DesFosses v. Shumway, et a l . CV-97-625-B 12/1/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Claire DesFosses, et al.

v. Civil No. 97-625-B Opinion N o . 2000DNH253 Donald Shumway, in his official capacity as Commissioner of the New Hampshire Department of Health and Human Services, et a l .

MEMORANDUM AND ORDER

After securing a settlement in this class action, plaintiffs

filed a motion for attorney’s fees, pursuant to Federal Rule of

Civil Procedure 54(d)(2)(B) and the Civil Rights Attorney’s Fee

Award Act,

. With the parties’ agreement, I

appointed a special master, David A . Garfunkel, and directed him

to file a report recommending a disposition of the state’s

challenge to the fee request. The special master issued his

Report and Recommendation on October 1 1 , 2000. Before me are the

parties’ objections to the report. After careful consideration

of the relevant documents, I adopt all of the special master’s

recommendations except his recommendation that plaintiffs should be fully compensated for work that their attorneys performed on

related state court litigation and his recommendation that

plaintiffs should receive a 50% fee enhancement. The total

amount of attorney’s fees and expenses that plaintiffs are

entitled to after these modifications is $230,421.85.

I . BACKGROUND1

This case involved a class action challenge of the State of

New Hampshire’s Medicaid recovery policies and practices.

Plaintiffs challenged: (1) the state’s practice of filing Notices

of Lien, after a Medicaid recipient’s death, on the real estate

once owned by the Medicaid recipient; (2) the state’s practice of

seeking recovery of the Medicaid recipient’s debt from the estate

of a surviving spouse; and (3) the state’s failure to create

rules for waiving Medicaid recovery on the basis of undue

hardship.

1 Unless otherwise noted, I take the facts from the Special Master’s Report, (Doc. n o . 6 1 ) , and the Plaintiffs’ Offer of Proof in Support of their Motion for Attorney’s Fees, (Doc. n o . 54).

-2- The named plaintiffs initially filed this action in

Rockingham County Superior Court. The state court suit raised

the same claims as the federal action, including violations of:

(1) the state and federal constitutions; (2) federal Medicaid

law, 42 U.S.C. §§ 1396a(a)(18), 1396p; and (3)

.

The superior court dismissed the complaint, finding that it

failed to state a claim upon which relief could be granted.

Rather than challenging this ruling through an appeal to the New

Hampshire Supreme Court, plaintiffs obtained defendants’ consent

to a motion for voluntary nonsuit without prejudice. The state

court ultimately allowed the voluntary nonsuit and thereby

effectively vacated its earlier order dismissing the complaint

for failure to state a claim.

Plaintiffs filed their complaint in this court on December

1 4 , 1997. The parties ultimately settled the case and filed

their proposed class action settlement agreement on July 2 0 ,

1999. Plaintiffs achieved all their settlement goals including:

(1) the enactment of prospective changes to the state’s Medicaid

-3- recovery practices and policies; (2) the identification of all

class members; (3) the reimbursement of monies that the state

incorrectly recovered including the payment of interest; (4) the

release of improper liens; (5) the preservation of state court

claims for potentially time-barred federal claims; (6) the

protection of class members during the implementation phase of

the settlement; and (7) the establishment of rules creating an

undue hardship waiver for Medicaid recovery. The parties have

stipulated that the economic value of the settlement is in excess

of $37,567,193, including over $7,000,000 in actual reimburse-

ments to the class.

The defendants agreed as part of the settlement that the

plaintiffs are entitled to reasonable attorney’s fees. After

holding a hearing, the special master issued a report recommend-

ing that the plaintiffs be awarded fees and expenses in the

amount of $339,248.35. Defendants challenge this determination.

-4- I I . STANDARD OF REVIEW

In issuing this Memorandum and Order, I accept the special

master’s factual findings unless they are clearly erroneous. See

Fed. R. Civ. P. 53(e)(2). I review his legal conclusions,

however, including his determinations of mixed questions of law

and fact, de novo. See Stauble v . Warrob, Inc.,

(1st Cir. 1992) (legal conclusions); Swoboda v . Pala Mining,

Inc.,

(9th Cir. 1988) (mixed questions of law

and fact).

III. DISCUSSION

The defendants challenge the special master’s Report and

Recommendation because they claim that: (1) the hourly rates

charged by plaintiffs’ counsel are too high and should be

reduced; (2) the work expended on the fees case should be

compensated at a reduced rate; (3) plaintiffs’ request for

compensation for outside counsel should be denied in its

entirety; (4) the hours claimed are excessive and the billing

-5- records suggest duplicative work; (5) the time spent preparing

for legislative hearings on Senate Bill 311 should not be

compensated because it was not work on the litigation; (6) the

time spent on the state court litigation is not compensable; and

(7) the special master improperly enhanced the fee award by 5 0 % .

The special master has produced a very thorough and well-

reasoned report analyzing the same issues raised by the

defendants’ current objections. After reviewing the defendants’

objections, the transcript of the hearing before the special

master, the special master’s report, and the relevant case law, I

adopt his recommendations pertaining to the first five

objections.2 I disagree, however, with both his recommendation

2 The special master determined that the work performed by outside counsel in this case is compensable. See Special Master’s Report (Doc. n o . 61) at 14-16. Plaintiffs make a limited objection to this recommendation because they are concerned that the report could be read to suggest that outside counsel should receive their compensation as a separate award from the court. I do not share their concern. The special master included the time expended by outside counsel in his calculation of the attorney’s fees to which the plaintiffs are entitled. See

at Schedule 1 . The special master’s inclusion of fees incurred by outside counsel in his calculation of plaintiffs’ fee award makes clear his intention that the plaintiffs should receive the entire attorney’s fee award and then compensate outside counsel if they have not already been paid.

-6- that work performed on the state court litigation is fully

compensable and his recommendation that the fee award should be

enhanced. I address these two issues below.

A. Prior State Court Litigation

The special master decided that all of the work performed on

the state court litigation was compensable. See Special Master’s

Report (Doc. n o . 61) at 16-18. Plaintiffs request compensation

for the time that their attorneys spent during the state court

litigation on: (1) meeting with clients; (2) negotiating on

behalf of the clients; (3) drafting various court documents; and

(4) working on the litigation after the initial dismissal that

led to the voluntary nonsuit. Mem. Attached to Pls.’ Mot. for

Att’y’s Fees (Doc. n o . 32) at 8 ; Tr. of Hearing (Doc. n o . 59) at

61-62.

Counsel’s work interviewing clients, negotiating on behalf

of clients, and drafting responses to defendants’ initial motions

-7- should be compensated because it constitutes “discrete work that

was both useful and of a type ordinarily necessary to advance ...

litigation to the stage it reached.” Schneider v . Colegio de

Abogados de P.R.,

0 , 33 (1st Cir. 1999) (quoting Webb

v . Board of Educ.,

(1985)). In determining

what work is “useful and ordinarily necessary,” courts have been

guided by Justice Brennan’s concurrence in Webb, where he states

that the work must have “significantly contributed to the success

of the federal court outcome and eliminated the need for work

that otherwise would have been required in connection with the

litigation.”

(Brennan, J., concurring); see

Schneider, 187 F.3d at 46 n.29 (describing cases applying Justice

Brennan’s concurrence); McDonald v . Armontrout,

(8th Cir. 1988) (holding that research and investigative

work for a habeas case that was later utilized in a § 1983 action

was compensable because it “obviated the need for comparable

work” in the § 1983 action). Counsel’s initial work in the state

court litigation qualifies for compensation under this standard

-8- because it both reduced the need for comparable work in the

federal action and played a role in the parties’ decision to

settle the action.

Time spent by plaintiffs’ counsel in evaluating the claim

preclusion issue and in obtaining the voluntary nonsuit, however,

should not be compensated. While these time charges may have

been necessary to the success of the federal action in the sense

that it may have been barred by the doctrine of claim preclusion

if plaintiffs had not obtained a voluntary nonsuit of the state

court action, a nonsuit became necessary only because counsel

elected to initially file their complaint in state court.3 The

record contains no evidence to suggest that counsel would have

incurred similar time charges if they had initially pursued their

case in federal court. Therefore, work performed on the claim

preclusion issue and the voluntary nonsuit dismissal should not

3 This case is thus distinguishable from Stathos v . Bowden,

5 , 22 (1st Cir. 1984), where the plaintiffs were compelled to defend a state court action initiated by the defendants in an effort to thwart plaintiffs’ anticipated federal action.

-9- be compensated because it did not “eliminate the need for work

that otherwise would have been required in connection with the

[federal] litigation.” Webb,

(Brennan, J.,

concurring).

After excluding time spent on the claim preclusion issue and

the voluntary nonsuit dismissal, I find that 4.7 hours of John

Bomster’s time (at $210/hour), 2 hours of John Bomster’s travel

time (at $105/hour), and 3.5 hours of Ellen Gordon’s time (at

$130/hour) should not be compensated.4 The recommended fee award

4 These figures are broken down in the attorneys’ timesheets as follows:

John 2.5 hours on Conference at Manchester on Bomster 10/10/96 litigation issues & strategy 2 hours on 11/19/96 Research Motions to Dismiss, Motions to Amend, res judicata r e : hearing 0.2 hours on Telcon J. Tobin r e : 11/22/96 implications of voluntary nonsuit without prejudice 2 hours on 10/10/96 Travel Time Ellen 2.5 hours on Meeting in Manchester w/ J. Gordon 10/10/96 Bomster, etc. r e : litigation strategies 1.0 hours on Draft Motion for Voluntary 11/23/96 Nonsuit

-10- therefore must be reduced by $1,652.00.

B. Lodestar Enhancement

The special master determined that the plaintiffs are

entitled to a 50% enhancement of the lodestar amount5 because of

the “sweeping success” of the lawsuit. In support of this

conclusion, he noted both that the stipulated value of the

settlement was in excess of $37 million and that the plaintiffs

succeeded in every one of their objectives. While I agree with

the special master that plaintiffs’ counsel did an outstanding

job of representing the interests of the class, I decline to

List of Addenda to Pls.’ Mot. for Att’y’s Fees (Doc. n o . 32) at Addendum 1 0 , 1 3 ; Revised Exhibit (Doc. n o . 60) at Hearing Exhibit 4. 5 The lodestar amount is the amount determined by multiplying the number of hours expended in the litigation by a reasonable hourly rate. See Texas State Teachers Ass’n v . Garland Indep. Sch. Dist.,

(1989).

-11- order any enhancement of the lodestar amount because I am

satisfied that this is not one of the truly exceptional cases

where the reasonable value of the services performed by counsel

is not reflected in the lodestar amount.

The Supreme Court has determined that the lodestar amount is

“‘presumed to be the reasonable fee’ to which counsel is

entitled.” Pennsylvania v . Delaware Valley Citizens’ Council for

Clean Air,

(1986) (quoting Blum v . Stenson,

(1984)). While the court has left open the

possibility that an upward adjustment of the lodestar amount may

be warranted in “rare and exceptional” cases, any upward

deviation must be “supported by both ‘specific evidence’ on the

record and detailed findings by the lower courts.”

at 565

(quoting Blum,

); see also Lipsett v . Blanco,

3 4 , 942 (1st Cir. 1992) (noting that the exception

allowing enhancement to a lodestar amount is a “tiny one”). In

commenting specifically on the issue of when an enhancement of

the lodestar amount may be justified based on superior

-12- performance, the Court has stated that:

In short, the lodestar figure includes most, if not all, of the relevant factors constituting a “reasonable” attorney’s fee and it is unnecessary to enhance the fee for superior performance in order to serve the statutory purpose of enabling plaintiffs to secure legal assistance.

Delaware Valley,

.

I decline to award plaintiffs an enhancement to the lodestar

amount because the value of their attorneys’ legal services is

fully reflected in their hourly rates and the number of hours

they expended: (1) Ann Butenhof- $150/hour for 574.7 hours; (2)

Elliot Berry- $175/hour for 163.1 hours; (3) John Bomster-

$210/hour for 53.0 hours and $225/hour for 76.8 hours, etc. See

Special Master’s Report (Doc. n o . 61) at Schedule 1 . These are

current rates that adequately represent the quality of the

lawyering and the results obtained. The Supreme Court has

observed that, “when an attorney first accepts a case and agrees

to represent the client, he obligates himself to perform to the

best of his ability and to produce the best possible results

-13- commensurate with his skill and his client’s interest.” Delaware

Valley,

. The plaintiffs’ attorneys in this case

did exactly that. Therefore, the lodestar figure takes into

account the results obtained and adequately compensates the

attorneys in this case. See

.

Because an enhancement is not warranted, I must adjust the

special master’s recommended award to eliminate the enhancement.

Without the enhancement, the attorney’s fees consist of the

lodestar figure, $229,859.00. See Special Master’s Report (Doc.

n o . 61) at Schedule 3 . This figure must be reduced by the

$1,652.00 that pertained to work performed on the claim

preclusion issue and the voluntary nonsuit and increased by

$2,214.85 for expenses. See

at 2 9 . Therefore, the final

amount of attorney’s fees and expenses to be awarded in this case

is $230,421.85.

IV. CONCLUSION

For the foregoing reasons, I adopt the special master’s

-14- recommendations with the noted exceptions. Attorney’s fees and

expenses are to be awarded to the plaintiffs in the amount of

$230,421.85. I do not rule on any remaining motions regarding

attorney’s fees, as they are now moot. I direct that the clerk

enter judgment in accordance with this order.

SO ORDERED.

Paul Barbadoro Chief Judge

December 1 , 2000

cc: Ann N . Butenhof, Esq. Daniel J. Mullen, Esq. David A . Garfunkel, Esq.

-15-