Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_02-cv-06213/USCOURTS-caed-1_02-cv-06213-6/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

BETH MAXWELL STRATTON, CHAPTER

7 BANKRUPTCY TRUSTEE FOR THE

SGP BENEFIT PLAN, INC.,

Plaintiff,

v.

GLACIER INSURANCE

ADMINISTRATORS, INC.; GLACIER

INSURANCE ENTERPRISE, INC.;

FRESNO AGENT SERVICE TEAM, INC

DOING BUSINESS AS BEN MAR

SERVICES; LAWRENCE THOMPSON;

BRAD STARK; PIERRE TADA; NORMA

SPALDING; DICK NEECE, SR;

WILLIAM WOLHAUPTER; AND DOES 1

THROUGH 250, INCLUSIVE,

Defendants.

1:02-CV-06213 OWW DLB

MEMORANDUM DECISION AND ORDER

GRANTING SECOND APPLICATION

FOR APPROVAL OF PROFESSIONAL

FEES OF CHAPTER 7

TRUSTEE/INDEPENDENT FIDUCIARY

1. INTRODUCTION

Stratton brings this motion as a Chapter 7 Bankruptcy

Trustee of the SGP Benefit Plan, Inc., and as the court-appointed

independent fiduciary for the SGP Benefit Plan (“The Plan”), and

the SGP Benefit Trust(“The Trust” or, collectively, “SGP/P/T”.) 

The Findings of Fact and Conclusions of Law entered in this case

on November 11, 2006 and the Judgement entered on November 27,

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2006 were entered subject to Stratton’s further fee applications

for services rendered after April 19, 2006. This is Stratton’s

second motion for approval of professional fees. This motion is

unopposed. 

2. BACKGROUND

The lengthy history of this litigation is set forth in great

detail in numerous memoranda decisions issued by the district

court, including a prior decision on the Findings of Fact and

Conclusions of Law (Doc. 175, Filed November 22, 2006), and an

order approving Stratton’s first application for attorneys’ fees

(Doc. 185, Order Re: Class Settlement, Permanent Injunction, and

attorneys fees, Filed January 29, 2007.) For the purposes of

this motion, a brief background summary is sufficient. 

SGP was created in August 1990 as a California non-profit

mutual benefit corporation for the purpose of administering a

voluntary employees benefit association. The Plan, also referred

to at time as the Trust, is an employee welfare benefit plan

under ERISA § 1002(1)(A). It was designed to be a multiple

employer welfare arrangement in accordance with ERISA for the

purpose of providing medical, surgical, and/or hospital care

benefits to members and affiliates of Sunkist Growers, Inc.

(“Sunkist”). SGP was the designated plan sponsor. 

Glacier Insurance Enterprises, Inc. (“Glacier”) and its

president and chief executive officer, Larry Thompson, acted as

administrators and consultants of the Plan throughout its

existence. Glacier was responsible for reporting to the officers

of SGP/P/T. 

Sunkist was an original promoter of the Plan and is alleged

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to have been a fiduciary and party in interest with respect to

the Plan within the meaning of ERISA. 29 U.S.C. §1002(21); 29

U.S.C. §1002(14). Sunkist members and officers including some of

the former Trustee Defendants and Ted Jones, were also officers

of SGP and/or trustees of the Plan and Trust. Sunkist endorsed

and actively participated in promotion of the Plan and provided

certain assurances regarding Plan financing. 

The Plan did well and operated without a loss throughout its

first years of existence. However, the Plan began to show

significant losses by 1999. For its fiscal year ending on

September 30, 1999, it had a $240,000 loss after accounting for

funds in reserve. By fiscal year end on September 30, 2000, the

annual losses had increased to $3.5 million. 

The California Department of Insurance investigated the Plan

and directed that it stop accepting new insureds in July 2001. 

The Plan ceased operation in October of 2001. The United States

Department of Labor (“DOL”) conducted an exhaustive investigation

into the history and demise of SGP/P/T and determined that there

was possibly as much as $10 million in medical claims against the

Plan outstanding and unpaid as of the end of 2001. No claims

have been paid since the Plan ceased operation in October 2001. 

The plan is without assets and there are no funds to pay claims

except as may be produced through this litigation. Medical

providers began to seek payment of their claims directly from

their patients and/or their employers. 

On February 25, 2002, SGP, Inc. filed for protection under

Chapter 7 of the United States Bankruptcy Code. Stratton became

the duly qualified, appointed and acting Chapter 7 Bankruptcy

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Trustee of SGP. The bankruptcy case was removed to the district

court. On May 28, 2003 the court appointed Stratton as an

independent fiduciary of the Plan and Trust in place of Former

Trustee Defendants. 

On October 1, 2002 Stratton initiated litigation to recover

SGP/P/T’s losses from Sunkist, Glacier, and the Former Trustee

Defendants alleging each of the defendants had breached fiduciary

duties owed to SGP/P/T. Stratton alleged causes of action for

breach of fiduciary duties imposed by ERISA, misrepresentation,

breach of contract, negligence, and engaging in prohibited

transactions. 

All parties eventually reached a settlement agreement that

was approved by the district court on January 29, 2007. (Doc.

185, Order Re: Class Settlement Agreement, Granting Permanent

Injunction against future claims, Attorneys Fees.) The

Settlement Agreement resolves a dispute between the Plaintiff and

Defendants Glacier Insurance Administrators, Inc. (“Glacier”),

Former Officers and Trustees of SGP/P/T (“Former Trustee

Defendants.”) The court also ordered the release of settlement

funds from the court registry. (Doc. 184, Order Releasing

Settlement Funds from Court Registry, Filed January 19, 2007.)

In this motion, Stratton reports to the court that after the

appeal period for the findings of fact expired, the first

disbursement of funds to claimants were made. (Doc. 189, Second

Application for Approval of Professional Fees, ¶ 11, Filed May

30, 2007.) Stratton states that approximately 630 checks were

issued and several were returned for bad addresses. (Id.) New

addresses for most such claimants have since been found and the

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checks re-mailed. (Id.) However there are still several

outstanding checks. (Id.) Stratton does not know whether said

checks are lost or simply have not yet been cashed. (Id.) 

Stratton claims that in her experience, claimants often hold onto

checks for several months before depositing them. (Id.) In the

next month, Stratton will be researching the outstanding checks

to see whether a stop payment and reissue is appropriate. (Id.) 

She will not determine for another several months whether or not

there will be sufficient excess funds for a second distribution

to claimants. (Id.) 

3. STANDARD OF REVIEW

Attorneys’ fees provisions included in proposed class action

settlement agreements are, like every other aspect of such

agreements, subject to the court’s scrutiny for fairness,

reasonableness, and adequacy. Staton v. Boeing Co., 327 F.3d

938, 963 (9th Cir. 2003). “Thus, to avoid abdicating its

responsibility to review the agreement for the protection of the

class, a district court must carefully assess the reasonableness

of a fee amount spelled out in a class action settlement

agreement.” Id. If fees are unreasonably high, there is a

“likelihood [] that the defendant obtained an economically

beneficial concession with regard to the merits provisions, in

the form of lower monetary payments to class members or less

injunctive relief for the class than could otherwise have [been]

obtained.” Id. at 964. However, the court’s task in reviewing

negotiated fees is different from the court’s task in fashioning

fee awards from scratch. Robbins, 127 Cal. App. 4th at 444. The

court is simply to determine whether the negotiated fee is

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 When a settlement agreement creates a large fund for 1

distribution to a class, as is the case here, courts may use

either of these two options in determining what is fair and

reasonable. 

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facially fair and reasonable. Id. This task requires the court

to review the settlement agreement as a whole, including the fee

award, to ensure that it was fairly and honestly negotiated, is

not collusive, and adequately protects the interests of the

parties. Id. Plaintiffs’ attorneys have a duty to limit fees to

an amount that represents the value of the work done. Id.

Therefore, although a negotiated fee may represent a reasoned

business decision to settle, a negotiated fee that exceeds a

reasonable fee for the attorneys’ contribution may not be

approved. Id.

In calculating attorneys’ fees in civil class action suits,

the district court has discretion to use either the percentage

method or the lodestar/multiplier method. Hanlon v. Chrysler

Corp., 150 F.3d 1011, 1029 (9th Cir. 1998). In determining 1

Attorneys’ Fees, counsel has used the lodestar method in this

case. “In determining what a reasonable attorney’s fee entails,

the district court must apply the hybrid approach adopted in

Hensley v. Eckerhart, 461 U.S. 424, 433 [] (1983).” United

States v. $12,248 U.S. Currency, 957 F.2d 1513, 1520 (9th Cir.

1992). “The most useful starting point for determining the

amount of a reasonable fee is [1] the number of hours reasonably

expended on the litigation [2] multiplied by a reasonable hourly

rate.” Sorenson v. Mink, 239 F.3d 1140, 1145 (9th Cir.

2001)(relying upon Hensley, 461 U.S. at 433). The resulting

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figure is known as the “Lodestar.” 

To determine what qualifies as reasonable attorney’s fees,

the Ninth Circuit has adopted the twelve Lodestar Factors as

“guidelines [and] as appropriate factors to be considered in the

balancing process required in a determination of reasonable

attorney’s fees:” 

(1) the time and labor required, 

(2) the novelty and difficulty of the questions involved,

(3) the skill requisite to perform the legal service

properly,

(4) the preclusion of other employment by the attorney due

to acceptance of the case, 

(5) the customary fee, 

(6) whether the fee is fixed or contingent, 

(7) time limitations imposed by the client or the

circumstances,

(8) the amount involved and the results obtained, 

(9) the experience, reputation, and ability of the

attorneys, 

(10) the “undesirability” of the case, 

(11) the nature and length of the professional relationship

with the client, and 

(12) awards in similar cases.

Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 71 (9th Cir.

1975) (suits brought pursuant to 29 U.S.C. §§ 412 and 529)

(citing Johnson, 488 F.2d 714); see also $12,248 U.S. Currency,

957 F.2d at 1520 (applying the twelve factors outlined in Kerr to

the EAJA). “[Although] the lodestar determination has emerged as

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the predominate element of the analysis....the court [can still]

make adjustments to the lodestar figure based on the ‘riskiness’

of the lawsuit and the quality of the attorney’s work.” Jordan

v. Multnomah Co., 815 F.2d 1258, 1262 n.5 (9th Cir. 1986). In

addition, the court may reduce the fee award “if the relief,

however significant, is limited in comparison to the scope of the

litigation as a whole.” Hensley, 461 U.S. at 440. 

4. DISCUSSION

In her request for approval of settlement and fees, Stratton

was authorized to submit further fee applications for services

rendered after April 19, 2006. She first estimated that future

fees for services (post April 19, 2006) would approximate $26,

250.00. In this application she is requesting $21,701.25, an

amount less than the estimated amount. (Doc. 189, Second

Application for Approval of Professional Fees, ¶ 11, Filed May

30, 2007.) Stratton claims that she has utilized staff from her

office to perform necessary services, where that staff member

could perform the task at a lesser hourly rate than that of

Stratton. (Id.) Stratton claims that most time spent by staff

was spent locating new addresses for returned mail. (Id.) This

task was required to be done in a very short period of time and

it was necessary to utilize the entire staff (including Mr. Seng)

in order to timely accomplish the task. 

Stratton requests the following additional fees: 

Person’s Name Hourly Rate x Total Hours = Total Fees

Beth Maxwell

Stratton,

Chapter 7

Trustee

$175.00 x. 95.10 hours = $16,642.50

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Michael J.

Seng, Attorney

(at law clerk

rate) 

$100.00 x 4.8 hours = $480.00

Desiree

Torrenz, law

clerk

$100.00 x 14.00 hours = 1,400.00

Kerry Cubberly,

paralegal 

$75.00 x 6.8 hours = $510.00

Nithi Jhaveri,

legal assistant

$75.00 x. 17.25 hours = $1,293.75

Joy Kirk, legal

assistant

$50.00 x 17.00 hours = $850.00

Angela Guthrey,

legal assistant

$50.00 x 10.5 hours = $525.00

TOTAL $21,701.25

Stratton also requests the following fees for the Law

Offices of Seng and Stratton: 

Person’s Name Hourly Rate x Total Hours = Total Fees

Michael J.

Seng, Partner

$75.00 x. 115.40 hours = $8,655.00

Beth Maxwell

Stratton,

Partner

$75.00 x $112.70 hours = $8,452.50

Legal

Assistant/

Paralegal

$25.00 x. 6.20 hours = $155.00

TOTAL $17,262.50

All hours calculated are reasonable. Class counsel has

submitted evidence of invoices dating back to April 3, 2006. The

invoices detail services rendered in this case after April 19,

2006. The hourly rates used to calculate the lodestar are also

reasonable. There were no objections to the approval of

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additional fees by any party. 

5. CONCLUSION

The second request for Attorneys Fees is GRANTED. 

IT IS SO ORDERED.

Dated: July 3, 2007 /s/ Oliver W. Wanger 

dd0l0 UNITED STATES DISTRICT JUDGE

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