In re Fine Paper Antitrust Litigation

BECKER, Circuit Judge, concurring:

Although I concur in virtually all of Judge Gibbons’ opinion, 1 I write separately to set forth a different perspective on three significant points.

1. I cannot join in the assertion in footnote 19 that “an examination of the case law in this circuit since Lindy I discloses that the principal beneficiaries of the heightened judicial scrutiny which that case required have not been class member beneficiaries of a settlement fund, but defendants resisting statutory liability for attorneys fees.” That may or may not be the case, but I cannot endorse the unsupported assertion.

2. While I generally agree with Judge Gibbons’ explication of the delay factor, I am troubled by the locution he uses to describe it. Specifically, I am concerned that his description of the multiplier for delay as being a function of the “time value of money” could be interpreted as requiring a mechanical calculation of the delay factor on the basis of interest rates.

Judge Gibbons properly divides the delay problem into two parts. The first part concerns the period of time before the settlement is paid into court. For this interval — which can, of course, last many years — Lindy II gives the district court discretion to award a multiplier for delay in payment. 540 F.2d at 117. Lindy does not, however, require that the district court award a delay factor equivalent to the prevailing or legal rate of interest for the relevant period of time; rather, the amount *602 of the delay multiplier is also subject to the discretion of the court. This is in contrast to the calculation regarding the second delay factor, discussed at page 594 of Judge Gibbons’ opinion; once the fund has been paid into court and is earning interest, counsel and litigants who are entitled to a share of the fund should also receive a pro-rata share of the interest earned by the fund pending its distribution.

I thus join in Part V.C(l) of the opinion on the understanding that the opinion means that the first part of the delay factor is awarded and calculated in the discretion of the district court.

3. ' I have several concerns relative to Judge Gibbons’ discussion of the contingency multiplier. As a preliminary matter, I note my doubts that either Sprague v. Ticonic National Bank, 307 U.S. 161 , 59 S.Ct. 777 , 83 L.Ed. 1184 (1939), or Trustees v. Greenough, 105 U.S. 527 , 15 Otto 527 , 26 L.Ed. 1157 (1881), is authority for the proposition that under the equitable fund doctrine, when a case brought against several defendants is settled with respect to some of those defendants, the costs of litigating the rest of the case may never be paid out of the fund established by the initial settlement. 2

More generally, although I agree that, given the facts in this case, counsel were not entitled to rely on the proceeds of the first settlement to fund their pursuit of the second, I believe that the “equitable fund doctrine” does not universally preclude such a result. If there is a prior agreement between the litigants and counsel, or if, in the class action context, judicial approval of such a funding scheme is obtained after a partial settlement conference, an initial settlement fund might properly become a “war chest” in support of further litigation, so long as the parties involved in the suit against the remaining defendants are the same as those involved in the original settlement. I understand the holding in the majority opinion — that the district court’s premise regarding the use of the earlier fund for the later litigation is “false as a matter of law” — to be limited to the facts in this case, where it is uncontroverted that no prior agreement or court approval of a funding plan is present. On this basis, I concur in that holding. 3

An issue of more particular relevance to this case is whether a large partial settlement should have any impact on a district court’s determination of the contingency multiplier that will be applied to calculate *603 the amount of attorneys fees to be paid out of a second settlement. I believe that the first settlement should impact on the contingency determination regarding the second settlement in the following ways:

a) Certainly, if fees were partly or wholly reimbursable out of the original settlement already paid into court, see supra, any contingency multiplier as to the second settlement would have to be reduced to account for the fact that the counsel fees would otherwise have been reimbursed. This, however, is not a factor here.

b) I also believe that a district court might conclude that there is less risk attached to the pursuit of a second settlement because counsel are at least not at risk with respect to the time and funds that they have already expended in obtaining the first settlement. As a general rule, a person is willing to go only so far “in debt” in pursuit of a risky objective; the elimination of part of that debt may very well affect the person’s perception of the risk involved in continuing the endeavor. This may have been one factor that the district court had in mind.

c) Although he intimates that the conditions are not met here, Judge Gibbons suggests that the contingency factor may be lowered if the initial settlement indicates an inevitability (or at least a strong likelihood) that a second settlement will follow. Supra at p. 594. I agree with this common sense proposition and offer the following commentary. In addition to examining the similarities and differences between the suits that settled initially and those that remained (with the assumption that, if at least one sophisticated defendant settled, it becomes very likely that other defendants faced with the identical suit will also settle), a district court might rely on various external factors pointing to the effect of the first settlement on the contingency of the second. For instance, it might be relevant that experienced practitioners who considered the suit initially too risky were willing to undertake a role in the case after the first settlement. This in fact happened in this case. Additionally, a court might take into account the fact that counsel reflected their subjective evaluation of the difference in risk by requesting a lower contingency multiplier for the second part of the litigation, as Harold Kohn in fact did here. Although Judge Gibbons might be correct that a finding that the first settlement made the second one “inevitable” would be “hard to support” on the record before us, supra at p. 594 . I think the record shows that the first settlement made the second one much more likely.

I do not suggest that the factors I have adumbrated necessarily preclude a contingency multiplier, but only that they should be considered when determining the propriety and amount of a multiplier for the second stage of the litigation. Neither do I believe that Judge Gibbons’ opinion rules out their application in this case. Rather, his opinion rejects only the overbroad rationale of the district court for denial of a contingency multiplier, i.e., that the risk in this case was eliminated because the attorneys were entitled to collect out of the first fund for subsequent litigation. I concur with the contingency multiplier part of the majority opinion on this understanding.

. I especially note my endorsement of Judge Gibbons’ comment that the district court faced an incredibly burdensome task in reviewing the massive set of fee applications, which, if stacked in one pile, would amount to a pillar of paper 27 feet high. I also emphasize my agreement with Judge Gibbons’ observations that the court discharged its burden with great care, and that we have accepted far more of the district court’s opinion than we have rejected, notwithstanding the existence of many unsettled questions in this area of law. I further note that, in addition to the numerous matters we have had to review, there are countless items with which we have not had to deal — unjustified claims for travel lodging and meal expenses, numerous items of needless duplication of effort, and a plethora of other meritless requests — because, in the wake of the district court's painstaking review, its decision respecting those items was not appealed.

. In Sprague , Justice Frankfurter specifically stated that the Court was "concerned solely with the power [of a district court] to entertain[ ] a petition” for fees, 307 U.S. at 167 , 59 S.Ct. at 780 , and left unresolved exactly how the district court would calculate "the extent of such award.” See id. In fact, because the fund at issue in Sprague was to be established through the effect of stare decisis, see id. at 166, 59 S.Ct. at 780 , Sprague suggests that-there may be a range of indirect benefits to a class that are compensable out of a common fund.

Neither does Trustees reach the issue presented by this case. Although the Trustees Court stated that fees may be awarded only "as justice and equity may require," 105 U.S. at 535, 536 , the Court established no absolute rule for determining when a class is no longer benefitted by the work of counsel. Indeed, the Court discussed with approval Cowdrey v. Galveston Railroad Co., 93 U.S. 352 , 3 Otto 352 , 23 L.Ed. 950 (1876). In Cowdrey, the Court allowed the payment of fees to an attorney from a fund in court despite the fact that the attorney had not actually been involved in the specific litigation that had established the fund. Id. 93 U.S. at 354 . Rather, the attorney had earlier brought a similar suit that was disrupted by the outbreak of the civil war. Id. I believe thát it is difficult to read the Court’s endorsement of Cowdrey as anything but a suggestion that the notion of a "benefit” to a class may be far more flexible than Judge Gibbons' opinion now allows.

. It is also worth noting that Judge Gibbons' rule regarding two-step settlements may complicate the allocation among counsel of their share of the first settlement fund. To the extent that a particular law firm or lawyer is to receive an aliquot share from that first settlement fund, the majority’s rule would appear to require that the share be in direct proportion to work specific counsel performed only in connection with the initial group of defendants that settled. This share may or not be equal to the share of work done by that particular law firm or lawyer over the course of the entire litigation. It may also not be equal to the entire share of work done by that particular law firm or lawyer in connection with all defendants before the date of the initial settlement.