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Merola v. Atlantic Richfield Co.

decided: March 8, 1974.

FRANK S. MEROLA AND FRANK J. MEROLA, JR., INDIVIDUALLY AND T/D/B/A MEROLA'S ARCO, ON THEIR OWN BEHALVES AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLANTS,
v.
ATLANTIC RICHFIELD COMPANY, A CORPORATION, APPELLEE



ON APPEAL FROM THE ORDER OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA AT CIVIL ACTION NO. 71-1020

Adams, Garth, Circuit Judges, Nealon, District Judge.

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge

This appeal involves the award of attorneys' fees following the settlement of an antitrust action brought on behalf of a class of service station dealers. This Court has recently developed standards for the determination of such an award in Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973). We remand for further consideration in light of Lindy Bros.

I

Plaintiffs, Frank S. Merola and Frank J. Merola, Jr., commenced this private antitrust action against the Atlantic Richfield Company (Atlantic) on behalf of all present and former Atlantic "lessee dealers"*fn1 in the Pittsburgh area.*fn2 The complaint alleges that by various methods--including threats of lease cancellation and nonrenewable -- the defendant restrained the free exercise of business judgment by the lessee dealers. In particular, the complaint charges that Atlantic has coerced dealers: (1) to purchase automobile tires, batteries, and accessories (TBA) from unnamed co-conspirators, (2) to sell motor fuel at fixed prices, (3) to operate their service stations during hours determined by defendant, and (4) to participate in promotional campaigns (e.g., the distribution of trading stamps). Plaintiffs' allegations, constituting charges of violations of Section 1 of the Sherman Act,*fn3 vest jurisdiction in the district court pursuant to 28 U.S.C. ยง 1337.

Prior to a determination of the appropriateness of the class action device, two settlements were agreed upon by the parties. The first, awarding the named-plaintiffs $10,000 in return for the early surrender of plaintiffs' lease, is not a subject of the instant appeal. The second settlement included the present*fn4 and future lessee dealers in the Pittsburgh area. In exchange for a dismissal of the litigation with respect to this class, Atlantic agreed to alter its leasing policies. Prior to the litigation herein, Atlantic had normally awarded leases for a one year term during the first two years of the leasehold, followed by a three year lease. Pursuant to the settlement, Atlantic agreed that for the next fifteen years, it would offer leases (to acceptable lessees)*fn5 for the following terms:

original lease 1 year term

second lease 3 year term

subsequent leases 5 year terms

The settlement at issue dealt only with the above schedule. However, during settlement negotiations, Atlantic agreed to pay reasonable attorneys fees to be subsequently determined by the District Court.*fn6

On December 20, 1972, the District Court approved the settlement as to all present and future lessees who did not opt out or object to the proposed compromise.

Three months later a hearing*fn7 was held on an application for counsel fees and expenses filed by plaintiffs' attorney, Howard A. Specter. Mr. Specter requested a fee of $250,000, this figure based in part upon a theoretical settlement value of $8 million. The defense countered by arguing: (1) that the settlement was without economic benefit to the class, and (2) that far fewer hours than the 871 hours alleged by plaintiffs were actually spent in the class aspects of the litigation. Without abandoning its position that the fee award should not exceed $5000, at oral argument before the District Court, in response ...


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