In re Copley Pharmaceutical, Inc.

• Decision Date: 30 April 1998
• Docket Number: MDL No. 1013.
• Parties: In re COPLEY PHARMACEUTICAL, INC., "Albuterol" Products Liability Litigation.
• Court: U.S. District Court — District of Wyoming

Page 1407

1 F.Supp.2d 1407

In re COPLEY PHARMACEUTICAL, INC., "Albuterol" Products Liability Litigation.

MDL No. 1013.

United States District Court, D. Wyoming.

April 30, 1998.

Stanley M. Chesley, Janet G. Abaray, Waite, Schneider, Bayless & Chesley Co., L.P.A., Cincinnati, OH, Michael R. O'Donnell, Burke, Woodard & O'Donnell, Cheyenne, WY, for Plaintiffs.

Sheila L. Birnbaum, Skadden, Arps, Slate, Meagher & Flom, New York City, for Defendant.

ORDER ON JOINT PETITION OF CLASS COUNSEL AND PLAINTIFFS' STEERING COMMITTEE FOR AN AWARD OF ATTORNEYS' FEES AND REIMBURSEMENT OF LITIGATION EXPENSES

BRIMMER, District Judge.

This matter came before the Court upon the Joint Petition of Class Counsel and Plaintiffs' Steering Committee seeking an award of attorneys' fees and expenses from the common fund created by the settlement of this action. The Court, having heard oral argument, having reviewed the materials on file, and being fully advised in the premises herein, hereby FINDS and ORDERS as follows:

Background

The Court has provided a more detailed history of this action in its prior orders. See In re Copley Pharmaceutical, Inc., 161 F.R.D. 456 (D.Wyo.1995); In re Copley Pharmaceutical, Inc., 158 F.R.D. 485 (D.Wyo.1994); Order Approving Settlement, November 15, 1995. Suffice it to say that this action arose out of the contamination with pseudomonas fluorescens of four batches of Albuterol manufactured by Defendant Copley Pharmaceutical, Inc. Individuals believing that this organism, or other contaminants in Defendant's products, caused injuries to themselves or others brought suit in state and federal courts throughout the country. Defendant removed those actions that it could to federal court, and eventually sought relief from the Judicial Panel for Multi-District Litigation. On June 7, 1994, the MDL Panel consolidated all federal cases against Defendant before this Court.

Following certification as a class action and appointment of class counsel, this action moved forward with surprising speed and efficiency. During expedited discovery, class counsel reviewed and analyzed more than 125,000 pages of documents and deposed roughly one hundred witnesses. One year and seven days after consolidation before this Court, trial commenced. And after 42 days of trial, in which each side presented an impressive case, the parties entered into a preliminary settlement agreement.

Class counsel and Plaintiffs' Steering Committee ("class counsel") now seek attorneys' fees and expenses pursuant to that settlement agreement ("Agreement"). Class counsel requests an award of 25% of what they deem to be a $150 million fund, resulting in a fee of $37.5 million; Defendant urges the Court to award roughly 20% of the $60 million that it estimates has already been paid out under the fund, resulting in a fee of $12 million.

The Settlement Agreement

The Agreement, perhaps surprisingly, does not fix the amount of class counsel's attorneys' fees, instead leaving this matter to the Court's discretion. Thus the Agreement merely provides that "Class Counsel shall receive an award in an amount approved by the Court, based upon the Gross Amount of money and benefits received by the Class and Claimants from all settlement funds...." (Agreement ¶ 8.1.) "`Gross Amount' as used in paragraph 8.1" is defined by the Agreement as "Copley's maximum potential contribution to the settlement funds before any remittitur, i.e., $150,000,000." (Agreement ¶ 3.19.) Private fee arrangements between claimants and non-class counsel are also addressed by the Agreement, which provides that "the Court shall reserve the power to set maximum limits on contingent fees, and [] the Court may make appropriate reductions on such contingent fee amounts for the cost of `common benefit' services provided by Class Counsel." (Agreement ¶ 8.3.)

While largely silent on the amount of the fees, the Agreement does explicitly address the allocation of fees. For Funds One, Two, and Three, the Agreement provides that each claimant meeting the fund's criteria will receive an award "less his or her pro rata share of attorneys' fees, costs, and administrative expenses." (Agreement ¶¶ 5.3.1, 5.4.1, 5.5.1.) Further, the Agreement provides that the money in Fund Four will be used for payments to claimants and for "payment of attorneys fees, litigation costs and administrative costs...." (Agreement ¶ 5.6.5.)

The Supplement to the Agreement broadens the definition of "Claimant" to include "Additional Claimants," or "those who timely requested exclusion from the class." (Supp. Agreement ¶¶ 3.6, 9.6.) However, the Supplement explicitly provides that "[n]o deductions will be made from any amounts paid to such Claimants for their pro rata share of attorneys' fees or litigation expenses awarded by the Court pursuant to paragraph 8.1." (Supp. Agreement ¶ 9.6.3.)

The Agreement also addresses Defendant's responsibilities regarding fees and expenses. The Agreement provides that "[i]f the total money paid from all settlement funds to Claimants and for attorneys' fees, litigation costs and administrative expenses pursuant to section 8 of this Agreement is more than $65,000,000," Defendant's remittitur will be reduced by "an amount equal to each Claimants' [sic] per capita share of attorneys' fees, costs, and administrative expenses awarded or paid pursuant to section 8...." (Agreement ¶¶ 5.3.3(ii), 5.4.3(ii), 5.5.3(ii).)

Discussion

The settlement in this case created a "common fund" from which the plaintiff class obtained a benefit. In a rare exception to the American rule that parties bear their own costs in litigation, "a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980); see also Aguinaga v. United Food & Commercial Workers Int'l Union, 993 F.2d 1480, 1482 (10th Cir.1993); Brown v. Phillips Petroleum Co., 838 F.2d 451, 454 (10th Cir.1988). This exercise of the federal court's historic equity jurisdiction, see Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 164, 59 S.Ct. 777, 83 L.Ed. 1184 (1939), prevents the unjust enrichment (at the successful litigant's expense) of "persons who obtain the benefit of a lawsuit without contributing to its costs," see Boeing, 444 U.S. at 478, 100 S.Ct. 745. Accordingly, the attorneys who contributed to the creation of the common fund in this case are entitled to a reasonable fee therefrom.

Before considering the proper methodology for awarding attorneys' fees out of a common fund, the Court feels compelled to define its role in these proceedings. When an attorney makes a claim for fees from a common fund, his interest is "adverse to the interest of the class in obtaining recovery because the fees come out of the common fund set up for the benefit of the class." Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513, 516 (6th Cir.1993). This divergence of interests requires a court to assume a fiduciary role when reviewing a fee application, because there is often no one to argue for the interests of the class: class members with small individual stakes in the outcome will often fail to file objections because they lack the interest or resources to do so, and the defendant who contributed to the fund will usually have scant interest in how the fund is divided between the plaintiffs and class counsel. Id. Defendant in the instant case does possess a common interest with the class in the amount of fees and expenses awarded, because Defendant will share the burden of fees and expenses under the remittitur formulas provided by the settlement agreement. However, this interest potentially conflicts with those of the class because Defendant will only share this burden if a threshold of recovery is reached, and Defendant denies that this threshold has been reached. Thus the Court will follow the Tenth Circuit's instruction that a court must act as a fiduciary for the beneficiaries of a common fund, weighing the appropriate interests of the beneficiaries in light of the efforts of counsel on their behalf. See Brown v. Phillips Petroleum Co., 838 F.2d 451, 456 (10th Cir.1988) (quoting Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237, 251 (1985)).

The two competing methodologies for the award of attorneys' fees from a common fund are the lodestar method and the percentage of the fund method. In the Tenth Circuit, following Brown and Uselton v. Commercial Lovelace Motor Freight, Inc., 9 F.3d 849, 853 (1993), either method is permissible in common fund cases. Gottlieb v. Barry, 43 F.3d 474, 482-3 (10th Cir.1994). While there are advantages and disadvantages associated with each method, the Tenth Circuit has recognized the recent trend towards utilizing the percentage method in common fund cases, see id., and in Rosenbaum v. MacAllister, the Tenth Circuit noted that it had expressed "a preference for the percentage of the fund method," 64 F.3d 1439, 1445 (1995). In all cases, whichever method is used, the court must consider the twelve Johnson factors to check the reasonableness of the fee awarded. Id. Thus the Court will consider whether, despite the Tenth Circuit's expressed preference, there are reasons to use the lodestar rather than the percentage of the fund method.

Traditionally, attorneys' fees in common fund cases were computed as a percentage of the fund, subject to considerations of reasonableness, and in every Supreme Court case that addressed the issue, the Court awarded attorneys' fees on a percentage of the fund basis. See, e.g., Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939); Central R.R. & Banking v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885); Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1881). In the 1970's, the Third Circuit initiated the move towards the...