Kaplan v. Rand

192 F.3d 60 (2nd Cir. 1999)

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Nature of the Case

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Facts

Kaplan (P) sued on behalf of Texaco various officers, directors and employees of the corporation and sought various forms of relief against Ds for breach of fiduciary duties and contractual obligations. This suit arose from another suit that was premised on Civil Rights Acts and law in which Texaco was accused of violating the rights of African-American salaried employees and discriminated against them in compensation and promotion. As part of the settlement Texaco was to set up a $115 million settlement fund to pay claims arising out of the settlement, costs including reasonable attorney fees, costs associated with administration of the settlement, and the expenses of any other court-ordered remediation. The Settlement also stated that Texaco would not object to the payment of reasonable attorney fees and expenses approved by the district court. Texaco also agreed to increase the annual salary of each employee by 11.34% and then funded a task force on Equality and Fairness. Two years after the commencement of the original suit, P initiated this derivative action lawsuit. P's alleged in the second suit that the Roberts complaint, the original discrimination lawsuit, resulted in losses to Texaco of some $176.1 million dollars all brought about by the wrongful acts of the officers and directors of Texaco. An agreement in principle was reached to settle this lawsuit. In the settlement of this second lawsuit and over stockholder objections the district court approved a proposed Stipulation of Settlement that required Texaco to make certain reports available to stockholders and insert a nondiscrimination statement in its vendor contracts. The settlement afforded the plaintiff stockholders no relief of any kind against the defendant officers and employees but did allow them to seek attorney fees and costs of up to $1.4 million with no opposition by Ds. The district court deemed the settlement fair and reasonable and found that counsel for Ps had conferred a benefit upon the corporation and referred to a Special Master for hearing and report the application for counsel fees. That report recommended $1 million. The attorneys wanted $1.4 million and cited $34,000 in litigation expenses along with hourly fees multiplied by a 2.15 lodestar factor; they cited litigation risks, the contingent nature of the fees, the quality of the opposition and the benefit received. Objectors pointed to the issue that the settlement was of minimal benefit that the total fees claimed were excessive and that the hours billed were exaggerated. The only fact that counsel for Texaco presented was that increased fees for insurance would be demanded based on this settlement. The Special Master found a 1.5 lodestar multiplier proper. Several stockholders, including Rand, who is an attorney, filed objections to that report. The district court adopted the report in toto and entered judgment accordingly. Rand was not a party to this litigation and now appeals the award of counsel fees.