Opinion ID: 738304
Heading Depth: 2
Heading Rank: 1

Heading: Dunne's claims--Florida case.

Text: 16 The State of Florida has not attempted to hold Dunne to his contract or disputed his claim of entitlement to a quantum meruit fee from the common fund. A 15% contingent fee contract applied to the common fund of $5,120,000 would have yielded a fee of $768,000, less than the $40 per hour compensation Dunne had already received. Because Florida has not put Dunne's right to a quantum meruit recovery at issue, we assume without deciding that he is entitled to it. 17
18 Dunne argues that the district court should have chosen between the lodestar method of multiplying reasonable hours times an hourly compensation rate or the percentage of the fund method, but erred in using both, with the percentage of the fund as a cap on the lodestar amount. He argues that the magistrate judge considered his claims of hours spent in light of the relationship between the product of hours times rate and 25% of the common fund. The district court, not the magistrate judge, made the award, but the district judge's order indicates that he adopted the magistrate judge's determination rather than substituting a different analysis of his own. 19 When Dunne's earlier fee award was appealed, we vacated and remanded because the district court had not considered the burden to the common fund of the other pending fee applications. State of Florida v. Dunne, 915 F.2d 542, 546 (9th Cir.1990). The fact that seventy-two percent of the common fund could be distributed in attorney's fees and costs in this case is disturbing. Id. 20 In common fund cases, fees are based on the equitable notion that those who have benefitted from litigation should share in its costs. Id. at 545. That means that the people who benefit from the money the lawyers' efforts brought in should share the burden of paying the lawyers. Thus, the people of Florida should pay Dunne and the other lawyers a reasonable amount for enriching them by $5,120,000. 21 We have said that common fund fees commonly range from 20% to 30% of the fund created, and that the district court should take note that 25 percent has been a proper benchmark figure. Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 270 (9th Cir.1989); cf. In re Pacific Enterprises Securities Litigation, 47 F.3d 373, 379 (9th Cir.1995). The district court has discretion to use the lodestar method or the percentage of the fund method in common fund cases. In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1295 (9th Cir.1994). Reasonableness is the goal, and mechanical or formulaic application of either method, where it yields an unreasonable result, can be an abuse of discretion. See id. at 1294-95 n. 2. A 25% benchmark might be reasonable in some cases, but arbitrary if the fund were extremely large. Id. at 1297. 22 It is not entirely clear from the record whether the magistrate judge looked for possible cuts to his claim to bring the total fees and costs charged to the common fund below the 25% benchmark, or whether she would have made the same cuts to Dunne's charges regardless. We assume for purposes of discussion that she did, as Dunne suggests, look for cuts to make on his bill in order to stay within the benchmark. Assuming she did, she did not abuse her discretion to Dunne's detriment. 23 It is reasonable for the district court to compare the lodestar fee, or sum of lodestar fees, to the 25% benchmark, as one measure of the reasonableness of the attorneys' hours and rates. This resembles what lawyers commonly do when they draft a bill based on hours spent, consider the bottom line as compared with the value of the result, then cut the bill if the total seems excessive as compared with the results obtained. The district court should evaluate whether the combined effect of granting the fee applications in toto would be to reduce substantially the size of the common fund available for distribution to the plaintiff class. Dunne I, 915 F.2d at 546. The plaintiff class should ordinarily receive 75% of the wealth the attorneys brought them, according to the 25% proper benchmark, Paul, Johnson, 886 F.2d at 270, at least where the size of the common fund does not make that benchmark arbitrary, Washington Pub. Power, 19 F.3d at 1297. If the lodestar amount overcompensates the attorneys according to the 25% benchmark standard, then a second look to evaluate the reasonableness of the hours worked and rates claimed is appropriate. 24
25 Dunne argues that he was entitled to compensation for every hour that he spent, and a prudent lawyer would have spent, on the client's case, under Twin City Sportservice v. Charles O. Finley & Co., 676 F.2d 1291, 1313 (9th Cir.1982) (a fee shifting case, not a common fund case). He claims that the magistrate judge erroneously limited his recovery to those hours for which he could show a connection between his work and benefit to the class. 26 The magistrate judge disallowed 2,149 of the 3,149 hours Dunne claimed to have spent preparing summary judgment materials and preparing for oral argument. Her detailed findings establish that Dunne wrote little for the summary judgments, and what little he wrote was of low quality and was entirely rewritten by others. He did not argue the motions orally. Instead, the evidence showed that Dunne was in an advisory role. 27 The magistrate also disallowed 3241.5 of 3,741.5 hours Dunne claimed to have worked after November 1985, when the western states summary judgment motions were argued. Dunne had no time sheets to establish that he really spent time on the case; his quarterly reports to Florida did not refer to any ongoing projects; and the reports of another lawyer, to whose work Dunne claimed to have contributed, did not corroborate Dunne's claim. The magistrate judge likewise disallowed other, smaller amounts of time because she was not satisfied that Dunne had performed work on the Florida case in those amounts, his work had been minimal and of no value, or he had conceded that it had been billed to Oregon and was not properly billable to Florida. All these disallowances were within the magistrate's discretion. 28 An attorney's right to common fund fees arises from equitable principles of restitution. See Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 167, 59 S.Ct. 777, 780, 83 L.Ed. 1184 (1939); Central Railroad & Banking Co. of Georgia v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885); Trustees v. Greenough, 105 U.S. 527, 532, 26 L.Ed. 1157 (1881); John P. Dawson, Lawyers and Involuntary Clients in Public Interest Litigation, 88 Harv.L.Rev. 849 (1975); John P. Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds, 87 Harv.L.Rev. 1597 (1974). It is well-established that an award of attorneys' fees from a common fund depends on whether the attorneys' specific services benefitted the fund--whether they tended to create, increase, protect or preserve the fund. Class Plaintiffs v. Jaffe & Schlesinger, P.A., 19 F.3d 1306, 1308 (9th Cir.1994) (internal quotations deleted). This is not to say that if a lawyer writes a well-founded motion that a prudent lawyer would have written but it is denied, or takes a deposition of a witness who turns out not to be helpful, that the beneficiaries of the common fund need not pay for the effort. Good legal representation regularly includes some work which does not bear fruit. Nevertheless, a lawyer is not entitled to be compensated from a common fund for work he did not do or hours he did not spend. Nor is he entitled to compensation for hours a reasonable lawyer would not have spent, hours unreasonably spent, or work done so badly it is of no value to the common fund beneficiaries. The disallowances by the magistrate fell within those categories. 29 In a common fund case, the judge must look out for the interests of the beneficiaries, to make sure that they obtain sufficient financial benefit after the lawyers are paid. Their interests are not represented in the fee award proceedings by the lawyers seeking fees from the common fund. See Washington Pub. Power, 19 F.3d at 1300-01. Nor did they hire those lawyers and choose to repose their trust in them and accept their hourly rates and times claimed. The district court acted properly to discharge its duty to the beneficiaries of the Florida common fund by its careful analysis of Dunne's claim and disallowances of unreasonable hours claimed. 30
31 Dunne argues that the magistrate judge should have used a higher hourly rate, given him a bigger increment for delay in payment, and applied a multiplier for risk and preclusion of other work. He argues that lawyers specializing in antitrust work in the Los Angeles area earn $300 per hour or more, yet to compute Dunne's fees, the magistrate judge used $175 per hour, increased to $200 because of delay in payment. Dunne goes so far as to claim he is entitled to more than $800 per hour based on what antitrust lawyers charge and how long he has waited for payment. 32 The magistrate found that there is no evidence that the work for Florida precluded Dunne from developing a substantial practice, and Dunne offers no reason why this finding might be clearly erroneous. Dunne had failed the California bar examination and could not have legally engaged in a general practice of law during most of this litigation. He worked on another antitrust case, and does not argue that there were any other cases he could legally have worked on but for the Florida case. 33 As for delay, Dunne's own historic rate had been $40 to $60 per hour. The magistrate based her $200 rate on an adjustment for delay as follows. Dunne argued to her at an earlier stage of the case that he had previously been awarded a $150 rate, which should be adjusted to $175 for inflation. The evidence was that a handful of the most highly compensated lawyers in the field might be getting $350 per hour, but the leading lawyers who had submitted affidavits showed hourly rates of $200 to $250. She credited evidence presented by Florida that Dunne's work was of exceptionally poor quality, which could not be compared to the work of the lawyers charging $200 per hour or more. She considered these and other factors to enhance what she termed his historic rate of $175 by $25 to cover delay in payment. 34 The district court must assure that attorneys in common fund cases are compensated for delay in payment, and the court has discretion to do so either (1) by applying the attorneys' current rates to all hours billed during the course of the litigation; or (2) by using the attorneys' historical rates and adding a prime rate enhancement. Washington Pub. Power, 19 F.3d at 1305. The magistrate judge did not follow either course exactly. She did not use a current rate Dunne was charging voluntary clients, but Dunne has not argued she should have, or directed our attention to evidence of what that rate might be. Nor did the magistrate enhance his $40 to $60 hourly rate by a prime rate enhancement. Dunne has not shown how either of the Washington Pub. Power methods would have yielded, as applied to evidence in the record, a higher rate than the $200 the magistrate judge used. It appears that either method would probably have yielded a lower rate, so any error was harmless to Dunne. The $200 rate the magistrate judge used was a current rate for other attorneys whose work, she concluded, had a higher market value than Dunne's, so use of that current figure did not prejudice Dunne's entitlement to compensation for delay. 35 The district judge must exercise discretion in deciding whether to award a risk multiplier. It may be an abuse of discretion to deny one, where the hourly rate does not reflect risk of nonpayment, willingness to represent the class assumes a risk multiplier will be applied, and there is no guarantee of payment. Washington Pub. Power, 19 F.3d at 1302. The magistrate judge decided against a risk multiplier largely because Dunne had no risk whatsoever of nonpayment; he had already been paid $863,944.15 for eight years work on the Florida case: 36 Because of his contract with Florida, Dunne was guaranteed $40 per hour, and as indicated, Dunne received a total payment of $863,944.15 pursuant to that contract. 37 ... Dunne received payment for the entire number of his 21,068.6 hours. The Magistrate Judge found for purposes of this litigation the hours worked were 17,552.70 taking into account double billing and other obviously excessive hours billed. 38 The absence of risk of nonpayment is obviously a good reason to deny a multiplier for risk of nonpayment. 39
40 Dunne argues that the magistrate judge erred by subtracting the $863,944.15 he had already received under his $40 per hour contract from the amount the common fund had to pay him. He has two theories, though no authorities. 41 First, Dunne says that the Florida Attorney General's office paid him the $863,944.15, so the money should be treated as part of Florida's fee petition as an expense borne by Florida, but the common fund should not get credit for it. Because the Attorney General's office was paying the people's money to Dunne for his work on behalf of the benefitted class, the magistrate reasonably exercised her discretion to credit this advance to Dunne on the class's behalf against what the common fund owed. 42 Dunne's second argument is that because the magistrate found that only 10,931.6 of his hours benefitted the class, and he had been paid $40 per hour for 21,068.6 hours, the common fund should only get credit for $40 per hour times 10,931.6 hours. The word chutzpah 1 leaps to mind. What the magistrate judge did was to credit the fund for what the people of Florida had already paid Dunne, whether he had overcharged them or not. He wants to be able to keep the money he charged inappropriately, without giving them credit for it. The magistrate reasonably exercised her discretion to credit the beneficiaries of the common fund with the full amount of their interim payments for Dunne's services, whether he had overcharged them or not. 43
44 Dunne challenges several of the magistrate's reductions in hours for which the Florida common fund was charged. In particular, the magistrate subtracted hours for which Dunne charged Oregon under his contract. Where a lawyer working for one client produces a fund benefitting one not his client, the non-client may be obligated to pay for the benefit conferred, even though the lawyer was paid by his client. 2 George E. Palmer, The Law of Restitution 431 (1978); see also Greenough, 105 U.S. at 532; Paul, Johnson, 886 F.2d at 271. The common beneficiaries would be unjustly enriched if they enjoyed the entire benefit produced by the work, and the client unjustly impoverished if it bore the entire burden of the expense of producing the fund. In this case, however, it was not an abuse of discretion to treat Dunne as fully compensated, where his work for Oregon was fully compensated by the people of Oregon pursuant to Dunne's contract, and his benefit to Florida was amply compensated. 45 Dunne's remaining specific reduction disputes are not supported by challenges to particular findings or legal errors. 46
47 Dunne has spent considerable time obtaining his fees. This court alone has now heard his lawyer's fee issue twice, in Florida v. Dunne, 915 F.2d 542 (9th Cir.1990), and in the case at bar. Of course much more time and effort was spent in the district court in the extensive proceedings before the magistrate. Dunne appeals denial of compensation for this time. 48 Time spent obtaining an attorneys' fee in common fund cases is not compensable because it does not benefit the plaintiff class. Washington Pub. Power, 19 F.3d at 1299. Dunne argues for an exception, because his case is extraordinary, and the money will go to Florida and its counties rather than individual class members. These are not reasons justifying an exception. The reason for the rule applies. Dunne's work on his fee applications did not benefit the class. Indeed, Florida points out that Dunne originally demanded $3.6 million for getting the people of Florida $5.2 million (70% of the fund), then increased his demand to $7.3 million when the fund had grown by accumulation of interest, so it is Florida's opposition rather than Dunne's application which benefitted the common fund. 49