In Re: CitiGroup Inc. Bond Action Litigation
Filing
183
OPINION & ORDER re: 158 MOTION for Attorney Fees AND REIMBURSEMENT OF LITIGATION EXPENSES filed by American European Insurance Company, City of Philadelphia Board of Pensions and Retirement, Miami Beach Employees' Retirement Plan, City of Tallahassee Retirement System, Southeastern Pennsylvania Transit Authority, Louisiana Sheriffs' Pension and Relief Fund. For the reasons set forth in this Opinion & Order, The Court grants plaintiffs' counsel's motion for an award o f attorneys' fees and reimbursement of litigation expenses. (Dkt. No. 158.) Specifically, the Court awards attorneys' fees in the amount of 16 % of the settlement fund, or $116.8 million; reimbursement of reasonable costs and expenses to leaf plaintiffs in the amount of $39,946. (Signed by Judge Sidney H. Stein on 12/19/2013) (tro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE CITIGROUP INC. BOND
LITIGATION
08 Civ. 9522 (SHS)
OPINION & ORDER
SIDNEY H. STEIN, U.S. District Judge.
In August, this Court approved the settlement of this securities class
action, which was brought on behalf of a class of purchasers of bonds issued
by or on behalf of Citigroup, Inc. and raised claims pursuant to the Securities
Act of 1933. Plaintiffs agreed to settle all claims in exchange for a payment of
$730 million—an agreement that the Court found to be fair, reasonable, and
adequate. See generally In re Citigroup Inc. Bond Litig., No. 08 Civ. 9522 (SHS),
2013 WL 4427195 (S.D.N.Y. Aug. 20, 2013). Plaintiffs’ attorneys, Bernstein
Litowitz Berger & Grossman LLP, seek an award of attorneys’ fees and
reimbursement of litigation expenses pursuant to Federal Rule of Civil
Procedure 23(h), as well as reimbursement of costs and expenses incurred by
class representatives pursuant to the Private Securities Litigation Reform Act
of 1995 (“PSLRA”), 15 U.S.C. § 78u–4. The Court has reviewed Bernstein
Litowitz’s request and finds that it is entitled to both an award of reasonable
attorneys’ fees and reimbursement of litigation expenses. The Court also
awards reasonable costs and expenses for services rendered to the class by
the lead plaintiffs.
I.
FEE AWARD
Rule 23(h) permits the Court to award reasonable attorneys’ fees in a
certified class action. Indeed, the U.S. Supreme Court has long recognized
that “a lawyer who recovers a common fund for the benefit of persons other
than himself or his client is entitled to a reasonable attorneyʹs fee from the
fund as a whole.” Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980); see also,
e.g., In re Am. Bank Note Holographics, Inc., 127 F. Supp. 2d 418, 430 (S.D.N.Y.
2001) (“[A]ttorneys who create a common fund to be shared by a class are
entitled to an award of fees and expenses from that fund as compensation for
their work.”). Class counsel Bernstein Litowitz has moved for such an award
here, seeking 20% of the common fund, or $146 million, plus interest.
Although the firm is certainly deserving of an award for its efforts in this
litigation—for which it has yet to receive compensation—the Court finds the
requested percentage too high given the significant size of the fund. See Wal‐
Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 123 (2d Cir. 2005) (noting that
the “sheer size” of a fund made “a smaller percentage” award appropriate
because it nonetheless produced a “generous fee”). For the reasons explained
below, the Court instead finds reasonable an award of attorneys’ fees of 16%
of the settlement amount, or $116.8 million. To ensure the fairness of this
percentage, the Court performs a “cross‐check,” comparing the amount of the
award to the approximate market value of plaintiffs’ attorneys’ work—
known as the lodestar figure—to ensure that the percentage of the fund
method yields appropriate compensation without resulting in a windfall for
plaintiffs’ attorneys. See id. Finally, the Court confirms the reasonableness of
the fee determined by the percentage of the fund method and bolstered by
the cross‐check by examining the factors set forth by the U.S. Court of
Appeals for the Second Circuit in Goldberger v. Integrated Resources, Inc., 209
F.3d 43 (2d Cir. 2000).
In performing this analysis, the Court takes into account an objection
submitted by class members Lexie and Michelle Hopson.1 (See Objection of
Lexie and Michelle Hopson dated June 24, 2013, Dkt. No. 165.) The Hopson
Objection argues in salient part that the requested percentage of the common
fund is too high for a settlement of this magnitude and that the proposed
billing rates for staff attorneys exceed what a reasonable client would pay.
The Court has the same concerns.
A. The Percentage of the Fund Method
As this Court recently observed, “using the percentage of the fund
method to compensate plaintiffs’ counsel in major securities fraud class
actions is now firmly entrenched in the jurisprudence of this Circuit.” In re
Citigroup Inc. Sec. Litig., Nos. 09 MD 2070 (SHS), 07 Civ. 9901 (SHS), 2013 WL
3942951, at *15 (S.D.N.Y. Aug. 1, 2013). Use of this method is supported by
the language of the PSLRA, which mandates that “[t]otal attorneys’ fees and
expenses awarded by the court to counsel for the plaintiff class shall not
exceed a reasonable percentage of the amount of any damages . . . actually
paid to the class.” 15 U.S.C. § 78u–4(a)(6). The Court therefore allocates fees
to plaintiffs’ counsel by determining an award that constitutes a reasonable
percentage of the common fund.
As noted in the Opinion approving the settlement, only five objections were received. In
re Citigroup Inc. Bond Litig., 2013 WL 4427195, at *4. To the extent the others address the
request for attorneys’ fees or expenses, the Court has considered their arguments and
finds them to be without merit.
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2
Plaintiffs’ counsel, as noted, contend that an award of 20% of the
common fund represents such a reasonable percentage. In support of this
request, they point to a number of cases with significant recoveries in which
courts awarded attorneys’ fees of between 17% and 33% of the common fund.
See, e.g., In re Comverse Tech. Inc. Sec. Litig., No. 06 Civ. 1825 (NGG) (RER),
2010 WL 2653354, at *6 (S.D.N.Y. June 24, 2010) (awarding attorneys’ fees of
25% of $225 million settlement); In re Initial Public Offering Sec. Litig., 671 F.
Supp. 2d 467, 513‐16 (S.D.N.Y. 2009) (awarding attorneys’ fees of 33% of $586
million settlement); In re Adelphia Commc’ns Corp. Sec. and Derivative Litig., No.
03 MD 1526 (LMM), 2006 WL 3378705, at *3 (S.D.N.Y. Nov. 16, 2006), aff’d 272
F. App’x 9 (2d Cir. 2008) (awarding attorneys’ fees of 21.4% of $455 million
settlement); In re Cardinal Health, Inc. Sec. Litig., 528 F. Supp. 2d 752, 754‐55
(S.D. Ohio 2007) (awarding attorneys’ fees of 18% of $600 million settlement);
In re Lucent Tech., Inc. Sec. Litig., 327 F. Supp. 2d 426, 433, 442 (D.N.J. 2004)
(awarding attorneys’ fees of 17% of $517 million settlement). They also note
that all lead plaintiffs2—seven of which are institutional investors—approved
the fee application and that a fee of 20% of the common fund is expressly
permitted under the terms of the retainer agreements counsel negotiated with
the institutional plaintiffs that initiated this suit. (Singer Decl. ¶¶ 191‐92.)
Further, the notice distributed to nearly 500,000 potential class members
advised that plaintiffs’ counsel would seek a fee not to exceed 20% of the
settlement fund. (Singer Decl. ¶ 194.) Only thirty‐one opt‐outs—thirteen of
which were from class members who suffered losses—and five objections
were received. In re Citigroup Inc. Bond Litig., 2013 WL 4427195, at *4.
Certain considerations must be balanced against these points in favor of
the requested fee, however. First is the Court’s responsibility to avoid
awarding plaintiffs’ counsel a “windfall” at the expense of the class—a
special concern when “the recovered fund runs into the multi‐millions,” as
does this fund of $730 million. See Goldberger, 209 F.3d at 52. In cases with
exceptionally large common funds, courts often “account[] for these
economies of scale by awarding fees in the lower range.” Id.
Second is that, although counsel’s case citations are accurate, there are
many others where the percentage fee awarded in settlements as large as this
one is typically lower—often substantially lower—than 20%. See, e.g., In re
The class representatives are Louisiana Sheriffs’ Pension & Relief Fund, the City of
Tallahassee Retirement System, the City of Philadelphia Board of Pensions and
Retirements, the Miami Beach Employees’ Retirement Plan, Southeastern Pennsylvania
Transit Authority, American European Insurance Company, Arkansas Teacher
Retirement System, Phillip G. Ruffin, and James M. Brown. In re Citigroup Inc. Bond Litig.,
2013 WL 4427195, at *2 n.2.
2
3
Citigroup Sec. Litig., 2013 WL 3942951, at *28 (awarding attorneys’ fees of 12%
of $590 million); In re Wachovia Preferred Sec. and Bond/Notes Litig., No. 09 Civ.
6351 (RJS), 2012 WL 2589230, at *1, *3 (S.D.N.Y. Jan. 3, 2012) (awarding
attorneys’ fees of 12% of $627 million); Carlson v. Xerox Corp., 596 F. Supp. 2d
400, 403, 414 (D. Conn. 2009) (awarding attorneys’ fees of 16% of $750
million). Indeed, as recognized by Professor Geoffery P. Miller in a report
submitted in support of the attorneys’ fee request in connection with the
settlement in In re Citigroup Inc. Securities Litigation (the “Securities Action”)—
another consolidated class action in this multidistrict litigation—the average
percentage fee award of post‐PSLRA settlements in the $550 to $800 million
range is 17.3%, with a median of 16.5%. 2013 WL 3942951, at *27. Moreover,
in Carlson v. Xerox Corp., which involved a common fund of $750 million—
comparable in size to the one here—the court considered the top twenty‐six
post‐PLSRA settlements that had occurred before early 2009 and found that
“in only 6 of the 26 cases were the fees awarded 20% or more of the amount
of the common fund.” 596 F. Supp. 2d at 405. The Carlson court ultimately
approved a fee award of 16% of the settlement fund, rather than the 20%
award requested by plaintiffs’ counsel. Id. at 411‐14.
Finally, the Court considers the objection of the Hopsons, who advocate
for a fee award of 15% or less. In support, they reference an empirical study
of class action settlements reached during the years of 2006 and 2007
concluding that the median percentage awarded in settlements between $500
million and $1 billion was 12.9%. Brian T. Fitzpatrick, An Empirical Study of
Class Action Settlements and Their Fee Awards, 7 J. Empirical Legal Stud. 811,
839 (2010). The objection also points to the 16% fee award in Carlson. The
Hopsons’ examples are of limited utility because of the narrow scope of their
sample size, but the Court takes seriously the concern that the requested 20%
fee award is too high for such a large settlement fund.
Ultimately, the Court finds the median of close to 16% in post‐PLSRA
cases of similar size, as well as the 16% of the settlement fund awarded in
Carlson, informative in determining a reasonable percentage fee that balances
the need to provide plaintiffs’ counsel with adequate compensation and the
desire to prevent attorneys from recovering windfalls in megafund cases.
Informed by these data, the Court finds a fee award of 16% of the settlement
fund to be reasonable, subject to confirmation by the lodestar cross‐check and
an examination of the Goldberger factors.
B. The Lodestar Cross‐Check
The lodestar is “the product of a reasonable hourly rate and the
reasonable number of hours required by the case”; it “creates a
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presumptively reasonable fee.” Millea v. Metro‐N. R. Co., 658 F.3d 154, 166 (2d
Cir. 2011) (internal quotation marks omitted). The reasonable fee is an
estimation of “what a reasonable, paying client would be willing to pay,
given that such a party wishes to spend the minimum necessary to litigate the
case effectively.” Simmons v. N.Y.C. Transit Auth., 575 F.3d 170, 174 (2d Cir.
2009) (internal quotation marks and citation omitted). A multiplier is
typically applied to the lodestar figure to represent “the risk of litigation, the
complexity of the issues, the contingent nature of the engagement, the skill of
the attorneys, and other factors.” In re Global Crossing Sec. and ERISA Litig.,
225 F.R.D. 436, 468 (S.D.N.Y. 2004).
Here, Bernstein Litowitz submitted a lodestar figure of $87,229,248. This
figure represents 213,507 hours of work—the total performed by all seven
firms that rowed oars on behalf of the class in this litigation3—multiplied by
the proposed reasonable hourly rate for each attorney according to how
many hours are attributable to her. (Ex. 12 to Singer Decl.) Overall, 166,213
hours and $67,134,135 of lodestar is attributed to Bernstein Litowitz; the next‐
highest‐billing firm, Kessler Topaz, contributed 34,251 hours and $14,001,494
of lodestar.
Plaintiffs’ counsel contend that this lodestar figure supports their request
for 20% of the settlement fee, or $146 million. Using the $87,229,248 figure,
counsel’s requested fee represents a 1.67 multiplier, which they contend is
significantly below the typical multiplier utilized in litigation involving large
common funds. As this Court has noted, however, “[c]ourts in this Circuit
have trended toward awarding lower percentages and lower multipliers for
awards from extremely large common funds.” In re Citigroup Inc. Sec. Litig.,
2013 WL 3942951, at *27. The multiplier of 1.34 that results from using the
Court’s preferred award of 16% of the settlement fee, or $116.8 million, is
therefore still well within the appropriate range. Awards recently approved
by courts in this Circuit confirm this. See, e.g., In re Citigroup, Inc. Sec. Litig.,
2013 WL 3942951, at *28 (applying multiplier of 2.8); In re Wachovia Preferred
Sec. & Bond/Notes Litig., 2012 WL 2589230, at *3 (applying multiplier of 2.3);
Carlson, 596 F. Supp. 2d at 413 (applying multiplier of 1.25); In re Initial Public
Offering Sec. Litig., 671 F. Supp. 2d at 514 (applying “negative multiplier” of
0.7). The Court nevertheless examines the reasonableness of both the number
In addition to Bernstein Litowitz, these firms are Kessler Topaz Meltzer & Check, LLP;
Pomerantz Grossman Hufford Dahlstrom & Gross LLP; Klausner & Kaufman PA; Rice,
Michels & Walther LLP; Ann D. White Law Offices, PC; and Murray Frank LLP. The
work of Bernstein Litowitz, Kessler Topaz, and Pomerantz accounts for the vast majority
of the lodestar. (Singer Decl. ¶ 161.)
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of hours and the hourly billing rates submitted by counsel to ensure the
lodestar amount is accurate.
1.
Hours Reasonably Expended
Although the overall number of hours spent on this litigation is high, the
Court does not find it unreasonably so in comparison to the amount of work
done. This litigation lasted four‐and‐one‐half years. Plaintiffs’ counsel were
responsible for investigating claims spanning a time period of over two
years—far longer than the class period in the Securities Action—and covering
forty‐eight separate debt instruments. Plaintiffs’ counsel filed two complaints
in state court, followed by a consolidated class action complaint in this Court,
fully briefed four significant motions—an opposition to a motion to dismiss, a
motion to compel, a motion for class certification, and an opposition to a
motion for judgment on the pleadings—reviewed in excess of 42.5 million
pages of documents, took or defended seventy‐six depositions, and engaged
six experts. Moreover, counsel negotiated the terms of the settlement—a
process that included a lengthy engagement with a third‐party mediator. In re
Citigroup Inc. Bond Litig., 2013 WL 4427195, at *2‐4, *7.
Bernstein Litowitz submitted evidence of the hours spent by each
attorney at each firm in support of its fee application, as well as detailed time
entries explaining what each attorney spent his or her time on. The Court has
reviewed these time records and finds no significant instances of inflation or
waste. And “[b]ecause the lodestar is being used merely as a cross‐check, it is
unnecessary for the Court to delve into each hour of work that was
performed by counsel to ascertain whether the number of hours reportedly
expended was reasonable.” In re Initial Public Offering Sec. Litig., 671 F. Supp.
2d at 506. Nonetheless, the Court has conducted an independent review of
these records because “the lodestar serves little purpose as a cross‐check if it
is accepted at face value.” In re Citigroup Inc. Sec. Litig., 2013 WL 3942951, at
*16. Subjected to the appropriate level of scrutiny, counsel’s commitment of
213,507 hours to this litigation appears reasonable.
2.
Reasonable Hourly Rates
Despite its determination that the reported number of hours is justified,
the Court questions whether the lodestar amount is too high because of the
proffered hourly billing rates for “staff attorneys.” These are attorneys whose
work the Court finds would be valued by the market somewhere in between
that of project‐specific or “contract” attorneys and traditional law firm
associates. See In re Citigroup Inc. Sec. Litig., 2013 WL 3942951, at *21
(characterizing contract attorneys as those “who are not permanent
employees of the law firm, are hired largely from outside staffing agencies,
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are not listed on counselʹs law firm website or resume, are paid by the hour,
and are hired on a temporary basis to complete specific projects related to a
particular action”). Unlike associates, staff attorneys—at least those utilized
by plaintiffs’ attorneys in this litigation—are employed essentially to review
documents, are paid on an hourly basis, and are not listed on the firm’s
website. Unlike contract attorneys, however, they are full‐time employees of
the law firm, work onsite, and are provided benefits and ongoing legal
education. (Supplemental Decl. of Steven B. Singer, Esq. dated July 15, 2013
(“Supp. Singer Decl.”) ¶¶ 3‐4.) In its opinion approving the attorneys’ fee
award in the Securities Action, the Court determined that $200 per hour was a
fair approximation of the rate a reasonable paying client with bargaining
power would pay for the work of a contract attorney. In re Citigroup Inc. Sec.
Litig., 2013 WL 3942951, at *25.
Here, the firms that worked on this litigation have submitted a range of
hourly rates for staff attorneys—as distinct from contract attorneys—that
results in a total blended hourly rate of $385. (Ex. 12 to Singer Decl.) The
question of whether this rate is too high, as the Hopsons suggest, is important
because of the significant percentage of the lodestar attributable to staff
attorney work. Approximately 78% of the total hours spent by plaintiffs’
attorneys litigating this action were logged by staff attorneys.4 And roughly
$63.5 million—approximately 73%—of the lodestar represents compensation
for staff attorneys.
There is, of course, nothing wrong on its face with plaintiffs’ counsel’s
extensive use of staff attorneys; it appears to be a cost‐effective manner of
conducting document review and similar routine tasks, which were
undoubtedly important to the development of plaintiffs’ claims and evidence.
Nor does the Court intend to call into question the quality of these attorneys’
work. The Court does question, however, whether the proposed blended
hourly rate for staff attorneys actually reflects what a reasonable client would
pay, and this inquiry is material to the accuracy of the lodestar writ large
because of the firm’s high utilization of staff attorneys.
The Court raised its concerns about the proposed blended hourly rate for
staff attorneys at the fairness hearing. In response, Bernstein Litowitz
submitted bankruptcy applications from six major firms—including defense
counsel Paul, Weiss, Rifkind, Wharton & Garrison LLP—in an attempt to
defend the reasonableness of its proposed rates. (Ltr. from Max W. Berger,
Esq. dated July 29, 2013 (“Berger Ltr.”).) The total blended hourly rate
165,569 of the 213,507 total hours expended by plaintiffs’ attorneys was spent by staff
attorneys. (Ex. 12 to Singer Decl.)
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proposed for the work of staff attorneys in these applications works out to
approximately $333 per hour. The Court notes that this rate is not only lower
than that proposed by plaintiffs’ counsel here, but also that its source is
bankruptcy fee applications, in which there is no indication that the
appropriateness of individual rates was analyzed independently. See In re
Citigroup Inc. Sec. Litig., 2013 WL 3942951, at *24 n.8.
The Court also recognizes, however, that the firms submitting these
applications to the bankruptcy courts affirmed these rates were reflective of
those typically charged. (Exs. A‐G to Berger Ltr.) The Court has no way of
knowing, however, whether the typical rates charged in bankruptcy actions
are the same as the typical rates charged in traditional litigation, or if clients
with substantial market power, such as the institutional investors who
comprise the majority of lead plaintiffs here, could have negotiated better
rates. See In re Citigroup Inc. Sec. Litig., 2013 WL 3942951, at *23‐25. This
information leads the Court to observe, as it did in the Securities Action, that
there is “no simple answer[]” and “no one number flows inexorably from the
record.” Id. at *25.
The available evidence, however, leads the Court to believe that the
proffered rate for staff attorneys—and therefore the lodestar figure itself—is
too high. It need not decide the exact rate at which a hypothetical paying
client would compensate a firm for the services of staff attorneys, however, to
conclude that the lodestar cross‐check supports its finding that an award of
$116.8 million is appropriate. If the Court reduces the blended hourly rate for
staff attorneys to $300—a rate that appears to be either appropriate or slightly
high—the modified lodestar is approximately $73.5 million. Such a reduction
would make the multiplier closer to 1.59. Assuming even a blended hourly
rate for staff attorneys of $250—perhaps somewhat on the low end—the
result is a modified lodestar of approximately $65 million and a multiplier of
nearly 1.8. All of these figures are within the range of reasonableness.
The lodestar cross‐check has therefore performed its function, satisfying
the Court that an award of 16%—which it has already determined represents
a reasonable percentage of the settlement fund—adequately compensates
plaintiffs’ counsel for their time and effort based on estimations of reasonable
market rates and factoring in an appropriate multiplier.
C. Assessing Reasonableness Pursuant to Goldberger
Regardless of whether the percentage of the fund method or the lodestar
method is used to calculate attorneys’ fees, courts within this Circuit consider
the following six factors to confirm that a fee award is reasonable in common
fund cases: “(1) the time and labor expended by counsel; (2) the magnitude
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and complexities of the litigation; (3) the risk of the litigation . . . ; (4) the
quality of representation; (5) the requested fee in relation to the settlement;
and (6) public policy considerations.” Wal‐Mart Stores, Inc., 396 F.3d at 121
(quoting Goldberger, 209 F.3d at 50). The Court examines each factor in turn,
concluding that all six support the substantial award given here.
1.
Time and Labor Expended By Counsel
As explained in detail in the Court’s Opinion approving the settlement,
counsel spent considerable time and labor for the benefit of the class during
the four‐and‐one‐half year duration of this case. In re Citigroup Inc. Bond Litig.,
2013 WL 4427195, at *2‐4, *7. The 213,507 hours plaintiffs’ counsel spent
pursuing this action on behalf of the class were, as stated, reasonable and are
not the product of waste. This significant expenditure of time and effort
weighs in favor of a large award.
2.
The Magnitude and Complexities of the Litigation
As is typical in securities class action suits, this litigation was both broad
in scope and complex. In re Citigroup Inc. Bond Litig., 2013 WL 4427195, at *7.
First, the class period was relatively lengthy and encompassed a significant
number of securities issuances. Specifically, plaintiffs’ claims were based on
numerous alleged material misstatements or omissions made in connection
with forty‐eight separate issuances of Citigroup debt securities or preferred
stock that occurred over a period of more than two years. See In re Citigroup
Inc. Bond Litig., 723 F. Supp. 2d 568, 574‐75 (S.D.N.Y. 2010). Second, these
misstatements involved an alphabet soup of complex financial instruments
that have become synonymous with the financial meltdown of 2008—
principally residential mortgage backed securities (“RMBS”) collateralized
debt obligations (“CDOs”), structured investment vehicles (“SIVs”), and
auction‐rate securities (“ARS”)—as well as Citigroup’s statements about its
capital ratio and its compliance with Generally Accepted Accounting
Principles (“GAAP”). Id. Moreover, in addition to the complexity of the facts,
the applicable law is far from simple. In particular, plaintiffs’ standing to
bring claims pursuant to the Securities Act of 1933 for each issuance was by
no means assured. Id. at 583‐85. Further, they had to contend with significant
case law developments that occurred during the pendency of this action
concerning the standard of proof required to demonstrate that certain types
of misstatements are actionable pursuant to the Securities Act. In re Citigroup
Inc. Bond Litig., 2013 WL 4427195, at *8. The upshot is that the magnitude and
complexity of the litigation also weigh in favor of a significant award.
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3.
The Risk of the Litigation
As other courts in this district have recognized, the risk of achieving no
recovery at all in a securities class action suit has become quite small. See, e.g.,
In re Merrill Lynch Tyco Research Sec. Litig., 249 F.R.D. 124, 139 (S.D.N.Y. 2008).
The vast majority of such cases that survive motions to dismiss resolve
themselves via agreed‐upon settlements. In re Citigroup Sec. Litig., 2013 WL
3942951, at *26. That said, this suit did not involve certain factors that
traditionally signal the virtual inevitability of a settlement—such as a
successful government investigation—and did involve the risk of an
unfavorable outcome brought on by changes in applicable case law. In re
Citigroup Inc. Bond Litig., 2013 WL 4427195, at *8. The Court finds that this
factor also tips in favor of a substantial fee.
4.
The Quality of Representation
The U.S. Court of Appeals for the Second Circuit has observed that “the
quality of representation is best measured by results, and . . . such results
may be calculated by comparing ‘the extent of possible recovery with the
amount of actual verdict or settlement.’”Goldberger, 209 F.3d at 55 (quoting
Lindy Bros. Builders, Inc. of Philadelphia v. Am. Radiator & Standard Sanitary
Corp., 540 F.2d 102, 118 (3d Cir. 1976)). Though the recovery here—$730
million—represents only a fraction of the possible recovery estimated by
plaintiffs’ damages experts—$3 billion—that fraction is still an impressive
result. This observation is particularly meaningful when the percentage of the
highest possible recovery here is compared to the percentage of the highest
possible recovery in comparable cases. In re Citigroup Inc. Bond Litig., 2013 WL
4427195, at *9. In short, it is a favorable comparison.
From a qualitative standpoint, the Court is satisfied with Bernstein
Litowitz’s representation. It has been recognized by other courts, see, e.g., In re
Lucent Techs. Inc. Sec. Litig., 327 F. Supp. 2d at 433, 436, and is reflected in the
work observed by the Court during the course of this action. This factor
therefore also suggests that counsel is deserving of a substantial award.
5.
The Requested Fee in Relation to the Settlement
As the Court has explained, the requested fee of 20% of the settlement
fund is too high when compared to fees awarded in similar cases. See In re
Citigroup Inc. Sec. Litig., 2013 WL 3942951, at *27. For the reasons set forth
above, the Court’s chosen percentage award of 16% is more appropriate in
relation to comparators. The Court has therefore considered this factor and
determined that it “weighs in favor of a substantial fee award, albeit lower
than Lead Counsel has requested.” Id.
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6.
Public Policy Considerations
Finally, the Court addresses the public policy considerations involved in
awarding significant attorneys’ fees when counsel has succeeded in creating a
large common fund on behalf of a class. Competing concerns cut both ways.
Weighing in favor of a large award are the importance of private actions to
ensuring the effectiveness of federal securities laws and the need to
encourage quality attorneys to take on such difficult, expensive, complex, and
time‐consuming actions on a contingency basis. See Hicks v. Stanley, No. 01
Civ. 10071 (RJH), 2005 WL 2757792, at *9 (S.D.N.Y. Oct. 24, 2005); In re
WorldCom, Inc. Sec. Litig., 388 F. Supp. 2d 319, 359 (S.D.N.Y. 2005) (“In order
to attract well‐qualified plaintiffs’ counsel who are able to take a case to trial,
and who defendants understand are able and willing to do so, it is necessary
to provide appropriate financial incentives.”). Weighing against such large
awards is the need to protect the interests of the class, who often have no
representative in the fee request debate, and guarding against an award of
fees “in excess of that required to encourage class litigation.” See In re Merrill
Lynch Tyco Research Sec. Litig., 249 F.R.D. at 142. Every dollar that goes to the
lawyers is a dollar less that goes to the class members.
The Court has carefully considered the public policy effects of significant
awards of attorneys’ fees—such as the one contemplated here—and it finds
that, although no solution is perfect, its preferred award achieves a balance
between encouraging skilled counsel to undertake securities class action
litigation on a contingency basis in the future, rewarding plaintiffs’ counsel
now for having done so successfully, and avoiding providing a windfall to
plaintiffs’ attorneys at the expense of the class.
***
In sum, the Court finds that the percentage of the fund method, the
lodestar cross‐check, and the Goldberger factors all support awarding
plaintiffs’ counsel substantial attorneys’ fees of 16% of the settlement fund, or
$116.8 million.
II. REIMBURSEMENT OF LITIGATION EXPENSES
Bernstein Litowitz also seeks reimbursement of litigation expenses on
behalf of itself and the other firms that spent significant time on this action.
The Court has reviewed the affidavits submitted in support of this request
and finds the requested fees to be reasonable. Plaintiffs’ counsel is therefore
awarded $7,286,868 in reimbursable expenses.
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