540 F.2d 102 (3rd Cir. 1976), 74-2189, Lindy Bros. Builders, Inc. of Philadelphia v. American Radiator & Standard Sanitary Corp.

Docket Nº:74-2189 and 74-2255.
Citation:540 F.2d 102
Party Name:LINDY BROS. BUILDERS, INC. OF PHILADELPHIA, et al. v. AMERICAN RADIATOR & STANDARD SANITARY CORP. et al. Appeal of FRIENDSWOOD DEVELOPMENT COMPANY and Humble Oil & Refining Company, Claimants. Appeal of Harold E. KOHN, P. A., et al.
Case Date:July 02, 1976
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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540 F.2d 102 (3rd Cir. 1976)

LINDY BROS. BUILDERS, INC. OF PHILADELPHIA, et al.

v.

AMERICAN RADIATOR & STANDARD SANITARY CORP. et al.

Appeal of FRIENDSWOOD DEVELOPMENT COMPANY and Humble Oil &

Refining Company, Claimants.

Appeal of Harold E. KOHN, P. A., et al.

Nos. 74-2189 and 74-2255.

United States Court of Appeals, Third Circuit

July 2, 1976

Argued Sept. 8, 1975.

Reargued May 14, 1976.

As Amended July 26, 1976.

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Arthur R. Miller, Cambridge, Mass., Harold E. Kohn, Stuart H. Savett, David H. Weinstein, Jay R. Stiefel, Carole Broderick, Harold E. Kohn, P. A., David Berger, H. Laddie Montague, Jr., Gerald Jay Rodos, David Berger, P. A., Philadelphia, Pa., for appellees and cross-appellants.

William Simon, G. Joseph King, Howrey, Simon, Baker & Murchison, Washington, D. C., for appellants.

Argued Sept. 8, 1975.

Before ALDISERT, GIBBONS and WEIS, Circuit Judges.

Reargued May 14, 1976.

Before SEITZ, Chief Judge, and ALDISERT, GIBBONS, ROSENN, HUNTER and WEIS, Circuit Judges.

OPINION

ALDISERT, Circuit Judge.

The question presented is whether the district court properly applied the guidelines for awarding attorneys' fees we set forth when this matter was previously before us. 487 F.2d 161 (3d Cir. 1973) (Lindy I ). We affirm in part, but vacate the judgment and remand for entry of an order in accordance with this opinion.

This protracted litigation emanates from the plumbing fixtures cases. 1 In connection with final court approval of the settlement of claims by the national class 2 of builder owners, the district court awarded attorneys' fees to Harold E. Kohn and David Berger, and their respective firms. 3 Those participating in the settlement fund may be categorized into three groups: appellees Kohn and Berger represented the first category; other lawyers, not implicated in this appeal, represented those in the second category; the third consisted of class members not represented by counsel until after court approval of the settlement. Two members of this third category Friendswood Development Company and

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Humble Oil & Refining Company objected to the fee award to Kohn and Berger, and appealed. The award was vacated and the cause remanded, fees were awarded again, and Friendswood and Humble have appealed again. Although the three categories were not formally denominated as subclasses, see F.R.Civ.P. 23(c)(4), appellants advance arguments which obtain unerringly for all members of the third category. Accordingly, we treat the contentions as applicable to all members of the third category. 4

In its opinion on remand, the district court determined that appellees were entitled to attorneys' fees of $1,134,765.45 from the settlement fund then valued at $29.3 million. Of this amount, the district court ordered members in the third category the previously unrepresented claimants to pay $925,968.61. Thus, the district court ordered members of the third category to pay 81.6 per cent of the attorneys' fee from the settlement fund, even though their aliquot share of the fund was only about $8,145,400 or 27.8 per cent. The district court ordered no further payment of attorneys' fees from the settlement fund, but appellees were to receive $861,191 under private contracts with their clients, the members of the first claimant category.

Any understanding of the specific issues in this appeal must start with the rules we enunciated when these proceedings were here before. The district court has properly summarized what we said:

In discussing the proper standards which would govern the award of fees in a case of this sort, . . . the first inquiry of the Court should be into the hours spent by the attorneys, including how many hours were spent in what manner by which attorneys. 487 F.2d at 167. After determining the time spent, the district court should then undertake to fix an hourly rate of compensation to be applied to the hours worked. While the amount thus found to constitute reasonable compensation should be the "lodestar" of the Court's fee determination, at least two other factors should be taken into account in computing the value of attorneys' services, namely the contingent nature of success and the extent, if any, to which the quality of an attorney's work mandates either increasing or decreasing the amount to which the Court has found the attorney reasonably entitled. 487 F.2d at 168. Finally, after determining the total reasonable value of an attorney's services in securing recovery of a fund for the class, the Court should determine what portion of that amount should be paid by the unrepresented claimants. (Absent extraordinary circumstances, the unrepresented claimants should pay for the attorneys' services in proportion to their benefit from them that is, the unrepresented claimants should pay a percentage of the reasonable value of the attorneys' services to the class equal to their percentage of the class' recovery.) 487 F.2d at 169.

382 F.Supp. at 1003.

The appellants press four contentions: (1) The district court should have made no award for services performed by the Berger firm; (2) The district court should have excluded certain specific services performed by appellees from the "lodestar" defined in Lindy I ; (3) The district court should not have doubled the "lodestar" to reflect (a) contingency and (b) quality factors; and (4) The district court required category three claimants to pay a disproportionate share of the attorneys' fees from the settlement fund.

I.

Appellants' contention that the Berger firm should not participate at all in the attorneys' fee awarded from the fund rests on two premises: (a) that Berger and his firm contributed nothing to the creation of the settlement fund, and (b) that, in any event, Berger and his firm will be adequately compensated for their services in connection with this litigation.

In support, appellants marshal several subsidiary points. First, Berger claimed

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only one hour's time related to settlement work. See ibid. at 1007. Second, although Berger signed the settlement agreement with the defendants, he only did so because Kohn asked that Berger's name be included and no defendant objected. Brief for Appellants at 33-34. Third, the district court concluded that the reasonable value of all work performed by the Berger firm was $139,186.85. However, as a result of a 50-50 fee splitting agreement between Kohn and Berger, the Berger firm stood to gross about $893,500 from the litigation. See 382 F.Supp. at 1028, n.34. Finally, the Berger firm did not support its application with accurate, contemporaneously-made time records. Instead, it relied on a "reconstruction" of the hours expended.

The district court was confronted with, and rejected, the identical arguments. We agree with its disposition. Ibid. at 1009-11. In summary, the district court found that the time expended by Berger and his firm "contributed materially to the creation of the settlement fund"; that Berger consulted with Kohn "at every stage of the proceedings"; that Kohn valued Berger's judgment and advice; and that Berger's firm reviewed briefs and pleadings for the Kohn firm during the early stages of the litigation. Upon a review of the record, we conclude that these findings of the district court were not clearly erroneous. Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972). With respect to the "reconstruction" of time expended, the district court stated:

. . . (T)ime records, although highly desirable, are not the only means of proving time spent in a multidistrict litigation of this sort. . . . Although mere estimates of time are not acceptable, an allowance of attorneys' fees may be based on a reconstruction, provided that the time records are substantially reconstructed and are reasonably accurate. . . .

The evidence here discloses that the reconstruction was carefully and accurately done. . . . Indeed, from the record as a whole, it appears that petitioner Berger and his firm probably spent more time than they are claiming in connection with this litigation.

382 F.Supp. at 1011. Finding the basic facts not clearly erroneous, and determining that there is no error either in the court's reasoning or in its application of the proper legal precept, we affirm the district court on this point. Implicit in this conclusion is the understanding that the agreement between Kohn and Berger to split fees is simply irrelevant to the considerations mandated by Lindy I.

Insofar as appellants urge that the Berger firm not receive an attorney's fee from the fund because Berger was not counsel for a court-appointed Class Representative, we reject the argument. We do not read the appellees' original petition as being on behalf of Kohn and Berger qua counsel for class representatives; rather, they petitioned "jointly as counsel for the plaintiffs and intervenor plaintiffs . . . (where) the plaintiffs were designated by the Court as class representatives . . . ." App. at 77. In addition, we are faced with the district court's findings of fact that the Berger firm benefited the fund which we will not upset.

II.

The district court excluded from its "lodestar" determination the time spent by appellees in negotiating fee arrangements with, and in preparing claim forms for, privately retained claimants. Although Kohn and Berger filed a cross appeal, they do not contest the propriety of this ruling. In any event, we would agree with the district court.

Appellants contend that the court also should have excluded from the "lodestar" time expended (A) relating to appellees'...

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