Latorraca, et al v. Centennial Technologies Inc., et al

Filing 452

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "In accordance with the foregoing, plaintiffs motion for an Award of Attorneys Fees and Reimbursement of Expenses (Docket No. 446 ) is ALLOWED, in part, and DENIED, in part. Class Counsel is awarded $151,200 for attorneys fees and $15,515 for expenses. Claims Administrator Berdon LLP is awarded $30,000 for its services. So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
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)
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v.
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CENTENNIAL TECHNOLOGIES INC.
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and EMANUEL PINEZ,
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Defendants,
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________________________________ )
SAL LATORRACA,
on behalf of himself and
others similarly situated,
Consolidated Lead
Plaintiff,

Civil No.
97-10304-NMG

MEMORANDUM & ORDER
GORTON, J.
Class action plaintiffs were awarded judgment against
Centennial Technologies, Inc. (“Centennial”) and Emanuel Pinez
(“Pinez”), Centennial’s founder and former Chief Executive
Officer, in an action for issuing false and misleading statements
in violation of multiple federal securities laws and improperly
trading in Centennial options on insider information.

Pending

before this Court is plaintiffs’ post-judgment motion for an
Award of Attorneys’ Fees and Reimbursement of Expenses.
I.

Background
This class action arose from one of the largest financial

frauds in Massachusetts history.

Pinez admitted disseminating

materially false and misleading financial statements for the
fiscal years 1994, 1995 and 1996.
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As a result of those false

statements, the price of Centennial’s stock rose from $6 per
share in 1994, to $55 per share by late 1996.

However, the true

financial condition of the company was worse than publicly
reported.

When the fraud was ultimately disclosed, Centennial’s

stock price collapsed to below $2 per share, decimating the
market value of the investors’ shares and thereby purportedly
defrauding them of millions of dollars.
After successful prosecution of the class action, judgment
was entered against Emanuel Pinez for $207 million in November,
2000.

In the five years that followed, the plaintiffs struggled

to recover even a portion of that judgment.
In the Fall of 2005, Class Counsel discovered an account at
H&R Block Financial Advisors, Inc. (“H&R Block”) in the name of
Taniki Financial Corporation (“the Taniki account”), which was
opened in 1994 by Mr. Pinez and his wife.

This Court promptly

granted plaintiffs’ motion to attach the Taniki account.

In

2008, Class Counsel succeeded in enlarging the attachment to
include the interest accrued in the account since the original
attachment.

This Court then assessed H&R Block as a trustee the

amount of $665,320 in partial satisfaction of the outstanding
$207 million judgment against Mr. Pinez.
Following an unsuccessful appeal by Taniki, H&R Block
transferred the remaining funds in the Taniki Account, $604,837,
to the Claims Administrator, Berdon LLP, after subtracting its

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own costs and fees.

The funds obtained on behalf of the Class

are now subject to Class Counsel’s pending request for attorneys’
fees, Claims Administrator’s fees and reimbursement of expenses.
II.

Legal Analysis
In his Motion for Award of Attorneys’ Fees, Class Counsel

requests attorneys’ fees of 30% of the common fund plus
reimbursement of $15,515 in out-of-pocket expenses.

Class

Counsel also requests $30,000 to be paid to the Claims
Administrator for its fee and reimbursement of out-of-pocket
expenses incurred in connection with his distribution of funds to
the Class.
A.

Standard

A lawyer who recovers a common fund for a class she
represents is entitled to reasonable attorneys’ fees and
reimbursement of expenses prior to the distribution of the
balance to the class.
478 (1980).
fees.

Boeing Co. v. Van Gemert, 444 U.S. 472,

Courts have wide discretion when awarding attorneys’

In re Thirteen Appeals Arising Out of San Juan, 56 F.3d

295, 307 (1st Cir. 1995).

In addition to ensuring that Class

Counsel is fairly compensated for his efforts, the district court
is obligated to function as “a quasi-fiduciary to safeguard the
corpus of the fund for the benefit of the plaintiff class.”
re Fidelity/Micron Sec. Litig. v. Fidelity Magellan Fund, 167

In

F.3d 735, 736 (1st Cir. 1990).

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In a common fund case, the district court may calculate
attorneys’ fees by either the percentage of the fund (“POF”)
method or the lodestar method. In re Thirteen Appeals, 56 F.3d at
307.

The First Circuit has acknowledged the “distinct

advantages” in utilizing the POF method, explaining that it is
less burdensome, enhances efficiency and better approximates the
workings of the marketplace. Id.
Courts in this circuit generally award attorneys’ fees in
the range of 20-30%, with 25% as “the benchmark,” Conley v.
Sears, Roebuck & Co., 222 B.R. 181, 187 (D. Mass 1998) (citing
Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301,
1311 (9th Cir. 1990)); see also New Eng. Carpenters Health
Benefits Fund v. 1st Databank, Inc., No. 05-CV-11148-PBS, 2009
U.S. Dist. LEXIS 68419, at *9 (D. Mass. Aug. 3, 2009) (20%); In
re Am. Dental Partners, Inc. Sec. Litig., No. 08-CV-10119-RGS,
2010 U.S. Dist. LEXIS 35074, at *2 (D. Mass. Apr. 9, 2010)
(22.5%); In re Fleet/Norstar Sec. Litig., 935 F. Supp. 99, 110
(D.R.I. 1996) (20%); In re Puerto Rican Cabotage Antitrust
Litig., No. 08-MD-1960(DRD), 2011 U.S. Dist. LEXIS 113980, at *48
(D.P.R. Sept. 13, 2011) (23%); Theodore Eisenberg & Geoffrey P.
Miller, Attorneys’ Fees & Expenses in Class Action Settlements:
1993-2008, J. of Empirical Legal Stud. 248 (2010)(Table
4)(finding that the median and mean attorneys’ fees awarded in
the First Circuit are 20%).

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In addition to attorneys’ fees, lawyers who recover a common
fund for a class are entitled to reimbursement of out-of-pocket
expenses incurred during litigation. In re Fidelity/Micron Sec.
Litig., 167 F.3d at 737.

Again, reasonableness is the goal, and

it is within the court’s discretion to reject or scale back any
expenses deemed superfluous or unreasonable. Id.

When a court

uses the POF method to calculate attorneys’ fees, it may set the
percentage award at a level which not only accounts for fees but
covers reimbursable expenses as well. Id.
Claim Administrators are also entitled to a reasonable fee
for their services in a common fund case.

See, e.g., Dare v.

Knox County, No. 02-251-P-C, 2007 U.S. Dist. LEXIS 49814, at *3
n.1 (D. Me. July 9, 2007); In re Gilat Satellite Networks, Ltd.,
No. CV-02-1510(CPS)(SMG), 2009 U.S. Dist. LEXIS 25109, at *20
(E.D.N.Y. March 25, 2009); Shaw v. Toshiba Am. Info. Sys., No.
99CV0120, 2000 U.S. Dist. LEXIS 3592, at *86 (E.D. Tex. Jan. 31,
2000).

As with any fee request, reasonableness is the touchstone

by which it will be measured.
B.

Application

Class Counsel requests a fee of 30% of the common fund, or
$181,000, and reimbursement of $15,515 for out-of-pocket
expenses.

Class Counsel argues that his request is reasonable in

light of the complicated nature of the case and Class Counsel’s
diligent efforts in securing the funds from the Taniki account
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for the Class.

While noting Class Counsel’s concerted efforts,

the aggregate of the funds collected to date is $604,837, well
below 1% of the $207 million judgment.

This Court must balance

the interests of the Class Plaintiffs, who have received only a
fraction of the damages awarded to them, with those of Class
Counsel, who has undoubtedly worked diligently for his clients.
The sum of the fees and expenses requested by Class Counsel
is approximately 38% of the common fund.

That percentage, though

high relative to amounts awarded in similar cases, is not per se
unreasonable.

In light of the relatively modest recovery for the

Class Plaintiffs thus far, it is, however, excessive in this
case.
For his successful prosecution of the case and diligent
efforts to attach the Taniki account, Class Counsel’s motion for
fees and expenses will be allowed but his fees will be reduced to
25% of the aggregate collected.

Accordingly, $151,200 will be

awarded to Class Counsel for attorneys’ fees, along with $15,515
as reimbursement for his expenses.

The Claims Administrator is

entitled to its fee, and, as such, $30,000 will be awarded to
Berdon LLP.

This aggregate award is reasonable in this case and

protects the interests of the Class Plaintiffs by awarding them
roughly two-thirds ($408,122) of the $604,837 recovered from the
Taniki account.

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ORDER
In accordance with the foregoing, plaintiffs’ motion for an
Award of Attorneys’ Fees and Reimbursement of Expenses (Docket
No. 446) is ALLOWED, in part, and DENIED, in part.

Class Counsel

is awarded $151,200 for attorneys’ fees and $15,515 for expenses.
Claims Administrator Berdon LLP is awarded $30,000 for its
services.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated November 22, 2011

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