Longden v. Sunderman
| Decision Date | 28 December 1992 |
| Docket Number | 91-7028 and 92-1474,Nos. 91-1592,s. 91-1592 |
| Citation | 979 F.2d 1095 |
| Parties | Larry L. and Patricia A. LONGDEN, et al., Plaintiffs, v. Jeffrey S. SUNDERMAN, et al., Defendants. Deborah R. MASSIE, A.P.C. and Approximately 1008 Class Plaintiffs, Appellants, v. SUSMAN GODFREY, Burleson, Pate & Gibson, Furth, Fahrner & Mason, Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C. and Schall, Boudreau & Gore, Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Deborah R. Massie, San Diego, Cal., pro se and for Deborah R. Massie, et al.
R. Dennis Wright, M. Michael Gill, C. Brooks Wood, Hillix, Brewer, Hoffhaus, Whittaker & Wright, Kansas City, Mo., Robert H. Mow, Jr., David C. Godbey, Hughes & Luce, Dallas, Tex., for Arthur Andersen & Co.
Robin Hartmann, Haynes & Boone, Dallas, Tex., for Linde, Thomson, Fairchild, Langworth, Kohn & Van Dyke.
Terrell Oxford, Lead Counsel, Stephen D. Susman, Martha A. Evans, Susman & Godfrey, Dallas, Tex., Steward M. Weltman, Lead Counsel, Lawrence H. Eiger, Michael J. Freed, Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C., Chicago, Ill., Craig C. Corbitt, Furth, Fahrner & Mason, San Francisco, Cal., for all appellees.
Appeals from the United States District Court for the Northern District of Texas.
Before BROWN, GARWOOD and DeMOSS, Circuit Judges.
PROLOGUE
Appellant, Deborah R. Massie (Massie), on behalf of herself and some 1008 class plaintiffs, appeals from a district court judgment awarding attorneys' fees to Appellees (Susman Attorneys) in this securities fraud and RICO class action settlement. At the district court level, Massie submitted a fee petition, and, after the district court ruled against her, filed motions to reconsider the rulings. The key issue that Massie raises on appeal is whether the district court abused its discretion in granting the Susman Attorneys' joint petition for attorneys' fees and their motion for payment of attorneys' fees. We affirm the district court's judgment.
This case is the classic situation where a small law firm, Massie & O'Brien, A.P.C., later Deborah R. Massie, A.P.C. (Massie) having initiated, with the assistance of a local counsel, Boyd & Fults (Boyd) multiple, individual actions against common defendants, found the ensuing litigation too complex to handle, joined larger, specialized firms, Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C. (Much), Susman Godfrey, L.L.P. (Susman), Furth, Fahrner & Mason (Furth), Burleson, Pate & Gibson (Burleson), and Schall, Boudreau & Gore (Schall) (altogether, including Massie, Class Counsel) to salvage the lawsuits. Upon conversion of the litigation by these firms into a class action and upon their negotiation of a successful settlement, Massie sought payment of attorneys' fees, including costs and expenses, for time and resources expended prior to the larger firms' involvement.
From October 1986 to June 1987, Massie, representing 1008 plaintiffs, filed 93 individual actions in United States District Court for the Northern District of Texas against Jeffrey Sunderman and several corporate entities which he controlled in the syndication of 114 limited partnerships (altogether Sunderman). In the same suit, Massie also filed against attorneys who assisted in formation of the partnerships (the Linde defendants), and against accountants, including Arthur Andersen, who assisted in forming the partnerships (the Anderson defendants) for securities fraud and RICO violations in connection with the sale of interests in the Sunderman partnerships. 1 In March 1987, the district court urged Massie and Boyd to convert the case to a class action. They responded with a written opposition to conversion, arguing that the factual prerequisites to class certification under F.R.Civ.P. 23 were nonexistent and that neither counsel nor plaintiffs contemplated conducting or funding litigation on a large scale. 2
In the summer of 1987, one of the individual plaintiffs, also a Much client, asked Much to investigate the status of the litigation. Much contacted Susman, and the two firms concluded that the case should be converted to a class action. After discussion with Massie, Much and Susman agreed to enter into the litigation and to convert the case to a class action. 3
In December 1987, Massie, Much and Susman filed a motion for leave to file a class action complaint on behalf of Longden et al. 4 Because discovery deadlines had lapsed in several of the individual actions due to the Massie and Boyd firms' negligent handling of the cases, Much and Susman assisted Massie from 1987 to early 1988 in defending several motions to dismiss for discovery violations. The Susman Attorneys did not contest most of Massie's time spent after entry of Much and Susman.
In January 1988, the district court granted leave to file a class action. At this time, Craig Zafis, the member of the Massie firm who had principally handled the litigation, left Massie and joined Schall, but remained involved in the case. It is not contested that Massie's involvement in the class action from this point on was other than de minimus.
In 1989, the Linde defendants settled for $7 million. On May 1, 1990, the district court denied Andersen's summary judgment motion for dismissal due to lapse in discovery as to 77 of the 114 partnerships and granted summary judgment against plaintiffs in 37 of the partnerships. Longden v. Sunderman, 737 F.Supp. 968 (N.D.Tex.1990).
The Andersen defendants settled on March 5, 1991 for $19.2 million plus interest. 5 In mid-March, Class Counsel mailed court notice concerning a hearing on approval of the settlement to all class plaintiffs and published the notice in the Wall Street Journal. 6 Based on Susman, Much and Furths' review of all Class Counsels' time and expense records, the Susman Attorneys filed a joint petition for fees benefitting the class as a whole. Massie disagreed with the other firms' calculations and filed what she characterized as her own fee petition. Included in the court notice was the requirement that for the court to hear objections to the settlement or fee petitions, the parties must submit written objections by April 15, 1991. 7 The Susman Attorneys filed a written objection to Massie's fee petition; however, no one filed a written objection to the Susman Attorneys' petition.
Massie appeals from the district court judgment awarding (1) the full amount requested by the Susman Attorneys' petition, that is 27.5% of both the Andersen and Linde Settlement funds, to Class Counsel, excluding her firm, and (2) 40% of her requested fee, based on a finding that her efforts constituted only a 40% benefit to the class. Massie's total fee award was $260,000. 8
Massie sought compensation for its time and expenses as a firm, and, in addition, reimbursement on behalf of all its individual clients for the $492,600 that they had paid to Massie as a retainer when they employed Massie to prosecute their individual actions. Massie argues that the district court erred by applying, or applying incorrectly, the incorrect standard when evaluating the competing fee petitions.
This circuit utilizes the "lodestar method" to calculate attorneys' fees. 9 Copper Liquor, Inc. v. Adolph Coors Co., 684 F.2d 1087, 1092 (5th Cir.1982). The "lodestar" is computed by multiplying the number of hours reasonably expended by the prevailing hourly rate in the community for similar work. Id. The court then adjusts the lodestar upward or downward depending on the respective weights of the twelve factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974). 10 The district court must explain how each of the Johnson factors affects its award, regardless of their specific factual significance; and "while the subsidiary fact findings are reversible only if clearly erroneous ... review of the total fee is [governed] by the precept that its amount lies in the trial judge's discretion, and is to be recalculated only if that discretion is abused." Copper Liquor, 684 F.2d at 1092, 1094 (emphasis added).
Massie contends that the district court abused its discretion by evaluating the Susman Attorneys' fee petition differently than the Massie fee petition and by making its determination without substantial factual support in the record. Specifically, Massie argues that although the court used the lodestar method to some extent in evaluating her fee petition, the court erred by not using this method in evaluating the Susman Attorneys' petition.
It is clear from the district court's discussion, however, that it had reviewed all of the relevant time and expense records before arriving at its conclusions, and that it discussed each Johnson factor when it ruled on the fee issue. 11 Not only did the district court use the proper standard in evaluating and determining attorneys' fees, its findings of fact were sufficiently based on record evidence.
For example, in reducing Massie's requested fee of $651,582 by 60%, the district court pointed out that the individual cases as handled by Massie and Boyd prior to the entry of Much and Susman had been handled more ineptly than any litigation in that court since that district court judge came on the bench in 1979. Considering that Massie originally opposed class certification and was ultimately responsible to her clients for allowing discovery to lapse, which resulted in near dismissal of several claims, the 40% award, or 60% reduction, was, as the court noted, generous.
Massie, herself, acknowledged at the May 1, 1991 hearing that prior to Much and Susman's involvement the case was a "litigation abyss." 12 Moreover, in her fee petition, Massie admitted that most of her claimed time excluded by the Susman Attorneys' evaluation did not provide a benefit to the class as a whole. 13
Massie also argues that the district court erred when it awarded a...
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