The Utah Supreme Court has ordered that attorneys representing thrift depositors be paid $5.4 million instead of the $4.25 million determined by a 3rd District judge last year.
In overturning the lower court's ruling, the Supreme Court found that a "special master" appointed by Judge David S. Young acted improperly and went beyond his authority in determining the attorneys' fee.The 3rd District Court "abused its discretion" and denied depositors' counsel due process, Justice Michael Zimmerman wrote, in allowing the special master to meet privately with Young to discuss the attorneys' fee and not hold hearings on the matter.
Zimmerman wrote that Young, seeking an opposing view on the attorneys' fee, was influenced by the "impermissible activities of the master."
Monday's ruling puts to rest the sensitive issue of attorneys' fees for depositors, which touched off debate among lawmakers on Capitol Hill and heated exchanges in Young's courtroom. In addition to the appeal, the depositors' attorneys filed a motion to have Young removed from the class-action suit. The motion was denied.
Attorneys George Haley, Robert Stolebarger, Malcolm Misuraca and Douglas Provencher were upset because Young had reversed a previous ruling that awarded them $5.8 million.
The fee would come from a $60 million settlement with the state. Depositors had sued the state over the loss of savings in five privately insured thrift and loans that failed in 1986.
Lawmakers nearly scuttled the settlement while arguing over using state funds to pay millions of dollars in attorneys' fees. They attempted to save face by recommending in the settlement bill that the court limit the legal fee to no more than $2 million. The recommendation has been ignored by both courts.
After Young's initial ruling on attorneys' fees, he appointed Jensen to review billings from other consultants and lobbyists depositors had hired. But Jensen also investigated the attorneys' fees and recommended slashing the initial award to $3.9 million.
The Supreme Court didn't find any problems with Young changing his mind or appointing a special master. But Zimmerman wrote that Jensen "exceeded the scope of his appointment" by delving into attorneys' fees, and his methods were "improper as a matter of law."
Zimmerman particularly took issue with private meetings between Jensen and Young, and with the court adopting Jensen's findings while knowing the depositors' attorneys hadn't had an opportunity to present their side.
The lower court justified Jensen's methods by saying the question of attorneys' fees lacked an adversary to represent the depositors. But Zimmerman said an attorney, not the special master, should have been appointed to do that.
In ordering Young to vacate his previous order and approve a $5.4 million fee, the Supreme Court adopted a stipulation reached between depositors and their attorneys, which also sets aside $400,000 to cover costs of future litigation.
"We are happy with the decision. We think it is a well-reasoned opinion," Stolebarger said. "Now we can get on with the rest of the lawsuit."
Depositors have continued to pursue their class-action suit against accounting firms and attorneys for the thrifts that have yet to settle.