Beesley et al v. International Paper Company et al

Filing 560

ORDER granting 546 Motion for Attorney Fees. Signed by Chief Judge David R. Herndon on 1/31/14. (klh, )

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF ILLINOIS
PAT BEESLEY et al.,

Plaintiffs,
No: 3:06-cv-703-DRH-CJP

v.
INTERNATIONAL PAPER COMPANY et
al.,
Defendants.
ORDER REGARDING PLAINTIFFS’ APPLICATION FOR ATTORNEYS’ FEES
AND REIMBURSEMENT OF EXPENSES
THIS MATTER is before the Court in connection with Plaintiffs’ Application for
Attorneys’ Fees and Reimbursement of Expenses and for Case Contribution Awards
for Named Plaintiffs. Doc. 546. In their Application, Class Counsel, the law firm of
Schlichter, Bogard & Denton, requests a court approved fee for its role in obtaining
a settlement of class claims under the Employee Retirement Income Security Act
(“ERISA”). The settlement provides a $30 million monetary recovery for the benefit
of as many as 175,000 current and former participants in two 401(k) plans offered
to employees of International Paper, as well as powerful affirmative relief designed
to reduce fees and improve investment offerings.
Class Counsel has asked this Court to approve a fee award of one-third of the
monetary settlement obtained or $10,000,000. Class Counsel has also asked this
Court to award it $1,563,046.39 for outstanding expenses. Additionally, Class
Counsel has requested this Court approve $25,000 incentive awards to each of the

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six living Named Plaintiffs and $15,000 to Sam Kistler, the surviving spouse of
Named Plaintiff Nelda Kistler.
Pursuant to the Settlement Agreement and the Court’s Order, Class Counsel
mailed individual notices to the Class and created a Class website to provide
information to the Class. Class Counsel also arranged for publication notice in
Parade Magazine (circulation of 11.3 million) and USA Today (circulation of 1.6
million). It is noteworthy that individual notices were mailed to over 175,000
potential Class Members, yet only one objected to Class Counsel’s request for fees
and costs. Doc. 547. This Court finds the lack of any meaningful number of
objections to be an unmistakable sign of the Class’s overwhelming support for Class
Counsel’s Application.
This Court has witnessed countless examples over the past seven years of Class
Counsel’s zealous representation of the Class. The Court remains impressed with
Class Counsel’s navigation of the challenging legal issues involved in this
trailblazing litigation and Class Counsel’s commitment and perseverance in
bringing this case to this resolution. Class Counsel’s Application is GRANTED. This
Order explains this Court’s conclusion that Class Counsel’s fee and cost request is
reasonable and merited.
I.

FINDINGS AND CONCLUSIONS
A. Class Counsel’s Request for Attorneys’ Fees
Under the “common-fund” doctrine, a class counsel is entitled to a reasonable

fee drawn from the commonly held fund created by a settlement for the benefit of
the class. See, e.g. Boeing Co. v. VanGemert, 444 U.S. 472, 478 (1980). Additionally,
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the United States Court of Appeals for the Seventh Circuit has found that
attorneys’ fees based on the common fund doctrine are appropriate in ERISA cases.
See Florin v. Nationsbank, 34 F.3d 560, 563 (7th Cir. 1994). A court must also
consider the substantial affirmative relief when evaluating the overall benefit to the
class. See Manual for Complex Litigation, Fourth, § 21.71, at 337 (2004); Principles
of the Law of Aggregate Litigation, § 3.13; cf. Blanchard v. Bergeron, 489 U.S. 87,
95 (1989) (cautioning against an “undesirable emphasis” on monetary “damages”
that might “shortchange efforts to seek effective injunctive or declaratory relief”).
Therefore, this Court acknowledges the importance of taking the affirmative relief
into account, in addition to the monetary relief, so as to encourage attorneys to
obtain effective affirmative relief. Class Counsel’s insistence on such affirmative
relief in addition to the monetary relief, added tremendous material value to the
International Paper 401(k) Plans. It will benefit the class as well as future Plan
participants year after year into the future.
In determining whether to grant a fee application in a class action settlement,
the Seventh Circuit Court of Appeals requires the Court to determine whether a
requested fee is within the range of fees that would have been agreed to at the
outset of the litigation in an arm’s length negotiation given the risk of nonpayment
and the normal rate of compensation in the market at the time. See In re Synthroid

Marketing Litig., 264 F.3d 712, 718 (7th Cir. 2001). In common fund cases, “the
measure of what is reasonable [as an attorney fee] is what an attorney would
receive from a paying client in a similar case.” Montgomery v. Aetna Plywood, Inc.,

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231 F.3d 399, 408 (7th Cir. 2000). “It is not the function of the judge in fee litigation
to determine the equivalent of the medieval just price. It is to determine what the
lawyer would receive if he were selling his services in the market rather than being
paid by the court.” Matter of Cont’l Ill. Sec. Litig., 962 F.2d 566, 568 (7th Cir. 1992).
This requires the district judge to “ascertain the appropriate rate for cases of
similar difficulty and risk, and of similarly limited potential recovery.” Kirchoff v.

Flynn, 786 F.2d 320, 326 (7th Cir. 1986).
When determining a reasonable fee, the Seventh Circuit Court of Appeals uses
the percentage basis rather than a lodestar or other basis. Gaskill v. Gordon, 160
F.3d 361, 363 (7th Cir. 1998); Florin, 34 F.3d at 566. A one-third fee is consistent
with the market rate in settlements concerning this particularly complex area of
law. Will v. General Dynamics Corp., 2010 U.S.Dist. LEXIS 123349, *9 (S.D.Ill.
Nov. 22, 2010) (finding that in ERISA 401(k) fee litigation, “a one-third fee is
consistent with the market rate”)(J. Murphy).
Schlichter, Bogard & Denton has achieved an extraordinary result on behalf of
its clients. Class Counsel’s fee request is more than justified in this case given the
extraordinary risk counsel accepted in agreeing to represent the Class; Class
Counsel’s demonstrated willingness to pursue this action over more than seven
years of intense, adversarial litigation; and the enormous value of the plan
improvements and future relief included in this settlement.
Litigating this case against formidable defendants and their sophisticated
attorneys required Class Counsel to demonstrate extraordinary skill and

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determination. Schlichter, Bogard & Denton and lead attorney Jerome Schlichter’s
diligence and perseverance, while risking vast amounts of time and money, reflect
the finest attributes of a private attorney general. At the time Plaintiffs retained
Class Counsel, no other firm was willing to accept such a daunting challenge on this
case at any rate, and virtually no cases had ever been filed against large 401(k) plan
sponsors involving claims of excessive fees and prohibited transactions under
ERISA. Class Counsel performed substantial work for over a year before filing suit,
including investing hundreds of hours of attorney time, investigating, speaking with
Plan Participants, obtaining documents from public sources and the Plan
administrator, reviewing and analyzing Plan documents and financial statements,
developing expertise regarding industry practices, conducting extensive legal
research and fashioning the Class’s causes of action. In short, this Court agrees
with Judge Baker in the Central District of Illinois: “the law firm Schlichter, Bogard
& Denton is the leader in 401(k) fee litigation.” Nolte v. Cigna, Corp., Case 07-2046,
Doc. 413 at 3 (C.D.Ill. Oct. 15, 2013) (order granting attorneys’ fees and
reimbursement of expenses).
After filing this case on September 11, 2006, Class Counsel has been committed
to the interests of the participants and beneficiaries of the International Paper
401(k) Plans in pursuing this case and several other 401(k) fee cases of first
impression. Mr. Schlichter and the Schlichter, Bogard & Denton firm’s actions have
had a “humongous” impact over the entire 401(k) industry, which have benefited
employees and retirees throughout the country by bringing sweeping changes to

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fiduciary practices. Linda Stern, Stern Advice—How 401(k) Lawsuits Are

Bolstering Your Retirement Plan, REUTERS, Nov. 5, 2013 (quoting Mike Alfred, cofounder and CEO of Brightscope, an independent firm that provides data about
retirement plans); see also Nolte v. Cigna, Corp., Case 07-2046, Doc. 413 at 3–4
(C.D.Ill. Oct. 15, 2013) (observing that nationwide, “fee reductions attributed to
Schlichter, Bogard & Denton’s fee litigation and the Department of Labor’s
disclosure regulations approach $2.8 billion in annual savings for American workers
and retirees.”). In the case of this Class, the tireless efforts of Schlichter, Bogard &
Denton have brought about both a significant monetary recovery and important
reforms to the International Paper 401(k) Plans. Current and future Plan
Participants will benefit from the affirmative relief for years to come.
Accordingly, this Court finds that the market for plaintiffs’ attorney work in
this case, and similar cases, is a contingent fee market and not an hourly market.
Based on the remarkable monetary recovery and affirmative relief, Class Counsel’s
fee application is certainly reasonable. This Court finds that Schlichter, Bogard &
Denton has provided an enormous benefit to the Class, while undertaking a great
financial risk in the event of an adverse decision on the merits.
The use of a lodestar cross-check has fallen into disfavor. See In re Synthroid

Marketing Litig., 325 F.3d at 979–80 (7th Cir. 2003) (“The client cares about the
outcome alone” and class counsel’s efficiency should not be used “to reduce class
counsel’s percentage of the fund that their work produced.”); Will, 2010 U.S.Dist.
LEXIS 123349, *10 (“The use of a lodestar cross-check in a common fund case is

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unnecessary, arbitrary, and potentially counterproductive.”). Nevertheless, this
Court finds that Class Counsel spent nearly 18,000 attorney hours and over 4,000
hours of non-attorney professional time litigating this case. 1
Additionally, few lawyers or law firms are capable of handling, much less
willing to handle, this type of national litigation. Schlichter, Bogard & Denton are
one of the few firms handling ERISA class actions such as this. The Court finds that
the market for legal services in cases such as this is a national one, and that Class
Counsel’s proposed rates are reasonable and consistent with market rates at that
time and could be enhanced to today’s rates.
This Court finds that the reasonable hourly rate for Class Counsel’s services are
as follows: for attorneys with at least 25 years of experience, $892 per hour; for
attorneys with 15–24 years of experience, $757 per hour; for attorneys with 5–14
years of experience, $545 per hour; for attorneys with 2–4 years of experience, $394
per hour; for Paralegals and Law Clerks, $275 per hour; for Legal Assistants, $170
per hour. Given these rates, a reasonable market rate for Class Counsel’s services
would be $12,158,777.90 without any enhancement for risk. Class Counsel’s fee
request for $10 million is considerably less than the unenhanced value of Class
Counsel’s work. It is well within reasonable limits, and the Class’ near-universal
support for the settlement and Class Counsel’s requested fee recognizes the bargain
they have received.

The Court may rely on summaries submitted by attorneys and need not review
actual billing records. Will, 2010 U.S.Dist. LEXIS 123349, *11 (citing In re Rite Aid
Corp. Sec. Litig., 396 F.3d 294, 306–07 (3d Cir. 2005)).
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This Court further finds that the expenses for which Class Counsel’s seek
reimbursement were reasonable and necessary. It is well established that counsel
who create a common fund like this one are entitled to the reimbursement of
litigation costs and expenses, which includes such things as expert witness costs;
computerized research; court reports; travel expense; copy, phone and facsimile
expenses and mediation. Fed.R.Civ.P. 23; Boeing v. Van Gemert, 444 U.S. 472, 478
(1980). Class Counsel had a strong incentive to keep expenses at a reasonable level
due to the high risk of no recovery when the fee is contingent. Additionally, Class
Counsel incurred these expenses over the course of over seven years. Further, the
fact that Class Counsel does not seek interest as compensation for the time value of
money or costs associated with advancing these expenses to the Class makes this
fee request all the more reasonable.
Finally, Plaintiffs request $25,000 incentive awards to each of the six surviving
Named Plaintiffs and $15,000 for Sam Kistler, surviving spouse of Nelda Kistler.
“Incentive awards are justified when necessary to induce individuals to become
named representatives.” In re Synthroid Marketing Litig., 264 F.3d at 722–23. The
record suggests that the Named Plaintiffs initiated the action, took on a substantial
risk, and remained in contact with Class Counsel. Additionally, the Named
Plaintiffs devoted substantial amounts of their own time to benefit the class by
responding to document requests, reviewing pleadings, assisting discovery and
submitting to lengthy depositions. ERISA litigation against an employee’s current

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or former employer carries unique risks and fortitude, including alienation from
employers or peers.
Furthermore, the total award for all of the Named Plaintiffs represents just 0.55
percent of the total Settlement Fund. Awards of $15,000 to $25,000 for a Named
Plaintiff award and total Named Plaintiff awards of less than one percent of the
fund are well within the ranges that are typically awarded in comparable cases.
See, e.g. Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1998) (upholding award of
$25,000 to class representative); Will, 2010 U.S.Dist. LEXIS 123349, *12–13
(awarding named Plaintiffs $25,000 each for their contribution to a case concerning
allegedly excessive fees in a 401(k) Plan, a total of 0.5% of the settlement fund); In

re Dun & Bradstreet Credit Services Customer Litig., 130 F.R.D. 366, 377 (S.D.Ohio
1990) (awarding $215,000 or 1.19% of the settlement fund to the Named Plaintiffs).
II. CONCLUSION
After consideration of Class Counsel’s Application, this Court concludes that the
requested attorneys’ fees and cost reimbursements are fair, reasonable and merited
by the Counsel’s enormous efforts resulting in relief for the class. But for Class
Counsel’s determined prosecution of this action, the International Paper 401(k)
plans and their participants would not have obtained any recovery because it is
extremely unlikely that they would have found other qualified counsel to assume
the burden and risk of pursuing these claims. Accordingly, it is ORDERED that the
requested attorneys’ fees of $10,000,000 are APPROVED. It is FURTHER
ORDERED that the requested reimbursement of $1,563,046.39 in outstanding costs
is APPROVED. The Settlement Administrator shall pay the combined sum of
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$11,563,046.39 to the firm of Schlichter, Bogard & Denton out of the Settlement
Fund and shall separately pay each of the six surviving Named Plaintiffs the sum of
$25,000 and shall pay Sam Kistler $15,000.
SO ORDERED THIS 31st day of January, 2014.

Digitally signed by
David R. Herndon
Date: 2014.01.31
14:20:28 -06'00'
_________________________________________
DAVID R. HERNDON
UNITED STATES DISTRICT JUDGE

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