Harman v. Lyphomed, Inc.
| Decision Date | 30 October 1991 |
| Docket Number | No. 90-2032,90-2032 |
| Parties | Fed. Sec. L. Rep. P 96,277 Sarah HARMAN, Samuel Golden, Emery Sugar, et al., Plaintiffs-Appellees, v. LYPHOMED, INCORPORATED, John N. Kapoor, Neil Gurwara, et al., Defendants. Appeal of ROBERT S. ATKINS AND ASSOCIATES, Robert D. Allison, Stull, Stull & Brody, Much, Shelist, Freed Denenberg, Ament & Eiger, Berger & Montague, Barrack, Rodos & Bacine, Milberg, Weiss, Bershad, Specthrie & Lerach, Plaintiff Class Counsel-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Sarah Harman, Samuel Golden, Emery Sugar, Emil Sugar, Joseph Harris and Barbara Kay Ament, pro se.
John W. Rotunno, William R. Carney, John B. Bitner, Larry L. Thompson, Bell, Boyd & Lloyd, Chicago, Ill., for defendants.
Robert D. Allison, pro se.
Michael P. Malakoff, argued, Berger, Kapetan, Malakoff & Myers, Pittsburgh, Pa., for appellant Robert D. Allison.
Michael J. Freed, Michael B. Hyman, Much, Shelist, Freed, Denenberg, Ament & Eiger, Chicago, Ill., for appellants.
Carole A. Broderick, Berger & Montague, pro se.
Leonard Barrack, Barrack, Rodos & Bacine, pro se.
David J. Bershad, Jerome Congress, Milberg, Weiss, Bershad, Specthrie & Lerach, pro se.
Geoffrey P. Miller, Chicago, Ill., for Milberg, Weiss, Bershad, Specthrie & Lerach.
Mark L. Levine, Kirkland & Ellis, Chicago, Ill., for appellant Stull, Stull & Brody.
Jules Brody, Stull, Stull & Brody, pro se.
Robert S. Atkins, pro se.
Robert E. Williams, Coleman & Associates, Geoffrey P. Miller, Chicago, Ill., for appellant Robert S. Atkins and Associates.
Before CUDAHY, COFFEY and FLAUM, Circuit Judges.
Out of a $10.4 million settlement fund, the district court awarded plaintiffs' counsel $950,000 in fees and $121,277 in expenses, the total of which--$1,071,277--is about 10.3 percent of the fund. 1 On the attorneys' motion for reconsideration, the court increased the fees to $1,050,000, plus the $121,277 in expenses. Counsel had requested $2,997,000 in fees and $131,900 in expenses. In making the award, the district court relied on the widely accepted lodestar-and-multiplier method and refused to adopt the percentage-of-the-fund approach. The court also declined to award a multiplier. On appeal the attorneys suggest adoption of the percentage-of-the-fund method as a rule of law in common fund cases. They also argue that the district court's methodology for computing the lodestar figure was improper, that the district court used an improper average for the attorneys' claimed hourly rates, that class counsel is entitled to a multiplier and that the court improperly denied expenses for computer-assisted legal research.
The underlying litigation was a class action that consolidated several individual suits and a derivative suit against Lyphomed for alleged violations of section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b) (1988). The complaint alleged fraudulent disclosures relating to product development and quality control. In 1987 the Food and Drug Administration was investigating alleged deficiencies in the firm's quality control measures and had alerted the company to possible violations of the Food, Drug and Cosmetic Act. This case was filed in January 1988. Discovery ensued, substantial settlement negotiations began in November 1988, a memorandum of understanding was reached in April 1989 and the parties entered a settlement stipulation in June 1989. On December 21, 1989, the district court approved the $10.4 million settlement.
Plaintiffs' counsel then sought fees and expenses from the common fund. In their December 18, 1989, request, counsel asked for $2,997,000 in fees, or just under thirty percent of the total. They also calculated a lodestar of $1,376,423 and suggested a multiplier of 2.177, yielding the same total. The attorneys claimed that the amount was fair and reasonable and that it did not exceed the thirty percent cap promised to class members. Counsel also requested $131,899.93 in expenses. Documentation of the fee request included summaries of expended time, listings of current hourly rates, work descriptions, biographies schedules of expenses and depositions from other attorneys attesting to the rates. The request covered sixty-one attorneys--thirty-one partners, twenty-eight associates and two student interns--representing four Chicago, four New York and two Philadelphia law firms.
The district court's decision of February 27, 1990, 734 F.Supp. 294, begins with four assumptions. The first is that the substantive reforms that took place at Lyphomed were the result of the FDA enforcement action and not the class action. Second, the court believed that the settlement was not the "extraordinary damage recovery" claimed by counsel. Third, the court considered it a strike against counsel that the settlement had been structured in a way that might hurt class members holding Lyphomed stock; whether true or not, the court thought it counsel's duty to mention this aspect of the settlement. Finally, the court observed that the case "did not involve protracted litigation," although discovery was somewhat vigorously resisted by the defense.
Reviewing the time and rate submissions, the court clearly suspected overbilling. The order observes that "a large number of attorneys [are] billing a substantial amount of time and it appears that such circumstances resulted in otherwise unnecessary duplication of effort." Order at 4. Further, the court requested that counsel provide more detailed billing data for three sample periods of the litigation: preparation of the class certification brief; final settlement approval; and court appearances for twenty-six status and motion calls. The court remained somewhat dissatisfied with the submissions but calculated needed subtotals and totals on its own.
To determine the award, the court first calculated a lodestar. Examining the first of the three sample periods, the judge concluded that class certification preparation showed that "much of counsel's bill consists of unnecessary duplication of work brought about by having an excessive number of attorneys involved in the case." Order at 7. The judge reduced the requested $58,591 to $30,000. The court then examined the submissions relating to the memorandum in support of final settlement and decided that the $40,441 billed was overstated; he granted $20,000 as "more than adequate compensation for the memorandum." Id. Finally, the court detected overbilling in the $24,406 requested for ninety-nine hours of court appearance involving twenty-six status and motion calls. Included in the request were court appearances on dates for which the docket showed no court activity. 2 After eliminating the hours of a New York partner the judge thought unwarranted and reducing the rates of a New York associate and two Chicago partners, the court allowed $14,897 of the originally requested $24,406 for appearances. Id. at 8. Based on the 47.4 percent reduction (to $64,897) in the three samplings' total lodestar request of $123,438, the court permitted 52.6 percent of the total lodestar requested for the case, netting $783,491.
The judge then took another tack. He assumed that 3,500 hours represented a reasonable number of associate hours for the case, which is close to the requested associate hours of 3,472. He also assumed--on what basis, the opinion does not say--that partners should have spent thirty percent as much time as associates, and that paralegals should have spent fifty percent as much. (This 3:10:5 ratio we will call the "staffing ratio.") Assuming rates of $225 for partners, $175 for associates and $60 for paralegals as "more than adequate," the court calculated a lodestar of $236,250 for partners, $612,000 for associates and $105,000 for paralegals (total = $953,750). The court believed this a bit high and rounded the figure to $950,000, which the court accepted as the lodestar for the case.
The court then assessed the arguments for a muliplier. Counsel contended that a multiplier of more than two was appropriate to attract counsel to contingent, complex litigation of this type. The court concluded that "[s]uch an argument is ludicrous as applied to this case" because plenty of attorneys had found the case worth their time. Id. at 10. Also believing that the quality and complexity of the work had been compensated by the high hourly rates and number of hours, the court denied any multiplier.
The court then considered the attorneys' suggestion to use the percentage-of-the-fund method for calculating the fees. The attorneys argued that the percentage method was simpler and less time-consuming and avoided the lodestar's incentive to bill excessive hours. But the court believed the lodestar-and-multiplier approach manageable to apply and found unpersuasive the fact that the lodestar method generally results in awards of twenty to thirty percent. The court also found undesirable incentive features in the percentage method: "A percentage award provides incentive to the attorneys to settle relatively cheaply early in the litigation since it can provide them with a larger hourly fee and then free them up to pursue more cases that they can also settle early in the litigation for less than the best value for the class." Id. at 13 (footnote omitted). The court concluded that in the absence of controlling precedent, it would continue to apply the lodestar-and-multiplier method. As an afterthought, the court remarked that even if required to use the percentage method, a percentage lower than the traditional 20 percent floor would be appropriate in view of the relatively few risks in this case.
The court also granted counsel's request for $131,900 in expenses, except for $10,623 in computer-assisted research fees, resulting in a total of $121,277. The court believed the computer expense was adequately reflected in the...
To continue reading
Request your trial
-
In re Unisys Corp. Retiree Med. Bene. ERISA Lit.
...513, 515-17 (6th Cir.1993); Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 526 n. 10 (1st Cir.1991); Harman v. Lyphomed, Inc., 945 F.2d 969, 974-75 (7th Cir.1991); Brown, 838 F.2d at The Court of Appeals for the Third Circuit has not considered whether the Lindy decisions preclud......
-
Kuhnlein v. Department of Revenue
...N.A., 34 F.3d 560 (7th Cir.1994); Rawlings, 9 F.3d at 517; Longden v. Sunderman, 979 F.2d 1095 (5th Cir.1992); Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir.1991); Florida v. Dunne, 915 F.2d 542 (9th Cir.1990); In re Agent Orange Product Liability Litigation, 818 F.2d 226 (2d Cir.1987); C......
-
Littlefield v. McGuffey
...methodology used in setting the attorney's fee. Consequently, the scope of review is quite limited and deferential. Harman v. Lyphomed, Inc., 945 F.2d 969, 973 (7th Cir.1991). A district court's rulings on attorney's fees will rarely be reversed on appeal, and then only for abuse of discret......
-
Chun v. Bd. of Trustees of ERS
...lodestar approach altogether. See, e.g., Florin v. Nationsbank of Georgia, 34 F.3d 560, 565 (7th Cir.1994) (citing Harman v. Lyphomed, Inc., 945 F.2d 969, 974 (7th Cir.1991)). The percentage method is not without flaws of its Although ... concerns with respect to lodestar awards of attorney......
-
Show me the Money! The Recoverability of Computerized Legal Research Expenses by the Prevailing party in the Federal Circuits
...plaintiff’s Westlaw charges “on the basis that research is factored into an attorney’s hourly rate”). 133Harman v. Lyphomed, Inc., 945 F.2d 969, 976 (7th Cir. 1991) (holding that “[c]omputer-assisted research fees—so long as reasonably incurred—in theory reduce the number of attorney hours ......