### No. 80-266 INTHE SUPREMECOURTOF THE STATE OF MONTANA 1981

JOHN R. 

### MEANS andMARY MEANS, MONTANA DEPARTMENT OF OF NATURAL RESOURCES and CONSERVATION,an agency of the State, PlaintiffsandAppellants,

THEMONTANA POWER COMPANY, A Montana Corporation, Defendantand Respondent.

Appeal from: District Court of the Fourth JudicialDistrict, In and for the County ofMissoula,Montana Honorable JohnHenson,Judgepresiding. Counselof Record: ForAppellants: Donald D. MacIntyre,Dept. ofNatural Resources, argued,

Helena,Montana 

# b~' Williams Law Firm,Missoula,Montana Richard Ranney argued, Missoula,Montana

Filed: 

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## -79!37 Submitted: January 13, 1981 Decided:

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# -1981Mr. JusticeGene B. Daly delivered theOpinion of theCourt. This appeal arises from an order appointing respondent's attorney lead counsel and providing for reasonable compensation and an order fixing that compensation entered by the District Court for the Fourth Judicial District, Missoula County, theHonorable John S. Henson presiding. There occurred on July 16, 1977, a fireinthePattee Canyon area of Missoula County, Montana. The fire caused extensive damage to both homes and land in the area. The Montana Department of Natural Resources and Conservation (DNRC) fought the blaze and made arrangements for an investigation into the causes of the fire. It was later determined that power lines of the Montana Power Company could have been the causeof thePatteeCanyon fire. A complaint for damages to their property caused by the firewas filedby John and Mary Means on March 14, 1978. Filing of the complaint had followed extensive discovery by Shelton C. Williams, attorney for Mr. and Mrs. Means. On December 21, 1978, DNRC filed its own complaint seeking approximately $532,000 for damages tostateland and costs for extinguishing the fire. On March 30, 1979, the Means case and the DNRC case

were consolidated by stipulation. Subsequently, other parties who had suffered losses caused by the fire filed additional complaints against the Montana Power Company. Altogether there were thirty-one cases filed in the Fourth Judicial District Court, Missoula County, except for one which Williams filed in the Federal District Court for Montana. There were approximately ten attorneys or firms who ultimately became involved inthelitigation for thevariousplaintiffs. The Montana Power Company, by motion on May 23, 1979, sought consolidationof allcasespending inDistrict Court. Shortly afterwards, on July 27, 1979, Williams filed a motion seeking an appointment of lead counsel. The motion for consolidation for the purpose of determining liability was granted on August 8, 1979. The order provided, however, that the damage aspect of the actions be bifurcated with separatetrialsbeing envisioned, if necessary, in thisregard. On October 30, 1979, Williams filed a stipulation whereby counsel for allparties, except DNRC, agreed tohis being lead counsel and to his compensation therefor. As a result of the stipulation, Williams represented thirty of thirty-one parties for claims totaling $2,242,875.75. On November 1, 1979, the District Court, without a hearing, ordered the appointment of Williams as lead counsel in all consolidated cases, including the action filedby DNRC. The order alsoprovided thattheWilliams Law Firm be reasonably compensated for services heretofore or hereafter rendered. The amount of compensationwas tobe determined by agreement of the parties or by the court after termination of lead counsel's responsibilities. The matter proceeded toward the scheduled trial date of December 3, 1979, with discovery proceeding and numerous preliminary motions withWilliams aslead counsel. Prior to trial settlement negotiations began with DNRC and various home owners settling their claims for $1,215,000 of which $425,000 was for DNRC. A group referred to as the raw landowners failed to reach a settlement and preparation ontheir behalf continued for the scheduled trialdate. On December 3, 1979, the presiding judge withdrew from the case, and the trialdatewas vacated. A new judge and trialdatewere subsequently 

### set, and the raw landowners proceeded totrial. On December 28, 1979, Williams, as lead counsel, after failing to reach an agreement with DNRC, moved for a determination of compensation. After a series of hearings the District Court entered an order on March 14, 1980, granting the Williams Law Firm $47,222.22 to be paid by DNRC

# . DNRC appeals both the order of November 1, 1979, appointing lead counsel and the order of March 14, 1980, determiningcompensation. The following issues have been presented to this Court for review: 1. Did the DistrictCourt err in failingtohold an evidentiary hearing prior to entering its findings of fact, conclusions of law and order appointing lead counsel? 2. Did the District Court err in appointing a lead counsel? 3. Did the District Court err in ordering DNRC to pay compensation tolead counsel? 4. Did the District Court abuse its discretion in awarding compensation inthe amount of $47,222.22? Astothe firstissueon appeal, DNRC would have this Court remand this action to the District Court due to its failuretohold an evidentiaryhearingprior toenteringthe November 1, 1979, order appointing lead counsel. The basis of this contention 

### is that since there 

### is no record toreview, thisCourt is unable todetermine if there is sufficient evidence to support the findingsmade. Wemust disagree. The order of November 1, 1979, was entered in response to a motion under Rule 42(a),M.R.Civ.P. (consolidation). Rule 52(a),M.R.Civ.P., inpertinent part, provides that, "[flindings of fact and conclusions of law are unnecessary on decisions of motions under Rules 12 or 56 or any othermotion 

# . .." Findings of factbeing unnecessary for a ruling on saidmotions, theDistrictCourt 

### is under no obligation toprovide an evidentiaryhearing. The DistrictCourt in this instance, however, though under no obligation todo so, chose tomake findingsof fact upon which it based its conclusions of law and order. This Court now being presented with theorder for examination, it is incumbent upon thisCourt to review the findings aswell

asthe applicable law. SeeTimmerman v. Gabriel (1970), 155 Mont. 294, 470 P.2d 528; section 3-2-204(5), MCA; Upper Missouri G & T ElectricCooperative, Inc. v. McCone Electric Cooperative, Inc. (1971), 157Mont. 239, 484 P.2d 741. It is not necessary, however, that this action be remanded for

an evidentiaryhearing. Here, the findings in dispute are: (1)that the size and complexity of thecasedemands theappointmentof a lead counsel; and (2)that almost allof the discovery and trial preparation has been done by Williams with the implied consent of DNRC. An examination of the submitted District Court file (asto the complexity of the case) and a review of the hearings held in regard tothe order setting compensation (as to the work done by Williams with the impliedconsent of DNRC) provides a sufficientbasis for review. The second issue on appeal involves a determination of whether or not this actionwas an appropriate one for a lead counsel tobe appointed. As the cases cited by both DNRC and Williams indicate, the appointment of lead counsel is made in conjunction with a motion and order for consolidation and has been primarily used in federal court proceedings involvingmultiparty litigation. See In Re Air Crash Disaster atFlorida Everglades (5thCir. 1977), 549 F.2d 1006; Vincent v. Hughes Air West, Inc. (9thCir. 1977),557 F.2d 759. In the present case, thirty-one separate plaintiffs allbrought suitagainst the Montana Power Company claiming damages occasioned by a single disaster. The thirty-one plaintiffs were represented by ten different attorneys. Clearly, this case does not appear as complex as that seen in Vincent (sixty separate actions brought in state and federal courts in Washington, Utah and California) or in FloridaEverglades (150 claims in both federal and state courts). However, it cannot be said that the trial court, in exercising 

### its managerial power over this proceeding, clearly abused its discretion as a matter of law in providing for the appointment of a lead counsel. The purpose of consolidation and appointment of lead counsel 

### is to permit trial convenience and economy in administration by avoiding unnecessary costs or delay. MacAlister v. Guterma (2ndCir. 1958), 263 F.2d 65. Absent

a lead counsel therewas no guarantee presented tothe court that all the parties to this proceeding would not become actively involved inthe litigation. Consequently, had theDistrictCourt failed to formally order appointment of lead counsel, it could have been faced with the possibility of ten different attorneys pursuing ten different theories of attack. It 

### is obvious that such an arrangementwould foster undue delay, cost and inconvenience. Furthermore, and most importantly, inlightof DNRC's past conduct, this Court seriously questions the propriety of allowing DNRC to avoid the application of the lead counsel order. After the order was entered atno timedid DNRC move for a reconsideration, nor did it seek an appeal

or writ to have the order reviewed by this Court prior to the scheduled trial date. Moreover, during the initial settlement negotiations, DNRC failed to accept a proposal made by theMontana Power Company tosegregate the claimsof DNRC, which would have allowed the Department toproceed on 

### itsown and toavoid further applicationof the lead counsel order. Even prior to the lead counsel order, during extensive discovery engaged in by theparties, DNRC allowed Williams to act as lead counsel, having him take a great bulk of the deposition needed for trial, while choosing not to attend and merely paying 

### its own pro rata share of the costs. DNRC alsoallowed Williams todo themajority of the work inpreparing interrogatories. DNRC contends it was bound by the lead counsel order and unable to appeal until the March 14, 1980, order was entered allowing Williams compensation. A final determination of theparties' rights, argues DNRC, onlyoccurred when the court ordered it topay compensation and thematter was deemed concluded. DNRC bases this argument on language in the lead counsel order that the courtwas toretain contin-uing jurisdiction over thematter toreview the actsof lead counsel toenforce and interpret the court asentered." We disagree with DNRC1s position in failing to see why the language noted shouldmake theorder appointing lead counsel any less final than the March 14, 1980, order setting compensation. The November 1, 1979, order specificallyappointed Williams lead counsel, subject to reasonable compensation. The only reason the court was retaining

a "continuing jurisdiction over the matter" was to assure that Williams acted in the best interest of the plaintiffs and to setthe already ordered reasonable compensation. If DNRC disputed this appointment and the terms thereunder, it should ha.ve made 

### itsfeelingsknown. It 

### is apparent thatDNRC was more thanwilling toallowWilliams to act aslead counsel; toaccept his appointment as such; and to accept the benefits of the $425,000 settlement acquired under the order. DNRC having alrea-dy consented to an application of the lead counsel order, it should not be allowed to avoid the same on appeal to this Court. As tothe order determiningcompensation forWilliams

as lead counsel, DNRC first argues that due to the absence of any contractual agreement between the parties or any statutoryauthority, attorneyfeesarenot recoverable. See Winder v. Jonal Corp. (1976), 169Mont. 247, 545 P.2d 1094. Williams acknowledges thisgeneral rulebut contends that in situations where attorney fees are paid from a "common fund," it is accepted that these feescanbe awarded even in absence of statuteor an express agreement. The "common fund1' concept provides thatwhen a partythrough active litigation creates, reserves or increases a fund, others sharing in the fund must bear a portion of the litigation costs including reasonable attorney fees. The doctrine is employed to spread the costof litigationamong all beneficiaries so that the active beneficiary 

### is not forced to bear the burden alone and the "stranger" (i.e., passive) beneficiaries do not receive their benefits atno cost tothemselves. See Vincent, supra, 557 F.2d at769. The doctrine 

### is well recognized and has been quoted in severalMontana cases. SeeInRe Baxter's Estate (1933), 94 Mont. 257, 22 P.2d 182; Hardware Mutual Casualty Co. v. Butler (1944), 116 Mont. 73, 148 P.2d 563; Tuttle v. Morrison-Knudsen Co., Inc. (1978), 177 Mont. 166, 580 P.2d 1379. See also City of Klawock v. Gustafson (9th Cir. 1978), 585 F.2d 428. The basisof thedoctrinebeing rooted inthe equitableconceptsof quasi-contract, restitutionand recapture of unjust enrichment, the common fund theory of awarding compensation to a lead counsel must be allowed as

an expansion of the general ruleprovided inWinder. DNRC argues that even if the common fund concept 

### is recognized in Montana it should not be applied in this instance. DNRC bases thiscontention on an active litigant

versus passivelitigantdistinction. It 

### is stated that only inactive or passive beneficiaries should be forced to bear the costs of litigation under the common fund doctrine. An inactivemember in this regard hasbeen defined asabeneficiarywho merely failsto retain counsel or one who retains legal counsel but said counsel fails, in any degree, to participate in any labors leading to the creation of the fund. See In Re Estate ofKorthe (1970), 88 Cal.Rptr. 465, 9Cal.App.3d 572; see also plumbing fixture anti-trust cases: Philadelphia Housing Authority v. American Radiator and Standard Sanitary Corp. (E.D. Pa. 1971), 322 F.Supp. 834, modified sub nom., Ace Heating and Plumbing Co. v. Crane Co. (3rd Cir. 1971), 453 F.2d 30; PhiladelphiaHousing Authorityv. American Radiator and Standard Sanitary Corp. (E.D. Pa. 1970), 323 F.Supp. 364; Note, Reimbursement forAttorneys' Fees fromBeneficiariesof Representative Litigation, 58 Minn. L. R. at 947- 948 (1974). Nevertheless, the courtshave recognized an exception to this general rule. See Vincent, 557 F.2d at 772. The exception provides that so long as contributions of active counsel were unequal (el greater) when compared with those of a less active counsel, compensation can still be ordered paid under the common fund doctrine by the less active party. See also Doherty v. Bress (D.C. Cir. 1958), 262 F.2d 20, cert. denied 359 U.S. 934, 79 S.Ct. 649, 3 L.Ed.2d 636. The purpose of this exception is similar to that of the common fund doctrine itself--to avoid unjust enrichment. Here the record indicates that DNRC accrued 1,680 hours in legal services. This total included the services of DNRC's legal staff, legal interns and nonlegal personnel. Williams Law Firm's time records reflected 3,909.25 hours on the case to the time of settlement. This total also included work by attorneys, interns and secretaries. Williams also testified that his time records understated the actual time spent on the case by 10 to20 percent. The disparity in efforts between lead counsel and DNRC being

### evident, the District Courtwas proper in ordering compensation. DNRC's final arguments concerning its efforts to avoid paying lead counsel are twofold. First, DNRC maintains that as a state agency, it should be treated differently with respect to an obligation to compensate lead counsel in that it can only retain counsel by an exclusive procedure set forth in Executive Order No. 15-78. Second, DNRC contends that DR2-107, "Division of Fees Among Lawyers," of the Canons of Professional Ethics, will be violated should this Court grant Williams the ordered compensation. In rejecting DNRC's contention that it should be treated different from other beneficiaries to a common fund,

we need only note that payment for litigation costs by the various beneficiaries is founded upon principles of equity. In enforcing this doctrine, equity demands that all parties receiving a benefit from the common fund be included in its application. Furthermore, there is no basis for applying DR2-107 of the Canons of Professional Ethics as submitted by DNRC. This rule is concerned solely with the question of two lawyers dividing fees. It has no application to a situation where there is a court-appointed lead counsel to whom others may be required to pay compensation, all under the strict supervision and authority of the court. In regard to the final issue on appeal, in determining a reasonable fee in a given case, this Court has established the following guidelines: 

# ".

. .The circumstances to be considered in determining compensation to be recovered arethe amount and the character of the services rendered, the labor, time and trouble involved, the character and importance of the litigation in which services are rendered, the amount of money or the value of property to be affected, the professional skill and experience called for, the character and standing intheir professionof the attorneys



# ...The result secured by the services of the attorneys may be considered 

### as an important element in determining their value." First Security Bank v. Tholkes (1976), 169 Mont. 422, 429-430, 547 P.2d 1328, 1332; accord, Carkeek v. Ayer (1980), Mont. 

## , 613 P.2d 1013, 1015, 37 St.Rep. 1274, 1275-1276. The fee awarded in this instance was 11.1 percent of DNRC's recovery under the lead counsel order. This amount

was granted only after extensive testimony relating to the above factors. It 

### is true that thisaward exceeds the compensation paid by the other plaintiffs represented by lead counsel; but, it should be noted that these other parties agreed to a set amount without having to invoke the aid of the trialcourt. We can findno abuseof discretion. The judgment of the District Court appointing Williams as lead counsel and granting compensation is affirmed.

We concur:

Chief Justice I



## &.JusticeDaniel J. Sheadissentsandwillfileawritten dissent later.