Id. at 905 n.5. In contrast, a concurring panel member noted that clear sailing
agreements had “adverse effects” in that they take away the advantages of the adversarial process
and create the likelihood that plaintiff counsel will negotiate away something of value to the class
in order to procure the defendant's agreement not to challenge the fee award.
Id. at 907-08
(Newman, J., concurring). Significantly, the district court here made a factual finding that there had
not been any collusion among the parties. See R132-1518-64 (“it should be noted that the settlement
plainly is not collusive in any respect”).
Other courts have not been as suspicious of clear sailing agreements reached after arms-
length negotiations. See Skelton v. General Motors Corp., 860 F.2d 250, 259-60 (7th Cir. 1988)
(noting that a settlement agreement is a contract and when a party “accepted the benefits of the
contract . . . [h]e cannot obtain the quid of the settlement agreement and avoid the quo of foregoing
his right to appeal.”). We are satisfied that the district court here fulfilled its Rule 23 supervisory
function and decline to address the clear sailing agreement.
6
award could only be based on the portion of the common fund actually claimed by
class members and not from the unclaimed portion of the fund. See Boeing, 444
U.S. at 477, 100 S. Ct. at 749. The Court found that “to claim their logically
ascertainable shares of the judgment fund, absentee class members need prove only
their membership in the injured class. Their right to share the harvest of the
lawsuit upon proof of their identity, whether or not they exercise it, is a benefit in
the fund created by the efforts of the class representatives and their counsel.”
Id. at
480, 100 S. Ct. at 750 (emphasis added). Boeing, as in the case at bar, involved the
defendant's potential claim on undispersed portions of the fund, causing the Court
to note that Boeing's “latent claim against unclaimed money in the judgment fund
may not defeat each class member's equitable obligation to share the expenses of
litigation.”
Id. at 482, 100 S. Ct. at 751.
In Camden I, we held that “attorney's fees awarded from a common fund
shall be based upon a reasonable percentage of the fund established for the benefit
of the class.” 946 F.2d at 774. We further noted that the “majority of common
fund fee awards fall between 20% to 30% of the fund.”
Id. Finally, we directed
district courts to view this range as a “benchmark” which “may be adjusted in
accordance with the individual circumstances of each case,” using the factors set
forth in Johnson v. Georgia Highway Express, Inc.,
488 F.2d 714 (5th Cir. 1974),
7
abrogated on other grounds, Blanchard v. Bergeron, 489 U.S. 87,
109 S. Ct. 939,
103 L. Ed. 2d 67 (1989).
Id. at 775.5
After determining that the benchmark in this case should be 30%, see R132-
1518-87, the district court proceeded to consider whether the benchmark should be
adjusted up or down based on the circumstances of the case as analyzed under the
twelve factors outlined in Johnson. Id. at 86-93. The district court concluded that
all factors were either neutral or required an upward adjustment in the benchmark
percentage.
Id. Following the directives of Camden I, the district court factored an
additional upward adjustment for the time taken to reach settlement through seven
years of litigation and five months of trial. The district court further found that the
case served an unusual public policy by highlighting the potential for “boiler
room” tactics in the commodities industry.
Id. at 94. The district court then
concluded that “class counsel is entitled to a small upward adjustment in the
benchmark of 30%, and that the appropriate adjustment is to the percentage of the
fund requested by class counsel as its fee, that is, 33 1/3%, or $13,333,333.”
Id.
5
Johnson instructs that district court should consider twelve factors in determining attorneys'
fee awards: (1) time and labor, (2) novelty and difficulty of the questions, (3) requisite skill, (4)
preclusion of other employment, (5) customary fee, (6) fixed or contingent fee, (7) time limitations,
(8) amount involved and results obtained, (9) experience, reputation and ability of attorneys, (10)
“undesirability” of the case, (11) nature and length of professional relationship with client, and (12)
award in similar
cases. 488 F.2d at 717-19.
8
The defendants' primary argument seems to be that the attorneys' fee award
was based on a percentage of the total fund rather than the actual payments made to
class members.6 The district court, however, considered the possibility that the
actual payout would be less than the total fund generated for the settlement and
noted that
after seven years the number of class members actually asserting
claims will be significantly lower than the class membership. I can
also anticipate that the number of class members who end up having
approved claims, who will actually demand payment on their notes
after five years similarly will decrease, so that the actual dollars paid
out will be substantially less than $40 million.
R132-1518-91-92.7
6
The estimated actual payment to class members is $6,485,362.15. See R35-1563-13.
7
Defendants' assertion to the contrary notwithstanding, the district court reiterated, in its
denial of defendants' motion to amend the final order and judgment approving the settlement, that
the “Court is, and was at the time the Final Judgment was entered, well aware that there is a
distinction between the ratio of attorneys' fee to the value of the class members' recovery in a
common fund settlement in circumstances where the entire fund is distributed to class members
asserting claims on a pro rata basis as opposed to circumstances where, as here, the defendants were
able to successfully negotiate for a reversion of any unclaimed portion of the fund.” R35-1544-2.
The district court also rejected defendants' suggestions that it was “misled” by the National
Economic Research Associates (NERA) study on class actions offered by both parties in support of
the settlement agreement, and that the NERA Study presented attorneys' fees as a percentage of the
actual payout rather than of the total fund. The district court responded that:
[Defense counsel's argument] (1) conflicts with the position he took earlier in the
case when he was seeking the Court's preliminary approval of the Stipulation of
Settlement that the fee application specifically contemplated by the Stipulation of
Settlement, i.e. $13,333,333 representing 33 and one third percent of the $40 million
Settlement Fund, was reasonable and that its reasonableness was supported by his
experience in other class actions and consistent with the conclusions contained in the
NERA Study; (2) conflicts with the Defendants' express undertaking that they would
not oppose Plaintiffs' fee application so long as it did not exceed 33 and one-third
9
Contrary to defendants' assertion, no case has held that a district court must
consider only the actual payout in determining attorneys' fees.8 Strong v.
BellSouth Telecommunications, Inc., 137 F.3d 844 (5th Cir. 1998), does not
mandate that a district court must consider only the actual award made to the class.
Rather, Strong held that it was not an abuse of discretion for a district court judge
to consider the actual award paid out to the class in determining whether a fee
application was reasonable.
Id. at 852-53. The Fifth Circuit, in fact, noted that
while the district court's request for information concerning the actual claims was
“not the usual” course of action, it was not an abuse of discretion under the
circumstances presented to the district court.
Id. at 853. Additionally, unlike the
percent of the $40 million Settlement Fund; and (3) conflicts with the term
“settlement value” as used in the NERA Study, the plain meaning of which is the
gross amount of the settlement pursuant to the Final Judgment as stated in the Final
Settlement Notice to class members. In fact, the Court's understanding of NERA's
usage of the term “settlement value' has been confirmed to the undersigned by Todd
S. Foster, a representative of NERA who was one of the authors of the NERA Study.
R35-1544-4.
8
In Goodrich v. E.F. Hutton Group, Inc., No. 8279 (Del. Ch. Feb. 2, 1996), aff'd, 681 A.2d
1039 (Del. 1996), the judge, in his discretion, chose to base the percentage of the attorney fee award
on the actual payment to claimants. Unlike the case at bar, Goodrich did not involve a situation
where each claimant had an “undisputed and mathematically ascertainable claim” to part of the
judgment.
Id. at 1048. Furthermore, Goodrich emphasized that the “award of attorneys' fee in a
common fund case is committed to the sound discretion of the trial court.”
Id. at 1050 n.12. The
court further declined to adopt a mandatory methodology for determining attorneys' fees.
Id. at
1050. The fact that the cases cited by the defendants emphasize that attorneys' fee awards are in the
discretion of the district court and decline to adopt a strict method of calculation, illustrate that
whether a district court judge considers the total fund or the actual payment will vary according to
the circumstances of each case. Here, where the district court considered both the total fund and the
possibility that the actual payment would be substantially lower, there is no abuse of discretion.
10
case at bar, Strong never established a “common fund” from which money would
be drawn. See Strong, 137 F.3d at 852 (“[N]o fund was established at all in this
case.”). In contrast, the parties here established that $40 million was the fund upon
which the amount of the individual claimants' awards would be based. The district
court here never made a determination that this amount was illusory. Cf.
id.
(finding that common fund figure was “phantom”).
Moreover, in Williams v. MGM-Pathe Communications Co., 129 F.3d 1026
(9th Cir. 1997) (per curiam), a class action reversionary fund case, the Ninth
Circuit held that the “district court abused its discretion by basing the fee on the
class members' claims against the fund rather than on a percentage of the entire
fund or on the lodestar.”
Id. at 1027 (footnote omitted). The court found that the
attorneys' fee award should have been based on a percentage of the total recovery
fund, $4.5 million, even though the actual payout only totaled approximately
$10,000. Interestingly, in addressing arguments similar to those presented by the
defendants here, the court stated that “Defendants here knew, because it was in the
settlement agreement, that the class attorneys would seek to recover fees based on
the entire $4.5 million fund. The Defendants had some responsibility to negotiate
11
at the outset for a smaller settlement fund if they wished to limit the fees.” Id.9 We
also note, as the district court recognized, that a leading commentator on class
actions has agreed that fee awards may be based on the total available fund:
When a lump sum has been recovered for a class, that sum represents
the common fund benchmark on which a reasonable fee will be based.
When, however, the defendant reserves the right to recapture any
unclaimed portion of the common fund after class members have had
an opportunity to make their claims against the fund, . . . the question
arises concerning whether the benchmark common fund amount for
fee award purposes comprises only the amount claimed by class
members or that amount potentially available to be claimed. In
Boeing Co. v. Van Gemert, the Supreme Court settled this question by
ruling that class counsel are entitled to a reasonable fee based on the
funds potentially available to be claimed, regardless of the amount
actually claimed.
9
While we fully agree that the district court has an independent supervisory duty to assess
the appropriateness of the fee award apart from any agreement reached by plaintiff and defense
counsel, see Piambino v. Bailey, 610 F.2d 1306, 1328 (5th Cir. 1980) (“A district court is not bound
by the agreement of the parties as to the amount of attorneys' fees.”), we note that defense counsel's
arguments about the “exorbitant and unprecedented fee Award,” Brief for Defendants-Appellants,
at 4, are in conflict with their earlier assertions to the district court. As the district court noted, at
the time the settlement agreement was presented to the court, the defense counsel fully supported,
as “well within the range of reasonable”, R132-1518-42, an award of 33 1/3% of the total settlement
fund. The district court further noted that both parties supported “a fee award of one-third of the $40
million settlement fund, which everyone at the time clearly understood to be approximately $13
million,”
id. at 34, and emphasized “that in these discussions both sides went to some lengths to
convince me that a settlement fund consisting of $40 million, albeit comprised of $10 million in cash
and the balance in notes, less a fee award of one-third of the gross amount of the settlement fund and
reimbursement of counsel's expenses, would produce an exceptional benefit to the class members.”
Id. at 35. Additionally, no class members opposed the amount of the attorneys' fee award. See
id.
at 63 (only class member to oppose portion of settlement stipulation at fairness hearing “was just
angry at the reversionary clause.”).
12
Herbert B. Newberg and Alba Conte, Newberg on Class Actions § 14.03, at 14-14
(3d ed. 1992).10
In addition to the district court's careful consideration of the Johnson factors
and awareness that the actual claims made could be less than the gross settlement
fund, our conclusion that the award is not an abuse of discretion is supported by
the following observations. Unlike many other class actions, the total fund amount
of $40 million was not illusory or meaningless. Each class claimant benefitted
from having the total amount of the fund set at $40 million because the individual
payment was based upon a percentage of the total fund. The amount of the total
fund determined the amount of each class member's claim, regardless of the actual
number of claims filed. In other words, as the district court explained:
In relationship to the plan of allocation, the stipulation of
settlement provides that each class member will recover from
the net settlement fund in the same proportion that his or her
losses bore to total customer losses. Therefore, the claim of
any class member will not reduce or increase the recovery of
10
See also In re Copley Pharmaceutical, Inc., 1 F. Supp. 2d 1407 (D. Wyo. 1998), where the
district court approved, under Boeing, the payment of attorneys' fees from the gross settlement fund.
“The first step in a percentage of the fund analysis is a determination of the value of the fund. While
disputed by the parties in this case, the matter is settled by the explicit terms of the Agreement.”
Id.
at 1412. The court further found that “this case involves a settlement negotiated at arms length,
rather than a judgment. Under the terms of that settlement and its remittitur provisions, Defendant
not only knew that class counsel would seek to recover fees based on the gross amount of the fund
recovered (regardless of whether some part of that fund was not claimed), but also agreed to a
mechanism and formula by which class counsel could do so. Thus Defendant cannot complain now
that class counsel seek to do what the settlement agreement explicitly contemplates.”
Id. at 1416.
13
any other class member except to the extent that the Court
orders that bonuses be paid to the class representatives.
R132-1518-64. Defendants' counsel also noted that “each claimant's
distribution does not depend on how many claims are submitted in this
case.” Id. at 145. The total fund awarded in the settlement, therefore,
substantially and directly affected the amount that each claimant would eventually
be awarded. The fact that there were a reduced number of claimants had no effect
at all on the amount each class member received. That amount, rather, was
determined by the total fund accrued. Negotiating a $40 million gross settlement
fund, therefore, created a benefit on behalf of the entire class.11
Moreover, even if we were to accept defendants' argument about the amount
on which attorneys' fees should be based, the reversionary nature of the settlement
necessarily would mean that 90% of the reduction in attorneys' fees would accrue
to the benefit of the defendant, in contrast to the mere 10% which would accrue to
the class' interest.12 Defense counsel's claimed interest in protecting the class thus,
11
Defendants argue that the court should consider the policy behind the recently-enacted
Private Securities Litigation Reform Act, (“PSLRA”), Pub. L. No. 106-67, 109 Stat. 737, 758, § 108,
which specifies that attorneys' fee requests must be considered in light of the total benefit to
plaintiffs. We decline to apply the policy of the PSLRA because it does not apply to actions
commenced before and pending upon its effective date, December 22, 1995. Furthermore, it is
likely that the PSLRA does not apply to commodities actions.
12
Defendants calculate that the attorneys' fees should be $3,627,526, as opposed to the $13.3
million awarded by the district court. Brief of Defendants-Appellants, at 47 & n.17. Of the
additional $9.7 million that would accrue to the settlement fund from this calculated reduction in
14
seen in this light, strains credulity. Furthermore, while we have decided in this
circuit that a lodestar calculation is not proper in common fund cases, we may refer
to that figure for comparison. The plaintiffs' counsels' lodestar calculation would
bring a fee of $12,663,897. See R32-1480, at ¶ 9. The $13.3 million awarded by
the district court then would have only a modest lodestar multiplier of 1.05%.
Finally, the abuse of discretion standard has particular meaning in lawsuits
that are as lengthy and contentious as the case at bar. This litigation has generated
134 volumes of record. Forty-eight witnesses testified at the trial alone. The
district court is in the unique position to evaluate the labors of both parties in this
litigation. Nothing in this opinion precludes a district court judge in a different
case from basing the attorneys' fee award on the actual class recovery, or on the
gross settlement figure. The factors the district court considers will vary according
to the circumstances presented in each case. When we can discern no clear error of
judgment by the court, however, there is no abuse of discretion.
III. EXPENSE AWARD
The defendants also challenge the district court's award of $2,400,204 in
expenses to the plaintiffs' class counsel. R35-1543-2. Plaintiffs' lead counsel
attorneys' fees, only $1,000,000 would be redistributed to the 20,000 potential claimants, while $8.7
million would revert to the defendants. Id.
15
originally requested an expense award of $2,586,611.60, and co-counsel,
$77,482.97, totaling $2,664,094.57. See R132-1518-94. While observing that
Camden I did not provide guidance for determination of expenses, the district court
recognized that “there is a requirement . . . on the part of class counsel to establish
that the costs are reasonable and necessary . . . to the prosecution of the case.”
R132-1518-96. See also In re “Agent Orange” Prod. Liab. Litig.,
611 F. Supp.
1296, 1314 (E.D.N.Y. 1985), modified on other grounds,
818 F.2d 226 (2d Cir.
1987) (“Upon submission of adequate documentation, plaintiffs' attorneys are
entitled to reimbursement of those reasonable and necessary out-of-pocket
expenses incurred in the course of activities that benefitted the class.”). The
district court further recognized a “responsibility to scrutinize the costs for which
reimbursement is requested in order to ensure that class counsel is not obtaining a
secret or unintended profit.” R132-1518-97.
After a March 31, 1997 hearing, the district court determined that lead
counsel for the plaintiff class had failed to substantiate its cost application to the
extent necessary for the court to make a determination as to whether the expenses
were reasonable. From the co-counsel's costs, the district court disallowed “legal
services” and “postal costs” and cut reproduction costs from 25¢ to 10¢ per page.
See R132-1518-95.
16
At an April 25, 1997, status conference, the district court made final expense
determinations in light of plaintiffs' counsel's supplements to the expense request,
such as “additional computer print-outs, invoices and other documents, as well as
affidavits explaining the law firm's billing procedures for out-of-pocket costs, and
affidavits addressing the reasonableness of certain categories of expenses.” R35-
1542-2-3. The record reveals that the district court conducted an exhaustive and
detailed examination of each of plaintiff's counsel's claimed expenses. See R133-
1535-4-16.13
We are convinced that the district court did not “rubber stamp” the
submissions of the plaintiffs' class counsel for expenses, but rather required more
specific documentation for costs, considered each type of expense separately, and
eventually disallowed over $200,000 of the request. Rarely do class action
litigations proceed to trial. The expense request in this case reflects seven years of
litigation and a five-month trial. We see no abuse of discretion in the district
court's expense award.
IV. ASSIGNABILITY OF FEE AWARD
13
Among many other considerations, the district court eliminated costs for local meals, cabs,
airline ticket upgrades, and other miscellaneous travel charges, id. at 6; approved telephone charges,
id. at 4; and disallowed lobbyist fees and charges for a jury selection psychiatrist,
id. at 9.
17
Under the original stipulation of settlement, plaintiffs' class counsel was to
receive the entire sum of attorneys' fees and expenses in cash. The district court
questioned this arrangement because the plaintiff class members were only to
receive 25% of their claim in cash and the remaining 75% in the form of
promissory notes. Responding to the district court's concern, plaintiffs' class
counsel agreed to accept 25% cash and 75% in deferred obligation for their fee
award. The terms of the deferred obligation are the source of the present
controversy.
Defendants challenge the district court's determination that the promissory
notes given to plaintiffs' class counsel are assignable. The stipulation of settlement
provides that the portion of attorneys' fees “not paid in cash out of the cash portion
of the Settlement Fund will be paid by the Settlement Administrator if, as and
when the Settlement Administrator receives payments with respect to the Master
Promissory Note, and the deferred portion of these fees and expenses will earn
interest at the same rate and be paid at the same time as interest is earned and paid
on the Master Promissory Note.” R31-1371-55-56. Exhibit A to the stipulation
agreement, a proposed order with respect to the class action settlement, signed by
counsel for both parties, provides that “Counsel will request that the payment of
fees and expenses out of the Settlement Fund be made in cash to the extent
18
available. Any fee awarded which is not paid in cash shall be paid in the form of
an obligation having the same terms and bearing the same interest rate as the
Promissory Notes, as defined in the Stipulation.” R31-1371, Exh. A, at 11. The
stipulation provided that promissory notes given to class claimants were freely
assignable. R31-1371-20. Under the terms of the proposed order, then, the
deferred attorney's fees would be on equal terms with the class claimants'
promissory notes and, therefore, assignable. Defendants argue that the language in
the proposed order is a material alteration of the language in the stipulation of
settlement. The proposed order, however, was attached to the stipulation
agreement as an exhibit. Under the terms of the stipulation agreement, “[a]ll of the
Exhibits to the Stipulation . . . are fully incorporated herein by this reference.” Id.
at 66, § 10.5.
Furthermore, as the district court noted, “[n]owhere in the January 31, 1997
Order or the Stipulation of Settlement is it specifically provided that the deferred
obligation to class counsel shall not be assignable or transferable.” R33-1515-2-3.
As a result, the more detailed language of the proposed order does not materially
alter the silence of the stipulation of settlement. Moreover, under Florida law, in
accordance with which the settlement agreement is to be governed, “[g]enerally, all
contractual rights are assignable unless the contract prohibits assignment, the
19
contract involves obligations of a personal nature, or public policy dictates against
assignment.” L.V. McClendon Kennels, Inc. v. Investment Corp., 490 So. 2d
1374, 1375 (Fla. Dist. Ct. App. 1986). Since there is no language in the stipulation
of settlement or proposed order prohibiting assignment, we find that the district
court properly determined the notes are assignable.
V. CONCLUSION
We find that district court did not abuse its discretion in awarding attorneys'
fees and expenses to plaintiffs' class counsel. We also affirm the district court's
order that the portion of attorneys' fee to be paid in promissory notes is assignable.
Nothing in this opinion should be interpreted to minimize the importance of the
active supervisory role of the district court when reviewing class action
settlements, particularly those involving the so-called “clear sailing” agreements.
The district court here, however, did not abuse its discretion in making an
attorneys' fee award. The court considered, and applied, all the relevant Eleventh
Circuit precedent. Defense counsel, having reaped the benefits of their bargain in
settling the class action suit, cannot expect the court to renegotiate on their behalf
the terms of an agreement concluded after arms-length negotiations.
AFFIRMED.
20
