Opposition Brief — Chieftain Royalty Company, Petitioner v. Charles David Nutley, et al.
Supreme Court briefOct 9, 2018
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No. 18-301
d
IN THE
Supreme Court of the United States
CHIEFTAIN ROYALTY COMPANY,
Petitioner,
—v.—
CHARLES DAVID NUTLEY, et al.,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE TENTH CIRCUIT
BRIEF IN OPPOSITION FOR
RESPONDENT CHARLES DAVID NUTLEY
C. BENJAMIN NUTLEY
1055 E. Colorado Boulevard,
Fifth Floor
Pasadena, California 91106
(626) 204-4060
JOHN W. DAVIS
3030 N. Rocky Point Drive W.,
Suite 150
Tampa, Florida 33607
(813) 533-1972
ERIC ALAN ISAACSON
Counsel of Record
LAW OFFICE OF
ERIC ALAN ISAACSON
6580 Avenida Mirola
La Jolla, California 92037
(858) 263-9581
ericalanisaacson@icloud.com
Attorneys for Respondent Charles David Nutley
i
QUESTION PRESENTED
Whether common-fund fee awards are governed in
diversity cases by state or federal law.
ii
PARTIES TO THE PROCEEDING
Petitioner Chieftain Royalty Company was plaintiff-appellee below.
Respondents Charles David Nutley and Danny
George were objectors-appellants below.
Respondents EnerVest Energy Institutional Fund
XIII-A, L.P.; EnerVest Energy Institutional Fund
XIII-WIB, L.P.; EnerVest Energy Institutional Fund
XIII-WIC, L.P.; EnerVest Operating, L.L.C.; and
FourPoint Energy, LLC were defendants-appellees
below.
iii
TABLE OF CONTENTS
Page
QUESTION PRESENTED……………………………….i
PARTIES TO THE PROCEEDING…………..………..ii
TABLE OF CONTENTS………………..………………iii
TABLE OF AUTHORITIES……………….……………iv
SUMMARY OF ARGUMENT……………….…………..1
REASONS FOR DENYING THE WRIT………………9
I. CHIEFTAIN IDENTIFIES NO MEANINGFUL
CONFLICT WITH THIS COURT’S DECISIONS……..…….....9
II. THE CIRCUITS ARE IN CONFLICT ON WHETHER
FEDERAL OR STATE LAW CONTROLS COMMON-FUND
ATTORNEYS’ FEE AWARDS IN DIVERSITY
CASES………………………………..…………….………13
III. THE CONFLICT AMONG THE CIRCUITS HAS
SUBSTANTIAL CONSEQUENCES……………………….....17
IV. ANSWERING CHIEFTAIN’S QUESTION PRESENTED
CANNOT BRING ORDER TO A CHAOTIC FIELD UNLESS
THIS COURT DIRECTS THE PARTIES TO BRIEF AND
ARGUE AN ADDITIONAL QUESTION………………......…23
CONCLUSION……………………………………..……32
iv
TABLE OF AUTHORITIES
Page
CASES
In re Abrams & Abrams, P.A., 605 F.3d 238,
244 (4th Cir. 2010) ........................... 3, 13, 16, 25
In re Activision Sec. Litig., 723 F.Supp. 1373
(N.D. Cal. 1989) ................................................ 22
In re Apple iPhone/iPod Warranty
Litigation, 40 F.Supp.3d 1176 (N.D.
Cal. 2014).......................................................... 14
Allapattah Services, Inc. v. Exxon Corp., 454
F.Supp.2d 1185 (S.D. Fla. 2006) ................. 4, 16
Barnett v. Equitable Trust Co., 34 F.2d 916
(2d Cir. 1929), mod. sub nom. United
States v. Equitable Trust Co., 283
U.S. 738, 746 (1931) ......................................... 31
In re BioScrip, Inc. Sec. Litig., 273
F.Supp.3d 474 (S.D.N.Y. 2017) ....................... 29
Black v. Settlepou, PC, 732 F.3d 492 (5th
Cir. 2013) .......................................................... 28
In re Bluetooth Headset Prod. Liab. Litig.,
654 F.3d 935 (9th Cir. 2011) ............................ 30
Blum v. Stenson, 465 U.S. 886 (1984).................. 19, 27
In re Bolar Pharm. Co. Sec. Litig., 800
F.Supp. 1091 (E.D.N.Y. 1992) ......................... 29
Brown v. Phillips Petroleum Co., 838 F.2d
451 (10th Cir. 1988) .................................... 26-27
v
TABLE OF AUTHORITIES—Continued
Page
Brytus v. Spang & Co., 203 F.3d 238 (3d
Cir. 2000) .......................................................... 29
Byrd v. Blue Ridge Rural Elec. Cooperative,
Inc., 356 U.S. 525 (1958) .................................. 10
Camden I Condominium Ass’n, Inc. v.
Dunkle, 946 F.2d 768 (11th Cir.
1991) ................................................17, 21, 29-31
Central Bank v. First Interstate Bank, 508
U.S. 959 (1993) ............................................. 8, 32
Central R. & Banking Co. v. Pettus, 113
U.S. 116 (1885) ....................................... 7, 11, 31
In re Checking Account Overdraft Litig., 830
F.Supp.2d 1330 (S.D. Fla. 2011) ..................... 17
City of Burlington v. Dague, 505 U.S. 557,
562 (1992) ......................................6,7, 12, 27- 29
In re Coordinated Pretrial Proceedings, 109
F. 3d 602 (9th Cir. 1997) .................................. 30
Dodge v. Tulleys, 144 U.S. 451 (1892) ..........2, 9, 13-14
Dunn v. H.K. Porter Co., 602 F.2d 1105 (3d
Cir. 1979) .......................................................... 15
Elder v. Metropolitan Freight Carriers, Inc.,
543 F.2d 513 (3d Cir. 1976) ....................... 15, 25
In re Enron Corp. Sec. Litig., 586 F.Supp.2d
732 (S.D. Tex. 2008) ......................................... 29
vi
TABLE OF AUTHORITIES—Continued
Page
Erie R. Co. v. Tompkins, 304 U.S. 64
(1938) ...................................2, 4, 9-10, 12, 14, 17
Faught v. American Home Shield Corp., 668
F.3d 1233 (11th Cir. 2011) ............................... 31
Florin v. NationsBank of Georgia, N.A., 34
F.3d 560 (7th Cir. 1994) ........................21, 29-30
Fritsch v. Swift Transp. Co.,899 F.3d 785
(9th Cir. 2018) .................................................. 30
In re GMC Pick-up Truck Fuel Tank Prod.
Liab. Litig., 55 F.3d 768 (3d Cir.
1995) ................................................................. 29
Goldberger v. Integrated Resources, Inc., 209
F.3d 43 (2d Cir. 2000) ............................ 8, 20, 31
Gottlieb v. Barry, 43 F.3d 474 (10th Cir.
1994) ..................................................... 22, 26, 30
Guaranty Trust Co. v. York, 326 U.S. 99
(1945) .............................................................. 2, 9
Guffey v. Smith, 237 U.S. 101 (1915) ........................... 9
Haggart v. Woodley, 809 F.3d 1336 (D.C.
Cir. 2016) .......................................................... 29
Halley v. Honeywell International, Inc., 861
F.3d 481 (3d Cir. 2017) ............ 3, 6, 9, 13, 15, 25
Hanna v. Plumer, 380 U.S. 460
(1965) ............................................ 2,4-5, 9-10, 18
vii
TABLE OF AUTHORITIES—Continued
Page
Harman v. Lyphomed, Inc., 945 F.2d 969,
971 (7th Cir. 1991) ........................................... 21
Harrison v. Perea, 168 U.S. 311 (1897).................. 7, 31
Johnson v. Georgia Highway Express, Inc.,
488 F.2d 714 (5th Cir. 1974) ......... 6-7, 16, 26-28
Kamen v. Kemper Financial Services, Inc.,
500 U.S. 90 (1991) ........................................ 5, 25
Kuhnlein v. Dept. of Revenue, 662 So.2d 309
(Fla. 1995)............................................... 4, 13, 16
Lafler v. Cooper, 562 U.S. 1127 (2011) .................. 8, 32
Lindy Bros. Builders, Inc. v. American
Radiator & Sanitary Corp., 487 F.2d
161 (3d Cir. 1973), appeal following
remand, 540 F.2d 102 (3d Cir. 1976)
(en banc) ............................................... 18, 20, 21
Mitzel v. Westinghouse Elec. Corp., 72 F.3d
414 (3d Cir. 1995) ....................................... 15, 25
Montgomery Ward & Co. v. Pacific
Indemnity Co., 557 F.2d 51 (3d Cir.
1977) ................................................................. 13
Morgan v. Public Storage, 301 F.Supp.3d
1237 (S.D. Fla. 2016) ....................................... 17
Muransky v. Godiva Chocolatier, Inc.,
__F.3d__, 2018 WL 4762434 (11th
Cir. Oct. 3, 2018) .................................. 28, 29, 30
viii
TABLE OF AUTHORITIES—Continued
Page
In re Nasdaq Market-Makers Antitrust
Litig., 187 F.R.D. 465 (S.D.N.Y.1998) ............... 2
Nensel v. People’s Heritage Fc’l Gp., 815
F.Supp. 26 (D. Me. 1993) ................................. 29
Ojeda v. Hackney, 452 F.2d 947 (5th Cir.
1972) ........................................................ 3, 13-14
Paul, Johnson, Alston & Hunt v. Graulty,
886 F.2d 268 (9th Cir.1989) ............................. 30
Pearson v. Callahan, 552 U.S. 1279 (2008) ........... 8, 32
Pennsylvania v. Delaware Valley Citizens’
Council for Clean Air, 478 U.S. 546,
566 (1986) .................................................... 27-28
Pennsylvania v. Delaware Valley Citizens’
Council for Clean Air, 483 U.S. 711
(1987) ................................................................ 27
Perdue v. Kenny A. ex rel. Winn, 559 U.S.
542 (2010) ................................................. passim
Pierce v. Visteon Corp., 791 F.3d 782 (7th
Cir. 2015) .......................................................... 29
Rawlings v. Prudential-Bache Properties,
Inc., 9 F.3d 513 (6th Cir. 1993) ....................... 21
In re Rite Aid Corp. Sec. Litig., 396 F.3d 294
(3d Cir. 2005) .................................................... 22
Rodriguez v. Disner, 688 F.3d 645 (9th Cir.
2012) ............................................................. 3, 14
ix
TABLE OF AUTHORITIES—Continued
Page
Rosenbaum v. MacAllister, 64 F.3d 1439
(10th Cir. 1995) ................................................ 22
Semtek Int’l Inc. v. Lockheed Martin Corp.,
531 U.S. 497 (2001) ...................................... 5, 24
Stanger v. China Electric Motor, Inc., 812
F.3d 734 (9th Cir. 2016) ................................... 30
Staton v. Boeing Co., 327 F.3d 938 (9th Cir.
2003) ................................................................. 29
Swedish Hospital Corp. v. Shalala, 1 F.3d
1261 (D.C. Cir. 1993) ............................21, 29-30
Swift v. Tyson, 41 U.S. 1 (1842) ................................. 12
Tarrant v. Capstone Oil & Gas Co., 2008 OK
CIV APP 17, 178 P.3d 866 (Okla. Civ.
App. 2007)......................................................... 24
Trustees v. Greenough, 105 U.S. 527 (1882) .............. 10
U.S. Airways v. McCutchen, 569 U.S. 88
(2013) .......................................................... 11, 23
Union Asset Management Holding A.G. v.
Dell, Inc., 669 F.3d 632 (5th Cir.
2012) ................................................................. 28
United States v. Equitable Trust Co., 283
U.S. 738 (1931) ............................................. 7, 31
Uselton v. Commercial Lovelace Motor
Freight, Inc, 9 F.3d 849 (10th Cir.
1993) ................................................................. 26
x
TABLE OF AUTHORITIES—Continued
Page
Vizcaino v. Microsoft Corp., 290 F.3d 1043
(9th Cir. 2002) .............................................. 3, 14
Wal-Mart Stores, Inc. v. Dukes, 562 U.S.
1091 (2010) ................................................... 8, 32
In re Washington Public Power Supply
System Litig., 19 F.3d 1291 (9th Cir.
1994) ......................................................21, 29-30
LEGISLATIVE HISTORY
S. Rep. No. 109-14 (2005) .......................................... 12
STATUTES
28 U.S.C. §1652 ............................................................. 1
28 U.S.C. §1712(b)(2) .................................................. 12
52 O.S. 2001 §570.14 .................................................. 24
RULES
Fed. R. Civ. P. 23 ...............................................4, 16-17
Fed. R. Civ. P. 23(e) .................................................... 15
Fed. R. Civ. P. 23(h) ................................................ 1, 17
N.J. Ct. Rule 1:21-7 .................................................... 25
xi
TABLE OF AUTHORITIES—Continued
Page
OTHER AUTHORITIES
Court Awarded Attorney Fees, Report of the
Third Circuit Task Force, 108 FRD
237 (1985) (“Task Force Report”) ................ 18-20
Brian Lauter, When the Court Awards Fees,
National Law Journal, July 8, 1985,
Special Section, S2 ........................................... 20
STATUTE AND RULE INVOLVED
The Rules of Decision Act provides:
The laws of the several states, except where
the Constitution or treaties of the United
States or Acts of Congress otherwise require
or provide, shall be regarded as rules of
decision in civil actions in the courts of the
United States, in cases where they apply.
28 U.S.C. §1652.
Federal Rule of Civil Procedure 23(h) provides in
relevant part:
(h) Attorney’s Fees and Nontaxable Costs. In
a certified class action, the court may award
reasonable attorney’s fees and nontaxable
costs that are authorized by law or by the
parties’ agreement. …
Fed. R. Civ. P. 23(h).
SUMMARY OF ARGUMENT
Respondent Charles David Nutley respectfully
submits that Chieftain Royalty Company’s Petition
for a Writ of Certiorari should be denied unless the
Court directs the parties to address an additional
question in order to clarify what the controlling
federal standards are in the event that the Court
holds common-fund fee awards are indeed controlled
by federal law even in diversity cases. In particular,
the Court should be able to address not just whether
common-fund attorney’s fee awards in diversity cases
are governed by federal law but also, if federal law
indeed controls, whether a “reasonable attorney’s fee”
is presumed to be the attorney’s lodestar, see, e.g.,
2
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010),
provided it does not exceed a reasonable percentage of
the common fund.
The decision below’s apparent conflict with the
1892 holding of Dodge v. Tulleys, 144 U.S. 451 (1892),
that a federal judge sitting in diversity could award
attorneys’ fees to a litigant trustee even if such an
award was not available under state law, provides no
basis for granting certiorari. Dodge’s holding did not
survive the Erie doctrine’s rule that “[e]xcept in
matters governed by the Federal Constitution or by
Acts of Congress, the law to be applied in any case is
the law of the State.” Erie R. Co. v. Tompkins, 304
U.S. 64, 78 (1938). This Court’s decision in Guaranty
Trust Co. v. York, 326 U.S. 99, 111 (1945), expressly
extended Erie’s mandate to cases coming within the
federal courts’ equitable jurisdiction. And Hanna v.
Plumer, 380 U.S. 460, 468 (1965), requires reference
to “the twin aims of the Erie rule: discouragement of
forum-shopping and avoidance of inequitable
administration of the laws.” Dodge’s rule, allowing
litigants who sue in federal court to receive awards of
attorneys’ fees that are not available in state court,
clearly violates those twin aims. Dodge is defunct.
See infra §I, at 9-13.
There is, however, very real conflict among the
circuits on whether, in diversity cases, common-fund
attorneys’ fees are governed by state or federal law.
See infra §II, at 13-17. That conflict has substantial
consequences, as attorneys surely consider potential
fee awards when deciding where and how to litigate
state-law claims. See infra §III, at 17-23. There is
great conflict, as well, concerning what the federal
law is—so that merely answering Chieftain’s
Question Presented cannot bring uniformity to a
disordered field, unless this Court directs the parties
3
to brief and argue an additional question. See infra
§IV, at 23-32.
With its decision below, the Tenth Circuit joins the
Ninth Circuit in holding that common-fund fee
awards in diversity cases are governed by state law.
See Pet. App. 7a-16a; Vizcaino v. Microsoft Corp., 290
F.3d 1043, 1047 (9th Cir. 2002); Rodriguez v. Disner,
688 F.3d 645, 653 (9th Cir. 2012). Chieftain’s Petition
convincingly demonstrates that Ninth and Tenth
Circuit decisions conflict with the Fifth Circuit’s
holding in Ojeda v. Hackney, 452 F.2d 947, 948 (5th
Cir. 1972), that when sitting in diversity “the district
judge, as a federal chancellor, possesses an equitable
discretion to award attorneys’ fees in a class action
suit despite the provisions of State legal restraints”
barring such an award. Respondent Nutley concedes
that this is a clear conflict. See infra §II, at 13-14.
But there is more conflict among the circuits than
Chieftain’s Petition identifies. Chieftain overlooks
Third Circuit precedent directly holding that
common-fund attorneys’ fees come within its own
more general rule that “‘contingency fee agreements
in diversity cases are to be treated as matters of
procedure governed by federal law.’”
Halley v.
Honeywell International, Inc., 861 F.3d 481, 499-500
(3d Cir. 2017) (citation omitted). This places the
Third Circuit, as well as the Fifth Circuit, in direct
conflict with the Ninth and Tenth Circuits. The
Fourth Circuit, moreover, appears to follow the Third
Circuit’s general rule that contingent fees in diversity
cases are governed by federal law, see In re Abrams &
Abrams, P.A., 605 F.3d 238, 244 (4th Cir. 2010), and
likely would join the Third Circuit in applying it to
common-fund fee awards. See infra §II, at 14-16.
4
In addition, federal district courts sitting in Florida
have for more than a decade have refused in diversity
cases to apply the Florida Supreme Court’s holding in
Kuhnlein v. Dept. of Revenue, 662 So.2d 309 (Fla.
1995), that common-fund attorneys’ fees shall not be
awarded as a percentage of the fund, but must be
constrained by lodestar principles. Federal district
courts in Florida hold: “The district court presiding
over a diversity-based class action pursuant to Fed. R.
Civ. P. 23 has equitable power to apply federal
common law in determining fee awards irrespective of
state law.” Allapattah Services, Inc. v. Exxon Corp.,
454 F.Supp.2d 1185, 1200 (S.D. Fla. 2006). See infra
§II, at 16-17.
So, there is clear conflict. The Tenth Circuit and
the Ninth Circuit both hold that common-fund fee
awards in diversity cases are governed by state law,
while the Third and the Fifth Circuits, as well as
district courts in the Eleventh Circuit, hold that
common-fund fee awards in diversity cases always are
governed by federal law. That circuit conflict might
be a compelling reason for granting certiorari—if only
the conflict were consequential.
The conflict is far more consequential than
Chieftain’s Petition suggests.
Because the Erie
doctrine mandates applying state law if applying a
significantly different federal law would cause
“forum-shopping” or “inequitable administration of
the laws,” Hanna, 380 U.S. at 468, Chieftain finds
itself compelled to downplay the consequences of
displacing Oklahoma’s state-law lodestar awards with
the federal-law percent-of-fund fee awards that
Chieftain favors. See Pet. at 24-26. Hoping to avoid
Erie, Chieftain describes the difference between
Oklahoma’s lodestar approach to fee awards, and a
federal-law percent-of-fund award as “‘[n]onsub-
5
stantial, or trivial, variations.’” Pet. at 25 (quoting
Hanna, 380 U.S. at 468). In truth, the two methods
have dramatic consequences for plaintiffs’ class-action
lawyers. Plaintiffs’ attorneys prosecuting antitrust,
securities, consumer, or oil-and-gas-royalty class
actions that produce large common-fund recoveries
can expect, in the long run, to make a lot more money
with percent-of-fund fee awards unconstrained by
their lodestars. That is why Chieftain desires this
Court’s review. See infra §III, at 17-22.
A genuine conflict among the circuits, on a matter
of consequence could easily warrant this Court’s
intervention—which Chieftain insists is needed to
ensure national uniformity.
But on this score,
Chieftain’s Petition fails, for answering Chieftain’s
Question Presented as currently framed would
neither resolve what standards properly control
common-fund fee awards nor bring national
uniformity to a chaotic field. Chieftain asks this
Court only to decide: “Whether common-fund fee
awards are governed in diversity cases by state or
federal law.” But the ruling Chieftain seeks—merely
that federal law controls—would do next to nothing to
determine what the controlling law really is. There
are many possibilities. See infra §IV, at 23-32.
First, even if common-fund fee awards are governed
by federal common law, this Court’s decisions hold
that the federal common law often incorporates state
law. See, e.g., Semtek Int’l Inc. v. Lockheed Martin
Corp., 531 U.S. 497, 508 (2001); Kamen v. Kemper
Financial Services, Inc., 500 U.S. 90, 98-99 (1991).
Third Circuit decisions holding that federal law
governs attorneys’ contingent fees have applied New
Jersey Court Rules as the controlling “federal
procedural law” limiting attorneys’ fee awards in
diversity cases from the District of New Jersey. E.g.,
6
Halley, 861 F.3d at 499. Thus, even if common-fund
fee awards are governed by federal common law, that
common law may well incorporate state law, either
from the state in which the district court sits, or from
the state under whose laws the plaintiffs’ claims
arise. See infra §IV, at 23-25.
Second, even if common-fund fees in diversity cases
are to be governed by an exclusively federal common
law that resolutely ignores state-law principles and
precedents, the central question remains of what
constitutes “a reasonable attorney’s fee”—a question
that this Court has repeatedly answered in cases
where Congress authorized the award of “a
reasonable attorney’s fee.” See, e.g., Perdue, 559 U.S.
at 550-53; City of Burlington v. Dague, 505 U.S. 557,
562 (1992).
Chieftain offers no reason why “a
reasonable attorney’s fee” must mean something
entirely different in this common-fund case than it
does in cases where this Court held that “a reasonable
attorney’s fee” ordinarily should not exceed the
attorney’s lodestar. E.g., Perdue, 559 U.S. at 546,
550-54.
Chieftain studiously ignores this Court’s decisions
defining “a reasonable attorney’s fee” and instead
assumes that its lawyers are entitled to one-third of
the fund in this case—under Tenth Circuit precedent
expressing a clear “preference” for awarding commonfund fees as a percentage of the fund, to determined
using the twelve factors set forth in Johnson v.
Georgia Highway Express, Inc., 488 F.2d 714, 717
(5th Cir. 1974). See Pet. App. 4a-5a. That should be
troubling, for the Tenth Circuit’s common-fund
jurisprudence is grounded in the very Johnson-factor
approach Perdue jettisoned as too subjective to
produce reasonably predictable results suited to
7
meaningful appellate review. 559 U.S. at 550-52. See
infra §IV, at 25-29.
Merely holding that common-fund fee awards shall
be governed by federal law would not bring order to a
chaotic field. The Tenth Circuit’s continued reliance
on the Johnson factors is misplaced, and the circuits
otherwise are in conflict on the most basic standards
governing fee awards in common-fund cases. Some
decisions sensibly apply the rule of Perdue and
Dague, that a reasonable attorney’s fee is properly
limited to the attorney’s lodestar even when a
common fund is recovered—at least in cases involving
claims also subject to a fee-shifting statute—while
others hold that this Court’s decisions defining “a
reasonable attorney’s fee” have no application at all in
common-fund cases. See infra §IV, at 28-29.
The circuits are in conflict in other ways. The
Eleventh Circuit and the District of Columbia Circuit
have mandated that common-fund attorneys’ fees
always be awarded as a percentage of the fund—and
never based on the attorneys’ lodestar. Other circuits
hold that district judges possess a largely unbridled
discretion to choose between awarding common-fund
fees as a percentage of the fund, or based on the
attorneys’ lodestar. See infra §IV, at 29-30.
Common-fund conflicts do not end there. This
Court’s own decisions support common-fund awards
coming to but ten percent, or less, of the fund.1 The
1 See, e.g., Central Railroad & Banking Co. v. Pettus, 113 U.S.
116, 128 (1885) (slashing common-fund fee award from an
unreasonably high 10% of the fund to just 5%); Harrison v.
Perea, 169 U.S. 311, 317-18, 325-26 (1897) (affirming award of a
fee amounting to 10% of the fund); United States v. Equitable
Trust Co., 283 U.S. 738, 746 (1931) (holding “the allowance [for
attorneys’ fees] of $100,000 unreasonably high and that to bring
8
Ninth Circuit and Eleventh Circuits nonetheless
impose a 25% “benchmark” when common-fund fees
are awarded as a percentage of the fund. The Second
Circuit, on the other hand, has flatly rejected the
Ninth Circuit’s 25% benchmark as “an all too
tempting substitute for the searching assessment that
should properly be performed in each case.”
Goldberger v. Integrated Resources, Inc., 209 F.3d 43,
52 (2d Cir. 2000). See infra §IV, at 30-31.
If this Court determines that an exclusively federal
common law controls the award of common-fund
attorneys’ fee awards in diversity cases, it should
have the opportunity to specify what principles, if
any, cabin those awards. Thus, Nutley respectfully
submits that Chieftain’s Petition for a Writ of
Certiorari should be denied, unless this Court directs
the parties to brief and argue an additional
question—as it has many times done when granting
writs of certiorari. See, e.g., Lafler v. Cooper, 562 U.S.
1127 (2011); Wal-Mart Stores, Inc. v. Dukes, 562 U.S.
1091 (2010); Pearson v. Callahan, 552 U.S. 1279
(2008); Central Bank v. First Interstate Bank, 508
U.S. 959 (1993).
Specifically, this Court should direct the parties to
brief and argue the additional question of whether, in
a common-fund case like this, “a reasonable attorney’s
fee” is presumed to be the attorney’s lodestar, see
Perdue, 559 U.S. at 546, 550-54, provided it does not
exceed a reasonable percentage of the common fund.
An affirmative answer to that question would resolve
many conflicts in federal common-fund jurisprudence
by providing a uniform rule that is consistent with
it within the standard of reasonableness it should be reduced to
$50,000,” which was roughly 7½% of the fund in question).
9
this Court’s prior holdings defining “a reasonable
attorney’s fee.” See infra §IV, at 32.
REASONS FOR DENYING THE PETITION
I.
CHIEFTAIN IDENTIFIES NO MEANINGFUL
CONFLICT WITH THIS COURT’S DECISIONS
Chieftain contends that the decision below conflicts
with Dodge v. Tulleys, 144 U.S. 451 (1892), a diversity
case holding that
while contract rights are settled by the law of
the State, that law does not determine the
procedure of courts of the United States
sitting as courts of equity, or the costs which
are taxable there, or control the discretion
exercised in matters of [attorney’s fee]
allowances.
Id. at 457. “It is a general rule of equity,” said Dodge,
“that a trustee called upon to discharge any duties in
administering of his trust is entitled to compensation
therefor, and included therein is a reasonable
allowance for counsel fees,” even if it would not be
available in state court. Id. at 457. In Guffey v.
Smith, 237 U.S. 101, 114 (1915), this Court cited
Dodge as holding “that the remedies afforded and the
modes of proceeding pursued in the Federal courts,
sitting as courts of equity, are not determined by local
laws or rules of decision, but by general principles,
rules and usages of equity having uniform operation
in those courts wherever sitting.”
That said, Chieftain’s reliance on Dodge ignores the
revolution worked by Erie and its progeny, including
Guaranty Trust Co. v. York, 326 U.S. 99 (1945), and
Hanna v. Plumer, 380 U.S. 460 (1965). Erie held:
10
Except in matters governed by the Federal
Constitution or by Acts of Congress, the law
to be applied in any case is the law of the
State. And whether the law of the State shall
be declared by its Legislature in a statute or
by its highest court in a decision is not a
matter of federal concern. There is no federal
general common law.
Erie, 304 U.S. at 78. “To make an exception to Erie R.
Co. v. Tompkins on the equity side of a federal court
is to reject the considerations of policy which, after
long travail, led to that decision.” York, 326 U.S. at
111. “The source of rights enforced by a federal court
under diversity jurisdiction, it cannot be said too
often, is the law of the States.” Id. at 112.
The contrary rule of Dodge directly violates “the
twin aims of the Erie rule: discouragement of forumshopping and avoidance of inequitable administration
of the laws.” Hanna, 380 U.S. at 468. For if a litigant
can recover attorneys’ fees in federal court that are
unavailable in state court, this would be a compelling
reason to engage in forum shopping. Only by filing
suit in federal court would the trustee or class
representative be able to recover its attorneys’ fees.
This is by no means a “nonsubstantial, or trivial,
variation[]” that could be characterized as “unlikely to
influence the choice of forum.” Hanna, 380 U.S. at
468.
Nor would applying state law “disrupt” federal
interests. Byrd v. Blue Ridge Rural Elec. Cooperative,
Inc., 356 U.S. 525 (1958). There is, after all, nothing
peculiarly “federal” about the common-fund doctrine.
This Court’s original common-fund decision, Trustees
v. Greenough, 105 U.S. 527, 536 (1882), applied what
it described as “the common practice, as well in the
11
courts of the United States as in those of the States.”
This Court’s next common-fund case, Central R. &
Banking Co. v. Pettus, 113 U.S. 116, 128 (1885), it
decided “according to the law of Alabama, by one of
whose courts the original decree was rendered, and by
which this question must be determined.” More
recently, in U.S. Airways v. McCutchen, 569 U.S. 88,
104 (2013), which involved the terms of a federal
ERISA plan, this Court emphasized that it was not
alone in applying the common-fund doctrine “in a
wide range of circumstances as part of our inherent
authority,” since “State courts have done the same;
the ‘overwhelming majority’ routinely use the
common-fund rule to allocate the costs of third partyrecoveries between insurers and beneficiaries.”
McCutchen follows those state-court common-fund
decisions explaining: “A party would not typically
expect or intend a[n ERISA] plan saying nothing
about attorney’s fees to abrogate so strong and
uniform a background rule. And that means a court
should be loath to read such a plan in that way.” Id.
at 104 & n.8.
Chieftain nonetheless suggests there is some
overarching federal interest in awarding fees as a
percentage of any common fund, so that district
courts may avoid the burden of lodestar analysis in
diversity cases.
Yet this Court’s precedents hold that a “reasonable
attorney’s fee” award in cases involving federal
statutory claims ordinarily requires calculation of the
attorneys’ lodestar: “‘[T]he ‘lodestar’ figure has, as its
name suggests, become the guiding light of our feeshifting jurisprudence.’” Perdue, 559 U.S. at 551
(citations omitted). Whenever federal courts award a
“reasonable attorney’s fee” under a federal statute
“there is a strong presumption that the lodestar is
12
sufficient.” Id. at 546. “‘[A] reasonable attorney’s fee
is one that is adequate to attract competent counsel,
but that does not produce windfalls to attorneys.’” Id.
at 552 (quoting Blum v. Stenson, 465 U.S. 886, 897
(1984)). “[T]he lodestar method yields a fee that is
presumptively sufficient to achieve this objective,”
with the caveat that “enhancements may be awarded
in ‘“rare”’ and ‘“exceptional”’ circumstances.” Id. at
552 (citations omitted).
Applying the lodestar analysis required by
Oklahoma’s common-fund doctrine is no more
demanding, and no more disruptive of federal
interests, than applying lodestar analysis to
determine a “reasonable attorney’s fee” under this
Court’s decisions in Perdue and Dague.
Chieftain nonetheless suggests that applying
Oklahoma’s preference for lodestar awards somehow
frustrates policies underlying the Class Action
Fairness Act of 2005 (“CAFA”), which provides for the
removal to federal courts’ diversity jurisdiction of
most state-law class actions. Without doubt, CAFA
reflects a Congressional determination that federal
courts should administer state-law class actions,
including the award of attorneys’ fees.
But
Chieftain’s notion that CAFA overrides Oklahoma’s
lodestar fee awards is contrary to statutory text and
legislative history.
See 28 U.S.C. §1712(b)(2)
(“Nothing in this subsection shall be construed to
prohibit application of a lodestar with a multiplier
method of determining attorney’s fees.”); S. Rep. No.
109-14, at 49 (2005) (CAFA “does not change the
application of the Erie Doctrine”).
Dodge thus is best understood as a decision
“imbued with the rationale of Swift v. Tyson,” 41 U.S.
1 (1842), which Erie “thoroughly rejected.”
13
Montgomery Ward & Co. v. Pacific Indemnity Co., 557
F.2d 51, 56-57 n.8 (3d Cir. 1977). That the decision
below conflicts with Dodge thus provides no reason to
grant certiorari.
II.
THE CIRCUITS ARE IN CONFLICT ON
WHETHER FEDERAL OR STATE LAW
CONTROLS COMMON-FUND ATTORNEYS’
FEE AWARDS IN DIVERSITY CASES
Chieftain has identified genuine conflict between
decisions of the Ninth and Tenth Circuits, which both
hold that common-fund fee awards in diversity cases
are governed by state law, and the Fifth Circuit’s
decision in Ojeda v. Hackney, 452 F.2d 947 (5th Cir.
1972), which applies Dodge’s outmoded reasoning to
displace state law denying attorneys’ fees with a
contrary federal rule. But the conflict is worse than
that, for a line of Third Circuit decisions holds that
federal law controls attorneys’ contingent fees in
diversity cases, including common-fund cases. See
Halley v. Honeywell International, Inc., 861 F.3d 481,
498-500 (3d Cir. 2017). The Fourth Circuit has
endorsed that line of decisions. See In re Abrams &
Abrams, P.A., 605 F.3d 238, 244 (4th Cir. 2010). And
for more than a decade, federal district courts sitting
in diversity have flatly refused to follow the Florida
Supreme Court’s holding in Kuhnlein v. Dept. of
Revenue, 662 So.2d 309, 311-12 (Fla. 1995), that
common-fund fees shall be calculated based on the
attorneys’ lodestar rather than as a percentage of the
fund.
_____
14
Like the Tenth Circuit in the decision below, the
Ninth Circuit squarely holds that common-fund
attorneys’ fee awards in diversity cases are governed
by state law. When Washington state-law claims
settled, producing a common fund, the Ninth Circuit
held: “Because Washington law governed the claim, it
also governs the award of fees. Under Washington
law, the percentage-of-recovery approach is used in
calculating fees in common fund cases.” Vizcaino v.
Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002)
(citations omitted).
In Rodriguez v. Disner, 688 F.3d 645, 653 (9th Cir.
2012), moreover, the Ninth Circuit reiterated that
while the claims before it involved alleged violations
of federal antitrust laws, so that common-fund
attorneys’ fees were governed by federal law, “[i]f, on
the other hand, we were exercising our diversity
jurisdiction, state law would control whether an
attorney is entitled to fees and the method of
calculating such fees.” Id. at 653 n.6. District courts
in the Ninth Circuit naturally follow this rule, that
common-fund attorneys’ fee awards are controlled by
state law in diversity cases. See, e.g., In re Apple
iPhone/iPod Warranty Litigation, 40 F.Supp.3d 1176,
1180 & n.1 (N.D. Cal. 2014).
This approach, of both the Ninth and Tenth
Circuits, clearly conflicts with that of the Fifth Circuit
in Ojeda, citing this Court’s pre-Erie decision in
Dodge to hold that when sitting in diversity over a
class action asserting only Texas state-law claims
“the district judge, as a federal chancellor, possesses
an equitable discretion to award attorneys’ fees in a
class action suit despite the provisions of State legal
restraints.” Ojeda, 452 F.3d at 948. It is tempting to
dismiss Ojeda as an isolated and ill-considered
decision mistaking Dodge for good law.
15
Yet Chieftain overlooks another line of decisions,
originating in the Third Circuit and holding that
attorneys’ contingent fees in diversity cases—
including class actions producing common-fund
settlements—are governed by federal law. The Third
Circuit’s
decision
in
Halley
v.
Honeywell
International, Inc., 861 F.3d 481, 498-500 (3d Cir.
2017), which involved a common-fund class-action
settlement, directly holds that “‘contingency fees in
diversity cases are to be treated as matters of
procedure governed by federal law.’” Id. (quoting
Mitzel v. Westinghouse Elec. Corp., 72 F.3d 414, 417
(3d Cir. 1995)). Halley follows the Third Circuit’s
opinion in Mitzel, which in turns relies on Elder v.
Metropolitan Freight Carriers, Inc., 543 F.2d 513 (3d
Cir. 1976):
“Rules regulating contingent fees pertain to
conduct of members of the bar, not to
substantive law which determines the
existence or parameters of a cause of action.
Such rules are designed to promote the
efficient disposition of litigation and enhance
the public’s confidence in the bar.”
Mitzel, 72 F.3d at 417 (quoting Elder, 543 F.2d at 519;
see also Dunn v. H.K. Porter Co., 602 F.2d 1105, 1110
n.8 (3d Cir. 1979) (in evaluating attorneys’ contingent
fees’ reasonableness, a district court “should apply
federal law for its action is part and parcel of the
process a federal court follows both in supervising
members of its bar and in meeting the obligations
imposed on it by Fed. R. Civ. P. 23(e)”).
The Fourth Circuit, moreover, has cited Mitzel with
apparent approval as holding that the “attorney fee
determination in contingency case[s] is [a] federal
procedural question.” In re Abrams & Abrams, P.A.,
16
605 F.3d 238, 244 (4th Cir. 2010). The Fourth Circuit
clearly agrees that federal law controls, being
“persuaded that the virtues of simplicity and
straightforwardness
counsel
against
adopting
different standards with different shades and
nuances in different contexts.” Id. at 244. Thus, the
Fourth Circuit held that a contingent attorneys’ fee
award—even in a state-law personal-injury action—
must be evaluated not according to state law, but
under “the twelve factors set forth in Johnson v.
Georgia Highway Express, Inc., 488 F.2d 714, 717-19
(5th Cir. 1974).” Abrams, 605 F.3d at 244. The
Fourth Circuit failed to note that this Court had
specifically disparaged the Johnson factors just four
weeks earlier in Perdue, 559 U.S. at 550-52.
Further contributing to the conflict in the lower
courts, federal district courts in Florida when
awarding common-fund fees in diversity cases have
for more than a decade refused to apply the Florida
Supreme Court’s holding in Kuhnlein v. Dept. of
Revenue, 662 So.2d 309, 311-12 (Fla. 1995), that
common-fund attorneys’ fees shall not be awarded as
a percentage of the fund, but must be constrained by
lodestar principles. They hold: “The district court
presiding over a diversity-based class action pursuant
to Fed. R. Civ. P. 23 has equitable power to apply
federal common law in determining fee awards
irrespective of state law.” Allapattah Services, Inc. v.
Exxon Corp., 454 F.Supp.2d 1185, 1200 (S.D. Fla.
2006). As one recent decision explained:
It is true that Florida courts follow the
lodestar approach in common fund class
action cases.
The federal courts in this
circuit, however, do not, and have not at least
since the Eleventh Circuit declared in
Camden I that “[a]ttorneys’ fees awarded from
17
a common fund shall be based upon a
reasonable percentage of the fund established
for the benefit of the class.”
Morgan v. Public Storage, 301 F.Supp.3d 1237, 1266
(S.D. Fla. 2016) (quoting Camden I Condominium
Ass’n v. Dunkle, 946 F.2d 768, 774 (11th Cir. 1991));
accord, e.g., In re Checking Account Overdraft Litig.,
830 F.Supp.2d 1330, 1362 n.32 (S.D. Fla. 2011)
(“Plaintiffs are correct that Eleventh Circuit
attorneys’ fee law governs” a common-fund fee award
in a diversity case, “not the law of Florida.”).
Clearly, we have a serious conflict among the
circuits on whether a federal general common law of
common-fund attorneys’ fees displaces otherwise
applicable state law in diversity cases. Such a conflict
might warrant this Court’s review, if it were at all
consequential.
III.
THE CONFLICT AMONG THE CIRCUITS HAS
SUBSTANTIAL CONSEQUENCES
Given Erie’s aim of discouraging forum shopping,
Chieftain feels compelled to downplay the
consequences of choosing between Oklahoma’s
lodestar fee awards, and what it touts as “federal”
percent-of-fund awards. But the prospect of attorneys’ fees, and method by which they will be
calculated, make a big difference in where and how
lawyers choose to litigate cases. “Fee awards are a
powerful influence on the way attorneys initiate,
develop, and conclude class actions.” Fed. R. Civ. P.
23, Advisory Committee Note to 2003 amendment
adding subdivision 23(h).
Chieftain says that “there is no reason to believe
that awards will be predictably higher or lower under
either method,” dismissing the differences between
18
percent-of-fund and lodestar awards as “‘[n]onsubstantial, or trivial, variations” that are unlikely to
affect plaintiffs’ class-action counsel’s litigation
decisions. Pet. at 25 (quoting Hanna, 380 U.S. at
468). But plaintiffs’ class-action counsel know better.
They know that they can expect to make a lot more
money, on average, when courts award common-fund
fees as a percentage of the fund unconstrained by the
attorneys’ lodestars.2
That is why securities-fraud and antitrust classaction plaintiffs’ lawyers have long favored replacing
lodestar fee awards with percent-of-fund awards.
Their complaints about lodestar awards reportedly
induced the Third Circuit to convene a Task Force on
Attorneys’ Fees, which issued a report in 1985 that
catalyzed a trend among federal courts to awarding
common-fund fees as a percentage of the fund
unhinged from attorneys’ lodestars. The Task Force
Report recognized that over the preceding decade this
Court’s decisions had endorsed the Third Circuit’s
approach to attorneys’ fees in Lindy Bros. Builders,
Inc. v. American Radiator & Sanitary Corp., 487 F.2d
161 (3d Cir. 1973), appeal following remand, 540 F.2d
102 (3d Cir. 1976) (en banc), which had overturned a
percent-of-fund award and directed that commonfund fees instead be calculated according to the
attorneys’ lodestar.3
A remarkable irony in this case is that Chieftain’s lawyers
initially filed in Oklahoma state court apparently thinking they
would obtain a 40% fee award there. Put bluntly, “class counsel
did not do the necessary homework on Oklahoma law.” Pet.
App. at 16a.
2
3 See Court Awarded Attorney Fees, Report of the Third Circuit
Task Force, 108 FRD 237, 242-43 (1985) (“Task Force Report”)
(“In Lindy, the court vacated the district court’s fee award,
19
Acknowledging that this Court had “declared that
the lodestar generally is ‘presumed to be the
reasonable fee,’” the Task Force Report challenged
that view. 108 F.R.D. at 246 (quoting Blum v.
Stenson, 465 U.S. 886, 897 (1984)). Further consideration was needed, the Task Force Report
insisted, because despite this Court’s acceptance of
Lindy’s lodestar methodology over the preceding
decade, “Lindy has come under increased criticism,
with some observers asserting that this technique
causes more problems than it solves.” Task Force
Report, 108 F.R.D. at 246. “Whatever the merits of
the Lindy objectives and the degree to which they are
being achieved, there is a widespread belief that the
deficiencies of the current system either offset or
exceed its benefits.” Id.
For its assertions that “Lindy has come under
increased criticism,” and had produced “widespread
belief that the deficiencies of the current system” of
lodestar common-fund fee awards “offset or exceed its
benefits,” the Task Force Report offered but two
citations. 108 F.R.D. at 246 & n.28. One was to a
National Law Journal article by David Lauter,
explaining why the Third Circuit Task Force had
been convened: “Circuit Chief Judge Ruggero J.
Aldisert acted after complaints by some antitrust
lawyers that the rules—under which fees are set by
which had been based on a percentage of the settlement fund,
and directed the district court to recalculate the fee pursuant to
an entirely different formula. The technique is easily described.
First, the court must determine the hours reasonably expended
by counsel that created, protected, or preserved the fund.
Second, the number of compensable hours is multiplied by a
reasonable hourly rate for the attorney’s services.”) (footnote
omitted).
20
multiplying the hourly market rate by the total
number of hours spent—force lawyers in antitrust
and securities class actions to pad their hours or
delay settlement to build their fees.” Brian Lauter,
When the Court Awards Fees, National Law Journal,
July 8, 1985, Special Section at S2. The other
authority cited by the Task Force Report for its
assertion that the Lindy lodestar awards were
problematic was a class-action plaintiff lawyer’s
“unpublished report on fees presented to the Ninth
Circuit [that] advocates abolishing Lindy and
returning to percentage based fees.” 108 F.R.D. at 246
& n.28.
Simply put, securities and antitrust
plaintiffs’ lawyers wanted more money.
They undoubtedly were pleased when the Task
Force Report recommended replacing the lodestar
methodology with a “negotiated percentage fee
procedure.”4 With the 1985 Task Force Report in
hand, class-action plaintiffs’ lawyers urged federal
appellate courts “to ‘junk’ the lodestar altogether in
common fund cases,” replacing it with a requirement
that district judges always award common-fund
attorneys’ fees as a percentage of the fund.5 The
plaintiffs’ class-action bar scored remarkable victories
in the Eleventh Circuit and the District of Columbia
Circuit, which both ruled that district judges cannot
Task Force Report, 108 F.R.D. at 255-59; cf. Goldberger v.
Integrated Resources, Inc., 209 F.3d 43, 49 (2d Cir. 2000) (noting
that “[t]he Task Force unequivocally recommended a return to
the percentage method in common fund cases,” but without
noting the Task Force’s recommended procedural qualifications).
4
Goldberger, 209 F.3d at 48 (“As succinctly stated at oral
argument, counsel now urge us to ‘junk’ the lodestar altogether
in common fund cases, and to remand for an award of an
appropriate percentage fee.”).
5
21
employ lodestar fee awards in common-fund cases,
but must award attorneys’ fees as a percentage of the
fund.6
Other circuits answered requests to junk the Lindy
lodestar approach to common-fund attorneys’ fees by
holding that district courts must have discretion to
award fees however they choose, based either on the
attorneys’ lodestar or as a percentage of the fund.7
6 Camden I Condominium Ass’n, Inc. v. Dunkle, 946 F.2d 768,
770 (11th Cir. 1991) (embracing class counsel’s argument that a
district court abuses its discretion by “calculating attorneys’ fees
based upon the lodestar and risk enhancement method rather
than a percentage of the class action common fund”); Swedish
Hospital Corp. v. Shalala, 1 F.3d 1261, 1263 (D.C. Cir. 1993)
(adopting class counsel’s arguments: “This appeal raises
important questions about the reasonable calculation of
contingent counsel fees in class actions resulting in the creation
of a common fund payable to plaintiffs. We hold that the proper
measure of such fees in a common fund case is a percentage of
the fund.”).
7 See,
e.g., Harman v. Lyphomed, Inc., 945 F.2d 969, 971, 974
(7th Cir. 1991) (holding district judges retain discretion to award
lodestar fees, even though “the attorneys suggest adoption of the
percentage-of-the-fund method as a rule of law in common fund
cases” based on counsel’s argument “that the percentage method
offers advantages that recommend it over the lodestar method in
common fund cases.”); Rawlings v. Prudential-Bache Properties,
Inc., 9 F.3d 513, 515 (6th Cir. 1993) (approving lodestar fee
award although “[c]lass counsel argues that the percentage of
the fund method is the appropriate way to calculate attorney’s
fees in common fund cases”); Florin v. NationsBank of Georgia,
N.A., 34 F.3d 560, 565 (7th Cir. 1994) (“Class counsel have urged
us to declare a rule in this case that would compel district courts
to use the ‘percentage-of-recovery method’ to award attorney’s
fees in all common fund cases. They point out that at least two
other circuits have done so, citing Swedish Hospital … and
Camden I ….”); In re Washington Public Power Supply System
Sec. Litig., 19 F.3d 1291, 1295 (9th Cir. 1994) (“Class Counsel
urge us to follow the Eleventh Circuit’s lead in mandating the
22
Still, the Third Circuit held that “[t]he percentage-ofrecovery method is generally favored in common fund
cases.” In re Rite Aid Corp. Sec. Litig., 396 F.3d 294,
300 (3d Cir. 2005). Holding that “either method is
permissible in common fund cases,” the Tenth Circuit
similarly expressed “a preference for the percentage
of the fund method.”8 Given the choice between
awarding common-fund fees based on the Lindy
lodestar methodology (requiring them actually to
monitor the attorneys’ work and time-keeping) or the
percent-of-fund “methodology” (permitting them to
pluck a percentage out of the air) district judges
needed little encouragement to abandon relatively
time-consuming lodestar awards for quick-and-easy
percent-of-fund fee awards.9
The result has been to funnel vast wealth into the
hands of a few plaintiffs’ class-action lawyers. That is
why Chieftain and its amici urgently desire this
use of the percentage method in common fund cases. Because the
law in our circuit is settled on this issue, we are not at liberty to
follow the Eleventh Circuit. We instead apply the law of our
circuit that the district court has discretion to use either method
in common fund cases.”).
8 Gottlieb
v. Barry, 43 F.3d 474, 483 (10th Cir. 1994) (holding
district court abused its discretion by rejecting the master’s
recommendation of the percentage-of-fund method); see Pet. App.
at 5a; see also Rosenbaum v. MacAllister, 64 F.3d 1439, 1445
(10th Cir. 1995).
See, e.g., In re Nasdaq Market-Makers Antitrust Litig., 187
F.R.D. 465, 484-85 (S.D.N.Y.1998) (collecting cases); In re
Activision Sec. Litig., 723 F.Supp. 1373, 1378 (N.D. Cal. 1989)
(“this court concludes that in class action common fund cases the
better practice is to set a percentage fee and that, absent
extraordinary circumstances that suggest reasons to lower or
increase the percentage, the rate should be set at 30%”).
9
23
Court’s review. Class counsel make a lot more money
under a regime of percent-of-fund fee awards than
they do when limited to what this Court has
repeatedly held is a reasonable attorney’s fee.
IV.
ANSWERING CHIEFTAIN’S QUESTION
PRESENTED CANNOT BRING ORDER TO
A CHAOTIC FIELD UNLESS THIS COURT
DIRECTS THE PARTIES TO BRIEF AND
ARGUE AN ADDITIONAL QUESTION
“If left undisturbed,” Chieftain says, “the Tenth
Circuit’s decision will burden lower courts and
undermine the uniformity in class actions that
Congress has specifically sought to ensure.” Pet. at
26. Chieftain says that “perhaps most importantly,
the application of state law would ‘disrupt’ an
important federal interest … namely the uniform
administration of class actions in federal court.” Pet.
at 26.
But merely answering Chieftain’s Question
Presented will not bring uniformity to the federal
courts’ common-fund jurisprudence. Chieftain asks
this Court to decide: “Whether common-fund fee
awards are governed in diversity cases by state or
federal law.” A holding that common-fund fee awards
are governed by federal law will mean next to nothing
unless this Court also specifies what the federal law
is.
For one thing, holding that federal common law
controls the award of common-fund attorneys’ fees in
diversity cases would not necessarily preclude
reference to state law, since the federal law often
incorporates state law. In U.S. Airways, Inc. v.
McCutchen, 569 U.S. 88, 104 & n.8 (2013), for
example, this Court held that a federal ERISA plan
24
should be interpreted in accord with state-court
common-fund precedents: “A party would not typically expect or intend a plan saying nothing about
attorney’s fees to abrogate so strong and uniform a
background rule. And that means a court should be
loath to reach such a plan in that way.” Id.
In Semtek Int’l Inc. v. Lockheed Martin Corp., 531
U.S. 497, 508 (2001), this Court held that because
“federal common law governs the claim-preclusive
effect of a dismissal by a federal court sitting in
diversity,” its task was “to determine the appropriate
federal rule.” This Court adopted a federal commonlaw rule that state law controls: “This is, it seems to
us, a classic case for adopting, as the federally
prescribed rule of decision, the law that would be
applied by state courts in the State in which the
federal diversity court sits.” Id. at 508. The federal
rule for common-fund fee awards might similarly
incorporate the law of the state in which the district
court sits.
Alternatively, the federal common law might
incorporate the common-fund rules of the state under
whose laws the underlying claims arise—particularly
in a case like this one, in which state law provides for
statutory fee shifting under the Oklahoma Production
Revenue Standards Act (“PRSA”).10 “The presumption that state law should be incorporated into federal
common law is particularly strong in areas in which
private parties have entered legal relationships with
10 See 52 O.S. 2001 §570.14(A), (C); Tarrant v. Capstone Oil &
Gas Co., 2008 OK CIV APP 17, ¶18, 178 P.3d 866, 871 (Okla.
Civ. App. 2007) (“The PRSA allows for recovery of unpaid
royalties with interest, damages for injury to business or
property arising from the violation, litigation costs, and attorney
fees.”) (emphasis added).
25
the expectation that their rights and obligations
would be governed by state-law standards.” Kamen v.
Kemper Financial Services, Inc., 500 U.S. 90, 96-97
(1991).
Also worth noting are Third Circuit decisions
holding federal law controls attorneys’ contingent fees
in diversity cases, as a matter of “federal procedure,”
which then apply the local rules of the U.S. District
Court for the District of New Jersey, and through
them incorporating as a federal procedural rule New
Jersey Court Rule 1:21-7’s state-law limitations on
attorneys’ contingent fees.11 The Fourth Circuit,
though following Third Circuit precedent in holding
that attorneys’ contingent fees are an issue of federal
procedural law, it apparently did so so in order to
avoid applying competing state-law standards. See
Abrams, 605 F.3d at 244.
Were this Court to hold that the federal common
law concerning common-fund fee awards does not
11 See, e.g., Halley, 861 F.3d at 198-99; Mitzel, 72 F.3d at 416-18;
Elder, 543 F.2d at 516 & n.2, 518-19; see also Elder, 543 F.2d at
521 & n.5 (Hunter, J., dissenting). New Jersey Court Rule 1:217 currently provides that “an attorney shall not contract for,
charge, or collect a contingent fee in excess of the following
limits: (1) 331 3% on the first $750,000 recovered; (2) 30% on the
next $750,000 recovered; (3) 25% on the next $750,000
recovered; (4) 20% on the next $750,000; and (5) on all amounts
recovered in excess of the above by application for reasonable fee
in accordance with the provisions of paragraph (f) hereof; and (6)
where the amount recovered is for the benefit of a client who was
a minor or mentally incapacitated when the contingent fee
arrangement was made, the foregoing limits shall apply, except
that the fee on any amount recovered by settlement before
empaneling of the jury or, in a bench trial, the earlier to occur of
plaintiff's opening statement or the commencement of testimony
of the first witness, shall not exceed 25%.” N.J. Ct. Rule 1:21-7.
26
incorporate any state-law common-fund rules, that
still would not settle what standards should control
the award of attorneys’ fees in this case. Chieftain
simply assumes that its lawyers are entitled to onethird of the common fund under Tenth Circuit
precedent expressing a preference for awarding fees
as a percentage of the fund, with the appropriate
percentage to be reckoned using the so-called Johnson
factors. See Pet. App. at 5a.
The decision below reiterates the Tenth Circuit’s
“preference for the percentage-of-the-fund approach,”
Pet. App. at 5a, that employs Johnson’s “12 factors to
determine the appropriate percentage.” Pet. App. at
4a. “The district court chose the percentage-of-thefund analysis, explaining that this is ‘[t]he preferred
method of determining a reasonable attorney fee
award in common fund cases.’ … It overruled the
objectors’ argument that the lodestar approach should
govern and that the fee is excessive under that
analysis.” Pet. App. at 6a; see id. at 32a & 35a. “It
then recited the Johnson factors and found that ‘most,
if not all, … support Class Counsel’s fee request, as
reduced by the Court’” from the 40% that Class
Counsel requested, to the 331/3% figure that the
district court plucked from the air. 6a; see 36a-37a.
This apparently is how things are done in the Tenth
Circuit—with district courts randomly generating a
percentage figure after reciting the twelve Johnson
factors.12
12 See
Pet. App. at 4a-6a; See, e.g., Gottlieb v. Barry, 43 F.3d
474, 482 & n.4 (10th Cir. 1994) (expressing a “preference for the
percentage of fund method,” with the specific percentage to be
set based on “the twelve Johnson factors”); Uselton v.
Commercial Lovelace Motor Freight, Inc, 9 F.3d 849, 853 (10th
Cir. 1993) (Johnson factors to be used to determine percentage
fee awards in common fund cases); Brown v. Phillips Petroleum
27
Alas, the Tenth Circuit’s common-fund jurisprudence, and the district court’s 331/3% award below,
are grounded in the very Johnson-factor routine that
this Court jettisoned in Perdue, 559 U.S. at 550-52, as
far too subjective to produce reasonably predictable
results that may be subject to meaningful appellate
review. Prior to Perdue, this Court had several times
held that the Johnson factors improperly doublecount considerations already reflected in the first
Johnson factor, the attorneys’ hourly rates and time
expended, also known as their lodestar.13 In Perdue
it specifically repudiated the Johnson-factors routine
for setting attorneys’ fees as one that “‘gave very little
actual guidance to district courts. Setting attorney’s
fees by reference to a series of sometimes subjective
factors placed unlimited discretion in trial judges and
Co., 838 F.2d 451, 454 (10th Cir. 1988) (Johnson factors to be
used “in setting and reviewing percentage fee awards in common
fund cases”).
13 See, e.g., Dague, 505 U.S. at 562 (holding that a contingency
enhancement under the fifth Johnson factor “amounts to double
counting”); Blum, 465 U.S. at 899 (holding the district court’s
reliance on “quality of representation” presents “a clear example
of double counting” and that “the results obtained,” the seventh
Johnson factor, “generally will be subsumed within [the] other
factors”); Pennsylvania v. Delaware Valley Citizens’ Council for
Clean Air, 483 U.S. 711, 726-27 (1987) (Delaware Valley II)
(Johnson factors relating to contingency risk and “the novelty
and difficulty of the issues presented” are already reflected “in
determining the reasonable number of hours expended and the
reasonable hourly rate” for the first Johnson factor) (plurality
opinion); Pennsylvania v. Delaware Valley Citizens’ Council for
Clean Air, 478 U.S. 546, 566 (1986) (Delaware Valley I)
(“considerations concerning the quality of a prevailing party’s
counsel’s representation normally are reflected in the reasonable
hourly rate”).
28
produced disparate results.’”14 Perdue rejected the
Johnson-factors routine in favor of simply using
attorneys’ lodestar which, “unlike the Johnson
approach … is ‘objective’ … and thus cabins the
discretion of trial judges, permits meaningful judicial
review, and produces reasonably predictable results.”
Perdue, 559 U.S. at 551-52. Given this Court’s
express rejection of the Johnson-factors routine, it is
frankly shocking how many courts continue to follow
it.15 Applying to common-fund cases Perdue’s holding
that an attorney’s lodestar ordinarily is “a reasonable
attorney’s fee,” provided of course that it does not
exceed a reasonable percent of the total fund, would
be a giant step toward uniformity and predictability
for fee awards in common-fund cases.
Merely holding that common-fund fee awards shall
be governed by federal law would not bring order to a
chaotic field, as federal courts are in conflict on the
most basic standards governing fee awards in
common-fund cases. Some decisions sensibly apply
the rule of Dague and Perdue, that a reasonable
Perdue, 559 U.S. at 550-51 (quoting Delaware Valley I, 478
U.S. at 563).
14
15 See, e.g., Muransky v. Godiva Chocolatier, Inc., __F.3d__, 2018
WL 4762434, at *11 (11th Cir. Oct. 3, 2018) (Johnson factors
control common-fund fees); Black v. Settlepou, PC, 732 F.3d 492,
502 (5th Cir. 2013) (citing Perdue’s “strong presumption of the
reasonableness of the lodestar amount,” but then holding:
“However, after calculating the lodestar, a district court may
enhance or decrease the amount of attorney’s fees based on the
‘relative weights of the twelve factors set forth in Johnson.’”)
(citation omitted); Union Asset Management Holding A.G. v.
Dell, Inc., 669 F.3d 632, 642-44 (5th Cir. 2012) (requiring
common-fund fee awards to be based on a Johnson-factors
analysis).
29
attorney’s fee is properly limited to the attorney’s
lodestar even when a common fund is recovered—at
least in cases involving claims also subject to a feeshifting statute.16 Other decisions hold that this
Court’s decisions in Perdue and Dague, defining what
constitutes a “reasonable attorney’s fee,” have no
application at all to common-fund fee awards—not
even to those awarded for settling and releasing
claims otherwise subject to statutory fee-shifting.17
The circuits are in conflict in other respects. The
Eleventh Circuit and the District of Columbia Circuit
have mandated common-fund attorneys’ fees be
awarded as a percentage of the fund—prohibiting fee
awards based on the attorneys’ lodestar. See Swedish
Hospital Corp. v. Shalala, 1 F.3d 1261, 1263 (D.C.
Cir. 1993); Camden I Condominium Ass’n, Inc. v.
Dunkle, 946 F.2d 768, 770 (11th Cir. 1991). The
Seventh, Ninth, and Tenth Circuits have refused to
follow those decisions, insisting that district judges
must be free to choose whether to award commonSee, e.g., Haggart v. Woodley, 809 F.3d 1336, 1358-69 (D.C.
Cir. 2016); Pierce v. Visteon Corp., 791 F.3d 782, 787 (7th Cir.
2015); Brytus v. Spang & Co., 203 F.3d 238, 242-47 (3d Cir.
2000); In re GMC Pick-up Truck Fuel Tank Prod. Liab. Litig., 55
F.3d 768, 822 (3d Cir. 1995); Nensel v. People’s Heritage Fc’l Gp.,
815 F.Supp. 26, 27-30 (D. Me. 1993); In re Bolar Pharm. Co. Sec.
Litig., 800 F.Supp. 1091, 1095-96 (E.D.N.Y. 1992).
16
17 See, e.g., Muransky, __F.3d__, 2018 WL 4762434, at *10 (11th
Cir. 2018); Staton v. Boeing Co., 327 F.3d 938, 967-69 (9th Cir.
2003); Florin v. NationsBank of Georgia, NA., 34 F.3d 560, 562
(7th Cir.1994); In re Washington Public Power Supply System
Litig., 19 F.3d 1291, 1299-1301 (9th Cir. 1994); In re BioScrip,
Inc. Sec. Litig., 273 F.Supp.3d 474, 483-86 (S.D.N.Y. 2017); In re
Enron Corp. Sec. Litig., 586 F.Supp.2d 732, 757-61 (S.D. Tex.
2008).
30
fund fee awards as a percentage of the fund, or based
on the attorneys’ lodestar.18
Nor do the conflicts in federal common-fund jurisprudence end there. The Ninth Circuit mandates a
25% “benchmark” fee as “a per se equitable rule”
when common-fund fees are awarded as percentage of
the fund,19 and the Eleventh Circuit precedent
approves a similar 25% “benchmark.”20 Yet this
See Gottlieb v. Barry, 43 F.3d 474, 483 (10th Cir. 1994)
(rejecting “two cited cases, Swedish Hosp. Corp. and Camden I
Condominium Ass’n, [as] the only two circuit decisions explicitly
rejecting the use of the lodestar method in common fund cases”);
Florin v. NationsBank, 34 F.3d 560, 565 (7th Cir. 1994)
(similarly rejecting Swedish Hospital and Camden I); In re
Washington Public Power Supply System Litig., 19 F.3d 1291,
1295 (9th Cir. 1994) (“Class Counsel urge us to follow the
Eleventh Circuit’s lead in mandating the use of the percentage
method in common fund cases. See Camden I … Because the law
in our circuit is settled on this issue, we are not at liberty to
follow the Eleventh Circuit. We instead apply the law of our
circuit that the district court has discretion to use either method
in common fund cases.”).
18
19 Fritsch v. Swift Transp. Co.,899 F.3d 785, 796 (9th Cir. 2018);
see, e.g., Stanger v. China Electric Motor, Inc., 812 F.3d 734, 738
(9th Cir. 2016) (“The Ninth Circuit has set 25% of the fund as a
‘benchmark’ award under the percentage-of-fund method.”); In re
Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 942 (9th Cir.
2011)(citing “25% of the fund as the ‘benchmark’ for a reasonable
fee award” and requiring an “adequate explanation in the record
of any ‘special circumstances’ justifying a departure” from the
benchmark); In re Coordinated Pretrial Proceedings, 109 F. 3d
602, 607 (9th Cir. 1997) (“‘the district court should take note that
25 percent has been a proper benchmark figure.’”) (quoting Paul,
Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 270 (9th
Cir.1989)).
Muransky, __F.3d__, 2018 WL 4762434, at *11 (11th Cir.
2018) (“[i]n Camden I, this Circuit called 25% of a common fund
a benchmark attorney’s fee award”); Faught v. American Home
20
31
Court’s own common-fund precedents support cutting
common-fund awards to ten percent or less of the
fund.21 Concordant with this Court’s jurisprudence,
and “disturbed by the essential notion of a benchmark,” the Second Circuit has rejected the Ninth
Circuit’s 25% benchmark as “an all too tempting
substitute for the searching assessment that should
properly be performed in each case.”22
Shield Corp., 668 F.3d 1233, 1243 (11th Cir. 2011) (Noting “wellsettled law from this court that 25% is generally recognized as a
reasonable fee award in common fund cases” and sustaining 25%
common-fund award where:
“The district court did not
separately analyze whether the 25% awarded here was a
reasonable fee in itself, but determined that because 25% is
generally accepted as reasonable in common fund cases, see
Camden I, 946 F.2d at 774, it should also be considered
reasonable in this case.”).
21 See, e.g., Central R. & Banking Co. v. Pettus, 113 U.S. 116, 128
(1885) (slashing common-fund fee award from an unreasonably
high 10% of the fund to just 5%); Harrison v. Perea, 168 U.S.
311, 325 (1897) (affirming award of a fee amounting to 10% of
the fund); United States v. Equitable Trust Co., 283 U.S. 738,
746 (1931) (holding “the allowance [for attorneys’ fees] of
$100,000 unreasonably high and that to bring it within the
standard of reasonableness it should be reduced to $50,000,”
which was roughly 7½% of the fund in question).
22 Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 52 (2d
Cir. 2000). “Starting an analysis with a benchmark could easily
lead to routine windfalls.” Id.; see also Barnett v. Equitable
Trust Co., 34 F.2d 916, 919 (2d Cir. 1929) (Learned Hand, J.) (“If
there be a rule in the District Court that in such cases
allowances shall be made upon a basis of one-third of the
amount involved, we do not know it and we disapprove it; it
certainly has never had our sanction.”), mod. sub nom. United
States v. Equitable Trust Co., 283 U.S. 738, 746 (1931) (cutting
fee award still further “to bring it within the standard of
reasonableness”).
32
The foregoing conflicts could be resolved by a
holding that in common-fund cases a “reasonable
attorney’s fee” is presumed to be the attorneys’
lodestar, see, Perdue, 559 U.S. at 552-553, provided it
does not exceed a reasonable percentage of the
common fund. See supra at 31 & notes 21-22. This
Court regularly directs the parties to brief and argue
an additional question when granting a petition for
certiorari. See, e.g., Lafler v. Cooper, 562 U.S. 1127
(2011); Wal-Mart Stores, Inc. v. Dukes, 562 U.S. 1091
(2010); Pearson v. Callahan, 552 U.S. 1279 (2008);
Central Bank v. First Interstate Bank, 508 U.S. 959
(1993). Doing so here would give the Court the
opportunity to provide a uniform standard that
Chieftain says is badly needed.
CONCLUSION
Chieftain’s Petition should be denied, unless this
Court supplements the Question Presented so that, if
federal law indeed controls, the Court may provide
meaningful guidance concerning what principles
cabin a district court’s award of common-fund
attorneys’ fees. The Petition should be granted if the
Court directs the parties to address an additional
question:
Whether a “reasonable attorney’s fee” is
presumed to be the attorney’s lodestar,
provided it does not exceed a reasonable
percentage of the common fund.
33
Respectfully submitted,
ERIC ALAN ISAACSON
(Counsel of Record)
ericalanisaacson@icloud.com
LAW OFFICE OF ERIC ALAN
ISAACSON
6580 Avenida Mirola
La Jolla, California 92037-6231
Telephone: (858) 263-9581
C. BENJAMIN NUTLEY
1055 E. Colorado Blvd.,
Fifth Floor
Pasadena, California 91106
Telephone: (626) 204-4060
nutley@zenlaw.com
JOHN W. DAVIS
LAW OFFICE OF JOHN W. DAVIS
3030 N. Rockly Point Drive W.,
Suite 150
Tampa, Florida 33607
(813) 533-1972
Telephone: (813) 533-1972
Attorneys for Respondent
Charles David Nutley
DATED: OCTOBER 9, 2018
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.