“Certiorari (/ˌsɜrʃⁱəˈrɛəraɪ/, /-ˈrɛəri/, or /-ˈrɑri/) is a type of writ seeking judicial review, recognized in Roman, U.S., English, Canadian, Philippine, and other law, meaning an order by a higher court directing a lower court, tribunal, or public authority to send the record in a given case for review.
Certiorari is the present passive infinitive of the Latin verb certioro (“to inform, apprise, show”)”
(from 2006. non-attorney black box warning: do not read this in bed. you will lose consciousness immediately)
QUESTIONS PRESENTED
In this antitrust class action, the Second Circuit held Appellant Leonardo’s, unnamed class member and objector to terms of the proposed settlement, did not preserve for purposes of appeal, its objections to Appellee Class Counsel’s fee request. The questions presented are:
1. Whether the Ninth Circuit correctly held Appellant Leonardo’s did not preserve its objections to Appellee Class Counsel’s fee request.
2. Whether risk enhancement fee-multipliers are appropriate in cases brought under federal fee-shifting statutes, specifically antitrust cases.
PARTIES TO THE PROCEEDING
All parties are listed in the caption.
RULE 29.6 STATEMENT
Petitioners 710 Corporation and Leonardo’s Pizza By the Slice, Inc. are privately held Florida corporations. There are no corporate parents, affliates or publicly held companies that own 10% or more of its stock.
TABLE OF CONTENTS
TABLE OF AUTHORITIES
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
710 Corporation and Leonardo’s Pizza By the Slice, Inc, petitioners herein, respectfully petition this Court for a writ of certiorari to review the judgment of the United States Court of Appeals for the Second Circuit, entered in the above-titled case on January 4, 2005.
OPINIONS BELOW
The opinion of the court of appeals is reported at 396 F.3d 96. The opinion of the district court is reported at 297 F.Supp.2d 503.
JURISDICTION
The judgment of the court of appeals was entered on January 4, 2005. The jurisdiction of this Court is invoked under 28 U.S.C. §1254(1).
STATUTES INVOLVED
This class action case arises under Sections 1, 2, 4 and 15 of the Sherman Antitrust Act, 15 U.S.C. §§1, 2, 4 and 15. Exclusive jurisdiction within the United States courts is granted by 28 U.S.C. §1331 and §1337.
STATEMENT OF THE CASE
This class action arises under Sections 1, 2, 4 and 15 of the Sherman Antitrust Act, 15 U.S.C. §§1, 2, 4 and 15. Exclusive jurisdiction within the United States courts is granted by 28 U.S.C. §1331 and §1337. This appeal concerns the Second Circuit’s Opinion issued January 4, 2005, affirming the district court’s Memorandum and Order entered December 19, 2003, approving the proposed class action settlement and the plan of allocation, and awarding attorneys’ fees to lead counsel and 29 other law firms. In re Visa Check/Mastermoney Antitrust Litigation, 297 F.Supp.2d 503, 507 (E.D.N.Y. 2003).
Named Plaintiffs representing a class of approximately five million merchants filed this antitrust action on October 25, 1996, against defendants Visa and Mastercard alleging the existence of a tying arrangement in violation of Section 1 of the Sherman Act, based upon defendants’ requirements that any merchant honoring their credit cards must honor their debit cards as well. In re Visa Check/Mastermoney Antitrust Litigation, 297 F.Supp.2d 503, 507 (E.D.N.Y. 2003); and In re Visa Check/Mastermoney Antitrust Litigation, 280 F.3d 124, 129-30 (2nd Cir. 2001). Named Plaintiffs also alleged that the defendants conspired and attempted to monopolize the debit card industry, in violation of Section 2 of the Sherman Act. Id. A class was certified on February 22, 2000, and the Second Circuit affirmed that class certification on October 17, 2001. In re Visa Check/Mastermoney, 280 F.3d 124 (2nd Cir. 2001). Summary judgment motions were heard on January 10, 2003. In re Visa Check/ Mastermoney, 297 F.Supp.2d at 507-508. Defendants’ motions were denied in full; the class’ motions were granted in part.
In its summary judgment opinion, the district court found that there were no issues of material fact as to four of the elements of the per se antitrust analysis with respect to Defendant Visa, and no issues of material fact for all but the fourth with respect to Defendant Mastercard, as follows: “(1) that the tying arrangement affects a substantial amount of interstate commerce; (2) the two products are distinct; (3) the defendant actually tied the sale of the two products; and (4) the seller has appreciable market power in the tying market.” In re Visa Check/Mastermoney Antitrust Litigation, 2003 WL 1712568 at *2-*5 (E.D.N.Y. 2003). The court also determined there was no issue of material fact regarding the relevant product market. Id. at *7.
Trial of this case began April 28, 2003, but was suspended when Defendant Mastercard agreed to settle. Id. All parties entered a proposed settlement on April 30, 2003. Id. Unnamed Class Members and Objectors, 710 Corporation and Leonardo’s Pizza By The Slice, filed their Preliminary Objections to Proposed Settlement on September 5, 2003, and appeared at the fairness hearing held on September 25, 2003. The trial court issued its Memorandum and Order on December 19, 2003, approving the proposed settlement and plan of allocation, and awarding attorneys’ fees to lead counsel and 29 other law firms representing class members. In re Visa Check, supra, 297 F.Supp.2d at 507.
REASONS FOR GRANTING THE PETITION
The Second Circuit’s Ruling on Preservation of Issues for Appeal
Is Clearly Erroneous and an Error of Law
The first question presented is whether Appellant Leonardo’s preserved its objections, at the district court level, to Appellee Class Counsel’s fee request. In its opinion issued January 5, 2005, the Second Circuit held Appellant Leonardo’s “did not preserve” its objections to class counsel’s fee request at the district court level, stating in its opinion at footnote 29, “[a]t the district court, Leonardo’s failed to contest class counsel’s fee petition. […] The record is clear: Leonardo’s did not preserve for appeal its challenge to the fee award.” Wal-Mart v. Visa/Mastercard, Appellees v. Leonardo’s Pizza by the Slice, Appellant, 2005 WL 15056 (2nd Cir. 2005) at *21, n. 29. This assertion is factually and legally contradicted by the record as well as the district court’s prior rulings. Appellee/Class Counsel’s own Brief in Opposition admits that Appellant Leonardo’s both objected to the Fee Petition, and incorporated all other unnamed class members fee objections, including those objections based on fee-shifting arguments. Appellee/Cross Appellant-Class Counsel’s Brief (i) in Opposition to the Appeal of Objectors 710 Corp. and Leonardo’s Pizza By the Slice, Inc. and (ii) in Support of Class Counsel’s Cross-Appeal from the District Court’s Award of Attorneys’ Fees, at pp. 52-53.
In addition, the district court specifically told all objectors at the fairness hearing, “[l]et me emphasize at the outset that I have read these objections. It is not useful simply to repeat them. I am going to give you an opportunity to be heard, but don’t feel constrained to get up and repeat what is in your papers as though nobody has read them. I have. So you don’t need to speak if you don’t want to.” Transcript of Proceedings, Settlement Fairness Hearing, September 25, 2003, p. 8. Appellant Leonardo’s counsel, Edward Cochran, was permitted “up to five minutes” to present argument. Id. at 12. On the subject of class counsel’s fee award, Mr. Cochran complied with the trial court’s request for brevity, stating clearly, “our objections contain matters as to the fee. I will not speak on that at all fully. I will incorporate the comments of other objectors so that they are not repeated.” Id. at 58.
The Second Circuit claimed there was only “one sentence addressing the fee petition in Leonardo’s ten-page brief objecting to the Settlement.” Wal-Mart, supra, at *21, n. 29. In fact, at least seven of the 13 separate paragraphs, contained in Appellant Leonardo’s brief objecting to the Settlement, refer to the issue of Class Counsel’s fee request, as follows:
7. The June 13, 2003 Notice specifically fails to inform class members what the amount of the attorney’s fees in this matter are, or will be, or will be requested and the relationship, in terms of a percentage, of the amount of the attorney fees to the rest of the settlement.
8. The June 13, 2003 Notice specifically fails to inform class members as to whether the attorney’s fees are based on the present value of the settlement or the potential payout over time, and whether the attorney fees are to be paid up front or over time in synchronization with the payout to class members.
9. The June 13, 2003 Notice deprives unnamed class members of Due Process of Law by allowing the Class Counsel to file for a specific amount of attorney’s fees over a month later on August 18, 2003, without re-notice to, or publication to, the class of the specific amount requested.
10. The June 13, 2003 Notice deprives unnamed class members of Due Process of law by requiring unnamed class members to calendar the August 18, 2003 date and then search on-line to find Class Counsel’s fee request.
11. The June 13, 2003 Notice deprives unnamed class members of Due Process of law by allowing class counsel to effectively shorten the time period for objecting to their requested fees to 18 days, i.e. from August 18, 2003 until September 5, 2003.
12. Objectors respectfully request to reserve the right to adopt and incorporate in their Preliminary Objections to the Proposed Settlement all other timely filed objections that are not inconsistent with these Objections.
13. Objectors request the Court carefully consider the amount of attorneys’ fees and expenses requested by class counsel, an issue which Objectors expressly reserve for further argument when the matter of fees is considered.
Appellants 710 Corp. and Leonardo’s Pizza By the Slice, Inc. Preliminary Objections to Proposed Settlement, pp. 8-9 (emphasis added). This utterly refutes Appellee Class Counsel’s assertion, “Leonardo’s barely objected to the fee petition.” Appellee’s Opening Brief, supra at 52.
The Second Circuit did not rule in accord with the record below. An issue is reviewable on appeal if it was “pressed or passed upon below.” United States v. Williams, 504 U.S. 36, 41 (1992) (internal citations omitted). “A claim is ‘pressed or passed upon’ when it fairly appears in the record as having been raised or decided.” United States v. Harrell, 268 F.2d 141, 146 (2nd Cir. 2001). Here, the Second Circuit ignored both the record and the district court’s specific factual finding that Appellant Leonardo’s objected to the Fee Petition.
The district court here below, in In re Visa Check/Mastermoney Antitrust Litigation, 297 F.Supp.2d 503, 522, n. 27 (E.D. N.Y. 2003), clearly and unmistakably found that Appellant preserved its objections to class counsel’s fee request, stating, “[a]s noted earlier, 17 merchants filed objections to the fee request. They are: Round House, Inc. d/b/a Smuggler’s Cove; Ron Fred, Inc. d/b/a Bailey’s; Ron Jen., Inc. d/b/a The Boathouse; Preston Center Personal Training, Inc.; Roman Buholzer d/b/a The Continental Garden Restaurant; Rent Tech, Inc.; Rental Solutions, Inc.; Thomas McMackin (as President of Wagner’s Bakery, Inc.); Beaches N Cream; Kickers Corner of the Americas, Inc.; Leonardo’s Pizza by the Slice; 710 Corp.; Sounds Deals, Inc.; Digital Playroom, Inc.; Southern Network Services, Inc.; Duke Products, Inc.; and Village Fabrics and Furnishings, Inc.” Thus, the record is clear that at the district court level, Appellant Leonardo’s contested class counsel’s fee petition, and in so doing, preserved its rights to appeal.
Further, the cases cited by the Second Circuit for the proposition that “where a party has shifted his position on appeal and advances arguments available but not pressed below, … waiver will bar raising the issue on appeal,” are criminal cases which all refer specifically to Federal Rules of Criminal Procedure, Rule 12(b)(3) and Rule 41(h), which concern motions to suppress evidence. “Rule 12(f) of the Federal Rules of Criminal Procedure clearly states that ‘[f]ailure by a party to raise . . . objections . . . shall constitute waiver thereof, but the court for cause shown may grant relief from the waiver.’” United States v. Singh, 628 F.2d 758, 762 (2nd Cir. 1980).
Appellant Leonardo’s has not in any way shifted its position on appeal. Appellee Class Counsel was fully informed of all legal arguments at issue in this appeal at the time of trial. Thus, the “waiver” rationale used by the Second Circuit is simply inapplicable.
This Court is the Only Source of Guidance to the Circuits on Whether Risk Enhancement
Fee Multipliers are Inappropriate in Cases Brought Under Federal Fee-Shifting Statutes, Specifically Antitrust Cases
The second question presented here is whether risk enhancement fee-multipliers are appropriate in cases brought under federal fee-shifting statutes, specifically antitrust cases. This Court has previously indicated, in City of Burlington v. Dague, 505 U.S. 557 (1992), that contingency risk fee enhancements for any and all cases brought under federal fee-shifting statutes are impermissible. In Dague, this Court determined “that enhancement for contingency is not permitted under the [federal] fee-shifting statutes at issue.” Dague, supra, at 567. This ruling is applicable to all federal fee-shifting statutes regardless of their subject matter. This Court explicitly stated that “our case law construing what is a ‘reasonable’ fee applies uniformly to all of them [federal fee-shifting statutes].” Dague, supra, at 562. Consequently, a reasonable fee is to be determined without regard for contingent risks. Id. at 566.
The instant case is by nature, as are all private antitrust actions, a statutory fee-shifting case. 15 U.S.C. §15 states: “[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor […] and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.” If the instant case had not settled but proceeded to trial and was concluded by judgment, the possible recovery for the class would have been trebled, but the attorneys’ fees would have been limited to the unenhanced lodestar under the holding of Dague, supra. This is one reason why it is important that antitrust class action “[s]ettlements do not come too early to be suspicious nor too late to be a waste of resources.” In re Vitamins Antitrust Litigation, 305 F.Supp.2d 100, 105 (D.D.C. 2004).
Under the antitrust laws, attorneys’ fees to the injured party are compulsory. “Section 4 of the Clayton Act states, in pertinent part, that ‘any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor … and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.’ 15 U.S.C. § 15(a).” United States Football League v. National Football League, 887 F.2d 408, 411 (2nd Cir. 1989). In USFL, the plaintiff was awarded damages of $1, trebled to $3, and attorneys’ fees of $5.5 million. “What is important is encouraging the detection and cessation of anticompetitive behavior, not the amount of damages found.” Id. at 412. Thus, if attorneys pursuing antitrust cases are allowed full, reasonable fees in the face of nominal damages, it stands to reason that attorneys should be awarded full (lodestar), presumptively reasonable fees in the face of a higher judgment or settlement.
The Third Circuit, though not faced with this precise issue, recently warned of this danger in Brytus v. Spang, 203 F.3d 238, 247 (3rd Cir. 2000), stating “there remains the possibility that in some cases counsel for a class of plaintiffs may receive a higher fee award upon settlement than they would have received had the case proceeded to judgment.” However, in Brytus, the court declined to rule on “some hypothetical situation that might be presented in the future.” This formerly “hypothetical” situation has presented itself to this Court. Class counsel here received more upon settlement than they would had the case been concluded by judgment favorable to the affected class. To enhance antitrust fees in the settlement context, but not the judgment context, puts the interests of class counsel and class members fundamentally, and irremediably at odds.
This is an issue of critical importance and first impression in the law of fee awards. “Although the Supreme Court has not addressed whether this prohibition [against risk enhancements] also applies in common fund cases, […] ‘the Court’s reasoning for excluding risk enhancements in fee-shifting cases applies equally to common fund cases.’ […] [J]urisdictions are split as to the application of risk enhancements in the common fund context.” In re Prudential Ins. Co. of America Sales Practices Litigation, 148 F.2d 283, 341 at n. 121 (3rd Cir. 1998) (quoting In re Prudential Fee Opinion, 962 F.Supp. 572, 581 n.24 (D.N.J. 1997)). Recently, in Staton v. Boeing, 327 F.3d 938, 966 (9th Cir. 2003), the court stated, “[w]ere the amount of fees Boeing agreed to pay in the settlement agreement distinctly higher than the fees class counsel could have been awarded by the district court using the lodestar method, the court would almost surely have had to find the fees unreasonable.” Although that particular situation was not before the Ninth Circuit in Brytus, the court nonetheless warned, “courts have to be alert to the possibility that the parties have adopted [their particular settlement agreement] precisely because the fee award is in fact higher than could be supported on a statutory fee-shifting basis[…].” Id. at 970.
This Court has “established a ‘strong presumption’ that the lodestar represents the ‘reasonable’ fee.” City of Burlington v. Dague, 505 U.S. 557, 562 (1992). In Dague, this Court determined “that enhancement for contingency is not permitted under the [federal] fee-shifting statutes at issue.” Dague, supra, at 567. This ruling is applicable to all federal fee-shifting statutes regardless of their subject matter. This Court explicitly stated that “our case law construing what is a ‘reasonable’ fee applies uniformly to all of them [federal fee-shifting statutes].” Dague, supra, at 562. Consequently, a reasonable fee is to be determined without
regard for contingent risks. Id. at 566.
Further, this Court found that if contingency enhancement were to be used in any contingent fee cases (brought under fee-shifting statutes), it would have to be applied to all such cases. Dague, supra, at 565. This result would, this Court reasoned, encourage non-meritorious claims to be brought, which is against public policy and Congressional intent. Dague, supra, at 563. This Court therefore concluded that “just as the statutory language limiting fees bars a prevailing plaintiff from recovering fees relating to claims on which he lost, so should it bar a prevailing plaintiff from recovering for the risk of loss.” Dague, supra, at 565.
This Court was especially concerned with the fact that “[t]o award a contingency enhancement under a fee-shifting statute would in effect pay for the attorney’s time (or anticipated time) in cases where his client does not prevail.” Dague, supra, at 565. Thus, this Court concluded, “[i]t is neither necessary nor even possible for application of the fee-shifting statutes to mimic the intricacies of the fee-paying market in every respect.” Dague, supra, at 566-67.
The instant case is definitely unique, since it is, in all likelihood, the largest settlement in class action history, with the value of the compensatory relief to the class approximated at $3.383 billion. In re Visa Check/Mastermoney, 297 F.Supp.2d at 508. This is due entirely to the size of the affected class, which is approximated at five million members. Id. at 506. The set of circumstances presented here has resulted in a “distortion of the equitable fund theory,” warned against in City of Detroit v. Grinnell Corp., 560 F.2d 1093, 1098 (2nd Cir. 1977) (“Grinnell II”).
Extremely large “megafund” cases involve fee-calculation hazards not present in smaller cases. For example, in a securities class action case involving a settlement of approximately $687 million, the judge observed,“the immense size of the settlement fund in this action far exceeds the amount of settlement funds in virtually all similar cases that counsel have cited and/or that the Court has reviewed. Just one percent of the settlement in this action is the equivalent of nearly seven million dollars. Every adjustment of .1% (1/10 th of one per cent) in an applied percentage would result in a fee variance amounting to approximately $700,000.” In re Washington Public Power Supply System Securities Litigation, 779 F.Supp. 1063, 1085 (D.Ariz. 1990); vacated in part, 19 F.3d 1291 (9th Cir. 1994). An even greater potential for fee-calculation error exists in the instant case. One-tenth of one per cent (0.1%) here is approximately $3,383,400.
CONCLUSION
The petition for a writ of certiorari should be granted.
Kimberly Townsend Palmer 