LOS ANGELES -- A federal judge this month refused to reconsider his decision that slashed a fee request by lawyers for class action members in the Washington Public Power Supply System bond fraud case.
U.S. District Court Judge William D. Browning said in a 14-page order that "the quality of counsel involved here creates an expectancy of excellent results, and the fees reflect that expectancy."
Accordingly, Judge Browning remained adamant about denying the bulk of so-called multiplier requests, which would have roughly tripled the lawyers' fees. Class action lawyers over all petitioned for $106.5 million, but Judge Browning reduced that amount to $36.5 million in a ruling last November.
The judge said he spent "the better part of two years" reviewing the petitions from 24 law firms. Those firms represented certain bondholders in the federal lawsuit over the supply system's $2.25 billion default in 1983 on nuclear power project 4 and 5 bonds.
Class action lawyers filed a motion that asked Judge Browning to rethink his decision, arguing that their efforts deserved much higher rewards. Out-of-court settlements cut short a trial over the case three years ago, and the settlement pot could total about $900 million.
Most of the lawyers' compensation came from the 'lodestar,' which is the lawyers' compensation for their hours worked, multiplied by their hourly rate.
Judge Browning said he was "not persuaded that a multiplier expectancy acted as a great incentive" in prompting lawyers to take the case.
"That claim rings hollow in light of the high hourly fees customarily charged in these cases," the judge continued, adding that "surely, risk is reflected, at least in part, by the hourly fees charged."
Judge Browning also noted that other factors helped the class action lawyers achieve a settlement. He noted, for example, that Chemical Bank -- the units 4 and 5 bond trustee -- "provided the war chest" for more than $50 million of cash advances to finance the litigation.
"In the climate created by this backdrop, it was almost inconceivable that a settlement would not be forthcoming," the judge said, adding that "this factor weighs heavily" against both the uncertainty of recovery and the argument that it would be difficult to find lawyers to take the case.
Class action lawyers are expected to appeal the judge's decision.
Judge Browning said he did not want an appeal to delay eventual payout of the settlement funds. As a result, he directed that only the legal fees in dispute be withheld so the balance of funds can be distributed.
The judge has blessed a plan for allocating the proceeds among various bondholder groups. But certain bondholders have appealed his decision, and a ruling is pending in a federal appellate court.
"Although the settlement was enormous in most respects, the court remained keenly aware that the bondholders' losses were also enormous," the judge said in the order dated Sept. 6, 1991. "To the extent therefore, that the bondholders must share the wealth, there was little to go around."
Judge Browning noted that the class action lawyers argued that they should be regarded for filing a void on behalf of bondholders "which regulatory agencies are unwilling and unable to."
But the judge said that such a reward "is not the purpose of fees in litigation of this kind." He added that bondholders "did not hire class counsel for the benefit of future litigants or to send any message to securities issuers and the like."