Opinion ID: 488034
Heading Depth: 3
Heading Rank: 3

Heading: Risk Multiplier

Text: 39 The district court declined to award a risk multiplier to any attorney involved in the case. It reasoned that risk of success should not be judged solely from the vantage point of whether a complete recovery at the conclusion of the action is viable, but also should include an evaluation of the likelihood that the parties will reach a settlement. In this regard, the court noted that it was probable that the defendant chemical companies would settle the case to avoid the further burden of litigation and to improve their respective financial pictures. Agent Orange, 611 F.Supp. at 1311. The court also recognized that awarding risk multipliers in a case such as Agent Orange, which held out little chance for a victory on the merits but a significant chance of settlement, would fuel the filing of nuisance litigation in which settlement becomes the main object and attorney fee awards an overpowering motivating force. Id. 40 Furthermore, the court indicated that strict application of inversely proportionate risk multipliers to cases such as Agent Orange, which it described as a high-risk case of highly questionable merit, would lead to a confounding disparity in the treatment of cases falling just above and just below the standard for frivolousness under Fed.R.Civ.P. 11. Attorneys in successful cases bordering on the frivolous, yet falling just above the proscriptions of Rule 11, would be awarded the highest risk multipliers, since the risk of success in such cases obviously would be great. In contrast, counsel in similar cases falling just below Rule 11's proscriptions, would not only receive no risk multiplier, but also would be subject to court-imposed sanctions for having brought such a case. 41 Finally, the court took note that, as a matter of public policy, the need to utilize a risk multiplier in a given case must be viewed in relation to the equally important concerns of judicial administration and legal morality. To this end, the refusal to allow a multiplier here would force the legal community to think at least twice before initiating sprawling, complicated cases of highly questionable merit that will consume time, expense and effort on the part of all concerned, including the courts, in a degree vastly disproportionate to the results eventually obtainable. Id. at 1312. While such a policy would not reward the filing of these questionable cases, the court did note that counsel's entitlement to a lodestar award without a multiplier would nonetheless serve adequately to encourage attorneys to represent plaintiffs in cases of this nature. 42 The PMC challenges the district court's failure to allow a risk multiplier on the ground that it does not comport with principles of just and fair compensation. While conceding that plaintiffs' case would have been difficult to prove, the PMC members strongly take exception to the district court's description of the action as being of dubious or questionable merit. As to the probability of the parties reaching a settlement in the action, the PMC members point to the fact that such a settlement was not reached until the eve of trial, and label as economic suicide the notion that they advanced funds and spent thousands of hours working on the case with some inner assurance that defendants would make a reasonable settlement proposal because of the bothersome nature of the litigation. 43 We have labeled the risk-of-success factor as perhaps the foremost factor to be considered under the second prong of the lodestar analysis. Grinnell I, 495 F.2d at 471. The multiplier takes into account the realities of a legal practice by rewarding counsel for those successful cases in which the probability of success was slight and yet the time invested in the case was substantial. Id.; see 7B C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 1803, at 524-27 (1986). As the chance of success on the merits or by settlement increases, the justification for using a risk multiplier decreases. Grinnell I, 495 F.2d at 471. The need for this type of multiplier is magnified when the diminutive character of the individual claims forces counsel to bring the action on a class basis. 7B C. Wright, A. Miller & M. Kane, supra, Sec. 1803, at 527. Without the prospect of some consideration for the risks and uncertainties of the action, the necessary incentive [for prosecuting such a suit] would be lacking and a major weapon for enforcing various public policies would be blunted. Id. 44 The problem with risk multipliers, however, is that they tend to reward counsel for bringing actions of dubious merit. If such multipliers are awarded on a perfectly proportionate basis, i.e., the greater the chance that the case would not succeed the higher the multiplier, the net effect ... would be to make a marginal case as attractive to bring as a very strong case. Laffey v. Northwest Airlines, Inc., 746 F.2d 4, 27 (D.C.Cir.1984), cert. denied, 472 U.S. 1021, 105 S.Ct. 3488, 87 L.Ed.2d 622 (1985). This, in turn, would provide an incentive for counsel to flood the courts with unmeritorious litigation, McKinnon v. City of Berwyn, 750 F.2d 1383, 1392 (7th Cir.1984), leading ... to a situation in which every conceivable claim would be litigated, subject only to the ability of the courts to handle the burden, Laffey, 746 F.2d at 27; accord Leubsdorf, The Contingency Factor in Attorney Fee Awards, 90 Yale L.J. 473, 491 (1981). The net result, of course, would be a dilution of the judiciary's ability to handle those cases with potentially meritorious claims. 45 A court, therefore, in adjudging whether to award a risk multiplier, should examine closely the nature of the action in order to determine whether, as a matter of public policy, it is the type of case worthy of judicial encouragement. In our view, the case here clearly is not and, consequently, we agree with the district court's decision not to impose a risk multiplier. 46 From the outset, the factual and legal difficulties hindering the successful prosecution of plaintiffs' case have been staggering. Factual evidence of causation has been at best tenuous and, if not for the last-minute settlement, the military contractor defense would have prevented class members from realizing any recovery at all. When these significant weaknesses in plaintiffs' case are viewed in light of the sheer magnitude of the action and the thousands of hours of court time that this type of action requires, it becomes clear that the federal courts should not actively encourage the bar to file such dubious actions in the future. 47 Besides matters of public policy, the settlement itself presents a rationale for denying counsel's request. While today we hold that the settlement falls within the range of reasonableness under Fed.R.Civ.P. 23, we are aware that the $180 million settlement provides a very small return to the class in light of the claims asserted. In our estimation, the relatively small size of the settlement reflects class counsel's realization of the extreme difficulty they would incur in overcoming the inherent weaknesses of their case, in particular the military contractor defense, and the defendant chemical companies' realization that they could end a burdensome litigation at very low cost. Award of a risk multiplier in such circumstances, as the district court reasoned, only would further the unwelcome prospect of nuisance litigation being brought in federal courts. 48 In denying class counsel their requested multiplier, we note that each attorney has received the fair value of his services to the class under the lodestar analysis. An additional award of a risk multiplier not only would provide excessive compensation but would encourage counsel to accept similar matters for litigation in the future. We find no reason to do more to encourage litigation that could substantially occupy the federal judiciary in matters of little merit.