Opinion ID: 197312
Heading Depth: 2
Heading Rank: 2

Heading: Individualized Objections

Text: 58 Next we consider appellants' objections to particular categories of cost-reimbursement claims. 15
59 Appellants contend that the $913,503 fee paid to Attorney Thomas H. Foulds by the PSC for services rendered as a putative insurance expert should not have been treated as a PSC-office cost, see Order No. 520 (Jan. 28, 1994), but as an attorney fee chargeable against the fifty percent share of the attorney-fee fund already recovered by PSC members. The district court determined that Foulds, who had worked for twenty years as an insurance claims manager before attending law school, had been hired not as an attorney, but primarily to consult with PSC attorneys regarding the nuts-and-bolts interpretation of various insurance policies. The PSC concedes that Foulds handled certain litigation tasks normally performed by attorneys (e.g., depositions in the liability case against defendant Alexander and Alexander), but nonetheless insists that this was the most cost-efficient approach, especially given Foulds' intimate understanding of the pertinent insurance policies. 17 Although the parties cite no authority regarding the appropriate criteria for determining whether one in Foulds' position should be considered an insurance expert or an attorney, we are persuaded that the district court ruling constituted error in these particular circumstances. 18 60 As a general rule, a PSC member who serves simultaneously as an IRPA in a mass-tort MDL is entitled to recover separate compensation from the common fund for the legal services performed in each distinctive role. See Thirteen Appeals, 56 F.3d at 300 n. 2. The prospect of more lucrative returns for their services prompted many IRPAs to compete for these coveted PSC appointments in 1987, respectively urging upon the district court their particular experience and expertise in previous mass-tort suits. See Nineteen Appeals, 982 F.2d at 605 ([A]ppointment to the PSC was much coveted....). 61 On the other hand, all the unsuccessful IRPA candidates for PSC appointment must nevertheless contribute toward defraying PSC attorney fees/costs, since the district court's decision to establish a PSC diverts a significant portion of their respective contingent fees toward funding the PSC. Cf. id. at 310 (noting that though the PSC may be a necessary concomitant to skillful case management of mass tort suits, it nevertheless significantly interferes with [the respective IRPAs'] expectations regarding the fees that his or her client has agreed to pay). Accordingly, due regard should be had for these nonmember-IRPAs' diminished fee expectations, at least to the extent that the judge ... attempt to avoid any perception of favoritism in mediating disputes between PSC members and nonmember IRPAs. See Nineteen Appeals, 982 F.2d at 605. 62 At the time the nine original PSC members were appointed, from among forty applicants, the district court expressly directed, inter alia, that the PSC shall neither be enlarged nor diminished in size or membership without Court approval, Pretrial Order No. 127, at 29, that the PSC conduct all pretrial liability and damage discovery, id. at 30, and that only two members of the PSC, or counsel duly authorized by them, may question [ ] deponent[s], id. Given the acknowledgement by the appellees that Foulds, on occasion, served as a de facto PSC attorney without prior district court authorization, his retention, to that extent at least, directly contravened the explicit pretrial orders prohibiting any de facto expansion of PSC membership. Thus, the district court's subsequent authorization of reimbursement to the PSC for the Foulds fee as an insurance expert cannot cure the PSC's unauthorized, unilateral expansion of its attorney ranks, without inviting similar circumventions in the future. 63 We therefore reject the suggestion that we remand to permit the district court to apportion the $913,503 fee as between the insurance expert and attorney services performed by Foulds. We wish to make clear, however, that the PSC was not precluded from retaining Foulds based on a reasonable belief that he was the best qualified insurance expert available, simply because he happened to be an attorney. Nonetheless, once the PSC did retain Foulds, it owed nonmember IRPAs a duty of fair dealing to ensure that he undertook no unauthorized attorney tasks which might have been performed by some disappointed candidate for PSC membership.
64 a) Photocopying Costs 65 Appellants oppose the twenty-five-cent page rate at which the district court permitted reimbursement to PSC members for photocopying; in all, amounting to $184,000. The district court explained that it fail[ed] to see the difference between PSC members and any IRPA charging a client a reasonable amount for copying charges. Order No. 510-A, at 8 (Nov. 24, 1993). Appellants cite numerous decisions which hold the twenty-five-cent rate unreasonable, and argue that the PSC provided no proof that it actually incurred that cost to copy each page. 66 The PSC members offer three justifications for the approved rate. First, most photocopying was done at the PSC office and no reimbursement claim was made. Second, appellants knew early on in the litigation that the PSC had voted to permit its members to claim reimbursement at twenty-five cents per page. Third, the twenty-five-cent rate, standard in many law offices, had been allowed in the MGM case. Although the district court's cost-allowance rulings are entitled to deferential review, Grendel's Den, 749 F.2d at 950, we are persuaded that its ruling does not withstand scrutiny. 67 Unlike the PSC, the IRPAs are free to assess their own clients for photocopying in accordance with their respective contingent fee agreements and any applicable ethical-code provision. On the other hand, the PSC is a creature of the district court, whose mission is to promote more efficient litigation, see MCL § 20.223 (Designated counsel should render services as economically as possible under the circumstances.). In a common benefit case of this sort, therefore, the court must ensure that PSC members recover only their actual costs, with no profit margin. See Fogleman v. ARAMCO, 920 F.2d 278, 286 (5th Cir.1991) (To the extent that counsel charges a party more than actual cost for any service, be it reproduction of documents or telephone calls, counsel is recovering additional fees.); Spicer v. Chicago Bd. Options Exch., Inc., 844 F.Supp. 1226, 1260 (N.D.Ill.1993); In re Washington Pub. Power Supply Sys. Sec. Litig., 779 F.Supp. 1063, 1111-12 (D.Ariz.1990) (reducing in-house photocopying costs claimed at twenty or twenty-five cents: [t]hat this amount may be charged to regular clients by the firm, or that it is 'standard' in the firm's area of practice, is not controlling, [and] Class members will not be assessed an amount that produces a clear and unwarranted profit for the firm), rev'd on other grounds, 19 F.3d 1306 (9th Cir.1994). 19 68 Unlike the PSC's alleged failure to document the necessariness and reasonableness of other types of expenses (e.g., hotel charges, air fares), see supra Section II.A, its failure to document its own in-house photocopying costs presents a fundamental problem. As in-house photocopying costs are not incurred with outside providers (e.g., hotel, airline, or even an outside photocopying service), there is no third-party receipt to verify the expenditure and its amount. 20 69 Even if only by reasoned approximation, therefore, the PSC needed either to demonstrate the various components of its in-house photocopying costs (e.g., the prorated cost of purchasing or leasing the photocopier, the copy paper, and salaries attributable to making the copies), or show the prevailing cost of comparable outside copy services, see, e.g., Haroco, Inc. v. American Nat'l Bank and Trust Co. of Chicago, 38 F.3d 1429, 1441 (7th Cir.1994) (holding that charges for in-house reproduction may not exceed the charges of an outside print shop). See Grendel's Den, 749 F.2d at 950 (noting that the district court's discretion must, of course, be exercised within evidentiary bounds, and the court must provide a 'clear explanation of its reasons for the fee award' ). 70 The PSC does not pretend to have established that it actually incurred a twenty-five-cent-per-page photocopying cost. As all three PSC justifications for the requested twenty-five-cent rate, supra, are inapposite to this essential showing, we vacate the district court ruling, and direct the PSC members to reimburse appellants for all PSC in-house photocopying cost claims calculated at a rate exceeding ten cents per page. Thus, appellees are to remit $110,400 of the $184,000 disbursed to the PSC. 71 b) Hotel Rates 72 Lastly, appellants contend that the district court abused its discretion by allowing reimbursement to various PSC members for hotel-room charges ranging from $180 to $450 per day, notwithstanding its pretrial order cautioning that hotel accommodations/meals should be moderate, not deluxe.... Pretrial Order No. 127, at 44-45. Appellants assert that any hotel-room charge above the $116 per diem rate then deemed deductible by the Internal Revenue Service, should not have been reimbursed, that less expensive rooms were available in Puerto Rico, and that on occasion PSC members obtained less expensive rates. There was no abuse of discretion. 73 First, the district court correctly noted that substantial leeway was due PSC members regarding their scheduling needs during the frenetic early stages of the litigation, when most investigation and discovery had to be conducted. See Order No. 584, at 9 (noting that the PSC conducted over 2300 depositions, and retained twenty-nine expert witnesses); id. ([The investigative] stage was decisive in terms of immediately preserving evidence and conducting valuable investigations regarding the fire origin and spread. Time was of the essence and because of this, the activity was feverish, leaving scant opportunity to fine-tune the preparation and justification of expenses.). Consequently, the appropriate inquiry here is not simply whether an individual attorney might have booked a room at a lower rate during a given time period. Rather, the PSC frequently was required to coordinate lodging for many individuals and without much advance notice. 74 Thus, the appropriate inquiry must be whether the rate was reasonable in relation to the legitimate needs occasioned by the litigation tasks at hand. Against this backdrop, appellants have failed to demonstrate an abuse of discretion. None of the hotel rates strike us as facially abusive in these particular circumstances. Cf. Grendel's Den, 749 F.2d at 957 (finding abuse of discretion where hotel bill of $917 could be considered unreasonable on its face). 75 Second, as with other PSC-costs, see supra Section II.A, appellants settled, from the outset and without protest, for amorphous general standards, such as moderate and non-deluxe hotel accommodations, whereas they were free from the start to propose the $116 per-diem rate they now suggest. Furthermore, there has been no showing that the hotel charges for which reimbursement was sought were either deluxe or not moderate in the circumstances. 21 Finally, as concerns appellants' contention that PSC members did not keep adequate supporting documentation relating to the necessariness and reasonableness of each hotel expense, their position is foreclosed. See supra Section II.A. III