Kaltman v. Petroleo Brasileiro S.A.- Petrobras

Filing 834

OPINION AND ORDER re: 777 MOTION for Attorney Fees and Reimbursement of Expenses to Counsel Filing the Initial Kaltman Action filed by Peter Kaltman, 784 MOTION for Attorney Fees and Expenses filed by Bernstein Litow itz Berger & Grossmann LLP, 781 MOTION for Attorney Fees NOTICE OF KAHN SWICK & FOTI, LLC'S APPLICATION FOR AWARD OF ATTORNEYS' FEES AND EXPENSES filed by Aura Capital Ltd., 791 MOTION for Attorney Fees Notice of Cl ass Counsel's Motion for an Award of Attorneys' Fees and Reimbursement of Litigation Expenses filed by Universities Superannuation Scheme Limited, Employees' Retirement System of the State of Hawaii, North Carolina Departmen t of State Treasurer. For the reasons stated above, and in the Court's preliminary approval of the settlement, the Court finds that the Settlement Agreement and Plan of Allocation are fair, reasonable, adequate, and otherwise in compliance w ith all applicable legal standards. Accordingly, the Court grants the motion of Class Plaintiffs for certification of the Settlement Class and for final approval of the Settlement Agreement and Plan of Allocation. The Court also grants in part Class Counsel's motion for feesand costs, awarding in fees $300,000 to USS, $50,000 to North Carolina, $50,000 to $13,350,000 to Labaton, Hawaii, $170,880,000 to and $2,314,000 to Motley Pomerantz, Rice, and $14,5 15,235.24 plus the costs expended by Pomerantz on 27 foreign contract attorneys to Class Counsel in costs. The Court also grants in part the motion of BLBG, awarding BLBG fees in an amount to be determined by Class Counsel to be paid from Class Counsel's fee award and $872,673.04 in costs to be paid from the Settlement Fund; grants in full Wolf Popper's motion, awarding Wolf Popper $107,629 in fees to be paid from Class Counsel's fee award and $1,219.66 in costs to be paid from the Settlement Fund; grants in full Almeida's motion, awarding Almeida $200,000 in fees to be paid from Class Counsel's fee award; and grants in full KSF's motion, awarding KSF $589,915.50 in fees to be paid from Class Counsel's fee award and $2,650.59 in costs to be paid from the Settlement Fund. As regards the fee awards, as noted above, counsel are to be paid 50% of the amounts due upon entry of final judgment and the rema ining amounts after the settlement funds have been fully distributed to the class. The Clerk is instructed to enter Final Judgment in accordance with the preceding paragraph, to close docket entry numbers 777, 781, 784, and 791, and to close the case. The Court will, however, retain jurisdiction over any further disputes arising in connection with the implementation of the Settlement or the payment of fees and costs. (Signed by Judge Jed S. Rakoff on 6/22/2018) (mro)

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 1 of 42
DOCUMENT
ELECTRO~ :I CALLY FILED
DOC#: _ __,,_____.._......

DATE FILED:

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------------x
14-cv-9662

In re: PETROBRAS SECURITIES
LITIGATION

OPINION AND ORDER

-------------------------------------x
JED S. RAKOFF, U.S.D.J.
The $3 billion settlement of this somewhat large securities
class action is before the Court for final approval. The Settlement
Agreement 1 comports with all legal requirements, and the objections
to the settlement are without merit. But the nearly $300 million
in attorneys'

fees

requested by plaintiffs'

counsel needs to be

reduced by roughly one-third.
Named plaintiffs Universities Superannuation Scheme Limited
acting as sole corporate trustee for Universities Superannuation
Scheme

("USS"),

North

Carolina

Department

of

State

Treasurer

("North Carolina"), and Employees' Retirement System of the State
of

Hawaii

("Hawaii")

(collectively,

"Class

Representatives"

or

"Class Plaintiffs"), seek final approval of a proposed settlement
agreement with defendants Petr6leo Brasileiro S.A.

("Petrobras"),

Petrobras

America

Global

(collectively,

Finance

B. V.,

Petrobras

the "Petrobras Defendants"),

Ci ti group Global Markets Inc.,

J.P.

Inc.

BB Securities Ltd.,

Morgan Securities LLC,

I tau

Except where otherwise noted, all capitalized terms in this
Opinion and Order have the same meanings as those assigned to them
in the Stipulation of Settlement and Release. See Dkt. 767-1.
1

1

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 2 of 42

BBA USA Securities, Inc., Morgan Stanley & Co. LLC, HSBC Securities
(USA)

Inc., Mitsubishi UFJ Securities (USA), Inc., Merrill Lynch,

Pierce, Fenner & Smith Incorporated, Standard Chartered Bank, Bank
of China (Hong Kong)

Limited, Banco Bradesco BBI S.A., Banca IMI

S. p. A., Scotia Capital

(USA)

Inc.

(collective 1 y, the "Underwriter

Defendants"), Almir Guilherme Barbassa, Jose Carlos Cosenza, Paulo
Roberto

Costa,

Estrella,
Filho,

Renato

Maria

Jose

das

de

Graca

Souza

Duque,

Silva

Sergio Gabrielli,

Guillherme

Foster,

de

Oliveira

Jose Miranda

Formigli

Silvio Sinedino

Pinheiro,

Daniel

Lima de Oliveira, Jose Raimundo Brandao Pereira, Servio Tulio da
Rosa Tinoco,

Paulo Jose Alves, Gustavo Tardin Barbosa, Alexandre

Quintao Fernandes,
Jozef Looman,

Marcos Antonio Zacarias,

Theodore M.

Helms

Cornelis Franciscus

(collectively,

the "Individual

Defendants"), Banco Votorantim Nassau Branch, Santander Investment
Securities

Inc.,

Petrobras

PricewaterhouseCoopers

International

Auditores

Finance

Independentes

Company,

("PwC

and

Brazil") . 2

See Memorandum of Law in Support of Class Plaintiffs' Motion for
Final Approval of Settlement and Plan of Allocation ("Pl. Mero."),
Dkt.
Class

776. Contingent on approval of the settlement,
Representatives,

Labaton Sucharow LLP

Pomerantz

namely,

("Labaton"),

LLP

counsel for

("Pomerantz"),

and Motley Rice LLC

("Motley

Pursuant to the Stipulation of Settlement and Release, Dkt. 7671, however, Paulo Roberto Costa and Renato de Souza Duque are not
Released Parties, id. at 22.

2

2

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 3 of 42

Rice")

3

(collectively, "Class Counsel"), move for fees and costs,

see Dkt. 791, as do four other law firms, namely, Wolf Popper LLP
("Wolf
Foti,

Popper"),
LLC

("BLBG"),

Almeida

("KSF"),

Advogados

("Almeida"),

Kahn,

Swick

&

and Bernstein Litowitz Berger & Grossmann LLP

who are counsel

for plaintiffs

in related individual

actions, see Dkts. 777, 781, 784.
Six members of the class filed timely objections to either
the settlement, the motion for fees and expenses, or both: William
Thomas Haynes,
Haynes

as trustee for the W Thomas Haynes and Katherine

Irrevocable

Trust

for

("Haynes"),

see

Obj."),

797; Spencer R.

Dkt.

Objection

the

of

William

Bueno,

Bueno to Class Action Settlement
A.

Martinez

and

Sandra

benefit

V.

of

Sara

Thomas

L.

Haynes

Haynes
("Haynes

see Objections of Spencer R.

("Bueno Obj."),

Bennun

Serrano

Dkt.

803; Julio

("Martinez"),

see

Objection to Approval of Class Action ("Martinez Obj."), Dkt. 806;
Mathis and Catherine Bishop ("Bishop"), see Objection to Proposed
Settlement and Fee Application

("Bishop Obj."),

Dkt.

Formenti on behalf of Renewable Carbon Corporation
see

Objection

("Formenti
( "Giela ta") ,

3

to

Obj."),

the

Petrobras

Dkt.

812;

and

Securities
Richard

see Shareholder Objections

to

and

811; Giulio
("Formenti"),

Litigation
Emelina

Case

Gielata

Proposed Settlement,

Motley Rice is counsel for Union Asset Management Holding AG.
3

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 4 of 42

Plan of Allocation, Proof of Claim, Class Notice and Request for
Attorneys' Fees ("Gielata Obj."), Dkt. 813.4
Class Plaintiffs,

responding to the objections,

argue that

they are without merit. See Reply Memorandum of Law in Support of
(1)

Lead Plaintiff's Motion for

Final Approval of Class Action

Settlement and Plan of Allocation; and (2) Class Counsel's Motion
for an Award of Attorneys'
Expenses
the

("Pl.

Reply"),

Settlement

Underwriter

Fees and Reimbursement of Litigation

Dkt.

Agreement,

Defendants'

Reply

824. 5 Defendants concur as regards
see
in

Petrobras
Support

of

Defendants'
Class

and

Plaintiffs'

Motion for Final Approval of Settlement and Plan of Allocation
("Def.

Reply") ,

Independentes'

Dkt.

825;

PricewaterhouseCoopers

Audi tores

Reply in Support of Class Plaintiffs'

Motion for

Final Approval of Settlement and Plan of Allocation, Dkt. 828, and

4

The Court is also in receipt of a letter from MaryAnne Lassegard
who objects to the notice and settlement amount. See Letter dated
June 5, 2018, Dkt. 832. This objection is untimely and Ms.
Lassegard has not demonstrated standing to object. Id. Ms.
Lassegard's objection is also without merit as Ms. Lassegard is
incorrect that smaller shareholders will be disadvantaged by this
Settlement compared with larger shareholders.
Class Plaintiffs have also accused certain objectors of having
improper motives including, in the case of Bueno and Gielata,
allegedly seeking to extort personal payments through the device
of frivolous appeals. See Pl. Reply at 4-14. As Class Plaintiffs
do not currently seek any specific relief at the district court
level, and the allegations of extortion, if true, will only become
evident on appeal, the Court sees no need to reach these issues at
this time.
5

4

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 5 of 42

take no position on the

Plan of Allocation or Class Counsel's

motion for fees and costs, see id.6
By

way

Plaintiffs

of

brief

moved,

background,

unopposed,

for

on

February

1,

preliminary

2018,

Class

approval

of

a

settlement agreement, see Dkt. 765, pursuant to the terms of which,
the Petrobras Defendants would pay $2.95 billion and PwC Brazil
would pay $50 million to the class in exchange for releases from
all claims. See Stipulation of Settlement and Release,

Dkt.

1; Amended Stipulation and Agreement of Settlement, Dkt.

767-

767-10.

On February 23, the Court held a preliminary approval hearing. See
Transcript,

Dkt.

773.

On

February 28,

the

Court

granted Class

Plaintiffs' motion for preliminary approval. See Order at 2, Dkt.
770. Thereafter, more than one million copies of the Class Notice
were mailed to potential class members and a summary notice was
published in major news publications worldwide. See Pl. Reply at
1.

On April 20, Class Plaintiffs moved for final approval of the
proposed Settlement and Plan of Allocation and certification of
the

Settlement

Class.

See

Dkt.

776.

No

institutional

investor

6 At the request of the Court, the Petrobras Defendants submitted
a letter identifying time entries in Class Counsel's fee request
warranting the Court's attention. See Letter from the Petrobras
Defendants dated May 7, 2018 ("Def. Ltr.") at 2, Dkt. 793. Also at
the Court's request, Class Counsel submitted a reply. See Letter
on Behalf of Class Representatives dated May 18, 2018 ("Pl. Ltr."),
Dkt. 814.
5

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 6 of 42

objected

to

the

Settlement

Agreement,

Plan

of

Al location,

or

proposed fee award and all but one of the institutional plaintiffs
who had previously filed separate lawsuits but had not yet settled
with defendants indicated their intention to remain members of the
class and forego their individual claims. See Pl. Reply at 1-2. 7
On June

4,

2018,

the Court held a

settlement hearing at which

objectors Haynes and Martinez appeared. See Transcript dated June
4, 2018 ("Tr."). After careful consideration of all the voluminous
written filings and oral argument in this case, the Court hereby
grants Class Plaintiffs' motion for final approval,
the

Settlement

reasonable,

Agreement

adequate,

and

Plan

of

Allocation

and comport with all

finding that
are

fair,

requirements of law.

The Court also grants in full the motions of Wolf Popper, Almeida,
and KSF for fees and costs, but only grants in part the motions of
Class Counsel and BLBG for the same.
I.

The Stipulation of Settlement and Plan of Allocation

More than a dozen institutional investors filed separate, socalled "tag-along" actions based on the same basic allegations as
the class complaint. Several have previously settled, and, with
one exception, the remainder have decided to forgo their separate
actions and, instead, receive their pro rata distributions as
members of the class. The only separate institutional investor
that has not so far indicated that it will, in effect, opt in to
the settlement is Washington State Investment Board ("WSIB").
Counsel for that party and counsel for defendants should jointly
call chambers by no later than July 2, 2018 to schedule the prompt
trial of that remaining case.
7

6

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 7 of 42

This case grows out of a massive fraud, but whether defendants
were responsible for the fraud or were themselves victims of the
fraud was

one

of

several

hotly-contested

issues

that made

the

outcome of this case uncertain. The proposed settlement followed
more than three years of litigation including, among other things,
non-frivolous
to

(though mostly unsuccessful)

dismiss plaintiffs'

claims,

defeat

motions by defendants

class

certification,

and

obtain summary judgment in their favor, as well as extensive fact
and expert discovery (including 68 depositions and review of more
than 25 million pages of documents),
substantial Second Circuit appeal,
for certiorari.

See Pl. Mem.

preparations for

trial,

a

and a fully briefed petition

at 5-6.

Familiarity with all these

prior matters is here assumed.
The

Settlement

Amount

equals

approximately

22.3%

of

the

likely recoverable damages suffered by the class (as estimated by
Class Plaintiffs).
premium

over

plaintiffs

the

See id.

at 1.

recoveries

It represents, moreover,
enjoyed

by

various

a 65%

individual

(sophisticated institutional investors represented by

experienced counsel) who have previously reached settlements with
the Petrobras Defendants. Id. at 2. Furthermore, as mentioned, all
but one of the remaining institutional plaintiffs have indicated
their intention to remain class members and forgo their individual
claims. See Pl. Reply at 1-2.

7

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 8 of 42

Under Federal Rule of Civil Procedure 23(e), the Court must
approve a class action settlement before it can take effect.
court

may

approve

adequate,

a

class

and reasonable,

action

settlement

if

it

is

"A

fair,

and not a product of collusion." Wal-

Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir.
2005)

(internal quotations omitted). In making its determination,

the Court can take into account,

inter alia,

expense, and duration of the litigation;

(1)

the complexity,

(2) the class's reaction

to the settlement; (3) the stage of the proceedings and the amount
of discovery completed;

(4)

the risks of establishing liability;

(5) the risks of establishing damages; (6) the risks of maintaining
the class action through trial;

(7)

the defendants'

ability to

withstand a greater judgment; and (8) the range of reasonableness
of the settlement fund in light of best possible recovery and all
attendant litigation risks. See City of Detroit v. Grinnell Corp.,
495 F.2d 448,
"settlement
classes

463

(2d Cir.

class"

is

previously

1974).

different

certified,

Furthermore if,
from

the

the

Court

as here,

litigation
must

now

class

certify

the
or
the

settlement class, although certain Rule 23 considerations are not
applicable
Windsor,

in

this

521 U.S.

inquire whether

context.
591,

the

management problems

620

case,

See,
(1997)
if

e.g.,

Amchem Prods.,

Inc.

v.

("a district court need not

tried,

would present

intractable

for the proposal is that there be no

trial").
8

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 9 of 42

Since,

in preliminarily approving the proposed settlement,

the Court tentatively concluded that all the forgoing standards
for

approval

had

been

met,

it

makes

sense

to

re-visit

these

preliminary conclusions chiefly in terms of the objections that
have now been

raised.

certification,

(2)

proposed cy pres

Objectors here principally challenge

the sufficiency of the class notice,
recipient,

and

(4)

(1)

(3)

the

the settlement amount.

The

Court reviews each of these objections in turn.

(Several objectors

also take issue with the fee award requested by Class Counsel; the
Court addresses these latter objections in Part II, infra.)
A. Certification
Objectors

argue

and

overbroad,

that,

that

the

proposed

accordingly,

it

settlement
fails

to

class

satisfy

is
the

requirements of Rule 23 that (1) the diverse groups and individuals
within the class be adequately represented by the named plaintiffs,
see Haynes Obj.
and that

(2)

at 3-8; Gielata Obj.

at 1-8; Bueno Obj.

at 6-9,

common issues of law and fact predominate over those

issues subject only to individualized proof, see Haynes Obj. at 912.
(1)

Adequate Representation
The

Class

as

proposed
al 1

settlement

persons

who

agreement

purchased

defines

Petrobras

the

Settlement

Securities

transaction "that satisfies any of the following criteria:

in

a

(i) any

transaction in a Petrobras Security listed for trading on the New
9

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 10 of 42

York Stock Exchange ("NYSE");
Security

that

cleared or

sett led

Company's

book-entry

system;

Petrobras

Security to

which

apply,

any transaction in a Petrobras

(ii)

through

(iii)

or
the

any

Oeposi tory Trust
transaction

United States

in

securities

a

laws

including as applicable pursuant to the Supreme Court's

decision

in Morrison v.

National Australia Bank,

(2010) ." Stipulation of Settlement and
1.

the

Haynes,

conflict

Gielata,

Release~

561

U.

s. 24 7

l(j), Okt. 767-

and Bueno purport to identify an intraclass

in this case between those persons whose purchases of

Petrobras Securities are connected to the U.S. solely by virtue of
the fact that their transactions were cleared or settled through
the

Oeposi tory

claimants")

Trust

and

Company

those

("OTC")

persons

whose

in

New

York

purchases

(the

of

"OTC

Petrobras

Securities are otherwise domestic under the operative case law
(the "domestic claimants"),
took

place

on

U.S.

for example because their purchases

exchanges.

According

to

Gielata,

the

OTC

claimants are not properly part of the class at all and should be
filtered out by a

special master.

problem here is not the

'classic'

See Gielata Obj.

at

4

("the

Amchem conflict necessitating

subclasses. Rather, the structural conflict here is [] class member
claimants versus claimants that cannot be part of the class because
their claims are barred by Morrison"). According to Haynes, while
the OTC claimants may properly be part of the class, the domestic
claimants

are

entitled

to

separate
10

representation

given

the

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 11 of 42

relative strength of their claims. See Haynes Obj.
proposes

that

purposes

of

the

Court

negotiating

litigation).

Id.

at 8.

certify
a

new

two

or

at 6. Haynes

three

subclasses

for

(or

continuing

the

settlement

Bueno similarly suggests that

the Court

appoint subclass representatives. See Bueno Obj. at 9.
What this boils down to as a practical matter is that certain
claimants who would have been unable to join the litigation classes
previously

certified by

the

Court

because

of

extraterritorial

impediments are now included in the settlement class so that the
defendants

can

buy

"global

peace."

In

the

Second

Circuit,

plaintiffs are entitled to settle even entirely non-meritorious
claims. See In re Am.
F.3d 229,

243

Int' l Grp.,

(2d Cir.

2012)

Inc. Sec. Litig.,

("AIG"), 689

("defendants in class action suits

are entitled to settle claims pending against them on a class-wide
basis

even

meritless

11
).

if

a

believes

that

those

claims

may

be

While "no class may be certified that contains members

lacking Article

III

injuries-in-fact,
their

court

claims

standing,

11

class members who have suffered

as all putative members here have,

"irrespective

of

whether

sufficient to sustain any cause of action.

their
11

can settle

injuries

Denney v.

are

Deutsche

Bank AG, 443 F.3d 253, 264-5 (2d Cir. 2006).
Domesticity - although not a matter of Article III standing,
see Morrison v.

Nat'l Australia Bank,

("to ask what conduct

§

10 (b)

561 U.S.

247,

254

(2010)

reaches is to ask what conduct
11

§

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 12 of 42

lO(b) prohibits, which is a merits question")
plaintiffs' securities fraud claims.

- is an element of

If contested by defendants,

domesticity must be proven by plaintiffs as part of their casein-chief.

But

defendants

here

have

waived

any

domesticity

requirement for the purposes of settlement. See Def. Reply at 3.
Accordingly, even though the Court previously found that the DTC
claimants could not establish domesticity as a matter of law (but
not because they lacked Article III standing),
that

the

Gielata is wrong

DTC claimants cannot be part of the settlement class

(assuming that the other requirements of Rule 23 are met).

See

AIG, 689 F.3d at 237-44 (certifying a settlement class even though
some or all of the class members could not satisfy the reliance
element of their securities fraud claims); Sullivan v. DB Invs.,
Inc.,

667 F.3d 273

(3d Cir. 2011)

(certifying a settlement class

even though some members of the class lacked statutory standing) .
Another objector,
argues,

while

the

Haynes,

"release

transactions might

concedes
of

this much.

claims

arising

But,
from

command some settlement value,"

the

Haynes
foreign
"proper

valuation" of such "foreign" claims must be "tested through armslength negotiation by separate representatives." Haynes Obj. at 7.
Since

Class

interests
represent

Counsel

of

the

the

were

class,"

distinct

"obligated
Haynes

to

advance

reasons,

interests

of

the

they were
the

collective
unable

subclasses.

to
Id.

(quotations omitted). As a result, Haynes concludes, Class Counsel
12

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 13 of 42

agreed to a proposed settlement agreement that unfairly diluted
the recovery of domestic-purchasing class members (like Haynes).
Federal Rule of Civil Procedure 23 (a) (4)

requires that the

representatives in a class action "fairly and adequately protect
the interests of the class." The Rule, among other things, "serves
to uncover conflicts of interest between named parties and the
class

they

seek

to

represent."

Amchem,

521

U.S.

at

625.

Representation is "adequate" where the class representatives have
(1) an interest in vigorously pursuing the claims of the class and
(2) no interests antagonistic to the interests of the other class
members.
Antitrust
2016),

In

re

Litig.

cert.

Payment

Card

("Payment

denied

sub

Interchange

Card"),

nom.

827

Photos

Fee

& Merch.

F.3d 223,

Etc.

Corp.

231
v.

Disc.

(2d Cir.

Home

Depot

U.S.A., Inc., 137 S. Ct. 1374 (2017).
In the event a court identifies a "fundamental" conflict that
goes "to the very heart of the litigation," Charron v. Wiener, 731
F.3d 241,

250

(2d Cir.

2013)

(quotations omitted),

the conflict

must be addressed with a "structural assurance of fair and adequate
representation for the diverse groups and individuals" among the
class, Amchem, 521 U.S. at 627. "One common structural protection
is division of the class into

'homogenous subclasses under Rule

23 (c) (4) (B), with separate representation to eliminate conflicting
interests of counsel.'" Payment Card,

827

F. 3d at 231

(quoting

Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999)). Where a court
13

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 14 of 42

certifies a class at the same time as it approves a settlement,
these requirements -

"designed to protect absentees by blocking

unwarranted or overbroad class definitions" -

"demand undiluted,

even heightened, attention." Amchem, 521 U.S. at 620.
Two Second Circuit cases bear on the question of whether there
is a fundamental conflict here between the DTC claimants and the
domestic claimants such that a
class

into

subclasses

makes

failure to divide the settlement
it

impossible

for

the

Court

to

determine whether the interests of all class members were fairly
and adequately represented. The first is In re Literary Works in
Electronic Database Copyright Litigation
F.3d 242

(2d Cir.

proposed

settlement

categories:

2011),

a

("Literary Works"),

copyright dispute.

agreement

divided

the

654

In that case the
class

into

three

"Category A" covered works that had been registered

with the Copyright Off ice in time to be eligible for statutory
damages and attorneys'

fees under the Copyright Act; "Category B"

covered works that had been registered with the Copyright Office
but not in time to be eligible for statutory damages; and "Category
C" covered all other works, none of which could be litigated for
damages purposes unti 1
Office.

Id.

at 246.

they were

registered with the Copyright

Category A and B claims were substantially

stronger than Category C claims, but Category C claims comprised
more than 99% of all claims held by the putative class. Id.

14

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 15 of 42

The proposed plan of allocation in Literary Works employed a
damages formula that disadvantaged Category C claims in a variety
of ways. Among other things,

the formula paid each Category A or

B claim substantially more than each Category C claim.
settlement also capped defendants'

Id.

The

total liability at $18 million

and, if the total amount of all claims plus costs and fees exceeded
$18 million, then the payout to Category C claims would be reduced
pro rata until the total amount of all claims plus costs and fees
reached $18 million. Id. Only if, after reducing Category C claims
to zero,

the payout due to Category A and B claims exceeded the

available funds would a reduction be applied to the Category A and

B claims. Id.
In these circumstances,
members'

"interests

the Second Circuit found that class

diverge [d]

as

to

the

distribution

of"

the

recovery because "each category of claim is of different strength
and therefore commands a different settlement value." Id. at 254.
Al though

all

parties

in

claims were the weakest,
whether

discount

the

appropriately reflect[ed]

Literary Works

agreed

that

the court saw "no basis
applied

to

Id.

for assessing
C's

recovery

at 253.

Nor could

Category

that weakness."

Category C

such a basis be established, the court concluded, "in the absence
of

independent

representation."

Id.

After

all,

the

named

plaintiffs -

who held combinations of claims - had "no incentive

to maximize

the

recovery

for

Category-C only plaintiffs,
15

whose

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 16 of 42

claims were lowest in settlement value but eclipsed all others in
quantity." Id. at 254.
In the

second relevant

case,

Payment Card,

the

settlement

agreement split plaintiffs into two classes: a Rule 23(b) (3) class
covering merchants who accepted Visa or MasterCard between 2004
and 2012

(the "(b) (3)

class")

and a Rule 23 (b) (2)

class covering

merchants who accepted Visa or MasterCard from 2012 onwards
"(b) (2)

class").

See

827

F.3d

at

229.

The

proposed

(the

plan

of

allocation awarded the (b) (3) class up to $7.25 billion in monetary
relief

and

the

(b) (2)

class

injunctive

changes to various network rules.

234.

In

the

these

same counsel

in

the

form

(b) (2)

class could not.

represented both classes.

circumstances,

of

Id. While members of the (b) (3)

class could opt out, members of the
Nonetheless,

relief

the

Second

Circuit

Id.

Id.

found

at

that

representation was inadequate because the (b) (3) class "would want
to maximize the cash compensation for past harm" and the
class

"would

want

to

maximize

restraints

on

network

(b) (2)

rules

to

prevent harm in the future." Id. at 233. "Unitary representation
of

separate

classes

that

claim

distinct,

competing,

and

conflicting relief create unacceptable incentives for counsel to
trade benefits to one class for benefits to the other in order
somehow to reach a settlement." Id. at 234.
The facts in the instant situation are dramatically different
from the facts in Literary Works and Payment Card. To begin with,
16

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 17 of 42

here, unlike in Literary Works, all plaintiffs have been placed on
an

equal

footing

because

defendants

challenge for settlement purposes.
Card,

9

8

waived

And here,

any

domesticity

unlike

in Payment

where the same lawyers sought to represent two settlement

classes with starkly distinct interests,

both the OTC claimants

and domestic claimants in this case suffered the same injury and
are receiving the same relief. Moreover,

there are no claimants

here who have not yet been injured, i.e. there is a closed universe
of potential claimants.
Additional 1 y,

here,

unlike in Literary Works,

10

the parties

provide an explanation for why the weaker claims are being treated

s In Literary Works, the proposed plan of allocation divided
plaintiffs' claims into three sub-groups, with those eligible for
statutory damages receiving greater relief than those not eligible
for statutory damages. 654 F. 3d at 246.

In Payment Card, the Second Circuit examined the settlement's
substance for evidence of prejudice and found that "the bargain
that was struck between relief and release on behalf of absent
class members [was] so unreasonable that it evidences inadequate
representation." 827 F.3d at 236. The problem was that merchants
in the (b) (2) class that accept American Express or operate in
states that prohibit surcharging would gain "no appreciable
benefit from the settlement" and merchants that began business
after July 20, 2021 would gain "no benefit at all." Id. at 238.
Thus, in exchange for nothing, "class counsel forced these
merchants to release virtually any claims they would ever have
against the defendants." Id. No such problem exists here, where,
at worst, recoveries of the domestic claimants are very slightly
diluted because the Plan of Allocation does not include a process
for differentiating between their claims and the claims of weaker
claimants (and awarding the latter a lesser amount).
9

In Literary Works, the Second Circuit said it could "discern no
reason, and authors and publishers offer none" for why the Category

10

17

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 18 of 42

equally to the stronger ones: the substantial administrative costs
of differentiating between the comparatively small number of DTC
claimants and the overwhelming majority of domestic claimants.11
See Supplemental Declaration of Niki L.

Mendoza Regarding Class

Notice,

and Claims

Date

Exclusion Requests,

("Mendoza Deel.")

Objections,

'II'II 17-19,

Exhibit G,

Gilmore in Support of Class Plaintiffs'
Dkt.

827

(affirming

that

"it

Received

to

Declaration of Emma

Reply Memorandum of Law,

would

be

costly

to

require

transaction-by-transaction determinations of whether" DTC claims
otherwise complied with Morrison and that such analysis would be
"time-consuming"

and

potentially

"delay

the

administration

of

C claimants should bear all the losses if the amount of total
claims exceeded the settlement cap. 654 F. 3d at 254. "That only
one category of claim was targeted for this penalty without
credible justification," the court reasoned, "strongly suggests a
lack of adequate representation for those class members who hold
only claims in this category." Id.
Class Plaintiffs estimate that DTC claimants make up about 2%
of the class as defined in the stipulation. See Tr. at 7. This is,
they argue, because most of the noteholders whose purchases cleared
through DTC in New York were domestic within the meaning of
Morrison for other reasons having to do with, for example, the
location of the buyers or sellers or the location of the brokers.
See Pl. Reply at 17. Although Class Plaintiffs' evidence on this
point
is not
conclusive,
objectors provide no alternative
calculations supporting their contention that the percentage is
higher than 2%. Additionally, were the Court to adopt objectors'
proposal, no one contests that the claims administrator would have
to undertake an analysis of each transaction and that such a
process would be both timely and costly, detracting from the
recovery of the Settlement Class and delaying distribution. Id. at
20.
11

18

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 19 of 42

claims

and distribution

Plaintiffs'

of

explanation is

funds") .
the

fact

Lending credence

to

Class

that not one. institutional

investor has joined Haynes in his objection and Haynes himself has
at most a couple hundred dollars at stake. See Tr.
John)

(estimating Haynes' expected recovery at $66)
Further still,

at 17: 3

(St.

.1 2

each of the three named plaintiffs

in this

case are represented by separate counsel, and two of those three
named

plaintiffs,

domestic

claims,

Hawaii
while

and

USS

North

has

Carolina,

both domestic

have
and

exclusively
non-domestic

claims. In other words, Hawaii and North Carolina are the sort of
domestic-only class representatives that Haynes and Bueno ask the
Court to appoint. Both were involved in the settlement negotiations
and neither objected to the equal treatment of the OTC claimants,
even though these institutional investors have orders-of-magnitude
more money on the line than Bueno or Haynes and have no plausible
reason to agree to disadvantageous settlement terms.
18:12-20
were

(Dubbs)

"domestic"

(explaining
per

the

that

Court's

all
prior

of Hawaii's
order,

that

See Tr. at
transactions
Hawaii

was

actively engaged in the settlement negotiations, and that Hawaii
is "satisfied with the result"). Objectors, for their part, provide
no explanation as to why Hawaii or North Carolina would agree to

Moreover, the Court notes that defendants "would not have agreed
to the Settlement Amount without the inclusion of all the
Settlement Class Members as defined." Def. Reply at 7.
12

19

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 20 of 42

a

settlement

that

unfairly

diluted

their

expected

recovery.

Indeed, counsel for these Representatives, while also representing
the class as a whole,
clients

to

clients'

ensure

interests.

have a fiduciary duty to their individual

that

the

Agreement

Accordingly,

and

Plan

the Court finds

advance
that

their

there

is

insufficient evidence of prejudice here to warrant the appointment
of

subclass

representatives.

See

Literary

Works

at

252

(in

evaluating the adequacy of representation a Court may "examine a
settlement's substance for evidence of prejudice to the interests
of a subset of plaintiffs")
(2)

Predominance

Haynes also argues that the presence of the DTC claimants in
the class definition means that the proposed class fails to meet
the predominance requirement of Rule 23(b) (3). See Haynes Obj. at
9.

The problem,

according to Haynes,

is that domesticity is an

individual question requiring class members to present evidence
that

varies

concerning

from

the

member

formation

to
of

member

(including,

contracts,

orders, and exchange of money).

placement

e.g.,
of

facts

purchase

Id. Haynes faults plaintiffs for

failing to put forth "class-wide evidence" of domesticity, which,
Haynes argues, is needed to "prevent the fact-finder from 'having
to look at every class member's transaction documents to determine
who did and who did not have a valid claim.'" Haynes Obj. at 10
(quoting In re Petrobras Sec., 862 F.3d 250, 274 (2d Cir. 2017)).
20

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 21 of 42

But the predominance requirement differs between trial and
settlement.

See AIG,

689 F. 3d at 241.

That,

as noted above,

is

because "with a settlement class, the manageability concerns posed
by numerous individual questions [] disappear." Id. After all, the
proposal is "that there be no trial." Arnchem,
Although

a

Court

must

still

consider

521 U.S.

whether

the

at 620.
class

is

"cohesive," all plaintiffs here claim injury by reason of the same
conduct,

defendants'

are common to all,

purported misrepresentations

plaintiffs'

between class members,

and all

and omissions

proof of intent would not differ
class members

have

suffered an

identical kind of injury. See Green v. Wolf Corp., 406 F.2d 291,
299-301 (2d Cir. 1968)

.13

Accordingly, while a class including DTC

claimants and domestic claimants might have created manageability
problems or other challenges at trial,

here,

in the settlement

context, such concerns are irrelevant. As domesticity is the only
issue objectors contend poses a problem in this regard, the Court
finds

that

common issues predominate and that Rule 23 (b) (3)

satisfied for purposes of settlement.

is

14

Moreover, the Second Circuit has previously held in this very
case that,
even in the trial context,
after weighing the
relationship between common and individual questions, the district
court might yet "determine that any variation across plaintiffs"
when it comes to domesticity on balance were "insufficient to
defeat predominance." In re Petrobras Sec., 862 F.3d at 274 n.27.
13

The Court approves the Plan of Allocation for the same reasons
set forth above, finding that it is fair, reasonable, and adequate.

14

21

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 22 of 42

B. Class Notice

Gielata argues that the Class Notice is deficient because it
fails

to

disclose

information:

three

categories

materially

relevant

(1) the percentage of the Settlement Fund apportioned

to American Depository Shares
a

of

("ADS");

(2)

an explanation of why

release is given to the underwriter defendants despite their

failure

to

contribute

to

the

Settlement

Amount;

and

(3)

the

compensation due to the claims administrator. See Gielata Obj. at
9-10.

Gielata

seeks

supplemental

notice

and

objects

compensation of the claims administrator to the extent

to
that

the
it

exceeds 1% of the Settlement Fund ($30 million). Id.
As regards the percentage of the Settlement Fund apportioned
to ADS, the Plan of Allocation discloses how that percentage will
be calculated and Gielata cites no case law for the proposition
that such notice is deficient where it does not

include break-

downs of expected payouts.
As regards the Underwriter Defendants' contribution (or lack
thereof) to the Settlement Fund, there is no requirement that the
Notice disclose the rationale behind the release. See O'Brien v.
Nat'l

Prop.

Analysts Partners,

739 F.

Supp.

896,

902

(S.D.N.Y.

1990). Moreover, it is permissible for an issuer to provide to the
underwriters that it indemnifies a release in a settlement without
requiring a contribution from those underwriters. And, as the Court
knows

from

its

familiarity

with
22

the

underlying

case,

the

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 23 of 42

plaintiffs'

case against the underwriters was materially weaker

than its case against the Petrobras Defendants and PwC Brazil.
As regards the claims administrator, that administrator, the
Garden

City

direction)

Group,

disclosed

that it will

at

the

hearing

(at

the

Court's

in no event be paid 1% or more of the

settlement fund and that its compensation is capped at $19 million.
See Tr. at 22. Accordingly, the Court finds that the disclosure in
this case was sufficient (and that the compensation of the claims
administrator is reasonable)
C.

~

15

Pres Award

Haynes and Bueno object to the cy pres recipient designated
in the proposed settlement agreement. See Haynes Obj. at 8-9; Bueno
Obj. at 4. As mentioned at the hearing,

see Tr.,

the Court will

permit further briefing on this issue, as appropriate, if and when
the question becomes ripe for consideration, and the Court retains
jurisdiction for that purpose.
D. Settlement Amount

Giulio Pieter Formenti, on behalf of Renewable Carbon Corp.
("RCC"),

objects to the size of the settlement,

arguing that a

"fair" settlement for investors would be "the full value of the
loss realized," or $12.40 per share. See Formenti Obj. at 2. RCC,

Bueno also argues that the Notice was deficient because, inter
alia, the Plan of Allocation was not provided on the notice website
and Class Plaintiffs have concealed the damages estimate provided
by their expert. These arguments are without factual basis.
15

23

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 24 of 42

however,

lacks standing to make this objection.

RCC sold all of

its Petrobras Securities on July 31, 2013, more than a year before
the first alleged corrective disclosure in this case on October
16, 2014. See id. at 8 (showing that RCC sold its 90,200 shares of
Petrobras on July 31,
recovery

in

this

2013).

case

was

Moreover,

as previously noted,

any

far

a

the

from

certainty,

given

substantial defenses that were raised.
Bueno also

objects

to

the

settlement

amount

as part

of

a

"kitchen-sink" brief that purports to identify inequities relating
to at least a dozen aspects of the proposed settlement. See Bueno
Obj. at 2-12. But as regards the settlement amount,

Bueno argues

only that Class Plaintiffs overstate the risks of proceeding to
trial, see id. at 6, and that certain market analysts had expected
settlement figures of between $5 billion and $10 billion, - - - see id.
at

2 n.1.

consider

Bueno does
the

fact

not

that

weigh

the

the other Grinnell

settlement

amount

factors,

represents

a

or
65%

premium over the settlements reached by institutional plaintiffs
in the previously-settled indi victual actions.

Indeed,

the small

number of objectors, their minor stakes in the settlement, and the
size of the premium strongly suggest that the settlement amount is
fair, adequate, and reasonable.
E. Other Objections

Bueno also objects to the Plan of Allocation as an "improper
claimant fund-sharing scheme," id. at 9-11, that is "inappropriate
24

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 25 of 42

to the extent that silent class members receive nothing and class
members who submit claims do not receive anything approaching their
actual damages," id. at 10. But the only relevant authority cited
by Bueno for this proposition is entirely inapposite. See Eisen v.
Carlisle & Jacquelin, 479 F.2d 1005, 1018 (2d Cir. 1973), vacated,
417 U.S. 156 (1974)
to

manageability

(finding "fluid recovery" an "illegal" solution
problems) .

16

Among

other

things,

the

proposed

settlement here requires proof of claim and the Plan of Allocation
sets forth estimated distributions per share and per note before
fees and expenses.
Martinez

objects

to

the

settlement's

release

of

unknown

claims, its failure to take into account "damages due to emotional
stress," its failure to stipulate or disclose the "value" of the
net settlement fund, and the payment of Class Counsel prior to the
Court's determining what amount "was actually paid in cash to the
class." See Martinez Obj. at 1-3.
Martinez cites no authority for his arguments.
Court

is

of

the

view

that

the

notice

was

Settlement is highly beneficial to Martinez.

Indeed,

sufficient

and

the
the

If Martinez remains

a member of the class, Martinez will enjoy a recovery 65% larger
per share than that enjoyed by numerous institutional plaintiffs

In Eisen, "the cost of obtaining proofs of claim by individual
members of the class and processing such claims was such as to
make it clear that the amounts payable to individual claimants
would be so low as to be negligible." 479 F.2d at 1017.
16

25

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 26 of 42

who spent large sums of money affirmatively litigating their same
claims against defendants. Moreover, it is worth noting that, even
taking the allegations in plaintiffs'

complaints as fact,

only a

portion of the losses suffered by Petrobras shareholders in recent
years are attributable to defendants'

fraud.

Losses incurred due

to economic and political factors cannot be recovered through class
action litigation. Finally, Martinez's objection to the timing of
payment of counsel is discussed below.

II.

Plaintiffs' Motions for Attorneys' Fees and Costs

Bueno objects to the compensatory award requested by the Class
Representatives,

and Bueno,

the Bishops,

Martinez,

Gielata,

and

Haynes object to the fee award requested by Class Counsel. Wolf
Popper,

Almeida,

objection,

for

KSF,
their

and BLBG also move,
fees

and

costs.

without opposition or

The

Court

considers

each

request in turn.
A. Class Representatives

Class

Representatives

seek,

pursuant

Securities Litigation Reform Act of 19 95
$400,000

for

expenses

incurred

to

( "PSLRA") ,

directly

Private

the

an award of

relating

to

their

representation of the class. See Memorandum of Law in Support of
Class

Counsel's

Motion

for

an

Award

Reimbursement of Litigation Expenses

of

Attorneys'

Fees

and

("Fee Mem.") at 1, Dkt. 787.

Bueno argues that there is no way for the Court to calculate
the reasonableness of the amount as plaintiffs have not provided

26

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 27 of 42

a break-down.

See Bueno Obj.

at 12. But each Representative has

provided sworn statements detailing the work performed, the people
who performed it, and the time expended. See Dkts. 789-12-14. The
Representatives also calculated estimated hourly rates.

Id.

The

work performed by named plaintiffs was beneficial to the class and
included

reviewing

defendants'

drafts

interrogatories

responsive documents,
settlement

process,

of

the

and

complaints,

document

requests,

providing oversight
authorizing

the

responding

of

to

producing

the mediation and

settlements,

and

reviewing

drafts of the settlements before they were filed with the Court.
See Corrected Deel. of Jeremy A.

Lieberman

~~

449-53,

Dkt.

789.

Lead plaintiff USS's representatives, for example, attended every
substantive hearing and mediation session, and reviewed the vast
majority of

significant

filings.

See Fee Mem.

at

25.

USS also

6onducted at least 70 telephonic and in-person meetings with Class
Counsel. Id.
When

selecting

explicitly

sought

out

the

Class

Representatives,

representatives

prepared

to

the

Court

be

highly

engaged in the litigation. From its own review, the Court is more
than

satisfied

Accordingly,

that

this

expectation

has

been

fully

met.

the Court finds that the requested awards are fair

and reasonable.
B. Class Counsel

27

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 28 of 42

Class

Counsel

seeks

a

fee

award

of

$284.4

million

and

reimbursement of $14,515,235.24 in litigation expenses.
Haynes,

Gielata,

Haynes argues
overstated,

(1)

Bueno,

the

Bishops,

and Martinez

object.

that Class Counsel's lodestar is substantially

(2) that a multiplier of 1.78 stands at the outer limit

of what the Court should allow, and that, accordingly,

(3)

class

counsel's fee request should be reduced to $90.3 million or 3% of
the $3 billion fund. See Haynes Obj. at 12-25. Gielata argues that
(1)

no lodestar multiplier is warranted in this case,

Counsel's lodestar is vastly inflated,

(2)

Class

(3) public policy disfavors

a $285 million fee award, and (4) a fee award of 2% or $60 million
would be appropriate. See Gielata Obj. at 10-20. Bueno argues that
Class Counsel's fee request is excessive.

See Bueno Obj.

at 13.

The Bishops argue that Class Counsel's fee award should be cut in
half.

See Bishop Obj.

at 1. And Martinez argues that the Court

should not award attorney's fees as a percentage of the Settlement
Amount. See Martinez Obj. at 2.1 7
Under controlling law, "a litigant or a lawyer who recovers
a common fund for the benefit of persons other than himself or his

As noted, defendants, at the Court's request, submitted a letter
on May 7, 2018 assessing the reasonableness of Class Counsel's fee
application, and flagging for the Court's consideration, inter
alia, the rates charged by more than 100 staff attorneys and
project attorneys, the rates charged for translation work, and
specific instances where counsel's time sheets do not support the
amount of time billed. See Def. Ltr. at 2-3.
17

28

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 29 of 42

client is entitled to a reasonable attorney's fee from the fund as
a whole." Boeing Co. v. Van Gernert, 444 U.S. 472, 478 (1980). "The
rationale for the doctrine is an equitable one: it prevents unjust
enrichment

of

those

benefitting

from

contributing to its cost." Goldberger v.

a

lawsuit

without

Integrated Res.,

Inc.,

209 F.3d 43, 47 (2d Cir. 2000). Fee awards also "serve to encourage
skilled counsel to represent those who seek redress for damages
inflicted

on

discourage

entire

classes

future misconduct

Telecom Holdings,

Ltd.

Sec.

of
of

persons,"
a

and

therefore

similar nature."

Litig.,

No.

02

Civ.

In

3400,

re

"to
FLAG

2010 WL

4 5 3 7 5 5 0, at * 2 3 ( S. D. N. Y. Nov. 8, 2010) .
At the same time, counsel are not entitled to reap a windfall.
See Goldberger, 209 F.3d at 49; Grinnell, 495 F.2d at 469. To that
end,

the Court must consider the reasonableness of the fee award

in light of (1) the time and labor expended;
complexities of the litigation;

(3)

the risks of the litigation;

(4) the quality of counsel's representation;
in relation to the settlement; and

(2) the magnitude and

(6)

(5) the requested fee

public policy.

Id.

at 50

(citing Union Carbide, 724 F. Supp. at 163). In considering these
factors,

Class Counsel's "lodestar" -

i.e.,

what its work would

have cost if billed at ordinary hourly rates - "remains useful as
a baseline." Id.
(1)

The Lodestar

29

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 30 of 42

Class

Counsel

states

a

lodestar

of

$158,923,426.50.

This

amount comprises over $110 million "billed" by Pomerantz contract
and staff attorneys and over $27 million "billed" by Pomerantz
partners

and

associates.

18

It

also

includes

over

$10

million

"billed" by Labaton lawyers and $1.8 million "billed" by Motley
Rice lawyers.
Rather

than

go

appointing

a

Special

Defendants

to

review

identify

issues

to

the

added,

Master,
the

meriting

the

time

Transcript dated February 23,

Court

sheets

the

considerable

of

Court's

asked

the

Class
close

2018 at 34-35,

expense

Petrobras

Counsel

and

attention.

Dkt.

of

to
See

773. Although

somewhat unusual, the Court took this step because of defendants'
intimate knowledge of various aspects of the case, and the Court's
confidence was rewarded by the highly professional way in which
defendants' counsel undertook their Court-directed task.
Among

other

things,

defendants

identified

a

series

of

specific instances where counsel's time sheets did not support the
amount

of

time

billed.

For

example,

defendants'

highlighted

entries for one project attorney who billed 23 consecutive billable

18

Nonetheless, it is well to keep in mind that cases like this one
are always handled on a contingent fee basis, so that plaintiffs'
counsel never do, in fact, bill the class on an hourly basis.
Plaintiffs' counsel's real profit is the difference between what
they pay their attorneys and staff on a salaried basis and what
they receive in their fee award, and to this extent the "lodestar"
is a somewhat artificial measure, though still useful as a check.
30

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 31 of 42

days for reading news articles on Petrobras exactly 8. 0 or
hours.

Id.

9. 0 hours per day -

at 7.

on most days for

totaling approximately 185

In another instance,

a project attorney spent

seven consecutive days reviewing the Consolidated Third Amended
Class Action Complaint for at least 48 hours of total time after
the Complaint had been filed.

Id.

Yet another project attorney

billed eight hours per day at $450 per hour listing only "office
closed" as the work description. Id.
While

Class

Plaintiffs

did

not

necessarily

concede

the

dubiousness of these and other charges questioned by defendants,
they did voluntarily remove a number of them (such as the project
attorney time billed while the office was "closed"), reducing their
total

lodestar

$158,923,426.50.
Plaintiffs

from
See

$159,496,169.50
Pl.

strenuously

Ltr.

at

defended

29.
as

to
At

the
the

justified

above-mentioned
same
and

time,

Class

appropriate

certain other charges identified by defendants. See id. In the end
the Court, having undertaken its own personal review of the time
sheets, concludes that the more global reductions described below,
together

with

plaintiffs'

the

counsel,

aforementioned

reductions

sufficiently account

for

agreed

to

by

any sporadic and

idiosyncratic overcharging that may have occurred.
Gielata argues that Pomerantz's billing rates for staff and
contract attorneys are excessive and that such rates should be
capped at a maximum of $200 per hour. See Gielata Obj. at 18-20.
31

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 32 of 42

Gielata further argues that the Court should reduce the number of
reimbursable hours billed by these attorneys by 20% because their
work focused on document review. Id. at 19.
Haynes argues that the $27,857,241.50 charged by 27 foreign
project associates should be billed at-cost as an expense,
Deel.

of

attorneys

Anna

St.

John

':IT

admitted

only

in

5,

Dkt.

Brazil

800
and

(listing
their

see

the

contract

amounts

billed).

According to Haynes, an attorney must be at least capable of being
admitted pro hac vice in this Court in order to recover fees for
legal services. See Haynes Obj. at 13-14 (citing Spanos v. Skouras,
364 F.2d 161,

168

(2d Cir.

1966)

(en bane)

and In re One Infant

Child, No. 12 Civ. 7797, 2014 WL 704037, at *5 (S.D.N.Y. Feb. 20,
2014), rev'd sub nom. Souratgar v. Lee Jen Fair, 818 F.3d 72
Cir. 2016)

(2d

(denying reimbursement for legal services by a foreign

attorney not admitted to practice in the United States)). Haynes
further argues that

the

rates

for contract attorneys

should be

reduced to $75 per hour and that the Court should sanction Class
Counsel for overinflating their lodestar by applying a further 20%
reduction. Id. at 18.
In evaluating these and other objections, the Court has spent
a

considerable amount of time personally reviewing the billing

documentation submitted by plaintiffs'
objections

and

responses

pertaining

counsel,
thereto.

as well
The

as

the

various

reductions made below reflect not only that review, but also the
32

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 33 of 42

Court's

familiarity

from

various

other

cases

with

appropriate

billing rates and time allocations.
As

regards

the time billed by 27

foreign attorneys,

Class

Counsel do not address the case law cited by Haynes or identify
cases supporting their position. Moreover, it would be improper to
charge the class U.S.-attorney rates for this work. Accordingly,
the full amount billed by these individuals must be deducted from
Class

Counsel's

lodestar

(approximately $27, 569, 829)

.19

However,

Class Counsel may add to their reimbursement request the actual
costs they incurred compensating these attorneys.
As regards the amounts billed by staff and contract attorneys
in

this

action

(approximately

$6,375,370 at Labaton,

$89,410,520.50

at

Pomerantz,

and $1,180,333 at Motley Rice),

see Def.

Ltr. at 10, 20 the Court agrees with objectors that a reduction is
appropriate to account for the considerable time spent by these
attorneys on low level document review. However,

given the legal

19 This
figure takes into account the fact that Pomerantz, in
already subtracted around
adjusting its original
lodestar,
$287,412.50 from the time billed by these attorneys. See Deel. of
Anna St. John ~ 5, Dkt. 800.

Whereas the Petrobras Defendants calculated a staff and project
attorney lodestar for Motley Rice of $1,201,798, see Dkt. 793 at
10, the lower figure cited above takes into account the fact that
Motley Rice withdrew certain time entries, reducing this amount by
at least $21,465. Similarly, the figure for Pomerantz represents
the firm's revised lodestar, $116,980,349.50, see Pl. Ltr. at Ex.
A, less the amount billed by individuals not admitted to practice
law in the United States, $27,569,829.
20

33

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 34 of 42

experience,

language skills, and status of these attorneys,21 the

Court disagrees with Gielata and Haynes that their rates should be
capped at or below $200. A more appropriate reduction is the one
suggested by Gielata of 20%.
As

regards

the

translating documents,
While

Class

certain

Counsel

translation

amounts

billed

by

these

attorneys

for

however, a further reduction is required.
appropriately
work

in

this

used

attorneys

case,

such

to

work

perform
is

not

appropriately billed at rates of between $325 and $625 per hour.
Accordingly,

these

amounts

(approximately

Pomerantz, $4,162,555 at Labaton,

$10

million

at

$752,783 at Motley Rice)22 must

be reduced by a further 50%.
Applying all the foregoing adjustments, and "rounding up" the
figures

in

counsel's

favor,

the

Court

calculates

an

adjusted

21 For example, some of these attorneys received health insurance
and an opportunity to participate in the firm's 401(k) program.
22 $13,174,549 of Pomerantz's original lodestar is attributable
solely to translation work performed by staff and project
attorneys. See Def. Ltr. at 6. This figure, however, is both overand under-inclusive. It is over-inclusive because it counts the
time "billed" by non-U.S. attorneys, which the Court determined
should be subtracted in its entirety. It is under-inclusive because
it does not count the sdbstantial amount of time "block billed" by
Pomerantz lawyers for multiple tasks, including translation work.
Indeed, the total time attributable in whole or in part to
translation is more than $35 million and, subtracting non-U.S.
attorney time, around $25 million. Nonetheless, this figure is
still considerably over-inclusive. Accordingly, the Court adopts
$10 million as a reasonable estimate of the amount of time
Pomerantz billed (in its remaining lodestar) for translation work.
34

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 35 of 42

lodestar

of

Pomerantz,

$104.8

million,

consisting

$7. 5 million at Laba ton,

of

$96.0

million

at

and $1. 3 million at Motley

Rice.
(2)

The Multiplier

"[T]here

is

a

strong

presumption

that

the

lodestar

is

sufficient," Perdue v. Kenny A., 559 U.S. 542, 546 (2010), without
an enhancement multiplier. The fee applicant bears "the burden of
proving that an enhancement is necessary." Id. at 553.
Gielata contends that no multiplier is warranted in this case
because the risk of non-recovery was practically nonexistent, and
Class Counsel's representation was unexceptional. See Gielata Obj.
11-16. Haynes concedes that a multiplier is warranted but argues
that no more than the requested 1.78 multiplier is appropriate.
See

Haynes

Obj.

at

19-23.

Anticipating

a

possible

lodestar

reduction, Class Counsel argues that even at "$104,461,062
requested

multiplier

acceptable

would

multipliers

in

be

well

2. 7,

this

within

Circuit."

[the]

range

Ltr.

Pl.

the

at

of
29.

Accordingly, Class counsel contend, the Court should honor the ex
ante fee agreement executed by Class Counsel with USS and award
$284.5 million. See Fee Mem. at 17-21.
As

an initial matter,

the Court

finds

that

there was,

as

previously mentioned, sufficient risk at both the motion to dismiss
phase

and the motion

multiplier.

for

Additionally,

summary
the

Court
35

judgment
finds

phase
that

to

warrant

a

Class Counsel's

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 36 of 42

performance was in many respects exceptional, with the result that,
as noted, the class is poised to enjoy a substantially larger per
share recovery than the

recovery enjoyed by numerous

large and

sophisticated plaintiffs who separately settled their claims.
also

bears

allegations

mentioning,
that

were

however,

that

previously

investigated by the authorities

this

widely

in Brazil,

case

involved

reported

and

It

fraud

heavily

so that much of the

work that might otherwise have been required of plaintiffs' counsel
had already been done, and done in a way that enhanced plaintiffs'
bargaining position. As for the fact that plaintiffs negotiated,
at the outset of the case,

a particular fee arrangement with a

particular client, this is at best just one factor to be weighed
in assessing, after settlement has been reached,

the full set of

intervening

provide

events

that

have

occurred and

that

a

much

better indication of what was the value of the attorneys' work to
the class as a whole than any before-the-fact private agreement
reached with an individual plaintiff.
Indeed, one purpose of the lodestar check is to ensure that
even an arms-length fee agreement reached between class counsel
and class representatives does not result in a harvest of fees at
the expense of the class. As Class Counsel's adjusted lodestar is
$104.8 million (and Class Counsel likely spent far,
this

compensating

its

attorneys),

the

Court

far less than

believes

that

the

original 1.78 multiplier requested by Class Counsel is sufficient
36

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 37 of 42

to adequately account
achieved.

Additional

for the

risks undertaken and the results

compensation

above

this

amount

would

represent a windfall to Class Counsel, who were highly incentivized
to heavily litigate this huge case regardless of the expected fee
award.
It is important to also remember that we are dealing here,
not

just with percentages,

billable rates,

and multipliers,

but

with very large amounts of money in absolute terms that plaintiffs'
counsel

will be

receiving under any analysis.

Accordingly,

the

Court grants Class Counsel's motion in part and awards fees in the
amount of $186.5 million - consisting of $170,880,000 to Pomerantz,
$13,350,000 to Labaton, and $2,314,000 to Motley Rice - or roughly
two-thirds of what was sought. The Court also awards costs in the
amount of $14,515,235.24, plus whatever amount Class Counsel paid
to employ the 27 foreign contract attorneys mentioned above.
As regards the fee award, fifty percent is payable to counsel
immediately upon entry of final judgment. The other fifty percent
shall

be

paid

only

after

the

distribution

is

completed.

This

schedule, which the Court has routinely employed in other cases,
reflects that, on the one hand, counsel have spent a great deal of
time

and money

continue

to

to

litigate

shoulder

the

this

costs

of

case

and

funding

should
this

not

have

1 i tigation

to
any

longer than necessary, but that, on the other hand, counsel should
not be paid in full before their clients have received any of their
37

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 38 of 42

recovery,
counsel

nor would it be helpful to eliminate an incentive for

to monitor

the

distribution agent

and ensure

that

the

settlement funds are distributed expeditiously. Dispensing half of
counsel's

fee

award

now

and

half

later

achieves

both

these

purposes. 23
C. Wolf Popper and Almeida

Wolf Popper and Almeida, counsel for the plaintiffs in Kaltman
v. Petroleo Brasileiro S.A., No. 14 Civ. 9662

(S.D.N.Y.), seek an

award of $307,629 in attorneys' fees and reimbursement of $1,219.66
in expenses. See Pl. Reply at 26-27. Class Counsel agrees to pay
these

fees

out of its

reimbursement

request

fee

award.

(which

publishing the PSLRA notice,

Id.

includes

As

regards Wolf

costs

for

and online research)

Popper's

filing

fees,

Class Counsel

states that it is reasonable and the Petrobras Defendants state
that counsel made a

substantial contribution to

outcome for the Settlement Class. Accordingly,

the settlement

the Court grants

Wolf Popper's and Almeida's motions in full.
D. KSF

KSF seeks $589,915.50 in attorneys' fees and reimbursement of
$2, 650 in expenses.

Id.

at 27.

Class Counsel agrees to pay the

requested fees from its fee award. As regards KSF's expense request

As noted earlier, Martinez objects to the immediate payment of
counsel's legal fees. While it is not clear what timing objector
has in mind or exactly what his rationales are, this resolution
more than addresses any legitimate concerns he might have.
23

38

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 39 of 42

(which includes primarily transcript and court

reporter costs),

Class Counsel represents that KSF's work was performed with proper
diligence

and

substantial

the

Petrobras

contribution

Defendants

to

the

state

class.

that

Accordingly,

KSF made
the

a

Court

grants KSF's motion in full.
E. BLBG

BLBG seeks $2,114,085 in attorneys' fees and reimbursement of
expenses

in

the

amount

of

$1,146,873

for

work

performed

and

expenses incurred in relation to the prosecution of its claims on
behalf of plaintiffs in four related cases: Hartford Mutual Funds,
Inc.

v.

Petroleo Brasileiro S.A.,

Massachusetts Mutual
S.A.,

No.

15

Civ.

Life
9243

Petroleo Brasileiro S.A.,

No.

15 Civ.

Insurance Co.
(S.D.N.Y.);
No.

16 Civ.

v.

Pacific
2013

9182

(S.D.N.Y.);

Petroleo Brasileiro
Funds,

et.

(S.D.N.Y.);

al

v.

and The

Prudential Insurance Co. v. Petroleo Brasileiro S.A., No. 16 Civ.
7192

(S.D.N.Y.).

See Application of Bernstein Litowitz Berger

Grossmann LLP for Reimbursement of Attorneys'

&

Fee and Litigation

Expenses ("BLBG Mem."), Dkt. 785.
BLBG does not seek an award equal to its lodestar but rather
wishes that its adjusted lodestar be recognized by the Court and
allocated at Class Counsel's discretion. See BLBG Mem. at 5. Class
Counsel offers, with this caveat,
own fee award. See Pl. Reply at 29.

39

to pay BLBG's fees out of its

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 40 of 42

As

regards

"observe[s]

that

BLBG's

reimbursement

$256,867.35

of

the

request,
requested

Class

Counsel

expenses

[are]

attributable to the retention of the Direct Action Plaintiffs'
loss causation/damages expert," who submitted a report that, Class
Counsel asserts, was not beneficial to the Settlement Class. See
id.

Indeed,

Class Counsel argues that the report was,

in fact,

detrimental to the Class and that reimbursement of this expense
should be denied. See id. at 30.
The balance of BLBG's expense request consists of $616,745.70
for external ESI vendors,
$21,371.91

for

travel,

$18,810.09

for

legal

reporting,

transcripts,

$192, 4 00
working

research

for a
meals,

services,

court

financial

fees,

and

and

consultant,

transportation,

$17,842.96
service

for

of

court

process,

$17,333.34 for mediation fees, and $5,502.38 for telephone costs,
postage, and delivery costs. See Dkt. 786-28.
While

BLBG

persuasively

argues

that

many

of

its

efforts

substantially aided the class and that the inclusion of the four
above-mentioned plaintiffs in the settlement was a material term
to the Settlement Agreement, a contention that neither defendants
nor objectors dispute,
that

its

advanced

disbursements
the

interests

see BLBG Mem.
for
of

at 18,

mediation
the

class.

BLBG fails to show

costs
24

When

and

expert

these

costs

plaintiffs

BLBG does not even seek to explain why or how the mediation
benefited the class. See BLBG Mem. at 20.
24

40

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 41 of 42

decided to pursue individual actions rather than join the class,
they accepted the risk that expense incurred by their counsel for
efforts that did not

redound to the benefit of the class

(for

whatever reason) would not be reimbursed by the class in the event
that

they

later

Accordingly,

chose

to

opt-in

the Court awards

fees

to

a

class-wide

settlement.

to BLBG in an amount

to be

determined by Class Counsel to be paid out of Class Counsel's fee
award, but costs to BLBG in the amount of only $872,673.04 to be
paid out of the Settlement Fund.
III. Conclusion

For the reasons stated above, and in the Court's preliminary
approval of the settlement,

the Court finds that the Settlement

Agreement and Plan of Allocation are fair,

reasonable, adequate,

and otherwise in compliance with all applicable legal standards.
Accordingly, the Court grants the motion of Class Plaintiffs for
certification of the Settlement Class and for final approval of
the Settlement Agreement and Plan of Allocation.
The Court also grants in part Class Counsel's motion for fees
and costs,

awarding in fees

Carolina,

$50,000

$13,350,000

to

to

Labaton,

$300, 000

Hawaii,
and

to USS,

$50, 000

$170,880,000

$2,314,000

to

to

Motley

to North
Pomerantz,
Rice,

and

$14,515,235.24 plus the costs expended by Pomerantz on 27 foreign
contract attorneys to Class Counsel in costs.

41

Case 1:14-cv-09662-JSR Document 834 Filed 06/25/18 Page 42 of 42

The Court also grants in part the motion of BLBG,

awarding

BLBG fees in an amount to be determined by Class Counsel to be
paid from Class Counsel's fee award and $872,673.04 in costs to be
paid from the Settlement Fund; grants in full Wolf Popper's motion,
awarding

Wolf

Popper

$107, 629

in

fees

to

be

paid

from

Class

Counsel's fee award and $1,219.66 in costs to be paid from the
Settlement Fund; grants in full Almeida's motion, awarding Almeida
$200,000 in fees to be paid from Class Counsel's fee award; and
grants in full KSF's motion, awarding KSF $589,915.50 in fees to
be paid from Class Counsel's fee award and $2,650.59 in costs to
be paid from the Settlement Fund. As regards the fee awards,
noted above,
entry

of

as

counsel are to be paid 50% of the amounts due upon

final

judgment

and

the

remaining

amounts

after

the

settlement funds have been fully distributed to the class.
The Clerk is instructed to enter Final Judgment in accordance
with the preceding paragraph,

to close docket entry numbers 777,

781, 784, and 791, and to close the case. The Court will, however,
retain

jurisdiction

over

any

further

disputes

arising

in

connection with the implementation of the Settlement or the payment
of fees and costs.
SO ORDERED.
Dated:

J?)!!.ftt;

New York, NY
June~' 2018

42

U. S. D. J.