Boeing Co. v. Van Gemert, 444 U.S. 472 (1980)

Boeing Co. v. Van Gemert

No. 78-1327

Argued December 3, 1979
Decided February 19, 1980
444 U.S. 472

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Petitioner company called for the redemption of certain convertible debentures, fixing a date by which debenture holders could convert their debentures into shares of petitioner’s stock and after which debenture holders could only redeem their debentures for slightly more than face value. After the deadline expired, some of the nonconverting debenture holders brought a class action against petitioner, claiming that it had violated federal and state laws by failing to give reasonably adequate notice of the redemption. The District Court ultimately entered judgment against petitioner, establishing the amount of its liability to the class as a whole, and fixing the amount that each class member could recover on a principal amount of $100 in debentures, with each individual recovery to carry its proportionate share of the total amount allowed for attorney’s fees, expenses, and disbursements. Petitioner appealed only the judgment’s provision as to attorney’s fees, contending that such fees should be awarded only from the portion of the fund actually claimed by class members, not from the unclaimed portion of the judgment fund. The Court of Appeals affirmed, holding that, since each class member had a present vested interest in the class recovery and could collect his share of the judgment upon request, absentee class members had received a benefit within the meaning of the common fund doctrine, which allows the assessment of attorney’s fees against a common fund created by the lawyers’ efforts.

Held:

1. The attorney’s fee award in this case is a proper application of the common fund doctrine, which rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its costs are unjustly enriched at the successful litigants’ expense. The criteria for application of the doctrine are satisfied when, as here, each member of a certified class has an undisputed and mathematically ascertainable claim to part of a lump sum judgment recovered on his behalf. In this case, absentee class members need prove only their membership in the injured class to claim their logically ascertainable shares of the judgment fund. Their right to share the harvest of the suit upon proof of their identity, whether or not they exercise it, is a benefit in the fund created by the efforts of the class representatives and their counsel, and unless absentees contribute to the payment of attorney’s fees incurred on their behalves, they will pay nothing for the creation of the fund, and their representatives may bear additional costs. This inequity is rectified by the District Court’s judgment requiring every class member to share attorney’s fees to the same extent that he can share the recovery. Pp. 478-481.

2. The common fund doctrine, as applied in this case, is entirely consistent with the American rule against taxing the losing party with the victor’s attorney’s fees. The class members, whether or not they assert their rights, are at least the equitable owners of their respective shares in the recovery, whereas petitioner’s present interest is limited to its stake in resisting third-party claims against the fund in view of petitioner’s colorable claim for the return of any unclaimed money. Although petitioner itself cannot be obliged to pay fees a.warded to the class lawyers, its latent claim against unclaimed money may not defeat each class member’s equitable obligation to share the expenses of litigation. Pp. 481-482.

590 F.2d 433, affirmed.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. REHNQUIST, J., filed a dissenting opinion, post, p. 482.