Stokes v. Saga Intern. Holidays, Ltd.

Page 86

376 F.Supp.2d 86

Vicki STOKES, Jean Greendyke, Plaintiffs, v. SAGA INTERNATIONAL HOLIDAYS, LTD., Saga International Holidays Travel, Inc., Saga Holidays Ltd., Defendants.

No. CIV.A. 02-11075-RBC.¹

United States District Court, D. Massachusetts.

July 18, 2005.

COPYRIGHT MATERIAL OMITTED

Beth L. Appelbaum, Paul J. Hall, Minh Hoang, Eric K. Larson, Timothy J. Lucey, Nixon Peabody LLP, San Francisco, CA, Mark H. Burak, Morse, Barnes-Brown & Pendleton, P.C., Waltham, MA, Stacey L. DiJon, Nixon Peabody LLP (BOS), Boston, MA, Donna Y. Porter, David S. Rosenthal, Nixon Peabody LLP (BOS), Boston, MA, Robert M. Shea, Morse, Barnes-Brown & Pendleton, P.C., Waltham, MA, for Saga Holidays Ltd., Saga International Holidays Travel, Inc., Saga International Holidays, Ltd., Defendants.

Dale A. Coggins, John P. Connelly, Robert T. Gill, Peabody & Arnold LLP, Boston, MA, John J. Dacey, Dacey & Sitkin, San Francisco, CA, for Vicki Stokes, Diane Fabiano, Jean Greendyke, Julia Johannesson, Sara Joyce Lowe, Plaintiffs.

James M. Sitkin, Dacey & Sitkin, San Francisco, CA, for Jean Greendyke, Vicki Stokes, Diane Fabiano, Julia Johannesson, Sara Joyce Lowe, Plaintiffs.

MEMORANDUM AND ORDER ON PLAINTIFFS' UNOPPOSED MOTION FOR AWARD TO PLAINTIFFS' ATTORNEYS OF REASONABLE ATTORNEYS FEES AND COSTS AND AWARD TO CLASS REPRESENTATIVES OF REASONABLE COMPENSATION FOR SERVICES TO TO SETTLEMENT CLASSES (# 92)

COLLINGS, United States Magistrate Judge.

I. Introduction

On December 17, 2004, the parties, plaintiffs Vicki Stokes and Jean Greendyke (hereinafter collectively "the Representative Plaintiffs") and defendants Saga International Holidays, Ltd., Saga International Holidays Travel, Inc., and Saga Holidays Ltd. (hereinafter collectively "Saga"), filed a Stipulation Re: Settlement Agreement and Release in this class action litigation. The Stipulation provided, inter alia, that the plaintiffs would apply for an award of attorneys' fees and costs in an amount not to exceed $350,000 and compensation for the Representative Plaintiffs in an amount not to exceed a total of $15,000. The defendants agreed that they would not oppose that application. On January 8, 2005 the Court granted preliminary approval of the class action settlement.

On or about February 16, 2005, an Unopposed Motion For Award To Plaintiffs' Attorneys Of Reasonable Attorneys Fees And Costs And Award To Class Representatives Of Reasonable Compensation For Services To Settlement Classes (# 92) was filed. A little more than a month thereafter on March 22, 2005, an Order granting final approval of the settlement of this class action was entered with the issues of attorneys' fees and representative plaintiff compensation remaining sub judice. At this time those final fee and compensation issues stand poised for resolution.

II. Discussion

Rule 23(e) of the Federal Rules of Civil Procedure mandates that the court approve any dismissal or compromise of class actions. This rule includes the review of the attorneys' fees, even those that have been pre-negotiated. See Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 522 (1 Cir., 1991). Courts have the "equitable jurisdiction to review and pass upon the reasonableness of a fee application submitted for judicial approval as part of a class action settlement." Great Northern Nekoosa Corp., 925 F.2d at 523.

Clear sailing clauses are agreements between parties to waive objections to attorneys' fees that do not exceed a negotiated limit. See Great Northern Nekoosa Corp., 925 F.2d at 520; Duhaime v. John Hancock Mut. Life Ins. Co., 989 F.Supp. 375, 376 (D.Mass., 1997). In Great Northern Nekoosa Corp., 925 F.2d at 524, the agreement was that the request for attorneys' fees would not exceed $2,000,000 while in Duhaime, 989 F.Supp. at 376, the defendants agreed not to oppose a fee application of more then $39,000,000 plus $750,000 in expenses. In this case the agreement between the parties was that the defendants would not oppose attorneys' fees that did not exceed $350,000. This provision is of the same nature as the agreement between the parties in Great Northern Nekoosa Corp. and Duhaime, to wit, a clear sailing clause.

Arm's length negotiations of attorneys' fees that would not diminish the common fund available to the members of the class action do not have the potential for the evils of extortion and collusion. Great Northern Nekoosa Corp., 925 F.2d at 524-25; Malchman v. Davis, 761 F.2d 893, 904-05 (2 Cir., 1985), cert. denied sub nom. Mountain Plains Congress of Senior Organizations v. Malchman, 475 U.S. 1143, 106 S.Ct. 1798, 90 L.Ed.2d 343 (1986); Duhaime, 989 F.Supp. at 379. Nevertheless, a fee award that does not come from a common fund still requires review by the court. Duhaime, 989 F.Supp. at 376. In Duhaime, the dangers of a clear sailing agreement were not present when the attorneys' fees were negotiated after the issues of class action were resolved. Duhaime, 989 F.Supp. at 379. The parties in Malchman submitted affidavits to the court to demonstrate that attorneys' fees were discussed only after all of the merits of the settlement had been decided except for "certain minutiae." Malchman, 761 F.2d at 904. Such agreements allay suspicions when made after the other substantive issues of the settlement have been decided. Malchman, 761 F.2d at 905.

However, attorneys' fees may be denied by a court even when there is a clear sailing agreement between the parties for the settlement of a class action. BTZ, Inc. v. Great Northern Nekoosa Corp., 47 F.3d 463, 466-67 (1 Cir., 1995). When a fee application is submitted along with the termination of a class action, courts should examine the reasonableness of the requested attorneys' fees. See Int'l Precious Metals Corp. v. Waters, 530 U.S 1223, 1224-25, 120 S.Ct. 2237, 147 L.Ed.2d 265 (2000); Staton v. Boeing Co., 327 F.3d 938, 963 (9 Cir., 2003)(stating that to "avoid abdicating its responsibility to review the agreement for the protection of the class, a district court must carefully assess the reasonableness of a fee amount spelled out in a class action settlement agreement"); Great Northern Nekoosa Corp., 925 F.2d at 522 (a court "should ordinarily determine the reasonableness of the fees, notwithstanding that the source of payment does not directly impair the class recovery.") Clear sailing agreements impact upon judicial supervision in examining fees; "[s]uch a clause by its nature deprives the court of the advantages of the adversary process." Great Northern Nekoosa Corp., 925 F.2d at 525; BTZ, Inc., 47 F.3d at 467. "The absence of adversariness makes heightened judicial oversight of both of these fee agreements highly desirable, especially since the very existence of a clear sailing agreement increases the likelihood that something of value will have been bargained away by the counsel." Great Northern Nekoosa, 925 F.2d at 525.

Clear sailing clauses can breed circumstances ripe for conflicts of interest between the members of the plaintiff class and counsel for the plaintiffs. Great Northern Nekoosa Corp., 925 F.2d at 524 (discussing Malchman, 761 F.2d at 906-08). There is the possibility that the plaintiffs'"lawyers might urge a class settlement at a low figure or on less-then-optimal basis in exchange for red carpet treatment on fees." Duhaime, 989 F.Supp. at 377 (quoting Great Northern Nekoosa Corp., 925 F.2d at 524). Judicial scrutiny is warranted because the defendant is only interested in getting rid of the claim, and the allocation of the funds between the attorney and the members of the class action is of no concern to the defendant. See Boeing Corp., 327 F.3d at 963; Duhaime, 989 F.Supp. at 377 (discussing Prandini v. Nat'l Tea Co., 557 F.2d 1015, 1020 (3d Cir.1977)).

The agreement with respect to attorneys' fees in the instant case was submitted along with settlement of the substantive issues between the parties. Consequently, the danger of a conflict of interest as discussed in the Great Northern Nekoosa Corp. case is created. The Court must be cognizant of this potential when deciding whether to allow the clear sailing agreement to determine the award of attorneys' fees.

Further, attorneys' fees should be reviewed in light of the "precedential value" set by the award for future class action settlements. Duhaime, 989 F.Supp. at 379; Great Northern Nekoosa, 925 F.2d at 526.

When ... a court is compelled by the nature of the case or statutory mandate to award attorney fees to a party, the determination of such award is not only a matter of public record, it becomes part of the great body of our law. A court would be shirking its responsibility to render a principled decision were it to accept without scrutiny and close examination the fees agreed upon by client and counsel.

Codex Corp. v. Milgo Electronic Corp., 717 F.2d 622, 632 (1 Cir., 1983), cert. denied sub nom. Milgo Electronic Corp. v. Codex Corp., 466 U.S. 931, 104 S.Ct. 1719, 80 L.Ed.2d 191 (1984) (holding that there was no abuse of discretion by the district court for refusing to adjust an award of attorney's fees when the attorney's submissions of expenses were inadequate).

As the plaintiffs have repeatedly stated in their submissions in this case, the issue of travel agents receiving overtime is a novel idea. See Memorandum of Points # 93 at 3 n. 1, 19 ("Plaintiff's Attorneys ... litigated over a more than three year period a case that presented novel and difficult questions of fact and law...."); # 93 at 8 ("It should be noted that, to the best of the Plaintiffs' knowledge, there are no reported U.S. court cases that rule on the merits of the applicability of the administrative or professional exemptions within the exact fact pattern of tour directors within the tour industry."). Thus the precedential value of decisions made in this case is significant.

Clear sailing agreements can also engender "potential public misunderstandings" with regard to the class counsel. See In re...