Opinion ID: 197312
Heading Depth: 3
Heading Rank: 4

Heading: Evidence of PSC Overreaching

Text: 51 Next we consider whether the PSC-cost reimbursements should be subjected to the across-the-board cuts (25% to 33%) urged by appellants notwithstanding their own failure to take appropriate preventive or corrective action. In our view, their crude cuts ought not be imposed in these circumstances absent evidence that the PSC acted in bad faith or took unfair advantage of the procedural deficiencies. Not only have we found no such evidence, but we can discern no appreciable PSC overreaching from the record. 52 First, there should be no ready presumption that counsel appointed to the PSC expended its funds in bad faith; that is, with intent to inflate PSC-cost reimbursement submissions. This is especially true in the present circumstances, since the PSC members repeatedly attested that their cost submissions were bona fide. See, e.g., Alabama Power Co. v. Gorsuch, 672 F.2d 1, 5 (D.C.Cir.1982) ([I]n most cases, the court should be content to rely upon the integrity of counsel, and allow the[ ] expenses [claimed].); Greenspan v. Automobile Club of Mich., 536 F.Supp. 411, 413-14 (E.D.Mich.1982) (refusing to second-guess necessariness of costs and relying in part on affidavits filed by requesting parties and their attorneys); cf. also, e.g., In re Agent Orange Prod. Liab. Litig., 611 F.Supp. at 1322 (If there was doubt about the reason for a[n] [attorney's phone] call, it was allowed.); 28 U.S.C. § 1924 (permitting attorneys to vouch for necessariness of costs). Whether or not there is a direct or formal attorney-client relationship between plaintiffs and the PSC, the PSC and its IRPA members necessarily owed a fiduciary obligation to the plaintiffs. Cf. In re Agent Orange Prod. Liab. Litig., 818 F.2d at 223 (noting that lead counsel owes fiduciary duty to class plaintiffs); see also MCL § 20.22 (counseling court to remind PSC members of their responsibility to the court and their obligation to act fairly, efficiently, and economically in the interests of all parties and their counsel). Furthermore, these PSC members simultaneously were acting in their respective roles as IRPAs, with direct professional responsibility for representing approximately seventy percent of the plaintiff class. In these circumstances especially, given their professional obligations to the court and their individual clients, we would be highly reluctant to suppose that the PSC members promoted overreaching by the PSC. 53 Second, the PSC auditing which did occur, whether or not adequate, cannot be dismissed as perfunctory, since it did screen out some significant cost excesses. For example, Adamina Soto attested that she contacted PSC members concerning problem expenses and followed up with requests for further documentation. Indeed, the Raben and Soto audits resulted in cost reductions exceeding $346,000. Although appellants object that some PSC auditing was conducted at random, particularly that performed by Kevane and Soto, as it did not purport to verify each expense claim, the reviews conducted by Raben and Sterling were not random. Finally, even the random audit procedures were not conducted under PSC control. Thus, we are not persuaded that the random review procedures were flawed to the point that they could provide no effective deterrent to substantial PSC overreaching. 54 Third, appellants emphasize that Kevane and Raben were accountants, with little personal knowledge regarding the precise litigation tasks assigned to the PSC. Both were professional CPAs, however, and Raben in particular was no neophyte, having been responsible for comparable cost oversight in the MGM case, itself a hotel fire litigation. It does not seem unreasonable, therefore, absent evidence to the contrary, to expect that Raben was reasonably qualified for the professional task assigned to him. 55 Fourth, as there is no indication in the appellate record that the PSC ever attempted to prevent appellants from examining its underlying cost documentation prior to 1991, the reasonably foreseeable prospect that appellants might well (indeed should) have requested interim access to the documentation presumably had some deterrent effect upon PSC overreaching. Not only did the pretrial orders not preclude ongoing access by appellants to the PSC documentation, but there would appear to have been no conflict of interest or work product privilege which would have prevented the individual plaintiffs or IRPAs from inspecting the PSC documentation at any time during the litigation. See supra note 12. 14 56 Finally, and most importantly, the district court initially proposed to limit PSC attorney fees and costs, combined, to ten percent of the eventual common fund, thus providing PSC members a substantial inducement to exert reasonable efforts to minimize PSC costs with a view to preserving a larger balance with which to fund their attorney fees as PSC members. See In re Wells Fargo Securities Litigation, 157 F.R.D. 467, 470 (N.D.Cal.1994) ([A]n attorney generally has no incentive to minimize litigation expenses unless his fee award is inversely related to such expenses.). Appellants respond that the ten percent ceiling did not deter inflated costs, however, because the district court announced in January 1991 that it would not be enforced after all. See Thirteen Appeals, 56 F.3d at 307 n. 10 (holding that tentative cap was not binding on district court); Nineteen Appeals, 982 F.2d at 612 (same). Nevertheless, until January 1991, by which time the lion's share of its $10 million in costs had accrued, the PSC could not have known that the district court would discard the ten percent ceiling. 57 We therefore conclude, based on the foregoing considerations, particularly the absence of reliable evidence of overreaching or bad faith on the part of the PSC, that it would be inequitable to resort to the crude cost-cutting bludgeon proposed by appellants, who share at least equal responsibility for these procedural lapses. Although the procedural deficiencies discussed above may have led to some unnecessary or unreasonable expenditures, appellants clearly failed to alert the district court until it had become impracticable either to prevent or assess, let alone correct them in any reliable or cost-effective manner.