APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION
January 17, 1996
DOMINIC F. SHORTINO AND VALERIE JOHNSON, INDIVIDUALLY AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS, AND BUSINESS AND PROFESSIONAL PEOPLE FOR THE PUBLIC INTEREST, THE MIDLAND HOTEL CORPORATION, ET AL., INTERVENING PLAINTIFFS/APPELLEES/CROSS-APPELLANTS,
ILLINOIS BELL TELEPHONE COMPANY, A CORPORATION, DEFENDANT-APPELLEE, AND THE ESTATE OF SIDNEY Z. KARASIK, APPELLANTS/CROSS-APPELLEES, AND LEONARD E. HANDMACHER AND SEYMOUR SCHRIAR, CROSS-APPELLEES.
Appeal from the Circuit Court of Cook County. HONORABLE Sophia Hall, Judge Presiding.
As Corrected January 17, 1996.
The Honorable Justice Cerda delivered the opinion of the court:* O'brien, J., Concurs. Zwick, J. Dissents.
The opinion of the court was delivered by: Cerda
The Honorable Justice CERDA delivered the opinion of the court:
This is a cross-appeal from a circuit court judgment awarding attorney fees to attorneys Leonard Handmacher and Seymour Schriar in a class action. The history of the underlying case is documented in Shortino v. Illinois Bell Telephone Co. (1990), 207 Ill. App. 3d 52, 565 N.E.2d 170, 151 Ill. Dec. 899.
Intervening plaintiffs, Business and Professional People For the Public Interest, the Midland Hotel Corporation, Eugene Pekow, Kathryn Tholin, and Ron Stevens, objected to the attorney fees as excessive and based on an erroneous legal standard. The only attorney fees at issue in this cross-appeal are those of attorneys Handmacher and Schriar. The objectors assert that (1) the trial court violated the legal standards established in Fiorito v. Jones (1978), 72 Ill. 2d 73, 377 N.E.2d 1019, 18 Ill. Dec. 383, by failing to determine the reasonableness of the hours claimed and the hourly rate requested by attorneys Handmacher and Schriar; (2) the trial court violated the legal standards established in Fiorito and Waters v. City of Chicago (1981), 95 Ill. App. 3d 919, 420 N.E.2d 599, 51 Ill. Dec. 185, by placing the burden of proof on the objectors; and (3) the trial court's fee award was not supported by the record. For the following reasons, we affirm the number of hours expended, but reverse the $350 hourly rate and remand this case for the trial court to conduct a hearing to determine a reasonable lower hourly rate.
Class counsel, including Handmacher and Schriar, filed a fee petition and legal memorandum requesting $7.5 million in attorney fees based on 25% of the common fund. Following several objections by intervening plaintiffs and other plaintiff class members, the trial court ordered class counsel to submit detailed documentation of tasks performed and hours expended. Ultimately, class counsel submitted an "Amended Statement of Tasks," which describes general tasks with each attorney's hours for that task. In addition, Handmacher and Schriar submitted affidavits stating the number of hours they expended.
Relying on Fiorito, 72 Ill. 2d 73, 377 N.E.2d 1019, 18 Ill. Dec. 383, the trial court rejected the percentage-based attorney fees award sought by class counsel and analyzed the fee request on a lodestar basis. The trial court awarded $1.5 million in fees to Handmacher and Schriar, which was based on a $350 hourly rate for all hours claimed with a multiplier of two.
The objectors' first issue on appeal was waived. The manner of Handmacher and Schriar's time records is not at issue because the objectors were given the opportunity to inspect the time records on which the summary was based, but declined to do so. They made no objection relating to the manner of the claimed hours. ( Burke v 12 Rothschild's Liquor Mart (1992), 148 Ill. 2d 429, 437, 593 N.E.2d 522, 170 Ill. Dec. 633; People v. Enoch (1988), 122 Ill. 2d 176, 188, 522 N.E.2d 1124, 119 Ill. Dec. 265; Tokar v. Crestwood Imports, Inc. (1988), 177 Ill. App. 3d 422, 434, 532 N.E.2d 382, 126 Ill. Dec. 697; Waters, 95 Ill. App. 3d at 925, 420 N.E.2d 599.
At the June 28, 1992, fee hearing, the objectors did not question the veracity of Handmacher and Schriar's time entries or affidavits. They merely challenged whether the hours claimed were duplicative of attorney Karasik's hours. The objectors declined to sample Handmacher and Schriar's entries even though they were allowed and encouraged to do so.
The objectors next argue that the number of hours claimed by Handmacher and Schriar for specific tasks are excessive and the trial court improperly placed the burden of proving reasonableness on the objectors rather than on those requesting the fees. That issue is also waived.
Finally, the objectors argue that the trial court awarded the $350 per hour fees based on the lack of evidence from the objectors rather than on a finding that the fee was reasonable. The objectors contend that they objected to the $350 per hour across-the-board fee as being unreasonable because it violates Fiorito's requirement that the hourly rate must reflect the nature of the tasks performed. The objectors indicate that Handmacher and Schriar presented no evidence of the reasonableness of the $350 per hour fee nor did they show that attorneys of similar experience, skill, and qualification customarily charge $350 per hour for such services, which included Shephardizing citations, doing basic factual and legal research, filing and serving notices of depositions, and conducting basic discovery. The objectors argue that the typical class action case involves a litigation team of lawyers with different levels of experience, who are compensated at different hourly rates that are consistent with their experience and regular rates. As a result, the objectors conclude that different hourly rates should have been assigned to different tasks or a lower blended across-the-board rate should have been awarded to reflect the variety of tasks performed. We agree.
As to the reasonableness of the $350 hourly fee, the trial court cited the affidavits filed by Handmacher and Schriar testifying that they regularly charge $350 an hour. The court concluded as follows:
"Considering the experience of counsel as presented in the affidavits, the Court has no evidentiary basis upon which to reduce the requested hourly rate for Attorneys*** Handmacher [and] Schrier [sic].
Attorney Schrier [sic] spent 923.5 hours at $350.00 for a lodestar of $323,725. Attorney Handmacher spent 1213 hours at $350.00 for a lodestar of $424,550."
The court then awarded a multiplier of two, thus awarding Schriar $647,450 in attorney fees and Handmacher $849,100 in attorney fees.
In determining reasonable attorney fees in class action common fund cases, the trial court first determines the lodestar, which is the multiplication of the hours properly spent on the case by a reasonable hourly rate of compensation for the attorneys involved. ( Fiorito, 72 Ill. 2d at 90, 377 N.E.2d 1019.) The trial court is not only to inquire into the total hours expended which benefited the unnamed class members, but also to determine in what manner the time was expended (e.g., court appearance, research, writing, discovery) and by whom (e.g., senior or junior partners, associates or law clerks). ( Fiorito, 72 Ill. 2d at 89, 377 N.E.2d 1019.) In considering the number of hours expended by the attorneys, the trial court disallows time spent that did not benefit the class members ( Fiorito, 72 Ill. 2d at 89, 377 N.E.2d 1019), then makes an independent determination whether the hourly total is reasonable.
Once the court has determined the number of hours that benefit the class, it must then value the services by fixing a reasonable hourly rate for each attorney, taking into account the nature of the services performed, the complexity of the undertaking, and the hourly fee charged for similar services by attorneys with similar skills and qualifications. ( Fiorito, 72 Ill. 2d at 90, 377 N.E.2d 1019; Leader v. Cullerton (1976), 62 Ill. 2d 483, 491-92, 343 N.E.2d 897.) The factors to be considered are: (1) time expended; (2) attorney's skills and qualifications; (3) magnitude and complexity of the undertaking; (4) benefit conferred on the class; (5) contingent nature of fee; and (6) amount of prior governmental action in support of the class. Leader, 62 Ill. 2d at 489, 343 N.E.2d 897.
The court must carefully weigh the attorney's experience and expertise and whether the hours claimed and tasks performed are reasonable in relation to the time required by other attorneys to complete similar activities. ( Fiorito, 72 Ill. 2d at 89, 377 N.E.2d 1019.) If the hours claimed are the result of unnecessary, duplicative work efforts or inefficiency, the court must reduce the excessive hours claimed. ( Fiorito, 72 Ill. 2d at 89, 377 N.E.2d 1019; Leader, 62 Ill. 2d at 490-91, 343 N.E.2d 897.) The court may award hourly rates that differ according to the categories of services rendered. Fiorito, 72 Ill. 2d at 90, 377 N.E.2d 1019.
The appropriate hourly rate is then multiplied by the hours expended. The hourly rate, multiplied by the allowable hours, is called the lodestar computation because it provides the point of orientation for determining the final fee award. Fiorito, 72 Ill. 2d at 90, 377 N.E.2d 1019.
The lodestar computation can then, at the trial court's discretion, be adjusted by a multiplier. ( Langendorf v. Irving Trust Co. (1992), 244 Ill. App. 3d 70, 80, 614 N.E.2d 23, 184 Ill. Dec. 822; Waters, 95 Ill. App. 3d at 926, 420 N.E.2d 599.) The multiplier of two has not been challenged in this cross-appeal.
The party seeking to recover attorney fees bears the burden of presenting sufficient evidence from which the trial court can render a decision about their reasonableness. ( Harris Trust & Savings Bank v. American National Bank & Trust Co. (1992), 230 Ill. App. 3d 591, 595, 594 N.E.2d 1308, 171 Ill. Dec. 788.) Once the records are submitted by the attorney and the trial court determines an hourly rate, the burden shifts to the challenger to rebut the reasonableness of the fees awarded. Fiorito, 72 Ill. 2d at 93, 377 N.E.2d 1019.
A reviewing court does not conduct a de novo review of the fee petition to allow objectors a second opportunity to disprove reasonableness but will confine its review to determining whether the trial court abused its discretion in awarding the fees. ( Lurie v. Canadian Javelin Ltd. (1982), 93 Ill. 2d 231, 239, 443 N.E.2d 592, 66 Ill. Dec. 666; Langendorf, 244 Ill. App. 3d at 81, 614 N.E.2d 23; Harris Trust & Savings Bank, 230 Ill. App. 3d at 598, 594 N.E.2d 1308.) However, where the record is not specific as to what factors the trial court deemed important in making the award, there can be no basis for adhering to the rule of discretion. ( Board of Commissioners v. County of Will (1987), 154 Ill. App. 3d 395, 400, 506 N.E.2d 1044, 107 Ill. Dec. 153.) A court of review will not hesitate to reduce the attorney fees awarded if its opinion is that the fees are unreasonably high. Leader, 62 Ill. 2d at 488, 343 N.E.2d 897.
In this case, the trial court found that the $350 per hour fee was reasonable based on the attorneys experience before shifting the burden for the objectors to show that the fee was unreasonable. There were no factors listed in the decision other than the attorneys' general experience. Different hourly rates should have been assigned to different tasks. Just because an experienced attorney is paid $350 per hour while appearing in court, he or she should not also be paid $350 per hour for tasks that could easily be done by junior attorneys, law clerks, paralegals, or secretaries at a lower hourly rate. Three-hundred fifty dollars per hour for each and every task is unreasonably high. Thus, we reverse the $350 hourly rate and remand this cause to the circuit court for a hearing to determine a reasonable rate lower than $350 per hour.
We are aware that during the pendency of this appeal, our supreme court issued its opinion in Brundidge v. Glendale Federal Bank, F.S.B. (Ill. S. Ct. Nov. 22, 1995), No. 78132. In Brundidge, Justice McMorrow, writing for a unanimous court, held that a trial judge is vested with discretionary authority to choose the "percentage-of-the award method" or the "lodestar method" when determining the amount of fees to be granted plaintiff's counsel in common fund class action litigation. Brundidge, (Ill. S. Ct. Nov. 22, 1995), No. 78132, slip op. at 7.
We recognize that the fees awarded here represent merely approximately 5% of the common fund. However, prior to Brundidge, Illinois trial courts could not utilize the "percentage-of-the award method" in determining attorney fees. This court, sitting in review, does not share the discretion vested in the circuit court as the finder of fact. For that reason, we decline to affirm the trial court's judgment here on the basis that it represents an acceptable percentage-based award of attorney fees. Such a decision more properly rests within the trial court's discretion. See Brundidge, (Ill. S. Ct. Nov. 22, 1995), No. 78132, slip op. at 7-8.
We, therefore, affirm the trial court's decision as to the number of hours expended; reverse that portion of the trial court's order approving a flat $350.00 hourly rate; and remand the case to the circuit court consistent with the above ruling and the precepts announced in Brundidge.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
* O'BRIEN J., CONCURS.
ZWICK, J. DISSENTS.
The Honorable Justice ZWICK dissenting in part and concurring in part:
I cannot agree with the majority's conclusion that the trial court abused its discretion in awarding an across-the-board hourly rate of $350 to attorneys Handmacher and Schriar. The court's opinion in Fiorito, upon which the majority relies, states only that the a trial court may award different hourly rates according to the categories of services performed, not that the trial court must do so. ( Fiorito, 72 Ill. 2d at 90; see also Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp. (3d Cir. 1973), 487 F.2d 161, 167.) I know of no precedent, and neither the objectors nor the majority have cited any, which requires that the trial court choose between awarding differing hourly rates to an attorney or paralegal based upon the nature of the specific tasks he or she has performed or face reversal by a reviewing body.
To require the trial court to assess a specific value for each task performed in the preparation of this case places an oppressive burden on both the litigants and the trial court. The majority also creates an onerous precedent for future lodestar calculations in common fund cases. Under the court's decision today, each lawyer, clerk and paralegal must now, of necessity, have a separate hourly billing rate for each of the many types of tasks he or she performs. Expensive and time-consuming court hearings are now required to prove the dollar value assigned each type of task so that a sufficient record is generated to support a possible challenge to court-awarded fees. It is not inconceivable that in some cases the hours spent on bill preparation and fee litigation may rival the hours spent on traditional lawyer work.
The fundamental flaw in the majority's analysis is the conclusion drawn from the observation that a typical general fund case such as this involves "a team of lawyers," each billing at different hourly rates. From this general observation the majority seems to conclude that it is always more efficient for attorneys to handle complex litigation in this way. I am not convinced that a court of review is in the best position to determine the optimum delegation of work in cases such as this. Changing the way the work was delegated here would certainly not have improved the impressive results achieved by attorneys Handmacher, Schriar and their co-counsel Sidney Karasik. Bringing additional lawyers or paralegals into this litigation may well have increased the overall fees required in light of the overhead associated with additional personnel, the complexity of the issues presented and the additional burdens associated with supervising a larger litigation team. Cf. Beverly Bank v. Board of Review of Will County (1989), 193 Ill. App. 3d 130, 550 N.E.2d 567, 140 Ill. Dec. 682 (trial court erred in reducing the hourly rate of certain attorneys because of the small size of their law firms).
Despite the majority's declaration that the record is not specific as to what factors "the trial court deemed important in making the award," evidence offered at the fee hearings showed that an hourly rate of between $250 and $450 represented appropriate compensation for the overall services performed by Handmacher and Schriar. I am simply at a loss to understand why the majority has rejected an hourly rate of $350, a figure which already represents a "blended" rate. An overall award of $350 per hour for litigation this complex is not a clear abuse of discretion.
It is well-settled law that it is improper to reverse the trial court's award of attorney fees unless the trial court's award is manifestly or palpably erroneous. ( In re Estate of Marks (1979), 74 Ill. App. 3d 599, 393 N.E.2d 538, 30 Ill. Dec. 502.) In Board of Commissioners v. County of Will (1987), 154 Ill. App. 3d 395, 107 Ill. Dec. 153, 506 N.E.2d 1044, a case cited and relied upon by the majority, the court noted that, once an attorney has put forth evidence of a reasonable fee, "the court must provide reasons justifying [a] particular cut in [the] hours or fees imposed." ( Board of Commissioners, 154 Ill. App. 3d at 400.) The objectors put no evidence in the record which would convincingly counter the fee claim of either Handmacher or Schriar. Cf. Board of Commissioners, Bollingbrook Park District v. County of Will (1987), 154 Ill. App. 3d 395, 506 N.E.2d 1044, 107 Ill. Dec. 153.
I am, however, in agreement with the majority's decision to remand this matter to the trial court in light of the supreme court's recent decision in Brundidge. The trial court should be given the opportunity to consider de novo the question of how fees should be awarded now that the supreme court has again placed the percentage-of-recovery arrow in the trial court's fee-resolution quiver. A different method of computing the fee award may be more equitable in this case in light of the fact that the compensation for the attorneys generated by the lodestar represents less than 5% of the class fund. My review of the record shows this to be an extremely modest fee award in light of the extraordinary benefit conferred upon the class by the professional and skillful work of the attorneys.