UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
December 14, 1983
JAY A. ZEFFIRO, individually and on behalf of all other persons similarly situated
FIRST PENNSYLVANIA BANKING AND TRUST COMPANY, a Pennsylvania Corporation v. CAPITAL FIRST CORPORATION, PHILIP M. COMERFORD, C. LAWRENCE RUTSTEIN, HARMON S. SPOLAN, EDWARD E. COHEN, ROBERT C. ARTHURS, LAVENTHOL & HORWATH, BABBITT, MEYERS & COMPANY and SPECTOR COHEN GADON & ROSEN; HARRY M. BERNARD, JR., on behalf of himself and all others similarly situated v. FIRST PENNSYLVANIA BANK, N.A. and CAPITAL FIRST CORPORATION v. CAPITAL FIRST CORPORATION, PHILIP M. COMERFORD, LAWRENCE RUTSTEIN, HARMON S. SPOLAN, EDWARD E. COHEN, ROBERT C. ARTHURS, LAVENTHOL & HORWATH, BABBITT, MEYERS & COMPANY and SPECTOR COHEN GADON & ROSEN
The opinion of the court was delivered by: BECHTLE
MEMORANDUM AND ORDER
In Alpine Pharmacy v. Chas. Pfizer & Co., Inc., 481 F.2d 1045 (2d Cir. 1973), the Court of Appeals for the Second Circuit stressed the public interest component of class action litigation in discussing the affirmative duty placed upon class counsel.
One accepting employment as counsel in a class action does not become a class representative through simple operation of the private enterprise system. Rather, both the class determination and designation of counsel as class representative come through judicial determinations, and the attorney so benefited serves in something of a position of public trust. Consequently, he shares with the court the burden of protecting the class action device against public apprehensions that it encourages strike suits and excessive attorneys' fees.
Id. at 1050.
More recently, Judge McGlynn of this district, in a prudent and thoughtful decision, stated that ". . . a class action is something more than a fee-generating device. It is a cause of action belonging to the members of the class to whom counsel owe a duty of fidelity. Their primary job is to create a fund for the class not the lawyers." In re Fine Paper Antitrust Litigation, 98 F.R.D. 48, 84-85 (E.D. Pa. 1983).
It is in light of these principles as well as those embodied in the Code of Professional Responsibility, the spirit of which calls for a lawyer to place his loyalty to the client above his personal interests,
that the court examines the present motion by counsel to reconsider the amount allowed as a fee in this consolidated class action suit.
Following approval of a settlement agreement which created a fund of $1,050,000 for the benefit of the class, counsel submitted their fee petitions requesting $420,000 plus a 40% share of the interest earned by the settlement fund for the 3358.55 hours of work of 10 attorneys, 2 legal assistants and 3 paralegals. The $420,000 figure consisted of a lodestar of $270,093.40, $36,038.63 in costs and expenses, $4,000.00 for services rendered after June 30, 1983, and an adjustment to the lodestar of $109,867.97. After reviewing the petitions and supporting affidavits and upon retrospective consideration of the litigation as a whole, the court awarded counsel $310,132.03 from the settlement fund. This figure granted counsel full allowance of their submitted hours at the rates they had requested, and provided for complete reimbursement for all claimed costs and expenses. The only way in which the amount awarded differed from the amount requested was in the court's disallowance of any adjustment to the lodestar.
Not satisfied with what they apparently view as half a loaf, counsel's motion asks this court to reconsider its denial of an adjustment. The thrust of counsel's argument is that the $310,132.03 award is inadequate because it did not make them financially whole in the sense that it failed to grant an upward adjustment despite a delay in payment.
The attorneys' approach to their motion is both interesting and unusual. Unfortunately it provides evidence to justify the burgeoning criticism that challenges "the altruism of some class action lawyers and charges that the paramount motivation for such litigation [is] counsel's desire to generate substantial fees." In re Fine Paper Antitrust Litigation, supra, 98 F.R.D. at 67 (quoting Kramer v. Scientific Control Corporation, 534 F.2d 1085 (3d Cir.)), cert. denied sub nom. Arthur Andersen & Co. v. Kramer, 429 U.S. 830, 50 L. Ed. 2d 94, 97 S. Ct. 90 (1976).
Although the court was somewhat disturbed by certain items contained in counsel's memorandum, initial attention will be given to the delay in payment argument. The attorneys complain that "the Zeffiro and Bernard class actions were commenced over 5 inflationary years ago in 1978." Petitioners' Motion to Reconsider October 27, 1983 Award at 2, 574 F. Supp. 443. While inflation and the erosion of the dollar during the course of this suit is obviously not to be overlooked, the court perceived that delay in major class action suits such as this one should be of relatively minor importance. The attorneys must recognize that undertakings of this sort involve protracted litigation. Consequently, they must anticipate a long wait for receipt of ultimate compensation, just as in other contingency representations. More importantly, the court would remind counsel that as they alleged throughout the litigation, the class had suffered since 1976, two "inflationary years" longer than counsel. Ultimately, the members of the class will receive only 53% of that to which they are entitled. There is no reason why the inflationary burden should be borne by the class alone for the exclusive benefit of counsel. Moreover, once the settlement was approved, in September 1983, any subsequent delay in payment would have to be considered de minimis. The court took pains to issue a prompt decision on the attorneys' fee petitions submitted by counsel. Considering all of the circumstances of the litigation including the class's interest in the time value of its money, the court sees no merit in counsel's motion on this ground.
While it is true that the Third Circuit's Lindy II decision, Lindy Brothers, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 117 (3d Cir. 1976) (en banc), directs the district court to consider delay in its determination of whether to adjust the lodestar, counsel misread Lindy II if they believe that such an adjustment is required whenever there is some type of delay. Cf. Ursic v. Bethlehem Mines, 719 F.2d 670 (3d Cir. 1983). Thus this court, while acknowledging Lindy II and its progeny and proceeding under their dictates, is not bound to adjust the lodestar and for the reasons expressed above declines to do so. Additionally, the pittance of interest that resulted from the settlement is better reserved for the class than awarded to the attorneys under the circumstances.
It is unfortunate that, due to certain points raised by counsel in their motion, further discussion is warranted. Nonetheless, the court cannot ignore the underlying attitude with which the present motion was apparently filed. The court was both troubled and disturbed upon reading the following:
"Comparing this case and this Court's fee with the Moore v. Industrial Valley Bank & Trust Company, Civil Action No. 80-4909 (E.D. Pa.) and the fee award in that case highlights the substantial recovery obtained in this case.
Outstanding value of
Debentures $970,000 $1,375,000
Settlement Fund $470,000 $1,050,000
% Recovery 48% 76%
Delay in Payment 18 months 62 months
Risk of loss on
appeal No Yes
Award of fees by
Court $77,418 n4 $274,093 n5
% of Fee Award to
class recovery 16.5% 26%
Net Recovery to Class
(After Costs) $389,592 $739,868
Net % recovery to
class 40% 53%
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