Electrical Workers Pension Fund, Local 103, I.B.E.W. et al v. Nuvelo Inc. et al

Filing 171

ORDER by Judge Charles R. Breyer granting 160 Motion for Attorney Fees (crblc2, COURT STAFF) (Filed on 7/6/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

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No. C 07-04056 CRB

In re: NUVELO, INC. SECURITIES
LITIGATION
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ORDER AWARDING ATTORNEYS’
FEES

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Plaintiffs brought this securities fraud class action against Defendant Nuvelo, Inc.,
alleging that Nuvelo, a biopharmaceutical company, artificially inflated its stock price by
misrepresenting the progress of certain drug trials. After four years of litigation, the parties
settled the dispute, creating an $8.9 million settlement fund.
On June 20, 2011, the Court granted final approval of the settlement, dkt. 165, and of
the plan of allocation, dkt. 166, as well as Plaintiffs’ requests for attorneys’ expenses and
Lead Plaintiffs’ costs and expenses, dkt. 167. The Court, however, reserved ruling on
Plaintiffs’ motion for attorneys’ fees, pending receipt of a final estimated cost of fund
administration. Dkt. 167.
Plaintiffs have now provided this estimate. Dkt. 169. The Court hereby finds that
30% of the net settlement fund ($2,490,737.91) is an appropriate fee award in this case.1

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Counsel requested that the Court award attorneys’ fees based on the gross settlement. See Pl.
Decl. (dkt. 159-3) ¶ 65. For the reasons stated in its prior Order regarding attorneys’ fees, the Court
finds it appropriate to award attorneys’ fees based on the net settlement. See Fees Order (dkt. 167) at
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Counsel have indicated that the total fees and costs relating to the notice and administration
process will not exceed $225,000. See Bull Decl. (dkt. 169) at 2. The net settlement fund is therefore:
the gross settlement fund of $8,916,666.70 less attorneys’ expenses ($366,156.09), Lead Plaintiffs’ costs

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I.

DISCUSSION
Rule 23(h) of the Federal Rules of Civil Procedure provides that, “[i]n a certified class

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action, the court may award reasonable attorneys’ fees and nontaxable costs that are

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authorized by law or by the parties’ agreement.” Fed. R. Civ. P. 23(h). “Attorneys’ fees

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provisions included in proposed class action agreements are, like every other aspect of such

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agreements, subject to the determination whether the settlement is ‘fundamentally fair,

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adequate and reasonable.’” Staton v. Boeing Co., 327 F.3d 938, 964 (9th Cir. 2003) (internal

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citation omitted).
In “common fund cases,” such as the present action, a court has discretion to award

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United States District Court
For the Northern District of California

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attorneys’ fees as either a percentage of such common fund or by using the lodestar method.

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Id. at 967-968. The Ninth Circuit’s “benchmark” for attorneys’ fees in common fund class

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actions is 25% of the common fund. Id. at 968. “Selection of the benchmark or any other

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rate must be supported by findings that take into account all of the circumstances of the

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case.” Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1048 (9th Cir. 2002).
Vizcaino outlines a number of factors that the Court may consider in setting an

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appropriate fee: (1) whether counsel achieved exceptional results; (2) the degree of risk

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assumed by counsel; (3) whether counsel’s performance generated benefits beyond the cash

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settlement fund; (4) whether the fee lies above or below the market rate; and (5) the length of

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time counsel represented the class on a contingency basis. Id. at 1048-1050. Additional

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factors may include (6) counsel’s experience and skill, (7) the complexity of the issues, (8)

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the reaction of the class, and (9) a comparison with counsel’s loadstar. In re Heritage Bond

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Litigation, 2005 WL 1594403, at *18 (C.D. Cal. June 10, 2005).
Applying the relevant factors, the Court finds that the settlement warrants an upward

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adjustment of the benchmark to 30%.

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and expenses ($21,692), Frank C. Petronis’s out-of-pocket expenses ($1,358.92), and total fund
administration expenses ($225,000), equalling $8,302,459.69. 30% of the net fund equals
$2,490,737.91.
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A.

Results Achieved

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Considering (1) the outstanding loss causation and liability issues in this case

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(discussed in more detail in Judge Walker’s 2009 Order, see In re Nuvelo, Inc. Securities

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Litigation, 668 F. Supp. 2d 1217, 1227 (N.D. Cal. 2009)), and (2) Nuvelo’s limited resources at

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the time of settlement, counsel obtained a sizable recovery for the class. See Fees Mot. (dkt.

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160) at 4 (arguing that the settlement “maximizes the recovery that Lead Plaintiffs could

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obtain”).

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The Court notes counsels’ estimate that Plaintiffs suffered a $440 million loss as a
result of the stock’s collapse. However, the misfortune of Nuvelo’s near-insolvency

United States District Court
For the Northern District of California

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significantly limited what counsel could obtain. The Court accepts counsels’ assertions that

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they first discovered Nuvelo’s precarious financial condition only after three years of

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litigation. See Pl. Decl. (dkt. 159-3) ¶ 30. The Court further accepts counsels’ assertions

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that they continued litigating thereafter, for a year until settlement, in order to gather enough

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evidence to “convince” Nuvelo to settle, id. ¶ 31, and to pursue an end (conclusion of the

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litigation) that they deemed socially valuable.

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In light of “all of [these] circumstances of the case,” Vizcaino, 290 F.3d at 1048, the

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Court finds that counsel obtained quality results. This factor supports an upward adjustment

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of the benchmark.

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B.

Litigation Risk

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Considering the complexities of this case and the significant risk of non-payment, the

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Court finds that counsel assumed a good deal of risk in bringing this suit. This factor

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supports an upward adjustment of the benchmark.

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C.

Non-monetary Relief

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Counsel did not generate benefits beyond the cash settlement fund.

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D.

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30% reasonably compares to other awards for a $10M settlement. In re Activision

Percentage Rate Relative to Market Rate

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Securities Litigation, 723 F. Supp. 1373, 1378 (N.D. Cal. 1989) contains an exhaustive list of

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cases that suggest the Ninth Circuit’s benchmark “is at approximately 30% of the fund.” In
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re Heritage Bond, 2005 WL 1594403, at *19, n.14 also collects a series of Ninth Circuit, and

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out-of-circuit, decisions that award between 30% and 33%.

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Plaintiffs also cite Cicero v. DirectTV, No. 07-1182, 2010 WL 2991486, at *6 (C.D.

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Cal. July 27, 2010) (“[C]ase law surveys suggest that 50% is the upper limit, with 30–50%

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commonly being awarded in case [sic] in which the common fund is relatively small.”) and

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Craft v County of San Bernardino, 624 F. Supp. 2d 1113, 1127 (C.D. Cal. 2008) (citing Van

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Vranken v. Atlantic Richfield Co., 901 F. Supp. 294, 297–98 (N.D. Cal. 1995)) (“Cases of

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under $10 Million will often result in fees above 25%.”). This factor supports an upward

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adjustment of the benchmark.

United States District Court
For the Northern District of California

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E.

The Lenth of Time Counsel Represented Class on a Contingency Basis

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Counsel represented Plaintiffs on a contingency basis for four years, Pl. Decl. (dkt.

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159-3) ¶ 70, during which time they conducted extensive pre-discovery investigations,

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negotiations over discovery, and discovery review of five million pages of documents, Fees

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Mot. (dkt. 160) at 5-6. It is an established practice to reward attorneys who assume

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representation on a contingent basis with an enhanced fee to compensate them for the risk

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that they might be paid nothing at all. See In re Washington Pub. Power Supply Sys. Sec.

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Litig., 19 F.3d 1291, 1299 (9th Cir. 1994). This practice encourages the legal profession to

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assume such a risk and promotes competent representation for plaintiffs who could not

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otherwise hire an attorney. Id. This factor supports an upward adjustment of the benchmark.

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F.

Counsel’s Experience and Skill

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Counsel possess significant experience in securities litigation. See Pl. Decl., Ex. 2-4

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(dkt 159-4 and 159-5) (containing the firms’ resumes). This factor supports an upward

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adjustment of the benchmark.

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G.

The Complexity of the Issues

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As stated above, this case presented especially complex issues. This factor supports

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an upward adjustment of the benchmark.

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H.

Reaction of the Class

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Only one class member has objected to the 30% award, which objection counsel have

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addressed.2 The Court considers this a strong, positive response from the class, supporting

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an upward adjustment of the benchmark.

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I.

Lodestar Cross-Check

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Lastly, an award of 30% of the net settlement fund falls well below the lodestar of

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almost $7 million. Fees Mot. (dkt. 160) at 10. This factor supports an upward adjustment of

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the benchmark. See, e.g., Van Vranken, 901 F. Supp. at 298 (“Multipliers in the 3-4 range

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are common in lodestar awards for lengthy and complex class action litigation.”).
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United States District Court
For the Northern District of California

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On balance, the Court finds that the aforementioned factors support a fee award of

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30% of the net settlement fund.

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II.

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CONCLUSION
The Court hereby awards counsel $2,490,737.91 in attorneys’ fees, plus any interest

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earned thereon, to be paid to Lead Counsel from the net settlement fund forthwith, subject to

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the terms, conditions, and obligations of the parties’ Stipulation and in particular ¶ 6.2

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thereof, which terms, conditions, and obligations are incorporated therein.

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IT IS SO ORDERED.

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Dated: July 6, 2011

CHARLES R. BREYER
UNITED STATES DISTRICT JUDGE

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This claimant objected to the award of attorneys’ fees and expenses “with[out] evidence of
hours devoted to work performed on the case.” Obj. (dkt. 161). He asked, “In the absence of evidence
that the requested amount is legitimately earned can the Judge approve the award?” Id. Plaintiffs have,
however, provided affidavits itemizing attorney hours and expenses of the three firms involved in this
litigation. See Pl. Decl. (dkt 159-4 and 159-5), Ex. 2-4. Furthermore, counsel filed a Declaration stating
that it sent a copy of the itemized expenses to the objector, who received the materials, thanked counsel
for sending them, “and indicated that he might not have time to review the materials in detail.” Kindall
Decl. (dkt. 163-1) ¶¶ 5-6.
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