Weitz & Luxenberg v. Sulzer Orthopedics

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0082p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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In re: SULZER ORTHOPEDICS, INC.
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Nos. 03-4155/4156
WEITZ & LUXENBERG, P.C. (03-4155); LOPEZ,
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HODES, RESTAINO, MILMAN & SKIKOS (03-4156), >
Appellants, -
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v.
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Appellees. -
SULZER ORTHOPEDICS, INC., et al.,
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Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 01-09000—Kathleen McDonald O’Malley, District Judge.
Argued: September 23, 2004
Decided and Filed: February 22, 2005
Before: MARTIN, COLE, and GIBBONS, Circuit Judges.
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COUNSEL
ARGUED: Glenn Zuckerman, WEITZ & LUXENBERG, New York, New York, Janet G. Abaray,
LOPEZ, HODES, RESTAINO, MILMAN & SKIKOS, Cincinnati, Ohio, for Appellants.
ON BRIEF: Glenn Zuckerman, WEITZ & LUXENBERG, New York, New York, Janet G. Abaray,
Gregory A. Keyser, LOPEZ, HODES, RESTAINO, MILMAN & SKIKOS, Cincinnati, Ohio, for
Appellants.
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OPINION
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BOYCE F. MARTIN, JR., Circuit Judge. The law firms of Weitz & Luxenberg and Lopez,
Hodes, Restaino, Milman & Skikos separately appeal the amount of attorney fees awarded to them
by the district court in connection with their efforts to confer a “Common Benefit” to the plaintiff
class in a multi-district litigation class action settlement. Because the firms present similar
arguments based on the same opinion of the district court, we have consolidated their appeals. For
the reasons that follow, we AFFIRM the awards.
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Nos. 03-4155/4156 In re Sulzer Orthopedics, Inc. Page 2
I.
In December of 2000, Sulzer Orthopedics, Inc., issued a recall of certain of its hip implants,
which were determined to be defective. Shortly thereafter, more than thirteen hundred civil actions
were filed across the United States. Thirty of those actions were consolidated and transferred as a
class action to the United States District Court for the Northern District of Ohio. Sulzer settled with
the certified class and the settlement agreement was approved by the district court. The settlement
agreement included an award of attorney fees in the amount of thirty-two per cent of the settlement
fund, which was approximately $1 billion. In addition, the agreement reserved an additional $50
million for the payment of Common Benefit Attorney Fee Awards. Payments from this Common
Benefit Fund were to be awarded to attorneys who had “contributed to the creation of the Settlement
Trust through work devoted to th[e] ‘common benefit’ of Class Members, including any attorney
who reasonably believe[d] that he or she actually conferred benefits upon the Class Members as a
whole through state court litigation, subject to determination by the Court.” Both Weitz &
Luxenberg and Lopez, Hodes were among the firms and individual attorneys that worked for the
benefit of the class in effectuating the settlement agreement. The firms, along with all of the other
Common Benefit attorneys, were ordered to submit applications for reimbursement for “Common
Benefit Fees” and/or “Common Benefit Expenses.”
The district court received fifty-seven applications, including the applications of Weitz &
Luxenberg and Lopez, Hodes, for reimbursement of fees. The court’s order of June 12, 2003,
awarded a total of $30,232,300 in fees and authorized an additional $12,650,000 in potential fee
awards. The remainder of the $50 million was to be held by the Claims Administrator for expenses
of administration. The court provided a detailed summary of its methods of calculating reasonable
attorney fees and ordered any dissatisfied attorney or firm to request a specific summary of the
court’s analysis for a particular fee award. Weitz & Luxenberg and Lopez, Hodes were among three
firms that appealed the award and requested a specific summary. We now consider their appeals in
light of the district court’s order and its subsequent specific summary of the basis for their fee
awards.
II.
We review a district court's award or denial of attorney fees for an abuse of discretion.
Bowling v. Pfizer, Inc., 102 F.3d 777, 779 (6th Cir. 1996) (citing Cramblit v. Fikse, 33 F.3d 633, 634
(6th Cir. 1994)). “It is within the district court’s discretion to determine the ‘appropriate method
for calculating attorney’s fees in light of the unique characteristics of class actions in general, and
of the unique circumstances of the actual cases before [it].’” Id. (quoting Rawlings v. Prudential-
Bache Props., Inc., 9 F.3d 513, 516 (6th Cir. 1993)). The district court’s award of attorney fees in
common fund cases need only be “reasonable under the circumstances.” Id. (quoting Rawlings, 9
F.3d at 516).
III.
The firms make one similar argument on appeal. The remaining arguments we will consider
separately. First, they challenge the district court’s consideration of their receipt of contingency fees
in reducing the award of attorney fees. This challenge fails because the settlement agreement
explicitly authorized the district court to consider contingency fees, which were paid out of the
Settlement Trust, in awarding attorney fees. The agreement provides that “[t]he Court shall
consider, among other factors, any contingent fee paid to a Common Benefit Attorney.” In
exercising this authority, the court explained that
the partial payment by the Settlement Trust of contingent fees owed by certain class
members to their attorneys is not only a benefit to those class members, it is also a
Nos. 03-4155/4156 In re Sulzer Orthopedics, Inc. Page 3
monetary recognition that the attorneys’ general efforts, and/or advice to their clients
to participate in the settlement agreement, provided a common benefit to the entire
class. Thus, an attorney’s receipt of contingent fee payments out of the settlement
trust, rather than out of an award to his individual client, must be a factor in the
assessment of that attorney’s common benefit fee award.
The firms cannot now appeal the terms of the settlement, and they have no basis to challenge the
reasonableness of the district court’s exercise of its explicit authority. The firms’ first argument is
therefore without merit.
a. Additional Arguments by Weitz & Luxenberg
Weitz & Luxenberg also contests the district court’s use of a uniform hourly rate that does
not account for variable market rates. The court established a uniform rate out of necessity. It
explained:
Because the hourly rates submitted by attorneys of the same experience varied
substantially, the Court “equalized” the attorneys’ lodestar calculations by
substituting the following hourly rates, depending on years of practice: 1-5 years,
$200/hour; 6-9 years, $300/hour; 10-14 years, $400/hour; and 15 years and over,
$500/hour.
The recalculation worked to reduce the hourly rate of one-sixth of the applicants, including Weitz
& Luxenberg, for common benefit fees. The firm states that its hourly rate was reduced by twenty-
seven per cent..
The firm argues that the district court had no authority to impose a uniform rate because
market rates create great variance among the rates of common benefit attorneys. The firm’s
objection might be appropriate here if the court had employed a rigid formula. However, the district
court made it clear that it based its awards on the totality of the circumstances, in order to “reflect
accurately the common benefit each applicant conferred upon the plaintiff class relative to each
other applicant.” Indeed, we believe that the district court acted reasonably under the circumstances,
and its application of both the lodestar method and the percentage of the fund method ensures that
Weitz & Luxenberg’s contributions, which inherently reflect its market value, were reasonably
considered. The holistic and reasonable nature of the court’s analysis overcomes the firm’s
challenge. See Rawlings, 9 F.3d at 517 (“In this circuit, we require only that awards of attorney’s
fees by federal courts in common fund cases be reasonable under the circumstances.”) (citing Smillie
v. Park Chem. Co., 710 F.2d 271, 275 (6th Cir. 1983)).
b. Additional Arguments by Lopez, Hodes
Lopez, Hodes makes two additional arguments: first, that the court erred in its assessment
of the common benefit value of the firm’s work, and second, that the court failed to articulate
properly the basis for its reduced award.
The firm contends that its work in liability discovery against Sulzer prior to the consolidation
of the action for multi-district litigation inured to the benefit of the class, because it was a material
force in causing the settlement to be achieved, and was improperly discounted by the district court.
The firm claimed a total of $1,810,695.20, based on 4,355 hours of work. The district court found
that fifty percent of those hours were reasonable, and awarded a total fee of $905,347.60.
In its specific summary for this firm’s attorney fee award, the district court explained its
discount of the firm’s pre-litigation efforts, stating that (1) “virtually all of the hours claimed by
attorney Lopez were spent primarily for the benefit of a given individual plaintiff, or a smaller group
Nos. 03-4155/4156 In re Sulzer Orthopedics, Inc. Page 4
of plaintiffs, and not the entire class; (2) many of the hours listed seemed excessive for the task
claimed; and (3) much of the time claimed for participating in conference calls, proofreading, and
attending depositions, even if not overstated, did not yield a substantial common benefit.” For these
reasons, the court reduced the “hours worked” factor of the firm’s lodestar calculation, as it did for
thirty-three of the fifty-seven fee award applicants.
For each of the fee applicants, including Lopez, Hodes, the court’s analysis was thorough,
as it explained:
The Court has spent a significant amount of time reviewing in detail the applications
and supplements, the supporting documentation, the advice of the Common Benefit
Attorney Fee Committee, and the objections and responses thereto. These materials
fill about seven banker’s boxes. In several instances, the Fee Committee
corresponded with counsel, asking for an explanation of a claimed expense or fee.
In a few instances, the Court wrote its own letters to the applicants, asking for
clarification or explanation of the requests, or expressing concern about apparent
violations of the Court’s Guidelines. With the help of the Common Benefit Attorney
Fee Committee, the Court examined virtually every entry listed in every Fee
Application.
In addition, the district court, in a thoroughly reasoned order, used the discretion granted it under
Rawlings to determine an appropriate methodology and applied the Rawlings factors to ascertain a
reasonable fee award. The district court's award of attorney fees in common fund cases need only
be "reasonable under the circumstances." Rawlings, 9 F.3d at 516. After careful scrutiny of the
alleged errors referenced by the firms, we conclude that the district court did not abuse its discretion.
IV.
For the foregoing reasons, we affirm the district court’s awards of attorney fees.