Police and Fire Retirement System of the City of Detroit et al v. Indymac MBS, Inc. et al
Filing
569
MEMORANDUM OPINION: The Court grants the motion for attorneys' fees and reimbursement of expenses [DI 548] in the aggregate amount of $31,469,489.61, which is broken down by law firm in Table 2 below. Lead plaintiffs' request for reimbursement of fees and expenses is denied. (Signed by Judge Lewis A. Kaplan on 3/24/2015) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------x
IN RE: INDYMAC MORTGAGE-BACKED
SECURITIES LITIGATION
Master Docket
No. 09-cv-4583 (LAK)
All Actions
This document relates to:
-------------------------------------x
MEMORANDUM OPINION
Appearances:
Joseph C. Kohn
Denis F. Sheils
William E. Hoese
KOHN, SWIFT & GRAF., P.C.
Lawrence P. Kolker
Gregory M. Nespole
WOLF HALDENSTEIN ADLER FREEMAN &
HERZ LLP
Counsel for Settlement Class Representative
Police and Fire Retirement System of the City
of Detroit
Kenneth I. Trujillo
Ira N. Richards
SCHNADER HARRISON SEGAL & LEWIS, LLP
Stewart L. Cohen
Jacob A. Goldberg
Jillian A. S. Roman
COHEN, PLACITELLA & ROTH, P.C.
Counsel for Settlement Class Representative
City of Philadelphia Board of Pensions and
Retirement
Joseph J. Tabacco, Jr.
Nicole C. Lavallee
Anthony D. Phillips
Patrick T. Egan
BERMAN DEVALERIO
Class Counsel, Counsel for Lead Plaintiffs,
the Wyoming State Treasurer and Wyoming
Retirement System, and Counsel for
Settlement Class Representative the Los
Angeles County Employees Retirement
Association
Richard M. Heimann
Joy A. Kruse
LIEFF CABRASER HEIMANN & BERNSTEIN, LLP
John L. Gadow
STOVER, GADOW AND TYLER, PLLC
Counsel for Settlement Class Representative
Public Employees’ Retirement System of
Mississippi
2
Joel P. Laitman
Christopher Lometti
Julie Goldsmith Reiser
Daniel B. Rehns
Kenneth M. Rehns
COHEN MILSTEIN SELLERS & TOLL PLLC
Counsel for Settlement Class Representative
Iowa Public Employees’ Retirement System
Robin F. Zwerling
Jeffrey C. Zwerling
Justin M. Tarshis
ZWERLING, SCHACTER & ZWERLING, LLP
Counsel for Settlement Class Representative
the General Retirement System of the City of
Detroit
LEWIS A. KAPLAN, District Judge.
This action concerns mortgage pass-through certificates (the “Certificates”) issued
by IndyMac MBS, Inc. in several offerings pursuant to multiple registration statements and related
prospectuses and prospectus supplements (the “Offering Documents”).1 Lead plaintiffs, the
Wyoming State Treasurer and the Wyoming Retirement System, allege that the Certificates were
issued pursuant to materially misleading Offering Documents in violation of Sections 11, 12(a)(2),
and 15 of the Securities Act of 1933.2 Plaintiffs sue both individual and underwriter defendants
involved in preparing the Offering Documents.
The parties filed a stipulation of settlement on September 11, 2014,3 and the Court
approved the settlement and certified a settlement class on February 23, 2015.4 The settlement
terminates this case as against the underwriter defendants in exchange for a payment of $340
1
See Second Am. Consolidated Compl. [DI 337] ¶¶ 1, 6.
2
15 U.S.C. §§ 77k(a), 77l(a)(2), 77o.
3
DI 536-1; see also DI 539-1 (amended stipulation of settlement).
4
DI 565.
3
million.5 Lead plaintiffs previously reached a $6 million settlement with certain individual
defendants.6 Consequently, there is a total settlement fund of $346 million.7 The matter is now
before the Court on plaintiffs’ counsel’s motion for attorneys’ fees and reimbursement of expenses.8
The Request for Attorneys’ Fees and Expenses
Eight law firms that served as counsel for plaintiffs9 request an aggregate fee award
of $44.89 million,10 or about 13 percent of the $346 million settlement fund. The aggregate lodestar
of $24.57 million reflects 55,372 hours worked multiplied by hourly rates of between of $210 and
$420 for associates and $410 to $835 for partners.11 The total requested fee reflects a blended
multiplier of 1.83, with proposed multipliers varying by firm (from a low of 1.32 to a high of 1.92).12
5
DI 539-1 ¶ 1(vv).
6
See DI 410 (approving settlement); DI 365-1 ¶ 1(ll) (specifying the $6 million payment).
7
See Mem. in Support of Motion for Atty’s’ Fees [DI 549] at 1 & n.4.
8
DI 548.
9
The eight law firms are (i) Berman DeValerio, (ii) Cohen Milstein Sellers & Toll PLLC
(“Cohen Milstein”), (iii) Cohen, Placitella & Roth, P.C. (“Cohen Placitella”), (iv) Kohn,
Swift & Graf., P.C. (“Kohn Swift”), (v) Lieff Cabraser Heimann & Bernstein, LLP (“Lieff
Cabraser”), (vi) Schnader Harrison Segal & Lewis, LLP (“Schnader Harrison”), (vii) Wolf
Haldenstein Adler Freeman & Herz LLP (“Wolf Haldenstein”), and (viii) Zwerling,
Schacter & Zwerling, LLP (“Zwerling Schacter”).
10
See Decl. of Nicole Lavallee [DI 556] Ex. A (“Proposed Allocation of Attorneys’ Fees and
Expenses”).
11
DI 549 at 12-13.
12
Id. at 14.
4
In addition, counsel seek reimbursement of $2.99 million in litigation expenses. The
two lead plaintiffs separately request reimbursement of costs and expenses of $27,725 relating to
their participation in a mediation and Rule 30(b)(6) depositions.13
There have been no objections to counsel’s proposed fees and expenses.
Discussion
I.
Legal Standards
Rule 23(h) permits the Court to “award reasonable attorney’s fees and nontaxable
costs” in a certified class action. The decision as to what constitutes a reasonable award rests in the
sound discretion of the Court.14 That discretion is especially capacious in this context because the
Court “is intimately familiar with the nuances of the case [and] is in a far better position to make
[such] decisions than is an appellate court.”15 The Court evaluates a request for fees as a fiduciary
for the class.16 It therefore is obliged to protect the settlement fund from excessive fee awards. The
13
See Decl. of Elizabeth Anderson [DI 551-3]; Decl. of Benjamin Brandes [DI 551-4]. The
Wyoming State Treasurer seeks compensation for 148.5 hours of time, billed at a rate of
$100 per hour, for a total of $14,050. DI 551-3 ¶ 12. The Wyoming Retirement System
seeks compensation for 143.5 hours of time, billed at rates between $75 and $100 per hour,
for a total of $13,675. DI 551-4 ¶ 12.
14
In re World Trade Ctr. Disaster Site Litig., 754 F.3d 114, 126 (2d Cir. 2014); see also
Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir. 2000) (citing Kirsch v. Fleet
Street, Ltd., 148 F.3d 149, 172 (2d Cir. 1998)).
15
McDaniel v. Cnty. of Schenectady, 595 F.3d 411, 416 (2d Cir. 2010) (quoting Goldberger,
209 F.3d at 47-48).
16
City of Detroit v. Grinnell Corp., 560 F.2d 1093, 1099 (2d Cir. 1977), abrogated on other
grounds by Goldberger, 209 F.3d at 43 (in awarding fees, the district court acts as a
“fiduciary who must serve as a guardian of the rights of absent class members”).
5
party seeking fees bears the burden of establishing the reasonableness of the fee award requested,
including the number of hours for which compensation is sought.17
In evaluating the reasonableness of a proposed fee, a court may elect either the
“percentage of the fund” or the “lodestar” method.18 Under the former, a court simply determines
what percentage of the recovery would constitute an appropriate fee. Under the latter, a court
“scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then
multiplies that figure by an appropriate hourly rate.”19 The court then may “increase the lodestar by
applying a multiplier” based on factors such as “the risk of the litigation and the performance of the
attorneys” – that is, the six case-specific factors delineated by the Second Circuit in Goldberger v.
Integrated Resources.20 Many, though not all, courts in this circuit begin with the percentage of the
fund method and then perform a lodestar “cross-check” to “ensure that the percentage of the fund
method yields appropriate compensation without resulting in a windfall for plaintiffs’ attorneys.”21
While the framework for scrutinizing fee awards is clear, the waters quickly muddy.
Neither the lodestar nor the percentage method closely aligns the incentives of the class and those
of its attorneys. Focusing on the lodestar encourages investment of needless hours, while the
17
Cruz v. Local Union No. 3 of Int’l Bhd. of Elec. Workers, 34 F.3d 1148, 1160
(2d Cir. 1994).
18
See McDaniel, 595 F.3d at 417 (“[I]t remains the law in this Circuit that courts ‘may award
attorneys’ fees in common fund cases’” under either method) (quoting Wal-Mart Stores,
Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 121 (2d Cir. 2005)).
19
Goldberger, 209 F.3d at 47.
20
Id. at 50.
21
In re Citigroup Inc. Bond Litig., 988 F. Supp. 2d 371, 373 (S.D.N.Y. 2013).
6
percentage of the fund method can generate egregiously high fees for the lawyers and encourage
counsel to settle a case prematurely.22 Nor do the difficulties stop there. As this Court has stated
previously:
“It is common knowledge that almost all securities class actions are settled. Those
that are settled typically are resolved on terms pursuant to which any fee award
comes out of the overall settlement fund and thus is of no concern to the defendant
and its counsel. The courts asked to approve these fees thus are left without any
effective adversarial testing of the claimed lodestar except in rare cases. . . . In
consequence, courts in the position in which this one finds itself are left pretty much
at sea, aided however by the principles that (1) the Court is a fiduciary for the class
members who ultimately pay any fee, (2) the class lawyers’ interests at this stage
diverge sharply from those of the class members, (3) it is the lawyers who bear the
burden of justifying the size of the award they seek at their clients’ expense, and (4)
the risk of non-persuasion is with those lawyers.”23
In the final analysis, then, the Court’s determination of what constitutes a reasonable fee rests on its
own experience: twenty-four years in practice, including the litigation of securities cases generally
and class actions in particular, and more than twenty years on the bench.
For reasons that will appear, the Court finds that the requested fee of $44.89 million
is unreasonably high. Instead, the Court approves an aggregate fee award of approximately
$28.48 million, a figure at which it arrives by cutting that portion of the aggregate lodestar
attributable to discovery costs by 25 percent and by adopting reduced multipliers. The bottom-line
award is still over 115 percent of counsel’s original lodestar and, in the Court’s view, strikes a more
salutary balance between the interests of the class and the attorneys than the fee proposed by counsel.
22
McDaniel, 595 F.3d at 419; see also In re Auction Houses Antitrust Litig., 197 F.R.D. 71,
76-78 (S.D.N.Y. 2000) (exploring the problems of perverse incentives and fee awards in
greater depth).
23
In re Weatherford Int’l Sec. Litig., No. 11-cv-1646 (LAK), 2015 WL 127847, at *1
(S.D.N.Y. Jan. 5, 2015).
7
Thus, counsel will be rewarded generously.
II.
The Requested Fee Award Would Be an Unreasonably High Percentage of the Fund
The Court begins in this case by considering the proposed $44.89 million fee as a
percentage of the fund.
Plaintiffs’ counsel argue that the proposed fee, which would amount to 13 percent of
the $346 million settlement fund, would be “modest and very much on the low end of percentage fee
awards by other courts in similar [mortgage-backed securities (“MBS”)] and securities litigation.”24
In support of this proposition, they cite orders in five other MBS cases in which counsel received
fees amounting to between 17 and 20 percent of recoveries exceeding $100 million.25
While comparisons to fee awards in similar cases can be helpful, their utility here is
limited. In the first place, only one of the fee orders submitted by counsel contains any substantive
analysis.26 The remainder appear to be lawyer-authored boilerplate. At least one of my colleagues
has expressed concern at the attempted use of such orders as precedential authority to support fee
24
DI 549 at 8.
25
See Decl. of Patrick Egan [DI 550] Ex. C (order in Maine State Ret. Sys. v. Countrywide Fin.
Corp., No. 10-cv-302 (C.D. Cal.)); id. Ex. D (order in Pub. Emps.’ Ret. Sys of Miss. v.
Merrill Lynch & Co., Inc., No. 08-cv-10841 (S.D.N.Y.)); id. Ex. E (order in N.J. Carpenters
Vacation Fund v. Royal Bank of Scot. Grp., No. 08-cv-5093 (S.D.N.Y.)); id. Ex. F (order in
Plumbers’ & Pipefitters’ Local #562 Supp’l Plan & Trust v. J.P. Morgan Acceptance Corp.
I, No. 08-cv-1713 (E.D.N.Y.)); id. Ex. G (order in In re Wells Fargo Mortgage-Backed
Certificates Litig., No. 09-cv-1376 (N.D. Cal.)).
26
See DI 550 Ex. C.
8
applications.27 More troubling, a non-random sample of five fee awards amounts to no more than
looking out over a crowd and picking out one’s friends. This approach just as easily could support
a fee much lower than 13 percent.28 It does not take a statistical whiz to appreciate that a more
helpful, though certainly not conclusive, approach would be to consider the proposed fee in light of
the distribution of all attorney fee awards in cases involving comparable settlement funds.
Counsel do bring to the Court’s attention at least one such authority – a 2014 report
regarding trends in securities litigation.29 It states that the median fee award in securities cases with
recoveries between $100 million and $500 million in the period from 1996 to 2013 was 22.2 percent
of plaintiffs’ total recovery.30 The report further notes that court-approved awards seem to be getting
smaller, with the median fee in the same recovery range shrinking to 20 percent of settlement
amounts in the period from 2011 to 2013.31 These figures roughly match those appearing in a 2010
27
Sakiko Fujiwara v. Sushi Yasuda Ltd., No. 12-cv-8742 (WHP), 2014 WL 5840700, at *8
(S.D.N.Y. Nov. 12, 2014) (“By submitting proposed orders masquerading as judicial
opinions, and then citing to them in fee applications, the class action bar is in fact creating
its own caselaw on the fees it is entitled to. . . . No wonder that ‘caselaw’ is so generous to
plaintiffs’ attorneys.”).
28
See In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d at 525 (awarding a fee
of 6.511 percent of the settlement fund); In re NASDAQ Market-Makers Antitrust Litig., 187
F.R.D. 465, 486 (S.D.N.Y. 1998) (“In cases where a class recovers more than $75–$200
million . . . fees in the range of 6–10 percent and even lower are common.”) (citing
examples).
29
DI 550 ¶ 163 & Ex. H (citing RENZO COMOLLI & SVETLANA STARYKH, NERA ECONOMIC
CONSULTING, RECENT TRENDS IN SECURITIES CLASS ACTION LITIGATION: 2013 FULL-YEAR
REVIEW (2014) (“NERA STUDY”)).
30
Id. at 34.
31
Id.
9
study published in the Journal of Empirical Legal Studies.32 Focusing only on settlements reached
in 2006 and 2007,33 that article found that the mean and median fees were 17.8 percent and 19.5
percent of plaintiffs’ recovery in eight cases with class settlements between $250 million and $500
million.34 Both reports conclude that fee awards decrease on a percentage basis as total recoveries
for a class increase.35
Another study, also published in the Journal of Empirical Legal Studies, reports
somewhat more conservative findings.36 There, Professors Eisenberg and Miller examined 689
settlements in common fund cases between 1993 and 2008.37 Two key conclusions emerge from
their data. First, the class recovery of $346 million in this case is high – larger than 90 percent of
settlements in common fund cases.38 By way of comparison, mean and median class recoveries in
32
Brian T. Fitzpatrick, An Empirical Study of Class Action Settlements and Their Fee Awards,
7 J. EMPIRICAL LEGAL STUDIES 811 (2010).
33
Id. at 812.
34
Id. at 839 (table 11).
35
Id.; see also NERA STUDY at 34 (“the percentage of fees shrinks as settlement size grows”).
36
Theodore Eisenberg & Geoffrey P. Miller, Attorney Fees and Expenses in Class Action
Settlements: 1993-2008, 7 J. EMPIRICAL LEGAL STUDIES 248 (2010).
37
Id. at 251.
38
Id. at 264-65 (table 7 and accompanying discussion).
Of course, the size of a settlement tells us little about the success of the lawyers in achieving
compensation for the class without knowing also what could have been recovered if the case
had been tried to verdict and, in addition, the likelihood of such a result.
10
the Second Circuit were $119.06 million and $11.63 million during this period.39 Second, Eisenberg
and Miller reported smaller fee percentages for large-recovery cases than either of the two studies
mentioned in the previous paragraph. For cases with total recoveries of $175.5 million or higher,
they found a mean fee of 12 percent of the settlement amount and a median fee of 10.2 percent.40
How, then, to reconcile these different benchmarks? The Court ultimately concludes,
in light of its own experience41 as well as its knowledge of this case, that a fee of eight to ten percent
of the settlement fund (i.e., $27.68 million to $34.6 million) would be more appropriate. Such a fee
would be closer to the average figures reported in the Eisenberg-Miller study, to which several courts
in this circuit have looked for guidance in recent years.42 More fundamentally, the Court finds that
counsel’s proposed fee of 13 percent of plaintiffs’ recovery is simply too high. Taking into account
39
Id. at 260 (table 4).
40
Id. 265 (table 7).
41
The Court’s experience includes In re Auction Houses Antitrust Litigation, 197 F.R.D. 71,
a case in which the position of lead class counsel was selected in part by an auction in which
(1) the Court fixed the compensation of the lead counsel as 25 percent of any class recovery
in excess of “X,” and (2) competing counsel submitted bids for the “X” that they would
offer. The larger the “X” bid, the more favorable to the class the bid was. In the event, the
case settled for $512 million. The successful bidder in the lead counsel auction, who had
“bid” that the class would receive the first $405 million of any recovery free of any
attorneys’ fees, received a fee of 25 percent of the excess over $405 million, which was
$26.75 million. Thus, in a competitive environment, the successful bidder agreed to a
compensation arrangement that ultimately produced a fee equal to 5.2 percent of the
recovery.
While Auction Houses is distinguishable from this case, the fact that able counsel were
prepared to undertake representation of that class on terms that ultimately yielded a fee of
5.2 percent of a recovery more or less of the same order of magnitude is interesting.
42
See, e.g., In re Colgate-Palmolive Co. ERISA Litig., 36 F. Supp. 3d 344, 349-51 (S.D.N.Y.
2014); In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., 991 F. Supp.
2d 437, 444 (E.D.N.Y. 2014).
11
the total number of lawyer and professional staff hours reflected in counsel’s billing
records – 55,372 – the proposed fee of $44.89 million would result in a blended hourly rate for all
attorneys and other time-keeping staff of $810.71, which strikes the Court as quite excessive.43 Any
fee in the Court’s adopted range would remunerate plaintiffs’ counsel beyond their lodestar of
$24.57 million and would reflect a more reasonable proportion of the total recovery. The Court
rejects also any notion that a fee in this range would penalize plaintiffs’ counsel. In light of the $346
million recovery for the class, it is eminently sensible that the fee percentage should be smaller than
in a more typical litigation.44
III.
Consideration of the Goldberger Factors
Irrespective of whether a court adopts the percentage of the fund or the lodestar
approach, it must assess the six factors delineated in Goldberger.45 These include “(1) counsel’s time
and labor, (2) the litigation’s magnitude and complexity, (3) the risk of the litigation, (4) the quality
of representation, (5) the requested fee in relation to the settlement, and (6) public policy
43
See, e.g., In re Gilat Satellite Networks, Ltd., No. 02-cv-1510 (CPS), 2007 WL 2743675,
at *18 (E.D.N.Y. Sept. 18, 2007) (an effective hourly rate of $602 for all personnel was
“significant” if not quite excessive); In re Merrill Lynch & Co., Inc. Research Reports Sec.
Litig., No. 02-mdl-1484 (JFK), 2007 WL 313474, at *23 (S.D.N.Y. Feb. 1, 2007)
(describing an effective hourly rate of $1,193.51 per hour as “exorbitant”).
44
See, e.g., In re Indep. Energy Holdings PLC, No. 00-cv-6689 (SAS), 2003 WL 22244676,
at *6 (S.D.N.Y. Sept. 29, 2003) (“[T]he percentage used in calculating any given fee award
must follow a sliding-scale and must bear an inverse relationship to the amount of the
settlement. Otherwise, those law firms who obtain huge settlements, whether by
happenstance or skill, will be over-compensated to the detriment of the class members they
represent.”).
45
Wal-Mart, 396 F.3d at 121 (under either method, “the Goldberger factors ultimately
determine the reasonableness of a common fund fee.”) (internal quotation marks omitted).
12
considerations.”46 While plaintiffs’ counsel argue that the Goldberger factors support their proposed
fee, this Court is dubious.
(1) Counsel’s time and labor. Plaintiffs’ counsel argue that their labor on this case
was intensive and state that it was not until after class certification and “extensive fact discovery”
that negotiations led to a settlement.47 The total number of hours – 55,372 – certainly indicates that
much effort was expended in litigating this case. Of course, it remains to be seen whether the total
number of hours devoted to it was reasonable.
(2) The magnitude and complexity of the action.
Counsel assert that the
complexities of this case were myriad. The case involved over 50 offerings based on more than
74,000 loans. Those 50 offerings in turn involved 465 certificates, each of which arguably might
have required expert proof as to valuation.48
(3) The litigation risks involved. Counsel assert that litigation risks in this case were
high, principally because IndyMac is insolvent and the underwriter defendants had viable affirmative
defenses. They argue also that evidence as to proof of falsity would have been complex and required
expert testimony, and they highlight the parties’ disagreement over the proper calculation of
damages.49 Nevertheless, there are at least two cross-cutting considerations. First, securities cases
like this practically always settle, meaning that the risk of total non-recovery was almost non-
46
McDaniel, 595 F.3d at 423 (citing Goldberger, 209 F.3d at 50).
47
DI 549 at 4.
48
Id. at 17-18.
49
Id. at 19-20.
13
existent.50 Second, plaintiffs in this case had the benefit of pre-existing investigations by government
authorities,51 a fact that rendered the case less risky than it otherwise might have been.52
(4) The quality of class counsel’s representation. The Court is satisfied that class
counsel litigated this case effectively. Moreover, the Court is mindful that this is the second largest
MBS settlement on record and the largest reported settlement against underwriters in the absence of
a solvent issuer,53 although the significance of these facts is not as strong as counsel would have it.54
(5) The requested fee in relation to the settlement. Counsel assert that lead
plaintiffs, who are “sophisticated institutional investors,”55 have reviewed the fee request and find
it reasonable. That may be so, but such an agreement between plaintiffs and their lawyers is no
substitute for an adversary testing of counsel’s assertions.56 The Court already has determined that
50
Goldberger, 209 F.3d at 52 (“At least one empirical study has concluded that ‘there appears
to be no appreciable risk of non-recovery’ in securities class actions, because ‘virtually all
cases are settled.’”) (citing Janet Cooper Alexander, Do the Merits Matter? A Study of
Settlements in Securities Class Actions, 43 STAN. L. REV. 497, 578 (1991)).
51
See DI 337 ¶ 9 (“Indeed, a February 26, 2009 report issued by the Office of Inspector
General . . . of the U.S. Department of Treasury . . . confirmed that many of these
undisclosed or untrue facts were part of long, systematic problems at IndyMac.”).
52
Cf. In re Citigroup Inc. Sec. Litig., 965 F. Supp. 2d 369, 399 (S.D.N.Y. 2013) (“[T]he
factors that traditionally render securities cases most likely to survive a motion to dismiss
and, in turn, to settle – such as prior government investigations – are absent here.”).
53
Mem. in Support of Final Approval of Settlement [DI 547] at 1.
54
See supra note 39.
55
DI 549 at 23.
56
See Sushi Yasuda, 2014 WL 5840700, at *8 (citing discussions in cases and articles).
14
13 percent of the settlement fund is too high a proportion of the recovery in these circumstances.
(6) Public policy considerations. Counsel contend that public policy supports class
actions ending in settlement and fee awards sufficient to encourage plaintiffs’ counsel to bring future
actions.57 The Court agrees. But the ultimate determination as to the incentive effects of any given
award is left to the Court’s discretion.58 The Court has concluded that an award at or above counsel’s
lodestar is warranted, albeit below the 13 percent of plaintiffs’ recovery sought. In the final analysis,
if such an award “amounts to punishment . . . there will be many attempts to self-inflict similar
punishment in future cases.”59
The Court has considered all of the Goldberger factors and is confident in its
conclusion that an award between eight and ten percent of the settlement fund is appropriate.
IV.
The Lodestar Cross-Check Confirms that the Proposed Fee Is Too High
Counsel helpfully have adopted a common format for the presentation of their time
records that distinguishes hours billed by category of task.
These categories include (1)
investigations and factual research, (2) discovery, (3) pleadings and pretrial motions (including legal
research), (4) court appearances, (5) settlement, (6) litigation strategy and analysis, (7) class
certification issues, and (8) appeal issues.
The aggregate lodestar is built upon hourly rates between $210 and $420 for
57
DI 549 at 24.
58
See McDaniel, 595 F.3d at 426 (stating that the Second Circuit has been “loath to disturb
the determinations of district courts” with respect to findings regarding public policy
considerations).
59
In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d at 525.
15
associates and between $410 and $835 for partners,60 and counsel have agreed to certain self-imposed
rate caps “for greater consistency” across firms.61 The Court finds that these hourly rates are
reasonable in this context, at least in the absence of any objections or contrary evidence.
As to hours expended, however, the Court has concerns – particularly as it relates to
hours spent on discovery. Counsel report that they devoted 32,658 hours to discovery, a figure
amounting to nearly 60 percent of all hours spent on this case. Figure 1 below helps illustrate the
extent to which work on discovery drove the total number of hours.62 In turn, the hours devoted to
discovery accounted for $12.6 million, or about 51 percent of the total lodestar.
Counsel have attempted to document exactly what tasks underlay this figure.63 They
included four discovery motions,64 propounding over a dozen document requests,65 participation in
15 depositions,66 and “reviewing and analyzing over eleven million documents produced by parties
and third parties,”67 among others. Even so, the sheer number of hours here is eyebrow-raising.
Assuming an industrious attorney billing 200 hours per month, the lawyers in this case claim to have
60
DI 549 at 12.
61
Id.
62
All figures and tables appear at the conclusion of this opinion.
63
See DI 550 ¶¶ 32-68.
64
Id. ¶ 35.
65
Id. ¶ 37.
66
Id. ¶ 68.
67
DI 549 at 9.
16
spent the equivalent of 13.6 years’ worth of effort on discovery. That would be surprising even in
a case with many depositions; it borders on astounding in this one, in which only 15 were taken.
And the astonishment is not fully mitigated by the volume of the documents produced. In a case
such as this, it is likely that many of the documents consisted of duplicates produced by similarly
situated defendants (especially the underwriters) as well as nearly identical offering documents and
other voluminous materials, relatively few of which contained much if anything that mattered to the
case.68 The Court, having conducted a “conscientious and detailed inquiry” into whether such hours
were expended “usefully and reasonably,”69 and bearing in mind plaintiffs’ counsel’s burden of
persuasion, cannot conclude that an efficient attorney “would have engaged in similar time
expenditures.”70
The Court therefore makes the following two adjustments to counsel’s proposed fee.
First, it exercises its discretion to cut “surplusage” on a percentage basis by reducing the portion of
each firm’s lodestar attributable to discovery by 25 percent.71 This results in a revised aggregate
lodestar of $21.42 million. Second, while the Court believes that the recovery for the class justifies
68
Plaintiffs’ counsel, who of course have the burden here, were at liberty to demonstrate that
the nature of the eleven million documents was quite different and required the enormous
investment of time that was recorded.
69
Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994).
70
Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992).
71
See Kirsch, 148 F.3d at 173 (“Hours that are excessive, redundant, or otherwise unnecessary
are to be excluded, and in dealing with such surplusage, the court has discretion to deduct
a reasonable percentage of the number of hours claimed as a practical means of trimming
fat from a fee application.”) (citation omitted); see also In re Warner Chilcott Ltd. Sec.
Litig., No. 06-cv-11515 (WHP), 2009 WL 2025160, at *4 (S.D.N.Y. July 10, 2009)
(applying a multiplier less than one in part to “encourage[] more efficient discovery
practices”).
17
a multiplier, it is not convinced that the blended multiplier of 1.83 suggested by counsel is warranted.
It therefore reduces the portion of any multiplier greater than 1 by 60 percent across the board (i.e.,
a multiplier of 1.92 becomes 1 plus 40 percent of 0.92, or 1.37). This yields a new blended
multiplier of 1.33 and a total fee award of $28.48 million. Updated firm-by-firm numbers appear
below in Table 1. The revised award is almost 116 percent of counsel’s original lodestar, 133
percent of counsel’s adjusted lodestar, 8.2 percent of the total $346 million recovery, and results in
a blended hourly rate of $514.29.
To be sure, these cuts represent “rough justice [rather than] auditing perfection.”72
Still, the Court believes that this revised fee award more reasonably balances the interests of the
class – which the Court must guard jealously73 – with the goal of adequately compensating counsel
for their work on this litigation. None of the Court’s statements are intended to impugn the lawyers
who toiled on this case. Rather, the Court “has merely done the best it can with the tools at hand,
given the lack of any real adversarial testing of any of the key issues.”74
V.
The Request for Reimbursement of Expenses
Plaintiffs’ counsel seek $2.99 million in reimbursement of expenses. The Court has
reviewed this request and finds nothing objectionable. Counsel’s request is granted.
Lead plaintiffs, the Wyoming State Treasurer and the Wyoming Retirement System,
72
Fox v. Vice, 131 S. Ct. 2205, 2216 (2011).
73
See McDaniel, 595 F.3d at 411 (“[A] fee award should be based on scrutiny of the unique
circumstances of each case, and a jealous regard to the rights of those who are interested in
the fund.”) (internal quotation marks omitted).
74
In re Weatherford Int’l Sec. Litig., 2015 WL 127847, at *2.
18
further request reimbursement of costs and expenses of $27,725. These expenses relate to
preparation for a mediation, attending the mediation, and preparing for (and attending) Rule 30(b)(6)
depositions.75 Lead plaintiffs recognize that the Court has denied such applications previously,76 but
they assert that, unlike plaintiffs in these prior cases, they have explained adequately the basis for
their request. They point also to a recent case, In re China Valves Technology Securities Litigation,77
in which the Court did approve an award of $5,000 in expenses to lead plaintiffs.
As a colleague of mine recently articulated, it is totally unclear “why a party who
chooses to bring a lawsuit should be compensated for time expended in appearing at a deposition
taken in order to insure that [he or she] is actually capable of fulfilling his statutory obligations, or
responding to document requests, or performing what are essentially duplicative reviews of pleadings
and motions that his lawyers are perfectly capable of reviewing.”78 This Court agrees. If the
Wyoming State Treasurer and the Wyoming Retirement System do not want the bother of serving
as lead plaintiffs in future cases, they can decline to take on that role.
75
See DI 551-3; DI 551-4.
76
See Order, In re Parmalat Sec. Litig., No. 04-cv-30 (LAK) (S.D.N.Y. Mar. 2, 2009)
[DI 1055] (denying request for award of costs and expenses to lead plaintiffs); In re NTL
Inc. Sec. Litig., No. 02-cv-3013 (LAK), 2007 WL 1294377, at *10-11 (S.D.N.Y. May 2,
2007) (adopting magistrate judge’s recommendation that a request for reimbursement of lost
wages be denied).
77
Order ¶ 17, No. 11-cv-796 (LAK) (S.D.N.Y. Sept. 30, 2014) [DI 119].
78
City of Providence v. Aeropostale, Inc., No. 11-cv-7132 (CM), 2014 WL 1883494, at *19
(S.D.N.Y. May 9, 2014).
19
Conclusion
The Court grants the motion for attorneys’ fees and reimbursement of expenses
[DI 548] in the aggregate amount of $31,469,489.61, which is broken down by law firm in Table 2
below. Lead plaintiffs’ request for reimbursement of fees and expenses is denied.
SO ORDERED.
Dated:
March 24, 2015
20
21
Table 1: Revised Fee Awards
Firm
Proposed
Lodestar
Adjusted
Lodestar
Proposed
Multiplier
Adjusted
Multiplier
Approved Fee
Award
Berman
DeValerio
$18,212,228.75
$15,712,306.13
1.9196
1.36784
$21,491,920.82
Cohen
Milstein
$1,555,128.75
$1,216,704.38
1.61
1.244
$1,513,580.25
Cohen
Placitella
$254,405.00
$233,860.75
1.61
1.244
$290,922.77
$1,680,367.00
$1,481,834.00
1.61
1.244
$1,843,401.50
Lieff
Cabraser
$964,430.00
$940,463.00
1.61
1.244
$1,169,935.97
Schnader
Harrison
$264,038.00
$248,671.88
1.32
1.128
$280,501.88
Wolf
Haldenstein
$857,860.00
$823,952.88
1.61
1.244
$1,024,997.38
Zwerling
Schachter
$779,912.00
$764,535.25
1.32
1.128
$862,395.76
$24,568,369.50
$21,422,328.27
1.83
(blended)
1.33
(blended)
Kohn
Swift
Total
$28,477,656.33
22
Table 2: Approved Award of Fees and Expenses
Firm
Approved Fee
Award
Berman DeValerio
$21,491,920.82
$2,413,853.36
$23,905,774.18
Cohen Milstein
$1,513,580.25
$41,593.31
$1,555,173.56
Cohen Placitella
$290,922.77
$25,047.37
$315,970.14
Kohn Swift
$1,843,401.50
$215,734.79
$2,059,136.29
Lieff Cabraser
$1,169,935.97
$167,036.55
$1,336,972.52
Schnader Harrison
$280,501.88
$689.75
$281,191.63
Wolf Haldenstein
$1,024,997.38
$117,430.23
$1,142,427.61
$862,395.76
$10,447.92
$872,843.68
$28,477,656.33
$2,991,833.28
$31,469,489.61
Zwerling Schachter
Total
Approved
Total Award of Fees
Reimbursements
and Expenses
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?