Cassata v. Federal Savings and Loan Insurance Corp.

• Decision Date: 17 June 1971
• Docket Number: No. 18618.,18618.
• Citation: 445 F.2d 122
• Parties: Frank CASSATA et al., Plaintiffs-Appellees, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, a body corporate and an instrumentality of the United States, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

445 F.2d 122 (1971)

Frank CASSATA et al., Plaintiffs-Appellees, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, a body corporate and an instrumentality of the United States, Defendant-Appellant.

No. 18618.

United States Court of Appeals, Seventh Circuit.

June 17, 1971.

Thomas R. Mulroy, Robert W. Patterson, Frederic L. Hahn, Chicago, Ill., for defendant-appellant, Arthur W. Leibold, Jr., Paul E. McGraw, Washington, D. C., Hopkins, Sutter, Owen, Mulroy & Davis, Chicago, Ill., of counsel.

Alex Elson, Willard J. Lassers, Herbert Lesser, Chicago, Ill., for plaintiffs-appellees, Aaron S. Wolff, Elson, Lassers & Wolff, Chicago, Ill., of counsel.

Before HASTINGS, Senior Circuit Judge, and KILEY and KERNER, Circuit Judges.

HASTINGS, Senior Circuit Judge.

Federal Savings and Loan Insurance Corporation (FSLIC) appeals from that part of an order entered April 15, 1970 by the district court¹ assessing attorneys' fees of $16,025 against FSLIC, and from a further order entered May 27, 1970, denying a motion of FSLIC to vacate such order.

The instant appeal stems from the receivership and liquidation of Marshall Savings and Loan Association (Marshall) of Riverside, Illinois. Marshall was an Illinois corporation subject to the Illinois Savings and Loan Act.² In late 1964, Marshall became insolvent. The Illinois Director of Financial Institutions took custody of Marshall, effective December 31, 1964. A receiver was appointed April 8, 1965. On that date, Marshall was an insured institution within the meaning of Section 401(a) of the National Housing Act, 12 U.S.C.A. § 1724. As of July 31, 1969, the aggregate amount of insurance paid by FSLIC to Marshall's insured depositor members was $84,071,876.48. In addition, those members whose accounts exceeded the $10,000 federal insurance limitation received certificates of interest aggregating approximately $2,800,000.

All phases of the custodial taking of Marshall, the payment of account insurance and the proposed liquidation of Marshall's assets were extensively challenged, resulting in a series of lawsuits in both the state and federal courts.

Effective October 1, 1968, the Illinois Commissioner of Savings and Loan Associations appointed FSLIC as the successor receiver of Marshall. Pursuant thereto, FSLIC took possession of all of Marshall's assets. Subsequently, after three months of trial in a state court case involving the challenge to the custodial taking, and under the supervision of Judge Donald J. O'Brien, before whom all of the state cases dealing with Marshall were pending, the parties agreed to a plan which would terminate all of the pending litigation and result in Marshall's orderly liquidation.

As a result of this settlement plan, FSLIC³ agreed to accept, in its individual capacity, a conveyance of all of Marshall's assets. In exchange, FSLIC agreed to assume and pay in full all obligations of Marshall, including the payment of about $2,800,000 to the uninsured depositors. On September 30, 1969, the "Agreement to Settle the Marshall Litigation" was approved by the members of Marshall at a special meeting. Thereafter, Judge O'Brien and Judge Bernard M. Decker of the federal district court approved the settlement agreement and adopted it as a part of their respective orders terminating the Marshall litigation.

During the course of the Marshall litigation, on December 27, 1966, Frank Cassata and others, named as plaintiffs in the instant complaint, filed a class action in the federal district court against FSLIC to recover additional savings account insurance, claiming that FSLIC had erroneously failed to pay all insurance due them on various legal grounds. This action was prepared and filed by attorneys Elson, Lassers and Wolff and Herbert Lesser on a written contingent fee basis of not to exceed one-third of the recovery and specifically reciting that "If there is no recovery, no fees will be charged." The court ordered notice of the filing of the action, including the contingent fee arrangement, mailed to all listed members of the class. This action was not pressed in the district court while the same attorneys prosecuted another somewhat related action against FSLIC in the district court before Judge Perry. On appeal, the related matter was determined adversely to plaintiffs. Mahoney v. Federal Savings and Loan Insurance Corp., 7 Cir., 393 F.2d 156 (1968).

Thereafter, plaintiffs changed their theory of recovery in the instant case, reduced the size of the class to 34 families and filed an amended complaint. This cause was set for trial in September, 1969. As above shown, the Agreement to Settle the Marshall Litigation was approved by the members of Marshall on September 30, 1969. Since the loss for which the class in the instant case claimed additional insurance was recovered by way of the settlement, the district court properly concluded that this action had become moot and subsequently entered an order of dismissal on April 15, 1970, on plaintiffs' own motion.

Thus it is clear and undisputed that the Cassata class action was never tried, the plaintiff members of Marshall received all they claimed and their attorneys were entitled to no attorneys' fees from their clients under the contingent fee contractual arrangement with them out of the amounts received by the 34 families.

However, prior to the dismissal of the Cassata action, counsel for plaintiffs filed their subject petition for the allowance of attorneys' fees and costs to be assessed against FSLIC. They contended (1) that they had established the validity of their claim by causing the denial of an earlier motion by FSLIC to dismiss the Cassata cause; (2) that the Cassata case had caused added impetus to the Marshall settlement; and (3) that they had performed the additional service entitling them to compensation by causing FSLIC to issue new regulations concerning account insurance.

Subsequently, the merits of the petition for attorneys' fees and costs was briefed and argued by both parties. Without hearing evidence, on April 15, 1970, the district court entered findings of fact and stated conclusions of law and awarded petitioning counsel $16,025 as attorneys' fees and $421 as expenses. In substance, the fees were determined by using a rate of $50 per hour for 195.5 hours claimed to have been expended in the Cassata case and for an additional 125 hours included for their work in the Mahoney case. The district court, although finding that the attorneys could not recover from their clients, found that they were entitled to recover from FSLIC on equitable grounds, relying upon Sprague v. Ticonic Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970); and Kahan v. Rosenstiel, 3 Cir., 424 F.2d 161 (1970), cert. denied, Glen Alden Corp. v. Kahan, 398 U.S. 950, 90 S.Ct. 1870, 26 L.Ed.2d 290.

Fifteen days later, on April 29, 1970, FSLIC filed a timely motion pursuant to Rule 60(b) (4) and (6), Federal Rules of Civil Procedure, 28 U.S.C.A., to vacate that part of the order of April 15, 1970, assessing attorneys' fees against it in the amount of $1,025.⁴ This motion was predicated upon the ground of sovereign immunity in that such an award against a federal agency is void and unenforceable under 28 U.S.C.A. § 2412.⁵

The district court, after chiding defendant for waiting until such a late hour to raise this question of immunity, summarily denied the motion as being without merit. In so ruling, we have concluded...