Petruzzi's, Inc. v. Darling-Delaware Co., Inc.

• Decision Date: 08 November 1996
• Docket Number: Civil Action No. 86-0386.
• Citation: 983 F.Supp. 595
• Parties: PETRUZZI'S, INC., formerly known as Petruzzi's IGA Supermarkets, Inc., Plaintiff, v. DARLING-DELAWARE COMPANY, INC., and Moyer Packing Company, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

983 F.Supp. 595

PETRUZZI'S, INC., formerly known as Petruzzi's IGA Supermarkets, Inc., Plaintiff, v. DARLING-DELAWARE COMPANY, INC., and Moyer Packing Company, Defendants.

Civil Action No. 86-0386.

United States District Court, M.D. Pennsylvania.

November 8, 1996.

Order Denying Reconsideration August 18, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Warren Rubin, Philadelphia, PA, Larry S. Keiser, Wilkes-Barre, PA, Douglas Lang, Philadelphia, PA, Objector: Douglas Lang, Philadelphia, PA (Robzens), for Plaintiffs.

David Acker, Williams Bay, WI, for Darling Delaware Co.

David Marion, Philadelphia, PA, for Moyer Packing Co.

MEMORANDUM

VANASKIE, District Judge.

As the concluding aspect of a class action settlement that yielded a dollar recovery to class members of approximately $400,000, counsel for the plaintiff class (hereinafter referred to as "class counsel") requests attorneys' fees in the amount of $4.7 million. Class counsel justifies this request by asserting that the full benefit of the two settlement agreements to the class was $9.4 million, a sum that class counsel claims represents the settling defendants' exposure under agreements that essentially accorded to class members 10% of their documented sales to the settling defendants over a prescribed time frame.¹ Contending that the entire "settlement fund" encompasses the settling defendants' agreement to pay fees over and above payments made to class members, and asserting that a fee of one-third of the "settlement fund" would be reasonable, class counsel arrives at a full settlement "value" of $14.1 million. Class counsel thus seeks a fee of $4.7 million, or 50% of the hypothetical $9.4 million benefit to the class.²

Defendant Darling, which is responsible under its settlement agreement for any fee award in excess of $1 million, agrees with class counsel that fees should be calculated on a percentage basis, but argues that the dollar multiplicand in the calculation should be the amount actually recovered by class members, $399,656.10, as opposed to the mathematically derived hypothetical "benefit" of $9.4 million. Under Darling's approach, a fee of one-third of the actual recovery would result in class counsel receiving only $120,000 for a ten year old case in which class counsel estimates that hours expended multiplied by 1995 hourly rates approximate $2.9 million.

In short, class counsel asks that I award fees that are approximately 12 times the amount actually recovered by class members. Darling, on the other hand, asks that I award fees that are less than 5% of the gross value of attorneys' services purportedly expended on behalf of the class. Both positions are based on precise arithmetic calculations — plaintiff's value is essentially the product of multiplying estimated sales made to the settling defendants by the aggregate settlement payment of 10% of those sales; Darling's value is the sum of the claims that have been approved and paid. Both positions suffer from the same fundamental flaw — they ascribe unrealistic values to the benefit conferred on the class by the settlement agreements. Class counsel sought approval of a settlement that reasonably would not result in anything close to 100% recovery. By the same token, however, the benefit conferred on the class is certainly more than the amount of claims actually paid. The difficulty here is that neither party has presented any basis for determining the reasonable value of the settlement agreements.

Our Court of Appeals has held that where, as here, "the nature of the settlement evades the precise evaluation needed for the percentage of recovery method [of calculating class counsel fees]," a district court may employ the lodestar method.³ In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 (3d Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995) ("General Motors"). Notwithstanding the arguments of counsel pertaining to the appropriateness of the percentage of recovery method, I believe that the penultimate goal of judicial determination of class counsel fees — the award of an amount that "`is fair, adequate and reasonable,'" Weiss v. Mercedes-Benz of North Am., Inc., 899 F.Supp. 1297, 1304 (D.N.J.), aff'd mem., 66 F.3d 314 (3d Cir.1995) — is best achieved in this case by using the lodestar method as the "primary determinant." General Motors, 55 F.3d at 821. After all, it has been recognized that "[t]he lodestar is strongly presumed to yield a reasonable fee." Washington v. Philadelphia County Court of Common Pleas, 89 F.3d 1031, 1035 (3d Cir. 1996).

In calculating the lodestar for this case, hours expended in connection with claims asserted against dismissed defendants Herman Isacs, Inc. and Standard Tallow Corporation will be excluded. Furthermore, in light of our Court of Appeals' pronouncement that the Supreme Court's rejection of a risk enhancement multiplier in City of Burlington v. Dague, supra, is applicable in the context of a class action settlement similar to that involved in this case, General Motors, 55 F.3d at 810, n. 27, 822, class counsel's request for a fee enhancement will be denied. On the other hand, the protracted course of these proceedings militates in favor of use of 1995 hourly rates for purposes of calculating the lodestar amount. Moreover, interest on the lodestar amount will be awarded from the date of the approval of the class action settlements, December 20, 1995, at the rate prescribed by 28 U.S.C. § 1961.

Unfortunately, the record in the present matter does not permit ascertainment of the lodestar. Specifically, class counsel has not identified those hours expended in pursuing claims against the dismissed defendants. Accordingly, the parties will be afforded an opportunity to supplement the record on this and on any other issue concerning the reasonableness of hours expended. If necessary, an evidentiary hearing will be conducted.⁴

BACKGROUND

On March 14, 1986, Petruzzi's, Inc., formerly known as Petruzzi's IGA Supermarkets, Inc. (hereinafter referred to as "plaintiff" or "Petruzzi's"), commenced this class action against Darling, Moyer, Standard Tallow Corp. ("Standard Tallow"), and Herman Isacs, Inc.⁵ The complaint alleged that the defendants had conspired to allocate customers in the fat and bone rendering industry in violation of section 1 of the Sherman Act, 15 U.S.C. § 1.

Members of the putative class were butcher shops, supermarkets, restaurants, hotels, etc. that sold inedible fats, bones, suet, and meat trimmings ("raw material") to the defendants in the pertinent geographic area during calendar years 1977 through 1985.⁶ Petruzzi's contended that although the defendants competed for new raw material accounts, they had agreed to refrain from soliciting accounts that had been secured or "loaded" by another defendant.

The case was vigorously litigated on both sides. A substantial number of discovery and procedural issues were contested and required court determination. During the years of ongoing litigation the parties engaged in extensive discovery and motion practice. On July 31, 1992, the Honorable James F. McClure of this Court granted summary judgment in favor of the three defendants. Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., No. 86-0386, 1992 WL 212230, 1992-2 Trade Cases (CCH) ¶ 69, 937 (M.D.Pa. July 31, 1992). In an opinion filed on July 13, 1993, the United States Court of Appeals for the Third Circuit reversed the Order of July 31, 1992 insofar as it had granted summary judgment in favor of Moyer and Darling. Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224 (3d Cir.1993). As to Standard Tallow, however, our Court of Appeals concluded that plaintiff had failed to present evidence sufficient to withstand its summary judgment motion. Id. at 1241.⁷ On November 29, 1993, the Supreme Court denied the Petition for Writ of Certiorari that had been filed on behalf of Moyer and Darling. Moyer Packing Co. v. Petruzzi's IGA Supermarkets, Inc., 510 U.S. 994, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993).

On remand, plaintiff was authorized to provide notice to members of a class certified under Federal Rule of Civil Procedure 23(b)(3).⁸ The notice approved by Order dated January 12, 1994 informed members of the class of their right to "opt out" of the class. Of the approximately 1,250 class members, only 21 elected to be excluded from the class.

On March 2, 1994, this case was reassigned to me. Trial was scheduled for October, 1994. During the intervening period the parties were to complete expert witness discovery and file motions in limine.

A court-conducted settlement conference was convened on June 6, 1994. Negotiations between plaintiff and Moyer continued after that date. In September, Plaintiff and Moyer indicated that a settlement between them was likely. A final Settlement Agreement was executed by counsel for Plaintiff and Moyer on September 29, 1994.

Essentially, Moyer agreed to provide up to $2 million in "premium certificates," which were to "be claimed by class members based on the dollar value of their sale of raw materials to Moyer within the [relevant] geographic area in up to 5 of the 9 calendar years 1977 through 1985, for eleven (11%) percent of the dollar value of such sales to Moyer." The certificates were redeemable over a 36 month period "for a premium payment on new sales of raw materials to Moyer, up to 20% of the actual dollar value of such sales of raw materials." Moyer also agreed to pay up to $1 million in cash for attorneys' fees, as approved by the Court, in six installments over a 36 month period.

Only one class member, Robzens' Inc. ("Robzens"), objected to the proposed partial settlement. Following a hearing that was conducted on December 28, 1994, I declined to approve the partial settlement. See Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 880 F.Supp. 292 (M.D.Pa. 1995). The...