The following are heavily-edited appellate opinions related to the massive litigation arising out of the intentionally-set fire at the Dupont Plaza Hotel in San Juan, Puerto Rico, on New Year's eve 1986, which killed 96 persons. Over 3,000 plaintiffs sued more than 300 defendants in hundreds of suits filed in the Federal Court system, which were consolidated for both discovery and trial purposes in the District of Puerto Rico. This case was so big, that a special courtroom had to be built to try it. The courtroom looked a lot like a classroom, except that all the tables had microphones. The jury was enclosed in a glass cage, to which sound could be cut-off, because having 100 lawyers "approach the bench" was impractical.
I have generally omitted all footnotes, those that are left retain their original numbers.
Simply "skim" this material. Try to get the "flavor" of this case from the opinions. See how the case goes from the initial filings, to discovery, to trial, to post-trial arguments regarding allocation of costs and attorney-fee awards.
Try to identify:
(1) The size of the case in terms of litigants and counsel;
(2) the costs of this litigation and how the court allocated them among the parties;
(3) the size of the settlement fund;
(4) how much of the settlement went to the lawyers, and when.
* * *
SELYA, Circuit Judge. There are two consolidated matters before us at this juncture. They are an odd couple: an interlocutory appeal and a petition for writ of mandamus. Because we find that the challenged orders (1) are not "final" within the purview of 28 U.S.C. § 1291 (1982), (2) do not come within the encincture of our jurisdiction under any recognized exception to the finality principle, and (3) are not suitable grist for the rarely-used mandamus mill, we pretermit the present proceedings shy of the merits.
On New Year's Eve 1986, a conflagration engulfed the San Juan Dupont Plaza Hotel. The blaze resulted in ninety-six deaths, numerous personal injuries, and extensive property damage. Upward of two thousand persons sued. The suits brought in federal fora were consolidated for discovery purposes in the United States District Court for the District of Puerto Rico. Petitioner-appellant Recticel Foam Corporation (RFC) is one of roughly two hundred defendants in this massive multi-district litigation. It is an especially reluctant respondent, because it insists that the district court lacks jurisdiction over its corporate person. RFC filed a dismissal motion, Fed. R. Civ. P. 12(b)(1), but as of the date of oral argument herein, the district court had not acted upon the motion. The jurisdictional issue is not now before us, and we take no view it.
Confronted with a litigatory monster, the district court took several innovative steps to handle the obvious complexities of pretrial discovery. These maneuvers included entry of an elaborate case management order (CMO); appointment of liaison counsel for plaintiffs and defendants, respectively; establishment of a document depository; and formation of a joint discovery committee (JDC). The JDC, drawn from the ranks of the lawyers on both sides, was apparently designed to promote quick discussion and resolution of discovery disputes and to explore novel methods of discovery that would ensure expeditious progress of the litigation.
In January 1988, with the blessing of the JDC, a codefendant (not RFC) moved to compel production of various videotapes and photographs. The holder of the depictions, the San Juan Dupont Plaza Hotel Corporation, despite conceding materiality and relevancy, claimed a work product immunity. Rather than fight this claim to the bitter end, the JDC and the Hotel worked out an agreement; the asserted immunity was waived in exchange for reimbursement of one-half the cost of generating the film. The district court ratified the agreement, ordering all served defendants to share in the expense.[2] RFC objected. It unsucuccessfully sought reconsideration of the cost-sharing order and appealed the ensuing denial.
But there is more. On February 11, 1988, the district court entered an order ancillary to the earlier CMO. Recticel -- which contended inter alia that the district court, having no personal jurisdiction over the corporation, could not require it to share in ongoing discovery expenses -- objected, but to no avail. The February 11 order allocated the continuing costs of the document depository and the defense liaison equally among the served defendants and third-party defendants. Displeased with this turn of events, RFC sought mandamus. On April 4, a duty panel of this court, in an unpublished order, rejected portions of Recticel's petition out of hand. Insofar as the prayer that the cost-sharing order be quashed (or levies thereunder postponed until resolution of RFC's motion to dismiss), we consolidated that segment of the petition with the appeal from the order directing shared payment of production costs. Thereafter, we granted petitioner's motion to supplement the record in the consolidated proceedings to allow concurrent consideration of yet another cost-sharing order of the same genre, to wit, an order entered April 18, 1988 which covered essentially the same ground as the February 11 order, but concerned expenses subsequently incurred for the document depository and for liaison counsel.
Against this backdrop, we consider petitioner-appellant's eclectic offerings. We look first at the appeal, focusing on its jurisdictional underpinnings (or, more aptly put, on the lack of any), and then turn to the question of mandamus.
* * *
Discovery orders, in general, are not final. * * * Short of electing not to comply and being adjudged in criminal contempt, a party may ordinarily obtain review of such an order only after judgment has entered. * * * Although pretrial cost-sharing orders can validly be characterized as case management orders rather than as "pure" discovery orders, the characterization is not dispositive. Federal jurisdiction cannot be dictated by the simple expedient of artful labelling. * * *
The similarity between discovery orders and case management orders is, we suggest, striking. In both instances, the main litigation continues to pend in the district court, as to all parties. In both instances, the orders deal with preliminary matters, leading up to -- but not comprising -- the main event. In both instances, the activities to which the orders relate tend to be frequent, repetitive, fragmentary, and bound up in the progress of the suit as a whole. Whether or not case management orders are discovery orders in the conventional sense, they are sufficiently akin to discovery orders to warrant precisely the same treatment under the finality principle.
Having determined that, in the usual case, orders issued incident to a CMO are on a par with discovery orders vis-a-vis finality concerns, we now discuss those considerations which, in this instance, weigh against appellate jurisdiction. In the first place, the cost-sharing orders do not seem "final." Not only does the pot continue to boil furiously below, but the rights of the parties are not settled by the disputed orders in any relevant sense. Although the orders require some temporary shifting of funds, they do not purport to resolve any party's rights in any definitive way. Given the district court's continued exercise of jurisdiction, the orders remain subject to modification. See Fed. R. Civ. P. 26(f) (orders relating to "proper management of discovery. . . . may be altered or amended"). The district court can reassess their content, and make adjustments as it thinks best. The orders work less than an immutable rejection of Recticel's position because no irreversible legal consequences flow from them, as they presently stand.
Nor are the orders "final" in a monetary sense. The costs in question continue to mount, and further orders will doubtless be forthcoming. The fact that we are being asked to review what are admittedly the first flurry of a potential blizzard of similar orders argues strongly against their finality. Here, as with discovery orders generally, interruption of the ongoing process carries with it a potentially high price in terms of diminished efficiency. Moreover, to the extent that an inquiry into finality requires "some evaluation of . . . competing considerations," Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171, 40 L. Ed. 2d 732, 94 S. Ct. 2140 (1974), we believe that the dangers inherent in piecemeal review of cost-sharing orders far overbalance any realistic possibility of denying justice by a delay in appellate oversight. * * *
. . . Merely saying that it would be "practical" to hear an appeal at an earlier time does not make it so. The kind of practical consideration which would warrant a departure from so well settled a principle [as finality] requires, at the least, some specialized showing of out-of-the-ordinary circumstances. These might include, say, a demonstration that what remained to be done was self-executing, or that cognizable harm of an unusual sort would result from delay, or that blind adherence to the letter of the finality principle would work some great injustice or grave systemic diseconomy. A petitioner, we think, has the burden of making the specialized showing needed to complete the arduous climb [**10] over the jurisdictional threshold.
Director, OWCP v. Bath Iron Works Corp., at 14. Having stated the task, it is readily evident that RFC's jeremiad is entirely inadequate to it. The cost-sharing orders are nonfinal, hence nonappealable, unless appellate jurisdiction attaches in some other fashion.
B. The Collateral Order Exception. The only detour around the finality principle which could conceivably make ends meet in this instance is the so-called "collateral order" exception. See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949). Collaterality, in the Cohen sense, demands conformity to certain hard-and-fast essentials:
The order must involve: (1) an issue essentially unrelated to the merits of the main dispute, capable of review without disrupting the main trial; (2) a complete resolution of the issue, not one that is "unfinished" or "inconclusive"; (3) a right incapable of vindication on appeal from final judgment; and (4) an important and unsettled question of controlling law, not merely a question of the proper exercise of the trial court's discretion.
* * *
Because petitioner-appellant's claim is fully capable of vindication on appeal from final judgment in the usual course, and Recticel would suffer no irreparable harm from waiting its turn, the urgency prong of Cohen has not been met. Thus, we have no jurisdiction over this appeal under the collateral order doctrine. See Van Cauwenberghe v. Biard, 486 U.S. 517, 108 S. Ct. 1945, 1950, 100 L. Ed. 2d 517 (1988) (if claim "is effectively reviewable on appeal from final judgment, [it] is not an immediately appealable collateral order under Cohen").
* * *
We prize strict adherence to the rules which define and delimit our jurisdiction. The finality principle, in particular, should be accorded great deference. The Court has termed it "crucial to the efficient administration of justice." Flanagan v. United States, 465 U.S. 259, 264, 79 L. Ed. 2d 288, 104 S. Ct. 1051 (1984). Moreover, the importance of the finality requirement is at its zenith in large cases such as this. The finality rule, after all, was designed to conserve judicial energy and eliminate the "delay, harassment and cost" that would result from a barrage of interlocutory appeals. Manual for Complex Litigation 2d § 25.1 (1985). The disruptive potential of successive interlocutory appeals is magnified in complex cases such as the one before us, where the district judge has made -- and must yet make -- numerous pretrial rulings, all of which are interrelated and tied into an integrated case management scheme. It follows ineluctably that "we should not rush to deviate from [the final judgment rule], nor should we do so lightly." Director, OWCP v. Bath Iron Works Corp., at 16.
In the circumstances of this case, we abjure premature intrusion into precincts which are, for the present, reserved to the district court. It would disserve the proper relationship between trial and appellate courts in the federal system, and wreak havoc with the taxing demands of modern-day case management, were the court of appeals gratuitously to inject itself as a super-navigator of sorts, second-guessing the district court from turn to turn as that tribunal wended its way through the thickets and brambles of complex litigation. To do so, we suggest, would be to concentrate on the trees at the expense of a balanced vision of the forest.
We need go no further. The cost-sharing orders are not final within the intendment of 28 U.S.C. § 1291; the Cohen exception to the finality principle does not apply; and there is no other hook upon which appellate jurisdiction may suitably be hung. Similarly, the paired petition fails to portray circumstances so extraordinary as to energize our mandamus powers. The merits of the cost-sharing controversy are not properly before us in this proceeding.
In No. 88-1298, the appeal is dismissed without prejudice for want of appellate jurisdiction.
In No. 88-1204, the petition for writ of mandamus is denied, as improvidently brought.
[2] Assembling the materials was estimated to have cost in the neighborhood of $ 600,000. Under the cost-sharing arrangement, therefore, the defense moiety was approximately $ 300,000. The moiety was to be prorated among the various served defendants.
* * *
OPINION: SELYA, Circuit Judge. This matter arises on an infrastructure of important concerns involving the prophylaxis to be accorded to attorneys' work product and the scope of trial judges' authority to confront case management exigencies in complex multi-district litigation. The critical question is somewhat novel. We delve rather deeply into the doctrinal underpinnings of the work product rule and the emergent need for increased judicial intervention in the early stages of the adjudicative process in explaining our affirmance of the challenged district court order.
On New Year's Eve 1986, a conflagration engulfed the San Juan Dupont Plaza Hotel. The blaze resulted in ninety-six deaths, numerous personal injuries, and extensive property damage. Upwards of 2,000 persons sued. Many of the suits were brought in, or removed to, federal district courts. Under the aegis of the Judicial Panel on Multi-District Litigation, those actions were consolidated for discovery purposes in the United States District Court for the District of Puerto Rico. The litigation has attained heroic proportions: there are roughly two hundred defendants and ten times that number of plaintiffs.
Pretrial discovery has proven to be a gargantuan undertaking. More than 2,000,000 documents have been produced; countless interrogatories have been served; and depositions are proceeding daily along fourteen simultaneous tracks. The trial judge recently estimated that over 2,000 depositions would be required before discovery closed. Due to the immensity of the litigation, the district court has necessarily assumed an active managerial role. As the linchpin of that endeavor, the court entered an elaborate forty-five page case management order (CMO). We described certain facets of the CMO in a recent opinion, In re Recticel Foam Corp., 859 F.2d 1000 (1st Cir. 1988), and will not repastinate that ground. It suffices for today to state that, inter alia, the CMO set out general discovery guidelines, established a phased schedule for pretrial preparation, and ordered formation of a joint discovery committee (JDC). From time to time, as appropriate, the court has supplemented the CMO with additional orders and refinements, whilst repeatedly imploring counsel "to explore novel methods of discovery that would ensure expeditious progress of the litigation." Recticel, supra, at 1001.
Not surprisingly, discovery disputes occurred with monotonous regularity. On February 24, 1988, the magistrate who the judge had appointed to oversee discovery held a hearing anent one such dispute. The defense representatives on the JDC sought to require parties taking depositions to identify, five days beforehand, the exhibits which they intended to utilize at deposition. Plaintiffs' representatives complained that such a paradigm, if sanctioned, would require disclosure of attorney work product. The magistrate turned a deaf ear to the protest and adopted the identification protocol.
Upon entry of the magistrate's order, the plaintiffs' steering committee (PSC), a coterie of lawyers representing the shared interests of all of the claimants, prosecuted an appeal to the district judge. See Fed. R. Civ. P. 72(a). The judge upheld the magistrate. In essence, the district court concluded that a document list of the type required was not attorney work product; that, even if such a list could be so categorized, it was at most qualifiedly privileged - and the privilege was overborne in this instance by the special needs of the sprawling litigation; and that, therefore, the order was not clearly erroneous or contrary to law. The judge appended to his affirmance a set of guidelines aimed at easing application of the identification protocol. The guidelines modified the order slightly by requiring all parties who wished to examine at the deposition to prepare and submit document lists.
Yet the PSC's basic grievance was not mollified.
After the district court certified its order for interlocutory appeal under 28 U.S.C. § 1292(b), the PSC requested that we hear the matter, and we agreed.
* * *
Appellant makes a well-constructed four-part argument which runs along the following lines: (1) PSC members sifted through millions of pieces of paper in order to locate and identify approximately 70,000 documents which they thought relevant to the litigation; (2) although the documents themselves are not protected work product, the identification protocol requires plaintiffs' lawyers to reveal to their opponents the mental processes, impressions, and opinions of the attorneys who culled the wheat from the chaff; (3) these mental processes, impressions, and opinions constitute "opinion" work product which - unlike its poor relation, "ordinary" work product -- should enjoy absolute protection; and (4) inasmuch as preidentification of relevant documents necessarily divulges the results of the attorneys' selection process, the work product doctrine interdicts the challenged order. We address this quadripartite contention by examining, first, the source of the district court's authority to manage litigation and the etiology of the disputed order. We then proceed to discuss the general nature of the work product doctrine and to chart the terrain at which the trial court's case management power intersects with the demands of that doctrine. Finally, we apply the relevant principles to the matter at hand.
* * *
B. The Identification Protocol. Before we can define the actual limitations which, in this case, impinge upon the district court's adoption of the identification protocol, we must determine more specifically the source of the court's power to enter the challenged order. Neither the district judge nor the magistrate attempted to elucidate this point, so we must look to the nature of the order itself, and the circumstances of its interposition, for guidance.
By its terms, the order establishes "rules . . . for prior identification and production of . . . exhibits." Appendix to Pretrial Order No. 57, at 1. Its text tells us that these rules were formulated by the district court "in the interest of expediting the taking of depositions and to afford the parties the opportunity adequately to prepare for discovery. . . ." Id. The key provision of the protocol states in relevant part:
Any party wishing to use exhibits during the questioning of a deponent . . . shall place a list of all exhibits which it intends to use during the taking of said deposition in the Joint Document Depository, at least five (5) working days before the commencement date for said deposition. Id. The rules constrain all parties: plaintiffs and defendants, those who notice depositions and those who receive deposition notices. They prohibit counsel referring to unlisted documents during a deposition unless their usage "could not have been reasonably anticipated." Id. at 2.
* * *
The protocol presently in dispute is not so much a discovery order as a case management order. Litigant initiative is of no moment: the identification protocol is a product of judicial action, not judicial reaction. Notwithstanding the PSC's insinuations to the contrary, it seems to us crystal clear that the district court crafted the challenged decree with care to serve the overall needs of the litigation rather than the individual interests of any particular party or group of parties. The resultant order is temporally and substantively pervasive; that is to say, it will guide the entire discovery phase of the litigation and leave its mark upon the taking of an estimated 2,000 depositions. It affects the parties' abilities effectively to depose persons thought to possess relevant information. It changes the plane of the playing field, but leaves the field level in that its impact is felt equally by plaintiffs and defendants.[4]
This focus on the systemic needs of the litigation, combined with the pervasive scope of the ensuing guidelines, persuades us that the order derives not from the district court's familiar Rule 26 "scope-of-discovery" power, but from the court's newly-augmented authority to control and manage the litigation and the course of discovery. See Fed. R. Civ. P. 16(e), 26(f). The question then becomes whether the work product doctrine limits a court's case management powers -- and if so, to what extent. Asking such a question, we think, is materially different from asking how the work product doctrine restricts a court's traditional power to compel discovery from Litigant A and cause the fruits to be delivered to Litigant B.
C. The Work Product Doctrine. The work product doctrine, first recognized by the Supreme Court in Hickman v. Taylor, 329 U.S. 495, 91 L. Ed. 451, 67 S. Ct. 385 (1947), has most frequently acted as a "limitation on the nonevidentiary material which may be the subject of pretrial discovery. . . ." United States v. Nobles, 422 U.S. 225, 243, 45 L. Ed. 2d 141, 95 S. Ct. 2160 (1975) (White, J., concurring). Although the Court has approached the doctrine in terms reminiscent of qualified privilege, its scope and effect outside the civil discovery context is largely undefined. 422 U.S. at 238. Fed. R. Civ. P. 26(b)(3), for example, partially codifies the work product doctrine as recognized in Hickman, but is narrowly drawn to confine its scope to its historical origins. Read literally, the rule applies only where a civil litigant seeks production of tangible information in another's possession. So, it is on its face inapplicable to the district court's order. Nonetheless, because the challenged decree governs the litigation's discovery phase and operates in a manner somewhat analogous to a stock discovery order -- it forces one party involuntarily to disclose information to other parties -- the spirit of Rule 26(b)(3), at least, should have pertinency. To assume that the work product doctrine does not apply at all when a court's order transcends the conventional discovery model would be to ignore the evolution of discovery.
* * *
When case management, rather than conventional discovery, becomes the hammer which bangs against the work product anvil, logic demands that the district judge must be given greater latitude than provided by the routine striking of the need/hardship balance. Because of "the taxing demands of modern-day case management," Recticel, supra, at 1007, the requirements of the litigation and the court must, we think, be weighed in determining whether a management technique impermissibly impinges upon the protected zone of work product privacy. In this context, the vista is not exclusively head-to-head, A against B, plaintiff versus defendant; the relationship is triangular, with the court itself as a third, important, player. There is no reason, then, why the crying need for efficient use of scarce judicial resources cannot -- and should not -- be factored into the equation. We hold that it must.
E. Classification of the Lists. Having refashioned the geometry of the weighbeam, we turn to an evaluation of the work product interest which the PSC asks us to place on the scales. We begin with an abecedarian verity: not every item which may reveal some inkling of a lawyer's mental impressions, conclusions, opinions, or legal theories is protected as opinion work product. Were the doctrine to sweep so massively, the exception would hungrily swallow up the rule. See Sporck v. Peil, 759 F.2d at 319 (Seitz, J., dissenting) ("every act by a litigant or his attorney gives rise to . . . vague inferences" as to strategy and counsel's thought processes). Whatever heightened protection may be conferred upon opinion work product, that level of protection is not triggered unless disclosure creates a real, nonspeculative danger of revealing the lawyer's thoughts. See Gould, Inc. v. Mitsui Mining & Smelting Co., 825 F.2d 676, 680 (2d Cir. 1987); Research Institute for Medicine and Chemistry, Inc. v. Wisconsin Alumni Research Foundation, 114 F.R.D. 672, 680 (W.D. Wis. 1987). There is, moreover, a second line of demarcation. Some materials do not merit heightened protection because, despite the revelations they contain as to an attorney's thought processes, the lawyer has had no justifiable expectation that the mental impressions revealed by the materials will remain private.
* * *
Consider, for a moment, an answer to a complaint. The drafting of such a pleading -- admitting certain averments, denying the remainder; advancing selective affirmative defenses, eschewing others; asserting one counterclaim, omitting another -- certainly implicates counsel's opinions, ideas, thoughts, and strategy. Filing and service of the answer discloses those mental impressions to the opposing party with some appreciable degree of clarity. Yet it would be foolhardy to urge that the contents of the answer should be enswathed in cotton batting. Because pleadings are drawn with the realization that they will be served upon the other parties to the case, it has never been seriously suggested that an answer could be hidden from view under the work product rubric. So, too, countless other legal documents generated in the ordinary course of litigation: complaints, counterclaims, third-party pleadings, requests for admissions, interrogatories, motions, supporting affidavits, and the like. Even when such documents are prepared specially, at the direction of the court, the outcome is the same.
* * *
[E]fficacious operation of the judicial system has much to gain by expedition of the disclosure * * *. Time and effort are conserved, and no meaningful intrusion takes place. Thus, the overall balance of equities plainly favors making what amounts to a timing adjustment, in the process treating such materials as something less than fully-protected opinion work product. Cf. Fed. R. Civ. P. 26(b)(3) advisory committee note (although party required to divulge mental impressions and conclusions, lawyer remains "entitled to keep confidential documents containing such matters prepared for internal use") (emphasis supplied).
* * *
In our view, the exhibit lists demanded by the district court's identification protocol fall well within this less-shielded category. The PSC concedes that the documents themselves are nonprivileged and that, apart from work product connotations, the lists are not otherwise eligible for special swaddling. More to the point, the challenged order does not result in the evulgation of matters which would otherwise remain perpetually hidden. When the deposition is held and examination commences, the questioner's document selection, and the stratagems it reveals, will become obvious to all. Requiring preidentification merely moves up the schedule, accelerating disclosures which would inevitably take place. Consequently, the resultant lists cannot validly aspire to the stature of opinion work product, nor can they command the correlative degree of (heightened) protection.
* * *
We need not belabor the point. It is, we think, readily apparent that the scope of this massive litigation and its consequent special needs called for unorthodox measures. The district court observed that over 2,000 depositions would be completed before the end of discovery and found that:
The benefits in terms of time saved by prior identification of exhibits, in view of such a large number of depositions, are undeniable. Among other things, such a rule: (1) avoids unnecessary waste of time required for review of the exhibit during the taking of the deposition; and (2) promotes the speedy resolution of objections to proposed exhibits either through agreement between the parties or by presentation of all objections to the Magistrate at once, rather than one by one during the course of the deposition.
Pretrial Order No. 57 at 7 (footnote omitted). The district court expressly found that opposing parties could not, without undue hardship, obtain the substantial equivalent of the information provided by compliance with the identification protocol. Id. And in the court's view, the parties had manifested a substantial need for deposition exhibit lists arising out of the time and delay inherent in reviewing and raising objections to deposition exhibits during, rather than before, each deposition. Id. The order, then, had a systemically beneficial component: not only would litigants' burdens be eased, but the court's ability to administer, process, and respond adequately to the case's ebb and flow would be materially enhanced.
It would be entirely unwarranted for us to disturb this thoughtful decision. The managerial gains attributable to the identification protocol are obviously substantial. Indeed, prior identification of deposition exhibits has been specifically recommended as an appropriate means of facilitating discovery. See Manual for Complex Litigation 2d, § 21.456 (1985). The Manual suggests that "depositions may be significantly expedited by requiring that, unless surprise is important for impeachment or similar purposes, opposing counsel and the deponent shall be notified in advance of the documents about which the deponent will be examined." Id.
* * *
We need go no further. The district court had adequate power pursuant to Rules 16(e) and 26(f) to order those choosing to take part in a given discovery deposition to provide, five days prior to the deposition, a list of exhibits to be utilized during the questioning. Although the work product rule can truncate the usual sweep of a court's powers, there is no requirement that case management orders which impinge upon work product be barred absolutely.
In this instance, work product considerations do not interdict the district judge's order. The information provided to opposing parties by the order's operation is ordinary work product, not opinion work product. In the context of a complex case, the court, if the needs of the litigation and the litigants reasonably so dictate, has broad discretion to command production of materials constituting ordinary work product. Given the special requirements of this mammoth collection of consolidated suits and the particularized findings which were made below, we conclude that the district court's calibration of the scales should not be disturbed. The court had power, authority, and sound reason to impose the preidentification condition.
Affirmed.
[4] We recognize, of course, that the actual burden of the order has to date fallen principally on the plaintiffs -- but only because they happen to have noticed, thus far, the majority of depositions. This fact does not, however, alter the order's neutrality, nor is it of moment with regard to the work product issue which the PSC has raised.
OPINION: SELYA, Circuit Judge. These consolidated appeals require us to grapple for the first time with a looming problem in modern federal court practice: how, if at all, should expenses indigenous to a court's handling of mass disaster litigation be reallocated once the winners and losers have been judicially determined? Here, the appellants, late-joined defendants and defendants in cross-claim, prevailed in the underlying litigation. Nonetheless, the district court, coincident with the entry of judgment, effectively foreclosed them from either seeking costs under Fed. R. Civ. P. 54(d) or otherwise lobbying for reallocation of several hundreds of thousands of dollars in court-ordered expense assessments. Finding that the court's abrupt slamming of these doors was improvident, we vacate the relevant portion of the judgment and remand for further proceedings.
In 1987, the Judicial Panel on Multidistrict Litigation appointed the Honorable Raymond L. Acosta, a United States District Judge for the District of Puerto Rico, to handle some 270 cases arising out of the deadly fire that had earlier engulfed the San Juan Dupont Plaza Hotel. See In re Fire Disaster at Dupont Plaza Hotel, 660 F. Supp. 982 (J.P.M.L. 1987) (per curiam). Judge Acosta's stewardship proved "a model of judicial craftsmanship and practical ingenuity." In re Nineteen Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire Litig., 982 F.2d 603, 606 (1st Cir. 1992). Among the many successful innovations that brought the litigation to a celeritous conclusion were (1) the creation of a Joint Document Depository (JDD), which housed and copied for distribution all discovery materials, see Pretrial Order No. 127 (Dec. 2, 1988), at 66; (2) the appointment of liaison counsels (plaintiffs' and defendants'), each of whom was responsible for dispersing filings among his or her constituents, see id. at 61-63; and (3) the formation of a Joint Discovery Committee (JDC) dedicated to devising means of expediting the litigation, see In re Recticel Foam Corp., 859 F.2d 1000, 1001 (1st Cir. 1988) (describing operation of JDC). To fund these innovations, the district court entered a series of case-management orders which imposed mandatory assessments upon all litigants.[1] In this way, the court periodically requisitioned fresh monies as funds on hand were depleted. The orders were silent as to (i) whether or not the court planned to readjust defendants' contributions in light of future developments, and (ii) the court's authority, if any, to effectuate such reallocations.
Roughly two years after the first shots in the litigation had been fired, a group of defendants involved in the hotel's ownership and operation settled with the plaintiffs (the fire victims and their families) and cross-claimed for indemnification against various insurers whose liability policies had expired before the fire started (the pre-fire insurers). On August 9, 1989, the plaintiffs followed the cross-claimants' lead, adding the pre-fire insurers as direct defendants under P.R. Laws Ann. tit. 26, §§ 2001, 2003 (1976). Because discovery had formally closed on December 15, 1988, see Pretrial Order No. 127, at 96-97, the pre-fire insurers' investigation of the newly emergent claims against them necessarily centered around a review of documents stored in the JDD. [3]
The pre-fire insurers quickly filed dispositive motions. The district court, faced with more pressing problems, was slow in addressing the motions. Finally, the court granted them on September 11, 1992, see In re San Juan Dupont Plaza Hotel Fire Litig., 802 F. Supp. 624 (D.P.R. 1992), aff'd, 989 F.2d 36 (1st Cir. 1993), entered judgment in favor of the pre-fire insurers on all claims, and decreed that the parties would bear their own costs.
On appeal, seventeen pre-fire insurers complain that the district court abused its discretion by summarily precluding both an award of costs and a complete or partial refund of the cost-sharing assessments. The fire victims, represented by the Plaintiffs' Steering Committee (PSC), and two cross-claimants, Hotel Systems International (HSI) and Dupont Plaza Associates (Associates), filed opposition briefs and participated in oral argument.
* * *
In the expectation that describing the disputed expenditures in greater detail will help to put matters in the proper perspective, we travel that route.
The vast majority of appellants' outlays comprise mandatory payments imposed by six orders of the district court. See Pretrial Order No. 48 (Feb. 11, 1988); Pretrial Order No. 67 (Apr. 18, 1988); Pretrial Order No. 127, supra; Pretrial Order No. 135 (Jan. 17, 1989); Pretrial Order No. 212 (July 31, 1989); Order No. 259 (Aug. 21, 1990). Although the first four orders eventuated before appellants entered the fray, those orders required appellants to pay the sums assessed therein shortly after filing entries of appearance. See Pretrial Order No. 127, at 71; Pretrial Order No. 135, at 9. Appellants paid the assessments under protest. The compulsory payments total $705,500. Eighty-three percent of this aggregate amount -- $586,500 -- represents assessments levied under the four earliest cost-sharing orders.
* * *
Appellants' tribute helped to fund the various instrumentalities that Judge Acosta had set in place to expedite the litigation. Thus, out of each insurer's total contribution ($41,500), $18,000 went toward defraying the JDD's operating expenses, see Pretrial Order No. 127, at 72; $3,500 went toward defraying the JDC's expenses, see id.; and $10,000 went toward paying costs associated with the office of Defendants' Liaison Person (DLP). [6] See id.; Pretrial Order No. 212, at 1; Order No. 259, at 1. The district court originally intended that the remaining $10,000 would subsidize the construction of a new courtroom and related facilities. See Pretrial Order No. 135, at 9. The idea was abandoned and the funds in question were eventually utilized for operational costs of the JDD and DLP. See In re San Juan Dupont Plaza Hotel Fire Litig., 142 F.R.D. 41, 46 n.20 (D.P.R. 1992). Therefore, the figures recited above, insofar as they pertain to the JDD and DLP, are minimum estimates.
Presumably, the payments made pursuant to the cost-sharing orders, though substantial, do not comprise the whole of appellants' investment in this sprawling litigation. Their successful defense doubtless required other, more commonplace expenditures, such as photocopy costs of the type and kind routinely associated with litigation. See, e.g., 28 U.S.C. § 1920 (1988) (listing fees and expenses taxable as costs).
Having described the expenses appellants seek to recoup, we pause to address a threshold matter. The plaintiffs submit that the pre-fire insurers waived any claim for expense recovery by failing to file bills of costs after judgment entered. See id. (requiring bill of costs to be filed). We demur: the doctrine of waiver presents no barrier to appellants' attempt to recover court costs or request a reallocation of the mandatory cost-sharing assessments.
* * *
* * *
We will not paint the lily. Rule 54(d) cannot be stretched beyond the parameters defined in section 1920. See Denny, 880 F.2d at 1468; Templeman v. Chris Craft Corp., 770 F.2d 245, 249-50 (1st Cir.), cert. denied, 474 U.S. 1021, 88 L. Ed. 2d 556, 106 S. Ct. 571 (1985); Bosse v. Litton Unit Handling Sys., 646 F.2d 689, 695 (1st Cir. 1981). Accordingly, district courts possess no authority under Rule 54(d) to tax as costs case-management charges of a type or kind unenumerated in 28 U.S.C. § 1920, including, without limitation, general overhead expenses paid pursuant to case-management orders in mass disaster litigation. It follows inexorably that the court below correctly treated these expenditures as lying outside the stunted reach of Rule 54(d).
* * *
c. To sum up, Rule 54(d) provides appellants only limited comfort; upon the filing of bills of costs, the pre-fire insurers will recover any itemized expenses that are statutorily allowable, unless the district court offers a sound reason for denying costs. However, to the extent that appellants invoke the rule as a means of retrieving the big-ticket items that constitute the centerpiece of these appeals -- the court-ordered cost-sharing assessments -- they are fishing in an empty stream.
Appellants also argue that, even if the mandatory assessments fall outside Rule 54(d)'s domain, they may still be reallocated. This asseveration supposes a federal court power, unrelated to Rule 54(d), to redistribute, after judgment, an initial division of discovery expenses among all parties, despite the absence of an explicit reservation of the right to do so.
We think appellants' premise is sound. We hold that a district court possesses the authority to reallocate court-imposed case-management expenses if, in the exercise of its considered judgment, it determines that equity and the interests of justice so require. In the sections that follow, we trace the derivation of that power, propose broad guidelines for its use, and discuss what remains to be done in this instance.
1. Source of Power. The exigencies of complex, multidistrict litigation change the ordnance with which courtroom battles are fought. Traditional procedures for serving papers and gathering information must often give way to innovations promoting economy and efficiency. See Manual for Complex Litigation § 20.22, at 15 (2d ed. 1985). Moreover, the sheer number of parties and issues produces a "critical need for early, active involvement by the judiciary." Id. § 20.1, at 5. To facilitate this involvement, explicit grants of authority contained in the Civil Rules, which supplement the trial court's inherent power to manage litigation, "enable the judge to exercise substantial control and supervision over the conduct of the litigation." Id. at 6.
Recent amendments to the Civil Rules have augmented the trial judge's arsenal of case-management weapons. For example, the 1983 overhaul of Rule 16 "encourages pretrial management that meets the needs of modern litigation." Fed. R. Civ. P. 16 advisory committee's notes. The drafters thought that cases would be disposed of "more efficiently and with less cost and delay" if "a trial judge intervenes personally at an early stage to assume judicial control over a case." Id.; see also Figueroa-Rodriguez, 878 F.2d at 1490 (acknowledging that in a time "of increasingly complicated cases and burgeoning filings, judges must have at their fingertips smooth-running, productive machinery for conducting litigation and managing caseloads").
In this multidistrict litigation, involving upward of 2000 parties and raising a googol of issues, Judge Acosta's power to mandate contributions to, inter alia, a central discovery depository can scarcely be doubted. See Recticel, 859 F.2d at 1001, 1004; see also David F. Herr, Multidistrict Litigation § 9.7.3, at 205 (1986) (recognizing "the potential use of a document depository as a means of facilitating efficiency"). While no procedural rule directly addresses pretrial cost-sharing orders per se, Rule 26(f) expressly authorizes trial judges, following discovery conferences, to enter orders for "the allocation of expenses[] as are necessary for the proper management of discovery." Fed. R. Civ. P. 26(f). We believe that this rule is flexible enough to serve as the source of judicial authority for imposing cost-sharing orders in complex cases.
* * *
The expense allocation orders Rule 26(f) authorizes "may be altered or amended whenever justice so requires." Fed. R. Civ. P. 26(f). For that reason, as well as on the basis of common sense, a trial judge's power to promulgate cost-sharing orders must carry with it the power to readjust such orders as changed circumstances require. Indeed, in denying a petition for mandamus addressed to the propriety of the very cost-sharing orders here at issue, we acknowledged the district court's power to "reshape and refashion its cost-sharing orders as new information comes to light, or as information already known takes on added significance." Recticel, 859 F.2d at 1004. We reaffirm this message today, confident that our reading of Rule 26(f) does not loose some strange new beast to prey on unsuspecting litigants. In the last analysis, a district court's intrinsic power to alter its own directives is a familiar one, applicable to many other sorts of pretrial orders. See, e.g., Poliquin v. Garden Way, Inc., 989 F.2d 527 (1st Cir. 1993) [slip op. at 20] (noting that pretrial protective orders are "always subject to the inherent power of the district court to relax or terminate the order, even after judgment").
* * *
Consequently, we hold that, despite the absence of any language in a cost-sharing order reserving a trial judge's right to rearrange the burdens therein imposed at a later date, "it is certain beyond peradventure that [a] district court can . . . entertain motions for the reallocation of expenses." Recticel, 859 F.2d at 1004-05. This power is the logical (and, we think, necessary) extension of the court's authority to fashion pretrial cost-sharing orders in the first place.
To say that the power to reallocate assessments under cost-sharing orders can fairly be implied from the Civil Rules is not to say that the district court's exercise of that power is unbridled. In our view, the power is coupled with an interest in fairness and its exercise must, therefore, comport with first principles of equity. It is to this unexplored terrain that we now turn.
2. The Standards Governing Reallocation. Although cost-sharing orders are sui generis, they almost always constitute a way of fueling an array of hand-crafted procedural devices designed to sort and resolve myriad claims in an equitable, efficient, comparatively inexpensive manner. A subsequent decision to readjust the burdens imposed by such orders, and the specific redistribution that results, must remain faithful to that aim.[16] The power to readjust, then, must be exercised in accordance with a set of equitable principles, shaped by the circumstances indigenous to the litigation but rooted in the concept that court-imposed burdens should, in the end, balance derived benefits. In the paragraphs that follow, we touch lightly upon certain fundamental principles that should inform the determination of whether a post-judgment reallocation of court-ordered expenses is advisable, and if so, to what extent.
a. Upon motion, a district court should consider reallocating costs after entry of judgment when, with the acuity of hindsight, it determines that a party or group of parties has significantly failed to derive the expected benefits from burdens imposed under cost-sharing orders entered earlier in the litigation, or has derived those benefits to a significantly greater or lesser extent than other similarly situated parties. This rule dominates the constellation of factors bearing on the decision to reallocate.
b. In contrast to the well-recognized presumption that prevailing parties should recover their taxable costs under Rule 54(d), there is no basis for a parallel presumption that the winners' case-management expenses should be borne by the losers. Thus, a prevailing party will not automatically receive a favorable reallocation, but must persuade the court of an entitlement to one. This conclusion flows naturally from the idea that derived benefit is the shining star in the readjustment galaxy: when all is said and done, the benefit a party secures from forced contributions to joint ventures in complex litigation may be unrelated, or vastly disproportionate, to the party's success on the merits.
c. To say that prevailing parties are not presumptively entitled to a favorable reallocation of cost-sharing assessments is not to say that either the fact or the scope of a litigant's victory is irrelevant to a district court's reassessment of the matter. The inherent clarity of a case and the ease with which it can be decided without resort to heroic measures ordinarily affect the degree of benefit the prevailing party obtains from the availability of innovative procedural mechanisms. Hence, the extent to which a litigant achieves a swift, across-the-board success not correlated with case-management tools must necessarily inform the district court's reallocation decision. The presence of knotty issues, fought, in the Stalingrad tradition, from rock to rock and tree to tree, often cuts the other way. Close cases, particularly those that are fact-dominated, tend to be cases in which all parties derive considerable benefit from the availability of sophisticated case-management tools.
d. When a district court considers a party's request to reallocate sums previously assessed, the requestor's ability to shoulder the expense is immaterial. Cost-sharing orders are attempts to distribute systemic costs in an equitable manner; they should not be transmogrified into a method of forcing deep pockets, whenever and for whatever reason they appear in a suit, to bear the crushing financial burdens of complex litigation. Equity in readjusting cost-sharing orders depends upon who, in the end, garnered a disproportionate slice of the benefits the orders sought to provide, not upon who can best afford to pay.[17] Although the operative considerations are not entirely the same, this principle parallels the Sixth Circuit's longstanding view that a prevailing party's ability to pay his or her own costs is an improper basis for refusing to tax costs against the loser under Rule 54(d). See White & White, 786 F.2d at 730; Lewis v. Pennington, 400 F.2d 806, 819 (6th Cir.), cert. denied, 393 U.S. 983, 21 L. Ed. 2d 444, 89 S. Ct. 450 (1968).
e. Cost-sharing orders are designed to inure to the benefit of all contributing parties. A case's history and particular circumstances may reveal that some parties carried heavy, even excessive, loads, while other parties enjoyed a relatively free ride. Reallocating cost-sharing assessments affords a way of balancing case-specific inequities. For example, a party's interjection of unmeritorious issues that unnecessarily lengthen the litigation might favor the conclusion that others have paid too much and the interjector has paid too little. Cf. Lichter Found., Inc. v. Welch, 269 F.2d 142, 146 (6th Cir. 1959) (approving denials of costs to prevailing parties under Rule 54(d) on this basis). A cost-readjustment analysis, like all decisions grounded in equity, must leave room for such case-specific factors.
f. We believe that we have said enough to erect a flexible framework for reallocation analysis and, hopefully, to provide a modicum of general guidance to the district courts. We caution that the relative weight and impact of relevant considerations will vary from situation to situation, and, moreover, that, given the virtually limitless number of permutations likely to be encountered in civil litigation, our compendium of factors is not all-encompassing.
3. Remedy. The question of remedy remains. It is clear that an appellate court is not the most propitious forum for shaking up a preexisting expense allocation. By definition, cost-sharing orders originate with the district court as a component of the court's case-management function. Given the district judge's intimate knowledge of the circumstances under which the imposts were conceived, his familiarity with the nature and purposes of the assessments, his front row seat throughout the litigation, and his matchless ability to measure the benefits and burdens of cost-sharing to the parties in light of the litigation's progress and stakes, we are convinced that the district judge has the coign of vantage best suited to determining, in the first instance, whether, and if so, how, the initial cost-sharing orders should be modified. We are keenly aware that this litigation has exhibited a capacity to chew up endless amounts of judicial resources and we are extremely reluctant to prolong matters. Here, however, the necessity for remanding is plain: not only is the trial judge best equipped to address the remaining problems, but also, as we explain below, there is at least a prima facie case for some reallocation of the assessments. Indeed, the collocation of circumstances strongly suggests that the pre-fire insurers did not reap in full the benefits associated with several of the procedural innovations they helped to fund. We run the gamut.
More than half of each appellant's assessment supplemented the budgets of the JDC and JDD, facilities devoted to the economical coordination and speedy completion of discovery. Because the pre-fire insurers defeated all adverse claims through dispositive motions short of trial, on purely legal grounds, the benefit they derived from these innovations was most likely minimal. The near-complete closure of discovery prior to appellants' appearance in the litigation, see supra p. 4 & note 3, rendered the JDC, established to stimulate expeditious resolution of discovery disputes, of dubious value to appellants. As for the JDD, the documents housed there were of questionable relevance vis-a-vis appellants because they were gathered during earlier litigation phases that settled a host of different issues. To be sure, appellants probably derived some benefit from the facilities they helped to fund. Certainly, they were free to peruse whatever useful evidence the JDD did contain. What is more, the DLP presumably facilitated the movement of papers to appellants' behoof; and appellants probably saved money through the avoidance of unnecessary duplication. But, it is difficult to fathom how contributions on a par with those of all other defendants to fact gathering largely irrelevant to the claims against appellants constituted the "most efficient use of . . . [appellants'] resources." Pretrial Order No. 127, at i.
* * *
The early stage at which the district court dismissed all claims against appellants also creates doubt as to whether the substantial assessments, geared largely toward efficient fact gathering, inured to appellants' benefit to any meaningful degree. The pre-fire insurers prevailed on all claims, as a matter of law, without going to trial. The district court, having determined that no issue of fact needed debate and that appellees' arguments had no basis in law, see Hotel Fire Litig., 802 F. Supp. at 635, 644, might be hard-pressed to conclude that appellants' huge expenditures, diverted to facilities designed, in large part, to collect, sort, and maintain factual documents, were integral to, or even marginally connected with, the pursuit of their cause.
In sum, it appears from the record before us that appellants have a colorable basis for arguing that they derived minimal benefits from the assessments. Nonetheless, this hypothesis remains unproven. There may be more here than meets the eye; for one thing, the appellate record does not speak in any detail to the equities. Although an appellate court may decline to remand where remanding would be an empty exercise, see, e.g., Societe des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 642 (1st Cir. 1992) (declining to remand where, once the court of appeals decided the correct rule of law, the district court's preexisting findings of fact rendered the result obvious), that is not the case here. Rather, there are pregnant questions to be mulled on remand -- questions on which the trial judge's viewpoint is especially important. We conclude, therefore, that the case must be returned to the district court for further proceedings before Judge Acosta. We intimate no opinion as to the appropriate outcome of those proceedings.
We are not yet at journey's end. Two appellees, Associates and HSI, invoke the so-called automatic stay provision, 11 U.S.C. § 362 (1988), in an endeavor to persuade us that an affiliated firm's bankruptcy should have resulted in a stay of proceedings on appeal. We are not convinced.
* * *
We need go no further. We hold that the district court erred in precluding, without explanation, the taxation of ordinary costs under Rule 54(d) in favor of appellants (who were the prevailing parties). Hence, we remand to allow appellants an opportunity to file bills of costs in the usual form. The lower court did not err, however, in refusing to treat case-management expenditures as taxable costs within the purview of Rule 54(d) and its statutory helpmeet, 28 U.S.C. § 1920.
We also hold that the district court possesses the implied power, under Fed. R. Civ. P. 26(f), to revisit the initial allocations of case-management expenses and readjust the same as equity may require. Because the lower court did not afford appellants a fair opportunity to seek such a reallocation, we remand for that purpose as well. Appellants shall file their motions to reallocate with the district court no later than thirty days from the date our mandate issues.
* * *
Vacated and remanded; one-half costs to appellants.
[1] Because the mechanics of the allocation process are not critical for present purposes, we supply merely a thumbnail sketch. The Plaintiffs' Steering Committee (PSC) and the defendant San Juan Dupont Plaza Hotel Corporation were assessed a total of $ 100,000 to defray the JDD's start-up costs. See Pretrial Order No. 127, at 69-70. Thereafter, each litigant paid for JDD-related services actually used. See id. at 70. To cover costs that were not offset by service charges (e.g., the JDD's overhead expenses), the district court imposed mandatory assessments. Initially, at least, the PSC bore 15% of the incremental cost and the defendants, collectively, bore 85%. See id. at 71. Within the defense collective, per-member assessments were presumably equal.
[3] In one attempt to conduct some independent discovery, the pre-fire insurers moved to reopen discovery for ninety days. The docket sheet indicates that this motion was granted on March 19, 1991, albeit only for a three-day period.
[6] The DLP was responsible for receiving, on behalf of all defendants, and disseminating, among all defense counsel, court orders and discovery materials. See Pretrial Order No. 127, at 62-63.
[16] We limit our discussion to cases where, as here, mandatory cost-sharing orders are largely silent on the matter of an eventual redistribution of expenses. A district court may, of course, build into a cost-sharing order a mechanism for eventual redistribution, the structure and propriety of which would have to be considered on its own merits against the backdrop of the particular litigation. Indeed, the court below formulated such a mechanism, but limited its operation to cost-sharing assessments levied against plaintiffs' attorneys. See Pretrial Order No. 127, at 39-40; see also supra note 2.
[17] We recognize that the presence of an indigent party may affect the reallocation decision. * * *
OPINION: SELYA, Circuit Judge. These appeals require us to revisit the war zone where two groups of plaintiffs' lawyers have struggled over the proposed allocation of roughly $68,000,000 in attorneys' fees. One camp, dissatisfied with the district court's latest formula for distributing the fees, attacks the court's order on three fronts. The disgruntled lawyers contend that the district court (1) violated their due process rights, (2) used an improper method to determine the awards, and (3) divided the available monies in an arbitrary and unreasonable manner. We find appellants' first two plaints to be without merit, but we agree with them that allocating 70% of the fees to the appellees constituted an abuse of the trial court's discretion. And, because we are reluctant to prolong a matter that, like the proverbial cat, seems to have nine lives, we take matters into our own hands and reconfigure the fee awards.
The lay of the land is familiar. We explored much the same terrain in an earlier encounter, see In re Nineteen Appeals Arising Out of San Juan Dupont Plaza Hotel Fire Litig., 982 F.2d 603 (1st Cir. 1992), and a plethora of opinions describing the details of the underlying litigation pockmark the pages of the Federal Reports, see, e.g., id. at 605 n.1 (offering partial listing). Thus, a brief overview of the litigation will suffice.
In 1987, the Judicial Panel on Multidistrict Litigation consolidated over 270 cases arising out of the calamitous conflagration that had ravaged the San Juan Dupont Plaza Hotel on the evening of December 31, 1986. See In re Fire Disaster at Dupont Plaza Hotel, 660 F. Supp. 982 (J.P.M.L. 1987) (per curiam). The designated trial judge, Hon. Raymond L. Acosta, handpicked certain attorneys, denominated collectively as the Plaintiffs' Steering Committee (PSC), to act as lead and liaison counsel for the plaintiffs. In Nineteen Appeals, we summarized the roles played by the PSC and the individually retained plaintiffs' attorneys (IRPAs), respectively:
The PSC members looked after the big picture: mapping the overarching discovery, trial, and settlement strategies and coordinating the implementation of those strategies. The IRPAs handled individual client communication and other case-specific tasks such as answering interrogatories addressed to particular plaintiffs, preparing and attending the depositions of their clients, and taking depositions which bore on damages. The IRPAs also worked with Judge Bechtle [the "settlement judge"] on a case-by-case basis in his efforts to identify and/or negotiate appropriate settlement values for individual claims. When Judge Acosta determined that the plaintiffs should try twelve representative claims as a means of facilitating settlement, a collaborative composed of three PSC members and four IRPAs bent their backs to the task. Nineteen Appeals, 982 F.2d at 605.
The combined efforts of all concerned generated a settlement fund approximating $220,000,000. The district court computed the payments due under the various contingent fee agreements, deducted the total (roughly $68,000,000) from the overall settlement proceeds, and placed that sum in an attorneys' fee fund (the Fund). In his initial attempt to disburse the Fund, Judge Acosta used an enhanced lodestar to compute the PSC's fees, and awarded some $36,000,000 (52% of the Fund) to PSC members in their capacity as such, leaving the balance to be distributed among the IRPAs. A group of lawyers (mostly, but not exclusively, "non-PSC" IRPAs)[2] succeeded in vacating this award on the ground that the proceedings were procedurally flawed. See id. at 610-16.
The victory proved to be illusory. On remand, the district court abandoned the lodestar approach, adopted the percentage of the fund (POF) method, and recalculated the fees based on what it termed "the relative significance of the labor expended by the IRPAs and PSC members in instituting, advancing, or augmenting the plaintiffs' settlement fund." Using this methodology, the court awarded 70% of the Fund to PSC members in their capacity as such, thereby increasing their share of the fees by some $11,000,000, while simultaneously reducing the IRPAs' share of the Fund by the same amount. These appeals ensued.
* * *
* * *
To sum up, the district court reformed its ways, significantly moderating the restrictions originally imposed on the IRPAs. The court levelled the playing field by permitting the IRPAs to present their case in precisely the same manner as their litigation adversaries. Moreover, the court gave both camps adequate notice and a meaningful opportunity to be heard. From a procedural standpoint, then, the adjudicative process employed on remand met the test of fundamental fairness and gave appellants the process that was due.
* * *
In allocating counsel fees, the district court assigned 70% of the Fund to the PSC, leaving 30% to be split among the IRPAs. * * *
* * *
We are uneasy with the way in which the lower court cut the fee pie, and with the size and shape of the resultant wedges, for several reasons.
First, we are troubled by the implications of a scheme in which the trial judge selects a chosen few from many lawyers who volunteer, assigns legal tasks to those few (thereby dictating, albeit indirectly, the scope of the work remaining to be done by the many), and then, in awarding fees, heavily penalizes the very lawyers to whom he has relegated the "lesser" duties. Courts must recognize that while such an arrangement may be a necessary concomitant to skillful case management of mass tort suits, it nevertheless significantly interferes with an attorney's expectations regarding the fees that his or her client has agreed to pay. Conversely, lead counsel are typically volunteers, as in this case, and, as such, they have no right to harbor any expectation beyond a fair day's pay for a fair day's work if a fee fund develops. Cf. Matthew 20:1-16 (recounting parable of the laborers in the vineyard). We believe that trial courts should take these differing expectations into account in allocating fees. Here, the judge's rescript does not suggest that he factored these expectations into the decisional calculus.
Courts must also be sensitive to a second facet of economic reality: the power to appoint lead counsel gives the trial judge an unusual degree of control over the livelihood of the lawyers who practice before the court. Though such appointments are often an administrative necessity in complex litigation, and disproportionate fees are at times an unavoidable consequence of the classic common fund "free rider" problem, see generally Mancur Olson, Jr., The Logic of Collective Action (1971), the judge must attempt to avoid any perception of favoritism. This need is especially acute in mass tort litigation where, as this case illustrates, free rider concerns are minimized by the important nature of the work to be done by claimants' individually retained attorneys. In this case, moreover, free rider concerns are also lessened by the fact that most of the IRPAs applied for appointment to the PSC, see Nineteen Appeals, 982 F.2d at 605 (noting that over 40 of the 56 IRPAs volunteered to serve on the PSC), thus signifying their willingness to pay full fare. The record does not contain any clue intimating that Judge Acosta considered these factors in ordering that 70% of the fees be paid to the PSC.
Third, and relatedly, this case required the IRPAs not merely to go along for a free ride but to earn their keep. They exhibited great versatility, counseling clients, researching medical histories, arranging for specialists to evaluate injuries, preparing the damages aspect of each case (including extensive work with physicians, psychologists, actuaries, vocational specialists, and other witnesses), obtaining evidence needed to prove losses of earnings and earning capacity, responding to client-specific discovery, preparing for and attending clients' depositions, negotiating settlement values before Judge Bechtle, assisting clients with probate, insurance, and tax matters, and handling a bewildering array of idiosyncratic problems as they developed. This is a far cry from the paradigmatic common fund case -- say, a securities class action -- in which class counsel do virtually all the work, and other counsel piggyback on their efforts.* * *
* * * We see no sign that the district court gave significant weight to this reality.
This leads directly to a fourth point. We have carefully considered the IRPAs' compendious submissions and are of the view that Judge Acosta undervalued the worth of the client contact/counseling aspect of this litigation. Such services are labor-intensive and frequently low in visibility -- at least in visibility from the bench. Thus, they are susceptible to being overlooked, leading to an overemphasis on the relative value of the court-related work. Despite their lack of visibility, however, the mundane chores incident to client representation are particularly critical in a mass tort common fund case. We explain briefly.
* * *
Fifth, although we do not dispute the district court's assessment of the quality of the PSC's work, this factor cancels itself out to some extent.
After all, the district court repeatedly commented upon "the excellence of the work performed by all attorneys" (emphasis supplied), and left no doubt but that both sets of plaintiffs' lawyers had rendered exemplary service. Given these widespread plaudits, it seems manifestly unfair to reward excellence on the part of one group and not the other.
Sixth, the district court failed to advance any reasoned explanation as to why it boosted the PSC's share of the Fund from 52% in the initial go-round to 70% on remand. Though we have great confidence in Judge Acosta, his silence on this subject leaves the award open to a perception that appellants have been penalized for successfully prosecuting their previous appeals. * * *
* * *
Seventh, the district court erred in failing to compensate the representative trial counsel -- those IRPAs who, though not members of the PSC, prepared and/or tried the so-called "representative" cases -- for their work in that capacity. Just as the PSC members deserved compensation for their endeavors on behalf of the whole, the IRPAs who labored as representative counsel conferred a common benefit, and must be compensated accordingly.
Last -- but far from least -- we are persuaded, on whole-record review, that it is simply unreasonable to award 70% of the aggregate fees to the attorneys who managed the litigation, leaving only 30% of the Fund to those who brought in the clients and worked hand-in-hand with them throughout the pendency of this long safari of a case. Because mass tort cases are a breed apart, it is difficult to envision situations in which, if fees are divided between lead counsel and individually retained counsel under a POF formula, the latter will not be entitled to at least half the fees. We do not think that this litigation, though unique, so far overshoots all other cases as to warrant a substantially larger differential. See, e.g., Vincent v. Hughes Air W., Inc., 557 F.2d 759 (9th Cir. 1977) (upholding district court's allocation of 5% of gross recovery, or approximately 20% of the fee fund, to lead counsel in mass tort action).
* * *
Concluding, as we do, that the fee allocation reflects a serious error of judgment, and therefore an abuse of discretion, we vacate the award.
Ordinarily, "an improper calculation of attorneys' fees necessitates remand for reconfiguration of the award." Lipsett, 975 F.2d at 943. But this rule admits of exceptions, so long as "the record is sufficiently developed that we can apply the law to the facts before us and calculate a fair and reasonable fee without resorting to remand." Id. Here, that qualification is satisfied; the record is voluminous and this court is painfully familiar with the particulars of this fee imbroglio. Nonetheless, an appellate court must think long and hard before usurping the district court's usual prerogatives, and, therefore, we doubt that this case would fall within the narrow confines of the exception under ordinary circumstances. But the circumstances here are extraordinary, and common sense commands that we not turn a blind eye to the reality of events.
This litigation has passed the point of diminishing returns. The holocaust that underlies the plaintiffs' claims occurred almost a decade ago. The meat-and-potatoes litigation is over; with one small exception, see supra note 1, only a side dish -- attorneys' fees -- remains on the table. The amount of time, energy and money already devoted to this peripheral item has careened virtually out of control. Remanding would invite an even greater investment in the side dish -- and we are reluctant to sanction the squandering of additional resources for this purpose. We have, at times, with considerably less provocation, simply grasped the bull by the horns and fixed the fees ourselves. See, e.g., Jacobs v. Mancuso, 825 F.2d 559, 562 (1st Cir. 1987); Grendel's Den v. Larkin, 749 F.2d 945, 951 (1st Cir. 1984).
We realize that dividing the Fund among groups of attorneys in accordance with the POF method cannot be accomplished with surgical precision. We -- or a district court, for that matter -- must necessarily traffic in estimates. Taking into account all the facts and circumstances, we conclude that we should subdivide the Fund ourselves, rather than remand yet again. We also conclude that, on balance, assigning 50% of the Fund to the PSC and 50% to the IRPAs comprises a fair and reasonable allocation.
This division reflects the district court's determination that the PSC contributed handsomely to the creation of the Fund -- it is, after all, at the high end of what a court should usually award -- while at the same time correcting for the district court's undervaluation of the IRPAs' contributions. This division also strikes a sensible balance between the equity-based common fund doctrine, which guards against the unjust enrichment of free riders, and the need to avoid adding insult to injury in a situation in which the court selects lead counsel from amidst a group of willing volunteers and thereafter invades the contingency agreements of the rejected lawyers to compensate the select few. Moreover, this division is not incommensurate with the time records of the PSC. Even if, as an uncritical reading of the record suggests, the PSC spent as many as 166,000 hours on the litigation, a 50% allocation (roughly $34,000,000) pays the members well. Although we have no tabulation of IRPA hours to compare with this total, the PSC's time records are still a valid measure of the vast resources its members expended in the course of the litigation.
* * *
One loose end remains. It involves appropriate compensation for the IRPAs who tried the "representative" cases. As we stated earlier, see supra p.33, their participation in the Phase II trial inured to the benefit of all plaintiffs. Thus, in presenting the representative claims, the lawyers were acting as de facto PSC members. It is only logical, therefore, that their compensation for those services be drawn from the PSC's share of the fee Fund. Since the record is inadequate to permit us to place a dollar value on these services, we leave it to the district court to determine the amount of compensation due to the non-PSC members who served as representative trial counsel during the Phase II trial for their services in that capacity, and then to order that sum paid out of the PSC's share of the Fund.
We need go no further. For the reasons we have expressed, we vacate the order allocating attorneys' fees; direct that the fee Fund be divided equally among the PSC, on the one hand, and the IRPAS, on the other hand; and remand for the entry of a suitable decree and for further proceedings consistent with this opinion. Costs shall be taxed in favor of the appellants.
It is so ordered.
[2] Since each PSC member is also an IRPA in the sense that he or she has been individually retained by one or more plaintiffs, the PSC members will receive payments in both capacities. Nevertheless, due to the wide disparity in the number of clients that each PSC member represents, a generous PSC award stands to benefit certain PSC members who have relatively few individual clients and to disadvantage those who represent many claimants. See Nineteen Appeals, 982 F.2d at 607. Similarly, an oversized PSC award is even more detrimental to the interests of those IRPAs who are not members of the PSC, as each dollar that is paid to the PSC shrinks the pot that otherwise will be divided among the IRPAs. See id. Due to this phenomenon, some PSC members were among the lawyers who fought to overturn the original allocation.