Amicus Curiae Brief — General Motors Corp. v. Skelton

Fe EE EPL EL ae re EROS 5 I

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Supreme Court, U.S.

(> FILED

ee, 14 1989

No. 88-1848 JUL

JOSEPH F. SFANIOL, JR.

CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

GENERAL MOTORS CORPORATION, PEPITIONER

ARLIE GLEN SKELTON, ET AL., RESPONDENTS

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

— 6 a ee ee ee -_—

=

BRIEF AMICUS C URIAE OF PRODUCT LIABILITY

ADVISORY COUNCIL, INC. IN SUPPORT OF THE

Of Counsel: MICHAEL HOENIG*

DANIEL V. GSOVSKI HERZFELD & RUBIN, P.

40 Wall Street

New York, New York

(212) 344-5500

Attorneys for

PETITION

id

10005

The Product Liability

Advisory Council,

July 14, 1989 *Counsel of Record

‘BEST AVAILABLE COPY

Inc.

" ab.

§

ERRATUM RE CONSENT OF

ALL PARTIES TO FILING OF BRIEF

AMICUS CURIAE

Contrary to the first paragraph of the facing page,

counsel for respondents have consented to the filing of

the instant Brief Amicus Curae. However, informal

notification of such consent was not given until late in the

day on July 13, 1989, at which time the Motion and Brief

were in the final printing.

By virtue of the consent of all parties, copies of

which are being filed herewith, the Motion for Leave to

File, pp. i-v injra, requires no action by the Court, and

should be considered only as the statement of Interest of

the Amicus, in which capacity it has been incorporated by

reference in the Brief. /njfra at 1.

MOTION OF THE PRODUCT LIABILITY ADVISORY

COUNCIL, INC. FOR LEAVE TO FILE A BRIEF

AMICUS CURIAE IN SUPPORT OF PETITION

FOR WRIT OF CERTIORARI

The Product Liability Advisory Council, Inc.

(“PLAC’’, the Council’), pursuant to Rule 36.1 of the

Court, respectfully requests leave to file a brief amicus

curiae in support of the petition of General Motors

Corporation (“GM7”’) for a writ of certiorari. Counsel

for petitioner have consented to such filing, but counsel

for respondents have not consented.

PLAC is a non-profit membership corporation

formed in June, 1983, pursuant to Act 162, State of

Michigan Public Acts of 1983.1 Its principal purpose is

the submission of appellate briefs, as friend of the court,

in cases raising significant issues affecting substantive

and procedural law in the area of product liability.

|. PLAC members include: American Home Products Corpo-

ration, American Telephone & Telegraph Company, American

Honda Motor Company, Inc., Automobile Importers of America,

Inc., The Budd Company, Clark Material Systems Technology

Company, The Coleman Company, Dow Chemical Company,

Eaton Corporation, Federal Mogul Corporation, FMC Corpo-

ration, Fiat Auto U.S.A. and Ferrari, N.A., Firestone Tire &

Rubber Company, Fruehauf Corporation, Great Dane Trailers,

Inc., Hyundai Motor America, J.L.G. Industries, Kawasaki Motors

Corporation, U.S.A., M.A.N. Truck & Bus, Mitsubishi Motor Sales

of America, Monsanto Company, The Motor Vehicle Manufac-

turers Association of the United States, Inc., and its members,

Nissan Motor Corporation, U.S.A., Otis Elevator Company, Play-

tex, Inc., Porsche Cars North America, Inc., RJR Nabisco, Inc.,

Saab-Scania America, Inc., Strum, Ruger & Company, Subaru of

America, Inc., Toyota Motor Sales, U.S.A., Inc., U-Haul Inter-

national, Inc., United States Tobacco, and Volkswagen of America,

Inc.

il

The members of the Council are obvious and

frequent “target defendants” in class actions of all

types, among them entrepreneurial ventures by firms

specializing in plaintiffs’ commercial class actions such

as this case. As such, Council members have real and

recurring vital interests which .are significantly and

adversely impacted by the decision below.

The decision of the court of appeals, reported at

860 F.2d 250 (7th Cir. 1988), strikes at fundamental

principles governing court awarded attorney fees in

class actions. First, the court of appeals declared that

the governing statute, 15 U.S.C. § 2310 (d)(2), which

provides attorney fees to a plaintiff who “finally pre-

vails,”” does not apply when a plaintiff class “prevails”

by way of settlement. 860 F.2d at 256. Second, the

circuit court found that the express Congressional man-

date that such fees must be “based on actual time

expended,”’ even where applicable, “does not prevent

the court from awarding risk multipliers.” 860 F.2d at

256-57.

The foregoing errors, grave enough in themselves,

were but the prelude to the circuit court’s dispositive

ruling. Citing Pennsylvania v. Delaware Valley Citizens’

Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078

(1987) (Delaware Valley II), the court of appeals

recognized that a risk or contingency enhancement,

even though not foreclosed, had been subjected to

“stringent requirements.” 860 F.2d at 254-57. The

court below, however, deemed the policy rationale of

Delaware Valley II inapplicable to “common fund”

cases and accordingly declared its own “multiplier” rule

without any further reference to this Court’s decision.

860 F.2d at 257-58 (Opinion, Part II).

iil

The resulting decision is diametrically opposed to

the unanimous view of the Court that “‘risk multipliers,”

even if proper, are never case-specific, and falls equally

afoul of the majority’s holding that they should almost

never exceed one-third of the lodestar. Delaware Valley

IT, 483 U.S. at —, 107 S.Ct. at 3089. Instead, the court

of appeals specifically directed the district court ‘“‘to

examine plaintiffs’ attorneys’ reasons for asserting that

this class action was a risky undertaking and to deter-

mine whether these reasons justify the 75% multiplier

they seek (or some multiplier less than that).” 860

F.2d at 258 (emphasis added). The upshot on remand

was an additional charge of $1,408,680 against the fund

available to the class in this case, over and above the

lodestar attorney and paralegal fees of nearly $2.4

million originally awarded. 661 F. Supp. 1368, 1393

(N.D. Ill. 1987).

The members of the Council are understandably

troubled by this development. Should the opinion

below become the governing law, negotiated common

fund settlement pots will require additional “sweet-

ening” by defendants to accommodate a “second help-

ing” by counsel. This increase in the price of settlement

will be all but automatic in class actions, which require

court approval based on fairness to the class.

The rule enunciated below threatens to drive up

the cost of litigation in other ways. The circuit court’s

suggested carte blanche to double even multi-million

dollar lodestars (860 F.2d at 258) will make previously

marginal cases worth fighting to a finish. There is no

readily discernible policy rationale for such a result.

(Indeed, under the bizarre construction of the

Magnuson-Moss Act adopted below, a defendant may

often reduce its fee exposure by trying a losing case to

iV

the bitter end.) The member companies of PLAC are

directly affected and understandably distressed by the

propsect of being conscripted into participation in so

®@ absurd an exercise.

The possible award of up to 200% multipliers in

any given case will continue to skew the litigation

process even after merits disposition or settlement.

With millions at issue, fee-setting will, as here, generally

metastasize into “a second major litigation,” the very

outcome which this Court has been at pajns to avoid.

E.g. Hensley v. Eckerhardt, 461 U.S. 424, 437 (1983).

The further delay in disbursing the remaining fund to

eligible class members while such litigation proceeds

will largely vitiate the potential for recouping customer

goodwill which often motivates settlement in com-

mercial and consumer class actions.

Paying successful claimants’ attorneys up to twice

what a court has found reasonable will also clearly

increase defendants’ costs of doing business. These, like

all costs, will in turn be passed on in the form of higher

prices, lowered efficiency and other general economic

burdens which, inevitably and ironically, ultimately

penalize the consuming public as a whole, in order to

enrich certain attorneys.

Such windfalls are not permitted even in cases

involving major national policies, such as civil rights or

the protection of the environment, e.g. Delaware Valley

IJ. There is even less reason to tolerate them in the

purely commercial arena. Certainly, the law firms

typically involved in cases like the present action have

no claim to largesse unavailable to their brethren of the

public interest bar. The members of the Council, as

litigants in both types of cases, are in a position to

Vv

observe and experience this unjustifiable incongruity at

first hand.

The development of a comprehensive set of stan-

dards by which reasonable attorney fees can be deter-

mined without precipitating a second major litigation in

each case came to fruition last Term in Delaware Valley

IJ. The instant case provides an ideal opportunity to

close the escape hatch in that scheme which the court of

appeals’ decision would open and to make explicit the

obvious application of Delaware Valley II to all court

awards of attorney fees. Significant resources at all

levels of the justice system may then hopefully be

returned to purposes more fitting than the preferential

enrichment of certain segments of the bar.

WHEREFORE, it is respectfully requested that

PLAC be granted leave to file the attached brief amicus

curiae.

Respectfully Submitted,

Of Counsel: MICHAEL HOENIG*

DANIEL V. GSOVSKI HERZFELD & RuBiIn, P.C.

40 Wall Street

New York, New York 10005

(212) 344-5500

Attorneys for

The Product Liability

Advisory Council, Inc.

July 14, 1989 * Counsel of Record

vl

TABLE OF CONTENTS

TABLE OF AUTHORITIES ...................... eon

INTEREST OF THE AMICUS ......................5- . igcaaraic '

PRELIMINARY STATEMENT ee ee

REASONS FOR GRANTING THE PETITION ...........

I. UNLESS IMMEDIATELY CLOSED BY

THIS COURT, THE “COMMON FUND LOOP-

HOLE” IN DELAWARE VALLEY II OPENED

BY THE COURT OF APPEALS THREATENS

ABSURD AND INDEFENSIBLE CONSE-

QUENCES, WHICH WOULD CALL SERI-

OUSLY INTO QUESTION THE INTEGRITY,

ACTUAL AND PERCEIVED, OF THE JUDI-

CUAL, PROD onvvesiccssessecresscciciersanraasneneaeaanerens

Defendants Are Vitally Interested in the Fair

Disposition of Common Fund Settlements...............

Attorneys in Commercial Litigation Have No Spe-

cial Claim to the Case-Specific Windfalls Re-

jected in Delaware Valley 11 ..............cccccccceeeeeeeseeteeees

Vii

Il. THE COURT OF APPEALS’ ERRONEOUS

CONSTRUCTION OF THE FEE PROVISION

OF THE MAGNUSON-MOSS ACT WILL SOW

PLAIN FEDERAL ERROR AMONG THE

STATE COURTS, IN WHICH MOST PRI-

VATE LITIGATION UNDER THE ACT IS

ona eu cahin inks ahh nennsnnenaenicsannaneennced

The Role of State Courts Under Magnuson-Moss..

The Court of Appeals’ Erroneous Reading of the

BPE wisasceonases © nt ak PR Cee Ee PT

NE cali sas suai ciissistsuanatvesisanrsicensintscnsascesonavendsacess

TABLE OF AUTHORITIES

Cases

Abraham v. Volkswagen of America, Inc., 795 F.2d 238

erica rk cia ui halk caasubawns peasety ciokusdennen

Cherner v. Transitron Electronic Corp., 221 F.Supp. 55

ed Ok intial dos Uaunakeaseunnnns

City of Detroit v. Grinnel Corp., 495 F.2d 448 (2d Cir.

NN ak actin brava eguwebenedans aesiasepenakaiciie

re Soe cars cas sa sauvedsitacscensnlcvaxanalassesaouasis

Fidelity Savings & Loan Assn. v. de la Cuesta, 458 U.S.

eae ract indi cneasenccecaciobicsdacaeakineciocstceks

12

Vill

Hensley v. Eckerhardt, 461 U.S. 424, E37 € 19BS). ...<00000 iv

In re Armored Car Antitrust Litigation, 472 F. Supp.

1357 (N.D. Georgia. 1979) .......cssseeseeesenseesssstsenenetteess

Jarecki v. Polaroid Corp., 367 U.S. 303 (1961) ....--..++ 12

Liebman v. J. W. Petersen Coal & Oil Co., 63 F.R.D.

684 (N.D. IIL. 1974) .0....ceseceesesseseeneeeesensnenesssnenenennenenss 9

Lindy Bros. Builders, Inc. Vv. American Radiator &

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

HOTS) ccnseccesneessecensasverqassecsevncnsneanennencnsanensnnanensonanscnnseasnees 8

Maher v. Gagne, 448 U.S. 122 (1980)... seeeeretetee 12

Milwaukee Towne Corp. v. Loew’s, Inc., 190 F.2d S61

(7th Cir. 1951), cert. denied, 342 U.S. 909 (1952)...... 8

Missouri v. Jenkins, 57 U.S.L.W. 4735, 1989 Westlaw

63856 (U.S.), No. 88-64 (June 19, NOI oicassotqursnecess 3

Pennsylvania v. Delaware Valley C itizens’ Council for

Clean Air, 483 U.S. 711, 107 S.Ct 3078 (1987)

(Delaware Valley 11) ........:sssessrrerrerettieitiete passim

Phillips Petroleum Co. v. Shutts, 472 U.S. 797

(19BS) vccccncscrsscntesssssscsssusesssnsennsnsnnnevoncnnoressnensannevenssansacens 4

Saval v. BL, Ltd., 710 F.2d 1017 (4th Cir. 6) eee 10

Walsh v. Ford Motor Co., 807 F.2d 1000 (D.C. Cir.

1986), cert. denied, 482 U.S. 915 ( “ES eee ee 10

Statutes

15 U.CSS. § 2060( f)..........ccccsesceeseeseeeenenesentennsesnsensseneessenes 12

15 U.S.C. § 2310 (a) (1) .....escessceeseeseeereeseeeneeseenneenssennen sense 11

15 U.S.C. § 2310 (dd) C1)... sceceeseeeseseesseeeseseesneneenaennenssensens 9

15 U.S.C. § 2310 (d) (2) .....ccccceeeeeeeseeeeeenteeenneetees i Se A

15 U.S.C. § 2310 (dh )(3) ....eececceeeseeeeesseeeereenenees BREN 9

AD U.S.C. § 1686 (€) ......ccessceeseessesseeeneeeseenenenensneeaensenseenees 12

AD U.S.C. § 2OL4(€) ......esscccceesssreeeesnseeeesneeeenensaeastenanesensnens 12

iX

Miscellaneous

Dawson, Lawyers and Involuntary C lients in Public

Interest Litigation, 88 Harv. L. Rev. 849 (1975)......... 6

S. Rep. No. 151, 93rd Cong., Ist Sess. ( ‘Leh eee 11

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

No. 88-1848

GENERAL MOTORS CORPORATION, PETITIONER

ARLIE GLEN SKELTON, ET AL., RESPONDENTS

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

BRIEF AMICUS CURIAE OF PRODUCT LIABILITY

ADVISORY COUNCIL, INC. IN SUPPORT OF THE PETITION

INTEREST OF THE AMICUS

Amicus respectfully refers the Court to the accom-

panying Motion for Leave to file the instant brief, supra

at 1-v, which sets forth the interests of itself and its

members in this case.

PRELIMINARY STATEMENT

Amicus adopts in its entirety petitioner’s Statement

appearing at pages 2-9 of the Petition. Petitioner’s

statement emphasizes and tellingly sets forth those

aspects of the case which bear on the court of appeals’

erroneous attempt to avoid applying Delaware Valley Il

to fees paid from a “common fund” rather than directly

from a losing defendant’s pocket.

Additional facts upon which amicus urges grant of

the instant petition are set forth as part of amicus’

statement of Reasons for Granting the Petition, directly

below.

REASONS FOR GRANTING THE PETITION

I. UNLESS IMMEDIATELY CLOSED BY THIS

COURT, THE “COMMON FUND LOOPHOLE” IN

DELAWARE VALLEY II OPENED BY THE

COURT OF APPEALS THREATENS ABSURD

AND INDEFENSIBLE CONSEQUENCES, WHICH

WOULD CALL SERIOUSLY INTO QUESTION

THE INTEGRITY, ACTUAL AND PERCEIVED, OF

THE JUDICIAL PROCESS

As indicated ante at 11-111, the court of appeals’

misconstruction of 15 U.S.C. § 2310 (d)(2) was but the

Stepping stone to the key feature of its decision. Waving

aside this Court’s recent teaching in Delaware Valley I],

the circuit court apparently found that the $2.4 million

“lodestar” awarded by the district court was not pre-

sumptively reasonable compensation to plaintiffs’ coun-

sel. The court then directed the district court to consider

application of a fee enhancement or “multiplier” in an

amount up to the 75% bonus requested by counsel,

noting that an additional 25% might properly be sought

in other cases. The stated criterion for this award was to

be the trial court’s ex post facto view of the riskiness of

this particular action, and the sole declared rationale for

this approach was to compensaie plaintiffs’ counsel for

other losing contingency fee cases. 860 F.2d at 254.

As the court below recognized, 860 F.2d at 257,

both this result and its reasoning were “squarely ad-

dressed,” and comprehensively rejected, in Delaware

Valley I, in which a majority of the Court permitted the

possibility of fee enhancements only where a class of

cases proved incapable of attracting competent counsel

in a particular market. See 107 S. Ct. at 3089

(O’Connor, J. concurring). Of particular relevance, all

members of the Court in Delaware Valley II directly

and specifically rejected, under any circumstances, the

concept of a case-specific “risk multiplier” based on the

prospects for success of a particular action. Delaware

Valley II thus categorically “rejected [the] argument

that a prevailing party was entitled to fee augmentation

to compensate for the risk of nonpayment.” Missouri v.

Jenkins, 57 U.S.L.W. 4735, 1989 Westlaw 63856 (US. )

at *4, No. 88-64 (June 19, 1989).

Defendants Are Vitally Interested in the Fair Dis-

position of Common Fund Settlements

The circuit court felt free to sidestep Delaware

Valley II, based solely on the fact that this case involved

a fee to be paid from a “common fund.” The essence of

4

the court’s analysis, reneated at various points through-

out the opinion, is that

[1]n a common fund case, where there is no direct

or immediate danger of unduly burdening the

defendant, a court has more latitude in exercising

its equitable powers to determine whether the

plaintiff class should compensate its attorneys for

their risk of nonpayment. And it remains arguable

that, at least in the common fund context, attorneys

whose compensation depends on their winning the

case, must make up in compensation in the cases

they win for the lack of compensation in the cases

they lose.

860 F.2d at 254. See also id. at 252-55, passim. This

“distinction without a difference” rests on a demonstra-

bly erroneous premise.

When cases are settled, as the overwhelming ma-

jority are, defendants will be every bit as burdened by

common fund windfalls to plaintiffs’ counsel as by

equivalent statutory fee bonanzas. The reason is simple

and obvious. Once “common fund multipliers” have

been declared the law, they must, like any other finan-

cial factors, be taken into account in negotiating the

amounts of future settlement funds. In class actions,

moreover, court approval of settlements is mandated,

and class members have a due process right to appear

and voice objections as part of the process. Phillips

Petroleum Co. v. Shutts, 472 U.S. 797 (1985). Accord-

ingly, sufficient increases in settlement common funds to

allow for a full “‘second helping” to counsel will be

demanded, with a straight face, in the name of “fairness

to the class.”

Thus, perversely, under the court of appeals’ deci-

sion, it will often be in a defendant’s interest to resist a

common fund settlement, particularly in a statutory fee

case, whenever the common fund “sweetener” de-

manded is equal to or more than the incremental cost of

defense.

Beyond the fact that all funds, common or statu-

tory, come from their pocket, target defendants such as

petitioner and amicus’ members are vitally interested in

the fairness and equity with which any fund in court

they create is divided between plaintiffs and lawyers. In

this case, for example, petitioner faced claims under the

Magnuson-Moss Act stemming from alleged short-

comings in its products. Key motivations a manufac-

turer may have in such a situation in agreeing to a

prompt and generous settlement include the desire to

satisfy its customers, recoup its goodwill, and restore its

image following adverse publicity often generated by

plaintiffs’ counsel as a settlement lever. A _ court-

imposed rule which strips away part of its customers’

recovery in_order to pay attorneys millions of dollars

over and above a presumptively reasonable “‘lodestar”’ fee

is hardly a matter of indifference to a defendant in such

circumstances. No manufacturer wishes to risk being

perceived by its customers as having compromised its

warranty or other obligations to them while enriching a

group of attorneys.

Numerous other indefensible aspects of this situ-

ation, particularly the conflicts of interest involved, are

canvassed in the petition and will not be repeated here.

Amicus, for its part, notes that even the “factual”

2. In this case, for example, the nearly $1.5 million in enhance-

ments, which the court of appeals conceded could not be awarded

had the case been fought to a finish, would fund 10,000 hours of

lawyer time at an average of $150 per hour.

premise of the circuit court’s attempt to distinguish

away Delaware Valley I], the defendant's supposed lack

of financial interest in the attorney fee doctrine appli

cable to a settlement fund, is simply wrong

Attorneys in Commercial Litigation Have No Special

Claim to the Case-Specific Windfalls Rejected in

Delaware Valley 11.

Even if it were factually valid, the court of appeals’

“common fund/statutory fee dichotomy” does not sup-

port a special multiplier rule in common fund cases

There is no equitable basis for allowing counsel to exact

a greater toll from a fund’s “faultless beneficiaries” than

they would be permitted to collect from a defendant

found guilty of wrongdoing. See Dawson, Lawyers and

Involuntary Clients in Public Interest Litigation, 88

Harv. L. Rev. 849, 928 (1975). There are equally

compelling reasons for not preferring one class of

lawyers over another in awarding fees.

Under Delaware Valley 1], “compensation for con-

tingency must be based on the difference in market

treatment of contingent fee cases as a class, rather than

on an assessment of the ‘riskiness’ of any particular

case.” 107 S. Ct. at 3089 (O’Connor, J., concurring in

judgment). Moreover, “[b]efore adjusting for risk

assumption, there should be evidence in the record, and

the trial court should so find, that without risk-

enhancement plaintiff would have faced substantial

difficulties in finding counsel in the local or other

relevant market.” Jbid. (plurality); 107 S. Ct. 3091

(O’Connor, J. concurring). It would be difficult to

imagine a case farther removed from the relevant

‘“counsel-finding” standard than the instant action.

The case below which was settled in Chicago

consolidates five separate federal and state actions.

661 F. Supp. at 1372-74. By the time of settlement, no

fewer than 29 lawyers from nine different law firms,

including counsel from Washington, D.C., New York

City, Chicago and Los Angeles, had devoted time to the

matter and been awarded fees by the district court. Jd.

at 1393. Nothing in the record even suggests that this

battalion was solely dependent on this action for its

livelihood, or was otherwise unoccupied while this

litigation proceeded. It is equally difficult to view the

prospect of $2.4 million in “lodestar” fees “based on

actual time expended”, 15 U.S.C. § 2310 (d)(2), as a

disincentive to similar cases.

The rule announced by the court of appeals will

often if not exclusively operate as it did below, allowing

attorneys in purely commercial matters to reap fee

harvests unavailable to those of the bar who elect to

devote themselves to the vindication of less tangible

interests, even where those interests are the declared

objects of fundamental national policies. The absurdity

and inequity of this result is so patent as to call into play

a fundamental concern which has repeatedly found

expression as courts have struggled with fee award

questions—the integrity of the courts, and of equal

importance, the public’s perception of that integrity.

Indeed, it is interesting that this concern has often

been best articulated precisely in commercial common

fund cases, in which significant monetary recoveries so

3. The 1989 edition of the Martindale-Hubbel directory of at-

torneys shows that the nine plaintiffs’ firms in this case employ a

total of approximately 130 attorneys. Counsel here clearly had the

means to spread their risk and hedge their bets.

8

often supply the pretext for equally noteworthy fee

requests:

For the sake of their own integrity, the integrity of

the legal profession, and the integrity of Rule 23, it

is important that the courts should avoid awarding

‘windfall fees’ and that they should likewise avoid

every appearance of having done so. To this end

courts must always heed the admonition of the

Supreme Court in Trustees v. Greenough, [105 U.S.

527 (1881)], when it advised that fee awards

under the equitable fund doctrine were proper only

‘if made with moderation and a jealous regard to

' the rights of those who are interested in the fund.’

105 U.S., at 536.

City of Detroit v. Grinnell Corp., 495 F.2d 448, 469 (2d

Cir. 1974). See also e.g., City of Detroit v. Grinnell

Corp., 560 F.2d 1093, 1099 (2d Cir. 1977); Lindy Bros.

Builders, Inc. v. American Radiator & Standard Sani-

tary Corp., 487 F.2d 161, 168 (3rd Cir. 1973); Mil-

waukee Tuwne Corp. v. Loew’s, Inc., 190 F.2d 561, 569-

70 (7th Cir. 1951), cert. denied, 342 U.S. 909 (1952);

In re Armored Car Antitrust Litigation, 472 F. Supp.

1357, 1382 (N.D. Georgia. 1979); Cherner v. Transi-

tron Electronic Corp., 221 F.Supp. 55, 61 (D.Mass.

1963) ( Wyzanski, J.).

It is also significant, and ironic, that common fund

fee award cases were among the very first to question

the case-specific risk multipliers ultimately rejected by

this Court in Delaware Valley II, on grounds fully

applicable here. E.g. City of Detroit v. Grinnell Corp.,

560 F.2d at 1099 (‘We have considerable doubt about

the justice of charging members of one class higher fees

to compensate counsel for failing to recover for another

9

class.”) (quoting Liebman v. J. W. Petersen Coal & Oil

Co., 63 F.R.D. 684, 697 (N.D. Ill. 1974)).

In short, the common fund escape hatch from

Delaware Valley II which the court of appeals created

comports neither with policy, history, equity or logic.

Review by this Court, amicus respectfully submits, is

urgently needed.

il. THE COURT OF APPEALS’ ERRONEOUS

CONSTRUCTION OF THE FEE PROVISION OF

THE MAGNUSON-MOSS ACT WILL SOW PLAIN

FEDERAL ERROR AMONG THE STATE COURTS,

IN WHICH MOST PRIVATE LITIGATION UNDER

THE ACT IS CONDUCTED.

The precedential importance of the decision below

is not confined to the federal courts, which have already

cited and relied upon it several times. See Petition at

24-25 n.9. Because of the specific features of the

enforcement structure of the Magnuson-Moss Act, the

decision below will directly influence state court deci-

sions across the nation in this area.

The Role of State Courts Under Magnuson-Moss

Though private actions under the Magnuson-Moss

Act may be brought both in federal and state courts,

Congress placed substantial jurisdictional barriers in the

path of federal actions. 15 U.S.C. § 2310 (d)(1), 15

U.S.C. § 2310 (d)(3). These provisions, particularly as

to multi-party and class actions, have been strictly

10

applied by the federal courts.4 As a result, the state

courts are, as Congress intended, the primary arena of

litigation, both individual and class actions, under the

statute.®

The court of appeals’ decision in this case will

inevitably be accorded great deference by state courts

eager for authoritative guidance in applying the Act.

The misconstructions of the governing provisions by the

court of appeals which could thus infect the state court

systems are fundamental. Under the court of appeals’

erroneous reading, the clearly intended applicability of

the Act to settlements and the prohibition on multipliers

are both nullified. Differing state doctrines would thus

control in each case, directly undermining the uniform

prescriptive effect of the Congressionally specified fee

provision. See Walsh v. Ford Motor Co., 807 F.2d at

1014 (explicit federal prescriptions in the Act “‘apply as

written.”) Federal appellate review of state rulings

following the court of appeals’ decision is problemati-

cal. There is therefore no reason to withhold such

review at this time.

4. E.g., Abraham yv. Volkswagen of America, Inc., 795 F.2d 238 (2d

Cir. 1986) (100 named plaintiff requirement for federal class

action jurisdiction demands 100 claims sufficient to withstand

summary judgment); Saval v. BL, Ltd., 710 F.2d 1017 (4th Cir

1983)(individual claims must meet standards of Rule 20,

F.R.Civ.P, to be aggregated to satisfy $50,000 “in controversy”

requirement).

5. 1S U.S.C. § 2310 (d). See Walsh v. Ford Motor Co., 807 F.2d

1000, 1007 n.38, 1013 (D.C. Cir. 1986), cert. denied, 482 U.S. 915

(1987) (statute confines the ‘“‘mine-run” of Magnuson-Moss cases

to State courts )

1]

The Court of Appeals’ Erroneous Reading of the Act

In avoiding the plain text of the fee provisions of

the Magnuson-Moss Act, the decision below is at odds

with legislative history, the statutory scheme, and this

Court’s construction of similar language in other reme-

dial Congressional enactments.

The court of appeals’ professed inability to find

evidence that the fee provision of Magnuson-Moss

applies to settlements, 860 F.2d at 256 n.7, fails to

square even with the statutory text. In fact, the

settlement of this case, on its face, met both relevant

statutory criteria for an award of fees under the Act. By

establishing a minimum $17 million fund for their class,

plaintiffs ‘finally prevailed,” and that result was

embodied in a “judgment” which included a fee award,

exactly as prescribed by the Act. 15 U.C.S. § 2310

(d)(2).6

Moreover, as the Petition notes, at page 23, the

drafters of the Act stated that a prevailing plaintiff, “if

successful in the litigation (including settlement)”,

could invoke the Act’s fee provision, in a Senate Report

which the court of appeals appears to have overlooked.

S. Rep. No. 151, 93rd Cong., Ist Sess. 22-23 (1973).

Lastly, the policy considerations underlying the Act,

particularly the explicitly declared Congressional en-

couragement of dispute resolution short of full trial, 15

U.S.C. § 2310 (a)( 1), militate strongly in favor of the

‘plain meaning” of the statute. This Court’s construc-

tion of the “prevailing party” requirement under similar

enactments should accordingly govern the virtually

6. The provisions of the Order of October 30, 1986, which

dismissed all claims of the class with prejudice and awarded fees in

accordance with the district court’s opinion are summarized in the

opinion below. 661 F. Supp. at 1396.

12

identical concept embodied in the Magnuson-Moss Act.

See, e.g., Maher v. Gagne, 448 U.S. 122, 129 (1989)

(civil rights ).

The reasoning by which the court of appeals

purported to reconcile multipliers of up to 200% with

the Congressional command that Magnuson-Moss fees

shall be “based on actual time expended,” 860 F.2d at

257, is pure sophistry. On this basis, any fee can be

supported as “*based on actual time expended” merely

by the application of an appropriate multiplier.

Arithmetic cannot be made to substitute for policy. In

addition, the reading adopted below, by rendering the

quoted language superfluous, directly violates the

fundamental canon of construction that Congressional

enactments shall be construed so as to give meaning

and effect to all their provisions. E.g., Fidelity Savings &

Loan Assn. v. de la Cuesta, 458 U.S. 141, 163 (1982);

Jarecki v. Polaroid Corp., 367 U.S. 303, 307-08 (1961)

(Where a “statute admits a reasonable construction

which gives effect to all its provisions, ... we will not

adopt a strained reading which renders one part a mere

redundancy.”’)

Such judicial nullification of statutory language is

especially indefensible where the provision at issue is a

distinguishing characteristic of the statute under consid-

eration. In fact, Magnuson-Moss is one of several

Statutes among the two hundred odd attorney fee

provisions of the federal code in which Congress took

the trouble to insert language restricting fees to those

13

“based on actual time expended.” E.g. 15 U.S.C.

§ 2060(f) (Consumer Product Safety Act); 49 U.S.C.

§ 1686 (e) (Liquid Gas Pipeline Safety Act; and 49

U.S.C. § 2014(e) (Hazardous Liquid Pipeline Safety

Act). This vital language cannot, as below, simply be

read out of the Act.

CONCLUSION

For the reasons stated, amicus respectfully submits

that the petition should be granted.

Respectfully Submitted,

Of Counsel: MICHAEL HOENIG*

DANIEL V. GSOVSKI HERZFELD & RUBIN, P.C.

40 Wall Street

New York, New York 10005

(212) 344-5500

Attorneys for

The Product Liability

Advisory Council, Inc.

July 14, 1989 *Counsel of Record

7. Indeed, the only ianguage in 15 U.S.C. § 2310 (d)(2) saretion-

ing any departure from the “lodestar” amount grants the court

discretion to dispense with fees entirely where an award woulda be

“inappropriate”. Thus, Congress, in Magnuson-Moss, authorized

reasonable attorney fees “based upon actual time expended” or a

court’s disallowance of such fees. It did mot authorize an increase

in such fees.