ed washington.bmpBy Chris Palamountain and Brian Wong

A few months ago, we wrote about an interim decision in Plumbers Union Local No. 12 Pension Fund v. Ambassadors Group Inc., No. CV-09-214-JLQ, 2012 U.S. Dist. LEXIS 26232 (E.D. Wash. Feb. 28, 2012), in which Judge Quackenbush of the U.S. District Court, Eastern District of Washington was contemplating disciplinary action against class counsel for an attorneys’ fees, costs, and expenses request that included expenses for wine, first class airline tickets, and expensive hotel bills. You can read that previous blog here. Following class counsel’s response to Judge Quackenbush’s “Interim Memorandum” of February 2012, the Court recently issued an order – Plumbers Union Local No. 12 Pension Fund v. Ambassadors Group Inc., No. CV-09-214-JLQ, 2012 U.S. Dist. LEXIS 73297 (E.D. Wash. May 25, 2012) – indicating that it will sanction class counsel and reduce the lodestar in this matter.

Basis Of The Court’s Ruling

Clearly, class counsel’s submissions did nothing to allay Judge Quackenbush’s initial concerns. Reaffirming its “fiduciary role” vis a vis the settlement class, the Court identified five concerns that arose from the close look it took at class counsel’s petition for an award of attorneys’ fees, costs, and expenses. Id. at *3.

First, the Court scrutinized the number of hours class counsel expended for particular tasks. The Court determined that a maximum of 40 hours was justified for preparation of the Amended Complaint. The Court also found that the 135 hours billed by an attorney whose involvement in the case was limited to preparing final settlement papers was excessive, stating that “not more than 95 hours of attorney time should have been involved in the preparation and completion of the settlement documents and pleadings.” Id. at *4. Defense counsel will find these rulings helpful both because they set a benchmark by which time spent in other cases for preparing amended complaints and finalizing settlements may be evaluated, and because this holding supports arguments that it is not reasonable for an attorney unfamiliar with the case to pad the lodestar figure after a settlement in principle is achieved by spending large amounts of time completing the settlement. 

Second, the Court took similar issue with class counsels’ hourly rates, reaffirming the rule that “usually, the reasonable attorney hourly rates in the district of the litigation should be utilized.” Id. at *4. Judge Quackenbush held that “considering the nature and relatively limited extent of this litigation compared to other class actions,” the maximum hourly rates should run $500/hour for partners, $300/hour for associates, and $150/hour for paralegals. Counsel defending class actions in the Eastern District of Washington in particular will find this holding useful for establishing a ceiling for maximum hourly rates in other cases within the district. Defense counsel in all districts can make good use of Judge Quackenbush’s determination that “the work of [a] docket clerk is not appropriately considered in setting the lodestar for attorney compensation,” because such tasks “are part of a law firm’s normal overhead and should not be included in the lodestar calculation.” Id. at *5.

Third, Judge Quackenbush addressed the hundreds of thousands of dollars class counsel sought for investigatory work. The Court rejected class counsel’s argument that trial courts should not look behind the claimed expenses with the strongest language of the Opinion, stating: “I make no apology as the facts in this case establish, to my dismay after 32 years on the federal bench, that the misleading expense and disbursement claims by [class counsel]  in this and other cases require specific scrutiny by the court.” Id. at *7. Noting that subsequent submissions by class counsel revealed enormous discrepancies between the $223,000 originally claimed and the $114,000 “actually paid and disbursed,” the Court ordered class counsel to amend their claim for fees and expenses to reflect the amount actually disbursed to investigators.

Fourth, and most significantly, the Court focused on the expensive dinners and first class airline tickets also included in the fee petition. The Court noted that, following his issuance of the Interim Memorandum, class counsel withdrew the claim for reimbursement of a $400 dinner bill; however, class counsel continued to press for reimbursements of their first class airline tickets. Judge Quackenbush wryly noted that “[f]rom personal experience the Court knows that an attorney or judge can accomplish his or her work requirements while flying in the coach section of an aircraft.” Id. at *8-9. In rejecting the claim for these expenses, the Court held that “it is not appropriate for the persons who suffered the securities losses to pay for first class transportation.” Id. at *9. Judge Quackenbush ordered class counsel to submit an amended expense request that reflected the cost a coach class ticket purchased two weeks in advance. 

Fifth and finally, in light of these concerns, the Court turned to the issue of sanctions. Although class counsel framed the concerns raised by the Court as “mistakes,” particularly with regard to the expense reimbursements, the Court stated that it was “unable to find that these ‘mistakes’ were inadvertent or mere oversights.” Id. at *10. Based in part on the fact that one member of class counsel’s team had made similar misleading statements in at least two other fee petitions, Judge Quackenbush determined that a “pattern” was established, and that he intended to sanction class counsel by admonition or written reproval, a formal disciplinary proceeding under the Rules of the Court. Id. at *11. 

Implications For Employers

Judge Quackenbush’s decision is a case study for class action practitioners. It illustrates how settlement approval issues can be endangered by “issues” with the fee petitions of plaintiffs’ counsel.

The ruling is also gaining traction and circulation, perhaps as a ready exhibit to those who trumpet the abuses of class action lawyers who allegedly line their pockets at the expense of the class.