Smiley v. Sincoff
| Decision Date | 05 March 1992 |
| Docket Number | D,No. 729,729 |
| Citation | 958 F.2d 498 |
| Parties | Robert R. SMILEY, III, Appellant, v. Milton G. SINCOFF and Michel F. Baumeister, Appellees. ocket 91-7864. |
| Court | U.S. Court of Appeals — Second Circuit |
Michael J. Pangia, Washington, D.C. (Gilman, Olson & Pangia, on the brief), for appellant.
Steven R. Pounian, New York City (Kreindler & Kreindler, on the brief), for appellees.
Before TIMBERS, WINTER and PRATT, Circuit Judges.
This appeal arises in the consolidated proceeding of nearly 300 civil actions against Spantax Airlines, McDonnell Douglas and United Airlines following the crash of a Spantax DC-10, Flight BX-995 on takeoff from Malaga, Spain on September 13, 1982.
On March 18, 1983, Eugene H. Nickerson, District Judge, appointed a plaintiffs' committee (the committee) to coordinate all aspects of the litigation in the Eastern District of New York.
By a subsequent order dated May 25, 1983, Magistrate John L. Caden established a fee structure pursuant to which all non-committee member attorneys placed a percentage of their fees in escrow for subsequent pro rata distribution among committee members as fees for their efforts in the liability aspect of the case. Committee members were exempt from placing their individual fees in escrow.
One committee member, appellant Smiley, entered into a retainer agreement with a non-member, pursuant to which Smiley agreed to assume responsibility for nineteen of the non-member's cases in exchange for a fee. By an order dated July 26, 1991 (which is the subject of this appeal), the court ordered that any fee paid to Smiley as a result of this subsequent retainer agreement was to be distributed pro rata among the committee members, as required by Magistrate Caden's fee structure order.
We hold that the court did not abuse its discretion in ordering such distribution of Smiley's fee. We affirm.
We summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.
The crash at Malaga resulted in the deaths of 48 of the 380 passengers and 3 crew members. Several passengers sustained severe injuries. The nearly 300 individual passenger death and injury actions referred to above were commenced in various district courts across the United States. The claims of all passengers aboard the airline were governed by the Warsaw Convention Treaty-Montreal Agreement, which imposed an absolute no-fault liability upon Spantax with a damage limitation of $75,000 in most instances. On January 4, 1983, the Judicial Panel on Multidistrict Litigation ordered the consolidation of all actions and transferred the cases to the Eastern District of New York pursuant to 28 U.S.C. § 1407 (1988). They were assigned to Judge Nickerson who in turn assigned Magistrate Caden to handle appropriate matters.
On March 18, 1983, following a hearing before Magistrate Caden, the committee was created to coordinate all liability aspects of the litigation on behalf of all plaintiffs in the various actions. The committee was created to avoid duplicate discovery and widely varying pre-trial rulings as a result of the great number of civil actions. Membership on the committee was limited to those attorneys specifically appointed by the Magistrate.
The committee consisted of attorneys with significant experience in mass air disaster litigation. Milton G. Sincoff was appointed lead counsel for the committee. Prior to his appointment, 74 passengers had retained him as counsel in their own individual actions arising from the Malaga crash. The second member of the committee, Frank H. Granito, Jr., likewise had been retained by approximately 30 individual passengers before his appointment to the committee. Finally, Robert R. Smiley, III, appellant on this appeal, had been retained by approximately 48 individual passengers before his appointment as a member of the committee.
On May 25, 1983, Magistrate Caden set forth the committee's responsibilities and fee structures in a pre-trial order. The order authorized the committee to prepare, serve, file and argue liability motions, conduct discovery, conduct any necessary depositions, enter into liability fact stipulations and act as spokespersons at liability pre-trial and trial conferences. In short, the committee was authorized to conduct the liability phase of the litigation on behalf of all plaintiffs.
Non-committee member attorneys had access to all relevant documents and were afforded the opportunity to voice divergent positions on behalf of their own clients whenever necessary. To assist them, Michel F. Baumeister, a partner of Sincoff at the time, was appointed as liaison counsel. Baumeister was responsible for the technical administration of the case, which included maintaining files, distributing progress reports on behalf of the committee, and ensuring that all notices, orders and other liability papers were distributed among the remaining plaintiffs' attorneys. The committee members agreed that Baumeister did not have any other "powers of Committee membership".
Magistrate Caden's order of May 25 also established a fee structure for members of the committee. The order provided that any committee fee was to be paid by all attorneys on behalf of their clients. Plaintiffs were not to pay fees to the committee out of their own recoveries. The fee was not to exceed 8% of the gross recovery, and could not exceed one-half of the total attorneys' fees collected for each claim. Any plaintiffs' attorney could apply to the court for an order granting a lower fee or no fee at all due to circumstances unique to the individual claim.
All fees collected on behalf of the committee were to be placed in escrow and, following an application to the court for distribution, the fees were to be distributed pro rata among the committee members based on their individual participation in the liability effort. Notably, several groups of plaintiffs were excluded from the mandatory payment of fees to the committee. First, the individual committee members agreed that none of their own firms would pay the Committee any fee on behalf of those clients who originally had retained them before the committee was established, because "they intend[ed] to fully and equally contribute to the liability effort." Second, the order excluded those plaintiffs who had not retained or who refused to pay an attorney. Third, the order excluded any plaintiff or claimant who agreed to a settlement before September 6, 1983 upon notice to the committee. Finally, the order excluded those plaintiffs whose damages did not exceed the Warsaw Convention Treaty limit of $75,000.
Meanwhile, in May 1983, Smiley began negotiations with Harold Sullivan, a non-committee member attorney representing 19 plaintiffs in actions arising from the Malaga crash. Pursuant to the May 25 order, as a non-committee member, Sullivan, like all other plaintiffs' attorneys, was obligated to pay the established committee fee. In these negotiations with Smiley, Sullivan sought to retain Smiley as the attorney for his 19 cases.
Before finalization of the Smiley-Sullivan agreement, the committee as a whole discussed the issue of whether the subsequent acceptance of an 8% liability retainer by one committee member would continue the obligation for a committee fee or be exempt. At a meeting of the committee on March 7, 1983, Smiley was the only member of the committee who refused to agree that any such fee should be paid to the committee, rather than to the individual committee member exclusively. Unable to reach a consensus on this issue, the committee agreed that it would be resolved by the court at the end of the litigation.
The original Smiley-Sullivan agreement of May 1983 provided that Smiley would assume responsibility for both the liability and damages phases of Sullivan's actions in exchange for a fee of 15% of the net recovery plus expenses. That agreement ultimately was modified in August 1983 to provide that Smiley would prosecute solely the liability phase of each action in exchange for the lesser of 8% of the net recovery or one-half of Sullivan's recovery in fees. In substance, this agreement closely paralleled Magistrate Caden's fee structure order of May 25, 1983.
On December 20, 1983, the court granted partial summary judgment against the airline in the liability phase of the litigation, allowing plaintiffs to recover full compensatory damages beyond the Warsaw Convention limitation of $75,000. Subsequently, Sincoff, as lead counsel, proposed that the committee voluntarily request the court to reduce the committee's liability fee from 8% to 3%. Over Smiley's initial objections, this proposal was accepted by Magistrate Caden in a supplemental order of August 2, 1984.
By December 1990, all plaintiffs' attorneys had contributed the 3% fee established by the order. The amount held in escrow was $356,041 in fees and $133,377 in interest. Distribution of the fees was deferred, however, pending resolution of the issue of the proper distribution of the fees received by Smiley pursuant to his agreement with Sullivan. Based on their agreement, Smiley sought to collect $266,800 in fees from Sullivan. With committee members unable to resolve the issue among themselves, Sincoff...
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