Court Opinion

ID: 770984
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:42:33+00
Date Added: 2024-06-11T12:00:26.741627
License: Public Domain

231 F.3d 399 (7th Cir. 2000)
Howard R. Montgomery, for himself and for  all others similarly situated,  for themselves and  for Aetna Plywood,  Inc. Profit Sharing Plan as  successor to Aetna Plywood, Inc.,  Employee Stock Ownership Plan, Plaintiffs-Appellants,v.Aetna Plywood, Incorporated, et al., Defendants-Appellees.Clinton A. Krislov and Krislov  & Associates, Ltd., Plaintiffs-Appellants,v.Aetna Plywood, Incorporated, et al., Defendants-Appellees.
Nos. 99-2364, 99-2707, 00-1033
In the  United States Court of Appeals  For the Seventh Circuit
Argued September 11, 2000Decided October 26, 2000

Appeals from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 95 C 3193--William T. Hart, Judge.[Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted]
Before Bauer, Evans, and Williams, Circuit  Judges.
Williams, Circuit Judge.

1
This appeal  arises out of a class action suit brought  by Howard Montgomery on behalf of  participants in Aetna Plywood's Employee  Stock Ownership Plan ("ESOP") against  Aetna Plywood and its directors, based on  an allegation that Aetna Plywood had not  adequately compensated the ESOP  participants when the directors caused  the ESOP to sell its shares back to the  company. Eventually, the parties reached  a pair of settlements. This appeal,  however, does not involve, directly at  least, the settlements or the underlying  class action suit. Rather, it involves  three ancillary matters the district  court decided: the legality of an  ownership restructuring plan Aetna  Plywood proposed, the amount of the  settlement fund that should be awarded to  class counsel and the lead plaintiff, and  the proper disposition of a subsequent  state law action brought by class counsel  to enforce a term in one of the parties'  settlement agreements. With one minor  exception, we affirm the district court's  decisions on each of these matters.

2
* Just before Aetna Plywood purchased the  stock owned by its ESOP, the ESOP owned  95% of the company's outstanding shares.  The remaining 5% was owned by Jeff Davis,  who served as Aetna Plywood's chief  executive officer, the chairman of its  board of directors, and a member of the  committee that managed its ESOP. Sometime  in mid-1992, Davis, along with the other  three individuals who served on both  Aetna Plywood's board of directors and  its ESOP committee, caused the ESOP to  sell its shares of Aetna Plywood stock to  the company. This transaction left Davis  as the sole stockholder in Aetna Plywood.

3
Believing that Davis and Aetna Plywood's  other directors had caused the ESOP to  sell its shares of Aetna Plywood stock  for too low a price, Howard Montgomery, a  former Aetna Plywood employee and ESOP  participant, filed, in May 1995, a class  action suit on behalf of ESOP  participants against Aetna Plywood and  the directors who had approved the stock  sale ("the Montgomery defendants"). The  class complaint alleged that, by causing  the ESOP to sell its shares at a below-  market-value price, Aetna Plywood's  directors had breached fiduciary duties  placed on them by ERISA and Delaware  corporate law.

4
The case eventually went to trial before  the district court in June 1998. On the  third day of the trial, two directors,  both of whom were outside directors,  entered into a settlement with the class.  They agreed to pay the class $800,000 in  exchange for a release from liability. At  the conclusion of the trial, the district  court found Aetna Plywood, Davis, and the  other remaining defendant-director, John  Francione ("the trial defendants"),  liable for causing the ESOP to sell its  interest in Aetna Plywood without  ensuring that the ESOP received adequate  consideration. The district court further  found that the defendants had under-  valued the ESOP's stock by $70 a share.  After making adjustments for the  settlement with the outside directors and  prejudgment interest, the court arrived  at a damages figure of $7,243,820.17.

5
Following the district court's decision,  the trial defendants initiated  negotiations with the class, fearing that  the judgment entered against them would  bankrupt Aetna Plywood. These  negotiations proved fruitful and the  parties reached a comprehensive  settlement agreement. The trial  defendants agreed that Aetna Plywood  would pay the class $6.1 million cash,  give the class 20% of the company's  stock, and, if Aetna Plywood were to be  sold within three years, turn over to the  class 25% of the sale proceeds in excess  of $6.1 million. Davis promised to  relinquish his Aetna Plywood stock and to  give up all control of and involvement in  the company. He also agreed to relinquish  his ownership interest in the company's  headquarters, to forfeit any monies  realized from the sale of his shares, and  to forego any future remuneration from  the company. Moreover, both Davis and  Francione agreed to give up any recovery  they might be entitled to as ESOP  participants.

6
In exchange for these promises, the  class agreed to release all claims  asserted and assertable against the trial  defendants and promised not to seek  further assets from Davis. In addition,  class counsel agreed to limit any  attorneys' fee request to one-third of  the settlement recovery plus  reimbursements of costs and expenses not  exceeding $500,000, and the defendants  promised not to oppose a request within  those bounds. The parties also agreed  that Aetna Plywood would consult with  class counsel regarding any sale or  change of control transaction involving  the company and that Aetna Plywood could  submit any proposal in this regard, to  which class counsel objected, to the  court for approval. Finally, the parties  provided that the district court would  retain jurisdiction over the case to  enforce the terms of the settlement  agreement.

7
After carefully reviewing the mid- and  post-trial settlements reached by the  parties, the district court, in March  1999, approved both settlement  agreements, finding each to be fair,  reasonable, and adequate. In the same  order, the district court took up class  counsel's requests for attorneys' fees,  costs, and an incentive award for the  lead plaintiff. Although none of the  Montgomery defendants challenged class  counsel's requests, as the requests were  within the bounds established by the  settlement agreement, objections were  received from class members. Primarily,  these came from three Aetna Plywood  managers, Larry Rassin, Keith Weller, and  Jon Minnaert. The district court reviewed  carefully both class counsel's requests  and the objections submitted, as well as  the numerous considerations relevant to  determining an appropriate attorneys'  fee, expense reimbursement, and incentive  award. Based on this review, and using  the percentage-of-recovery method for  awarding attorneys' fees, the court  awarded class counsel 25% of the net  settlement recovery (amounting to  $1,655,177.71), 25% of any future class  recovery, and $279,289.15 in expense  reimbursements. The court declined to  award class counsel any portion of the  stock promised to the class and refused  to grant the lead plaintiff an incentive  award. A subsequent order granted class  counsel an additional $200,000 in expense  reimbursements, but reaffirmed the  district court's refusal to grant a  reimbursement for computer-assisted legal  research costs.

8
At the same time the district court was  considering the fairness of the two  settlements and the appropriateness of  class counsel's requests for attorneys'  fees, costs, and an incentive award, the  parties also brought before the court an  ownership restructuring plan proposed by  Aetna Plywood. Pursuant to this plan,  which was submitted to the district court  in February 1999, Davis would relinquish  his stock to Aetna Plywood in exchange  for $1,000 and the company would give  that stock (as well as the $1,000) to the  class; then, Aetna Plywood would issue  new stock representing 80% of the total  number of outstanding shares; finally,  Aetna Plywood would turn 29% of the  company's stock over to its attorneys to  pay for services rendered and would sell  the remaining 51% to a group of managers  (Rassin, Weller, Minnaert, and Scott  Halden) for $4,000. The class objected to  the plan on the ground that it did not  maximize the value Aetna Plywood could  have received for selling a controlling  interest in the company. After briefing  on the issues raised by the restructuring  plan, the district court, in April 1999,  gave its consent to the proposed  restructuring.

9
Around this same time, class counsel  discovered that Aetna Plywood had funded  the objections Rassin, Weller, and  Minnaert filed opposing class counsel's  request for attorneys' fees. Believing  this violated the parties' settlement  agreement, class counsel filed suit  against Aetna Plywood, Rassin, Weller,  Minnaert, and Halden ("the Krislov  defendants") in the Circuit Court of Cook  County, Illinois, asserting a breach of  contract claim. In response, the Krislov  defendants removed the case to federal  court and filed a motion to dismiss.  Class counsel then filed a motion to  remand the case to state court and, in  the alternative, asked for leave to file  an amended complaint. The district court  denied the motion to remand, but granted  class counsel leave to amend. Class  counsel then added claims of aiding and  abetting a breach of contract and  intentional interference with a  contractual relationship against the  individual Krislov defendants. Following  a second motion to dismiss, the district  court, in December 1999, concluded that  class counsel had failed to state a claim  against the Krislov defendants and  dismissed class counsel's suit.

10
In July 1999, the district court entered  final judgment in the Montgomery class  action suit, and in December 1999, did  the same in the Krislov suit. Timely  appeals were filed in both cases.

II

11
A.  Legality of Ownership Restructuring  Plan

12
The first issue raised in these appeals  concerns the district court's decision to  allow Aetna Plywood to go forward with  its proposed ownership restructuring  plan. The class contends that the  restructuring plan violates Delaware  corporate law by giving away control of  the company for less than fair market  value. Specifically, the class alleges  that, in adopting the restructuring plan,  Aetna Plywood's board of directors  breached its fiduciary duty to maximize  the value a corporation's shareholders  receive in a corporate control  transaction.1 See Paramount  Communications Inc. v. QVC Network Inc.,  637 A.2d 34, 48 (Del. 1994). The district  court rejected the class's objections on  the ground that the company's stock  belonged to Davis and he could do with it  what he wanted. The district court's  conclusion rests on a faulty premise,  however; Davis's stock went to the class  (and even then only after being sold to  Aetna Plywood), while the stock given to  the company's attorneys and sold to the  management group was newly-issued stock.  On appeal, the Montgomery defendants  attempt to defend the district court's  decision on the grounds that (1) the  class lacks standing to challenge the  restructuring plan under Delaware law;  and (2) the proposed transaction did not  trigger any fiduciary duty toward the  class to maximize value received. We only  discuss the first of these contentions,  however, as it is dispositive.

13
Delaware law requires that the plaintiff  in a derivative suit (the form that the  parties assume the class's objections  take) be a stockholder of the corporation  at the time of the challenged  transaction. 8 Del. Code sec. 327. To  determine whether the class has standing  under this rule, we must determine who is  a "stockholder" and what is the "time of  the challenged transaction" for purposes  of 8 Del. Code sec. 327.

14
Taking the second question first, a  review of Delaware law reveals that the  "time of the challenged transaction"  depends on precisely what about the  transaction is being challenged. Where  the plaintiff complains of the terms,  rather than the actual consummation, of a  transaction, the "time of the challenged  transaction" is when the terms of the  transaction are established. 7547  Partners v. Beck, 682 A.2d 160, 161-63  (Del. 1996). For instance, in 7547  Partners, the Delaware Supreme Court  considered a case involving a plaintiff  that bought stock in an initial public  offering at a price much higher than that  paid by certain corporate executives to  whom the corporation's board of directors  had decided to sell stock in a private  placement accompanying the public  offering. Id. at 161. The court  determined that the plaintiff lacked  standing because the challenged  transaction was the decision to set the  price for the private placement, a  decision that took place before the  plaintiff bought its stock. Id. at 162-  63. The court reasoned that because the  plaintiff challenged only the terms of  the private placement, rather than the  technicality of its consummation, the  challenged transaction took place when  the terms of the private placement were  established. Id. at 163. Here, the class  complains only about one of the terms of  the restructuring plan--the price at  which the board of directors sold control  of Aetna Plywood--a term that was  announced (and therefore established) one  month prior to final approval of the  parties' settlement agreement. Thus, the  challenged transaction took place before  the class came into actual possession of  the Aetna Plywood stock promised to it.

15
This conclusion brings into focus the  question we have yet to answer--who, for  standing purposes, is a "stockholder." In  light of our conclusion about when the  transaction the class challenges took  place, the class will have standing only  if a prospective stockholder can be  considered a "stockholder" for standing  purposes. Unfortunately for the class,  Delaware law treats actual stockholders  and prospective stockholders quite  differently. Most significantly, prospec  tive stockholders are not owed fiduciary  duties. Anadarko Petroleum Corp. v.  Panhandle Eastern Corp., 545 A.2d 1171,  1174-77 (Del. 1988). Fiduciary duties  arise only after a stockholder comes into  actual possession of stock, regardless of  how certain the stockholder's future  ownership was when the challenged  transaction took place. Id. For instance,  in Anadarko Petroleum, the Delaware  Supreme Court held that directors of a  wholly-owned corporate subsidiary about  to be spun off owed no fiduciary duties  to the post-spin-off stockholders even  though those stockholders had been  identified and those holders' future  stock interests were being traded on the  New York Stock Exchange. Id. The court  reasoned that because the prospective  stockholders did not acquire legal or  equitable title over the stock of the  subsidiary until the day the stock was  distributed, they were not owed fiduciary  duties until that day. Id. at 1176. That  prospective stockholders are not owed  fiduciary duties under Delaware law leads  us to conclude that prospective  stockholders would not be considered  "stockholders" for standing purposes.  Accordingly, we hold that the class was  not a stockholder at the time of the  transaction it challenges.

16
In an effort to avoid the necessary  implication of this conclusion--that it  lacks standing to challenge the  restructuring plan under Delaware law--  the class contends that ERISA and the  settlement agreement itself grant the  class standing. Certainly the settlement  agreement and perhaps ERISA as well grant  the class standing to challenge the  restructuring plan, but, so far as we can  tell, neither grants standing to raise a  challenge under Delaware law that  Delaware law itself would not permit.  And, the class has not cited any legal  authority to the contrary, nor has it  articulated a theory that suggests we  should rule otherwise. As the class only  challenges the restructuring plan under  Delaware law, it must satisfy the  standing requirements of 8 Del. Code sec.  327.2 Because it was not a stockholder  at the time of the challenged  transaction, the class can not do so.  Therefore, we must affirm the district  court's rejection of the class's  challenge to Aetna Plywood's ownership  restructuring plan.

17
B.  Attorneys' Fees, Costs, and the  Incentive Award

18
Class counsel challenges several aspects  of the district court's decisions  regarding attorneys' fees, costs, and the  requested incentive award for the lead  plaintiff. Specifically, counsel argues  that the district court should have: (1)  awarded it 33-1/3% of the gross  settlement recovery; (2) awarded it a  like percentage of the stock promised to  the class; (3) included computer-assisted  legal research costs in the expense  reimbursement; and (4) granted the lead  plaintiff an incentive award. We review  the district court's decisions respecting  these matters for abuse of discretion,  except where counsel challenges the  methodology employed by the district  court, in which case our review becomes  plenary. Harman v. Lyphomed, Inc., 945  F.2d 969, 973 (7th Cir. 1991).

19
Before getting to class counsel's  specific challenges, we note that in  cases like the present one, where the  district court is asked to award  reasonable attorneys' fees or reasonable  costs, the measure of what is reasonable  is what an attorney would receive from a  paying client in a similar case. Cook v.  Niedert, 142 F.3d 1004, 1012 (7th Cir.  1998); In re Continental Ill. Sec.  Litig., 962 F.2d 566, 568, 570, 573 (7th  Cir. 1992). This standard obviates, at  least to a certain extent, the need to  assign a value to an attorney's work  based on nothing more than a subjective  judgment regarding that work. It gives a  court a background against which to work  by requiring courts to look to evidence  regarding the sorts of fees and costs  generated in analogous suits funded by  paying clients. To the extent possible,  then, our analysis in this case will be  guided by this methodology.

20
We begin with class counsel's contention  that its fee should be based on the gross  settlement recovery--the settlement  recovery before counsel's cost award is  deducted--rather than the net recovery--  the recovery after the cost award is  deducted. Counsel cites no authority  standing for the proposition that gross  recovery is to be preferred over net  recovery as the basis for calculating a  fee under the percentage-of-recovery  method, nor has our review of the  relevant case law revealed any authority  to that effect. Moreover, counsel has not  come forward with evidence indicating  that private contingent fee agreements  typically employ one or the other basis,  nor has counsel suggested any logical  reason that gross recovery should be the  preferred basis. As such, it is  impossible to conclude that the district  court abused its discretion in using net  recovery as a basis for awarding  attorneys' fees.

21
We consider next class counsel's  complaint that the district court should  have awarded counsel a greater percentage  of the settlement recovery, 33-1/3%  rather than 25%. Counsel contends that  the district court, in adopting what it  found to be the median percentage-of-  recovery figure used in securities cases,  failed to adequately appreciate the  riskiness of this case. The district  court concluded that the case was not  particularly risky because the fact  (although not the amount) of the  Montgomery defendants' liability could  not be doubted. Although a reasonable  argument can be made that the case was  more risky than the district court  thought, the district court's assessment  of the risk involved is not without  support. It is fairly obvious that at  least some of the Montgomery defendants  (most notably Jeff Davis) plainly were  not acting in the best interests of Aetna  Plywood's shareholders or in the best  interest of the ESOP. Moreover, a lack of  risk was not the only reason the district  court gave for refusing to select a  percentage-of-recovery figure greater  than the median; the court also noted  that the large settlement recovery  counseled against a high figure. In fact,  the court undertook a careful analysis of  both the factors weighing in favor of a  greater-than-median percentage figure and  those weighing against such a figure.  Because it is impossible to say that the  district court's balancing of these  factors was unreasonable, we cannot  conclude that the district court abused  its discretion in selecting 25% as the  appropriate percentage-of-recovery  figure.

22
We come, then, to class counsel's  challenge to the district court's refusal  to award counsel a portion of the stock  the settlement agreement promised to the  class. Counsel contends that the stock  obtained for the class should be treated  just as the cash obtained for the class  is treated. The district court's only  reason for not awarding counsel stock was  that counsel's fee was already  substantial. We do not believe this is an  adequate reason for denying counsel  stock. Stock, like cash, is simply a form  of compensation secured on the class's  behalf. There is no reason it should be  treated differently than cash. In fact,  treating it differently creates perverse  incentives for attorneys by encouraging  them to seek all cash recoveries even  when a cash and stock recovery would be  in their clients' best interest or would  otherwise be more appropriate. If a court  believes a fee award would be too large  if stock is made part of the award, then  it should reduce the percentage-of-  recovery figure (something which, as  noted above, the district court here  essentially did). Although we have not  discovered any significant authority on  this matter, and the record does not  reveal how private contingent fee  arrangements in securities cases treat  awards of stock, we are convinced that  the district court's refusal to award  class counsel any of the stock obtained  for the class is unreasonable. As such,  we conclude that the district court  abused its discretion in so ruling.

23
We next turn to class counsel's claim  that the district court erred in refusing  to include in the expense reimbursement  award computer-assisted legal research  costs. Counsel contends that the district  court should have included these costs in  the reimbursement award because the  private market compensates lawyers for  these costs and to do otherwise would  violate the ethical rules regarding the  payment of costs by attorneys. Counsel's  arguments are misguided. Computer  research charges are considered a form of  attorneys' fees. Haroco, Inc. v. American  Nat'l Bank & Trust Co. of Chicago, 38  F.3d 1429, 1440-41 (7th Cir. 1994);  Harman, 945 F.2d at 976. The idea is that  computer-assisted legal research  essentially raises an attorney's average  hourly rate as it reduces (at least in  theory) the number of hours that must be  billed. Haroco, 38 F.3d at 1440-41;  Harman, 945 F.2d at 976. As a form of  attorneys' fees, the charges associated  with such research are not separately  recoverable expenses. When a court uses  the percentage-of-recovery method of  calculating attorney's fees, such charges  are simply subsumed in the award of  attorneys' fees.3 Here, therefore,  counsel's arguments regarding the  necessity of separately recoverable  computer research charges are not  persuasive because counsel has already  been compensated for the computer  research charges it incurred through the  attorneys' fee awarded it. Thus, we  conclude that the district court did not  abuse its discretion or otherwise err in  excluding computer-assisted legal  research charges from the expenses  awarded class counsel.

24
Finally, we take up class counsel's  challenge to the district court's  decision to deny the lead plaintiff an  incentive award for his participation in  this case. Incentive awards are  appropriate if compensation would be  necessary to induce an individual to  become a named plaintiff in the suit.  Cook, 142 F.3d at 1016; Continental Ill.  Sec. Litig., 962 F.2d at 571-72. Counsel  claims that the circumstances of the lead  plaintiff's participation require that he  be awarded $30,000 out of the settlement  fund. Without directly addressing whether  the lead plaintiff's participation  justified an incentive award, the  district court gave three reasons for  refusing to grant such an award: (1)  counsel's failure to make any serious  argument in favor of granting such an  award (especially in the amount  requested); (2) counsel's failure to  include in the most recent notice to the  class adequate information regarding  counsel's plan to seek an incentive  award; and (3) the possibility that  counsel could pay an incentive award out  of the fees awarded it.

25
Although the district court's last  reason for its ruling is not a  particularly persuasive one, the other  two carry significant weight. Counsel's  uncertain and less than vigorous efforts  to seek an incentive award in the  district court can reasonably be  interpreted as an abandonment of its  request for such an award. In any event,  the case for granting the lead plaintiff  in this case an incentive award is not so  overwhelming as to remove any doubt about  whether an award would be appropriate.  While the lead plaintiff was the only  named plaintiff, was subjected to a rough  deposition, and was portrayed by the  Montgomery defendants in an unfavorable  light during the litigation, it does not  appear that he had to devote an  inordinate amount of time to the case or  that, as a former employee, he suffered  or risked any retaliation by Aetna  Plywood. Accordingly, we conclude that  the district court did not abuse its  discretion in refusing to grant the lead  plaintiff an incentive award.

C.  State Law Action

26
The final issue in this case is whether  the district court properly disposed of  class counsel's lawsuit against Aetna  Plywood and the four managers who  purchased control of the company ("the  Krislov suit"). The district court  assumed jurisdiction over the suit, which  was filed originally in state court and  alleged a variety of state law causes of  action arising out of a purported breach  of the attorneys' fees provision of the  settlement agreement, and dismissed the  suit for failure to state a claim. Class  counsel challenges both the district  court's refusal to remand the lawsuit  back to state court and the district  court's decision to dismiss the lawsuit  on its merits. We consider counsel's  jurisdictional challenge first.

1.  Assumption of Jurisdiction

27
Class counsel contends that there was no  basis for removing the Krislov suit to  federal court and that, therefore, the  district court should have remanded the  case back to state court. Ordinarily, a  case filed in state court can be removed  to federal court only if the case falls  within the original jurisdiction of the  federal district courts. 28 U.S.C. sec.  1441. Because it is based entirely on  state law and involves non-diverse  parties, however, the Krislov suit does  not come within the original jurisdiction  of the federal district courts. The  district court nevertheless concluded  that removal was proper under the  doctrine of ancillary jurisdiction since  the lawsuit involved claims relating to  an alleged breach of the settlement  agreement resolving the Montgomery case  and the court had expressly retained  jurisdiction to enforce the terms of that  settlement agreement when it entered a  final judgment in the Montgomery case.

28
Precedent in this circuit firmly  establishes that the doctrine of  ancillary jurisdiction confers federal  jurisdiction over a case otherwise  outside federal jurisdiction in which the  plaintiff seeks to enforce a settlement  agreement, as long as the district court  incorporated the agreement into its final  order or retained jurisdiction to enforce  the terms of the agreement. Ford v.  Neese, 119 F.3d 560, 562 (7th Cir. 1997);  In re VMS Sec. Litig., 103 F.3d 1317,  1321-22 (7th Cir. 1996); Lucille v. City  of Chicago, 31 F.3d 546, 548 (7th Cir.  1994); McCall-Bey v. Franzen, 777 F.2d  1178, 1188 (7th Cir. 1985); see also  Kokkonen v. Guardian Life Ins. Co. of  Am., 511 U.S. 375, 381-82 (1994). Thus,  where a party to a settlement agreement  approved by a federal court brings a new  suit in federal court alleging a breach  of the agreement, federal jurisdiction  exists over the suit, provided the  federal court incorporated the agreement  into its final order or reserved  jurisdiction to enforce the agreement.  See, e.g., Ford, 119 F.3d at 562; McCall-  Bey, 777 F.2d at 1188-90.

29
What is less firmly established is when  a case filed in state court that  nevertheless comes within a federal  court's ancillary jurisdiction may be  removed. Our court addressed this issue  in In re VMS Securities Litigation, 103  F.3d 1317 (7th Cir. 1996), which  considered whether a pair of district  courts had properly removed and enjoined  a state law class action alleging fraud  and misrepresentation relating to the  settlement of a pair of prior class  action lawsuits approved by those two  district courts. The court first  determined that the two district courts  possessed ancillary jurisdiction over the  state law actions at issue. Id. at 1321-  23. The court then turned to whether the  district courts had the authority to  remove the state law actions from state  court. Relying on authority from the  Second Circuit, specifically In re "Agent  Orange" Product Liability Litigation, 996  F.2d 1425, 1431-32 (2d Cir. 1993), the  court concluded that the All Writs Act,  28 U.S.C. sec. 1651, which provides that  federal courts may issue orders  "necessary or appropriate in aid of their  respective jurisdictions and agreeable to  the usages and principles of law,"  granted the district courts the necessary  authority. 103 F.3d at 1323-24. The court  explained, however, that the All Writs  Act does not permit removal in every  case. Id. at 1324. Again relying on the  Second Circuit's decision in In re Agent  Orange, the court suggested that only the  presence of exceptional circumstances  threatening the integrity of a court's  rulings in complex litigation would  justify removal under the All Writs  Act.4 Id.

30
Reading In re VMS Securities together  with this circuit's law on ancillary  jurisdiction, two different standards for  exercising ancillary jurisdiction emerge.  In a suit otherwise outside federal  jurisdiction brought in federal court, a  district court may assume jurisdiction  over the suit if it satisfies the  ordinary requirements for ancillary jurisdiction. In a suit otherwise outside  federal jurisdiction brought in state  court, a district court may assume  jurisdiction over the suit if it  satisfies the ordinary requirements for  ancillary jurisdiction and exceptional  circumstances threatening the integrity  of its prior rulings are present.5

31
Strictly speaking, the Krislov suit does  not involve the sort of extraordinary  circumstances described in In re VMS  Securities. Any threat it presents to the  integrity of the district court's rulings  in the Montgomery case is minimal,  involving ordinary collateral estoppel  and res judicata issues. Pacheco de Perez  v. AT&T Co., 139 F.3d 1368, 1380 (11th  Cir. 1998) (holding that such a threat  would not supply exceptional  circumstances); In re Agent Orange, 996  F.2d at 1431 (suggesting the same). And,  the Montgomery case was not particularly  complex litigation--it was a relatively  straight-forward class action.

32
Still, the Krislov suit is not an  ordinary action to enforce a term of a  settlement agreement involving a dispute  regarding whether a party has reneged on  its post-judgment obligations through  some out-of-court action or failure to  act. Rather, the Krislov suit involves a  dispute over whether the Krislov  defendants reneged on their pre-judgment  obligations by obtaining a ruling (they  promised not to seek) from the district  court. The district court is uniquely  positioned to resolve this sort of  dispute. It involves events that occurred  before the court and revolves, in part,  around the impetus for one of the  district court's rulings. Moreover, it  would be awkward, to say the least, for a  state court to pass on certain issues  raised by this case, such as what  prompted the district court to rule in  the way it did. In our view, the unusual  nature of the Krislov suit--involving the  alleged procurement of a court ruling  through a breach of a pre-judgment  settlement obligation--does present a set  of circumstances that make it appropriate  for a federal court to remove a case from  state court in aid of its jurisdiction.  Therefore, although it does not involve  the sort of extraordinary circumstances  described in In re VMS Securities, we  conclude that the Krislov suit does  involve a set of extraordinary  circumstances that justifies removal  under the All Writs Act. Accordingly, the  district court properly assumed  jurisdiction over the Krislov suit and  did not err in refusing to remand the  case to state court.

2.  Merits

33
Class counsel also contends that the  district court erred in dismissing the  Krislov suit on its merits. The suit  alleged a breach of contract claim  against Aetna Plywood and the four  managers who purchased control of the  company, as well as claims of aiding and  abetting a breach of contract and  intentional interference with a  contractual relationship against the  individual defendants, all arising out of  the defendants' efforts to oppose class  counsel's request for attorneys' fees, in  violation of the settlement agreement  resolving the Montgomery case. In  dismissing the lawsuit, the district  court concluded that class counsel was  collaterally estopped from arguing that  the amount of attorneys' fees the court  awarded was other than the proper amount  and that, consequently, counsel could not  establish that the alleged breach of  contract (or associated aiding and  abetting and intentional interference)  caused it any damages. On appeal, the Krislov defendants advance this argument,  as well as several others, in support of  the district court's decision. We need  not go through each argument they make,  however, as their argument that class  counsel cannot establish causation is  dispositive.

34
The Krislov defendants argue that,  because the district court made an  independent determination as to the  appropriate attorneys' fee (as it is  required to do, see Strong v. BellSouth  Telecomms. Inc., 137 F.3d 844, 849-50  (5th Cir. 1998)), class counsel cannot  establish that they caused counsel's  alleged damages, an element of each of  the causes of action at issue, see Dallis  v. Don Cunningham & Assocs., 11 F.3d 713,  717 (7th Cir. 1993) (tortious/intentional  interference with contract); Gonzalzles  v. American Express Credit Corp., 733  N.E.2d 345, 351 (Ill. App. Ct. 2000)  (breach of contract); Restatement  (Second) of Torts sec. 876 (1979) (aiding  and abetting6). We agree. It would  beimpossible for class counsel to prove  that the objections filed by Rassin,  Minnaert, and Weller, rather than the  district court's efforts in fulfilling  its duty to independently evaluate  counsel's attorneys' fee request, were  the proximate cause of any alleged  diminution of counsel's attorneys' fee  award. The district court did cite the  objections filed by Rassin, Minnaert, and  Weller, but that only means that the  court read, and perhaps was persuaded by,  their objections, it says nothing about  whether the court would have reached a  different result in the absence of the  objections or whether the objections  caused the court to rule the way it did.  In fact, assuming (as we always do) that  the district court took its duty to  independently evaluate class counsel's  request seriously, the only proximate  cause of the court's ruling could be its  own determination that the amount of  attorneys' fees awarded was an  appropriate amount. In short, it is  impossible, as a matter of law, to  establish the proximate cause for a  judicial ruling of the sort involved  here. Accordingly, the Krislov suit  deserved to be dismissed for failure to  state a claim.

III

35
Because the class in the Montgomery case  lacks standing to challenge Aetna  Plywood's ownership restructuring plan,  we affirm the district court's rejection  of the class's challenge to that plan. We  also affirm all of the district court's  decisions regarding attorneys' fees,  costs, and the requested incentive award,  except its decision to not award class  counsel any of the Aetna Plywood stock  obtained for the class, which we reverse.  Finally, we affirm the district court's  decision to dismiss class counsel's state  law action.

36
Affirmed in part, Reversed in part.

Notes:

1
 In passing, the class suggests that  the reorganization plan also  represents a waste of corporate assets,  an independent breach of  fiduciary duty, see Sanders v. Wang,  No. 16640, 1999 WL 1044880, at *10  (Del. Ch. Nov. 8, 1999), but it  does not pursue this theory with any  vigor. In any event, the analysis that  follows would apply equally to  any claim based on such a theory.

2
 We note, nevertheless, that Delaware  appears to have a doctrine of  equitable standing that allows for  standing in certain circumstances  when 8 Del. Code sec. 327 would otherwise  deny standing to a plaintiff.  See Shaev v. Wyly, No. 15559-NC,  1998 WL 13858 (Del. Ch. Jan. 6, 1998),  reargument denied, 1998 WL 118200 (Del.  Ch. Mar. 6, 1998). But, the  class does not invoke this doctrine and  it is far from obvious that the  doctrine would grant the class standing.  As such, we decline to explore  the possibility that the class may  qualify for equitable standing.

3
 When a court uses the lodestar  method of calculating attorney's fees,  computer research charges are separately  recoverable, but (and this is  the important point) only as a type  of attorneys' fee, not as an  expense. Haroco, 38 F.3d at 1440-41.

4
 The court's ruling regarding removal  under the All Writs Act is in  accord with the weight of the authority  from the other courts of  appeals that have considered the issue.  See Bylinski v. City of Allen  Park, 169 F.3d 1001, 1002-03 (6th Cir.  1999); NAACP, Minneapolis Branch  v. Metropolitan Council, 125 F.3d 1171,  1173-74 (8th Cir. 1997),  reinstated after remand, 144 F.3d 1168,  1171-72 (8th Cir. 1998); Davis  v. Glanton, 107 F.3d 1044, 1047 n.4  (3d Cir. 1997); In re Agent Orange,  996 F.2d at 1431-32. But see Pacheco  de Perez v. AT&T Co., 139 F.3d  1368, 1378-80 (11th Cir. 1998) (declining  to take a position, but  holding that removal was improper  even if the All Writs Act might  authorize removal in some cases);  Hillman v. Webley, 115 F.3d 1461,  1467-69 (10th Cir. 1997) (rejecting  the All Writs Act as a basis for  removal). The only authority to the  contrary, the Tenth Circuit's  Hillman decision, which rests on  circuit precedent holding that the All  Writs Act does not independently  confer federal jurisdiction, overlooks  one of the key points underlying  In re VMS Securities and the similar  cases from other circuits. In those  cases federal jurisdiction exists  by virtue of the ancillary jurisdiction  doctrine (though the other  circuits do not use the term  "ancillary jurisdiction"), not by virtue  of the All Writs Act. The All Writs  Act is simply the source of  authority for removal.

5
 While the lack of symmetry between  the treatment of cases filed in  state court and federal court may  appear to be incongruous, it is  justified by the necessity of remaining  faithful to the important  limitations on the use of the  All Writs Act. Moreover, a standard for  removing a case from state court  that is more demanding than the  standard for assuming jurisdiction  over a case filed in federal court  pays heed to the legitimate comity  concerns raised by the removal of  a state law action that does not fall  under any of the established  heads of federal jurisdiction.

6
 Class counsel cites, and we have  discovered, no Illinois case  recognizing a cause of action for  aiding and abetting a breach of  contract, but counsel does point  to sec. 876 of the Restatement  (Second) of Torts, which sets out  a cause of action for, among other  things, providing substantial  assistance or encouragement to another's  tortious acts. Because a breach of  contract is not a tortious act, sec.  876 does not support class counsel's  aiding and abetting claim, see  Reuben H. Donnelley Corp. v. Brauer,  655 N.E.2d 1162, 1169-71 (Ill.  App. Ct. 1995), but even if it did,  causation is an element of the  cause of action. Restatement (Second)  of Torts sec. 876 cmt. d (1979)  (noting that ordinary principles  of tort causation apply).