Opinion ID: 379262
Heading Depth: 2
Heading Rank: 2

Heading: Fees Awarded for Services of Doherty, Rumble & Butler

Text: 177 As local counsel for ITA, Doherty, Rumble & Butler received fees of $68,476.86. This was based on hourly fees multiplied by the hours worked for a total lodestar amount of $43,089.75. The Special Master then multiplied the lodestar amount by a factor of 1.5 based on the contingency nature of the work and its quality. Doherty kept precise records, and we do not question the Special Master's award of hours, nor the hourly rate determinations. 24 However, we think it was unreasonable to award Doherty a 1.5 multiplier in this case. 178 As the Third Circuit has explained, 179 Any increase or decrease in fees to adjust for the quality of work is designed to take account of an unusual degree of skill, be it unusually poor or unusually good.    (T)he increase or decrease reflects exceptional services only; it may be considered in the nature of a bonus or penalty. The heavy burden of proving entitlement to such an adjustment is on the moving party. 180 Lindy II, supra, 540 F.2d at 118. See also Grinnell II, supra, 560 F.2d at 1100. The Special Master's conclusory language about quality of work and the risk involved does not satisfy this requirement. Grinnell II, supra, 560 F.2d at 1100. The majority of the risk in this case was with Tomin, and the Special Master reasonably applied to his hourly rate a $10.00 per hour bonus factor, which is about a 12.5% increase in the hourly rate. Pursuant to a normal fee arrangement, ITA had paid Doherty approximately $3,800.00 in attorney fees and $3,000.00 in disbursements up to July 12, 1977, the time of the trial. At that time ITA and Doherty agreed future attorney fees for trial work were contingent on success, and would be the amount awarded by the court pursuant to 15 U.S.C. § 15. In any event, the firm was to be reimbursed for necessary expenses it incurred. 181 The 1.5 multiplier as a bonus to the hourly rate would result in some of the Doherty attorneys receiving in effect $135.00 for their services ($90.00 X 1.5). Additionally, Boyd Ratchie, who served as second chair in the case and was inexperienced in antitrust litigation, would have been compensated in effect at a rate of $112.50 per hour ($75.00 X 1.5). ITA has not met the heavy burden of proving entitlement to such an adjustment. Lindy II, supra, 540 F.2d at 118. We therefore find it excessive and reduce the award to the straight-time figure of $43,089.75. 25 C. Contingency Fee Agreement Between ITA and Its Counsel 182 The private contingency fee agreement between ITA and its counsel requires separate consideration. The court has the power and the responsibility to monitor contingency fee agreements for reasonableness. ABA Canons of Professional Ethics No. 13; Dunn v. H. K. Porter Co., 602 F.2d 1105, 1108-09 (3d Cir. 1979); Farmington Dowel Products Co. v. Forster Manufacturing Co., supra, 421 F.2d 61 (1st Cir. 1970) (Farmington Dowel I), appeal of decision on remand, 436 F.2d 699 (1st Cir. 1970) (Farmington Dowel II ). 183 We feel that under the circumstances of this case we must examine the reasonableness of the fee agreement. Tomin testified at the hearing before the magistrate with regard to his fee arrangement with ITA, and at oral argument before this court explained the manner in which his fee was determined. We have inserted the figures awarded under 15 U.S.C. § 15 into this formula, and have made the following approximations: From the total award (treble damages plus costs and attorneys' fees), which adjusted by our reductions in attorneys' fees is $533,371.15, is deducted the fees for Doherty, Rumble & Butler ($43,089.75) and costs and expenditures in the case made by ITA (estimated by Tomin to be $30,000.00). Tomin is to receive 45% of this remaining figure, $460,281.40, or approximately $207,126.63. Doherty, Rumble & Butler agreed to receive only what the court awards ITA for the services of the firm, which is $43,089.75. 184 These computations indicate that the attorneys altogether will take home approximately $250,000.00 of the total award of $533,371.15. This is 47% of the total award going to the attorneys. 185 The role of the court in awarding a reasonable fee under 15 U.S.C. § 15, and in exercising its supervisory power over the bar by examining contingency agreements between attorney and client, differs greatly. 186 The first requires the court to arrive at a figure it considers reasonable; the second requires it to arrive at a figure which it considers the outer limit of reasonableness. The first determination is made without reference to any prior agreement between the parties; the second must take account of the fact that an agreement, if freely made, is not lightly set aside. 187 Farmington Dowel I, supra, 421 F.2d at 90. Our inquiry here is therefore limited to whether the fee agreement yields a fee which is (beyond the) outer limit(s) of reasonableness. Id. 188 There are several factors to consider in determining reasonableness for the purposes of the Canons of Ethics, many of which have little applicability for purposes of an award pursuant to 15 U.S.C. § 15. We examine, inter alia, the reasonableness of the fee arrangement according to the circumstances in which it was made, the fact it is contingent on success, the status of sophistication of the plaintiffs, and whether the plaintiff remains willing to abide by the contract. 26 One factor not conclusive is that the contingency fee agreement formulated to satisfy needs other than those contemplated by 15 U.S.C. § 15 exceeds the section 15 award. Dunn v. H. K. Porter Co., supra, 602 F.2d at 1112. 189 In examining all the relevant factors, we note that Doherty, Rumble & Butler is receiving only its reasonable fees under 15 U.S.C. § 15 ($43,089.75) and the court finds no reason to intrude in its fee arrangement with ITA. In fact, we agree with the Third Circuit that the courts should be loathe to intrude into a contractual relationship between an attorney and client. Id. 27 190 We are also reluctant to intrude in the agreement entered into between Tomin and ITA. Tomin's fee arrangement results in his being paid approximately 39% of the total award ($207,000.00 of $533,371.15) which he contends is in line with normal contingency rates. There is no question, however, that his award must be considered in light of the fact other attorneys' fees were also being paid by ITA to Doherty for its involvement in the case. The fact that 47% of the substantial total award will be paid to attorneys is disturbing. We reiterate that the major purpose for the statutory award for attorney's fees was to prevent substantial diminution of the plaintiff's trebled damage recovery. Farmington Dowel I, supra, 421 F.2d at 88 n.60. That the client freely entered into the contract and is apparently willing to abide by it is relevant but not controlling. Id. at 89 n.61. 191 We conclude the fee agreement between ITA and Tomin results in a fee which exceeds the outer limits of reasonableness. Without rejecting the formula used by Tomin in all cases, considering the fees awarded other counsel and the substantial damage award, 28 our supervisory power requires us to reduce the fee which ITA must pay Tomin pursuant to its contingency fee agreement. 192 Our examination of the circumstances of this case leads us to conclude that the outer bounds of reasonableness require that the fee paid by ITA to Tomin under their contingency fee agreement be limited to 45% of the treble damage award of $361,596.00. This is approximately $162,718.20, as compared with the $207,126.63 fee we computed supra to be his fee according to the agreement. 29 193 In view of the issues raised on appeal, and our disposition of these issues, ITA will be awarded $5,000.00 pursuant to 15 U.S.C. § 15 as a reasonable sum for attorneys' fees in defending its verdict on appeal. Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 692 (8th Cir. 1966) (Blackmun, J.). See also Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39, 55-56 (5th Cir. 1976); Farmington Dowel I, supra, 421 F.2d at 91-92. In addition court costs on appeal are awarded to ITA and against Western. 194 We affirm the district court's conclusion that Western violated the Sherman Act §§ 1 and 2; we affirm the damages awarded to ITA. We reduce the attorneys' fees for the reasons discussed above.