After the usual preliminaries — certification of a 253-member class, subclass certifications, discovery, and motions and cross-motions for summary judgment — the parties in a rails-to-trails takings case in the Court of Federal Claims mediated the dispute and ended up agreeing to $110 million plus interest as just comp for the property taken, and slightly more than $2 million in statutory attorney fees and costs under the Uniform Relocation Act. Many of the class consented to this deal.
Class counsel and the government filed a joint motion for court approval, but a day later, class counsel sought additional fees under the “common-fund” doctrine in the neighborhood of $35 million, based on its contingency fee agreement with some members of the class which entitled them to a percentage of the total award. The CFC did some calculating:
As to whether class counsel’s request for thirty percent of the common fund was reasonable, the Claims Court looked to factors it has previously applied in determining the percentage of recovery. The court ultimately used a scaled methodology and, from the $110 million the Government agreed to pay, “award[ed] class counsel 30% of the first $50 million, 25% of the next $50 million, and 20% of all monies over $100 million.” Thus, the court awarded class counsel fees totaling $35,092,243.74.
Haggart v. Woodley, slip op. at 33, No. 14-5106 (Jan. 8, 2016) (citations omitted). The CFC approved the $110 million compensation and $2 million in fees set out in the settlement agreement, and after a hearing, the CFC approved the $35 million common-fund fee award, reduced by the earlier $2 million fee award. [Barista’s note: we sure do wish there were some old abandoned railroads in Hawaii, but no such luck.]
Two members of the class appealed the fee award to the Federal Circuit.
The court’s opinion vacating the award is long (39 single-spaced pages), and we’re certainly not going to go through each step of the court’s analysis. If you are like us, you probably don’t get overly thrilled about the prospect of reading an opinion about fee awards, and really don’t pick them up until you are in the middle of a motion for fees. Then they become really interesting. They’re just not inherently interesting, even though they are certainly important.
What grabbed our attention here was the court’s analysis about whether the common fund doctrine is applicable in cases where a fee-shifting statute like the Uniform Relocation Act is applicable. The court framed the issue as “whether class counsel can recover attorney fees under the common fund doctrine in lieu of the URA, which provides class counsel with reasonable attorney fees.” Slip op. at 30. The court held that the common-fund doctrine, a quantum meruit principle based in equity, was designed to redress unfairness when counsel scores a recovery that benefits nonclients. In such cases, counsel is entitle to a reasonable fee. The reasonable fee here according to the CFC was based in class counsel’s contingency fee arrangement.
Although the Federal Circuit agreed that the $110 million just comp recovery was a common fund, it disagreed that counsel could elect to recover a contingency fee in lieu of the statutory URA recovery. The reason? The common fund doctrine is designed to remedy unfairness, and the availability of fee recovery under the URA meant that there was no unfairness to remedy.
Under the URA, it is the Government, as opposed to class counsel or another member of the plaintiff class, who bears the reasonable cost of the action; thus, the inequity that would otherwise result is expressly addressed by the statute. In the presence of the URA, we find no inequity to redress. The sine qua non of the common fund doctrine is that some inequity must exist. Without inequity, class counsel cannot attempt to augment reasonable attorney fees by substituting the application of the doctrine in place of the URA. Such an action not only undermines the purpose of the URA, see Milwaukee v. Illinois & Michigan, 451 U.S. 304, 314 (1981) (“[W]hen Congress addresses a question previously governed by a decision rested on federal common law[,] the need for such an unusual exercise of lawmaking by federal courts disappears.”), but also unjustly enriches class counsel at the expense of class members, a result diametric to the primary purpose of the common fund doctrine, see Greenough, 105 U.S. at 532; see also Tex. v. Pankey, 441 F.2d 236, 241 (10th Cir. 1971) (asserting that federal common law applies “[u]ntil the field has been made the subject of comprehensive legislation or authorized administrative standards”).
Slip op. at 35-36. Thus the common fund doctrine didn’t apply. Or, more accurately, the URA preempts the common fund doctrine.
Finally, a cert petition alert: the court acknowledged that the Seventh Circuit agrees with it, while Ninth Circuit has concluded that “statutory fee shifting and the equitable common fund doctrine operate differently and should be treated separately[.]” Slip op. at 37.
Any bets on whether counsel who just watched a $35 million fee award vanish will want to try their luck at the Supreme Court?
Haggart v. Woodley, No. 14-5106 (Fed. Cir. Jan. 8, 2016)