who labored as representative
counsel conferred a common benefit, and must be compensated
accordingly.
Last but far from least we are persuaded, on whole-
record review, that it is simply unreasonable to award 70% of the
aggregate fees to the attorneys who managed the litigation,
leaving only 30% of the Fund to those who brought in the clients
and worked hand-in-hand with them throughout the pendency of this
long safari of a case. Because mass tort cases are a breed
apart, it is difficult to envision situations in which, if fees
are divided between lead counsel and individually retained
counsel under a POF formula, the latter will not be entitled to
35
at least half the fees.15 We do not think that this
litigation, though unique, so far overshoots all other cases as
to warrant a substantially larger differential. See, e.g., ___ ____
Vincent v. Hughes Air W., Inc., 557 F.2d 759 (9th Cir. 1977) _______ _____________________
(upholding district court's allocation of 5% of gross recovery,
or approximately 20% of the fee fund, to lead counsel in mass
tort action).
Concluding, as we do, that the fee allocation reflects
a serious error of judgment, and therefore an abuse of
discretion, we vacate the award.
V. REMEDY V. REMEDY
Ordinarily, "an improper calculation of attorneys' fees
necessitates remand for reconfiguration of the award." Lipsett, _______
975 F.2d at 943. But this rule admits of exceptions, so long as
"the record is sufficiently developed that we can apply the law
to the facts before us and calculate a fair and reasonable fee
without resorting to remand." Id. Here, that qualification is ___
satisfied; the record is voluminous and this court is painfully
familiar with the particulars of this fee imbroglio.
Nonetheless, an appellate court must think long and hard before
usurping the district court's usual prerogatives, and, therefore,
we doubt that this case would fall within the narrow confines of
the exception under ordinary circumstances. But the
circumstances here are extraordinary, and common sense commands
____________________
15We have been unable to find any common fund case in which ___
a court, using the POF method, has allocated more than 50% of a
fee fund to lead counsel.
36
that we not turn a blind eye to the reality of events.
This litigation has passed the point of diminishing
returns. The holocaust that underlies the plaintiffs' claims
occurred almost a decade ago. The meat-and-potatoes litigation
is over; with one small exception, see supra note 1, only a side ___ _____
dish attorneys' fees remains on the table. The amount of
time, energy and money already devoted to this peripheral item
has careened virtually out of control. Remanding would invite an
even greater investment in the side dish and we are reluctant
to sanction the squandering of additional resources for this
purpose. We have, at times, with considerably less provocation,
simply grasped the bull by the horns and fixed the fees
ourselves. See, e.g., Jacobs v. Mancuso, 825 F.2d 559, 562 (1st ___ ____ ______ _______
Cir. 1987); Grendel's Den v. Larkin, 749 F.2d 945, 951 (1st Cir. _____________ ______
1984).
We realize that dividing the Fund among groups of
attorneys in accordance with the POF method cannot be
accomplished with surgical precision. We or a district court,
for that matter must necessarily traffic in estimates. Taking
into account all the facts and circumstances, we conclude that we
should subdivide the Fund ourselves, rather than remand yet
again. We also conclude that, on balance, assigning 50% of the
Fund to the PSC and 50% to the IRPAs comprises a fair and
reasonable allocation.
This division reflects the district court's
determination that the PSC contributed handsomely to the creation
37
of the Fund it is, after all, at the high end of what a court
should usually award16 while at the same time correcting for
the district court's undervaluation of the IRPAs' contributions.
This division also strikes a sensible balance between the equity-
based common fund doctrine, which guards against the unjust
enrichment of free riders, and the need to avoid adding insult to
injury in a situation in which the court selects lead counsel
from amidst a group of willing volunteers and thereafter invades
the contingency agreements of the rejected lawyers to compensate
the select few. Moreover, this division is not incommensurate
with the time records of the PSC. Even if, as an uncritical
reading of the record suggests, the PSC spent as many as 166,000
hours on the litigation,17 a 50% allocation (roughly
$34,000,000) pays the members well. Although we have no
tabulation of IRPA hours to compare with this total, the PSC's
time records are still a valid measure of the vast resources its
members expended in the course of the litigation.
One loose end remains. It involves appropriate
compensation for the IRPAs who tried the "representative" cases.
As we stated earlier, see supra p.33, their participation in the ___ _____
____________________
16Although we do not impose an absolute ceiling on lead
counsel fees in common fund mass tort cases, cf. Camden I, 946 ___ ________
F.2d at 774-75 (holding that, as a general rule, 50% is the upper
limit in common fund cases in the Eleventh Circuit), cases in
which a court should exceed 50% are likely to be hen's-teeth
rare.
17This figure includes time logged not only by the PSC
members themselves but also by their associates, paralegals, and
law clerks.
38
Phase II trial inured to the benefit of all plaintiffs. Thus, in
presenting the representative claims, the lawyers were acting as
de facto PSC members. It is only logical, therefore, that their __ _____
compensation for those services be drawn from the PSC's share of
the fee Fund. Since the record is inadequate to permit us to
place a dollar value on these services, we leave it to the
district court to determine the amount of compensation due to the
non-PSC members who served as representative trial counsel during
the Phase II trial for their services in that capacity, and then
to order that sum paid out of the PSC's share of the Fund.
VI. CONCLUSION VI. CONCLUSION
We need go no further. For the reasons we have
expressed, we vacate the order allocating attorneys' fees; direct
that the fee Fund be divided equally among the PSC, on the one
hand, and the IRPAS, on the other hand; and remand for the entry
of a suitable decree and for further proceedings consistent with
this opinion. Costs shall be taxed in favor of the appellants.
It is so ordered. It is so ordered. ________________
39
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380 U.S. 545 (Supreme Court, 1965)
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Oliver S. Brown v. Phillips Petroleum Company, Etc., Mobil Oil Corporation, Ashland Oil, Inc.
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