Opposition Brief — General Motors Corp. v. Skelton

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(9) } Supreme Court, US, _

No.s8-1s48 \/ i] FILED

Jur 14 86

EPH F. SPANIOL, JR.

IN THE gs CLERK

Supreme Court of the United States

OCTOBER TERM, 1988

GENERAL MOTORS CORPORATION,

Petitioner,

ARLIE GLEN SKELTON, et ai.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO —

THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

LOwELL E. SACHNOFF

Counsel of Record

JEFFREY A. SCHUMACHER

Gary S. CAPLAN

SACHNOFF & WEAVER, LTD.

30 S. Wacker Drive

Suite 2900

Chicago, Illinois 60606

(312) 207-1000

Counsel for Respondents

Pandick Midwest. Inc.. Chicago @ (312) 733-6000 £2

QUESTIONS PRESENTED

Whether GM, with no economic stake in the attorneys’

fee issue it seeks to raise, has standing to petition for certiorari.

Whether review by this Court of an attorneys’ fee award

of a 1.6 risk multiple out of a common fund is warranted

when there is no conflict among the Circuits and the Seventh

Circuit’s decision is consistent with the decisions of this

Court.

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED............::csseseseeeesseeeereeees i

TABLE OF AUTHORITIEG..............cccccssssscessscesssonsees ll

JURISDICTION .......cccccscocccsscoscsovecccsssccseseosssnssenscsonses l

STATEMENT OF THE CAGE ...............sssccsssscsseeeesenees l

REASONS FOR DENYING THE WRIT ...............-.. 4

I. Because GM Has No Economic INTEREST

IN THis APPEAL, IT Lacks STANDING TO

BRING ITs PETITION For CERTIORARI ..........- 4

Il. Statutory FEE Provisions AND THE

COMMON FuND Doctrine ARE Two Dis-

TINCT LEGAL THEORIES TO WHICH CouRTS

AppLy DIFFERENT STANDARDS For DECI-

sion; GM FaiLs To ADDRESS THIS POINT...... 7

Ill. THe SEVENTH Circuilt’s DECISION Is CONSIS-

TENT WITH THE DECISIONS OF ALL CIRCUITS

THAT HAVE ADDRESSED THE ISSUE ............... 13

IV. THE UNiquE Facts AND CIRCUMSTANCES OF

THis CasE SuPpPpORT THE Risk MULTIPLE

AWAREIGD .ocencircststssimumiinamenaeae 15

V. THeCourt OF APPEALS’ DECISION Is Not IN

CONFLICT WITH THE DECISION IN DELAWARE

Vatcey II OR ANY OTHER DECISION OF THIS

CIE ve iiacsessesnsecronnetnsnasesienonnnanne 16

COIN LTRIIIIN, inecesistiviicnwscavcnsssarsesescensceonnseeenannanen 19

PPPOE A vvscisnincceisscsstssitiinennseiaieneenneiannenas la

DPOGNI ovcesicannssesnssnsiccisnsrtoonniecsecioneanne 28a

PPO IIIE C vcicsscnsniiascsssssastraeisecencenmsnnmrenr eens 30a

DRIED ocececesienssinntasastisniarecrvessasscstemnenaneneann 34a

POPU EE occevacsncinescesssvncitsrrscsenesevicnssseaaae 39a

PPO Pvc iceinsinsersdcsuscsscisrsessceserieraemeninae 42a

Peeper CF ong seis cccccvcnosechnencscadenassacnaneumesianden ete Me 45a

ill

TABLE OF AUTHORITIES

Cases

Basile v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 640 F. Supp. 697 (S.D. Ohio 1986)..........

Bebchick v. Washington Metro. Area Transit

Comm’n, 805 F.2d 396 (D.C. Cir. 1986).........

Blum vy. Stenson, 465 U.S. 886 (1984) ...........0000-

Boeing Co. v. Van Gemert, 444 U.S. 472 (1980).

Brewer v. Southern Union Co., 607 F. Supp. 1511

Neen clssessesevsrenssesronseese

City of Detroit v. Grinnell Corp., 495 F.2d 448

Neen en swevssnocessenecaes

Copeland v. Marshall, 641 F.2d 880 (D.C. Cir.

Copper Liquor, Inc. v. Adolph Coors Co., 624

De Funis v. Odegaard, 416 U.S. 312 (1974)........

Edmonds v. United States, 658 F. Supp. 1126 (D.

Neen ee ccesronecorerorcesecs

In re Fine Paper Antitrust Litig., 751 F.2d 562

Nee csecesecanecnsesccerece

Graves v. Barnes, 700 F.2d 220 (Sth Cir. 1983)...

Grunin v. Int’l House of Pancakes, 513 F.2d 114

(8th Cir.), cert. denied, 423 U.S. 864 (1975)...

Lindy Bros. Builders, Inc. v. American Radiator

& Standard Sanitary Corp., 487 F.2d 161 (3d

Cir. 1973), affd in part and vacated in part,

Lindy Bros. Builders, Inc. v. American Radiator

& Standard Sanitary Corp., 540 F.2d 102 (3d

gS | ig

PAGE

13,14

8, 13

13,14

Loring v. City of Scottsdale, 721 F.2d 274 (9th

CO CI a cckserthsdeeaacoacdnaanaedtens

Mashburn vy. National Healthcare, Inc., 684 F.

Sermes: G7 CNG. ABD: VIED vincnsssnnescscsiscvisoncsins

McKinnon v. City of Berwyn, 750 F.2d 1383 (7th

CE DI cn cinercoccictntoa acianeaabaiedsenancats

Mills v. Electric Auto-Lite Co., 396 U.S. 375

CRT viaccess caairceieesitioahaioehieianasie:

Norman v. Housing Auth. of City of Montgomery,

836 F.2d 1292 (11th Cir. 1988) .................c000

Pavlidis v. New England Patriots Football Club,

Inc., 675 F. Supp. 707 (D. Mass. 1987)...........

Pennsylvania v. Delaware Valley Citizens’ Coun-

cil for Clean Air, 478 U.S. 546 (1986)..............

Pennsylvania v. Delaware Valley Citizens’ Coun-

cil for Clean Air, 483 U.S. 711 (1987) (“Dela-

I IE WEB cesicer cen nectianenennnnseetercaaisicceunciiens

Preiser v. Newkirk, 422 U.S. 395 (1975)........::00

Schwartz v. Novo Industri A/S, 119 F.R.D. 359

OE ce 0 eR cctachtshaxvancanachacmcaiateonnicminvnwaaess

Sierra Club v. Morton, 405 U.S. 727 (1972)........

Skelton v. General Motors Corp., 860 F.2d 250

‘¢, LE A) RR reese ae Se renee

Skelton v. General Motors Corp., 661 F. Supp.

1368 (N.D. Ill. 1987), afd in part and rev'd in

part, 860 F.2d 250 (7th Cir. 1988)...

Sprague v. Ticonic Nat'l Bank, 307 US. 161

0 Or Se cicsecsicapsinsedcnnasssclcepeieclacistcoscunuceiitcsiaooicncanlinateldeines

Student Pub. Interest Research Group, Inc. v.

AT&T Bell Laboratories, 842 F.2d 1436 (3d

ir FP ccs cotenteasanitke secede mmaiainn

United States v. SCRAP, 412 U.S. 669 (1973).....

PAGE

passim

PAGE

Valley Forge Christian College v. Americans

United for Separation of Church & State, Inc.,

te is Pe ID vncccchsavhcvnckescccobaibdashsnirissicnwns 5, 6, 7

Warth v. Seldin, 422 U.S. 490 (1975).......00..0000. 6

In re Wicat Sec. Litig., 671 F. Supp. 726 (D. Utah

gy MI RREETER ETS S ee eet Ro en toe Ee 12

Constitutional Provisions

hi I I I acta cic anascn oe taiceuiebenntensmanenes 5

Statutes

Magnuson-Moss Warranty—Federal Trade

Commission Improvement Act, 15 U.S.C. §§

ea I idicccet nctnnicsniteaceiiasitncanndardlanincsine 2,8

Civil Rights Attorney’s Fees Awards Act of 1976,

Oe Sse Oe Fe I sini catnanesicchanscndervancannens 15

Be ae EE Satesitceravcccctevpictintiienss l

Other Authorities

R. POSNER, ECONOMIC ANALYSIS OF Law (3d ed.

Ris Gaaiala anshcaneticeh Lémncccanthaibiasamimamceossannese woveseys 11,12

THIRD Circuit Task Force, Court Awarded At-

I eel 8,9

IN THE

Supreme Court of the United States

OcTOBER TERM, 1988

GENERAL MOTORS CORPORATION,

Petitioner,

ARLIE GLEN SKELTON, et al.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

Respondents respectfully request that this Court deny

the petition for a writ of certiorari, seeking review of the

Seventh Circuit’s opinion in this case. That opinion is

reported at 860 F.2d 250 (1988).

JURISDICTION

On June 1, 1989, the Clerk of the Supreme Court ex-

tended the time for filing a brief in opposition to the petition

for a writ of certiorari to and including July 14, 1989. GM

attempts to invoke this Court’s jurisdiction under 28 U.S.C.

§ 1254(1) (1982). However, this case is not properly before

this Court because GM lacks standing to bring its petition

for a writ of certiorari.

STATEMENT OF THE CASE

Beginning in 1976 and continuing through 1979, General

Motors Corporation (“GM”) equipped large numbers of its

automobiles with defective THM 200 transmissions. These

transmissions failed at an alarming rate—some models expe-

rienced failure rates in excess of 40%. In 1979, the underlying

litigation was brought as a class action alleging a wide range

of claims including violations of the Magnuson-Moss War-

ranty—Federal Trade Commission Improvement Act, 15

U.S.C. §§ 2301-2312 (1982) (*“Magnuson-Moss” or the “Act”),

various state consumer protection statutes and common law

claims. Plaintiffs sought damages for a class of consumers

who purchased GM automobiles with defective THM 200

transmissions and suffered actual monetary losses from trans-

mission breakdowns. After six years of extensive discovery,

after a national class of injured consumers was certified, after

GM’s numerous motions to dismiss were denied and when

the litigation was headed toward a trial date, GM settled its

liability to the plaintiff class by creating a settlement fund of

$19.5 million ($17 million cash plus a reserve cash fund of

$2.5 million). GM further agreed to bear the costs of two

individual first class notices mailed to over three million

potential class members. The total value of the settlement,

including the costs borne by GM, was in excess of $21 million. J

The background of the litigation is described more fully in

the decisions below.

The settlement preserved for GM a potential reverter

from the settlement fund, but only if class members’ claims

did not exceed certain predetermined amounts. As it turned

out, class members’ claims, fees awarded to plaintiffs’ counsel

and expenses of administration fully exhaust the cash settle-

ment fund, whether or not counsel receive a multiple.

In February 1987, the district court awarded fees of

$1,989,661 out of the settlement fund to the lawyers

representing the plaintiff class. In making this award, the

district court first reduced counsels’ lodestar fees by more

than $800,000 and also denied any enhancement for the risk

of nonpayment. Skelton v. General Motors Corp., 661 F.

Supp. 1368 (N.D. Ill. 1987), afd in part and rev'd in part,

860 F.2d 250 (7th Cir. 1988). In October 1988, the Seventh

Circuit reversed the denial of any enhancement for risk and

OO oO

remanded the case to the district court to determine whether

there was risk of nonpayment when the litigation began, and

if so, what if any risk multiple should be awarded to plaintiffs’

counsel. Skelton v. General Motors Corp., 860 F.2d 250 (7th

Cir. 1988). GM sought rehearing and rehearing en banc, and

both were denied with no judge voting to rehear the case.

On remand to the district court, there was extensive

briefing on the issue of whether a risk multiple was appro-

priate in this common fund case. In February 1989, plaintiffs’

counsel introduced as evidence the affidavits of eight promi-

nent attorneys representing a cross section of the bar, ranging

from the largest commercial firms to small public interest

practitioners. App. at la-27a. These affidavits demonstrated

that plaintiffs in a large contingent fee class action would have

substantial difficulty finding competent counsel to represent

them in this area without the prospect of some enhancement

for risk above their regular rates. GM offered no evidence

of any kind to counter the affidavits produced by plaintiffs’

counsel.

After several hearings and considering the affidavits sub-

mitted by plaintiffs’ counsel, the district court made specific

findings including: (i) there were risks of nonpayment when

the litigation began; and (ii) without the prospect of some fee

enhancement for the risks of nonpayment, plaintiffs wouid

have had substantial difficulty in retaining counsel in a contin-

gent class case in this market (App. at 29a). Based on these

specific findings, the district court awarded plaintiffs’ counse!

a risk multiple of 1.6 applied to their reduced lodestar fees

previously awarded. Because GM elected not to seek a stay

of the court of appeals’ mandate or any of the orders of the

district court, final distributions have been made to all class

members and all fees and expenses to plaintiffs’ counsel have

been paid. The entire settlement fund has been paid out,

and as the district court has stated and GM cannot deny, GM

has no possible reverter from the settlement fund because

any amounts returned if the multiple award is reversed would

be paid to the class, not GM. Thus, GM has no economic

stake in the issue for which it seeks review in this Court.

With all distributions made and the settlement fund fully

exhausted, 64,828 plaintiff class members received payments

averaging $264 each before legal fees, or approximately 77%

of their eligible repair expenses related to defective THM 200

transmissions. With the risk enhancement of 1.6 allowed by

the district court, plaintiffs’ counsel have been paid a total of

$3,183,458 in legal fees, or approximately 15% of the total

value of the settlement to the plaintiff class.

GM filed its petition for a writ of certiorari on May 12,

1989. On May 23, 1989, the district court made the additional

factual finding that “without an adjustment for risk the

plaintiffs would have faced substantial difficulties in finding

counsel in this market.” App. at 29a. Thus, GM’s petition

did not address the fact that respondents satisfied the require-

ments of Delaware Valley IT, as well as those applicable to

common fund cases. On May 26, 1989, GM appealed the

order in which the district court awarded the 1.6 multiple.

A motion to dismiss this appeal based upon the provisions

of the settlement agreement has been filed and is pending

before the Seventh Circuit.

REASONS FOR DENYING THE WRIT

I. Because GM Has No Economic INTEREST IN THIS

APPEAL, IT Lacks STANDING TO BRING ITs PETITION For

CERTIORARI

GM lacks standing to bring its petition for certiorari.

Any reversal of the lower court decision will have absolutely

no impact on GM. If the multiple were overturned, GM

would receive not one cent nor would any ruling or order

which has any impact on GM be changed. Any increase in

the fund would go exclusively to class members.

GM is pursuing this petition because it is opposed to any

precedent supporting fee awards and it is in GM’s interest to

inake fee awards as difficult as possible for plaintiffs’ attor-

neys. However, in connection with the settlement, GM

bargained for and received a blanket release including any

liability for attorneys’ fees. Now, with no direct interest in

the proceeding, GM is in effect petitioning for certiorari as

an amicus curiae. While an amicus curiae may support or

oppose an action by this Court, it cannot seek to have the

Court act on its own behalf. That is exactly what GM is

attempting to do.

GM had the potential for standing in the district court

because of its possible reversionary interest in the settlement

fund. See Boeing Co. v. Van Gemert, 444 U.S. 472, 481 n.7

(1980). But GM no longer has an economic stake in the

action. Any possible reversionary interest by GM in the

settlement fund has been foreclosed by claims already made

against the fund. The fee issue is moot as to GM, and GM

has “no cognizable interest in further litigation between the

class and its lawyers over the amount of the fees ultimately

awarded from money belonging to the class.” Id. See also

Copeland v. Marshall, 641 F.2d 880, 905 n.57 (D.C. Cir.

1980) (“In ‘common fund’ cases, the losing party no longer

continues to have an interest in the fund; the contest becomes

one between the successful plaintiffs and their attorneys over

division of the bounty.”). Absent any “ ‘colorable claim for

the return of [any] excess,’” GM “has no more standing to

press its appeal than would a losing defendant have standing

to contest the division of an award between plaintiff and his

attorney pursuant to a contingent-fee arrangement.” Boeing,

444 US. at 488, 489 n.4 (Rehnquist, J., dissenting).

Standing under Article III of the U.S. Constitution re-

quires that a party who seeks to invoke a federal court’s

jurisdiction show that: (i) he or she personally has suffered

some actual or threatened injury, economic or otherwise; (ii)

the injury “ ‘fairly can be traced to the challenged action’ ”;

and (ili) the injury is likely to be redressed by a favorable

decision. Valley Forge Christian College v. Americans United

for Separation of Church & State, Inc., 454 U.S. 464, 472

(1982) (citations omitted). An actual live controversy must

exist at all stages of litigation, not merely at the time the

complaint is filed. See, e.g., Preiser v. Newkirk, 422 U.S. 395,

401 (1975); De Funis v. Odegaard, 416 U.S. 312, 319 (1974).

GM satisfies none of these requirements.

Nor is GM a proper party to pursue this petition on

behalf of the class. While GM purports to represent the

interests of the thousands of persons it injured in selling cars

with defective transmissions (Pet. at 9), its interests in fact

are quite opposite. GM’s position has been adverse to the

class throughout the nine year course of this litigation. GM

does not represent the class, nor can it seek certiorari on

behalf of the class. A petitioner “must assert his own legal

rights and interests, and cannot rest his claim to relief on the

legal rights or interests of third parties.” Warth v. Seldin, 422

U.S. 490, 499 (1975). See also United States v. SCRAP, 412

U.S. 669, 687 (1973); Sierra Club v. Morton, 405 U.S. 727,

740 (1972).

In federal common fund litigation, it is the district court,

not the defendant, that has the “special obligation to ensure

that the fee is fair.” Copeland, 641 F.2d at 905 n.57. The

district court here recognized and fulfilled this obligation:

“(T]he Court .. . is now in a position of representing the class

in a sense because General Motors has agreed to pay out and

will pay out the full amount....” App. at 31a. Moreover,

no member of the only “party” with proper standing—the

class itself—filed objections to the fee awards or has sup-

ported GM in its arguments in the court of appeals or in this

Court. Nor has any class member obtained additional counsel

with which to litigate this issue. The absence of any class

support for GM’s position is not surprising; the class of over

64,000 claimants received the benefits of one of the largest

and most successful class recoveries in recent years.

GM’s sudden concern for the class it battled against so

staunchly rings hollow. GM cannot don the class’s mantle,

just as it cannot claim any economic stake in the fee issue it

now presses. What it boils down to is that GM has no

standing, and a petitioner “who [does] not possess Article III

standing may not litigate as [suitor] in the courts of the

United States.” Valley Forge Christian College, 454 U.S. at

475-76.

II. Srarutory FEE Provisions AND THE COMMON FUND

DocTRINE ARE Two Distinct LEGAL THEORIES TO

WuicH Courts AppLy DIFFERENT STANDARDS For

Decision; GM Farts To AppREss THIS POINT

Contrary to GM’s assertion, this case does not concern

the award of fees to the plaintiffs from the defendant GM

under the Magnuson-Moss Act. Rather, plaintiffs’ counsel

were awarded fees from the plaintiff class through a common

fund settlement established by counsels’ efforts. In common

fund cases, the court employs its equitable powers to divide

the gain obtained through counsels’ efforts. In statutory fee-

shifting cases, the court enforces an explicit congressional

intent to ensure compliance and impose an additional penalty

on the defendant. The statutory fee and common fund

doctrines are not substitutes for one another; they are separate

rules for separate situations governing the relative rights of

different sets of parties. A failure to draw this basic distinction

pervades GM’s petition.

Although this case commenced under several distinct

legal theories—only one of which was the Magnuson-Moss

Act—it ended with a class recovery for all the claims to which

the common fund doctrine applies. Once the common fund

was created through the settlement of a wide range of claims,

it became the obligation of the district court to award attor-

neys’ fees from the fund based upon its equitable powers.

Boeing, 444 U.S. at 478; Mills v. Electric Auto-Lite Co., 396

U.S. 375, 392-93 (1970); Sprague v. Ticonic Nat'l Bank, 307

U.S. 161, 166 (1939).' To award attorneys’ fees from a

common fund “is not to saddle the unsuccessful party with

the expenses but to impose them on the class that has

benefited from them and that would have had to pay them

had it brought the suit.” Mills, 396 U.S. at 396-97.?

This Court has distinguished statutory fee cases from

common fund cases. The common fund doctrine has been

described as operating “in addition to” statutory fee provi-

sions. Pennsylvania v. Delaware Valley Citizens’ Council for

Clean Air, 478 U.S. 546, 562 n.6 (1986). Statutory fee cases

are also distinguishable from cases “where any plaintiff,

impecunious or otherwise, has a damages case that competent

lawyers would take in the absence of fee-shifting statutes.”

Pennsylvania v. Delaware Valley Citizens’ Council for Clean

Air, 483 U.S. 711, 726 (1987) (“Delaware Valley IT’). In

Blum y. Stenson, 465 U.S. 886, 900 n. 16 (1984), Justice

Powell also recognized that “reasonable fees” under statutory

authority and the common fund doctrine are not the same.

' The fact that this action was commenced, in part, under a

statute with a fee-shifting provision does not, as GM maintains,

preclude an award under the common fund doctrine. To the

contrary, when a case is “settled by the creation of a fund in

exchange for the release of the defendants from liability both for

damages and for statutorily authorized fees,” it is converted into a

common fund case. Jn re Fine Paper Antitrust Litig., 751 F.2d 562,

582 (3d Cir. 1984). See also THirp Circuit Task Force, Court

Awarded Attorney Fees (1985).

? By its terms, the Magnuson-Moss Act is inapplicable to an

award of fees from a common fund. The fee award provision of

the Act provides:

If a consumer finally prevails in any action brought under

paragraph (1) of this subsection, he may be allowed by the

court to recover as part of the judgment a sum equal to the

aggregate amount of cost and expenses. . . .

15 U.S.C. § 2310(d(2) (1982) (emphasis added). Any award of fees

under the Act is payable to the consumer from the defendant.

Plaintiffs’ counsel had no standing to seek and the district court

had no authority to award fees “under” the Magnuson-Moss Act.

GM relies almost exclusively on decisions which involve

statutory fee awards. Delaware Valley II, the case upon which

GM places chief reliance, is a statutory fee case. However,

there is no hint anywhere in the opinions of the four-justice

plurality, Justice O’Connor’s concurrence or the four-justice

dissent that the issues involved in Delaware Valley II have

any bearing on the propriety of a risk multiplier in a common

fund case. More to the point, GM is incorrect in its assertion

that the same legal standards govern common fund and

statutory fee cases. GM does not provide any analysis why

the same or similar standards should apply to rights arising

from totally different legal foundations (statutory vs. equita-

ble) and in which divergent and conflicting considerations

of policy and fairness are called into play.’ Statutory fee

provisions impose what amounts to a penalty on the defen-

dant in order to assure compliance with certain statutes; the

fees are awarded to the plaintiffs, not their lawyers. The

purpose of the common fund doctrine is to impose and spread

costs (including risk) on those who reap the benefits.

The principal objections to risk multipliers which have

been raised in statutory fee cases are nonexistent in common

fund cases. The use of multipliers in statutory fee-shifting

cases, courts fear, may conflict with the statutory requirement

that fees be awarded only to “prevailing parties” by compen-

sating attorneys indirectly for prior cases which they did not

win. See Delaware Valley II, 483 U.S. at 725. Fees paid by

the plaintiffs as a result of the common fund doctrine face no

such statutory prescription and do not involve any statutory

interpretation. Courts are also concerned that an award of

risk multiples under fee-shifting statutes will penalize the

unlucky defendant who initially had a strong case but lost

> After a thorough analysis of court awarded fees, the Third

Circuit Task Force concluded: “The Task Force believes that a

distinction must be drawn between fund-in-court cases and statu-

tory fee cases since the policies behind the two categories differ

greatly.” Court Awarded Attorney Fees at 13.

anyway. Jd. at 722. However, awarding a risk multiple in a

common fund case increases the return to the attorneys who

bore the risk, but only at the expense of the plaintiffs for

whose benefit the risk was undertaken. This js in stark

contrast to the anomalous result posited by GM in statutory

fee cases where the defendant pays for the risk the attorneys

undertook on plaintiffs’ behalf—and arguably pays a higher

premium when its position was more defensible in the first

place.

The distinction between the parties in interest also under-

scores the basic fallacy of GM’s argument that no multiple

would be available if plaintiffs’ counsel had tried the case. If

this case had gone to trial with a final judgment for the

plaintiff class on a fee-shifting claim in the aggregate amount

of $20 million, counsel, on behalf of the plaintiffs, would have

sought an award of fees from GM in addition to the actual

damages of $20 million. Suppose the fee award, as per the

four-justice plurality in Delaware Valley II, was $2,000,000

with no risk multiple. Counsel for the class have no fee

agreement with class members—they never do in class ac-

tions. Under Magnuson-Moss, the $2,000,000 fee would

belong to the plaintiff class members, not to counsel. Counsel

would then petition the court for an award of fees from the

entire fund of $22 million including damages and statutory

fees. An award of fees from the total fund of $22 million

would be made under the common fund doctrine and the

award of fees to counsel from the fund would not be limited

to the statutory fees awarded from the defendant. * Though

* The Seventh Circuit in McKinnon v. City of Berwyn, 750 F.

2d 1383, 1393 (7th Cir. 1984), recognized the distinction between

the “reasonable” fees awardable to a plaintiff under a statutory fee

provision and the amount which plaintiffs’ attorneys are entitled

to receive if they prevail to a litigated judgment:

Suppose the contingent fee were 40 percent of the sum of

the damages and attorney’s fees awarded (as is common),

and the jury awarded $100,000 in damages and the judge

awarded $20,000 in attorney’s fees (without consideration

of a possible risk multiplier), thus entitling the plaintiff's

attorney to a total fee of $48,000—more than twice the

reasonable attorney’s fee calculated by the judge.

counsel and the class may have adverse interests in allocating

the fund, they have the same fundamental interest—maxi-

mizing the total amount of the fund.

In contrast to risk enhancement under statutory fees, the

common fund doctrine correctly aligns risk and return. Class

counsel are given a higher return by reducing the recovery of

the plaintiffs whom they represented on a contingent basis.

Plaintiffs’ counsel undertook risk for the benefit of plaintiffs

and plaintiffs “pay” for that risk taken by receiving a smaller

amount from the fund. The defendant is indifferent, since

it pays the same amount whether or not plaintiffs were

represented on a contingent basis. The defendant bears the

penalty and the risk of statutory fees but not the risk that

plaintiffs were represented on a contingent basis. That risk

is borne by plaintiffs through a risk multiple if suit is success-

ful, and by their attorneys if it is not.

Risk multipliers in common fund cases, where the pre-

mium is paid by the plaintiff class, are-analogous to the fees

paid to lawyers in common law tort contingency fee cases.

As in common fund cases, the attorney is compensated for

bearing an additional risk, risk that would otherwise be

carried by clients who pay as they go. The heart of the request

for a risk multiplier in a common fund situation is the

contingent nature of the attorney’s fee arrangement with his

or her clients. The attorney requests reasonable compensa-

tion for assuming the risk of nonpayment, /.e., for making a

risky loan of services to the client. Judge Posner has accu-

rately explained the nature of the contingent arrangement:

A contingent fee must be higher than a fee for the

same legal services paid as they are performed. The

contingent fee compensates the lawyer not only for the

legal services he renders but for the loan of those services.

The implicit interest rate on such a loan is high because

the risk of default (the loss of the case, which cancels the

debt of the client to the lawyer) is much higher than that

of conventional loans, and the total amount of interest

is large not only because the interest rate is high but

because the loan may be outstanding for many years—

and with no periodic part payment, a device for reducing

the risk of the ordinary lender.

R. POSNER, ECONOMIC ANALYSIS OF Law § 21.9 at 534-35 (3d

ed. 1986). The multiplier is commensurate with the risk of

the loan the attorney is making to his or her client. It is

in effect a nonrecourse loan to the client, a loan which

economically requires a premium—but a premium payable

by the client.

Contrary to GM’s assertion, the Seventh Circuit’s opin-

ion does not require the award of a risk multiple in a common

fund case; it simply instructs a trial court to determine

with specific findings whether there was sufficient risk of

nonpayment to justify a raultiple. Skelton, 860 F.2d at 258.

Thus, risk multiples would be improper where no appreciable

risk of nonpayment is present at the start of the litigation,

and where there would be little if any difficulty retaining

counsel, e.g., a civil antitrust suit where the defendant had

already been found guilty in a criminal trial.°

GM does not, and cannot, cite even one decision of this

Court—or for that matter any other federal court—that holds

that enhancement for risk is, as a matter of law, impermissible

in a common fund case. GM simply wishes to discourage

any consumer litigation against it—by making it virtually

impossible for competent counsel to take these cases.°

° Courts awarding attorneys’ fees in common fund cases after

Delaware Valley II have denied any multiple in appropriate situa-

tions. See, e.g., Schwartz v. Novo Industri A/S, 119 F.R.D. 359

(S.D.N.Y. 1988); In re Wicat Sec. Litig., 671 F. Supp. 726 (D. Utah

1987).

® The position of plaintiffs’ lead counsel, Sachnoff & Weaver,

supports this point. Sachnoff & Weaver is a 90 person law firm

with an active commercial practice, including corporate, securities,

real estate, tax and probate as well as a diverse litigation practice.

Our firm would not have taken part in a complex contingent fee

ten-year lawsuit against the world’s largest industrial corporation

with its phalanx of skillful and tenacious lawyers without the

prospect of some risk enhancement.

Il. THe SEVENTH Circult’s DECISION Is CONSISTENT WITH

THE Decisions Or ALL Circuits THAT Have Ap-

DRESSED THE ISSUE

The Seventh Circuit’s decision is neither novel nor

ground-breaking. Rather, the Seventh Circuit’s narrow hold-

ing that in common fund cases a multiple based on the risk

of nonpayment may be appropriate, in certain circumstances

and only if based upon specific findings by the trial court, is

fully consistent with the decisions of all circuits that have

addressed the issue of common fund fee awards.

The lodestar/multiple approach to fee awards in common

fund cases was first articulated by the Third Circuit in Lindy

Bros. Builders, Inc. v. American Radiator & Standard Sanitary

Corp., 487 F.2d 161 (3d Cir. 1973), afd in part and vacated

in part, 540 F.2d 102 (3d Cir. 1976) and Lindy Bros. Builders,

Inc. v. American Radiator & Standard Sanitary Corp., 540

F.2d 102 (3d Cir. 1976) (“Lindy II”). The Lindy II court

found that in addition to the lodestar, a reasonable attorneys’

fee award in a common fund case included a reflection of the

contingent nature of success—“[t]he probability or likelihood

of success, viewed at the time of filing suit.” 540 F.2d at 117.

The Third Circuit has consistently affirmed the rule of law

set forth in the Lindy decisions regarding common fund fee

awards. See, e.g., In re Fine Paper Antitrust Litig., 751 F.2d

562 (3d Cir. 1984). The Seventh Circuit’s decision wholly

conforms with the Lindy decisions.

The Second Circuit specifically adopted the Lindy analy-

sis in City of Detroit v. Grinnell Corp., 495 F.2d 448, 471 (2d

Cir. 1974). In Grinnell, the settlement of a national antitrust

class action resulted in a common fund. The Second Circuit

held that the lodestar fee could be enhanced based on the

“risk of litigation.” Jd.

The law in the Eighth Circuit is the same. In Grunin v.

Int'l House of Pancakes, 513 F.2d 114, 128 (8th Cir.), cert.

denied, 423 U.S. 864 (1975), an antitrust class action resulting

in a common fund, the Eighth Circuit also applied a risk

analysis test: “The Lindy standards as interpreted in City of

Detroit... provide the approprigte test for determining any

discretionary fee award in a class action context.”

In Copper Liquor, Inc. v. Adolph Coors Co., 624 F.2d 575

(Sth Cir. 1980), where the settement of a class antitrust

action resulted in a common fund, the Fifth Circuit utilized

the same approach. Relying upon Lindy, Grinnell and

Grunin, the court determined that the fee award should

be determined under the lodesiar analysis, and thereafter

modified to take into account “the contingent nature of

success.” 624 F.2d at 583 n.15. lh a subsequent decision, the

Fifth Circuit adopted the cornmon fund fee award analysis

based on risk and clarified the neaning of the “contingent

nature of success” as “the probability or likelihood of success,

viewed at the time of filing suit.” Graves v. Barnes, 700 F.2d

220, 222 (Sth Cir. 1983) (quoting Lindy IJ, 540 F.2d at 117).

The Ninth Circuit has applied the same reasoning to

common fund fee award decisigns. In Loring v. City of

Scottsdale, 721 F.2d 274, 276 (9th Cir. 1983), the Ninth

Circuit remanded a district court’s fee award in a common

fund case with instructions to determine “whether some

multiplier is justified by the contingent nature of the case.”

The law in the District of Columbia Circuit regarding

multiples in common fund caségs is also consistent. “With

regard to the contingent nature of success, it may be appro-

priate in some circumstances to compensate counsel for the

risk as seen at the start of the litigation that the suit would

be unsuccessful and that no fees would be forthcoming.”

Bebchick v. Washington Metro. Area Transit Comm’n, 805

F.2d 396, 403 (D.C. Cir. 1986).

The uniformity in this area is striking. GM does not,

and cannot, cite any authority disputing the uniformity of

decisions of all federal courts discussing the issue of attorneys’

fees in cases with common fund recoveries, most of which

began under fee-shifting statutes.’ The reason is clear. The

court of appeals decision here is consistent with the decisions

of all courts that have addressed the common fund fee award

: 8

issue.

IV. THe UNIQUE Facts AND CIRCUMSTANCES OF Tuis CASE

Support THE Risk MULTIPLE AWARDED

The district found that this was a “unique case” (App.

at 40a) which delved “into previously uncharted areas of the

Magnuson-Moss Warranty Act.” Skelton, 661 F. Supp. at

1380. These unique facts and the district court’s findings

(both written and oral) based upon the extensive factual

record before it overwhelmingly support the allocation of the

common fund to include the modest 1.6 multiple for plain-

tiffs’ counsel. A full exposition of the risks and facts presented

to the district court is beyond the scope of this brief. However,

’GM seriously miscites Norman v. Housing Auth. of City of

Montgomery, 836 F.2d 1292 (11th Cir. 1988). Pet. at 14-15.

Respondents contacted plaintiffs’ counsel in Norman who con-

firmed that the court in Norman awarded fees under the Civil

Rights Attorney’s Fees Awards Act of 1976, 42 U.S.C. § 1988

(1982), which were payable by the defendant, not out of any fund.

See App. at 34a-38a. Similarly, Student Pub. Interest Research

Group, Inc. v. AT&T Bell Laboratories, 842 F.2d 1436, 1438 (3d

Cir. 1988), “involve[d] an appeal and cross appeal from an order

of the district court awarding counsel fees to prevailing parties (two

public interest groups) pursuant to the fee shifting provisions of

the Clean Water Act... .”

® Although other circuits have not squarely addressed risk

multiples in common fund cases, the district courts in those circuits

have long recognized that multiples based upon the risk of non-

payment may be appropriate. See, e.g., (Ist Cir.): Pavlidis v. New

England Patriots Football Club, Inc., 675 F. Supp. 707, 709 n.1 (D.

Mass. 1987); (4th Cir.): Edmonds v. United States, 658 F. Supp.

1126, 1148 (D. S.C. 1987); (6th Cir.): Basile v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 640 F. Supp. 697, 702-03 (S.D. Ohio

1986); (10th Cir.): Brewer v. Southern Union Co., 607 F. Supp.

1511, 1531 (D. Colo. 1984); (11th Cir.): Mashburn v. National

Healthcare, Inc., 684 F. Supp. 679, 700-02 (M.D. Ala. 1988).

counsel did represent plaintiffs on an entirely contingent

basis. Plaintiffs would not have paid their counsel any fee,

either directly or through a fund, if a recovery had not been

obtained. This was not an idle supposition in the case at bar.

To counsel’s knowledge, this case was the first nationwide

product defect case ever certified. The district court itself

found that this case involved “great uncertainty” and that “it

would be difficult to have great assurance as to what the

ultimate verdict” would be. App. at 43a-44a, 47a.

Moreover, the total fees awarded are fair and reasonable

when viewed as a percentage of the recovery. The lodestar

fee award of $1,989,661, adjusted by a multiple of 1.6,

resulted in total legal fees of $3,183,458, just 15% of the $21

million total value of the settlement. This Court in Blum v.

Stenson, 465 U.S. 886, 900 n.16 (1984), recognized the

propriety of using the percentage of recovery method as a

guideline in determining the reasonableness of fees in

common fund cases. Even with the 1.6 multiple, the class

here was assessed a fee of 15%, substantially less than the

market rate for contingent fees. Class members could not

have retained attorneys to press their individual claims

against GM for anywhere close to a 15% contingent fee.

V. THe Court OF ApPEALs’ DECISION Is Not IN CONFLICT

WITH THE DECISION IN Detaware Vattey IJ OR ANY OTHER

DECISION OF THis CourRT

In its zeal to chill any litigation against it for marketing

defective products, such as its THM 200 transmission, GM

has distorted the holding and the opinions of this Court in

Delaware Valley II beyond all recognition. Furthermore,

plaintiffs’ counsel have satisfied even the more stringent

requirement for a risk multiplier under statutory fee-shifting

cases set forth in Delaware Valley IT, a fact which completely

undermines GM’s claimed justification for obtaining

certiorari.”

In Delaware Valley II, a plurality of four justices, plus

Justice Q’Connor in her concurrence, held that under the

facts of that case and analyzed under the fee-shifting statute

involved, a risk multiplier was not appropriate. 483 U.S. at

734. In the plurality opinion four justices concluded that in

fee-shifting cases risk multiples were not appropriate. /d. at

727. Alternately, the plurality held that in exceptional cases,

where risk enhancement may be appropriate, it should be

small and in any event based on a finding that without risk-

enhancement the plaintiff “would have faced substantial

difficulties in finding counsel” in the local market. /d. at 733.

Four justices dissented, contending that Congress did not

intend to prohibit risk multiples, and that the availability of

risk multiples under proper circumstances was essential to

the statutory scheme under most fee-shifting statutes. /d. at

755. Justice O’Connor agreed with the dissent regarding

Congress’s intent, and concluded that before adjusting for

risk, the trial court must find that without enhancement for

risk plaintiffs would have faced substantial difficulties finding

counsel in the relevant market. /d. at 731, 733.

What emerges from a correct analysis of the Court’s

opinions in Delaware Valley II is not GM’s distorted charac-

* While the perspectives are different, with statutory fee cases

focusing on congressional intent and common fund cases on fairness

between the class and their counsel, the standards in each case are,

in significant measure, two sides of the same coin. In common

fund cases the court is really assessing whether the risk undertaken

merits compensation, i.e., hypothetically if the plaintiffs had gotten

together, would the “market” have required them to pay a premium

for taking the case on a contingent basis. In statutory fee cases the

inquiry is somewhat more complex and restrictive—because the

multiple is being extracted from the defendants, not the plaintiffs,

and the statute only allows fees for prevailing parties. Still, the

inquiry is essentially the same—would the “market” demand a msk

multiple in order to provide representation to the plaintiffs?

nes

terization, but that five justices would allow a risk multiple

in fee-shifting cases under appropriate circumstances, and

even the four-justice plurality, in its alternate position spe-

cifically endorsed by Justice O’Connor, would also allow

enhancement for risk.

Plaintiffs’ counsel here took the extraordinary step of

satisfying the exact standard articulated by Justice O’Connor

in her concurrence as if this case were a statutory fee-shifting

case—which it is not. The detailed affidavits submitted

by counsel demonstrate that the plaintiffs here would have

encountered substantial difficulties in retaining counsel with-

out the prospect of a risk enhancement if successful. The

district court, relying on these unrefuted affidavits and its

own knowledge and experience, made a specific finding that

more than satisfies the propriety of a risk multiple even if

this had been a statutory fee-shifting case. In its order of May

23, 1989, the district court, after hearing GM’s objections on

the record, found “that without an adjustment for risk the

plaintiffs would have faced substantial difficulties in finding

counsei in this market.” App. at 29a. It is telling that

although it had four months to do so, GM was unable to

produce one shred of evidence, not a single affidavit, to rebut

the truth of plaintiffs’ counsel affidavits or the correctness of

the district court’s finding.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

July 14, 1989

Respectfully submitted,

LOwELL E. SACHNOFF

Counsel of Record

JEFFREY A. SCHUMACHER

Gary S. CAPLAN

SACHNOFF & WEAVER, LTD.

30 S. Wacker Drive

Suite 2900

Chicago, Illinois 60606

(312) 207-1000

Counsel for Respondents

Appendices

;

i al Pry iy | ~ Ba ea tT ee hs 2.

ee eee

APPENDIX A

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., ;

Plaintiffs,

v. |

GENERAL Motors CorRPORATION, No. 79 C 1243

Defendants. Chis destin

Honorable John Nordberg

JOSEPHINE C. NEwTONn, et al.,

Plaintiffs,

. No. 80 C 2151

GENERAL Motors CORPORATION,

Defendants. |

AFFIDAVIT OF DOUGLASS W. CASSEL, JR.

DOUGLASS W. CASSEL, JR. on oath states as follows:

1. 1am a 1972 graduate of Harvard Law School. I was

admitted to the Bar of the State of Maryland in 1972, and in

1976 I was admitted to the Bar of the State of Illinois. I have

practiced continuously in the Chicago legal community since

that time.

2. J am presently on a four month leave as Generali

Counsel of Business And Professional People for the Public

Interest (“BPI”), a nonprofit law center in Chicago, whose

attorneys work on a broad range of public interest legal

matters including civil rights, civil liberties, consumer and

environmental law among other fields, in which attorneys’

fees are often awardable to a prevailing plaintiff pursuant to

various statutory authorizations. In connection with my

work at BPI, I have been extensively involved for the last 13

years in class action and test case litigation before federal and

state courts and administrative agencies in Chicago, including

actions under federal statutes such as the Civil Rights Act

and federal environmental laws. In connection with such

matters, I have worked extensively with many attorneys in

private practice in the Chicago area on both sides of such

litigation, including numerous efforts undertaken by me and

other BPI attorneys to recruit volunteer assistance from the

private bar.

3. BPI is a not-for-profit corporation and is supported

principally by donations from supporters. Accordingly, the

criteria employed by BPI in deciding whether or not to

undertake litigation are substantially different from that of

private practitioners. BPI undertakes representation of cases

based upon our assessment of the public importance of the

litigation (as well as other factors such as the likelihood of

success and the availability of alternative representation, if

any, for the litigant), without regard to remuneration in the

event that the litigation is successful. I understand, however,

that private practitioners do not and cannot afford to select

their cases based on the same criteria.

4. Based on my experience with members of the Chicago

Bar, I have come to have what I believe to be a reliable

understanding of the principal factors that private prac-

titioners consider in determining whether to undertake the

representation of plaintiffs in complex civil litigation on a

contingent fee basis. In my experience, private practitioners

in the Chicago area do not undertake the representation of

plaintiffs in complex civil litigation on a contingent fee basis

unless those practitioners believe that they have a strong

likelihood of receiving substantially more than their normal

hourly rates in the event that they prevail. While private

practitioners quantify the hourly-rate enhancement differ-

ently depending on various facts and circumstances, the

private practitioners with whom I am familiar typically re-

quire an expectation of two or more times their normal hourly

rates in order to undertake complex civil litigation on a

contingent fee basis.

5. Various federal statutes and causes of action provide

for the payment of attorneys’ fees either through express

provisions in the statutes or through the Equal Access To

Justice Act. Because of a growing perception of a reluctance

of the federal courts in this circuit to award attorneys for

prevailing parties in such cases fees commensurate with the

substantial risk and delay in payment involved in undertaking

such matters, BPI has received an increasing number of

requests for representation in the last few years from persons

unable to find counsel willing to undertake substantial litiga-

tion on a contingent fee basis. Because BPI has very limited

resources and there are usually few other relevant nonprofit

agencies, if any, we are increasingly having to turn away

clients without referring them to any other office or attorney

willing to take their case.

6. It is my belief that a plaintiff in the Chicago legal

community wishing to bring a complex civil action would

face substantial difficulty in finding competent counsel in the

private bar to undertake such representation on a contingent

fee basis unless there is, in the view of counsel, the reasonable

expectation of receiving compensation substantially more

than their normal hourly rates.

/s/ DouGtass W. CASSEL, JR.

DOUGLASS W. CASSEL, JR.

SUBSCRIBED and SWORN

to before me this ____ day of

February, 1989.

Notary Public

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., y

Plaintiffs,

GENERAL Motors CORPORATION, No. 79 C 1243

Defendants. Chess Astion

Honorable John Nordberg

JOSEPHINE C. NewTon, et al.,

Plaintiffs,

‘ No. 80 C 2151

GENERAL Motors CORPORATION,

Defendants. |

AFFIDAVIT OF PAUL E. SLATER

I, Paul E. Slater, being first duly sworn, state as follows:

1. I am a partner with the law firm of Sperling, Slater &

Spitz in Chicago, Illinois. I have been admitted to practice

in the courts of Illinois and in the Federal District Court for

the Northern District of Illinois since 1970.

2. From September 1970, to September 1971, I was on

the faculty of the University of California Law School (Boalt

Hall), Berkeley, teaching legal writing and civil procedure.

From September 1971, to September 1972, I was an assistant

professor of law at the University of Connecticut School of

Law, and from September 1972, to January 1976, I was

assistant and then an associate professor of law teaching

antitrust law at Northwestern University Law School. In

January 1976, I resigned my appointment to the full time

regular faculty at Northwestern and commenced the private

practice of law. I have remained, however, as an adjunct

professor of antitrust law at Northwestern and teach courses

in antitrust practice and procedure at Northwestern in the

second semester of each year. ;

3. Since entering private practice |3 years ago, my prac-

tice has been exclusively in the area of complex business

litigation and in particular, antitrust cases. I am familiar

with the market for legal services in large, complex cases.

4. Our firm has been asked to take cases in this area on

a contingent fee basis on behalf of plaintiffs where our fee

would be dependent on the success of the litigation. In

assessing whether to take a case on a contingent basis, our

firm is guided by what we perceive to be the extreme riskiness

of legal claims in this area of the law. Even in a case which

we believe to be fundamentally sound, we wiil ask as our fee

for a portion of any judgment in favor of our client which

corresponds roughly to a 3.0 multiplier of our best estimate

of our usual hourly rates for the work necessary on the case.

We find that a multiplier of this magnitude is necessary

because of the risk of non-payment; the risk that the facts

will develop differently or in addition to the facts of which

we are first advised; the risk that the law will change before

the case is resolved; and the risk that even if we ultimately

prevail, we may have to wait 10 years or more before we

realize any compensation for our efforts.

5. We usually attempt to translate the anticipated multi-

plier into a percentage of the judgment based upon our

evaluation of the prospect of success and the size of any likely

judgment. Typically, we seek anywhere from 25% to 40% of

the judgment in order to provide the return necessary to

induce us to take a complex case on a contingent fee basis.

Even then we politely decline to take the vast number of

contingent fee cases offered to us.

6. In my experience, other firms in Chicago would only

accept similar contingent fee cases based on contingent fee

arrangements similar to the ones that we would accept.

7. Even with an anticipated multiplier of 3.0 for contin-

gent work, my firm is reluctant to accept contingent cases

because of the high risk inherent in such cases. We much

prefer to work for our regular hourly rates paid on an ongoing

basis.

___/s/_ PAULE. SLATER

PAUL E. SLATER

SUBSCRIBED and SWORN

to before me this ____. day of

February, 1989.

Notary Public

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., 7

Plaintiffs,

Vv.

GENERAL Motors CORPORATION, No. 79 C 1243

Defendants. Cine Action

Honorable Joha Nordberg

JOSEPHINE C. NewTon, et al.,

Plaintiffs,

No. 80 C 2151

GENERAL Motors CORPORATION,

Defendants. |

AFFIDAVIT OF GARY M. ELDEN

Gary M. Elden, being first duly sworn, states as follows:

1. 1am a 1969 graduate of Harvard Law School. I was

admitted to practice in the State of Illinois in 1969 and have

practiced in Chicago continuously since that time.

2. I am a partner in the law firm of Grippo & Elden.

Prior to the formation of Grippo & Elden, I was a partner in

the firm of Isham, Lincoln & Beale. Prior to the merger of

Isham, Lincoln & Beale and Reuben & Proctor, I was a

partner in the firm of Reuben & Proctor and a member of its

Executive Committee. Prior to the formation of Reuben &

Proctor, I was a partner in the law firm of Kirkland & Ellis.

Throughout this time, my individual practice has consisted

almost exclusively of complex civil litigation, predominantly

in federal courts. Over the years, I have been involved in

more than 30 class actions, both in Chicago and other parts

of the country. Most such cases have involved federal

securities litigation. In connection therewith, I had consider-

able contact with most of the plaintiffs’ class action bar in

this legal community and a substantial number of the princi-

pal firms involved in such matters across the country.

3. I am thoroughly familiar with my firm’s billing prac-

tices (as well as those of Isham, Lincoln & Beale and Reuben

& Proctor) and the considerations that attend a decision by

our firm to undertake a client’s representation. We do not

undertake the representation of plaintiffs in any sort of

litigation on a purely contingent fee basis. It is our judgment

that the potential benefits of such representation are substan-

tially outweighed by its risks and by the delay in payment

even in cases where a recovery is ultimately achieved. Accor-

dingly, we only undertake representation of clients where

payment is made on an hourly basis.

4. I am aware that there are some attorneys and firms in

Chicago and in other areas of the country that will undertake

complex civil litigation on a purely contingent basis. Based

on my familiarity with such attorneys in this area of the law,

it is my understanding and belief that those attorneys will

undertake such cases only if they believe that it is realistic to

expect that they will receive roughly two to three times their

normal hourly rates in the event of success. I am personally

familiar with a number of attorneys whose practice has

changed considerably in recent years, shifting away from or

reducing their involvement in contingent federal class action

work because of the uncertainty that fee award decisions in

recent years have injected into this area.

5. Based on my personal knowledge as set forth above,

it is my firm belief that a person would face substantial

difficulty in finding competent representation in the Chicago

area to represent him or her in a complex civil litigation

matter on a contingent fee basis unless counsel believed he

or she had a probability of receiving substantially more than

double the regular hourly rates in the event the litigation

succeeded.

/s/ Gary M. ELDEN

GARY M. ELDEN

SUBSCRIBED and SWORN

to before me this day of

February, 1989.

Notary Public

10a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, ef al., 7

Plaintiffs,

GENERAL Motors CorRPORATION, No. 79 C 1243

Defendants. Class Action

Honorable Jolin Nordberg

JOSEPHINE C. NEwTONn, et al.,

Plaintiffs,

" No. 80 C 2151

GENERAL Motors CORPORATION,

Defendants. |

AFFIDAVIT OF GEORGE F. GALLAND, JR.

George F. Galland, Jr. states under oath:

1. I am an attorney licensed to practice law in the State

of Illinois. I was admitted to practice in 1973 and have

practiced in Chicago since that time. I am a partner in the

firm of Davis, Barnhill & Galland, P.C. My practice has

concentrated in the area of federal civil rights and other class

action litigation. I have personally handled a large number

of class action suits under the federal securities law, the

federal antitrust laws, Title VII of the Civil Rights Act of

1964, and ERISA. I have not only handled such class actions,

but have been called upon in a number of cases to decide on

lla

behalf of my law firm whether my firm would become in-

volved in proposed class actions.

2. My purpose in this affidavit is to describe the consider-

ations that I and my firm take into account in deciding

whether to undertake representation of a proposed plaintiff

class in complex class action litigation. In addition, I have

some familiarity, through my contact with other lawyers in

the same field on both sides, with considerations that prevail

generally in the legal community in Chicago and elsewhere

before lawyers become involved in such actions.

3. In general, I operate under the assumption that a class

action of the type typified by the Skelton case will be a long

and expensive undertaking for my firm. The major class

actions that my firm has handled have taken at least four

years from filing to conclusion, whether that conclusion was

a settlement, a victory in court, or a loss in court. For

example, the class action Mays v. Motorola, Inc., No. 75 C

1753(N.D. IIl.), took six years from filing to final disposition

after a successful trial followed by a settlement. Liberles v.

Daniel, No. 73 C 3217 (N.D. IIL), a Title VII class action,

took ten years from filing till final disposition. The class

action Phemister v. Harcourt Brace Jovanovich, Inc., No. 77

C 39(N.D. IIL), under the antitrust laws, took six years from

filing in 1977 to settlement in 1983. At least ten other class

actions handled by this firm took similar amounts of time.

These class actions were also expensive. For example, in the

class action McBride v. Burlington Northern, Inc., No. 78 C

269; No. MDL 374(N.D. Iil.), my firm advanced or obligated

itself for over one million dollars in costs that it would clearly

have been unable to recoup from the named plaintiffs in the

event the case had been lost.

4. These cases obviously carry substantial risks of partial

or total loss. Aside from a number of cases settled for far

less than had originally been hoped for (resulting in little

payment to my firm for the work that had been required), at

least three of my firm’s class actions resulted, after years of

12a

litigation, in a total loss for the class claims: Coates v.

Johnson & Johnson, 756 F.2d 524 (7th Cir. 1985); Martino v.

McDonald’s, 1985-2 Trade Cas. 9 66,885 (N.D. Ill. 1985);

and Washington v. Pierce, 576 F. Supp. 473 (N.D. Ill. 1983).

Of perhaps twenty major federal and state class actions my

firm has handled, at least seven of these cases have proceeded

_ to trial and several others were litigated through trial court

~summary judgment and appeals when defendants refused to

settle. My firm’s experience has led me to assume at the start

of a case that there is a substantial probability that the case

may proceed to trial if the class is certified and that it may

never settle at all. My experience as a defense lawyer bears

that out. Of the three major certified class actions I have

defended, my client forced the plaintiff to trial in one of them

and has recently settled a second after losing on summary

judgment in the trial court and precipitating years of appeals.

In short, the idea that class actions are too big to try, or that

they all settle, is in my experience untrue.

5. Because of these factors, my firm does not accept the

representation of plaintiffs in class action cases unless it

believes, at the beginning of the case, that there is a substantial

probability of being paid, in the event of success, substantially

more than the hourly rate that we bill our paying clients. (In

fact, our contingent fee agreement with individual clients now

includes a “multiplier” provision.) My firm has a substantial

amount of such hourly paying business at rates ranging up to

$250 per hour billed by senior partners. A decision to take

class action plaintiffs’ cases entails a decision to give such

paying work second priority, and even to turn down such work

under certain circumstances. My firm has never accepted a

class action on behalf of plaintiffs without operating under

the belief that in the event of success it could likely obtain

some substantial sort of “multiplier” over the regular rates

prevailing in the marketplace in the event of success.

6. Because it follows this policy, my firm, during the

period from 1984 through 1987, accepted no new plaintiffs’

13a

antitrust, securities, or Title VII Rule 23 class actions. The

uncertainty among the Federal Courts of Appeals and the

district courts as to whether a multiplier for risk could be

contrast, we continued to accept state court class actions,

because the Illinois courts look sympathetically on risk multi-

pliers. We reevaluated this policy in light of the United

States Supreme Court’s decision in Delaware Valley IT, which

despite the lack of a majority opinion, allows the use of risk

multipliers. It appears to us that both the Seventh Circuit

and district courts are moving toward a recognition that risk

multipliers can be awarded in class actions under fee-shifting

statutes. Even so, we have remained cautious about commit-

ting major resources to Rule 23 cases, and we have initiated

only one new such case, Meiresonne v. Marriot Corp., a Title

VII class action. Instead, we have shifted our emphasis to

“opt-in” cases under the Age Discrimination In Employment

Act, where we can reach individual fee agreements with

individual clients that explicitly guarantee us a multiplier in

the event that we win.

14a

7. While I cannot speak for all lawyers and law firms, |

hold the strong opinion, based on my discussions with my

colleagues in this field, that firms capable of litigating complex

cases will not invest time and money in this area on a

contingent basis without the strong possibility of receiving a

multiplier over their regular hourly rates in the event they

win. This is particularly true in cases not preceded by

government indictments. There is, so far as I can tell, no

variation in the major cities of the United States in the

attitude of plaintiffs’ class action lawyers in this respect. They

rightly regard themselves as practitioners in one of the most

risky areas of the law, and they will not take cases without

the expectation of substantial returns over prevailing non-

contingent hourly rates in the event they prevail.

/s/ GEORGE F. GALLAND, Jr.

GEORGE F. GALLAND, JR.

SUBSCRIBED and SWORN

to before me this 14th day of

February, 1989

Notary Public

15a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, e7 al.,

Plaintiffs,

GENERAL Motors CORPORATION, No. 79 C 1243

Defendants. Class Action

| Honorable John Nordberg

JOSEPHINE C. NEwTONn, et al.,

Plaintiffs,

No. 80 C 2151

GENERAL Motors CORPORATION,

Defendants. |

AFFIDAVIT OF GERALD G. SALTARELLI

Gerald G. Saliarelli, being first duly sworn on oath, states

as follows:

1. I am an attorney licensed to practice law in the State

of Illinois. Iam a 1973 graduate of the University of Chicago

Law School and I have been admitted to the practice of law

in this State since 1973. I have practiced continuously in the

Chicago legal community since that time.

2. I am a partner in the law firm of Butler, Rubin,

Newcomer, Saltarelli & Boyd. My practice consists almost

exclusively of complex litigation matters, mostly in federal

court.

3. I am familiar with my firm’s billing practices and the

considerations that go into my firm’s decision to undertake

l6a

representation of clients. Because of the substantial risk and

delay in receipt of payment inherent in undertaking complex

civil litigation on a contingent basis, our firm refuses to do

so even when the plaintiffs case appears to be solid and

potentially worth significant sums. Indeed, even in non-

complex litigation, we do not represent clients on a contingent

basis. With the exception of one plaintiff in a personal injury

case, we have never handled any matter on a contingent basis.

In our firm’s judgment, the risk and delay in payment of

contingent litigation substantially outweigh its benefits as

compared to work done on a purely hourly basis. If in the

future we were to consider undertaking the representation of

a client on a contingent basis, I am confident we would do

so only if we felt it were highly likely that, if successful, we

would receive compensation substantially in excess of our

normal hourly rates; even then, it is extremely unlikely that

we would do so.

4. While there are certain attorneys and firms in the

Chicago legal community that do undertake class actions and

complex civil matters on a purely contingent basis, it is my

experience and belief that those attorneys and firms do so

Only in those situations where they believe that there is

a strong probability that, if successful, they will receive

compensation substantially in excess of their normal hourly

rates.

17a

5. I have reviewed the Court of Appeals decision in this

case. It is my belief that a plaintiff would face substantial

difficulty in finding competent representation in this legal

community for cases such as the case at bar if there were

not the likelihood that counsel would receive a substantial

enhancement of their normal hourly rates in the event they

prevailed in the litigation.

/s/ GERALD G. SALTARELLI

GERALD G. SALTARELLI

SUBSCRIBED and SWORN

to before me this 14th day of

February, 1989.

Notary Public

18a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., ;

Plaintiffs,

¥.

GENERAL Motors CorPORATION, No. 79 C 1243

Defendants. Class Action

q Honorable John Nordberg

JOSEPHINE C. NEwTon, et al,

Plaintiffs,

; No. 80 C 2151

GENERAL Motors CorRPORATION,

Defendants. |

AFFIDAVIT OF DAVID C. ROSTON

David C. Roston, being first duly sworn on oath, states

as follows:

1. Iam an attorney licensed to practice law in the State

of Illinois. I graduated from Harvard Law School in 1967.

I have practiced in Chicago for 21 years. I am a partner in

the law firm of Altheimer & Gray in Chicago, where I am a

litigator.

2. My firm handles a wide variety of litigation, some

of which is undertaken on a contingent-fee basis. I am

familiar with our firm’s policies with respect to the representa-

tion of clients on a contingent-fee basis. My firm does not

undertake the representation of plaintiffs in contingent-fee

19a

matters of any kind, especially matters as complex as class

actions, unless it is our analysis that, if successful, the firm

has a reasonable expectation of recovering a fee of at least

twice our normal hourly rates for the time expended on the

case.

3. My firm is regularly involved in substantial antitrust

matters and securities litigation on a class action basis and is

also involved in complex civil litigation on an individual

basis in a variety of matters, generally falling under the

heading of commercial litigation. The contingent fee analysis

my firm makes in all of these matters is the same as that

described in paragraph 2 above, without regard to the specific

subject matter of the litigation.

4. I believe that I am familiar with the factors considered

by many Chicago lawyers in determining whether to under-

take non-personal injury contingent fee litigation, including

class actions. I believe that all of the lawyers with whom |

have had contact who would consider undertaking such

litigation on a contingent fee basis would do so only on the

basis of an analysis similar to the one I described in paragraph

2 above.

5. In my opinion, plaintiffs in a complex civil litigation

matter would have substantial difficulty in obtaining qualified

counsel in the Chicago legal community on a contingent fee

basis if it were not reasonable to expect to receive a fee

substantially in excess of (approximately twice) the normal

hourly rate for the time expended on the case.

/s/ Davip C. ROSTON

DAVID C. ROSTON

SUBSCRIBED and SWORN

to before me this 14th day of

February, 1989.

Notary Public

20a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, ef al., 7

Plaintiffs,

GENERAL Motors CORPORATION, No. 79 C 1243

Defendants. Chass Antien

Honorable John Nordberg

JOSEPHINE C. NEwTon, et al,

Plaintiffs,

. No. 80 C 2151

GENERAL MOTORS CORPORATION,

Defendants.

AFFIDAVIT OF KEVIN M. FORDE

Kevin M. Forde, being first duly sworn on oath, states

as follows:

1. I am an attorney licensed to practice law in the State

of Illinois. I am a 1963 graduate of the Loyola University

Law School, and have been admitted to the practice of law

in Illinois since 1963. I am admitted to practice before the

Supreme Court of the United States and the United States

Court of Appeals for the Seventh Circuit, District of Colum-

bia Circuit and Federal Circuit. I have tried and/or argued

cases before the Northern District of Illinois, Central District

of Illinois, Eastern District of Wisconsin, Southern District

of New York, Central District of California and Southern

District of Florida. I have served as President of the Chicago

2ia

Bar Association. Prior to that office I served on its Board of

Managers and in the elected offices of Librarian, Treasurer,

Second Vice President and First Vice President. I served

two terms as Chairman of the CBA Class Action Litigation

Committee. I am a member of the ABA and am Chair-Elect

in the Rules and Procedure Committee of the Section on

Torts and Insurance Practice. I have served as a member of

other professional associations, boards and committees.

2. Asubstantial portion of the practice of my firm, Kevin

M. Forde, Ltd., has been in class action litigation. I have

written on the subject of class actions (e.g., Forde, J/linois’

New Class Action Statute, 59 Chi.B.Rec. 120 (1977)) and was

the original proponent and principal draftsman of the Illinois

Class Action Statute. I have personally handled a large

number of class action lawsuits in both federal and state

courts. Our firm is often consulted in class action cases and

we have represented, as counsel, attorneys petitioning for

fees in class action cases. These cases include, e.g., Sampson

v. Eastman Kodak, 86 CH 650 (Cir. Ct. of Cook County);

A.C.L.U. v. City of Chicago, 75 C 3295 (N.D. of Ill.); Jn re

Illinois Congressional Districts Reapportionment Cases, 81 C

3915 (N.D. of IIl.); Jn re General Motors Engine Interchange

Litigation, MDL 308 (N.D. of Ill.).

3. It is the purpose of this affidavit to describe the factors

which I and my firm consider in deciding whether to represent

a plaintiff in a proposed meritorious class action or other

complex litigation. Based on my experience in this legal

community, it is my belief that those considerations are

substantially similar to those which prevail in this legal

community with regard to such matters.

4. It is my experience that an attorney proposing to

undertake litigation of this sort must do so with the expecta-

tion that the case will take substantially more time and effort

than will an even more complicated individual case involving

the same legal subject matter. This is true not only because

of the briefing and discovery with respect to class certification,

22a

but because of the whole overlay of additional obligations

and risks that devolve upon an attorney for the class once a

case is certified (including but not limited to class notice

procedures, communications with class members, etc.). It is

also my experience that class action lawsuits are defended

with particular vigor by exceptionally able counsel in part

because of the increased liability faced by defendants by

virtue of classwide liability. It is my expectation in assessing

a meritorious potential class action lawsuit that it will place

extremely heavy demands on my firm, and may well take

four to six years to resolve.

5. It is my experience that class action litigation not only

places onerous time demands on the attorney for the class, but

also substantial financial demands, including out-of-pocket

expenses which may be substantial.

6. The most imposing financial demand that the under-

taking of class action representation places on the lawyer is

that he or she is required to devote a substantial amount of

time (and, during certain periods of the litigation, virtually

all of his or her time) to a case which yields no current

income, even though the attorney’s expenses must be paid

on a current basis. Rent, secretarial and support staff, non-

equity attorneys in the firm, library upkeep, professional

liability insurance, etc. must all be paid by the firm on a

regular basis without regard to income received by the firm.

Hence, once a commitment is made to undertake such litiga-

tion, it necessarily limits the ability of the firm to undertake

other cases which would provide income to the firm on a

current basis.

7. As a consequence of the factors outlined above, it is

my experience that many attorneys and firms which under-

take substantial class action representation maintain lines of

credit with banking institutions so that the firms can continue

to operate and meet their bills during the sometimes-extended

periods of time during which there is no income resulting

from class action litigation undertaken on a contingent basis.

23a

8. In my experience, class actions are no more likely to

result in recovery than are individual lawsuits. It is my

experience that a substantial percentage of class action law-

Suits are lost.

9. In my experience, it is almost never the case that the

plaintiffs in a proposed class action can retain counsel on

anything other than a contingent basis. Accordingly, when

deciding whether to undertake the representation of a plaintiff

in a proposed class action, in my experience counsel must

make that decision on the assumption: (a) that the representa-

tion will require a tremendous investment of the attorney’s

or firm’s time and money; (b) that there is a substantial risk

that after such an investment of time the attorney will receive

nothing; and (c) that if there is a recovery, it will probably

not come for a number of years. Because of these factors, we

generally do not undertake such representation unless we

believe tiat there is a substantial probability that, if the suit

is successful, our firm will receive substantially more than

our usual hourly rate for time devoted to the litigation. By

“substantially more than our usual hourly rate,” we mean at

least double that rate; otherwise the risk is too great, consider-

ing the costs of maintaining a law office. This same analysis

prevails throughout the Chicago legal community.

24a

10. Based on my experience in and familiarity with the

Chicago legal community, it is my belief that a person seeking

representation in a complex civil matter in this community

faces very substantial difficulties in finding counsel to under-

take such representation on a contingent fee basis without

the possibility of receiving a substantial enhancement over

normal hourly rates in the event of success.

/s/ KEVIN M. ForDE

KEVIN M. FORDE

SUBSCRIBED and SWORN

to before me this 14th day of

February , 1989.

Notary Public

25a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., 7

Plaintiffs,

Vv.

GENERAL Motors CORPORATION, No. 79 C 1243

Defendants. ee

Honorable John Nordberg

JOSEPHINE C. NEwTon, ef al,

Plaintiffs,

. No. 80 C 2151

GENERAL MoTors CORPORATION,

Defendants. |

AFFIDAVIT OF ROBERT L. GRAHAM

Robert L. Graham, being first duly sworn on oath, states

as follows:

1. I am an attorney licensed to practice law in the State

of Illinois. I am a 1972 graduate of Harvard Law School and

| have been admitted to the practice of law in this State since

1972. I have practiced continuously in the Chicago legal

community since that time. In addition to other bar activities,

| have served as the President of the Chicago Council Of

Lawyers, Chairman of the Fund For Justice and a member

of the Illinois Supreme Court Committee On Pattern Jury

Instructions In Civil Cases.

2. | am a partner in the law firm of Jenner & Block. My

practice consists almost exclusively of litigation matters,

26a

mostly in federal court. I have litigated a large number of

class action lawsuits and feel that I am quite familiar with

the litigation bar in this legal community.

3. Iam familiar with my firm’s billing practices and the

considerations that go into our firm’s decision to undertake

representation of clients. Except for cases taken on a pro

bono basis, our firm does not undertake the representation

of plaintiffs in any sort of litigation on a purely contingent

basis. Indeed, it is my belief that in only one instance has

our firm undertaken the representation of a plaintiff on a

partially contingent basis, in which case our firm had the firm

belief that, if successful, we would receive substantially more

than our normal hourly rates for all time devoted to that case.

4. Because of the substantial risk and delay in receipt of

payment involved in undertaking complex civil litigation on

a contingent fee basis, our firm does not undertake such

matters on that basis. While there are certain attorneys and

firms in the Chicago legal community that do undertake class

actions and complex civil matters on a purely contingent

basis, it is my experience and belief that those attorneys and

firms do so only in those situations where they believe that

there is a strong probability that they will receive compensa-

tion substantially in excess of their normal hourly rates if they

prevail. Based on my conversations with various members of

the Chicago Bar over the years, the standard that seems to

be applied by those firms undertaking substantial litigation

on a purely contingent basis is whether there is a reasonable

probability of receiving two to three times the attorneys’

hourly rates if a recovery is made.

27a

5. It is my belief that a plaintiff would face substantial

difficulty in finding competent representation in this legal

community for complex civil cases if there were not the

likelihood that counsei would receive a substantial enhance-

ment of their normal hourly rates (as discussed in the preced-

ing paragraph) in the event they prevailed in the litigation.

/s/ Ropert L. GRAHAM

ROBERT L. GRAHAM

SUBSCRIBED and SWORN

to before me this 14th day of

February, 1989.

Notary Public

My commission expires: 2/16/89

28a

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

IN RE GENERAL MOTORS CORP. “THM 200”

TRANSMISSION LITIGATION

ARLIE GLEN SKELTON, ef al., on

behalf of themselves and all others

similarly situated,

Plaintiffs,

v. No. 79 C 1243

CLASS ACTION

GENERAL Motors CORPORATION,

JUDGE

Defendant. JOHN NORDBERG

JOSEPHINE C. NEwTOoNn, ef al., on

behalf of themselves and all others

similarly situated, No. 80 C 2151

ae AND ALL

Plaintiffs, CONSOLIDATED

ACTIONS

V. +]

GENERAL Motors CORPORATION,

Defendant. |

ORDER.

Pursuant to prior Orders and rulings of the Court, the

escrow agent is ordered to make payment to the following

law firms the amounts of additional fees and interest indicated

below. Payment is to be made to each firm on May 25, 1989,

provided that by that date that firm has filed with the Court

29a

the undertaking as indicated during the hearing on May 5,

1989. The Court finds that without an adjustment for risk

the plaintiffs would have faced substantial difficulties in

finding counsel in this market.

Interest From

Additional Fees 4/25/89 to

And Interest 5/25/89 (at

Law Firm Awarded 4/25/89 prime rate, 11.5%) Total

Charles A. Boyle & Assoc... $ 189,346.00 $ 1,516.00 $ 190,862

Corinblit and Seltzer........... 8,914.00 71.00 8,985

Abraham N. Goldman &

PRDIE. sscrecsevorensessvencorssnenee 190,860.00 1,528.00 192,388

Goodkind, Wechsler,

Labaton & Rudoff............ 102,633.00 822.00 103,455

Frances E. Goodman .......... 26,099.00 209.00 26,308

Williams J. OTtC....c.ccnsecsosese. 109,503.00 877.00 110,380

Beverly C. Moore................ 219,841.00 1,761.00 221,602

Sachnoff, Weaver &

PEIIIIR ccccsdissaccesasebers 553,866.00 4,435.00 558,301

Zwerling, Schachter &

i anieiecstchonexivssssnexess 7,618.00 61.00 7,679

SPIE conckihenienioics $1,408,680.00 $11,280.00 $1,419,960

Dated: May 23, 1989

/s/ JOHN A. NORDBERG

JOHN A. NORDBERG

United States District Judge

30a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al.,

Plaintiffs, No. 79 C 1243 No. 79 C 1243

E Chicago, Illinois

April 11, 1989

GENERAL MoTors CORPORATION, 4:00 p.m.

Defendant. |

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE JOHN A. NORDBERG

APPEARANCES:

For the Plaintiffs: MR. ABRAHAM N. GOLDMAN

MR. LOWELL E. SACHNOFF

For the Defendant: MR. JAMES ANDREW LANGAN

MR. WILLIAM R. JENTES

ALSO PRESENT: DR. RICHARD E. HOYT

MICHAEL P. SNYDER, RPR, CSR

Office Reporter

United States District Court

19 South Dearborn Street, Room 2128

Chicago, Illinois 60604

Telephone (312) 435-5563

MR. SACHNOFF: If Your Honor would grant a multi-

ple that was sufficiently high to upset the folks at General

Motors, then obviously they then—they couldn’t appeal that,

but they could take cert from that ruling, they could attempt

3la

to apply for certiorari from that ruling, because both sides

have agreed not to appeal from the size of the multiple that

Your Honor grants.

Am I stating that right, Mr. Jentes? I think I am.

MR. JENTES: You are. I have that here.

MR. SACHNOFF: Good.

So Your Honor has the power to at least stop it in this

court, stop it in the Court of Appeals, and then the only thing

that could block a distribution would be the extraordinarily

remote circumstance of the Supreme Court taking cert in a

common fund case like this.

Your Honor, there has been no stay of the mandate. We

would ask to have the distribution go ahead, and if they are

really serious in this frolic, they ought to ask for a stay in the

Supreme Court. Now, they could ask—

THE COURT: That is true. If there is no stay, we could

order the final distribution.

MR. SACHNOFF: Sure, we could go ahead with the

final distribution.

THE COURT: Well, all right. I want to hear from

General Motors now, but let me just make two observations.

Obviously, in a sense, while I don’t mean to indicate that

anyone involved in this case has a wrongful attitude, the

Court in a sense is now in a position of representing the class

in a sense because General Motors has agreed to pay out and

will pay out the full amount, and you have the conflict of

interest on the question of attorneys’ fees. That plus the

surprise, because I think the record is clear, I feel surprised

at the amount of the cost of the Analytics operation. I just—

I had no idea we were running that far over, and I didn’t—

perhaps I should have anticipated it, but I didn’t realize the

amount of the cost per month where no, in effect, questions

. 32a

now are being taken, and we are merely waiting for a final

distribution.

So those are concerns that compelled me to ask all

counsel to meet to see if there wasn’t some way we could just

settle the whole thing out and make a final distribution now

so that we would maximize to that extent the ultimate

distribution to each of the members of the class as well as

whatever goodwill falls to General Motors and in effect be as

efficient as possible in this by working out now an overall

settlement where no further delay would be required by

reason of any further court action.

Now, as I understand it, there is no delay if I find there

should be a multiplier, there could continue to be a delay if

I find that there should be no multiplier, and because there

has been no supersedeas bond, in effect, filed, there is no stay

from the seeking of cert with the United States Supreme

Court.

With that, I would like to call on General Motors and

Mr. Jentes to see what General Motors’ position is on this.

MR. JENTES: All right. Let me say by way of back-

ground on the question of the cert. As Your Honor may or

may not know, one of my partners happens to ke Justice

White’s son, and the Justice for a long time has taken the

position that he recuses himself in cases involving our firm.

Also, as you probably know, Justice White has been the

author of most of these opinions relating to attorneys fees

questions including the most recent, the Blanchard versus

Bergeron case, and General Motors felt, and I think they are

correct in their judgment, that they didn’t want to have

Justice White not have an opportunity to review the matter

on the cert petition.

Therefore, they have decided to retain Mr. Shapiro,

formerly with the Solicitor General’s office, at Mayer, Brown

to handle the cert petition. He has now gotten himself up to

33a

speed. He intends to file the cert petition on the | 3th of this

month, and I am sure will press it very strenuously.

One possibility, Your Honor, would be on the normal

schedule in the cert petition, that cert petition then would be

responded to I am sure promptly by counsel for the other

side, and the clear expectation would be that the Court would

rule on any cert petition before it adjourned for the summer.

MICHAEL P. SNYDER, Official Reporter

34a

APPENDIX D

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 86-7763

MATTIE NORMAN, et ai.,

Plaintiffs—Appellants

THE HOUSING AUTHORITY OF THE

CITY OF MONTGOMERY, et ai.,

Defendants—Appellees

ON APPEAL FROM THE UNITED STATES

DISTRICT COURT FOR THE MIDDLE

DISTRICT OF ALABAMA

BRIEF FOR PLAINTIFFS—APPELLANTS

VANZETTA PENN MCPHERSON

639 Martha Street

Montgomery, Alabama 36104

(205) 262-7337

Counsel for Plaintiffs—Appellants

35a

B. THE ATTORNEY FEES SHOULD HAVE BEEN

ENHANCED.

The United States Supreme Court has recognized that

enhancement of a fee award is entirely permissible in certain

cases. See Blum yv. Stenson, supra, Hensley v. Eckerhart,

supra. Factors which traditionally have been considered to

support enhancement of the Appellants’ fee award.

First, it is beyond dispute that recovery of fees in civil

rights cases is contingent upon the plaintiffs prevailing in the

litigation. The legislative history accompanying the civil

rights fee award statute (42 U.S.C. Section 1988) specifically

refers to Johnson v. Georgia Highway Express, 488 F.2d 714

(Sth Cir. 1974), as providing “the appropriate standards to

be applied by courts awarding attorney’s fees under Section

1988.” Blum vy. Stenson, 104 S.Ct. at 1551 (Brennan &

Marshall, J.J., Concurring Opinion).

“Whether the fee is fixed or contingent is one of twelve

enumerated Johnson v. Georgia Highway Express factors and

“was consequently recognized by Congress as a relevant

consideration in setting a reasonable fee.” Blum v. Stenson,

supra at 1551. Accordingly, the Appellants’ fee in the present

case should be enhanced—either by increasing the hourly

rate requested or by otherwise enhancing the fee—to “reflect

the risk of not prevailing.”

A portion of the Appellee’s counterargument below

should be struck down by this Court. They presume—and

the affidavits which they submitted presume—that civil rights

cases are not as intellectually taxing as “securities, antitrust,

or other such complex litigation”. RT-57. This presumption

is not uncommon, but the policy underlying 42 U.S.C. Section

1988 and the legion of cases in this Circuit which have

unequivocally endorsed the soundness of that policy compel

36a

a specific judicial denunciation of the notion that civil rights

cases are not complex. !

Although the “quality of representation” is generally

reflected in the appropriate hourly rate, it may justify an

upward adjustment where the fee applicant offers “evidence

to show that the quality of service rendered was superior to

that one reasonably should expect in light of the hourly rates

charged” and that the success was “exceptional” Blum y.

Stenson, 104 S.Ct. at 1549.

Appellants have demonstrated that they have handled

an exceptionally complex case in an exceptionally expedient

manner. While that fact is to some extent reflected in the

appropriate hourly rate to be awarded Appellants’ counsel,

the fact that Appellants’ counsel expended approximately '3

of the time litigating a case which involved a class approxi-

mately three times as large as that involved in Nelson, supra,

warrants an enhancement in recognition of skill.

In addition, the anticipated monetary recovery to the

class in the instant case is approximately double that which

is anticipated in Nelson, even though the instant case was

settled prior to actual trial.2 Thus, the quality of services

rendered in the present case was “superior” and the success

achieved “exceptional.” For this reason as well, Appellants’

fee request should be enhanced.

Finally, although the “results obtained” will generally be

“subsumed within other factors used to calculate a reasonable

fee,” and will not normally provide an independent basis for

enhancing a fee award, see Blum v. Stenson, 104 S.Ct. 1549,

' This notion is but an extension of the stigma attached to the

status of “civil rights lawyer”. It’s perpetuation in the bar is the

likely seed of the Johnson requirement that the court consider the

undesirability of a case or its adherents.

? The same court awarded fees of $100 per hour to far less

experienced Legal Services counsel in a class action which settled

prior to trial. See McClain v. City of Enterprise, No. 85-T-1288-S

(M.D.Ala Oct. 15, 1986).

37a

it may be considered in “cases of exceptional success.” Blum,

supra, at 1550. In the instant case, the Montgomery Housing

Authority has publicly stated that the anticipated recovery

to the plaintiff class (electric utilities only) will be about

$700,000.00. Based on information provided by the Housing

Authority and by the Alabama Power Company, the ultimate

recovery could actually be as high as $1,000,000. In addition,

Appellees have stated that subsequent to the filing of the

present case they suspended collection of excess gas charges

from tenants at the Housing Authority (plaintiff class mem-

bers) for a period of approximately [2'2 years], and that the

benefit to the plaintiff class (gas utility allowances) would

probably approximate the recovery on the electric utility

allowances. In addition, the Defendants have agreed to

charge reduced gas utility allowances for an additional twenty-

one months following entry of the Consent Order and

Judgment.

Thus, a conservative estimate of the total benefit

achieved for plaintiff class members is between 1.5 amd 2

million dollars. Obviously, the results obtained were “excep-

tional”; and enhancement of Plaintiffs’ fee award is entirely

justified on that basis as well. (A modest contingent fee award

of only 30% would equate a $400,000—600,000 fee award

in the instant case).

C. There Have Been Comparable Fee Awards In

Similar Cases

A predominant factor to be considered in setting fee

awards under Johnson v. Georgia Highway Express is “awards

in s.milar cases.” 488 F.2d at 719. One of the contemporane-

ous fee awards in similar cases is that awarded in Ne/son v.

Greater Gadsden Housing Authority, supra. There, two legal

services attorneys and an associated private attorney spent

approximately 1,200 hours litigating a case comparable to

the instant case, but involving approximately 5 the number

of public housing units. The fee award in the case was

enhanced by a factor of 1.5. In addition, the Court awarded

38a

$3,101.40 as reasonable fees and expenses incurred in the

representation of counsel for the plaintiff class at the hearing

on attorney’s fees. The total fee awarded was $209,518.45.

There have been several other cases in the Middle District

of Alabama in which the lodestar calculation yielded a much

higher hourly rate and in which the court’s consideration of

the Johnson factors enhanced the fee under circumstances

similar to those that obtain here. That court has awarded

fees in the range of $100 per hour in the following civil rights

cases: York v. Alabama State Bd. of Education, supra; Birl vy.

Wallis. No. 83-T-809-N (M.D. Ala. July 24, 1986); Zakrzew-

ski v. Alabama State Council, No. 85-T-512-N (M.D. Ala.

April 28, 1986); and McClain v. Alabama State Council, No.

85-T-512-N (M.D. Ala.)

39a

APPENDIX E

IN THE UNITED STATES DISTRICT COLURI

NORTHERN DISTRICT OF [ILLINOIS

EASTERN DIVISION

\RLIE GLEN SKELTON, et al.,

Plaintiffs No. 79 C 1243

Chicago, Illinois

April 25, 1989

/ 3 | 3:58

GENERAL MOTORS CORPORATION | ——

Defendant. |

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE JOHN A. NORDBERG

APPEARANCES:

For the Plaintiffs: MR. ABRAHAM N. GOLDMAN

MR. LOWELL E. SACHNOFF

For the Defendant: MR. JAMES ANDREW LANGAN

MR. WILLIAM R. JENTES

MS. ANN M. HAMILTON

MR. SACHNOFF: I can say for the record now that there

was a great deal of skepticism as to whether it was a wise

thing to do, because they thought there would be an afirmance

that would be carved in stone up in the Seventh Circuit. Our

fees are, I feel. what fees ought to be on appeal.

I want to state for the record that I am going to consult

with my colleagues upon whom | have really bestowed a gift

here, and I will see whether or not I can persuade them in

the interest of full justice to compensate us for the costs and

the fees that we incurred in connection with the appeal. |

40a

hope they will do that, but I am not certain, and if they don’t,

| will supply the Court with authorities that support the

proposition that class counsel are entitled to payment of fees

in a case such as this where it is necessary to take an appeal.

Those are the only two issues, Your Honor, that come

to mind.

THE COURT: All right, but that wouldn’t delay the

final distribution.

MR. SACHNOFF: No, not at all.

THE COURT: Mr. Jentes.

MR. JENTES: We are obviously disappointed in Your

Honor’s ruling. I think it is an unfortunate precedent, but I

am not going to reargue the issue.

THE COURT: Well, it is not going to be published, and,

as far as | am concerned, it ends with this case. This is a

unique case.

MR. JENTES: I would certainly welcome Mr. Sachnoff’s

offer to provide some kind of a letter of credit or bond or

whatever on behalf of the plaintiffs’ counsel so that if the

Supreme Court takes this matter on cert and reverses the

Seventh Circuit, as I would hope and indeed somewhat expect

them to do, that we would be able to figure out a way to

insure that the attorneys fees that are now being withheld

would ultimately get to the class. So if that can be worked

out mechanically, we would welcome that.

Secondly, with regard to the matter of any further appli-

cation for fees, I can only say we will respond to that whenever

that is put forward.

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Finally, I think that the procedural status of the case now

in terms of further appeals and in terms of the certiorari is

something that we will have to consult with the Mayer, Brown

firm on, and I just don’t know now whether we may have any

other suggestions as to how the actual ordering here should

be done so that we are preserving adequately the record so

that it can be considered by the Supreme Court. So I will

have to get back to Your Honor, if I may, if we have any

suggestions on that.

42a

APPENDIX F

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, ef al,

Plaintiffs,

GENERAL Motors CorPORATION,

Civil Action

Defendant. No. 79 C 1243

JOSEPHINE C. NEwTOon, ef al,

Plaintiffs,

No. 80 C 2151

GENERAL Motors CorPORATION,

Defendant. |

And Related.

Before the HON. JOHN A. NORDBERG,

Judge, on Tuesday, July 8, 1986, at the hour of

10:15 o’clock, a.m.

PRESENT:

MR. SACHNOFF,

MR. BOYLE,

MR. HARTE,

MR. MOORE,

MR. PLASSE,

MR. JENTES,

MR. JOHNSON

(And other parties not identifying themselves

for the record.)

43a

MR. JENTES: I think that that language is eminently

applicable to the settlement that has been reached here, and,

on that basis, I hope that your Honor will preliminarily

approve the materials that have been submitted.

In that connection, Mr. Sachnoff handed to you the order

for consolidation and the redefinition of the class, et cetera.

There is a second order that also has some changes in it,

necessitated by the fact that we do not have the Atard and

Morgan cases here.

I gather, Mr. Sachnoff, that you’ve just handed that to

the —

MR. SACHNOFF: I have.

THE COURT: Okay.

MR. JENTES: All right. Fine.

Those two orders, as modified, your Honor, | think are

in an appropriate form now for entry by your Honor. | think

there are a couple of dates that need to be filled in on the

forms—

THE COURT: Well, all right, but before we get to that

let me just indicate, and I was planning to cover that language

but— and that’s in Section 30.44 of the Manual for Complex

Litigation Second, and I do think that that sums up what the

Court should consider at this hearing, which is a first stage

of the ultimate Fairness Hearing that would be required to

settle this case. ‘

It seems to me that the other thing that has not really

been fully covered by all of the parties orally, although it has

been alluded to in the written material, and certainly anybody

who has worked on this case is familiar with all of the

problems that are involved in this litigation, and without

taking sides substantively in any way, I think that it is clear

over the course of this litigation and is indicated in other

similar type of litigation, the severe strains and the great

44a

uncertainty that results from the sheer numbers and the sheer

complexity of fact finding that could be required in a case of

this nature.

Now, I know that plaintiffs have a statistical theory that

they feel could have supported the case but—and that may

ultimately have proven to be correct, but I don’t think

anybody can look at this entire case without realizing that it

not only would be extremely expensive to try; there would be

an extremely expensive appeal that would be taken, but also

there would be a great deal of uncertainty and I think an

extremely long period of time before this matter was finally

resolved, and I think that all of these are factors also that

have to be considered in determining whether this is a fair

and proper settlement of this action.

Now, the request for the modification of the class is a

matter that I have also carefully considered and the settlement

class, the revised class, in a way, is broader than what was

certified; broader, perhaps, than what the law would require,

but, 1n a way, it is narrower, too, and I have considered that

as well.

In any event, one final thing, which is not really as easy

for counsel to say themselves as it is for me to say because it

is the truth, the Court has been biessed throughout this case

with the fact that we have outstanding lawyers representing

the respective interests involved here and they have worked

very conscientiously on their respective clients’ behalf and

that has been a real help to the Court and that certainly is a

factor that the Court can also take into account in determining

whether, ultimately, the settlement reached is a proper and

fair one.

45a

APPENDIX G

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ARLIE GLEN SKELTON, et al., }

Plaintiffs,

GENERAL MOTORS CORPORATION,

Defendants. Civil Action

| No. 79 C 1243

JOSEPHINE C. NewTon, et al.,

Plaintiffs, |

. No. 80 C 2151

GENERAL MoTorRS CORPORATION,

Defendants. J

And Related.

Before the HON. JOHN A. NORDBERG,

Judge, on Thursday, October 30, 1986, at the

hour of 2:30 o’clock, p.m.

PRESENT:

MR. SACHNOFF,

MR. BOYLE,

MR. SCHUMACHER,

MR. MOORE,

MR. SCHACHTER,

MR. HARTE,

MR. GOLDMAN,

46a

MR. SUCHAROW

on behalf of respective plaintiffs;

MR. JENTES,

MR. JOHNSON,

MR. LANGAN,

MR. LINDEMAN,

on behalf of defendant.

THE COURT: Now, I think that I did cover—we did

deal with the question about the loss of trade-in value, as to

which there would be, and I think the expression was “the

insurmountable problems of proof,” and I don’t know that

anything is “insurmountable” but it would be extremely

difficult and I’m not sure, in the long run, what that would

do to the ability of there to be an ultimately successful

judgment on behalf of any of the plaintiffs. But, in any event,

I do believe that there has been an adequate explanation for

the reason that one—one of the reasons, anyway—why it was

not attempted to be included and— well, | think it probably

was attempted to be included but the reason it was not

included in the settlement agreement is that it is a settlement

agreement; it was negotiated. Certain matters could be

included, ultimately, by agreement; other matters could not.

That was a matter that was not included and I don’t find that

that makes the settlement agreement unfair.

I might just say that there is difficulty of proof in this

case. [ know how strongly the plaintiffs feel about the case,

and I know how strongly General Motors feels to the contrary

that it should not be found liable on this situation, and |

don’t say that either side is not acting in complete good faith

in having that difference in views.

One of the reasons for it is, and I won’t go into the details

of it but, unfortunately, no company on earth can make

perfect products, particularly when you get into more complex

areas such as are involved in making automobiles; there is

47a

always a certain number of failures that will occur in mass

production, and so, too, is this true of transmissions.

So, the real issue in the case is whether the failure rate

of the THM-200 transmission is high enough to indicate that

there is should be liability on the part of General Motors.

That’s an oversimplification of the issues but having some

knowledge now of the general areas in which the proof would

come in, I can speak, I think, with some authority to indicate

that this would be a difficult case for plaintiffs to try and it

would be difficult to have great assurance as to what the

ultimate verdict of a jury might be in this case.

So, taking, then, all of these various matters into account,

the Court does find, pursuant to Rule 23(e), now, that the

proposed settlement of this case and the settlement agreement

that is involved, is fair, reasonable and adequate, and the

Court so finds, and, therefore, the Court does approve the

proposed order that has previously been presented to the

Court, and I have now a revised version of that, a portion of

the order being—well, I will read the first portion of the order

just so that those of you who are present will have a sense of

it. It is a long order and I won’t read the whole thing but,

certainly, copies will be made available to anybody who

wishes to have a copy of that order.

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.