Boeing Co. v. Van Gemert

In 1966, the Boeing Company (defendant) called for redemption of convertible debentures, meaning investors could redeem their debentures or convert them into Boeing shares. Van Gemert and other investors who did not convert debentures (plaintiffs) brought a class action claiming Boeing failed to provide reasonably adequate notice and thus violated federal and state securities laws. The investors sought damages equal to the value of shares they could have obtained less the debentures’ redemption value. The district court found Boeing liable for over $3 million and determined an amount recoverable for each $100 worth of debentures. Each individual investor who recovered would pay a proportionate share of the total attorney fees allowed in the same ratio as each individual recovered to the total recovery for the class. The court ordered Boeing to deposit the total amount of the judgment plus interest into an escrow account. Including interest and earned income, the fund totaled over $7 million. Boeing appealed, arguing the court could not award attorney fees from the unclaimed portion of the fund for two reasons. First, Boeing argued the common-fund doctrine did not allow assessment of attorney fees against class members who never filed claims. Second, Boeing argued the award violated the American rule against shifting fees to the losing party—Boeing—because it arguably had a claim for the return of any unclaimed money. As a result, Boeing argued the court could award attorney fees only from the portion investors actually claimed.