decided: October 31, 1973.
LINDY BROS. BUILDERS, INC. OF PHILA.; DENNY DEVELOPMENT CORP.; CAMELOT, INC. WELSH-GRANT CORP., B & S CONSTRUCTION CORP., PENN TOWER DEVELOPMENT CORP. AND MARTIN DECKER BY AARON M. FINE, HAROLD E. KOHN, DOLORES KORMAN GOODWIN HOMES, INC.; NOTTINGHAM CORPORATION; WARING BUILDING CORP.; KRAMER JEANETT, INC.; HARRY J. GOODWIN AND RICHARD C. GOODWIN T/A ATLANTIC COMPANY; HARRY K. MADWAY, SAM MADWAY, RALPH K. MADWAY AND PAULINE M. MARGOLIS T/A MADWAY ENGINEERS AND CONSTRUCTORS; E. J. FRANKEL ENTERPRISES, INC.; E. J. FRANKEL, ZERLINE FRANKEL, EDWARD MARGOLIS, AND LILLIAN MARGOLIS T/A WELLINGTON APARTMENTS; E. J. FRANKEL T/A E. J. FRANKEL ENTERPRISES BY MARVIN COMISKY AND PHILIP C. PATTERSON ROCKLEDGE HOMES, INC., RICHARD HOMES, INC., HARDY ASSOCIATES, INC., JAGER CONSTRUCTION COMPANY, EVERETT COURT APARTMENTS, INC., STURBRIDGE DEVELOPMENT COMPANY, INC., UPPER DUBLIN COMPANY, HANKIN REALTY CORPORATION, A PENNSYLVANIA CORPORATION, MINAMAYOR CORPORATION, A PENNSYLVANIA CORPORATION, MOE HENRY HANKIN ET UX, PERCH P. HANKIN ET UX, MAX A. HANKIN ET UX, SAMUEL HANKIN ET UX, BENJAMIN R. SHANKEN ET UX, INDIVIDUALS AND TRADING AS HOWARD JOHNSON MOTOR LODGE OF HORSHAM AND GEORGE WASHINGTON EASTMOTOR LODGE BY DAVID BERGER A & L TOWERS, INC. AND OCEAN MANOR APARTMENTS, INC., BY DAVID BERGER BROOKVIEW APARTMENTS, INC. BY DAVID BERGER BARLOW HOLDING COMPANY, INC. BY DAVID BERGER TILSEN CONSTRUCTION COMPANY AND TWIN CITY BUILDING & IMPROVEMENT COMPANY BY DAVID BERGER ALFRED P. ORLEANS; MORRIS CAPLAN; MARVIN ORLEANS AND BENJAMIN FLITTER, T/A ORLEANS CONSTRUCTION CO.; 7900 OLD YORK ROAD CORP.; ORCAP CORPORATION; KESO CORPORATION BY MARVIN COMISKY; GONCER M. KRESTAL; PHILIP C. PATTERSON PROVIDENT CORPORATION; KINGSTON HOUSING CORPORATION; KINGSTON CONSTRUCTION CORPORATION; RAMBLEWOOD BUILDERS BY MARVIN COMISKY; GONCER M. KRESTAL; PHILIP C. PATTERSON ORLEANS CONSTRUCTION CO. OF FLORIDA, INC. BY MARVIN COMISKY; GONCER M. KRESTAL; PHILIP C. PATTERSON
AMERICAN RADIATOR & STANDARD SANITARY CORP., KOHLER CO., CRANE CO., UNIVERSAL-RUNDLE CORP., RHEEM MANUFACTURING CO., BORG-WARNER CORP., WALLACE-MURRAY CORP., BRIGGS MANUFACTURING CO., GERBER PLUMBING FIXTURES CORP., OGDEN CORP., MANSFIELD SANITARY INC., PEERLESS POTTERY, INC., KILGORE CERAMICS CORP., LAWNDALE INDUSTRIES, INC., GEORGIA SANITARY POTTERY, INC., PLUMBING FIXTURE MANUFACTURERS ASSOCIATION FRIENDSWOOD DEVELOPMENT COMPANY AND HUMBLE OIL & REFINING COMPANY, CLAIMANTS, APPELLANTS IN NO. 72-1647, THE WEITZ COMPANY, INC., SHATTUCK REALTY, INC., DRAKE UNIVERSITY, WESTMAR COLLEGE, PARK HOMES, INC. (PARK REALTY) AND HAWKEYE HOMES, INC. PLAINTIFFS AND/OR CLAIMANTS AND DONALD A. WINE AND C. CARLETON FREDERICI, ATTORNEYS OF RECORD FOR SUCH PLAINTIFFS AND/OR CLAIMANTS, APPELLANTS IN NO. 72-1648
D.C. Civil Action No. 41774. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.
Seitz, Chief Judge, Weis, Circuit Judge and Scalera, District Judge.
These appeals concern the award of attorneys' fees following the settlement of a class action. Two members of the class here involved, Friendswood Development Company and Humble Oil and Refining Company, appeal from the award of fees to attorneys Kohn and Berger and members of their law firms. Also before us is an appeal by attorneys of the firm of Thoma, Schoenthal, Davis, Hockenberg and Wine, who were denied fees. Kohn and Berger are attorneys for Lindy Bros. Builders and the Philadelphia Housing Authority, appellees in both appeals.*fn1 We will deal first with the appeal of Friendswood and Humble.
Following the indictment of plumbing fixture manufacturers and their trade association for price-fixing violations of the antitrust laws, numerous civil suits were filed on behalf of several classes of plaintiffs seeking treble damages. One such class action was filed by appellees on behalf of builders and owners shortly after the indictments were returned. The various class actions were consolidated for pretrial proceedings and transferred to the Eastern District of Pennsylvania. Several years of procedural maneuvering followed between plaintiffs and defendants, who wanted the civil suits stayed or enjoined pending resolution of the criminal actions. During the stay proceedings, in which the plaintiffs eventually prevailed, the criminal action proceeded, and on May 2, 1969, a jury verdict was returned against those defendants who had pleaded not guilty.*fn2 The schedule of depositions in the civil suit was filed in June 1969, and the taking of depositions was to have begun in the fall of 1969.
In October 1969, settlement negotiations were undertaken, primarily by attorneys Kohn and Berger and their firms. The first settlement agreement involving the builder owner class was reached early in 1970. As a result of the settlement agreement a single fund was created to satisfy the claims of all builder-owners, those who had not filed suit ("unrepresented" claimants) as well as those who had.*fn3 The district court gave preliminary approval to the settlement plan in May 1971, after the Supreme Court denied defendants' petition for certiorari to review this Court's affirmance of the criminal convictions. In its order preliminarily approving the settlement the district court appointed appellees as Class Representatives. The settlement was given final approval by the district court in April 1972.
At the time the district court gave final approval to the settlement, numerous attorneys petitioned for award of fees.*fn4 Among these was a petition by Kohn and Berger as attorneys for the Class Representatives. Kohn and Berger had private fee agreements with the appellees and also with many other builder-owners who made claims against the fund. In their fee petition, Kohn and Berger asked for an award to be given to them directly in addition to the amounts to be received pursuant to contracts with individual claimants. For purposes of their petition, Kohn and Berger divided the class into four categories. The first category was composed of claimants who had contractual fee arrangements with Kohn and Berger. Kohn and Berger were to receive over $800,000 from these claimants. The second category included claimants who had filed suit and whose attorneys Kohn and Berger felt had contributed to the creation of the settlement fund. Kohn and Berger were to receive no fees from these claimants and sought none. Other claimants who had joined in the suits but whose attorneys Kohn and Berger concluded had not contributed to the creation of the settlement fund comprised the third category. From these claimants, who had contracted to pay varying fees to other attorneys, Kohn and Berger sought a fee award equal to one-sixth of the claimants' share of the settlement fund.*fn5 The final category was made up of builder-owners who filed claims against the fund, but who had not joined in the suit and, therefore, had not contracted with any attorney participating in the settlement negotiations or other related proceedings. Kohn and Berger asked the court to award them one-third of the amounts to be recovered by these last claimants.*fn6 The petition was opposed by unrepresented claimants Friendswood Development Company and Humble Oil and Refining Company.
The district court, 341 F. Supp. 1077, denied Kohn and Berger's petition for fees from the third category of claimants and granted fees from the last category equal to 20% of the amount of the fund apportioned to the unrepresented claimants. Kohn and Berger have not appealed the denial of fees from claimants in category three nor the award of fees from unrepresented claimants in an amount less than requested.
Friendswood and Humble appeal from the award of fees out of the settlement apportioned to them and other unrepresented claimants.
The first contention advanced by Friendswood and Humble is that the court below lacked authority to award any fees to Kohn and Berger. We assume that appellants are correct in stating that Section 4 of the Clayton Act, 15 U.S.C. § 15 (1970), does not authorize award of attorneys' fees to a plaintiff who has settled his antitrust action, rather than pursue it to successful judgment. Cf. Milgram v. Loew's, Inc., 192 F.2d 579 (3d Cir. 1951), cert. denied, 343 U.S. 929, 96 L. Ed. 1339, 72 S. Ct. 762 (1952); Decorative Stone Co. v. Building Trades Council, 23 F.2d 426 (2d Cir.), cert. denied, 277 U.S. 594, 72 L. Ed. 1005, 48 S. Ct. 530 (1928). There is, however, authority for the award of fees under the general equitable powers of the court. E.g., Trustees v. Greenough, 105 U.S. 527, 26 L. Ed. 1157 (1882). These equitable powers may, under the equitable fund doctrine, be used to compensate individuals whose actions in commencing, pursuing or settling litigation, even if taken solely in their own name and for their own interest, benefit a class of persons not participating in the litigation. See Sprague v. Ticonic National Bank, 307 U.S. 161, 83 L. Ed. 1184, 59 S. Ct. 777 (1939).
Appellants Friendswood and Humble concede that the equitable fund doctrine may provide a basis for award of attorneys' fees in the instant case. They contend, however, that the application for fees should be made by the client or clients who were parties to the action and not the attorneys who prosecuted the action or negotiated the settlement. Clearly, fees may be awarded on the attorney's petition. Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 28 L. Ed. 915, 5 S. Ct. 387 (1885). The thrust of appellants' contention here is more that, regardless of which person files the petition, the right to compensation is in the client rather than the attorney. We think that appellants misconceive the basis for award of attorney fees.
The award of fees under the equitable fund doctrine is analogous to an action in quantum meruit: the individual seeking compensation has, by his actions, benefited another and seeks payment for the value of the service performed. Understood in this way, there are two possible "causes of action" that may be urged as the basis for award of attorneys' fees. One of these "causes" belongs to the plaintiff who brought the underlying suit. His claim is that by instituting the suit he has performed a service benefiting other class members. The reasonable value of that service is measured by the expenses incurred by the plaintiff on behalf of the class. Trustees v. Greenough, supra, the seminal case in establishing the equitable fund doctrine, involved this type of claim for attorneys' fees. There a bondholder brought suit on behalf of himself and other bondholders to prevent the trustees of a fund that secured the bonds from committing waste. The judgment for the plaintiff set aside fraudulent conveyances and restored the fund. Relying principally on English cases requiring a trust fund to pay for the costs of its own administration, the Supreme Court affirmed the award to plaintiff of attorneys' fees and other ...
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