Appeal from the United States District Court for the District of Arizona. D.C. No. MDL 551-WDB. William D. Browning, District Judge, Presiding.
Before: William A. Norris, Charles Wiggins, and Edward Leavy, Circuit Judges.
In this companion case to Nos. 91-16669, 91-16685, and 91-16687, ____ F.3d ____ (9th Cir. 1994), decided on this day, the appellants, Jaffe & Schlesinger, P.A., Ginsburg, Feldman & Bress, Ferguson & Burdell and Weinstein, Hacker, Yost, Berry & Mathews (collectively known as the " Haberman counsel"), appeal the district court's denial of their fee and expense application for work done in state court litigation related to the Washington Public Power Supply System's ("WPPSS") $2.25 billion bond default. Haberman counsel represented individual and institutional bond purchasers in Haberman v. Washington Pub. Power Supply Sys., 109 Wash. 2d 107, 744 P.2d 1032 (Wash. 1987) as retained counsel.
Haberman counsel agreed with the class action plaintiffs that Haberman counsel would seek an award of attorneys' fees and reimbursement of expenses incurred out of the settlement fund created for Class Plaintiffs in the federal litigation ("MDL 551"). In exchange for the right to apply for fees and expenses out of the settlement fund, Haberman counsel agreed to waive the contingent fee arrangements made part of retainer agreements entered into with their nearly 300 individual and institutional investor clients and to reimburse their clients for the litigation fees advanced out of such fee award.
The Haberman action was never part of the MDL 551 action, but instead was parallel litigation. By its terms, however, the settlement of MDL 551 also resolved the Haberman litigation. Haberman counsel sought remuneration totalling $2,091,015.20 out of the MDL 551 settlement fund, arguing that their efforts in the state proceedings conferred benefits on the class.
The district court described the benefits asserted by Haberman counsel as follows:
(a) Their activities eliminated any potential for res judicata or collateral estoppel defenses that might be raised as a result of the Washington State Supreme Court's decision in Chemical Bank v. Washington Public Power Supply System ("Chemical Bank II"), 102 Wash. 2d 874, 691 P.2d 524 (1984), cert. den Haberman v. Chemical Bank, 471 U.S. 1065, 85 L. Ed. 2d 497, 105 S. Ct. 2140 (1985), and cert. den Chemical Bank v. Public Utility Dist. No. 1, 471 U.S. 1075, 85 L. Ed. 2d 510, 105 S. Ct. 2154 (1985).
(b) They established an expansive definition of "seller" for purposes of the Washington State Securities Act (WSSA) that would encompass the Supply System, its 23 members, the 88 participating utilities, and professional defendants, and ensure the Act's applicability to them in MDL 551.
(c) They were first to name Ernst & Whinney, in May 1984, as a party defendant in either action. Later sued in MDL, as well, this defendant contributed $6.5 million in settlement.
(d) They alleged derivative negligence claims against the Professional defendants that were eventually assigned to Class Plaintiffs in MDL as part of the settlement.
(e) They helped organize the WPPSS 4/5 Bondholders' Committee which later brought an action, known as Hoffer v. State, against the State of Washington. In Hoffer the Washington Supreme Court, relying in large part on its prior Haberman decision, held that bondholders had the right to establish liability against the State on certain claims. As a result, the State later contributed $10 million to the settlement of MDL 551.
(f) They supported state appellate arguments by counsel for the Haberman Intervenors concerning common law negligent misrepresentations and fraud claims. Such claims were later certified in MDL 551.
(g) They challenged the constitutionality of the "Scienter Amendment" to the WSSA before the Washington State Supreme Court and the United States Supreme Court, preserving the issue for review in the event plaintiffs (in MDL 551 or in Haberman) were ...