The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
This action, like the world in T.S. Eliot's The Hollow Man, has ended
"not with a bang but a whimper." Plaintiffs have never generated a
complaint that has survived a motion to dismiss. Under the agreed-upon
settlement, which this Court approved at the scheduled hearing August 9,
1982, plaintiffs' counsel have the right to seek an attorneys' fee award
for services rendered not only in this action but in a group of related
actions*fn1 —not one of which has been successful on the merits.
Nonetheless plaintiffs' counsel argue plaintiffs are "prevailing
parties" in the sense necessary for an allowance of fees. In that respect
they have pointed to three things (P1. Mem. 14):*fn2
1. Settlement has produced a $150,000 cash fund to
"satisfy all of petitioners' fee requests which
might otherwise be taxable to Xcor."
2. Louis Nicastro ("Nicastro"), James Hughes
("Hughes") and William O'Brien ("O'Brien"), who were
respectively Xcor's Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer when
this action was filed, have been "removed and
replaced as Xcor's chief officers."
3. Xcor has created an independent Special
Committee that "can now review the entire situation
and take any action it finds appropriate, including
continuation of these actions by Xcor itself."
It is true that the $150,000 cash fund, available for payment of fees
if and to the extent this Court awards them, is being put up by
officer-director defendants and not by Xcor. That does not however make
plaintiffs "prevailing parties" except through an impermissible kind of
Lawsuits can hardly be viewed as successful from the plaintiffs'
perspective if their principal result is to generate not any recovery for
plaintiffs, but rather funds out of which plaintiffs' lawyers get paid.
Xcor itself laid no claim to the fund under the settlement agreement. It
was only in response to this Court's direct inquiry that the parties
acknowledged that if the Court so determined, the unawarded portion of
the $150,000 fund could (as in this Court's view it most logically
should) go into the corporate coffers. And even on that score we are
confronted with the anomaly that the more that factor is viewed as making
plaintiffs "prevailing parties," the more could presumably be awarded as
attorneys' fees, and the less would remain for Xcor's
shareholders—thus making plaintiffs less viewable as "prevailing
In the determination of "prevailing parties," then, generation of the
cash fund is not really a factor unless other significant factors are
also present that independently make plaintiffs prevailing parties. At
most the fund provides a sort of self-fulfilling self-justification
that, unless plaintiffs' counsel are successful on their other
arguments, cannot be given real weight.*fn3
"Removal" of the Challenged
Defendants' response to plaintiffs' fee application is very brief,
addressing not all what defendants term "at best [plaintiffs'] exercise
in revisionist history" (Def. Mem. 1)*fn4 They do however challenge the
contention that Messrs. Nicastro, Hughes and O'Brien were "removed" from
their offices. Instead defendants say (id. at 2-3):
None of these executives was "removed" from their
Xcor positions. None of these executives was
"removed" or terminated by Xcor as a result of this
litigation or otherwise. Messrs. Hughes and O'Brien
voluntarily resigned as Xcor's President and Chief
Operating Officer and Executive Vice
President-Finance respectively, and thereafter
accepted other positions with Xcor; both continue as
directors of Xcor. Mr. Nicastro voluntarily resigned
as an officer and director of Xcor, to enable him to
undertake the position as President, Chief Executive
Officer and Chairman of the Board of another public
company. None of these executive resignations was
stimulated or caused by the instant litigation.
At the Court's request during the hearing on the settlement, defendants
agreed to elaborate on that assertion. Appendix 1 to this opinion is the
letter counsel then filed for that purpose. Plaintiffs' counsel responded
at the hearing that rather than committing time and expense to further
hearings, they desired the Court to make its own ...