On Appeal from the United States District Court for the District of New Jersey, D.C. Civil No. 86-0701.
Sloviter and Becker, Circuit Judges, and Pollak, District Judge.*fn*
Opinion OF THE COURT BECKER, Circuit Judge
This appeal concerns a counsel fee dispute. The underlying case involved claims that defendants had violated several provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (1982), with respect to two pension plans in which the plaintiff was a participant. The case settled, and the stipulation of settlement authorized the district court to award a reasonable attorneys' fee to plaintiff's counsel. The ultimate issue on appeal is whether the district court erred in awarding a substantially lower amount of fees than plaintiff's attorneys requested. In the course of deciding that issue we must confront the important procedural question of how parties contesting fee petitions must raise their challenges thereto.
We conclude that, generally, such parties need not submit counter-affidavits challenging the fee request, so long as they submit briefs that identify the portion of the fee request being challenged and state the grounds for the challenge with sufficient specificity to give the fee applicants notice that they must defend the contested portion of their fee petition.*fn1 We hold that, with two exceptions, the defendants met this burden here. However, as plaintiff contends, the district court opinion was unclear as to the basis of its fee reductions. Inter alia, it is unclear whether the district court rejected certain of the fees because it found them excessive in light of plaintiff's lead counsel's expertise (counsel who bill at a high rate should take fewer hours to do the work) and because of the ministerial nature of co-counsel's duties (which should command a lower rate), or because the court believed that the fees claimed were disproportionate to the amount that the plaintiff recovered, or because the plaintiff recovered only on one of the claims that she alleged in her complaint. Furthermore, the district court erred in analyzing the reasonableness of the fee award by applying several factors that this Court has held are relevant only to the question whether fees should be awarded, not to the appropriate amount of a fee award. Consequently, we will vacate the district court's fee award and remand this case to it for clarification of the basis of its award and further action consistent with this opinion.
The plaintiff has also raised an issue as to the accuracy of the district court's calculations. We believe that the better practice is to raise such mathematical contentions on a motion for reconsideration in the district court. We will therefore leave these allegations for the district court on remand.
Commencing in 1977, plaintiff Joyce Bell worked as a bookkeeper for United Princeton Properties, Inc. ("UPP"), a New Jersey real estate investment and syndication firm. While Bell was employed by UPP, the firm maintained and contributed to two ERISA-qualified pension plans for the benefit of its employees. Bell was entitled to receive retirement benefits from both plans. However, in May 1985, Bell was allegedly forced to resign from her position because she refused to falsify business records. See Complaint at 3, JA at 6. Upon leaving, Bell requested immediate payment of her vested share in both pension plans. UPP refused, taking the position that it was not required to pay her until she reached age 60.
On February 19, 1986, Bell brought suit in the district court for the District of New Jersey against UPP, two of UPP's owners (both individuals), the two pension plans, and the trustees and administrators of the plans.*fn2 Bell's complaint alleged that, under the terms of the plans, UPP was obliged to pay to her the accrued benefits due her under the plan within one month of her separation from service, and that failure to do so violated ERISA. See Amended Complaint at 15, JA at 33. It further alleged a number of other violations of ERISA. These included failure to disclose to plan participants the terms of the plans, failure to obtain bonds for the pension plan fiduciaries, violation of ERISA's minimum vesting standards, and failure to maintain required records. Bell also brought suit on behalf of the plans, contending, inter alia, that there had been mismanagement of plan assets,*fn3 and that the plan had enrolled ineligible participants. Finally, Bell alleged violations of New Jersey's racketeering laws.
The parties subsequently settled the matter, and the court approved the settlement on August 25, 1987. The content of the settlement, in relevant part, is as follows: (1) Bell would immediately be paid $33,721.00, which represented her interest in the pension plans; (2) Bell would be paid $8,139.50 as "general damages" for the delays in providing required plan documents; (3) all claims and counterclaims would be dismissed with prejudice; (4) Bell's attorneys, Frederic J. Gross and P. Kay McGahen, would not represent others with claims against the UPP pension plans; (5) "[in] the absence of any supplementary agreement, defendants [would] pay plaintiff's reasonable costs and reasonable attorneys' fees, including reasonable costs of investigation, in such amounts and for such matters as are fixed by the United States District Court on the formal application of plaintiff's counsel"; and (6) interest would begin to accrue on all unpaid costs and attorneys' fees 21 days after the application for fees was filed with the District Court, at the rate of 12% calculated daily and compounded annually. See Stipulation of Settlement, JA at 240-43. Consequently, after the settlement, the only item left for the court to dispose of was attorneys' fees.
On August 14, 1987, Bell petitioned the court for $74,804.51 in attorneys' fees and costs. This amount represented the amount of time spent on the case by Gross, McGahen, and Gross's law clerk, multiplied by their respective billing rates -- $150 per hour for Gross, $125 per hour for McGahen, and $25 per hour for the law clerk -- plus their expenses. It also included a requested 20% enhancement for Gross's fees to compensate him for the risk of non-payment in the case, for the delay in payment inherent in the contingency arrangement, and for voluntarily restricting his practice by agreeing not to represent other plaintiffs against the UPP pension plans. See Magistrate's Op. at 2 n. 1, App. at 245. The court referred the matter to a Magistrate.
The pension plans did not file any counter-affidavits but argued in their several briefs that the amount Bell had requested on behalf of her attorneys was too high and that the use of a multiplier was unwarranted. They contended that this was essentially a simple suit, involving only the issue of when Bell would get her pension benefits. They also asserted that the relief Bell had obtained was minimal. More particularly, they alleged that the plaintiff had engaged in excessive discovery; that there had been unnecessary "double-chairing" by plaintiff's counsel at pretrial conferences and depositions; that the procedures used for client communication were unduly time-consuming; that Gross's billing rate in 1986 was lower than he claimed; that McGahen had overcharged for the largely ministerial services that she provided; that Bell's attorneys had unnecessarily engaged accountants; that the requested fee was grossly disproportionate to the amount Bell recovered; and that the fee request included a large amount of time spent on issues unrelated to Bell's claim for benefits. Bell filed a reply brief disputing the characterization of the suit as a simple suit that obtained only minimal relief and defending the reasonableness of the hours expended and the rates charged.
On March 3, 1988, the Magistrate filed a report recommending that Bell's attorneys recover all requested fees and costs, but not receive a lodestar multiplier. First, the Magistrate found that "plaintiff's recovery was not minimal. Her success could hardly have been more complete." Mag. Op. at 9, JA at 252. Second, the Magistrate rejected the defendants' contention that the attorneys' fees award should not exceed the amount that Bell recovered in the settlement. He reasoned that defendants "could have, but did not, place a cap on fees sought" (in the settlement agreement). Id. Third, he found the hours claimed by Gross and McGahen to be reasonable, rejecting the defendants' claim that the tasks assigned to McGahen of filing the court papers should have been delegated to a lesser-paid employee. Fourth, he accepted the fee rates requested by the attorneys and law clerk. However, he rejected the request for a multiplier for Gross's services, finding that the contingency of non-payment in this case was no greater than average, that no novel issues were involved, and that Gross should not receive additional compensation for agreeing not to take on other clients in suits against these defendants because that restriction was "in clear violation of the ethical rules of this court and of doubtful enforceability." Id. at 12, JA at 255. In the end, the Magistrate recommended awarding $66,634.01 to Bell's counsel for fees and costs.
The defendants filed objections to the Magistrate's Report and Recommendation with the district court. Although, once again, they did not file any affidavit, they contended in a letter brief to the district court that the Magistrate's recommendation
simply fails to evaluate whether all of the hours spent by plaintiff's counsel can be said to be reasonably related to the only claim which plaintiff engaged them to prosecute, and the only claim upon which plaintiff ultimately recovered.
Although plaintiff's severance from the defendants' employ involved unpleasant circumstances, there was only one real question between them regarding her retirement plan benefits: were they payable soon after she left, or were they to be paid when she reached age 60-65? The resolution of this issue should have been straightforward. . . .
Defendants' Letter Br. at 2, JA at 260.
The defendants "emphatically" challenged the assertion of Bell's counsel that their time "was spent in a manner reasonably related to their client's claim for benefits. Lawyers at their level could not require more than 75 or 100 hours to understand both the facts of this case and the relevant law bearing upon whether plaintiff's benefits were payable upon severance or at retirement age." Id. at 3, JA at 261. The Defendants also invited the district court to consider the briefs that they had submitted to the Magistrate. Id. at 3-4, ...