Winston & Strawn LLP v. Fed. Deposit Ins. Corp.

• Decision Date: 27 January 2012
• Docket Number: Civil No. 06–1120 (RCL/JMF).
• Citation: 841 F.Supp.2d 225
• Court: U.S. District Court — District of Columbia
• Parties: WINSTON & STRAWN LLP, et al., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for the Benj. Franklin FS & LA, Portland, Oregon, Defendant.

841 F.Supp.2d 225

WINSTON & STRAWN LLP, et al., Plaintiffs,

v.FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for the Benj. Franklin FS & LA, Portland, Oregon, Defendant.

Civil No. 06–1120 (RCL/JMF).

United States District Court,

District of Columbia.

Jan. 27, 2012.

Don S. Willner, Trout Lake, WA, William Francis Demarest, Jr., Husch BlackwellSanders, LLP, Washington, DC, James Borthwick, Husch Blackwell Sanders, LLP, Kansas City, MO, for Plaintiffs.

Bruce C. Taylor, Federal Deposit Insurance Corporation, Arlington, VA, for Defendant.

MEMORANDUM AND ORDER

ROYCE C. LAMBERTH, Chief Judge.

Before the Court is plaintiff Don S. Willner & Associates, P.C.'s Motion to Expedite Consideration [104] of its claim for attorney's fees in connection with its role in obtaining a settlement of a tax claim lodged by the Internal Revenue Service against the Federal Deposit Insurance Corporation (“FDIC”), as receiver for the Benj. Franklin Federal and Loan Association of Portland, Oregon (“Benj. Franklin”). On December 3, 2010, Magistrate Judge John Facciola issued a Report and Recommendation [85] in which he recommended an award of $416,999.96. Magistrate Judge Facciola then vacated that initial Report and Recommendation and issued a Revised Report and Recommendation [96] in which he recommended an award of $166,175.39. Both parties filed objections to the initial report [86], [87], responses to those objections [88] [89], and objections to the revised report [97], [98]; the defendant further filed a response [100] to the plaintiff's objection to the revised report. Upon consideration of the motion, the reports, the objections and responses thereto, the applicable law, and the entire record herein, the Court will award the plaintiff attorney's fees in the amount of $150,062.25. Because the Court will award judgment in this case, it will deny the motion to expedite consideration as moot.

I. BACKGROUND

In the midst of the savings and loans crisis of the 1980s and 1990s, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The Act in part prevented federal regulators from in most cases counting supervisory goodwill toward capitalization requirements. This change rendered Benj. Franklin unable to satisfy minimum regulatory capitalization requirements, and federal regulators seized Benj. Franklin in February, 1990. The law firm Winston & Strawn, working with the plaintiff, filed a derivative and class action law suit in the United States Court of Federal Claims as a result. That Court granted Benj. Franklin's motion for summary judgment on December 22, 1997, and ordered a trial on damages. On or about the same time, the Internal Revenue Service (“IRS”) asserted a claim against the defendant in its capacity as the Benj. Franklin receiver for $1.2 billion in alleged taxes and penalties accrued during the failed thrift's receivership. On June 6, 2002, the Court of Federal Claims entered judgment in favor of the Benj. Franklin receivership of $34,672,500, which following a motion for reconsideration the Court increased to about $52 million. Shortly after the Court entered judgment in that case, the plaintiff filed a separate case in the United States District Court for the District of Oregon, obtaining a temporary restraining order prohibiting the defendant from satisfying the IRS's claim against the defendant as receiver. The IRS then sued the defendant in this district court to recover the taxes and penalties allegedly owed by Benj. Franklin in United States of America v. Federal Deposit Insurance Corporation, Civil No. 02–1427. The defendant, the Department of Justice on behalf of the IRS, and the shareholder-plaintiffs in the derivative action reached a settlement of the IRS's suit, negotiated in part by the plaintiff, that reduced the IRS's claim to $50 million. Judge Emmet Sullivan issued an order in that case [33] approving the settlement, in which the defendant also agreed to pay counsel reasonable attorney's fees.¹

The plaintiff recouped $101,739.90 in attorney's fees from the Benj. Franklin shareholders and submitted a fee petition with invoices to the FDIC for additional attorney's fees. The plaintiff requested a base amount of $541,327.50, times a multiplier for performance, minus the amount paid by the shareholders. The plaintiff also requested payment for other expenses. The FDIC approved the request in part and denied it in part on May 19, 2006. The FDIC calculated a reasonable fee based on 842.35 hours of work, billed at $250 per hour, for a total of $210,587.50, minus the amount paid by the shareholders. It issued a check to the defendant for $122,731.44, inclusive of that fee and approved costs. The plaintiff on July 7, 2006 filed a complaint in Don S. Willner & Associates, P.C. v. Federal Deposit Insurance Corporation, Civil No. 06–1227, seeking a total judgment of $782,110.24 based on a calculation of 2 percent of the receivership surplus of $44 million, minus the amount paid by the shareholders. The plaintiff's case was later consolidated with the instant case, which Winston & Strawn initiated as lead plaintiff on October 3, 2006.

The plaintiffs in the consolidated case all moved for summary judgment, as did the defendant. Judge Sullivan issued a separate memorandum [31] and order [30] on July 13, 2007, 2007 WL 2059769, denying each motion. As to the plaintiffs' motions, Judge Sullivan determined that reasonable attorney's fees should not be calculated based on a percentage of the remaining receivership surplus. Following those motions, Judge Sullivan first referred the dispute to mediation by order [36] on August 15, 2007. Following unsuccessful mediation, the plaintiff filed a motion for summary judgment [48] on June 23, 2008. The parties at this stage in the litigation argued principally over the appropriate hourly rate for work done by Mr. Willner personally, whether to apply a multiplier for success, and whether the FDIC properly reduced 186.35 hours from Willner's billed hours. Judge Sullivan denied the plaintiff's motion without prejudice by separate order [54] and memorandum [55] on March 31, 2009 and referred the matter to Magistrate Judge Facciola by order [56] on April 2, 2009 for a Report and Recommendation. Magistrate Judge Facciola entered an order [63] on July 30, 2009, in part requiring the parties to provide supplemental briefing as to why the reasonable rate for Don S. Willner (the namesake of the plaintiff firm) should not be calculated on the basis of the Laffey Matrix, see Laffey v. Northwest Airlines, Inc., 572 F.Supp. 354 (D.D.C.1983), rev'd on other grounds,746 F.2d 4 (D.C.Cir.1984), as modified by Save Our Cumberland Mountains, Inc. v. Hodel, 857 F.2d 1516, 1524–25 (D.C.Cir.1988); Laffey Matrix–2003–2012, available at http:// www. justice. gov/ usao/ dc/ divisions/ civil_ Laffey_ Matrix_ 2003– 2012. pdf. The parties provided a joint stipulation [76] agreeing to the use of Laffey rates to calculate the reasonable fee for Mr. Willner.

Magistrate Judge Facciola issued his first Report and Recommendation on December 3, 2010, recommending a total award to the plaintiff of $416,999.96. Magistrate Judge Facciola then issued an order [95] on March 11, 2011 discussing his recommendation in the wake of the objections raised by the parties. He noted the FDIC's argument that the plaintiff must have been reimbursed already for some of the costs sought based on accounting irregularities in those claims. Magistrate Judge Facciola therefore ordered clarification from the plaintiff. The docket does not reflect a responsive submission from the plaintiff Magistrate Judge Facciola vacated his prior recommendation and on April 12, 2011 issued his Revised Report and Recommendation. The revised recommendation differs from the initial recommendation in three respects. First, Magistrate Judge Facciola adjusted his recommendation for reimbursement of services provided by bookkeeper Katherine Kelley upward from $700 to $1,200, based on what Magistrate Judge Facciola believed to be a typographical error in the plaintiff's submissions. Second, Magistrate Judge Facciola adjusted his recommendation for reimbursement of costs downward from $41,941.21 to $15,141.98, based on the inconsistencies noted in his March 11, 2011 order and the plaintiffs failure to respond to that order. Finally, and most significantly, Magistrate Judge Facciola reduced his recommendation by $224,525.34 to reflect reimbursement already received by the plaintiff. This figure reflects the shareholders' payment to the plaintiff of $101,793.90; the FDIC's payment to the plaintiff of the $108,793.60 in attorney's fees to which the FDIC admits the plaintiff is entitled; and an additional $13,937.84 paid by the FDIC to the plaintiff for costs to which the FDIC admits the plaintiff is entitled.

The parties filed their objections to the Revised Report and recommendation on April 26, 2011. The case was reassigned to this Court on October 11, 2011. The plaintiff filed his instant motion to expedite consideration on October 27, 2011.

II. DISCUSSIONA. Magistrate Judge's Jurisdiction to Issue Revised Report and Recommendation

The plaintiff first argues that once a magistrate judge has issued a Report and Recommendation, and the parties have lodged their objections to the recommendation, the matter is essentially on appeal to the district court and the magistrate judge loses jurisdiction over the case. Thus, the plaintiff argues, Magistrate Judge Facciola lacked authority to vacate his initial recommendation and issue a revised version, and this Court should disregard the latter report. The plaintiff cites no authority to support this contention, instead quoting a Ninth Circuit decision for the proposition that a magistrate judge's recommendation is simply a recommendation and has no binding effect. Of course. SeeFed R. Civ. P. 72(b)(3). The Court must conduct de novo review of objections to a magistrate...