Arkansas Teacher Retirement System v. State Street Corporation et al

Filing 590

Judge Mark L. Wolf: ORDER entered. MEMORANDUM AND ORDER. It is hereby ORDERED that:1. The Proposed Resolution of Labaton's Objections to theSpecial Master's Report (Dkt. No. 485) is DENIED.2. After hearings and considering de< /u> novo all objections to the Master's Findings of Fact and Conclusions of Law, including Labaton's, the Master's Report and Recommendation (Dkt. No. 357) is ADOPTED in part, REJECTED in part, and MODIFIED in the manner describ ed in this Memorandum and Order. See Fed. R. Civ. P. 53(f). More specifically, $60,000,000 is awarded to counsel forplaintiffs as reasonable fees and expenses. From the $60,000,000 a total of $22,202,131.25 shall be paid to Labaton; a total of $13,261,908.10 shall be paid to Thornton; a total of $15,233,397.53 shall be paid to Lieff; a total of $3,978,152.18 shall be paid to Keller Rohrback; a total of $3,439,775.42 shall be paid to McTigue; and a total of  6;3,298,598.55 shall be paid to Zuckerman Spaeder.3. Service Awards shall be paid as follows: $15,000 to ATRS, and $10,000 to each of the six ERISA Plaintiffs, Arnold Henriquez, Michael T. Cohn, William R. Taylor, Richard A. Sutherland, The Andover Companies Employee Savings and Profit Sharing Plan, and James Pehoushek-Stangeland.4. This matter is RESUBMITTED to the Master. The Master shall, by March 23, 2020:(a) Consult Class Counsel, ERISA Counsel, and CCAF, and report conce rning whether notice to the class of new awards that have been ordered is legally required or appropriate. If the Master or anyone consulted is of the view that notice to the class should be given, the Master shall submit a proposed form of notice.(b)Report how he proposes to manage the implementation of this Order, including the required recovery from Labaton, Thornton, and Lieff of fees previously awarded, and the reallocation of them to other counsel and the class.(c) Identify and provi de advice on any other issues relevant to the implementation of this Order.5. Labaton and Thornton shall, by March 11, 2020, provide to the Clerk of the United States District Court for the District of Massachusetts an additional $250,000 eac h to pay past and future reasonable fees and expenses of the Master and any firm, organization, or individual assisting him.6. The Clerk shall send this Memorandum and Order to the Massachusetts Board of Bar Overseers for whatever action, if any, it deems appropriate. Upon request, the Clerk shall provide the Board any documents in the public record of this case. The Board of Bar Overseers may move for the unsealing of sealed documents. The Board shall report its final actions to the court. (Attachments: # 1 Exhibit A)Associated Cases: 1:11-cv-10230-MLW, 1:11-cv-12049-MLW, 1:12-cv-11698-MLW(Montes, Mariliz)

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 1 of 159

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
ARKANSAS TEACHER RETIREMENT SYSTEM,
on behalf of itself and all others
similarly situated,
Plaintiff,
v.
STATE STREET BANK AND TRUST COMPANY,
Defendant.
ARNOLD HENRIQUEZ, MICHAEL T. COHN,
WILLIAM R. TAYLOR, RICHARD A.
SUTHERLAND, and those similarly
situated,
Plaintiffs,
v.
STATE STREET BANK AND TRUST COMPANY,
Defendant.
THE ANDOVER COMPANIES EMPLOYEE
SAVINGS AND PROFIT SHARING PLAN, on
behalf of itself, and JAMES
PEHOUSHEK-STANGELAND and all others
similarly situated,
Plaintiffs,
v.
STATE STREET BANK AND TRUST COMPANY,
Defendant.

)
)
)
)
) C.A. No. 11-10230-MLW
)
)
)
)
)
)
)
)
) C.A. No. 11-12049-MLW
)
)
)
)
)
)
)
)
)
)
) C.A. No. 12-11698-MLW
)
)
)
)
)

MEMORANDUM AND ORDER
WOLF, D.J.

February 27, 2020

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 2 of 159

TABLE OF CONTENTS
SUMMARY..................................................... 3
PROCEDURAL BACKGROUND..................................... 31
THE STANDARDS FOR AWARDING ATTORNEYS' FEES............... 33
THE FACTS................................................. 40
The Approval of the Proposed Settlement ................40
The Reports of Errors in the Fee Petitions .............46
The Appointment of the Master ..........................52
The Master's Investigation .............................59
The Report and Recommendations .........................62
Proceedings Following Submission of the Master's
Report and Recommendations .............................69
THE AWARD OF ATTORNEYS' FEES............................... 77
The Role of the Court ..................................77
Megafund Cases .........................................78
The Applicable Standards ...............................79
Analysis of Certain Relevant Factors ...................80
Public Policy Considerations ...........................84
The Duty of Candor.................................. 84
Thornton, Labaton, and Lieff ..................... 86
An Award of $60,000,000 in Attorneys' Fees is
Reasonable and Most Appropriate. ......................126
Allocation of the Fee and Expense Award ...............144
Service Awards ........................................153
REFERRAL TO THE MASSACHUSETTS BOARD OF BAR OVERSEERS..... 154
IMPLEMENTATION OF THIS MEMORANDUM AND ORDER............. 155

2

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 3 of 159

CONCLUSION............................................. 156
ORDER.................................................... 157

SUMMARY
In 1913, Supreme Court Justice Oliver Wendell Holmes said that
"[j]udges are apt to be naif, simple-minded men . . . ." Occasional
Speeches of Justice Oliver Wendell Holmes 172 (Howe ed. 1962).
This case is a reminder that he was right.
Judges trust lawyers. They expect that lawyers will provide
the court the accurate and complete information that is necessary
to decide matters properly. The Federal Rules of Civil Procedure
and the Massachusetts Rules of Professional Conduct make these
expectations legal obligations.
For example, Federal Rule of Civil Procedure 11(b) provides
that

by

presenting

a

pleading

to

a

court

an

attorney

is

representing that he or she has made a reasonable inquiry and that
all factual contentions are supported by evidence. This means,
among other things, that an attorney who has signed a memorandum
or sworn declaration that is submitted to the court represents
that he or she has read the document and that the statements in it
are true. In addition, Rule 11 requires that an attorney not
continue to advocate positions based on false statements after he
or she learns they are not true. Similarly, Massachusetts Rule of

3

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 4 of 159

Professional Conduct 3.3(a) requires that an attorney not make a
false statement to a court and that an attorney correct any such
false statement when it is discovered to be untrue.
Judges also expect that complex class action cases conform to
the paradigm prescribed by statutes, Supreme Court decisions, and
other

well-established

jurisprudence.

Although

the

instant

consolidated cases are not subject to the Private Securities
Litigation Reform Act ("PSLRA"), 15 U.S.C. §78u-4, the parties
agree that its principles apply here too.
Prior to the enactment of the PSLRA, there was "a cottageindustry

of

specialized

securities

litigation

firms

that

researched potential targets for [class action] suits, enlisted
plaintiffs, controlled the course of the litigation, and often
negotiated settlements that resulted in huge profits for the law
firms with only marginal recovery for the shareholders." In re
Cendant Corp. Litig., 182 F.R.D. 144, 145 (D.N.J. 1998) (internal
quotation marks omitted), aff'd, 264 F.3d 201. The PSLRA was
intended to assure that institutional investors with a large
financial stake in the litigation would "choose counsel rather
than, as [was] true [in 1995], counsel choosing the plaintiff."
H.R. Conf. Rep. No. 104-369, at 35. It was expected that such an
institutional investor would have "sophistication and interest in
the litigation [] sufficient to permit that . . . entity to
function as an active agent for the class" and "actively supervise

4

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 5 of 159

the conduct of the litigation." Cendant Corp., 264 F.3d at 26667.
Attorneys always have a duty to provide their clients with
the information necessary to permit the clients to make informed
decisions concerning the representation. See Massachusetts Rules
of

Professional

Conduct

1.4(a)(1),

(b).

For

an

attorney

representing a class, providing material information to all class
members is required. Courts expect counsel to discharge this duty
too.
When a class action has been settled, a common fund must be
divided between class counsel and the members of the class. At
this point, there is a tension between the interests of counsel in
maximizing their compensation and the interests of members of the
class in maximizing their recovery. The court, therefore, acts as
a fiduciary to protect the interests of the class.
A defendant who has agreed to settle for a total sum has no
interest in how the common fund is divided between counsel and the
class. Thus, the usual adversary system does not operate to expose
possible misrepresentations by counsel for the class to the court.
Recognizing this, the Massachusetts Rules of Professional Conduct
deem a petition to approve the settlement of a class action to be
an ex parte proceeding. See Mass. R. Prof. C. 3.3 cmt. 14A.
Accordingly, lawyers for the class are required to inform the court
of all material facts, "whether or not the facts are adverse" to

5

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 6 of 159

the attorneys' personal interests. Mass. R. Prof. C. 3.3(d). Judges
trust attorneys to discharge this duty when seeking an award of
attorneys' fees, among other things.
Usually courts award class counsel a percentage of the common
fund as attorneys' fees. Frequently the most appropriate award is
found to be in the 20 to 30% range. However, the percentage award
is

usually

less

than

20%

if

the

common

fund

is

more

than

$250,000,000.
There

are

a

series

of

well-known

factors

that

judges

customarily consider in awarding attorneys' fees. These include:
(1) the size of the fund and the number of persons
benefitted; (2) the skill, experience, and efficiency of
the attorneys involved; (3) the complexity and duration
of the litigation; (4) the risks of the litigation;
(5) the amount of time devoted to the case by counsel;
(6) awards in similar cases; and (7) public policy
considerations.
In re Neurontin Mktg. & Sales Practices Litig., 58 F. Supp. 3d
167, 170 (D. Mass. 2014) (citation omitted). Assuring the integrity
of

judicial

proceedings

is

an

important

public

policy

consideration. Therefore, among other things, "courts should look
to the various codes of ethics as guidelines for judging the
conduct of counsel" in making fee awards. In re Agent Orange Prod.
Liab. Litig., 818 F.2d 216, 222 (2d Cir. 1987).
"'Every lawyer is an officer of the court [and] has a duty of
candor to the tribunal.'" Pearson v. First NH Mortg. Corp., 200
F.3d 30, 38 (1st Cir. 1999) (quoting Burns v. Windsor Ins. Co., 31

6

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 7 of 159

F.3d 1092, 1095 (11th Cir. 1994)). If counsel in a class action
fail in their duty to be candid with the court, it is permissible
and appropriate for the court to take this into account in deciding
what amount within the reasonable range is most appropriate to
award as attorneys' fees. In some cases it is most appropriate to
deny an award of attorneys' fees as a sanction for misconduct.
In addition to considering the customary factors, courts
regularly check the reasonableness of a requested fee award against
the

"lodestar"

of

plaintiff's

counsel

to

determine

whether

awarding a multiple of the lodestar is justified. A lodestar is
calculated by multiplying the number of hours reasonably spent on
the litigation by a reasonable hourly rate for each attorney. See
In re Thirteen Appeals Arising out of the San Juan Dupont Plaza
Hotel Fire Litig., 56 F.3d 295, 305 (1st Cir. 1995) (citing Blum
v. Stenson, 465 U.S. 886, 896-902 (1984)). "Reasonable fees are to
be calculated according to the prevailing market rates in the
relevant community . . . ." Blum, 465 U.S. at 895. "[T]he rate
that private counsel actually charges for her services, while not
conclusive, is a reliable indicium of market value." United States
v. One Star Class Sloop Sailboat, 546 F.3d 26, 40 (1st Cir. 2008)
(emphasis added).
Only counsel for a class possess the information necessary to
calculate the lodestar, which they know will be used to test the
reasonableness of their request for attorneys' fees. Therefore, it

7

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 8 of 159

is especially important that their representations concerning the
lodestar be reliable. Judges expect that such representations have
been carefully considered and are correct.
In 2016, these consolidated cases seemed to fit the PSLRA
paradigm for class actions. Arkansas Teachers Retirement System
("ATRS"), the representative of the class of customers alleging
fraud in billing for foreign exchange transactions by defendant
State

Street

Bank

and

Trust

Co.

("State

Street"),

was

an

institutional investor with experience as the Lead Plaintiff in
class actions. ATRS had reportedly selected experienced counsel,
Labaton

Sucharow

LLP

("Labaton").

Labaton

involved

other

experienced counsel, The Thornton Law Firm ("Thornton"), and Lieff
Cabraser Heimann & Bernstein, LLP ("Lieff") (collectively, "Class
Counsel").

In

addition,

several

Employee

Retirement

Income

Security Act ("ERISA") pension plans ("ERISA Plans") in separate
suits consolidated with the ATRS case made comparable allegations
of

fraud

and

were

also

represented

by

experienced

counsel

(collectively, "ERISA Counsel").
In 2016, the parties moved for approval of a $300,000,000
settlement and for a fee award to plaintiffs' counsel of about 25%
of that common fund -- approximately $75,000,000. 1 At a November

1

Counsel requested, and the court awarded, $74,541,250 in
attorneys' fees and $1,257,697.94 in expenses. For simplicity, in
this Memorandum the award is referred to as a $75,000,000 award.

8

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 9 of 159

2, 2016 hearing, the court repeatedly stated that because the
adversary system was not then operating, it was relying heavily on
the representations of plaintiffs' counsel. After approving the
settlement,

considering

the

customary

factors,

and

doing

a

lodestar check, the court decided that their reported multiplier
of

1.8

was

reasonable,

and

awarded

counsel

the

requested

$75,000,000 in attorneys' fees.
The evolution of events since has demonstrated that the
court's assumptions in awarding fees were incorrect in material
respects. Many of the representations made to the court in support
of the request for attorneys' fees by Labaton and Thornton, and to
a lesser extent by Lieff, were untrue. In addition, the court now
realizes that the relationship between ATRS and Labaton in this
case was very different than the previously described paradigm for
complex class actions.
About a week after the court ordered the $75,000,000 fee
award, David Goldsmith of Labaton informed the court that inquiries
from the media had caused Class Counsel to realize that they had
inadvertently double-counted the hours of staff attorneys who
worked on this case. This error inflated what had been represented
to be their collective lodestar by more than 9,300 hours and more
than

$4,000,000.

Goldsmith

asserted

that,

nevertheless,

a

multiplier of 2.0, rather than 1.8, as originally erroneously

9

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 10 of 159

calculated, was reasonable and that the court should not reduce
the $75,000,000 award.
Soon

after,

a

Boston

Globe

article

raised

additional

questions about the reliability of the representations made by
counsel in their request for attorneys' fees. For example, it was
reported that staff attorneys who were represented as having a
regular rate of $335 to $500 an hour, were typically paid $25 to
$40 an hour. Moreover, the article pointed out that different
hourly rates had been attributed to the attorneys who were doublecounted by different firms, which suggested that those rates may
have been fabricated. In addition, it was reported that Michael
Bradley, the brother of Thornton Managing Partner Garrett Bradley,
had been represented to be an employee of Thornton with a regular
rate of $500 an hour, but was actually a sole practitioner who
never charged that much and often made $53 an hour representing
indigents in state court.
A subsequent Boston Globe story described the means by which
Labaton and Thornton reportedly obtained clients in Massachusetts.
Garrett

Bradley

was

the

Assistant

Majority

Leader

of

the

Massachusetts House of Representatives. He exploited his political
connections to get business. In addition, many Labaton and Thornton
lawyers

made

campaign

contributions

to

elected

officials

who

chaired public pension funds. Those funds retained Labaton to
monitor their investments and to represent them as Lead Plaintiffs

10

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 11 of 159

in class actions. The Plymouth County Retirement Fund, which
Garrett Bradley had recruited as a client, and whose Chair had
received

substantial

campaign

contributions

from

Labaton

and

Thornton lawyers, reportedly recovered about $40,000 in cases in
which it represented a class, while Labaton was in those cases
awarded more than $41,000,000, which it shared with Thornton.
Another fund, chaired by the Treasurer of the Commonwealth of
Massachusetts who had received campaign contributions from Labaton
and Thornton, reportedly recovered in two class actions about
$682,000, while Labaton was awarded approximately $60,000,000,
which it also shared with Thornton.
In view of the questions raised by the inflated lodestar and
the Boston Globe articles -- which evidently prompted Garrett
Bradley to resign from the Massachusetts House of Representatives
-- the court proposed appointing Retired United States District
Judge Gerald Rosen as a Master to investigate the reliability of
the representations made to the court in the request for attorneys'
fees and related issues.
On March 7, 2017, the court conducted a hearing on its
proposal

to

appoint

Judge

Rosen

as

Master.

The

Competitive

Enterprise Institute's Center for Class Action Fairness ("CCAF") 2

2

CCAF is no longer part of the Competitive Enterprise
Institute. It is now, instead, part of the Hamilton-Lincoln Law
Institute.
11

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 12 of 159

moved for leave to serve as guardian ad litem for the class and/or
to make submissions to the court and Master as amicus curiae. Class
Counsel opposed these requests. The court did not appoint CCAF as
guardian ad litem or authorize it to participate in proceedings
before the Master. The court did, however, allow CCAF to make
submissions to the court and participate in hearings it conducted.
CCAF brought expertise to the proceedings, which was often very
helpful to the court. 3
Led by Labaton, Class Counsel and ERISA Counsel agreed to the
appointment of Judge Rosen as Master. They also agreed to pay the
reasonable cost of his services and those he engaged to assist
him. 4
In appointing the Master, the court ordered that:
The Master shall investigate and prepare a Report
and Recommendation concerning all issues relating to the
attorneys' fees, expenses and service awards previously
made in this case. The Report and Recommendation shall
address, at least: (a) the accuracy and reliability of
the representations made by [Class Counsel] in their
requests for awards of attorneys' fees and expenses,
including but not limited to whether counsel employed
the correct legal standards and had a proper factual
basis for what was represented to be the lodestar for
each firm; (b) the accuracy and reliability of the
representations made in the November 10, 2016 letter
3

The court would consider ordering that CCAF be compensated
for its work if it had the authority to do so.

4

The initial payment to the Clerk of the District Court by
Labaton on behalf of Class Counsel was $2,000,000. Counsel were
informed that the court would order additional payments if
necessary.

12

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 13 of 159

from David Goldsmith, Esq. of Labaton Sucharow, LLP to
the court (Docket. No. 116); (c) the accuracy and
reliability of the representations made by [Class
Counsel and each of the named plaintiffs in] requesting
service awards; (d) the reasonableness of the amounts of
attorneys' fees, expenses, and service awards previously
ordered, and whether any or all of them should be
reduced;
(e) whether
any
misconduct
occurred
in
connection with such awards; and, if so, whether it
should be sanctioned, see e.g. Fed. R. Civ. P. 11(b)(3)
& (c); Massachusetts Supreme Judicial Court Rule of
Professional Conduct 3.3(a)(1) & (3).
Mar. 8, 2017 Order (Dkt. No. 173). The Master was ordered to
attempt to complete his investigation by October 10, 2017, but the
court authorized him to request an extension of time to do so if
necessary.
In order to eliminate any possible doubt about the court's
authority to modify the $75,000,000 fee award after receiving the
Master's

Report

and

Recommendations,

the

court

subsequently

vacated the original fee award.
The Master worked hard to complete his investigation and
Report. However, the process became protracted when -- based on
documents produced by Thornton, but not Labaton or Lieff -- the
Master discovered that Labaton had agreed to pay $4,100,000 to
Damon Chargois, a lawyer who had done no work on this case, as an
ethically impermissible finder's fee for the role of his firm,
Chargois & Herron, in influencing ATRS to employ Labaton.
On May 14, 2018, the Master filed his 377-page Report and
Recommendations (the "Report") and an Executive Summary of it. The

13

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 14 of 159

Report was filed under seal to permit the parties to propose
redactions. The court denied Labaton's request to keep under seal
all references to Chargois, whom it had secretly paid 20% of its
fee -- amounting to millions of dollars -- in eight other class
action cases in which it had represented ATRS. In addition, the
court

denied

Labaton's

motion

to

disqualify

the

court

from

continuing to preside in this case and the First Circuit promptly
denied Labaton's appeal of that decision. The court also denied
Labaton's

motion

to

prevent

the

Master

from

responding

to

objections to his Report.
The Master's Report recommended that the court again award
$75,000,000 but reallocate it because of the misconduct by Class
Counsel that he found. If adopted, the Master's recommendations
would reduce Class Counsel's compensation: from about $32,000,000
to about $26,000,000 for Labaton; from about $20,000,000 to about
$17,000,000 for Thornton; and from about $16,000,000 to about
$13,000,000 for Lieff. The Master also recommended that additional
payments be made to ERISA Counsel to compensate them for the cost
of participating in the proceedings after the original fee award
that were prompted by the misconduct of Class Counsel. In addition,
the Master recommended that some of the funds "disgorged" by Class
Counsel go to the class. The Master also recommended that sanctions
in the amount of $400,000 to $1,000,000 be imposed on Thornton
pursuant to Federal Rule of Civil Procedure 11 and that Garrett

14

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 15 of 159

Bradley be referred to the Massachusetts Board of Bar Overseers
for disciplinary action.
Numerous objections to the Report were filed. Eventually,
however, Labaton and ERISA Counsel agreed to settle their disputes
with the Master, if the court approved that settlement (the
"Proposed

Resolution").

Nevertheless,

Lieff

and

Thornton

maintained their objections to the Report.
The

court

conducted

hearings

on

all

of

the

objections,

including Labaton's, in June 2019. It is now deciding de novo each
objection to the Master's findings of fact and conclusions of law.
See Fed. R. Civ. P. 53(f)(3) & (4). It is also, in effect, modifying
his Report. See Fed. R. Civ. P. 53(f)(1).
As described in detail in this Memorandum, the court finds
that it is reasonable and most appropriate to award attorneys'
fees in the amount of $60,000,000, which constitutes 20% of the
$300,000,000

common

fund.

It

is

exercising

its

authority

to

allocate the total award among the participating firms as follows:
$22,202,131.25

to

Labaton;

$13,261,908.10

to

Thornton;

$15,233,397.53 to Lieff; and a total of $10,716,526.15 to all ERISA
Counsel. 5 The court is reducing the Service Award to ATRS from
$25,000 to $15,000 and reinstating the original $10,000 service

5

A chart comparing the amount to be received by each firm under
the original award, the Master's recommendations, and this
Memorandum and Order is attached hereto as Exhibit A.

15

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 16 of 159

awards to the six ERISA plaintiffs. An additional more than
$14,000,000 is, therefore, being allocated to the class.
In summary, the reasons for the court's decision concerning
the most appropriate amount to award as attorneys' fees is as
follows.
The court begins by assuming that an award of 20% to 30% would
be reasonable, and uses 25% as a starting point for determining
the amount to be awarded. It does not presume that a lower
percentage of the common fund should be awarded merely because
this case involves a "megafund" of more than $100,000,000.
The court recognizes that this was a complex case in which
capable

counsel

achieved

for

the

class

an

unusually

large

settlement -- $300,000,000. At the outset the case was based on an
untested

theory

of

liability

under

Massachusetts

consumer

protection law and was, therefore, risky. However, the risk that
the class and, therefore, counsel would recover nothing was greatly
reduced when the court denied State Street's motion to dismiss the
ATRS case. Since being appointed in 1985, this court has never
been required to try a class action. Rather, every case that has
survived a motion to dismiss has subsequently been settled. There
is no reason to believe that this court's experience is unique or
unusual. In essence, the court believes that when class action
cases are carefully chosen by experienced counsel, and claims are
thoughtfully alleged to defeat a motion to dismiss, the questions,

16

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 17 of 159

as a practical matter, are when the case will settle and for how
much.
Lieff and Thornton brought to this case special knowledge and
experience they acquired as plaintiffs' counsel in settling the
first foreign currency exchange class action alleging deceptive
practices. See In re Bank of N.Y. Mellon Corp. Forex Trans. Litig.,
No. 12-md-02335-LAC-JLC (S.D.N.Y.) ("BONY Mellon"), Dkt. No. 581.
The instant case involved far less work than BONY Mellon. Following
the denial of State Street's motion to dismiss there was no further
litigation. Rather, the case was stayed for informal discovery and
the mediation that resulted in settlement.
In view of the foregoing, the court would now award less than
25% of the $300,000,000 common fund as attorneys' fees even if
public policy considerations did not make a lower award reasonable
and most appropriate. However, like the Master, the court now finds
that the submissions of Labaton and Thornton in support of the
request for an award of $75,000,000 were replete with material
false and misleading statements. Labaton and Thornton in many
respects violated Federal Rule of Civil Procedure 11(b) and related
Massachusetts Rules of Professional Conduct. This misconduct makes
an award at the lower end of the presumptive reasonable range -20% -- most appropriate.
In summary, the misconduct of Thornton and Labaton includes,
but is not limited to, the following. Garrett Bradley did not, as

17

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 18 of 159

required

by

Massachusetts

Federal
Rules

Rule
of

of

Civil

Professional

Procedure
Conduct,

11

and

the

read

the

fee

declaration in support of the fee request that he signed under
oath before it was submitted to the court on behalf of Thornton.
It

included

many

false

statements.

For

example,

Bradley

represented that certain attorneys were employed by Thornton and
that the hourly rates attributed to them for the purpose of
calculating Thornton's lodestar were "the same as my firm's regular
rates charged for their services, which have been accepted in other
complex class actions." G. Bradley Decl. ¶4 (Dkt. No. 104-16)
(emphasis added). However, Thornton worked solely on a contingentfee basis. It had no clients who paid the firm on an hourly basis
and no "regular rates charged" for its attorneys. In addition,
Michael Bradley was not, as represented, employed by Thornton. Nor
had the firm, as Garrett Bradley claimed, ever charged $500 an
hour for his services, which in this case were worth far less. 6
Moreover, the staff or contract attorneys Thornton claimed in
its lodestar did not work for Thornton. Rather they were employed
by Labaton or Lieff and paid for by Thornton, primarily to increase
Thornton's lodestar and thus its claim for a higher percentage of
the fees that would foreseeably be awarded. The arrangement for

In this Memorandum, Garrett Bradley will at times be referred
to as "Bradley" and his brother will be referred to as "Michael
Bradley."

6

18

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 19 of 159

Thornton to pay for lawyers employed by Labaton and Lieff led to
the double-counting error that inflated their total lodestar by
over $4,000,000.
Contrary to his testimony under oath on June 25, 2019, see
June 25, 2019 Tr. at 85:25 to 88:13 (Dkt. No. 565), Garrett Bradley
did read his declaration after a December 17, 2016 Boston Globe
article was published. He then knew that the declaration included
false statements. However, he did not, as required by Rule 11 and
the Massachusetts Rules of Professional Conduct, inform the court
and correct them. Rather, he permitted Labaton to continue to argue
for an award of $75,000,000 based in part on his false statements.
Labaton also repeatedly violated Rule 11 and the related
Massachusetts Rules of Professional Conduct. Sucharow filed a
sworn declaration stating that the lodestar calculations of all of
plaintiffs' firms that he submitted were "based on their current
billing rates." Dkt. No. 104, ¶176. This was not true with regard
to Thornton, at least. A reasonable inquiry -- such as a question
to Garrett Bradley who was also Of Counsel to Labaton -- would
have revealed Sucharow's sworn statement to be untrue. However,
evidently neither Sucharow nor anyone at Labaton made any inquiry
at all.
Nor did Sucharow or his partner Nicole Zeiss, who was in
charge of assembling the documents in support of the fee petition,
read with reasonable care the declarations concerning the lodestar

19

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 20 of 159

of each firm that Sucharow swore were accurate. If he or she had,
Sucharow or Zeiss would have recognized that many attorneys were
claimed to have been employed by two firms, which attributed
different regular hourly rates to them.
Sucharow also falsely claimed that the rates attributed to
Labaton attorneys were "the same as my firm's regular rates charged
for their services, which have been accepted in other complex class
actions." Dkt. No. 104-15, ¶7 (emphasis added). When Sucharow made
this statement under oath he believed that Labaton did not have
any clients who were charged or paid hourly rates. 7
Sucharow

also

failed

in

his

duty

to

correct

his

false

statements after the Boston Globe alerted Labaton to the doublecounting and later published its first, December 17, 2016 article.
Nor did his partner, Goldsmith, who sent the court the November
10, 2016 letter disclosing the double-counting, but which did not
correct Labaton's false claims to have had regular hourly rates
charged for its attorneys. Rather, Goldsmith continued to rely, in
part, on that false information in arguing that an award of
$75,000,000 as attorneys' fees was justified.
In addition, in the memorandum in support of the request for
a $75,000,000 award, signed by Sucharow for Labaton, and also
represented to have been signed by partners of Thornton and Lieff,

7

Labaton now claims it had a few clients who paid hourly rates.

20

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 21 of 159

Labaton provided a misleading description of a prominent study by
Brian Fitzpatrick. See Brian T. Fitzpatrick, "An Empirical Study
of Class Action Settlements and Their Fee Awards," 7 J. Empirical
Legal

Stud.

811

(2010)

(the

"Fitzpatrick

Study").

Labaton

accurately reported that Fitzpatrick had found that the mean and
median fees awarded in 444 common fund settlements were 25.7% and
25%. Sucharow argued that, therefore, "[t]he 24.85% fee requested
[in this case] is right in line with Professor Fitzpatrick's
findings." Dkt. No. 103-1, at 17-18 of 36.
However, Sucharow did not disclose other findings from the
Fitzpatrick Study that undermined his argument, as was required by
the

Massachusetts

ethical

rules

that

deem

applications

for

attorneys' fees to be ex parte proceedings in which lawyers must
disclose all material facts even if some of them are adverse to
the attorneys' interests. See Mass. R. Prof. C. 3.3 cmt. 14A. More
specifically,

Sucharow

did

not

disclose

that

Fitzpatrick

had

written that: "fee percentage is strongly and inversely associated
with settlement size . . . ; [when] a settlement size of $100
million was reached . . . fee percentages plunged well below 20
percent." Fitzpatrick Study, supra, at 837-38. Nor did Sucharow
reference

Fitzpatrick's

finding

that

in

settlements

between

$250,000,000 and $500,000,000, the mean fee award was 17.8% and
the median award was 19.5%. See id. at 839. It was, therefore,
misleading

for

Sucharow

to

assert

21

that

the

25%

award

being

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 22 of 159

requested

in

this

case

was

"right

in

line

with

Professor

Fitzpatrick's findings." 8
Sucharow also did not disclose to ERISA Counsel, the ERISA
pension

funds

representing,

in
or

the
the

single
court

settlement

that

Labaton

class
would

Labaton
pay

was

Chargois

$4,100,000 as a finders fee for the successful efforts of his
partner Tim Herron to secure ATRS as a Labaton client.
More specifically, in about 2007, Labaton asked Chargois, a
Texas lawyer, to find institutional investors in the Southwest for
Labaton to represent in class actions, and to influence them to
hire Labaton. Neither Chargois nor his partner in Arkansas, Herron,
had any relationship with an institutional investor. However,
Herron knew Arkansas State Senator Steve Faris, who served on the
legislative committee responsible for oversight of ATRS. Chargois
introduced Labaton partners to Faris and said that Faris was
"prepared to . . . take necessary steps [with ATRS] after you do
your thing." Email from Chargois to Belfi (Aug. 9, 2007) (Dkt. No.
454-5). Faris subsequently introduced Labaton to the Executive
Director of ATRS, Paul Doane. Chargois later reported to Labaton

8

A table in the Fitzpatrick Study reported that for settlements
between $250,000,000 and $500,000,000, there was a standard
deviation of 7.9%. Id. at 839. However, Sucharow did not mention
this fact either. If Sucharow had disclosed this finding, he could
have argued that a 25% award would be within the range of the
standard deviation and, therefore, reasonable. The court would
have then assessed the merit of that argument.

22

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 23 of 159

that "[t]he good Senator is finalizing with Paul Doan[e]" an
arrangement for Labaton to represent ATRS, urged Labaton to "act
surprised" when officially informed, and added that "[e]verybody
wants something sometimes." Email from Chargois to Belfi (Sept.
26, 2007) (Dkt. No. 454-8). Labaton was soon hired to serve as a
"monitoring counsel" for ATRS. As monitoring counsel, Labaton
would recommend that ATRS initiate certain class actions and retain
Labaton as lead counsel if ATRS succeeded in being appointed lead
plaintiff.
As a result of being engaged as monitoring counsel by ATRS,
Labaton agreed to pay Chargois 20% of any fee Labaton was awarded
as a lead counsel representing ATRS in a class action, although
neither Chargois nor Herron was expected to serve as local counsel
or do any work on the case. As Chargois credibly explained:
Our deal with Labaton is straightforward-- we got you
ATRS as a client (after considerable favors, political
activity, money spent and time dedicated in Arkansas)
and Labaton would use ATRS to seek [L]ead [C]ounsel
appointments in institutional investor fraud and
misrepresentation cases. Where Labaton is successful in
getting appointed [L]ead [C]ounsel and obtains a
settlement or judgment award, we split Labaton's
attorney fee award 80/20. Period.
Email from Chargois to Belfi (Oct. 18, 2014), R. & R. Ex. 177 (Dkt.
No. 401-176) (emphasis added). With regard to the instant case,
Labaton negotiated a reduced payment to Chargois of $4,100,000.
Thornton and Lieff each contributed to this payment. Thornton was
fully familiar with Labaton's agreement with Chargois. Indeed,

23

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 24 of 159

Garrett Bradley, who was Of Counsel to Labaton, played a leading
role in persuading Chargois to accept a reduced payment. Lieff had
been told that Chargois had served as local counsel. However, Lieff
knew or should have known Chargois did not do any work on this
case and should have at least suspected that the payment was
improper.
Labaton did not inform ATRS, ERISA Counsel or their clients,
or the court of the agreement to pay Chargois. This was consistent
with Labaton's practice of secrecy in the eight other ATRS cases
for which it paid Chargois despite the fact that, in six of them,
Chargois did not file an appearance or do any work.
Labaton's

$4,100,000

payment

to

Chargois

violated

Massachusetts Rule of Professional Conduct 7.2(c), which in 2011
prohibited a lawyer from paying a person for recommending his
services, except for paying a referral fee as defined in Rule
1.5(e). Contrary to Labaton's contentions, a lawyer is a person
and the payment to Chargois was not a permissible "referral fee"
under the Massachusetts Rules.
After the Master discovered the payment to Chargois, Labaton
sought and obtained ratification of it from George Hopkins, who
had succeeded Doane as the Executive Director of ATRS. However,
Labaton was then Lead Counsel for a single class that included the
ERISA pension funds which were not represented by ATRS. Labaton
had a fiduciary duty to all class members, including those funds.

24

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 25 of 159

This included the duty, under Massachusetts Rules of Professional
Conduct 1.4(a)(1) and (b), to provide the ERISA Plans all of the
information

necessary

to

make

informed

decisions

concerning

Labaton's representation, including concerning its request for
attorneys' fees. Labaton violated this duty by failing to inform
the ERISA Plans of the payment to Chargois.
If informed, ERISA Counsel would have viewed the Labaton
payment to Chargois as important to their clients, to the viability
of the settlement that the United States Department of Labor had
approved before it was presented to the court, and to its agreement
with Labaton to accept only ten percent of the total fee award,
about $7,500,000, for the valuable work they did in this case.
At a minimum, ERISA Counsel would have informed the court of
Labaton's obligation to pay Chargois. This would have prompted the
court to question the purpose of the payment, possibly remove
Labaton as lead counsel, and/or reduce the fee awarded to Labaton.
The court had not ordered that counsel disclose the terms of
any agreement concerning fees, as it could have under Federal Rules
of Civil Procedure 23(h) and 54(d)(2). Therefore, in contrast to
the Master, the court does not find that Labaton's failure to
inform the court of the intended payment to Chargois violated
Federal

Rule

violation

of

of

Civil

its

Procedure

duty,

under

23(e)(3).
the

However,

Massachusetts

Labaton's
Rules

of

Professional Conduct, to inform ERISA Counsel and their clients of

25

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 26 of 159

the payment had the practical effect of depriving the court of
important information.
The conduct of Lieff was also deficient, but not as serious
as the misconduct of Labaton and Thornton. Using the template
provided by Labaton, Lieff too represented in its declaration in
support of the fee petition that the hourly rates attributed to
lawyers it employed were "the same as my firm's regular rates
charged for their services, which have been accepted in other
complex class actions." Chiplock Decl. ¶5 (Dkt. No. 104-17).
However, Lieff also worked primarily on a contingent-fee basis and
had only a "handful of paying clients over the years." Mar. 7,
2017 Tr. at 93:17 (Dkt. No. 176). In BONY Mellon, Lieff stated in
its fee declaration that "[t]he hourly rates charged by the
Timekeepers are the Firm's regular rates for contingent cases and
those generally charged to clients for their services in noncontingent/hourly matters." Dkt. No. 622-1 ¶5, BONY Mellon, 12md-02335-LAK-JLC (S.D.N.Y. Aug. 17, 2015), also available at R. &
R. Ex. 186 (Dkt. No. 401-185). To the extent Lieff had ever
actually charged an hourly rate for an attorney involved in this
case, Lieff should have used similar language in the declaration
it submitted to this court.
In

addition,

Lieff

reviewed

and

authorized

Labaton

to

represent that it had signed the memorandum submitted in support
of the request for attorneys' fees that mischaracterized the

26

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 27 of 159

Fitzpatrick Study. In BONY Mellon, Lieff was a signatory of a
memorandum that accurately described the Fitzpatrick Study. Lieff
should have caused Labaton to correct the mischaracterization of
the Fitzpatrick Study in this case.
In contrast to Garrett Bradley and, therefore, Thornton,
Lieff was not accurately or completely informed of the reasons
Labaton was paying Chargois $4,100,000 when it agreed to contribute
$1,000,000 to that payment. More specifically, attorneys at Lieff
had been told Chargois was "local counsel" and testified that they
assumed that Chargois was dealing with ATRS. However, the fact
that Chargois was being paid so much despite doing no work on this
case should have prompted the Lieff lawyers to question Labaton
carefully about the matter. Lieff claims that if fully informed,
it would not have subsidized the payment to Chargois and would
have encouraged Labaton to disclose it to the court. However, its
inaction and acquiescence contributed to the misconduct of Labaton
and Thornton concerning Chargois.
Awarding attorneys' fees in a class action is an exercise of
the

court's

equitable

authority.

Each

case

is

unique

and

"individualization is the name of the game." In re Fidelity/Micron
Secs. Litig., 167 F.3d 735, 737 (1st Cir. 1999). The court now
finds that an award of 20% of the $300,000,000 common fund -$60,000,000 -- is within the reasonable range and most appropriate.

27

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 28 of 159

On closer scrutiny, the court has decided that even absent
the serious, repeated misconduct of Labaton and Thornton, an award
of less than 25% of the common fund would be most appropriate.
However, for the reasons described in detail in this Memorandum,
in this equitable proceeding it is permissible and appropriate to
take that misconduct into account in awarding and allocating
attorneys' fees.
An award of 20% of the common fund is at the low end of the
20-30% range generally presumed to be reasonable. It is above both
the mean of 17.8% and median of 19.5% in settlements between
$250,000,000 and $500,000,000 according to the Fitzpatrick Study
on which plaintiffs' counsel asked the court to rely. It is also
above the average of 13.16% that was awarded in the 20 cases with
settlements between $100,000,000 and $500,000,000 that Labaton's
expert William Rubenstein referenced in an expert declaration. See
Dkt. No. 446-2, Ex. E; see also Dkt. No. 522 at 7. In addition, a
20% award is compatible with what Class Counsel reported to be the
awards in the eight cases in the First Circuit with common funds
exceeding $100,000,000.
A check against the properly calculated lodestar confirms the
reasonableness of a $60,000,000 fee award. It involves a multiplier
of 1.67, which is not materially less than the 1.8 multiplier that
plaintiffs' counsel asserted was reasonable in their request for

28

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 29 of 159

a $75,000,000 award that was based, in part, on an inflated
lodestar calculation.
The parties acknowledge that the court has the authority to
allocate the $60,000,000 among the firms. The court is doing so.
The award of attorneys' fees and expenses now being made is as
follows:

Labaton
Thornton
Lieff
Keller Rohrback
McTigue
Zuckerman Spaeder

Fees
Expenses
Total
21,943,464.40
258,666.85
22,202,131.25
12,966,592.60
295,315.50
13,261,908.10
14,961,453.00
271,944.53
15,233,397.53
3,567,380.83
410,771.35
3,978,152.18
3,367,917.34
71,858.08
3,439,775.42
3,193,191.83
105,406.72
3,298,598.55

TOTAL

60,000,000.00

1,413,963.03

61,413,963.03

ERISA Counsel Total
Customer Counsel Total

10,128,490.00
49,871,510.00

588,036.15
825,926.88

10,716,526.15
50,697,436.88

This fee award provides ERISA Counsel the full amount they
received from the original $75,000,000 award and compensates them
for their lodestar concerning the post-award proceedings prompted
by the misconduct of Labaton and Thornton primarily. Because of
that misconduct, Labaton and Thornton are being required to bear
the full future cost of the Master. Therefore, an additional more
than $14,000,000 is being provided to the class.
The Code of Conduct for United States Judges states that "[a]
judge should take appropriate action upon receipt of reliable
information indicating the likelihood . . . that a lawyer violated
applicable rules of professional conduct." U.S. Judicial Conf.,

29

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 30 of 159

Code of Judicial Conduct for U.S. Judges, Canon 3(B)(6) (Mar.
2019). Therefore, this Memorandum and Order shall be sent to the
Massachusetts Board of Bar Overseers for whatever action, if any,
it deems appropriate.
The court is also ordering that the Master advise concerning
whether it is necessary or appropriate to give notice to the class
of this new fee award and to perform the additional work necessary
to implement the Order concerning attorneys' fees now being issued.
This will entail additional expense. The $4,850,000 previously
paid to the Clerk of Court to compensate reasonably the Master and
those he employs has been substantially spent. Therefore, Labaton
and Thornton are being ordered to provide the Clerk, by March 11,
2020, with an additional $250,000 each for this purpose.
In addition, the Proposed Settlement among Labaton, ERISA
Counsel, and the Master is being denied.
The

United

States

has

a

proud

history

of

honorable,

trustworthy lawyers. However, this case demonstrates that not all
lawyers can be trusted when they are seeking millions of dollars
in attorneys' fees and face no real risk that the usual adversary
process will expose misrepresentations that they make. Therefore,
in making fee awards in class actions, it is important that judges
be skeptical, and do the hard work necessary to protect the
interests of the class and the integrity of the administration of
justice.

30

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 31 of 159

PROCEDURAL BACKGROUND
This matter involves three related class action cases against
State Street which were consolidated for pretrial purposes. In one
case, C.A. No. 11-10230-MLW, ATRS sued State Street on behalf of
a putative class of similarly situated customers, alleging that
State

Street

engaged

in

unfair

and

deceptive

practices

by

overcharging clients for foreign currency exchange transactions.
As requested by ATRS, and approved by the court, the class in that
case has been represented by "Lead Counsel" Labaton, and by
Thornton and Lieff. In the other two cases, C.A. No. 11-12049-MLW
and C.A. No. 12-11698-MLW (the "ERISA cases"), members of employee
pension and retirement plans covered by ERISA alleged that State
Street breached its fiduciary duties under ERISA, and engaged in
transactions prohibited by ERISA, Pub. L. No. 93-406, 88 Stat. 829
(codified in relevant part as amended at 29 U.S.C. §§1001-1461),
with regard to foreign currency exchange. The ERISA plaintiffs
have been represented by McTigue Law LLP ("McTigue"), Zuckerman
Spaeder

LLP

("Zuckerman"),

Keller

Rohrbach

LLP

("Keller"),

(collectively, "ERISA Counsel"), and, to a limited extent, by
several other firms working with them.
In 2012, the court denied State Street's motion to dismiss
the ATRS case. At the request of all parties, the court then stayed
the cases to permit them to engage in informal discovery and
mediated settlement negotiations.

31

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 32 of 159

In July 2016, the parties filed a stipulation of settlement
of

the

three

cases.

They

asked

that

the

court:

certify

for

settlement purposes a single class that included both customers in
the original proposed ATRS class and the ERISA Plans in the
original

proposed

ERISA

classes;

preliminarily

approve

the

settlement; appoint Labaton as "Lead Counsel" for the single class
to

be

certified;

give

class

members

notice

of

the

proposed

settlement and an opportunity to object; and then finally approve
the settlement. While State Street did not admit liability, the
proposed settlement provided for a payment by State Street of
$300,000,000.

It

also

authorized

plaintiffs'

counsel

to

seek

approximately $75,000,000 in attorneys' fees, up to $1,750,000 in
expenses,

and

representatives.

$85,000
The

in

proposed

service

awards

settlement

had

for

the

previously

class
been

approved by the United States Departments of Justice and Labor and
the Securities and Exchange Commission, subject to approval by the
court.
These cases then appeared to the court to fit the paradigm
for securities class actions prescribed by PSLRA, which the parties
agree is equally applicable to these cases. See, e.g., June 26,
2019 Tr. at 126-27 (Dkt. No. 566). As the First Circuit has
written, "[i]n certain types of complex litigation, the lawyers'
monetary interests often comprise a tail that wags the dog."
Fidelity/Micron, 167 F.3d at 736. The PSLRA "was intended to end

32

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 33 of 159

the perceived practice of counsel choosing plaintiffs, operating
without supervision, and often profiting greatly from settlements
that provided little benefit to class members." Garbowski v. Tokai
Pharm., Inc., 302 F. Supp. 3d 441, 443 (D. Mass. 2018). The statute
sought to ensure that plaintiffs' counsel in class actions do not
"litigate with a view toward ensuring payment for their services
without sufficient regard to whether their clients are receiving
adequate compensation in light of evidence of wrongdoing." S. Rep.
No. 104-98, at 6 (1995) (citation omitted).
When the proposed settlement in this case was presented, the
court inferred that ATRS, a sophisticated institutional investor,
had identified a promising basis for a class action, selected
counsel, directed and monitored their performance, and concluded
that about $75,000,000 would be reasonable compensation for their
work. As explained below, Class Counsel and ERISA Counsel did
obtain reasonable compensation for class members. However, the
evolution of events has demonstrated that in the ATRS case, the
appearance of conforming to the proper paradigm was a fiction.
THE STANDARDS FOR AWARDING ATTORNEYS' FEES
The court's authority to award fees "has its origins in
equity . . . ." Fidelity/Micron, 167 F.3d at 737. With regard to
class actions, "[c]ourts have long recognized that a lawyer who
recovers a 'common fund' for the class she represents is entitled
to be paid a reasonable attorneys' fee and her expenses prior to

33

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 34 of 159

the distribution of the balance to the class." In re Lupron Mktg.
& Sales Practices Litig., No. 01-cv-10861-RGS, 2005 WL 2006833, *2
(D. Mass. Aug. 17, 2005). "The common fund doctrine is founded on
the

equitable

principle

that

those

who

have

profited

from

litigation should share its costs." Thirteen Appeals, 56 F.3d at
305 n.6. As the award of attorneys' fees is an exercise of a
court's equitable authority, the court has "wide latitude in
shaping the contours of [attorneys' fee] awards." Fidelity/Micron,
167 F.3d at 736.
In exercising its discretion, the district court "functions
as a quasi-fiduciary to safeguard the corpus of the fund for the
benefit of the plaintiff class." Id.; see also Agent Orange, 818
F.2d at 222 (Federal Rule of Civil Procedure 23(e) "requires court
approval of any settlement of a class action suit and squarely
places the court in the role of protector of the rights of the
class when such a settlement is reached and attorneys' fees are
awarded"); In re Relafen Antitrust Litig., 360 F. Supp. 2d 166,
192-94 (D. Mass. 2005) (collecting authorities). This fiduciary
duty can be difficult to discharge because "the presentation of
the settlement for judicial approval is nonadversarial in nature:
the prior competing parties (class counsel and the defendants)
have resolved their differences and are now in harmony in seeking
the court's approval." 4 William B. Rubenstein, Newberg on Class
Actions §13:40 (5th ed. Dec. 2019 Update). Ultimately, courts have

34

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 35 of 159

to rely on counsel, particularly plaintiffs' counsel, to provide
the accurate and complete information necessary for the court to
exercise properly its discretion in awarding attorneys' fees. The
Massachusetts Rules of Professional Conduct impose on attorneys
seeking a fee award in a class action the duty to do so. See Mass.
R. Prof. C. 3.3.
Courts

may

award

fees

from

a

common

fund

"either

on

a

percentage of the fund basis or by fashioning a lodestar." Thirteen
Appeals, 56 F.3d at 307. "[T]he [percentage of fund] method in
common fund cases is the prevailing praxis . . . ." Id. "Within
the First Circuit, courts generally award fees in the range of 20–
30%, with 25% as the benchmark." Bezdek v. Vibram USA Inc., 79 F.
Supp. 3d 324, 349–50 (D. Mass. 2015) (internal quotation marks
omitted), aff'd, 809 F.3d 78 (1st Cir. 2015); see also Lupron,
2005 WL 2006833 at *5 ("Courts in the First Circuit have recognized
that fee awards in common fund cases typically range from 20 to 30
percent."). The First Circuit's approach is comparable to that
employed in other Circuits. For example, the Ninth Circuit has
written: "Twenty-five percent is the 'benchmark' that district
courts should award in common fund cases. The district court may
adjust the benchmark when special circumstances indicate a higher
or lower percentage would be appropriate." In re Pac. Enters. Secs.
Litig., 47 F.3d 373, 379 (9th Cir. 1995) (internal citation
omitted).

35

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 36 of 159

"[T]he First Circuit does not require courts to examine a
fixed

laundry

list

of

factors"

in

determining

a

reasonable

attorneys' fee award. In re Tyco Int'l, Ltd. Multidist. Litig.,
535 F. Supp. 2d 249, 265-66 (D.N.H. 2007). However, district courts
within the First Circuit generally consider the factors initially
identified by the Second and Third Circuits, particularly:
(1) the size of the fund and the number of persons
benefitted; (2) the skill, experience, and efficiency of
the attorneys involved; (3) the complexity and duration
of the litigation; (4) the risks of the litigation;
(5) the amount of time devoted to the case by counsel;
(6) awards in similar cases; and (7) public policy
considerations.
Neurontin, 58 F. Supp. at 170 (quoting Lupron, 2005 WL 2006833 at
*3); see generally Goldberger v. Integrated Res., Inc., 209 F.3d
43, 50 (2d Cir. 2000); Third Circuit Task Force, Court Awarded
Attorney Fees, 108 F.R.D. 237, 255–56 (1985).
Courts have a duty to promote and protect the integrity of
judicial proceedings. In exercising its equitable authority to
award fees, a court should not reward or encourage inequitable
conduct by counsel. Therefore, it is permissible and appropriate
for a court to take misconduct into account in making a fee award.
More

specifically,

in

fulfilling

its

duty

to

serve

as

protector of the class, the court should, among other things, "look
to the various codes of ethics as guidelines for judging the
conduct of counsel." Agent Orange, 818 F.2d at 222. As the First
Circuit has written, "'[e]very lawyer is an officer of the court

36

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 37 of 159

[and] has a duty of candor to the tribunal.'" Pearson, 200 F.3d at
38 (quoting Burns, 31 F.3d at 1095).
In

view

of

the

fact

that

the

adversary

process

is

not

operating when attorneys representing a class seek a fee award, it
is especially important that they satisfy their duty of candor to
the court. As explained earlier, the particular importance of
attorneys' providing accurate and complete information to the
court when seeking an award of attorneys' fees in a class action
is emphasized in the Massachusetts Rules of Professional Conduct.
Comment 14A to Rule 3.3 states that:
When adversaries present a joint petition to a tribunal,
such as a joint petition to approve the settlement of a
class action suit or the settlement of a suit involving
a minor, the proceeding loses its adversarial character
and in some respects takes on the form of an ex parte
proceeding. The lawyers presenting such a joint petition
thus have the same duties of candor to the tribunal as
lawyers in ex parte proceedings and should be guided by
Rule 3.3(d).
(emphasis added). Rule 3.3(d) provides that:
In an ex parte proceeding, a lawyer shall inform the
tribunal of all material facts known to the lawyer that
will enable the tribunal to make an informed decision,
whether or not the facts are adverse.
A petition for an award of attorneys' fees in a class action
is appropriately treated as an ex parte submission because at that
point the attorneys' interests in maximizing their compensation is
adverse to the interest of the class in maximizing its recovery.
See In re Rite Aid Corp. Secs. Litig., 396 F.3d 294, 307-08 (3d

37

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 38 of 159

Cir. 2005). Except in the rare case in which a well-endowed class
member invests in opposing a request for attorneys' fees, the
adversary process does not operate to advocate for the interests
of the class.
"[I]n light of the divergence of interests that can . . .
develop between counsel and the class in [] class actions, it is
essential that courts not doubt the forthrightness of counsel." In
re IMAX Secs. Litig., No. 06 Civ. 6128(NRB), 2012 WL 3133476, at
*11 (S.D.N.Y. Aug. 1, 2012). When counsel fail in their duty to be
candid and complete in their presentations to the court, "the grant
of fees and expenses must reflect this." Id.
Indeed, "'[i]t is well settled . . . that the district court
has the duty and responsibility to supervise the conduct of
attorneys

who

appear

before

it,

and

that

. . .

[d]enial

of

attorneys' fees may be a proper sanction' for attorney misconduct."
Travers v. Flight Servs. & Sys., Inc., 808 F.3d 525, 542 (1st Cir.
2015) (quoting Culebras Enters. Corp. v. Rivera-Rios, 846 F.2d 94,
97 (1st Cir. 1988)). Therefore, as the Ninth Circuit wrote in a
decision concerning a class action, "under long-standing equitable
principles, a district court has broad discretion to deny fees to
an attorney who commits an ethical violation." Rodriguez v. Disner,
688 F.3d 645, 655 (9th Cir. 2012).
In addition to considering whether a requested award is
reasonable based on the customary Goldberger factors and any others

38

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 39 of 159

that are relevant in the unique circumstances of the case, courts
in the First Circuit and nationally regularly check the requested
award against the "lodestar" to evaluate whether such an award
would be reasonable. See David F. Herr, Annotated Manual for
Complex Litigation §14.122 (4th ed. May 2019 Update) ("[T]he
lodestar is . . . useful as a cross-check on the [percentage of
fund] method . . . ."); see also Goldberger 209 F.3d at 50
(encouraging use of lodestar as a cross check). A lodestar is
properly calculated by multiplying the number of hours reasonably
spent on the litigation by a reasonable hourly rate. Thirteen
Appeals, 56 F.3d at 305 (citing Blum, 465 U.S. at 896-902); Bezdek,
79 F. Supp. 3d at 350. "Reasonable fees are to be calculated
according

to

the

prevailing

market

rates

in

the

relevant

community . . . ." Blum, 465 U.S. at 895. "[T]he rate that private
counsel actually charges for her services, while not conclusive,
is a reliable indicium of market value." One Star Class Sloop
Sailboat, 546 F.3d at 40 (emphasis added).
Although awarding a percentage of the fund in the 20% to 30%
range

is

common,

the

First

Circuit

has

explained

that

"'[r]easonableness is the goal,' and that courts should avoid
'mechanical

or

Fidelity/Micron,

formulaic
167

F.3d

application'
at

737

(quoting

of
In

rigid
re

rules."

Coordinated

Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 109
F.3d 602, 607 (9th Cir. 1997)). Accordingly, "because each common

39

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 40 of 159

fund case presents its own unique set of circumstances, trial
courts must assess each request for fees and expenses on its own
terms,"

and

"when

a

court

exercises

[its]

equitable

power,

individualization is the name of the game." Id.
Moreover, "the court has the ultimate authority to determine"
not only the most appropriate total amount to award in attorneys'
fees but also "how the aggregate fee is to be allocated among
counsel." 5 Rubenstein, Newberg on Class Actions §15:23.
Counsel for the plaintiffs in this case agree that the
foregoing are the generally applicable principles for awarding
attorneys' fees, including concerning the authority of the court
to allocate an award of attorneys' fees among counsel. See June
24, 2019 Tr. at 17 (Dkt. No. 560).
THE FACTS
The Approval of the Proposed Settlement
On August 8, 2016, the court conducted a hearing on the
requests for preliminary approval of the proposed settlement and
for attorneys' fees. The court stated that the case was at "a point
at which the adversary system doesn't work." Aug. 8, 2016 Tr. at
41:13-14 (Dkt. No. 93). Indeed, the court characterized a proposed
class action settlement as "a point at which the adversary process
usually fails." Id. at 14:4-5.
The court was referring to the fact that when plaintiffs'
counsel request an award of attorneys' fees, their interest in

40

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 41 of 159

maximizing their compensation is in tension with the interests of
the members of the class, who will share the remainder of the
common fund. The court's statements should have reminded Class
Counsel of the importance of their ethical duty to provide the
court, as fiduciary for the class, with accurate and complete
information. See Mass. R. Prof. C. 3.3 cmt. 14A; Pearson, 200 F.3d
at 38. However, as explained below, the court's remarks did not
influence Labaton and Thornton, and to a lesser extent Lieff, to
satisfy their duty of candor to the court.
At the August 8, 2016 hearing, the court certified for
settlement purposes the proposed single class that included the
members of the putative ATRS class and of the putative ERISA
classes. As requested, the court appointed Labaton as Lead Counsel
for

that

single

class.

It

also

preliminarily

approved

the

settlement and subsequently approved a revised notice of it to be
provided to the classes. See Aug 8, 2016 Tr. at 11:17-21, 21:2123:6 (Dkt. No. 93); Aug. 11, 2016 Order (Dkt. No. 97). A hearing
concerning

whether

the

proposed

settlement

should

be

finally

approved and to award attorneys' fees was scheduled for November
2, 2016. See id.
In advance of the November 2, 2016 hearing, Labaton, as Lead
Counsel, filed a memorandum in support of the proposed settlement
which stated that it was signed by Thornton and Lieff as well. See
Dkt. No. 101-1. As Lead Counsel, Labaton also filed a memorandum

41

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 42 of 159

in support of a request for $74,541,250 in attorneys' fees,
$1,257,698 in expenses, and $85,000 in service awards. See Dkt.
No. 103-1. That memorandum too stated that it was also signed by
Thornton and Lieff. See id. at 28-29 of 36. In addition, Sucharow
of Labaton submitted a sworn declaration attesting to the accuracy
of the sworn declarations concerning the request for attorneys'
fees submitted by representatives of each law firm that had
appeared for plaintiffs in these cases. See Sucharow Decl. ¶¶16198 (Dkt. No. 104).
The memorandum in support of the request for attorneys' fees:
addressed

the

Goldberger

factors,

including

public

policy

considerations; noted that the requested fee was in the 20% to 30%
range that is usual in the First Circuit, and was consistent with
the typical 25% starting benchmark, citing Bezdek, 79 F. Supp. 3d
at 349-50; asserted that the requested fee was reasonable when
compared to settlements in First Circuit in other cases involving
more than $100,000,000, which are often referred to as "megafund"
cases; and argued that a sliding scale had not been used by judges
in the First Circuit to reduce the percentage of the common fund
awarded in megafund cases and should not be used in this case. See
Dkt. No. 103-1. The memorandum also stated that the requested fee
was comparable to the award in another foreign currency exchange
class action in which Thornton and Lieff were counsel for the
class, BONY Mellon. See id. at 17 n.17 of 36.

42

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 43 of 159

In addition, the memorandum stated that:
Empirical studies also support the requested fee. An
in-depth review of all 688 class action settlements in
federal courts during 2006 and 2007 found that the mean
and median fees awarded in the 444 settlements where
the [percentage of fund] method was used (either with
or without a lodestar cross-check) were 25.7% and
25.0%, that the mean and median fees awarded in
securities cases (233 of 444) were 24.7% and 25.0%, and
that the mean and median fees awarded in consumer cases
(39 of 444) were 23.5% and 24.6%. Brian T. Fitzpatrick,
"An Empirical Study of Class Action Settlements and
Their Fee Awards," 7 J. Empirical Legal Stud. 811, 835
(2010) (Ex. 31); see also Neurontin, 58 F. Supp. 3d at
172 (favorably citing this study). The 24.85% fee
requested is right in line with Professor Fitzpatrick's
findings.
Id. at 17-18 (emphasis added) (footnote omitted). The

memorandum

also stated in a footnote that Fitzpatrick "found . . . that the
mean and median fees awarded in settlements in the First Circuit
(23 of 444) were 27.0% and 25.0%." Id. at 18 n.18 of 36. As
explained

below,

characterization

the
of

court
the

now

finds

Class

Counsel's

Study

Fitzpatrick

that

was

materially

misleading because Class Counsel did not inform the court that for
settlements

between

$250,000,000

and

$500,000,000

Fitzpatrick

found that the mean award was 17.8% and the median award was 19.5%.
See Fitzpatrick Study, supra, at 839.
In

further

support

of

the

motion

for

attorneys'

fees,

Sucharow, Garrett Bradley of Thornton, and Daniel Chiplock of Lieff
submitted sworn declarations. Each of their declarations included
an attachment listing the attorneys and professional staff each

43

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 44 of 159

firm employed who worked on this case, the hours that each worked,
the regular hourly rate for each attorney, and the total lodestar
for his firm. More specifically, each declarant stated that:
The schedule attached hereto as Exhibit A is a summary
indicating the amount of time spent by each attorney and
professional support staff-member of my firm who was
involved in the prosecution of the Class Actions, and
the lodestar calculation based on my firm's current
billing rates. For personnel who are no longer employed
by my firm, the lodestar calculation is based upon the
billing rates for such personnel in his or her final
year of employment by my firm. The schedule was prepared
from contemporaneous daily time records regularly
prepared and maintained by my firm, which are available
at the request of the Court. . . .
The hourly rates for the attorneys and professional
support staff in my firm included in Exhibit A are the
same as my firm's regular rates charged for their
services, which have been accepted in other complex
class actions.
Sucharow Decl. ¶¶6-7 (Dkt. No. 104-15) (emphasis added); G. Bradley
Decl. ¶¶3-4 (Dkt. No. 104-16) (emphasis added); Chiplock Decl.
¶¶4-5 (Dkt. No. 104-17) (emphasis added).
In

view

of

the

well-established

jurisprudence

described

earlier and the representations of counsel, the court understood
that in calculating the lodestar, plaintiffs' law firms had used
the rates they each customarily actually charged paying clients
for the services of each attorney and were representing that those
rates were comparable to the rates actually charged to clients for
similar services by other attorneys in their community. Counsel
for Labaton has acknowledged that a judge would have reasonably

44

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 45 of 159

interpreted the foregoing representations this way. See June 24,
2019 Tr. at 119-20 (Dkt. No. 560). However, as explained below,
the

court's

understanding,

based

on

the

statements

in

the

declarations and the clearly established law they addressed, was
incorrect. More specifically, various representations concerning
calculation of the lodestar were false or misleading, including
the representation that the rates attributed to Labaton, Thornton,
and Lieff attorneys were actually charged to paying clients.
Nevertheless, in his sworn declaration, Sucharow stated that
the declarations of each of the nine firms in support of the
requested fee award were based on "the current billing rates" of
each of the attorneys in each firm, including his own. Sucharow
Decl.

¶¶175-76

(Dkt.

No.

104).

Based

on

this

representation

Sucharow stated that the total lodestar was $41,323,895.75. See
id. ¶177; Mem. Supp. Attys.' Fees 31 of 36 (Dkt. No. 103-1); Nov.
2, 2016 Tr. at 30:18-31:12 (Dkt. No. 114). Sucharow claimed that
the

$75,000,000

requested

fee

award

would

constitute

a

1.8

multiplier of the lodestar, which was reasonable in view of the
risk

that

plaintiffs

and

their

counsel

might

have

recovered

nothing, the delay in obtaining any payment, and the multipliers
deemed reasonable in other cases. See Mem. Supp. Attys.' Fees at
31-32 of 36 (Dkt. No. 103-1). These assertions were reiterated at
the November 2, 2016 hearing by Goldsmith of Labaton. See Nov. 2,
2016 Tr. at 30:24-33:1 (Dkt. No. 114).

45

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 46 of 159

At the November 2, 2016 hearing, the court approved the
proposed $300,000,000 settlement. Id. at 35:6-37:3. With regard to
attorneys' fees, the court stated that it was "relying heavily on
[counsel's] submissions and what [had] been said" at the hearing.
Id. at 35:4-6 (emphasis added). The court stated that it had "used
the percentage of common fund method" and the lodestar crosscheck, and found counsels' request to be reasonable. Id. at 35:636:18. Therefore, the court awarded $74,541,250 in attorneys' fees
and $1,257,697.94 in expenses. See id. It also made service awards
of a total of $85,000 to the plaintiff class representatives. See
id. at 36:18-37:3.
The Reports of Errors in the Fee Petitions
On November 10, 2016, Goldsmith, on behalf of all Class and
ERISA Counsel, sent the court a letter. See Dkt. No. 116. Goldsmith
noted that the court had used the lodestar calculated by Labaton
as a check concerning the reasonableness of the percentage of the
common fund requested for attorneys' fees. See id. at 3 n.4. He
stated

that

"inadvertent

as

a

errors

result
[had]

of

an

just

"inquiry

[been]

from

discovered

the

media,"

in

certain

written submissions from Labaton Sucharow LLP, Thornton Law Firm
LLP, and Lieff Cabraser Heimann & Bernstein LLP supporting Lead
Counsel's motion for attorneys' fees . . . ." Id. at 1. Goldsmith
reported that the hours of 23 temporary "staff attorneys," who
were paid by the hour primarily to review documents, had been

46

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 47 of 159

included in the lodestar reports of more than one firm. Id. at 1–
2. More specifically, Goldsmith stated that lawyers located at
Labaton's and Lieff's offices were counted by Thornton and should
have been included only in Thornton's lodestar. See id. at 2.
Goldsmith also wrote that in some instances different billing rates
had been attributed to the same staff attorneys by different firms.
See id. at 3.
This double-counting resulted in inflating the number of
hours worked by more than 9,300 and inflating the total lodestar
by more than $4,000,000. See id. at 2–3. As a result, Goldsmith
stated that the correct lodestar was approximately $37,270,000 and
that a multiplier of 2, rather than 1.8, should have been used to
test the reasonableness of the request for an award of $75,000,000
in attorneys' fees. See id. at 3. He asserted that the award
nevertheless remained reasonable and should not be reduced. See
id.
The letter did not indicate that the reported lodestar was
not based on what plaintiffs' counsel actually customarily charged
paying clients for the type of work done by the staff attorneys or
other lawyers involved in this case. Nor did the letter raise any
other question concerning the reliability of the representations
made to the court in the request for attorneys' fees.
Additional questions were, however, raised by a December 17,
2016 Boston Globe article headlined "Critics hit law firms' bills

47

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 48 of 159

after class-action lawsuits." See Dkt. No. 117, Ex. B. For example,
the article reported that the staff attorneys involved in this
case were typically paid $25 to $40 an hour. Id. at 24 of 37. In
calculating the lodestar, Class Counsel had represented to the
court that the regular hourly billing rates for the staff attorneys
were much higher–for example, $425 to $500 for Thornton, see Dkt.
No. 104–16 at 7–8 of 14, and $335 to $440 for Labaton, see Dkt.
No. 104–15 at 7–8 of 52. A representative of Labaton reportedly
confirmed the accuracy of the article in this respect. See Dkt.
No. 117, Ex. B at 24 of 37.
The article also raised questions concerning the reliability
of statements made in his sworn declaration by Garrett Bradley,
the Managing Partner of Thornton, concerning his brother Michael
Bradley. Id. at 22-23, 25. Garrett Bradley had represented that
Michael Bradley was employed by Thornton and the regular rate
charged by the firm for his brother's services was $500 an hour.
See Dkt. No. 104-16 at 7 of 14. However, the article stated,
without

reported

contradiction,

that

"Michael

Bradley

.

.

.

normally works alone, [and] often mak[es] $53 an hour as a courtappointed defender in [the] Quincy District Court . . . ." See
Dkt. No. 117, Ex. B. at 22 of 37.
The Boston Globe published a second article six weeks later.
See

Andrea

Estes,

"Firms

profited

48

from

Garrett

Bradley's

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 49 of 159

ties," Boston

Globe (Jan.

28,

2017).

The

article

stated

that

Plymouth County Treasurer Thomas J. O'Brien was:
an unlikely magnet for campaign contributions
from high-powered attorneys in Manhattan and
downtown Boston. . . . Yet, since 2007, lawyers
from the Thornton Law Firm in Boston and Labaton
Sucharow of New York City have given $100,000
to O'Brien's political campaigns, accounting for
almost half of all of the donations he's
received over the decade.
Id. The article also reported that "[f]ourteen times in the past
decade, the Plymouth County retirement system has filed [class
action]

lawsuits

on

the

advice

of

lawyers

from

Labaton

and

Thornton . . . ." Id. Reportedly, "[c]ourt records show that the
retirement fund has collected a grand total of $40,035 from all
the lawsuits combined while the lawyers have received 1,000 times
that amount: $41.4 million." Id. In addition, the article stated
that "in Massachusetts, no one is better at persuading investors
to join class action lawsuits than O'Brien's friend, [Garrett]
Bradley, the managing partner of Thornton Law Firm and, until his
sudden departure a few months ago, assistant majority leader in
the

state

House

of

Representatives."

Id.

Thornton's

lawyer

reportedly explained that Bradley's role was indeed to "drum[] up
business" for Thornton and Labaton. Id. "O'Brien said his county's
decision to join so many Labaton lawsuits has nothing to do
with political favors." Id.

49

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 50 of 159

The January 28, 2017 Boston Globe article also described more
than

$30,000

in

campaign

contributions

Thornton

and

Labaton

attorneys and their family members had made to former Massachusetts
Treasurer Timothy Cahill. Reportedly, several months after those
contributions,

the

state

pension

fund

Cahill

chaired

hired

Labaton. Id. Labaton reportedly subsequently filed two successful
class action lawsuits for the state pension fund. Id. As a result,
Labaton reportedly received approximately $60,000,000 and gave
$9,000,000 to Thornton, while the state pension fund collected
$681,763. Id. The article also reported that after the Boston
Globe began asking questions about Bradley's work with the pension
fund, "he took [the] drastic step [of] . . . abruptly resign[ing]
from the [state] Legislature . . . ." Id.
In testimony on June 25, 2019, Garrett Bradley confirmed that
he had served in the Massachusetts Legislature with O'Brien, the
Plymouth

County

Treasurer

who

chaired

the

Plymouth

County

Retirement Board, and he was instrumental in obtaining the Board
as a client for Labaton and Thornton. 9 See June 25, 2019 Tr. at
37-39 (Dkt. No. 565). Garrett Bradley also confirmed that it was
indeed his role to "drum up business" for Labaton and Thornton.
More specifically, he testified that it was his job to get Labaton

9

Garrett Bradley also testified that he obtained the Plymouth
County Retirement Board as a client before O'Brien became its
Chair. See June 25, 2019 Tr. at 38-39 (Dkt. No. 565).

50

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 51 of 159

retained as a monitor for a fund and to represent it if the fund
became a lead plaintiff in a class action. See id. at 42-43.
Thornton would then get up to 20% of the fees awarded to Labaton
in a class action in which Labaton represented a client obtained
by Bradley, even if Thornton did not file an appearance or do any
work on the case. Id. at 39-40, 44, 45.
Bradley also confirmed that Labaton and Thornton lawyers,
including himself, made campaign contributions to O'Brien. Id. at
40. With regard to the Boston Globe report that the Plymouth County
Retirement System received about $40,000 in cases in which Labaton
had received more than $41,000,000, which it shared with Thornton,
Bradley testified that while the numbers seemed high, "that's the
class action model." Id. at 41. Christopher Keller of Labaton also
confirmed

the

essential

accuracy

of

the

Boston

Globe

report

regarding the relationship between Labaton, Thornton, and the
Plymouth County Retirement System. See June 26, 2019 Tr. at 120:13124:5 (Dkt. No. 566). 10

10

In Iron Workers Local No. 25 Pension Fund v. Credit-Based
Asset Servicing & Securitization, LLC, 616 F. Supp. 2d 461
(S.D.N.Y. 2009), Judge Jed Rakoff expressed concern about
monitoring arrangements like the agreement Labaton had with ATRS
and other pension funds.
Going far beyond any traditional contingency arrangement
of which the Court is aware, this practice, on its face,
creates a clear incentive for [the plaintiffs' firm] to
discover "fraud" in the investments it monitors and to
recommend to the Fund's non-lawyer administrator (and,
through him, to the trustees) that the Fund, at no cost
51

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 52 of 159

The Appointment of the Master
In a February 6, 2017 Memorandum and Order, the court wrote
that the December 17, 2016 Boston Globe article raised questions
concerning whether the hourly rates plaintiffs' counsel attributed
to the staff attorneys in calculating the lodestar were, as
represented, what these firms actually charged for their services
or what other lawyers in their community charge paying clients for
similar services. See Dkt. No. 117. This concern was enhanced by
the fact that different firms represented that they customarily
charged clients for the same lawyer at different rates. See id. at
7. In general, the court questioned whether clients customarily

to itself, bring a class action lawsuit. In other words,
the practice fosters the very tendencies toward lawyerdriv[en] litigation that the PSLRA was designed to
curtail.
Id. at 464.
This court shares that concern. Serving as monitoring counsel
for an institutional investor is potentially very lucrative. The
opportunity for monitoring counsel to profit greatly creates a
risk that firms will engage in questionable conduct to obtain such
assignments. As explained below, questionable conduct was involved
in Labaton's successful effort to become one of ATRS' monitoring
counsel and, as a result, Lead Counsel in this case.
There may be good reasons for a pension fund, particularly a
smaller pension fund, to engage someone to monitor its portfolio
in order to minimize the risk that it will be injured by fraudulent
conduct. However, it would be far more consistent with the purposes
of the PSLRA if such monitors, who could provide the service to
many funds that would share the cost, were paid on a fee-forservice basis and did not have powerful financial incentives to
recommend initiating a class action from which they would
foreseeably benefit the most.

52

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 53 of 159

agreed

to

pay,

and

actually

paid,

an

hourly

rate

for

staff

attorneys that is about ten times more than the hourly cost, before
overhead, to the law firms representing plaintiffs. See id.
In addition, the court noted that the article raised a
question concerning whether Thornton regularly charged $500 an
hour

for

Michael

Bradley's

services

as

Garrett

Bradley

had

represented in his sworn declaration. See id.
The court also stated that the acknowledged double-counting
of hours of staff attorneys and the other matters discussed in the
December 17, 2016 Boston Globe article raised questions generally
about

the

accuracy

and

reliability

of

the

representations

plaintiffs' counsel made in their calculation of the lodestar. See
id. at 8. These questions caused the court to express concern about
whether the award of almost $75,000,000 in attorneys' fees was
reasonable. Therefore, the court informed the parties that it
proposed to appoint Retired United States District Judge Gerald
Rosen

as

a

Master

to

investigate

and

provide

a

Report

and

Recommendation on all issues relating to the award of attorneys'
fees in this case. See id. at 8-10.
On March 7, 2017, a hearing was held concerning the proposed
appointment of Judge Rosen as Master and related issues. The court
first addressed a motion filed by Ted Frank of CCAF to participate
in these proceedings, including as a guardian ad litem for the
class

with

the

authority

to

serve

53

as

an

adversary

to

the

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 54 of 159

plaintiffs' law firms in any proceedings before the proposed
Master. See Dkt. No. 126. In successfully opposing this request
counsel for Labaton argued that Judge Rosen could retain someone
"to ask cross-examination questions in an adversarial or quasiadversarial model," and, therefore, neither the class nor the
Master would need Frank's assistance. Mar. 7, 2017 Tr. at 40:1942:15 (Dkt. No. 176). Labaton's counsel added that Judge Rosen was
"obviously very skilled and has been in the role of a judge for
many,

many

years . . . ."

Id.

at

40:22-25.

She

expressed

appreciation for "the opportunity to present to a special master
of his qualifications." Id. at 41:7-9. Therefore, Labaton had "no
objection to Judge Rosen" being appointed as Master. Id. at 41:7,
43:8-9. Nor did anyone else object to Judge Rosen's appointment.
Id.
Labaton also agreed to the court's proposal that it return
$2,000,000 to the Clerk of the District Court to permit the court
to compensate the Master and those he employed. Id. at 43:14-45:7,
65:18-25. The court informed Class Counsel that if more than
$2,000,000 was needed they might be required to return additional
funds. Id. at 65:18-25.
The March 7, 2017 hearing also included discussion of some of
the issues that prompted the appointment of the Master. Counsel
for

Thornton

stated

that

the

court's

concerns

about

the

representations that had been made in the requests for attorneys'

54

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 55 of 159

fees were "justifiable." Id. at 71:20-72:5. He represented that
Michael Bradley had actually worked more than the number of hours
attributed

to

him

in

the

fee

petition,

but

did

not

have

conventional time sheets to document his time. See id. at 72:124. Thornton's counsel and Michael Bradley each also stated that
Michael Bradley was not an employee of Thornton, and that neither
the firm nor Michael Bradley had, as represented under oath in
Garrett Bradley's declaration, ever billed for his time at the
rate of $500 per hour. See id. at 72:25-77:10. Although Garrett
Bradley claimed that Thornton's regular rate for Michael Bradley
was $500 an hour, he could not identify any case in which a client
had been charged that rate, and identified only one case in which
his brother was billed by Thornton at a rate of as much as $300 an
hour. See id. at 87:10-90:3.
As explained earlier, Sucharow of Labaton had stated in his
sworn declaration in support of Labaton's request for attorneys'
fees that: "[t]he hourly rates for the attorneys and professional
support

staff

in

[Labaton]

included

in

Exhibit

A

[to

my

declaration] are the same as my firm's regular rates charged for
their services, which have been accepted in other complex class
actions." Sucharow Decl. ¶7 (Dkt. No. 104-15). At the March 7,
2017

hearing,

characterized

however,
as

Labaton's

Sucharow
"regular

stated

that

rates

charged

the
for

rates
[the]

services" of the attorneys who worked on this case had never been

55

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 56 of 159

charged to paying clients because his firm always worked on a
contingent-fee basis and had no "billable clients." Mar. 7, 2017
Tr. at 79:1-22 (Dkt. No. 176).
Similarly, Garrett Bradley acknowledged that Thornton had
never billed a paying client $425 an hour for a staff attorney
and, indeed, the staff attorneys that he had represented in his
declaration worked for Thornton actually worked at, and were paid
by, Labaton and Lieff. See id. at 88:6-18.
Richard Heimann of Lieff explained at the March 7, 2017
hearing that Lieff was "almost entirely a contingent-fee firm,"
with only a "handful of paying clients." Id. at 93:11-21. His
partner Daniel Chiplock stated that the "staff attorneys" were
sometimes called "contract attorneys," and there had been "two or
three cases" in which clients had paid "close to" the rates
attributed to them in his declaration. Id. at 93:2-6.
The court stated at the March 7, 2017 hearing that the
propriety of the hourly rates attributed to "staff" and "contract"
attorneys for the purpose of calculating lodestars for use in class
actions had become the subject of litigation recently in cases in
the Southern District of New York and mentioned several of them.
Id. at 93:22-94:13 (citing In re Weatherford Int'l Secs. Litig.,
No. 11 Civ. 1646(LAK), 2015 WL 127847, *1 (S.D.N.Y. Jan. 5,
2015); In re Citigroup Inc. Secs. Litig., 965 F. Supp. 2d 369
(S.D.N.Y. 2013); In re Citigroup Inc. Bond Litig., 988 F. Supp. 2d

56

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 57 of 159

371 (S.D.N.Y. 2013); In re Beacon Assocs. Litig., Nos. 09 Civ
777(CM) et al., 2013 WL 2450960 (S.D.N.Y. May 9, 2013); City of
Pontiac Gen. Emps.' Ret. Sys. v. Lockheed Martin Corp., 954 F.
Supp. 2d 276 (S.D.N.Y. 2013)). In one of those cited cases, which
included a firm involved in the instant case as ERISA Counsel, the
judge wrote:
There is little excuse in this day and age for delegating
document review (particularly primary review or first
pass review) to anyone other than extremely low-cost,
low-overhead
temporary
employees
(read,
contract
attorneys) -- and there is absolutely no excuse for
paying those temporary, low-overhead employees $40 or
$50 an hour and then marking up their pay ten times for
billing purposes.
Beacon Assocs., 2013 WL 2450960 at *18. The lodestars and requested
fee awards were reduced in some of the cases in the Southern
District of New York. See, e.g., Weatherford, 2015 WL 127847 at
*2; Citigroup Secs. Litig., 965 F. Supp. 2d at 373-74.
With the consent of Class and ERISA Counsel, the court
appointed Judge Rosen to serve as the Master in this matter. See
Mar. 8, 2017 Order (Dkt. No. 173). With regard to his duties, it
ordered that:
The Master shall investigate and prepare a Report
and Recommendation concerning all issues relating
to the attorneys' fees, expenses, and service
awards previously made in this case. The Report
and Recommendation shall address, at least:
(a) the
accuracy
and
reliability
of
the
representations made by [Class Counsel] in their
requests for awards of attorneys' fees and
expenses, including but not limited to whether
counsel employed the correct legal standards and

57

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 58 of 159

had a proper factual basis for what was
represented to be the lodestar for each firm;
(b) the
accuracy
and
reliability
of
the
representations made in the November 10, 2016
letter from David Goldsmith, Esq. of Labaton
Sucharow, LLP to the court (Docket. No. 116);
(c) the
accuracy
and
reliability
of
the
representations made by [Class Counsel and each
of the named plaintiffs in] requesting service
awards; (d) the reasonableness of the amounts of
attorneys' fees, expenses, and service awards
previously ordered, and whether any or all of them
should be reduced; (e) whether any misconduct
occurred in connection with such awards; and, if
so, (f) whether it should be sanctioned, see e.g.
Fed. R. Civ. P. 11(b)(3) & (c); Massachusetts
Supreme Judicial Court Rule of Professional
Conduct 3.3(a)(1) & (3).
Id. ¶2. Class Counsel were ordered to pay $2,000,000 to the Clerk
of the District Court from the fee awards they received. See id.
¶13. The Master was authorized to retain counsel and others, who
would be reasonably compensated by the court from this fund. See
id. ¶14. The Master was directed to attempt to complete his
investigation and report by October 10, 2017, but the court
authorized him to seek an extension of time to do so if necessary.
See id. ¶3.
In order to eliminate any possible doubt about the court's
authority to modify the fee award after receiving the Master's
report and resolving any objections to it, the court later vacated
the original fee award. See June 22, 2018 Order (Dkt. No. 331).

58

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 59 of 159

The Master's Investigation
The Master promptly retained counsel and other assistants.
They worked hard to perform their duties. However, the Master's
investigation became more protracted than anticipated when he
discovered, as a result of documents produced by Thornton, but not
Labaton or Lieff, that Labaton had paid $4,100,000, about 5.5% of
the $75,000,000 fee award, to Chargois.
Chargois is a Texas lawyer who had done no work on these
cases. However, in 2007, Labaton had asked Chargois to find
institutional investors in the Southwest that could hire Labaton
as monitoring counsel and to influence them to do so. Neither
Chargois, nor his partner in Arkansas, Herron, had a relationship
with any institutional investor. No institutional investor had
ever

asked

either

of

them

for

advice

generally

or

to

find

monitoring counsel particularly.
However, Herron knew Steve Faris, an Arkansas State Senator
on the Joint Committee on Public Retirement and Social Securities,
which was responsible for oversight of ATRS. Chargois arranged for
Labaton's partners Eric Belfi and Chris Keller to meet Faris. In
an August 2007 email to Belfi, Chargois explained that Faris was
"prepared to hear you out and take necessary steps after you do

59

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 60 of 159

your thing." Email from Chargois to Belfi (Aug. 9, 2007) (Dkt. No.
454-5). 11
Faris subsequently introduced Belfi and Keller to Doane, the
Executive Director of ATRS. Belfi and Keller met with Doane in
Little Rock and New York City, and explained Labaton's desire to
become a monitoring counsel for ATRS.
In September 2007, Chargois wrote to Belfi that "[t]he good
senator is finalizing with Paul Doan[e]," and "[e]verybody wants
something sometimes." Email from Chargois to Belfi (Sept. 26, 2007)
(Dkt. No. 454-8). 12 Chargois reported that "the Labaton firm will
represent the pension fund," and asked Belfi to "[p]lease be
discreet and act surprised when it happens." Id.
To

formalize

Doane's

agreement

that

Labaton

would

be

retained, ATRS issued a Request for Qualification ("RFQ") to
Labaton to act as monitoring counsel. See Chargois Dep. Tr. at
37:19-24, R. & R. Ex. 125 (Dkt. No. 401-124). Labaton responded by
submitting a joint proposal on behalf of Labaton and Chargois &
Herron. See Joint Response (July 30, 2008), R. & R. Ex. 128 (Dkt.
No. 401-127). In October 2008, the Board formally selected Labaton
as monitoring counsel. See Email from Clark to Belfi (Oct. 13,

11

It is not clear what Chargois meant by "do your thing."

12

It is also not clear what Chargois meant in writing that
"[e]verybody wants something sometimes."

60

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 61 of 159

2008), R. & R. Ex. 129 (Dkt. No. 401-128). ATRS stated that "the
state procurement process is not conducive to a joint proposal"
and, therefore, it could select only Labaton, and not also Chargois
& Herron, as monitoring counsel. See id. 13 The agreement did,
however, permit Labaton to affiliate with Chargois & Herron to
work on particular ATRS matters. See id.
Labaton did not disclose to ATRS in its submission to become
monitoring counsel, or after being selected as monitoring counsel,
that Labaton already had an arrangement with Chargois. See Belfi
Dep. Tr. at 23:5-16; 115:17-21; 118:16-19, R. & R. Ex. 122 (Dkt.
No. 401-121); Keller Dep. Tr. at 297:14-16, R. & R. Ex. 83 (Dkt.
No. 401-82). More specifically, as Chargois wrote to Labaton:
Our deal with Labaton is straightforward-- we got
you ATRS as a client (after considerable favors,
political activity, money spent and time dedicated
in Arkansas) and Labaton would use ATRS to seek
13

The exclusion of Chargois & Herron from the ATRS contract
with Labaton had the effect, if not purpose, of concealing from
the public that Herron was involved. Public disclosure of Herron's
involvement could have led to an investigation of his role by the
media, the state legislature, or law enforcement.

In 2008, the Arkansas State Treasurer, Martha Shoffner, was
a Trustee of ATRS. See Dkt. No. 420, at 18-21; Dkt. No. 420-1, Ex.
D. Faris had introduced Shoffner to Herron in 2006. See Dkt. No.
420-1, Ex. D. Herron then allowed her to live rent-free in a house
he owned until 2011. See Dkt. No. 420-1, Ex. D. Herron was
reportedly interviewed by the Federal Bureau of Investigation
about this arrangement in an investigation of Shoffner that led to
her conviction for accepting bribes that she used to pay rent to
Herron when he began, in about 2011, charging her about $800 a
month to live in another of his properties. See Dkt. No. 420 at
20; Dkt. No. 420-1, Ex. D.

61

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 62 of 159

lead counsel appointments in institutional investor
fraud and misrepresentation cases. Where Labaton is
successful in getting appointed lead counsel and
obtains a settlement or judgment award, we split
Labaton's attorney fee award 80/20. Period. 14
R. & R. at 125 n.111 (quoting Email from Chargois to Belfi (Oct.
18, 2014), R. & R. Ex. 177 (Dkt. No. 401-176)). As Chargois
explained and others confirmed, this meant that Labaton had agreed
that Chargois would receive 20% of its fee in any ATRS case in
which Labaton was Lead Counsel despite there being no expectation
that Chargois would do any work on the case.
As

Chargois

credibly

and,

as

explained

below,

correctly

testified, the agreement that he would be paid 20% of Labaton's
fee in each ATRS case was not "a referral fee arrangement."
Chargois Dep. Tr. at 62, R. & R. Ex. 125 (Dkt. No. 401-124). Nor
was it a "local counsel arrangement." Id. Rather, it was "just an
arrangement." Id.
The Report and Recommendations
In his investigation, the Master interviewed 34 witnesses,
conducted 63 depositions, and reviewed over 200,000 pages of
documents. On May 14, 2018, he filed under seal his 377-page
Report, as well as an Executive Summary and exhibits. See Dkt. No.

14

The Special Master did not investigate further what Chargois
meant by his reference to "considerable political favors" and
"money spent." R. & R. at 125 n.111. Nor has this been clarified
in proceedings after the Master's Report.

62

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 63 of 159

224 (under seal).

The court provided a framework for the parties

to propose redactions. See May 16, 2018 Mem. & Order (Dkt. No.
223); May 30, 2018 Tr. at 24-47 (Dkt. No. 243). The parties
proposed redactions and, on June 28, 2018, the Master filed for
the public record redacted versions of the Report and Executive
Summary. See Dkt. No. 357.
The Master found the original $75,000,000 fee award to be
reasonable. However, he recommended that Labaton, Thornton, and
Lieff return approximately $10,000,000 to ERISA Counsel and the
class to remedy and sanction what he found to be misconduct. The
Report addresses two broad subjects: (1) the truthfulness and
accuracy of Labaton's, Thornton's, and Lieff's fee declarations;
and (2) the Chargois matter. In analyzing the fee declarations,
the

Report

focuses

on

the

double-counting

error,

Thornton's

declaration, and the hourly rates used to calculate the lodestar.
With respect to the double-counting error, the Master found
that Class Counsel inadvertently double-counted 9,332.9 hours,
overstating the lodestar by $4,058,654.50. See R. & R. at 219-225.
He

attributed

Labaton,

the

Thornton,

error
and

to

a

cost-sharing

Lieff.

Pursuant

to

arrangement
the

among

cost-sharing

arrangement, Thornton paid for and included in its lodestar certain
staff attorneys who worked in Labaton's and Lieff's offices. See
id. at 221-23. The Master faulted Labaton, as Lead Counsel, for
failing to detect the error. See id. at 223-24. To remedy the

63

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 64 of 159

error, the Master recommended that Labaton, Thornton, and Lieff
return to the class the double-counted lodestar in equal shares,
meaning $1,349,551.50 each. See id. at 363-64.
With respect to Thornton, the Master concluded that Garrett
Bradley

"deliberately

and

intentionally"

filed

a

false

and

misleading fee declaration, in violation of Federal Rule of Civil
Procedure

11

and

Massachusetts

Rules

of

Professional

Conduct

3.3(a) and 8.4(c), all of which prohibit making false statements
to the court. Id. at 234, see generally id. at 229-45. More
specifically, the Master found that, contrary to Garrett Bradley's
representations in his declaration, Thornton did not employ any of
the staff attorneys included in its lodestar; Thornton did not
maintain

contemporaneous

daily

time

records

for

those

staff

attorneys; Thornton did not maintain any "regular" or "current
billing rates" for the staff attorneys; and Michael Bradley's
"regular" rate was not $500 an hour. See id. at 195, 225-35.
The Master recommended that the court impose sanctions on
Thornton in the range of $400,000 to $1,000,000 and refer Garrett
Bradley to the Massachusetts Board of Bar Overseers for possible
disciplinary action. See id. at 364-65. In addition, the Master
recommended that Thornton return to the class the difference
between the total multiplied lodestar calculated with Michael
Bradley at $500 an hour, and a lodestar calculated at a rate for

64

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 65 of 159

him of $250 per hour. See id. at 366-67. This would amount to
Thornton returning $182,880 to the class.
With regard to the reported hourly rates, the Master found
the rates attributed by plaintiffs' counsel to partners, ranging
from $535 to $1000 an hour, to be reasonable. See id. at 173-76.
The

November

10,

2016

Goldsmith

letter

to

the

court

characterized all 23 of the lawyers whose hours were double-counted
as "staff attorneys." See Dkt. No. 116. However, in the course of
the Master's investigation, a distinction emerged between "staff
attorneys" and "contract attorneys."
In

the

Master's

lexicon,

staff

attorneys

were

lawyers

employed directly by Labaton or Lieff who were not on a track that
could result in their becoming partners. The Master found that
staff attorneys did much more than low-level document review, for
example by writing memoranda. See id. at 177. They each had years
of relevant experience, including knowledge gained in the earlier
foreign currency exchange class action case, BONY Mellon. See id.
Most

of

the

staff

attorneys

were

paid

$40

to

$60

an

hour.

Nevertheless, the Master found that it was generally reasonable to
attribute to them hourly rates of $335 to $515 an hour for the
purpose of calculating the lodestar. See id. at 176-81. This
conclusion was based in meaningful measure on the Master's finding
that

the

staff

attorneys

did

the

work

of

low

to

mid-level

associates. See id. at 180. The Master's finding is material to

65

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 66 of 159

the lodestar calculation as the staff attorneys were responsible
for about 70% of the hours included in it. See id. at 180.
In contrast to the staff attorneys, the "contract attorneys"
included in Lieff's lodestar were not employed directly by the
firm. Id. at 181. Rather, they were employed by a staffing agency,
which Lieff paid for their work. Id. at 181. The Report indicates
that Lieff engaged only four or seven contract attorneys. Id. at
181, 367. However, Heimann of Lieff stated in an affidavit that
there were nine. See Heimann Decl. at 10 n.4 of 11 (Dkt. No. 5331).
In any event, the Master found that the rates of $415 to $515
per hour for contract attorneys claimed by Lieff and Thornton were
unreasonable. See id. at 181-89. The Master reasoned that because
firms generally pay a third-party to supply contract attorneys,
the firms do not have the same overhead or "long-term financial
obligations in securing contract attorneys" compared to staff or
associate

attorneys.

Id.

at

186-87.

Accordingly,

the

Master

recommended that the court treat contract attorneys as an expense
and, therefore, not include them in Class Counsel's lodestar. See
id. at 367-68. In addition, the Master recommended that Lieff and
Thornton disgorge the difference between the total amount of the
lodestar and multiplier attributable to the contract attorneys,
and $50 an hour per contract attorney. Believing there were only

66

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 67 of 159

seven contract attorneys, the Master recommended disgorgement of
$2,386,058. See R. & R. at 367.
The

Master

characterized

as

a

"more

serious

issue"

the

Chargois matter. Exec. Summ. at 25 (Dkt. No. 357-1). The Master
found

that

Labaton

had

agreed

to

pay

Chargois

approximately

$4,100,000 from the attorneys' fee award in this case, even though
Chargois "made no appearance, did no work, and did not participate
in the case in any way . . . ." Exec. Summ. at 25. Rather, the
payment was consideration for Chargois & Herron's efforts -- which
included "considerable favors, political activity, [and] money
spent" -- to obtain ATRS as a client for Labaton. See R. & R. at
92-96, 125 n.111 (quoting Ex. 177 (Dkt. No. 401-176)). The Master
also found that Labaton "engaged in consistent, conscious, and
calculated

efforts

to

conceal

Chargois

from

almost

all

participants" in this case. Exec. Summ. at 26.
The Master concluded that the Chargois arrangement violated
Massachusetts Rule of Professional Conduct 1.5(e), which at the
inception of this case in 2011 required the client's informed
consent to any fee division between lawyers in different firms.
See id. at 249-63. In addition, the Master found that by violating
Rule 1.5(e), Labaton also violated Rule 7.2(c), which in 2011
prohibited a lawyer from "giv[ing] anything of value to a person
for recommending the lawyer's services" except for, among other
things, payment of a "referral fee" under Rule 1.5(e). See id. at

67

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 68 of 159

263-73.
Chargois

The

Master

from

the

also

found

class

that

violated

Labaton's

concealment

Massachusetts

Rule

of
of

Professional Conduct 1.4, which in 2011 provided that "[a] lawyer
shall explain a matter to the extent reasonably necessary to permit
the client to make informed decisions . . . ." See id. at 281-86.
With respect to Labaton's failure to disclose Chargois to
ERISA co-counsel and the court, the Master found that "general
principles of fairness and professional responsibility toward cocounsel, and toward the [c]ourt, strongly suggest that Labaton was
required to disclose the Chargois agreement." Id. at 290. The
Master found that by not disclosing Chargois to the court, Labaton
violated both Massachusetts Rule of Professional Conduct 3.3(a),
which imposes a general duty of candor to the court, and Federal
Rule of Civil Procedure 23(e)(3), which requires that parties
seeking approval of a proposed class action settlement "file a
statement identifying any agreement made in connection with the
proposal." See id. at 318-326, 353-57.
The Master did not recommend that the court impose Rule 11
sanctions on Labaton because "there is no First Circuit case,
either appellate or district, holding that a material omission
warrants the imposition of Rule 11 sanctions." Id. at 317-18.
However, he recommended disgorgement of the entire $4,100,000
payment to Chargois, with Labaton paying $3,400,000 to ERISA
Counsel and $700,000 to the class. See id. at 368-70.

68

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 69 of 159

Proceedings Following Submission of the Master's Report
and Recommendations
The submission under seal of the Master's Report on May 19,
2018, generated intense litigation.
As indicated earlier, on May 16, 2018, the court issued an
order establishing a schedule for proposing redactions to the
Report so it could be at least substantially unsealed. See Dkt.
No. 223. It also provided a framework for redactions rooted in the
principle that the public has a right to "materials on which a
court relies in determining the litigants' substantive rights."
Id. at 3 (quoting F.T.C. v. Standard Fin. Mgmt. Corp., 830 F.2d
404, 408 (1st Cir. 1987)). It was, therefore, then foreseeable
that the court would not authorize redaction of the references to
Chargois, including to the payments he received from Labaton
relating to eight other ATRS cases.
A court has a continuing duty to assess at all stages of class
action

litigation

whether

a

named

class

representative

has

interests which conflict with those of the class and, even if there
is no conflict, whether it will vigorously represent the interests
of the class through qualified counsel. See, e.g., Nat'l Ass'n of
Reg'l Med. Programs, Inc. v. Matthews, 551 F.2d 340, 345 (D.C.
Cir. 1976); see also 7A Wright & Miller, Fed. Prac. & Proc.,
§§1765, 1768 (3d ed. 2018). The Master's Report raised questions
concerning whether ATRS remained an adequate class representative

69

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 70 of 159

because of its relationship with Labaton. See Ark. Teachers Ret.
Sys. v. State St. Bank & Tr. Co., 404 F. Supp. 3d 486, 507-10 (D.
Mass. 2018). These questions were magnified because despite the
Master's finding that Labaton violated its ethical duties by not
disclosing to ATRS the $4,100,000 paid to Chargois from its fee
award in this case, the Executive Director of ATRS, Hopkins, had
stated he did not expect to be told of it. See id. at 509-10.
Hopkins' position prompted the Master to write that, "[w]e cannot
see how, in light of this clear dereliction of his fiduciary duties
to the class, Hopkins can fairly and adequately protect the class'
interests moving forward." Id. at 509. (quoting R. & R. at 257
n.7).
The court also anticipated that when the Master's Report was
unsealed, questions would be raised about the origins of the ATRS
relationship with Labaton, similar to the questions raised by the
Boston

Globe

about

Garrett

Bradley's

role

in

obtaining

Massachusetts pension funds as clients for Labaton. See id. 51011. The court was concerned that such foreseeable questions could
render

ATRS

an

atypical

and

inadequate

class

representative.

Therefore, on May 25, 2018, it ordered Hopkins to appear at a May
30, 2018 hearing to testify about these issues. See id. at 509.
On Memorial Day, May 28, 2018, two days before the May 30,
2018 hearing, Hopkins met with former State Senator Faris, who
had, as a result of Herron's efforts, introduced Labaton to ATRS.

70

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 71 of 159

See id. at 511. At the hearing, the court asked Hopkins a series
of

questions

concerning

whether

he

could

be

an

adequate

representative of the class, making only general references to the
questions

relevant

to

the

origins

of

ATRS

relationship

with

Labaton, the details of which were in the still sealed Report. See
id. at 511-12. The court did not on May 30, 2018 decide whether
ATRS was then an adequate representative of the class. Rather, the
court ordered Hopkins to take time to reflect and to report whether
he wanted ATRS to continue as class representative. See id.
At a subsequent sidebar, counsel for Labaton asked if the
court was suggesting there was impropriety concerning possible
payments to Faris. See id. at 512-13 (quoting now-unsealed May 30,
2018 Tr. at 3-4 (Dkt. No. 244)). The court stated that it was
foreseeable that when the Report became public such questions could
be raised and might render ATRS an atypical and inadequate class
representative. See id. 15

15

As anticipated by the court, soon after the Report became
public, the Arkansas legislature began investigating the Chargois
matter. See July 31, 2018 Letter from Master's Counsel to the Court
(Dkt. No. 411). More specifically, on July 25, 2018, an email was
sent to the Master by Arkansas State Representative Mark Lowery,
stating:
I am co-chair of the Arkansas Joint Performance Review
Committee that has recently held a 3 hour hearing
questioning Arkansas Teacher Retirement System director
George Hopkins.
We are extremely concerned about references to
"political favors" in Arkansas that brought about the
71

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 72 of 159

Based on the colloquy at side bar, Labaton moved for the
court's disqualification. See Dkt. No. 315. Labaton did not contend
that

the

court

was

actually

biased,

which

would

require

disqualification under 18 U.S.C. §455(b). Rather, it argued that
a reasonable person could question the court's impartiality and,
therefore, recusal was required under §455(a). For the reasons
described in a 72-page Memorandum and Order, the court denied the

relationship between ATRS, Labaton Sucharow and the
Chargois/Herren [sic] law firm.
We are especially interested in the following excerpt
from a Forbes article: Rosen was more circumspect in his
report, only noting the questions raised by Chargois'
2014 e-mail discussing the "considerable favors" and
"money spent" getting ATRS as a client.
"The special master did not investigate further into the
background facts alleged by Chargois in this email as to
how
the
Chargois/Labaton/ATRS
relationship
was
originated and developed," the special master said in a
footnote. "This investigation is beyond the scope of the
Special Master's assignment."
Is it possible that Judge Rosen's work in the case has
come to a point where he would be able to discuss with
me findings about the Chargois/Herren [sic] relationship
with Labaton that may not have been included in the
Special Master report to the Court?
If so please let me know how I could go about discussing
with him or a representative any information that may
assist us in our investigation going forward.
Id. The court did not authorize the Master to speak to
Representative Lowery because of the pendency of proceedings in
this case. See Dkt. No. 412.
Hopkins resigned as Director of ATRS several months later.
See June 26, 2019 Tr. 15:19-21 (Dkt. No. 566).
72

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 73 of 159

motion. See Ark. Teachers, 404 F. Supp. 3d 486. Labaton then
petitioned the First Circuit for a writ of mandamus ordering
recusal. The First Circuit promptly denied the petition. See In re
Labaton Sucharow LLP, No. 18-1651 (1st Cir. Jul. 25, 2018).
While the motion for the court's recusal was pending, Labaton
moved to have redacted from the public version of the Report all
references to its agreement to pay Chargois 20% of its fee in every
ATRS class action in which it served as Lead Counsel, including
this case and eight others. See Dkt. No. 254. The court denied the
motion because of: the strong presumption of public access to
records on which judicial decisions are made; the Master's view
that the payments to Chargois in the eight other ATRS cases were
of "great significance" to his conclusion that the payment to
Chargois in this case was an impermissible fee for "solicitation"
rather

than

redaction

a

would

legitimate
mask

"referral

information

fee";

and

concerning

the

fact

possible

that

ethical

violations by Labaton that might, if disclosed, be investigated in
other jurisdictions. See June 28, 2018 Mem. & Order 6-13 (Dkt. No.
356). On June 28, 2019, the Report was unsealed with limited,
appropriate redactions. See Dkt. No. 357.
In June 2018, Class Counsel moved for an order declaring that
the Master's appointment had ended. See Dkt. No. 302. If that
motion had been allowed, the Master and his counsel would have
been precluded from responding to objections to the Report, and

73

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 74 of 159

the court would again have been deprived of information presented
and tested through the customary adversary process. The court
denied Class Counsel's request to end the Master's appointment.
Instead, pursuant to Federal Rules of Civil Procedure 23(h)(4) and
53(f)(1), the court resubmitted the Report to the Master to respond
to objections to it. See Dkt. No. 445.
After the failure of the efforts to remove this court and the
Master from this case, and to conceal from the public information
concerning the origins of Labaton's relationship with ATRS and the
firm's obligation to make substantial payments to Chargois in all
ATRS class actions in which Labaton served as Lead Counsel, the
focus

of

the

litigation

moved

to

Class

Counsel's

numerous

objections to the Report.
However, on September 18, 2018, the Master reported that
Labaton, ERISA Counsel, and he had "reached a tentative agreement
. . . for the Court's consideration resolving all of the disputed
issues as to those firms." See Dkt. No. 468. If approved, the
"Proposed Resolution" would result in the reinstatement of the
original $75,000,000 fee award and Labaton would "acknowledge[]
that its . . . payment to Damon Chargois did not constitute a casespecific referral fee," pay the class $2,052,666.67, pay ERISA
Counsel

$2,750,000,

and

adopt

compliance reforms. Id.

74

certain

organizational

and

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 75 of 159

Labaton and the ERISA Counsel also agreed not to appeal if
the settlement was accepted by the court. Id. However, Labaton
retained the right to revive its objections if the court did not
accept the proposed settlement fully. Id. Lieff urged the court
not

to

act

on

the

proposed

settlement

until

it

decided

its

objections. See Lieff Resp. Proposed Resolution 1-4 (Dkt. No. 513).
Thornton deferred to the court as to whether to accept the Proposed
Resolution before ruling on Thornton's objections. See Thornton
Resp. Proposed Resolution 2 (Dkt. No. 514).
The court conducted hearings on the Proposed Resolution and
other matters in October and November 2018. As authorized by
Federal Rule of Civil Procedure 53(f)(1), the hearings included
testimony by Labaton partners concerning the firm's relationship
with Chargois, among other things.
The court then decided that it would not act on the Proposed
Resolution before deciding Lieff's and Thornton's objections to
the Report. See Nov. 7, 2018 Tr. at 73 (Dkt. No. 519). It reasoned
that the process of resolving those objections would provide
information relevant to evaluating the Proposed Resolution. Id. at
73. In addition, the court was concerned that deciding matters
piecemeal would result in unwarranted disparity in the treatment
of counsel despite the existence of common issues resulting from
the collaboration in this case between Labaton, Thornton, and
Lieff. Id. at 106.

75

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 76 of 159

In a May 31, 2019 Order, the court notified counsel of the
framework to address objections to the Report at hearings scheduled
for June 24, 25, and 26, 2019. See Dkt. No. 543. Among other
things,

the

court

expressed

its

intention

to

hear

argument

concerning: (1) whether the initial $75,000,000 fee award was
reasonable or whether another amount should be awarded; (2) whether
the Fitzpatrick Study had been misrepresented; (3) whether Class
Counsel's reported lodestar, not including the double-counting,
was accurate; (4) whether Garrett Bradley intentionally filed a
false fee declaration concerning certain identified matters, among
other things; and (5) issues relating to Chargois. Id. The court
also stated it might hear testimony from Thornton attorneys in
addition to Garrett Bradley, and additional testimony from Labaton
lawyers relating to Chargois. Id.
On June 20, 2019, the court denied without prejudice Labaton's
request to present Fitzpatrick as a witness because it viewed the
issue of whether his study had been characterized in a false and
misleading manner to be a question of fact on which his testimony
was neither necessary nor appropriate. See Dkt. No. 554. In
addition, the court stated that it did not then intend to receive
expert testimony on the reasonableness of the original $75,000,000
fee award. Id.
At the outset of the hearing on June 24, 2019, the court
further explained and amplified the agenda for addressing the

76

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 77 of 159

objections to the Report, and the Proposed Settlement with Labaton
and ERISA Counsel. It then heard three days of argument and
testimony concerning the contested issues. Class Counsel, ERISA
Counsel, and the Master subsequently submitted memoranda further
addressing those issues.
THE AWARD OF ATTORNEYS' FEES
As explained earlier, the court vacated the original award of
attorneys' fees in the amount of $75,000,000. It is, therefore,
deciding de novo all of the objections to the Report, including
Labaton's, determining the most appropriate amount to award, and
exercising its authority to allocate that award between counsel.
In doing so, the court is deciding de novo all objections to the
Master's findings of fact and conclusions of law, including those
of Labaton. See Fed. R. Civ. P. 53(f)(3) & (4). It is also, in
effect, modifying his Report. See Fed. R. Civ. P. 53(f)(1).
The Role of the Court
As more fully explained earlier, in awarding attorneys' fees,
the court must act as a fiduciary or protector of the class. See
Fidelity/Micron, 167 F.3d at 736; Agent Orange, 818 F.2d at 222.
The goal is to make a reasonable award that is fair to both counsel
and the class. See Fidelity/Micron, 167 F.3d at 737. Courts
customarily consider certain factors and make certain presumptions
in fashioning a reasonable award. See, e.g., Goldberger, 209 F.3d
at 50; Neurontin, 58 F. Supp.3d at 170-71; Bezdek, 79 F. Supp. 3d

77

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 78 of 159

at 349-50. However, as the First Circuit has written, "each common
fund case presents its own unique set of circumstances . . . [and]
when a court exercises [its] equitable power [to award attorneys'
fees],

individualization

is

the

name

of

the

game."

Fidelity/Micron, 167 F.3d at 737.
Megafund Cases
This case is properly characterized as a "megafund" case
because the common fund exceeds $100,000,000. See Neurontin, 58 F.
Supp. 3d at 170. As CCAF has noted, some courts find that lower
percentage awards should regularly be made in megafund cases. See
CCAF Mem. at 6 of 41 (Dkt. No. 522). This "sliding scale" approach
is intended to "to prevent a windfall for plaintiffs' attorneys at
the expense of the class" because "[i]t is generally not 150 times
more difficult to prepare, try and settle a $150 million case than
it is to try a $1 million case." In re NASDAQ Market-Makers
Antitrust Litig., 187 F.R.D. 465, 486 (S.D.N.Y. 1998).
Empirical

studies

demonstrate

that

there

is

an

inverse

relationship between fee awards as a percentage of settlement and
the size of settlement. See, e.g., Fitzpatrick Study, supra, at
811, 837, 843; Theodore Eisenberg & Geoffrey P. Miller, "Attorney
Fees and Expenses in Class Action Settlements: 1993–2008," 7 J.
Empirical Legal Stud. 248, 265 tbl.7 (2010) (the "Eisenberg-Miller
Study"). However, this court does not find that it is appropriate
to apply special standards or presumptions categorically to reduce

78

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 79 of 159

fee awards in all megafund cases, including this one. The customary
Goldberger factors capture considerations relevant to determining
the most reasonable award in a megafund case, such as the time
attorneys devoted to the case, their skill, and their efficiency.
See Goldberger, 209 F.3d at 50. A properly calculated lodestar
allows the court to assess whether the multiplier being requested
by counsel is justified by the complexity of the case, the risks
of the litigation, and the benefit they conferred on the class.
See id; Rite Aid, 396 F.3d at 303. Therefore, this court agrees
that "it would be inappropriate to reduce the percentage award
based on the size of the recovery alone." Tyco Int'l, 535 F. Supp.
2d at 270; see also Lupron, 2005 WL 2006833, at *6.
The Applicable Standards
Accordingly, this court, like others in the District of
Massachusetts and nationally, begins by presuming that an award of
20% to 30% of the common fund would be reasonable. See Bezdek, 79
F. Supp. 3d at 349-50; Lupron, 2005 WL 2006833, at *5. Twenty-five
percent, meaning $75,000,000 in this case, is the court's starting
benchmark. See Pac. Enters., 47 F.3d at 379; Bezdek, 79 F. Supp.
3d at 349-50. However, again, this benchmark should be adjusted if
the unique circumstances of this case demonstrate that a higher or
lower award would be most reasonable. See Fidelity/Micron, 167
F.3d at 737; Pac. Enters., 47 F.3d at 379.

79

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 80 of 159

As explained earlier, courts in the District of Massachusetts
and

nationally

generally

consider

the

following

factors

in

tentatively fashioning an award of attorneys' fees and then subject
that tentative award to a lodestar cross-check to evaluate whether
such an award would indeed be reasonable:
(1) the size of the fund and the number of persons
benefitted; (2) the skill, experience, and efficiency of
the attorneys involved; (3) the complexity and duration
of the litigation; (4) the risks of the litigation;
(5) the amount of time devoted to the case by counsel;
(6) awards in similar cases; and (7) public policy
considerations.
Neurontin, 58 F. Supp. 3d at 170 (quoting Lupron, 2005 WL 2006833,
at *3); see generally Goldberger, 209 F.3d at 50; Third Circuit
Task Force, Court Awarded Attorney Fees, 108 F.R.D. at 255-56.
Analysis of Certain Relevant Factors
In these consolidated cases, the size of the common fund
produced
unusually

by

the

large

work
--

of

Class

$300,000,000.

Counsel
The

and

ERISA

settlement

Counsel

will

is

benefit

thousands of participants in the pension funds and retirement plans
represented

by

ERISA

Counsel.

It

will

also

benefit

the

approximately 1,300 custody clients of State Street. See Mem. Supp.
Attys.' Fees at 18 of 36 (Dkt. No. 103-1).
This case was complex. At the outset the case was also risky.
It

began

with

a

theory

of

liability

for

alleged

unfair

and

deceptive practices in violation of M.G.L. c. 93A that was then
untested. The risk that these consolidated cases would not be

80

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 81 of 159

settled was reduced when the court denied State Street's motion to
dismiss the ATRS case.

Since being appointed in 1985, this court

has never been required to try a class action.

Rather, every case

that has survived a motion to dismiss has subsequently been
settled. There is no reason to believe that this court's experience
is unique or unusual. Rather, the court expects that when cases
are

thoughtfully

chosen

and

claims

are

carefully

alleged

by

competent counsel to defeat a motion to dismiss, almost all class
actions settle and experienced counsel know that. Following the
denial of a motion to dismiss, the practical issues are usually
when and for how much the case will settle. A delay in settling
may benefit class counsel, as they do more work on the case and
their increased lodestar supports an award of a larger percentage
of the common fund than might otherwise be justified. The risk
that this case would not be settled was further diminished when
settlement was reached in March 2015, in the first foreign currency
exchange class action alleging deceptive practices against a bank,
BONY Mellon.
Lieff, Thornton, and McTigue brought the special knowledge
and experience that they gained as plaintiffs' counsel in BONY
Mellon to this case. Generally, all plaintiffs' counsel in this
case were skilled and experienced in class action litigation. They
had to contend with a well-endowed defendant that was represented
by able counsel. They did so well.

81

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 82 of 159

Following the denial of State Street's motion to dismiss the
ATRS case, there were no additional motions or other litigation.
However,

plaintiffs'

counsel

received

substantial

discovery

voluntarily, participated in review of millions of documents,
analyzed many issues, and participated in about 15 mediation
sessions. See Mem. Supp. Attys.' Fees at 27 of 36 (Dkt. No. 1031); Marks Decl. ¶16 (Dkt. No. 104-5). The Master closely examined
the work done by all of plaintiffs' counsel and did not find the
number of hours included in the lodestar to be unreasonable. The
court

accepts

his

finding

that

the

hours

reported

were

not

inaccurate or unreasonable.
With regard to similar cases, as Lead Counsel, Labaton argued
that BONY Mellon is the most relevant comparator. See Dkt. No.
537, at 12 of 27. There, the court awarded 25% of the $325,000,000
common fund -- $83,750,000 -– in attorneys' fees. However, CCAF
argued, without contradiction in this case, that "the plaintiffs
in [BONY Mellon] took and defended 110 depositions (0 here),
exchanged 11 expert reports (0 here), and defeated four motions to
dismiss in two venues (1 here)." CCAF Mem. Re Fee Award at 31 of
41 (Dkt. No. 522). Therefore, the court finds that BONY Mellon
involved much more work by plaintiffs' counsel than the instant
case.
Labaton also argued that an award of 25% of the $300,000,000
common fund would be reasonable in comparison with awards in the

82

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 83 of 159

eight other First Circuit cases involving more than $100,000,000.
See Dkt. No. 103-1, at 13-17 of 36. In those cases the awards
reportedly ranged from about 9% to 31% of the common fund, with
six in the 20 to 31% range. Id. at 14. There is no evidence calling
into question these reported facts.
In addition, an award of 25% is arguably within the range of
reason based on the findings in two often cited empirical studies,
the

Fitzpatrick

Study

and

another

by

Theodore

Eisenberg

and

Geoffrey Miller, because 25% is within one standard deviation of
the median and mean awards in megafund cases. As accurately
described by Lieff as "Co-Lead Customer Counsel" in the request
for attorneys' fees in BONY Mellon:
One recent study surveying all class settlements during
2006-2007 found that the mean and median percentages
awarded for settlements between $250 million and $500
million were 17.8% and 19.5%, respectively, with a
standard deviation of 7.9%. See Brian T. Fitzpatrick, An
Empirical Study of Class Action Settlements and Their
Fee Award, 7 J.Empirical Legal Studies 811, 839 (2010).
Other well-known commentators have opined that "fee
requests falling within one standard deviation above or
below the mean should be viewed as generally reasonable
and approved by the court unless reasons are shown to
question the fee." Theodore Eisenberg and Geoffrey P.
Miller, Attorney Fees in Class Action Settlements: An
Empirical Study, 1 J. Empirical Legal Studies 27, 74
(2004). The 25% fee requested here [in BONY Mellon] is
within one standard deviation of the mean shown in the
Fitzpatrick study.
Dkt.

No.

619

at

35

of

44,

BONY

Mellon,

12-md-02335-LAK-JLC

(S.D.N.Y. Aug. 17, 2015) (footnote omitted). Similarly, an award
of 25% of the common fund in this case would be far above the 17.8%

83

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 84 of 159

mean and 19.5% median for settlements between $250,000,000 and
$500,000,000, but within one standard deviation of them.
Therefore, there is support for the argument that an award of
$75,000,000 would be reasonable. However, as explained below,
important

public

policy

considerations,

among

other

things,

persuade the court that a lower award is reasonable and most
appropriate.
Public Policy Considerations
The Duty of Candor
As explained earlier, in fulfilling its duty to serve as a
protector of the class, the court should, among other things, "look
to the various codes of ethics as guidelines for judging the
conduct of counsel." Agent Orange, 818 F.2d at 222. As the First
Circuit has written, "'[e]very lawyer is an officer of the court
[and] has a duty of candor to the tribunal.'" Pearson, 200 F.3d at
38 (quoting Burns, 31 F.3d at 1095).
In

view

of

the

fact

that

the

adversary

process

is

not

operating to inform the court when attorneys representing a class
seek a fee award, it is especially important that they satisfy
their duty of candor to the court. As indicated earlier, this
particular
complete

importance

information

attorneys'

fees

in

of

attorneys'

to

the

a

class

court

when

action

84

providing

is

seeking

accurate
an

emphasized

award
in

and
of
the

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 85 of 159

Massachusetts Rules of Professional Conduct.

Comment 14A to Rule

3.3 states that:
When adversaries present a joint petition to
a tribunal, such as a joint petition to
approve the settlement of a class action suit
or the settlement of a suit involving a minor,
the proceeding loses its adversarial character
and in some respects takes on the form of an
ex parte proceeding. The lawyers presenting
such a joint petition thus have the same
duties of candor to the tribunal as lawyers in
ex parte proceedings and should be guided by
Rule 3.3(d).
(emphasis added). Rule 3.3(d) provides that:
In an ex parte proceeding, a lawyer shall
inform the tribunal of all material facts
known to the lawyer that will enable the
tribunal to make an informed decision, whether
or not the facts are adverse.
As explained earlier, a petition for an award of attorneys'
fees in a class action is appropriately treated as an ex parte
submission because at that point the attorneys' interests in
maximizing their compensation is adverse to the interest of the
class in maximizing its recovery. See Rite Aid, 396 F.3d at 30708. Except in the rare case in which a well-endowed class member
invests in opposing a request for attorneys' fees, the adversary
process does not operate to advocate for the interest of the class.
"[I]n light of the divergence of interests that can . . .
develop between counsel and the class in [] class actions, it is
essential that courts not doubt the forthrightness of counsel."
IMAX, 2012 WL 3133476 at *11. When counsel fail in their duty to

85

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 86 of 159

be candid and complete in their presentations to the court, "the
grant of fees and expenses must reflect this." Id. Indeed, "'[i]t
is well settled . . . that the district court has the duty and
responsibility to supervise the conduct of attorneys who appear
before it and that . . . [d]enial of attorneys' fees may be a
proper sanction' for attorney misconduct." Travers, 808 F.3d at
542 (quoting Culebras Enters., 846 F.2d at 67). More specifically,
in a class action case, "under long-standing equitable principles,
a district court has broad discretion to deny fees to an attorney
who commits an ethical violation." Rodriguez, 688 F.3d at 655.
In this case, the court is neither imposing sanctions nor
denying a fee award to any attorney or firm because of misconduct.
It is, however, considering such misconduct in deciding where
within the reasonable range to make a total fee award and how to
allocate the total award among counsel.
Thornton, Labaton, and Lieff
As explained below, the court now finds that Class Counsel,
particularly Labaton and Thornton, made submissions in support of
their request for $75,000,000 in attorneys' fees that were replete
with false and misleading statements. Labaton and Thornton each
violated their obligations, under Federal Rule of Civil Procedure
11,

to

make

representations

reasonable
were

inquiries

reliable

and

86

to

to

assure

correct

them

that
when

their
they

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 87 of 159

realized

that

they

were

not.

Their

conduct

violated

the

Massachusetts Rules of Professional Conduct as well.
Thornton
The declaration of Garrett Bradley in support of the request
for an award of $75,000,000 in attorneys' fees was false in several
respects. This contributed to the double-counting and, therefore,
undermined the value of the lodestar check on the reasonableness
of the request.
As explained earlier, courts, including this court, regularly
use a properly calculated lodestar, and the multiplier that a
requested

larger

fee

award

would

involve,

to

evaluate

the

reasonableness of that request. The lodestar is calculated by
multiplying the number of hours reasonably worked on the case by
a reasonable hourly rate. See Thirteen Appeals, 56 F.3d at 305.
Again,

reasonable

rates

are

those

charged

in

the

relevant

community. Blum, 465 U.S. at 895. "[T]he rate that private counsel
actually charges for her services, while not conclusive, is a
reliable indicium of market value." One Star Class Sloop Sailboat,
546 F.3d at 40 (emphasis added).
The court foreseeably understood that Garrett Bradley was
employing these familiar standards when he made the following
statements in his declaration and the court relied on them:
3. The schedule attached hereto as Exhibit A
is a summary indicating the amount of time
spent by each attorney and professional

87

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 88 of 159

support staff-member of my firm who was
involved in the prosecution of the Class
Actions, and the lodestar calculation based on
my firm's current billing rates. For personnel
who are no longer employed by my firm, the
lodestar calculation is based upon the billing
rates for such personnel in his or her final
year of employment by my firm. The schedule
was prepared from contemporaneous daily time
records regularly prepared and maintained by
my firm, which are available at the request of
the Court. Time expended in preparing this
application for fees and payment of expenses
has not been included in this request.
4. The hourly rates for the attorneys and
professional support staff in my firm included
in Exhibit A are the same as my firm's regular
rates charged for their services, which have
been accepted in other complex class actions.
Dkt. No. 104-16, R. & R. Ex. 66 (Dkt. No. 401-65) (emphasis added).
Exhibit A to Bradley's declaration included the names of 23
staff attorneys with reported regular rates of $425 an hour. It
also

characterized

Michael

Bradley

as

a

staff

attorney

and

represented that he had a regular rate of $500 an hour.
As the Master succinctly and accurately summarized in his
Report,

Garrett

Bradley's

quoted

statements

were

untrue

in

virtually every respect. 16 See R. & R. at 227-28. More specifically,
the staff attorneys listed on Exhibit A were not employed by
Thornton. Rather, except for Michael Bradley, they were employed

16

The Report on pages 227-228 provides citations to the record
that support some of the relevant findings of the Master and the
court.

88

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 89 of 159

by

Lieff

or

Labaton,

contemporaneous

time

at

their

records

for

offices.
them.

Thornton
The

billing

had

no

rates

attributed to each staff attorney were not Thornton's current
billing

rates

for

them.

Thornton

worked

exclusively

on

a

contingent-fee basis. It did not charge any clients for any
partner,

associate,

or

staff

attorney

on

an

hourly

basis.

Therefore, the purported hourly rates were not "the same as
[Thornton's]

regular

rates

charged

for

their

services."

Id.

Moreover, with the exception of four lawyers, the $425 rate
attributed to the staff attorneys had never been accepted by a
court in a complex class action.
In

addition,

Garrett

Bradley

directed

his

colleagues

to

include his brother Michael as having a regular hourly rate of
$500 an hour. However, as Garrett Bradley knew, neither Thornton
nor Michael Bradley as a sole practitioner regularly charged for
his services at the rate of $500 an hour. Michael Bradley had once
charged $500 an hour for three hours work in a case, and $450 an
hour for his work in one other. See R. & R. at 195. His regular
rate was much less. Often he worked for $53 an hour representing
indigent defendants in state court. Id.
Michael Bradley worked on this case in his own office, not
Thornton's, in his spare time. His work involved only document
review. He found a few possibly relevant documents. However, he
produced no memoranda or made any other contribution to this case.

89

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 90 of 159

It was untrue to claim that the regular rate for his service was
$500 an hour or that the market would have valued his services at
$500 an hour.
Several factors contributed to Garrett Bradley making many
misrepresentations in his declaration. First, Thornton, Labaton,
and Lieff had entered into an unusual arrangement that allowed
Thornton to pay for Staff and contract attorneys employed by
Labaton and Lieff, and to claim them on its lodestar for the
purpose of allocating among themselves attorneys' fees awarded by
the court. Class Counsel claim that this arrangement was motivated
by a desire to share costs and reduce the risk to Labaton and Lieff
that the class and its counsel might recover nothing in this case.
However, the court finds that Thornton demanded this arrangement
because, as Garrett Bradley wrote to his partners, it was "the
best way to jack up the loadstar," [sic] and thus give Thornton a
claim to a larger percentage of the foreseeable future fee award
to be shared with Lieff and Labaton. Email from Bradley to Thornton
& Lesser (Feb. 6, 2015), R. & R. Ex. 64 (Dkt. No. 401-63); G.
Bradley Dep. Tr. at 67, R. & R. Ex. 43 (Dkt. No. 401-42). Labaton
acquiesced

in

this

arrangement

to

maintain

the

goodwill

of

Thornton, particularly of Garrett Bradley, who was so adept at
exploiting

his

political

connections

to

get

lucrative

institutional clients for Labaton that Labaton made Bradley Of
Counsel to the firm in January 2015. See R. & R. at 105 n.86.

90

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 91 of 159

Similarly, Thornton had brought Lieff into this case. Garrett
Bradley reminded Lieff of this in negotiating the arrangement that
allowed Thornton to pay for staff and contract attorneys that Lieff
employed. See R. & R. Ex. 87 (Dkt. No. 401-86). Lieff too wanted
to maintain a good relationship with Garrett Bradley and Thornton
to enhance the likelihood that they would bring Lieff into future
lucrative cases as counsel for institutional investors, including
those recruited by Garrett Bradley.
The Master found that more than $4,500,000, constituting more
than 60% of Thornton's purported lodestar, was attributable to the
Lieff and Labaton Staff and contract attorneys for whom Thornton
paid. See R. & R. at 227. Daniel Chiplock of Lieff wrote to Garrett
Bradley that he was "happy" to allow this "as a courtesy" because
Thornton had brought Lieff into this case. Email from Chiplock to
Bradley (Aug. 30, 2015), R. & R. Ex. 87 (Dkt. No. 401-86).
The
prepared

manner

in

also

which

Garrett

contributed

misrepresentations.

Labaton

to
partner

Bradley's
the

declaration

inclusion

Nicole

Zeiss

of

was
many

prepared

a

template for the fee declarations that was provided to each firm.
Zeiss had no prior involvement in this case. Among other things,
she

did

not

know

about

the

cost-sharing

arrangement

between

Labaton, Lieff, and Thornton, which had not been memorialized in
a written contract. The court infers that she knew that Labaton
worked almost exclusively on a contingent-fee basis. There is no

91

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 92 of 159

evidence that she inquired or knew whether or not the other firms
had any clients that paid regular hourly rates for their services.
Nevertheless, she provided plaintiffs' firms, including Thornton,
a template that stated:
3. The schedule attached hereto as Exhibit A is a summary
indicating the amount of time spent by each attorney and
professional support staff-member of my firm who was
involved in the prosecution of the Class Actions, and
the lodestar calculation based on my firm's current
billing rates. For personnel who are no longer employed
by my firm, the lodestar calculation is based upon the
billing rates for such personnel in his or her final
year of employment by my firm. The schedule was prepared
from contemporaneous daily time records regularly
prepared and maintained by my firm, which are available
at the request of the Court. Time expended in preparing
this application for fees and payment of expenses has
not been included in this request.
4. The hourly rates for the attorneys and professional
support staff in my firm included in Exhibit A are the
same as my firm's regular rates charged for their
services, which have been accepted in other complex
class actions.
R. & R. Ex. 201 (Dkt. No. 401-200) (emphasis added). The template
also included several blanks to be filled in with information
specific to the firm submitting the declaration, and a blank
Exhibit A concerning the hours and regular rates for each of the
firm's attorneys and employees.
Two Thornton attorneys added information to the template
before the declaration was given to Garrett Bradley to sign. Evan
Hoffman filled in the blanks concerning the total hours worked and
expenses, and added to Exhibit A the hours and the rates that

92

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 93 of 159

Thornton purportedly regularly charged for the staff and contract
attorneys, among others, who were represented to be employees of
Thornton. See June 25, 2019 Tr. at 146 (Dkt. No. 565). Michael
Lesser added the narrative concerning Thornton's contribution to
the case. See June 26, 2019 Tr. at 185 (Dkt. No. 566). Hoffman
brought the declaration to Garrett Bradley or left it for him. See
G. Bradley Dep. Tr. at 84-85, R. & R. Ex. 43 (Dkt. No. 401-42).
Neither

Hoffman

nor

Lesser

told

Garrett

Bradley

that

the

declaration included statements that were not true.
Garrett Bradley credibly testified that on September 14,
2016, he signed his declaration, under oath, without reading it.
See June 25, 2019 Tr. at 66 (Dkt. No. 565). This constituted a
violation of Federal Rule of Civil Procedure 11(b).
As described earlier, Rule 11(b) provides, in pertinent part
that:
By presenting to the court a pleading, written motion,
or other paper -- whether by signing, filing,
submitting, or later advocating it -- an attorney or
unrepresented party certifies that to the best of the
person's knowledge, information, and belief, formed
after an inquiry reasonable under the circumstances:
. . .
(3) the factual contentions have evidentiary
support or, if specifically so identified, will
likely have evidentiary support after a reasonable
opportunity
for
further
investigation
or
discovery . . . .
(emphasis added).

93

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 94 of 159

"Fed.

R.

Civ.

P.

11

requires

that

an

attorney

make

a

reasonable inquiry to assure that all pleadings, motions, and
papers filed with the court are factually well-grounded, legally
tenable, and not interposed for any improper purpose. Counsel is
held to standards of due diligence and objective reasonableness."
Mariani v. Drs. Assocs., Inc., 983 F.2d 5, 7 (1st Cir. 1993)
(internal citations omitted). "Whether a litigant breaches his or
her duty [under Rule 11] to conduct a reasonable inquiry into the
facts and the law depends on the objective reasonableness of the
litigant's conduct under the totality of the circumstances." CQ
Int'l Co., Inc. v. Rochem Int'l USA, 659 F.3d 53, 62 (1st Cir.
2011) (alteration in original) (internal quotation marks omitted).
To

determine

whether

an

inquiry

was

reasonable

under

the

circumstances, courts consider "the complexity of the subject
matter, the party's familiarity with it, the time available for
inquiry, and the ease (or difficulty) of access to the requisite
information." Navarro-Ayala v. Nunez, 968 F.2d 1421, 1425 (1st
Cir. 1992).
Garrett

Bradley

not

only

failed

in

his

duty

to

make

a

reasonable inquiry concerning whether the representations he was
making were reliable, he made no inquiry at all.

There

is

no

excuse for his failure to read his declaration before he signed it
under oath or for the many misrepresentations included in it.
Bradley had ample time to read his declaration before signing it.

94

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 95 of 159

The declaration had only two pages of text and Exhibit A was only
another two pages. See Dkt. No. 104-16. Bradley was the Managing
Partner of Thornton. He was fully familiar with its operations. If
Bradley had read his declaration before signing it on September
14, 2016, he would have realized that the representations in
paragraphs 3 and 4, and on Exhibit A were incorrect. He then could
and should have corrected them.
Especially egregious was Garrett Bradley's claim that "[t]he
hourly rates for the attorneys and professional support staff in
my firm . . . are the same as my firm's regular rates charged for
their services, which have been accepted in other complex class
actions." G. Bradley Decl. ¶4 (Dkt. No. 104-16).

Bradley was

experienced in class action litigation. He knew this information
was relevant to the important lodestar cross-check the court would
use to determine whether the request for $75,000,000 in attorneys'
fees was reasonable. See June 25, 2019 Tr. at 73 (Dkt. No. 565).
He also knew that Thornton did not charge any clients on an hourly
basis

and

had

not

employed

any

process

to

develop

reliable

hypothetical market rates for its attorneys. Garrett Bradley now
acknowledges that the representations about Thornton's regular
hourly rates were not correct. See id. at 86. If he had read his
declaration before signing it, he would have recognized that it
was false and misleading in many respects.

95

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 96 of 159

The template language could have easily been revised to be
true and not misleading. Three of ERISA Counsel's firms -– McTigue,
Zuckerman, and Beins Axelrod -– made changes to the template
language in their declarations. See Kravitz Decl. ¶4 (Dkt. No.
104-20); McTigue Decl. ¶20 (Dkt. No. 104-19); Axelrod Decl. ¶8
(Dkt. No. 104-22). For example, Beins' declaration stated:
The hourly rates charged by the Timekeepers are the
Firm's regular rates for contingent cases and those
generally charged to clients for their services in noncontingent/hourly matters. Based on my knowledge and
experience, these rates are also within the range of
rates normally and customarily charged in Washington,
D.C. by attorneys of similar qualifications and
experience in cases similar to this litigation, and have
been approved in connection with other class action
settlements.
Axelrod Decl. ¶8 (Dkt. No. 104-22).
Thornton's failure to make reliable representations to this
court appears to be part of a pattern. In BONY Mellon, using
language evidently drafted by Lieff, Thornton and Lieff stated in
their

declarations

that

"[t]he

hourly

rates

charged

by

the

Timekeepers are the Firm's regular rates for contingent cases and
those generally charged to clients for their services in noncontingent/hourly matters." Chiplock Decl. ¶5, Dkt. No. 622-1,
BONY Mellon, 12-md-02335-LAK-JLC (S.D.N.Y. Aug. 17, 2015); Lesser
Decl.

¶9,

Dkt.

No.

622-8,

BONY

Mellon,

12-md-02335-LAK-JLC

(S.D.N.Y. Aug. 17, 2015). This statement would have been true and,
therefore, not misleading if made by Lieff in this case. It was

96

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 97 of 159

evidently not true when made on behalf of Thornton in BONY Mellon
because the firm charged no clients by the hour and had not
developed hypothetical market rates for its attorneys. See June
25, 2019 Tr. at 91, 110 (Dkt. No. 565).
Garrett Bradley violated Rule 11(b) again in November 2016,
when, the court finds, he did read his declaration. As explained
earlier, soon after the court awarded $75,000,000 in attorneys'
fees on November 2, 2016, the Boston Globe alerted Class Counsel
to

errors

in

their

fee

submissions,

including

but

not

only

concerning the double-counting of staff and contract attorneys.
Lesser,

Hoffman,

and

Garrett

Bradley

reviewed

Bradley's

declaration. 17 They did so again after the first Boston Globe
article was published on December 17, 2016.
The Advisory Committee Note to the 1993 amendment to Rule 11
states

that

"a

litigant's

obligations . . .

are

not

measured

solely as of the time [papers] are filed with or submitted to the
court,

but

include

reaffirming

17

to

the

court

and

advocating

Garrett Bradley testified that in November and December 2016,
he only read Exhibit A and did not read paragraphs 2 and 3 of his
declaration. See June 25, 2019 Tr. at 87 (Dkt. No. 565). This
contention is not credible. The Boston Globe was raising a major
issue that threatened the award of $75,000,000 as attorneys' fees.
Bradley learned of it from counsel for Thornton. See id. As
indicated earlier, the declaration was only two-pages long and
referenced Exhibit A. Bradley was discussing the declaration with
his partners. Therefore, the court concludes he read his
declaration in November 2016.

97

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 98 of 159

positions contained in those pleadings and motions after learning
that they cease to have any merit." Therefore, "[t]he duty under
Rule 11 to inquire into the facts is a continuing duty and counsel
cannot ignore the realities of life once facts come to their
attention

which

indicate

that

their

earlier

reliance

was

misplaced." Meadow Ltd. P'ship v. Heritage Sav. & Loan Ass'n, 118
F.R.D. 432, 434 (E.D. Va. 1987), aff'd sub nom. Fahrenz v. Meadow
Farm P'Ship, 850 F.2d 207 (4th Cir. 1988).
Here, Garrett Bradley did not inform the court that his
declaration contained false statements, even as Goldsmith argued
on behalf of all plaintiffs' counsel in his November 10, 2016
letter to the court that the original $75,000,000 fee award was
reasonable despite the double-counting error. Therefore, the court
finds that Garrett Bradley intentionally violated Rule 11 after
reading his declaration in November 2016. 18
Garrett Bradley's failure to correct his declaration after he
read it also violated Massachusetts Rule of Professional Conduct
3.3(a). Rule 3.3(a) provides in relevant part, that "[a] lawyer

18

In any event, Bradley testified that he read his declaration
after the court issued its February 6, 2017 Order raising questions
concerning his representations regarding the regular hourly rates
reportedly charged by Thornton. See June 25, 2019 Tr. at 86 (Dkt.
No. 565). He did not, however, inform the court that his
declaration was incorrect until the court questioned him at the
March 7, 2017 hearing. See Mar. 7, 2017 Tr. at 88 (Dkt. No. 176).
Therefore, Bradley violated Rule 11 again no later than shortly
after February 6, 2017.

98

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 99 of 159

shall not knowingly: (1) make a false statement of fact or law to
a tribunal or fail to correct a false statement of material fact
or law previously made to the tribunal by the lawyer" (emphasis
added). "Knowingly" means with "actual knowledge of the fact in
question." Mass. R. Prof. C. 1.0(g) "A person's knowledge may be
inferred from the circumstances." Id. A fact is "material" if,
"viewed

objectively,

reasonable

and

it

natural

directly
tendency

or
to

circumstantially
influence

a

had

a

judge's

determination." In re Angwafo, 899 N.E.2d 778, 784 (Mass. 2009).
"It is not necessary . . . that the statement of material fact did
in fact influence a determination by the judge." Id. at 785.
The conduct of Garrett Bradley that violated Rule 3.3(a)(1)
also violated Massachusetts Rule of Professional Conduct 8.4(c).
Rule 8.4(c) provides that "[i]t is professional misconduct for a
lawyer to engage in conduct involving dishonesty, fraud, deceit or
misrepresentation."
In this case the court finds that Garrett Bradley knew that
his declaration included false statements of fact after he read it
in November 2016. He did not, however, correct it. The matter of
whether the hourly rates attributed to attorneys Thornton claimed
to employ were regularly charged to clients was material. As
explained earlier, the lodestar check to determine the multiplier
of a requested fee award has the potential to influence the court
to award a lesser amount. The reasonable hourly rate, measured in

99

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 100 of 159

part by what clients actually pay for each lawyer's services, is
essential to calculating the lodestar correctly. It is, therefore,
important

that

a

lawyer's

representations

concerning

regular

hourly rates and the resulting lodestar be reliable. In this case
Garrett Bradley repeatedly violated his duty to be candid with the
court and to correct the misrepresentations he had made.
Labaton
Labaton also violated Federal Rule of Civil Procedure 11(b)
and Massachusetts Rules of Professional Conduct 3.3(a) and 8.4(c).
In support of the request for $75,000,000 in attorneys' fees,
Sucharow

submitted

two

declarations.

The

first

Sucharow

declaration, Dkt. No. 104, presented the facts on which plaintiffs'
counsel relied to justify the $75,000,000 fee request and addressed
the attached declarations by a member of each firm that had
appeared on behalf of plaintiffs. Among other things, Sucharow
stated, under oath, that:
Included with these declarations are schedules that
summarize the lodestar of each respective firm, as well
as the expenses incurred by category (the "Fee and
Expense Schedules"). The individual firm declarations
and the Fee and Expense Schedules indicate the amount of
time spent by each attorney and professional support
staff on the case, and the lodestar calculations based
on their current billing rates. As stated in each of
these
declarations,
they
were
prepared
from
contemporaneous daily time records regularly prepared
and maintained by the respective firms, which are
available at the request of the Court. See also Master
Chart of Lodestars, Litigation Expenses, and Plaintiffs'
Service Awards, Exhibit 24 hereto.

100

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 101 of 159

Dkt. No. 104, ¶176 (emphasis added).
As

explained

earlier,

with

regard

to

Thornton,

these

representations were false. Among other things, Thornton did not
have "current billing rates" for the attorneys it employed because
it never billed clients at an hourly rate or even used a process
to develop hypothetical rates for its attorneys. There is no
evidence that Sucharow, or anyone at Labaton, made any effort to
determine

if

Thornton's

representations

were

true.

This

was

unreasonable and, therefore, in violation of Rule 11.
In addition, Sucharow knew that Thornton was paying for staff
and contract attorneys employed by or working at Labaton and Lieff.
See Mar. 7, 2017 Tr. at 81:14-23 (Dkt. No. 176). Therefore, if he
had read it, Sucharow would have known that the lawyers listed as
staff attorneys on Thornton's Exhibit A were not, as Bradley
claimed, members of that firm. However, neither Sucharow nor Zeiss
compared the Exhibits of Labaton, Lieff, and Thornton to assure
that none of the staff and contract attorneys were double-counted.
See R. & R. at 56, n.39.

In view of the cost-sharing agreement,

this too was unreasonable. As Thornton and Lieff were not given
the declarations of other firms, Labaton's negligence was the major
cause of the submission by Sucharow of a declaration that falsely
claimed that an additional 9,322 double-counted hours had been
worked, improperly inflating the purported lodestar by more than

101

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 102 of 159

$4,000,000,

and

rendering

it

unreliable

as

a

check

of

the

reasonableness of the requested $75,000,000 fee award.
Sucharow's

declaration

concerning

Labaton's

lodestar

calculation was also false and misleading. Like Garrett Bradley,
Sucharow represented that "[t]he hourly rates for the attorneys
and professional support staff in my firm included in Exhibit A
are the same as my firm's regular rates charged for their services,
which have been accepted in other complex class actions." Dkt. No.
104-15, ¶7. However, when he made this statement under oath,
Sucharow believed that Labaton did not have any clients who were
charged or paid hourly rates. See Mar. 7, 2017 Tr. at 79 (Dkt. No.
176). More specifically, he testified, "we don't have paying
clients, your Honor . . . . Most firms in our field do not have
billable clients . . . [w]e don't have billable clients." Id.
Labaton now claims that it had a few paying clients. See
Master's Suppl. Resp. 3 (Dkt. No. 523); Labaton's Resp. to Master's
1st Set of Interrogs. 34 (Dkt. No. 526-1). 19 To the extent, if any,
that it would have been accurate, Sucharow could have easily used
language similar to that used by Lieff in the fee declaration it

19

Labaton later identified several clients who had been charged
an hourly rate. See Wolosz Decl. Ex. A (Dkt. No. 510-2). However,
Sucharow did not know or believe Labaton billed any clients by the
hour when he signed and submitted his declaration. Moreover, even
if Sucharow's reference to Labaton's "regular rates charged" was
not completely false, it was misleading.

102

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 103 of 159

submitted in BONY Mellon quoted earlier: "The hourly rates charged
by the Timekeepers are the Firm's regular rates for contingent
cases and those generally charged to clients for their services in
non-contingent/hourly matters." Chiplock Decl. ¶5, Dkt. No. 6221, BONY Mellon, 12-md-02335-LAK-JLC (S.D.N.Y. Aug. 17, 2015).
Labaton's counsel acknowledged that "it would be silly for me to
argue that language is not preferable." June 24, 2019 Tr. at 125
(Dkt. No. 560). Using language in sworn declaration that is not
false or misleading, however, is not merely preferable. It is
required. See Fed. R. Civ. P. 11(b)(3); Mass. R. Prof. C. 3.3(a),
8.4(c).
Like Garrett Bradley, Sucharow did not correct his false
representation regarding regular rates charged by Labaton before
the court questioned him on March 7, 2017, despite the fact that
the court raised this issue in its February 6, 2017 Memorandum and
Order. See Dkt. No. 117 at 4.
Nor

did

Sucharow's

partner

Goldsmith

correct

Sucharow's

misrepresentation concerning Labaton's rates when he reported the
double-counting to the court. As explained earlier, prompted by
"an inquiry from the media," on November 10, 2016, Goldsmith filed
a letter informing the court of the double-counting that resulted
in the court using an inflated purported lodestar in deciding to
award

$75,000,000

in

letter

indicates

that

attorneys'
Goldsmith

103

fees.

The

detailed

scrutinized

all

of

four-page
the

fee

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 104 of 159

declarations. See Dkt. No. 116. The court infers Goldsmith knew
that Labaton had few, if any, clients who were charged and paid an
hourly rate, and that few, if any, of the attorneys who worked on
this case had ever been charged to a client at an hourly rate.
However, Goldsmith continued to rely on what Sucharow falsely
stated were Labaton's "regular rates charged" in claiming a revised
lodestar of $37,265,241. Id. As the 1993 Advisory Committee note
quoted earlier indicates, this too constituted a violation of Rule
11. See also Meadow Ltd. P'ship, 118 F.R.D. at 434.
In addition, in the Memorandum in Support of the Motion for
Attorneys' Fees submitted by Sucharow as Lead Counsel on behalf of
Labaton, and represented to have been also signed by counsel for
Thornton and Lieff, Labaton provided a misleading characterization
of the Fitzpatrick Study. See Dkt. No. 103-1, at 17-18 of 36. More
specifically, Labaton argued:
Empirical studies also support the requested fee. An
in-depth review of all 688 class action settlements in
federal courts during 2006 and 2007 found that the mean
and median fees awarded in the 444 settlements where
the [percentage of fund] method was used (either with
or without a lodestar cross-check) were 25.7% and
25.0%, that the mean and median fees awarded in
securities cases (233 of 444) were 24.7% and 25.0%, and
that the mean and median fees awarded in consumer cases
(39 of 444) were 23.5% and 24.6%. Brian T. Fitzpatrick,
"An Empirical Study of Class Action Settlements and
Their Fee Awards," 7 J. Empirical Legal Stud. 811, 835
(2010) (Ex. 31); see also Neurontin, 58 F. Supp. 3d at
172 (favorably citing this study). The 24.85% fee
requested is right in line with Professor Fitzpatrick's
findings.

104

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 105 of 159

Id. at 17-18 (emphasis added) (footnote omitted). Labaton added in
a footnote that Fitzpatrick "found . . . that the mean and median
fees awarded in settlements in the First Circuit . . . were 27.0%
and 25.0%." Id. at 18 n.18.
Labaton accurately reported the figures in the Fitzpatrick
Study that supported the request for an award of 25% of the
$300,000,000 common fund. However, Labaton omitted other findings
from the Fitzpatrick Study that undermined the argument that an
award of 25% of the common fund was appropriate. In particular, as
indicated earlier, Fitzpatrick had concluded that "fee percentage
is strongly and inversely associated with settlement size among
all cases, among securities cases, and among all nonsecurities
cases." Fitzpatrick Study, supra, at 837. Fitzpatrick explained
that "fee percentages tended to drift lower at a fairly slow pace
until a settlement size of $100 million was reached, at which point
the fee percentages plunged well below 20 percent . . . ." Id. at
838.

In

settlements

between

$250,000,000

and

$500,000,000,

Fitzpatrick found a mean of 17.8% and a median of 19.5%. See id.
at 839. Labaton did not mention these important findings. The court
now recognizes that a table in the Fitzpatrick Study indicated
there was for settlements between $250,000,000 and $500,000,000 a
standard deviation in awards of 7.9%. Id. at 839. However, Labaton
did not mention this fact either.

105

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 106 of 159

As intended, Labaton's memorandum communicated to the court
that Fitzpatrick had found that the mean and median awards for
comparable, megafund cases were in the range of 25% of the common
fund, and that a $75,000,000 award in this case would be "right in
line with Professor Fitzpatrick's findings." Dkt. No. 103-1, at 18
of 36. This statement was false and misleading.
Labaton

filed

the

Fitzpatrick

Study

with

its

voluminous

submission in support of the request for attorneys' fees. It was
Exhibit 31 of 32 exhibits to Sucharow's declaration. See Dkt. No.
104-31. The court could have read the 36-page study at the time it
made the original fee award. However, there were 778 pages of
exhibits, in addition to the lengthy declarations and memoranda.
In contrast to Neurontin, counsel did not in this case file an
affidavit from Fitzpatrick, which would have focused the court on
his

study.

See

Neurontin,

58

F.

Supp.

3d

at

171. 20

It

is

unreasonable to expect that the court would scrutinize hundreds of
pages of exhibits to determine the veracity of every representation
made by counsel. Rather, as the court stated at the final approval
hearing on November 2, 2016, it relied "heavily" on counsel's

20

In Neurontin the court noted that Fitzpatrick had found that
"for settlements between $250 million and $500 million, the mean
percentage was just 17.8%." F. Supp. 3d at 172. However, while
Labaton repeatedly cited Neurontin in its Memorandum, it did not
include reference to this statistic. See Dkt. No. 103-1, at 15-18
of 36.

106

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 107 of 159

submissions and statements at hearing, Nov. 2, 2016 Tr. at 35 (Dkt.
No. 114), on the assumption that counsel were satisfying their
duty of candor to the court. Once again, the court now finds that
trust was misplaced.
As explained earlier, the description of the Fitzpatrick
Study made by Lieff and Thornton in requesting attorneys' fees in
the BONY Mellon case was not false or misleading. 21 Similar language
could and should have been used in this case as well.
Labaton also violated the Massachusetts ethical rules, but
not the Federal Rules of Civil Procedure, in concealing its
agreement to pay Chargois 20% of its fees in all ATRS cases in
which Labaton was Lead Counsel.

21

In BONY Mellon, counsel wrote:
One recent study surveying all class settlements during
2006-2007 found that the mean and median percentages
awarded for settlements between $250 million and $500
million were 17.8% and 19.5%, respectively, with a
standard deviation of 7.9%. See Brian T. Fitzpatrick, An
Empirical Study of Class Action Settlements and Their
Fee Award, 7 J. Empirical Legal Stud. 811, 839 (2010).
Other well-known commentators have opined that 'fee
requests falling within one standard deviation above or
below the mean should be viewed as generally reasonable
and approved by the court unless reasons are shown to
question the fee.' Theodore Eisenberg and Geoffrey P.
Miller, Attorney Fees in Class Action Settlements: An
Empirical Study, 1 J. Empirical Legal Stud. 27, 74
(2004). The 25% fee requested here [in BONY Mellon] is
within one standard deviation of the mean shown in the
Fitzpatrick study.

Dkt No. 619 at 35 of 44, BONY Mellon, 12-md-02335-LAK-JLC (S.D.N.Y.
Aug. 17, 2015).

107

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 108 of 159

ATRS entered into a Retention Agreement designating Labaton
to serve as its counsel in this case on February 8, 2011. See R.
& R. Ex. 138 (Dkt. No. 401-137). The Retention Agreement stated,
in part, that "Arkansas Teachers agrees that Labaton Sucharow may
allocate fees to other attorneys who serve as local or liaison
counsel, as referral fees, or for other services performed in
connection with the Litigation," meaning this case. Id. (emphasis
added).
The Master and Labaton agree that the relevant Massachusetts
Rules of Professional Conduct then in effect should be used to
evaluate the propriety of Labaton's conduct, rather than the
revisions of those Rules that were effective as of March 15, 2011.
See R. & R. at 251; Dkt. No. 359 at 27-8. The relevant Massachusetts
Rules were then Rules 7.2(c) and 1.5(e).
Rule 7.2(c) stated, in pertinent part, that "[a] lawyer shall
not give anything of value to a person for recommending the
lawyer's services, except that a lawyer may: . . . (4) pay referral
fees permitted by Rule 1.5(e) . . . ." Mass. R. Prof. C. 7.2(c)
(eff. Oct. 1, 1999), R. & R. Ex. 231 (Dkt. No. 401-233) (emphasis
added). Rule 1.5(e) then provided, in pertinent part, that "[a]
division of a fee between lawyers who are not in the same firm may
be made only if, after informing the client that a division of
fees will be made, the client consents to the joint participation

108

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 109 of 159

and the total fee is reasonable." Mass. R. Prof. C. 1.5(e) (eff.
Jan. 2, 2001), R. & R. Ex. 225 (Dkt. No. 401-227).
Prior to February 8, 2011, Labaton had agreed to pay Chargois
20% of its fee in all ATRS cases in which Labaton was Lead Counsel,
including this case. 22 Labaton agreed to make this payment because,
as Chargois wrote to Labaton, Chargois & Herron "got [Labaton]
ATRS as a client (after considerable favors, political activity,
money spent and time dedicated in Arkansas) . . . ." Email from
Chargois to Belfi (Oct. 18, 2014), R. & R. Ex. 177 (Dkt. No. 401176). Therefore, Chargois & Herron "recommended" Labaton to ATRS
and did much more to assist Labaton in getting ATRS as a client.
However, neither Chargois nor Herron performed any services in
connection with this case.
Labaton argues that a lawyer is not a "person" for the purpose
of Rule 7.2(c) and, therefore, the Rule does not apply. This
contention is incorrect. "Where the statutory language is clear,
it must be given its plain and ordinary meaning." Nationwide Mut.

22

Labaton has represented ATRS in at least six other cases in
which it paid Chargois a percentage of the fee award even though
Chargois did no work on the case and did not file an appearance.
See Brado v. Vocera Commc'ns, Inc., No. 13-cv-3567 (N.D. Cal.); In
re Spectrum Pharm., Inc. Secs. Litig., No. 13-cv-0433 (D. Nev.);
In re Colonial BancGroup Inc. Secs. Litig., No. 09-cv-0104 (M.D.
Al.); Gammel v. Hewlett-Packard Co., No. 11-cv-1404 (C.D. Cal.);
Hoppaugh v. K12 Inc., No. 12-cv-0103 (E.D. Va.); In re Beckman
Coulter, Inc. Secs. Litig., No. 10-cv-1327 (C.D. Cal.); see also
Am. Brown Report at 12-13 of 16 (Dkt. No. 539-1) (listing the
foregoing cases); R. & R. at 124.

109

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 110 of 159

Ins. Co. v. Comm'r of Ins., 491 N.E.2d 1061, 1064 (Mass. 1986). A
lawyer, like any other human being, is commonly and correctly
understood to be a "person." 23
In addition, the payment to Chargois in connection with this
case was not a "referral fee" within the meaning of Rules 7.2(c)(4)
and 1.5(e). In 2005, in Saggese v. Kelley, 837 N.E.2d 699 (2005),
the Massachusetts Supreme Judicial Court described a referral fee
as follows:
Jan Doe consulted Saggese about a matter.
Sagesse told Doe he had little experience in
the
field
for
which
Doe
sought
his
representation, but that the Kelleys had such
experience. Later that month, he introduced
Doe to Kathleen Kelley. . . . Kathleen Kelley
sent Doe a written fee agreement that
specified an hourly rate and a retainer. A
copy of the agreement was sent to Saggese.
Id. at 702 (footnote omitted). Subsequently, the Kelleys agreed to
Saggese's request for one-third of their fees in cases he referred,
including Doe's case. Id.

23

The relevant revised, current Massachusetts Rules of
Professional Conduct refer specifically to individuals who are not
lawyers in sections other than 7.2(b) (the successor to Rule
7.2(c)), including within 7.2. This indicates that the drafters of
the Massachusetts Rules know how to make a distinction between
individuals who are not lawyers and those who are. See, e.g., Mass.
R. Prof. C. 5.3, 7.2(b)(4). The fact that no distinction is now
made between lawyers and other individuals in Rule 7.2(b) indicates
that the prior version of the Rule applied to lawyers as well as
others, and the drafters did not in the revision narrow the Rule
to exclude lawyers.

110

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 111 of 159

The instant case does not resemble the paradigmatic referral
fee described in Saggese. As explained earlier, Labaton asked
Chargois to find institutional investors in the Southwest that
could engage Labaton as monitoring counsel and to influence them
to do so. Neither Chargois nor Herron had a relationship with any
institutional

investor.

No

institutional

investor

ever

asked

either of them for advice generally or to find monitoring counsel
particularly. However, Herron somehow persuaded Arkansas State
Senator Faris to use his influence as a member of the legislative
committee

that

oversaw

ATRS

to

assist

Labaton.

When

Faris'

intervention led to ATRS' selection of Labaton as a monitoring
counsel, Labaton agreed to pay Chargois 20% of its fees in every
ATRS case in which Labaton served as Lead Counsel, despite the
fact that Chargois did not refer that case to Labaton and was not
expected to file an appearance or do any work on it. Therefore,
the payment to Chargois concerning this case constituted what could
be called a "finders fee." It was, in any event, not a referral
fee within the meaning of Rules 7.2(c)(4) and 1.5(e).
The conclusion that the payment to Chargois was a "finders
fee" is consistent with Vita v. Berman, DeValerio & Pease, LLP.,
967 N.E.2d 1142 (Mass. App. Ct. 2012). In Vita, the Massachusetts
Appeals Court used the term "referral fee" to describe an "ongoing
arrangement whereby Vita [a criminal defense attorney], who had
many contacts in the financial securities field, would refer

111

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 112 of 159

potential class action plaintiffs to [Berman, DeValerio & Pease]."
Id. at 1145. Neither Chargois nor Herron were comparable to Vita.
In 2005, in Saggese, the Supreme Judicial Court held that
with regard to agreements for what genuinely constitute referral
fees, Rule 1.5(e) would in the future be construed to require
disclosure of the fee-sharing agreement to the client before the
referral is made and securing the client's consent to it in
writing. See 837 N.E.2d at 706. Labaton did not satisfy those
requirements with regard to this case. 24
The payment to Chargois is also not a "referral fee" within
the meaning of the Retention Agreement, which allowed Labaton to
divide fees with other attorneys for serving as "local or liaison
counsel, as referral fees, or for other services performed in
connection with" this case because Chargois did not serve as local
or liaison counsel, refer this case to Labaton, or perform any
other services in connection with it. Letter from Belfi to Hopkins
(Feb. 8, 2011), R. & R. Ex. 138 (Dkt. No. 401-137).

24

The revised Rule 1.5(e), which was promulgated in December
2010, before the February 8, 2011 Retention Agreement, and became
effective March 15, 2011, codified the ruling in Saggese by
requiring that "the client [be] notified before or at the time the
client enters into a fee agreement for the matter that a division
of fees will be made and consents to the joint participation in
writing and the total fee is reasonable." (Emphasis added). With
regard to Chargois, Labaton also did not satisfy the requirements
of the revised Rule of which it had notice when it entered into
the Retention Agreement.

112

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 113 of 159

Moreover, assuming, without finding, that the payment to
Chargois was a "referral fee" within the meaning of the Retention
Agreement, ATRS did not have the authority to relieve Labaton of
its

ethical

obligations

under

Massachusetts

Rules

7.2(c)

and

1.5(e). See R. & R. at 230. Labaton argues, however, that it did
not violate Rule 7.2(c) or 1.5(e) because after this issue emerged,
Hopkins,

the

Executive

Director

of

ATRS,

ratified

Labaton's

agreement to share its fees with Chargois. See Hopkins Decl. ¶116
(Mar. 15, 2018), R. & R. Ex. 130 (Dkt. No. 401-129); Dkt. No. 579
at

23.

In

Saggese,

the

Supreme

Judicial

Court

permitted

ratification to authorize belated disclosure of a referral fee
sharing agreement. See 837 N.E.2d at 705. The Court reasoned that
"[a]lthough Doe's consent came toward the end of the attorneyclient relationship, the beneficiary in a fiduciary relationship
may ratify the conduct that otherwise would constitute a breach of
fiduciary

duties,

provided

the

requisite

disclosure

has

been

made." Id.
Significantly, however, Saggese was not a class action. In
this

case,

no

later

than

when

the

class

was

certified

for

settlement purposes on August 8, 2016, Labaton had fiduciary duties
to all class members, not only to ATRS. In January 2012, the court
appointed Labaton as "interim lead counsel to act on behalf of all
plaintiffs and the proposed class." See Dkt. No. 4. In the Notice
of the proposed settlement drafted by Labaton, the class was

113

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 114 of 159

defined as including "all custody and trust customers of [State
Street]," including the ERISA Plans. Revised Long-Form Notice 8
(Dkt. No. 95-3). In the August 10, 2016 Notice, Labaton described
itself as "Lead Counsel" for the single class. Id. at 17. This was
proper because "once a class has been certified, the default
presumption

is

that

there

is

an

attorney-client

relationship

between class counsel and the absent class members." 6 Rubenstein,
Newberg

on

Class

Actions

§19:2;

see

also

Fulco

v.

Cont'l

Cablevision, Inc., 789 F. Supp. 45, 47 (D. Mass. 1972) ("[O]nce
the court enters an order certifying a class, an attorney-client
relationship arises between all members of the class and class
counsel.") (citing cases).
Lawyers generally have a fiduciary duty to their clients.
See, e.g., Saggese, 837 N.E.2d at 705. As counsel for the certified
class, Labaton had a fiduciary duty to all members of the class.
Indeed, it has been held that even prior to class certification,
attorneys

for

the

putative

class

have

fiduciary

and

ethical

obligations to all putative class members. See In re Gen. Motors
Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768,
801 (3d Cir. 1995) ("Beyond their ethical obligations to their
clients, class attorneys, purporting to represent a class, also
owe the entire class a fiduciary duty once the class complaint is
filed."); Piambino v. Bailey, 757 F.2d 1112, 1139 (11th Cir.
1985)("The lawyers who bring [class actions] have a heavy fiduciary

114

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 115 of 159

responsibility to their clients . . . ."); Singer v. AT&T Corp.,
185 F.R.D. 681, 690 (S.D. Fla. 1998) ("The class attorney has a
fiduciary duty to the court as well as to each member of the
class.").
In this matter, the ERISA Plans brought their own cases and
had their own counsel, while permitting Labaton to serve as "Lead
Counsel" in the consolidated cases. ATRS did not represent the
ERISA Plans or have the authority to ratify the Labaton payment to
Chargois

on

their

behalf.

Labaton

did

not

consult

the

representatives of the ERISA Plans concerning the payment to
Chargois or ask them to ratify the fee sharing agreement. If ERISA
Counsel had been informed of the proposed payment to Chargois,
they would have advised the ERISA Plans not to ratify it and the
Plans would have followed that advice. In these circumstances,
ATRS' purported ratification does not qualify the conclusion that
Labaton violated Rule 7.2(c) because the payment to Chargois did
not constitute a permissible "referral fee" within the meaning of
Rule 1.5(e).
The failure to inform the ERISA Plans of the fee sharing
arrangement and to seek their ratification of it also violated
Massachusetts Rules of Professional Conduct 1.4(a)(1) and (b).
Rule 1.4(b) states that "[a] lawyer shall explain a matter to the
extent reasonably necessary to permit the client to make informed
decisions regarding the representation." Rule 1.4(a)(1) requires

115

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 116 of 159

that a lawyer "promptly inform the client of any decision or
circumstance with respect to which the client's informed consent"
is required. Rule 1.0(f), in turn, defines "[i]nformed consent" as
"the agreement by a person to a proposed course of conduct after
the lawyer has communicated adequate information and explanation
about the material risks of and reasonably available alternatives
to the proposed course of conduct."
As ERISA Counsel have stated, information concerning the
Labaton payment to Chargois was important to their clients, to the
viability of the settlement, and to the allocation of attorneys'
fees. If it had been disclosed to them, ERISA Counsel may have
felt compelled to disclose the Chargois payment to the Department
of Labor. The Department of Labor then might not have approved the
proposed settlement, which was a prerequisite for presenting it
for

court

approval.

At

a

minimum,

ERISA

Counsel

would

have

discussed the issue of disclosure to the Department of Labor with
the Plans representing the putative ERISA classes. In addition,
ERISA Counsel would not have agreed to Labaton's demand that they
accept only $7,500,000 in attorneys' fees if they had known
Chargois was going to receive $4,100,000 without having done
anything concerning this case. See Sarko Dep. Tr. at 75, R. & R.
Ex. 37 (Dkt. No. 401-36).
Labaton's

conduct

in

assiduously

trying

to

conceal

its

obligation to pay Chargois indicates that it knew the arrangement

116

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 117 of 159

was highly questionable, if not improper. Labaton did not at the
outset of this case disclose to ATRS its obligation to pay Chargois
as was required by Rule 7.2(c). Labaton attorneys consistently
sent Chargois blind copies of relevant emails to Hopkins and
forwarded Hopkins' responses to Chargois, rather than copying
Chargois, in order to keep Hopkins from discovering Chargois'
financial interest in this case. In addition, Labaton ardently,
but unsuccessfully, argued to this court that all references to
Chargois in the Master's Report should be redacted from the version
of it filed for the public record. See June 28, 2018 Mem. & Order
(Dkt. No. 356).
Labaton did discuss the $4,100,000 payment to Chargois with
Thornton and Lieff. Thornton shares responsibility for Labaton's
misconduct in failing to disclose the Chargois arrangement and
payment to ATRS, the ERISA Plans, and ERISA Counsel. Garrett
Bradley was fully familiar with the Chargois arrangement. He knew
Chargois and understood that Chargois' role, like his own, was to
use political connections to generate clients for Labaton. Labaton
had Bradley speak to Chargois in a successful effort to get
Chargois to agree to reduce his demand for 20% of Labaton's fee in
this case. As part of the effort to conceal the reasons for the
payment to Chargois from Lieff, Bradley referred to Chargois as
"the local attorney in this matter who played an important role,"
in an email to his partner Michael Thornton, Sucharow and others

117

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 118 of 159

at Labaton, Chiplock of Lieff, and Chargois. See R. & R. Ex. 157
(Dkt. No. 401-156). However, Bradley knew Chargois had not served
as local counsel or done any other work concerning this case.
Bradley's email was part of a successful effort to persuade
Lieff to reduce its share of the fee award by about $1,000,000 in
order to compensate Labaton for part of its payment to Chargois.
See Email from Lieff to Chiplock (Aug. 28, 2015), R. & R. Ex. 153
(Dkt. No. 401-152). Chiplock and Robert Lieff had been told that
Chargois was a local counsel assisting ATRS in Arkansas. See R. &
R. at 109-110, Lieff Dep. Tr. at 58-80, R. & R. Ex. 139 (Dkt. No.
401-138), Chiplock Dep. Tr. at 101-116, R. & R. Ex. 41 (Dkt. No.
401-40).

However, they should have been suspicious about the

reasons for a payment of more than $4,000,000 to an attorney who
did not file an appearance in the case and did no work on it that
they

had

seen.

Nevertheless,

evidently

to

sustain

Lieff's

harmonious, lucrative relationship with Labaton and Thornton,
Chiplock did not object to the reduction of Lieff's fee.
While the court finds that Labaton violated its duty to
disclose its obligation to pay Chargois to the ERISA Plans through
their counsel, in contrast to the Master, see R. & R. at 309, 357,
the court does not find that Labaton violated Federal Rule of Civil
Procedure 23(e)(3) by not disclosing to the court its agreement to
pay Chargois. Rule 23(e)(3) states that "[t]he parties seeking
approval must file a statement identifying any agreement made in

118

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 119 of 159

connection with the proposal." Read in isolation, the Rule would
appear

to

have

required

Labaton

to

inform

the

court

of

its

agreement to share with Chargois the fee award it received. As one
of Labaton's experts, Professor Rubenstein, has written, Rule
23(e) "generally references the settlement agreement itself, but
given the broader language covering agreements 'made in connection
with the [settlement] proposal,' agreements beyond the settlement
agreement itself – such as any agreement about fees – may also
fall within the purview of Rule 23(e)." 5 Rubenstein, Newberg on
Class Actions §15.12.
Disclosure to the court would have prompted it to ask many
questions. Disclosure might have resulted in the removal of Labaton
as Lead Counsel, and/or a decision by the court to exercise its
discretion to allocate fees among counsel and award less to Labaton
than it otherwise would have.
However, Rule 23(h) directly addresses awards of attorneys'
fees. It provides, in part, that a request for attorneys' fees
must be made pursuant to Rule 54(d)(2). Rule 54(d)(2)(B)(iv) states
that a motion for attorneys' fees must "disclose, if the court so
orders, the terms of any agreement about fees for the services for
which the claim is made." (emphasis added). The court did not issue
such an order in this case. In view of the fact that Rule 23(h)
expressly
attorneys'

addresses
fees

the

and

obligations
incorporates

119

of

counsel

Rule

in

seeking

54(d)(2)(B)(iv)'s

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 120 of 159

requirement
ordered,

that

the

agreements

court

finds

concerning

that

Rule

fees

be

23(e)(3)

disclosed

should

not

if
be

interpreted as requiring disclosure of the Chargois arrangement to
the court in this case.
However, based on its experience in this case, the court
agrees with Rubenstein that "there is little obvious downside to
transparency so not only should courts order disclosure of fee
agreements

under

Rule

54(d)(2),

but

settling

parties

should

readily provide them under Rule 23(e) in any case." 5 Rubenstein,
Newberg on Class Actions §15.12. 25
The Master also found that the failure to disclose Chargois
to the court violated the Massachusetts Rules of Professional
Conduct. See id. at 318-27. In reaching this conclusion, the Master
relied substantially on the thorough and thoughtful analysis of
Professor Stephen Gillers concerning Rule 3.3, which as explained
earlier defines counsel's duty of candor to the courts. See id.;

25

This court intends to order, pursuant to Rule 54(d)(2),
disclosure of agreements concerning fees in all future class
actions. It also intends to recommend that the District of
Massachusetts adopt a Local Rule requiring such disclosure that is
similar to the Local Rule for the Southern and Eastern Districts
of New York.

Rule 23.1 of the Local Rules for the Southern and Eastern
Districts of New York provides that "[t]he notice [of a class
action settlement] shall include a statement of the names and
addresses of the applicants for such fees and the amounts requested
respectively and shall disclose any fee sharing agreements with
anyone" (emphasis added).

120

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 121 of 159

see also Gillers Suppl. Ethical Report for the Master 87-93, R. &
R. Ex. 233 (Dkt. No. 401-232). As the Master and Gillers note, and
as explained earlier, for the purposes of Rule 3.3, applications
for fee awards in class actions are treated as ex parte submissions
and, therefore, plaintiffs' counsel have a duty to inform the court
of all facts that are material concerning the requested award. See
Mass. R. Prof. C. 3.3(d), cmt. 14A. As also indicated earlier, the
court agrees that the Chargois matter was material. Again, if the
court had been informed of the matter in 2016, it might have
removed Labaton as Lead Counsel, and/or reduced the total fee award
or the amount of it allocated to Labaton.
However, it would be anomalous to find that conduct permitted
in

the

circumstances

of

this

case

by

Federal

Rule

of

Civil

Procedure 23 violates the Massachusetts Rules of Professional
Conduct. Comment 14 to Rule 3.3(d) concerning ex parte proceedings
provides guidance in resolving the tension between the Federal
Rules

of

Civil

Procedure

and

the

Massachusetts

Rules

of

Professional Conduct. It states, in part, that "Rule 3.3(d) does
not change the rules applicable in situations covered by specific
substantive law, such as presentation of evidence to grand juries,
applications for search or other investigative warrants and the
like." Federal Rule of Civil Procedure 23 is comparable to the
examples cited in Comment 14. Therefore, the court does not find

121

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 122 of 159

that Labaton violated Rule 3.3(d) in concealing Chargois from the
court.
However, an attorney must "explain a matter to the extent
reasonably

necessary

to

permit

the

client

to

make

informed

decisions regarding the representation." Mass. R. Prof. C. 1.4(b).
As explained earlier, Labaton did violate Rules 1.4(a)(1) and (b)
in failing to inform the ERISA Plans, through their counsel, that
Chargois would be paid $4,100,000 if, as requested, the court
awarded $75,000,000 as attorneys' fees. If Labaton had made that
required disclosure concerning Chargois to ERISA Counsel, the
court

finds

that

they

would

have

informed

the

court

of

it.

Concealing the Chargois matter from ERISA Counsel and their clients
was part of a consistent effort by Labaton to assure that the
court, among others, would not have an opportunity to explore the
origins and propriety of Labaton's obligation to pay Chargois, and
to consider those matters in deciding the most reasonable amount
to award as attorneys' fees. While the court does not find that
Labaton violated a Federal or Massachusetts Rule in concealing
Chargois from the court alone, the concealment of its obligation
to pay Chargois from the ERISA Plans and their counsel constituted
misconduct.
As explained earlier, Thornton acted in concert with Labaton
in improperly concealing the Chargois matter from the ERISA Plans,
their

counsel,

and

the

class

members

122

they

represent.

This

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 123 of 159

contributed to the Chargois matter being concealed from the court
and from the public as well.
Lieff
As also explained earlier, in contrast to Garrett Bradley
and, therefore, Thornton, Lieff was not accurately or completely
informed of the reasons Labaton was paying Chargois. Robert Lieff
testified that he was told that Chargois was local counsel and
assumed that Chargois was dealing with ATRS. See R. & R. at 110,
288, Ex. 139, at 97 (Dkt. No. 401-138). He also stated that if he
had been fully informed, he would not have agreed to contribute to
the payment to Chargois and would have encouraged Labaton to
disclose the agreement to pay Chargois to the court. Id. These
contentions are credible. However, as indicated earlier, the fact
that Chargois was being paid $4,100,000 -– which the court infers
was a very large amount to pay to a local counsel who had done no
work that was visible to Robert Lieff or his colleagues -– should
have prompted questions to Labaton that, if honestly answered,
would have provided Lieff material information. Therefore, while
the court finds that Lieff is much less responsible than Labaton
and Thornton, it did by its inaction and acquiescence contribute
to the occurrence of their misconduct concerning Chargois.
Lieff's performance was also deficient in other ways. Like
Thornton, it used the template provided by Labaton to claim that
the rates attributed to the attorneys it employed and those it

123

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 124 of 159

engaged as contract attorneys were regularly charged for their
services. Lieff had what it characterized as a "handful of paying
clients over the years." Mar. 7, 2017 Tr. at 93 (Dkt. No. 176). It
also had a process to develop hypothetical, reliable market rates
for its attorneys. See R. & R. at 173; Fineman Dep. Tr. at 58-60,
R. & R. Ex. 18 (Dkt. No. 401-17). However, as noted earlier, in
its BONY Mellon declaration Lieff stated that "[t]he hourly rates
charged by the Timekeepers are the Firm's regular rates for
contingent cases and those generally charged to clients for their
services in non-contingent/hourly matters." Chiplock Decl. ¶5,
Dkt. No. 622-1, BONY Mellon, 12-md-02335-LAK-JLC (S.D.N.Y. Aug.
17, 2015). To the extent that was true, Lieff should in this case
have revised the template to use the same language accurately
describing the rates attributed to its lawyers.
Lieff, in contrast to Thornton, did employ the staff and
contract attorneys it listed on its Exhibit A, and attributed to
them rates that had been developed through a process intended to
determine their market value. However, Lieff knew that Thornton
was paying for some of those attorneys. Nevertheless, it did not
receive, request, or review Thornton's fee declaration. Lieff also
did not communicate with Labaton or Thornton to assure that
Thornton was not claiming those attorneys in its lodestar. Nor did
Lieff review the submission to the court made by Labaton on Lieff's

124

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 125 of 159

behalf to assure the hours of the attorneys paid for by Thornton
were not double-counted. This was unreasonable.
In addition, Lieff authorized Labaton to represent on the
signature page that the misleading memorandum in support of the
request for attorneys' fees was signed by Lieff attorneys as
"Additional

Counsel

for

Plaintiff

[ATRS]

and

the

Settlement

Class," as well as by Labaton as "Lead Counsel for Plaintiff [ATRS]
and the Settlement Class," and by Thornton, as "Liaison Counsel
for Plaintiff [ATRS] and the Settlement Class." Dkt. No. 103-1, at
36 of 36. Lieff reviewed that memorandum. See Lieff's Objs. to
Master's Report 33 (Dkt. No. 367). However, Lieff did not attempt
to correct the misleading characterization of the Fitzpatrick
Study in the memorandum. As explained earlier, Lieff submitted an
accurate description of the Fitzpatrick Study in the memorandum in
support of the request for attorneys' fees in BONY Mellon. It
should have caused Labaton to do the same in this case. In any
event, Lieff violated Federal Rule of Civil Procedure 11(b) by
agreeing to be a signatory to a misleading submission to the court.
Similarly,

Lieff

reviewed

and

suggested

revisions

to

Sucharow's declaration attesting to the accuracy of all of the fee
declarations. See id. Lieff did not, however, inform Labaton that
the template language characterizing the rates attributed to its
attorneys as "regularly charged" was inaccurate and misleading. It
should have done so.

125

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 126 of 159

An Award of $60,000,000 in Attorneys' Fees is Reasonable
and Most Appropriate
Having vacated the original award of attorneys' fees in the
amount of $75,000,000, the court is now deciding de novo the amount
to award that is reasonable and most appropriate in the unique
circumstances of this case. See Fidelity/Micron, 167 F.3d at 737.
The court presumes that an award of 20-30% would be reasonable and
begins by considering whether an award of 25% would be most
appropriate. See Pac. Enters., 47 F.3d at 379; Bezdek, 79 F. Supp.
3d at 349-50; Lupron, 2005 WL 2006833 at *5.
Even absent the misconduct of Thornton, Labaton, and to a
lesser extent Lieff, that the court has found, the court would not
now award $75,000,000 in attorneys' fees. At the outset, whether
plaintiffs would recover anything in these cases was uncertain.
However, after the court denied the motion to dismiss the ATRS
case, the consolidated cases were stayed. What proved to be a
prolonged period of informal discovery and mediated negotiations
resulted in settlement. Plaintiffs' counsel were not required to
conduct any depositions, litigate any discovery disputes, oppose
a motion for summary judgment, or try the case. After the denial
of the motion to dismiss the ATRS case and the settlement in BONY
Mellon, the risk that the class and its attorneys would not receive
anything was greatly diminished. By then, at least, experienced
counsel would have realized that, as a practical matter, the key

126

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 127 of 159

questions were not whether settlement would be reached, but rather
when and for how much. In these circumstances alone, the court
would now make an award of less than 25% of the common fund.
Public policy considerations prompt the court to conclude
that it is most appropriate to award 20% of the common fund -$60,000,000 -- in attorneys' fees. Again, as the Second Circuit
has written, "in fulfilling [its role as protector of the class],
courts should look to the various codes of ethics as guidelines
for judging the conduct of counsel." Agent Orange, 818 F.2d at
222. It is equally appropriate to consider whether counsel have
violated Federal Rule of Civil Procedure 11 in seeking attorneys'
fees. This is, in part, because "'the district court has the duty
and responsibility to supervise the conduct of attorneys who appear
before it, and . . . [d]enial of attorneys' fees may be a proper
sanction' for attorney misconduct." Travers, 808 F.3d at 542
(quoting Culebras Enters., 846 F.2d at 97). While the court is not
imposing sanctions or denying attorneys' fees, it is taking into
account the proven misconduct of certain counsel in deciding where
within the reasonable range to award such fees.
In this case, Labaton and Thornton repeatedly demonstrated a
cavalier indifference to their duty to provide the court with the
accurate and complete information necessary to make a properly
informed decision concerning the most appropriate amount to award
in attorneys' fees. Rather than satisfy the elevated duty of candor

127

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 128 of 159

that exists in what the Massachusetts Rules of Professional Conduct
treat as an ex parte proceeding, see Mass. R. Prof. C. 3.3 cmt.
14A, Labaton and Thornton disregarded even the most basic duties
of counsel in any case.
For example only, as described earlier, Garrett Bradley: did
not read his declaration before signing it under oath; made false
representations

concerning

what

were

purportedly

the

regular

hourly rates charged for lawyers claimed to have been employed by
Thornton; did not correct his false statements after he read his
declaration; authorized the submission by Labaton of a memorandum
said to be signed by him, among others, that included a false and
misleading description of the Fitzpatrick Study; and collaborated
with Labaton to conceal its agreement to pay Chargois $4,100,000
from ATRS, the ERISA Plans and their counsel, and thus from the
court and the public.
Similarly, again for example only, Sucharow: submitted a
sworn

declaration

that

falsely

represented

that

Bradley's

declaration, among others, was accurate; falsely represented that
certain hourly rates were regularly charged by Labaton for its
attorneys; failed to make a reasonable inquiry before providing
the court with a lodestar that was erroneously inflated by 9300
hours and more than $4,000,000; provided a false and misleading
description of the Fitzpatrick Study; and with others at Labaton
and Garrett Bradley, improperly concealed Labaton's obligation to

128

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 129 of 159

pay Chargois more than $4,000,000 concerning this case. See R. &
R. at 311; Sucharow Dep. Tr. at 18-19, R. & R. Ex. 38 (Dkt. No.
401-37).
Judges expect that representations made to them by lawyers
result from reasonable inquiries, are not false or misleading, and
do not violate Federal Rule of Civil Procedure 11 or related
ethical rules. As explained earlier, it is especially important
that

attorneys

meet

those

standards

in

their

requests

for

attorneys' fees in class actions when the adversary process does
not operate and have the potential to expose misrepresentations.
The repeated, egregious misconduct of counsel for Labaton and
Thornton in this case should not be ignored in the award of
attorneys' fees. See Agent Orange, 818 F.2d at 222; Travers, 808
F.3d at 542; Culebras Enters., 846 F.2d at 67. That misconduct
contributes to the court's conclusion that it is most appropriate
to award counsel 20% of the common fund, $60,000,000.
There

are

several

facts

that

confirm

that

an

award

of

$60,000,000 is reasonable. An award of 20% of the common fund is
at the low end of the range generally presumed reasonable. See
Pac. Enters., 47 F.3d at 379; Bezdek, 79 F. Supp. 3d 324, 349–50;
Lupron, 2005 WL 2006833 at *5. It is above both the mean of 17.8%
and the median of 19.5% in settlements between $250,000,000 and
$500,000,000
plaintiffs'

according
counsel

to

the

originally

Fitzpatrick
asked

129

the

Study

court

to

on

which

rely.

See

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 130 of 159

Fitzpatrick Study, supra, at 839. An award of 20% of the common
fund is also compatible with what Class Counsel reported to be the
awards in the eight cases in the First Circuit with common funds
exceeding $100,000,000 in which the fee awards ranged from 9% to
30.9%, with the majority (5) in the 20% to 25% range. See Dkt. No.
103-1, at 13-14 of 36.
In addition, the reasonableness of an award of 20% of the
common fund is consistent with the views expressed by Labaton's
expert,

Professor

Rubenstein,

in

his

treatise.

Professor

Rubenstein wrote that "empirical data on class action fee awards
[] demonstrate that the percentage awarded to counsel decreases as
the size of the fund increases, though more along the lines of a
sliding

scale

(smooth

decrease)

than

a

megafund

(cliff-like

decrease)." Rubenstein, 5 Newberg on Class Actions §15:81 (citing
and discussing the Fitzpatrick (2010) and Eisenberg-Miller (2010)
Studies).

Professor

Rubenstein

added

that,

"the

author's

own

database, taken from a six-year sample shows the average . . . for
settlements over $44.625 million is 20.9%." Id. In a declaration
in

this

case,

Professor

Rubenstein

referenced

20

cases

with

settlements between $100,000,000 and $500,000,000, See Dkt. No.
446-2, Ex. E. The average award in those cases was 13.16% of the
common fund. See Dkt. Nos. 522 at 7; 522-1 at 8-9.
In addition, a $60,000,000 award is reasonable when checked
against the properly calculated lodestar. As indicated earlier

130

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 131 of 159

when, as here, the percentage of fund method is used to calculate
an award of attorneys' fees in a common fund case, a lodestar check
of the reasonableness of the amount requested is encouraged. See,
e.g., Goldberger; 209 F.3d at 50; In re Gen. Motors, 55 F.3d at
820. District Courts regularly do so. See, e.g., Bezdek, 79 F.
Supp. 3d at 349–50; Lupron, 2005 WL 2006833 at *5; Neurontin, 58
F. Supp. 3d at 170-71. When used merely as a cross-check, the
reasonableness of the hours and rates used to develop the lodestar
"need not be exhaustively scrutinized by the district court" in
part because it is assumed that "the strictures of Rule 11," which
requires attorneys to make representations that are not false or
misleading, have been observed. Goldberger, 209 F.3d at 50.
Again,

as

explained

earlier,

a

lodestar

is

properly

calculated by multiplying the number of hours reasonably spent on
the litigation by a reasonable hourly rate. See Thirteen Appeals,
56 F.3d at 305

"Reasonable fees . . . are to be calculated

according to the prevailing rates in the relevant community." Blum,
465 U.S. at 895. "The rate that private counsel actually charges
for her services, while not conclusive, is a reliable indicium of
market value. One Star Sloop Sailboat, 546 F.3d at 40. Where the
award being considered is larger than the lodestar, the court must
decide if the resulting multiplier would be reasonable.
Labaton originally reported that the lodestar for all of
plaintiffs' counsel was $41,323,895.75 and, if $75,000,000 was

131

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 132 of 159

awarded, the multiplier of 1.8 would be reasonable. See, e.g.,
Letter from Goldsmith to the Court (Nov. 10, 2016), Dkt. No. 116.
When the double-counted hours were removed, Labaton represented
that the combined lodestar was $37,265,241.25, and the correct
multiplier was, therefore, 2.00. Labaton contended it would also
be reasonable.
As indicated earlier, this case raises substantial doubts
about whether courts should assume that the representations made
by counsel to the court concerning their lodestar are reliable, as
required by Rule 11. See Goldberger, 209 F.3d at 50. As explained
earlier, Thornton, Labaton, and to a lesser extent Lieff made false
and misleading representations concerning the regular hourly rates
charged for their attorneys because Thornton works exclusively,
and Labaton and Lieff work almost exclusively, on a contingentfee basis. When questions were raised by the Boston Globe about
the reliability of their representations, and were magnified by
the court's questioning on March 7, 2017, it was necessary and
appropriate to appoint a Master to investigate the reliability of
the representations made concerning the reported lodestar, among
other things.
In a detailed Memorandum, Thornton asserts that the language
used in this case characterizing the rates attributed to attorneys
as each firm's "regular rates charged for their services . . ." is
"very common and is somewhat of a standard practice," although

132

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 133 of 159

often the representation is not true. Dkt. No. 530 at 40. Thornton
supports this assertion with two volumes of exhibits. See Dkt. No.
530-4 (attaching 73 exhibits). Thornton correctly cites another
ATRS class action before this court, Ark. Teachers Ret. Sys. v.
Insulet Corp., No. 15-cv-12345-MLW (D. Mass.), in which two of
plaintiff's firms used the same language used by Labaton, Thornton,
and Lieff in this case and, in response to questions from the
court, acknowledged that they had no paying clients because they
work

exclusively,

or

almost

exclusively,

on

a

contingent-fee

basis. See id. at 41. Thornton cites many other cases before this
court, before other judges in the District of Massachusetts, and
throughout the United States in which the same or substantially
similar statements, which are likely false or misleading, have
been made by other firms that specialize in representing plaintiffs
in class actions. See id. at 42-58. 26 Therefore, it appears the
lodestar check that district judges regularly employ in making
percentage of the common fund awards is often fundamentally flawed
and, at a minimum, that the representations of counsel should be
scrutinized, rather than accepted on the assumption that they
satisfy the requirements of Rule 11.

26

Thornton does not claim that the fact that misrepresentations
concerning regular rates charged are evidently common excuses its
conduct in this case. Rather, it argues that it should not have
been singled out by the Master for the imposition of sanctions.
See Dkt. No. 530 at 40-41.

133

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 134 of 159

In this case, the Master did substantial investigation and
research to attempt to calculate the lodestar properly. He found
that

each

of

the

plaintiffs'

firms

except

for

Thornton

had

contemporaneous time records as required by the jurisprudence. See
R. & R. at 202-09; Hensley v. Eckerhart, 461 U.S. 424, 438 n.13
(1983); Gay Officers Action League v. Puerto Rico, 247 F.3d 288,
297. The Master also found that the hours reportedly worked in
calculating the revised, lower lodestar were reliable. See R. & R.
at 209-18. The court accepts this conclusion.
In addition, the Master found that the rates attributed to
the partners and associates who worked on this case, although not
as

represented

reasonable.

See

regularly
R.

&

R.

charged
at

to

173-76.

paying
The

court

clients,

were

accepts

this

conclusion too.
Addressing a question raised initially in the December 17,
2016 Boston Globe article, the Master found that even though the
hourly rates attributed to the staff attorneys by Labaton and Lieff
also were not regularly charged to paying clients, they were
reasonable. See R. & R. at 176-81. In essence, the Master found
that the staff attorneys were experienced lawyers who did much
more than low-level document review. All had years of experience,
and some at Lieff had specialized knowledge acquired working on
the BONY Mellon case. The Master viewed the staff attorneys as
comparable to low to mid-level associates. See id. at 180. Although

134

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 135 of 159

they were paid $40 to $60 an hour, plus benefits, he found that
attributing billing rates to them of $335 to $515 was reasonable.
This was material to the Master's calculation of the lodestar
because he found that staff attorneys were responsible for 70% of
the work that comprised it. Id. at 178.
The court accepts the finding that the staff attorneys, who
were paid an average of $55 an hour, see Exec. Summ. at 23 (Dkt.
No. 357-1), were comparable to associates and that the rates
attributed to them were justified. However, those rates should not
have been misrepresented as regularly charged.
In contrast to the staff attorneys, the Master found that the
lodestar should not include the hours and rates attributed to the
seven contract attorneys hired by Lieff through an agency at an
hourly rate of $45 to $50. See Exec. Summ. at 23, 50; R. & R. at
367-68. Rather, he recommended that the contract attorneys be
treated as an expense at the rate of $50 an hour. The seven contract
attorneys were represented by Lieff to have reasonable rates
between $415 and $515 an hour. According to the Master, their time,
after a 1.8 multiplier, contributed $2,386,058 to the lodestar.
The

Master

reasoned

that

the

contract

attorneys

were

not

permanently or continuously employed by Lieff and did not receive
benefits from the firm, even if they in some instances did work
comparable to the work performed by the staff attorneys.

135

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 136 of 159

When appointing the Master, the court noted that courts,
particularly in the Southern District of New York, have begun
questioning whether attorneys hired temporarily through an agency
should be included in the lodestar at greatly inflated rates or
treated as an expense. See Mar. 7, 2017 Tr. at 93-94 (Dkt. No.
176) (citing Weatherford, 2015 WL 127847; Citigroup Secs. Litig.,
965 F. Supp. 2d 369; Citigroup Bond Litig., 988 F. Supp. 2d
371; Beacon Assocs., 2013 WL 2450960; City of Pontiac, 954 F. Supp.
2d 276). For example, in City of Pontiac, 954 F. Supp. 2d at 280,
the

court

wrote

that

"a

sophisticated

client,

knowing

these

contract attorneys cost plaintiff's counsel considerably less than
what the firm's associate attorneys cost (in terms of both salaries
and benefits) would have negotiated a substantial discount in the
hourly rates charged the client for these services."
The court hoped that the Master would find definitive evidence
of whether this commonsense observation was confirmed by the
operation of the actual marketplace. He was evidently unable to do
so as the Report does not include discussion of such evidence.
However, in response to an inquiry from the court, counsel
for the defendant stated that State Street itself hired and paid
an agency for contract attorneys to do first level document review
for its law firm. See Mar. 7, 2017 Tr. at 83-84 (Dkt. No. 176).
State Street paid $35 an hour for those contract attorneys. Id. at
84. The contract attorneys were, therefore, an expense for State

136

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 137 of 159

Street, providing support for the Master's conclusion that they
should not be included in plaintiffs' lodestar.
In addition, in some cases, plaintiffs' firms have treated
contract attorneys as an expense in their fee petitions. See
Meredith Corp. v. SESAC, 87 F. Supp. 3d 650, 671 (S.D.N.Y. 2015);
Dial Corp. v. News Corp., 317 F.R.D. 436, 438 (S.D.N.Y. 2016). In
other cases, courts have allowed contract attorneys to be included
in the lodestar at rates higher than their actual cost. See, e.g.,
Tyco Int'l, 535 F. Supp 2d at 272; Carlison v. Xerox Corp., 596 F.
Supp. 2d 409, 410 (D. Conn. 2009); Citigroup Secs. Litig., 965 F.
Supp 2d at 394-95; In re WorldCom, Inc. Sec. Litig., 2004 WL
2591402, at *21 (S.D.N.Y. Nov. 12, 2004).
However, courts have increasingly rejected the assertion that
contract attorneys who do document review should be valued at rates
comparable for those of an associate. For example, in Citigroup
Inc. Securities Litigation, the court wrote:
"There is little excuse in this day and age for
delegating document review (particularly primary review
or first pass review) to anyone other than extremely
low-cost, low-overhead temporary employees (read,
contract attorneys) -– and there is absolutely no excuse
for paying those temporary, low-overhead employees $40
or $50 an hour and then marking up their pay ten times
for billing purposes."
965 F. Supp 2d at 395 (quoting Beacon Assocs., 2013 WL 2450960 at
*18).

The

Citigroup

court

concluded

that,

"[c]onsidering

the

hypothetical client and the range of services at issue, . . . a

137

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 138 of 159

reasonable blended hourly rate for the contract attorneys here is
$200." Id. at 399.
Other courts have reached comparable conclusions. In City of
Pontiac, contract attorneys were valued at rates between $295 and
$435 an hour and the court found that "a sophisticated client could
have negotiated a total of, say, half that amount, or less." 954
F. Supp. 2d at 280. In Weatherford, the "staff attorneys" who
reviewed

documents

and

organized

them

for

depositions

were

represented to have hourly rates of $375 to $395. The court wrote
that, "[a]s [the firm] has conceded, the hourly rates for which
the firm seeks compensation for these staff attorneys are more
than 600 percent of their direct cost to the firm, and the Court
has been provided with nothing persuasive from which to conclude
that this sort of markup is reasonable." 2015 WL 127847 at *1.
As the Second Circuit has written, "'the burden is on the fee
applicant to produce satisfactory evidence -– in addition to the
attorney's own affidavits -– that the requested rates are in line
with' prevailing market rates." Citigroup Secs. Litig., 965 F.
Supp. 2d at 396 (quoting Savoie v. Merchs. Bank, 166 F.3d 456, 463
(2d Cir. 1999)). In this case, plaintiffs' counsel have not
provided evidence that paying clients in complex cases pay many
multiples of cost for contract attorneys who do basic document
review and that law firms do not generally bill contracts attorneys
to such clients as an expense. As described earlier, there is

138

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 139 of 159

evidence, including the direct payment for its contract attorneys
by State Street, that indicates that in some cases contract
attorneys are treated as an expense. Therefore, it would be
reasonable for the court to adopt the Master's recommendation and
to treat the cost of the contract attorneys as an expense, rather
than include them in the lodestar for cross-check purposes.
However, the court did not at the outset of this case inform
counsel that contract attorneys doing basic document review should
not be included in their lodestars. Nor did the caselaw put them
on clear notice that such attorneys would not be counted in
calculating the lodestar. Therefore, the court finds that, in these
circumstances, it is also reasonable and most appropriate to
include the contract attorneys in the lodestar, which does not
have to be calculated with precision because it is only being used
to check the reasonableness of the $60,000,000 award the court is
considering. See Beacon Assocs., 2013 WL 2450960 at *19.
However, the court finds that ascribing rates between $415
and $515 an hour for the contract attorneys is unjustified.
Therefore, as in Citigroup, 965 F.Supp. 2d at 399, for the purpose
of the lodestar check, the court is using a blended rate of $200
an hour for them.

139

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 140 of 159

The contract attorneys reportedly worked 4,779.1 hours. See
Heimann Decl. at 10 of 11 n.4 (Dkt. No. 533-1). 27

At a rate of

$200 an hour, they contribute $955,820 to the total lodestar. This
amount is $1,168,470 less than the $2,124,290 attributed to the
contract attorneys in the corrected purported lodestar presented
to the court after the media alerted counsel to the doublecounting. See Heimann Declaration (Dkt. No. 533-1) at 9-11 of 11.
As explained earlier, like the Master, the court finds that
Michael Bradley should not be included in the lodestar at a rate
of $500 an hour. This rate was fabricated by Garrett Bradley.
Michael Bradley had in his career only charged $500 an hour one
time, for three hours work. He never charged more and clients
regularly paid him much less an hour.
Nor was Michael Bradley's work in this case worth $500 an
hour. He only did the lowest level document review, which was
comparable

to

the

work

done

by

27

the

contract

attorneys.

His

The Master stated in the Report that the total number of
contract attorney hours was either 2,833.5 or 2,949.5. See R. & R.
at 367. At the request of the Master, Lieff prepared memoranda
calculating the lodestar applying various billing rates for
contract attorneys. Lieff notes that the Report fails to account
for 1,879.9 additional, non-duplicative contract attorney hours
listed on Thornton's lodestar, which bring the correct total
contract attorney hours to 4,779.1. See Heimann Decl. at 6-7 of 11
(Dkt No. 533-1). The Master does not appear to have addressed this
discrepancy. The court is using this higher figure for the purpose
of calculating a revised lodestar. However, the difference in the
revised lodestar resulting from inclusion of these additional
hours -- $375,980, or about 1% of the total –- is not material to
the court's analysis.
140

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 141 of 159

experience as a state prosecutor and criminal defense lawyer did
not enhance his value in this case. He claims to have identified
and made comments on only a few relevant documents.
In these circumstances, it would be reasonable to attribute
to Michael Bradley the $200 an hour rate the court has ascribed to
the contract attorneys. However, unlike the contract attorneys,
Michael Bradley was not paid hourly during the pendency of this
case and took some risk that he would not be paid at all if
plaintiffs did not recover anything. Therefore, the court accepts
the Master's recommendation that Michael Bradley be attributed a
rate of $250 an hour for the purpose of the lodestar check. See R.
& R. at 366.
Michael Bradley reportedly worked 406.4 hours on this case.
At $250 an hour, his work contributes $101,600 to the lodestar,
which is $101,600 less than claimed by Thornton.
After

removing

the

originally

double-counted

hours,

and

valuing the contract attorneys at $200 an hour and Michael Bradley
at $250 an hour, the total lodestar is $36,005,171.25. Therefore,
a fee award of $60,000,000 represents a lodestar multiplier of
1.67.
A 1.67 multiplier is reasonable in this case. In arguing for
a $75,000,000 award, counsel asserted that a 1.8 multiplier would
be reasonable. See Mem. Supp. Attys.' Fees at 9 of 36 (Dkt. No.

141

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 142 of 159

103-1); Nov. 2, 2016 Tr. at 30-31 (Dkt. No. 114). 1.67 is not
materially less than 1.8.
In addition, a 1.67 multiplier is greater than that in some
other cases involving fee awards that counsel characterized as
"comparable"

to

their

request

in

this

case

for

an

award

of

$75,000,000. Dkt. No. 103-1, at 13-14 of 36. For example, in In re
Lupron,

in

which

there

was

a

$150,000,000

settlement,

the

multiplier was 1.41. Id. at 14. In In re Lernout & Hauspie Sec.
Litig., which involved a $120,520,000 settlement, the multiplier
was 1.4. Id. The court recognizes that in some other megafund cases
in the First Circuit awards have involved multipliers greater than
1.67, including in one case, New England Carpenters Health Benefits
Fund v. First Databank, a multiplier of 8.3. See 2009 WL 2408560,
at *2 (D. Mass. Aug. 3, 2009). However, the lodestar confirms the
court's tentative view that an award of $60,000,000 is within the
range of reason.
As explained earlier, in deciding the most appropriate fee to
award, the court is now exercising its "equitable power [and]
individualization is the name of the game." Fidelity/Micron, 167
F.3d

at

737.

Memorandum,

For

the

the

court

reasons
finds

described

that

an

in

award

detail
of

20%

in
of

this
the

$300,000,000 is reasonable and most appropriate in the unique
circumstances of this case. Id.

142

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 143 of 159

In summary, in this case capable counsel performed well in
achieving a $300,000,000 settlement. In other circumstances, the
court might find an award greater than 20%, but less than 25%, to
be

most

appropriate.

authority

to

award

However,

fees,

the

in

exercising

court

can

and

its

equitable

should

consider

misconduct by counsel. See Agent Orange, 818 F.2d at 222; Travers,
808 F.3d at 542; Rodriguez, 688 F.3d at 655; IMAX, 2012 WL 3133476,
at *11. In view of the fact that the adversary process cannot be
relied

upon

to

reveal

misrepresentations

and

other

ethical

violations by counsel seeking fee awards in class actions, it is
especially important that, when discovered, such misconduct not be
ignored.
The

evidently

unprecedented

appointment

of

a

Master

to

investigate the application for a prior award of attorneys' fees
in this case, and arduous effort, revealed the extensive misconduct
detailed in this Memorandum by Labaton and Thornton, particularly.
That misconduct contributes to the conclusion that an award at the
lower

end

of

the

presumptively

reasonable

20-30%

range

is

appropriate.
As this is a megafund case, a lower award would also be
reasonable.

As

explained

earlier,

the

Fitzpatrick

Study

that

counsel mischaracterized to this court found that the percentage
of the common fund awarded in attorneys' fees "plunged well below
20%" for settlements of more than $100,000,000. Fitzpatrick Study,

143

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 144 of 159

supra,

at

838.

In

settlements,

such

as

this

one,

between

$250,000,000 and $500,000,000, Fitzpatrick found the mean award
was 17.8% and the median award was 19.5%. See id. The award being
made in this case is above both the median and the mean. It is
also well-above the 13.16% average award in the 20 cases Professor
Rubenstein

referenced

with

common

funds

of

$100,000,000

to

$500,000,000. See Dkt. Nos. 446-2, Ex. E; 522 at 7; 522-1 at 8-9.
In view of the foregoing, the court concludes that an award
of $60,000,000 is reasonable and most appropriate.
Allocation of the Fee and Expense Award
As explained earlier, "the court has the ultimate authority
to determine how the aggregate fee is to be allocated among
counsel." 5 Rubenstein, Newberg on Class Actions §15:23. The
parties have acknowledged this authority. See June 24, 2019 Tr. at
17:8-19

(Dkt.

No.

560).

In

view

of

the

varying

degrees

of

responsibility for the misconduct in this case, the court finds it
appropriate to exercise its authority to allocate the fee award
among counsel.
By agreement, class counsel allocated the original, vacated
fee award as follows:

144

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 145 of 159

Firm
Labaton

Fees
Expenses
Total
31,530,948.75
258,666.85 31,789,615.60

Thornton

19,455,266.25

295,315.50 19,750,581.75

Lieff

16,100,910.00

271,944.53 15,399,163.17

Keller Rohrback

2,484,708.33

342,766.63

2,827,474.96

McTigue

2,484,708.34

50,176.39

2,534,884.73

Zuckerman Spaeder

2,484,708.33

38,670.29

2,523,378.62

TOTAL

74,541,250.00

1,257,540.19 75,798,790.19

See Dkt. No. 562-1.
In

total,

therefore,

ERISA

Counsel

originally

received

$7,454,125 in fees and $431,613 in expenses. 28 Using the lodestar
formula, the Master's investigation and related proceedings have
cost ERISA Counsel an additional $2,674,365 in fees and $156,422.84
in expenses. 29
Other than the fact that three ERISA firms used the template
language concerning fees regularly charged prepared by Labaton,
which they should have revised, the conduct of ERISA Counsel was

28

The total amount awarded to ERISA Counsel included payments
they made to firms that assisted them in this case. The new award
to ERISA Counsel also includes amounts the court understands they
will make to these other firms.

29

More specifically, the Master's investigation and related
proceedings have cost: Keller Rohrback an additional $1,082,672.50
in lodestar and $68,004.72 in expenses; Zuckerman Spaeder an
additional $708,483.50 in fees and $66,736.43 in expenses; and
McTigue an additional $883,209.00 in fees and $21,681.69 in
expenses. See ERISA Counsel Resp. June 28, 2019 Order at 5-6 n.8
(Dkt. No. 580).

145

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 146 of 159

not deficient. 30 Rather, they and their clients were victimized by
the misconduct of Labaton and Thornton. Therefore, it would be
inequitable for ERISA Counsel to receive less in fees or expenses
under a new award than under the original, vacated award.
Accordingly, the court is awarding ERISA Counsel the fees and
expenses they received under the original, vacated fee award, plus
the fees and expenses ERISA Counsel incurred after that award.
This amounts to $10,128,490 in fees and $588,036.15 in expenses.
This total amount is comprised of $3,567,380.83 in fees and
$410,771.35 in expenses for a total of $3,439,777.42 to Keller
Rohrback; $3,367,917.34 in fees and $71,858.08 in expenses for a
total of $3,439,775.42 to McTigue; and $3,193,191.83 in fees and
$105,406.72 in expenses for a total of $3,298,598.55 to Zuckerman
Spaeder.
At the inception of the Masters' investigation, ERISA Counsel
agreed with Labaton that if the court reduced the fee award, each
firm would "refund to [Labaton] . . . [its] pro rata share of any
Court Ordered reduction of fees, expenses, or service awards." R.
& R. Ex. 179 (Dkt. No. 401-178) (the "Claw Back Agreement").
However, prior to entering into the Claw Bank Agreement with ERISA
Counsel, Labaton did not disclose material information concerning

30

The three ERISA firms that did not revise the misleading
template language were Keller Rohrback LLP; Richardson, Patrick,
Westbrook & Brickman, LLC; and Feinberg, Campbell & Zack, P.C. See
R. & R. at 57.
146

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 147 of 159

Labaton's misconduct, and misconduct by its ally Thornton, that
caused the Master's investigation to become more protracted and
expensive than ERISA Counsel could have reasonably anticipated,
and has contributed to the court's conclusion that a $60,000,000
fee

award

is

most

appropriate.

As

explained

earlier,

such

misconduct included, but was not limited to, the failure of
Labaton, Thornton, and Lieff to inform ERISA Counsel of Labaton's
obligation and intention to pay Chargois more than $4,000,000.
ERISA Counsel were duped into entering into the Claw Back
Agreement.

In

these

circumstances,

it

would

be

inequitable,

contrary to public policy, and inconsistent with the court's
acknowledged

equitable

authority

to

allocate

fees,

to

allow

Labaton to enforce the Claw Back Agreement. Therefore, the court
deems

the

Claw

Back

Agreement

to

be

inoperative

and

unenforceable. 31 Cf. Kenda Corp. v. Pot O'Gold Money Leagues, Inc.,
329 F.3d 216, 224 (1st Cir. 2003) (fraud in the inducement is
grounds for rescission of a contract, an equitable remedy, in
Massachusetts); Restatement (Second) of Contracts §164 (1981) ("If

31

Labaton recognized that the Claw Back Agreement might be
unenforceable if only some of counsel for the class were found to
have engaged in misconduct that resulted in a reduction of the
$75,000,000 fee award. More specifically, Goldsmith of Labaton
testified that: "if there is a determination that expressly applied
only to some firms, then I guess [that] letter would bring up some
questions about how [The Claw Back Agreement] would be handled."
Goldsmith Dep. Tr. at 159:10-15, R. & R. Ex. 58 (Dkt. No. 401-57).

147

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 148 of 159

a party's manifestation of assent is induced by either a fraudulent
or a material misrepresentation by the other party upon which the
recipient is justified in relying, the contract is voidable by the
recipient."); id. §161 ("[A party's] assertion of only some of the
facts without the inclusion of such additional matters as he knows
or believes to be necessary to prevent it from being misleading is
itself a misrepresentation.").
After the award of $10,128,490 to ERISA Counsel, there remains
$49,871,510 to be allocated among Labaton, Thornton, and Lieff. Of
the original $75,000,000 fee award, $67,913.051.88, was divided
between

them.

Labaton

received

47%,

$31,789.615.60.

Thornton

received 29%, $19,750,58175. Lieff received 24%, $16,372,854.53.
See Dkt. No. 562-1.
The court now deems it most appropriate to award Lieff
$15,233,397.53, comprised of $14,961.453 as fees and $271,944.5 as
expenses. This is a reduction of about $1,140,000 and provides
Lieff 30% of the new award to Customer Class Counsel.
Lieff was deficient in its performance as counsel in this
case. As explained earlier, Lieff was a signatory to the false and
misleading

memorandum

filed

in

support

of

the

request

for

attorneys' fees (Dkt. No. 103-1) that it had read and edited. Thus,
Lieff contributed to the misrepresenting of the number of hours
worked by more than 9,000 and to providing a misleading description
of the Fitzpatrick Study. In addition, by using the template

148

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 149 of 159

provided

by

Labaton,

Lieff

made

false

and

misleading

representations concerning the regular hourly rates charged for
the attorneys who worked on this case. The failure of Lieff to
probe the reasons for what should have been viewed as a suspicious
payment of $4,100,000 by Labaton to Chargois before agreeing to
underwrite
violation

$1,000,000
of

the

of

that

Massachusetts

payment
Rules

of

facilitated

Labaton's

Professional

Conduct

7.2(c), 1.5(e), 1.4(a)(1) and (b) by failing to disclose the
Chargois

payment

to

ERISA

Counsel

and

their

clients.

These

deficiencies in Lieff's conduct justify reducing the original fee
award to Lieff by about $1,140,000.
As Thornton engaged in repeated, serious misconduct, the
court finds it most appropriate to award Thornton $13,261,908.10,
comprised of $12,966,592.60 in fees and $295,315.50 in expenses.
This is a reduction of $6,488,673 from the original fee award, and
provides Thornton 25% of the new award to Customer Class Counsel.
Again, for example only, acting for Thornton, Garrett Bradley: did
not read his declaration before signing it under oath; made false
representations

concerning

what

were

purportedly

the

regular

hourly rates charged for lawyers claimed to have been employed by
Thornton; did not correct his false statements after he read his
declaration; authorized the submission by Labaton of a memorandum
represented to have been signed by him, among others, that included
a false and misleading description of the Fitzpatrick Study; and

149

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 150 of 159

collaborated with Labaton to conceal its agreement to pay Chargois
$4,100,000 from the ERISA Plans and their counsel, and thus from
the court and the public. In addition, two of Bradley's partners
knew that the declaration drafted for his signature included false
and misleading statements and did not correct those statements or
inform Bradley of them. Therefore, reducing the fee award to
Thornton by almost $6,500,000 is reasonable and appropriate.
The

court

$22,202,131.25,

finds

it

comprised

most
of

appropriate

to

$21,943,464.40

award
in

Labaton

fees

and

$258,666.85 in expenses. This is a reduction of about $9,587,484
from the original fee award and provides Labaton 44% of the new
award to Customer Class Counsel.
Labaton bears ultimate responsibility for all of the false
and misleading representations made to the court in connection
with the petition for attorneys' fees, which in many respects
violated Federal Rule of Civil Procedure 11(b) and Massachusetts
Rules of Professional Conduct as well. Again, for example only,
Labaton: submitted a sworn declaration that falsely represented
that Bradley's declaration, among others, was accurate; falsely
represented that certain hourly rates were regularly charged by
Labaton for its attorneys; failed to make a reasonable inquiry
before providing the court with a lodestar that was erroneously
inflated by 9300 hours and more than $4,000,000; provided a false
and misleading description of the Fitzpatrick Study; and violated

150

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 151 of 159

the Massachusetts Rules of Professional Conduct by concealing
Labaton's obligation to pay Chargois $4,100,000.
Labaton caused or contributed to the deficiencies in the
performance of Thornton and Lieff as well. Evidently, no one at
Labaton informed Zeiss, the attorney who prepared the settlement
documents,

that

Thornton

was

paying

for

staff

and

contract

attorneys employed by Labaton and Lieff. If she had been fully
informed, she might have discharged her duty to compare the
declarations of Thornton and Lieff and recognized that each had
included the same attorneys in their lodestar calculations, in
some instances at different hourly rates. Similarly, Labaton did
not inform Zeiss of its obligation to pay Chargois $4,100,000,
thus causing her to draft documents that were false and misleading,
and that violated the Massachusetts Rules of Professional Conduct.
In these circumstances, awarding Labaton $22,202,131.25 is
reasonable and most appropriate. As indicated earlier, attached as
Exhibit A is a chart which includes the fees each firm received
under the original %75,000,000 award, the fee each firm would have
received if the Master's recommendations had been adopted, the fee
each firm will receive under the new $60,000,000 award, and a
comparison of the three.
With regard to payment for the cost of the Master, the 2003
Advisory Committee Notes to Federal Rule of Civil Procedure 53(h)
state, in part, that "[a] party whose unreasonable behavior has

151

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 152 of 159

occasioned the need to appoint a master . . . may properly be
charged all or a major portion of the master's fees." In 2017, the
court ordered that the initial payment for expense of the Master
be made from the fees awarded to Labaton, Thornton, and Lieff. See
Mar. 8, 2017 Order (Dkt. No. 173) ¶13. The court understands that
the first and subsequent payments to compensate the Master have
been allocated between them by agreement. The court is not ordering
an

alteration

of

that

agreement

concerning

prior

payments.

However, Labaton and Thornton are being ordered to pay equally the
future costs of the Master from the awards made to them. It was
their conduct that prompted the appointment of the Master, and
caused his investigation to become prolonged and more expensive.
Lieff's conduct in this case was deficient in the ways previously
described, but is not comparable to the misconduct of Labaton and
Thornton. All ERISA Counsel should have modified the Labaton
template

concerning

hourly

rates

to

make

their

respective

declarations accurate, as several ERISA firms did. However, if
this had been the only issue the appointment of the Master may not
have been necessary. Therefore, the court is not requiring ERISA
Counsel to contribute to the cost of the Master or requiring Lieff
to contribute to the future cost of the Master.
It would be inequitable to impose any of the cost of the
Master on the class –- the clients of Labaton, Thornton, and Lieff.
Class Counsel were appointed to represent the class properly.

152

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 153 of 159

Instead, Labaton and Thornton violated their ethical duty to
disclose

to

the

class

Labaton's

obligation

to

pay

Chargois

$4,100,000. As explained earlier, at this point in the proceedings
the court is a fiduciary for the class and must protect its
legitimate interests. See Fidelity/Micron, 167 F.3d at 736. Those
interests include protecting the class from being required to
underwrite a reduction of the common fund caused by the misconduct
of Labaton and Thornton primarily.
Labaton has, on behalf of all plaintiffs' counsel, returned
to the Court to date $4,850,000 to pay the reasonable cost of the
Master and those he has employed. The court is now ordering that
the Master do additional work to implement the new fee award.
Therefore, Labaton and Thornton are being ordered to, by March 11,
2020, pay to the Clerk of the Court an additional $250,000.00 each
to compensate the Master for future work. See Mar. 8, 2017 Order
(Dkt. No. 173), ¶13 n.4.
Service Awards
The court originally made service awards of $25,000 to ATRS
and $10,000 to each of the six ERISA class representatives. See
Dkt. No. 111 ¶4. There is no reason to decrease the service awards
to the ERISA class representatives. Therefore, they are being
reinstated.
ATRS invested time in this case. It was, however, deficient
in

directing

and

supervising

Labaton

153

as

Lead

Counsel,

as

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 154 of 159

exemplified by its indifference to the payment to Chargois and its
attempted ratification of it. Therefore, the service award to ATRS
is being reduced to $15,000.
REFERRAL TO THE MASSACHUSETTS BOARD OF BAR OVERSEERS
A federal judge has an ethical obligation to "take appropriate
action

upon

likelihood

receipt

. . .

professional

of

that

conduct."

a

reliable
lawyer

U.S.

information

violated

Judicial

indicating

applicable

Conf.,

Code

of

rules

the
of

Judicial

Conduct for U.S. Judges, Canon 3(B)(6) (Mar. 2019). The Local Rules
of

the

United

Massachusetts

States

provide

District
that

Court

referring

for

the

the

matter

District
to

a

of

state

disciplinary authority -– meaning the Massachusetts Board of Bar
Overseers -- is a permissible means of discharging this duty. See
L.R. 83.6.5(e)(1).
Accordingly, the court is ordering that the Clerk transmit
this Memorandum and Order to the Massachusetts Board of Bar
Overseers for whatever action, if any, it deems appropriate and
for a report concerning the results of its consideration of this
matter. Id. In addition, the Clerk shall, upon request, provide to
the Board any documents in the public record of this case. Any
motion for sealed filings shall be decided by the court after the
affected parties have any opportunity to respond to it.

154

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 155 of 159

IMPLEMENTATION OF THIS MEMORANDUM AND ORDER
This matter is being resubmitted to the Master for further
action. See Fed. R. Civ. P. 53(f)(1). In a March 31, 2017 Order
(Dkt. No. 192), the court stated that it would provide class
members notice of the Master's Report and Recommendation and
provide them an opportunity to file any objections or comments.
Id. at 5. The court has now, in effect, modified the Report. If
notice to the class is indeed necessary or appropriate, the court
has determined that it should have notice of this decision. The
Master is being directed to consult Class Counsel and ERISA
Counsel, with regard to whether notice to the class is now legally
required or appropriate. It shall also consult CCAF, which has
previously

asserted

that

the

proposed

settlement

concerning

Labaton, ERISA Counsel, and the Master would require notice to the
class under Rule 23(h). See Dkt. No. 451 at 7-8. 32
In addition, the Master shall confer with Class Counsel and
ERISA Counsel regarding the logistics concerning the recovery and
reallocation of funds previously awarded that is required by this
Memorandum and Order.

32

As this decision provides more than an additional $14,000,000
to the class, if notice is given there may be no objection to it.
However, in view of the fact that the award of 20% of the common
fund is above the median and mean for settlements between
$100,000,000 and $500,000,000 reported in the Fitzpatrick Study,
it is possible that, in view of the court's findings, an objector
may assert that the award is too generous.
155

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 156 of 159

The Master is being ordered to, by March 23, 2020, report on
the foregoing issues and any others relating to implementation of
this memorandum and order.
CONCLUSION
As noted at the outset of this Memorandum, in 1913 Justice
Oliver Wendell Holmes said that "[j]udges are apt to be naif,
simple-minded men." Occasional Speeches of Justice Oliver Wendell
Holmes at 172. Justice Holmes then added that "they need something
of Mephistopheles." Id. Once again, this case is a reminder that
he was right.
The United States has a proud history of attorneys for whom
the

law

is

an

honorable

calling.

As

Justice

Robert

Jackson

described those lawyers, each:
loved his profession, he had a real sense of dedication
to the administration of justice, he held his head high
as a lawyer, he rendered and exacted courtesy, honor and
straightforwardness at the Bar. He respected the
judicial office deeply . . . .
Jackson, "The County Seat Lawyer," 36 A.B.A. J. 497 (June 1950).
Because

of

such

attorneys,

judges

have

historically

trusted

lawyers. Many attorneys still deserve such trust.
However,

this

case

has

demonstrated

that

judges

should

recognize that in class actions not all lawyers are trustworthy.
Some may engage in unethical conduct to obtain clients who will
allow them to instigate and control class actions, and to be richly
rewarded. When such class actions settle and the adversary process

156

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 157 of 159

is not operating, some attorneys may engage in misconduct to
maximize their income at the expense of their clients and cocounsel.
As explained earlier, when class actions settle, the judge
must

serve

as

a

fiduciary

or

protector

for

the

class.

See

Fidelity/Micron, 167 F.3d at 736. Judges are, therefore, "subject
[] to the high duty of care that the law requires of fiduciaries."
Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 280 (7th Cir.
2002). This case has educated this court to understand that in
view of its foreseeable fiduciary duties, it is important that
judges scrutinize motions to appoint class representatives and
lead counsel, as well as motions for awards of attorneys' fees,
even -– indeed especially -– when such motions are not opposed.
Candid,

capable

counsel

will

easily

survive

such

scrutiny.

Unethical attorneys should not.
If

judges

are

appropriately

skeptical

and

do

the

work

necessary to discharge their duties as fiduciaries for a class,
its

members

administration

will
of

be

protected

justice

will

and
be

the

integrity

promoted.

This

of

the

effort

may

sometimes be arduous. It will always be important.
ORDER
In view of the foregoing, it is hereby ORDERED that:
1.

The Proposed Resolution of Labaton's Objections to the

Special Master's Report (Dkt. No. 485) is DENIED.

157

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 158 of 159

2.

After hearings and considering de novo all objections to

the Master's Findings of Fact and Conclusions of Law, including
Labaton's, the Master's Report and Recommendation (Dkt. No. 357)
is ADOPTED in part, REJECTED in part, and MODIFIED in the manner
described in this Memorandum and Order. See Fed. R. Civ. P. 53(f).
More

specifically,

$60,000,000

is

awarded

to

counsel

for

plaintiffs as reasonable fees and expenses. From the $60,000,000
a total of $22,202,131.25 shall be paid to Labaton; a total of
$13,261,908.10 shall be paid to Thornton; a total of $15,233,397.53
shall be paid to Lieff; a total of $3,978,152.18 shall be paid to
Keller Rohrback; a total of $3,439,775.42 shall be paid to McTigue;
and a total of $3,298,598.55 shall be paid to Zuckerman Spaeder.
3.

Service Awards shall be paid as follows: $15,000 to ATRS,

and $10,000 to each of the six ERISA Plaintiffs, Arnold Henriquez,
Michael T. Cohn, William R. Taylor, Richard A. Sutherland, The
Andover Companies Employee Savings and Profit Sharing Plan, and
James Pehoushek-Stangeland.
.

This matter is RESUBMITTED to the Master. The Master

shall, by March 23, 2020:
(a)

Consult Class Counsel, ERISA Counsel, and CCAF, and

report concerning whether notice to the class of new awards that
have been ordered is legally required or appropriate. If the Master
or anyone consulted is of the view that notice to the class should
be given, the Master shall submit a proposed form of notice.

158

Case 1:11-cv-10230-MLW Document 590 Filed 02/27/20 Page 159 of 159