Nilsen v. York County

• Decision Date: 10 November 2005
• Docket Number: No. CIV 02-212-P-H.,CIV 02-212-P-H.
• Parties: Michele NILSEN, et al., on Behalf of Themselves and on Behalf of Others Similarly Situated, Plaintiffs v. YORK COUNTY, Defendant.
• Court: U.S. District Court — District of Maine

400 F.Supp.2d 266

Michele NILSEN, et al., on Behalf of Themselves and on Behalf of Others Similarly Situated, Plaintiffs v. YORK COUNTY, Defendant.

No. CIV 02-212-P-H.

United States District Court, D. Maine.

November 10, 2005.

David G. Webbert, Johnson & Webbert, LLP, Augusta, ME, Howard Friedman, J. Lizette Richards, Myong J. Joun, Boston, MA, for Michele Nilsen, On Behalf Of Herself And On Behalf Of Others Similarly Situated and Michael Goodrich and Charles Neville, Plaintiffs.

John J. Wall, III, Monaghan, Leahy, Hochadel & Libby, Portland, ME, Harrison L. Richardson, Thomas R. McKeon, Richardson, Whitman, Large & Badger, Portland, ME, Peter T. Marchesi, Wheeler & Arey, P.A., Waterville, ME, for York County, Defendant.

ORDER ON MOTION FOR AWARD OF ATTORNEY FEES AND LITIGATION EXPENSES

HORNBY, District Judge.

I. INTRODUCTION

This is an award of attorney fees and expenses, out of a $3.3 million class action settlement for arrestee strip searches at the York County Jail. Although I approved final settlement in my Orders of August 18 and September 8, 2005, I reserved ruling on the motion for attorney fees. I conclude that the preferred method for determining a reasonable attorney fee is a market-mimicking analysis. Although the market data here is scant, it leads me to award 25% of the settlement, $825,000. Final expenses remain to be determined. But it appears that approximately $2,400,000 (including interest of about $70,000)¹ will go to the class members.

II. PROCEDURAL BACKGROUND

Individuals processed at York County Jail ("Jail") filed a lawsuit under 42 U.S.C § 1983. They claimed that the Jail violated the Fourth Amendment by maintaining a policy of "strip searching" arrestees without individualized suspicion. After extensive discovery by the parties, I granted the plaintiffs' motion for class certification under Federal Rule of Civil Procedure 23(b)(3). Certification was appealed and affirmed. Tardiff v. Knox County, 365 F.3d 1 (1st Cir.2004). The parties then began discussions with a mediator. They subsequently filed a notice of voluntary settlement.

The settlement agreement requires York County to establish a common fund of $3.3 million in satisfaction of all its liabilities (including attorney fees). The fund is to be distributed to class members after deduction of costs and fees. The agreement also provides that the plaintiffs' lawyers will ask the Court to award attorney fees out of the fund, in the amount of 30%, along with reimbursement for costs and expenses. Obviously the agreement does not and cannot dictate what amount I will actually award.

I held a preliminary hearing on the proposed settlement, and approved class-wide notice. Prior to the final fairness hearing, the plaintiffs submitted a Motion for Attorney's Fees and Litigation Expenses.² After the final fairness hearing, I approved the settlement in all respects but one, and gave the parties the opportunity to amend. At that time I reserved ruling on the request for attorney fees and expenses. The parties amended the settlement to cure the offending term, and on September 8, 2005, I granted final approval of the settlement. The motion for attorney fees, therefore, is now ripe for decision.

The plaintiffs' lawyers have asked me to award attorney fees, using the "percentage-of-funds" method, in the amount of 30% of the total settlement fund (irrespective of interest.)³ As the settlement fund is worth $3.3 million, they are asking for $990,000. (On the basis solely of hourly rates and hours spent, the lawyers estimated in June, 2005, that they would accrue somewhat less than $520,000 by the time everything is complete, although that estimate may now be higher, see Pls.' Rep. on Admin. of Settlement 5 (Docket Item 181).)⁴ They also request reimbursement of litigation expenses and claims administration costs, in the amount of 3% of the total settlement, i.e., $99,000. If awarded 30% in fees, they have agreed to limit cost and expense reimbursement to this 3%, and propose to pay any additional expenses out of attorney fees.

III. ANALYSIS

A. ATTORNEY FEES⁵

Under the Federal Rules of Civil Procedure, in a class action I may award "reasonable attorney fees and nontaxable costs authorized by law." Fed.R.Civ.P. 23(h). Had this lawsuit proceeded to a successful judgment for the plaintiffs, they could have recovered from the defendant York County reasonable attorney fees and costs under 42 U.S.0 § 1988, on top of any damages they received. Instead, York County settled the lawsuit before trial for a lump sum of $3.3 million, covering all its liabilities, including attorney fees. Second Am. Settlement Agreement ("Settlement Agreement") ¶¶ 6-7 (Docket Item 168). That settlement amount reflects both the class members' compensable injuries and their statutory claim to attorney fees.⁶ Unless the lawyers who have produced the successful outcome are paid, the class members will be unjustly enriched.⁷ See Florin v. Nationsbank of Ga. (Florin 1), 34 F.3d 560, 564 (7th Cir.1994) ("[T]he settlement agreement seems to anticipate that the amount paid by the defendants into the fund includes an unspecified sum for class counsel's fees...."); Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980) ("[P]ersons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched ..."); Restatement (Third) of Restitution and Unjust Enrichment § 30 cmt. b, at 75 (Tentative Draft No. 3, 2004) (when a fee-shifting case settles through creation of a common fund, "[q]uestions of unjust enrichment may guide the court's inquiry").⁸ By the terminology of some of the caselaw, this settlement is a "common fund," and the common fund doctrine allows me to award attorney fees from it. In re Compact Disc Minimum Advertised Price Antitrust Litig. (In re Compact Disc I), 216 F.R.D. 197, 216 n. 43 (D.Me.2003) (citing In re Thirteen Appeals Arising out of the San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295, 307 (1st Cir.1995)); see also 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 14:6 (4th ed.2002).⁹

Making a fair fee award from a common fund in a class action settlement is a difficult determination for a judge. There are no adversarial presentations to test the fee claim, and our legal system does not ordinarily expect judges to behave as inquisitors, gathering testimony and collecting information on their own. Presented with an unopposed request, therefore, I depend upon my own analysis and secondary research — against a backdrop of popular dissatisfaction with large and highly publicized fees. Third Circuit Task Force Report, Selection of Class Counsel, 208 F.R.D. 340, 343-44 (2002) ("2002 Task Force Report") ("[T]here is a perception among a significant part of the non-lawyer population ... that class action plaintiffs' lawyers are overcompensated for the work that they do."). But the lawyers here are highly skilled and experienced civil rights attorneys. Their professional performance was exemplary; they represented the class members' interests zealously, achieving an excellent result for the class under the circumstances. For these reasons, they deserve a reasonable fee that duly recognizes their professional excellence and performance and provides an appropriate incentive for lawyers to take on future meritorious cases on behalf of a client class.¹⁰ At the same time, they do not deserve a windfall at the expense of the class and I do not want the size of the award to encourage frivolous litigation that benefits primarily lawyers.

In candor, I simply do not know the precise fee award that meets those concerns.¹¹ I can only detail the process I have used.

(1) Method: Lodestar or Percentage-of-Funds. In the First Circuit, courts have discretion to award fees from a common fund "either on a percentage of the fund basis or by fashioning a lodestar." In re Thirteen Appeals, 56 F.3d at 307 (approving allocation of fee award using percentage-of-funds method); United States v. 8.0 Acres of Land, 197 F.3d 24, 33 (1999).¹² As between the two methods, the First Circuit has noted that the percentage-of-funds method is the prevailing practice, and that it may have distinct advantages over the lodestar approach. In re Thirteen Appeals, 56 F.3d at 307; see also 2002 Task Force Report, 208 F.R.D. at 422 (suggested procedures for reviewing fee requests in non-auction cases); In re Compact Disc I, 216 F.R.D. at 215. According to the Third Circuit, the percentage-offunds method is preferred in common fund cases "because it allows courts to award fees from the fund in a manner that rewards counsel for success and penalizes it for failure." In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 300 (3d Cir.2005) (quoting In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283, 333 (3d Cir.1998) )(internal quotation marks omitted).¹³ I shall use the percentage-of-funds method here — i.e., is the total fee reasonable when examined as a percentage of recovery?

(2) The Limited Role of the Lodestar. As I have previously recognized, the "lodestar approach (reasonable hours spent times reasonable hourly rates, subject to a multiplier or discount for special circumstances, plus reasonable disbursements) can be a check or validation of the appropriateness of the percentage-of-funds fee, but is not required." In re Compact Disc I, 216 F.R.D. at 215-16; see also Vaughn R. Walker & Ben Horwich, The Ethical Imperatives of a Lodestar Cross-Check: Judicial Misgivings About "Reasonable Percentage" Fees in Common Fund Cases, 18 Geo. J. Legal Ethics 1453, 1468, 1470 (2005) (arguing that courts reviewing percentage fees have ethical obligation to perform cross-check); but see 2002 Task Force Report, 208 F.R.D. at 422 (expressing skepticism of even this limited use of the lodestar; "the lodestar is at most a relevant factor ... and it should not receive exaggerated importance."). Here, the lodestar figure is lower than...