Court Opinion

ID: 60150
Source: CourtListenerOpinion
Date Created: 2010-04-26 03:57:55+00
Date Added: 2024-06-11T17:19:54.182665
License: Public Domain

[DO NOT PUBLISH]

          IN THE UNITED STATES COURT OF APPEALS

                  FOR THE ELEVENTH CIRCUIT            FILED
                    ________________________ U.S. COURT OF APPEALS
                                                 ELEVENTH CIRCUIT
                           No. 07-10547             March 26, 2008
                     ________________________     THOMAS K. KAHN
                                                       CLERK
                D. C. Docket No. 03-01519-CV-1-MMP

SHARELE DIKEMAN,
RICHARD LULOW,
ANNA BARBOSA,
MICHAEL A. CADDELL,
CADDELL & CHAPMAN,
JULIUS DUNMORE,
ANGELA FETCHER

                                                 Plaintiffs-Appellants,

RUBY JOHNSON,

                                                             Plaintiff,

THOMAS S. BELL,
MARILYN BELL,
KELLY A. GAMBELLO,
ALICE LUSK,
GWANJUN KIM,
                                                 Objectors-Appellants,
                              versus

PROGRESSIVE   EXPRESS INSURANCE COMPANY,
PROGRESSIVE   AMERICAN INSURANCE COMPANY,
PROGRESSIVE   CONSUMERS INSURANCE COMPANY,
PROGRESSIVE   SOUTHEAST INSURANCE COMPANY,
PROGRESSIVE CASUALTY INSURANCE COMPANY, et al.,

                                                                       Defendants-Appellees.

                               ________________________

                      Appeals from the United States District Court
                          for the Northern District of Florida
                            _________________________

                                      (March 26, 2008)

Before HULL and WILSON, Circuit Judges, and ALBRITTON,* District Judge.

PER CURIAM:

       This appeal stems from a nationwide class action settlement between The

Progressive Corporation (“Progressive”) and plaintiffs in several class actions that

were consolidated in the Northern District of Florida.1 All plaintiffs alleged that

Progressive failed to meet the adverse action notice requirements of the Fair Credit

Reporting Act (“FCRA”), 15 U.S.C. § 1681m, by sending notices stating that the

       *
       Honorable W. Harold Albritton, United States District Judge for the Middle District of
Alabama, sitting by designation.
       1
          This multidistrict litigation and nationwide class settlement settled claims against The
Progressive Corporation and 31 of its subsidiaries or mutual insurance company affiliate(s),
collectively referred to as “Progressive.”
        Pursuant to 28 U.S.C. § 1407, the Judicial Panel on Multidistrict Litigation granted
Progressive’s request for consolidation and transferred similar cases to the Northern District of
Florida for consolidated pretrial proceedings. In re Progressive Corp. Ins. Underwriting &
Rating Practices Litigation, 259 F. Supp. 2d 1370 (J.P.M.L. 2003). At the time of consolidation,
class certification was pending in the Oregon, Texas, and Louisiana cases.

                                                2
plaintiffs’ consumer credit reports “may” have resulted, rather than actually

resulted, in adverse insurance determinations.2 After six years of litigation, and the

rejection of one proposed settlement agreement, the district court finally approved

a settlement that conferred the following benefits to class members: (1) changes to

Progressive’s adverse action notice policy; (2) one free copy of a consumer credit

report and a PLUS® credit score, furnished by Experian; (3) a free copy of a

corrected credit report, if a class member finds and corrects errors, along with

Progressive’s promise to allay Experian’s expenses incurred by the statutory credit

correction procedures; and (4) a $75–$225 premium credit for current and former

Progressive policyholders who can show that they would have received lower

premiums but for subsequently corrected errors in their credit reports. The court

also awarded class counsel $3,000,000 in attorneys’ fees.

       On appeal, the objecting class members argue that the district court abused

its discretion by approving the settlement as fair, adequate, and reasonable because

it did not provide each class member with a specific amount of monetary relief

within the statutory range set forth in the FCRA. The objectors also argue that the

       2
          The FCRA sets forth mandatory notice requirements for those who take adverse action
on the basis of information contained in consumer reports. 15 U.S.C. § 1681m(a). The notice,
which may be given in writing, orally, or electronically, must provide notice of the adverse
action; contact information for the agency that provided the consumer report with a statement
that the agency did not take the adverse action; and notice of the consumer’s rights to obtain a
free credit report from the credit reporting agency and dispute the accuracy of the information
contained therein. 15 U.S.C. § 1681m(a)(1)-(3).

                                                3
amount of attorneys’ fees awarded was improper given the settlement’s low value.

Mr. Caddell, counsel for one of the objecting class members, appeals the district

court’s award of sanctions against him and his firm after the court found no legal

or evidentiary basis for Mr. Caddell’s assertion that class counsel intentionally

omitted opt-out and objecting information from the first class notice.

      A. Class Settlement Terms & Attorneys’ Fees

      The district court must approve any settlement agreement in a class action.

Fed. R. Civ. P. 23(e). The court may approve the settlement, however, “only after

a hearing and on a finding that the settlement, voluntary dismissal, or compromise

is fair, reasonable, and adequate.” Id. Where, as here, a class action has been

certified specifically for the purpose of settlement, “the district judge has a heavy

duty to ensure that any settlement is ‘fair, reasonable, and adequate’ and that the

fee awarded plaintiffs’ counsel is entirely appropriate.” Piambino v. Bailey, 757

F.2d 1112, 1138 (11th Cir. 1985). The district court’s conclusion that a class

settlement is fair will not be disturbed absent a clear showing of abuse of

discretion. Bennett v. Behring Corp., 737 F.2d 982, 986 (11th Cir. 1984). “In

addition, our judgment is informed by the strong judicial policy favoring

settlement as well as by the realization that compromise is the essence of

settlement.” Id.

                                           4
      We have identified the following factors as relevant to our review of

whether a class settlement’s terms are fair, reasonable and adequate:

      (1) the likelihood of success at trial; (2) the range of possible recovery; (3)
      the point on or below the range of possible recovery at which a settlement is
      fair, adequate and reasonable; (4) the complexity, expense and duration of
      litigation; (5) the substance and amount of opposition to the settlement; and
      (6) the stage of proceedings at which the settlement was achieved.

Id.

      Although the plaintiffs sought statutory damages ranging between $100 and

$1000, statutory damages are available only for willful violations of the FRCA.

See 15 U.S.C. § 1681n(a). The district court found, after considering the testimony

and evidence presented at the fairness hearing, that “‘willfulness’ on the part of

Progressive is seriously debatable and the agreed to settlement reflects that

uncertainty.” R. 359 at 5. After careful review of the record and the benefit of oral

argument, we cannot say that the district court abused its discretion in approving

the settlement agreement.

      The district court has wide discretion to award attorneys’ fees based on its

own expertise and judgment because of “the district court’s superior understanding

of the litigation and the desirability of avoiding frequent appellate review of what

essentially are factual matters.” Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.

Ct. 1933, 1941, 76 L. Ed. 2d 40 (1983). Yet, the district court’s discretion is not

                                           5
unlimited, and “[a] conclusory statement that a fee is reasonable in light of the

success obtained is generally insufficient.” Norman v. Housing Authority of

Montgomery, 836 F.2d 1292, 1304 (11th Cir. 1988). “It remains important . . . for

the district court to provide a concise but clear explanation of its reasons for the fee

award.” Hensley, 461 U.S. at 437, 103 S. Ct. at 1941.

      In this case, the district court’s only explanation for the fee award was that,

“[c]onsidering the years Plaintiffs’ counsel has spent working on this case, . . . an

award of attorneys’s fees and costs in the amount of $3,000,000.00 is fair and

reasonable.” R. 359 at 7. This conclusory statement does not allow for our

meaningful review. See Norman, 836 F.2d at 1304 (“The court’s order on

attorney’s fees must allow for meaningful review—the district court must articulate

the decisions it made, give principled reasons for those decisions, and show its

calculation.”). For these reasons, we vacate the award of attorneys’ fees and

remand to the district court.

      On remand, the district court must explain the method it used to set the

attorneys’ fee award and make findings showing the factors and calculations used

in setting that fee award. For example, the district court’s order did not indicate

whether the court used the percentage-of-the-common-fund method or lodestar

method in setting its $3 million fee award. See Camden I Condo. Ass’n. v. Dunkle,

                                           6
946 F.2d 768, 774 (11th Cir. 1991) (concluding that in class action cases,

attorneys’ fees awarded from a common settlement fund established for the benefit

of the class “shall be based upon a reasonable percentage of the fund established

for the benefit of the class” but that “[t]he lodestar analysis shall continue to be the

applicable method used for determining statutory fee-shifting awards”). Although

the FCRA provided for an award of costs and reasonable attorneys’ fees to

prevailing parties in a § 1681m action, see 15 U.S.C. §§ 1681n(c) (willful

noncompliance), the district court is not limited to applying a lodestar analysis for

a statutory fee-shifting award because the suits were resolved by a class settlement

agreement without any express finding as to Progressive’s willful noncompliance

with the FRCA. The district court should indicate on remand what method it is

using and why.3

       Further, if the district court used the common-fund method, the parties

vigorously disputed (in the district court and on appeal) the monetary value, if any,

of the settlement. Even though we find no abuse of discretion in the district court’s

approving the ultimate settlement (which had mainly non-monetary benefits) as

fair, the district court, if it was applying the common-fund method, should have

       3
         Although the negotiated settlement included up to $3 million in attorneys’ fees, the
parties have not disputed that the district court has a supervisory role and ultimately must
calculate and set the attorneys’ fees award up to a maximum of the $3 million cap.

                                                 7
    determined the monetary value of the settlement before applying the common-fund

    method to the attorneys’ fees award.

          On the other hand, if the district court was using the lodestar method, the

    district court must explain why it used that method and how it calculated the

    attorneys’ fee award, including the total number of attorney hours reasonably spent

    by plaintiffs’ counsel on the matter; the hourly rate used to calculate the award;

    whether a multiplier was used and, if so, in what amount; and the reasons why a

    multiplier is warranted or not. Further, even if the district court used the common-

    fund method, the district court should indicate whether the lodestar method is

    warranted to double-check the result of the percentage-of-the-common-fund

    method.

|         Whether the district court uses the lodestar or the common-fund method, the

    district court should apply the twelve factors listed in Johnson v. Georgia Highway

    Express, Inc., 488 F.2d 714 (5th Cir. 1974), abrogated on other grounds by

    Blanchard v. Bergeron, 489 U.S. 87, 109 S. Ct. 939, 103 L. Ed. 2d 67 (1989), to

    determine the appropriate statutory fee or the percentage to be utilized. See

    Hensley, 478 U.S. at 434 & n.9, 103 S. Ct. at 1940 & n.9 (finding that the district

    court may consider the Johnson factors to adjust the lodestar fee upward or

    downward while noting that many of those factors are presumed within the initial

                                               8
calculation of reasonable hours by a reasonable hourly rate); Camden I, 946 F.2d at

772 & n.3, 775 (agreeing the Johnson factors continue to be appropriately used in

common-fund cases); see also Waters v. Int’l Precious Metals Corp., 190 F.3d

1291, 1294 (11th Cir. 1999) (reaffirming that common-fund “benchmark” may be

adjusted using the Johnson factors).

      In this opinion we expressly do not resolve the issue of what method is

appropriate in this case. We simply determine that the district court’s conclusory

order as to attorneys’ fees does not allow for any meaningful review. See Burke v.

Ruttenberg, 317 F.3d 1261, 1263 (11th Cir. 2003) (per curiam) (vacating order

allocating fees in class action suit because “[n]o finding of fact or rationale is

provided in the order to aid our understanding of the allocations made”).

      B. Sanctions

      Similarly, the district court’s award of sanctions is incapable of meaningful

review. Mr. Smiljanich’s motion for sanctions, in the amount of costs and

attorneys’ fees associated with responding to the motion to amend the case

management order, was grounded in two sources: on the court’s own initiative

under Federal Rule of Civil Procedure 11(c)(1)(B) and 28 U.S.C. § 1927. We have

held that “[w]hen a district court cites multiple sources of authority for issuing

sanctions, the appellate court’s basic task in reviewing the sanctions is to determine

                                            9
whether the sanctions were permissible under at least one of those sources of

authority.” Amlong & Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1238 (11th

Cir. 2007), superseding 457 F.3d 1180 (11th Cir. 2006). However, here the district

court did not cite Rule 11 or § 1927 or otherwise state any authority for issuing

sanctions.

      From our review of the district court’s order, we are unable to determine

under what authority the court issued sanctions and what conduct formed the basis

for sanctions. Although the court did state that after conducting a full evidentiary

hearing it determined there was no legal or evidentiary basis for the assertion that

Mr. Smiljanich committed a “fraud upon the court,” the court also failed to explain

whether and how Mr. Caddell and his firm unreasonably, knowingly or recklessly

pursued a frivolous claim. Cf. Anderson v. Smithfield Foods, Inc., 353 F.3d 912,

915 (11th Cir. 2003) (reaffirming the standard for testing conduct under Rule 11 as

“reasonableness under the circumstances”); Amlong, 500 F.3d at 1242 (finding that

sanctions under either § 1927 or the court’s inherent authority are justified when

“the attorney . . . knowingly or recklessly pursue[s] a frivolous claim or needlessly

obstruct[s] the litigation of a non-frivolous claim”). Even if the court ordered

sanctions on its own Rule 11 initiative, it is nonetheless required to specify the

offending conduct and to direct the attorneys to show cause as to why they have

                                          10
not violated Rule 11(b)’s certification provision. See Fed. R. Civ. P. 11(c)(1)(B).

To that end, the parties raised procedural objections to the sanctions order which

should be addressed by the district court in the first instance. There is also no

indication or calculation in the district court’s order of the number of attorney

hours reasonably awarded or of the hourly rate used. For these reasons, we vacate

the award of sanctions and remand to the district court for findings of fact and

conclusions of law setting forth the bases for its award. See Oxford Asset Mgmt.,

Ltd. v. Jaharis, 297 F.3d 1182, 1197 (11th Cir. 2002) (vacating award of Rule 11

sanctions and remanding to the district court to “explain its decision such that it is

capable of meaningful review”).

      AFFIRMED, IN PART; VACATED AND REMANDED, IN PART.

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