Steven Arkin v. Smith Medical Partners, LLC

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[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-11019
____________________
STEVEN ARKIN,
ANDERSON & WANCA,
Plaintiffs-Appellants,
WILLIAM P. SAWYER,
M.D., individually and as the representative of a
class of similarly-situated persons, et al.,
Consolidated Plaintiffs,
versus
PRESSMAN, INC.
Consolidated Plaintiff-Appellee,
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2 Opinion of the Court 21-11019
SMITH MEDICAL PARTNERS, LLC,
Delaware limited liability company,
H.D. SMITH, LLC,
Delaware limited liability company,
JOHN DOES 1-5,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:19-cv-01723-CEH-AEP
____________________
____________________
No. 21-11502
____________________
DR. STEVEN ARKIN,
a Florida resident, individually and as the
personal representative of a class of
similarly-situated persons,
ANDERSON & WANCA,
Plaintiffs-Appellants,
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21-11019 Opinion of the Court 3
WILLIAM P. SAWYER,
M.D., individually and as the representative
of a class of similarly-situated persons, et al.,
Consolidated Plaintiffs,
versus
PRESSMAN, INC.,
Consolidated Plaintiff-Appellee,
SMITH MEDICAL PARTNERS, LLC,
Delaware limited liability company,
H.D. SMITH, LLC,
Delaware limited liability company,
JOHN DOES 1-5,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:19-cv-01723-CEH-AEP
____________________
Before NEWSOM, TJOFLAT, and ED CARNES, Circuit Judges.
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4 Opinion of the Court 21-11019
TJOFLAT, Circuit Judge:
Dr. Steven Arkin and his counsel, Anderson + Wanca
(“Wanca”), appeal the District Court’s denial of their motion for
Wanca to receive a portion of the attorneys’ fees resulting from the
settlement of a class action lawsuit brought under the Telephone
Consumer Protection Act of 1991 (“TCPA”), 47 U.S.C. § 227.
Wanca, while not appointed as class counsel in this case, began the
chain of litigation that resulted in the settlement below and so con-
tends that it provided a substantial and independent benefit to the
class justifying a portion of the attorneys’ fees. While we do find
that Wanca has shown it provided one substantial and independent
benefit to the class, we affirm because Wanca’s prioritization of its
interests over the class’s interests throughout the Arkin litigation
forecloses the equitable relief Wanca seeks.
I.
On September 15, 2017, Smith Medical Partners (“Smith”)
sent an unsolicited fax to Dr. Arkin, a Florida resident and medical
doctor represented by Wanca at all times relevant to this appeal.
On September 26, 2017, Dr. Arkin filed suit in the Middle District
of Florida against Smith on behalf of a putative class of other per-
sons or entities who allegedly received “unsolicited advertise-
ments” by fax in violation of the TCPA (“Arkin I”). See 47 U.S.C.
§ 227(b)(1)(C) (“It shall be unlawful for any person within the
United States . . . to use any telephone facsimile machine, com-
puter, or other device to send, to a telephone facsimile machine,
an unsolicited advertisement.”). The parties then engaged in a
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21-11019 Opinion of the Court 5
discovery dispute which resulted in an order directing Smith to
produce “1,324 fax campaigns and logs for [Dr. Arkin’s] review”
and directing Dr. Arkin to provide Smith with “his sampling of 20
fax campaigns.” The District Court also ordered Dr. Arkin and
Smith to participate in mediation. Following mediation negotia-
tions, the parties reached a settlement agreement (“the Arkin Set-
tlement”).
The Arkin Settlement provided that Smith would create a
$21 million common fund to pay verified claims against Smith;
claimants would receive $493.32 for each fax number they had that
received unsolicited advertisements from Smith. 1 Wanca would
receive one-third of the $21 million common fund—$7 million—as
a fee award for its services, subject to court approval. 2 As Eleventh
Circuit precedent generally only allows district courts to award
25% of the common fund to class counsel as attorneys’ fees, 3 Dr.
1 The TCPA provides for $500 in statutory damages per violation, not per fax
number. 47 U.S.C. § 227(b)(3)(B). The Arkin Settlement explicitly provided
that each claimant would only be entitled to $493.32 per fax number that re-
ceived an unsolicited advertisement from Smith, “irrespective of the number
of faxes received.”
2 As Wanca claimed 671.95 billable hours in Arkin I, this would amount to a
fee of $10,417.44 per billable hour.
3 Since awards of up to 25% of the common fund are presumptively reasona-
ble in this circuit, district courts must apply the twelve Johnson factors before
approving a greater award to class counsel. Faught v. Am. Home Shield
Corp., 668 F.3d 1233, 1242 (11th Cir. 2011). The twelve Johnson factors are:
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6 Opinion of the Court 21-11019
Arkin and Smith agreed to voluntarily dismiss Arkin I and refile the
class action in the Nineteenth Judicial Circuit Court of Illinois, the
Illinois state trial court for Lake County, Illinois. See, e.g., Faught
v. Am. Home Shield Corp., 668 F.3d 1233, 1242 (11th Cir. 2011)
(recognizing the 25% common fund award benchmark). Illinois
precedent allows state trial courts to award one-third of the com-
mon fund as attorneys’ fees in class actions. Shaun Fauley, Sabon,
Inc. v. Metro. Life Ins. Co., 52 N.E. 3d 427, 436, 440–442 (Ill. App.
Ct. 2016) (approving a one-third common fund award to Wanca as
reasonable). While Wanca would receive $7 million from the com-
mon fund regardless of the actual number of claimants, any money
remaining in the common fund after paying Wanca’s attorneys’
fees and all claimants would revert to Smith. 4 Additionally, the
(1) the time and labor required; (2) the difficulty of the issues;
(3) the skill required; (4) the preclusion of other employment
by the attorney because he accepted the case; (5) the custom-
ary fee in the community; (6) whether the fee is fixed or con-
tingent; (7) time limitations imposed by the client or circum-
stances; (8) the amount involved and the results obtained; (9)
the experience, reputation, and ability of the attorneys; (10) the
undesirability of the case; (11) the nature and length of the pro-
fessional relationship with the client; and (12) awards in similar
cases.
Id. at 1242–43 (citing Hensley v. Eckerhart, 461 U.S. 424, 430 n.3, 103 S. Ct.
1933, 1938 n.3 (1983) (citing Johnson v. Ga. Highway Express, Inc., 488 F.2d
714, 717–19 (5th Cir. 1974))).
4 The Supreme Court has approved the practice of basing attorneys’ fees off
the total possible amount recoverable by members of the class, not the total
amount actually recovered, as the “right to share the harvest of the lawsuit
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21-11019 Opinion of the Court 7
Arkin Settlement provided that any party could “terminate the set-
tlement, for any reason or no reason at all, at any time prior to the
Court’s Final Approval Hearing.” Should termination occur, the
settlement agreement provided that the lawsuit would return to
the Middle District of Florida as though the Arkin Settlement had
never been made.
Pursuant to the Arkin Settlement agreement, Dr. Arkin filed
a stipulation of dismissal under Fed. R. Civ. P. 41(a)(1)(A)(ii) in Ar-
kin I in the Middle District of Florida on August 23, 2018. On the
same day, Dr. Arkin had Wanca file a new putative class action
(“Arkin II”) in the Nineteenth Judicial Circuit. In so doing, the par-
ties avoided by one day an order from the Middle District of Florida
that would have required them to disclose the results of the medi-
ation—and thus the terms of the Arkin Settlement—to the Middle
District by August 24, 2018. See Absolute Activist Value Master
Fund Ltd. v. Devine, 998 F.3d 1258, 1265 (11th Cir. 2021) (explain-
ing that voluntary dismissals under Fed. R. Civ. P. 41(a)(1) are “ef-
fective immediately upon filing” (internal citation, quotation
marks, and alteration omitted)).
The Arkin II court, likely sensing that something was amiss,
ordered supplemental briefing on whether it was proper and ap-
propriate under Illinois law to award one-third of the common
upon proof of their identity, whether or not they exercise it, is a benefit in the
fund created by the efforts of the class representatives and their counsel.” Boe-
ing Co. v. Van Gemert, 444 U.S. 472, 480, 100 S. Ct. 745, 750 (1980).
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8 Opinion of the Court 21-11019
fund as attorneys’ fees. Wanca responded by citing over thirty Illi-
nois state cases where the trial court awarded one-third of the com-
mon fund as attorneys’ fees. The Arkin II court then preliminary
approved the terms of the Arkin Settlement on January 25, 2019.
Accordingly, Dr. Arkin and Smith sent out a notice of settlement
to the Arkin class members, of which 1,633 filed claims. As each
claim was capped at $493.32, the Arkin Settlement class members
would have received only $805,591.56 of the $21 million fund had
the Arkin Settlement received final approval in Arkin II. Wanca,
again, would have received $7 million, and the remaining $13 mil-
lion or so would have remained with Smith.
However, one of the class members notified in Arkin II was
Pressman, Inc., a pharmaceutical and medical supply company rep-
resented by the law firm Bock, Hatch, Lewis & Oppenheim, LLC
(“Bock”). Bock, like Wanca, has extensive experience in TCPA
class actions, and the two law firms have tangled before. See, e.g.,
Med. & Chiropractic Clinic, Inc. v. Oppenheim, 981 F.3d 983 (11th
Cir. 2020); Tech. Training Assocs., Inc. v. Buccaneers Ltd. P’ship,
874 F.3d 692 (11th Cir. 2017). On March 25, 2019, Pressman
(through Bock) filed a wide-ranging objection to the Arkin Settle-
ment challenging, inter alia, the $493.32 cap, the decision to dismiss
Arkin I from the Middle District of Florida in (what Bock described
as) an apparent attempt to secure more attorneys’ fees for Wanca,
the provision allowing reversion of unclaimed funds to Smith, and
the termination provision. As a result of this objection, Smith ex-
ercised its right to terminate the settlement “rather than engage in
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21-11019 Opinion of the Court 9
what promised to be a protracted and acrimonious objection pro-
cess.” Per the terms of the Arkin Settlement, Arkin II was dismissed
from the Nineteenth Judicial Circuit in June 2019. Dr. Arkin then
refiled the class action in the Middle District of Florida on July 16,
2019 (“Arkin III”). Pressman, meanwhile, filed a separate putative
class action through Bock and against Smith in the Nineteenth Ju-
dicial Circuit, which Smith removed to the United States District
Court for the Northern District of Illinois. The Northern District
of Illinois transferred Pressman’s suit to the Middle District of Flor-
ida on September 26, 2019, which then consolidated Pressman’s
suit with Arkin III on December 18, 2019.
When Arkin II fell apart in June 2019, Smith agreed to pro-
duce documents to Pressman and Bock for purposes of negotiation
and settlement. Bock then spent months independently reviewing
what the District Court described as “voluminous electronic files”
while negotiating a settlement with Smith. The District Court later
found that Bock “did not have access to the Wanca firm’s work
product” while negotiating with Smith. Following Bock’s inde-
pendent review of Smith’s documents, Pressman and Smith filed a
new proposed settlement agreement in Arkin III on February 18,
2020 (“the Pressman Settlement”).
The Pressman Settlement was very different from the Arkin
Settlement. For starters, it only provided for a $4.5 million com-
mon fund. However, this fund was non-reversionary, and each
claimant was entitled to receive a pro rata share of the common
fund. Additionally, class counsel could only receive up to 25% of
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10 Opinion of the Court 21-11019
the common fund as a fee award, or $1.125 million. The Pressman
Settlement also provided that each claim form submitted in the Ar-
kin Settlement would be valid under the Pressman Settlement un-
less the Arkin claimant later submitted an opt-out request. And,
unlike the Arkin Settlement, the Pressman Settlement could only
be terminated if it was not approved by the District Court or too
many class members opted out.
The District Court granted preliminary approval of the
Pressman Settlement on June 23, 2020. The Settlement Adminis-
trator for the Pressman Settlement then began collecting claims
forms on August 17, 2020, with over 2,900 ultimately being ap-
proved, including the 1,633 claims filed in the Arkin Settlement.
No class member objected to the Pressman Settlement or re-
quested exclusion. On February 25, 2021, the District Court
granted final approval of the Pressman Settlement in Arkin III, ap-
pointed Bock as class counsel, and awarded Bock the full $1.125
million as attorneys’ fees. Each claimant received approximately
$1,100. Additionally, the District Court denied Dr. Arkin and
Wanca’s motion for a portion of the Pressman Settlement attor-
neys’ fees, finding that Wanca had not conferred a substantial or
independent benefit to the class justifying a portion of the fees. Dr.
Arkin and Wanca appeal only the Court’s denial of its motion for a
portion of the Pressman Settlement fees.
II.
This Court reviews a district court’s decision to award attor-
neys’ fees for abuse of discretion. Johnson v. NPAS Sols., LLC, 975
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21-11019 Opinion of the Court 11
F.3d 1244, 1251 n.2 (11th Cir. 2020). This “standard of review al-
lows us to closely scrutinize questions of law decided by the district
court in reaching the fee award.” Id. (quoting Camden I Condo.
Ass’n, Inc. v. Dunkle, 946 F.2d 768, 770 (11th Cir. 1991)). Further-
more, “[a] district court abuses its discretion if it applies an incor-
rect legal standard, follows improper procedures in [reaching its
decision], or makes findings of fact that are clearly erroneous.” Id.(quoting Fitzpatrick v. Gen. Mills, Inc., 635 F.3d 1279, 1282 (11th
Cir. 2011) (second alteration in original)).
III.
“[A] lawyer who recovers a common fund for the benefit of
persons other than himself or his client is entitled to a reasona-
ble attorney’s fee from the fund as a whole.” In re Home Depot
Inc., Customer Data Sec. Breach Litig., 931 F.3d 1065, 1079 (11th
Cir. 2019) (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478,
100 S. Ct. 745, 749 (1980)). Common funds belong to the plaintiffs,
not to the defendant(s), and so plaintiffs’ lawyers may receive pay-
ment from the common fund without violating the American
Rule. 5 Id. The key here is that only those lawyers who “recover[]
5 Under the American Rule, “each party is traditionally responsible for its own
attorney’s fees.” Home Depot, 913 F.3d at 1078. We have recognized
three exceptions to the American Rule: (1) when a statute
grants courts the authority to direct the losing party to pay at-
torney’s fees; (2) when the parties agree in a contract that one
party will pay attorney’s fees; and (3) when a court orders one
party to pay attorney’s fees for acting in bad faith.
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12 Opinion of the Court 21-11019
a common fund” for the plaintiffs are entitled to a portion of the
common fund as a reasonable attorneys’ fee. Id. This makes sense.
Attorneys, like all other professionals, are paid for the services they
provide their clients, and it would be foolish to force plaintiffs to
pay lawyers whose work did not benefit them, especially in the ab-
sence of a contractual relationship. And in a class action, it is typi-
cally the court appointed class counsel that recovers the common
fund for the class. See Fed. R. Civ. P. 23(g) (setting forth the duties
and qualifications of class counsel).
But this does not mean that only class counsel may aid in
recovering a common fund and so be entitled to attorneys’ fees
from the fund. Occasionally, other lawyers and law firms may pro-
vide valuable services to the class deserving of compensation.
Therefore, Rule 23(h)
provides a format for all awards of attorney fees and
nontaxable costs in connection with a class action, not
only the award to class counsel. In some situations,
there may be a basis for making an award to other
counsel whose work produced a beneficial result for
the class, such as attorneys who acted for the class be-
fore certification but were not appointed class coun-
sel, or attorneys who represented objectors to a pro-
posed settlement under Rule 23(e) or to the fee mo-
tion of class counsel. Other situations in which fee
Id. As the common fund belongs to the plaintiffs, the American Rule does not
apply because the plaintiffs are paying their own lawyers, much like in a con-
tingency fee arrangement. Id. at 1079.
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21-11019 Opinion of the Court 13
awards are authorized by law or by agreement of the
parties may exist.
Fed. R. Civ. P. 23(h) advisory committee’s note to 2003 amend-
ment. Our sister circuits have also acknowledged that attorneys’
fees may be awarded to non-class counsel in certain circumstances.
See, e.g., In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., &
Prods. Liab. Litig., 914 F.3d 623, 641 (9th Cir. 2019) (“Various
courts, including our own, have determined that even non-class
counsel can be entitled to attorneys’ fees.”); In re Cendant Corp.
Sec. Litig., 404 F.3d 173, 194–98 (3d Cir. 2005) (allowing non-lead
counsel to receive attorneys’ fees in the private securities context if
they provide a “substantial” and “independent” benefit to the
class); Victor v. Argent Classic Convertible Arbitrage Fund L.P.,
623 F.3d 82, 86–87 (2d Cir. 2010) (following the Third Circuit’s
Cendant opinion); Gottlieb v. Barry, 43 F.3d 474, 488–89 (10th Cir.
1994) (reversing a district court’s decision not to award attorneys’
fees to non-class counsel when a special master determined that
non-class counsel “conferred a benefit on the class”).
Therefore, we hold that non-class counsel is generally enti-
tled to a portion of a common fund recovered in a class action as
attorneys’ fees under Rule 23(h) if non-class counsel confers a sub-
stantial and independent benefit to the class that aids in the recov-
ery or improvement of the common fund. See Cendant, 404 F.3d
at 194–98; Victor, 623 F.3d at 87. A substantial benefit is one that
“‘creates, discovers, increases, or preserves’ the class’s ultimate re-
covery” of the common fund. Cendant, 404 F.3d at 197 (alterations
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14 Opinion of the Court 21-11019
omitted) (quoting In re Gen. Motors Corp. Pick-Up Truck Fuel
Tank Prods. Liab. Litig., 55 F.3d 768, 820 n.39 (3d Cir. 1995)). Ex-
amples of substantial benefits may include, but are not limited to,
“significant factual investigations,” “legal research on novel or in-
novative theories,” actions that positively affect the “ultimate
course of the litigation,” or objections that aid in the class’s recov-
ery. Victor, 623 F.3d at 87; Fed. R. Civ. P. 23(h) advisory commit-
tee’s note to 2003 amendment. An independent benefit, mean-
while, is a benefit class counsel did not provide the class during its
representation that class counsel could not have easily duplicated.
See Cendant, 404 F.3d at 197 (holding that “attorneys who merely
duplicated [class counsel’s] work—however noble their intentions,
however diligent their efforts, and however outstanding their prod-
uct—will not be entitled to compensation. Only those who confer
an independent benefit upon the class will merit compensation”).
And, of course, any substantial and independent benefit must also
aid in the recovery or the improvement of the common fund for
non-class counsel to have a claim on the fund. See Home Depot,
931 F.3d at 1078.
Wanca argues that it provided several substantial and inde-
pendent benefits to the common fund because it “identified, filed,
and litigated” the class action and because 1,633 of the Pressman
Settlement claimants filed their claims under the Arkin Settlement.
We partially agree.
First, the mere fact that Wanca devoted substantial time and
effort to litigating this class action does not entitle Wanca to
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21-11019 Opinion of the Court 15
attorneys’ fees. Simply put, most of the 671.95 hours Wanca spent
litigating Arkin I and II did not aid in the recovery or improvement
of the common fund obtained under the Pressman Settlement in
Arkin III. This is because the settlement Wanca negotiated with
Smith was fundamentally flawed. As the District Court put it:
[D]espite the Wanca firm’s representations as to the
amount of work the firm performed, the settlement
failed because Defendants were able to and did cancel
it. Critically, the settlement agreement that the
Wanca firm negotiated with Defendants allowed for
a right of cancellation for any reason, including if
there were too many claims. The Court fails to see
how such agreement provided a substantial benefit to
the class members.
Effort spent in obtaining a failed settlement agreement by non-class
counsel simply is not compensable unless it directly aids in the re-
covery or improvement of the common fund that was actually ob-
tained. And the District Court did not clearly err by finding that
Bock did not have access to Wanca’s work product when Bock ne-
gotiated the Pressman Settlement. Insofar as Wanca argues that it
is entitled to attorneys’ fees merely for expending time and effort
litigating the class action or pursuing the Arkin Settlement, it is in-
correct. See Cendant, 404 F.3d at 197 (“We emphasize that, in de-
termining who is entitled to attorneys’ fees . . ., the court’s only
consideration must be whether or not the attorney’s work pro-
vided benefits to the class.”).
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16 Opinion of the Court 21-11019
While most of the work Wanca performed pursuing the Ar-
kin Settlement did not substantially benefit the class or aid in the
recovery or improvement of the Pressman Settlement common
fund, its efforts in identifying 1,633 class members who ultimately
recovered under the Pressman Settlement are an exception. In
some circumstances, identifying class members entitled to recov-
ery may well provide a substantial benefit to the class and improve
the common fund by ensuring that more class members ultimately
recover. 6 The problem here, though, is that Wanca’s work in iden-
tifying the 1,633 claimants did not provide the class with an inde-
pendent benefit. Wanca identified the 1,633 claimants in the Arkin
Settlement using documents provided by Smith. Bock inde-
pendently reviewed Smith’s documents and found the same class
members that Wanca did. While it is true that Bock did not require
the 1,633 Arkin claimants to file new claim forms in the Pressman
Settlement, it easily could have. Wanca is not entitled to attorneys’
fees for performing work that Bock could easily have duplicated
and did not only for the convenience of the class members.
6 Of course, for individual class members receiving a pro rata share of a com-
mon fund, additional claimants decrease the amount each claimant individu-
ally receives. However, we view non-class counsel’s actions from the perspec-
tive of whether they benefit the class, not necessarily individual class mem-
bers, and increasing the amount of class members who recover from a com-
mon fund may provide a substantial benefit and improve the common fund
by ensuring that more class members entitled to recovery receive recovery.
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21-11019 Opinion of the Court 17
Wanca also argues that it provided a substantial benefit to
the class by filing a class action in September 2017, almost two years
before Bock filed. We agree with Wanca that filing a class action
long before any other lawyer or law firm can provide a substantial
benefit to the class by preventing class members from falling out-
side the statute of limitations. While the Third Circuit in Cendant
and the Second Circuit in Victor placed little value on the mere fil-
ing of class action complaints, they were analyzing securities class
actions conducted under the framework of the Private Securities
Litigation Reform Act. See Cendant, 404 F.3d at 195–96; Victor,
623 F.3d at 86–87. As those circuits explained, “[s]ecurities litiga-
tion is often an entrepreneurial exercise in which multiple attor-
neys file complaints in the hopes of ultimately being appointed lead
counsel.” Victor, 623 F.3d at 86 (citing Cendant, 404 F.3d at 196).
In such cases, there is little concern that large numbers of the class
may become barred by the statute of limitations unless an attorney
files quickly. When the statute of limitations is a concern, non-class
counsel may provide a substantial benefit to the class merely by
preserving a substantial portion of the class’s claims through early
filing.
But that does not mean Wanca provided a substantial bene-
fit to the class by being the first to file here. While Wanca did file
two years before Bock, it squandered any benefit that earlier filing
may have provided the class by dismissing Arkin I to refile in Illi-
nois, then dismissing Arkin II to return to the Middle District of
Florida. So, the relevant filing date for Wanca is when it refiled in
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18 Opinion of the Court 21-11019
federal court after Arkin II, not when it filed Arkin I. As the District
Court noted, Wanca’s actions “potentially impaired 75% of the
faxes at issue.”
Nevertheless, Wanca did provide a substantial and inde-
pendent benefit to the class in one way: Wanca identified Smith’s
TCPA violations and the potential for a class action. As the Third
Circuit observed, “attorneys who alone discover grounds for a suit,
based on their own investigation rather than on public reports, le-
gitimately create a benefit for the class.” Cendant, 404 F.3d at 196–
97. There is no indication that Pressman or Bock were aware of
Smith’s faxes or the potential for a class action until Wanca notified
them in Arkin II. But for Wanca’s identification of the class action,
there may well have been no class action at all. Wanca’s identifi-
cation of the class action thus constituted a substantial and inde-
pendent benefit that aided in the recovery of the common fund.
Ordinarily, this would entitle Wanca to a portion of the common
fund as attorneys’ fees.
But this is not an ordinary case. Here, the record clearly
shows that Wanca subordinated the interests of the class to its own
interests throughout the Arkin litigation. There is no other rational
explanation for the terms of the Arkin Settlement, which provided
for a huge payout for Wanca with little to the class, while giving
Smith the right to terminate the settlement agreement for any rea-
son, including if the number of claimants grew too large. Further,
the Arkin Settlement’s requirement that the class action be refiled
in Illinois (and before the Middle District of Florida had a chance to
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21-11019 Opinion of the Court 19
scrutinize the agreement) appears to exist so Wanca could receive
one-third of the (nominally) $21 million common fund as attor-
neys’ fees instead of only receiving 25%. Had the Arkin Settlement
been approved in Illinois state court, Wanca would have received
$1.75 million more in attorneys’ fees than it likely would have had
the settlement agreement been approved in the Middle District of
Florida. The difference between what Wanca would have received
in Illinois versus the Middle District of Florida is $625,000 more
than Bock received as attorneys’ fees under the Pressman Settle-
ment. Indeed, the increase in attorneys’ fees from merely refiling
in Illinois state court is over double what the class would have re-
ceived under the Arkin Settlement.
Wanca, of course, denies that it refiled in Illinois state court
to receive a greater fee award. Instead, Wanca contends that it re-
filed in Illinois state court for the “convenience of the parties,” as
both Wanca and Smith were based in Illinois and because Wanca
had experience with pursuing class actions in Illinois state court.
Oral Arg. at 3:18–3:43. This rationale simply does not explain the
terms of the Arkin Settlement. But let’s assume for the sake of the
argument that Wanca really did refile in Illinois only out of con-
venience, and that the Arkin Settlement’s provisions providing for
the refiling and the one-third attorneys’ fees award (by happen-
stance, the apparent benchmark award under Illinois law) really
were a happy coincidence. Even still, Wanca’s stated reasons for
the refiling establish that the refiling was undertaken for the benefit
of Wanca (and Smith), not for the benefit of the class. After all, Dr.
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20 Opinion of the Court 21-11019
Arkin, Wanca’s nominal client charged with overseeing the class
action on behalf of the class, 7 was a Florida resident, not an Illinois
resident, and we fail to see how the refiling in Illinois was conven-
ient for him, an actual party (unlike Wanca). More troubling is
how this refiling for “convenience” put many of the class’s claims
at serious risk by potentially impairing 75% of the faxes at issue un-
der the statute of limitations, as Arkin II was filed in August 2018,
almost one year after Arkin I was filed in September 2017. See 28
U.S.C. § 1658(a) (providing for a four-year statute of limitations in
federal actions). If it truly had been more convenient for the parties
to litigate in Illinois, they could have jointly moved for the venue
to be transferred to an Illinois district court under 28 U.S.C. §
1404(a) and avoided the statute of limitations problem. 8 In fact,
under Seventh Circuit precedent, Wanca could still have received
one-third of the common fund as attorneys’ fees, as the Seventh
Circuit bases common fund awards solely “on relevant market
rates and the ex ante risk of nonpayment.” 9 Williams v. Rohm &
7 See Fed. R. Civ. P. 23(a)(4) (“One or more members of a class may sue or be
sued as representative parties on behalf of all members only if . . . the repre-
sentative parties will fairly and adequately protect the interests of the class.”).
8 Wanca also could have initiated the litigation in Illinois state or federal court
if it truly was that concerned with convenience. Smith is apparently based in
Illinois, so there would have been no jurisdictional or venue issues.
9 Of course, this would have required Wanca to prove that it deserved a one-
third attorneys’ fees award, rather than simply receiving a one-third award as
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21-11019 Opinion of the Court 21
Haas Pension Plan, 658 F.3d 629, 636 (7th Cir. 2011) (citing In re
Synthroid Mktg. Litig., 264 F.3d 712, 718–19 (7th Cir. 2001)). Sub-
ordinating the interests of the class for the convenience of the at-
torneys is as much an ethical violation as selling the class out for
attorneys’ fees. So, we agree with the District Court that “[r]egard-
less of the reason, the dismissal and re-filing does not appear to
have been a decision made in the interest or for the benefit of the
class members.”
The Arkin Settlement’s reversion and termination provi-
sions are likewise inexplicable. Together, these two provisions en-
sured that Smith would never have to pay anything close to the $21
million nominally provided for by the settlement agreement, as
Smith would simply terminate the settlement had too many claim-
ants filed. Wanca, being a sophisticated TCPA class action law
firm, of course would have known this. The $21 million number
was therefore never anything more than a legal fiction created to
maximize Wanca’s attorneys’ fees. Further, these provisions pro-
vided a disincentive for Wanca to seek out class members for re-
covery under the Arkin Settlement because if too many of them
filed claims, Smith could cancel the settlement and Wanca would
lose out altogether on its inflated attorneys’ fees. No wonder the
Arkin Settlement fell apart after a single objection.
a benchmark in Illinois state court like Wanca’s supplemental filing in Arkin II
suggested.
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22 Opinion of the Court 21-11019
“Historically, the rationale entitling counsel to a percentage
of the common fund derives from the equitable power of the
courts under the doctrines of quantum meruit.” Camden, 946 F.2d
at 771 (citing Cent. R.R. & Banking Co. v. Pettus, 113 U.S. 116, 5 S.
Ct. 387 (1885)). But “he who comes into equity must come with
clean hands,” and a party (or law firm) “tainted with inequitable-
ness or bad faith” “closes the doors of a court of equity” with its
misconduct. Precision Instrument Mfg. Co. v. Auto. Maint. Mach.
Co., 324 U.S. 806, 814, 65 S. Ct. 993, 997 (1945). The record clearly
shows that Wanca put the class at serious risk of harm with the
Arkin Settlement for the sake of inflated attorneys’ fees and con-
venience. Wanca has thus closed the doors of equity on its claim
for attorneys’ fees under the Pressman Settlement. Accordingly,
we hold that the District Court did not abuse its discretion by deny-
ing Wanca attorneys’ fees.
IV.
For the reasons stated above, we affirm the District Court’s
denial of Wanca’s motion for attorneys’ fees.
AFFIRMED.