BRIEF OF APPELLANTS JEFFREY A. CRANE,
GENE RANDALL, AND GERARD BENEDIK
In this appeal, appellants challenge a decision of the district court concerning the method by which the court awarded attorney's fees for post-settlement work in a common-fund class action. Appellants principally contend that the decision below cannot be reconciled with the recent fee decision of this Court in this very case. Bowling v. Pfizer, 102 F.3d 777 (6th Cir. 1996).
At the outset, it is important to note what is not at issue in this appeal. Appellants do not dispute the quality of class counsel's representation of the class, nor do they deny that class counsel has vigorously represented the class' interests on non-fee matters. But, as this Court has observed, "[t]he interest of class counsel in obtaining fees is adverse to the interest of the class in obtaining recovery because the fees come out of the common fund set up for the benefit of the class." Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513, 516 (6th Cir. 1993). For the reasons set forth below, in failing to follow the prior mandate of this Court, the fee-setting procedure adopted by the district court allocates too much of the common fund to fee-seeking counsel and not enough to the class members on whose behalf the fund was established.
STATEMENT IN SUPPORT OF ORAL ARGUMENT
This appeal challenges the district court's March 1997 attorney's fee ruling in a complex class action settlement first approved in 1992 and currently being implemented. Oral argument will aid the Court in understanding the interaction between the settlement, the district court's fee ruling, and an earlier attorney's fees decision of this Court in this case, which appellants believe requires reversal of the decision now under review. See Bowling v. Pfizer, 102 F.3d 777 (6th Cir. 1996). In addition, the district court's decision effectively awards class counsel $6.25 million in fees, for all future work to be performed over a 10-year period, on top of counsel's already-received $10.25 million fee, without any scrutiny of the quantity or quality of counsel's future services to the class. Given the significance of this ruling, oral argument should be granted.
STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION
The district court had jurisdiction over this class action on the basis of diversity of citizenship under 28 U.S.C. 1332. This is an appeal from a post-judgment order of the district court entered on March 17, 1997. R. 1061. The March 17 order was a final decision with regard to attorney's fees applications then pending before the court. The Notice of Appeal was filed on April 15, 1997. R. 1078. This Court has jurisdiction under 28 U.S.C. 1291.
STATEMENT OF ISSUES FOR REVIEW
1. Did the district court err in holding that counsel for the plaintiff class are automatically entitled to an annual $625,000 fee award over the next 10 years, as compensation for all future services to the class, regardless of the quantity or quality of the services performed, where a prior district court ruling, recently affirmed by this Court, had required annual fee applications demonstrating entitlement to the amounts requested?
2. Did the district court err in awarding class counsel $625,000, plus all requested expenses, for the period August 1995-October 1996, without making any inquiry into the quantity or character of the services performed or the legitimacy of the claimed expenses?
STATEMENT OF THE CASE
This appeal involves a worldwide class action settlement involving the claims of thousands of individuals implanted with the Bjork-Shiley Convexo-Concave heart valve manufactured and sold by the defendants. The valve has a tendency to fracture, which has caused hundreds, if not thousands, of deaths and serious injuries to valve patients. The settlement was proposed by class counsel in early 1992. At that juncture, individual class members, as well as patient advocacy groups, objected to the settlement's deficiencies. Because of those objections, some of which were noted by the court in an interim ruling, Bowling v. Pfizer, 143 F.R.D. 138 (S.D. Ohio 1992), the settlement was improved substantially.
As modified, the settlement provides all class members with immediate albeit modest cash payments from a $90 million Medical and Psychological Consultation Fund, which includes a separate $10 million fund dedicated solely to the spouses of valve patients. Bowling v. Pfizer, 143 F.R.D. 141, 149 (S.D. Ohio 1996). In addition, the settlement establishes a $75 million Patient Benefit Fund, the principal purposes of which are to fund research to develop a non-invasive method for detecting fracture-prone valves and to pay for valve replacement surgery in instances where the risk of valve fracture outweighs the risk of the surgery. Id. The Patient Benefit Fund was established with an initial $12.5 million payment from the defendants, to be followed by 10 additional annual payments of $6.25 million that began in October 1996.
The District Court's Initial Fee Decision
Appellants-intervenors Jeffrey A. Crane, Gene Randall, and Gerard Benedik (collectively "Crane") are class members who intervened in the district court to challenge what they believed to be class counsel's grossly excessive $33 million attorney's fee request. After discovery and the submission of comprehensive fee applications, a hearing was held in September 1995 before the Honorable John F. Nangle, the Chair of the Judicial Panel on Multidistrict Litigation, who had been appointed to hear the fee dispute by Chief Justice Rehnquist after Judge S. Arthur Spiegel--the judge who had approved the settlement--removed himself from the fee issue, but not other aspects of the case still remaining. Thereafter, Judge Nangle issued a comprehensive, painstakingly detailed 62-page opinion granting counsel $10.25 million in fees for their work performed to date, plus more than $475,000 in expenses. See Bowling v. Pfizer, 922 F. Supp. 1261 (S.D. Ohio 1996). The court used the percentage-of-the-fund method for computing fees for work already performed, id. at 1278-80, and awarded 10% of the total amount that had been paid by the defendants into the two monetary funds. Id. at 1283. Although it used the percentage approach, the court noted that the award represented, at the very least, a fee equal to the lodestar of all counsel, with a multiplier of 2.4. See id. at 1281; Bowling v. Pfizer, 927 F. Supp. 1036, 1042 (S.D. Ohio 1996). In doing so, the district court rejected class counsel's far larger fee request, holding that "$33 million is entirely too much money for legal fees given the facts and circumstances of this case." Id. at 1283.
This left the question of how to compensate class counsel for future work to implement the settlement. At the fee hearing, Judge Nangle expressed serious concerns about devising a method to compensate counsel for future services to the class, and directed counsel to address the question. See, e.g., R. 677, at 61, 145, Fee Hearing Transcript. Class counsel responded with a one-page letter to Judge Nangle, saying that he "would much prefer" to receive the entire $33 million request in 1995, but, if necessary, he would take $18 million up front, with $15 million in guaranteed automatic payments over the next 10 years ($10 million the first 5 years, and $5 million the latter 5 years), regardless of the nature or amount of future work performed. See R. 685, at Exh. A, Letter From Stanley Chesley to Judge Nangle, dated Sept. 27, 1995.
Crane objected to this procedure, noting that it involved entirely too much money and did not tie the fee to the performance of future work. R. 685, Mem. in Response to Proposed Payment Schedule. Crane submitted a counter-proposal, under which future fees would be earned on a pay-as-you-go basis, with applications made to the Claims Administrator who would make initial decisions on future fee awards (with final review by the trial court). The court adopted this proposal in part, but substituted the settlement Special Masters/Trustees for the Claims Administrator, and added a innovative method for determining the maximum fee to be awarded in any year. See Bowling, 927 F. Supp. at 1044 (noting that class counsel's proposal was "patently unacceptable"). As payments are made into the fund, at a rate of $6.25 million per year, counsel could apply for up to 10% of that amount. Bowling, 922 F. Supp. at 1284. Judge Nangle noted on reconsideration that the 10% figure provides adequate incentive to render quality legal services, since the settlement was final, and counsel were not operating under any contingency of non-recovery nor any significant delay in payment. Bowling, 927 F. Supp. at 1044. In sum, Judge Nangle specifically and repeatedly rejected class counsel's request for automatic future payments, and required that counsel justify their requests on an annual basis, with an opportunity for amicus and absent class members to respond.
The First Fee Appeal In This Court
Fee-seeking counsel appealed to this Court, which affirmed the $10.25 million award and the future fees component. Counsel argued that their original $33 million fee request had been reasonable. In their briefs to this Court, counsel also specifically criticized Judge Nangle's method for awarding future fees on three grounds: (1) that it would be unfair to allow the fees to be paid only through 2005, since some class members, no matter how few, will need services past that date; (1) that it would be a burden to file annual fee applications; and (3) that there was a possibility, however remote, that no monies would be available in the settlement fund to cover class counsel's fees and expense. Red Brief in Nos. 96-3568/3740/3744/3774, at 11 & n.11, 14, 24 (filed Oct. 8, 1996).
Crane responded to each contention. He maintained that: (1) the structured fee plan was appropriate, noting the irony of class counsel's claim that fees would not be available after 2005, since his principal claim in the district court had been that all the fees should be paid up front, with no future fees at all; (2) there was no undue burden in filing annual fee applications, especially since the Special Masters and others serving the class were required to file their fee and expense applications on a more frequent basis; and (3) the settlement fund was overfunded, but that if, on the remote chance that the fund were ever on the verge of extinction, money could be held back to cover fees and expenses. Yellow Brief in Nos. 96-3568/3740/3744/3774, at 34-39 (filed Oct. 24, 1996).
After oral argument, on December 12, 1996, this Court affirmed all aspects of the fee and expense award. Bowling v. Pfizer, 102 F.3d 777 (6th Cir. 1996). Because of the importance of this affirmance to the proper disposition of the present appeal, we now review it in some detail. The Court first reviewed the background of the case and the district court's $10.25 million award for work to date. Chief Judge Martin then explained that "[t]he court also recognized class and special counsels' continuing obligations to the class and ordered that those attorneys be permitted in the future to apply annually for additional fees and expenses in an amount not to exceed 10% of the annual $6.25 million payments to be made to the common funds by Pfizer and Shiley." Id. at 779 (emphasis added).
After explaining the district court's rationale for the $10.25 million award, this Court went on to applaud the district court's careful application of the six fee-setting factors set forth by this Court in Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513, 516-17 (6th Cir. 1993). With reference to the district court's grounds for the future fee structure, Judge Martin noted that:
The district court then found that the case had been taken on a contingent basis, but was not persuaded by counsel's contention that the case was undesirable when undertaken. Furthermore, although the court stated that class counsel did make a substantial investment of time and expenses when risk of nonrecoupment was still present, the early settlement and its approval significantly reduced the risk dramatically, and there was no contingency associated with future work in this case.
Bowling, 102 F.3d at 780. The Court therefore concluded:
These are the findings that provided the basis for the district court's award of attorneys' fees. The district court, in a thoroughly reasoned order, used the discretion granted it under Rawlings to determine the appropriate methodology and applied the Rawlings factors to ascertain a reasonable fee award. The fee is, at the very least, reasonable. Accordingly, we find that the district court did not abuse its discretion in its fee award to class and special counsel.
Class Counsel's October 1996 Fee and Expense Application
In accordance with Judge Nangle's ruling, and before the first appeal was argued, class counsel filed a 10-page fee and expenses application for the 14-month period ending on October 15, 1996, together with an appendix of time and expense records compiled by counsel and explanations from special counsel as to the work they had performed. R. 1001, Application for Award of Attorney's Fees and Expenses of Class Counsel and Special Counsel John T. Johnson and James T. Capretz (hereafter "1996 Fee App."). Although ordinarily fee applications filed pursuant to Judge Nangle's Order will be submitted annually, and therefore cover only 12-month periods corresponding to the defendants' annual contributions to the settlement fund, Bowling, 922 F. Supp. at 1284, this first annual application covered a longer period because of a two-month lag between the end date of class counsel's prior fee award and the date of the annual contribution.
In their application, class and special counsel claimed that their hourly billings alone justified a fee of approximately $720,000. R. 1001, at 2, 1996 Fee App. They maintained, therefore, that Judge Nangle's fee cap was "inequitable and unfair with reference to the current application" and suggested that the district court (once again, Judge Spiegel, not Judge Nangle) could "institute any needed changes or amendments to Judge Nangle's orders." Id. at 9. Class counsel did not request "a specific dollars amount," but rather some "amount over and above the dollar-for dollar value of the services rendered plus any appropriate interest thereon." Id. at 10. In other words, counsel requested an unspecified amount greater than $720,000. In addition, class counsel made a request for $71,967.48 in expenses, attaching supporting receipts and similar documentation, but giving no written justification for the expenses, let alone showing how the expenses related to particular litigation tasks. Id. at 9.
Crane partially opposed class counsel's fee request. R. 1006, Mem. of Jeffrey Crane, et al., in Response to Class Counsel's Supp. Fee App. (hereafter "Crane Response"). Before turning to the specifics of class counsel's application, Crane made two preliminary observations. First, he noted that, because class counsel was no longer operating under any contingency, future fee awards should be made solely on a lodestar basis. Id. at 2-4; see Northcross v. Bd. of Educ. of the Memphis City School, 611 F.2d 624, 638 (6th Cir.), cert. denied, 447 U.S. 911 (1980). Second, Crane explained that, contrary to class counsel's assertions, the annual cap of $625,000 was not unfair because, among other reasons, the compensable billings of counsel were well below $625,000, and the value of work performed in future years was likely to be far lower still, since major issues of settlement implementation were likely to be resolved in fairly short order.
Crane then turned to the particulars of class counsel's fee application, and explained that, although a majority of the work performed was compensable under applicable law, a significant proportion of it was not. See generally R. 1006, at 7-19, Crane Response. In this regard, Crane focussed on five categories of non-compensable activities: (i) work performed to obtain and enhance class counsel's fee; (ii) work that was inadequately described; (iii) clerical work for which counsel sought fees at substantial hourly rates; (iv) hours expended that appeared to be duplicative of the work of other counsel; and (v) work that, although it concerned the Shiley heart valve, did not appear to be germane to the class action. For instance, in addressing the question whether it was appropriate to be awarded fees from the common fund for work done by class counsel to attain the $33 million fee request, particularly where class counsel had been unsuccessful in that regard, see Hensley v. Eckerhart, 461 U.S. 424, 435-37 (1983), Crane identified over $75,000 in billings for Mr. Chesley's firm and at least $50,000 in fees for special counsel Capretz (well more than one-third of his total request) that was non-compensable.
Crane also partially opposed class counsel's expense request. Crane acknowledged that a large portion of the request appeared reasonable, but observed that it was generally impossible to tell which portions of the expense request were attributable to non-compensable work. Crane also pointed out particular expense requests that, in his view, were non-compensable because they were related to class counsel's attempt to overturn the district court's now-affirmed ruling on fees. R. 1006, at 20, Crane Response. Crane therefore requested that the court direct counsel to review their expense records and re-submit them with good-faith estimates of expense deductions tailored to the categories of fees that the Court decided were and were not compensable.
The District Court's Ruling Now Before This Court
On March 17, 1997, the district court, per Judge Spiegel, ruled on the pending fee application. R. 1061, Order. The court began by noting that the "[t]he award of attorneys' fees is controlled by Judge Nangle's Fee Orders which were affirmed recently by the Court of Appeals for the Sixth Circuit." Id. at 2. The district court "recognize[d its] authority to award more than the 10% cap," but "confine[d] its exercise of that authority to the situation identified by Judge Nangle--in the 'highly unlikely' event that Counsel's legal services for a particular period would justify such action. Bowling, 927 F. Supp. at 1044." The court acknowledged, however, that the Trustees had not found such justification and that it, too, did "not find any independent justification for exceeding the 10% cap." R. 1061, at 5, Order. The district court did not, however, address Crane's objection that a large part of class counsel's request was non-compensable, nor did the court even mention any of the categories of counsel's request, let alone review his time records. The court thus awarded the maximum $625,000 fee, without any analysis of counsel's specific request.
Finally, the court turned to a matter which was not before it, and which had not been briefed by any party. The court opined that "awarding Class and Special Counsel each year 10% of the annual payment, regardless of the lodestar, fairly and efficiently resolves the attorneys' fees issue for the present and future fee applications." Id. The district court explained that, in its view, this approach would balance years in which class counsel's lodestar might be higher than $625,000 against those that might be lower, would eliminate an "annual controversy" over fees, and would "relieve the Court from the burden of ... scrutinizing the fee application in order to separate out the compensable hours." Id. The court concluded that so long as counsel perform "the duties required of them"--whatever their quantity and character--"Class and Special Counsel will receive each year a fee award equal to 10% of Defendants' annual payment to the Patient Benefit Fund." Id. at 6. (See Footnote 1)
The net effect of the district court's fee order was that class counsel was awarded the maximum 10% fee, without any inquiry into the degree to which his work was compensable, and that he would be awarded the maximum 10% fee each year for the next nine years, again without any inquiry into the quantity or nature of the work performed as Judge Nangle's prior order had demanded. This appeal followed.
SUMMARY OF ARGUMENT
1. The decision under review should be reversed because, contrary to Judge Nangle's controlling March 1996 ruling, it awards counsel an automatic fee of $625,000 per year over the next 10 years, without any scrutiny of the quantity and nature of the work to be performed during that time period. Judge Nangle's decision, on the other hand, required class counsel to submit an annual fee application detailing the work performed, and it set forth a procedure for class members and amicus to object to class counsel's request. And of particular importance, Judge Nangle's Order established $625,000 as an annual fee cap, not an automatic award. The district court below had no basis for deviating from Judge Nangle's earlier ruling, which was the law of the case and should have been adhered to absent extraordinary circumstances not present here. See Hanover Ins. Co. v. American Engineering Co., 105 F.3d 306, 312 (6th Cir. 1997). And because Judge Nangle's ruling was affirmed by this Court, see Bowling v. Pfizer, 102 F.3d 777 (6th Cir. 1996), the district court lacked authority to impose a future fees process different from the one ordered by Judge Nangle. See Campbell v. United States, 592 F.2d 309, 311-12 (6th Cir. 1979).
2. In addition to reversing the decision below, this Court should direct the district court to use the lodestar method for determining class counsel's fee awards for the current and all future requests. A flat percentage award, like the one allowed by Judge Spiegel, would be inconsistent with the central rationale of Judge Nangle's decision--that fees should be tied to the performance of future work. That rationale can only be heeded if the fee is determined on the basis of counsel's hourly billings. Moreover, the principal justification for using the percentage-of-the-fund method is that counsel runs the risk of non-recovery, a justification not applicable here. Because the settlement is final, there is no risk that counsel will go without compensation, as this Court observed in affirming Judge Nangle's fee ruling, Bowling, 102 F.3d at 780, further demonstrating that the lodestar method should be used in this case.
The district court erred in awarding counsel $625,000 for work performed from July 1995 to October 1996, without scrutinizing the particulars of counsel's fee application. A review of that application demonstrates that a large portion of the amount sought by class counsel was not compensable under applicable law. To cite but one example, counsel sought fees for a large amount of (largely unsuccessful) work to obtain a $33 million fee award before the district court and, after that request was denied, to have the district court's far smaller award overturned by this Court. See Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 111 (3d Cir. 1976). For this and other reasons discussed in more detail below, the district court abused its discretion by failing to conduct an inquiry into counsel's fee request, which would have resulted in an award of less than $625,000.
A. THE DISTRICT COURT'S DECISION--AUTOMATICALLY AWARDING $6.25 MILLION IN FEES FOR WORK YET TO BE PERFORMED--SHOULD BE REVERSED.
1. The Decision Under Review Cannot Be Reconciled With The District Court's Prior Decision, Made Binding By This Court's Affirmance.
There is no doubt that the district court's decision to award counsel 10% of the defendant's contribution to the common fund automatically, regardless of the amount and nature of counsel's future work, is drastically at odds with what Judge Nangle held and what this Court affirmed in December of last year. See Bowling, 102 F.3d 777. Judge Nangle expressed great concern at the September 14, 1995 fee hearing over developing a method for the award of future fees, because he was unwilling to make a lump sum fee award for work yet to be performed. See, e.g., R. 677, at 61, Fee Hearing Transcript. Therefore, he ordered the parties to submit a plan for the award of future fees. Class counsel's response did not suggest any method for evaluating his future work. Instead, he first reiterated his request that the entire $33 million fee be paid up front. If the Court were not inclined to go that far, however, class counsel suggested that he be paid $18 million up front, with $15 million to be paid in guaranteed automatic payments over the next 10 years, $10 million over the first five years and $5 million over the last five. See R. 685, at Ex. A, Letter From Stanley Chesley to Judge Nangle, dated Sept. 27, 1995 (with attached proposed payment schedule).
Judge Nangle found class counsel's proposal non-responsive and "patently unacceptable." Bowling, 927 F. Supp. at 1044. He thus rejected this automatic payment plan--identical in form to the one recently embraced by Judge Spiegel--and imposed a "pay as you go" system, under which class counsel would file an annual application, class members and amicus could, within a specified period of time, file objections, and the application would be evaluated by the Trustees and then by the district court. The district court could award "up to 10%" of the defendants' annual $6.25 million payment into the fund, depending on the work performed by counsel during the relevant period.
Class counsel moved for reconsideration of Judge Nangle's fee ruling, arguing, among other things, that the future fee award was unfair because it required counsel to earn their future fees based on the future work performed, which counsel claimed would not be adequately compensated under the 10% cap. R. 804, at 9-11, Motion and Mem. in Support of Motion for Reconsideration, Alteration And Amendment of Memorandum and Order on Applications for Attorney's Fees and Expenses. Judge Nangle explicitly rejected this argument, noting, among other things, that the annual fee cap would amply reward counsel and, since the settlement was final, there was no contingency associated with class counsel's future work. Bowling, 927 F. Supp. at 1044.
Class counsel appealed this aspect of the district court's ruling, again arguing that the future fees' procedure was unfair. This Court rejected that argument, and affirmed Judge Nangle's ruling in all respects, specifically acknowledging the district court's finding that "there was no contingency associated with future work in this case." Bowling, 102 F.3d at 780.
With the foregoing chronology in mind, Judge Spiegel's March 17, 1997 Order could not be further from what Judge Nangle held and this Court affirmed. It adopts class counsel's alternative automatic periodic payment approach--the approach that Judge Nangle had found "patently unacceptable." Bowling, 927 F. Supp. at 1044. It awards $6.25 million in fees (discounted to present value), while Judge Nangle awarded "up to 10%," Bowling, 922 F. Supp. at 1284, depending on the character and amount of the work performed. The March 17 Order thus eliminates the need for an annual application detailing hourly billings. Judge Nangle's ruling, on the other hand, required annual submissions to the Trustees and to the court, with the opportunity for opposition by class members who have a direct interest in minimizing the payment of fees from a fund dedicated to their needs.
Under the circumstances of this case, even if there had been no affirmance by this Court, it would have been inappropriate for Judge Spiegel to have revised Judge Nangle's ruling as he did. As this Court noted recently, under the law of the case doctrine, a lower court is "ordinarily precluded from reexamining [an] issue" previously decided by that court. Consolidation Coal Co. v. McMahon, 77 F.3d 898, 905 n.5 (6th Cir. 1996)(citation omitted); see also Hanover Ins. Co. v. American Engineering Co., 105 F.3d 306, 312 (6th Cir. 1997); Shore v. Federal Express Corp., 42 F.3d 373, 379 (6th Cir. 1994); Coal Resources, Inc. v. Gulf & Western Indus., Inc., 865 F.2d 761, 766-67 (6th Cir. 1989). Although that doctrine is not an "inexorable command," Petition of United States Steel Corp., 479 F.2d 489, 494 (6th Cir.), cert. denied, 414 U.S. 859 (1973), a district court should only reconsider one of its prior rulings if (1) new evidence comes to light; (2) a different legal principle is established by a higher court; or (3) the prior decision is "clearly erroneous and would work a manifest injustice." See Hanover, 105 F.3d at 312.
None of these exceptions applies, and Judge Spiegel's March 17, 1997 Order does not suggest otherwise. First, the evidence in this case remained the same between the issuance of Judge Nangle's ruling and the issuance of the ruling now under review. Second, the applicable law has remained the same; indeed, Judge Spiegel began his March 17 Order by acknowledging that "the award of attorneys' fees is controlled by Judge Nangle's Fee Orders which were affirmed recently by the Court of Appeals for the Sixth Circuit." R. 1061, at 2, Order. Finally, no manifest injustice would result from abiding by Judge Nangle's carefully crafted decision. To the contrary, counsel is simply required to file periodic applications to obtain fees for post-judgment work to implement a settlement, which is standard operating procedure in complex class actions. See Alba Conte, Attorney Fee Awards Sec. 4.22, at 217-24 (2d ed. 1993). (See Footnote 2)
In any event, a much more powerful command than the law of the case doctrine is applicable here because Judge Nangle's ruling was affirmed by this Court, with specific reference to the procedure for awarding future fees. "When matters are decided by an appellate court, its rulings, unless reversed by a superior court, bind the lower court." Insurance Group Comm. v. Denver & Rio Grande Western Railroad Co., 329 U.S. 607, 612 (1947). Thus, "pursuant to the mandate rule, lower courts must 'adhere to the commands of a superior court.'" Brunet v. City of Columbus, 58 F.3d 251, 254-55 (6th Cir. 1995)(emphasis added), quoting United States v. Moored, 38 F.3d 1419, 1421 (6th Cir. 1994). Put another way, a district court sitting in this Circuit does not have jurisdiction to alter one of its earlier decisions if that decision was affirmed by this Court. See Campbell v. United States, 592 F.2d 309, 311-12 (6th Cir. 1979). Thus, the district court simply was not free to revisit Judge Nangle's ruling after it was affirmed by this Court, and the decision below should be reversed on that basis alone.
Even if the district court had retained some discretion to revise its prior ruling, the district court's grounds for providing class counsel with an automatic annual $625,000 fee award are unconvincing. First, the decision below does not, as Judge Spiegel suggested, merely balance years in which class counsel's lodestar might be above $625,000 against years in which his lodestar would be below that amount. In the first place, avoiding this type of speculation about the value of counsel's future services is precisely why Judge Nangle insisted on annual fee applications detailing counsel's work. There is simply no way of knowing what counsel's lodestar will be in, say, 2003, or any other future year, and thus it is conjecture to suggest that things will balance out over the next 10 years.
Moreover, despite the lack of precise knowledge about counsel's future work, there is every reason to believe that class counsel's annual lodestar will be much lower than $625,000 in most years, as an analysis of his first annual fee application demonstrates. Typically, fee applications under Judge Nangle's ruling will seek compensation for work done over the prior 12 months. However, with respect to the application now before this Court, the period stretches from when counsel filed their last updates to the initial common-fund fee application in the summer of 1995, through mid-October 1996, shortly after Pfizer made its first on-going contribution to the Patient Benefit Fund. Thus, the present fee application covers more than 14 months, underscoring the propriety of the $625,000 cap for a normal 12-month period. (See Footnote 3)
In addition, as detailed in Part B below, the fee request at issue here contains a number of items that, even if they are properly compensable (but see infra Part B) are surely non-recurring. For instance, the current application seeks very substantial reimbursement for work done before this district court and in this Court on the question of class counsel's entitlement to enhanced fees. This work involved not only the relatively modest amount of time needed to submit counsel's initial fee application, but hundreds of hours--and tens of thousands of dollars in claimed fees--working on a motion for reconsideration and the appeal aimed at overturning Judge Nangle's decision and gaining a $33 million fee award at the expense of the class. In our view, this time is not compensable under any circumstances, but for these purposes, the point is that these matters will not recur in the future (at least after this appeal is decided) and so there is no reason to question the reasonableness of the $625,000 cap.
Other aspects of this year's fee request further demonstrate that Judge Nangle's annual fee cap will be more ample in future years. Implementation of the settlement will continue to require significant work. However, as the years go by, counsel's work volume will diminish. Certain threshold issues have been, or will shortly be, resolved. For instance, there has been a considerable controversy over the guidelines for valve replacement surgery, which was the subject of a hearing in the district court on June 4, 1997, and will soon be resolved. Similarly, the last of the Pennsylvania Class Objectors' intervention appeals was argued in August and was affirmed by this Court in December 1996. Those appeals involved hundreds of hours of work by the most senior attorneys from class counsel's law firm and is now done.
Moreover, hours spent assisting claimants in obtaining monetary compensation--which involved dozens, if not hundreds of hours, expended by class counsel and his firm's paralegals--is now largely over because the claims period has ended. Sixth Report of Special Masters/Trustees, at 1-3 (June 4, 1997). Cash distributions have been made to the class members and the only question remaining is whether a pending federal tax ruling request will allow the settlement Trustees to make a small additional pro rata distribution. Id. at 2-3. When that distribution is made, class counsel will be involved, but, as with prior distributions (id. at 2), the work will be largely administrative and thus carried out by the settlement Claims Administrator. Similarly, claims made by class members for reoperation benefits will be skewed toward the front end of the settlement because claimants qualifying for reoperation benefits are likely to have already sought such benefits or will do so in the near future when revised guidelines are issued.
To be sure, work to implement the settlement will remain. Class counsel will continue to monitor the research efforts, and other efforts may be made to detect high-risk valves. But the overall workload will undoubtedly decrease, rather than increase. In short, the annual fee cap is more than adequate to meet counsel's average lodestar request, thus confirming that an annual $625,000 award is not necessary to balance out high-lodestar and low-lodestar years. (See Footnote 4)
Nor was it appropriate to award $625,000 each year simply to avoid an "annual controversy" or to "relieve the court from the burden" of reviewing the fee application "to separate out the compensable hours." R. 1061, at 5, Order. If, by using the term "annual controversy," Judge Spiegel meant the mere filing of a detailed fee application, with the opportunity for class members to respond, that is, of course, precisely what Judge Nangle's ruling, affirmed by this Court, required. If he meant actual litigation on the propriety of specific fee requests, that, too, is what Judge Nangle's opinion portends. But there are two additional responses to the perceived need to avoid future fee disputes.
First, the level of "controversy" accompanying class counsel's annual fee applications will depend heavily on what this Court says about the standards to be used in analyzing those applications. If this Court reaffirms Judge Nangle's approach and makes clear that class counsel's future fee requests must adhere to ordinary lodestar principles, as we believe they should, that will greatly diminish the probability of significant future controversies.
Second, "controversy" on fee issues should not, as the decision below suggests, be avoided at all costs. If not for the dispute initiated by Crane on class counsel's initial $33 million fee request, the class may well have lost upwards of $20 million dollars, which was in fact preserved for the common fund and later used for distribution to the class and made available to pay for valve replacement surgery and for scientific research. So too with class counsel's first annual fee application, where Crane urges rejection of a significant portion of the request on the ground that it is not compensable under applicable law, but should remain available to class counsel's clients.
In sum, the decision below is at odds with this Court's affirmance of Judge Nangle's fee Order, and cannot be sustained on the grounds offered by the district court.
2. Class Counsel's Annual Fee Applications Should Be Evaluated On A Lodestar Basis.
Having shown that the district court's ruling cannot be sustained, we now turn to the proper method for evaluating class counsel's fee applications for this and future years. In Crane's view, counsel fees for future work should be based on a lodestar calculation, without a multiplier, for three distinct, but related reasons, all of which are evident in Judge Nangle's fee rulings. First, a flat percentage award would be inconsistent with the central rationale of Judge Nangle's decision--that it was inappropriate to award fees automatically, but rather that fees should be tied to the performance of future work. As the settlement Trustees put it in remarking on Judge Nangle's decision: "The Court was concerned that fees paid in future years should be supported by the value of the services actually rendered during the year in question, so that the 10% figure becomes the maximum amount to be awarded. Judge Nangle repeatedly referred to the 10% figure as a cap. If attorney services do not justify the full 10% figure, the award could presumably be a figure less than the cap." R. 1029, at 4, Report and Recommendation of Special Masters/Trustees on Application for Attorneys' Fees and Expenses. Whatever the other benefits and drawbacks of the lodestar method, it plainly ties counsel fees to work performed, while the percentage of the fund approach plainly does not, and thus the lodestar method serves the purposes of Judge Nangle's original decision. See also Smillie v. Park Chemical Co., 710 F.2d 271 (6th Cir. 1983)(attorney's fees in common-fund cases should be based, among other things, on value of benefit rendered and value of services on an hourly basis).
Second, the purpose of counsel's future work is to implement the settlement, not to create or enhance the common fund. This can be seen, for instance, in the time records of class attorneys Stilz and Goodman and paralegals McCauslin and Reardon, who regularly take calls from class members and make sure that their claims are adequately documented. R. 1001, Chesley Tab (Summary Chart), 1996 Fee App. Counsel also customarily provide information to the Trustees and to the Supervisory Panel--a group of scientists who, among other things, make important recommendations regarding use of the Patient Benefit Fund--to enable them to carry our their work. These tasks, while necessary and important, do not create or augment the common fund. Thus, the principal rationale for a common-fund percentage fee award--that class counsel should be entitled to a percentage of the fund that they have created--is not applicable to post-judgment fees for implementing a settlement. Cf. Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 111 (3d Cir. 1976)(no fees generally permitted where litigation involves competing interests against common fund, because litigation does not benefit fund's beneficiaries).
Third, as with lodestar multipliers, percentage awards in excess of an attorney's hourly billings are generally appropriate where counsel has taken a risk that the work done might result in no recovery (and no fee). That rationale no longer applies in this case. The settlement was approved in the summer of 1992, the merits appeals were final in October 1994, and the distribution of settlement benefits has been on-going for more than two years. Class members have received monetary recoveries, and other aspects of the settlement--such as valve-related research and reoperation benefits--are being implemented. Counsel's fees are not now subject to any contingencies, and therefore fees at rates greater than hourly billings would constitute a windfall. As Judge Nangle noted, one reason for requiring scrutiny of annual fee applications, rather than automatically awarding a percentage fee for future work, was that counsel was not operating under any risk of non-recovery. Bowling, 927 F. Supp. at 1044. This Court made the same observation in Northcross v. Bd. of Educ. of the Memphis City School, 611 F.2d 624, 638 (6th Cir.), cert. denied, 447 U.S. 911 (1980), where it stated that, "[i]n a long and complicated lawsuit ..., only a portion of the time expended can reasonably be regarded as contingent; once liability is established, the attorney is assured of compensation." See also Berry v. School Dist. of City of Benton Harbor, 703 F. Supp. 1277, 1285 (W.D. Mich. 1986)(no multiplier for hours expended after defendant's motion for new trial was denied because risk of non-recovery was no longer present).
* * *
For the reasons given above, this Court should reaffirm Judge Nangle's Order requiring the district court to consider each annual fee application on its merits, and should instruct the district court to evaluate all future fee applications on a lodestar basis.
B. THE DISTRICT COURT ERRED IN AWARDING CLASS COUNSEL $625,000 IN FEES AND NEARLY $70,000 IN EXPENSES WITHOUT ANY EVALUATION OF THE AMOUNT AND NATURE OF THE SERVICES PROVIDED.
In evaluating counsel's first annual fee request, Crane reviewed the time records submitted by class counsel and special counsel Johnson and Capretz on an entry-by-entry basis. Crane acknowledges here, as he did below, that those records show that class counsel has diligently implemented the settlement.
We do not ask this Court to engage in the same detailed analysis. Crane's purpose here is to show that a significant portion of the hours claimed by class counsel and by special counsel Capretz's law firm are not compensable, which will provide a basis for this Court to remand the matter to the district court for redetermination, under the standards that this Court sets forth.
As noted earlier, the non-compensable items in the fee application fall generally into five categories: (i) work performed to obtain and enhance class counsel's fee; (ii) work that was inadequately described; (iii) clerical work for which counsel sought fees at substantial hourly rates; (iv) hours expended that appeared to be duplicative of the work of other fee-seeking counsel; and (v) work that, although it concerned the Shiley heart valve, did not appear to be germane to the class action.
Counsel's fee application contains time records from class counsel's law firm, Waite, Schneider, Bayless & Chesley ("WSBC"), special counsel Capretz' law firm, Capretz and Radcliffe ("C&R"), and special counsel Johnson's law firm, Johnson & Dylewski ("J&D"). Before turning to each set of records, it is necessary to explain the methodology employed by Crane in the district court. With respect to WSBC, Crane submitted copies of the time records of Mr. Chesley, Ms. Stilz, Ms. Reardon, and Ms. McCauslin, but not the time records for WSBC's attorney Goodman, paralegal Sowell, or staff member Elsbernd because all of their time records suffer from a lack of explanatory detail. See infra at 34. Crane also attached a copy of C&R's time records. (See Footnote 5) Crane then placed a letter code in the margin next to each of the time entries that he believed was non-compensable, in whole or in part. Each letter code represented a different basis for deduction from counsel's claimed lodestar, as follows:
Letter Code Reason for Deduction
F Work on fees, including fee appeals.
PF Partial Fees: Time entry describes several tasks, including work on fees and work that does not pertain to fees.
?F Probably fees, in light of date work was performed and surrounding context, although lack of adequate description makes it impossible to determine with assurance.
D Description of work lacks sufficient detail to determine what the lawyer or paralegal was doing and/or how the work pertained to the litigation.
PD Time entry refers to several tasks, some of which are adequately described and others of which are not.
C Clerical work (e.g., copying, faxing, and delivering documents), improperly billed at substantial hourly rates.
X Appears that work is not germane to the class action.
PX Time entry includes some work that does not appear germane to the class action.
In assigning codes and calculating proposed deductions, Crane attempted to err on the side of compensability, even though the lawyers and paralegals at WSBC and C&R did not separately delineate the amount of work done on each task. Rather, for each day the lawyer or paralegal had done work, there was only one time entry. That entry described what had been done and set forth the aggregate number of hours worked in that day, without stating the amount of time work on each task. This was true even where there were many tasks and they were unrelated to each other (e.g., work on fee appeal and discussing valve research with the Supervisory Panel). In these instances, Crane made what were, in his view, conservative assumptions about the number of hours spent on non-compensable work.
For instance, if, in a given day, a lawyer had spent five hours doing legal research and brief writing on the prior fee appeal in this Court, but also spoke to a class member on the phone, Crane assumed that the former tasks took a majority of the time and assigned hours accordingly. In cases where Crane maintained that the task was partially non-compensable (codes "PF," "PD," and "PX"), he assumed that one-half the claimed time was non-compensable. In those instances, based on the description, although it appeared that more than half of the time fell into the non-compensable category, Crane only excluded half the time. Crane also submitted summaries of deductions for WSBC (Tables Ia-Id) and R&D (Table II). See R. 1006, at Exh. B, Crane Response.
1. Time Records Of Waite, Schneider, Bayless & Chesley.
a. Deduction For Work On Fee Matters. As noted earlier, WSBC sought fees for a large amount of work to obtain a $33 million fee award before the district court and, after that request was denied, to have that award overturned by this Court. This work is not compensable for two reasons. First, because that work seeks to diminish, rather than to preserve or enhance, the common fund, it is unjust to award a fee for seeking fees where the payment is to be made directly from the clients' recoveries. This is precisely the conclusion reached by the Third Circuit when presented with the identical questions:
Services performed in connection with the fee application are necessary to the attorney's recovery. They benefit him, for without them, the attorney cannot...recover. But such services do not benefit the fund--they do not create, increase, protect or preserve it. Accordingly and in the circumstances of this case, we accept the prevailing rule for litigation involving the competing interests of claimants to a common fund. ... There being no benefit to the fund from services performed by appellees in connection with their fee application, there should be no attorneys' fee award from the fund for those services.
Lindy, 540 F.2d at 111 (emphasis in original); accord City of Detroit v. Grinnell Corp., 560 F.2d 1093, 1102 (2d Cir. 1977).
But there is an even more compelling reason why "fees on fees" should not be awarded in this case. If counsel had prevailed in obtaining their claimed $33 million fee, their work would have been its own reward, and they would hardly have needed an additional fee on top of that. But because counsel lost in their quest to have the district court's much smaller award overturned by this Court, they should not be awarded a fee under those circumstances, since attorney's fees may never be awarded to counsel who have not prevailed. See Hensley v. Eckerhart, 461 U.S. 424, 435-37 (1983).
In the court below, Crane determined--and WSBC did not dispute--that lawyers and paralegals at WSBC spent at least 330.4 hours working on fee issues. The total lodestar for these hours was $75,760.63, which the district court awarded, but should have deducted from counsel's award. (See Footnote 6)
b. Deduction For Inadequately Described Work. Significant amounts of work are described in such general terms as to make their compensability impossible to determine. Crane's analysis showed that many time entries stated only that a conversation took place or that a letter was written, in many cases without even identifying the party with whom the conversation was had or to whom the letter was sent. In all instances, there is no way of knowing what the conversation or letter was about. In short, it is impossible to tell whether the time was reasonably spent on implementing the settlement, whether it was duplicative of other work, or was otherwise non-compensable under the law of this Circuit. See United Slate, Tile & Composition v. G & M Roofing and Sheet Metal Co., 732 F.2d 495, 502 n.2 (6th Cir. 1984)("documentation offered in support of the hours must be of sufficient detail and probative value to enable the court to determine with a high degree of certainty that such hours were actually and reasonably expended in the prosecution of the litigation").
Nonetheless, in situations where the description was lacking, but the surrounding entries indicate what the work entailed, Crane did not seek a deduction for lack of adequate detail. Moreover, in cases where the entry contained detail for some tasks, but not the majority of them, he coded the entry "PD," and generously assumed that only half of the time should be counted as lacking in detail. In addition, despite the lack of detail, we acknowledge that, in many cases, the work performed would have been compensable, at least in part. Since it was impossible to tell which of the entries fall into this category, Crane simply suggested an across-the-board 20% reduction of the items that were lacking detail.
Although this approach runs the risk of permitting counsel to obtain fees for non-compensable work, it promotes efficiency and has therefore gained this Court's approval in the past. See Kelley v. Metropolitan County Bd. of Educ., 773 F.2d 677, 683-84 (6th Cir. 1985), cert. denied, 474 U.S. 1083 (1986); Northcross, 611 F.2d at 636-37; Oliver v. Kalamazoo Bd. of Educ., 576 F.2d 714, 715 n.2 (6th Cir. 1978). The lodestar for these items--coded "D" or "PD" for lack of description--is $44,575.63. See R. 1006, Exh. 1, Crane Response. In addition, as noted earlier, all of the time for attorney Goodman, paralegal Sowell, and staff member Elsbernd fall into this category--a lodestar of an additional $12,522.50--for a total lodestar of $57,098.13. Crane recommended a deduction in class counsel's fee of 20% of that amount, or $11,419.63. See id.
c. Deduction for Clerical Work. WSBC's paralegals spent substantial numbers of hours doing purely clerical work (coded "C"). See R. 1006, at Exh. 1, Crane Response. This work included copying, faxing, mailing, and delivering documents to the Court, the Trustees, and other offices. As Crane pointed out below, these tasks constituted overhead costs that are not separately compensable over and above the attorneys' lodestar. See Mississippi State Chapter, Operation PUSH v. Mabus, 788 F. Supp. 1406 (N.D. Miss. 1992); Martin v. Mabus, 734 F. Supp. 1216, 1226 (S.D. Miss. 1990)(clerical tasks never separately compensable, even at a minimal rate, even if performed by a lawyer); Held v. Bruner, 496 F. Supp. 93, 100 (D.N.J. 1980); see also Honorable J. Thomas Greene, How to Be Effective and Contented in the Law, 162 F.R.D. 375, 378-79 & n.4 (1995)(decrying attempts by attorneys to charge clients with overhead costs already contained in hourly billings). Although class counsel noted on his fee application that he was not seeking fees for secretarial time (R. 1001, Chesley Tab (Summary Chart), 1996 Fee App.), he nevertheless was awarded compensation at substantial hourly rates for things that secretaries often do--such as copying and faxing--simply because they were performed by someone who has a title other than "secretary." In any event, the class members surely should not have been taxed at $60 per hour--the rate WSBC's paralegals claim--for copying or walking a document to the Trustees' office. Cf. Bowling, 927 F. Supp. at 1042 n.14 ("Class counsel's 8410.25 hours in 'staff' time, for instance, may well not be compensable at all and certainly would not be billable at the rates claimed in the application").
As with the other categories, Crane was conservative in figuring the amount of time spent on clerical tasks. In cases where the clerical work appeared to be a small portion of the time entry, no deduction was made. See, e.g., R. 1006, at Exh. 1, Crane Response (Reardon, 8/23/95; McCauslin, 12/7/95). In other instances, where the time entry contains both clerical and non-clerical tasks (e.g., id. at Exh. 1 (McCauslin, 12/1/95, 1/31/96)), Crane made relatively small deductions based on the number and kind of tasks listed, erring on the side of compensability. All told, Crane identified 71.25 hours of clerical work, for a total lodestar deduction of $2,900.00. See id. at Exh. 3 (Tables Ic and Id).
d. Duplication of Effort. This Court has previously expressed its concern about duplication of effort and made clear that it warrants a reduction in fees. See Oliver, 576 F.2d at 715 n.2. In particular, the time records of Mr. Chesley and Ms. Stilz reflect that, on many occasions, Ms. Stilz conducted legal research and prepared briefs and other documents, and Mr. Chesley was required thereafter to have extensive "conferences" with Ms. Stilz, presumably to familiarize himself with the issue. See, e.g., R. 1006, at Exh. 1, Crane Response (Chesley, 10/26/95, 11/1/95, 11/22/95, 1/15/96, 1/26/96, 2/9/96, 5/1/96).
One example of this problem is illustrative. On July 30, 1996, Ms. Stilz began work in preparation for oral argument in the Sixth Circuit regarding this Court's denial of the Pennsylvania Class Objectors' motion to intervene (Appeal No. 95-4054). Through August 13, 1996, Ms. Stilz spent approximately 60 hours preparing for the argument. But Ms. Stilz, who had written the brief (see various entries from 2/5/96 through 3/6/96) and done the extensive preparation for argument, did not argue before the Sixth Circuit. Rather, because Mr. Chesley argued the appeal, he had to meet with Ms. Stilz for more than a dozen hours and incurred substantial other preparation time as well. See R. 1006, at Exh. 1, Crane Response (Chesley, 8/1/96 through 8/13/96). It is, of course, counsel's prerogative to have one lawyer do the research, writing, and other preparation, while another lawyer does the courtroom appearances, but the class members should not be taxed for such duplication.
This Court has held that it is preferable to employ an across-the-board reduction rather than reviewing each of the hundreds of time entries. See Oliver, 576 F.2d 714; Northcross, 611 F.2d at 636-37. Therefore, Crane recommended below that, after making deductions for other non-compensable items, the district court should have deducted an additional 20% from Mr. Chesley's lodestar for duplication of effort.
2. The Time Records Of Capretz & Radcliffe.
C&R has appeared in this case through special counsel James Capretz. Several problems pervade C&R's claim for fees. See R. 1006, at Exh. 3 (Table II), Crane Response.
a. Work On Fee Matters. C&R logged a considerable number of hours trying to obtain its large fee request in the district court. Thereafter, although the firm apparently had little or no role drafting either the motion for reconsideration in the district court or the appellate briefs (which were drafted by WSBC), C&R still logged a considerable number of hours on fee matters. All together, C&R claimed 187.05 hours (codes "F" or "PF")--or nearly 40% of all C&R hours claimed--for a lodestar of $49,618.75, which should have been deducted from the overall fee for the reasons described above with regard to WSBC. See R. 1006, at Exh. 3, Crane Response.
There were additional reasons, beyond those applicable to WSBC, that C&R should not have been awarded compensation for seeking fees from the common fund. First, as noted above, C&R's work on fee matters was largely duplicative of the work done by WSBC. Second, some of the claimed hours apparently concern Mr. Capretz' negotiations with his former law partner, Mr. Kasdan, or with WSBC, on how the fee would be divided among the various lawyers. See, e.g., R. 1006, at Exh. 2, Crane Response (time entries for 8/2/95/, 9/27/95, 9/28/95, 5/29/96, 6/19/96, 8/19/96). The class should not pay for that activity. Third, C&R charged for significant time spent seeking out one or more experts regarding fees. See id. (entries for 8/25/95, 8/28/95, 8/30/95, 9/7/95, 9/8/95). As far as the record reveals, no expert testimony or advice was brought to bear on C&R's fee application, and it was inappropriate for C&R to be paid for this time out of the class members' recoveries. Finally, Mr. Capretz spent a large amount of time from September 4-13, 1995 in preparation for the September 14, 1995 fee hearing. This part of the fee request is particularly puzzling since Mr. Capretz played a small role in the fee hearing, speaking only briefly. See R. 677, at 78-88, Fee Hearing Transcript.
b. Deduction For Inadequately Described Work. As with WSBC, C&R has described its work in such vague terms as to make it impossible in many instances to determine what the firm has done. The total lodestar for these items comes to $40,008.25. See R. 1006, at Exh 3 (Table II), Crane Response. Crane recommended below a 30% across-the-board deduction, reducing C&R's lodestar by $12,002.48. Although this percentage reduction was greater than the 20% reduction recommended for WSBC, Crane urged its adoption because C&R did not have principal responsibility for implementing the settlement. In many instances, for instance, C&R charged the class for review of miscellaneous pleadings and documents, many of which probably have nothing to do with Mr. Capretz' role as special counsel, which is principally to help establish new valve replacement guidelines. See, e.g., R. 1006, at Exh. 2, Crane Response (time entries for 11/14/95, 11/21/95, 3/12/96). At the very least, the time entries lacking in detail did not establish that the matters were germane to Mr. Capretz' special counsel role, and yet, by making the full $625,000 award, the district court effectively awarded C&R fees for these activities.
c. Matters Involving Shiley Heart Valve Issues, But Not Directly Related To The Class Action. Mr. Capretz has worked, and continues to work, on a significant number of matters involving the Shiley heart valve that are not directly related to the class action, including individual personal-injury suits against the defendants. In the district court, Crane pointed out that some of the work listed by C&R appeared to relate to matters other than those arising out of this class action, and C&R did not argue otherwise. See R. 1006, Exh. 2, Crane Response (code "X"). For instance, several entries (e.g., id. 5/21/96, 5/22/96, 5/23/96) relate to Mr. Capretz' work with amicus Public Citizen regarding how to update the knowledge of emergency room personnel about the signs and symptoms of imminent valve fracture. Although this work is important and may help heart valve patients, it does not relate directly to this class action.
Another example is the time spent reviewing certain pleadings filed by special counsel Lewis Saul. E.g., id. (time entry of 5/14/96). Although those pleadings were filed in the class action (see R. 865, 866, 879), they concerned a dispute between Mr. Saul and Mr. Chesley over the meaning of their fee-sharing agreement, which obviously has nothing to do with C&R, let alone its service to the class.
In total, matters that appear non-germane to the class action comprise 16.15 hours, for a lodestar of $3,981.25, which should have been deducted from counsel's overall award. See id. at Exh. 2 (code "X").
3. The Time Records Of Johnson & Dylewski.
As Crane noted in the district court, the time records of J&D differ markedly from those of WSBC and C&R. First, they pertain almost entirely to Mr. Johnson's special counsel role, which is to identify high-risk Shiley heart valves. Thus, J&D's time sheets reflect a large amount of work reviewing Shiley's manufacturing records to determine whether certain manufacturing variables, such as the shop order from which a particular valve was produced, are related to risk of fracture. Second, the time records themselves are very detailed; there is no doubt what Mr. Johnson and his colleagues were working on with respect to each matter reported. Third, Mr. Johnson excluded the overhead costs of his staff. See R. 1001, Johnson Tab, at 15, 1996 Fee App. Finally, J&D is not, as a general matter, requesting compensation for his time spent to obtain an enhanced fee. (See Footnote 7)
4. Counsel's Expense Request.
Crane explained below that, in general, counsel's expense request was reasonable. However, the district court erred both in granting the full expense request and in suggesting that Crane had not opposed it. In fact, Crane specifically argued that neither class counsel nor special counsel should have been reimbursed for expenses related to non-compensable fee categories, such as those relating to enhancing counsel's fee recovery or to work not germane to the class action. Crane also noted, however, that, in most cases, it was impossible to determine which expenses were compensable and which were not because many of them were not itemized in sufficient detail.
Crane also pointed out that counsel's travel and other expenses for the September 1995 fee hearing and for the New York meeting to try to settle the fee dispute (see supra note 7) are identifiable and should have been denied. Crane noted other expenses, such as WSBC's $105 filing fee to enable class counsel to challenge the district court's fee award, which were identifiable and should have been deducted. These expenses included some of the lodging costs for Messr's Capretz and Johnson which were exorbitant. For instance, Mr. Capretz' hotel rooms in Cincinnati ranged from $162.12 to $217.00 per night (see R. 1001, Capretz Tab, 1996 Fee App., entries for 10/3/95 and 10/27/95), while Mr. Johnson spent $384.57 for his one night stay in Cincinnati on 6/13/96. See id. (Johnson Tab, at 48 (hotel and "misc. expenses")). Compare R. 1003, at 5, Conditional Application For An Award of Attorney's Fees and Expenses of Counsel For Class Members Crane, et al. (one night Cincinnati hotel expense of $48.48). Out-of-town counsel are entitled to stay where they choose, but they should only be able to tax the class members for a reasonable amount.
Moreover, as with C&R's time records, some of C&R's expenses do not appear to be related to the class action. E.g. R. 1001, Capretz Tab, 1996 Fee App. (entry for 6/18/96 regarding $121.99 for "taxi and misc expenses in Washington"). C&R also requested reimbursement for a large number of Federal Express mailings and other deliveries that appear to relate to the fee matters. On the other hand, other expenses, such as copying and postage, cannot so easily be separated from the overall request.
In light of these difficulties, we asked the district court to determine which categories of fees are compensable and which are not and, thereafter, to direct counsel to review their expense records and resubmit them with good-faith estimates of expense deductions tailored to the court's guidelines. Crane believes that this procedure would allow the district court to make a reasoned expense decision without having to determine the purpose of each item. However, the court did not do so, and did not even deny reimbursement for obvious overcharges, such as those not directly related to the class action.
* * *
The foregoing analysis of counsel's fee and expense request more than amply demonstrates that the district court abused its discretion in awarding the full $625,000 fee and all of counsel's claimed expenses. These awards should be reversed and the case remanded for a reevaluation based on the quantity and nature of the services performed and of the expenses incurred by counsel.
- The district court also awarded all of the expenses requested, again without any inquiry into the nature of those expenses, in part on the (incorrect) assumption that Crane had not objected to the amount requested. Id.
- The fact that the fees issue was transferred from Judge Spiegel to Judge Nangle and then back to Judge Spiegel is all the more reason for the district court to have adhered to Judge Nangle's decision, absent very compelling circumstances. The litigants and the public must be confident that the rule of law will not depend on the identity of the judge. See Williams v. Comm'r, 1 F.3d 502, 503 (7th Cir. 1993)("Litigants have a right to expect that a change in judge will not mean going back to square one. The second judge may alter previous rulings if new information convinces him that they are incorrect, but he is not free to do so even [where] the time for reconsideration has not expired, merely because he has a different view of the law or facts from the first judge"); cf. Moses v. Business Card Express, Inc., 929 F.2d 1131, 1137 (6th Cir. 1991).
- Specifically, Waite, Schneider, Bayless & Chesley sought fees for work performed from 8/16/95 through 10/15/96, special counsel Capretz sought fees for work performed from 7/30/95 through 10/15/96, and special counsel Johnson sought fees for work performed from 8/16/95 through 10/15/96.
- Judge Nangle held that, if in any year there is a very large amount of work, the district court has the discretion to lift the cap. Bowling, 927 F. Supp. at 1044. Although the need for such an adjustment in future years is "highly unlikely," id., we agree that the court does have such discretion where counsel's compensable lodestar exceeds the $625,000. If that ever were to occur, the court might also want to weigh in the balance the fact that counsel's original $10.25 million award was more than double their lodestar which, as the settlement Trustees put it, was "to Counsel's clear advantage." R. 1029, at 4, Report and Recommendation of Special Masters/Trustees on Application for Attorneys' Fees and Expenses.
- Crane did not, however, attach J&D's time records because, as a general matter, that firm's time was, in Crane's view, fully compensable. See infra at 40.
- Under Judge Nangle's Order of September 5, 1996 (R. 650, at 3), counsel were not permitted to charge for time spent reaching stipulations on fees issues. However, Mr. Chesley and Ms. Stilz included approximately 1.5 and 23 hours, respectively, working on those stipulations. These entries were coded as "S/F" in Crane's analysis of counsel's time records and included in his suggested deductions for non-compensable fee-related matters. See R. 1006, at Exh. 1, Crane Response.
- Crane suggested only one deduction for J&D, for time spent by Mr. Johnson to attend an October 1996 meeting in New York City, in which he, among others, attempted to negotiate a solution to the fee appeals with the defendants. Since any "solution" would necessarily have involved additional payments to counsel, not a benefit to counsel's clients, fees should not have been awarded for the time spent on the New York trip. Mr. Johnson expended 17 hours, or a lodestar of $4,250, which should have been deducted from his award. See R. 1001, 1996 Fee App. (Johnson Time Records, 10/14-10/15/96).
For the reasons stated above, the decision of the district court should be reversed and the case remanded for further consideration of counsel's application for fees and expenses.
Alan B. Morrison
Public Citizen Litigation Group
1600 20th Street, N.W.
Washington, D.C. 20009
Attorneys for Jeffrey Crane, et al.
June 10, 1997