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08/08/95 MARTIN RYAN v. CITY CHICAGO

August 8, 1995

MARTIN RYAN, ET AL., PLAINTIFFS-APPELLEES, CROSS-APPELLANTS,
v.
THE CITY OF CHICAGO, A MUNICIPAL CORPORATION, FIREMAN'S ANNUITY AND BENEFIT FUND OF CHICAGO, DEFENDANTS-APPELLANTS, CROSS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Richard L. Curry, Judge Presiding.

Petition for Leave to Appeal Denied January 31, 1996.

The Honorable Justice Hartman delivered the opinion of the court: Scariano, P.j., and DiVITO, J., concur.

The opinion of the court was delivered by: Hartman

JUSTICE HARTMAN delivered the opinion of the court:

These consolidated appeals arise from a lawsuit brought against the City of Chicago (City) by four pension funds: Firemen's Annuity and Benefit Fund (Firemen's Fund); Policemen's Annuity and Benefit Fund; Municipal Employees', Officers', and Officials' Annuity and Benefit Fund; and the Laborers' and Retirement Board Employees' Annuity and Benefit Fund, based upon the City's retention for its own use of certain pension fund monies. In Ryan v. City of Chicago (1986), 148 Ill. App. 3d 638, 499 N.E.2d 517, 101 Ill. Dec. 929, appeal denied (1987), 113 Ill. 2d 585 (Ryan I), this court held that the City had improperly retained for its own benefit the profits it had made upon tax receipts it collected for the pension funds. We ordered full restitution "of all earnings upon withheld funds, whether retrospective or prospective." Ryan I, 148 Ill. App. 3d at 646.

On remand, the parties agreed to a judgment in the amount of$19,324,131.38, representing simple interest which the City had earned and withheld from the pension funds. The City and three of the funds (Settling Funds) then settled on additional damages representing compound interest. The circuit court awarded the Firemen's Fund $3,072,943.43 in compound interest and incentive awards of $10,000 each to two of the fund's participant plaintiffs. The court also awarded the Firemen's Fund's attorneys $1,993,742.35 in fees calculated as a fixed percentage (33 1/3%) of that fund's total recovery.

The City appeals the compound interest award to the Firemen's Fund; the Firemen's Fund appeals the award of attorneys' fees as well as the incentive awards; and plaintiffs appeal from the denial of their motion seeking additional fees from the City for fiduciary breach and from the court's refusal to award attorneys' feesfor certain work done for the Settling Funds.

In order to comply with recently adopted page limitations set forth in Supreme Court Administrative Rule MR No. 10343, which accompanied amended Supreme Court Rule 23, (134 Ill. 2d R.23 (amended eff. July 1, 1994)), the written disposition in this appeal will be bifurcated into this opinion, to be published, and an unpublished Rule 23 order disposing of the remaining, nonprecedential issues, filed contemporaneously with this opinion.

The following issues are raised for our review. Their disposition, whether by this opinion or by Rule 23 order (R.23) are designated in parenthesis. The issues include: (1) whether the circuit court erred in awarding Firemen's Fund compound interest (opinion); (2) assuming the compound interest award was proper, whether the circuit court erred in calculating the award (opinion); (3) on Firemen's Fund's appeal, whether the circuit court erred in awarding attorneys' fees as a fixed percentage of the fund's recovery (opinion); (4) on Firemen's Fund's appeal, whether the circuit court abused its discretion in awarding lodestar-based attorneys' fees and costs without findings in the record as to the reasonable number of hours expended by counsel and counsel's reasonable hourly rate (R.23); (5) on Firemen's Fund's appeal, whether the circuit court erred by utilizing a lodestar risk multiplier in awarding attorneys' fees (R.23); (6) on Firemen's Fund's appeal, whether the circuit court erred in awarding attorneys' fees and expenses incurred in connection with the instant fee litigation (R.23); (7) on Firemen's Fund's appeal, whether the circuit court abused its discretion in granting incentive awards to certain plaintiffs (R.23); (8) on plaintiff's appeal, whether the circuit court erred in refusing to award additional attorneys' fees for certain work done for the Settling Funds (R.23); and (9) on plaintiffs' appeal, whether the circuit court erred in denying their motion for an additional award of fees against the City for fiduciary breach (opinion).

In Ryan I, this court ordered the City to make full restitution to four municipal pension funds after finding that the City improperly withheld tax receipts from the funds, placed those receipts in interest-bearing accounts, and retained the interest generated for its own purposes. ( Ryan I, 148 Ill. App. 3d at 638.) On February 15, 1989, the parties agreed to a partial judgment whereby the City would pay the funds $19,324,131.38 representing the principal amount of simple interest income earned by the City's use of pension tax revenues. The parties could not agree, however, about whether the funds were entitled to additional compensation representing the interest that would have been earned on the $19.3 million dollar judgment had the City immediately paid it to the funds when it was generated rather than pursuant to the 1989 judgment. The City eventually settled this question with all the pension funds, except Firemen's Fund, for $10,383,122.60, representing "compound interest restitution and attorneys' fees."

The issues concerning the additional damages that the City owed Firemen's Fund were extensively briefed by the parties and on May 8, 1991, the circuit court ruled that Ryan I required the City to make full restitution to the funds in order to remedy the breach of its fiduciary duty. Accordingly, the court granted plaintiffs' motion for full compound interest fiduciary restitution upon the City's earnings from use of the pension tax levies. The court ordered the City to pay Firemen's Fund full compound interest computed at the rates earned by the fund upon its investments generally.

On October 7, 1991, the circuit court entered a $2,930,875.82 judgment in favor of Firemen's Fund for compound interest upon the fund's recovery under the February 15, 1989 partial judgment and granted incentive awards of $10,000 each to plaintiffs Walter Rucinski and Bernard McKay out of the fund's recovery. The judgment was later amended and increased to $3,072,943.43. The court placed this judgment money into escrow pending final resolution of the attorneys' fees issues.

Following this ruling, the circuit court considered further a fee dispute between Firemen's Fund and attorney Clinton Krislov, who acted as lead counsel for plaintiffs throughout this litigation. On May 28, 1992, Krislov filed a petition for attorneys' fees and costs, requesting $2.2 million from Firemen's Fund, arguing the amount was justified under either a "percentage of recovery" approach or a "lodestarbasis." *fn1 Krislov's petition further requested $350,000 from the Settling Funds for work done after May 21, 1990 *fn2, an additional award against the City to reimburse Firemen's Fund for its fees and a fee based upon an appropriate percentage of any additional award against the City.

On September 25, 1992, the circuit court granted Firemen's Fund's motion to strike the portion of Krislov's fee petition related to the instant fee litigation as well as its motion to strike the fee request of one attorney. The court denied, however, Firemen's Fund's motion to strike: the request for a percentage of recovery as attorneys' fees, improper time entries, current rates for historic work, and consideration of projected income or recovery. On November 17, 1992, Krislov revised his lodestar analysis by eliminating 570 hours connected with fee litigation. According to the revision, the overall lodestar was reduced to $1,136,629.62 with Firemen's Fund's 35% share being $397,820.

On December 14, 1992, the circuit court issued an opinion and order vacating its September 25 ruling striking Krislov's request for attorneys' fees and expenses incurred in connection with the fee dispute. Finding a meaningful lodestar analysis of Krislov's fees to be "nigh impossible," "unworkable in this case," and stating that "the findings could never be based on anything other than conjecture, surmise, intuition or gut feelings," the court adopted a percentage-of-the-fund method and awarded Krislov $1,993,742.35 as a 33 1/3% fee from the $5,981,227.05 benefit conferred upon Firemen's Fund. For comparative purposes only, the court also found the fee supported by an approximate lodestar analysis based on 5000 hours, a $175/hour rate and a 2.1 multiplier. The court also denied Krislov's requests: for consideration of the present value of the future benefits, for a penalty award against the City for breach of fiduciary duty, for any fees for post-May 21, 1990 services rendered to the Settling Funds, and for interest on fees or incentive awards.

On February 16, 1993, the circuit court granted Krislov's motion for modification of costs, thus increasing his recovery by $45,713.86. The court also granted Krislov's request to correct the court's comparative lodestar analysis by allocating 35% of the lodestar work to Firemen's Fund's claim and ...


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