Downing v. Goldman Phipps, PLLC

• Decision Date: 22 August 2014
• Docket Number: No. 13–2345.,13–2345.
• Citation: 764 F.3d 906
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: Don M. DOWNING; Adam J. Levitt, on behalf of themselves and those similarly situated Plaintiffs–Appellants v. GOLDMAN PHIPPS, PLLC; Goldman, Pennebaker & Phipps, P.C.; Martin Phipps; Keller Stolarczyk, PLLC; Mikal C. Watts, PC; Mikal C. Watts; Stephen B. Murray, Sr.; Murray Law Firm; Charles A. Banks; Banks Law Firm Defendants–Appellees.

764 F.3d 906

Don M. DOWNING; Adam J. Levitt, on behalf of themselves and those similarly situated Plaintiffs–Appellants

v.GOLDMAN PHIPPS, PLLC; Goldman, Pennebaker & Phipps, P.C.; Martin Phipps; Keller Stolarczyk, PLLC; Mikal C. Watts, PC; Mikal C. Watts; Stephen B. Murray, Sr.; Murray Law Firm; Charles A. Banks; Banks Law Firm Defendants–Appellees.

No. 13–2345.

United States Court of Appeals,

Eighth Circuit.

Submitted: June 11, 2014.

Filed: Aug. 22, 2014.

Gretchen Garrison, argued, Saint Louis, MO, (Don Manley Downing, Adam J. Levitt, of Chicago, IL, and Stacey Kelly Breen of New York, NY, on the brief) for Plaintiffs–Appellants.

Kimberly S. Keller, argued, Boerne, TX, (Michael Gross, St. Louis, MO, on the brief), for Defendants–Appellees.

Before MURPHY, COLLOTON, and KELLY, Circuit Judges.

MURPHY, Circuit Judge.

Plaintiff class representatives Don Downing and Adam Levitt (Downing), lead counsel in a large multidistrict litigation (MDL) against Bayer CropScience LP and other defendants (Bayer), brought this action for unjust enrichment and quantum meruit against other plaintiff lawyers. The class alleges these other lawyers benefitted in their state court actions from litigation materials and work product generated in the MDL by the plaintiff class but refused to pay for it. Defendants include attorneys and firms Martin J. Phipps, Mikal C. Watts, Charles A. Banks, Goldman Phipps PLLC, Goldman Pennebaker & Phipps P.C., Mikal C. Watts P.C., Banks Law Firm PLLC, Keller Stolarczyk PLLC (the Phipps group), Steven B. Murray and the Murray Law Firm (Murray), all of whom had represented clients in both the federal MDL and the state court actions against Bayer. The district court granted defendants' motion to dismiss for lack of personal jurisdiction, and Downing appeals. We reverse and remand.

I.

Thousands of long grain rice producers located primarily in Arkansas, Louisiana, Mississippi, Missouri, and Texas, as well as certain rice millers and dealers, sued Bayer in federal and state court for damages resulting from a widespread contamination of the United States rice supply. The Judicial Panel on Multidistrict Litigation (JPML) transferred all of the federal actions to the United States District Court for the Eastern District of Missouri for its oversight and administration. The defendants' cases were among those transferred for administration from other districts by the JPML.

A number of attorneys sought to be appointed lead counsel for MDL plaintiffs including Steven Murray. His application stated that he had made a judgment that his clients' interests were best served “by being in the federal system,” and that he “embrace[d] the MDL process.” At an April 12, 2007 hearing attended by Murray and Martin Phipps, the district court appointed Don Downing and Adam Levitt as co lead counsel and also appointed an executive committee. The court ordered all plaintiffs to act only through this leadership and ordered the leaders to act on behalf of all the federal plaintiffs on all matters, including directing and conducting settlement negotiations. This leadership filed a motion for class certification, which the Phipps group opposed. Phipps came to Missouri for the May 22, 2008 hearing on this motion to certify a plaintiff class. The district court denied the motion.

Leadership moved to establish a common benefit fund for attorney compensation. The leaders sought to require contribution from all MDL recoveries, as well as from non MDL recoveries whose counsel had access to the MDL work product. A majority of MDL attorneys supported the motion, and some counsel for state court clients agreed to contribute to the fund. The Phipps group and Murray objected to its creation, however, as well as to the court's jurisdiction to require contribution from state court recoveries. The district court concluded it lacked jurisdiction to order contributions from parties not transferred to it, even when counselin those cases also had federal cases pending in the MDL before the court. The court “reach[ed] this conclusion reluctantly, because it [wa]s abundantly clear that the plaintiffs in the related state-court cases have derived substantial benefit from the work of the leadership counsel in these federal cases.” Nevertheless, a common benefit trust fund (CBTF) was created for contributions to be deposited with the court. As the district court pointed out, “most of the lawyers representing plaintiffs in state cases have agreed to join in the trust” and those “who have not agreed to join in the trust will have been unjustly enriched if they are not required to contribute to the fees of the leadership lawyers.” The court “encourage[d] all plaintiffs' counsel having cases in both this federal court and in state courts to agree to participate in the fund.” None of the defendants participated.

Common benefit attorneys (CBAs) spent over 107,000 hours and expended about $5.5 million in prosecuting the MDL. Their work included, but was not limited to, drafting a master consolidated complaint asserting 33 claims against Bayer under the laws of six states, successfully opposing Bayer's motion to dismiss, examining and coding about 2.8 million pages of documents, and taking or defending 167 depositions. Murray himself attended depositions taken in Missouri by CBAs, and the defendants requested that those depositions be cross noticed in their state court cases. CBAs also conducted three MDL bellwether trials which tested liability under the laws of Missouri, Arkansas, Mississippi, and Louisiana. Each of those state law trials was held in the St. Louis federal courthouse and resulted in a plaintiffs' verdict. The Phipps group attorneys also traveled to Missouri to attend them. These bellwether trials were held in St. Louis in November 2009, January 2010, and June 2010.

Downing alleges that the defendants made extensive use in their state court cases of CBA generated materials, which they first acquired in Missouri from Downing. Phipps, Banks, and Keller represented plaintiffs in Kyle v. Bayer A.G., No. CV–2008–107–3 (Mar. 8, 2010), in a February 2010 trial in the Circuit Court of Woodruff County, Arkansas. Downing alleges that the Phipps group used materials at this trial which relied on CBA reasoning and also used MDL depositions, exhibits, and testimony from the bellwether trials. Downing further alleges that 18 of the 22 witnesses in the Kyle trial had either been deposed or testified in the MDL and that Phipps defendants introduced videotaped MDL depositions taken by the CBAs, as well as exhibits the CBAs had spent thousands of hours to acquire from searching some 2.8 million pages of MDL documents produced by Bayer.

In November 2008 the district court appointed retired United States District Judge Stephen N. Limbaugh to serve as special master to assist the rice MDL plaintiffs and Bayer in settlement negotiations. The following month Phipps moved on behalf of defendants' MDL and state court clients to allow them all to attend the settlement meetings. The district court granted the motion over the opposition of common benefit leadership. In the declaration he filed in district court, Downing alleged that Phipps, Watts and Murray attended settlement meetings or meditations in Missouri on the following dates:

February 9 and 10, 2009,

April 20 and 21, 2010,

August 19, 20 and 21, 2010,

December 3 and 4, 2010.

At the settlement meeting held in February 2009, the “Phipps legal team” (which included Phipps, Watts, their firms, and Keller Stolarczyk PLLC) made a presentation on individual damage models of rice farmers in Texas and Arkansas. In a subsequent filing in the district court, these defendants represented that they addressed their presentation to “the Bayer Defendants and Riceland because Riceland is also a defendant in the Phipps Legal Team's Arkansas state cases.” Banks also attended two settlement conferences in Missouri; in his affidavit he states that his “participation at the two settlement conferences was limited exclusively to the representation of Arkansas residents in the State Court Actions.”

Bayer required that the negotiated global settlement resolve 85% of all the claims against it, including the claims in the rice MDL and those claims of defendants' state court clients. A settlement was reached in July 2011, in which Bayer agreed to pay $750 million to settle all producers' claims. The settlement contained two agreements, one governing the rice MDL claims and another known as the GMB settlement. The latter settlement covered claimants outside the MDL represented by Phipps, Watts, Banks and Murray. Keller Stolarczyk PLCC is not named in the GMB settlement, but Downing's complaint alleges that Keller also received compensation from this settlement.

In September 2012 Downing asked the court to approve awards to those CBAs whose work benefitted all plaintiffs. In opposition the Phipps defendants argued that “the funds held back for attorney's fees under [the common benefit fee allocation order] will come from the attorney's share of the recovery, not the client's share.” The Phipps group sought a common benefit fee award instead for their work in their state cases. The district court approved a fee award of up to $72 million for certain CBAs but rejected the Phipps group's request for an award. The district court explained that “the work done by the Phipps Group for its own clients did not benefit the rest of the plaintiffs, while the work performed by the common benefit attorneys definitely benefitted the Phipps Group and its clients. It is not an exaggeration to say that the Phipps Group has been unjustly enriched by the work of the common-benefit attorneys.”

On January 31, 2013, Downing filed a class action complaint against the defendants in the Eastern District of Missouri and sought interpleader in the rice MDL. In that action Downing brought state law unjust enrichment and quantum meruit claims against the...