Oklahoma Firefighters Pension and Retirement System v. Neustar, Inc. et al
Filing
69
MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 12/08/15. (pmil, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
IN RE NEUSTAR, INC. SECURITIES
LITIGATION
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M E M O R A N D U M
1:14cv885 (JCC/TRJ)
O P I N I O N
By order and memorandum opinion dated September 22,
2015, and September 23, 2015, respectively, this Court took the
following actions: (1) certified a settlement class, appointed
Class Representative, Class Counsel, and Claims Administrator;
(2) preliminarily approved the proposed Settlement Agreement;
and (3) approved the form and manner of notice.
Order [Dkt. 53]; Mem. Op. [Dkt. 54].)
(Sept. 22, 2015
On December 3, 2015, the
present matter came before the Court on Lead Plaintiff’s
Unopposed Motion for Final Approval of Proposed Class Action
Settlement and Plan of Allocation [Dkt. 56], and Motion for
Attorneys’ Fees and Expenses [Dkt. 58].
The Court approved
those motions by written orders on December 3, 2015.
This
memorandum opinion elaborates on the basis for those rulings.
I.
Background
The facts of this case are set out at length in this
1
Court’s two prior memorandum opinions.
See In re Neustar Sec.
Litig., 83 F. Supp. 3d 671 (E.D. Va. 2015) (motion to dismiss);
In re Neustar Inc. Sec. Litig., No. 1:14cv885 (JCC/TRJ), 2015 WL
5674798 (E.D. Va. Sept. 23, 2015) (preliminary settlement
approval).
The facts are presumed known and discussed only to
the extent necessary to aid the present motions.
This case involved allegations that Defendants
NeuStar, Inc. (“NeuStar”) and several NeuStar executives
(collectively “Defendants”) made fraudulent statements or
omissions in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a),
and Securities and Exchange Commission (“SEC”) Rule 10b-5, 17
C.F.R. § 240.10b-5.
The statements or omissions related to
NeuStar’s competitiveness in the bidding process for a lucrative
Federal Communications Commission (“FCC”) contract that NeuStar
previously administered.
Despite indications that NeuStar might
lose the bidding, Defendants allegedly made public statements
between April 18, 2013, and June 6, 2014, reassuring investors
of the competitiveness of NeuStar’s bid.
This legal proceeding
began shortly after the FCC inadvertently disclosed that NeuStar
would not win the contract.
In July 2014, Lead Plaintiff’s predecessor filed this
federal securities class action on behalf of those who purchased
2
NeuStar’s publicly traded common stock between April 19, 2013,
and June 6, 2014.
The Court appointed the Indiana Public
Retirement Systems as Lead Plaintiff and approved selected
counsel.
Thereafter, the Court granted Defendants’ motion to
dismiss, finding that Defendants’ statements were not actionable
under the securities law, there was no loss causation, and
Defendants did not act with the requisite scienter.
Neustar, 83 F. Supp. 3d at 686.
In re
Lead Plaintiff timely noticed
an appeal to the Fourth Circuit, but the parties reached an
agreement in settlement before briefing their appellate
arguments.
The Fourth Circuit remanded the case to this Court
to consider the proposed Settlement.
Lead Plaintiff then motioned for the unopposed
preliminary approval of the proposed Settlement.
The Court
granted that motion after conducting a preliminary fairness
hearing on September 17, 2015.
Specifically, the Court
certified a settlement-only class pursuant to Federal Rule of
Civil Procedure 23(a) and 23(b)(3); appointed Lead Plaintiff as
Class Representative, Lead Counsel as Class Counsel, and A.B.
Data as Claims Administrator; preliminarily approved the terms
of Settlement according to Rule 23(e); and approved the form and
manner of notice as required by the U.S. Constitution, Rule
23(c)(2), and the Private Securities Litigation Reform Act
3
(“PSLRA”), 15 U.S.C. § 78u-4(a)(7).
The Court explained its
order in a detailed memorandum opinion.
In re Neustar, No.
1:14cv885, 2015 WL 5674798 (E.D. Va. Sept. 23, 2015).
Pursuant to that order, Claim Administrator caused
over 44,000 notice packets to be sent to potential class
members.
(Walter Reply Decl. [Dkt. 64-1] ¶ 6.)
Claim
Administrator also posted the court-approved notice on a website
dedicated to this settlement, published notice in Investor’s
Business Daily, and broadcast the notice via PR Newswire.
(Walter Decl. [Dkt. 60-2].)
By the November 12, 2015 deadline
for receiving objections, Claim Administrator received no
requests for exclusion from the class and no substantial
objection to the settlement.1
Plaintiff now moves for final approval of the terms of
settlement, approval of the plan of allocation of the net
settlement fund, and approval of attorneys’ fees and expenses.
The Court held a final settlement hearing to consider these
motions on December 3, 2015.
1
For the foregoing reasons, the
Claims Administrator received one hand-written objection
consisting of thirty-seven words of generalized objection to the
per-share recovery from settlement, the societal value of class
action lawsuits, and the significance of this settlement in
particular. (See Objection [Dkt. 64-2].) As discussed later in
this memorandum opinion, this informal and insubstantial
objection does not affect the Court’s analysis of the
settlement.
4
Court granted the motions.
II.
Analysis
As the Court’s prior memorandum opinion and order
certified a settlement class,2 this memorandum opinion addresses
the following three remaining issues: (1) the proposed
Settlement between the parties; (2) the proposed allocation
thereof; and (3) the award of attorneys’ fees and cost to Class
Counsel.
The Court will address each issue in turn.
A.
Terms of Proposed Settlement
Before parties may settle a class action, a court must
2
The Class consists of the following:
All persons who purchased or otherwise
acquired the publicly traded common stock of
Neustar, Inc. between April 19, 2013 and
June 6, 2014, inclusive, and who were
damaged
thereby.
Excluded
from
the
Settlement Class are: (i) Defendants; (ii)
present and former executive officers of
Neustar; (iii) members of Neustar’s Board of
Directors; (iv) Immediate Family Members of
any of the foregoing individuals; (v) the
legal representatives, heirs, successors or
assigns of any of the foregoing individuals
and entitles; (vi) any entity in which
Defendants
have
or
had
a
controlling
interest;
and
(vii)
any
affiliate
of
Neustar.
Also excluded from the Settlement
Class will be any Person who timely and
validly seeks exclusion from the Settlement
Class and is so excluded by the Court.
(Sept. 22, 2015 Order ¶ 2.) No persons have timely or validly
sought exclusion from this Class.
5
approve the settlement.
Fed. R. Civ. P. 23(e).
Final
settlement requires a hearing to determine whether the agreement
is “fair, reasonable, and adequate.”
Fed. R. Civ. P. 23(e)(2).
This standard includes an assessment of both the procedural
fairness of the settlement negotiations and the substantive
adequacy of the agreement itself.
See In re Am. Capital
S’holder Derivative Litig., No. 11-2424 PJM, 2013 WL 3322294, at
*3 (D. Md. June 28, 2013) (identifying procedural and
substantive prongs of settlement analysis).
The procedural
fairness inquiry protects against “the danger of counsel . . .
compromising a suit for an inadequate amount for the sake of
insuring a fee.”
Id.
The substantive adequacy inquiry, by
contrast, “weigh[s] the likelihood of the plaintiff’s recovery
on the merits against the amount offered in the settlement.”
Id.
(internal quotations omitted).
Together, these
requirements serve to protect “class members whose rights may
not have been given adequate consideration during the settlement
negotiations.”
In re Jiffy Lube Sec. Litig., 927 F.2d 155, 158
(4th Cir. 1991).
A court may apply these same principles in a
preliminary fairness hearing, as the Court did in this case.
When a district court preliminary approves a settlement after a
hearing, the proposed settlement enjoys a presumption of
6
fairness.
See Berkley v. United States, 59 Fed. Cl. 675, 681
(Fed. Cl. 2004) (“Settlement proposals enjoy a presumption of
fairness afforded by a court’s preliminary fairness
determination.”); In re Gen. Motors Corp. Pick-Up Truck Fuel
Tank Products Liab. Litig., 55 F.3d 768, 785 (3d Cir. 1995)
(“This preliminary determination establishes an initial
presumption of fairness . . . .”); Martin v. Cargill, Inc., 295
F.R.D. 380, 383 (D. Minn. 2013) (accord); In re Tableware
Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007)
(accord).
i)
Fairness
The four Jiffy Lube factors guide the Court’s analysis
of whether the settlement was fairly reached through good-faith
bargaining at arm’s length.
F.2d 155 (4th Cir. 1991).
In re Jiffy Lube Sec. Litig., 927
Those factors are “(1) the posture of
the case at the time settlement was proposed, (2) the extent of
discovery that had been conducted, (3) the circumstances
surrounding the negotiations, and (4) the experience of counsel
in the area of securities class actions litigation.”
159.
Id. at
The proposed Settlement satisfies these factors.
Considering the posture of the case at the time of
settlement allows the Court to determine whether the case has
progressed far enough to dispel any wariness of “possible
7
collusion among the settling parties.”
In re The Mills Corp.
Sec. Litig., 265 F.R.D. 246, 254 (E.D. Va. 2009) (quoting In re
Jiffy Lube, 927 F.2d at 159).
In this case, as in In re
MicroStrategy, Inc., although the “settlement was reached
relatively early in the litigation, it was reached only after
the Settling Parties vigorously contested a motion to dismiss.”
148 F. Supp. 2d 654, 664 (E.D. Va. 2001).
Unsatisfied with the
Court’s dismissal of this case, Lead Plaintiff noticed an appeal
before reaching a settlement with Defendants.
As this Court
noted at the preliminary approval stage, “[t]hese adversarial
encounters dispel any apprehension of collusion between the
parties.”
In re NeuStar, 2015 WL 5674798, at *10.
The second Jiffy Lube factor—the extent of discovery—
ensures that all parties “appreciate the full landscape of their
case when agreeing to enter into the Settlement.”
Corp., 265 F.R.D. at 254.
The Mills
This factor derives from the
recognition that “a reasonable judgment of the possible merits
of the case is best achieved when all discovery has been
completed and the case is ready for trial.”
927 F.2d at 159.
In re Jiffy Lube,
Although this case never reached fact or class
discovery proceedings, the Court is satisfied that two years of
litigation and investigation have fully informed Class Counsel
of the value of its claims against Defendants.
8
According to
Class Counsel, it conducted a “rigorous investigation” of the
claims before filing an amended complaint, including: review of
NeuStar’s SEC filings and public statements, analysis of the
entire FCC public record concerning the contract bidding and
selection process, investigation of all available media reports
concerning the bidding, communications with staff from
subscription news service The Capitol Forum, interviews with
twenty-one former NeuStar employees, and consultation with a
damages and causation expert.
(Goldsmith Decl. [Dkt. 60] ¶ 54.)
Thus, “although this settlement came early on—prior to the
completion of formal discovery–it is clear that plaintiffs have
conducted sufficient informal discovery and investigation to
. . . evaluate [fairly] the merits of Defendants’ positions
during settlement negotiations.”
In re MicroStrategy, 148 F.
Supp. 2d at 664 (internal quotation and citation omitted).
The negotiations leading to settlement were also
sufficient to satisfy the third Jiffy Lube factor.
This factor
requires the Court to consider “the negotiation process by which
the settlement was reached in order to ensure that the
compromise [is] the result of arm’s-length negotiations
. . . necessary to effective representation of the class’s
interests.”
The Mills Corp., 265 F.R.D. at 255 (internal
quotation and citations omitted).
9
This Settlement is the
product of an informed negotiation before a mediation neutral.
The parties initially appeared before a Senior Resident Circuit
Mediator for the Fourth Circuit.
(Goldsmith Decl. ¶ 44.)
After
two appearances before this Mediator, the parties engaged a
private neutral affiliated with Judicial Arbitration and
Mediation Services.
(Id. ¶ 45.)
Class Counsel, an authorized
representative of Lead Plaintiff, Defendants’ Counsel,
authorized representatives of NeuStar, and counsel for
Defendants’ insurance carriers then attended a day-long
mediation with the private neutral.
(Id. ¶ 46.)
Class Counsel
came equipped with the facts acquired through its informal
discovery, as well as new information of the FCC’s contractaward decision and a reevaluated perspective of the strength of
its case after this Court’s dismissal.
(Id. ¶ 56.)
Additionally, both parties submitted detailed mediation briefs
describing the relative strengths of their positions.
(Id.)
Class Counsel supplemented its mediation brief with a “robust
and sophisticated market efficiency, loss causation and damages
analysis prepared by Lead Plaintiff’s expert.”
(Id.)
These
negotiations were sufficiently informed, thorough, and at arm’s
length to conclude that the parties fairly arrived at the
proposed Settlement.
Lastly, the Court is satisfied that Class Counsel is
10
sufficiently experienced in the field of securities fraud class
action litigation to fairly represent the interests of the
Class.
The Court may pay heed to Class Counsel’s judgment in
approving, negotiating, and entering into a putative settlement
when counsel are “nationally recognized members of the
securities litigation bar,” as is the case here.
Corp., 265 F.R.D. at 255.
The Mills
This Court has already found Class
Counsel to be “sufficiently qualified and experienced to fairly
represent the interests of the class.”
5674798, at *5.
In re NeuStar, 2015 WL
Class Counsel’s experience in the field of
securities fraud class actions generally and management of this
case in particular reaffirms the Court’s prior assessment.
Class Counsel’s firm resume includes five pages of notable
securities class action successes demonstrating counsel’s
competency.
(Firm Resume [Dkt. 60-5] Ex. C at 2-7.)
Guided by
this experience and success, Class Counsel represents the
Settlement to be fair, reasonable, and adequate.
Furthermore,
Lead Plaintiff is a sophisticated institutional investor that
also approves of the Settlement.
(Goldsmith Decl. ¶ 50.)
The
Court finds from the foregoing factors that the integrity of the
arm’s length negotiation process was preserved, indicating that
this settlement is sufficiently “fair” under Federal Rule of
Civil Procedure 23.
11
ii)
Adequacy
The Court is also satisfied that the $2,625,000 gross
recovery for the Class and other terms of Settlement are
adequate.
The adequacy analysis “weigh[s] the likelihood of the
plaintiff’s recovery on the merits against the amount offered in
settlement.”
In re Am. Capital, 2013 WL 3322294, at *3.
The
factors to consider include:
(1) the relative strength of the plaintiffs’
case on the merits, (2) the existence of any
difficulties of proof or strong defenses the
plaintiffs are likely to encounter if the
case goes to trial, (3) the anticipated
duration
and
expense
of
additional
litigation,
(4)
the
solvency
of
the
defendants and the likelihood of recovery on
a litigated judgment, and (5) the degree of
opposition to the settlement.
In re Jiffy Lube, 927 F.2d at 159.
The Court previously discussed the first four factors
in its preliminary fairness analysis.
The substance of those
factors has not changed since that time and the Court
incorporates the preliminary fairness memorandum opinion here.
In brief, substantial legal and financial obstacles stand
between Lead Plaintiff and any recovery on the merits of its
claims.
In light of those obstacles, the gross Settlement
amount of $2,625,000 is a substantial victory for the Class and
weighs heavily on the side of finding the agreement adequate.
The lack of opposition to the Settlement amount
12
further supports a finding of adequacy.
The court-appointed
Claims Administrator distributed more than 44,000 packets
notifying potential Class members of the Settlement amount and
terms.
Additionally, the notices informed interested parties
how to object to the Settlement.
After notice through the
thousands of packets, print publications, and broadcasts, only
one objection was received.
The handwritten objection consisted
of thirty-seven words of general discontent with the size of the
settlement and the societal value of class action settlements
generally.3
As the objection contains no indication that the
objector is a class member and is devoid of actual argument, the
Court gives the objection no weight at all.
Therefore, all
parties, the unanimity of potential Class members, and this
Court agree the Settlement is sufficiently adequate.
In conclusion, the Court finds the proposed Settlement
is fair, reasonable, and adequate under Federal Rule of Civil
Procedure 23.
Settlement.
Accordingly, the Court approves the proposed
The Court will now consider the proposed plan of
allocation.
3
The objection reads as follows: “$.06 per share for
settlement? Really?!? Don’t you have something better to do
with your time? Find something to do that benefits society. By
the way, the settlement is barely minor league. You should be
ashamed.” (See Objection [Dkt. 64-2].)
13
B.
Plan of Allocation
The plan of allocation, like the Settlement itself,
must meet the standards of fairness, adequacy, and
reasonableness.
See In re MicroStrategy, 148 F. Supp. 2d at 668
(“To warrant approval, the plan of allocation must also meet the
standards by which the partial settlement was scrutinized—
namely, it must be fair and adequate.”).
When evaluating the
plan, “the opinion of qualified counsel is entitled to
significant respect.”
The Mills Corp., 265 F.R.D. at 258.
“The
proposed allocation need not meet standards of scientific
precision, and given that qualified counsel endorses the
proposed allocation, the allocation need only have a reasonable
and rational basis.”
Id.
Here, Class Counsel received expert advice from a
Virginia Corporation, Nathan Associates, Inc., to create the
plan of allocation.
(Counsel Decl. [Dkt. 60] ¶¶ 65-67.)
As a
general matter, the plan treats class members fairly by awarding
a pro rata share to every claimant.
However, the plan also
accounts for the fact that not every class member suffered
identical losses attributable to Defendants’ actions.
Specifically, the plan identifies three dates corresponding with
Defendants’ actions that likely affected the amount of
artificial inflation in NeuStar share prices at the time of
14
purchase.
Specifically, Lead Plaintiff believes that the merits
of the claims against Defendants became stronger on October 30,
2013,4 because this was the “first date on which Defendants made
allegedly false and misleading statements after Neustar
submitted an unsolicited, revised best-and-final offer for the
NPAC contracts that was subsequently rejected.”
60-2] Ex. A at 7.)
(Notice [Dkt.
Therefore, purchasers after this date are
allocated more on a per-share basis.
Additionally, Lead
Plaintiff believes that Defendants made corrective statements on
January 30, 2014, and June 9, 2014, which “impacted the market
price of publicly traded Neustar common stock and removed the
alleged artificial inflation from the stock price.”
(Id.)
Therefore, these two dates also serve as points of
differentiation in the plan of allocation.
In light of those
identified events and dates, Class Counsel and its expert
propose the following three-group plan of allocation.
4
The Notice of the Plan of Allocation and the Memorandum in
Support of Approval of the Plan of Allocation both stated that
“Lead Plaintiff believes that the merits of the claims became
stronger as of October 30, 2014, the first date on which
Defendants made allegedly false and misleading statements after
Neustar submitted the October Revised BAFO.” (Mem in Supp. at
19; Notice Ex. A at 7.). The reference to October 2014 appears
to be an error. The correct date should be October 2013. The
amended complaint states that Neustar submitted its revised
offer in October 2013. (Am. Compl. [Dkt. 23] at ¶¶ 63-67.)
Additionally, the Plan of Allocation groups claimants based on
whether they purchased before or after October 30, 2013.
(Notice Ex. A at 7.)
15
The first group consists of claimants who purchased
stock between April 19, 2013, and October 29, 2013.
These
purchasers acquired shares before the Defendants’ statements
regarding the revised best-and-final offer.
The allocation for
these claimants is based on the date they sold their stock, as
follows:
(1) Sold on or before January 29, 2014, the
Recognized Loss per share is zero. (2) Sold
between January 30, 2014, and June 6, 2014,
inclusive, the Recognized Loss per share is
the lesser of (a) the excess of the purchase
price over the sale price or (b) $8.58. (3)
Held as of the close of trading on June 6,
2014, the Recognized Loss per share is
$8.58.
(Id.)
The second group consists of individuals who purchased
stock after the October 30, 2013 statements but before the
corrective statements of January 29, 2014.
The allocation for
these claimants is based on the date they sold their stock, as
follows:
(1) Sold on or before January 29, 2014, the
Recognized Loss per share is zero. (2) Sold
between January 30, 2014, and June 6, 2014,
inclusive, the Recognized Loss per share is
the lesser of (a) the excess of the purchase
price over the sale price or (b) $9.15. (3)
Held as of the close of trading on June 6,
2014, the Recognized Loss per share is
$9.15.
(Id.)
16
Lastly, the third group consists of Class members who
purchased shares after the first corrective statement on January
30, 2014, but before the last corrective statement on June 6,
2014.
These third-group members receive less allocation because
they purchased after the alleged fraudulent statements were
partially corrected and thus the price inflation was decreased.
These purchasers are allocated nothing if they sold before June
6, 2014.
They will receive the lesser of the excess of the
purchase price over $27.28 or $2.27, if they continued to hold
stock as of the close of trading on June 6, 2014.
(Id.)
Thus, the planned allocation “fairly treats class
members by awarding a pro rata share to every Authorized
Claimant, but also sensibly makes interclass distinctions based
upon, inter alia, the relative strengths and weaknesses of the
class members’ individual claims and the timing of purchases of
the securities at issue.”
at 669.
In re MicroStrategy, 148 F. Supp. 2d
Accordingly, the Court finds the plan to be a fair,
reasonable, and adequate allocation of settlement proceeds and
approves the plan of allocation.
C.
Attorneys’ Fees and Expenses
Having approved the Settlement and proposed plan of
allocation, the only issue remaining is Class Counsel’s motion
for $498,750 in attorneys’ fees and $119,507.44 in costs.
17
The
PSLRA provides for an award of attorneys’ fees and costs out of
any recovery obtained by plaintiffs in a securities fraud class
action.
See 15 U.S.C. § 78u-4(a)(6).
But, the PSLRA limits an
award of fees and expenses to “a reasonable percentage of the
amount of any damages and prejudgment interest actually paid to
the class.”
Id.
Thus, a court has “an independent obligation
to ensure the reasonableness of any fee request.”
In re
MicroStrategy, 172 F. Supp. 2d at 786 (quoting In re Cendant
Corp. Litig., 264 F.3d 201, 281-82 (3d Cir. 2001)).
The PSLRA does not create a specific method for
calculating fees and costs.
786.
MicroStrategy, 172 F. Supp. 2d at
Instead, courts may exercise their discretion to set an
award of attorneys’ fees and costs at a reasonable amount.
Mills Corp., 265 F.R.D. at 252.
The
Courts evaluating PSLRA fees
typically employ the percentage-of-recovery method or the
lodestar method of calculation.
Under the percentage-of-
recovery method, the award is based on a reasonable percentage
of the common fund recovered for the Class.
The lodestar
method, by contrast, “requires the multiplication of the number
of hours worked by a reasonable hourly rate, the product of
which the Court can then adjust by employing a ‘multiplier.’”
Id. at 260.
18
In this case, the parties proposed a fee based on
Class Counsel’s prior negotiation of a fee arrangement with Lead
Plaintiff which is reasonable under both methods.
Therefore,
the Court will adopt the common practice within this Circuit;
the Court will apply the percentage-of-recovery method and then
use the lodestar method as a “cross-check.”
See id. (applying
percentage method with lodestar cross-check); In re Royal Ahold
N.V. Sec. & ERISA Litig., 461 F. Supp. 2d 383, 385 (D. Md. 2006)
(“While the Fourth Circuit has not yet definitively addressed
the issue, other district judges in this circuit have suggested
a flexible analysis that uses the percentage of recovery method
but applies the lodestar method as a cross-check . . . .”).
i)
Percentage of Recovery Test
When evaluating Class Counsel’s fee request under the
percentage-of-recovery method, the Court will apply the sevenfactor approach that other district courts in this Circuit have
adapted from the Third Circuit case of Gunter v. Ridgewood
Energy Corp., 223 F.3d 190 (3d Cir. 2000).
See, e.g., In re
Wachovia Corp. ERISA Litig., No. 3:09cv262, 2011 WL 5037183, at
*3 (W.D.N.C. Oct. 24, 2011) (applying these factors); The Mills
Corp., 265 F.R.D. at 261 (same).
Those factors include the
following: (1) the results obtained for the Class; (2) the
presence or absence of substantial objections by members of the
19
class; (3) the quality and skill of the attorneys involved; (4)
the complexity and duration of the litigation; (5) the risk of
nonpayment; (6) public policy considerations; and (7) awards in
similar cases.
Gunter, 223 F.3d at 195 n.1.
a.
Results Obtained for the Class
The result achieved is among the most important
factors to be considered in making a fee award.
See Hensley v.
Eckerhart, 461 U.S. 424, 436 (1983) (“[T]he most critical factor
is the degree of success obtained.”).
In this case, Class
Counsel’s efforts have led to the creation of a $2,650,000
common fund to be distributed to class members on a modified pro
rata basis.
Although this amount is modest relative to
“megafund” cases, it is nevertheless a substantial value for
class member in this particular case.
The millions in the
common fund are far more than class members were likely to
recover through continued litigation on the merits.
See In re
Wachovia, 2011 WL 5037183, at *4 (accounting for dismissal on
the merits and unlikelihood of success on appeal or remand).
To
receive any benefit through continued litigation, Class Counsel
had to succeed on its appeal to the Fourth Circuit, certify a
class, survive summary judgment, and ultimately persuade a jury
to award a money judgment.
Class Counsel acknowledges that the
probability of passing the first step—succeeding on appeal—was
20
very low.
(See Mem. in Supp. [Dkt. 59] at 6 (calling risk of
affirmance “substantial”).)
Indeed, this Court found several
dispositive shortcomings in Lead Plaintiff’s case at the motionto-dismiss stage.
See In re NeuStar, 83 F. Supp. 3d at 679-86;
In re NeuStar, 2015 WL 5674798, at *11 (“Any one of these
deficiencies would have been sufficient for the Court to dismiss
the complaint.”).
In light of the substantial probability of
receiving no recovery on the merits, the settlement amount of
$2,625,000 represents a fair result for the Class.
The absence
of substantial objections to the settlement amount also
demonstrates that the result achieved is a desirable one.
b.
Objections
Additionally, there have been no objections to the
attorneys’ fees or costs requested in this case.
As of November
24, 2015, the claims processor had mailed over 44,000 notice
packets to potential Class members.
64-1] ¶ 6.)
(Decl. of A. Walter [Dkt.
The notice disclosed the settlement amount and that
Class Counsel would seek a fee award of no more than 19% and
litigation expenses not to exceed $200,000.
As discussed above,
Claims Administrator received no objection to attorneys’ fees or
requested expenses.
The lack of objection is particularly
informative of fairness in this case because Class Counsel is
seeking less in fees and expenses than was disclosed in the
21
notice.
Thus, the lack of objections supports finding the fee
request reasonable.
See The Mills Corp., 265 F.R.D. at 262
(“Thus, while not dispositive, the death of legitimate
objections to the requested fee of 18% enforces the
reasonableness of that request in the Court’s eyes.”).
c.
Quality and Skill of Attorneys Involved
The Court has found Class Counsel to have “an
extensive record of representing plaintiffs in securities class
actions” and to have advocated “vigorously” throughout this
litigation.
In re NeuStar, 2015 WL 5674798, at *5.
Class
Counsel conducted substantial informal fact discovery when
structuring this lawsuit, including reviewing all relevant SEC
filings, the entire FCC public record concerning the contract
bidding process, and all available media reports.
Supp. at 5.)
(Mem. in
Additionally, Class Counsel consulted with a
damages and causation expert throughout litigation and
settlement discussions.
(Id. at 5-6.)
Although ultimately
unsuccessful on the merits, Class Counsel litigated this case
skillfully and efficiently.
Even after suffering a dismissal of
the case, Class Counsel advocated for the Class by filing an
appeal and presenting comprehensive mediation statements to a
private mediator.
(Id. at 7.)
Throughout these proceedings,
Class Counsel proceeded against experienced and sophisticated
22
defense counsel with a nationally recognized complex litigation
practice.
See The Mills Corp., 265 F.R.D. at 262 (noting
defense counsel’s skill as a consideration).
Class Counsel’s
skill and quality permitted it to achieve this fair and
reasonable result for the class, despite the substantial
adversarial and legal barriers it faced in this suit.
d.
Complexity and Duration of the
Litigation
Securities fraud class actions are complex and
difficult to prosecute, as “[e]lements such as scienter,
reliance, and materiality of representation are notoriously
difficult to establish.”
See id. at 263.
The Court’s dismissal
demonstrates the difficulty of proving those elements in this
case, as the Court found no indication of scienter, loss
causation, or materiality.
Hence, this case presented many
factual and legal difficulties for Class Counsel.
Perhaps in
light of those difficulties, this case quickly proceeded from
the initial complaint to settlement.
Class Counsel motioned for
approval of its agreement in principle less than thirteen months
after filing the complaint and before any formal discovery or
appellate briefing.
And although the Court finds that this
settlement is both adequate and was fairly reached, the
agreement in principal came after only one day of mediation.
Thus, this case presented difficult factual and legal problems
23
for counsel, but proceeded through the stages of litigation at a
rapid pace.
See In re Wachovia, 2011 WL 5037183, at *4 (noting
substantive complexity but lack of prolonged litigation).
e.
Risk of Nonpayment
The risk of nonpayment in this case does not come from
Defendant’s financial condition, but from the uncertainty that
Lead Plaintiff would prevail on the merits.
Class Counsel
undertook the case on a contingent-fee basis, which created a
“substantial risk of nonpayment.”
The Mills Corp., 265 F.R.D.
at 263; MicroStrategy, 172 F. Supp. 2d at 788 (noting risk of
nonpayment in securities fraud class action contingency cases).
The potential for nonpayment became even more apparent after the
Court dismissed Lead Plaintiff’s amended complaint.
Despite
this risk of nonpayment, Class Counsel worked nearly 2,100 hours
and advanced or incurred almost $120,000 in expenses during the
course of litigation and settlement to secure a favorable result
for the Class.
(See Decl. Exs. 5-A, 6-A, 5-B, 6-B and 7.)
Thus, beyond mere risk of nonpayment, Class Counsel stood to
lose substantial sunk costs if this case ended with an
unfavorable judgment on the merits.
f.
Public Policy Considerations
When determining a proper fee percentage, the Court
considers two countervailing public policies.
24
See In re
Wachovia, 2011 WL 5037183, at *5.
On the one hand, the Court is
concerned with the “need to diminish the perception among a
significant part of the non-lawyer population and even among
lawyers and judges that the risk premium is too high in class
action cases and that class action plaintiffs’ lawyers are
overcompensated for the work that they do.”
Id. (quoting Third
Circuit Task Force Report, Selection of Class Counsel, 208
F.R.D. 340, 343-44 (Jan. 15, 2002)).
On the other hand, a PSLRA
fee “must include an incentive component to ensure that
competent, experienced counsel will be encouraged to undertake
the often risky and arduous task of representing a class in a
securities fraud case.”
In re MicroStrategy, 172 F. Supp. 2d at
788.
After considering the foregoing factors and policies,
the Court finds that attorneys’ fees equal to 19% of the
Settlement fund is a reasonable award in this case.
The Court
finds this fee sufficient to incentivize qualified counsel to
expend the significant resources necessary to effectively
litigate meritorious cases.
At the same time, this percentage
is on the lower end of awards in similar cases, as indicated
below.
25
g.
Awards in Similar Cases
Comparing the size of fund and fee awards in other
cases, while overly simplistic, “nonetheless provides a valuable
point of reference.”
The Mills Corp., 265 F.R.D. at 264.
A
comparison of recent cases with analogous settlement values
within this Circuit indicates that 19% is below the typical
range of fee awards in similar securities class actions and
common fund cases.
See Boyd v. Coventry Health Care Inc., 299
F.R.D. 451, 465 (D. Md. 2014) (“Cases in this circuit involving
settlement comparable to the $3.6 million settlement fund here
have resulted in awards of attorneys’ fees in the ranges of 25%
to 28% of the common fund.”)
Case
Braun v. Culp, Inc., 1985 WL 5857
(M.D.N.C. 1985)
Strang v. JHM Mortg. Sec. Ltd.,
890 F. Supp. 499 (E.D. Va. 1995)
Singleton v. Domino’s Pizza, LLC,
976 F. Supp. 2d 665 (D. Md. 2013)
In re SPX Corp. ERISA Litig., 2007
U.S. Dist. LEXIS 28072 (W.D.N.C.
Apr. 13, 2007)
Boyd v. Coventry Health Care Inc.,
299 F.R.D. 451 (D. Md. 2014)
In re LandAmerica 1031 Exch.
Servs., Inc., 2012 WL 5430841
(D.S.C. Nov. 7, 2012)
Smith v. Krispy Kreme Doughnut
Corp., 2007 WL 119157 (M.D.N.C.
Jan. 10, 2007)
26
Approximate Size
of Fund/Recovery
$1,500,000
Percentage
Award
25%
$1,150,000
25%
$2,500,000
25%
$3,600,000
28%
$3,600,000
28%
$4,000,000
25%
$4,750,000
26%
Class Counsel’s request of 19% falls below the range
of fees awarded in those comparable cases.
This provides a
strong indication of the reasonableness of the fee requested.
ii)
Lodestar Cross-Check
A lodestar cross-check of the 19% fee request confirms
the fairness and reasonableness of the fee.
To apply the
lodestar method, “a court must first determine a lodestar figure
by multiplying the number of reasonable hours expended times a
reasonable rate.”
Robinson v. Equifax Info. Servs., LLC, 560
F.3d 235, 243 (4th Cir. 2009).
To determine what rates and
hours are “reasonable,” a court applies a twelve-factor tests to
guide its discretion.
See Barber v. Kimbrell’s, Inc., 577 F.2d
216, 226 n.28 (4th Cir. 1978).5
The court then substracts fees
for hours spent on unsuccessful claims unrelated to successful
ones.
Robinson, 560 F.3d at 244.
“Because the lodestar is
employed as a ‘cross-check’ and because these factors are so
5
The twelve factors are as follows: (1) time and labor
expanded; (2) novelty and difficulty of the questions raised;
(3) skill required to properly perform the legal services; (4)
opportunity costs in pursuing the instant litigation; (5)
customary fee for like work; (6) attorney’s expectation at the
outset of litigation; (7) time limitations imposed by the client
or circumstances; (8) amount in controversy and results
obtained; (9) attorney credentials; (10) undesirability of the
case within the legal community in which it arose; (11) nature
and length of the professional relationship between attorney and
client; and (12) fee awards in similar cases. See Barber, 577
F.2d at 226 n.28.
27
similar to the seven factors analyzed within, each of the twelve
Barber factors will not be laid out and analyzed separately.”
The Mills Corp., 265 F.R.D. at 261 n.6.
“When using lodestar as
a ‘cross-check,’ the Court need[] not apply the ‘exhaustive
scrutiny’ typically mandated, and the Court may accept the hours
estimates provided by Lead Counsel.”
The Mills Corp., 265
F.R.D. at 264.
Class Counsel expended roughly 2,100 hours on this
case and charged rates of $260-310 for paralegal services, $420700 for associates, and $800-975 for partners.
7 [Dkts. 60-5, 60-6, 60-7].)
These hours and billing rates
combined to produce a lodestar of $1,380,671.
7].)
0.36.
(Exs. 5-A, 6-A,
(Ex. 7 [Dkt. 60-
The fee request of $498,750 represents a “multiplier” of
Such a low multiplier is comfortably below the range of
multipliers other courts have found to be reasonable.
See
Domonoske v. Bank of Am., N.A., 790 F. Supp. 2d 466, 476 (W.D.
Va. 2011) (surveying cases to conclude that a 1.8 multiplier is
“well within the normal range of lodestar multipliers”).
Although the hourly rates charged here are well above
those set forth in the Laffey Matrix,6 the fee request would
6
“The Laffey Matrix is used as a guideline for reasonable
attorneys’ fees in the Washington/Baltimore area.” Galvez v.
Am. Servs. Corp., No. 1:11cv1351 (JCC/TCB), 2012 WL 2522814, at
*5 n.6 (E.D. Va. June 29, 2012).
28
remain reasonable if the Court were to discount the total
lodestar figure by fifty percent.
At that discount, the
lodestar would be around $700,000.
Thus, the lodestar still be
greater than the fees Class Counsel requested.
Having considered the factors discussed above in light
of the totality of the circumstances, the Court finds the fee
award of 19% of the Settlement is fair and reasonable
compensation for Class Counsel.
Skilled counsel committed
substantial resources to achieve a fair result for the class,
despite the legal and factual difficulties that this case
presented.
Furthermore, the fees fall below those commonly
awarded in similar cases and prompted no objection from class
members.
A lodestar cross-check confirms that this award
appropriately balances competing public policies by fairly
compensating counsel.
Therefore, the Court approves the
$498,750 requested in attorneys’ fees.
iii)
Costs
In addition to the fees awarded above, Class Counsel
seeks reimbursement of $119,507.44 for litigation expenses
incurred in connection with the prosecution and settlement of
this action.
“There is no doubt that costs, if reasonable in
nature and amount, may appropriately be reimbursed from the
common fund.”
In re MicroStrategy, 172 F. Supp. 2d at 791.
29
Class Counsel’s claimed costs include expert fees, computer
research fees, transportation expenses, mediation fees, and
various expenses for document printing, filing, and delivery.
(Exs. 5-B, 6-B [Dkts. 60-5, 60-6].)
The bulk of these expenses
arise from almost $80,000 paid to Class Counsel’s loss causation
and damages expert, who opined on issues of market efficiency,
loss causation, and damages during settlement mediation and
negotiation and helped structure the plan of allocation.
in Supp. at 13.)
(Mem.
The expenses appear to be reasonable, given
the case’s complexity, the time and effort required, and the
fact that no class member objected to the notice disclosing a
potential expense request of $200,000.
Accordingly, the request
is granted.
III.
Conclusion
For the foregoing reasons, the Court grants Lead
Plaintiff’s Unopposed Motion for Final Approval of the Proposed
Settlement, Motion for Approval of Plan of Allocation, and
Motion for Attorneys’ Fees and Expenses.
Appropriate orders
issued on December 3, 2015.
December 8 , 2015
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
30
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