Deloach v. Philip Morris Companies, Incorporated, No. 1:00CV01235 (M.D.N.C. 12/19/2003), 1:00CV01235.
| Decision Date | 19 December 2003 |
| Docket Number | No. 1:00CV01235.,1:00CV01235. |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | D. LAMAR DELOACH, WILLIAM G. HYMAN, HYMAN FARMS, INC., GUY W. HALE, JAMES R. SMITH, HOUSTON T. EVERETT, D. KEITH PARRISH, Plaintiffs, v. PHILIP MORRIS COMPANIES, INCORPORATED, PHILIP MORRIS USA INC., PHILIP MORRIS INTERNATIONAL, INC., R.J.R. NABISCO HOLDINGS CORP., R.J. REYNOLDS TOBACCO HOLDINGS, INC., R.J. REYNOLDS TOBACCO COMPANY, B.A.T. INDUSTRIES, P.L.C., BRITISH AMERICAN TOBACCO COMPANY, INC., BATUS HOLDINGS INCORPORATED, BROWN & WILLIAMSON TOBACCO CORPORATION, LORILLARD TOBACCO COMPANY, LOEWS CORPORATION, UNIVERSAL LEAF TOBACCO CO., J.P. TAYLOR CO., INC., SOUTHWESTERN TOBACCO CO., INC., DIMON INC., STANDARD COMMERCIAL CORP., Defendants. |
This class action litigation joined tobacco farmers against tobacco product manufacturers and others in a cause of action referred to simply as a conspiracy to violate the antitrust laws. Essentially, the tobacco farmers contended and the manufacturers denied that a scheme was devised and implemented to deny farmers a fair price for their leaf poundage. The essence of the case theory was such that emotions on both sides could have reached dangerous levels and the scent of vindication could have overwhelmed the aroma of justice.
When the litigation was initiated and assigned, this court reviewed the pleadings and pondered whether the matter could be concluded within a decade. Yet, within a relatively short period, the parties, in the court's view, amazingly, except for one remaining defendant, have reached accord and settled their differences. It is worthy of note that there was a conspicuous absence of acrimony during the proceeding and in the aftermath of settlement deserving of acknowledgment by the court.
While this court recognizes that litigation belongs to the parties, it is undoubtedly true in most cases, and specifically in this matter, that lawyers set the tone and degree of professionalism under which the litigation proceeds. From prior knowledge of the attorneys chosen by the adversaries to lead their cause the court expected and now recognizes the superior professionalism and art of advocacy exhibited by the lawyers representing Plaintiffs and Defendants. Their efforts, and to no lesser degree those of the mediator selected by the parties, have brought this mammoth litigation to a conclusion in which few, if any, animosities remain among the settling parties. A remarkable feat! The parties have maturely and responsibly acquitted themselves and the lawyers have exemplified the best tradition of the legal profession. As to the settling parties, the only remaining matter for the court's decision is the assessment of reasonable attorneys' fees.
The settlement among the consenting parties directed that Defendants should pay to Plaintiffs $200,000,000.00 in cash, along with payments totaling $11,800,000.00 for administration, research, education, and lobbying activities. Defendants committed to a leaf purchase agreement for the next 10 years from which Plaintiffs have a right to expect a potential value in excess of $1,000,000,000.00. The parties agreed that attorneys' fees for Plaintiffs' Co-Lead Counsel would not be part of the class settlement fund but would be separately determined by the court after confirmation of the settlement. No fund was created for attorneys' fees and no minimum or maximum limits were agreed upon. It was agreed that Defendants Philip Morris USA, Lorillard Tobacco Co., and Brown & Williamson would pay the ordered fees. The only limitation imposed upon the court was that the fees should be reasonable. That determination is not a simple one.
One of the most comfortable tools with which lawyers and judges ply their trade is the certainty enunciated by precedent. Unfortunately, in this proceeding, we have reached the stage in which learned courts and articulate legal analysts have hurled conflicting conclusions upon the usually tranquil waters of constancy causing rippling and cross currents to the extent that finding a destination requires great caution and difficult reckoning. Nevertheless, it is such a journey which the parties have asked the court to undertake.
In briefs and in arguments, the parties have vigorously urged their positions. Plaintiffs' Co-Lead Counsel contend that a reasonable and just amount of $175,000,000.00 should be ordered to cover attorneys' fees and costs,1 while Defendants urge that a maximum of $30,000,000.00 constitutes an amply reasonable reward. At first glance, these diverse positions seem staggering, but upon closer examination there is logic behind each position. Legal precedent exists upon which to extend coverage for both positions. Ironically, at times the parties cite the same legal authority in support of their opposing positions. Further, each side has proffered its own expert in support of its contentions.
Weighing in for Plaintiffs' Co-Lead Counsel is Professor Arthur Miller of Harvard Law School and representing Defendants is Professor George Priest of Yale Law School. The court recognizes the eminent position of respect occupied by each, not only from the logic of each affidavit but from personal, professional knowledge and admiration gained for these well-known academics. For full disclosure, the court has heard and enjoyed their remarks at various and separate functions, none of which involved the subject matter of the present motion, and the court recognizes each as a distinguished scholar. Nevertheless, it is striking how these two learned gentlemen can view the law so differently. Not surprisingly, Professor Miller disdains the lodestar methodology in favor of the percentage of value approach for assessing reasonable attorneys' fees and concludes that the proper calculation for reasonable attorneys' fees would award Plaintiffs' Co-Lead Counsel the sum of $175,000,000.00. To put it another way, Professor Miller opines that such award would be well within the low limits of a percentage award. He predicts great conflict should the court attempt to adopt the lodestar methodology. On the other hand, Professor Priest, with equal logic, assures us that to use the percentage calculation would be inappropriate in absence of a common fund or a pre-litigation agreement concerning the fees claimed. Professor Priest opines that to use the percentage method would create a real conflict between Plaintiffs and their attorneys which the court should not allow. He then predictably urges that the appropriate lodestar methodology will set reasonable attorneys' fees at $22,000,000.00, exclusive of expenses.
It, thus, becomes the court's duty to reconcile, or, at least consider, these seemingly irreconcilable disparate positions in order to assess reasonable attorneys' fees.
In awarding attorneys' fees to Plaintiffs' Co-Lead Counsel, the Settlement Agreement provides limited guidance, mandating only that the court award Plaintiffs' Co-Lead Counsel "their reasonable fees, costs and expenses." (Settlement Agreement § 2.3.) Many courts have confirmed that the touchstone of any award of attorneys' fees must be reasonableness. See, e.g., Fischel v. Equitable Life Assurance Soc'y, 307 F.3d 997, 1007 (9th Cir. 2002) (); In re Fidelity/Micron Sec. Litig., 167 F.3d 735, 737 (1st Cir. 1999) (); Fair Hous. Council of Greater Wash. v. Landow, 999 F.2d 92, 96 (4th Cir. 1993) ().
As previewed above, the court is faced with two methods for awarding attorneys' fees: the lodestar method and the percentage of the fund method. Under the lodestar method, the fee award is based on the reasonable hours expended multiplied by a reasonable hourly rate. Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 652 (4th Cir. 2002). The lodestar method is generally employed in cases that are based on a fee-shifting statute. In re General Motors Corp., 55 F.3d 768, 821 (3d Cir. 1995); Teague v. Bakker, 213 F. Supp.2d 571, 582 (W.D.N.C. 2002); Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237, 250 (1986). In many of these cases, the lodestar method is preferred because the relief granted is of such small monetary value that a percentage fee for the attorneys would not provide adequate compensation. See Teague, 213 F. Supp.2d at 582 (citing In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 732 (3d Cir. 2001)). Even in non-fee-shifting cases, the lodestar method may be used where the value of a recovery is so indeterminate as to impede the use of the percentage method. General Motors, 55 F.3d at 821.
The percentage method awards some fraction of the total recovery as an attorneys' fee, and is generally used in cases in which a common fund is created. Id.; Teague, 213 F. Supp.2d at 582 (citing Cendant Corp., 243 F.3d at 732). A common fund exists where "the efforts of counsel have generated a `common fund' from which the plaintiffs and counsel are to be compensated." Petruzzi's, Inc. v. Darling-Delaware Co., 983 F. Supp. 595, 602 (M.D. Pa. 1996); see also Brzonkala v. Morrison, 272 F.3d 688, 691 n.* (4th Cir. 2001) ("The `common-fund' doctrine . . . applies, as its name suggests, in cases where an actual common fund has been created as a consequence of the litigation."); Brewer v. School Bd. of City of Norfolk, 456 F.2d 943, 948 (4th Cir. 1972) (). In...
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