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In re Community Bank of Northern Virginia Mortgage Lending Practices Litigation

United States District Court, W.D. Pennsylvania

August 23, 2017



          Arthur J. Schwab United States District Judge

         Before the Court are two Motions: (1) a Motion to Confirm Costs and Attorneys' Fees Awarded to R. Bruce Carlson, Esquire, and Motion to Stay Pending State Court Litigation filed at ECF 781 by Attorney Carlson; and (2) a Motion to Vacate Orders (ECF 782 and ECF 783), filed by Attorney Stein at ECF 784.

         I. BACKGROUND

         Because the Court writes primarily for the Parties, the Court will not revisit the 14-year history of this case. Suffice it to say, that the Parties to this class action agreed to resolve their dispute in accordance with certain terms they set forth in a Final and Binding Settlement Agreement (“Settlement Agreement”) dated August 8, 2016. The Settlement Agreement contained the following language relevant to the matters before the Court:

The Parties have agreed to a class settlement, the value of which will be determined by a final and binding arbitration of all class claims and issues in MDL case no. 1674, Western District of Pennsylvania case numbers 03-cv-425 and 03-cv-1586.
The arbitration will be conducted by three persons, chosen by Judge Arthur J. Schwab at his sole discretion, after consultation with counsel for the Parties. Counsel shall supply suggested names to Judge Schwab by no later than 5 p.m. on August 12, 2016.
The arbitration will be conducted as a high-low ("baseball") arbitration. The Parties shall provide their respective number, which represents their total valuation of the case, including attorneys' fees and expenses, to Dan Sandman by no later than 5 p.m. on August 12, 2016.
The three-person arbitration panel must make their ruling (i.e., selecting either the high or low number) by March 31, 2017. The Parties will evenly divide the fees and costs for the three-person panel. No written decision/opinion is required.
In addition, the three-person arbitration panel will also determine attorneys' fees and expenses, which shall be paid solely from the selected number. The amount and allocation of the selected number among subclasses may be determined by the three- person panel. The selected number shall not be reduced by any other recoveries or settlements.

ECF 759-1. This Court approved the Settlement Agreement (ECF 759-1) along with the terms and procedures set forth therein, subject to further consideration at the Final Approval Hearing.

         ECF 762.

         After Notice was provided to the Class (see ECF 761), the Court granted the Unopposed Motion for Preliminary Approval of the Class Action Settlement. ECF 759. In so doing, the Court honored the terms set forth the Parties' Settlement Agreement (ECF 759-1) and appointed a Three-Person Arbitration Panel[1] (ECF 758) to make their ruling as to the “high” or “low” amount submitted by the Parties and to “determine attorneys' fees and expenses, which [was to] be paid solely from the selected number.” ECF 759-1.

         After the Panel's appointment, but before the three Arbitration Panelists heard the case and determined the award, one Motion for Attorneys' Fees was filed. ECF 766 and ECF 770 (amended). The Court denied without prejudice, the [Amended] Motion for Attorneys' Fees (ECF 770), because the August 8, 2016 Agreement (ECF 759 -1) provided that the three-person Arbitration Panel would also determine attorneys' fees and expenses. See Text Order at ECF 775

         The Arbitration Panel, after a comprehensive 13-day hearing, issued a “Unanimous Decision” on March 24, 2017. ECF 778. The Panel announced the amount to be awarded to the Plaintiff Class ($24, 000, 000.00). The Panel also decided the following with respect to Attorneys' fees:

5. From the Final Settlement Amount of $24, 000, 000 and based on the representation by all Class Counsel that they have irrevocably agreed on an allocation of attorneys' fees and reimbursable expenses among themselves, the undersigned Arbitrators unanimously approve the payment of attorneys' fees of 35% of the Final Settlement Amount (i.e., the amount of $8, 400, 000), less costs and expenses to the extent that they exceed $1, 150, 000, as set forth in paragraphs 6 and 7 below. Such attorneys' fees are fair, appropriate, adequate and reasonable and are to be allocated among the various Class Counsel as they have previously agreed. No fees, costs or expenses are approved or authorized except as described herein.

ECF 778, p. 4-5 (emphasis added).

         Despite the representations made by “all Class Counsel” to the Arbitration Panel - upon which the Panel commented twice in a single paragraph (see above) - Attorney Carlson's prior law firm, Specter Specter Evans & Manogue (“SSEM”), now claims that it is entitled to a portion of the attorney fees to be paid out in this matter. SSEM relies upon its June 30, 2004, “Separation Agreement” with Attorney Carlson, and an earlier document dated February 6, 2004, entitled “Agreement, ” to substantiate its claim to a portion of Attorney Carlson's attorneys' fees to be paid in this case.

         Simply put, Attorney Carlson, on his own behalf, and Attorney Carlson's former law firm, SSEM, disagree over the amount of attorneys' fees SSEM should receive. Attorney Carlson suggests that SSEM should receive nothing, while SSEM claims it is entitled to nearly $1.9 million of the awarded attorneys' fees. SSEM, to this end, filed a Complaint in the Court of Common Pleas of Allegheny County seeking nearly $1.9 million of the $8.4 million in attorneys' fees which were awarded by the Arbitration Panel. See Complaint (Specter Specter Evans & Manogue, P.C. v. R. Bruce Carlson pending in the Court of Common Pleas of Allegheny County, Pennsylvania at docket number GD-17-008330) filed at ECF 781-1, hereinafter “State Court action” or “State Court lawsuit.”

         Meanwhile, in this Court, Attorney Carlson filed a Motion and Brief in Support to conform costs and attorneys' fees awarded to Attorney Carlson, and to stay the State Court litigation initiated by SSEM. See ECF 781 and ECF 787, respectively. In his Motion and Brief, Attorney Carlson argued that this Court has ancillary jurisdiction over this fee dispute. Id.

         This Court granted Attorney Carlson's Motion to stay the State Court lawsuit, thereby suggesting it had ancillary jurisdiction. ECF 782. The Court will expand on that ruling in greater detail, below.

         SSEM filed a Motion/Response to Attorney Carlson's Motion to Conform Fees (ECF 782) and a Motion to Vacate the Order of Court Asserting Ancillary Jurisdiction. See ECF 789 (Response to Motion to Conform Fees); and ECF 784 and ECF 785 (Motion and Brief in Support to Vacate Order Asserting Ancillary Jurisdiction). Attorney Carlson filed a Reply to the Motion/Response filed by Attorney Stein. ECF 790.

         These Motions are ripe for adjudication.

         II. Discussion

         A. ...

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