Florin v. Nationsbank of Georgia, N.A., 93-2062

• Decision Date: 08 September 1994
• Docket Number: No. 93-2062,93-2062
• Citation: 34 F.3d 560
• Parties: Jennifer A. FLORIN and Alan L. Mundt, on behalf of themselves and all others similarly situated, Plaintiffs, v. NATIONSBANK OF GEORGIA, N.A., Robert K. Barton, Leonard S. Gaby, et al., Defendants. Appeal of COHEN, MILSTEIN, HAUSFELD & TOLL; Lawton & Cates, S.C.; Opperman, Heins & Paquin; and Robins, Kaplan, Miller & Ciresi.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 560

34 F.3d 560

Jennifer A. FLORIN and Alan L. Mundt, on behalf of themselves and all others similarly situated, Plaintiffs, v. NATIONSBANK OF GEORGIA, N.A., Robert K. Barton, Leonard S.

Gaby, et al., Defendants.

Appeal of COHEN, MILSTEIN, HAUSFELD & TOLL; Lawton & Cates,

S.C.; Opperman, Heins & Paquin; and Robins,

Kaplan, Miller & Ciresi.

No. 93-2062.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 12, 1993.

Decided Sept. 8, 1994.

Bruce M. Davey, Kent I. Carnell, Mark W. Ratten, Lawton & Cates, Madison, WI, Lowell E. Sachnoff, Gary S. Caplan, Sachnoff & Weaver, Chicago, IL, Herbert E. Milstein, Lisa M. Mezzetti, Cyrus Mehri, Cohen, Milstein, Hausfeld & Toll, Washington, DC, Samuel D. Heins, Eric L. Olson, Opperman, Heins & Paquin, Minneapolis, MN, Thomas J. Gallo, Robert W. Fisher, Robins, Kaplan, Miller & Ciresi, Atlanta, GA, for plaintiffs.

Brady C. Williamson, Lafollette & Sinykin, Madison, WI, John A. Busch, Peter L. Coffey, Michael, Best & Friedrich, Milwaukee, WI, Peter Q. Bassett, Philip C. Cook, John E. Stephenson, Jr., Alston & Bird, Atlanta, GA, for Nationsbank of Georgia, N.A.

Robert H. Friebert, Friebert, Finerty & St. John, John A. Busch, Peter L. Coffey, Michael, Best & Friedrich, Milwaukee, WI, for Robert K. Barton.

John A. Busch, David J. Cannon, Peter L. Coffey, Michael, Best & Friedrich, Milwaukee, WI, for Leonard S. Gaby, Allen G. Lacoe, Robert A. Magnusson, Anthony A. Saliture, Harlan B. Smith, Thomas F. Stutzman.

Barry Levenstam, Jerold S. Solovy, William D. Heinz, Jenner & Block, Chicago, IL, Robert H. Friebert, Friebert, Finerty & St. John, John A. Busch, Peter L. Coffey, Michael, Best & Friedrich, Milwaukee, WI, for Raymond G. Chambers, Frank E. Richardson, E. Burke Ross, Jr., William E. Simon, Frank E. Walsh, Jr.

Lowell E. Sachnoff (argued), Gary S. Caplan, Sachnoff & Weaver, Chicago, IL, for Cohen, Milstein, Hausfeld & Toll, Lawton & Cates, S.C., Opperman, Heins & Paquin, Robins, Kaplan, Miller & Ciresi.

Before GIBSON, ^* KANNE, and ROVNER, Circuit Judges.

KANNE, Circuit Judge.

Four law firms representing class plaintiffs in this case appeal from the district court's order allowing fees to be paid out of a fund created by the settlement of the class action suit. ¹

Participants in and beneficiaries of the Simmons Mattress Company's employee stock ownership plan ("ESOP"), brought this action alleging that the defendants ² violated their fiduciary obligations under the Employee Retirement Income Security Act ("ERISA") by causing or permitting shares of Simmons stock to be sold to the ESOP at a price above fair market value. The class plaintiffs sought to recover damages from the sale of stock. In March 1993, the parties settled the suit for a total of $15,448,304.66. A settlement fund was created for the benefit of the plaintiff class, and the parties agreed that class counsel would seek its fees and expenses from the fund.

Plaintiffs' counsel then petitioned the district court for an award of fees and expenses from the settlement fund. Counsel requested attorney's fees of $2.85 million, which represented 18.45% of the fund, or the lodestar figure ³ of $1,863,838.75 enhanced by a risk multiplier of 1.53. ⁴

The district court first determined that the rates and hours documented by the attorneys for use in calculating the lodestar were "fair and reasonable." Thus, it approved counsel's suggested lodestar of $1,863,838.75. The court then turned to decide whether it would increase the award with a multiplier to reflect the risk the plaintiff's lawyers undertook when they decided to pursue the case. The court stated that it was "of the opinion that counsel have billed at their usual hourly rates and have been recompensed with this fee award for the full fees for services expended in this matter," and found "no compelling reason to provide that multiplier which has been requested in this matter." Having denied counsel the multiplier, the district court accordingly awarded attorney's fees only in the amount of the lodestar.

Standard of Review

We review a district court's award of attorney's fees for abuse of discretion. Harman v. Lyphomed, Inc., 945 F.2d 969, 973 (7th Cir.1991). We will find an abuse of discretion when the district court reaches an erroneous conclusion of law. Id.; 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). We review de novo the court's method of determining fees, to determine that it comports with approved procedures for calculating awards. Harman, 945 F.2d at 973.

Analysis

In the United States, parties to a lawsuit usually bear their own expenses, regardless of which party prevails. This is sometimes called the "American Rule." See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). Congress, however, has created exceptions to the American Rule, by inserting fee-shifting provisions in certain statutes, such as the one in ERISA, at 29 U.S.C. Sec. 1132(g). These fee-shifting statutes were enacted for the purpose of encouraging the private prosecution of certain favored actions, by requiring defendants who have violated plaintiffs' rights to compensate plaintiffs for the costs they incurred to enforce those rights. County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1327 (2d Cir.1990); Skelton, 860 F.2d at 253.

Courts may also make an exception to the American rule based on equitable doctrines, such as the "common fund" or "equitable fund" doctrine. ⁵ When a case results in the creation of a common fund for the benefit of the plaintiff class, the common fund doctrine allows plaintiffs' attorneys to petition the court to recover its fees out of the fund. In such a case, the defendant typically pays a specific sum into the court, in exchange for a release of its liability. The court then determines the amount of attorney's fees that plaintiffs' counsel may recover from this fund, thereby diminishing the amount of money that ultimately will be distributed to the plaintiff class. The common fund doctrine is based on the notion that not one plaintiff, but all " 'those who have benefitted from litigation should share its costs.' " Skelton, 860 F.2d at 252 (citations omitted).

I.

The issue in this case is whether the district court abused its discretion by failing to award appellants a multiplier for risk. However, we must first determine whether this case should be governed by common fund principles or by statutory fee-shifting principles, for "when a case is initiated under a statute with a fee-shifting provision [but] is settled with the creation of common fund, the question may arise whether statutory fee principles should govern in whole or in part the attorney fee award." Skelton, 860 F.2d at 254. In such a situation, "the statute must control and the doctrine must be deemed abrogated to the extent necessary to give full effect to the statute." Long Island Lighting, 907 F.2d at 1327.

In Skelton v. General Motors Corp., plaintiffs brought a class action against GM under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act. The Magnuson-Moss Act contained a fee-shifting provision; however, the plaintiff class settled the case through the creation of a common fund. We held there that "when a settlement fund is created in exchange for release of the defendant's liability both for damages and for statutory attorney's fees, equitable fund principles must govern the court's award of the attorney's fees." Skelton, 860 F.2d at 256 (citing In re Fine Paper, 751 F.2d 562, 582-84 (3d Cir.1984); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 164-65 (3d Cir.1973)).

Our holding in Skelton applies to this case. Even more so than the fee-shifting provision in Skelton, the terms of ERISA's fee-shifting provision do not purport to control fee awards in cases settled with the creation of a common fund, nor does the operation of common fund principles in this case conflict with the provision's intended purpose. Section 1132(g)(1) provides simply, "... [i]n any action under this title by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." This fee-shifting provision is unusual because it does not specify that prevailing plaintiffs may be awarded attorney's fees, but instead states that attorney's fees may be awarded to either party. ⁶ However, we have interpreted the provision to mean that although winning defendants may, in rare cases, collect fees from losing plaintiffs, the ERISA fee-shifting statute primarily benefits winning plaintiffs. See generally Chicago Painters & Decorators Pension, Health and Welfare, and Deferred Savings Plan Trust Funds v. Karr Bros., 755 F.2d 1285 (7th Cir.1985); Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820 (7th Cir.1984); Marquardt v. North Amer. Car Corp., 652 F.2d 715 (7th Cir.1981).

The settlement agreement approved by the court provides that the defendants are released from potential liability for statutory attorney's fees and that class counsel may instead petition the court for an award of fees from the settlement fund. Thus, the settlement agreement seems to anticipate that the amount paid by the defendants into the fund includes an unspecified sum for class counsel's fees.

An award of attorney's fees from the fund would therefore be consistent with the goal of the fee-shifting provision to allow " 'the offending party [to] bear the costs of the award rather than ... plan participants.' " Bowen v. Southtrust Bank of Alabama, 760 F.Supp. 889, 894 (M.D.Ala.1991) (citing Eaves v. Penn, 587 F.2d 453, 464 (10th Cir.1978)). Furthermore, an award of fees from the settlement fund comports with the fee-shifting policy of enabling meritorious plaintiffs who would not otherwise be able to afford to bring a...