Court Opinion

ID: 9653355
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:44:49.318761+00
Date Added: 2024-06-11T18:12:58.122811
License: Public Domain

A. D. McAllister, Jr., Special Justice, concurring in part, dissenting in part. On this second appeal in this case appellants claim that the allowance of attorney’s fees in the amount of $95,884.31 to three attorneys whose efforts in a taxpayers’ class action had established a common fund of $639,226.24 was improper and excessive. The first appeal is reported in Henry v. Powell, 262 Ark. 763, 561 S.W. 2d 296 (1978), wherein this court reversed an appeal from the regular chancellor’s1 order setting aside a special chancellor’s order (initially allowing the fee) for want of an appealable order. The opinion in Henry v. Powell, supra, was handed down on February 13,1978. Thereafter, the regular chancellor reinstated the special chancellor’s order approving payment of the fee. Three attorneys of the Pulaski county bar, representing 12 named plaintiffs (5 of whom subsequently withdrew) on a contingent fee basis of 25% of any amounts recovered, filed a complaint for their clients and “all others similarly situated” for an accounting and refund of all moneys alleged to have been illegally exacted by the electric department of North Little Rock and for recovery of reasonable attorney’s fees. This court has said that the one person in the best position to evaluate and make an award of attorney’s fees was the chancellor before whom the entire proceedings were conducted. Robinson v. Champion, 251 Ark. 817, 475 S.W. 2d 677 (1972). And that no one is more intimately acquainted with the proceedings, the character of the services performed, and the attorneys who took part in the litigation than the chancellor who tried the case. Marlin v. Marsh & Marsh, 189 Ark. 1157, 76 S.W. 2d 965 (1934). Even though this court usually defers to the superior perspective of the trial judge for an assessment of the various factors enumerated in the majority opinion in any determination of reasonable attorney’s fees, we have not hesitated to reduce an allowance for attorney’s fees when, based upon the entire record, we cannot find adequate support for the allowance. Equitable Life Assurance Society of the United States v. Willie Runnell, 257 Ark. 90, 514 S.W. 2d 224 (1974). Since the chancellor who originally heard this case did not make the allowance of attorney’s fees, a review of the entire transcript of the trial court is in order. The original complaint was filed on August 10,1976 and subsequently amended. No interrogatories, requests for admissions of facts, responses or objections thereto, or discovery depositions are shown in the record. A motion for preliminary hearing, answer, amended answer, a 55 page memorandum and pre-trial brief and motion for summary judgment were filed by the city. An 8-page brief was filed by one of the three attorneys. Although a summons was issued for appearance of the North Little Rock bookkeeper to testify on behalf of the plaintiffs at trial on November 12, 1976, there is no evidence in the record that the hearing was stenographically recorded. On November 17, 1976, appropriately under the pleadings, the trial court appointed an attorney, Jerry D. Jackson, as a master in chancery “to examine the evidence, hold hearings, investigate the records ... or do any other acts necessary to determine what the extra charges were. . . and report to the court his findings in dollars and cents ...” The order instructed the master to study certain specified exhibits among others and authorized the master to hire an accountant if necessary. The master filed his 22 page report on December 28, 1976, and on December 30, 1976 Judge Hickman entered a final order finding that the master’s report was “accepted without objections by either party”. The order directed the city to refund $639,226.24 to the city’s electric customers on a pro-rata basis. The master’s fee of $1500.00 for 14.1 hours of work was approved, but plaintiffs request for attorney’s fees was denied. As Judge Hickman became a member of this court on January 1,1977, the remaining proceedings in the trial court were conducted by Judge Bullion, elected to succeed Judge Hickman, and by Judge Taylor, the special chancellor. In my opinion, the three attorneys should not be allowed a fee for their efforts to obtain or to enforce collection of their own fees. The record of the proceedings before the trial court reveals that the efforts of the master and the court itself may have well exceeded the “in court” efforts of the three attorneys leading to the establishment of the fund on December 30, 1976. The “out of court” efforts of the three attorneys leading to the establishment of the fund is not sufficiently documented. Since the prayer of plaintiffs compliant was for the recovery of attorney ’ s fees from the city rather than from the common fund it is readily apparent why Judge Hickman concluded that there was no existing statutory authority to assess an attorney’s fee against the city. John Harmon testified that the “first serious effort” to recover attorney’s fees in excess of 25% of the amount recovered for the 8 named plaintiffs came after March 18, 1977, the effective date of Act 822 of 1977 which authorized fees for the attorneys of record in taxpayer refund actions for monies illegally exacted by a county, city or town before distribution of the balance to the members of the class. The order establishing the common fund is shown at pages 157-8 of the 395 page transcript. The remaining 237 pages reflect principally and almost exclusively the efforts of the three attorneys to obtain and enforce collection of their fees by execution and garnishment. These efforts include the two appeals to this court and the actions taken by a special master and the city to comply with Judge Bullion’s order entered March 9, 1977 which found that the city had withdrawn its previously filed petition for rehearing and review of Judge Hickman’s order of December 30, 1976 and appointed Price, Waterhouse & Co., certified public accountants, to calculate and oversee the refunds to the electric customers. By this order the court retained jurisdiction “for clarification pertaining to attorney’s fees due plaintiffs out of the fund.” We are here considering the rights of 8 named plaintiffs, their 3 attorneys, and the rights of more than 32,400 unnamed plaintiffs who did not participate in the litigation and had no notice of any of the proceedings. Most importantly the proceedings involving thé allowance of attorney’s fees, which, would reduce the total refund payable to the unnamed plaintiffs by the amount of such allowance. This court noted in Henry v. Powell, supra, that Judge Taylor awarded the attorney’s fee of $95,884.31 out of the common fund, at a hearing on April 1, 1977 which was not stenographically reported. The record does not reflect whether the unnamed plaintiff members had received reasonable notice of and an opportunity to be heard on the issue of allowance of attorney’s fees. The lack of such notice may well violate traditional standards of procedural due process, but due process is not in issue here. On May 4, 1977, Judge Bullion entered an order approved by all counsel of record setting aside Judge Taylor’s order awarding attorney’s fees which was reversed by this court in Henry v. Powell, supra, for want of an appealable order. After remand and on December 27,1978 Judge Bullion conducted an evidentiary hearing on the allowance of attorney’s fees without notice to the unnamed plaintiffs. The three attorneys and two expert witness attorneys, who had nothing to do with the litigation, all testified before Judge Bullion at the stenographically reported hearing. The potential of a class action case for abuse in award of attorney’s fees out of a common fund was first recognized in Trustees v. Greenough, 105 U.S. 527 where the U.S. Supreme Court warned that court awarded attorney’s fees should be “made with moderation and a jealous regard to the rights of those who are interested in the fund.” The unnamed plaintiffs, numbering over 32,400, had little or no opportunity to exercise any measure of control over the conduct of the litigation by the three attorneys or in the allowance of their attorney’s fees. Without this opportunity and little incentive (the individual refunds would have been less than $20.00 per customer) the unnamed plaintiffs could hardly be expected to register any complaints. The common fund itself once established, no longer belonged to the city so the city had little incentive to oppose any allowance of attorney’s fees out of the fund. In both the Love and Lytle cases, cited in the majority opinion, the awards of attorney’s fees were vigorously opposed in an adversary proceeding between two named parties both represented by their own attorneys. Although most state courts, including our own, have considered few class action cases involving the allowance of attorney’s fees, the federal courts have struggled with the problem for many years. An experienced and prominent group of judges and lawyers prepared for use in class action cases in the federal courts a Manual of Complex Litigation.2  The Manual states that “few subjects associated with the class action device have generated as much critical commentary in recent years as the matter of attorney’s fees.”3 It urges strict compliance with exacting standards approved by the courts to insure that awards of attorney’s fees are not abused. Although the standards for determining attorney’s fees in class actions enunciated by the federal courts are somewhat varied, many federal appellate courts are requiring the federal trial courts to hold evidentiary hearings and to award attorney’s fees only upon specific findings of facts based on proper standards rather than upon unsubstantiated discretion coupled with a recital of the various factors considered. Illustrative of this trend is Lindy Brothers Builder, Inc. v. American Radiator & Standard Sanitary Corp., 487 F. 2d 161 (C. A. 3. 1973), (Lindy I), an antitrust class action case, in which the Third Circuit held that the district court’s “failure to hold an evidentiary hearing and its failure to follow proper standards in awarding fees to attorneys constituted an abuse of discretion”, and found that “the mere listing of four factors for consideration by the court makes meaningful review difficult and gives little guidance to attorneys and claimants.” In City of Detroit v. Grinnell, 495 F. 2d 448 (C.A.2. 1974), also a class action case, the Second Circuit observed that the initial duty of the trial court was “to ascertain the number of hours which the attorney and his firm spent on the case,” the next step was “to place a value on that time . . . with a proper index being the hourly rate to which attorneys of like skill in the area would be typically entitled for a given type of work on the basis of an hourly rate of compensation.” Like the Lindy court, the Detroit court then considered several “less objective factors such as the risk of litigation, and concluded that an evidentiary hearing of the relevant facts on the issue of attorney’s fees was a necessity.” See also Johnson v. Georgia Highway Express, Inc., 488 F. 2d 714 (C.A. 5, 1974) and Merola v. Atlantic Richfield Co., 493 F. 2d 292 at 297 (C.A. 3 1974). Our own Eighth Circuit in Grunin v. International House of Pancakes, 513 F. 2d 114 (C.A 8, 1975) has approved and followed Detroit and the. Lindy four-step test in a class action case holding at page 128 of its opinion: “The Lindy standards as interpreted in the City of Detroit and Merola provide the appropriate test for determining a discretionary fee award in a class action context.” The Manual for Complex Litigation states that the standards imposed in the federal decisions “make it imperative that counsel be required to keep precise records of the hours spent in working on the case and of the specific tasks which were performed in the time recorded.”4 The Manual also states that the award of attorney’s fees must be based upon these records and not upon estimates and recommends that the trial courts order counsel at the beginning of the action to keep accurate time sheets describing precisely how much time was spent in each activity and whether the activity itself was of benefit toward resolution of the case. In the recent case of In Re Anthracite Coal Antitrust Lit., 81 F.R.D. 499 (1979), after counsel for the class representatives had mailed notices to all customers of the defendants who might be members of the class, an evidentiary hearing was conducted on the petition for award of attorney’s fees and costs. The petitioning attorneys made the following information available at the hearing: a written analysis of the work performed by each attorney, paralegal and law clerk, by date, description of services and amount of time expended; a detailed listing of all expenses incurred, including the date of incurrence, type and amount of expense; a statement of the normal billing rate of each attorney; and a narrative description of the proceedings and the asserted impact of each attorney’s service upon the result achieved. In Miller v. Mackey International, Inc., 70 F.R.D. 533 (1976), the court appointed an independent attorney as guardian ad litem to represent the interests of the class in connection with the proceedings for determination of the attorney’s fees. The court said: “Because the interest of the class members is specifically adverse to the interest of their lawyers who seek an attorney’s fee to be awarded from the settlement fund, the class members must be protected. The attorney for the defendant has little concern for the manner in which the fund is divided. Consequently, the court appointed an experienced attorney as guardian ad litem for members of the class . . . this procedure both achieves protection for members of the class and enables the trial judge to remain in an impartial position.” See also: Haas v. Pittsburgh Nat. Bank, 77 F.R.D. 382 (1977). The following factors militate against my affirmance of the full amount of the award of attorney’s fees in this case: 1. The failure of any of the attorneys to record their time and furnish to the court a breakdown of who spent time, both in and out of court, and in what endeavor so as to avoid duplication of effort. See Colson v. Hilton Hotels Corp., 59 F.R.D. 324 (N.D. Ill. 1972). 2. The failure of one attorney to supply the court with any information relating to his standard hourly rate. See Grunin v. International House of Pancakes, supra. 3. The two judges who presided over the hearings which resulted in the allowance of attorney’s fees had not presided over the substantive proceedings which culminated in the establishment of the common fund. See White v. Auerbach, 500 F. 2d 822 (C.A. 2, 1974). 4. Much of the work leading to the establishment of the common fund was necessarily performed by a master and the court without objection of any of the parties. See Alpine Pharmacy, Inc. v. Chas. Pfizer & Co., Inc., 481 F. 2d 1045 (C.A. 2, 1973). 5. Supervision of distribution of the refunds was performed by a second master appointed by the court without objection of any of the parties. See Alpine Pharmacy, Inc. v. Chas. Pfizer & Co., Inc., supra. 6. That no notice of the evidentiary hearing on the allowance of attorney’s fees was given to the unnamed plaintiff members of the class. See In Re Anthracite Coal Antitrust Lit., supra. 7. The unnamed plaintiff members of the class were not represented by counsel i.e. a guardian ad litem at the two hearings on the award of attorney’s fees. See Flast v. Cohen, 392 U.S. 83, 88 S. Ct. 1942, 20 L. Ed. 2d 947 (1968). 8. Both hearings on the issue of attorney’s fees resulted in an identical award of 15% of the common fund suggestive of an arbitrary discount of the 25% contingent fee contract. See Illinois v. Harper & Row Publishers, Inc., 55 F.R.D. 221 (N.D. Ill. 1972); Manual For Complex Litigation, reprinted in Vol. 1, Part 2, Moore’s Federal Practice, § 1.47 (2d Ed. 1974). 9. The transcript of the trial court record shows that much, if not most, of the “in court” attorney’s time was spent to obtain and enforce collection of their own fees. See Lindy Bros. Builders v. American Radiator and Sanitary Corp., 540 F. 2d 102 (3d Cir. 1976) (Lindy II). 10. The use of three attorneys without appropriate documentation to support the need for three separate attorneys. See The Mutual Life Ins. Co. v. Owen, 111 Ark. 554, 164 S.W. 720 (1914). The three attorneys testified that altogether they spent 47 hours a week for 16 weeks on the case i.e. an aggregate of 752 hours. On the award of $95,884.31, their hourly rate would have been $127.50. The qualifications and experience of Walter Davidson, one of the two expert witnesses, was the most nearly comparable to that of John Harmon. Mr. Harmon did not testify as to his usual and customary hourly rate but Mr. Davidson testified that his usual and customary hourly rate was $70.00. The expert witnesses had no knowledge of the time spent by the three attorneys. Neither of the expert witnesses testified that they had handled any utility rate class action cases. Upon consideration of the transcript of the entire trial court record in the light of the affirmative factors (enumerated in the majority opinion) and the negative factors (enumerated in this opinion), I would award a reasonable attorney’ s fee to counsel for the class in the amount of $52,640.00, for their services rendered, both in and out of court, which were concluded with the establishment of the fund on December 30, 1976. I would not award attorney’s fee for the efforts exerted by the three attorneys after December 30, 1976 to obtain and enforce collection of their own fees. As modified by reduction of the allowance of attorney’s fees from $95,884.31 to $52,640.00 (752 estimated hours times $70.00 per hour), I would affirm. Mr. Justice George Rose Smith joins in this opinion.   The regular chancellor was Judge Hickman, not Judge Bullion as reported in Henry v. Powell, supra. Judge Taylor was the special chancellor assigned by order of the chief justice of this court to hold courtfor the week of March 28 through April 1, 1977 in the absence of Judge Bullion. Judge Hickman properly disqualified himself in Henry v. Powell, as well as in this case.   Manual for Complex Litigation, § 1.47, reprinted in Volume 1, Part 2, Moore’s Federal Practice, pages 77-85 (2d Ed. 1948).   See 7A C. Wright and A. Miller, Federal Practice and Procedure § 1803 (1976 Supp.); Lawyers and Involuntary Clients In Public Interest Litigation, 88 Harv. L. Rev. 849 (1975); Attorney’s Fees in Individual and Class Action Antitrust Litigation, 60 Cal. L. Rev. 1656 (1972); Handler; The Shift from Substantive to Procedural Innovations in Antitrust Suits; The Twenty-Third Annual Antitrust Review, 71 Colum. L. Rev. 1, 9-10 (1971).   See Volume 1, Part 2, Moore’s Federal Practice, at page 1.50.