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Heckmann v. Hospital Service Corp.

OPINION FILED JANUARY 22, 1982.

MARTIN HECKMANN, PLAINTIFF,

v.

THE HOSPITAL SERVICE CORPORATION ET AL., DEFENDANTS. — (ERNEST BRANDON ET AL., INTERVENING PLAINTIFFS; LEONARD E. HANDMACHER ET AL., PETITIONERS-APPELLEES,

v.

THE HOSPITAL SERVICE CORPORATION ET AL., RESPONDENTS-APPELLANTS.)



APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.

JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:

Defendants appeal from the trial court's award of attorney fees for plaintiffs and intervenors in a settled class action suit. The issue for review is that the trial court abused its discretion in awarding substantial attorney fees and incorrectly applied the factors which should be components of a fee award. The pertinent facts follow.

Plaintiff filed this action on June 12, 1974, on behalf of subscribers who purchased coverage from defendants under separate health plans providing duplicate or overlapping medical and hospital benefits. The complaint alleged that premiums were paid by plaintiff, or on his behalf, on the separate duplicative certificates and subscriptions. It was plaintiff's contention that retention of these duplicate premiums in light of defendants' "Coordination of Benefits" (COB) policy constituted unjust enrichment and violated Illinois insurance laws. The complaint further alleged that defendants "controlled, dominated or monopolized" the group insurance market in Illinois in the field of hospital and medical expense indemnity insurance in violation of the Illinois Antitrust Act (Ill. Rev. Stat. 1969, ch. 38, par. 60-1 et seq.).

On December 26, 1974, Ernest and Katie Brandon were granted leave to file their intervening complaint. This action alleged that the intervenors represented a subclass within the plaintiff class consisting of husbands and wives who were each covered by family benefits provisions of each other. They contended that the duplicative or overlapping coverage resulted in duplicative premiums for which refunds were requested.

During discovery, plaintiff acquired knowledge that defendants had a program for refund of premiums in at least eight categories. *fn1 As a result, plaintiff filed an amended and supplemental class action complaint alleging pro-rata refunds of premiums were due to those subscribers whose coverage had ended as defined by the eight categories. Plaintiff stated that defendants would make refunds on request, but had not taken any affirmative steps to inform eligible subscribers of their right to a refund of these "unearned premiums."

In August 1978, while motions for summary judgment were pending, the parties reached an agreement settling the lawsuit. The stipulation of settlement provided in pertinent part:

(1) to refund the premiums paid by class members under coordination of benefits provisions unless the governing certificate contained a COB rider:

(2) to coordinate benefits in the future only after it has been explained in non-technical language;

(3) to refund "unearned premiums" to the six subclasses of certificate and subscription holders and to set forth in all certificate and subscription forms issued after July 1, 1979, the categories, circumstances and conditions under which defendants would make refunds of unearned premiums;

(4) for the appointment of a special trustee to administer the program;

(5) for notice to the class; and

(6) payment of costs and attorney fees by defendants without deduction from the refunds to the classes.

In January 1980, counsel for plaintiff and intervenors filed their petition for attorney fees and costs. Neither counsel kept contemporaneous records of time spent on this matter, but they did reconstruct their time in schedules filed with the court. At the hearing on fees and costs, Alvin R. Becker, an attorney with extensive experience in class action litigation, testified on behalf of plaintiff and intervenors. He indicated that the fairness and reasonableness of the settlement and the benefits to the class justified an award of substantial legal fees. He stated that from his reading of the pleadings, motions for summary judgment, the size of the file and the hours expended, as well as the contingency of the recovery element, that this was a very complex case which should be considered in determining the amount of the multiplier. He believed $150 an hour was a reasonable hourly rate, and that the multiplier of definitely "3" should be applied up to the point of approval of the class action settlement by the court.

After the hearing, the court allowed counsel for plaintiff 1261 hours and intervenor's counsel 720 hours; 25 of the hours recorded by plaintiff's counsel were disallowed and 14 hours of the hours recorded by intervenors' counsel were disallowed. The court found that $150 an hour was a fair, adequate and reasonable rate and awarded $931,000 to plaintiff's counsel and $692,700 to intervenors' counsel on the basis of the "significant and substantial benefit * * *" of revised and simplified insurance contract forms ...


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