                        UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA
_______________________________________
                                        )
WINSTON & STRAWN LLP, et al.,           )
                                        )
            Plaintiffs,                )
                                       )
            v.                         )
                                       ) Civil No. 06-1120 (RCL)
FEDERAL DEPOSIT INSURANCE              )
CORPORATION, AS RECEIVER FOR           )
THE BENJ. FRANKLIN FS&LA,              )
PORTLAND, OREGON,                      )
                                       )
            Defendant.                 )
_______________________________________)

                                MEMORANDUM OPINION

       This attorney’s fee dispute comes before the Court after a day and a half bench trial. At

issue is the proper compensation owed to plaintiff Ernest M. Fleischer, an attorney hired as a

consultant for litigation surrounding a tax claim against the Federal Deposit Insurance

Corporation (“FDIC”) receivership of the Benj. Franklin Federal Savings and Loan Association

(“Benj. Franklin”). Mr. Fleischer has already been paid a total of $89,465.34 by the FDIC,

including $1408.34 for expenses and $88,057 for approximately 250 hours of work at $340 to

$390 per hour. Mr. Fleischer argues that he should instead be paid according to one of two

alternative methods. First, he argues he is entitled to 2% of the $43.4 million surplus preserved

after settlement of the tax claims. This would result in a judgment of $778,535 more than what

he has been paid, or a total award of ten times his hourly fee. In the alternative, he requests a

success fee of twice his hourly rate plus fees on fees, which would result in an award of

$223,075 over what the FDIC has already paid him.




                                               1
        Having carefully reviewed the evidence presented and all representations made during

trial, the record in this case, and the applicable law, the Court now finds that Mr. Fleischer has

already been reasonably compensated by the FDIC and is not entitled to additional fees.

   I.      BACKGROUND

        As one witness testified, nothing about this case is typical. Stewart Test., Sept. 24, 2012.

The matter involves a group of attorneys (the “shareholder attorneys”) who sought compensation

for their involvement in settlement discussions, and ultimately a settlement agreement, in a tax

case to which their shareholder clients were not parties and in which the attorneys were not of

record. Mr. Fleischer did not directly represent any of the shareholders or the parties; he was

hired, pursuant to an oral agreement with another shareholder attorney, as a consultant.

Moreover, Mr. Fleischer does not seek compensation from a fund created by his efforts, but from

surplus funds held in receivership by the FDIC (a receivership surplus being a rarity in itself) that

remain after payment of the tax settlement. Finally, because of the current stage of the litigation,

fees for all other participating attorneys have already been determined through arbitration,

mediation, and order of this Court. Thus, some of the legal theories now advanced by Mr.

Fleischer have been previously rejected during the litigation and the payments already

determined for other shareholder attorneys necessarily shape the equities at play with respect to

Mr. Fleischer.

           a. Context of the Dispute

        Because the facts of this case are unusual, and necessarily inform the outcome, they are

discussed in some detail here. In the midst of the savings and loans crisis of the 1980s and

1990s, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act

(FIRREA) of 1989.       The Act prevented federal regulators from, in most cases, counting



                                                 2
supervisory goodwill toward capitalization requirements. This change rendered Benj. Franklin

unable to satisfy minimum regulatory capitalization requirements, and federal regulators seized

Benj. Franklin in February, 1990. The Resolution Trust Corporation (“RTC”) acted as Benj.

Franklin’s receiver from 1990 to 1995, after which the FDIC took over.

       As receiver, the FDIC succeeds to “all rights, titles, and privileges of the insured

depository institution” and may “take over the assets of and operate the insured depository

institution with all the powers of the members or shareholders, the directors, and the officers . .

. .” 12 U.S.C. §§ 1821(d)(2)(A)–(B)(i). The FDIC may also “collect all obligations and money

due the institution,” and “preserve and conserve the assets and property of such institution.” 12

U.S.C. § 1821(d)(2)(B)(ii), (iv). Ultimately, the FDIC is tasked with liquidating the remaining

assets of the institution. After all depositors, creditors, other claimants, and administrative

expenses are paid, the FDIC then distributes any surplus to the institution’s shareholders. 12

U.S.C. § 1821(d)(2)(E); 12 C.F.R. § 360.3(a)(10).

       The present attorney’s fees litigation is shaped by several related developments regarding

the receivership of Benj. Franklin.     First, the value of the assets in receivership exceeded

liabilities, resulting in a surplus of over $90 million. This is unusual in that most receiverships

under RTC or FDIC supervision have resulted in deficits. Darmstadter Test., Sept. 24, 2012.

Given the surplus, Benj. Franklin shareholders will receive pro rata distributions of any

remaining liquidated assets.

       Second, a nearly $1.2 billion claim by the Internal Revenue Service (“IRS”) for unpaid

taxes, penalties, and interest was lodged against the receivership in 1992 and remained until the

settlement of tax litigation in 2006.    Tax claims against receiverships have typically been

irrelevant given than most receiverships faced deficits rather than surpluses. However, the Benj.



                                                3
Franklin receivership had surplus funds with which to pay at least part of the taxes owed.

Moreover, because the receiver and IRS expected the Benj. Franklin receivership to face a

deficit, it appears that the receivership’s early tax returns were not closely scrutinized by either

the FDIC or IRS. The impact this had on the tax liability and progress of the tax litigation is not

entirely clear.

        Third, in September 1990, a group of shareholders filed a shareholder derivative suit

against the United States in the U.S. Court of Federal Claims, contending that the seizure of

Benj. Franklin constituted, among other things, a breach of contract. See C. Robert Suess v.

United States, 52 Fed. Cl. 221 (2002) (“CFC suit”). The shareholders were represented by

Oregon attorney Don Willner and by Tom Buchanan of Winston & Strawn. The CFC suit

remained pending until August 2012 when an appeal to the Federal Circuit was voluntarily

dismissed pursuant to Fed. R. App. Proc. 42(b). See Suess v. United States, Fed. Cir. Ct. App.

2011-5101. However, until dismissal, the shareholders and attorneys involved in the CFC suit

expected that a possible damages award might increase the surplus available for shareholders.

The shareholders also knew that the pending tax claim could deplete the entire surplus and any

damages won in the Court of Claims and thus sought to participate in discussions and litigation

surrounding the tax claim.

            b. IRS Claim Against the Receivership

                   i. Initial Proof of Claim and Filing of Suit

        In September 1992, while the shareholder suit was pending, the IRS filed its first proof of

claim for unpaid federal income taxes with the Benj. Franklin receivership in the amount of $862

million with $166 million in interest and $280 million in penalties accruing through November 5,

1992. Complaint at 5–6, United States v. FDIC-Receiver, No. 02-1427 (D.D.C. July 17, 2002).



                                                 4
In 1998, Mr. Willner filed an action seeking appointment of an independent trustee but the action

was dismissed after the FDIC-Receiver agreed to attempt to minimize the tax claim and keep the

shareholders’ attorneys informed about negotiations with the IRS. See Blackwell Pls.’ Statement

Facts 4, ECF No. 120-1; FDIC’s Partial Stipulation to Blackwell Pls.’ Statement Facts 2, ECF

No. 120-2. For reasons that remain unclear, little progress was made between 1992 and 2002 to

resolve the tax claim.

       By 2002, Benj. Franklin had a surplus of more than $90 million. Id. After an April 2002

judgment of $34.7 million in favor of shareholders in the CFC suit, Mr. Willner sought renewed

assurances from the FDIC-Receiver that it would “‘make a good faith effort to minimize the IRS

tax claim’” and would not make any payments to the IRS without first consulting with the

shareholders. Letter from Don Willner to Bruce Taylor, FDIC Legal Division (May 20, 2002),

Pl.’s Ex. 6. The FDIC responded that it had not agreed to consult with shareholders before

paying and that a decision might be made shortly regarding the IRS claim. Letter from Bruce

Taylor, FDIC Legal Division, to Don Willner (June 6, 2002), Pl.’s Ex. 8. Willner thus became

concerned that the FDIC would pay the tax claim and exhaust the surplus. Willner Dep. 9:18–

12:8, Jan. 18, 2007, Pl.’s Ex. 60.

       At some point in early- to mid-June 2002, Mr. Willner hired Ernest Fleischer, a tax

attorney in Kansas City, Missouri who was Of Counsel to the firm then known as Blackwell

Sanders Peper Martin, to serve as a tax consultant. Fleischer Test., Sept. 21, 2012; Willner Dep.

39:11–20 (stating that Willner “would certainly have talked to Mr. Fleischer before [filing] for

the TRO” on June 17, 2002). Willner explained to Fleischer that he lacked funds to pay him and

that Fleischer would have to work on the case on contingency.               Willner Dep. 22:14–20.

Specifically, Mr. Fleischer testified at trial that Willner had told him that, if they were successful,



                                                  5
a fee would be set by a federal district court judge based on Mr. Fleischer’s contribution and

benefit to his clients. Mr. Fleischer stated that no specific contingency amount was discussed,

but that he understood that something more than his hourly rates would be paid. Fleischer Test.,

Sept. 21, 2012.

       In June 2002, based in part on Fleischer’s advice regarding the tax claim, Mr. Willner

filed suit in the U.S. District Court for the District of Oregon to restrain the FDIC from paying

the surplus to the IRS. Fleischer Test., Sept. 21, 2012. Willner obtained an ex parte TRO and,

although this was rescinded just two weeks later for lack of jurisdiction, Willner testified that

during the relevant preliminary injunction hearing, the FDIC agreed to advise him before making

any payment to the IRS. Thus, Willner “felt that [he] had the protection [he] needed.” Willner

Dep. 42:7–21.

       On July 17, 2002, the IRS sued the FDIC-Receiver in the U.S. District Court for the

District of Columbia seeking a determination that approximately $1.2 billion in tax and related

interest and penalties were due and owing. Complaint, United States v. FDIC-Receiver (“Tax

Case”). The tax case was assigned to Judge Emmet Sullivan. The only attorneys to enter an

appearance for the receivership were those for the FDIC-Receiver. Although Mr. Willner filed a

motion to intervene on behalf of the Benj. Franklin shareholders, the motion was denied without

prejudice after the case was stayed. At some point, the FDIC-Receiver and IRS agreed to permit

the shareholders’ attorneys to participate in negotiations with the IRS, despite the formal position

of the IRS and DOJ that the FDIC was the taxpayer and only party in interest with standing to

challenge the tax liability. Darmstadter Test., Sept. 24, 2012.

                   ii. Settlement of Tax Case and Negotiation of Attorneys’ Fees




                                                 6
         Attorneys from at least four law firms participated in tax settlement discussions on behalf

of the shareholders, including lawyers from Winston & Strawn and Spriggs & Hollingsworth, as

well as Mr. Willner and Mr. Fleischer. Mr. Willner was lead counsel for shareholders in these

discussions and Mitch Moetell from Winston & Strawn was the lead tax counsel for

shareholders. Fleischer Test., Sept. 21, 2012; Buchanan Test., Sept. 21, 2012. During at least

parts of the settlement discussions, the shareholder clients paid reduced hourly fees to Willner,

Winston & Strawn, and Spriggs & Hollingsworth with the understanding that these attorneys

would seek a success fee if successful. Mr. Fleischer does not appear to have been paid anything

throughout the settlement discussions.

         In November 2005, the parties reached a proposed agreement to settle the tax claim for

$50 million. Letter from Eileen J. O’Connor, Assistant Attorney Gen., Tax Div., U.S. Dep’t of

Justice, to Richard Aboussie, Assoc. Gen. Counsel, FDIC (Nov. 16, 2005), Def.’s Ex. 18. This

amount would preserve an estimated $44 million for distribution to the shareholders.                              As

discussed in more detail below, neither party to the current litigation can say exactly why the IRS

agreed to settle for this amount.

         The FDIC and shareholders’ attorneys also agreed to a mechanism by which the attorneys

could collect their fees through the FDIC claims process. 1 The tax case was not a class action or

derivative suit which would have required notice of the settlement to class members or

shareholders. However, because of the “unusual facts and somewhat unique situation presented

by [the] receivership,” the FDIC argued that its responsibility to distribute surplus funds to

shareholders raised considerations analogous to those in class or derivate suits. See Unopposed

Motion for Fairness Hearing, United States v. FDIC-Receiver, No. 02-1427 (D.D.C. July 17,


1
  The parties do not claim that this was a “fee agreement,” but the FDIC does not dispute that the attorneys are owed
reasonable fees through this process.

                                                          7
2002). Thus, on February 3, 2006, the FDIC-Receiver requested that the Court approve a Notice

to Shareholders describing the proposed settlement. Id. According to the Notice, which the

Court approved, the FDIC-Receiver agreed that the shareholders’ attorneys would be paid

“reasonable fees and expenses . . . in connection with [their] work to reduce the $1.2 billion tax

liability alleged by the IRS down to the $50 million settlement amount.” Notice of Proposed

Settlement 8, Def.’s Ex. 19. The Notice further stated that “[w]hile the FDIC has not yet

determined the total amount of legal fees and expenses it will approve pursuant to its

receivership claims procedures, the amount will likely be between $1 and $2 million.” Id. at 8–

9. The Notice was sent to shareholders and on May 2, 2006, the Court held a fairness hearing

and approved the settlement.

         One of the attorneys involved in settlement discussions, Rosemary Stewart of the firm

then known as Spriggs & Hollingsworth, testified that she drafted the Notice to Shareholders and

provided it to FDIC counsel who made a few edits before filing it. Ms. Stewart acknowledged

that the attorneys were to be paid “reasonable” fees and would have to file claims through the

FDIC’s receivership process. Her testimony, along with correspondence in the record, suggests

that she and Don Willner negotiated this agreement with the FDIC one and a half to two years

prior to approval of the settlement agreement.

         It is unclear the extent to which attorneys from other law firms participated in the

negotiation of this attorneys’ fee provision.                 However, the other attorneys, including Mr.

Fleischer, appear to have had notice of the agreement as early as November 2004. 2 See Letter


2
 Mr. Fleischer’s Proposed Findings of Fact state that he “did not see the Notice [to Shareholders containing the
attorney’s fees agreement] before it was filed, was not consulted regarding its contents, and did not take part in its
preparation.” Pl.’s Proposed Findings of Fact 16, ECF No. 124. While the Court has no reason to doubt Mr.
Fleischer’s credibility, and while he may not have been consulted about the Notice, it does appear that he had notice
of Willner and Stewart’s agreement with the FDIC that it would distribute “reasonable fees and expenses of
shareholders’ counsel and consultants as approved by the Court and as determined through the receivership
process.” This language is nearly identical to that ultimately used in the Notice.

                                                          8
from Don Willner to Robert Clark, FDIC (Nov. 8, 2004), Def.’s Ex. 11; see also E-mail from

Rosemary Stewart to Tom Buchanan, Michael Moetell, Ernest Fleischer, and Don Willner (Nov.

22, 2004, 2:14 PM), Pl’s Ex. 43 (attaching the “side-agreement with FDIC”); E-mail from

Rosemary Stewart to Tom Buchanan, Michael Moetell, Ernest Fleischer, and Don Willner (Nov.

22, 2004, 3:26 PM), Pl’s Ex. 43 (“As to attorneys’ fees, Par.5(c) allows us to seek only the

reasonable fees and expenses related to the tax work.”).

        Ms. Stewart testified that it was the attorneys, not the FDIC, who calculated the estimated

$1 to $2 million range in legal fees. Ms. Stewart, Don Willner, and an attorney with Winston &

Strawn determined that compensation calculated at their hourly rates would amount to

approximately $1 million. Because they planned to seek a multiplier of two in their fee petitions

to the FDIC, the outer range was set at $2 million. 3 Ms. Stewart’s testimony is bolstered by the

November 8, 2004 letter from Don Willner to Robert Clark of the FDIC in which Mr. Willner

stated that he understood “reasonable” attorney’s fees “as approved by the Court and as

determined through the receivership process” would be distributed by the receivership “pursuant

to FDIC receivership and administrative procedures.” Def.’s Ex. 11. It is unclear what role, if

any, Mr. Fleischer played in the discussions about the range of possible attorney’s fees and the

multiplier that would be sought.

                     iii. Post-Settlement Claims for Attorneys’ Fees

        The shareholder attorneys filed fee petitions through the FDIC process. According to

Ms. Stewart, the FDIC granted payment for most of the hours submitted by Spriggs &

Hollingsworth and Winston & Strawn but denied their request for a multiplier of two. Mr.

Willner sought compensation for approximately 1000 hours based on prevailing hourly rates for


3
 In fact, Winston & Strawn’s fee agreement with their shareholder client provided that, if successful, they would be
paid a success-contingent fee of twice their hourly rates.

                                                         9
complex litigation in Washington, D.C., as well as for a “substantial contingent fee . . . no less

than the same contingent fee percentage awarded to the other attorneys.” See Def.’s Ex. 16 at 3,

14. He also sought payment for expenses and the work his consultants, including $93,600 for

240 hours of work by Mr. Fleischer and $2,200 for Fleischer’s expenses. Mr. Willner did not

seek a multiplier for Mr. Fleischer’s fees. Mr. Fleischer was subsequently asked to provide more

detail about his hours and expenses and he submitted billing records for 253.6 hours and

$1408.34 in expenses. Facsimile from Ernest Fleischer to Richard Gill, FDIC (Mar. 3, 2006),

Pl.’s Ex. 48. Mr. Fleischer never directly requested a multiplier but instead described his oral

agreement with Willner to be compensated “fairly” and that his understanding that a “‘fair’

contingent fee amount would be determined by a Federal judge.’” Id. The FDIC disallowed

payment for 188.75 of Mr. Willner’s hours and rejected Willner’s request for $525 per hour plus

an enhancement, instead paying him $250 per hour, an amount lower than the Laffey rates.

Def.’s Ex. 21. The FDIC also disallowed 4.5 hours of Mr. Fleischer’s time and ultimately paid

him a total of $89,465.34. Def.’s Ex. 22.

       After being denied a multiplier, Ms. Stewart decided not to pursue the matter further.

Mr. Willner, Mr. Fleischer, and attorneys from Winston & Strawn filed suit in this Court and the

cases were consolidated in October 2006. Winston & Strawn sought the same amount it had

requested through the FDIC administrative claims process, invoking the Court’s authority under

12 U.S.C. § 1821(d)(6) to review FDIC claims or under a quantum meruit theory. Complaint,

Winston & Strawn LLP v. Fed. Deposit Ins. Corp., No. 06-1120 (D.D.C. June 20, 2006). Don

Willner invoked the same theories to request $880,000 which represented his total hours at $525

per hour plus an approximately 63% success enhancement. See Complaint, Don S. Willner &

Associates v. Fed. Deposit Ins. Corp., No. 06-1227 (D.D.C. July 7, 2006).          Mr. Fleischer



                                               10
requested 5% of the remaining surplus minus what had been paid to him through the FDIC

process. Complaint, Blackwell Sanders Peper Martin, LLP v. FDIC, No. 06-1273 (D.D.C. July

18, 2006). Winston & Strawn’s and Willner’s claims amounted to about 2.6% and 2% of the $44

million remaining surplus, respectively, but their claims appear to have been based on their hours

worked times a multiplier.

       In early 2007, plaintiffs in the consolidated case moved for summary judgment, and

FDIC cross-moved. Plaintiffs appear to have modified their legal arguments to some degree in

their motions for summary judgment. While requesting the same dollar amounts, plaintiffs

argued that the common fund doctrine, and specifically the percentage-of-the-fund method,

governed their fee request. However, except for Mr. Fleischer, the plaintiffs merely requested

percentages that matched or approximated the amounts they had originally requested from the

FDIC based on the hours worked.

       Judge Sullivan denied the motions for summary judgment. As described in more detail

below, he rejected plaintiffs’ argument that they should be compensated under the “common

fund doctrine” based on a percentage of the remaining surplus. Winston & Strawn LLP v. Fed.

Deposit Ins. Corp., No. 06-1120, 2007 WL 2059769, at *4–5 (D.D.C. July 13, 2007) (Mem. Op.

8, ECF No. 31).     Judge Sullivan also found the record insufficient to fully evaluate the fees

awarded by the FDIC. The Court noted that a multiplier “may be appropriate to account for

additional factors such as the contingent nature of the case.” Id. at 13 (emphasis added). Judge

Sullivan then referred the dispute to mediation.

       The Winston & Strawn plaintiffs ultimately obtained judgment as a result of arbitration in

which the mediator recommended they receive their fees plus a multiplier of two. The Court

entered final judgment for Winston & Strawn in that amount and ordered Winston & Strawn to



                                                   11
bear its own costs with respect to litigation over the fees. Order, Nov. 28, 2007, ECF No. 39;

Final J., Nov. 28, 2007. ECF No. 40.

         Mr. Willner obtained judgment pursuant to this Court’s approval of a Report and

Recommendation by Magistrate Judge Facciola. Judge Facciola’s Report recommended that

Willner be paid Laffey rates for an attorney with twenty or more years of experience, thus

increasing his hourly rates to between $350/hour and $425/hour depending on the years the work

was done. Judge Facciola did not recommend a multiplier and Willner did not receive one.

         Mr. Fleischer and the Blackwell firm failed to reach agreement with the FDIC through

the first round of mediation and their motion to participate in additional mediation with Mr.

Willner was denied.     On August 13, 2012, this Court dismissed Fleischer’s firm without

prejudice. Mr. Fleischer himself is thus the only remaining plaintiff.

   II.      LEGAL STANDARD

            a. Court’s Jurisdiction

         This court has jurisdiction to review de novo claims filed with, and processed by, the

FDIC under its administrative claims process. 12 U.S.C. § 1821(d)(5)–(d)(6); Freeman v. FDIC,

56 F.3d 1394, 1400 (D.C. Cir. 1995).

            b. Court’s Discretion

         Trial courts “enjoy[] substantial discretion in making reasonable fee determinations.”

Swedish Hospital v. Shalala, 1 F.3d 1261, 1271 (D.C. Cir. 1993) (citing Hensley v. Eckerhart,

461 U.S. 424, 437 (1983)). Trial court decisions on attorney fee determinations are reviewable

only for an abuse of discretion. Id. (citing Pierce v. Underwood, 487 U.S. 552, 563 (1988)).

            c. Attorney’s Fees




                                                12
         The general rule in the American legal system is that each party bears its own attorney

fees and expenses. Perdue v. Kenny A. ex rel. Winn, 130 S. Ct. 1662, 1671, (2010) (citing

Hensley, 461 U.S. at 429); see also Swedish Hosp., 1 F.3d at 1265. Exceptions to this rule are

supplied by various fee-shifting statutes and equitable doctrines. Swedish Hosp., 1 F.3d at 1265.

         The most common equitable exception is the “common fund” doctrine, which is typically

applied in class actions. This doctrine “allows a party who creates, preserves, or increases the

value of a fund in which others have an ownership interest to be reimbursed from that fund for

litigation expenses incurred, including counsel fees.” Id. The D.C. Circuit has acknowledged

that courts historically enjoyed great discretion to calculate a common fund award based on the

particular circumstances of the case.              A percentage-of-the-fund calculation was the most

common method; however, in the wake of large fee awards, a number of courts began to move

toward the lodestar method of paying attorneys a product of the reasonable hours expended and

the reasonable hourly rate. Id. at 1265–66. In Swedish Hospital v. Shalala, the D.C. Circuit held

that, a percentage-of-the-fund method, and not the lodestar method, “is the appropriate

mechanism for determining the attorney fee awards in common fund cases.” 4 Id. at 1271.

         The basis of the common fund doctrine is often said to be the free rider problem that

results when fund claimants do not contribute to the fees of the parties and attorneys who fought

to create or protect the fund. See Consol. Edison Co. of New York, Inc. v. Bodman, 445 F.3d
4
  The Circuit noted that the appeal in that case raised “important questions about the reasonable calculation of
contingent counsel fees in class actions resulting in the creation of a common fund payable to plaintiffs.” Swedish
Hosp., 1 F.3d at 1263 (emphasis added). However, the court did not specify whether its holding was limited to the
class action context. The common fund doctrine itself is not limited to class actions. See Sprague v. Ticonic
National Bank, 307 U.S. 161, 167 (1939) (recognizing the equitable power of courts to award attorney’s fees where
equity demands, regardless of the “formalities of the litigation [or] the absence of an avowed class suit or the
creation of a fund”). However, this does not answer the question of whether a percentage-of-the-fund method must
be applied to non-class action suits as well. For the sake of argument, this Court assumes that the Circuit’s holding
that the percentage-of-the-fund method applies is not limited to the class action context. The Circuit seems to have
implicitly assumed this in Consolidated Edison, where the court reversed a district court’s refusal to grant fees
pursuant to a percentage-of-the-fund calculation to an attorney who did not represent a certified class. 445 F.3d at
442. Moreover, the same concerns that motivated the decision in the class action context will often apply to other
common fund cases.

                                                         13
438, 442 (D.C. Cir. 2006) (“[T]he common fund theory conventionally rests on a theory that

beneficiaries of the lawsuit would be unjustly enriched if not compelled to pay a share of the fees

that made success possible.”) (citing Swedish Hosp., 1 F.3d at 1265). “Jurisdiction over the fund

involved in the litigation allows a court to prevent this inequity by assessing attorney’s fees

against the entire fund, thus spreading fees proportionately among those benefited by the suit.”

Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). The rule provides an incentive for lawyers

to take on cases for which the expected value of the litigation for claimants willing to fund the

case will not support adequate compensation for counsel. However, the D.C. Circuit has also

noted that “[i]n some cases, of course, a subset of potential beneficiaries will have stakes large

enough to call forth ample litigation effort; if so, the free-rider concern declines, possibly to nil.

This last point would be pertinent, if at all, in calculation of fees.” See Consol. Edison, 445 F.3d

at 443.

          The free rider problem explains why fees should be paid from the entire fund, rather than

by a few litigants, but does not explain why a percentage of the fund is the appropriate measure

of those fees. The D.C. Circuit has explained that the latter practice: (1) promotes efficiency by

basing the attorney award on the amount won; (2) more closely resembles the market practice of

contingent fee litigation; (3) conserves scarce judicial resources by not requiring district judges

to review attorney billing information in detail; and (4) requires less subjectivity than a lodestar

analysis.

   III.      DISCUSSION

             a. Fleischer Entitled to Reasonable Attorney’s Fees

          The parties agree that Mr. Fleischer is entitled to compensation for the services he

provided during the tax settlement discussions. However, the FDIC argues he has been paid



                                                 14
“reasonable” fees based on the hours he worked and his hourly rate. Mr. Fleischer argues that he

is due either a percentage of the surplus or a success fee.

           b. Settlement Agreement Governs Attorney’s Fees Owed

       As already noted, Judge Sullivan previously rejected the common fund theory now

advanced by the plaintiff. The parties dispute whether the law of the case doctrine mandates the

same result in the present opinion. However, the applicability of the law-of-the-case doctrine is

irrelevant because the Court agrees with Judge Sullivan’s reasoning and conclusions. As a

preliminary matter, Judge Sullivan presided over the tax litigation that led to settlement and the

agreement to pay attorneys’ fees. When he denied summary judgment in the present litigation,

he thus brought to the bench an understanding not only of the present dispute but of the

agreement underlying that dispute.

       Moreover, as explained more fully below, the Court agrees with Judge Sullivan’s analysis

that this case deals not with a typical attorneys’ fee award at the close of litigation, but with

review of the FDIC’s administrative determination of reasonable fees as provided for in the

Notice to Shareholders. As Judge Sullivan noted, “[p]laintiffs are not seeking attorney fees in

the Tax Case itself. Nor were plaintiffs’ clients . . . even parties to the Tax Case. . . . Nor are

plaintiffs seeking an award from the opposing party in interest in the Tax Case, the United

States.” Winston & Strawn, 2007 WL 2059769, at *4 (Mem. Op. 8, ECF No. 31). Instead,

Judge Sullivan noted that plaintiffs had sought payment from the FDIC through its

administrative claims process and that the Court’s “only purpose is to review the FDIC’s

payment decisions . . . [which were] part of an overall agreement reached amongst the parties to

settle the Tax Case. . . . [That] agreement stated that the FDIC would pay plaintiffs ‘an amount

representing the reasonable fees and expenses.’” Id.



                                                 15
       Although the agreement did not define what constituted “reasonable” fees, Judge Sullivan

concluded that the term should be interpreted in light of prevailing law governing reasonable

attorneys’ fees in other contexts. Id. at 5. Although the percentage-of-the-fund method is used

to determine “reasonable” fees in the common fund context, Judge Sullivan found that this was

not appropriate here. Id. Specifically, provision in the agreement of an estimated $1 to $2

million for attorneys’ fees demonstrated that the parties did not expect that a standard

percentage-of-the-fund method would be used. Id. That method would normally result in an

award of twenty to thirty percent of the remaining fund, which in this case would have required

the agreement to provide for fees of roughly $8 to $12 million. Id.

       As discussed below, given the fact that the parties appear to have contemplated use of the

lodestar method, with or without a multiplier, what constitutes “reasonable” fees should not be

determined based on the percentage-of-the-fund method but on the lodestar method.

           c. Common Fund Doctrine Not Applicable

       Even if the Notice to Shareholders had not seemed to provide for a lodestar calculation,

the percentage-of-the-fund method would nevertheless be inappropriate.

       Neither Mr. Fleischer nor any of the other shareholder attorneys represented parties to the

litigation. In fact, Mr. Fleischer did not represent any shareholder client directly, but was hired

as a consultant by Mr. Willner. The only parties to the Tax Case were the FDIC and the IRS.

Common fund cases routinely discuss application of the doctrine to “parties” or “litigants” who

create, preserve, or increase the value of a fund. See Swedish Hosp., 1 F.3d at 1265, 1268–69.

The plaintiff cites no law to show that the Swedish Hospital holding should apply to attorneys

such as himself who are not of record or who were hired as consultants. The Court has been able

to find only one case, not binding in this Circuit, suggesting that attorneys not of record might



                                                 16
qualify for attorney’s fees under the common fund doctrine. See Gottlieb v. Barry, 43 F.3d 474

(10th Cir. 1994) (holding, in settlement of securities class action, that nondesignated class

counsel and class members whose arguments led to reduction of fees to be awarded to various

counsel were entitled to attorneys’ fees). However, this approach has been rejected in at least

one circuit, which noted that “simply doing work on behalf of the class does not create a right to

compensation; the focus is on whether that work provided a benefit to the class. . . . Non-lead

counsel will have to demonstrate that their work conferred a benefit on the class beyond that

conferred by lead counsel.” In re Cendant Corp. Securities Litigation, 404 F.3d 173 (3d Cir.

2005). However, even if the common fund doctrine and percentage-of-the-fund method can be

applied to non-party attorneys, other concerns militate against application of this method.

       The concerns of the D.C. Circuit supporting application of the common fund doctrine and

the percentage-of-the fund calculation are not as applicable in this case as they may be in cases

in which the attorneys brought the case or represented parties to the underlying litigation. First,

here there is less of a free rider problem. In this case, shareholders holding a large percentage of

the outstanding shares funded much of the litigation effort leading up to and including the Tax

Case. The D.C. Circuit has noted that where a subset of potential beneficiaries have stakes large

enough to fund litigation, the free-rider concern declines “possibly to nil” and that this would be

pertinent in calculation of fees. Consol. Edison, 445 F.3d at 443; see also C. Robert Suess v.

Fed. Deposit Ins. Corp., 770 F. Supp. 2d 32, 40 (D.D.C. 2011) (rejecting claim for common fund

attorney’s fees by largest shareholder in part because of lack of free rider concern). Moreover,

although the record does not contain much detail on the topic, it appears that the FDIC has

already distributed over $3 million to reimburse 4200 shareholders for contributions to a

litigation fund to pay Willner and attorneys from Winston & Strawn and Spriggs &



                                                 17
Hollingsworth. This further alleviates concerns that other claimants will be able to free ride off

of a few shareholders’ efforts. Finally, any payments by the FDIC to shareholders’ attorneys,

whether based on a lodestar or a percent of the fund, will be made from the fund as a whole and

thus will thus affect all shareholders’ distributions.

       The concerns driving Swedish Hospital’s percentage-of-the-fund holding are also less

applicable where, as here, the attorney requesting compensation was a consultant. In adopting

the percentage of the fund calculation, the D.C. Circuit noted that such a method more closely

resembles market contingent fee practices. However, that concern is less relevant for attorneys,

like consultants, who are often paid on an hourly, rather than a contingent basis. See Willner

Dep. 23:3–10 (stating that he had hired a variety of expert witnesses and experts during his

career and that they were normally paid hourly rates).

       Third, the percentage of the fund theory would appear more difficult to administer in this

case than a lodestar-type approach because of the participation of various parties and the inability

to tease out what portion of the fund the shareholder lawyers were responsible for. Here, the

funds available after settlement of the tax claim necessarily depended on the surplus that existed

before settlement, any successes obtained by the FDIC attorneys, and the reasons why the IRS

agreed to settle for $50 million (which no witness was able to fully explain).

       Finally, the Supreme Court has noted that “[a]s in much else that pertains to equitable

jurisdiction, individualization in the exercise of a discretionary power will alone retain equity as

a living system and save it from sterility.” Sprague, 307 U.S. at 167. The facts of this case are

highly unusual and do not readily fit the typical percentage-of-the-fund mold. The parties have

not succeeded in convincing this Court to apply a broadly outlined doctrine to a case in which

the doctrine would clearly not produce equitable results.



                                                  18
           d. Even if Common Fund Doctrine Applied, Mr. Fleischer Has Not Met His

               Burden

       “‘[T]he unarticulated threshold requirement for application of the common-benefit

doctrine is that the claimant must enjoy some form of success on the merits of the litigation.’”

Consol. Edison, 445 F.3d at 457 (quoting I Alba Conte, Attorney Fee Awards § 2.1, at 41 (3d ed.

2005)). Further the “claiming parties’ litigation [must] have played a causal role in achieving the

benefits for which they seek reimbursement.” Id. at 451 (citing cases and a secondary source

suggesting that the attorney’s actions must be a “substantial cause,” a “cause-in-fact,” or a “but

for” cause of the benefit); see also Consol. Edison, 445 F.3d at 460 (“[P]ayment should be

allowed ‘only as a reasonable proportion of the amount actually collected . . . for which

petitioners’ attorneys were responsible,’ i.e., proportional to the degree to which the civil

litigation enhanced the probability of pay-out to the beneficiaries in question and the amount

distributed.”) (citing Democratic Central Committee of D.C. v. WMATC, 38 F.3d 603, 606 (D.C.

Cir. 1994)).

       Here, it is reasonable to assume that Mr. Fleischer and the other attorneys may have

assisted in obtaining a successful outcome for the shareholders. However, it is not clear that Mr.

Fleischer’s actions were a “substantial cause” or a “but for” cause of that success. Fleischer cites

several primary contributions to the settlement agreement and preservation of the remaining $44

million surplus. First, he argues that he provided the legal theory that supported Mr. Willner’s

request for a TRO restraining the FDIC from making any payment to the IRS. However, the

TRO only restrained the FDIC for approximately two weeks before it was rescinded for lack of

jurisdiction. Mr. Willner in a deposition, and Mr. Fleischer in trial testimony, stated that the

TRO was instrumental in convincing the FDIC not to pay the IRS without first notifying



                                                19
shareholders.   However, it appears that Mr. Willner, rather than Mr. Fleischer, was more

instrumental in obtaining authorization for the shareholders’ attorneys to participate in settlement

discussions. Willner Dep. 12:15–14:5. Mr. Fleischer also points to tax advice, informed by his

unique experience in the taxation of another savings association, provided during settlement

discussions. However, several witnesses testified that the IRS was not receptive to the theories

proposed by Mr. Fleischer. Buchanan Test., Sept. 21, 2012; Stewart Test., Sept. 24, 2012;

Willner Dep. 19:17–20:2.

       Mr. Fleischer also acknowledges that other attorneys, including FDIC attorneys,

contributed to the parties’ ability to reach a settlement that preserved a surplus. In addition to

participating in settlement discussions generally, the FDIC prepared a memorandum regarding

the tax treatment of $258 million in post-insolvency interest, which apparently was one of the

few theories the IRS accepted. Fleischer Test., Sept. 21, 2012. Mr. Fleischer acknowledged that

if the IRS had not accepted the FDIC’s position on that issue, the surplus also would have been

wiped out. Id. Moreover, the IRS was responsible for preparing the scenario upon which the

FDIC’s final settlement offer was based.

       As a result, Mr. Fleischer has not shown the benefit conferred by him beyond that

conferred by other shareholder attorneys or by the FDIC. Cf. In re Prudential Ins. Co. of Am.

Sales Practices Litig., 148 F.3d 283, 333 (3d Cir. 1998) (rejecting a fee award to class counsel in

a case in which state government lawyers also performed much of the investigation and

negotiation and criticizing the district court for “not attempt[ing] to distinguish between those

benefits created by the [state attorneys] and those created by class counsel”).

       In fact, none of the witnesses could say exactly why the IRS chose to settle for $50

million and various witnesses advanced very different theories for the basis for the settlement.



                                                20
Ms. Stewart suggested the IRS was swayed by the equities at play in the situation, namely, the

rarity of a receivership with a surplus and the human story of many elderly shareholder investors

who stood to gain from a distribution of the remaining surplus. She believed that the IRS never

intended to hold fast to their claim for $1.2 billion; if this were the case, she testified, there

would have been no reason to involve the shareholders in settlement negotiations.                 Mr.

Buchanan’s testimony implied that the IRS, although unwilling to reduce the tax liability to zero,

was trying to find a way to settle for some amount that would preserve a surplus. He stated that

the shareholders had equities on their side. He emphasized that the settlement was a compromise

and agreed that it was fair to characterize it as a “black box settlement” that produced a fair result

but the legal basis of which was never entirely clear. Mr. Fleischer also acknowledged that he

does not know what legal theories the IRS did or did not accept, and that he does not know the

basis upon which the IRS reduced its claim from $1.2 billion to $50 million.

       Even if Mr. Fleischer succeeded in showing that he contributed to some degree to the

settlement, courts are within their discretion to apply a percentage of the fund calculation to only

that portion of the fund for which counsel was responsible.” Swedish Hosp., 1 F.3d at 1272. Mr.

Fleischer has not demonstrated that he was responsible for a settlement amount that preserved all

$44 million of the remaining surplus and the Court would be unable to calculate what portion, if

any, Mr. Fleischer was responsible for.

       Finally, given that the common fund doctrine is an equitable exception to the general

attorney’s fee rule, it is important to note that equity does not favor Mr. Fleischer’s request for a

percentage of the fund. None of the other attorneys in this case have been compensated based on

the common fund doctrine. It would inequitable to compensate Mr. Fleischer under a common

fund theory when no other attorney has been paid on that basis. This is particularly true given



                                                 21
that Mr. Fleischer, while he may have contributed creative legal theories, appears to have

performed the least amount of work of the four shareholder firms. 5 Although it is true that the

other attorneys could, like Mr. Fleischer, have insisted on a trial, they made decisions regarding

their fees based in part on Judge Sullivan’s rejection of the common fund theory at the summary

judgment stage.

             e.    FDIC Acted Reasonably in Denying Success Multiplier

         Mr. Fleischer argues that, if not based on a percentage of the fund, his “reasonable”

attorney’s fees should nevertheless be twice his hourly rates. Again this argument hinges on

what constitutes “reasonable” fees as provided for in the Notice to Shareholders.

         The Court has already outlined why a percentage of the fund would not be “reasonable”

in this context. However, Courts have determined “reasonable” fees through a number of other

methods. In the context of fee-shifting statutes, courts have relied on a lodestar approach, a

twelve-factor test, and a combination of the two to determine reasonable fees. The lodestar

approach is simply the product of the reasonable hours expended and the reasonable hourly rate.

Swedish Hosp., 1 F.3d at 1266. The amount calculated could historically be adjusted up or down

based on the risk involved or contingent nature of the work and the quality of the attorney’s

contributions. Id. The twelve-factor approach bases fees on factors such as the time and labor

required, the novelty of the questions, time limitations imposed by the client, etc. 6 In some


5
  Mr. Fleischer submitted billing records for approximately 250 hours of work, significantly less than that submitted
by Ms. Stewart (376 hours), Winston & Strawn (1457 hours), and Mr. Willner (approximately 1000 hours).
However, Mr. Fleischer did not keep contemporaneous time records and he believes that he may have worked more
than 250 hours but still less than 500 hours. Fleischer Test., Sept. 21, 2012.
6
  The following twelve factors inform the determination of a reasonable fee: “1) the time and labor required; 2)
novelty and difficulty of the questions involved; 3) the skill requisite to perform the legal services properly; 4) the
preclusion of other employment by the attorney due to acceptance of the case; 5) the customary fee; 6) whether the
fee is contingent or fixed; 7) time limitations imposed by the client or other circumstances; 8) the amount involved
and the results obtained; 9) the experience, reputation, and ability of the attorneys; 10) the ‘undesirability’ of the
case; 11) the nature and length of the professional relationship with the client; and 12) awards in similar cases.”
Swedish Hosp., 1 F.3d at 1266 (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)).

                                                          22
cases, a combination of these approaches has been used.          Recently, however, the lodestar

approach, without enhancement by the twelve factors, has emerged as the prevailing method for

calculating attorneys’ fees. Id. (citing City of Burlington v. Dague, 505 U.S. 557 (1992); King v.

Palmer, 950 F.2d 771 (D.C. Cir. 1991) (en banc)).

       Multipliers are now disfavored and fee enhancements are rare. The Laffey rates are

presumed to be the highest reasonable rates in the context of statutory attorney’s fees. See

Swedish Hosp., 1 F.3d at 1267 n.3 (“[W]e have generally disavowed the use of enhancement, in

recognizing that enhancing factors are reflected in the original lodestar.”); cf. Rooths v. District

of Columbia, Civil No. 09-492, 2011 U.S. Dist. LEXIS 87659, *12 (D.D.C. Aug. 9, 2011).

Indeed, the Supreme Court has stated that enhancements under the lodestar approach for superior

results and performance are permitted only “in extraordinary circumstances” and that there is a

“strong presumption that the lodestar is sufficient.” Perdue v. Kenny A., 130 S. Ct. 1662, 1669

(2010). The “party seeking fees has the burden of identifying a factor that the lodestar does not

adequately take into account and proving with specificity that an enhanced fee is justified.” Id.

       Mr. Fleischer has already been compensated at his own rates which are comparable to the

Laffey matrix. As with the percentage-of-the-fund calculation, Mr. Fleischer has not met his

burden to show, with specificity, that factors not included in the lodestar would justify an

enhanced fee.

       Mr. Fleischer testified that he was uniquely qualified and had particular experience that

allowed him to quickly provide sophisticated legal advice. Fleischer Test., Sept. 21, 2012. He

stated that, without his prior experience in the taxation of another savings plan, he would have

had to spend five to ten times the number of hours on the case. Id. Moreover, he suggested that




                                                23
the risk of his not collecting any fee also supports his request for a multiplier. Finally, Mr.

Fleischer again points to his contributions to the tax settlement.

         However, attorney experience is already reflected in the Laffey rates. Moreover, the

Supreme Court has said that the “quality of an attorney’s performance generally should not be

used to adjust the lodestar.” Perdue, 130 S.Ct. at 1673. More importantly, Mr. Fleischer, while

he may be a highly capable tax attorney, simply has not met his burden of showing that his

efforts were extraordinary or that he is uniquely responsible for the settlement obtained. As

already discussed, the IRS was not receptive to his legal theories and may have been more

persuaded by the equities at play in the case than by any tax arguments advanced by Mr.

Fleischer. The FDIC attorneys and other attorneys working on the case also appear to have

contributed to the settlement agreement reached. Finally, no other attorney has been awarded a

success fee by this Court. It is true that Winston & Strawn obtained twice their fees; however,

this was negotiated in arbitration and was due in part to admissions by the FDIC that Winston &

Strawn had done significant work. The results of an arbitration process are not binding on this

Court.

         Mr. Fleischer argues that the holding of Perdue with respect to fee enhancements is not

applicable here because that case was based on interpretation of a federal fee-shifting statute and

because it was decided after Fleischer decided to provide services on a contingent basis. Pl.’s

Proposed Conclusions Law 15, ECF No. 125. However, these arguments are without merit.

Perdue is instructive not only for its holding, but for its discussions of lodestar calculations more

generally. This Court relies on Perdue to better inform its review of whether the FDIC’s

determinations were “reasonable” in comparison with other attorney fee calculations. Finally,




                                                 24
the language of Perdue confirms a trend that had been taking place long before that decision in

2010.

            f. Mr. Fleischer Is Not Due Fees on Fees

         Mr. Fleischer has not succeeded in showing that a fee enhancement was wrongfully

withheld by the FDIC. As such, he cannot succeed on his claim for fees on fees. Moreover,

even if he had successfully demonstrated his entitlement to a multiplier, he would not be owed

fees on fees for the expenses associated with the current litigation.

         This Court permitted Mr. Willner to recover the costs for preparing his fee petition.

However, neither Mr. Willner nor Winston & Strawn were granted costs for litigating their

attorneys’ fees claims in this Court.

   IV.      CONCLUSION

         Mr. Fleischer has already been reasonably compensated by the FDIC for his work on the

tax settlement. Of the approximately 250 hours he reported working, he was compensated at his

hourly rates for all but 4.5 hours.

         Mr. Fleischer is not entitled to a percentage-of-the-fund award. In this case, the FDIC

agreement to pay “reasonable” attorney’s fees governs the determination of what fees are owed

to Mr. Fleischer. The parties clearly did not contemplate that “reasonable” fees would be

calculated based on a percentage of the fund, which would likely have entailed payment of fees

in the range of $8 to $13 million, rather than the $1 to $2 million requested by the parties.

Moreover, other shareholder attorneys stated that they planned to ask for a success modifier of

twice their hourly rates, and not a percentage of the remaining surplus funds. The percentage-of-

the-fund doctrine is simply not applicable in this case. Even if that method were found to be




                                                 25
governing, Mr. Fleischer would not have met his burden to show that his efforts caused the

preservation of the surplus.

       Mr. Fleischer is not due a success fee. Success enhancements are now rare and fees

calculated by the lodestar method are presumed adequate. Mr. Fleischer would need to produce

specific evidence that a factor not included in the lodestar would mandate a fee enhancement.

He has not done so.

       Finally, Mr. Fleischer is not due fees on fees, both because he did not prevail on his

request for a fee enhancement and because fees on fees would nevertheless be inappropriate. An

appropriate Order and Judgment accompanies this Memorandum Opinion.



       Signed by Royce C. Lamberth, Chief Judge, on October 2, 2012.




                                             26
