111 F.3d 220 (1st Cir. 1997), 95-2285, In re San Juan Dupont Plaza Hotel Fire Litigation

Docket Nº:95-2285, 96-1142.
Citation:111 F.3d 220
Party Name:In re SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION. Pasquale MASSARO, et al., Appellants, v. Stanley CHESLEY, et al., Appellees. In re SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION. Richard BIEDER, et al., Appellants, v. Stanley CHESLEY, et al., Appellees.
Case Date:April 22, 1997
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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111 F.3d 220 (1st Cir. 1997)


Pasquale MASSARO, et al., Appellants,


Stanley CHESLEY, et al., Appellees.


Richard BIEDER, et al., Appellants,


Stanley CHESLEY, et al., Appellees.

Nos. 95-2285, 96-1142.

United States Court of Appeals, First Circuit

April 22, 1997

Argued Aug. 1, 1996.

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[Copyrighted Material Omitted]

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Judith Resnik, New York City, with whom Dennis E. Curtis, Richard A. Bieder, Koskoff, Koskoff & Bieder and Jose E. Fernandez-Sein, were on brief, for appellants.

Will Kemp, Las Vegas, NV, with whom Harrison, Kemp & Jones, Chtd., was on brief, for appellees.

Before SELYA, CYR and LYNCH, Circuit Judges.

CYR, Circuit Judge.

Plaintiffs and their counsel appeal from a district court order awarding the Plaintiffs' Steering Committee ("the PSC") approximately $10,670,000 for costs incurred in representing plaintiffs in this mass-tort litigation. We affirm the district court order in substantial part and direct appellees to remit $1,023,903 ($913,503 in PSC "expert" fees, and $110,400 in photocopying charges).



Ninety-seven people perished in a tragic New Year's Eve fire at the San Juan Dupont

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Plaza Hotel on December 31, 1986, and many others sustained serious personal injuries and property losses. After thousands of individual plaintiffs filed hundreds of claims against a host of defendants in many different jurisdictions ("multidistrict litigation" or "MDL"), the Judicial Panel on Multidistrict Litigation consolidated all cases for trial in the United States District Court for the District of Puerto Rico (Acosta, J.), see 28 U.S.C. § 1407.

As most plaintiffs had already retained their own counsel (hereinafter: "individually retained plaintiffs' attorneys" or "IRPAs"), the district court recognized the need to coordinate their representation through the PSC. Eventually comprised of eleven attorneys with expertise in mass-tort litigation, the PSC served as plaintiffs' lead counsel, responsible for coordinating discovery, settlement negotiations and, if necessary, trial matters common to all plaintiffs. The eleven PSC members nonetheless retained their respective roles as IRPAs, directly representing approximately seventy percent of the individual plaintiffs. The IRPAs, on the other hand, were to focus their efforts on litigation tasks idiosyncratic to their respective clients' cases.

  1. Pretrial Case-Management Orders

    In two pretrial orders, the district court directed plaintiffs, who would derive common benefit from PSC services, to pay PSC attorney fees and costs from the common fund ultimately recovered in the litigation. See Pretrial Order No. 127 (Dec. 2, 1988); Pretrial Order No. 2 (Mar. 23, 1987). At the time, the district court tentatively proposed to limit the PSC to a combined attorney fee/cost award not exceeding ten percent of the eventual common fund, see Pretrial Order No. 127, at 48, which ultimately approximated $220 million. The district court established the following cost-submission and reimbursement guidelines:

    [A]ssessments 2 will be deposited in a fund that will defray the reasonable expenses of the PSC in the performance of its duties. The PSC shall maintain a careful statement of account on the fund, that is, prepare and keep accurate, contemporaneous, detailed records of the receipts, deposits, accumulated interest and subsequent disbursements. The fund shall be used only to make disbursements (whether directly to creditors or to reimburse the PSC) for expenses incurred for the benefit of all plaintiffs. Any disbursements made for the benefit of a particular plaintiff represented by a member of the PSC shall be the sole responsibility of the plaintiff in question.

    The PSC shall be authorized to periodically expend monies from the fund as needed to defray the necessary "hard" costs of its work, such as office overhead, staff salaries, warehousing, duplication, expert fees, deposition costs, etc. The members of the PSC shall be reimbursed from time to time for the "hard" expenses of the PSC-related work incurred by them or their employees/appointees, provided they submit to the PSC careful, contemporaneous, detailed records of their expenditures.

    "Soft" costs such as travel, meals, transportation, lodging, etc., shall be borne by the individual PSC members who shall be reimbursed at the conclusion of this litigation or as otherwise provided by the Court. All persons interested in reimbursement, particularly members of the PSC, must keep careful, contemporaneous, detailed records of individual expenses. Only reasonable and necessary expenses will be reimbursed. For example, airplane/transportation expenses should be at economical rates, not first class; and hotel accommodations/meals should be moderate, not deluxe, etc. Reimbursements are conditioned, of course, on the proper verification of expenses.

    The PSC and/or its members, as pertinent, shall submit to the Court for its approval a statement for reimbursable "hard" expenses and another for "soft" expenses as well as statements of account

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    beginning on August 1, 1987 and every sixty (60) days thereafter.

    Id. at 44-45 (emphasis added). See also Pretrial Order No. 2, at 14.

  2. The PSC-Office Cost Regimen

    Although individual PSC members performed some PSC litigation tasks through their individual law firms, the district court also authorized the PSC to recover its direct costs in establishing, staffing, and operating a centralized PSC Office (hereinafter: "PSC-Office costs"). Further, the PSC bylaws required prior approval, by five PSC members, for any PSC-office cost reimbursement above $500, as well as payment of such costs by PSC check.

    In March 1987, certified public accountant ("CPA") Donald Kevane was retained to review and submit to the PSC monthly reports summarizing PSC-office costs. In February 1991, the PSC submitted its final report to the district court, claiming $6,956,368 in PSC-office costs attributable to Phases I and II of the litigation. 3

  3. The PSC-Member Cost Regimen

    Similarly, the district court authorized reimbursements of costs incurred by the eleven individual PSC members in perform ing PSC litigation tasks (hereinafter: "PSC-member costs"), as distinguished from their respective duties as IRPAs. Every sixty days, the PSC submitted, under seal and "for [court] approval," a consolidated report summarizing each PSC member's individual "hard" and "soft" costs. (Emphasis added.) 4

    In September 1989, the district court appointed C. Terry Raben, a CPA, to "review the [PSC-member cost] information supplied to ... date to ensure it is complete, accurate and contemporaneous [,] as well as to organize the reports before the sheer number of them unduly complicates any reasonable accounting procedures." Order No. 222 (docket No. 12671, entered under seal Sept. 15, 1989). Raben previously had performed comparable cost oversight responsibilities in another mass-tort litigation. See generally In re MGM Grand Hotel Fire Litig., 660 F.Supp. 522 (D.Nev.1987) (or "the MGM case"). The district court directed Raben to scrutinize the PSC files for compliance with the criteria in Pretrial Order No. 127, supra, to obtain any additional documentation deemed appropriate, and submit findings to the court.

    In November 1990, almost four years into these proceedings, the PSC became concerned that outside accountants like Raben, who were not attorneys and lacked intimate knowledge of the PSC's litigation responsibilities and inner workings, might not adequately appreciate whether PSC-member cost claims met the compliance criteria prescribed in Pretrial Order No. 127. Accordingly, the PSC directed Monita Sterling, a paralegal for a PSC-member law firm with prior exposure to PSC litigation tasks, to review each PSC-member cost claim independently to determine whether the expenditures were "necessary" to legitimate PSC litigation tasks, "reasonable" in amount, and not duplicative of other PSC-member cost claims. Sterling thereafter reviewed "every receipt or other piece of documentation submitted," noting

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    each questionable claim. 5 Sterling submitted her reports and supporting documentation to Adamina Soto, a CPA who reviewed the Sterling report and randomly checked its underlying documentation, then contacted PSC members about problem items and requested further documentation. Soto eventually disallowed $207,475 in costs and submitted her reports to Raben.

    Raben submitted three final reports to the district court, covering PSC-member cost claims through January 31, 1991. 6 He disallowed an additional $138,569 of the total $3,847,233 in claimed expenditures. The district court approved each Raben report as submitted. See In re San Juan Dupont Plaza Hotel Fire Litig., 768 F.Supp. 912, 934 (D.P.R.1991), vacated on other grounds, 982 F.2d 603 (1st Cir.1992). PSC members ultimately recovered $3,708,665. Id.

  4. Attorney Fee/Cost Rulings

    In February 1991, the PSC submitted its final application for cost reimbursements, attaching the report previously prepared by Donald Kevane and requesting $6,956,368 in PSC-office costs attributable to Phases I and II. See supra at p. 224. Three months later, the district court abandoned its earlier tentative proposal, see supra at p. 223, to limit the PSC's combined attorney fee/cost award to ten percent of the common fund. Thereafter, the court approved the entire PSC fee/cost application. See Order No. 346 (June 21, 1991).

    On appeal, we vacated the fee/cost award for failure to afford the plaintiffs and IRPAs a meaningful opportunity to challenge the PSC attorney fee application on the...

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