Plumb v. State
| Decision Date | 10 December 1990 |
| Docket Number | No. 900012,900012 |
| Citation | 809 P.2d 734 |
| Court | Utah Supreme Court |
| Parties | Dolly PLUMB, et al., Plaintiffs and Appellees, v. STATE of Utah, et al., Defendants. Malcolm A. Misuraca, Haley & Stolebarger, Douglas B. Provencher, and Beyers, Costin & Case, Appellants. |
Jackson Howard, Leslie W. Slaugh, Provo, for appellants.
Craig G. Adamson, Stewart M. Hanson, Jr., Salt Lake City, for plaintiffs and appellees.
Appellants Malcolm A. Misuraca, Haley & Stolebarger, Douglas B. Provencher, and Beyers, Costin & Case (collectively "class counsel") seek an award of attorney fees consistent with a stipulation between them and the class they represented in the underlying action. The stipulation was entered after the lower court reduced the amount of fees in accordance with the recommendations of a special master. The court had originally appointed the special master to determine the reasonableness of costs incurred by class counsel. We approve the stipulation in part and remand for an award of attorney fees consistent with this opinion.
Class counsel challenge as inadequate the district court's award of attorney fees for work done in their role as counsel for plaintiffs in a class action brought under Utah Rule of Civil Procedure 23. Appellees Dolly Plumb, et al., are the named plaintiffs representing the class, which consists of approximately seven thousand persons holding approximately seventeen thousand accounts in five failed thrift institutions located in the state of Utah. After the failure of the thrift institutions, the named plaintiffs employed class counsel to bring a class action to recover money, estimated at over $100,000,000, that members of the class had on deposit with the failed institutions. The class representatives and class counsel entered into a written agreement pursuant to which class counsel would be paid a "reasonable fee" to be determined as a percentage of any future recovery. The agreement provided that a reasonable fee would be between 20 and 40 percent of the recovery, but recognized that the trial court would have ultimate discretion in fixing the fee.
Plaintiffs filed the underlying action on July 20, 1987, alleging that the State of Utah, through its commissioner of financial institutions, violated Utah law by (i) allowing the taking of deposits in insolvent institutions, see Utah Code Ann. § 76-6-512 (1990); (ii) mishandling fiduciary deposits, resulting in their loss or jeopardy, see id. § 76-6-513 (1990); (iii) allowing thrifts to go below their statutory minimum capital requirements, see id. § 7-8-5(5) (Supp.1990); and (iv) not notifying the county attorney that certain insolvent thrifts were in violation of the financial institutions law, see id. § 7-1-319 (1982).
After months of negotiation, a settlement of the claim against the State of Utah was reached between the class representatives, the State, and the State's insurer. Under this settlement, the class was to be paid $44,000,000 to dispose of the claims against the State. A portion of the settlement, $15,000,000, consisted of funds advanced by the State that were to be repaid out of any amounts recovered upon the liquidation of assets of the failed thrifts.
On October 24, 1988, class counsel filed a motion under Utah Rule of Civil Procedure 23 for certification of the class for settlement purposes, as well as a motion under rule 54(b) for certification for interlocutory appeal of any order approving the settlement. The principal defendants stipulated to the motion.
On October 31, 1988, the trial court granted a motion for preliminary approval of the settlement and approved a form of notice to be sent to all class members. Thereafter, documents outlining the proposed settlement were mailed to all known thrift depositors and published in various newspapers. Depositors were allowed to "opt out" of the class if they wished by returning a card so indicating. Those not opting out were asked to return a ballot indicating whether they favored accepting the settlement. The description of the negotiated settlement informed the depositors that class counsel intended to request attorney fees of $7,250,000. This figure represents 25 percent of $29,000,000 (the $44,000,000 recovery less the $15,000,000 advanced by the State). Some 99.9 percent of the depositors who responded to the notice voted to accept the settlement as negotiated.
On November 30, 1988, the trial court held a further hearing on the proposed settlement and on the request for attorney fees. In a memorandum decision dated December 5th and an order dated December 6th, the court, inter alia, approved the settlement and awarded attorney fees of $5,800,000. This award represents 20 percent of $29,000,000. Because the claim for attorney fees and the request for approval of the settlement did not dispose of the entire litigation, the order was interlocutory and left a number of questions unanswered, such as how the reimbursement of costs incurred by counsel and the class representatives, as well as payment of unpaid costs and expenses, were to be handled.
To assist in resolving these technical issues, in its December 6th order the trial court appointed as special master one James U. Jensen, an attorney ("the special master"), "for the purpose of reviewing requests for cost reimbursements." Despite the narrow wording of the order of appointment, the special master apparently understood his charge to include making a review of the interlocutory award of attorney fees.
On December 16, 1988, only ten days after the order appointing him, without holding hearings of any kind, the special master submitted his first interim report. This report was adopted by the trial court, without notice or hearing, by an order entered the same day. In line with the special master's recommendations, the trial court's December 16th order modified its December 6th order by withholding 33 percent of the attorney fee award and by requiring that a substantial portion of the costs and expenses of litigation be borne by class counsel.
In his third interim report, 1 dated May 2, 1989, the special master recommended that the fee approved in the December 6th order be reduced by one-third, to $3,900,000. In the period between his appointment and the issuance of this third report, the special master did not hold any hearings or take any evidence on the record. From his time records and his report, it appears that during this period he researched the applicable law on attorney fees and reviewed the records of work done by class counsel. In his third interim report, the special master stated that the grounds for his proposed reduction of attorney fees were, first, the incomplete guidance as to the applicable law given to the trial court by class counsel with regard to how a "reasonable" award of attorney fees should be determined, and second, the lack of an "adversarial situation" as to counsels' fees because the class representative acquiesced in the class counsel's request for fees.
Class counsel moved to strike the special master's recommendation and report on several grounds, one of which was that they had no notice that the fee issue was being reconsidered. They also moved to vacate the appointment of the special master and filed a formal request for oral argument on the motions. The trial court held no oral argument, but filed three minute entries on July 5, 1989, which summarily denied the motions and attempted to "clarify" the authority of the special master by retroactively empowering him to consider the reasonableness of attorney fees.
Class counsel then requested that the special master hold a hearing on the attorney fees issue and asked for two days to present evidence. The special master held a hearing on July 8th, but limited class counsel to two hours to make a presentation, instead of the two days requested. The master also ordered that the testimony could be submitted by proffer. Six days later, on July 14, 1989, the special master filed his final report on costs and fees of class counsel and service providers. The final report withdrew the recommendations regarding attorney fees made in the third interim report. Instead, the master "advised" the trial court as to what legal and factual standards it should apply in determining a reasonable attorney fee.
On July 17, 1989, the trial court held a hearing at which parties were given the opportunity to present oral argument on the issue of attorney fees; however, they specifically were not allowed to present evidence. In an order dated July 17, 1989, the court amended the December 6th order by expanding the master's authority to include within its scope what the master had actually done. Where the original order directed the special master to review "requests for cost reimbursements," the July 17th order directed him to "inquire into all costs and fees, including the attorneys' fees and costs" involved in the matter. The trial court filed a final memorandum decision on October 31, 1989. In it, the court modified its December 5, 1988 order by reducing the attorney fees award from $5,800,000 to $4,250,000. Class counsel sought a rule 54(b) certification of appeal from this order, and the court granted certification on January 2, 1990. This appeal followed. 2
Class counsel make four basic arguments: (i) the trial court erred in refusing to enter an order consistent with the agreement between class counsel and the class representatives; (ii) the law-of-the-case doctrine precludes the trial court from reassessing its order of December 6, 1988, which initially fixed the fee; (iii) the trial court abused its discretion by using a lodestar approach to determine the amount of the fee; and (iv) the proceedings before the special master were conducted in an improper manner and tainted the court's ruling of October 31, 1989. The remedy sought is vacation of the October 31st order and reinstatement of the December 6th order. 3
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