Allen v. Dairy Farmers of America, Inc.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS FOR ATTORNEYS' FEES AND COSTS, AND INCENTIVE AWARDS (DOCS. 728 & 729)

          Cnristma Reiss, United States District Court Chief Judge.

         Pending before the court are Dairy Farmer Subclasses' Motion for Award of Attorneys' Fees, Reimbursement of Expenses, and Incentive Awards for Subclass Representatives in Connection with the DFA/DMS 2015 Settlement (Doc. 728) ("Lead Counsel" proposal), and Additional Named Representatives Stephen H. Taylor and Darrel J. Aubertine's Alternative Motion for Award of Overall Attorneys' Fees, for Incentive Award and Division of Such Fees Among Class Counsel (Doc. 729) ("Intervenor Counsel" proposal).

         Lead Counsel seeks attorneys' fees in the amount of $16, 666, 666, reimbursement of $3, 804, 337.68 in expenses, and an incentive award of $130, 000 for distribution to the nine Subclass Representative farms.^[1] Intervenor Counsel seeks an attorneys' fees award totaling $11, 500, 000, with $500, 000 designated for payment to Intervenor Counsel. Intervenor Counsel also seeks reimbursement of their expenses in the amount of $6, 294.18 and incentive awards for Subclass Representatives Aubertine and Taylor of $20, 000 each. On May 13, 2016, the court held a Fairness Hearing to consider whether to approve the December 2015 Settlement, at which time the court took the pending motions under advisement.

         The attorneys participating in Lead Counsel's motion are Robert G. Abrams, Esq., Robert J. Brookhiser, Esq., Gregory J. Commins, Jr., Esq., Terry L. Sullivan, Esq., Danyll W. Foix, Esq., Emily J. Joselson, Esq., Lisa B. Shelkrot, Esq., Kit A. Pierson, Esq., Benjamin D. Brown, Esq., Brent W. Johnson, Esq., Emmy L. Levens, Esq., David A. Balto, Esq., and Andrew D. Manitsky, Esq. The attorneys participating in Intervenor Counsel's motion are Daniel Smith, Esq., and Richard T. Cassidy, Esq.

         I. Factual and Procedural Background.

         This class action arises out of Plaintiffs' allegations that Defendants Dairy Farmers of America, Inc. ("DFA"), Dairy Marketing Services, LLC ("DMS"), Dean Foods Company ("Dean"), and other named and unnamed co-conspirators conspired to control the supply of raw Grade A milk in Order 1, which had the effect of suppressing certain premiums paid to dairy farmers for their milk.

         On August 3, 2011, the court granted final approval of a settlement between Plaintiffs and Dean, requiring Dean to make a one-time payment of $30, 000, 000 (the "Dean Settlement"). The court awarded attorneys' fees of $4, 500, 000, reflecting fifteen percent of the Dean Settlement, and reimbursement of $1, 500, 000 in expenses. The total award to Plaintiffs' attorneys was therefore twenty percent of the Dean Settlement. The court declined to grant any incentive payments to class representatives at that time, explaining that the notice sent to class members did not disclose these proposed payments and thus "[additional compensation for their efforts must await further developments in this case, and must be accompanied by full and accurate notice of any deduction from the class's recovery." (Doc. 341 at 19.)

         On November 19, 2012, the court certified a class consisting of all dairy farmers, whether individuals, entities, or members of cooperatives, who produced and pooled raw Grade A milk in Order 1 during any time from January 1, 2002 to the present (the "Dairy Farmers Class"). This class is comprised of two Subclasses.^[2] At the time of class certification, the court approved Plaintiffs' request that Claudia and Jonathan Haar and Richard Swantak be named representatives of the DFA/DMS Subclass, and that Alice H. and Laurance E. Allen and Garrett and Ralph Sitts be named representatives of the non-DFA/DMS Subclass.

         After an adjudication of Defendants' motion for summary judgment, which the court granted in part and denied in part, the parties reached a settlement agreement on July 1, 2014 (the "2014 Settlement"). The court subsequently denied without prejudice the motion for final approval of the 2014 Settlement.

         During communications regarding the 2014 Settlement, the relationship between Lead Counsel and certain Subclass Representatives eroded. Those Subclass Representatives subsequently moved to remove Lead Counsel. The court denied the motion, concluding "removal of class counsel at this late stage in the proceedings and in this complicated case would constitute an extraordinary remedy reserved for actual misconduct for which no alternative remedy is either feasible or prudent." (Doc. 667 at 8.)

         While the motion to remove Lead Counsel was pending, Stephen H. Taylor and Darrel J. Aubertine moved to intervene and be joined as additional Subclass Representatives for the non-DFA/DMS Subclass. They also sought the addition of their attorneys, Daniel Smith, Esq., and Richard T. Cassidy, Esq., as Subclass Counsel for the non-DFA/DMS Subclass. On August 11, 2015, the court granted the motion to intervene, noting that:

At this juncture, the opposing Subclass Representatives and Subclass Counsel are failing to present a united front on behalf of the Dairy Farmer Subclasses and, in this respect, are undermining the interests of absent class members. As the case progresses towards either trial or to a final settlement, the stalemate and the lack of communication between Subclass Counsel and all but two of the Subclass Representatives is and will continue to be unacceptable. Without a significant change in circumstances, removal of either Subclass Representatives or Subclass Counsel or both may be warranted.

(Doc. 682 at 8.) The court initially denied the request to add additional attorneys because their addition would increase the attorneys' fees and costs and "would effectively force Subclass Counsel to work with new attorneys at the court's direction." Id. at 14. When the stalemate between opposing Subclass Representatives and Lead Counsel persisted, the court granted the appointment of Attorneys Smith and Cassidy as additional counsel ("Intervenor Counsel").^[3]

         On September 24, 2015, Lead Counsel moved to add Marilyn and Peter Southway, Reynard Hunt, and Robert Fulper as DFA/DMS Subclass Representatives, and to remove the previously appointed DFA/DMS Subclass Representatives. On October 23, 2015, the court granted the motion to add Subclass Representatives, but denied the motion to remove the previously appointed Subclass Representatives. The court explained that the existing Subclass Representatives "adequately represent the DFA/DMS Subclass and remain committed to vigorously pursuing its interests" and their removal would eliminate dissenting opinions that may be important to the adequate representation of the class. (Doc. 707 at 7.)

         The parties thereafter continued negotiations that resulted in the December 2015 Settlement. On May 13, 2016, the court held a Fairness Hearing at which members of the Dairy Farmers Class overwhelmingly supported the settlement. On June 7, 2016, the court granted final approval of the December 2015 Settlement.^[4]

         Lead Counsel and Intervenor Counsel (collectively, "Plaintiffs' counsel") now seek attorneys' fees and expenses. In support of their pending motions, Plaintiffs' counsel submit affidavits identifying the amount of hours that attorneys and other legal professionals devoted to this case, as well as the hourly rates those individuals typically charge for their services. In total, Plaintiffs' counsel expended approximately 64, 000 hours, reflecting more than $28.7 million in fees, exclusive of costs, on this case.^[5] The records they submit in support of their request identify general categories of tasks, such as "Investigations, Factual & Legal Research[, ]" "Discovery, Document Management and Depositions[, ]" and "Case Management and Administration[.]" See Doc. 728-2 at 2.

         These general categories do not reveal how much time was expended on discrete tasks, such as filing an opposition to a motion for summary judgment or filing a motion to replace certain Subclass Representatives.

         Plaintiffs' counsel have also incurred unreimbursed costs in the amount of $3, 810, 631.86. Lead Counsel summarizes their expenses as follows:

Obtaining, reviewing, and hosting documents; preparing, taking, and defending depositions; hiring stenographers and videographers for depositions; performing computerized legal research; making copies and deliveries; preparing pleadings (motions, memoranda, etc.) filed with the Court; preparing for hearings; expert witness fees and costs[;] . . . preparing for trial (reviewing and organizing video deposition testimony, preparing witness examinations, selecting exhibits, preparing demonstratives, etc.); and traveling to depositions, hearings, and meetings with clients, experts, and potential witnesses.

(Doc. 728 at 27-28.) Intervenor Counsel's expenses arise solely from travel and lodging related to this case.

         II. Conclusions of Law and Analysis.

         A. Whether to Grant Lead Counsel's Proposal for Attorneys' Fees or Intervenor Counsel's Proposal for Attorneys' Fees.

         Lead Counsel seeks attorneys' fees in the amount of $16, 666, 666, or 33.3% of the monetary recovery under the December 2015 Settlement. Intervenor Counsel proposes an alternative award of $11, 500, 000, which reflects 23% of the monetary recovery. For the reasons set forth below, the court determines that an attorneys' fees award comprising 14% of the December 2015 Settlement ($7, 000, 000), without accrued interest, is reasonable.

         "In a certified class action, the court may award reasonable attorney's fees[.]" Fed.R.Civ.P. 23(h). It is "well established that the common fund doctrine permits attorneys whose work created a common fund for the benefit of a group of plaintiffs to receive reasonable attorneys' fees from the fund" and that "[c]lass action lawsuits are the prototypical example of instances where the common fund doctrine can apply." Victor v. Argent Classic Convertible Arbitrage FundL.P., 623 F.3d 82, 86 (2d Cir. 2010). Approval of a reasonable fee in common fund cases is "often challenging . . . especially because-since the attorneys' fees are drawn from a common fund rather than being paid separately by the defendants-there is little incentive for the defendants to contest the size of the fee. To the contrary, plaintiffs' and defendants' lawyers share an interest in the approval of an agreed upon settlement." McDaniel v. Cty. of Schenectady, 595 F.3d 411, 418 (2d Cir. 2010). For this reason, the district court has a "duty to act as a fiduciary who must serve as a guardian of the rights of absent class members, and [to] reaffirm the requirement of a searching assessment regarding attorneys' fees that should properly be performed in each case." Id. at 419 (citations and internal quotation marks omitted).

         "[E]ither the lodestar or percentage of the recovery methods may properly be used to calculate fees in common fund cases[.]" Goldberger v. Integrated Res., Inc., 209 F.3d 43, 45 (2d Cir. 2000). "[T]he trend in [the Second] Circuit is toward the percentage methodf.]" McDaniel, 595 F.3d at 417 (internal quotation marks omitted). Pursuant to the percentage method, the court "sets some percentage of the recovery as a fee." Goldberger, 209 F.3d at 47. That "fee award should be assessed based on scrutiny of the unique circumstances of each case, and a jealous regard to the rights of those who are interested in the fund." Id. at 53 (internal quotation marks omitted).

         Although courts in the Second Circuit most often use the percentage method, the lodestar may nonetheless serve "as a 'cross check' on the reasonableness of the requested percentage." Goldberger, 209 F.3d at 50. The lodestar method "scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then multiplies that figure by an appropriate hourly rate." Id. at 47.^[6]

         "[WJhether calculated pursuant to the lodestar or the percentage method, the fees awarded in common fund cases may not exceed what is 'reasonable' under the circumstances[.]" Goldberger, 209 F.3d at 47. "What constitutes a reasonable fee is properly committed to the sound discretion of the district court[.]" Id. District courts must consider: "(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations." Id. at 50 (alterations and internal quotation marks omitted).

         1. Time and Labor Expended by Counsel.

         Plaintiffs' counsel estimate they expended approximately 64, 000 hours on this case, amounting to $28, 790, 531 in fees.^[7] The problem with this estimate is threefold. First, some of the 64, 000 hours gave rise to the Dean Settlement. At the time of the Dean Settlement, Lead Counsel represented that it had completed "over 31, 000 hours of legal work." (Doc. 310-1 at 17.) The court has already awarded attorneys' fees to compensate the time expended in pursuing the Dean Settlement.

         Second, the estimate includes time that Lead Counsel spent addressing the communication breakdown with Subclass Representatives. Intervenor Counsel ask the court to consider Lead Counsel's "responsibility for the breakdown in communications[, ]" and "propose that the majority of the time spent on this issue be accounted for, and removed, as part of the lodestar cross-check." (Doc. 729-1 at 8) (internal quotation marks omitted). The court agrees that the attorneys' fees award should reflect that some of the fees expended on this issue could have been avoided by a more cooperative relationship between Lead Counsel and Subclass Representatives.

         Third, Plaintiffs' counsel aggregate their hours expended into broad categories of tasks. Consequently, the court cannot "scrutinize[] the fee petition to ascertain the number of hours reasonably billed to the class[.]" See Goldberger, 209 F.3d at 47; see also Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., 2016 WL 3163073, at *8 (6th Cir. June 7, 2016) (holding that the district court erroneously approved class counsel's request for $10 million in fees, and observing that "class counsel provided no backup whatsoever-no time records, no descriptions of work done-in support of their hours spent working on this case . . . class counsel [instead] provided the district court with a ...