In re High Sulfur Content Gasoline Products Liability Litigation, 517 F.3d 220 (5th Cir. 2008)

Brief Summary
The Louisiana U.S. District Court allocated attorneys’ fees between 79 attorneys by relying on the recommendation of only five attorneys. The Fifth Circuit held that because the court did not scrutinize this recommendation and did not give the remaining 74 attorneys a full opportunity to be heard, the court abused its discretion.

Complete Summary
Following settlement of a class action lawsuit against Shell Oil, plaintiffs’ attorneys were awarded nearly $7 million in fees. The district court appointed a committee of five plaintiffs’ attorneys to allocate these fees among the 32 law firms and 79 attorneys who worked on the case. During an ex parte hearing, the members of the committee proposed awarding almost half of the $7 million to themselves. None of the other 74 attorneys were notified of the hearing. The hearing lasted 20 minutes and the court, with minimal review, effectively rubber stamped the committee’s proposal. The court further sealed an exhibit listing individual legal fees, prohibited all attorneys from disclosing their awards, and required funds to be distributed immediately.

A group of plaintiffs’ attorneys excluded from the committee appealed to the Fifth Circuit. The issue was whether the district court’s allocation procedure was adequate. The Fifth Circuit held it was not.

The Fifth Circuit stated that, while the district court was free to appoint the committee, the court was obligated to closely scrutinize the committee’s recommendation — especially given the self-interest of the committee members in the allocation. Pursuant to Federal Rule of Civil Procedure 23, the court must determine the reasonable hours expended by each attorney and multiply that number by the attorney’s reasonable hourly rate. The resulting fee must then be adjusted according to 12 factors set out in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974) (e.g., the novelty and difficulty of questions). While this analysis need not be meticulous, the court must explain the effect of each Johnson factor on the final award.

The Fifth Circuit also stated that, while a district court may seal a record, it should only do so if there is strong justification. The only justification here was to minimize fee sharing disputes among the attorneys. The Fifth Circuit found this insufficient.

The Fifth Circuit went on to state that the district court’s procedure violated two other Federal Rules of Civil Procedure. First, by requiring funds to be distributed immediately, the court violated Rule 62(a), which imposes a 10-day automatic stay on the enforcement of judgments. Second, the court violated Rule 23(h) because the ex parte hearing, which provided no avenue of objection for the excluded attorneys, was not fair and did not provide minimal due process.

Significance of Opinion
Nonetheless, the process must be reasonably fair and open in complex litigation. It can be difficult to assess relative attorney contributions.

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Hinshaw & Culbertson LLP and The Hildebrandt Institute Present: The Three-Part Law Firm Risk Management Virtual Seminar Series

Two Remaining Seminars:

May 15, 2008: Third Party Claims for Lawyers: Is There Life After Stoneridge

July 16, 2008: Impaired and Poorly Behaving Partners: Managing the Risks

Third Party Claims for Lawyers: Is There Life After Stoneridge

May 15, 2008, Noon-1:30 pm EST

Speakers
Rebecca Lambreth, Partner, Duane Morris LLP
Anthony Davis, Partner, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP

Program Overview
One of the most important (and disturbing) developments in law firm risk management in recent years has been the increased willingness of plaintiff’s lawyers, government agencies, and courts to hold lawyers and law firms culpable for the actions or omissions of their clients. We have seen these so-called “third party claims” in a wide variety of contexts, from securities fraud cases to abusive tax shelter claims to cases involving circumstances of deepening insolvency. In January, the Supreme Court handed down its decision in Stoneridge Investment Partners v. Scientific-Atlanta, a case that affirms the limited ability of plaintiffs in securities fraud cases to reach lawyers and other providers of services to defendant companies.

This virtual seminar will bring together two highly knowledgeable and experienced practitioners to discuss these and related issues.

Topics to Include

• The circumstances under which lawyers can still be held liable for the actions or omissions of their clients;
• Potential liability for lawyers as third-party defendants in securities fraud cases after Stoneridge, and whether the “aiding and abetting” claim still has relevance;
• The seriousness of the threat of lawyers being held liable for the actions of their clients in deepening insolvency circumstances;
• What lawyers and law firms can do to protect themselves against such claims going forward;
• Red flags” in this area that firm managements should pay attention to.

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Impaired and Poorly Behaving Partners: Managing the Risks

July 16, 2008, Noon-1:30 pm EST

Speakers
Thomas L. Browne, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP
Tom H. Luetkemeyer, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP
Dr. Larry R. Richard, Vice President and Head of the Leadership & Organization Development Practice Group, Hildebrandt International

Program Overview
Dealing with “problem” partners has always been a challenge for law firm leaders. In recent years, however, it has also become a serious area of risk exposure as state bars, regulatory agencies, clients, and plaintiff’s lawyers have been increasingly willing to charge firms with accountability for the “lack of supervision” often evidenced in such behaviors. In this virtual seminar, you will hear three experts ― two professional responsibility lawyers and one lawyer/psychologist ― describe the nature of these risks and offer some practical advice on dealing with these problems.

Topics to Include

• Ways of identifying “problem” partners before the problems cause serious damage;
• Methods for dealing with impaired or poorly behaving partners that protect the interests of the partners and the firm;
• Circumstances in which “problem” partners must be reported to the local bar;
• Understanding the psychological issues that can give rise to problems and how to short-circuit them;
• Discussing “problem” partner issues with clients; and
• Managing the damage to the firm when and if problems become public.

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• Law Firm General Counsel or Firm Counsel
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• Senior Insurance Industry Executives with Responsibility for Lawyers Professional Liability Insurance