Boyd et al v. Coventry Health Care Inc. et al

Filing 88

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 1/31/14. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
LORETTA BOYD, ET AL.
:
v.

:

Civil Action No. DKC 09-2661

:
COVENTRY HEALTH CARE INC.,
ET AL.

:

MEMORANDUM OPINION
Presently pending and ready for resolution in this class
action arising under the Employee Retirement Income Security Act
(“ERISA”) are unopposed motions filed by Plaintiffs (ECF Nos. 84
and 85) seeking an order that: (1) grants final approval of the
Settlement

Agreement

(ECF

No.

77)

between

Plaintiffs

and

Defendants Coventry Health Care, Inc., Dale B. Wolf, Daniel N.
Mendelson, Rodman W. Moorhead, III, Timothy T. Weglicki, L. Dale
Crandall, Elizabeth E. Tallett, Allen F. Wise, Joel Ackerman,
Lawrence N. Kugelman, Shawn M. Guertin, Patricia Davis, John J.
Ruhlmann,
James

401(K)

McGarry,

Plan

Allen

Investment
Spath,

David

Committee,
Finkel,

Harvey

Maria

DeMovick,

Fitzpatrick,

Richard Bates, John J. Ruhlmann, and John Does 1-20; (2) grants
final

certification

of

the

Settlement

Classes

pursuant

to

Federal Rule of Civil Procedure 23; (3) approves the Plan of
Allocation (ECF No. 77-4); (4) approves a payment of one-third
of the Settlement Fund to class counsel for attorneys’ fees; (5)

approves

a

litigation

payment

of
and

expenses;

$137,315.65
(6)

to

approves

class

counsel

incentive

for

payments

to

Loretta Boyd, Christopher Sawney, Karen Billig, Jack J. Nelson,
and Karen Milner (“Named Plaintiffs”) in the amount of $5,000
each; and (7) dismisses this action with prejudice, with the
court

to

retain

jurisdiction

over

the

interpretation,

enforcement, and implementation of the settlement agreement and
the final order.

For the following reasons, the motions will be

granted, although the attorneys’ fees will be reduced.
I.

Background
The

Named

Healthcare,

Inc.

Plaintiffs

are

(“Coventry”)

former
and

employees

participants

Retirement Savings Plan (the “Plan”).

of
in

Coventry

Coventry’s

On October 13, 2009,

Plaintiff Boyd filed this ERISA lawsuit against Defendants as a
putative class action.

(ECF No. 1).

Numerous related actions

claiming identical violations of ERISA followed.
2009,

Judge

Alexander

Williams

consolidated

On December 9,
the

cases

and

designated Harwood Feffer LLP and Gainey McKenna & Egleston to
act as Interim Co-Lead Counsel and Tydings & Rosenberg LLP as
Interim

Liaison

Counsel

for

the

1

Plaintiffs.

(ECF

No.

13).1

The cases consolidated with Boyd’s were: Billig v.
Coventry Health Care, Inc., et al., 10-cv-00462-AW; Nigro v.
Coventry Health Care, Inc., et al., 09-cv-03074-AW; Nelson v.
Coventry Health Care, Inc., et al., 09-cv-03063-AW; and Milner
v. Coventry Health Care, Inc., et al., 09-cv-02850-AW.
Mr.
2

Plaintiffs filed an amended complaint on June 28, 2010.
No. 17).

(ECF

The alleged ERISA violations center on the Plan’s

investment in the stock of Coventry Healthcare, Inc., a national
managed health care company located in Bethesda, Maryland.

At

issue is Coventry’s Medicare Advantage Private-Fee-For-Service
(“PFFS”).

Coventry presented to investors – including the Plan

participants – that Coventry’s PFFS was performing very well.
In

fact,

Coventry

accurately

was

processing

having

PFFS

great

claims,

difficulty

causing

it

timely

and

materially

to

understate its true claims exposure, which in turn overstated
the

PFFS’s

performance.

profitability,

distorting

Coventry’s

financial

Coventry’s actual performance started to reveal

itself in summer 2008, sending the company’s stock price from
$40.00 per share to $13.93 per share.
169).

(ECF No. 17 ¶¶ 160 and

All the while, Defendants – each of whom are allegedly

fiduciaries of the Plan within the meaning of ERISA – continued
to have the Plan invest in Coventry stock, despite their alleged
knowledge of Coventry’s misrepresented financial health.

The

eventual decline in Coventry’s stock price resulted in the Plan
declining in value, which ultimately led to diminished account
balances of the Plan’s participants.

The complaint brings a

putative class action on behalf of all participants of the Plan

Nigro
voluntarily
withdrew
as
a
plaintiff
representative on March 8, 2011. (ECF No. 27).
3

and

class

who held Coventry stock from February 9, 2007 to October 28,
2008, alleging four counts, all violations of ERISA, 29 U.S.C. §
1001, et seq.: (1) failure prudently and loyally to manage the
Plan and assets of the Plan; (2) failure to monitor fiduciaries;
(3) failure to avoid conflicts of interest; and (4) co-fiduciary
liability.
sought

a

(ECF

No.

17

declaration

¶¶

that

202-257).

each

The

Defendant

Named

breached

Plaintiffs
its

ERISA

fiduciary duties to the Plan participants; an order compelling
Defendants to make good to the Plan all losses resulting from
Defendants’

breaches

and

profits

that

would

have

accrued

if

Defendants fulfilled their fiduciary obligations; imposition of
a constructive trust; an order enjoining each Defendant from any
further violations of their fiduciary obligations under ERISA;
an order requiring Defendants to appoint one or more independent
fiduciaries
investment

to
in

participate
Coventry

in

the

Stock;

and

management
actual

of

the

Plan’s

damages,

costs,

attorneys’ fees, and all appropriate equitable monetary relief.
(ECF No. 17, at 92-93).
On August 12, 2010, Defendants moved to dismiss (ECF No.
20).

In a memorandum opinion and order dated March 31, 2011,

Judge Williams denied Defendants’ motion as to counts one, two,
and four, and granted the motion as to count three.
29 and 30).

(ECF Nos.

Defendants filed a motion to reconsider on April

14, 2011 (ECF No. 33), and answered the amended complaint on
4

June 6, 2011 (ECF No. 37).

Judge Williams granted Defendants’

motion for reconsideration in part, dismissing count one as to
some

of

the

Defendants.

(ECF

Nos.

46

and

47).

Discovery

commenced and included a motion to compel that was resolved by
Magistrate Judge Jillyn K. Schulze.

(See ECF Nos. 66 and 67).

The parties engaged in an all-day private mediation session in
May 2012 which proved unsuccessful.
mediation

conference

with

Parties engaged in another

Magistrate

Judge

William

Connelly,

which led to the proposed settlement presently pending.

(ECF

No. 84-1, at 16-17).
The parties filed a stipulation of settlement on September
23, 2013.

(ECF No. 77).

The class is non-opt-out and consists

of all persons who were participants in, or beneficiaries of,
the Plan and who held Coventry stock in their Plan accounts
between

February

Class”).

9,

2007

and

October

22,

2008

(“Settlement

Coventry shall pay the class $3.6 million.

After

attorneys’ fees and administrative expenses are taken out, the
remainder will be distributed to class members pro rata based on
their losses relative to all other class members, but no monies
will be paid to class members whose final share is less than
$50.00.
Defendants

In exchange, the Settlement Class agrees to release
from

any

and

all

claims

that

relate

directly

or

indirectly to the facts that are, or could have been, alleged in
the amended complaint, including, but not limited to, any and
5

all claims under ERISA, with the exception of any claims at
issue in Plumbers Local No. 98 Defined Benefit Pension Fund v.
Coventry Healthcare, Inc., No. 09-cv-2337-AW.
and 77-4).

(See ECF Nos. 77

During a hearing held on the settlement on October

23, 2013, Judge Williams preliminarily designated Harwood Feffer
LLP

and

Gainey

McKenna

&

Egleston

as

co-class

counsel;

preliminarily certified the class; and preliminarily approved
the settlement subject to further consideration at the final
fairness

hearing.

(ECF

Nos.

81

and

82).

The

preliminary

approval order approved the class notice and ordered the notice
sent to each identified member of the settlement class via his
or her email address and his or her last known mailing address
by November 13, 201[3],2 while also publishing the notice on the
website specified.
On November 12, 2013, the class notice was sent via firstclass mail to 20,356 members of the settlement class, and via
email to 14,972 members.

338 notices came back undeliverable

for which a search turned up no other viable addresses.

(ECF

No. 84-2, at 2-3).
On January 9, 2014, Plaintiffs filed unopposed motions for
final

approval

proposed

plan

of
of

class

certification,

allocation,

an

award

the
of

settlement,
attorneys’

reimbursement of expenses, and incentive awards.
2

the
fees,

(ECF Nos. 84

The handwritten date in the order mistakenly reads “2014.”
6

and 85).
nor

No class member has filed objections to the settlement

did

any

objector

appear

at

the

January

30,

2014

final

fairness hearing.
II.

Analysis
The following issues remain: whether the Settlement Class

should

receive

final

certification;

whether

the

Settlement

Agreement and the Plan of Allocation are fair, reasonable, and
adequate;

and

whether

class

counsel’s

request

for

attorneys’

fees and litigation expenses, as well as payment of incentive
payments to the Named Plaintiffs, should be granted.
A.

Rule 23 Class Certification

A class action will be certified only if it meets the four
prerequisites identified in Rule 23(a) and also fits within one
of the three subdivisions of Rule 23(b).
the

United

States

has

held

that

The Supreme Court of

district

courts

must

pay

“undiluted, even heightened attention” to class certification
requirements in the settlement context.
Windsor,
omitted);

521
see

U.S.
also

591,

620

Grice

v.

(1997)
PNC

Amchem Prods., Inc. v.

(internal
Mortg.

quotation

Corp.

of

marks

Am.,

No.

CIV.A.PJM-97-3084, 1998 WL 350581, at *2 (D.Md. May 21, 1998)
(“Despite the parties’ agreement, class certification must be
carefully scrutinized.”).

7

1.

Rule 23(a) Prerequisites

Rule 23(a) provides as follows:
(a) Prerequisites. One or more members of a
class may sue or be sued as representative
parties on behalf of all members only if:
(1) the class is so numerous that joinder of
all members is impracticable; (2) there are
questions of law or fact common to the
class; (3) the claims or defenses of the
representative parties are typical of the
claims or defenses of the class; and (4) the
representative
parties
will
fairly
and
adequately protect the interests of the
class.
Based on a review of the parties’ submissions, the Rule 23
Settlement Classes meet the numerosity, commonality, typicality,
and adequacy requirements.
a.

Numerosity

Although

there

is

no

precise

threshold

for

determining

numerosity, see Gen. Tel. Co. v. E.E.O.C., 446 U.S. 318, 330
(1980), the Settlement Class, which consist of more than 20,000
individuals,

is

substantially

larger

than

other

have been certified in the Fourth Circuit.

classes

that

See, e.g., In re

Kirschner Med. Corp. Sec. Litig., 139 F.R.D. 74, 78 (D.Md. 1997)
(observing

that

a

class

size

of

25

to

30

members

presumption that the numerosity requirement is met).
numerosity

is

satisfied

where

joinder

of

members would prove to be “impracticable.”

all

raises

a

Moreover,

putative

class

Hewlett v. Premier

Salons Int’l Inc., 185 F.R.D. 211, 215 (D.Md. 1997) (explaining
that practicability of joinder depends on a variety of factors,
8

including the geographic dispersion of putative class members
and the size of their claims).

When a class is large - as is

the case here - the numbers alone may allow the court to presume
impracticability of joinder.
Garden

and

Pet

Corp.,

891

Id.; see also Stanley v. Central
F.Supp.2d

757,

770

(D.Md.

2012)

(“Classes of as few as 25 to 30 have been found to ‘raise[] the
presumption that joinder would be impracticable.’” (quoting In
re Kirschner Med. Corp. Sec. Litig., 139 F.R.D. at 78)).
b.

Commonality

To establish commonality, the party seeking certification
must “demonstrate that the class members have suffered the same
injury” and that their claims “depend upon a common contention.”
Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011)
(internal quotation marks omitted).
moreover,

must

be

of

such

a

nature

“That common contention,
that

it

is

capable

of

classwide resolution – which means that determination of its
truth or falsity will resolve an issue that is central to the
validity of each one of the claims in one stroke.”
common

question

member

in

a

consideration
member.”

is

one

that

can

single

hearing,”

of

individual

the

be
and

resolved
does

not

circumstances

for

Id.
each

“turn[]
of

each

“A

class
on

a

class

Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311,

319 (4th Cir. 2006).

9

Here, there are numerous questions of law and fact common
to the Settlement Class, principally whether Defendants violated
their fiduciary duties under ERISA by continuing to have the
Plan

invest

in

Coventry

prudent investment.
F.R.D.

59,

plaintiff
under

64

by

when

they

knew

it

was

not

a

See Tatum v. R.J. Reynolds Tobacco Co., 254

(M.D.N.C.

allege

ERISA

stock

2008)

defendants
mismanaging

(commonality

breached
the

their

plan);

satisfied
fiduciary

Banyai

v.

where
duties

Mazur,

205

F.R.D. 160, 163 (S.D.N.Y. 2002) (“In general, the question of
defendants’

liability

for

ERISA

violations

is

common

to

all

class members because a breach of a fiduciary duty affects all
participants and beneficiaries.”).

Based on the foregoing, the

Rule 23(a)(2) commonality requirement is satisfied.
c.

Typicality

The Supreme Court has noted that “[t]he commonality and
typicality requirements of Rule 23(a) tend to merge.”
Co.

v.

Falcon,

typicality

457

between

a

U.S.

147,

plaintiff

158
and

n.13
the

Gen. Tel.

(1982).

class,

To

the

show

plaintiff

“must be part of the class and possess the same interest and
suffer

the

same

injury

as

the

class

(internal quotation marks omitted).

members.”

Id.

at

156

The typicality requirement

focuses on “whether a sufficient relationship exists between the
injury to the named plaintiff and the conduct affecting the
class, so that the court may properly attribute a collective
10

nature to the challenged conduct.”
As

discussed

in

Hewlett,

a

Hewlett, 185 F.R.D. at 217.

plaintiff’s

claim

may

factually

differ and still be “typical” of class member claims, if “it
arises from the same event or practice or course of conduct that
gives rise to the claims of other class members, and if his or
her claims are based on the same legal theory.”

Id. (quotations

omitted).
All of the Named Plaintiffs’ claims are typical.

They were

all employed by Coventry and all held Coventry stock in their
Plan accounts during the Class Period.

The Named Plaintiffs’

allegations that Defendants violated ERISA arise from a unified
practice or course of conduct by Defendants, and like the other
class members, Named Plaintiffs seek equitable relief for the
alleged violations.

Ultimately, “as goes the claim[s] of the

[Named Plaintiffs,] so go the claims of” the Rule 23 Settlement
Classes.

Deiter v. Microsoft Corp., 436 F.3d 461, 466 (4th Cir.

2006).
d. Adequacy
Finally,

Rule

23(a)(4)

requires

“representative

parties

[who] will fairly and adequately protect the interests of the
class.”

Representation

is

adequate

if:

(1)

the

named

plaintiff’s interests are not opposed to those of other class
members,

and

(2)

the

plaintiff’s

11

attorneys

are

qualified,

experienced, and capable.

Mitchell-Tracey v. United Gen. Title

Ins. Co., 237 F.R.D. 551, 558 (D.Md. 2006).
Here,

the

Named

Plaintiffs’

those of the class members.

interests

are

aligned

with

Specifically, the Named Plaintiffs

share an interest with class members in establishing Defendants’
actions during the relevant period and showing that Defendants
violated ERISA by failing to fulfill their fiduciary duties.
Finally, the attorneys at Harwood Feffer, LLP and Gainey McKenna
&

Egleston

are

qualified,

experienced,

and

competent,

as

evidenced by their background in litigating class-action cases
involving ERISA violations.

(See ECF Nos. 84-3, 84-4, and 84-

5).
Accordingly,

the

Settlement

Class

satisfies

each

of

the

Rule 23(a) prerequisites.
2.

Rule 23(b) Requirements

Plaintiffs

invoke

Rule

23(b)(1),

which

permits

action to be maintained only if it can be concluded that:
prosecuting separate actions by or against
individual class members would create a risk
of:
(A)
inconsistent
or
varying
adjudications
with
respect
to
individual class members that would
establish
incompatible
standards
of
conduct for the party opposing the
class; or
(B)
adjudications
with
individual class members
12

respect
to
that, as a

a

class

practical matter, would be dispositive
of the interests of the other members
not
parties
to
the
individual
adjudications or would substantially
impair or impede their ability to
protect their interests.
Thus, subsection A seeks to avoid possible prejudice to the
defendants, while subsection B attempts to eliminate prejudice
to the putative class members.
the

type

of

ERISA

claims

Several courts have held that
raised

here

appropriate for Rule 23(b)(1) certification.

are

particularly

See, e.g., In re

Schering Plough Corp. ERISA Litig., 589 F.3d 585, 604 (3d Cir.
2009) (“In light of the derivative nature of ERISA § 502(a)(2)
claims,

breach

of

fiduciary

duty

claims

brought

under

§

502(a)(2) are paradigmatic examples of claims appropriate for
certification

as

a

Rule

23(b)(1)

class.”);

DiFelice

v.

U.S.

Airways, 235 F.R.D. 70, 80 (E.D.Va 2006) (“Alleged breaches by a
fiduciary

to

especially

a

large

appropriate

23(b)(1). . . .

class

of

instance

beneficiaries
for

present

treatment

under

an
Rule

[G]iven the derivative nature of suits brought

pursuant to § 502(a)(2) on behalf of the Plan, ERISA litigation
of

this

class.”

nature

presents

(internal

a

quotation

paradigmatic
marks

example

omitted));

of
In

a

(b)(1)

re

Global

Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 453 (S.D.N.Y.
2004) (granting class certification under Rule 23(b)(1)(B) in a
suit alleging breach of ERISA fiduciary duties).

13

Where, as

here, “the allegations in the Complaint implicate misconduct in
the management in the Plan as a whole, disparate lawsuits by
individual

participants

would

raise

the

specter

of

‘varying

adjudications.’”

In re Marsh ERISA Litig., 265 F.R.D. 128, 144

(S.D.N.Y.

(internal

2010)

omitted).

quotation

marks

and

alternation

Plaintiffs’ ERISA claims are similar to those at

issue in the cases cited, thus certification of the proposed
class in this suit under Rule 23(b)(1) is appropriate.
In

sum,

requirements

because
of

both

the

Settlement

Rule

23(a)

Class
and

satisfies

23(b)(3),

the
final

certification will be granted.
B.

Final Approval of the Settlement Agreement

Pursuant to Rule 23(e), a settlement agreement that binds
members of a class action can only be approved upon a “finding
that it is fair, reasonable, and adequate.”

“The ‘fairness’

prong is concerned with the procedural propriety of the proposed
settlement agreement, while the ‘adequacy’ prong focuses on the
agreement’s substantive propriety.”

In re Am. Capital S’holder

Derivative Litig., Civ. Nos. 11-2424 PJM, 11-2428 PJM/AW, 112459 PJM, 11-2459 RWT, 2013 WL 3322294, at *2 (D.Md. June 28,
2013).
1.

Fairness

In evaluating the fairness of a proposed settlement, the
following factors must be considered: “(1) the posture of the
14

case at the time settlement was proposed; (2) the extent of
discovery

that

had

been

conducted;

(3)

the

circumstances

surrounding the negotiations; and (4) the experience of counsel
in the area of [ERISA] class action litigation.”
Lube

Sec.

fairness

Litig.,

F.2d

serves

inquiry

927

to

155,

159

protect

(4th

Cir.

against

the

In re Jiffy
1991).
danger

The
that

counsel might “compromis[e] a suit for an inadequate amount for
the sake of insuring a fee.”

In re Mid-Atl. Toyota Antitrust

Litig., 564 F.Supp. 1379, 1383 (D.Md. 1983) (internal quotation
marks omitted).
Here,
approval.

each

fairness

factor

weighs

in

favor

of

final

The record indicates that the Settlement Agreement is

a product of good faith, arms-length negotiations following two
rounds of mediation, first privately and then with Magistrate
Judge Connelly.
to

dismiss

Plaintiffs

In addition, the parties fully briefed a motion

and

then

“conducted

a

subsequent

an

extensive

motion

to

reconsider.

investigation

of

[the]

claims, including a review of the Plan’s governing documents and
materials,

communications

with

Plan

participants,

internal

[Coventry] documents regarding the Plan, SEC filings . . . and
other publicly available documents.”
With

respect

to

the

posture

(ECF No. 84-1, at 29).
of

the

case,

the

parties

litigated the case since Plaintiffs filed the initial complaint
on October 13, 2009, exchanged discovery demands, and received
15

documents and written responses thereto.

A discovery dispute

had to be adjudicated by Magistrate Judge Schulze.
that

all

parties

weaknesses

of

had

a

their

clear

view

respective

of

the

positions,

It appears

strengths
and

and

sufficient

information about the claims and defenses at the time they began
exploring the possibility of settlement.
noted,

the

declarations

and

resumes

Finally, as has been

submitted

by

Plaintiffs’

attorneys establish that they are qualified, experienced, and
competent.
2.

Adequacy

The

adequacy

prong

requires

consideration

of:

“(1)

the

relative strength of the plaintiff’s case on the merits; (2) the
existence of any difficulties of proof or strong defenses the
plaintiffs are likely to encounter if the case goes to trial;
(3)

the

litigation;

anticipated
(4)

the

duration

and

solvency

of

expense
the

of

defendants

additional
and

the

likelihood of recovery on a litigated judgment; and (5) the
degree of opposition to the settlement.
159.

Jiffy Lube, 927 F.2d at

The purpose of the adequacy analysis is to “weigh the

likelihood of the plaintiff’s recovery on the merits against the
amount offered in settlement.”

Mid-Atl. Toyota, 564 F.Supp. at

1384 (internal quotation marks omitted).
Here, the adequacy factors, on balance, counsel in favor of
final approval of the Settlement Agreement.
16

The court partially

denied Defendant’s motion to dismiss (ECF No. 25), but whether
Plaintiffs

would

prevail

proceed is uncertain.

on

the

merits

if

the

case

were

to

Genuine disputes exist regarding whether

each Defendant was a fiduciary of the Plan with respect to its
investments in Coventry stock; whether each Defendant breached
his or her fiduciary duties under ERISA with respect to the
Plan’s investments in Coventry; and whether that breach caused
losses to the Plan, Plaintiffs, and the Settlement Class.
demonstrations

are

“fraught

with

uncertainty,”

Such

Langbecker

v.

Elec. Data Sys. Corp., 476 F.3d 299, 308 (5th Cir. 2007), as
ERISA claims for breach of fiduciary duty in connection with
company stock are complex and quite new, with still evolving
contours.

See Marsh, 265 F.R.D. at 138-40.

Even

if

Plaintiffs

were

to

overcome

the

liability

obstacles, moreover, there are also risks in proving damages at
trial.

“[T]he damages issue is uncertain because courts have

not had occasion to apply a damages measure in a case like this
after a trial.”

Id. at 140.

Furthermore, absent final approval

of the Settlement Agreement, litigation of this dispute could
prove to be long and expensive.

In particular, the likely next

steps in this case – e.g., additional discovery and dispositive
motions

–

attorneys.

would

require

Although

substantial

there

is

time

nothing

by
to

the

parties’

indicate

that

Defendants would be unable to satisfy a judgment if one were
17

ultimately entered, it is not clear how long it might take to
resolve this lawsuit.

On balance, the risks, delays, and costs

associated with further litigation weigh in favor of granting
final approval of the Settlement Agreement.
Lastly,
Agreement.
20,000

there

has

been

no

opposition

to

the

Settlement

In November 2013, notice forms were mailed to over

Plan

participants

participants.

and

emailed

to

nearly

15,000

The notice forms informed each class member, in

clear and concise language, of the basis for this lawsuit; the
definition
Settlement

of

the

Settlement

Agreement;

the

Class;

process

the
for

key

terms

objecting

of
to

the
the

Settlement Agreement; and the date, time, and place of the final
fairness hearing.

Thus, the forms and method of notice complied

with Fed.R.Civ.P. 23(c)(2) & 23(e).

The postmark deadline for

filing objections was January 20, 2014.

(ECF No. 82, at 6).

Neither the court nor counsel received any objections to the
Settlement Agreement.

The fact that no class member objected

supports final approval of the Settlement as fair, adequate, and
reasonable.

Furthermore,

the

parties

engaged

an

independent

fiduciary to evaluate the proposed settlement, who found the
settlement
difficulties

to
in

be

fair

proving

to

the

class

Plaintiffs’

members

case.

In

given

the

sum,

the

Settlement Agreement is a good result for the class members when
considered in light of the disputed liability and difficulty in
18

proving

a

case

of

this

type.

Accordingly,

the

Settlement

Agreement will be approved.
C.

Plan of Allocation
Like the analysis above of the Settlement,
the plan of allocation must also meet the
standards of fairness, reasonableness, and
adequacy.
In
evaluating
a
plan
of
allocation, the opinion of qualified counsel
is entitled to significant respect.
The
proposed allocation need not meet standards
of scientific precision, and given that
qualified counsel endorses the proposed
allocation, the allocation need only have a
reasonable and rational basis.

In re The Mills Corp. Sec. Litig., 265 F.R.D. 246, 258 (E.D.Va.
2009)

(citations

omitted).

Here,

the

Plan

of

Allocation

provides a recovery to the Class, net of administrative costs,
attorneys’

fees

and

other

expenses,

on

a

pro

rata

basis

according to each Class Member’s recognized claim of damages.
Each Class Member will receive a share of the net proceeds of
the Settlement Fund, based approximately on the decline in the
value of Coventry stock held in that Class Member’s plan during
the

Class

Coventry

Period
Stock

in

held

comparison
by

to

other

the

Class

decline

Members

in

in

value

their

of

Plan

accounts, although no Class Member whose share is less than $50
will receive an award, owing to the costs of administering the
benefits.
equally

(ECF

under

the

No.

77-4).

formula

Allocation have been raised.

All

and

no

Class

members

objections

to

are
the

treated
Plan

of

The Plan of Allocation is similar
19

to those approved by other courts in company stock fund ERISA
cases.

See, e.g., In re AOL Time Warner ERISA Litig., No. 02

Civ. 8853 SWK, 2006 WL 2789862, at *7-8 (S.D.N.Y. Sept. 27,
2006).

Accordingly,

the

Plan

of

Allocation

is

fair

and

reasonable and will be approved.
D.
Attorneys’ Fees, Litigation Expenses, Settlement
Administration Expenses, and Incentive Awards
Finally, Plaintiffs seek attorneys’ fees in the amount of
one-third of the Settlement Amount, or $1,200,000; reimbursement
of

litigation

incentive
$5,000.

expenses

awards

to

in

the

each

(ECF No. 85).

Named

amount

of

Plaintiff

$137,315.65;
in

the

amount

and
of

For the following reasons, the court

will grant the request for litigation expenses and incentive
awards in full but reduce the attorneys’ fees to $1 million.
1.

Attorneys’ Fees

“It is for the district court in the first instance to
calculate an appropriate award of attorney’s fees.”

Carroll v.

Wolpoff & Abramson, 53 F.3d 626, 628 (4th Cir. 1995).

Rule 23

permits a court to award “reasonable attorney’s fees . . . that
are

authorized

by

Fed.R.Civ.P. 23(h).

law

or

by

the

parties’

agreement.”

The court must determine the best method of

calculating attorneys’ fees to appropriately compensate class
counsel.

There

are

two

primary

methods

of

calculating

attorneys’ fees: (1) the “percentage of recovery” or “percentage

20

of the fund” method; and (2) the “lodestar” method.

Whitaker v.

Navy Fed. Credit Union, No. RDB 09-cv-2288, 2010 WL 3928616, at
*4 (D.Md. Oct. 4, 2010).

With either method, the goal is to

make sure that counsel is fairly compensated.

The United States

Court of Appeals for the Fourth Circuit has not decided which of
the general approaches to adopt, although the “current trend
among the courts of appeal favors the use of a percentage method
to calculate an award of attorneys’ fees in common fund cases.”
Goldenberg v. Marriott PLP Corp., 33 F.Supp.2d 434, 438 (D.Md.
1998);

see

also

Strang

v.

JHM

Mortg.

Sec.

Ltd.

P’ship,

890

F.Supp. 499, 503 (E.D.Va. 1995) (“the percentage method is more
efficient

and

less

burdensome

than

the

traditional

lodestar

method, and offers a more reasonable measure of compensation for
common fund cases.”).

“[U]sing the percentage of fund method

and supplementing it with the lodestar cross-check . . . take[s]
advantage of the benefits of both methods.”
265 F.R.D. at 261.3

The Mills Corp.,

Accordingly, in this case, the “percentage

of recovery” method cross-checked by the “lodestar” method is

3

“Using the percentage method, cross-checked by the
lodestar method reduces the risk that the amount of the fee
award either overcompensates counsel in relation to the class
benefits obtained or undercompensates counsel for their work.”
In re Heartland Payment Systems, Inc. Customer Data Sec. Breach
Litig., 851 F.Supp.2d 1040, 1073 (S.D.Tex. 2012); see also In re
Royal Ahold N.V. Securities & ERISA Litig., 461 F.Supp.2d 383,
385 (D.Md. 2006) (“both are useful tools for trial courts to use
to inform and calibrate a judgment as to a fair and reasonable
. . . fee award.”).
21

the

appropriate

method

for

reviewing

the

proposed

attorneys’

fees under Rule 23(h).
a.
“Percentage of Recovery” or “Percentage of the Fund”
Method
The

Supreme

Court

has

“recognized

consistently

that

a

litigant or a lawyer who recovers a common fund for the benefit
of persons other than himself or his client is entitled to a
reasonable attorney’s fee from the fund as a whole.”
v. Van Gemert, 444 U.S. 472, 478 (1980).
of

recovery”

or

“percentage

of

the

Boeing Co.

Under the “percentage

fund”

method,

the

court

awards attorneys’ fees as a percentage of the common fund used
to pay class members’ damages and claims.
465 U.S. 886, 900 n.16 (1984).4
“percentage

of

recovery”

method

See Blum v. Stenson,

An attractive aspect of the
is

its

results-driven

nature

which “ties the attorneys’ award to the overall result achieved
rather than the hours expended by the attorneys.”

Jones v.

Dominion Res. Servs., 601 F.Supp.2d 756, 759 (S.D.W.Va. 2009).
The

Fourth

Circuit

has

not

yet

identified

factors

for

district courts to apply when using the “percentage of recovery”
method.

District

courts

in

this

circuit

have

analyzed

the

following seven factors: (1) the results obtained for the class;
4

“The [common-fund] doctrine provides that a private
plaintiff, or plaintiff’s attorney, whose efforts create,
discover, increase, or preserve a fund to which others also have
a claim, is entitled to recover from the fund the costs of his
litigation, including attorneys’ fees.”
In re Cendant Corp.
d
Sec. Litig., 404 F.3d 173, 187 (3 Cir. 2005).
22

(2)

the

quality,

skill,

and

efficiency

of

the

attorneys

involved; (3) the risk of nonpayment; (4) objections by members
of the class to the settlement terms and/or fees requested by
counsel; (5) awards in similar cases; (6) the complexity and
duration of the case; and (7) public policy;.

Domonoske v. Bank

of Am., N.A., 790 F.Supp.2d 466, 475 (W.D.Va. 2011); The Kay
Company

v.

Equitable

Prod.

Co.,

749

F.Supp.2d

455,

464

(S.D.W.Va. 2010); The Mills Corp., 265 F.R.D. at 261; Jones, 601
F.Supp.2d

at

760.

Importantly,

“fee

award

reasonableness

factors ‘need not be applied in a formulaic way’ because each
case

is

different,

‘and

in

certain

cases,

one

factor

may

In re AT&T Corp., 455 F.3d 160, 166 (3d

outweigh the rest.’”

Cir. 2006) (quoting In re Rite Aid Corp. Sec. Litig., 396 F.3d
294, 301 (3d Cir. 2005)).
i. Results Obtained for the Class
As mentioned above, a major advantage of the “percentage of
recovery” method is that it considers the results that class
counsel actually obtained for the class as opposed to the number
of hours they expended.

See Hensley v. Eckerhart, 461 U.S. 424,

436 (1983); Brodziak v. Runyon, 145 F.3d 194, 196 (4th Cir. 1998)
(“the most critical factor in calculating a reasonable fee award
is

the

degree

of

success

obtained.”

(internal

quotations

omitted)); Fed.R.Civ.P. 23(h) advisory committee notes to 2003
amendments

(explaining

that

the
23

“fundamental

focus”

in

determining a common fund attorneys’ fee award “is the result
actually achieved for class members”).
As class counsel highlight in the memorandum supporting the
request

for

attorneys’

fees,

the

Settlement

Class

considerable value and benefit from the settlement.
have

consented

to

a

common

fund

of

$3.6

distributed to a class of over 20,000.
“megafund”

case,

class

counsel

obtained

Defendants

million

to

be

While this is not a

nevertheless

achieved

a

substantial value on behalf of the class, given the complexity
and

uncertainty

of

litigation

of

this

type.

Unfortunately,

owing to the complexity of the Plan of Allocation, Plaintiffs
were not able to provide estimates as to: (1) how many class
members will get nothing because their

pro rata

share falls

below the $50 de minimis amount, or (2) the range of awards that
will

be

deposited

in

Plan

members’

accounts.

Defendants’

counsel represented that he was almost certain that some will
recover

thousands

individual
success

in

of

recoveries
one

dollars.
make

respect,

it

the

While

the

difficult
recovery

to

for

aggregate crosses the threshold of success.

unknowns
assess

the

as

to

degree

of

class

in

the

In the aggregate,

the settlement obtained $3.6 million for a class of over 20,000.
Counsel estimated the actual Plan losses to be between $7.5
million and $111 million, depending on which measure of damages

24

would have been adopted.5

While Class Counsel engage in some

overstatement when they state that “thousands of people will
recover substantial sums due to the efforts of Class Counsel,”
undoubtedly a claim for an ERISA violation based on imprudent
investments

presents

a

challenge

recovery is commendable.

for

which

a

considerable

See, e.g., In re Wachovia Corp. ERISA

Litig., Civ. No. 3:09cv262, 2011 WL 7787962, at *4 (W.D.N.C.
Oct.

24,

2011)

(finding

a

$12.35

million

settlement

for

approximately 150,000 class members in an ERISA class action a
“significant” and “fair result for the class”); Moore v. Comcast
Corp., Civ. Action No. 08-773, 2011 WL 238821, at *4 (E.D.Pa.
Jan. 24, 2011) (finding a settlement of $5 million for a class
of

approximately

35,000

to

be

“reasonable

considering

the

defendants denied, and continue to deny, liability and litigated
this case before the court for two years before they settled.”);
Mehling v. N.Y. Life Ins. Co., 248 F.R.D. 455, 465 (E.D.Pa.
2008) (finding that a $14 million settlement for a class of
approximately 45,600 “represents a successful result”); In re
Sprint Corp. ERISA Litig., 443 F.Supp.2d 1249, 1270-71 (D.Kan.
2006) (a settlement of $25 million for a class of more than
5

There are roughly three measurements of losses: (1) losses
incurred only by new money entering the Plan in Coventry stock
during the Class Period; (2) losses in the value of all Coventry
stock held by the Class during the Class Period; and (3) the
value between the scenario number two and the amount that would
have been realized had the resources invested in Coventry stock
been put in more prudent investments.
25

67,000

is

“extraordinary

compared

to

the

anticipated

difficulties of establishing significant amounts of damages even
if plaintiffs could have overcome the numerous obstacles for
establishing
reviewed

liability.”).

by

an

The

independent

Settlement

fiduciary,

who

Agreement

was

endorsed

the

settlement, finding it fair given the difficulties Plaintiffs
would

have

combined

faced

with

the

had

litigation

fact

that

no

gone

forward.

objections

This

have

been

fact,
filed,

further suggests that the result achieved is a desirable one.
ii. Quality,
Involved

Skill,

and

Efficiency

of

the

Attorneys

As noted above, Plaintiffs’ attorneys are experienced and
skilled ERISA class action litigators who achieved a favorable
result for the Settlement Class.

Counsel exchanged discovery

with Defendant and litigated a dispute in front of Magistrate
Judge Schulze; participated in two rounds of all-day mediation;
and fully briefed a motion to dismiss and the subsequent motion
to reconsider.

Plaintiffs’ attorneys also “reached a favorable

settlement after evaluating the strengths and weaknesses of the
respective positions and negotiating with sophisticated defense
attorneys,” from Morgan, Lewis & Bockius LLP, a global law firm.
The Mills Corp, 265 F.R.D. at 262 (quality of opposing counsel
is

a

factor

to

be

considered

performance).

26

in

evaluating

class

counsel

iii. Risk of Nonpayment
“In determining the reasonableness of an attorneys’ fee
award, courts consider the relative risk involved in litigating
the specific matter compared to the general risks incurred by
attorneys
Jones,

taking

601

on

class

F.Supp.2d

at

actions

762.

The

on

a

risk

contingency
undertaken

basis.”
by

class

counsel is evaluated by, among other things, the presence of
government action preceding the suit, the ease of proving claims
and

damages,

and,

if

the

case

resulted

in

settlement,

relative speed at which the case was settled.

the

Id.; see also

Strang, 890 F.Supp. at 503 (finding that risks to plaintiffs’
counsel were minimized by settlement within six-months from the
filing of the complaint and consequently reducing the percentage
award from 30% to 25% of the Settlement Fund).
Despite the attorneys’ skill and experience in litigating
ERISA

class

actions,

there

existed

meaningful

risk

of

non-

recovery here, although this is a reality in the vast majority
of litigation.
been

profitable

Class counsel contend that the case may not have
at

all,

given

that

counsel

took

it

on

a

contingency basis and the difficulties of proving liability in
an ERISA case of this nature.

(ECF No. 85-1, at 25).

Counsel

further argue that the risk of nonpayment was amplified by the
developing nature of this area of law.

27

While

every

substantial

attorney

risks,

those

undertaking
risks

are

ERISA litigation of this nature.

a

class

especially

action

bears

pronounced

in

See In re Schering-Plough

Corp. Enhance ERISA Litig., Civ. Action No. 08-1432 (DMC)(JAD),
2012

WL

1964451,

at

*5

(D.N.J.

May

31,

2012)

(ERISA

class

actions based on imprudent investments in company stock “involve
a complex and rapidly evolving area of law”); AOL Time Warner,
2006
faced

WL

2789862,

by

at

plaintiffs

*7-8

bringing

breach of fiduciary duty).
risks

of

negotiations

nonpayment
begin,

(outlining
an

the

ERISA

“considerable

class

action

risk”

alleging

Unlike other class actions where the

largely

Jones,

601

dissipate
F.Supp.2d

at

once
763,

settlement
nothing

is

guaranteed in this sort of litigation especially where, as here,
a prior mediation session was unsuccessful and the case had been
in intense litigation for nearly four years.
appears

that

class

counsel

experienced

Accordingly, it

higher

risk

in

the

pursuit of this case than that present in other class actions.
iv. Objections
As noted above, class members were notified directly of the
proposed settlement terms in the Settlement Agreement, including
an explanation of the attorneys’ fee request.
2, at 8).

(See ECF No. 77-

No one filed objections to either the settlement

terms or the proposed attorneys’ fees.

Furthermore, no class

member objected at the final fairness hearing on January 30,
28

2014.

The lack of objections tends to show that at least from

the class members’ perspective, the requested fee is reasonable
for the services provided and the benefits achieved by class
counsel.

Nevertheless,

reasonableness

of

the

the

court

requested

must

fee

still

applying

determine
the

the

remaining

factors.
v. Awards in Similar Cases
Attorneys’ fees awarded under the “percentage of recovery”
method are generally between twenty-five (25) percent and thirty
(30)

percent

(“MCL”),
addressed

§

of

the

14.121.
this

fund.
While

issue,

Manual
the

for

Fourth

several

Complex

Circuit

courts

Litigation

has

have

not

yet

established

benchmarks, subject to upward or downward adjustment depending
on the facts of the class actions.

“The Ninth and Eleventh

Circuit generally use a 25% benchmark for common-fund cases.”
In re Heartland Payment Sys., Inc. Customer Data Sec. Breach
Litig., 851 F.Supp.2d 1040, 1080 (S.D.Tex. 2012).

The Second

and Third Circuits, on the other hand, have not relied on rigid
benchmarks, and instead consider the specific circumstances of
each case based on factors enunciated in Johnson v. Ga. Highway
Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974).

See, e.g.,

Goldberger v. Integrated Res., Inc., 209 F.3d 43, 51-52 (2d Cir.
2000); Third Circuit 2001 Task Force Report on Selection of
Class Counsel, 74 Temp.L.Rev. 689, 705 (2001) (recommending that
29

courts “avoid rigid adherence to a ‘benchmark’” and concluding
that

“a

percentage

particular

case,

fee,

tailored

remains

to

superior

the

to

realities

any

other

generating

comparatively

smaller

funds

can

the

means

determining a reasonable fee for class counsel.”).
cases

of

of

“In fact,
require

a

higher percentage fee award, due to the perception that large
percentages

of

attorneys.”

very

large

Serrano

settlements

v.

Sterling

lead

to

Testing

windfalls

Sys.,

for

Inc.,

711

F.Supp.2d 402, 420 (E.D.Pa. 2010); see also In re Prudential
Ins. Co. of Am. Sales Practice Litig. Agent Actions, 148 F.3d
283, 339 (3d Cir. 1998) (noting inverse relationship of large
settlement to smaller percentage award).
In

considering

awards

in

similar

cases,

courts

look

cases of similar size, rather than similar subject matter.

to
See

In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 737 (3d Cir.
2001); The Mills Corp., 265 F.R.D. at 263-64 (“comparing the
size of the fund and percentage of the award in other cases to
the

present

reference.”).

case

.

.

.

provides

a

valuable

point

of

Fees awarded under “the percentage-of-recovery”

method in settlements under $100 million have ranged from 15% to
40%.

See Stoner v. CBA Information Services, 352 F.Supp.2d 549,

553 (E.D.Pa. 2005).
comparable

to

the

Cases in this circuit involving settlement
$3.6

million

settlement

fund

here

have

resulted in awards of attorneys’ fees in the ranges of 25% to
30

28% of the common fund.

See

In re SPX Corp. ERISA Litig.

(W.D.N.C. 2007) (28% of the fund awarded, where the fund was
$3.6 million); Smith v. Krispy Kreme Doughnut Corp., 2007 WL
119157, at *3 (M.D.N.C. 2007) (26% of the fund awarded where the
fund was $4,750,000); Mason v. Abbot Labs. (N.D.W.Va. 2001) (25%
of the fund awarded where the fund was $1,705,200); Braun v.
Culp, Inc. (M.D.N.C. 1985) (25% of the fund awarded where the
fund was $1.5 million).

Furthermore, a recent study in the

Journal of Empirical Studies found that for class recoveries in
the

range

of

$2.8

to

$5.3

million,

the

mean

attorneys’

fee

percentage award from 1993-2008 was approximately 26.4%, and the
median was 25.0%.

See Theodore Eisenberg & Geoffrey P. Miller,

Attorney Fees and Expenses in Class Action Settlements: 19932008, 7 J.Emp.L.Studies 248, 265 T.7 (June 2010).

In terms of

attorneys’ fee awards in comparable ERISA cases, awards range
from 19% to 45%, Schering-Plough, 2012 WL 1964451, at *7, but
typically

fall

between

30%

and

33%

of

the

Settlement

fund.

Griffin v. Flagstar Bancorp, Inc., No. 2:10-cv-10610, 2013 WL
6511860, at *8 (E.D.Mich. Dec. 12, 2013).

Striking the balance

between the percentage awarded in cases in this circuit for an
award of this magnitude and those given in cases of this type
across the nation, $1 million - approximately twenty-eight (28)
percent - would appear to be an appropriate number.

31

vi. The Complexity and Duration of the Litigation
The

‘complexity

and

duration’

element

suggests

that

recovery in the amount of $1 million is more appropriate here.
“In evaluating the complexity and duration of the litigation,
courts consider not only the time between filing the complaint
and reaching settlement, but also the amount of motions practice
prior to settlement, and the amount and nature of discovery.”
Jones, 601 F.Supp.2d at 761; see also In re Cendant, 243 F.3d at
736-36.
laws

Cases are considered more complex where the applicable

are

new,

changing,

or

unclear.

See

Goldenberg,

33

F.Supp.2d at 439 (finding that the case was “fairly complex,
requiring analysis of several complicated financing arrangements
and tax shelter opportunities in the context of a business and
regulatory climate in flux.”).

In a settlement context, courts

consider whether negotiations were “hard fought,” “complex,” or
“arduous.”
The

In re Merrill Lynch, 249 F.R.D. at 138.

instant

litigation

was

both

protracted

and

complex.

Plaintiffs brought an action against Defendants for breach of
their

fiduciary

duties

under

ERISA

for

continuing

to

make

investments in Coventry stock which they knew to be imprudent.
Numerous courts have emphasized the many hurdles plaintiffs must
clear to succeed on such a claim, including proving: (1) each
Defendant is a fiduciary; (2) each Defendant breached a duty;
(3) that the breach has caused damage; and (4) the amount of
32

damages that are attributable to the fiduciary breaches.
Broadwing,
2006).

Inc.

ERISA

Litig.,

252

F.R.D.

369,

374

In re

(S.D.Ohio

Moreover, unlike securities class actions which have

seventy-five years of precedent, ERISA jurisprudence concerning
the performance of company stock is thin, with the first cases
filed in the late 1990s.
the

issue,

“designed

ERISA

law

primarily

Marsh, 265 F.R.D. at 147.
is

to

still

regulate

developing,
traditional

as

Compounding
the

defined

law

was

benefit

plans, as opposed to 401(k) plans, which did not even exist when
ERISA was enacted.”

Id.

On the other hand, discovery in this case was relatively
straightforward.

Class

counsel

highlight

that

the

parties

exchanged initial disclosures and engaged in a motion to compel
(ECF

No.

85-1,

at

23-24),

but

there

is

no

evidence

that

discovery was particularly challenging or that class counsel had
to fight for access to documents.
762

(finding

counsel

that

reviewed

discovery

over

was

118,000

See Jones, 601 F.Supp.2d at
straightforward

pages

of

where

documents);

see

class
also

Domonoske, 790 F.Supp.2d at 476 (noting that discovery was brief
where class counsel obtained fewer than 10,000 pages of written
discovery).

This case also involved limited motions practice,

with only a motion to dismiss followed by a motion to reconsider
over

four

years.

See

Jones,

601

F.Supp.2d

at

762

(finding

motions practice to be minimal where the parties only briefed
33

two motions over the course of one year).
foregoing

considerations

weigh

in

favor

On balance, the
of

reducing

the

attorneys’ fees award to $1 million or approximately twentyeight (28) percent.
vi. Public Policy
“The most frequent complaint surrounding class action fees
is

that

they

are

artificially

high,

with

the

result

(among

others) that plaintiffs’ lawyers receive too much of the funds
set aside to compensate victims.”

Report on Contingent Fees in

Class Action Litigation, 25 Rev.Litig. 459, 466 (2006).

“Such

perceptions are not only harmful to the legal profession, but
undermine the integrity of the entire legal system.”
F.Supp.2d at 764.

Jones, 601

Thus, in assessing the reasonableness of the

requested attorneys’ fees, the court must strike the appropriate
balance

between

promoting

the

important

public

policy

that

attorneys continue litigating class action cases that “vindicate
rights that might otherwise go unprotected,” and perpetuating
the public perception that “class action plaintiffs’ lawyers are
overcompensated for the work that they do.”

Third Circuit Task

Force Report, 208 F.R.D. 340, 342, 344 (Jan. 15, 2002).

Courts

in this circuit have recognized that “[t]his concern is not a
trivial one and requires attentiveness . . . in awarding fees.”
The Mills Corp., 265 F.R.D. at 263; see also Domonoske, 790
F.Supp.2d

at

476

(“the

court
34

notes

the

need

to

‘properly

balance[ ] the policy goals of encouraging counsel to pursue
meritorious [litigation in the relevant legal field, consumer
litigation
excessive
Litig.,

here,]
fees.’”

539

.

.

.

while

(quoting

F.3d

129,

In

re

(2d

132

[also]
Nortel

Cir.

protecting
Networks

2008))

against

Corp.

Sec.

(alterations

in

original); The Kay Company, 749 F.Supp.2d at 469 (“[b]ecause of
the

damage

caused

by

the

perception

of

overcompensation

of

attorneys in class action suits, lawyers requesting attorneys’
fees

and

judges

reviewing

those

requests

must

exercise

heightened vigilance to ensure the fees are in fact reasonable
beyond reproach and worthy of our justice system.”).
Here,

a

reduction

of

the

attorneys’

fees

award

to

$1

million dollars or approximately 28% of the common fund would be
more

reasonable

concerns.

in

light

of

these

competing

public

policy

Although no class member objected to the proposed

attorneys’ fee of up to one-third of the common fund, they had
and have no notice concerning the range of individual recoveries
except that some will receive no benefit if their “loss” is
below

$50.00.

Of

course,

deduction

of

the

requested

fees

reduces the class members’ potential recovery by a significant
percentage.

Plaintiffs argue that the cost and difficulty of

bringing

action

an

act

as

a

deterrent.

Consequently,

it

furthers public policy to award sufficient attorney’s fees to
incentivize lawyers to enforce federal laws.
35

(ECF No. 85-1, at

29-30).

Based on the foregoing, however, a nominal reduction in

the requested fee award is sufficient to account for the risks
class counsel identifies while continuing to promote the policy
goals

of

enforcing

excessive fees.

consumer

goals

and

protecting

against

See The Kay Company, 749 F.Supp.2d at 468-69

(“It is not at all clear . . . that the increased risk to class
counsel

of

investing

actions

justifies

analogous

to

Increasing

the

time

the

resources

treatment

individual
number

and

of

of

to

such

claims

for

class

action

prosecute

cases

fee

as

award

plaintiffs

class

entirely
purposes.
does

not

necessarily increase the amount of time class counsel spends on
a case.”).
b.

Lodestar Cross-Check

Under the “lodestar” method, a district court identifies a
lodestar figure by multiplying the number of hours expended by
class counsel by a reasonable hourly rate.

Grissom v. The Mills

Corp., 549 F.3d 313, 320 (4th Cir. 2008).

The court may then

adjust the lodestar figure using a “multiplier” derived from a
number

of

factors,

including

the

benefit

obtained

for

the

settlement class, the complexity of the case, and the quality of
the representation.

See The Kay Company, 749 F.Supp.2d at 462;

see also In re Microstrategy, Inc. Sec. Litig., 172 F.Supp.2d
778, 786-87 (E.D.Va. 2001).

36

The

purpose

of

a

lodestar

cross-check

is

to

determine

whether a proposed fee award is excessive relative to the hours
reportedly worked by counsel, or whether the fee is within some
reasonable multiplier of the lodestar.

Rite Aid Corp., 396 F.3d

at 306 (“The lodestar cross-check serves the purpose of alerting
the trial judge that when the multiplier is too great, the court
should

reconsider

its

calculation

under

the

percentage-of-

recovery method”); Viscaino v. Microsoft Corp., 290 F.3d 1043,
1050

(9th

Cir.

perspective
award.”).
mere

on

2002)
the

(“[T]he

lodestar

reasonableness

may

of

a

provide
given

a

useful

percentage

Importantly, “where the lodestar fee is used ‘as a

cross-check’

reasonable

to

attorneys’

the
fees,

percentage
‘the

hours

method

of

documented

determining
by

counsel

need not be exhaustively scrutinized by the district court.’”
Royal Ahold, 461 F.Supp.2d at 385 (quoting Goldberger, 209 F.3d
at 50).
A lodestar cross-check confirms that attorneys’ fees of $1
million of the $3.6 million settlement fund is a reasonable fee
award for class counsel here.
approximately

$1,579,878.25,

Class counsel claim a lodestar of
which

represents

2,987.75

hours

billed by twenty-one (21) attorneys across five firms at rates
ranging
support

from

$325

staff,

to

$700

including

per
law

hour

and

clerks,

eight

professional

paralegals,

legal

assistants, litigation support staff, and class action clerks,
37

at rates ranging from $175 to $250 per hour.
4, 84-5, 84-6, 86-1 and 86-2).6

(ECF Nos 84-3, 84-

Courts have generally held that

lodestar multipliers falling between 2 and 4.5 demonstrate a
reasonable attorneys’ fee.

See Goldenberg, 33 F.Supp.2d at 439

n.6; see also In re Microstrategy, Inc., 172 F.Supp.2d at 789
(reducing fee award from a requested percentage, which would
have resulted in an award approximately four times the lodestar
figure, to a percentage that resulted in an award 2.6 times the
lodestar figure); In re Cendant, 243 F.3d at 742 (“[M]ultiples
ranging from one to four are frequently awarded in common fund
cases when the lodestar method is applied.”).
Here,

class

counsel’s

request

for

one-third

of

the

settlement amount yields a lodestar multiplier of approximately
0.76.

(ECF No. 85-1, at 27).

The range of multipliers on ERISA

company stock cases have ranged from 0.7 to 4.8.
F.R.D.

at

149.

While

reducing

the

award

to

See Marsh, 265
approximately

twenty-eight percent results in a multiple of 0.63, and ERISA
litigation of this type is complex, considering the history of

6

These hourly rates, while quite high for this district,
are within a reasonable range for firms with national class
action practices. See, e.g, In re Telik, Inc. Sec. Litig., 576
F.Supp.2d 570, 589 (S.D.N.Y. 2008) (finding reasonable hourly
rates of $700 to $750 for partners).
In any event, as noted
above, the court need not engage in an intensive analysis of the
rates charged when applying the lodestar analysis merely as a
cross-check, in contrast to employing the lodestar method in
full.
See In re WorldCom Sec. Litig., 388 F.Supp.2d 319, 355
(S.D.N.Y. 2005).
38

this

litigation

and

the

public

policy

concerns

with

large

percentage awards in common fund cases, the lower award is more
reasonable.

Furthermore, the low multiplier is, of course, the

result of the claim for nearly 3,000 hours at very high hourly
rates.

While it is not necessary to scrutinize Class Counsel’s

representations

as

closely

as

in

assessment would be appropriate.
only

the

total

hours

pure

lodestar

cases,

some

This record, however, contains

spent

by

each

attorney

and

professional, with no specification of date or task.

other
Without

that back-up detail, it is impossible to assess duplication of
effort or unproductive time.

Accordingly, any assertion that

the quoted multiplier is artificially low likely results from an
inflated lodestar given the characteristics of this case.
2.

Reimbursement for Litigation Expenses

In addition to attorneys’ fees, Plaintiffs’ attorneys seek
$137,315.65 in out-of-pocket expenses incurred throughout the
litigation.

(ECF No. 85-1, at 22).

“It is well-established

that plaintiffs who are entitled to recover attorneys’ fees are
also entitled to recover reasonable litigation-related expenses
as part of their overall award.”

Kabore v. Anchor Staffing,

Inc., No. L-10-3204, 2012 WL 5077636, at *10 (D.Md. Oct. 17,
2012).

The

Fourth

Circuit

has

stated

that

such

costs

may

include “those reasonable out-of-pocket expenses incurred by the
attorney which are normally charged to a fee-paying client, in
39

the course of providing legal services.”
F.2d

762,

Examples

771
of

(4th

costs

Cir.
that

1988)
have

Spell v. McDaniel, 852

(internal
been

quotations

charged

include

omitted).
necessary

travel, depositions and transcripts, computer research, postage,
court costs, and photocopying.

See Almendarez v. J.T.T. Enters.

Corp., No. JKS 06-68, 2010 WL 3385362, at *7 (D.Md. Aug. 25,
2010) (citing Vaughns v. Bd. of Educ. of Prince George’s Cnty.,
598 F.Supp. 1262, 1289-90 (D.Md. 1984)).
The court has reviewed the itemization submitted by class
counsel of the incurred costs and expenses.

The itemization

included filing fees, expert and mediation fees, travel costs,
computer research, copies, and other miscellaneous costs.
Nos

84-3,

84-4,

84-5,

84-6,

86-1

and

86-2).

The

(ECF

requested

reimbursement for expenses appears to be reasonable and typical.
Accordingly, the request for $137,315.65 in expenses will be
approved.
3.

Settlement Administration Expenses

The

Settlement

Agreement

provides

that

the

costs

of

settlement administration will be drawn from the $3.6 Settlement
Fund.

The Agreement provides no limit on the amount of those

expenses, however.

At the final fairness hearing, Plaintiffs

submitted that they have received bids for the work and have
chosen

a

company,

one

they

have

used

in

the

past.

They

anticipate the costs of administrating the Settlement (fees and
40

expenses)
($50,000

to
-

estimate,

be

between

$60,000).

however,

capping costs.
arriving

at

fifty

Class

as

they

and

sixty

counsel

have

not

thousand

could
yet

only

dollars

provide

signed

a

an

contract

The court relies on those cost estimations in

its

conclusions

regarding

attorneys’

fees

and

litigation expenses, and Counsel are well-advised to meet that
budget.
4.

Reasonableness of the Incentive Payments

As a last step in granting final approval of the Settlement
Agreement,

the

court

must

assess

the

reasonableness

of

the

$5,000 incentive payments to each Named Plaintiff: Loretta Boyd,
Christopher

Sawney,

Karen

Billig,

Jack

J.

Nelson,

and

Karen

Milner.
Incentive

payments

to

class

awarded in Rule 23 class actions.

representatives

have

been

See, e.g., In re Tyson Foods,

Inc., No. RDB-08-1982, 2010 WL 1924012, at *4 (D.Md. May 11,
2010).

“Because a named plaintiff is an essential ingredient of

any class action, an incentive award is appropriate if it is
necessary to induce an individual to participate in the suit.”
Cook

v.

Niedert,

142

F.3d

1004,

1016

(7th

Cir.

1998).

To

determine whether an incentive payment is warranted, a court
should consider “the actions the plaintiff has taken to protect
the interests of the class, the degree to which the class has
benefitted from those actions, and the amount of time and effort
41

the plaintiff expended in pursuing the litigation.”

Id.

at

1016.
Here,

the

Settlement

Agreement

–

to

which

no

one

has

objected - contemplates an incentive payment of $5,000 to each
Named Plaintiff, in addition to their receipt of a settlement
payment.

(ECF No. 77, at 17).

In the final approval motion,

Plaintiffs represent that this award is justified because each
Named Plaintiff spent a considerable amount of time over the
past four years contributing to the litigation and benefiting
the class by reviewing the relevant documents; staying apprised
of developments in the case and making themselves available to
class counsel; providing class counsel extensive information and
materials

regarding

Defendants’

document

their

Plan

requests;

investments;

and

reviewing

responding
and

to

ultimately

approving the terms of the settlement.
In light of the Named Plaintiffs’ role in initiating this
lawsuit and devoting the time and effort necessary to achieve a
favorable resolution, the relatively modest incentive payment of
$5,000

to

each

approved.

Named

This

amount

Plaintiff
is

at

*9

reasonable

comparable

approved in similar ERISA cases.
6511860,

is

(approving

to

and

incentive

will

be

payments

See, e.g., Griffin, 2013 WL

incentive

payment

of

$5,000);

Wachovia, 2011 WL 7787962, at *7 (same); Broadwing, Inc., 252
F.R.D.

at

382

(same);

Sprint

Corp.,

42

443

F.Supp.2d

at

1271

(same); In re WorldCom, Inc. ERISA Litig., Case No. 02 Civ.
4816(DLC), 2004 WL 2338151, at *11 (S.D.N.Y. Oct. 18, 2004)
(same).
III. Conclusion
For the foregoing reasons, the unopposed motion for final
approval of the Settlement Agreement will be granted, with the
change in the amount for attorneys’ fees.

A separate Order will

follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

43