Brundidge v. Glendale Federal Bank, F.S.B.

• Decision Date: 22 November 1995
• Docket Number: No. 78132,78132
• Court: Illinois Supreme Court
• Parties: , 213 Ill.Dec. 563 Helen BRUNDIDGE et al., Appellants, v. GLENDALE FEDERAL BANK, F.S.B., Appellee.

Page 909

659 N.E.2d 909

168 Ill.2d 235, 213 Ill.Dec. 563

Helen BRUNDIDGE et al., Appellants, v. GLENDALE FEDERAL BANK, F.S.B., Appellee.

No. 78132.

Supreme Court of Illinois.

Nov. 22, 1995.

Daniel A. Edelman, Cathleen M. Combs and James O. Latturner, Edelman & Combs, and Lawrence Walner (James P. Arndt, of counsel), all of Chicago, for appellants.

Gerald L. Angst, of Sidley & Austin, Chicago, for appellee.

Alvin D. Meyers and Steven J. Teplinsky, Fagel & Haber, and James D. Holzhauer and Javier H. Rubinstein, Mayer, Brown & Platt, all of Chicago, for amicus curiae Firemen's Annuity & Benefit Fund of Chicago.

Justice McMORROW delivered the opinion of the court:

In this appeal we are asked to reconsider Fiorito v. Jones (1978), 72 Ill.2d 73, 18 Ill.Dec. 383, 377 N.E.2d 1019, and Leader v. Cullerton (1976), 62 Ill.2d 483, 343 N.E.2d 897. In Fiorito and Leader, this court adopted the lodestar method for awarding attorney fees to plaintiffs' counsel in class action litigation where the plaintiffs' recovery results in the creation of a common fund from which attorney fees are awarded. The question presented is whether we should grant the trial court the discretion to award attorney fees based on a percentage of the common fund recovered in the class action suit.

BACKGROUND

The pertinent facts are undisputed. In June 1991, plaintiff Helen Brundidge filed suit against the defendant, Glendale Federal Bank (the Bank). The complaint alleged that the Bank's methods of computing mortgage escrow accounts for the payment of residential real estate taxes were unfair and amounted to deceptive practices. The litigation was brought as a class action suit on behalf of all residential mortgage customers of the Bank who had been affected by the allegedly deceptive manner of computing mortgage escrow accounts.

In June 1992, plaintiff and the Bank entered into a settlement agreement pursuant to which the Bank agreed to refund to all of its customers the sums that represented overpayments they had made into their mortgage escrow accounts. The Bank further agreed to follow certain procedures in its future collection of customers' mortgage escrow payments. The agreement provided a right to plaintiff's counsel to monitor the Bank's implementation of the new procedures.

With regard to attorney fees, the agreement recited that the Bank would pay a set sum to plaintiff's counsel. The Bank also agreed not to oppose an additional attorney fee petition from plaintiff's attorneys. Thereafter plaintiff's lawyers filed a fee petition in which they requested that they be awarded a percentage of the amounts that the Bank would pay in refunds and interest to the plaintiff class members. The trial court denied the fee petition on the ground that this court rejected use of a percentage method when it adopted the lodestar method of awarding attorney fees in class action litigation in Fiorito, 72 Ill.2d 73, 18 Ill.Dec. 383, 377 N.E.2d 1019.

Plaintiff appealed from the trial court's ruling that disallowed a percentage award of attorney fees. The appellate court affirmed, relying on the precedent of Fiorito. (No. 1-92-3559 (unpublished order under Supreme Court Rule 23).) However, the appellate court noted several deficiencies in the lodestar method of awarding fees and suggested that this court reconsider the doctrine. We allowed the plaintiff's petition for leave to appeal. (145 Ill.2d R. 315(a).) Because the propriety of the lodestar method was questioned in Ryan v. City of Chicago (1995), 274 Ill.App.3d 913, 211 Ill.Dec. 21, 654 N.E.2d 483, we allowed the motion of one of the litigants in that case, Firemen's Annuity and Benefit Fund of Chicago, to file an amicus curiae brief in the instant appeal. The remaining litigant in Ryan, attorney Clinton A. Krislov, was permitted to file a response to Firemen's Fund's amicus brief.

ANALYSIS

Illinois has long adhered to the general American rule that the prevailing party in a lawsuit must bear the costs of litigation, unless a statutory provision or an agreement between the parties allows the successful litigant to recover attorney fees and the expenses of suit. (Saltiel v. Olsen (1981), 85 Ill.2d 484, 488, 55 Ill.Dec. 830, 426 N.E.2d 1204; Hamer v. Kirk (1976), 64 Ill.2d 434, 437, 1 Ill.Dec. 336, 356 N.E.2d 524.) However, where the outcome of the litigation has created a common fund, this court has adopted the "common fund doctrine." (Saltiel, 85 Ill.2d at 489-91, 55 Ill.Dec. 830, 426 N.E.2d 1204; Hamer, 64 Ill.2d at 437, 1 Ill.Dec. 336, 356 N.E.2d 524.) The common fund doctrine allows one who "creates, preserves, or increases the value of a fund in which others have an ownership interest to be reimbursed from that fund for litigation expenses incurred, including counsel fees." (Swedish Hospital Corp. v. Shalala (D.C.Cir.1993), 1 F.3d 1261, 1265; see Central R.R. & Banking Co. v. Pettus (1885), 113 U.S. 116, 126-27, 5 S.Ct. 387, 392-93, 28 L.Ed. 915, 918-19.) The doctrine finds its source in the court's inherent equitable powers (Sprague v. Ticonic National Bank (1939), 307 U.S. 161, 167, 59 S.Ct. 777, 780, 83 L.Ed. 1184, 1187) and is founded on the rationale that successful litigants would be unjustly enriched if their attorneys were not compensated from the common fund created for the litigants' benefit (Mills v. Electric Auto-Lite Co. (1970), 396 U.S. 375, 392, 90 S.Ct. 616, 625, 24 L.Ed.2d 593, 606). By awarding fees payable from the common fund created for the benefit of the entire class, the court spreads the costs of litigation proportionately among those who will benefit from the fund. Boeing Co. v. Van Gemert (1980), 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676, 682; see generally Silver, A Restitutionary Theory of Attorneys' Fees in Class Actions, 76 Cornell L.Rev. 656 (1991).

At one time, attorney fees in Illinois common fund cases were awarded based upon a percentage of the amount recovered on behalf of the plaintiff class. (See Fiorito, 72 Ill.2d at 88, 18 Ill.Dec. 383, 377 N.E.2d 1019; Leader, 62 Ill.2d at 488, 343 N.E.2d 897.) Approximately two decades ago, this court questioned the percentage method of assessing fees and began to follow the Federal courts' approach of using a lodestar method to award attorney fees.

This court's adoption of the lodestar method of awarding attorney fees in class action litigation began in a trilogy of cases commencing with Flynn v. Kucharski (1974), 59 Ill.2d 61, 319 N.E.2d 1. In Flynn, the court held that attorney fees were properly awarded for plaintiffs' counsel in class action litigation that challenged the diversion of tax monies from countywide agencies to units of local government. However, this court found that the trial court had not properly considered the various factors that influence the amount of attorney fees that should be awarded to plaintiffs' counsel in class action litigation. The court discerned error in the trial court's failure to give greater importance to the amount of time which plaintiffs' counsel had devoted to the cause, stating,

"In a case of this kind the fee is not, as it is in the usual contingent-fee case, an amount that has been fixed by voluntary agreement between the client and his attorney. Rather, it is the amount taken, by order of the court, from money that belongs to others. The rights of those others must be carefully considered as well as those of the attorneys. In our opinion the time expended in such a case is not to be relegated to a secondary or minor position; it is a highly significant factor in determining the fee." Flynn, 59 Ill.2d at 66-67, 319 N.E.2d 1.

In both Leader and Fiorito, this court relied upon Flynn to hold that the reasonable hours devoted by plaintiff's attorneys should be the starting point in assessing fees (Fiorito, 72 Ill.2d at 88-89, 18 Ill.Dec. 383, 377 N.E.2d 1019; Leader, 62 Ill.2d at 488, 343 N.E.2d 897.) The court decided that, to determine an appropriate computation, the reasonable value of the services rendered should be increased by a weighted multiplier representing the significance of other pertinent considerations, such as the contingency nature of the proceeding, the complexity of the litigation, and the benefits that were conferred upon the class members. (Fiorito, 72 Ill.2d at 91, 18 Ill.Dec. 383, 377 N.E.2d 1019; Leader, 62 Ill.2d at 489, 343 N.E.2d 897.) The court declined to adopt any set guidelines with respect to the value attributable to these additional considerations and stressed that each case must be considered on its own merits. Fiorito, 72 Ill.2d at 92, 18 Ill.Dec. 383, 377 N.E.2d 1019.

In so ruling, this court criticized the percentage-of-the-recovery method of awarding fees, noting that "[s]uch computation in many cases resulted in exorbitant fees, sparking criticism of courts and of the legal profession. [Citations.]" (Leader, 62 Ill.2d at 488, 343 N.E.2d 897.) The court also expressed its concern that the interests of absent class members should be protected, observing,

"[A]lthough class action attorney's fees are contingent upon success, a class action is not a typical contingent-fee case because the amount of the fee is not the result of a voluntary agreement between the client and his attorney. Rather, the fee is an amount taken, by order of the court, from money that belongs to others, and the amount is dependent upon the exercise of the court's sound discretion." Fiorito, 72 Ill.2d at 87-88, 18 Ill.Dec. 383, 377 N.E.2d 1019.

This court's decisions since Fiorito have continued to use and apply this lodestar method of determining attorney fees in class action litigation. (Lurie v. Canadian Javelin, Ltd. (1982), 93 Ill.2d 231, 239, 66 Ill.Dec. 666, 443 N.E.2d 592 (applying lodestar method, but noting that it "is hardly suited to a case in which a large amount of time has been spent for a disproportionately modest benefit for the class"); Saltiel v. Olsen (1981), 85 Ill.2d 484, 55 Ill.Dec. 830, 426 N.E.2d 1204.)...