Rosquist v. Soo Line R.R.

• Decision Date: 10 November 1982
• Docket Number: Nos. 81-2693,81-2927,s. 81-2693
• Citation: 692 F.2d 1107
• Parties: Edward Nils ROSQUIST, Administrator of the Estate of Norie Rosquist, Deceased, Plaintiffs-Appellees, v. The SOO LINE RAILROAD, Defendant, Robert Willrett, Intervenor-Appellee. Appeal of WILLIAM D. MADDUX & ASSOCIATES, Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1107

692 F.2d 1107

Edward Nils ROSQUIST, Administrator of the Estate of Norie

Rosquist, Deceased, Plaintiffs-Appellees, v. The SOO LINE RAILROAD, Defendant, Robert Willrett, Intervenor-Appellee.

Appeal of WILLIAM D. MADDUX & ASSOCIATES, Appellant.

Nos. 81-2693, 81-2927.

United States Court of Appeals, Seventh Circuit.

Argued May 13, 1982.

Decided Nov. 10, 1982.

William D. Maddux, Chicago, Ill., for appellant.

Charles M. May, Waukegan, Ill., for plaintiffs-appellees.

Before CUMMINGS, Chief Judge, and DAVIS, ^* and PELL, Circuit Judges.

DAVIS, Circuit Judge.

This consolidated appeal challenges the District Court's award of attorneys' fees in an accident case tried in that court under its diversity jurisdiction. In October 1975 Norie Rosquist and her two children, Nina and Edward, Jr., were in an automobile as it was struck by a Soo Line Railroad train. Norie Rosquist was killed, Nina was very seriously injured, and Edward, Jr. sustained lesser injuries. Edward Rosquist, Sr., the surviving husband and father, initially retained Milton Zacksman and James A. Dooley to represent the interests of himself, Norie's estate, and the children in suit against the Railroad. Later, William D. Maddux and Associates, the appellant here, succeeded as plaintiffs' counsel. The retainer agreement provided that the attorneys were to receive one-third of the award (less costs) in the event they won or settled the case.

After suit was filed, it was removed from the Circuit Court of Cook County to the District Court for the Northern District of Illinois, Eastern Division. Following some preliminary motions, depositions, and discovery, counsel presented in January 1979 for the district court's approval a dismissal order and settlement agreement. Under the proposed "structured settlement," Nina and Edward, Jr. were to receive a small lump sum initially and periodic payments for quite some time thereafter. Edward, Sr. was to receive nothing. ¹ The total present value to the plaintiffs of the proposed settlement was (according to appellant's expert) approximately $304,874. The agreement provided that attorney's fees were to be paid separately by the Railroad, but did not specify an amount. Upon inquiry, the judge learned that the fee was to be $250,000, payable in five yearly $50,000 installments. The 1979 present-value of that fee (according to the same source) was $223,006.

Judge Grady rejected the settlement, stating that it was unclear in what circumstances the payments to Nina would continue until her death, it was uncertain whether payments to Nina would cover her future medical needs, and it was unlikely that the attorney's fees and trusteeship provisions would adequately protect Nina's interests. The court appointed a guardian ad litem to investigate the case and advise the court on Nina's behalf.

The case subsequently went to trial, and the jury awarded plaintiffs a total of $628,000:--$350,000 for Nina, $10,000 for Edward, Jr., $260,000 to Norie's estate, and $8,000 to Edward, Sr. for funeral expenses. The district court entered judgment on the verdict, ² and ordered the guardian ad litem and plaintiffs' counsel to submit petitions for fees and expenses. ³ Judgment creditors of Edward Rosquist, Sr. were allowed to intervene. Plaintiffs' counsel, William D. Maddux & Associates (Maddux), filed a petition for $209,333--one-third out of the total recovery (less claimed costs). The court redetermined that fee and awarded $90,950 (somewhat less than 15% of the total judgment), reaffirming its determination on a petition to alter or amend that award. Counsel ⁴ then appealed from both the decision setting fees at $90,950 and the order denying the petition to amend that decision. (Those appeals were consolidated in this court).

Appellant argues four main points: (1) that the district court lacked jurisdiction because no case or controversy was before it, (2) that in any event the fee issue should have been sent to the state probate court, (3) that Judge Grady should not have passed upon the fee issue because he was prejudiced on that subject, and (4) that the one-third fee set by the fee-contract was reasonable and should have been upheld. ⁵ We reject those contentions and affirm.

I

Article III of the United States Constitution requires a case or controversy as a prerequisite to the exercise of federal judicial power. Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 239, 57 S.Ct. 461, 463, 81 L.Ed. 617 (1937). Maddux does not challenge the district court's jurisdiction over this diversity case as a whole or that there was a controversy between the Rosquists and the Railroad. But we are told that because neither party to the fee-contract (Rosquist, Sr. and the attorneys) challenges its validity or amount, no "case or controversy" is presented as to the subject of attorneys' fees. That proposition is simply incorrect in this case which was and is still quite alive with respect to the disposition of the fund before the district court. The special guardian appointed by the court had not yet been discharged; in fact, he defended this appeal on behalf of the children. Cf. Hoffert v. General Motors Corp., 656 F.2d 161, 164 (5th Cir.1981) (federal jurisdiction upheld partly because of appointment of guardian). Moreover, the court retained control of the fund provided by the defendant Railroad (pursuant to the judgment for plaintiffs) and the disposition of that fund was yet unsettled. Judgment creditors (from a previous action) of Edward Rosquist, Sr. had intervened to protect their interest in the fund and Maddux asserted a right to a portion of the fund for its fee. "[O]nce invoked, the equitable jurisdiction of the court was not exhausted until all claims against the funds in the registry of the court were adjudicated." Cappel v. Adams, 434 F.2d 1278, 1281 (5th Cir.1970). See Garrett v. McRee, 201 F.2d 250, 253 (10th Cir.1953).

Appellant cites Brown v. Watkins Motor Lines, Inc., 596 F.2d 129 (5th Cir.1979), to show that no case or controversy could exist. Brown is easily distinguishable because that case was actually over; no live controversy was then before the trial court. All that remained was for the court to release the judgment fund to the plaintiff. Id. at 132. In the present situation, in contrast, the district court had much more than pro forma ministerial tasks yet to perform, and the presence of the special guardian showed that the interests of minors were affirmatively to be protected. There was still a litigation which was fully alive, including the subject of proper legal fees. In these circumstances, it made no difference to the existence of a "case or controversy" that the adult parties to the contractual fee-arrangement (the older Rosquist and the attorneys) may have been satisfied with that agreement, or that the District Court itself raised and pursued the subject of the amount of the fee-award. ⁶ See, also, Part II, infra.

II

Not only was there technical compliance with the constitutional demands of Article III, but there was no other adequate reason calling upon the district court to refuse to evaluate the fee to be paid to Maddux. Counsel fees have been subjected to such oversight when the client is unable fully to protect his own interests. For example, seamen (Schlesinger v. Teitelbaum, 475 F.2d 137 (3d Cir.), cert. denied, 414 U.S. 1111, 94 S.Ct. 839, 38 L.Ed.2d 737 (1973)), parties to a class action (Dunn v. H.K. Porter Co., 602 F.2d 1105, 1109 (3d Cir.1979)), and children (Cappel v. Adams, 434 F.2d 1278, 1280 (5th Cir.1970); Wiener v. United Air Lines, 237 F.Supp. 90, 96 (S.D.Cal.1964)), have all enjoyed the protection of federal courts from excessive fees. In ordinary circumstances, trial courts may have no reason to inquire into the terms of an attorney-client contract. But in this case there were two children, one severely injured, both deprived of their mother and in effect abandoned by their father. The children were unable to recognize actions against their interests and unable to assert their rights even if they suspected less than proper treatment. We cannot assume that counsel will necessarily protect those children's interests that are directly in conflict with his own financial well-being. Furthermore, we cannot presume that the father here will, by protecting his own interests, protect those of his children as well; he is sufficiently in debt that apparently he has little or no real personal interest in the outcome of the case--his share may well to go to his judgment creditors. ⁷

The district court's appraisal of the amount of the fee is also justified by the court's inherent right to supervise the members of its bar. See Schlesinger v. Teitelbaum, 475 F.2d at 141 ("The district courts' supervisory jurisdiction over contingent fee contracts for services rendered in cases before them is well-established"). Even when the validity of the fee contract itself has not been challenged by the parties, it is within the court's inherent power of supervision over the bar to examine the attorney's fee for conformance with the reasonable standard of the Code of Ethics. Farmington Dowel Products Co. v. Forster Manufacturing Co., 421 F.2d 61, 90-91 (1st Cir.1970); Elder v. Metropolitan Freight Carriers, Inc., 543 F.2d 513, 518 (3d Cir.1976); Cappel v. Adams, 434 F.2d at 1280. Cf., Dunn, 602 F.2d at 1114 (district courts have authority to examine sua sponte attorney's fees pursuant to inherent supervisory power and the duties imposed by Fed.R.Civ.P. 23(e)); In Re Michaelson, 511 F.2d 882, 888 (9th Cir.), cert. denied, 421 U.S. 978, 95 S.Ct. 1979, 44 L.Ed.2d 469 (1975) (court has authority to inquire into fee arrangements to protect clients from excessive fees and suspected conflicts of interest). The courts have not automatically required the client to object to the fee agreement. As the First Circuit explained: "[t]hat a client, as here, remains willing to abide by his fee contract is...