Opinion ID: 1945816
Heading Depth: 1
Heading Rank: 3

Heading: Common-Fund Doctrine

Text: It is true that requests for contribution to attorneys' fee expenditures are often analyzed under the so-called common-fund or common-benefit doctrine. This doctrine, which may fairly be viewed as a subcategory of unjust enrichment, constitutes an exception to the American Rule that each party to litigation bears its own attorneys' fees. The doctrine permits an award of attorneys' fees to a person who preserves or recovers a fund or property for the benefit of others, Passtou, Inc. v. Spring Valley Ctr., 501 A.2d 8, 11-12 (D.C.1985), and operates to `spread litigation costs proportionately among all the beneficiaries so that the active beneficiary does not bear the entire burden alone and the `stranger' beneficiaries do not receive these benefits at no cost to themselves.' Id. at 12 (quoting Vincent v. Hughes Air West, Inc., 557 F.2d 759, 769 (9th Cir.1977)). The doctrine classically applied to cases in which the litigation actually produced or preserved a common fund for the benefit of a group of which the attorneys' fee claimant was a member. See, e.g., Trustees v. Greenough, 105 U.S. 527 (1882). However, it has been extended to permit reimbursement in cases where the litigation has conferred a substantial benefit on the members of an ascertainable class.... Passtou, supra, 501 A.2d at 13 (quoting Mills v. Electric Auto-Lite Co., 396 U.S. 375, 393-94, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970)). Thus, courts apply the doctrine in appropriate cases to avoid unjustly enriching parties who benefit from litigation but do not contribute to the costs of recovery. Id. at 12 (noting that the doctrine is employed to realize the broadly defined purpose of recapturing unjust enrichment.) (quoting John P. Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds, 87 HARV. L.REV. 1597 (1974)). In particular, courts have applied the doctrine in a broad range of contexts in which one plaintiff's litigation efforts created a pool of money from which others benefitted, or merely conferred a non-monetary benefit on them. See, e.g., Shlensky v. Dorsey, 574 F.2d 131, 149 (3d Cir.1978) (shareholder derivative suit); Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1165 (Del.1989) (non-monetary benefit). DCHA argues that the present case is different because the positions of Ms. Peart and DCHA were adverse as to rights to the fund created by the rent abatement, citing Hobbs v. McLean, 117 U.S. 567, 6 S.Ct. 870, 29 L.Ed. 940 (1886), and United States v. Tobias, 935 F.2d 666 (4th Cir.1991). The common-fund doctrine did not apply in either Hobbs or Tobias because the party seeking contribution had performed no service to procure or benefit the fund. Hobbs, supra, 117 U.S. at 581, 6 S.Ct. 870 ([I]t is sufficient to say that the defendant rendered no services whatever in the recovery of the fund.); Tobias, supra, 935 F.2d at 668-69. [12] Here, the positions of Ms. Peart and DCHA were identical vis-a-vis the landlord; both sought the creation of the common fund and, more importantly, both had legitimate property interests in the fund, albeit one's claim was junior to the other. A useful illustration can be found in insurance subrogation cases, where courts regularly make common-fund awards. In that context, the plaintiff can recover attorneys' fees from the insurance company who is subrogated to his recovery based on the equitable notion that, because an insurer is entitled to share, to the extent of its subrogation interest, in any recovery its insured achieves against a tortfeasor, the insurer should share a proportionate share of the burden of achieving that recovery including a pro rata share of the insured's attorney fee. Gov't Employees Ins. Co. v. Capulli, 859 So.2d 1115, 1119 (Ala.Civ.App. 2002). The law of worker's compensation present another example. See Kavanaugh v. City of Sunnyvale, 233 Cal.App.3d 903, 284 Cal.Rptr. 698, 700 (1991) (noting that where an injured worker sues and recovers from a third-party tortfeasor, the worker's employer is entitled to recover from that money the benefits it has already paid, but not without paying its share of the employee's attorneys' fees if it did not assist with the lawsuit). Thus, courts have awarded fees from a common fund where one party, by dint of litigation, recovers a fund to which a third party has a superior claim. Courts have looked favorably upon fee awards even where the nature and extent of the subrogation claim is disputed, or where there exists some adversity between the claimants as to their respective rights in the fund. [13] We conclude that adversity with respect to the underlying action, not with respect to how the captured funds should be distributed where both have legitimate interests, should affect the applicability of the common-fund doctrine. [14] The former, not the latter, tests for what should be the real concern to courtsavoiding the authorization of attorneys' fees between adverse litigants akin to simple fee-shifting. [15]