In Re: San Juan v. Massaro
Case Date: 04/22/1997
Court: United States Court of Appeals
Docket No: 95-2285
|
UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 95-2285 IN RE SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION PASQUALE MASSARO, ET AL., Appellants, v. STANLEY CHESLEY, ET AL., Appellees. ____________________ No. 96-1142 IN RE SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION RICHARD BIEDER, ET AL., Appellants, v. STANLEY CHESLEY, ET AL., Appellees. ____________________ APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Raymond L. Acosta, Senior U.S. District Judge] __________________________ ____________________ Before Selya, Cyr and Lynch, Circuit Judges. ______________ ____________________ Judith Resnik, with whom Dennis E. Curtis, Richard A. Bieder, _____________ _________________ __________________ Koskoff, Koskoff & Bieder and Jos E. Fernandez-Sein were on brief for _________________________ ______________________ appellants. Will Kemp, with whom Harrison, Kemp & Jones, CHTD was on brief _________ _____________________________ for appellees. ____________________ April 22, 1997 ____________________ 2 CYR, Circuit Judge. Plaintiffs and their counsel CYR, Circuit Judge. ______________ appeal from a district court order awarding the Plaintiffs' Steering Committee ("the PSC") approximately $10,670,000 for costs incurred in representing plaintiffs in this mass-tort litigation. We affirm the district court order in substantial part and direct appellees to remit $1,023,903 ($913,503 in PSC "expert" fees, and $110,400 in photocopying charges). I I BACKGROUND1 BACKGROUND __________ Ninety-seven people perished in a tragic New Year's Eve fire at the San Juan Dupont Plaza Hotel on December 31, 1986, and many others sustained serious personal injuries and property losses. After thousands of individual plaintiffs filed hundreds of claims against a host of defendants in many different juris- dictions ("multidistrict litigation" or "MDL"), the Judicial Panel on Multidistrict Litigation consolidated all cases for trial in the United States District Court for the District of ____________________ 1We relate only the record facts directly material on 1 appeal. The following cases offer the hardy reader a more complete history of these marathon proceedings at the appellate level. See In re Three Additional Appeals Arising Out of the San ___ _____________________________________________________ Juan Dupont Plaza Hotel Fire Litig., 93 F.3d 1 (1st Cir. 1996); ____________________________________ In re Thirteen Appeals Arising Out of the San Juan Dupont Plaza _________________________________________________________________ Hotel Fire Litig., 56 F.3d 295 (1st Cir. 1995); In re San Juan __________________ _______________ Dupont Plaza Hotel Fire Litig., 45 F.3d 569 (1st Cir. 1995); In _______________________________ __ re San Juan Dupont Plaza Hotel Fire Litig., 45 F.3d 564 (1st Cir. __________________________________________ 1995); In re Two Appeals Arising Out of the San Juan Dupont Plaza __________________________________________________________ Hotel Fire Litig., 994 F.2d 569 (1st Cir. 1993); In re San Juan __________________ ______________ Dupont Plaza Hotel Fire Litig., 989 F.2d 36 (1st Cir. 1993); In _______________________________ __ re Nineteen Appeals Arising Out of the San Juan Dupont Plaza _________________________________________________________________ Hotel Fire Litig., 982 F.2d 603 (1st Cir. 1992); In re San Juan __________________ ______________ Dupont Plaza Hotel Fire Litig., 907 F.2d 4 (1st Cir. 1990); In re ______________________________ _____ San Juan Dupont Plaza Hotel Fire Litig., 888 F.2d 940 (1st Cir. ________________________________________ 1989). 3 Puerto Rico (Acosta, J.), see 28 U.S.C. 1407. ___ As most plaintiffs had already retained their own counsel (hereinafter: "individually retained plaintiffs' attor- neys" or "IRPAs"), the district court recognized the need to coordinate their representation through the PSC. Eventually comprised of eleven attorneys with expertise in mass-tort litiga- tion, the PSC served as plaintiffs' lead counsel, responsible for coordinating discovery, settlement negotiations and, if neces- sary, trial matters common to all plaintiffs. The eleven PSC members nonetheless retained their respective roles as IRPAs, directly representing approximately seventy percent of the individual plaintiffs. The IRPAs, on the other hand, were to focus their efforts on litigation tasks idiosyncratic to their respective clients' cases. A. Pretrial Case-Management Orders A. Pretrial Case-Management Orders _______________________________ In two pretrial orders, the district court directed plaintiffs, who would derive common benefit from PSC services, to pay PSC attorney fees and costs from the common fund ultimately recovered in the litigation. See Pretrial Order No. 127 (Dec. 2, ___ 1988); Pretrial Order No. 2 (Mar. 23, 1987). At the time, the district court tentatively proposed to limit the PSC to a com- bined attorney fee/cost award not exceeding ten percent of the eventual common fund, see Pretrial Order No. 127, at 48, which ___ ultimately approximated $220 million. The district court estab- lished the following cost-submission and reimbursement guide- 4 lines: [A]ssessments2 will be deposited in a fund that will defray the reasonable expenses of the PSC in the performance of its duties. The PSC shall maintain a careful statement of account on the fund, that is, prepare and keep accurate, contemporaneous, detailed ________ _______________ ________ records of the receipts, deposits, accumu- _______ ________ lated interest and subsequent disbursements. The fund shall be used only to make disburse- ments (whether directly to creditors or to reimburse the PSC) for expenses incurred for the benefit of all plaintiffs. Any disburse- ments made for the benefit of a particular plaintiff represented by a member of the PSC shall be the sole responsibility of the plaintiff in question. The PSC shall be authorized to periodically expend monies from the fund as needed to defray the necessary _________ "hard" costs of its work, such as office overhead, staff salaries, warehousing, dupli- cation, expert fees, deposition costs, etc. The members of the PSC shall be reimbursed from time to time for the "hard" expenses of the PSC-related work incurred by them or their employees/appointees, provided they submit to the PSC careful, contemporaneous, _______ _______________ detailed records of their expenditures. ________ _______ "Soft" costs such as travel, meals, transportation, lodging, etc., shall be borne by the individual PSC members who shall be reimbursed at the conclusion of this litiga- tion or as otherwise provided by the Court. All persons interested in reimbursement, particularly members of the PSC, must keep careful, contemporaneous, detailed records of _______ _______________ ________ _______ individual expenses. Only reasonable and __________ necessary expenses will be reimbursed. For _________ example, airplane/transportation expenses should be at economical rates, not first class; and hotel accommodations/meals should be moderate, not deluxe, etc. Reimbursements ________ ___ ______ are conditioned, of course, on the proper ______ ____________________ 2As commonly occurs in mass-tort MDLs, plaintiffs' attor- neys, inter alios, were required to advance and pool the monies _____ _____ needed to fund their clients' litigation, including the interim- cost petitions filed by the PSC and its members. See Pretrial ___ Order No. 127, at 37-43. Reimbursement for their advances were contingent upon their recoveries from defendants. 5 verification of expenses. ____________ The PSC and/or its members, as perti- nent, shall submit to the Court for its ap- ___ ___ ___ proval a statement for reimbursable "hard" ______ expenses and another for "soft" expenses as well as statements of account beginning on August 1, 1987 and every sixty (60) days _____ _____ ____ thereafter. Id. at 44-45 (emphasis added). See also Pretrial Order No. 2, at ___ ___ ____ 14. B. The PSC-Office Cost Regimen B. The PSC-Office Cost Regimen ___________________________ Although individual PSC members performed some PSC litigation tasks through their individual law firms, the district court also authorized the PSC to recover its direct costs in establishing, staffing, and operating a centralized PSC Office (hereinafter: "PSC-Office costs"). Further, the PSC bylaws required prior approval, by five PSC members, for any PSC-office cost reimbursement above $500, as well as payment of such costs by PSC check. In March 1987, certified public accountant ("CPA") Donald Kevane was retained to review and submit to the PSC monthly reports summarizing PSC-office costs. In February 1991, the PSC submitted its final report to the district court, claim- ing $6,956,368 in PSC-office costs attributable to Phases I and II of the litigation.3 ____________________ 3Phase I involved liability claims against the hotel and its affiliates, whereas Phase II involved claims against the suppli- ers of goods and services to the hotel. The district court has yet to rule on attorney fees and costs attributable to Phase III, which allocated liability among defendants' various insurers. See In re Nineteen Appeals, 982 F.2d at 608-10 (determining that ___ ______________________ Phase I and II cost awards were final, appealable orders). 6 C. The PSC-Member Cost Regimen C. The PSC-Member Cost Regimen ___________________________ Similarly, the district court authorized reimbursements of costs incurred by the eleven individual PSC members in per- forming PSC litigation tasks (hereinafter: "PSC-member costs"), as distinguished from their respective duties as IRPAs. Every sixty days, the PSC submitted, under seal and "for [court] ap- ___ ___ proval," a consolidated report summarizing each PSC member's ______ individual "hard" and "soft" costs. (Emphasis added.)4 In September 1989, the district court appointed C. Terry Raben, a CPA, to "review the [PSC-member cost] information supplied to . . . date to ensure it is complete, accurate and ________ ________ contemporaneous[,] as well as to organize the reports before the _______________ sheer number of them unduly complicates any reasonable accounting procedures." Order No. 222 (docket No. 12671, entered under seal Sept. 15, 1989). Raben previously had performed comparable cost oversight responsibilities in another mass-tort litigation. See ___ generally In re MGM Grand Hotel Fire Litig., 660 F. Supp. 522 (D. _________ _________________________________ ____________________ 4On July 2, 1987, the district court approved PSC bylaws. Article XI, entitled "Accounting and Expense Management," provid- ed, inter alia, that: (1) all PSC members were to "insure the _____ ____ exact and efficient management of plaintiffs' resources by strictly complying with proper accounting and expense management principles . . . [as] set forth in the Orders of the Court, in the Manual for Complex Litigation, and herein," id. 11.01 _______________________________ ___ (emphasis added); (2) PSC members were to submit to the PSC secretary every 60 days a standardized form listing their total costs, broken down into ten broadly enumerated categories (e.g., ____ "air travel," "hotels and meals"), id. 11.02, 11.03 & 11.05; ___ (3) the PSC Secretary was to consolidate these member reports for submission to the district court, with the individual members' summary reports attached, id. 11.04; and (4) the PSC Secretary ___ would nominate an auditor for appointment by the court, id. ___ 11.07. 7 Nev. 1987) (or "the MGM case"). The district court directed ___ Raben to scrutinize the PSC files for compliance with the crite- ria in Pretrial Order No. 127, supra, to obtain any additional _____ documentation deemed appropriate, and submit findings to the court. In November 1990, almost four years into these proceed- ings, the PSC became concerned that outside accountants like Raben, who were not attorneys and lacked intimate knowledge of the PSC's litigation responsibilities and inner workings, might not adequately appreciate whether PSC-member cost claims met the compliance criteria prescribed in Pretrial Order No. 127. Accordingly, the PSC directed Monita Sterling, a paralegal for a PSC-member law firm with prior exposure to PSC litigation tasks, to review each PSC-member cost claim independently to determine whether the expenditures were "necessary" to legitimate PSC litigation tasks, "reasonable" in amount, and not duplicative of other PSC-member cost claims. Sterling thereafter reviewed "every receipt or other piece of documentation submitted," noting each questionable claim.5 Sterling submitted her reports and ____________________ 5Sterling, who had acquired extensive prior experience in the MGM case, established eleven criteria for determining whether ___ PSC-member costs were reimbursable: (1) major expenditures only if documented by receipts; (2) minor expenditures (e.g., tips, ____ pay-phone charges), for which the use of receipts was impractica- ble, only if supported by affidavit; (3) coach air fare only; (4) federal express charges if documented by airbills designating origin and destination; (5) long distance phone charges if documented according to date, number, duration, and cost; (6) photocopying expenditures at 25 cents per page and postage charges at actual cost if the member indicated compliance with normal in-house procedure at the member's law firm for tracking these costs; (7) telefax charges at actual cost, not at a page 8 supporting documentation to Adamina Soto, a CPA who reviewed the Sterling report and randomly checked its underlying documenta- tion, then contacted PSC members about problem items and request- ed further documentation. Soto eventually disallowed $207,475 in costs and submitted her reports to Raben. Raben submitted three final reports to the district court, covering PSC-member cost claims through January 31, 1991.6 He disallowed an additional $138,569 of the total $3,847,233 in claimed expenditures. The district court approved each Raben report as submitted. See In re San Juan Dupont Plaza Hotel Fire ___ _______________________________________ Litig., 768 F. Supp. 912, 934 (D.P.R. 1991), vacated on other ______ _______ __ _____ grounds, 982 F.2d 603 (1st Cir. 1992). PSC members ultimately _______ recovered $3,708,665. Id. ___ D. Attorney Fee/Cost Rulings D. Attorney Fee/Cost Rulings _________________________ In February 1991, the PSC submitted its final applica- tion for cost reimbursements, attaching the report previously prepared by Donald Kevane and requesting $6,956,368 in PSC-office costs attributable to Phases I and II. See supra p. 6. Three ___ _____ months later, the district court abandoned its earlier tentative ____________________ rate; (8) secretarial expense if specifically authorized by the PSC; (9) costs relating to equipment placed at the PSC Office for use by PSC staff; (10) no reimbursement for court-ordered mone- tary sanctions imposed on the PSC; and (11) duly authorized miscellaneous costs only if "reasonable and necessary in the prosecution of the case, . . . for the benefit of the PSC and the plaintiffs as a whole, and not for individual clients." 6These reports were dated: March 13, 1990 (costs from January 1987 to September 1989); October 12, 1990 (costs from October 1989 to March 1990); and February 20, 1991 (costs from April 1990 to January 1991). 9 proposal, see supra p. 4, to limit the PSC's combined attorney ___ _____ fee/cost award to ten percent of the common fund. Thereafter, the court approved the entire PSC fee/cost application. See ___ Order No. 346 (June 21, 1991). 10 On appeal, we vacated the fee/cost award for failure to afford the plaintiffs and IRPAs a meaningful opportunity to chal- lenge the PSC attorney fee application on the merits. According- ly, we remanded for further proceedings. See In re Nineteen ___ _______________ Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire _________________________________________________________________ Litig., 982 F.2d 603, 608, 615-16 (1st Cir. 1992) [hereinafter ______ "Nineteen Appeals"]. Following the remand and a second appeal, ________________ the PSC and IRPAs were directed to share the available attorney- fee fund ($68 million) equally. See In re Thirteen Appeals Aris- ___ ____________________________ ing Out of the San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d ________________________________________________________ 295, 312 (1st Cir. 1995) [hereinafter "Thirteen Appeals"]. ________________ Following the remand in Nineteen Appeals, the district ________________ court separately reconsidered the PSC application for costs, fixing March 12, 1993, as the deadline for the plaintiffs and IRPAs to submit "specific/detailed written objections" to all PSC-cost submissions through January 31, 1991. See Order No. 478 ___ (Jan. 15, 1993). The court further directed three categories of documents to be filed in the joint document depository ("JDD") for review by the plaintiffs and IRPAs: (1) the three Raben reports analyzing PSC-member costs; (2) the Kevane monthly reports summarizing PSC-office costs; and (3) the PSC-member cost documentation. See Order No. 479 (Jan. 20, 1993). Although the ___ court rejected a request by the plaintiffs and IRPAs for addi- tional formal discovery, see Thirteen Appeals, 56 F.3d at 303 ___ _________________ (noting that mandated exchanges of documentation, rather than "searching discovery," are appropriate where only attorney fees 11 and expenses are at issue), it ordered both Raben and Kevane to submit descriptions of their auditing procedures and directed Kevane to produce his working papers, correspondence, and docu- mentation. See Order No. 485 (Mar. 3, 1993). ___ Within the extended deadline for further objections to costs, the plaintiffs and IRPAs submitted a report and affidavit by William Torres, a CPA newly retained to audit the PSC-cost submissions, attesting that he had requested the PSC to "provide [him] with access to all of the records documenting the costs incurred in this case, . . . including but not limited to, original bills or statements kept by the PSC staff or any PSC member, and any summaries or supporting documentation (including charge account bills) of the same." Even though necessary to a "meaningful analysis," Torres attested, the PSC failed to provide the requested documents, including the Raben working papers; and, until March 10, 1993, the "critical" Kevane working papers were not made available; many documents made available were unread- able; the PSC did not allow access to the PSC-member-cost-reim- bursement policies or the PSC-policy meeting minutes relating to cost reimbursements; and, finally, the PSC refused to permit him to depose Raben, Kevane or any PSC member regarding questionable cost submissions or documentation. On November 24, 1993, the district court overruled most major objections to the PSC-cost submissions. See Order No. 510- ___ A. For example, as regards hotel charges, the court rejected the contention that the maximum per diem rate should be $116, the 12 rate considered "reasonable" by the IRS for tax-deduction purpos- es. It ruled that reasonableness must be assessed case by case, to reflect such variants as locale, seasonal fluctuations, room availability, the number of persons sharing a room, accessibility of equipment and facilities essential to the litigation task at hand, as well as other exigencies. Id. at 7-8. The court ruled ___ that, like the IRPAs, PSC members were entitled to "reasonable" reimbursement for photocopying costs and had not "profit[ed]" from the authorized twenty-five-cents-per-copy rate. Id. at 9. ___ The district court further noted, inter alia, that the _____ ____ objections the plaintiffs and IRPAs made to the PSC-cost submis- sions were so voluminous and entwined with issues relating to attorney fees that it was difficult to determine the particular costs to which the plaintiffs and IRPAs were objecting. It directed the plaintiffs and IRPAs to "sort out this chaos," id. ___ at 12; Torres and Sterling to meet and consult at the JDD not later than December 10; and the plaintiffs and IRPAs to file particularized objections to the remaining expenditures not later than January 12, 1994. The district court conducted an evidentiary hearing in December 1993, to determine whether to allow the PSC to recover its final cost installment for retaining Thomas Foulds, Esquire, as an expert. The PSC maintained that Foulds, who had worked for many years in the insurance industry before attending law school, had been retained as an insurance expert, to interpret insurance _________ ______ contracts, rather than as an attorney, and that his fee therefore 13 was fully reimbursable as a PSC-office cost. See Pretrial Order ___ No. 127, at 48. Although the plaintiffs and IRPAs objected that Foulds had performed many litigation tasks, including legal research and conducting depositions, normally performed by attor- neys and not by insurance experts, the district court allowed the Foulds fee reimbursement as a PSC-office cost after concluding that Foulds "was not contracted merely as an attorney" but primarily for his insurance expertise. See Order No. 520, at 3-4 ___ (Jan. 28, 1994). The final installment brought the total Foulds- fee reimbursement to $913,503.7 The plaintiffs and IRPAs filed their final objections to PSC-member costs in January 1995, essentially reiterating that the cost review and verification process had proven hopelessly inadequate to document either the necessariness or reasonableness of the claimed costs, and that it was unfair to require them to sort through the chaotic documentation created by the PSC and its members. Alternatively, the plaintiffs and IRPAs asserted specific objections to a sampling of allegedly inappropriate PSC- member costs (e.g., phone calls, tips, charges for "drinks," ____ etc.) and urged an across-the-board reduction of all PSC-cost claims by a fixed percentage (25-33%) to reflect the sampling- based estimate of alleged PSC overcharges. Finally, the plain- ____________________ 7The district court had approved two prior PSC reimburse- ments relating to Foulds, totaling $850,000. See Margin Order ___ No. 755 (filed under seal Dec. 27, 1990); Order No. 398 (filed under seal Oct. 15, 1991). The final PSC installment of $84,107 was disallowed in part, due to deficiencies in contemporaneous documentation. 14 tiffs and IRPAs complained that Monita Sterling had refused to allow CPA Torres to inspect the documentation pertaining to PSC- office costs at the joint meeting required by Order No. 510-A. The district court once again overruled the bulk of the objections. See Order No. 584 (Aug. 29, 1995). First, it found ___ the PSC review process adequate, noting that it had resulted in disallowance of several questionable expenditures based on the independent review conducted by Raben, Sterling, and Soto under objective criteria. Second, except for a handful of de minimis __ _______ mischarges totaling less than $2,000, the court rejected the specific challenges asserted by the plaintiffs and IRPAs based on their samplings of alleged overcharges. Finally, the court ruled that its Pretrial Order No. 510-A, see supra pp. 11-12, had envi- ___ _____ sioned only that Sterling and Torres inspect documentation relating to "outstanding issues" those involving PSC-member costs, not PSC-office-cost issues. In due course, the plaintiffs and IRPAs [hereinafter: "appellants"] appealed from the various orders approving PSC-cost reimbursements (Order Nos. 478, 485, 510-A, 520, and 584). II II DISCUSSION DISCUSSION __________ A. The PSC-Cost Reimbursement Regimen A. The PSC-Cost Reimbursement Regimen __________________________________ 1. Appellants' Position 1. Appellants' Position ____________________ Appellants aim their main broadside at the regimen established for documenting, monitoring, submitting, and approv- ing PSC costs. Although the PSC, IRPAs, and plaintiffs in mass- 15 tort MDLs share the same litigation goal (viz., an optimum common ____ fund), internecine differences as to subsidiary matters particularly the appropriate allocations from the common fund for their respective attorney fees and costs are commonplace. The greater the attorney fees and costs awarded the PSC, of course, the less available for the IRPAs and their individual clients. Appellants maintain that these conflicting self-interests neces- sarily entail heightened oversight responsibilities on the part of the district courts in mass-tort MDLs to ensure stringent monitoring and review procedures adequate to protect the individ- ual plaintiffs and IRPAs from overreaching by the PSC. Appellants fault the district court for adopting reimbursement procedures which delegate important judicial oversight responsibilities to auditors appointed either by the court or the PSC. It is the PSC, they say, rather than the appellants, which must bear the ultimate burden in establishing entitlement to reimbursement, see Grendel's Den, Inc. v. Larkin, ___ ___________________ ______ 749 F.2d 945, 956-57 (1st Cir. 1984), which in turn necessitates three distinct showings by the PSC for each claimed reimburse- ment; viz., that it document: (i) the actual expenditure; (ii) ____ ______ ___________ its necessariness to the assigned litigation task; and (iii) its _____________ reasonableness, see, e.g., In re Agent Orange Prod. Liab. Litig., ______________ ___ ____ _____________________________________ 611 F. Supp. 1296, 1314 (E.D.N.Y. 1985) ("Expenses must be both reasonable in amount and reasonably related to the interests of the class."), aff'd in pertinent part, 818 F.2d 226, 238 (2d Cir. _____ __ _________ ____ 1987). 16 Appellants contend that the Raben and Kevane "audits" did not inform the district court adequately regarding potential PSC excesses. Raben and Kevane were accountants, neither trained in the law nor familiar with the litigation tasks assigned to the PSC. At best they could verify that the PSC and its members actually made the claimed expenditures, but in many instances PSC members maintained no detailed records relating to their reason- ableness and necessariness. Moreover, appellants argue, though Monita Sterling and others similarly designated by the PSC undoubtedly were more familiar than Kevane and Raben with the nature and demands of the PSC's litigation responsibilities, their assessments of claimed expenses were inherently biased because their employment with the PSC gave them a vested interest in justifying PSC reimbursements. Appellants contend that the district court erred in suggesting that it was incumbent upon them, rather than the PSC, to demonstrate that particular PSC expenditures were not reim- bursable. See, e.g., Order No. 520, at 1 n.1 ("Parties question- ___ ____ ing payments previously approved carried the burden of setting them aside whereas the PSC/Mr. Foulds were required to justify the pending request."). The court based its ruling on the ground that most PSC cost-reimbursement claims during earlier stages in the litigation had been approved, without opposition, as submit- ted. Appellants complain not only that the district court thereby subverted the well-established burden of proof incumbent 17 upon the PSC, see Grendel's Den, 749 F.2d at 956-57, but foisted ___ _____________ on the plaintiffs and IRPAs the impracticable task of rummaging through mountainous PSC documentation to determine within very restrictive court-ordered deadlines which PSC-cost submissions were either inadequately documented or otherwise nonreimbursable. Appellants therefore urge that all otherwise allowable PSC-cost reimbursements be reduced by a fixed (if somewhat arbitrary) discount (25% to 33%), see, e.g., Mokover v. Neco Enters., Inc., ___ ____ _______ __________________ 785 F. Supp. 1083, 1093-94 (D.R.I. 1992), to reflect the likely extent to which the PSC inferably overcharged due to its failure to maintain "appropriate" documentation. 2. Standard of Review 2. Standard of Review __________________ District court orders awarding costs normally are reviewed only for abuse of discretion. See Grendel's Den, 749 ___ _____________ F.2d at 950; see also Anderson v. Secretary of Health & Human ___ ____ ________ _____________________________ Servs., 80 F.3d 1500, 1507 (10th Cir. 1996); National Info. ______ ______________ Servs., Inc. v. TRW, Inc., 51 F.3d 1470, 1471 (9th Cir. 1995); ____________ _________ Estate of Borst v. O'Brien, 979 F.2d 511, 517 (7th Cir. 1992) ________________ _______ ("The award of costs 'is the type of discretionary ruling to which appellate courts should give "virtually complete" defer- ence.'") (citations omitted). 3. "Burdens of Proof" 3. "Burdens of Proof" ________________ The PSC and its members undoubtedly must establish their entitlement to reimbursement. See Grendel's Den, 749 F.2d ___ _____________ at 956-57. Furthermore, there can be no quarrel that the respec- tive self-interests of the plaintiffs, the IRPAs, and the PSC in 18 mass-tort MDLs often diverge, nor for that matter that the cost- containment regimen initiated at the outset in this case (without benefit of hindsight) ultimately proved inadequate and even chaotic, see supra Section I.D, as the district court itself ___ _____ acknowledged several years later. We nevertheless part company with appellants' conten- tion that the belatedly perceived shortcomings in the adopted safeguards against PSC overreaching proximately caused the ______ unsatisfactory regimen in this case, or that the PSC and its members must therefore be required to bear the entire brunt of its failure to function as envisioned by the district court. Quite apart from formal burdens of proof, all litigants must share in their mutual obligation to collaborate with the district court ab initio in fashioning adequate case management and trial __ ______ procedures, or bear the reasonably foreseeable consequences for their failure to do so. See, e.g., Reilly v. United States, 863 ___ ____ ______ _____________ F.2d 149, 160 (1st Cir. 1988) (noting that district court reason- ably may presume affected parties, which take no exception to an announced course of action, have no objection); see also Clemente ___ ____ ________ v. Carnicon-Puerto Rico Mgt. Assocs., 52 F.3d 383, 387 (1st Cir. _________________________________ 1995); K-Mart Corp. v. Oriental Plaza, Inc., 875 F.2d 907, 913 ____________ _____________________ (1st Cir. 1989); Austin v. Unarco Indus., Inc., 705 F.2d 1, 15 ______ ____________________ (1st Cir.), cert. dismissed, 463 U.S. 1247 (1983). _____ _________ As the lawbooks bear out, in many respects this has been a groundbreaking mass-tort MDL from its onset in 1987. See, ___ e.g., supra n.1. The district court was confronted not only with ____ _____ 19 the daunting task of devising (sometimes from "whole cloth") mechanisms for streamlining case administration (e.g., the JDD), ____ but with establishing auxiliary administrative entities, includ- ing the PSC itself, which would permit adequate ongoing judicial oversight to be reserved for the most pressing and essential litigation. The PSC, IRPAs, and plaintiffs were indispensable partners in this important endeavor. Spurred by their respective self-interests, these broadly allied litigants were far better positioned than the trial judge to propose the prophylactic procedures believed necessary to protect their respective inter- ests from undue encroachment by potential adversaries, including one another. These complex and unwieldy "mass tort cases are a breed apart," Thirteen Appeals, 56 F.3d at 311, to the point that ________________ efficient, and often innovative, administrative arrangements become absolutely essential to enable the "court[] [to] run [a] tight ship[] to ensure that [the] litigation stays on course." Nineteen Appeals, 982 F.2d at 614. See In re Reticel Foam Corp. ________________ ___ _________________________ (In re San Juan Dupont Plaza Hotel Fire Litig.), 859 F.2d 1000, ______________________________________________ 1004 (1st Cir. 1988) ("In multi-party, multi-case litigation, the district court's success is largely dependent upon its ability to uncomplicate matters."). Trial judges newly immersed in mass- tort MDLs simply cannot reasonably be expected to anticipate, from the inception, all potential flaws in their unopposed procedural and administrative initiatives. It is essential, therefore, that counsel collaborate 20 with the trial judge from the outset in fashioning workable programmatic procedures, and thereafter alert the court in a timely manner as operating experience points up infirmities warranting further judicial attention. Absent this collaborative administrative monitoring, there inevitably remains an unaccept- able potential for internecine conflicts among the PSC, IRPAs and plaintiffs over their respective dormant claims to the common fund, which threaten to convert their cost-reimbursement disputes into wasteful satellite litigations. See Hensley v. Eckerhart, ___ _______ _________ 461 U.S. 424, 437 (1983) (cautioning that cost claims "should not [be allowed to] result in a second major litigation"). Even at the outset, while their primary focus remained on establishing defendants' liability, the PSC, IRPAs, and plain- tiffs surely could anticipate that their respective financial stakes in future PSC-cost reimbursement rulings would be substan- tial (e.g., $10 million, or 4 1/2 percent of common fund), ____ especially since the district court had authorized the PSC not only to take over certain IRPA litigation tasks but to establish and finance its own ad hoc law firm at a centralized and inevita- __ ___ bly costly adjunct office. Confronted with this serious poten- tial for conflicting self-interests, see Pretrial Order No. 2 ___ (cautioning counsel that "your working relationship will occa- sionally be strained, communication hampered, and mutual trust impeded"), and the virtually certain prospect that the massive litigation would be protracted, see id. (cautioning that counsel ___ ___ would "probably be laboring together [in strained relationships] 21 for several years"), the PSC, IRPAs, and plaintiffs were on reasonable notice from the outset that establishing adequate prophylactic procedures was a priority matter. Thus forewarned, the PSC, IRPAs, and plaintiffs all ___ were fairly alerted that the massive cost-submission documenta- tion generated over the years ahead would become critically important to them; viz., to satisfy the PSC's burden of proof ____ under Grendel's Den and enable both the IRPAs and plaintiffs to _____________ assert informed objections to inappropriate PSC cost-reimburse- ment submissions. Clearly, then, their timely fashioning of mutually satisfactory documentation and monitoring procedures offered the most reasonable prospect for forfending this satel- lite litigation. See Hensley, 461 U.S. at 437. ___ _______ As appellants acknowledge that there are no legal precedents which provide detailed models for designing suitable mass-tort cost-reimbursement procedures, they now urge, after the fact, that we define the relevant responsibilities incumbent upon the district court and the PSC in these matters. We decline their request, however, in large part for the reason that the guidance presently available plainly runs counter to their premise that the primary responsibility for designing cost- submission procedures, ab initio, rests with the district court. __ ______ Although the Manual for Complex Litigation ("the MCL") ___ itself includes no detailed provisions on the subject, opting instead to encourage counsel for the principal parties to forge 22 ad hoc prophylactic procedures by mutual agreement from the __ ___ outset,8 it envisions that prescriptive procedural models will emerge, and deserving ones gain currency, through the litigants' own collaborative ad hoc initiatives, rather than originate in __ ___ appellate case law. See Pretrial Order No. 127, at 22 ("The ___ Manual for Complex Litigation . . . has been and will continue to ____________________ 8The MCL provides, in relevant part: Expenses incurred and fees earned by designated counsel acting in that capacity should not be borne solely by their clients, but rather shared equitably by all benefiting from their services. If possible, the terms and procedures for payment should be established _____ ___ __________ by agreement among counsel, but subject to judicial _________ _____ _______ approval and control (see infra section 24.214, compen- ___ _____ sation for designated counsel). Whether or not agree- ment is reached, the judge has the authority to order reimbursement and compensation and the obligation to ensure that the amounts are reasonable. Terms and procedures should be established before substantial __________ ______ services are rendered and should provide for, among other things, the following: periodic billings during ________ ________ the litigation or creation of a fund through advance or ongoing assessments of members of the group; appropri- ate contributions from parties making partial settle- ments with respect to services already rendered by designated counsel; and contributions from parties in later filed or assigned cases who benefit from the earlier work of designated counsel. Designated counsel should render services as economically as possible under the circumstances, avoiding unnecessary activity and limiting the number of persons attending conferences and depositions and working on briefs and other tasks. The court should make clear at the first pretrial conference that com- pensation will not be approved for unnecessary or duplicative activities or services. The court should also inform counsel what records should be kept and when they should be submitted to the court to support applications to recover fees and expenses from copar- ties. See infra section 24.21, which discusses ground ___ _____ rules and record keeping where attorneys' fees are awarded by the court. MCL 20.223 (3d ed. 1995) (emphasis added). ___ 23 be a primary reference text in this litigation. Counsel must become familiar with the Manual."). Furthermore, ex post facto __ ____ _____ pronouncements detailing model procedures would be particularly inappropriate in these circumstances as it is readily apparent that the present dispute sprang inexorably from the flawed proce- dural design in which appellants acquiesced from the outset, and for six years thereafter, to the point that its deficiencies became both systemic and irremediable. Appellants simply waited too long before asking the district court to undo, with their broad axe (viz., a 25% to 33% across-the-board cut), the documen- ____ tary muddle allowed to accumulate. Moreover, pressed on many other fronts since 1987, it was not practicable for the district court alone to scrutinize all cost-related documentation maintained by the PSC for nearly half a decade. See Grendel's Den, 749 F.2d at 950 (noting that ___ _____________ courts must strive for cost-setting processes which are "not unnecessarily burdensome to the courts themselves"). Unlike less attenuated and complex litigation, mass-tort MDLs by their very nature predetermine that detailed monitoring of case-administra- tion-related responsibilities be delegated. The early pretrial orders entered by the district court, with appellants' acquies- cence, accordingly established a cost-monitoring regime which required the PSC to submit cost summaries every sixty days for interim approval by the court. The PSC-cost summaries, which _______ merely reflected total expenses by general type and category, represented the cumulative, edited product of the Raben and 24 Kevane "audits," without the underlying documentation. Thus, the interim-approval regime was reasonably designed to ensure that cost verification and containment by the parties not simply await an end to the entire litigation, by which time the accompanying avalanche of documentation would all but preclude cogent review. Nevertheless, two serious deficiencies made their way into these interim-approval procedures with appellants' acquies- cence: (1) the failure to include defined criteria for assessing "reasonableness" and "necessariness"; and (2) the failure explic- itly to authorize or require appellants to monitor the underlying documentation as interim PSC-cost summa |