Opinion ID: 2508213
Heading Depth: 2
Heading Rank: 2

Heading: Order Granting Fees and Interest

Text: On July 27, 2000, the Retirees' filed their motion on remand for payment of attorney's fees and interest on sum disbursed to their class [hereinafter, motion for fees on remand] and their memorandum in support of the motion. In the motion, the Retirees moved for the circuit court for attorney's fees to be awarded to legal counsel, to be calculated on a percentage basis of 33.33% on the back retirement pay already disbursed to the [Retirees] . . . only, with no attorney's fees being calculated upon the future retirement benefit increases awarded the [Retirees]. The Retirees further move[d] that the [ERS] be ordered to pay interest to [the Teachers] . . . on the principle amounts ordered in the judgment herein. In their memorandum in support of the motion, the Retirees asserted (1) that the circuit court should recalculate attorney's fees on a percentage of the common fund basis rather than the Montalvo lodestar basis in order to comply with [ Chun III ], (2) that the ERS violated HRS[ ] ง 478-3[, see supra note 6,] by failing to pay postjudgment interest on the monies disbursed in 1999 to satisfy the [circuit court's] March 11, 1996 final judgment herein enforcing the March 4, 1996 order requiring, inter alia, back retirement pay to [the Retirees], and (3) that interest on back retirement pay should be paid to [the Teachers] pursuant to [the] stipulation executed by [the Retirees and the ERS]. On August 22, 2000, the ERS filed its memorandum in opposition to the Retirees' motion for fees on remand, which recited the following arguments: (1) that the ERS has standing to challenge and criticize the calculation of attorney's fees; (2) that Khim's motion for additional attorney's fees should be denied, inasmuch as (a) the circuit court has a duty to protect the interests of the individual class members, (b) the class members have not been provided with notice or an opportunity to be heard, and (c) Khim is not entitled to additional attorney's fees because (i) he mischaracterizes the lodestar method in order to argue for use of the percentage method, (ii) an award of 33 and 1/3 percent of the fund would be extraordinary, and (iii) the circuit court's previous lodestar calculation provided . . . Khim with adequate compensation; (3) that, to the extent [that] the motion seeks postjudgment interest, it should also be denied, insofar as (a) this issue is not properly before the court and (b) in any event, the request for interest should be denied because (i) there was no judgment for a determined amount and (ii) the stipulation does not provide [the Retirees] with a basis upon which [the circuit] court should award interest. On August 24, 2000, the Retirees filed a reply memorandum in support of their motion for fees on remand, asserting that the ERS's arguments were without merit because (1) backup awards are money judgments and (2) attorney's fees are calculated on the gross amount of the [common] fund. On August 25, 2000, the circuit court conducted a hearing on the Retirees' motion for fees on remand. After entertaining arguments by both parties, the circuit court requested further briefing and took the matter under advisement. On August 31, 2000, the ERS filed the declaration of David Shimabukuro, the Administrator of the ERS. On September 15, 2000, the Retirees filed the affidavit of Bill Southwood, who is one of the members of the Retirees' class. On October 18, 2000, the circuit court entered the order granting fees and interest. The circuit court ruled in relevant part as follows: I. ATTORNEYS' FEES 1. The [ERS] contended that it was necessary to provide class members with notice of these remand proceedings on attorneys' fees as a matter of the opposing class action members' constitutional due process rights. The Court rejects this argument because a) while the ERS does have standing to contest common fund attorneys' fees, as set forth in [ Chun III ], it cannot raise due process claims of the opposing party; b) the notice requirement was met before the original circuit court ruling on fees; and c) this proceeding as to the fees is limited to the instructions of the Hawai'i Supreme Court on remand which did not implicate notice requirements. 2. On remand, the trial court is to exercise sound discretion whether to apply the percentage or lodestar method, thus identifying the fee award that most equitably compensates [Khim], while at the same time protecting the interests of the class members for whose benefit the common fund was created. [ Chun III, 92 Hawai'i at 445[, 992 P.2d at 142]. In so doing, this Court adopts the findings regarding factors set forth by the Honorable Gail Nakatani in her order of October 21, 1998, originally awarding fees of $1,027,625.50 plus GET under the lodestar method. The Court completes the analysis by determining the ascertainable amount of the common fund, establishing the appropriate percentage to be applied, and comparing the percentage with the lodestar method. 3. The Court finds the ERS has paid a total of $4,853,755 inclusive of the stipulated premium paid to the principals and vice-principals computed from the 1991 decision as to them and inclusive of the amount the ERS contends is an offset computed from Judge Nakatani's order recovering the amount that was due as an employee contribution to the retirement fund. 4. The ERS claims the premium should not be calculated as part of the common fund. The Retirees claim it should be. The stipulation expressly says the amount is not postjudgment interest. On the other hand, the retirees do not seek postjudgment interest as to the principals and vice principals. Further, the ERS claims the retirees are not entitled to postjudgment interest ( see decision infra ) for the [T]eachers who are claiming it. Under these circumstances, where the parties agree the amount of the premium is not postjudgment interest, this Court finds that the premium is indeed an amount that [Khim] negotiated for the principals and vice-principals and therefore the Court finds it should be included in the common fund amount that counsel obtained in representing the classes. 5. The Court does not find that postjudgment interest (awarded to the [T]eachers infra ) is part of the common fund amount for purposes of calculating attorneys' fees. 6. The amount referred to in the David Shimabukuro declarations as the offset ($691,916) is the amount that the [R]etirees properly would have been assessed or were required to contribute had the ERS calculations been the proper amounts in the beginning. The August 31, 2000 Declaration of David Shimabukuro indicates this offset was never returned to the [R]etirees in any form, including as part of proceeds to which class members were entitled by virtue of choosing the option 5 retirement form of the contributory system (which returns in lump sum the contributions of the employee at the outset of retirement). The competing declaration of named Plaintiff Bill Southwood asserts that most of the class members who were in the contributory retirement system elected option 5 and therefore the offset amounts should have been returned to the retirees after the ERS had deducted those amounts pursuant to Judge Nakatani's order as the employee's retirement contribution. The specific number of option 5 (and/or 4) members in the class is not determined and thus this Court finds no basis for contradicting the figures contained in the Shimabukuro declarations. This Court finds that $691,916 is the amount that was offset or completely recaptured by [the] ERS consistent with paragraph 6 on page 14 of Judge Nakatani's March 4, 1996 order. This Court further finds that the offset amount is not part of the common fund amount because it was not paid to class members. The [R]etirees' reliance on Williams v. MGM-Pathe, 129 F.3d 1026 (9th Cir.1997)[,] is misplaced. There the Ninth Circuit held that the basis for the common fund was to be the gross amount recovered for the class, not the amount of the claims filed against it, even if that meant that the unclaimed portion would be returned to defendants. This Court is basing the ascertained common fund on the gross amount available to be paid to the retirees. Where, as here, the order from which the gross amount can be determined expressly eliminates that portion contained in the offset ( i.e., paragraph 6 of the order), inclusion of that amount would inaccurately and improperly inflate the common fund figure. Merely because the Shimabukuro declaration uses the term net amount does not make the excluded amount cognizable under the Ninth Circuit analysis. 7. K[h]im asserts that the contingency fee contract of 1/3 that he has with the [Retirees] should be the percentage this Court adopts if awarding fees under the percentage method. He argues such percentage is customary, relying on affidavits of attorneys and the Intermediate Court of Appeals decision, In re Chow [3 Haw.App. 577] 656 P.2d 105 (Haw.App.1982), which is not a common fund nor class action. In contrast, [the] ERS relies upon federal class action case law to suggest the appropriate percentage should be 25% as a benchmark, adjustable for special circumstances, e.g., Torrisi v. Tucson Elec[.] Power Co., 8 F.3d 1370 (9th Cir.1993); Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272-73 (9th Cir.1989). The Court finds the federal cases to be persuasive and further finds no peculiar circumstances to merit greater than 25% of the common fund. (The few contingency fee contracts with the [Retirees] herein can be honored separately, as was the case in Graulty, id. at 272.) 8. Using 25% under the percentage method and determining that the amount of the common fund excludes the offset and includes the premium, the calculation is as follows: 25% of $4,161,839 is $1,040,459.70 for fees. 9. In the event this Court's analysis is in error and the common fund is deemed to be other than as aforesaid, the alternative figures are as follows: 25% of $4,853,755 = $1,213,438.70 (total with premium and offset) 25% of $4,636,982 = $1,159,245.50 (total less premium) 25% of $4,161,839 = $1,040,459.70 (total less offset as in finding 8) 25% of $3,945,066 = $986,256.50 (total less premium and offset) 10. The percentage on remand must be compared with the lodestar method figures which are as follows: $1,070,436 = lodestar amount actually paid (including GET as per Judge Nakatani's order) $1,027,625.50 = lodestar amount less GET 11. This Court normally does not award GET finding that attorneys, not their clients, are responsible for general excise taxes, but the award of GET is the law of the case herein and will not be disturbed. In addition, it is not contested by any party. 12. The comparison between lodestar and percentage is $12,834.20 (exclusive of GET calculation) more under the percentage method as applied to this Court's determination of the common fund amount. (This does not calculate the additional amount due on the 1/3 contingency fee for the [Retirees], but the Court finds that sum to be negligible for comparison purposes.) 13. This Court finds that the original lodestar amount of fees was a fair and just compensation for both the amount of work and the results achieved. That notwithstanding, based upon the above findings this Court is persuaded that the additional sum of $12,834.20 plus GET plus an additional 8.33% of total amounts paid to the [Retirees] (33.33% minus 25% = 8.33%) will fully and equitably compensate [Khim] while protecting the interests of the class members for whose benefit the common fund was created. II. INTEREST 14. The [Retirees] during these remand proceedings on attorneys' fees have also requested an award for postjudgment interest for the [Teachers]. The ERS objected on the grounds that the remand was limited to attorneys' fees. This Court agrees with [the] ERS that remand was limited to the issue of attorneys' fees but also agrees with the [Retirees] that there is nothing to preclude their raising the postjudgment interest matter now that the circuit court is reinvested with jurisdiction following remand. Indeed, this court cannot think of a more judicially efficient way to deal with the matter, and requiring [the Retirees] to file a separate motion on that issue would improperly elevate form over content to no good end. Therefore, this Court entertains the request for postjudgment interest. 15. [The] ERS claims the class action cannot admit of a postjudgment interest award because it arises out of an agency appeal involving [the] interpretation of [a] statute and under those circumstances the State has not waived sovereign immunity as to postjudgment interest. This Court rejects that argument. The underlying decision dealt with the amount of money owed [to the R]etirees under the retirement statute. The Hawai'i State Constitution, Article 16, Section 2, defines the employee and [the] ERS relationship as contractual, which cannot be diminished. Thus, the action is in the nature of assumpsit, and postjudgment interest accrues pursuant to HRS Section 478-3. 16. [The] ERS cites Harada v. Ellis, 60 Haw. 467 [591 P.2d 1060] (1979)[,] for the proposition that an award of statutory interest must be predicated on a determined amount, and the final orders and judgment herein did not contain a sum certain. The Court rejects this argument, finding that Harada denied postjudgment interest in a situation where there is no indebtedness ( e.g., escrow funds) whereas here the ERS did owe money to class members, and back retirement benefits had to be recalculated and specific amounts were paid. The final orders and judgments in this action determined with specificity how the sum certain was to be calculated and properly left the workout to the ERS. Indeed, proof that the sum certain was clear is found in the declarations of Mr. Shimabukuro on remand in which he specifically set forth the amounts paid pursuant to the final orders. That is precisely the point of an ascertainable common fund which generated the remand proceedings. Thus, Harada is not applicable. 17. Having found that postjudgment interest is applicable herein, this Court now turns to the disputed date of the judgment triggering the statutory interest. [The] ERS argues that the March 11, 1996 judgment cannot be the triggering date because the later order of Judge Nakatani denying [the Retirees'] motion to hold [the] ERS in contempt for failure to pay the judgment expressly found no payment could be made until the attorneys' fees issue was decided (because the fees were to be paid from the judgment award; that is deducted from the common fund). 18. This Court finds that the order denying contempt for failure to pay under those circumstances does not prohibit the date of judgment as to the [T]eachers from being March 11, 1996. Indeed, the Hawai'i Supreme Court, in deciding the appeal in [ Chun II, 87 Hawai'i at 155, 952 P.2d at 1218], described the final judgment entered on March 11, 1996 as a basis for the appeal. Thus, it is precedent that the final judgment is March 11, 1996. 19. Therefore, this Court concludes that the ERS must pay statutory interest (10% per annum) pursuant to HRS Section 478-3 to the [Teachers] ... on the amount of the final judgment attributable to them commencing March 11, 1996, and ceasing on the actual date that said retirement pay was actually paid. 20. Alternatively, the [Retirees] asked for this Court to import to the [Teachers] the stipulation interest between [the] ERS and the [P]rincipals and [V]ice-principals establishing a premium to be paid on the amount of the 1991 judgment as to them. [The Retirees] contend that said stipulation must [pertain] to all classes once the action was consolidated. This Court rejects the argument, finding that the consolidation did not nor could it expand the stipulation and further finding that to do so would be tantamount to imposing prejudgment interest, which by law is not allowed against the State, because the [T]eachers did not even obtain final judgment until March 11, 1996. NOW THEREFORE, BASED UPON THE ABOVE FINDINGS AND CONCLUSIONS, THIS COURT ORDERS, ADJUDGES AND DECREES THAT 1. [The] ERS pay statutory interest at the rate of 10% per annum, pursuant to HRS Section 478-3, to the [Teachers] ... on the amount of the final judgment attributable to each one of them from March 11, 1996, ceasing on the actual date that the back retirement pay was actually paid to them; and 2. Awards [Khim] on remand ... additional attorney[']s fees of $12,834.20 plus GET thereon, plus an additional 8.33% of the amounts paid to the [Retirees] plus GET thereon, all to be paid out of future retirement benefits. On November 14, 2000, the ERS timely filed a notice of appeal from the October 18, 2000 order granting fees and interest. [12] On November 15, 2000, the Retirees timely filed a notice of appeal from the same order. See supra note 12. On January 30, 2001, this court ordered consolidation of the foregoing appeals for briefing and disposition under Supreme Court No. 23892. See supra note 1.