UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BARI-ELLEN ROBERTS, SIL CHAMBERS JANET LEIGH WILLIAMS, MARSHA HARRIS,
BEATRICE HESTER and VERONICA SHINAULT,
94 Civ. 2015 (CLB)
Upon all papers and proceedings had herein, the Motion by Plaintiffs
for Partial Adoption of the Special Masters Report, which motion was filed
July 29, 1997 is granted, and
IT IS HEREBY ORDERED:
1. The Court has reviewed the Special Master's Report and concludes
that it is reasonable and will-founded based upon the record in the Action.
Accordingly, the Special Master's Report of Charles G. Moerdler, Esp. dated
July 22, 1997 is adopted by the Court, except for the part of the Report
which relates to the application of plaintiff Veronica Shinault for an
individual incentive award. For the reasons set forth therein, the Court
finds that the Special Master's recommended awards of attorneys' fees and
incentive awards for named plaintiffs Bari-Ellen Roberts, Sil Chambers,
Janet Leigh Williams, Marcia Harris and Beatrice Hester are fair, appropriate
and reasonable, and that there is no opposition thereto except with respect
to the amount of the recommended incentive award for Veronica Shinault.
2. Plaintiffs' counsel are awarded attorneys' fees for services rendered
prior to the entry of judgment in the Action in the amount of $19,154,144.62.
Said fees shall be withdrawn from the Settlement Fund and paid to plaintiffs'
counsel upon entry of this Order.
3. Named plaintiffs Roberts, Chambers, Williams, Harris and Hester are
awarded individual incentive awards in the amounts set forth in the Special
Master's Report, said awards to be withdrawn from the Settlement Fund and
Paid upon entry of the Order.
4. The sum of $1,000,000.00 as attorneys' fees for services to be rendered
in the future by plaintiffs' counsel in this Action, payable over a five-year
period in bi-annual installments is reserved to be disbursed upon bi-annual
approval by the Court.
5. Plaintiff Veronica Shinault is authorized to file written objections
to the part of the Special Mater's Report that relates to her application
for an individual incentive award in the form and manner specified in the
Special Master's Report, by no later than August 4, 1997.
6. Class Counsel are authorized and directed to distribute $82,000,000.00
from the Settlement Fund to Class Member, in accordance with the Plan of
Allocation approved by the Court and the application of the factors contained
therein. Said distributions shall be made as soon as practicable after
entry of this Order.
7. The monies remaining in the Settlement Fund after these distributions
shall continue to be held in escrow, at interest, pending further order
of the Court.
8. The results of the application of the factors contained in the Plan
of Allocation, by Class Counsel, are approved.
9. The Court retains jurisdiction over the parties and the subject matter
of the action for the purpose of administering the settlement and for the
entry of such other or further orders or supplemental judgments as Justice
Dated: White Plains, New York
July 29, 1997
/s/ Charles L. Brieant, U.S.D.J.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BARI-ELLEN ROBERTS, SIL CHAMBERS JANET LEIGH WILLIAMS, MARSHA HARRIS,
BEATRICE HESTER and VERONICA SHINAULT, Individually and as Class Representatives,
94 Civ. 2015 (CLB)
SPECIAL MASTER'S REPORT
This report is submitted pursuant to the April 1, 1997 order of United
States District Judge Charles L. Brieant appointing the undersigned as
Special Master, pursuant to FRCP Rule 53, to hear and report upon
(1) the application of plaintiffs' counsel for legal fees for services
(a) rendered in the prosecution of the action to the entry of the Judgment,
filed March 21, 1997, and
(b) to be rendered on behalf of plaintiffs during the Administration
of the Task Force created under the Judgment; and
(2) the individual plaintiffs' application for incentive awards.
This action was commenced on March 23, 1994. The putative plaintiff
Class then was represented solely by plaintiffs Roberts and Chambers. The
complaint alleged that Texaco had engaged in a pattern and practice of
discrimination against the individual plaintiffs and the Class in violation
of Section 1981 of the Civil Rights Act of 1971, as amended in 1991 (42
U.S.C. õ 1981) ("Section 1981 "), and Section 296 of the New York
Human Rights Law (N.Y. Exec. Law õ 296).
On June 30, 1994, a first Amended Complaint was filed, adding claims
on behalf of plaintiffs Williams, Harris, Hester and Shinault, and asserting
that, as to all plaintiffs and the putative Class, Texaco had violated
Title VII of the Civil Rights Act of 1964, as amended in 1991 (42 U.S.C.
õõ 2000e, et seq.), ("Title VII").
Concisely put, the Amended Complaint charged that, beginning no later
than March 23, 1991, Texaco had, by certain employment policies and practices,
engaged in conduct that had a disparate impact upon and abridged the rights
of salaried African-American employees of Texaco in promotions, compensation,
and the terms and conditions of their employment, including training and
Texaco answered on July 15, 1994, denying all claims of wrongdoing and
Mediation, under the auspices of the Community Relations Service of
the United States Department of Justice, commenced in or about October
1994. Some twenty-five separate mediation sessions were held, but it was
concluded that the parties' positions were too far apart, and litigation
resumed in or about February 1995.
Plaintiffs moved for Class certification on May 15, 1995. Texaco opposed,
and discovery ensued. In August 1996, plaintiffs moved to add Title VII
claims to the Class motion. A right-to-sue letter, containing class allegations,
was received from the United States Equal Employment Opportunity Commission
("EEOC"). Relying thereon, plaintiffs' counsel sought to expand the class
beyond the scope of the right-to-sue letter. Texaco opposed, noting that
it was seeking reconsideration before the EEOC. On September 27, 1996,
Judge Brieant heard counsel and, pursuant to agreement of the parties,
then scheduled a hearing for December 6, 1996 on the Class certification
In the period preceding the scheduled December 6 hearing, several significant
events occurred, culminating in the execution of an Agreement in Principle,
dated November 15, 1996, between counsel for the parties, to settle the
action. The major event involved the so-called "Lundwall tapes."
Richard A. Lundwall was a fairly senior staffer in Texaco's headquarters'
Finance Department, located in Harrison, New York. It appears that in August
1996, Lundwall approached plaintiff Roberts, who worked in the same Texaco
Department, and offered her information that he claimed could materially
aid plaintiffs in this litigation. /1 Ms. Roberts referred Mr. Lundwall
to one of her counsel, rather than pursuing the subject directly with him.
Mr. Lundwall thereupon contacted Cyrus Mehri, an associate at Cohen, Milstein,
Hausfeld & Toll, one of plaintiffs' counsel. Mr. Lundwall reportedly
then told Mr. Mehri that, at age 55 and after a lifelong career with Texaco
entities, his employment had been terminated. He felt betrayed and asked
if Mr. Mehri could represent him in a suit against Texaco. Mr. Mehri declined,
on conflict grounds. Mr. Lundwall thereupon repeated the assertion, previously
made to plaintiff Roberts, that he had important information that would
aid plaintiffs' cause in this litigation, disclosing that he had surreptitiously
made microcassette recording tapes of certain Texaco business meetings.
Later, copies of those tapes were made available to Mr. Mehri, and were
then enhanced and transcribed at the instance of plaintiffs' counsel.
At the April 30, 1997 conference before the Special Master, a copy of
that transcript of plaintiffs' version of the Lundwall tapes was marked
as an Exhibit. It has been reviewed and contains statements that evidence
racial bias by senior officials of Texaco. /2 Additionally, the transcript
reflects statements that can fairly be interpreted as evidencing an attempt
to impede discovery by, among other things, concealing, withholding or
destroying information that might be germane to pending discovery requests
in this litigation.
On October 29, 1996, Judge Brieant, at the request of plaintiffs' counsel,
signed an order directing Texaco to show cause why sanctions should not
issue predicated upon the Lundwall tapes' disclosures respecting the impeding
of discovery. The proceedings and excerpts from plaintiffs' version of
the transcript of the Lundwall tapes were soon thereafter disclosed to
the press and received wide publication. /3
On November 15, 1996, counsel for the parties entered into the Agreement
in Principle to settle the litigation. Several days later, Texaco's Chairman
and Chief Executive Officer, Peter Bijur, in an address to the Westchester
County Association, acknowledged:
Once the taped conversations were revealed, there was no question in
my mind that settlement was the right step to take. It was the reasonable
and honorable course of action. It takes the issue we face from the realm
of confrontation in the courts into the arena of active cooperation and
joint action. It allows the healing process to proceed. /4
On March 18, 1997, following notice, Judge Brieant conducted a hearing
as to (a) the fairness of the proposed settlement of this action, in accordance
with the Agreement which had been reduced to writing under date of January
23, 1997, and (b) the applications, at issue here, seeking attorneys' fees
and incentive compensation for the individual plaintiffs. The only opposition,
relating solely to the applications for attorneys' fees and incentive compensation,
came by way of several, essentially form, letters that were submitted to
the Court. /5
By order dated March 21, 1997, Judge Brieant concluded that the settlement
had been arrived at by arms' length negotiations between equally informed
parties, that it is fair and reasonable, is highly beneficial to the Class
and should be approved. Judgment thereon was entered that day.
The approved settlement, as relevant here, provided as follows:
(a) On November 22, 1996, Texaco created a Settlement Fund by depositing
$115 million in cash with a designated escrow agent. The Settlement Fund,
together with earned interest, would pay (i) monetary claims arising out
of the settlement; (ii) costs, including reasonable attorneys' fees for
plaintiffs counsel, the expenses of plaintiffs experts, and consultants,
(iii) the cost of administration of the Plan of Allocation as among the
litigant Class, (iii) any other obligations that Texaco might have in connection
with payments or distributions from the Settlement Fund, and (iv) any other
purpose the Court might order. The $115 million thus deposited would fully
discharge Texaco's economic obligations under the settlement, including
awards to the plaintiff class, administrative costs attendant to the settlement
and its effectuation, and attorneys' fees /6;
(b) Texaco would increase the salaries of all members of the Class who
were employed by Texaco or its subsidiaries on November 15, 1996 (the date
of the Agreement in Principle) by an amount equal to 11.34% of each such
person's base annual salary, such increase to be in addition to, and not
instead of or as replacement for, any other salary increase that such person
would receive in 1997 in the ordinary course of business;
(c) Texaco affirmed its commitment to provide, to the fullest extent
possible, an environment of inclusion and the eradication of prejudice
within the company. An entity, later reconstituted by the Court, with the
assent of the parties, as the Task Force on Equality and Fairness (the
"Task Force") would be created and charged during its five-year term with
initiating and determining the effectiveness of improvements and additions
to Texaco's human resources programs and helping to monitor the progress
made in such programs toward creating opportunity for African Americans,
diversity in the Texaco workforce and equal opportunity for all Texaco
employees. The Task Force would be composed of three designees by each
of Texaco and plaintiffs, with one independent person to be agreed to by
the parties to serve as Chair. The Task Force would provide to the Court,
Texaco's Chairman and its Board of Directors a report every six months
for a term of five years setting forth information relevant to the impact
of the settlement, plus a detailed annual report to the Court, and Texaco's
Chairman and Board of Directors concerning the impact of its actions. Texaco
agreed to fund the reasonable compensation of the Task Force, and the reasonable
cost of its staff, consultants, statisticians and other appropriate experts.
(d)Determinations of the Task Force would apply to all salaried nonofficer
job positions at all grade levels, in all departments, divisions and subsidiaries
nationwide. In the event Texaco objected to any final determination of
the Task Force with respect to the actions it was authorized to recommend
or implement under the Agreement, such objection would be made to the Court.
Should such objection eventuate, counsel for plaintiffs would participate
in the proceedings before the Court in support of the Task Force determination
thus challenged. Importantly, in terms of this application, "[a]ll reasonable
fees and expenses of Plaintiffs' counsel, including reasonable expert fees
and expenses, in so doing will be paid by Texaco." /7
(e) Texaco will have no obligation to pay "any money" other than as
explicated in the Settlement Agreement, including plaintiffs' attorneys
fees, or the costs of plaintiffs or the Class. Such reasonable attorneys'
fees, costs and expenses as plaintiffs or their counsel may establish and
the Court may approve, shall be payable out of the Settlement Fund created
by Texaco's initial $115 million deposit and the accrued interest thereon.
/8 Plaintiffs' application for counsel fees and expenses would be submitted
to the Court for approval, following Court approval of the Settlement.
Texaco agreed that it would not oppose that application. Plaintiffs' costs,
attorneys' fees, and related awards approved by the Court shall be paid
from the Settlement Fund.
By order entered April 1, 1997, the undersigned was appointed Special
Master to hear and report upon the pending applications of plaintiffs'
counsel for attorneys' fees, and the application of plaintiffs for incentive
Notice of an April 30, 1997 Conference of all counsel and affected parties
before the Special Master was sent by U.S. mail to all interested parties
under date of April 6, 1997. Among those to whom notice was sent were those
members of the Settlement Class who had previously objected in writing
to the awards (see fn. 5, supra). None of the objectants chose to appear
or submit any additional matter. 10 Under the Stipulation and Settlement
Agreement, as approved, Texaco, having deposited the $115 million in escrow,
no longer had any . further role, nor any responsibility for additional
payment obligations with respect to the attorneys' fees and incentive awards
issues. It was, therefore, without standing before the Special Master and,
accordingly, was not given notice of these proceedings and did not participate
Prior to the Conference, plaintiffs' counsel made documentary submissions
in support of their application and that of the applicant-plaintiffs.
The Conference was transcribed, and the transcript will be submitted
to the Court herewith, together with the exhibits then marked.
Responding to questions posed by the Special Master at the Conference
and thereafter, counsel for plaintiffs made several additional submissions,
which to the extent relevant will, likewise, be submitted to the Court.
I. COUNSEL FEES
Three law firms act as co-counsel for plaintiffs: Bernstein, Litowitz,
Berger & Grossmann LLP ( "Bernstein, Litowitz"); Cohen, Milstein, Hausfeld
& Toll PLLC ("Cohen, Milstein"); and Semmes, Bowen & Semmes ("Semmes
Bowen"). They jointly apply /11 for an award of counsel fees aggregating
twenty five percent of the $115 million cash settlement, or $28, 750,000.
While plaintiffs' counsel focus primarily upon the $115 million cash
settlement as the predicate common fiend against which the counsel fee
award should be measured, their application repeatedly emphasizes counsel's
estimate that the full value of the Class recovery exceeds $172 million
over the five-year period of monitoring (including the costs attendant
to the creation and maintenance of the Task Force and the value of the
Salary Increase package). However, in paragraph 35 of the Notice of Settlement
it is represented that "Class Counsel will not seek an award of attorneys'
fees for any other portion of the Settlement [than the $115 million cash
settlement], including the Salary Increase that Class Counsel estimates
to be worth $26 million, and the creation of the Task Force that Class
Counsel estimates to be worth $36 million." While those added values cannot
be gainsaid, the foregoing voluntary limitation is controlling.
Counsel have submitted combined detailed time records documenting their
claim to having incurred hourly time charges, stated on the basis of current
hourly rates, aggregating $3,460,417.50 /13 Additionally, they maintain
that, following approval of the settlement, significant services remain
to be performed in order to effectuate the settlement. Such services are
approximated by plaintiffs' counsel to be (in terms of hourly charges)
some 20% of the services rendered prior to approval. Counsel maintain that
the combination of these services, together with the significant results
achieved for the benefit of the Class, entitle them to an award of $28,750,000.
With respect to the prospective services (i.e., those rendered or to be
rendered following judicial approval of the settlement), counsel state
that over the next five years (and with the assistance, in some instances,
of experts retained by them) they will be required to perform various additional
legal services. They include, among other matters, the selection and constitution
of the Task Force, obtaining tax rulings, computing allocations, communicating
with Class members with respect to the criteria to be used in calculating
their individual distributions, and resolving their inquiries, with Texaco's
Human Resources Department, reviewing and evaluating the Task Force annual
reports and the information that the Task Force shall submit to the Court,
Texaco's Chairman and others concerning the impact of the settlement, and
commenting upon and attempting to resolve such disputes as may arise as
between the Task Force and Texaco with respect to the former's recommendations
and proposals. The latter point focuses upon an aspect of the Stipulation
and Settlement Agreement that merits clarification.
Under Paragraph 23 of the Stipulation and Settlement Agreement, Texaco
undertakes the obligation to pay "[a]ll reasonable fees and expenses of
Plaintiffs' counsel, including reasonable expert fees and expenses," in
participating in proceedings before the Court in support of Task Force
recommendations objected to by Texaco. Under Para. 33 Texaco is absolved
of any "obligation under this Settlement Agreement to pay any money except
only as expressly set forth in this Settlement Agreement. " Unlike other
payment obligations fixed by the Agreement (see Para. 32), Texaco is not
explicitly absolved of liability with respect to this aspect of post-proceeding
attorneys' fees. Since plaintiffs' counsel maintain that they anticipate
spending "some significant amount of time attempting to resolve any disagreements"
arising out of conflicts presented concerning Task Force recommendations,
plaintiffs' counsel was asked by the Special Master (following the conclusion
of the conference and post-conference briefing) to clarify their position
with respect to the payment obligation for such services. By letter dated
May 28, 1997, Daniel L. Berger, on behalf of plaintiffs' counsel, acknowledged
Going forward, Texaco has no obligation or responsibility for plaintiffs'
attorneys' fees, with one exception. As provided in paragraph 23 of the
Settlement Stipulation, if Texaco files an objection with the Court to
a Task Force determination, plaintiffs' counsel are required to represent
the Task Force before the Court, and Texaco is obligated to pay all reasonable
fees and expenses of plaintiffs' counsel for such representation. Any such
fees and expenses that Texaco would pay will be in addition to, and not
come out of, the $115,000,000 cash settlement fund. Thus, in fixing what
prospective service obligations and fees, if any, may properly be attributed
to the post-settlement services of counsel, no consideration should be
given to prospective services that implicate participation on behalf of
the Task Force in proceedings before the Court pertaining to its recommendations.
If plaintiffs' counsel are entitled to compensation therefor, they must
look to Texaco.
The issue, then, is whether the fee request of $28,750,000 is appropriate
in view of established time charges of slightly less than $3.5 million
and an estimate that additional services will be required having a time
charge value of some $700,000 (i.e., an additional service obligation of
some 20% of the services rendered to the date of conclusion of the settlement)
Over the years, the Courts have taken varying approaches to the fixation
of counsel fees in Class actions in which a common fund has been created
from which such fees will be recovered. The formulas utilized in determining
the award range from percentage of recovery, to "lodestar," to a combination
of the two, sometimes modified by (a) a sliding scale geared to reduction
of the percentage as the aggregate fund mounts and (b) a "bonus" if the
proceeding is promptly resolved. See, Lapointe, Attorney's Fees in Common
Fund Actions, 59 Fordham L. Rev. 843, 874 (1991); Berger, Court Awarded
Attorneys' Fees: What is "Reasonable", 126 Univ. of Pa. L. Rev 281, 291
The shift in this Circuit from the percentage of recovery approach to
"lodestar" was marked by City of Detroit v. Grinnell Corporation ("Grinnell
I"), 495 F.2d 448,469 (2d Cir. 1974); see also City of Detroit v. Grinnell
Corporation ("Grinnell II), 560 F.2d 1093 (2d Cir. 1977). As Judge Brieant
observed in Union Carbide Corporation Consumer Products Business Securities
Litigation, 724 F. Supp. 160 (S.D.N.Y. 1989), the Second Circuit, seeking
to avoid perceived public criticism of windfall fees in class actions,
reversed a fee award in Grinnell I, finding that it "was excessive and
displayed too much reliance upon the contingent fee syndrome." Id. at 162.
Pointing favorably to the "lodestar" formula, the Circuit in Grinnell II
ruled that "the district court [must] specify fully the facts warranting
any modification of its lodestar determination." Grinnell II at 1100. The
factors the District Court was directed to consider were aptly summarized
by Judge Brieant as:
(1) the time and labor expended by counsel; (2) the magnitude and complexities
of the litigation; (3) the risk of the litigation (i.e., the contingent
nature of the fee); (4) the quality of the representation; (5) the requested
fee in relation to the settlement; and (6) public policy considerations.
Union Carbide at 162.
"Lodestar" has continued to be a prevailing method of fee calculation
in this Circuit [e.g., Luciano v. The Olsten Corporation 109 F.3d 111 (2d
Cir. 1997) /15; In re "Agent Orange." 818 F. 2d 226 (2d Cir. 1987); New
York State Association for Retarded Children. Inc.. v. Carey. 711 F. 2d
1136 (2d Cir. 1983)], although some courts in this District have returned
to the percentage of recovery method [see generally Dubin v. E.F. Hutton
Group inc.. 878 F. Supp. 616, 621 (S.D.N.Y. 1995) (Level, D.J.)]. Others
have sought to engraft upon the percentage of recovery method a lodestar
verification [ In re RJR Nabisco. Inc. Securities Litigation. 1992 U.S.
Dist. LEXIS 12702, Fed. Sec. L. Rep. (CCH) p96,984 (S.D.N.Y. Aug. 24, 1992)(Mukasey,
D.J.)] while, conversely, lodestar has been utilized and reference then
made to the percentage of recovery method, essentially to provide an additional
check on the fairness of the award [e g, In re Dime Savings Bank, 1994
WL 60884 (E.D.N.Y. Feb. 23, 1994, Fed. Sec. L. Rep. (CCH) p. 4) (Mishler,
D.J.); Kronfeld v. TW, 129 F.R.D. 598 (S.D.N.Y. 1990) (Wood, D.J.) /16].
In still another variation, a "billing judgment approach" has been utilized,
one that focuses on the amount of time that should be devoted to the case
in light of anticipated recovery [See, Quaratine v. Tiffany & Co..
948 F. Supp. 332 (S.D.N.Y. 1996) (Martin, D.J.)]. And while adjustments
for "risk," complexity and quality of the legal work performed have been
recognized [see Wesely v. Spear. Leeds & Kellogg, 711 F. Supp. 713,
717-18 (E.D.N.Y. 1989) (Nickerson, D.J.)], such adjustments have also been
criticized on the theory that a strong presumption exists that "the lodestar
figure represents the 'reasonable' fee." [Hurley v. Coombe. 1996 WL 46889,
*8 (S.D.N.Y Feb. 6, 1996) (Carter, D.J.) (quoting City of Burlington v.
Dague, 505 U.S. 557, 562 (1992))]. /17
With some frequency, the courts employing the percentage of recovery
method have lowered the percentage where the common fund is large, thereby
to avoid a perceived windfall. See e g., International Travel Arranger.
Inc. v. Western Airlines. Inc. 623 F. 2d 1255 (8th Cir. 1980); Dunn v.
H.K. Porter Company. Inc.. 602 F.2d 1105 (3d Cir. 1979); see also, Berchin
v. General Dynamics. Company, 1996 WL 465752 (S.D.N.Y. Aug. 14, 1996) (Martin,
D.J.); In re First Fidelity Bancorporation Sec. Litig.. 750 F. Supp. 160
(D. N.J. 1990); Milstein v. Werner, 58 F.R.D. 544, 551-52 (S.D.N.Y. 1973)
(Pollack, D.J.) ("As the amount of a recovery involved increases, equity
and good conscience requires that fees based on percentages of the total
recovery should decrease"); Third Circuit Task Force Report. supra ,at
Finally, plaintiffs' counsel claim that, over and above consideration
of the benefit manifested by the common fund of $115 million, the fee award
should include compensation for services necessarily to be rendered following
consummation of the settlement. As previously noted, such services include,
inter alia, response to inquiries from Class members relating to their
appropriate share of recovery, work in establishing the Task Force, obtaining
tax rulings and other activities that counsel initially estimated would
comprise some 20% of their aggregate effort (or some $700,000 based on
time charges to the date of approval of the settlement), but which counsel
have subsequently suggested would entail additional time, effort and cost
(see, fn. 14, .supra). It is important that such services be rendered and
appropriate payment therefor now be fixed. Since such services are to be
rendered in futuro, it is necessary that a sum be set aside to be "due
when, and only if" such services are actually rendered, thereby to insure
"that the fees earned are based on a realized benefit, not an illusory
projection." Milstein v. Werner. 58 F.R.D. S44, 551 (S.D.N.Y. 1973) (Pollack,
D.J.). See also, Pollard v. United States, 69 F.R.D. 646, 650-51 (M.D.
Applying these criteria, it is recommended that plaintiffs' counsel
receive an aggregate fee award of $19,154,144.62 (or 5.5 times the lodestar
of $3,482,571.75), payable upon approval or modification by the District
Court, plus $1,000,000 to be held aside in the escrow account for payment
(without interest) for said future services over the five years following
approval of the settlement, such $1,000,000 to be payable upon bi-annual
application to and approval by the Court in equal payments, unless the
Court shall direct otherwise upon good cause shown.
Applying the criteria set forth above, the foregoing award, is fair
and reasonable whether tested under lodestar or the percentage of recovery
method. Preliminarily, however, several observations are necessary.
This case involved extraordinary skill and effort on the part of plaintiffs'
counsel, particularly in view of the relentless effort, vigor and skill
employed by Texaco's experienced and able counsel in pursuing a defensive
strategy that maximized burden and left no litigation tactic unexplored.
The risk of litigation was substantial, to say the least. Cases such as
this have rarely produced significant recoveries and are fraught with problems
of proof, being largely based on statistical data. /18 And, the result
achieved was one that captured national attention and focused upon the
importance of private attorneys general in enforcement of the proscriptions
against racial discrimination in the workplace - a class action concern
that has not received the same focus as have, for example, securities and
products liability class actions, though it implicates concerns of considerable
public importance. Further, this settlement also produced a result the
Task Force, monitoring and a five-year program to achieve equality of treatment
- that could not otherwise have been accomplished. Cf, Women's Committee
for Equal Employment Opportunity v. National Broadcasting Co. 76 F.R.D.
173, 180 (S.D.N.Y. 1977). As Judge Lloyd MacMahon aptly noted in Women's
Finally, as the Supreme Court has recognized, Congress has determined
that enforcement of the Civil Rights Act is to a great extent entrusted
to 'private attorneys general,' and plaintiffs should be encouraged to
bring private actions to further the policies of the Act. See, e.g Newman
v. Piggie Park Enterprises. Inc., 390 U.S. 400, 402. . . .
Id. at 181. The point applies with equal force to counsel, as it does
to the individual plaintiffs. After all, it is the skill, ingenuity, effort
and risk of counsel that, in the final analysis. produces the result.
The starting point, in this Circuit at least, for measurement of a proper
counsel fee award is lodestar. See, ea., Luciano v. The Olsten Corporation,
supra. The Courts have utilized lodestar formulas that range from less
than two times the reasonable time charges to, approximately, a five-times
factor. E.g., In re Alcoholic Beverages Litigation, 1983 WL 1808 (E.D.N.Y.
April 8, 1983) (1.5 multiplier used) (Sifton, D.J.) (; In re Baldwin United
Corporation Litigation, 1986 WL 12195 (S.D.N.Y. June 27, 1986) (lodestar
plus 2.0 multiplier used) (Brieant, D.J.); Weseley v. Spear. Leeds &
Kellogg, supra, 711 F. Supp. at 716-20 (multiplier of 2.0 plus upward adjustment
of .3 for efficiency) (Nickerson, D.J.) 19 Pepsico Sec. Litig., 1985 WL
44682 (S.D.N.Y. April 26, 1985) (multiplier of 3.3% stated to also represent
20% of settlement) (Sofaer, D.J.); Rabin v. Concord Assets Group. Inc..
1991 WL 275757 (S.D.N.Y. Dec. 19, 1991) (4.4 multiplier used) (Sand, D.J.);
see also, In re Beverly Hills Fire Litigation, 639 F. Supp. 915 (E.D. Ky.
1986) (5 times multiplier); In re Boston and Maine Corp. v. Sheehan. Phinney.
Bass & Green. P.A.. 778 F. 2d 890 (1st Cir. 1985) (6 times multiplier).
See also, In re RJR Nabisco. Inc. Securities Litigation. supra). /20
As the above cases make clear, the lodestar approach simply involves
taking a base figure (predicated upon hours productively worked on the
matter, times the value of such charges, times the multiplier) that then
is adjusted upwards or downwards depending on factors ranging from the
size of the common fund, to the efficiencies of counsel and complexity
of the litigation, to, and, of particular pertinence, the risk of recovery.
In re Baldwin-United Corporation
Litigation, supra, 1986 WL 12195, p. 2; See, Pennsylvania v. Del. Valley
Citizens' Council. 483 U.S. 711, 717, 726-27 (1987) (White with Renquist,
C.J., and Powell and Scalia concurring); In re Alcoholic Beverages Litigation,
supra, 1983 WL 1808. /21
In this instance, the risks of litigation were substantial in view of
the nature of the dispute (significant recoveries in race discrimination
cases such as this have been relatively isolated). The litigation itself
was hard fought, with skilled counsel for Texaco waging a relentless defense
on all fronts prior to the advent of the Lundwall tapes. The amount of
time required to be expended was substantial. The discovery proceedings
were extensive and time consuming. There is no evidence that counsel procrastinated
or over-worked the case or performed their task in other than an able and
professional manner. And the ingenuity of counsel (and their respective
clients) in framing an imaginative settlement, that may well have important
ameliorative impact not only at Texaco but in the corporate context as
a whole, likewise merit consideration.
Under such circumstances, a 5.5 times lodestar based on the $3, 482,571.75
time charges appears reasonable. That, in turn, would generate a fee award
of $19,154,144.62. That award, under the percentage of recovery method,
would produce a recovery of approximately 16.66% of the $115 million common
Measured or compared against the percentage formula, the Courts in this
Circuit have frequently concluded that 15% to 30% of the aggregate recovery
is reasonable. See cases collected in In re Union Carbide, supra, 724 F.
Supp. 160; Weseley v. Spear. Leeds & Kellogg, supra, 711 F. Supp. at
718. See also Eltman v. Grandma Lee's Inc.. 1986 WL 53400, at *9 (E.D.N.Y.
May 28, 1986) (slightly less than 30%) (Glasser, D.J.); In re New York
City Mun. Sec. Litig., 1984 WL 2411, at *2 (S.D.N.Y. March 28, 1984) (
almost 33%) (Owen, D.J.); In re Franklin Nat'l Bank Sec. Litig. [1980 Transfer
Binder] Fed. Sec. L. Rep. (CCH) Paras. 97,571 at 97,988 (E.D.N.Y. June
24, 1980) (34%); In re Emerson Shareholder Litigation. 1992 U.S. Dist.
LEXIS 20934 (E.D.N.Y. April 16, 1992) (37.08%) (Weinstein, C.J.); Greene
v. Emersons Ltd.. 1987 WL 11558 (S.D.N.Y. May 20, 1987) (46.2%) (Height,
D.J.). The approximately 16.66 percentage of the common fund that here
is recommended is certainly not out of line with the foregoing.
Still another check and balance against windfall awards exists - the
so-called sliding scale approach. See e.g., International Travel Arranger.
Inc. v. Western Airlines. Inc., supra, 623 F. 2d 1255; Dunn v. H.K. Porter
Company. Inc., supra, 602 F.2d l 105; see also, Berchin v. General Dynamics,
supra, 1996 WL 465752; In re First Fidelity Bancorporation Sec. Litig..
supra, 750 F. Supp. 160: Milstein v. Werner, supra, 58 F.R.D. at 551-S2;
Third Circuit Task Force Report. supra ,at 256. Applying a sliding scale
of 25% on the first $25,000,000 recovered, 20% on the next $25,000,000,
15% on the next $30,000,000 and 9.73% on the remainder- a sliding scale
formula not dissimilar from that recently proposed in Berchin - produces
essentially the same lodestar-multiplier result here proposed. Hence, applying
lodestar and then comparing it against the percentage method and the sliding
scale approach all permit of an award, as here, of $19,154,144.62.
Finally, plaintiffs' counsel seek fees for the work to be performed
and which, under the settlement agreement, is manifestly essential. That
work over the five-year term of monitoring provided under settlement agreement,
includes, inter alia, the selection and constitution of the Task Force,
obtaining tax rulings, computing allocations, communicating with Class
members with respect to the criteria to be used in calculating their individual
distributions and resolving their inquiries, resolving outstanding disputes
with Texaco's Human Resources Department, and reviewing and evaluating
the Task Force annual reports and the information that the Task Force shall
submit to the Court, Texaco's Chairman and others concerning the impact
of the settlement. These are time-consuming tasks requiring skill and judgment.
Thus, it has taken months of sometimes contentious confrontation for counsel
and the parties to finally constitute the Task Force and, even then, the
Court's intervention was essential. It cannot be gainsaid that considerable
additional services will be indispensable. Whether such services will,
in fact, entail time requirements equivalent to 20% or more of that already
expended is, at best, speculative (see fn. 14, supra).
In Milstein v. Werner. supra, Judge Milton Pollack provided guidance
for dealing with situations such as this, directing that the award for
future benefit be deferred and geared to a "realized benefit." 58 F.R.D.
at 551. See Pollard v. United States, supra, 69 F.R.D. at 650.
This record makes clear that, while plaintiffs counsel are precluded
from including for purposes of fee computation the claimed benefits to
the Class over and above the common fund of $11 S million, there was in
fact a significant and economically quantifiable benefit over and above
the $115 million. Plaintiffs' expert, Dr. Charles Mann, in an affidavit
sworn to March 11, 1997, estimated at $35 million the value of the cost
of initiating and maintaining the Task Force (in connection with which
plaintiffs' counsel have performed post-settlement services of value and
consequence, and plainly will be doing so again in the future), plus some
$22 million value for the wage increases ova the five year settlement period
(and, as noted above, plaintiffs' counsel have been and will be called
upon to respond to Class inquiries with respect thereto). Certainly these
prospective services will produce value that merits consideration, albeit
not as part of the common fund as against which recovery is to be measured.
Plaintiffs' counsel initially estimated that the value of such future
services would amount to 20% of the value on a current rate basis of the
services rendered pre-settlement. Later, as experience in the first several
months following approval of the settlement showed that the initial estimate
was understated, plaintiffs' counsel revised upwards their initial estimate
(see fn. 14, supra). Plaintiffs' counsel did not bifurcate the valuation
of their services for fee award purposes, or, as here recommended, seek
to obtain a distinct fee award for such services. Instead, plaintiffs'
counsel sought a lump sum fee award of $28,750,000 or 25% of the $1 15
million common fund, including the prospective services. In this era of
all too numerous examples of law firm instability or personnel changes,
it would be unwise and unfair to the Class to pay in advance for services
to be rendered without some assurance that counsel are in fact available
when needed and willing to render such services.
To insure that the benefit paid for is realized and that the payment
therefor is made when realized, it is recommended that the prospective
services aspect of fee payment be deferred and paid bi-annually in each
of the five pertinent years upon application to and approval by the Court.
While, for the reasons noted and discussed at length above, a lodestar
multiplier of 5.5 times is reasonable as to the major aspects of the fee
award, a multiplier seems inappropriate as to this aspect of the services.
To illustrate, as to future services there is little recovery risk at this
juncture. However, the services to be performed will, as recent events
have demonstrated, require considerable time, effort and skill, quite likely
more than had initially been contemplated. Accordingly, it is recommended
that a further fee award be made for future services in the aggregate amount
of $1,000,000, payable in bi-annual installments of $100,000, or such other
sum as the Court may direct, following bi-annual application to the Court.
II. THE INCENTIVE AWARD APPLICATIONS
Plaintiffs Roberts and Chambers each seek incentive awards of $200,000
over and above their appropriate share of the ultimate recovery. The four
additional plaintiffs named in the First Amended Complaint - plaintiffs
Harris, Hester, Williams and Shinault - each seek $100,000. In each instance,
it is, in sum, claimed that the applicant played an indispensable part
in the prosecution of the litigation.
In this Circuit, the Courts have, with some frequency, held that a successful
Class action plaintiff, may, in addition to his or her allocable share
of the ultimate recovery, apply for and, in the discretion of the Court,
receive an additional award, termed an incentive award. The guiding standard
in determining an incentive award is broadly stated as being the existence
of special circumstances including the personal risk (if any) incurred
by the plaintiff applicant in becoming and continuing as a litigant, the
time and effort expended by that plaintiff in assisting in the prosecution
of the litigation or in bringing to bear added value (e.g., factual expertise),
any other burdens sustained by that plaintiff in lending himself or herself
to the prosecution of the claim, and, of course, the ultimate recovery.
See, e.g., Yap v. Sumitomo Corp.. 1991 U.S. Dist. LEXIS 2124 (S.D.N.Y.
Feb. 21, 1991 (Sand, D.J.); Green v. Battery Park City Authority, 44 Fair
Empl. Prac. Cas. (BNA) 623 (S.D.N.Y. 1987) (Cedarbaum, D.J.); Block v.
Revlon, 37 Fair Empl. Cas. (BNA) 1327 (S.D.N.Y. 1985) (Krane, D.J.); Wire
Service Guild v. Associated Press, No. 78 4502, No. 79 0991, slip op. (S.D.N.Y.
Sept. 23, 1983) (Motley, D.J.). /22
Other jurisdictions have likewise granted incentive awards upon substantially
the same grounds. See, e g, Gaskill v. Gordon, 1995 WL 746091 (N.D. Ill.
Dec. 14, 1995), motion to reconsider granted on other grounds, 942 F. Supp.
382 (N.D. Ill. 1996); In re Catfish Antitrust Litigation, 939 F. Supp.
493 (N.D. Miss. 1996); Van Vranken v. Atlantic Richfield Co.. 901 F. Supp.
294 (N.D. Cal. 1995); In re Revco Securities Litigation, 1993 WL 497208
(N.D. Ohio Sept. 14, 1993); Enterprise Energy Corp. v. Columbia Gas Transmission
Corp.. 137 F.R.D. 240 (S.D. Ohio 1991); In re Dun & Bradstreet Credit
Serv. Customer Litigation, 130 F.R.D. 366 (S.D. Ohio, 1990). The argument
most frequently advanced against the grant of incentive awards is that:
A class representative is a fiduciary to the class. If class representatives
expect routinely to receive special awards in addition to their share of
the recovery, they may be tempted to accept suboptimal settlements at the
expense of the class members whose interests they are appointed to guard.
Weseley v. Spear. Leeds & Kellogg, 711 F. Supp. 713, 720 (E.D.N.Y.
1989), citing Women's Committee for Equal Employment Opportunity v. National
Broadcasting Co.. 76 F.R.D. 173, 180 (S.D.N.Y. 1977). See also In re Continental
Illinois Securities Litigation, 962 F. 2d 566 (7th Cir. 1991); In re Carbon
Dioxide Antitrust Litigation 1996 WL 523534 (M.D. Fla. July 15, 1996);
In re Laidlaw Securities Litigation, 1992 WL 236899 (E.D. Pa. Sept. 15,
1992); In re Gould Securities Litigation, 727 F. Supp. 1201 (N.D. Ill.
Mindfull of the possibility that, for a variety of reasons, suboptimal
settlements may be proposed, the Courts scrutinize settlements with precisely
that potential in mind. And, as here, when it comes to incentive awards,
the inquiry is whether there are present special circumstances warranting
grant of an award. Women's Committee, id. at 181-182. However, there is
a fundamental distinction between litigation based on claims of racial,
gender or other discrimination, and securities-based litigation (like Weseley)
or antitrust suits - the primary reported instances in which incentive
awards have been sought. /23 In securities cases, it is rare that the plaintiff
-- usually a shareholder who has little continuing contact with the defendant
-- is exposed to or can establish personal risk by reason of his or her
having prosecuted the suit. /24 In discrimination-based litigation, the
plaintiff is frequently a present or past employee whose present position
or employment credentials or recommendation may be at risk by reason of
having prosecuted the suit, who therefore lends his or her name and efforts
to the prosecution of litigation at some personal peril. See, Thornton
v. East Texas Motor Freight. 497 F. 2d 416, 420 (6th Cir. 1974) ("We also
think there is something to be said for rewarding those drivers who protest
and help to bring rights to a group of employees who have been the victims
of discrimination"); Re v. Chase Manhattan Corporation, supra, 20 Empl.
Prac. Dec. (CCH) Paras. 30,057; Women's Committee at 182 ("...plaintiffs
here ...undertook significant obligations, perhaps at some risk to job
security and good will with co-workers, resulting in broad-ranging benefits
to the class"). /25
The reported cases that permit separation of the incentive award from
an award to plaintiff as a member of the class or on some individual claim
generally range from individualized awards of $50,000 (e.g., Van Vranken
v. Atlantic Richfield Co., supra, 901 F. Supp. 294; Enterprise Energy Corp.
v. Columbia Gas Transmission Corp., supra. 137 F.R.D. 240; In re Dun &
Bradstreet Credit Serv. Customer Litigation, supra, 130 F.R.D. 366); to
$30,000 (Yap v. Sumitomo Corp., supra, l991 U.S. Dist. LEXIS 2124); to
$4,000 (Green v. Battery Park City Authority, supra, 44 Fair Emp. Prac.
Cas. (BNA) 623); to lesser sums. One exception to that range of awards
was In re Revco Securities Litigation, 1992 WL 118800 (N.D. Ohio 1992)
and 1993 WL 497208 (N.D. Ohio Sept. 14, 1993), a securities class action,
in which $200,000 was awarded to a corporate plaintiff (that had sustained
a $514,000 investment loss and whose employees had expended many hours
in aiding in the prosecution of the litigation) who later received an additional
$50,000. /26 No meaningful guidelines of broad applicability are discernible
from the reported decisions as to the appropriate measure for an award,
the focus being on special circumstances.
Special circumstances are amply evident here. The record reveals that
most, if not all, of the plaintiffs were aware from the outset that Texaco
had previously retaliated against employees charging discrimination. See
Malarkey v. Texaco Inc.. 794 F. Supp. 1237 (S.D.N.Y. 1992); Malarkey v.
Texaco Inc., 794 F. Supp 1248, 1251 (S.D.N.Y. 1992), aff'd 983 F. 2d 1204
(2d Cir. 1993). There is also evidence that an African-American attorney
employed by Texaco, who had been trying to initiate a race discrimination
class action against Texaco, was fired, assertedly because of such efforts,
and that several plaintiffs knew of that event and that it "petrified most
of the individuals who wanted to commence a class action and most of these
people gave up for fear of losing their jobs." ( Roberts April 24, 1997
Aff. at Para. 11; see also, Chambers April 23, 1997 Aff. at Para. 12).
Indeed, several plaintiffs claim that, following commencement of the litigation,
they were subjected to retaliatory action by Texaco supervisors and employees,
ranging from hostility to threats to assignment changes (See, e g., Roberts
April 24, 1997 Aff. at Paras. 20-22; Chambers April 23, 1997 Aff. at Paras.
22-25; Williams April 23, 1997 Aff. at Paras. 10-11).
The record also reflects that, to varying degrees, each of the plaintiff-applicants
expended time and effort in assisting in the prosecution of the litigation
or in bringing to bear added value (e.g., knowledge of and the ability
to analyze and explain Texaco's practices). And several of the plaintiffs
suffered direct injury.
On this record, it cannot be doubted that these plaintiffs amply meet
the basic qualifications for an incentive award. It also seems clear that
plaintiffs, in varying measures, endured an undue and meaningful burden
as a result of their willingness to come forward and lend themselves to
the prosecution of litigation that achieved a significant benefit for the
Class, thereby directly confronting an employer that was perceived as being
willing to exact retribution.
This record evidences that Ms. Roberts, one of the original plaintiffs,
undoubtedly was a major force in the initiation and prosecution of the
litigation. It appears that Ms. Roberts, who had been a Vice President
and Team Leader in the Corporate Pensions Department at Chase Manhattan
Bank before joining the Finance Department at Texaco's Harrison, New York
headquarters, determined to press discrimination claims against Texaco
when her requests for consideration of equal opportunity programs were
rejected in racially disparaging terms /27 and when she was denied advancement
that seemed merited.
In a particularized affidavit, sworn to April 24, 1997, and in response
to questioning at the conference with the Special Master, Ms. Roberts made
a persuasive case that she had been specially burdened by her role as a
plaintiff, in terms of personal risk and her active participation in the
prosecution of the suit. She detailed historical instances where sex discrimination
complaints had been met with retaliation by Texaco and the chilling effect
that that had on her and those who she sought to have join her in these
proceedings, particularly in terms of concerns respecting continued employment.
She maintains that she was threatened with physical violence by a superior
following the filing of the suit, and that senior management, with whom
she worked at Texaco's Harrison headquarters, were hostile towards her
and plaintiff Chambers. The tension continued even after conclusion of
the settlement, at which point she and Chambers were assertedly told by
Texaco's EEO officer not to "show our faces at Texaco for a while."
Ms. Roberts' active participation in the prosecution of the litigation
ranged from regular conference calls with counsel and the other plaintiffs,
to assisting counsel and participating in the discovery phase, to conferring
with class members and witnesses, to maintaining an active role in the
mediation process. In many instances, Ms. Roberts was required to take
vacation days (rather than to take time off) to participate in the discovery
and mediation phases.
In terms of the ultimate class action recovery, it is estimated that
Ms. Roberts will be at the low end of the range (most class members will,
it is estimated, receive between $60,000 and $80,000 each from the cash
portion of the settlement). She will also not receive the 11.34% salary
increase afforded current employees under the settlement since, subsequent
to the settlement, she resigned from Texaco under circumstances that merit
Following conclusion of the settlement, Ms. Roberts was advised by Texaco's
EEO Officer that she should absent herself from Texaco for a while because
the Company "needed a cooling off-period." (Roberts Aff. Para. 40). Accordingly,
her counsel arranged for "individual relief,' under which she would be
granted a two-year paid leave of absence to pursue an M.B.A. degree at
Texaco's expense. Thereafter, she was afforded an opportunity to write
a book. /28 Texaco objected to her doing so while on the paid leave. Her
"Hobson's choices" thus were to take the paid leave of absence and not
write the book, to return to work (despite the contrary advice of Texaco's
EEO Officer) and write the book while working at Texaco, or to leave Texaco's
employ and write the book, seeking to obtain whatever severance, if any,
was available under all of the circumstances. Ms. Roberts opted to resign
rather than forego the opportunity to write the book, which she viewed
as her obligation to "inspire others to have the courage and fortitude
to stand up for what is right." (Id at Para. 40-42).
As part of her separation agreement with Texaco, Ms. Roberts agreed,
inter alia, to deliver a General Release, not to serve as a Class Representative
in this action, to submit to Texaco a pre-publication copy of the galley
proofs of any book she might write concerning this action or her employment
by Texaco and to delay publication until November 15, 1998. In turn, Ms.
Roberts received a severance payment of $125,000, which, according to her
counsel, was "typical of the severance accorded employees of her pay grade
and status." Counsel has estimated that, had Ms. Roberts continued in Texaco's
employ under the agreement which allowed her to attend business school,
her salary would have been $95,284 for 1997 and $100,048, including the
11.34% salary increase produced by the settlement and the standard 5% annual
pay increase. Hence, even if one were to disregard counsels' claim that
the severance paid was no more than the norm (in which event Ms. Roberts'
loss could be said to approach $200,000), Ms. Roberts still sustained a
net loss of some $70,000 ($125,000 in severance versus slightly more than
$195,000 in lost leave of absence pay).
Based on the totality of the circumstances, it is recommended that Ms.
Roberts receive an incentive award of $85,000. While that award is an upward
departure from the cited precedents, it seems amply warranted. It seems
clear that Ms. Roberts, together with plaintiff Chambers, was a driving
force in the initiation of this litigation and in its prosecution to a
successful conclusion, a result that mightily benefited the Class. It,
likewise, seems clear that she not only faced personal risk, she was subjected
to, at least, verbal abuse. Finally, in undertaking and actively pursuing
her role as plaintiff, Ms. Roberts suffered loss not only in terms of vacation
and other time taken to pursue the litigation, but also in terms of out-of-pocket
loss resulting from the circumstances attendant to her separation from
Mr. Chambers worked with Ms. Roberts in the Texaco Finance Department
at its Harrison headquarters. Mr. Chambers holds Bachelor of Arts and M.B.A.
degrees from N.Y.U. Prior to joining Texaco, he worked for the Federal
Reserve Bank of New York and at Prudential-Bache Securities. He received
several awards from Texaco. Together with Ms. Roberts, he decided to try
to reform perceived discriminatory hiring and promotion policy. The results
of that effort have been noted above. Like Ms. Roberts, Mr. Chambers knew
of the firing of the African-American attorney who had endeavored to initiate
proceedings against Texaco based on its racially discriminatory practices,
as well as the retaliatory actions that had followed the filing of gender-based
discrimination claims. Despite the chilling effect that Mr. Chambers says
these events created, he joined Ms. Roberts in identifying class counsel
and in actively pursuing its successful prosecution at some cost, including
the loss of vacation time.
Mr. Chambers helped counsel draft the charge relating to Texaco's Performance
Management Process evaluation system, which system later was invalidated
by the Equal Employment Commission as invalid and discriminatory against
women and minorities. During the course of his internal challenge to that
policy, Texaco's Treasurer assertedly pressed him to withdraw it in exchange
for a salary increase. Mr. Chambers refused the offer. (See Chambers April
23 Aff. at Para. 15-17. That episode, in turn, caused Mr. Chambers to press
for the initiation of this litigation.
In his April 23, 1997 affidavit and in testimony before the Special
Master, Mr. Chambers recounted that, following the commencement of this
action, he was subjected to attempts by superiors to embarrass him before
senior officials of Texaco, was threatened and was denied advancement ratings.
He asserts that his son was ostracized by his teacher, who criticized the
child for his father's role in this litigation (Id at 1T 25). Mr. Chambers
presented a persuasive case of personal embarrassment and attempts at humiliation.
It is estimated that Mr. Chambers will be among those in the low range
of the $60,000 to $80,000 in cash benefits to be derived from the settlement.
Having been cautioned by Texaco's EEO officer to not "show your face at
Texaco for a while" following the consummation of the settlement, Mr. Chambers
was the recipient of individual relief, pursuant to which he was placed
on a one-year "Executive on Loan" leave, receiving full pay from Texaco
while working as Chief Financial Officer of his church. Mr. Chambers' current
salary is $88,700.
What has been said above concerning Ms. Roberts' contribution to the
successful prosecution of this litigation and the risks, burdens and humiliation
sustained by reason thereof, applies with equal force to Mr. Chambers.
It appears, however, his out-pocket loss may not have been as substantial
as that of Ms. Roberts'. It is recommended that Mr. Chambers receive an
incentive award of $50,000.
Plaintiffs Williams, Harris and Hester
The essential facts respecting each of these plaintiffs, as established
(without contradiction) in their supporting papers and at the conference
with the Special Master, are substantially similar. Each joined the litigation
subsequent to its commencement by Plaintiffs Roberts and Chambers. Each
did so following one or more incidents giving rise to the conviction that
discriminatory practices had impeded advancement at Texaco. Each was aware,
prior to joining the proceedings, that others had faced what appeared to
be retribution for similar actions, and, nonetheless, became a plaintiff
out of a sense of conviction that it was the right thing to do. Each participated
in one fashion or another in aiding in the prosecution of the litigation.
/29 Each was required to devote time, generally vacation time, to that
task. Following their joinder as plaintiffs, each was subject to hostility
- manifested in lesser job evaluations and diminished compensation increases
(Williams Aff at 10-11 ), less significant job assignments and ostracism
(Harris Aff. at Para. 14), and to transfer to a more remote job location
(Hester Aff. at Paras. 15-16). It seems clear, however, that plaintiffs
Roberts and Chambers have borne, at least, the initial brunt of the proceedings
and, without in any way diminishing the fortitude shown by these plaintiffs,
they and their counsel correctly concluded that they should receive a lesser
award than plaintiffs Roberts and Chambers (they seek $100,000 each, while
plaintiffs Roberts and Chambers seek $200,000 each).
It is recommended that plaintiffs Williams, Harris and Hester each receive
an incentive award of $25,000.
Much of what has been said above applies to Ms. Shinault, in terms of
joining the litigation after its initial commencement by plaintiffs Roberts
and Chambers, in terms of the burdens attendant to being a plaintiff (in
submitting to deposition and feeling demeaned in the proceedings), and
in providing (while using vacation time) valuable assistance to counsel
in prosecuting the litigation. However, there is one critical element that
separates Ms. Shinault from the other plaintiffs. She resigned from Texaco
shortly before the commencement of this action by plaintiffs Roberts and
Chambers. Hence, her submission lacks any significant showing of post-litigation
burden or risk. It is estimated that Ms. Shinult will receive between $30,000
and $40,000 when the settlement funds are ultimately distributed.
It is recommended that Ms. Shinault receive an incentive award of $2,500.
In sum, it is recommended that:
1. Plaintiffs' counsel receive (a) for legal services rendered prior
to the entry of judgment a fee award payable out of the escrow fund (and
without interest) upon approval by the Court in the amount of $19,154,144.62
(or 5.5 times the lodestar of $3,482,571.75), plus (b) a further payment
out of the escrow fund and covering services to be rendered in the aggregate
amount of $1,000,000 payable (without interest) over a five-year period
in bi-annual installments, or in such other sum as the Court may direct,
upon bi-annual application to and approval by the Court;
2. Plaintiff Roberts receive, in addition to whatever sums she might
receive as a member of the Class or otherwise, the sum of $85,000;
3. Plaintiff Chambers receive, in addition to whatever sums he might
receive as a member of the Class or otherwise, the sum of $50,000;
4. Plaintiffs Williams, Harris and Hester receive, in addition to whatever
sums they might receive as a member of the Class or otherwise, the sum
of $25,000; and
5. Plaintiff Shinault receive, in addition to whatever sums she might
receive as a member of the Class or otherwise, the sum of $2,500.
A copy of the documentary materials not previously filed with the Court
but provided to the Special Master and cited above, will be filed, together
with the transcript of the April 30, 1997 Conference and a signed original
of this report, with the Clerk of the Court. A copy of this report is simultaneously
being served upon counsel for the parties.
Pursuant to FRCP Rule 53, the parties who appeared before the Special
Master shall have ten (10) days, plus an additional three (3) days, pursuant
to FRCP Rule 6(e), or a total of thirteen ( 13) working days (see FRCP
Rule 6(a)) from the date hereof, to file written objections to this Report.
Such objections, if any, shall be filed with the Clerk of the Court, with
extra copies delivered to the Chambers of The Honorable Charles L. Brieant,
U.S.D.J., at the United States Courthouse, 300 Quarropas Street, White
Plains, New York 10601.
Dated: New York, New York
July 22, 1997
Charles G. Moerdler
[Endnotes]/1 See, e.g., Frankel, Tale of the Tapes, The American Lawyer
65 (March 1997); Eichenwald, Texaco Executives, On Tape, Discussed an Impending
Bias Suit, The New York Times, November 4, 1996; Eichenwald, Investigation
Finds no Evidence of Slur on Texaco Tapes, The New York Times, November
/2 It merits emphasis that, soon after release of information concerning
the Lundwall tapes, Texaco retained distinguished counsel, Michael Armstrong,
to investigate. As part of that process the Lundwall tapes were, apparently,
re-mastered. The more offensive racial bias, reported in the transcript
of plaintiffs' version of the tapes, does not, according to press reports,
appear in the transcript of that portion of the re-mastered tapes, which
interpret in different terms the words and sounds appearing on the enhanced
version of the re-mastered tapes. See, Eichenwald, Investigation Finds
no Evidence of Slur on Texaco Tapes, The New York Times, November 11, 1996.
See also, Eichenwald, Report says 3 Executives Misled Texaco, The New York
Times, July 15, 1997. However, neither a copy of the transcript of the
above-mentioned re-mastered tapes, or of any portion thereof, was submitted
or examined in these proceedings. The following circumstances account for
As later more fully appears, as part of the Court-approved settlement,
Texaco created a Settlement Fund by depositing $ 115 million in cash with
a designated escrow agent upon the understanding that such deposit would
fully discharge Texaco's economic obligations Texaco also then agreed that
it would not oppose the applications for attorneys' fees and incentive
awards, which the Court would resolve. Texaco thus had no standing to object
to either of the applications at issue here. It accordingly did not receive
notice of or participate in these proceedings, or make any submission herein
(i.e., the Armstrong tapes or transcript).
Finally, it merits note that for the reasons set forth above, Texaco
is not bound by the factual findings or historical recitations herein set
/3 See fn. 2.
/4 Transcript of November 19, 1996 Statement of Peter Bijur before the
Westchester County Association, Exhibit E to Class Counsel's Submission
To The Special Master In Further Support Of Application For An Award Of
Attorneys' Fees. Parenthetically, it merits note that on the next day,
the EEOC moved before Judge Brieant to intervene in this action. On January
3, 1997, Texaco and the EEOC filed a stipulation with the Court resolving
all of the claims raised in the EEOC's letter of determination of June
6, 1996, and imposing various stated requirements, including one requiring
Texaco not to engage in any discriminatory employment practices, and providing
for compensation and other
relief in accordance with the settlement agreement between plaintiffs
herein and Texaco. Judge Brieant "So Ordered" that stipulation following
/5 The objectants were James Larry Pitre, Floyd Thompson, Cassandra
L. Roberts, Sandra J. Amerson, Sunny O. Anyalebechi, Willie R. Treadwell,
Nell Rose Clark, Willie Alfreda Hill, Billy R Amerson, Patricia A. Robers,
Belinda Louise Jackson, and Teretta B. Johnson. The writers claimed to
be members of the settlement class and objected to the fees sought by class
counsel on the basis of an attached "op-ed" article published in the Wall
Street Journal. Smith and Lindemann, Legal Billing: Is the Meter Broken,
The Wall Street Journal, January 27, 1997. The article contains interesting
musings on an important public policy issue. However, it adds nothing to
an analysis that must rest on the applicable law.
/6 The dollar "value of the settlement" has been variously described.
It includes not just the initial S1 1S million escrow deposit, but the
cost of the Task Force and other aspects of cost and benefit. Plaintiffs'
expert, Dr. Charles R. Mann, in an affidavit, sworn to March 11, 1997,
estimated the total value of the settlement to be $35 million for the cost
of initiating and maintaining the activities of the Task Force, $22 million
in wage increases over the five-year settlement period, $23 million in
compensation for pay inequity during the class period, S64 million in compensatory
damages and $28 million in incentive awards, expenses and fees for a total
of $172 million. On this application, plaintiffs counsel cite to that $172
million as the economic value of their contribution. For reasons stated
in the text, it is not necessary for the Special Master to accept or reject
/7 Stipulation and Settlement Agreement, executed January 21, 1997,
at Para. 23.
/8 Id. at Para. 33
/9 The Special Master's oath then was executed and submitted for filing.
/10 One objectant, Sunny O. Anyalbecchi, subsequently inquired as to
the status of these proceedings.
/11 On the eve of the April 30, 1997 Conference, Semmes Bowen faxed
to the Special Master a detailed submission, which Semmes Bowen unilaterally
characterized as being "under seal." The application stated that Semmes
Bowen had been unable to finalize an agreement with other counsel concerning
its share of the fee award. Semmes Bowen added that, while discussions
were continuing, absent agreement, it would press for a separate award.
The amount and bases of that request were detailed. At the Conference,
Semmes Bowen represented that all counsel had reached agreement inter sese
and that its separate fee application was mooted. This report and recommendation
does not contemplate a separate award for Semmes Bowen. Accordingly, since
the Semmes Bowen application was mooted, comment upon the terms and sufficiency
of the showing made in that submission is not required.
/12 Counsels' detailed disbursements, as modified, aggregate $778,137.34
through the conclusion of settlement. They have been separately reviewed
and approved by the Court for payment.
It merits note that plaintiffs' counsel in the Notice of Pendency of
Class Action, Proposed Settlement and Fairness Hearing, dated January 24,
1997 (the "Notice"), called attention to its position that, in addition
to the out-of-pocket costs and disbursement incurred in the litigation,
recourse to the Settlement Fund would be sought for the costs attendant
to providing notice and for other administrative expenses "as approved
by the Court." At the April 30 Settlement Conference, counsel listed the
included expenses as being "the expenses, for example, of paying the checks,
of cutting checks, of calculating the awards, of tax counsel, for example,
and any other administration that is necessary to pay the people the money
that they're entitled to get out of the settlement." (Tr. 73). Counsel
advised the Special Master, by letter dated July 15, 1997, that they intend
in due course to apply to the Court for their remaining expenses from the
Fund, specifically those in the following categories: (1) Professional
fees and expenses of Special Tax Counsel (McCarter & English); (2)
the professional fees and expenses of the settlement administrator (David
Berdon & Co.) incurred in connection with printing and mailing the
Notice, locating and identifying class members, and cutting and disbursing
checks; and, (3) the professional fees and expenses of Dr. Charles Mann,
counsels' statistical expert, for work in connection with applying the
Plan of Allocation, correcting the information on the particular factors
applicable to the individual class members as provided in the Plan of Allocation,
and calculating the exact distribution amounts for each class member. Plaintiffs'
counsel estimate, in their July 15, 1997 letter, that such additional expenses
"will not exceed $200,000." Such matters are not currently before the Special
Master. Hence, this Report does not comment upon the appropriateness or
amount of the foregoing, other than to note that it will require separate
application to and review and approval by the Court.
/13 The actual time records and supporting documents submitted to the
Special Master showed a lodestar total of $3,460,417.50, plus $33,337.50
for an individual practitioner by the name of Diane R. Williams. At the
Conference (Tr. p. 84-85) Ms. Williams was described as having defended
various depositions. If those charges are included in the lodestar, as
plaintiffs' counsel urge, they would bring the lodestar to $3,493,755,
a sum in excess of that reported to the Court. Thus, at page 42 of the
affidavits submitted to Judge Brieant by Daniel Berger of the Bernstein
Litowitz firm and Michael Hausfeld of the Cohen Milstein firm, the claim
was made that the hourly-based time charges were valued at $3,482,571.75.
For purposes of this determination, the lodestar will be deemed to be the
number represented to the Court, namely $3,482,571.75, which is supported
by the documentation submitted to the Special Master.
Counsels' time charge documentation was, on submission to the Special
Master, asked to be treated as confidential. The submission reflects a
summary of the actual services rendered and includes some obviously privileged
matter. The submission has been reviewed, and it appears to reflect reasonable
and appropriate services that could fairly be stated to have the indicated
For completeness, it should be noted that the Semmes Bowen time charges
were separately valued in accordance with District of Columbia practice
and on an actual hourly rate basis (see fn. 14).
/14 By letter, dated July 15, 1997, plaintiffs' counsel revised their
estimate of the prospective services that they would be required to perform
. Such revision was predicated on the time spent during the 19-week period
from March 4, 1997 to July 14, 1997, which counsel stated amounted to 1942.25
hours of attorney and paralegal time, valued by them at $405,165.25. The
bulk of that time was stated to have been spent in responding to inquiries
from class members concerning the factors to be used in calculating their
distributions, working with defense counsel and the Court in selecting
the nominees and Chair for the Task Force and other start up issues, as
well as working with tax counsel on taxation issues. Through a mathematical
exercise that the Special Master finds tortured, to say the least, Counsel
argue that the initial 20% estimate would have produced a value of some
$900,000 (as contrasted with the approximately $700,000 figure set forth
above) and, using that figure as the predicate, the revised estimate is
stated to be $1,750,000. The Special Master has confirmed that extensive
services have been performed by plaintiffs' counsel subsequent to approval
of the settlement and, quite likely, they have involved a greater expenditure
of time and effort than had been anticipated, particularly in connection
with unanticipated problems encountered in constituting the Task Force
and the designation of an acceptable Chair. However, the estimate, which
is just that and no more, seems excessive.
/15 In Luciano. the Second Circuit recently held that "[t]he 'lodestar'
figure should be 'in line with those [rates] prevailing in the community
for similar services by lawyers of reasonably comparable skill, experience,
and reputation[,]" citing Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984),
the prevailing community being the district in which the court sits, citing
Polk v. New York State Dep't of Correctional Servs.. 722 F.2d 23,25 (2d
Cir. 1983). Luciano. supra 109 F.3d at 115. Luciano would have placed in
question the validity of using the District of Columbia rate formula -
advanced by Semmes Bowen had the rates not been presented, as they alternatively
were, consistent with local practice.
/16 See also In re General Motors Corporation Pick Up Fuel Tank Products
Liability Litigation. 55 F.3d 768,820-21 (3rd Cir. 1995).
/17 The Third Circuit formed a Task Force that suggested that "lodestar,'
was a less useful tool than the percentage recovery method. See, Court
Awarded Fees: A Report of the Third Circuit Task Force, 108 F.R.D.237 (1985).
/18 It is true, of course, that the Lundwall tapes provided a fortuitous
and significant advantage to plaintiffs and their counsel. However, such
chance events can just as easily cripple a case as aid it. The fortuitous
nature of the event should not, in my view, detract from the claim of counsel
here in light of the totality of their skilled performance, dedication
to the interests of their clients and the circumstances recounted above.
/19 Weseley collects a series of cases, many unpublished, on both the
percentage and multiplier approaches. Id.
/20 Plaintiffs' counsel, in a supplemental submission, dated July 15,1997,
cite RJR as authority for 6 times lodestar multiplier. The case does not
quite stand for the cited proposition. In RJR Judge Mukasey used the percentage
of recovery method in awarding counsel fees in a securities class action.
An objector complained that the fees proposed would amount to an award
of 6 times the lodestar and was excessive. Judge Mukasey disagreed and
sustained the award.
/21 C.f., Maywalt v. Parker & Parsley Petroleum, 864 F. Supp. 1422,
1435-37 (S.D.N.Y. 1954) (Sweet, D.J.), concluding that absent "exceptional
circumstances" and the need for "judicial encouragement" of the type of
action at issue, lodestar provides a sufficient reasonable fee.
/22 The foregoing are Employment Discrimination cases. In this Circuit,
the bulk of the reported decisions granting incentive awards arise out
of securities litigation. e.g. In re Sapiens Securities Litigation. 1996
WL 689360 (S.D.N.Y. Nov. 27, 1996); In re Presidential Life Securities.
857 F. Supp. 331 (S.D.N.Y.1994); Kazanas v. Millicom Inc., 1992 WL 237358
(S.D.N.Y. Sept. 17, 1992); Diamond v. Fogelman, 1992 WL 203779 (E.D.N.Y.
Aug. 3,1992); Golden v. Shulman 1988 WL 144718 (E.D.N.Y. Sept. 30,1988).
/23 See fn. 15, supra
/24 In antitrust cases, the plaintiff is frequently a competitor or
customer who claims injury on a distinctly different basis from that at
/25 Additionally, it may be argued that incentive awards in this context
serve the salutary purpose of encouraging "private attorney[s] general"
to further policies that seek to bar unlawful discriminatory practices
and policies. Newman v. Piggie Park Enterprises. Inc.. 390 U.S. 400, 402
/26 Plaintiffs' counsel cited to cases reported in the press as having
resulted in significant reported aggregate awards that appeared to embrace,
without distinction, both the class award and the incentive award. Upon
review of court papers from those cases, subsequently submitted by counsel,
it is apparent that the cases do not involve court ordered awards of incentive
fees on the scale suggested by counsel. See Shorex v. Publix Super Markets.
Inc.. Civ. No. 95-1162-Civ.-T-25E (M.D. Fla.) (according to the consent
decree that determined all settlement awards, $29,585 of awards specifically
provided to Class Representatives were in consideration for full releases
over and above gender discrimination claims; $20,500 was provided for risks
and potential liability; $17,625 was provided for time and effort expended;
and $3000 was to be paid to any class member who was deposed); and Stender
v. Lucky Stores. Inc., No. 88 Civ. 01467 N.D. Cal.) (consent decree provided
for awards of $100,000 to $275,000 for the named plaintiffs, whose share
of class damages was, accordingly, curtailed; no indication being provided
of what portion, if any, of the settlement amounts were intended to be
"incentive" payments); Haynes v. Shoney's. Inc., No. PCA 89-30093-RV (N.D.
Fla.) (consent decree provided for $100,000 settlement payments to named
plaintiffs, and awards for other "special claimants" ranging from $20,000
to $40,000; all amounts to be offset against any awards received through
normal claims processes).
/27 Disturbingly, Ms. Roberts noted that when she and plaintiff Chambers
presented their research respecting equal employment programs to Texaco's
Vice President of Human Resources (significantly, one of the participants
in the Lundwall Tapes), the suggestions were rejected with racially disparaging
remarks -- "before you know it, we will have Black Panthers in the Texaco
parking lot". Roberts April 24, 1997 Aff. at Para. 9.
/28 A copy of the publishing agreement and of the January 22, 1997 agreement
between Texaco and Ms. Roberts respecting the terms of her separation from
Texaco's employ were furnished to the Special Master, at his request, following
the April 30 conference. The publishing agreement reflects that the bulk
of the $50,000 initial payment due prior to editorial acceptance of the
outline and, later, the manuscript is to go those assisting Ms. Roberts
in authoring the book. There is no assurance that the remaining initial
payments will be forthcoming; they are conditioned on editorial acceptance.
/29 The April 23, 1997 affidavit of Ms. Harris makes the disturbing
allegation that the Reporter who took her deposition testimony supposedly
omitted to transcribe portions of it for fear of losing business and that
she aided counsel in "bringing ethical charges."(Harris Aff. at Para. 22).
The outcome of such proceedings is not set forth.