Submitted September 25, 2013.
Petition for certiorari filed at, 12/31/2014
Appeal from United States District Court for the Eastern District of Missouri - St. Louis.
For The Phipps Group, Appellant (12-3958, 12-4045): Michael Gross, Saint Louis, MO; Amanda L. Hazleton, Martin John Phipps, Goldman & Phipps, San Antonio, TX; Kimberly S. Keller, Kellar & Stolarczyk, Boerne, TX; Mikal C. Watts, Watts & Guerra, San Antonio, TX.
For Don M. Downing and Adam J. Levitt, Plaintiffs' Co-Lead Counsel and on behalf of all Common Benefit Attorneys, Appellee (12-3958, 12-4045): Stacey Kelly Breen, Wolf & Haldenstein, New York, NY; Don Manley Downing, Gretchen Garrison, Gray & Ritter, Saint Louis, MO; Adam J. Levitt, Grant & Eisenhofer, Chicago, IL.
Before LOKEN, COLLOTON, and BENTON, Circuit Judges.
The district court appointed Don Downing and Adam Levitt, among others, as leadership counsel to coordinate the pretrial activities of plaintiffs in a multidistrict litigation (" MDL" ). The Phipps Group (" Phipps" ) represented some plaintiffs, but was not a member of the attorney leadership group. In 2010, the district court established a common benefit trust fund (" the Fund" ) to compensate the leadership group for their common benefit work. The plaintiffs settled the litigation. In 2012, the district court awarded common benefit fees from the Fund to leadership counsel, and denied Phipps's request for a common benefit award. Phipps and Phipps's clients raise various challenges to the establishment of the fund and the award of fees, and Downing and Levitt cross-appeal. We affirm.
In state and federal court, several thousand rice farmers, to whom we will refer as " producers," and others involved in the rice business who are " non-producers," sued Bayer CropScience after Bayer's genetically modified rice, which had not been approved for human consumption, tainted the U.S. rice supply. The Judicial Panel on Multidistrict Litigation established a multidistrict litigation under 18 U.S.C. § 1407, transferring several hundred federal court cases to the United States District Court for the Eastern District of Missouri to handle the pretrial phases of those federal suits.
On April 18, 2007, the district court appointed a leadership group of plaintiffs' attorneys--including Don Downing and Adam Levitt as Lead Counsel--to orchestrate pretrial litigation for all MDL plaintiffs with claims against Bayer. To foster the efficiency-related goals of the MDL mechanism, the court not only mandated cooperation among federal rice plaintiffs' counsel, but also " directed [all counsel] to take all appropriate steps to provide as much coordination as possible between [the federal MDL] actions and any related matters pending in state court." Lead Counsel spearheaded litigation-wide collaboration. These attorneys coordinated pretrial discovery, prepared for and conducted numerous depositions, appeared before the district court at hearings and status conferences, selected and prepared experts, and performed and assisted with bellwether trials. Lead Counsel shared their work with all rice plaintiffs, in both federal and state court. Phipps was not a member of the leadership group.
During pretrial preparations, and shortly before the MDL litigation's first bellwether trial, Lead Counsel filed a motion to create a common benefit trust fund. Lead Counsel argued that a common benefit trust fund could and should be used to pay certain fees and expenses of Lead Counsel and other attorneys who performed work benefiting all rice plaintiffs. The district court agreed and--in a " Common Benefit Fund Order" filed on February 24, 2010--mandated the establishment of the Fund. The district court found that all rice plaintiffs, including those in state court, had benefited substantially from the work of Lead Counsel. But the court " reluctantly" found that it did not have jurisdiction to order holdbacks from state-court rice recoveries. The court ordered that money from all awards or settlements in MDL cases be set aside to finance the Fund, but merely " encourage[d] defendants to seek the state court plaintiffs' agreement as part of any settlements or to
seek orders . . . from the appropriate state courts" that state plaintiffs participate in the Fund.
In its 2010 Order, the district court also determined, after reducing slightly the contribution required from European non-producers, that the holdbacks requested by Lead Counsel were reasonable. The order setting up the Fund, however, " [wa]s not an award of attorneys' fees," so the district court did not yet need " to determine whether the leadership group ha[d] earned the entirety of the proposed contribution." Rather, the 2010 Order provided that " [n]o disbursement shall be made from the [Fund] . . . except upon further order of [the] court after a hearing upon notice to all parties." The 2010 Order permitted " any plaintiffs' counsel (whether part of the leadership group or not)" to " petition for distribution of funds if that counsel believes he or she has provided a common benefit to plaintiffs other than his or her own clients."
The district court found that Phipps received several benefits from the work of Lead Counsel. For example, the court stated that Phipps used " documents and other discovery from Bayer obtained by the leadership group." Likewise, the court explained, " [a] member of the Phipps firm attended all depositions conducted by the leadership group and asked questions at the end," and " [a] representative of the Phipps firm was in daily attendance at the second bellwether trial." An Arkansas state court, in one of Phipps's state-court rice suits, similarly found that Phipps benefited from the work performed by the leadership group in the federal MDL.
The litigation progressed further, and the parties eventually agreed to settle. An MDL Settlement Agreement was entered into " by and among" Bayer, Negotiating Claimants' Counsel, and " each Enrolled Claimant and Eligible Claimant who is bound by this Agreement according to its terms." Likewise, " by submitting an Enrollment and Claims Package, Enrolling Counsel and each Eligible Claimant . . . agree[d] to be bound by all of the terms and conditions of [the] Agreement." Lead Counsel are among Negotiating Claimants' Counsel, but Phipps is not. Phipps submitted claims on behalf of claimants who enrolled in the settlement, so Phipps is an Enrolling Counsel who agreed to be bound by the Agreement's terms. The MDL Settlement Agreement provided that " [a]ll payments to Enrolled Claimants . . . under [the] Settlement Agreement shall be made as if Judge Perry's February 24, 2010 Common Benefit Fund Order applied to those claims," including that 8 percent of all payments to the Enrolled Claimants be paid to the Fund for attorneys' fees and 3 percent of all payments be directed to the Fund for costs and expenses incurred by attorneys providing a common benefit.
After settlement was reached, Lead Counsel and other common benefit attorneys sought a distribution of monies from the Fund. On September 4, 2012, the district court appointed retired federal judge Stephen N. Limbaugh, Sr., as Special Master " to review and issue a recommendation relating to the protocols, processes and allocation for distribution of Common Benefit Fees and Expenses." The Special Master considered Lead Counsel's motion for allocation of Fund monies and objections to that motion made by other plaintiffs' attorneys. The Special Master also reviewed other attorneys' requests for common benefit work disbursements.
On November 2, 2012, after meeting with Lead Counsel, as well as Phipps and two other members of Phipps's legal team, the Special Master made his report and recommendation. The Special Master explained that he had " carefully ...