Archie COOK, individually and on behalf of a class of
persons similarly situated, Plaintiff-Appellant,
Cross-Appellee,
and
Charles Pressman, Charles Pressman, P.C., Robin B. Potter,
Potter & Schaffner, P.C., Joel M. Hellman, Stephen
G. Seliger, Stephen G. Seliger, LTD.,
Petitioners-Appellants, Cross-Appellees,
v.
Ralph NIEDERT, John Monroe, John Navigato, et al.,
Defendants-Appellees,
and
Gerald Zero, John McCormick, Robert Presak, individually and
as Trustees of Local 705 International Brotherhood
of Teamsters Health and Welfare Fund, et
al., Defendants-Appellees,
Cross-Appellants.
TEAMSTERS LOCAL UNION 705, Truck Drivers, Oil Drivers,
Filing Station and Platform Worker's Union, et
al., Plaintiffs, Cross-Appellants,
v.
Daniel C. ("Danny") LIGUROTIS; William D. Delessandro, et
al., Defendants.
Nos. 97-1666, 97-1667 and 97-1584.
United States Court of Appeals,
Seventh Circuit.
Argued Oct. 30, 1997.
Decided April 24, 1998.
Joel M. Hellman (argued), Chicago, IL, Robin B. Potter, Potter & Schaffner, Chicago, IL, Charles Pressman, Chicago, IL, for Plaintiff-Appellant in Nos. 97-1584, 97-1667.
Stephen G. Seliger, Joel M. Hellman (argued), Chicago, IL, Robin B. Potter, Potter & Schaffner, Chicago, IL, Charles Pressman, Chicago, IL, for Plaintiff-Appellant in No. 97-1666.
Sherman Carmell, Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, Barbara J. Hillman (argued), Cornfield & Feldman, Chicago, IL, James P. Daley, David M. Novak, Melissa A. Siebert, Robert R. Brown, Bell, Boyd & Lloyd, Chicago, IL, for Defendant-Appellee McCarron in No. 97-1584.
Sherman Carmell, Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, James P. Daley, David M. Novak, Melissa A. Siebert, Robert R. Brown, Bell, Boyd & Lloyd, Chicago, IL, James R. Cox, Wilmette, IL, for Defendant-Appellee Bridge.
Sherman Carmell, Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, James P. Daley, David M. Novak, Melissa A. Siebert, Robert R. Brown, Bell, Boyd & Lloyd, Chicago, IL, for Defendant-Appellee Siewert.
John W. Dondanville, Michael A. Pollard, Lisa S. Brogan, Adriane W. Burkland, Baker & McKenzie, Chicago, IL, Sherman Carmell, Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, for Defendant-Appellee Ligurotis in No. 97-1584.
Sherman Carmell, Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, Thomas D. Allison, Michael H. Slutsky, Allison, Slutsky & Kennedy, Chicago, IL, for Defendant-Appellee Zero in No. 97-1584.
James L. Coghlan, John A. Kukankos, Coghlan, Joyce, Kukankos & D'Arcy, Chicago, IL, Thomas D. Allison, Allison, Slutsky & Kennedy, Chicago, IL, for Defendant-Appellee Local 705 International Brotherhood of Teamsters Health & Welfare Fund.
Charles Pressman, Chicago, IL, pro se.
Robin B. Potter, Potter & Schaffner, Chicago, IL, pro se.
Joel M. Hellman, Chicago, IL, pro se.
Stephen G. Seliger, Chicago, IL, pro se.
Matthew F. Kennelly, James R. Streicker, Cotsirilos, Stephenson, Tighe & Streicker, Chicago, IL, for Defendant-Appellee D & K Vascular Labs, Incorporated.
David E. Morgans, Williams & Montgomery, Chicago, IL, for Defendant-Appellee Carmell.
John W. Dondanville, Michael A. Pollard, Baker & McKenzie, Chicago, IL, for Defendant-Appellee in No. 97-1666.
James P. Daley, David M. Novak, Bell, Boyd & Lloyd, Chicago, IL, for Defendant-Appellee McCarron in No. 97-1666.
Adrianne E. Hampo, Carmell, Charone, Widmer, Mathews & Moss, Chicago, IL, Earl V. Brown, Jr., International Brotherhood of Teamsters, Washington, DC, Thomas D. Allison, Allison, Slutsky & Kennedy, Chicago, IL, Thomas E. Johnson, Johnson, Jones, Snelling & Gilbert, Chicago, IL, Michael J. Passino, Lassiter, Tidwell & Hildebrand, Nashville, TN, for Defendant-Appellant Zero in No. 97-1666.
James L. Coghlan, Coghlan, Joyce, Kukankos & D'Arcy, Chicago, IL, Michael H. Slutsky, Allison, Slutsky & Kennedy, Chicago, IL, Thomas E. Johnson, Jeffrey B. Gilbert, Johnson, Jones, Snelling & Gilbert, Chicago, IL, Michael J. Passino, Lassiter, Tidwell & Hildebrand, Nashville, TN, for Defendant-Appellant Truck Drivers, Oil Drivers, Filling Station and Platform Workers' Union Local 705.
Earl V. Brown, Jr., International Brotherhood of Teamsters, Washington, DC, Michael H. Slutsky, Allison, Slutsky & Kennedy, Chicago, IL, Thomas E. Johnson, Johnson, Jones, Snelling & Gilbert, Chicago, IL, Michael J. Passino, Lassiter, Tidwell & Hildebrand, Nashville, TN, for Defendants-Appellants Burke and Persak.
Barbara J. Hillman (argued), Cornfield & Feldman, Chicago, IL, Earl V. Brown, Jr., International Brotherhood of Teamsters, Washington, DC, Michael H. Slutsky, Allison, Slutsky & Kennedy, Chicago, IL, Thomas E. Johnson, Johnson, Jones, Snelling & Gilbert, Chicago, IL, Michael J. Passino, Lassiter, Tidwell & Hildebrand, Nashville, TN, for Defendant-Appellant Marasovich.
Barbara J. Hillman (argued), Cornfield & Feldman, Chicago, IL, James P. Daley, David M. Novak, Robert R. Brown, Bell, Boyd & Lloyd, Chicago, IL, for Defendant-Appellant Local 705 International Brotherhood of Teamsters Health & Welfare Fund in No. 97-1667.
Before CUDAHY, COFFEY and MANION, Circuit Judges.
CUDAHY, Circuit Judge.
Members of a pension fund needed a named plaintiff and legal representation to combat fund mismanagement. Archie Cook, the named plaintiff, needed an incentive to bring the suit, and the attorneys he ultimately retained needed a reasonable fee for their services. One might have thought that members of the pension fund and Cook's attorneys would be satisfied with the result in the district court. The pension fund recovered over $14 million and underwent substantial structural reforms, Cook received a $25,000 incentive award, and the attorneys obtained more than $2 million for approximately 5,900 hours of work. But apparently no one feels that he, she, or it received the benefit of the bargain, since the pension fund challenges the propriety of the incentive award and both the fund and Cook's attorneys object to the amount of attorney's fees. On appeal we affirm the district judge in all respects.
I. Background
In 1992, Archie Cook, a truck driver and participant in the Teamsters Local 705 Health and Welfare Fund, filed a class action against the Fund, the International Brotherhood of Teamsters Local 705, and the trustees of both entities. He alleged that the Fund had been mismanaged in violation of the Employee Retirement Income Security Act of 1974 (ERISA), and sought damages for the Fund of more than $20 million and structural reforms. In September 1995, Cook's attorneys advised the district judge of the possibility of settlement with the defendants' liability insurer. At Cook's request and in an effort to facilitate settlement, Judge Manning referred the case to Special Master Frank McGarr. The parties entered into a settlement agreement in January 1996, which provided that the Fund would undergo extensive structural reforms and receive a cash payment of over $13 million. Judge Manning preliminarily approved the settlement and again referred the case to Special Master McGarr, instructing him, in relevant part, to make recommended findings regarding petitions for attorney's fees and incentive awards.
In accordance with these instructions, Special Master McGarr held hearings, reviewed documents and then prepared a report for the district judge. In his report, the master concluded that Archie Cook was entitled to a $25,000 incentive award because of the time he devoted to the case and the risk he faced in bringing the suit. With respect to attorney's fees, Cook's counsel had requested $4,785,000. In evaluating this request, the special master found that contingent fee agreements in the Chicago area typically provide that attorneys will be paid between 25 and 30 percent of the amount they recover for their client. The master determined that, in light of the substantial relief obtained by Cook's counsel and the riskiness of the litigation, an appropriate fee was $4,400,000, or 30 percent of the amount recovered for the Fund.1 Although the number of hours logged by Cook's attorneys and their hourly rates were not directly relevant to the percentage-of-fund analysis, the special master noted the reasonable hourly rates for the attorneys and paralegals involved in the litigation: between $115 and $325 for the attorneys and $80 for paralegals. Attorneys had logged 4,741 hours and paralegals 1,166 hours, for a total of 5,907 hours. The master acknowledged that a "very small part" of the total hours expended may be excessive, but did not pursue the issue further. The attorney's fees and Cook's incentive award were to be paid out of the settlement escrow created for the benefit of the Fund.
When presented with the special master's report, Judge Manning agreed that Cook should receive a $25,000 incentive award. But she declined to follow the master's recommendation with respect to attorney's fees. Instead she employed the lodestar method, multiplying each attorney's and paralegal's hourly rate by the total number of hours spent on the case. To reflect the riskiness of the litigation, Judge Manning enhanced the lodestar by a multiplier of 1.5. In making these calculations, the district judge used the rates and hours that were reported by the special master. The final result was an attorney's fee of $2,121,045.40.
Both Cook's attorneys and the Fund are dissatisfied with this result. Cook's attorneys assert that Judge Manning erred in rejecting the recommendation of the special master and failed to award a reasonable fee. The Fund challenges the district judge's use of a multiplier, the hours she included in her computation, and her approval of Archie Cook's incentive award.
II. Rejection of the Special Master's Recommendation
We begin by addressing whether Judge Manning erred when she declined to follow the special master's recommendation to award a percentage of the cash recovery to Cook's attorneys. Before reaching the merits of the question, we must focus on the applicable standards of review. Because this case involves a special master and a district judge, two standards of review are relevant: the standard the district court applies to the special master's report and the standard we apply to the district court's opinion. With respect to the former, the general rule is that the district court steps into the shoes of an appellate court and employs the same standards that an appellate court uses to review a lower court opinion. See Williams v. Lane,
Cook's attorneys argue that the general rule should apply--that the district court should review the master's recommendation for an abuse of discretion, the same standard an appellate court would use to review a district court's choice between the lodestar and percentage-of-fund methods. In support of this position, Cook's attorneys cite Gottlieb v. Barry,
While not as familiar as, for example, "abuse of discretion" and "de novo," "some deference" is not a novel standard of review. See, e.g., Goluba v. School Dist. of Ripon,
Next we address the standard under which we review the district court's decision to reject the master's recommendation of methods. Perhaps we risk redundancy, because we have already stated that the district court has discretion to choose between methods. But it is worth emphasizing that we will review the district court's decision for an abuse of discretion. Typically when the district court disagrees with the special master, we bypass the district court's decision altogether and review only the report of the special master. See McDonald v. United Air Lines, Inc.,
Of course, "whether this discretion has been abused depends ... on the bounds of that discretion and the principles that guide its exercise." United States v. Taylor,
It also is clear that Judge Manning was concerned with the fact that Cook's litigation resulted in the creation of a common fund, an actuality not emphasized by the special master. In common fund cases, after attorneys obtain a settlement for the class, they petition the court for compensation from the fund that has been established for the benefit of the plaintiffs. Because the payment of attorney's fees ultimately reduces the amount of the common fund, after attorneys secure a settlement, "their role changes from one of a fiduciary for the clients to that of a claimant against the fund created for the clients' benefit." Skelton v. General Motors Corp.,
Judge Manning plainly was concerned that the percentage-of-fund method resulted in excessive compensation for Cook's attorneys. In recommending that Cook's counsel receive 30 percent of the common fund, Special Master McGarr did not consider the hourly rates that would result from such an award: roughly $750 for each attorney and paralegal on Cook's team, more than twice the usual hourly rate of the most expensive attorney involved in the litigation. We suspect that this figure weighed heavily on the mind of Judge Manning when she decided that the percentage approach was not necessarily this case's Rosetta Stone. Indeed, she expressly noted that the lodestar method "provides for greater accountability and a more careful check on excessive fees." Mem. Op. at 39 (citing Harman,
This is not a case like Gottlieb, where the district court abused its discretion by rejecting the master's recommendation of the percentage-of-fund method "for reasons largely unrelated to the particular circumstances of [the] case."
III. The District Court's Choice of the Lodestar and the Resulting Award
Our analysis cannot end here, however. Cook's attorneys argue that even if Judge Manning had the discretion to reject Special Master McGarr's recommendation, her choice of the lodestar was nonetheless an abuse of discretion. First they contend that Judge Manning did not consider the merits of the percentage-of-fund approach, because she erroneously believed that the lodestar method applied to common fund cases as a matter of law. And it is true that the district judge's opinion includes an unfortunate sentence: "[A]s a matter of law, we find the percentage method to be inapplicable to this case as it defeats the whole purpose of attempting to make the plaintiffs whole." Mem. Op. at 39. But the bulk of the opinion manifestly demonstrates that the judge understood the relevant law. She explained at the outset of her fee analysis that "both the lodestar approach and the percentage approach may be appropriate in the determination of attorney's fee awards" and that "[t]he decision of which method to employ remains within the discretion of the district court." Id. at 38 (citing Florin v. Nationsbank of Ga.,
Cook's attorneys also object to Judge Manning's use of the lodestar on the ground that, in this particular case, it failed to generate a reasonable fee. In In re Continental, we explained that "the object in awarding a reasonable attorney's fee ... is to give the lawyer what he would have gotten ... in an arm's length transaction, had one been feasible."
We have never held that a district judge must choose the method that is most prevalent in the marketplace. Indeed, such a holding would run counter to our statement that the district judge has discretion to choose between the lodestar and percentage-of-fund approaches. That we leave the matter to the district court's discretion implies that the judge may wish to consider several factors; evidence about the market's preference is only one. In Harman, we considered whether district courts should be required to utilize the percentage method in common fund cases. See
Moreover, if substantially similar results must be reached under the lodestar and percentages approaches, then Harman might as well have eliminated the lodestar altogether. Judge Manning's selection of a 1.5 multiplier is at the root of Cook's attorneys' objection to the fee award; presumably they believe that a multiplier of about 3 would have been more appropriate. The choice of a multiplier, however, is left to the district court's discretion, see id. at 976, and whether Judge Manning has abused this discretion depends upon "the principles that guide its exercise." Taylor,
Cook's counsel rely heavily on In re Continental,
For its part, the Fund challenges the district court's authority to employ any sort of multiplier, even one of 1.5. But as the Fund recognizes, in Florin,
The Fund argues that Fleischmann necessitates that we overrule Florin. In Florin we held that in ERISA common fund cases, the award of attorney's fees is made pursuant to the principles of equity, not ERISA's fee-shifting provision. See
But because the Fund's interpretation of Fleischmann is untenable, the Fund's argument cannot withstand scrutiny. A case that finds that a court cannot award attorney's fees unless authorized by statute is not the equivalent of a case that holds that a court cannot award attorney's fees according to equitable principles when the relevant statute plainly contemplates that attorney's fees will be a remedy. Moreover, even if Fleischmann could be stretched so far, its application is not absolute. Fleischmann only stated that "when a cause of action has been created by a statute which expressly provides the remedies for vindication of the cause, other remedies should not readily be implied."
Under Florin, Judge Manning's use of a multiplier was not merely permissible, but mandated, because Cook's counsel "had no sure source of compensation for their services."
Apart from the issue of the multiplier, the Fund raises an objection to Judge Manning's computation of the lodestar. Here the Fund challenges the nuts-and-bolts of the lodestar calculation, specifically, whether Judge Manning included excessive hours when she multiplied the number of hours expended by each attorney by the attorney's reasonable hourly rate. This is a question about the district court's "methodology," which is subject to de novo review. See Harman,
After review of the fee application and the district court's opinion, we believe that a remand is unwarranted. The Fund argues that too little work was done by associates, that excessive hours were logged for conferencing and after settlement offers had been made, and that the Fund was billed for time spent preparing the fee petition. Special Master McGarr found that a "very small part of the total hours expended" may have been excessive, but declined to pursue the matter further because it was not relevant to the percentage-of-fund approach. See Report at para. 83. Judge Manning noted the objections, but concluded that the hours were "representative" of the work performed by Cook's counsel. See Mem. Op. at 41. In light of this conclusion, we are disinclined to pursue the only issue raised by the Fund that might have necessitated a remand--the possibility that the lodestar included hours expended on the fee application. See Mills v. Eltra Corp.,
IV. The Incentive Award
Having resolved the issues surrounding the attorney's fees, we address the final matter raised by the Fund--the propriety of Archie Cook's $25,000 incentive award. Because a named plaintiff is an essential ingredient of any class action, an incentive award is appropriate if it is necessary to induce an individual to participate in the suit. See In re Continental,
AFFIRMED.
Notes
In addition to the over $13 million obtained through the settlement agreement, Cook's litigation resulted in Local 705 making a $1,373,957 payment to the Fund. The special master included this payment when calculating the total recovery
Fleischmann was decided before the passage of 15 U.S.C. § 1117(a), which provides that the Lanham Act authorizes attorney's fees in "exceptional cases."