Home/N.D. Illinois/Kennedy v. Nicastro

Kennedy v. Nicastro

546 F. Supp. 267, 1982 U.S. Dist. LEXIS 14268
CourtDistrict Court, N.D. Illinois
DecidedAugust 19, 1982
DocketNo. 80 C 2820
StatusPublished
Cited by1 cases

This text of 546 F. Supp. 267 (Kennedy v. Nicastro) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kennedy v. Nicastro, 546 F. Supp. 267, 1982 U.S. Dist. LEXIS 14268 (N.D. Ill. 1982).

Opinion

[268]*268MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

This action, like the world in T.S. Eliot’s The Hollow Man, has ended “not with a bang but a whimper.” Plaintiffs have never generated a complaint that has survived a motion to dismiss. Under the agreed-upon settlement, which this Court approved at the scheduled hearing August 9, 1982, plaintiffs’ counsel have the right to seek an attorneys’ fee award for services rendered not only in this action but in a group of related actions 1 — not one of which has been successful on the merits.

Nonetheless plaintiffs’ counsel argue plaintiffs are “prevailing parties” in the sense necessary for an allowance of fees. In that respect they have pointed to three things (PI. Mem. 14):2

1. Settlement has produced a $150,000 cash fund to “satisfy all of petitioners’ fee requests which might otherwise be taxable to Xcor.”
2. Louis Nicastro (“Nicastro”), James Hughes (“Hughes”) and William O'Brien (“O’Brien”), who were respectively Xcor’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer when this action was filed, have been “removed and replaced as Xcor’s chief officers.”
3. Xcor has created an independent Special Committee that “can now review the entire situation and take any action it finds appropriate, including continuation of these actions by Xcor itself.”

Xcor and the Cash Fund

It is true that the $150,000 cash fund, available for payment of fees if and to the extent this Court awards them, is being put up by officer-director defendants and not by Xcor. That does not however make plaintiffs “prevailing parties” except through an impermissible kind of bootstrapping.

Lawsuits can hardly be viewed as successful from the plaintiffs’ perspective if their principal result is to generate not any recovery for plaintiffs, but rather funds out of which plaintiffs’ lawyers get paid. Xcor itself laid no claim to the fund under the settlement agreement. It was only in response to this Court’s direct inquiry that the parties acknowledged that if the Court so determined, the unawarded portion of the $150,000 fund could (as in this Court’s view it most logically should) go into the corporate coffers. And even on that score we are confronted with the anomaly that the more that factor is viewed as making plaintiffs “prevailing parties,” the more could presumably be awarded as attorneys’ fees, and the less would remain for Xcor’s shareholders — thus making plaintiffs less viewable as “prevailing parties.”

In the determination of “prevailing parties,” then, generation of the cash fund is not really a factor unless other significant factors are also present that independently make plaintiffs prevailing parties. At most the fund provides a sort of self-fulfilling self-justification that, unless plaintiffs’ counsel are successful on their other arguments, cannot be given real weight.3

[269]*269 “Removal” of the Challenged Xcor Officers

Defendants’ response to plaintiffs’ fee application is very brief, addressing not all what defendants term “at best [plaintiffs’] exercise in revisionist history” (Def. Mem. I).4 They do however challenge the contention that Messrs. Nicastro, Hughes and O’Brien were “removed” from their offices. Instead defendants say (id. at 2-3):

None of these executives was “removed” from their Xcor positions. None of these executives was “removed” or terminated by Xcor as a result of this litigation or otherwise. Messrs. Hughes and O’Brien voluntarily resigned as Xcor’s President and Chief Operating Officer and Executive Vice President-Finance respectively, and thereafter accepted other positions with Xcor; both continue as directors of Xcor. Mr. Nicastro voluntarily resigned as an officer and director of Xcor, to enable him to undertake the position as President, Chief Executive Officer and Chairman of the Board of another public company. None of these executive resignations was stimulated or caused by the instant litigation.

At the Court’s request during the hearing on the settlement, defendants agreed to elaborate on that assertion. Appendix 1 to this opinion is the letter counsel then filed for that purpose. Plaintiffs’ counsel responded at the hearing that rather than committing time and expense to further hearings, they desired the Court to make its own determination from the opposing contentions before it and such inferences as it deemed reasonable.

Nonetheless plaintiffs’ counsel has since dealt with that subject in the final submission referred to in n. 2. Separating fact from argument in that submission, it appears that Appendix 1 is entirely accurate, subject only to the following possible additions:

1. Mr. Hughes was 46 and Mr. O’Brien 45 in September 1980.
2. Since September 1980 no Xcor mergers or acquisitions have taken place.

Without the factual hearing none of the parties wants to have, there is no predicate here for determining whether or not the departure of Mr. Nicastro, and the internal shifting of responsibilities of Messrs. Hughes and O’Brien, were tantamount to removal. In its practice of law this Court has represented major corporations and is of course familiar with the phenomenon of easing an executive out (or kicking an executive upstairs) while the corporation provides a sanitized cover story. But that may or may not have occurred here. Plaintiffs’ counsel asks the Court to indulge in speculation not fact.

Unless corporate benefit can be found from this litigation, no fees are properly allowable to plaintiffs’ counsel. Given the lack of facts submitted to it, at most this Court can view plaintiffs as having been minimally successful so as to permit some fee allowance. Based on the history of the litigation known to this Court, it would be- a gross exaggeration to call them “prevailing parties” in any meaningful sense.

Xcor’s Special Committee

In its report to the Court regarding the proposed settlement, the Special Committee advised that based on its review:

[270]*2701. It had concluded “that the transactions challenged in this action were the consequence of the exercise of sound business judgment by members of [Xcor’s] management and its Board of • Directors based upon circumstances existing at the time of said transactions.”
2. In light of all the facts, including its “analysis of the serious financial impact and burden of continued litigation on [Xcor] its business judgment was that the settlement was in the best interests of Xcor and its shareholders.”
3. If however the settlement were disapproved by this Court, it had concluded that Xcor “should continue to defend the plaintiffs’ action and is obligated to continue paying the costs of defense of the action on behalf of the individual officer-director defendants as well as its own costs.”

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Related

Skelton v. General Motors Corp.
661 F. Supp. 1368 (N.D. Illinois, 1987)

Cite This Page — Counsel Stack

Bluebook (online)
546 F. Supp. 267, 1982 U.S. Dist. LEXIS 14268, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kennedy-v-nicastro-ilnd-1982.