Camden I Condominium Ass'n, Inc. v. Dunkle
| Decision Date | 04 November 1991 |
| Docket Number | No. 90-6074,90-6074 |
| Citation | 946 F.2d 768 |
| Parties | CAMDEN I CONDOMINIUM ASSOCIATION, INC., Camden L. Condominium Association, Inc., Cambridge A. Condominium Association, Inc., Cambridge I Condominium Association, Cambridge F. Condominium Association, Inc., Chatham A. Condominium Association, Inc., Chatham M. Condominium Association, Inc., Coventry A. Condominium Association, Inc., Coventry J. Condominium Association, Inc., Dorchester E. Condominium Association, Inc., Kent D. Condominium Association, Inc., Kent J. Condominium Association, Inc., Salisbury D. Condominium Association, Inc., Salisbury E. Condominium Association, Inc., Somerset A. Condominium Association, Inc., Somerset C. Condominium Association, Inc., Somerset H. Condominium Association, Inc., Somerset I. Condominium Association, Inc., Waltham E. Condominium Association, Inc., Waltham H. Condominium Association, Inc., and Windsor N. Condominium Association, Inc., Florida corporations not for profit, Plaintiffs-Appellants, v. John B. DUNKLE, Clerk of the 15th Judicial Circuit of Florida, and Palm Beach County, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Larry Klein, Klein & Walsh, West Palm Beach, Fla., for plaintiffs-appellants.
Phillip T. Crenshaw, West Palm Beach, Fla., for Swenson.
Thomas H. Duffy, Gregory T. Stewart, Nabors, Giblin & Nickerson, Tallahassee, Fla., for Palm Beach County.
Appeal from the United States District Court for the Southern District of Florida.
Before TJOFLAT, Chief Judge, DUBINA, Circuit Judge and WILLIAMS *, Senior Circuit Judge.
Appellants, Camden I Condominium Association, Inc., et al. ("the Associations"), appeal the district court's award of attorneys' fees in this class action. For the reasons which follow, we vacate the district court's order and remand this case for further proceedings.
The Associations sued John B. Dunkle, the clerk of Florida's 15th Judicial Circuit, and Palm Beach County (collectively referred to as "the County"), to recover interest on funds deposited with the circuit court. The Associations ultimately prevailed on the merits, which are not at issue in this appeal. See Camden I Condominium Ass'n, Inc. v. Dunkle, 805 F.2d 1532 (11th Cir.1986), cert. denied, 483 U.S. 1021, 107 S.Ct. 3266, 97 L.Ed.2d 765 (1987). 1
After the district court granted class certification, the case was settled. The settlement provided that the County would create a fund of $3,000,000 to pay all claims, including attorneys' fees and costs, and that any unclaimed funds would revert to the County. The class members were notified that the attorneys for the class would be seeking a fee and cost award of 31% of the class fund. None of the class members objected. Instead of a contingency percentage award, however, the district court calculated fees based upon the lodestar and risk enhancement method utilized in calculating attorneys' fees under fee-shifting provisions such as the Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988. The district court accepted all time recorded by the Associations' attorneys, applied the current billing rate in order to compensate for delay, and adjusted the award upward by one-third to allow for risk enhancement. The district court limited its enhancement to one-third in reliance upon Pennsylvania v. Delaware Valley Citizens' Council, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987). The district court's calculations resulted in a fee of approximately one-half of the 31% contingency fee requested by the Associations.
The Associations contend on appeal that the district court erred in the following respects: (1) calculating attorneys' fees based upon the lodestar and risk enhancement method rather than a percentage of the class action common fund; (2) limiting risk enhancement to one-third; and (3) utilizing present hourly rates to compensate for delay in payment. This court reviews an award of attorneys' fees for abuse of discretion; nevertheless, that standard of review allows us to closely scrutinize questions of law decided by the district court in reaching the fee award. See Haitian Refugee Ctr. v. Meese, 791 F.2d 1489, 1496, vacated in part on other grounds, 804 F.2d 1573 (11th Cir.1986). See also Skelton v. General Motors Corp., 860 F.2d 250, 257 (7th Cir.1988), cert. denied, 493 U.S. 810, 110 S.Ct. 53, 107 L.Ed.2d 22 (1989).
According to the now axiomatic American Rule, which was reaffirmed by the United States Supreme Court in Alyeska Pipeline Service Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975), all parties are to bear their own costs in litigation. One of the recognized exceptions to the American Rule is the "common fund" case. The common fund exception "rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense." Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676 (1980). Attorneys in a class action in which a common fund is created are entitled to compensation for their services from the common fund, but the amount is subject to court approval. Fed.R.Civ.P. 23(e).
Historically, the rationale entitling counsel to a percentage of the common fund derives from the equitable power of the courts under the doctrines of quantum meruit, Central R.R. & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885); unjust enrichment, see, e.g., Trustees v. Greenough, 105 U.S. (15 Otto) 527, 26 L.Ed. 1157 (1881); and later, what has become known as the "substantial" or "common benefit" doctrine. Under this doctrine, fee reimbursement is permitted in the following circumstances:
(1) when litigation indirectly confers substantial monetary or nonmonetary benefits on members of an ascertainable class, and (2) when the court's jurisdiction over the subject matter of the suit, and over a named defendant who is a collective representative of the class, makes possible an award that will operate to spread the costs proportionately among class members.
H. Newberg, Attorney Fee Awards § 2.01 at 28-29 (1986). See also Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970).
In accordance with the well-established common fund exception to the American Rule, we are persuaded that class counsel herein are entitled to an award of their fees and expenses out of the fund that has been created for the class by their efforts. 2 The dispositive issue in this appeal is whether such fees should be based upon a percentage of the fund or the lodestar computation method.
During the 1970's, a debate was triggered primarily in the Second and Third Circuits over the appropriate method of calculating a common fund fee award. This controversy still affects how attorneys' fees are awarded. Thus, a look back at both the history of the common fund fee doctrine and the more recent instructions regarding its use and calculation by the United States Supreme Court and commentators will prove instructive.
In the first Supreme Court case recognizing that attorneys had a claim to fees payable out of a common fund which has been created through their efforts, a fee was awarded based upon a percentage of the fund recovered for the class. Pettus, 113 U.S. at 127-28, 5 S.Ct. at 393. Because class counsel in Pettus had an agreement with the named plaintiffs limiting the percentage of their fee, the Court used that fee agreement as a guideline to determine a reasonable percentage based fee. Id. at 128, 5 S.Ct. at 393. From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund exception were computed as a percentage of the fund. The amount of the fee was left to the district court's discretion, with the only standard being reasonableness under the circumstances of a particular case. See, e.g., Newberg, supra, § 202 at 31; Court Awarded Attorney Fees, Report of the Third Circuit Task Force, October 8, 1985 (Arthur R. Miller, Reporter), 108 F.R.D. 237, 242 (1985) (the "Task Force Report").
In an effort to provide findings on fee awards that could be more easily reviewed by the courts of appeal and to insure that attorneys be compensated for the reasonable value their time would normally command in the marketplace, the Third Circuit in 1973 established a prescribed set of guidelines that district courts in that circuit would be required to consider in arriving at a reasonable fee award under the common fund doctrine. In Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973), appeal following remand, 540 F.2d 102 (3d Cir.1976), the Third Circuit reviewed a district court's order approving attorneys' fees out of a common fund which was created by the settlement of several class actions charging a conspiracy to fix prices in violation of the Sherman Act. The Third Circuit in Lindy vacated the district court's fee award and set forth new fee award guidelines and prescribed steps, which now are known commonly as the "lodestar" approach.
To arrive at a lodestar figure under the Third Circuit's approach, the district court must first determine the number of hours reasonably spent by the plaintiffs' counsel on the matter, then multiply those hours by an hourly rate the court deems reasonable for similarly complex non-contingent work. That lodestar figure may then be adjusted upward or downward for certain factors known as multipliers, such as contingency and the quality of the work performed, to arrive at a final fee.
At approximately the same time as the Lindy decision was rendered, the United States Court of Appeals for the Fifth...
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