In re High Sulfur Content Gasoline Products Liab.

• Decision Date: 04 February 2008
• Docket Number: No. 07-30384.,07-30384.
• Citation: 517 F.3d 220
• Parties: In re: HIGH SULFUR CONTENT GASOLINE PRODUCTS LIBILITY LITIGATION. Frank A. Silvestri, John P. Massicot, Silvestri & Massicot, Peter D. Derbes, Stephen B. Murray, Stephen B. Murray, Jr., Murray Law Firm, Carroll Farmer, Appellants, v. John W. (Don) Barrett, Richard J. Arsenault, Walter C. Dumas, Patrick E. Geraghty, Ben Barnow, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

517 F.3d 220

In re: HIGH SULFUR CONTENT GASOLINE PRODUCTS LIBILITY LITIGATION.

Frank A. Silvestri, John P. Massicot, Silvestri & Massicot, Peter D. Derbes, Stephen B. Murray, Stephen B. Murray, Jr., Murray Law Firm, Carroll Farmer, Appellants, v. John W. (Don) Barrett, Richard J. Arsenault, Walter C. Dumas, Patrick E. Geraghty, Ben Barnow, Appellees.

No. 07-30384.

United States Court of Appeals, Fifth Circuit.

February 4, 2008.

John D. Sileo, Dane S. Ciolino (argued), New Orleans, LA, for Appellants.

F.A. Little, Jr. (argued), Stanley, Flanagan & Reuter, New Orleans, LA, for Appellees.

Walter C. Dumas, Dumas & Associates, Baton Rouge, LA, pro se.

Patrick E. Geraghty, Geraghty, Dougherty & Edwards, Fort Myers, FL, pro se.

Richard J. Arsenault, Neblett, Beard & Arsenault, Alexandria, LA, pro se.

John. William Barrett, Barrett Law Office, Lexington, MS, pro se.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JONES, Chief Judge, and REAVLEY and SMITH, Circuit Judges.

EDITH H. JONES, Chief Judge:

Lead Plaintiffs' Counsel in this class action case persuaded the district court to divide up a $6.875 million lump sum attorneys' fee award among more than six dozen plaintiffs' lawyers according to Lead Counsel's proposed allocation. This might be permissible, except that the court was so persuaded in an ex parte hearing and apparently without benefit of supporting data. The court further accepted Lead Counsel's proposed order sealing the individual awards; preventing all counsel from communicating with anyone about the awards; requiring releases from counsel who accepted payment; and limiting its own scope of review of objections to the allocation. These and other facets of the court's process are unauthorized and objectionable. Pursuant to the appeal of attorneys who challenged their awards, we VACATE the order approving the allocation and REMAND.

I. BACKGROUND

During 2004, Shell Oil Co.'s Norco, Louisiana refinery allegedly produced contaminated gasoline that was purchased and used by thousands of motorists, damaging, inter alia, their fuel gauges. The consumers filed numerous lawsuits against Shell, which were consolidated in a federal class action. Before a settlement was reached, Shell undertook a program to repair motorists' broken fuel gauges.

In September 2005, Shell agreed to settle the class action by expanding its voluntary repair program, paying $3.7 million to cover general damages for plaintiffs who filed repair claims, and setting aside $6.875 million to pay the plaintiffs' attorneys' fees, costs, and expenses. After a final fairness hearing, the district court approved the settlement and the aggregate attorneys' fee award.

When the court approved the attorneys' fee award, which was unobjected to, it also appointed a five-member Fee Committee to allocate the fee award among approximately thirty-two law firms and seventy-nine plaintiffs' attorneys who worked on the case. The committee consisted of co-lead counsel, John Barrett and Ben Barnow, and three other plaintiffs' attorneys, Walter Dumas, Patrick Geraghty, and Richard Arsenault ("Appellees").¹ The court's final approval order stated that any dispute concerning the fee allocation would be subject to its exclusive jurisdiction.

The Fee Committee then invited plaintiffs' attorneys to submit statements (a) explaining their contributions to the common benefit of the class and (b) evaluating the contributions of other attorneys. It appears that the Fee Committee already possessed the attorneys' time and expense statements because co-lead counsel had requested these statements around August 2005, presumably to help calculate the aggregate attorneys' fee award for the class action settlement. The record on appeal, however, does not include the time and expense statements of any plaintiffs' counsel except those of Appellants Frank Silvestri, John Massicot, Peter Derbes, Stephen Murray, Stephen Murray, Jr. ("Appellants"), and Ronnie Penton.²

The Fee Committee presented its proposed fee allocation to the district court on January 22, 2007 at an ex parte status conference. None of the other seventy-four plaintiffs' attorneys, including Appellants, were notified of the hearing, nor were they shown the allocation proposal or the proposed order approving the Committee's allocation of fees and costs

Also unbeknownst to the other attorneys, the proposed order went far beyond the allocation of fees. The order (a) placed under seal the document prepared by the Fee Committee listing each attorney's fee award ("Exhibit A"); (b) prohibited each plaintiffs' attorney from disclosing to anyone, including his clients and other attorneys, the amount of his award under penalty of sanctions to be imposed by the court; (c) required fees, costs, and expenses to be "distributed immediately;" (d) mandated that fee award checks bear a full and final release;³ and (e) established the district court's process for dealing with any objections to fee awards.⁴

The transcript of the ex parte hearing and the court's fee allocation order suggest that the Fee Committee provided the court with documentation to support its recommendation. For example, the district court stated during the ex parte hearing that it had received "each individual attorney's responses." The court also indicated that the Fee Committee had given the court "material" in connection with the hearing. Further, the order states the court was "provided with the documentation submitted as well as a report" from the Fee Committee. Contrary to these vague statements, the record on appeal includes no "responses" from any attorneys other than Appellants, and it lacks any "material," "documentation," or "report" from the Fee Committee other than Exhibit A and the proposed order.

At the ex parte hearing, the district court asked the Fee Committee why it wanted the court to seal the fee allocation list. Barrett responded that keeping the individual fee awards confidential would prevent lawyers from fighting over awards that they could not compare. He asserted that during the past ten to fifteen years other judges have "go[ne] with this confidentiality dynamic." Barrett specifically cited another federal district court in Louisiana that had recently placed under seal the fee allocation list associated with its order awarding individual attorneys' fees.⁵

The district court also asked the Fee Committee about the process it used to make its fee allocation recommendations. Arsenault and Barrett responded that the Fee Committee considered, among other things, the benefits of the attorneys' work to the class as a whole and their hourly billing rates. Barrett highlighted two firms whose recommended fee allocations were lower than their requests. He asserted that these firms "really ... didn't do anything for the common benefit and caused us trouble and caused the plaintiffs almost killing the settlement." Barrett was referring to the Appellants, Silvestri and Derbes, who "almost killed the settlement" by sending a letter to their clients about the proposed settlement that caused 101 of them to opt-out. Barrett did not point out that this situation had been resolved by sending a curative notice to these clients, and most of them ultimately chose not to opt-out of the settlement.

Pertinent to the Murray Appellants, Barrett said nothing explicit but left the district court with the impression that all plaintiffs' firms other than Silvestri's and Derbes's had, received compensation based on the hours and hourly billing rates they submitted to the Fee Committee and a multiplier. Barrett's implication was inaccurate, however. The Murray firm received a fee check for $33,000, inclusive of costs, a sum representing far less than the $114,310 fee the firm claims based on its hours, billing rates, and a multiplier of 2.3.

The hearing with the Fee Committee lasted only twenty minutes. At the end of the hearing, the court sealed the hearing transcript. Later on the same day, the district court signed—apparently without modification—the proposed order embodying both the proposed attorneys' fees and the procedural limitations on challenges. The order awarded almost half of the $6.875 million fee to the five members of the Fee Committee and their law firms. Appellants were awarded less than they had requested. Soon thereafter, Appellants requested the district court to reconsider its order and unseal Exhibit A, the fee allocation list.

The court held an in camera hearing on these motions at which Appellants and members of the Fee Committee presented oral arguments on March 16, 2007. At the hearing, the court stated that it considered all of the factors set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974),⁶ with regard to each attorney when it approved the fee allocation. The court later sealed the docket minute entry for the hearing and the hearing transcript It also entered a sealed order allowing the parties to file supplemental memoranda and requiring the Fee Committee and the Appellants to meet and report back to the court.

On April 5, 2007, the court entered a sealed order denying the motions to reconsider and refusing to unseal Exhibit A. Appellants Silvestri, Massicot, Derbes, Murray, and Murray, and Caroll Farmer, a class member, filed a notice of appeal.⁷ The district court subsequently entered orders unsealing Exhibit A and various other documents. This court granted Appellants' motion to instruct the district court to supplement the record on appeal with all documents and submissions reviewed by the district court prior to making its fee allocation order.⁸

II. STANDARD OF REVIEW

This court reviews a district court's attorneys' fee awards for abuse of discretion. Strong v. BellSouth Telecomma, Inc., 137 F.3d 844, 850 (5th Cir. 1998). "To constitute an abuse of discretion, the district court's decision must be either premised on an erroneous...