# Opposition Brief — General Motors Corp. v. Skelton

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1989
- **Citation:** 493 U.S. 810

## Text

(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,

V.

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

i
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.

ll

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
a

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,
EL

Lindy Bros. Builders, Inc. v. American Radiator
& Standard Sanitary Corp., 540 F.2d 102 (3d
gS | ig

PAGE

13,14

15

8, 13
a

13,14

13

iV

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

15
6

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,

V.

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-

2

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

3

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

Se

4

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.

5

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’ ”;

6

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.

7

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

8

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.

9

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.

10

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.

11

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

12

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.

13

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

14

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

15

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).

EE

16

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

17

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

18

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.

19

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

la

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

2a

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

3a

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

4a

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
ARLIE GLEN SKELTON, et al., y
Plaintiffs,
V.
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

Sa

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.

Qe

6a

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

Ta

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

8a

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.

9a

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,
V.
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,
V.
GENERAL Motors CORPORATION, No. 79 C 1243
Defendants. Class Action
| Honorable John Nordberg
JOSEPHINE C. NEwTONn, et al.,
Plaintiffs,
No. 80 C 2151

V.

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,
V.
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

Vz

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).

q

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
VS
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.

4la

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,

7:

GENERAL Motors CorPORATION,

Civil Action
Defendant. No. 79 C 1243
-
JOSEPHINE C. NEwTOon, ef al,
Plaintiffs,
No. 80 C 2151

V.

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,

V.

GENERAL MOTORS CORPORATION,

Defendants. Civil Action

| No. 79 C 1243

JOSEPHINE C. NewTon, et al.,

Plaintiffs, |
. No. 80 C 2151

V.

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1357%3A2. Public record. Not legal advice.