In Re Copley Pharmaceutical, Inc.
1999 U.S. Dist. LEXIS 8451, 1999 WL 359736, 50 F. Supp. 2d 1141 (1999)
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Rule of Law:
When class counsel cannot agree on the division of a common fund attorneys' fee award, the trial court has broad discretion to allocate the fees. In doing so, the court may give substantial deference to Lead Counsel's proposal while independently evaluating each attorney's contribution based on both the quantity and quality of their work.
Facts:
- Following a class action settlement that created a $150 million common fund, the court awarded class counsel $19.5 million in attorneys' fees, to be allocated amongst themselves.
- Lead Counsel, Stanley M. Chesley, convened a steering committee to handle the allocation, but the aggregate of the attorneys' initial fee requests was nearly double the total award.
- After the steering committee and a subsequent subcommittee failed to reach a consensus, Chesley began negotiating fee amounts with each attorney and firm on a one-on-one, confidential basis.
- In determining the allocations, Chesley considered multiple factors beyond raw hours, including the quality of work, the benefit conferred upon the class, the timing of an attorney's involvement, and the complexity of the issues handled.
- Chesley submitted a final proposed allocation to the court that awarded the largest shares to his own firm and two other members of the trial team, Peter Brodhead and David Suggs.
- Five attorneys—Paul Rheingold, Michael O’Donnell, Charles Schmidt, Lewis Saul, and Donald Edgar—objected to the proposed allocation, believing their awards were unfairly low given their contributions.
Procedural Posture:
- Following a class action, the parties reached a settlement which the U.S. District Court for the District of Wyoming approved.
- The court awarded class counsel a total of $19.5 million in attorneys' fees from the common fund and instructed them to allocate the award amongst themselves.
- When class counsel failed to agree on an allocation, Lead Counsel submitted a proposed distribution to the court.
- On November 23, 1998, the District Court issued an Amended Order adopting Lead Counsel's proposed allocation.
- Five members of class counsel subsequently filed motions with the District Court, asking it to reconsider and modify its fee allocation order.
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Issue:
Is Lead Counsel's proposed allocation of a common fund attorneys' fee award, which heavily rewards the trial team and Lead Counsel, a fair and reasonable distribution among the various class counsel attorneys?
Opinions:
Majority - Brimmer, District Judge
Yes, Lead Counsel's proposed allocation is a fair and reasonable distribution of the attorneys' fees. A trial court has extremely broad discretion in allocating fees and should give substantial deference to Lead Counsel, who is in a unique position to assess co-counsels' contributions. The court's role is to evaluate both the quantity and quality of work, using frameworks like the 'Johnson' factors, rather than rigidly applying a formula based on hours. Here, the largest awards to the trial team (Lead Counsel, Brodhead, and Suggs) are justified because the case settled only after 42 days of trial, and their performance was directly responsible for creating the enormous value for the class. The objectors' lower awards were also reasonable: Rheingold's award was properly reduced for actions detrimental to the class (trying to decertify it); O'Donnell joined the trial team very late and thus assumed less risk; Saul's role diminished over time and most of his firm's hours were billed by junior staff; Schmidt's role was minimal; and Edgar failed to provide credible documentation for his hours. Therefore, Lead Counsel's allocation, previously approved by the court, is affirmed.
Analysis:
This decision provides a detailed judicial roadmap for allocating attorneys' fees in complex class actions, particularly when counsel cannot agree. It strongly reinforces the principle of giving substantial deference to Lead Counsel's judgment, recognizing their unique managerial role and insight into the litigation. The opinion is significant for emphasizing that fee allocation is not a simple mathematical calculation; qualitative factors like trial performance, risk assumption, and overall benefit to the class can heavily outweigh raw billable hours. This precedent grants trial courts significant flexibility to reward attorneys who create the most value during critical phases of litigation, ensuring that compensation is tied to contribution, not just time spent.
