Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


February 18, 1993


The opinion of the court was delivered by: JOHN F. GRADY


 This class action was concluded on the merits in 1987, but the question of fees for class counsel has still not been resolved. The most recent development is an order of the Seventh Circuit Court of Appeals issued on January 21, 1993, directing me "to issue within 30 days of today an order setting forth a procedure and timetable for resolving this matter by the entry of a final fee award within 120 days of today." In the Matter of Continental Illinois Securities Litigation, No. 92-4088, at 4 (7th Cir. Jan. 21, 1993). The purpose of this opinion is to comply with that direction. In order to understand what follows, some background is necessary.

 The four cases were consolidated, and it was apparent that there was no need for the large number of plaintiffs' lawyers who had filed appearances in the four separate cases. Several disputed matters had to be decided before I could certify a class, but pending class certification, I entered an order on June 21, 1983, establishing guidelines that would govern any eventual award of attorneys fees. I also suggested to counsel that they attempt to agree among themselves who would be designated class counsel. See In re Continental Illinois Securities Litigation, 572 F. Supp. 931 (N.D. Ill. 1983). At that time, there was no doubt in anyone's mind that the "lodestar" method would be used to determine fees. I knew the time spent on the case would be substantial and that accurate and descriptive records of the work done by the attorneys would be essential to a lodestar determination. The order specified a number of techniques for avoiding duplication of effort and for keeping records of activity in a way that would facilitate a determination of whether the particular work was necessary and the time claimed was reasonable. See id. at 933-35. Two of these procedures, relating to legal research and lawyer conferences, are of particular relevance for present purposes:

The description of the work done should be sufficient to demonstrate that it benefitted the class or contributed to the recovery of the common fund. Notations such as "research re class action" will not suffice. The particular question researched should be described. Much of the narrative in most fee petitions consists of entries like "conference with GBS re motion to compel." As indicated above, such "conferences" should be held only when necessary, which should not be very often. But in no event would that kind of entry be sufficient to show the conference was necessary and productive. There should be a statement, albeit very brief, of specifically what was discussed and what conclusion was reached. Should such a statement necessarily include privileged information (which seems unlikely, since it will be submitted at the end of the case), it may be submitted in camera.

 Id. at 934-35. I did not consider this an academic exercise. I had seen enough "legal research . . . 2.5 hours" type entries in lawyers' time records to know how common they are, and I knew from experience with fee petitions how useless such entries are as an indication of what was done and how long it should have taken. My purpose in entering the order early in the case was to give fair notice to counsel as to what would be needed, so that they could keep their time records accordingly. No complaint was made about the order, and I had no reason to think counsel were not complying with it.

 Counsel did not agree on who should represent the class and spent considerable time accusing each other of greed, incompetence, and disloyalty to the class. On November 27, 1984, appointed Lawrence H. Eiger (now deceased), James F. Fornari, Nicholas E. Chimicles, and Lawrence Walner to represent the class and authorized them to enlist the services of lawyers and paralegals from their firms when necessary. In a notice to the class, counsel agreed that in no event would their fees exceed $ 9 million.

 The case proceeded to a $ 25 million settlement with Continental, a $ 13 million settlement with various insurance carriers on behalf of officers of Continental, and an unsuccessful 18 week jury trial of the claim against Ernst & Whinney. The $ 38 million settlement fund had the benefit of the high interest rates that were available at the time, so that the total amount on deposit by the end of 1989 was $ 45 million.

 Class counsel then presented their fee petition. It sought the full $ 9 million based on 41,955 hours in attorney and paralegal time. The attorney time was organized into 284 categories of work. Unfortunately, the time was not broken down or described in the manner I had specified in my earlier order, and the bulk of the entries consisted of the kind of vague references I had tried to avoid by that order. In my ruling on the fee petition I described in detail the difficulties I had with the attorney time and will not repeat the description here. See In re Continental Illinois Securities Litigation, 750 F. Supp. 868, 878-85, 896-900 (N.D. Ill. 1990). Some categories of attorney work stood out as excessive; the time entries in most categories defied analysis because of their vagueness. The thousands of hours in paralegal time were mostly described as "organizing files," or "reviewing," "indexing," or "filing" materials that were not specifically identified. Id. at 891.

 At that point, I had to devise a method for determining a fee despite the insufficiencies of the petition. The easiest thing to have done would have been to disallow all time that petitioners had not demonstrated to be reasonable. It is clear that the applicant for a fee has the burden of establishing the reasonableness of the number of hours and the hourly rate claimed. See Hensley v. Eckerhart, 461 U.S. 424, 437, 76 L. Ed. 2d 40, 103 S. Ct. 1933 (1982); see also Blum v. Stenson, 465 U.S. 886, 897, 79 L. Ed. 2d 891, 104 S. Ct. 1541 (1983). The Seventh Circuit has noted that a judge "may eliminate hours that are not documented in sufficient detail." Tomazzoli v. Sheedy, 804 F.2d 93, 98 n.5 (7th Cir. 1986). On the other hand, it was obvious that counsel had spent considerable time on the case and that an order disallowing all hours not adequately documented would deprive them of compensation for most of that time. I could think of no satisfactory solution but adopted an approach that was highly favorable to the petitioners:

In an effort to be as fair as possible to petitioning attorneys, I will disallow hours only where I am convinced the time is excessive or that the time did not significantly benefit the class. I will resolve moderate doubts in favor of petitioners, which means that an enormous amount of time evidenced only by vague entries will be approved. Most categories will survive intact as far as the number of hours is concerned, and I will discuss only those categories where I order a reduction. The reductions are in time spent on work I warned counsel would be subject to particular scrutiny: excessive time spent on legal research; too much time spent on "reviewing" the work of others; and too much time spent by counsel "conferring" with each other. In re Continental Illinois Securities Litigation, 572 F. Supp. at 933, 934-935. I have not disturbed the paralegal and law clerk time but have concentrated on the attorney time, which I find more susceptible to analysis.

 In re Continental Illinois Securities Litigation, 750 F. Supp. at 880 (footnote omitted).

 The next question was how to arrive at the appropriate reductions in those categories I could identify as clearly excessive. Several Seventh Circuit cases had approved percentage reductions, recognizing the difficulty of making a specific ruling on every individual time entry. I adopted the percentage approach, In re Continental Illinois Securities Litigation, 750 F. Supp. at 880, and made percentage reductions in 21 categories of work. Id. at 881-85, 896-900. I also reduced the rates claimed for paralegals. Id. at 889-93. A more recent Seventh Circuit case has reiterated the court's approval of percentage reductions. See Dutchak v. Central States Pension Fund, 932 F.2d 591, 597 (7th Cir. 1991) (percentage reduction affirmed on petition seeking lodestar of over $ 3 million).

 My fee order was filed on September 20, 1990. Two weeks earlier, in an unreported opinion of which I had not been aware, Judge James B. Zagel of this court had described an innovative procedure he uses to evaluate fee petitions:

In order to determine whether these hours are excessive I have closely examined, at the request of defendants, two specific areas of counsel's work -- the preparation of findings of fact and the summary judgment motion. It is my practice to conduct a close examination of two or three particular tasks performed by counsel claiming fees and to apply the findings made there to the remaining hours claimed. Counsel are informed of this practice and counsel opposing the fee is permitted to suggest the specific work that ought to be scrutinized. This sampling procedure operates on the reasonable premise that a lawyer's billing and work habits and practices are, in fact, habits and practices which will uniformly apply to all of the lawyer's work.

 Evans v. City of Evanston, 1990 WL 129603, at 1 (N.D. Ill. Sept. 5, 1990). Judge Zagel's order was affirmed on appeal with an express approval of the "sampling" approach:

Fee calculation is an imprecise science, and the numbers arrived at by a district court, figured to the last penny, may be seen by counsel and others to convey an Impression of exactness" that is illusory, even "delusive." . . .
Likewise the methodology used to calculate those figures, which represent no more than the learned guesses of district court judges, based on their extensive experience overseeing litigation and observing lawyers, as to how to go about determining what compensation an attorney deserves for her efforts in a given case. "There is no precise rule or formula for making these determinations," and a district court "necessarily has discretion" in choosing among the various alternative methods. Hensley v. Eckerhart, 461 U.S. 424, 436-37, 103 S. Ct. 1933, 1941, 76 L. Ed. 2d 40 (1983). So long as the method selected is not arbitrary and is likely to arrive at a fair fee, it will not be disturbed on appeal.
We are unable to conclude that the sampling technique employed by the district court in this case falls below this standard. As the district court correctly observed, a lawyer's work habits, while not immutable, are likely to be consistent for the duration of a case litigated over the course of a few years.

 Evans v. City of Evanston, 941 F.2d 473, 476-77 (7th Cir. 1991) (citations omitted).

 Meanwhile, the fee petitioners in this case took the fees I allowed but appealed my denial of the full amount they had claimed. The Seventh Circuit reversed my order in its entirety. See Matter of Continental Illinois Securities Litigation, 962 F.2d 566 (7th Cir. 1992). The portion of the opinion that is relevant to my compliance with the recent direction from the court concerns the determination of the number of ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.