Court Opinion

ID: 9464692
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:40:03.128932+00
Date Added: 2024-06-11T17:38:45.843831
License: Public Domain

OAKES, Circuit Judge
(dissenting in part):
I first disavow the rhetoric of the majority directed at class actions and “class action lawyers.” Class actions often are valuable tools for the individual plaintiff seeking justice against a defendant whose resources enable it to obtain the highest-paid lawyers to engage in such extensive discovery and other litigation techniques that one, two or three plaintiffs otherwise could never afford to conduct the lawsuit. This very case exemplifies the usefulness of class actions. Holders of $1.5 million of debentures that were worth $4 million only if converted by a given deadline were given inadequate and unreasonable notice of Boeing’s intention to redeem the debentures and of the conversion deadline. The class members therefore failed to exercise their conversion rights by the deadline. Van Gemert v. Boeing Co., 520 F.2d 1373, 1378, 1383 (2d Cir.) (Van Gemert I), cert. denied, 423 U.S. 947, 97 S.Ct. 364, 46 L.Ed.2d 282 (1975). A decade of hard-fought difficult litigation has at last resulted in an award to the debenture holders which, had the original notice been sufficient, would have rightfully been theirs for the asking. In the process, against uphill odds, the lawyers for the now successful plaintiffs did an extraordinarily capable job, having even “made new law” on a complicated set of facts. Thus, criticism against class actions generally or plaintiffs’ attorneys’ fees in particular1 falls flat when focused on the case at bar.
*738I am required to agree, however, with the basic theory of the majority opinion — that attorneys’ fees are recoverable solely from the class members who file proper proofs of claim, rather than from the entire class fund — because so-called fluid class recovery was rejected in Van Gemert v. Boeing Co., 553 F.2d 812, 815-16 (2d Cir. 1977) (Van Gemert II),2 relying on Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2d Cir. 1973), vacated and remanded on other grounds, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). Van Gemert II is the “law of the circuit”; absent en banc treatment of the issue I am bound to follow it, therefore, whether or not I agree.
But this court’s rejection of fluid class recoveries does not end the inquiry here. It seems to me that there is a sharp distinction between attorneys’ fees and attorneys’ disbursements. Plaintiffs’ attorneys' fees in class actions generally being contingent, as they are here, are earned only if there is recovery. And Van Gemert II’s implicit holding, see note 2 supra, that attorneys’ fees may not be imposed oh unclaimed funds, must be based on a similar theory— when there are no claimants, there is no “recovery”; thus this portion of the fund has not been “earned.” Reimbursement of disbursements, by contrast, is not dependent on success. In fact, attorneys are precluded from expending funds on behalf of their clients unless the client remains ultimately liable for the expenses. See ABA Code of Professional Responsibility, Canon 5, Ethical Consideration 5-8, Disciplinary Rule 5-103(B). Accordingly, the number of ultimate claimants should not affect an attorney’s right — perhaps his duty — to recover all disbursements from the entire fund. Additionally, fundamental principles of fairness underlying established law relating to recovery of expenses from a common fund,3 see Mills v. Electric Auto-Lite Co., 396 U.S. 375, 389-97, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), militate in favor of permitting repayment of attorneys’ disbursements out of the fund as soon as it is established. These expenses, incurred for the benefit of all, are necessary if there is to be recovery by anyone. Attorneys who advance such sums do so expecting, as they must, reimbursement. Furthermore, if they are only repaid per claimant — that is, by computing the amount that each class member would have to contribute if the whole award were claimed, and then charging the claiming class members for disbursements as if all potential claimants had filed — the attorneys would have to bear the loss for the portion of out-of-pocket costs attributable to entitled class members who failed to file their claims.4 This result simply does not make common sense. I therefore dissent in part.

. Those who criticize the fees of class action plaintiffs’ lawyers seem to overlook the fees *738charged by class action defendants’ lawyers. Could it be that a double standard is being applied?

. Van Gemert II rejected the proposition that class members who file proper proofs of claim should be entitled to pro rata distribution of the unclaimed portion of the damage award. In doing so, it found unconvincing the argument that the unclaimed funds should be awarded to the claiming members of the class to defray their legal expenses. I agree with the majority to the extent that this holding precludes use of the unclaimed funds to pay the legal fees of class action attorneys.

. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 257, 264-65 n. 39, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975), expressly preserved the common fund doctrine.

. Of course, if the filing claimants were required to absorb the total disbursements out of their pro rata share of the recovery, the attorneys would obtain complete reimbursement. But this would reduce the filing claimants’ compensation and, in turn, be unfair to them.
The result of the majority decision, ante at 736-737, is either that the attorneys absorb the disbursements attributable to unfiled claims or that the claiming members of the class end by being responsible for paying all attorneys’ disbursements' — perhaps even fees— from their shares of the award. With either result I disagree.