PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
_______________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
09/30/99
No. 97-5074
THOMAS K. KAHN
_______________ CLERK
D. C. Docket No. 90-6863-CV-UUB
WILLIAM WATERS, LINDA BARTHOLOMEW, individually,
and on behalf of all those similarly situated,
Plaintiffs-Appellees,
versus
INTERNATIONAL PRECIOUS METALS CORPORATION,
MULTIVEST, INCORPORATED, et al.,
Defendants-Appellants.
______________________________
Appeal from the United States District Court
for the Southern District of Florida
______________________________
(September 30, 1999)
Before TJOFLAT and BIRCH, Circuit Judges, and BRIGHT*, Senior Circuit
Judge.
__________________
*Honorable Myron H. Bright, Senior U.S. Circuit Judge for the Eighth Circuit,
sitting by designation.
BIRCH, Circuit Judge:
In this class action, customers of the commodity futures brokerage firm,
MultiVest Options, Inc. (“MOI”), brought suit against the firm and its brokers,
alleging that the defendants engaged in a scheme to defraud customers by soliciting
and stimulating excessive trading in commodities options. James Grosfeld, as
owner of MOI's parent company, MultiVest, Inc., is the primary defendant in the
case, as MultiVest, Inc. is substantially insolvent.
After seven years of extremely contentious litigation and five months of
trial, the parties agreed to a settlement prior to the scheduled date of closing
arguments to the jury.1 The settlement created a $40 million fund to pay claims of
class members and the fees and expenses of the plaintiffs' attorneys. The fund was
“reversionary,” meaning that any unclaimed amounts would revert to defendant
Grosfeld, the sole source of funding for the settlement. Defendants now argue that
(1) the district court's award of $13.3 million in fees to the plaintiffs' attorneys was
an abuse of discretion, (2) they are not prohibited from challenging the fee award
even though the settlement agreement contained a “clear sailing” provision
whereby defendants agreed not to challenge the fee award application, (3) the
1
The merits of the underlying class action, notwithstanding the energy devoted to those topics
by counsel, are not at issue in this appeal.
2
district court's order finding that plaintiffs' counsels' fee award is assignable is
reversible error, and (4) that the district court's approval of plaintiffs' attorneys'
expense request was an abuse of discretion. We address each of these issues in
turn.
I. FEE AWARD
On the eve of closing arguments, the parties reached a settlement stipulation
and presented the agreement to the district court. In pertinent part, the settlement
provided that defendant Grosfeld would provide the money to fund a settlement of
$40 million with which to satisfy the claims of the plaintiff class. The fund would
consist in part of cash payments and in part promissory notes. In addition, the
stipulation provided that any money not claimed by the plaintiff class or used to
pay out fees and expenses would revert to defendant Grosfeld. See R31-1371, §
6.2(e), at 43.
The stipulation also provided that plaintiffs' class counsel would apply for
attorneys' fees “in an amount not to exceed 33-1/3% of the Settlement Fund plus
their costs and expenses.” Id., § 7.1, at 54-55.2 Finally, the stipulation included a
2
Under the agreement, “settlement fund” is defined as “the sum of the cash and aggregate
initial principal amount of the Master Promissory Note to be delivered to the Settlement
Administrator pursuant to § 2.2 of this Stipulation.” R31-1371, § 1.36, at 15. Section 2.2 provides
that: “Defendants shall cause James Grosfeld to deposit the Settlement Fund in the amount of
$40,000,000 by delivery actually made to the Settlement Administrator, contemporaneously with
the entry of an order by the United States District Court for the Southern District of Florida
3
“clear-sailing” agreement which provided that “Defendants will not directly or
indirectly oppose Plaintiff's Class Counsel of Record's application for fees and
expenses or compensation of the Representative Plaintiffs.” Id. at 55.3 The district
court conducted numerous hearings and conferences among the parties on the
provisions of the settlement agreement. On January 31, 1997, the district court
held a hearing in open court on the pending motion for preliminary approval of the
stipulation of settlement. The court gave preliminary approval and dismissed the
jury. The final fairness hearing was held on March 31, 1997. The district court
approved the settlement and awarded plaintiff's class counsel $13.3 million in
attorneys' fees. See R132-1518-94. The court postponed consideration of
expenses and asked the plaintiffs' counsel to provide additional documentation.
After two additional conferences on April 25 and April 28, 1997, the district court
awarded plaintiffs' class counsel $2,400,204 in expenses. See R35-1543-2.
We review a district court's award of attorneys' fees for abuse of discretion.
Camden I Condominium Assoc., Inc. v. Dunkle, 946 F.2d 768, 770 (11th Cir.
preliminarily approving this Stipulation.” Id., § 2.2, at 17.
3
Such agreements are sometimes included in class action settlements so that defendants have
a more definite idea of their total exposure. See Weinberger v. Great N. Nekoosa Corp., 925 F.2d
518, 520 n.1 (1st Cir. 1991) (“In general, a clear sailing agreement is one where the party paying the
fee agrees not to contest the amount to be awarded by the fee-settling court so long as the award falls
beneath a negotiated ceiling.”).
4
1991). The district court “has great latitude in formulating attorney's fees awards
subject only to the necessity of explaining its reasoning so that we can undertake
our review.” McKenzie v. Cooper, Levins & Pastko, Inc., 990 F.2d 1183, 1184
(11th Cir. 1993) (internal quotation omitted).
By definition . . . under the abuse of discretion standard of review
there will be occasions in which we affirm the district court even
though we would have gone the other way had it been our call. That
is how an abuse of discretion standard differs from a de novo standard
of review. As we have stated previously, the abuse of discretion
standard allows a range of choice for the district court, so long as that
choice does not constitute a clear error of judgment.
Purcell v. BankAtlantic Fin. Corp., 85 F.3d 1508, 1513 (11th Cir. 1996) (citation
omitted).
In considering a fee award in the class action context, the district court has a
significant supervisory role. Federal Rule of Civil Procedure 23(e) mandates that a
“class action shall not be dismissed or compromised without the approval of the
court.” See also Evans v. Jeff D., 475 U.S. 717, 726, 106 S. Ct. 1531, 1537, 89
L.Ed.2d 747 (1986) (“Rule 23(e) wisely requires court approval of the terms of any
settlement of a class action.”). Upon reviewing the voluminous record in this case,
5
we find no abuse of discretion by the district court and affirm the award of
attorneys' fees.4
On March 31, 1997, the district court presided over a fairness hearing
concerning the proposed Settlement Agreement. At that hearing, after noting the
objections raised by the defendants, the district court proceeded to discuss the
attorneys' fee award with reference to Boeing Co. v. Van Gemert, 444 U.S. 472,
100 S. Ct. 748, 62 L.Ed.2d 676 (1980) and Camden I. See R132-1518-84-85. In
Boeing, the Supreme Court rejected petitioner's argument that the attorneys' fee
4
Because we find no abuse of discretion by the district court in its award of fees and
expenses, we need not address the ramifications of the “clear sailing” agreement on the defendants'
ability to challenge the fee award in this case. We note that clear sailing agreements have been the
subject of some controversy in the class action arena. In Malchman v. Davis, 761 F.2d 893 (2d Cir.
1985), abrogated on other grounds, Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 117 S. Ct. 2231,
138 L.Ed.2d 689 (1997),the court upheld an attorneys' fee award from a settlement agreement that
contained a clear sailing clause. The writing judge noted that while the district court judge should
always be the ultimate determiner of the fee award, “where . . . the amount of the fees is important
to the party paying them, as well as to the attorney recipient, it seems . . . that an agreement