Font Size: 
2nd Circuit Sends Dispute Over Lockerbie Fees Back to Lower Court
New York Law Journal
June 08, 2009
A dispute over the allocation of attorney fees in the settlement of claims against Libya for the bombing of Pan Am Flight 103 over Lockerbie, Scotland, is headed back to the district court.
The 2nd U.S. Circuit Court of Appeals found three "significant" errors plagued a judge's decision ordering Emery Celli Brinckerhoff & Abady to pay from its contingency fees $1.44 million, 21.3 percent of what it had then earned from the case, to a plaintiffs' committee, whose lead counsel until his death in 2003 was Lee S. Kreindler of Kreindler & Kreindler.
On Dec. 21, 1988, a bomb destroyed Pan Am Flight 103, killing all 259 people onboard and 11 on the ground. Following an international investigation, two survivors of the victims, including Emery client Paul Hudson, filed suit in 1991 against Libya and three Libyan officials, accusing them of involvement in the bombing.
Eastern District of New York Judge Thomas C. Platt initially dismissed the suits, saying the court lacked jurisdiction under the Foreign Sovereign Immunities Act, Smith v. Socialist People's Libyan Arab Jamahiriya, 886 F. Supp. 306 (EDNY, 1995).
The 2nd Circuit affirmed that decision, 101 F.3d 239 (1996), but reinstated the lawsuit after Congress changed the law to provide a terrorism exception to the immunity of a sovereign state, 28 U.S.C. §1605A. New suits against Libya were then filed by other attorneys, including Kreindler and others in the plaintiffs' committee.
Libya eventually agreed to pay $10 million to each plaintiff, although it withheld $2 million of this amount until May 2006, when the U.S. State Department removed the country from its State Sponsors of Terrorism list.
All but one of the 270 decedents accepted the settlement. Of those 269 parties, 240 were represented by members of the plaintiffs' committee. The remaining 29 parties were advised by 14 other counsel -- six by Emery Celli Brinckerhoff & Abady.
Eventually, all of the non-committee counsel except Emery Celli agreed to pay the plaintiffs' committee a portion of their fees equal to 3 percent of their clients' recoveries. The plaintiffs' committee used part of those payments for expenses it said it had incurred on behalf of all plaintiffs. It donated the remainder to a nonprofit foundation established in the name of Kreindler that has endowed a chair at Harvard Law School and a conference center at Dartmouth College, both in his name.
As justification for refusing to pay the fee, Emery Celli argued that it had performed a key role in lobbying Congress to change the law to permit suits against Libya to go forward. According to the circuit decision, the firm also objected to the use of the fees for "nonprofit causes unrelated to victims' rights or anti-terrorism, serving instead to glorify Lee S. Kreindler's legacy."
Judge Platt sided with the plaintiffs' committee on the fee issue and Emery Celli headed to the 2nd Circuit with Emery Celli Brinckerhoff & Abady v. Plaintiffs' Committee, 06-4565-cv, an appeal decided by Judges Pierre N. Leval, Guido Calabresi and Richard C. Wesley.
COURT'S ERRORS
Writing for the court, Leval said the lower court's first mistake was to rely on a letter by Paul Hudson, a lawyer and legal representative of decedent Melina K. Hudson and who was represented by Emery Celli.
Hudson's letter to the plaintiffs' committee largely spoke of his own efforts to lobby Congress for the change to the Foreign Sovereign Immunities Act. Platt had said, "A disinterested view supports the Committee's position that [Emery] just happened to hitch itself to an enterprising and motivated client with the hope of sharing in his efforts."
But Leval said use of the Hudson letter was "impermissible" because Hudson not only referred to Emery Celli's lobbying work in the letter, but also submitted an affidavit to the court saying that "but for the advocacy and legal services" provided by the law firm, "at a time when the chance of holding Libya accountable was minimal, the ultimate success of the cases against Libya would not have been realized."
The second mistake was the lower court's consideration of a letter sent by Emery Celli during settlement discussions over fee allocation, in which it said, "Though we believe no surcharge is appropriate in this case," the plaintiffs' committee proposal to set aside a 3 percent fee "to establish a charitable foundation to aid the victims of terrorism is acceptable."
Leval said the use of the Emery Celli letter violated the rule against using settlement concessions.
"The court essentially used Emery's conditional proposal to accept a particular monetary settlement as the basis for making an award of that amount," Leval said. "Were courts permitted to use provisional settlement concessions in that fashion, the possibilities of negotiating settlement in the future would be seriously impaired."
The third error found by the circuit panel was the lower court's consideration of the fact that no other lawyers in the case objected to the 3 percent contribution, which Platt said was a testament to its "reasonableness."
But Leval said 11 of the 13 non-committee counsel in the case who agreed to the charge engaged in no lobbying.
The other two, he said, accepted the charge "not because they considered it reasonable but rather because they reasoned it was more to their advantage to accept it and receive prompt payment than to litigate it into the indefinite future in the hope of eventually defeating or reducing the charge."
The 2nd Circuit upheld the decision of the lower court rejecting Emery Celli's request to compel production of time records of the plaintiffs' committee. It also rejected the firm's claim that Platt used impermissibly summary proceedings in deciding the allocation of fees.
"As a general proposition, the court was not obligated to conduct more extensive proceedings," Leval said, adding later that the court held a hearing on April 18, 2006, in which it "offered all interested parties an opportunity to present their contentions and to dispute opposing contentions."
Emery Celli, Leval said, only sought to have the time records produced at the hearing, and "did not seek to compel additional testimony or request permission to submit additional briefing or evidence."
While noting that the plaintiffs' committee had done "substantial work" on behalf of the class, it remanded the case for reconsideration.
Richard D. Emery said Friday that the plaintiffs' committee had done excellent work but had ridden "our coattails" when it came to the crucial change in the law that held Libya accountable.
"This was a huge effort on our part on behalf of Paul Hudson in what was Paul's heroic fight to hold Libya accountable before the Foreign Sovereign Immunities Act allowed any redress."
Emery noted that it was the initial dismissal of the case, and an affirmation of that dismissal by the 2nd Circuit, that triggered a "political outcry" and action by Congress, which "was the only reason that Kreindler and the other families ultimately won."
John S. Martin Jr. of Martin & Obermaier represented Emery Celli. Steven R. Pounian of Kreindler & Kreindler represented the plaintiffs' committee.
Pounian said the case now goes back to the judge for determination on the fee issue without a hearing and absent the three considerations that undermined the earlier ruling.
"Obviously we would have preferred the ruling below had been upheld," Pounian said. "But the court also upheld our argument on time records and procedural issues in the case that were important to us."
