Smith v. Gurstel Chargo, PA, et al

Filing 53

MEMORANDUM AND ORDER that class representative Gary D. Smith's supplemental motion for attorney fees 47 is granted. Supplemental attorney fees in the amount of $12,567.60 are awarded to the lead plaintiff. A Judgment in accordance with this Memorandum and Order will issue this date. Ordered by Senior Judge Joseph F. Bataillon. (ADB)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
GARY D. SMITH, on behalf of himself and
all others similarly situated;
8:14CV183
Plaintiff,
vs.

MEMORANDUM AND ORDER

GURSTEL CHARGO, PA,
Defendant.

This matter is before the court on class representative Gary D. Smith's
(hereinafter, "lead plaintiff") supplemental motion for attorney fees, Filing No. 47. This is
a class action for violations of the Fair Credit Reporting Act, 15 U.S.C. § 1692, et seq.
("FDCPA") and the Nebraska Consumer Protection Act, Neb. Rev. Stat. § 59-1601, et
seq. ("NCPA").
The court entered an order preliminarily approving a class action settlement,
Filing No. 23, held a fairness hearing, Filing No. 31, and entered an order of final
approval of the parties' settlement, Filing No. 32. Pursuant to those orders and the
settlement, the court awarded fees to the plaintiff in the amount of $12,567.60 on March
31, 2015. See Filing No. 22, Ex. 1, Settlement Agreement; Filing No. 32, Memorandum
and Order. Lead plaintiff now moves for approval of additional fees and costs expended
as a result of alleged errors made by the defendant in the administration of the class
action settlement.
In the Settlement Agreement, the parties agreed that the settlement would be
administered "by the defendant (or, at Defendant’s choice and subject to approval of
Class Counsel, an independent claims administrator)."

Filing No. 22-1, Settlement

Agreement at 10. The lead plaintiff asserts that the defendant did not abide by the
terms of the Settlement Agreement and did not consult or inform Class Counsel that the
defendant was not administering the class action settlement nor did they obtain
approval for an independent claims administrator to identify class members and
distribute settlement proceeds to them. See Filing No. 49-5, Index of Evid., Ex. 3,
Affidavit of Pamela Car ("Car Aff.") at 4. Instead, it obtained the services of a mail
house known as Renkim. Id.
The lead plaintiff has shown that almost immediately after the attorney fee award
was entered, the defendants notified the plaintiff that it objected to the judgment entered
by the court. Id., Car Aff. at 3. Lead plaintiff has submitted e-mail correspondence
documenting lead counsel's attempts to resolve the matter. Filing No. 52-2, Index of
Evid., Ex. 1, Affidavit of Pamela Car ("Car Aff. II"), Ex. 1A, e-mails. Defendants filed a
Motion to Modify Final Judgment on April 28, 2015. Filing No. 34. That motion was
ultimately denied. Filing No. 36.
Shortly thereafter, the court approved additional notice to the class, on a showing
that counsel for the defendant had informed lead counsel that all of the approximately
5000 checks mailed were defective and nonnegotiable because of a mistake in the bank
routing number printed on the checks. Filing No. 37, Motion for Additional Notice; Filing
No. 40, Order; Filing No. 42, Stipulation. The court also ordered the defendant to post a
performance bond. Filing No. 40, Order; Filing No. 45, Modified Order.
Lead counsel have now shown that additional fees and costs were incurred as a
result of the defendant’s actions. See Filing No. 49, Index of Evid., Ex. 1, Declaration of
William Reinbrecht; id., Ex. 1A, Reinbrecht Time Records; id., Ex. 2, Declaration of O.
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Randolph Bragg; id., Ex. 2A , Bragg Time Records; id., Ex. 3, Declaration of Pamela A.
Car; id., Ex. 3A, Car Time Records.

Lead plaintiff requests fees in the amount of

$16,717.14 (representing 50.05 hours of attorney time at the rates of $300 to $350 per
hour and 6.7 hours of paralegal time at the rate of $125 per hour) for time required after
March 4, 2015.
In opposition to the motion, defendant contends the fees are sought for work
performed as a result of an inadvertent unintentional error and that the class was not
damaged thereby.

It contends that no class members submitted a claim form

requesting fees, charges, or expenses as a result of dishonor, rejection or return of the
original settlement check.1 It argues that the request for supplemental fees is itself a
breach of the settlement agreement. It contends that the lead plaintiff is seeking a
“second bite” at an attorney fee award, attempting to get fees that are above and
beyond the contractually agreed-upon fee cap and fees that were, in fact, already
addressed as of the Final Fairness Hearing.

Also, defendant submits an affidavit

showing that of the 3,376 settlement checks sent to the Class, 681 were honored by the
bank despite the incorrect routing number, and only 136 class members returned their
original checks and requested replacement checks. Filing No. 50-1, Index of Evid.,
Affidavit of Lewis S. Doot at 1-2. Defendant also argues additional fees should be

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Specifically, they argue that:

The work allegedly related to the mis-printed checks was completely unnecessary. Class counsel
raised a “parade of horribles” before the Court about the possibility of dishonored check fees, unpaid bills
and other detrimental effects to the Class that would arise from the misprint. None of these events Class
counsel speculated would happen even came to pass.
Filing No. 50, Defendant’s Brief in Opposition at 8.

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denied because lead counsel did not request them in pleadings or at hearings in
connection with the misprinted checks issue. Filing No. 50, Defendant’s Brief at 10.
In support of the motion for an award of additional fees, lead plaintiff has shown
that defendant first caused lead counsel to expend time on the defendant’s objections to
the initial fees award.

Lead counsel has also shown that the management of the

problems caused by the mistaken routing number required multiple conference calls
with the court and defense counsel. Lead counsel was also required to file additional
pleadings and make additional appearances in connection with the issue. Counsel was
also required to expend time and effort securing the performance bond.
The equitable supervisory authority that Rule 23 of the Federal Rules of Civil
Procedure grants federal courts in class actions extends to attorney fee questions and
itself provides a quasi-substantive predicate for fee allowances. In re “Agent Orange”
Prod. Liab. Litig., 611 F.Supp. 1296, 1310 (E.D.N.Y. 1985), modified on other grounds,
818 F.2d 226 (2d Cir. 1987); see, e.g., Vincent v. Hughes Air West, Inc., 557 F.2d 759,
768 (9th Cir. 1977); 7A C. Wright & A. Miller, Federal Practice and Procedure § 1803
(1972 & Supp.1984). The court first finds that the expenditure of such fees and costs
was necessary and reasonable to effectuate the settlement agreement and to conclude
the litigation. The fee expenditure benefitted the class and was necessitated by actions
outside the lead plaintiff's or lead counsel's control. The court rejects the defendant’s
specious contention that the request for additional fees is itself a breach of the
settlement agreement. It appears to the court that the defendant’s recalcitrance,
untenable positions, and lack of cooperation served to increase the fees. The court
finds class counsel's efforts were appropriate and reasonable considering the potential
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damage to the class that could have been caused by the check debacle. The fact that
no "parade of horribles" resulted from the misstep is of no consequence to the
determination. Lead counsel's efforts served to minimize the damages that could have
resulted. Under the circumstances the court finds an award of supplemental fees is
necessary. The lead plaintiff should not bear the brunt of the defendant’s mistakes,
whether inadvertent or not.
The court further finds, based on its familiarity with attorney rates in this
community, and its knowledge of the competence and expertise of the attorneys
representing the class, that rates of $300 to $350 per hour for attorneys and $125 per
hour for paralegals are reasonable in this community. Furthermore, the court finds the
number of hours expended is reasonable in view of the potential damage to the class,
and the nature of the defendant’s opposition.
The court finds, however, that an award only up to the amount of the original
award is appropriate. In the settlement agreement, defendant agreed not to challenge
the award up to that point. The defendant could have avoided the additional fees by
properly administering the settlement, or could have lessened the fees by cooperating in
efforts to resolve the issue. As a result of the defendant’s actions, lead counsel were
required to respond to a baseless objection to the court's final order and to essentially
re-do the class notice.

The court finds a re-imposition of the initial award is a

reasonable outcome. Accordingly,
IT IS ORDERED:
1.

Class representative Gary D. Smith's supplemental motion for attorney

fees (Filing No. 47) is granted.
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2.

Supplemental attorney fees in the amount of $12,567.60 are awarded to

the lead plaintiff.
3.

A Judgment in accordance with this Memorandum and Order will issue

this date.
Dated this 4th day of April, 2016.
BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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