The opinion of the court was delivered by: PLATT
In this action, maintained as a class action for the purposes of settlement, plaintiffs' counsel, Milberg Weiss Bershod Specthrie & Lerach (Milberg Weiss), has obtained a settlement for the class. The settlement establishes a settlement fund of $908,377.60 and, in addition, the defendants agreed to bear the costs associated with the providing of notice and the administration of the settlement. In approving the settlement, this Court has found that it is "fair, reasonable and adequate that in the best interests of the members of the Class." See Findings of Fact and Conclusion of Law filed simultaneously herewith.
The plaintiffs have made an application for an award of attorneys' fees for services rendered by Milberg Weiss on behalf of the class and for reimbursement of expenses. The plaintiffs request attorneys' fees of $227,000 and reimbursement of $5,615.79 for expenses and disbursements incurred in this action. For the reasons stated below, the plaintiffs' application is granted.
Courts have adopted various methods for determining a fair and reasonable attorneys' fee in contingent class actions. Most courts calculate as award based on the time expended by plaintiffs' counsel, increased by a multiplier to compensate for the benefit achieved and the contingency of success factor. E.g., Grunin v. International House of Pancakes, 513 F.2d 114 (8th Cir.), cert. denied, 423 U.S. 864, 96 S. Ct. 124, 46 L. Ed. 2d 93 (1975); City of Detroit v. Grinnell Corp., 495 F.2d 448, 470 (2d Cir.1974);
Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 166-69 (3d Cir.1973).
Other courts have considered fees by reviewing and evaluating them as a percentage of the recovery. E.g., Amsterdam v. Turbodyne Corp., [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) P97,976 (S.D.N.Y.1981); Weinberger v. Cook Industries, Inc., [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) P97,978 (S.D.N.Y.1981). Both of these methods demonstrate that the attorneys' fees requested in this case are fair and reasonable.
Under the first method, the starting point for determining an attorneys' fee is to multiply the number of compensable hours spent on the litigation by a reasonable hourly rate. A court may then adjust this figure by considering two additional factors -- the contingent nature of success and the quality of the services provided. Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 117-18 (3d Cir.1976).
In a detailed affidavit, Lawrence Milberg, Esq., set forth the time expended by each attorney and paralegal in the Milberg Weiss firm and arrived at a total of 931.25 hours for the law firm. The affidavit also set forth the hourly rate of each participant and included an analysis of the work performed and a description of the expertise of each attorney, which fully support the reasonableness of the requested hourly rates. When the number of hours expended is multiplied by the various hourly rates, a lodestar figure of $150,992.50 is obtained. Milberg Weiss requests an upward adjustment of the fee award to $227,000, which constitutes a multiple of 1.5 and represents less than two times the normal hoursly fee of plaintiffs' attorneys for the more than 900 hours that they expended on this case.
An increase in a fee award is appropriate in situations, such as this one, where an action is prosecuted solely on a contingent fee basis and counsel, faced with a large case containing complex and novel legal issues, successfully recovers a substantial benefit to the class. City of Detroit, 495 F.2d at 470; Lindy Bros., 540 F.2d at 117. In our Order approving the settlement, we have already indicated the novelty and complexity of the legal issues raised by this lawsuit and have discussed the difficulties faced by plaintiffs' attorneys on the merits of this case. The settlement provides class members with funds they might well not have recieved even after trial. Milberg Weiss compentently, diligently and vigorously pursued this action despite the great risk that liability and substnatial damages could not be proven. Milberg Weiss deserves to be highly commended for the skill and determination they have demonstrated in this action. For these reasaons we believe the fee increase is not only fair and reasonable, but indeed a relatively modest one.
The reasonableness of the fee award requested by the plaintiffs is further demonstrated when the award is viewed as a percentage of the total benefit obtained by Milberg Weiss for the class. The requested fee represents 25 percent of the settlement fund. This percentage is consistent with awards in similar cases. E.g., Amsterdam v. Turbodyne Corp., [1981 Tranfer Binder] Fed.Sec.L.Rep. (CCH) P97,976 (S.D.N.Y.1981) (court awarded 29.4% of settlement fund for counsel fees); Weinberger v. Cook Industries, Inc., [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) P97,978 (S.D.N.Y.1981) (court awarded 27% of settlement fund for counsel fees); In re Scientific Control Corp., 80 F.R.D. 237, 244 (S.D.N.Y.1978) (court awarded 30% of recovery for counsel fees); The Munsey Trust v. Sycor, Inc., 457 F. Supp. 924 (S.D.N.Y.1978) (court awarded 32% of recovery for counsel fees).
It should be noted that there have been no objections to the plaintiffs' request for an award of attorneys' fees in the amount of $227,000 and reimbursement of $5,615.79.
For the above stated reasons, the plaintiffs' application is hereby granted.
FINDINGS OF FACT, CONCLUSIONS OF LAW, ORDER APPROVING SETTLEMENT
1. This Court has jurisdiction of this action pursuant to Section 27 of the Securities Exchange of 1934 (the "Exchange Act"), 15 U.S.C. 78aa, 28 U.S.C. §§ 1331 and 1337(a) and in accordance with principles of pendent jurisdiction.
2. Plaintiffs Edgert Milstein and May Milstein (the "Milsteins") commenced this class action in April 1983 on behalf of themselves and a class consisting of all persons who owned or purchased common stock of Morse Electro Products Corp. ("Morse Corp.") on or after December 16, 1981 and sustained damage thereby. The action was brought against the Mathes Company, its subsidiaries Curtis Mathes Manufacturing Company and Curtis Mathes Corporation (hereafter collectively referred to as "Mathes"), certain of its present and former officers and directors and against Morse Corp. and certain of its present and former officers and directors.
3. Plaintiffs allege violations by defendants of §§ 10(b), 14(e) and 13(d) of the Securities Exchange Act of 1934, the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder and common law principles. Plaintiffs seek damages alleged to have been sustained by plaintiffs and the class as a result of such violations.
4. Plaintiffs allege in substance that Mathes, aided and abetted by all the other defendants, seized control of Morse Corp. in December of 1981 through an illegal and selective tender offer not denominated as such by defendants but which plaintiffs allege constituted a "creeping" tender offer (the "1981 Tender Offer"). Plaintiffs further allege that the 1981 Tender Offer was accompanied by repeated deceptive statements made by Mathes and Morse Corp. that Mathes would propose a merger to remaining Morse Corp. shareholders in April or May of 1982 at a price fo $2.70 per share or book value of Morse Corp. if higher (the "$2.70 buyout"). It is alleged that the 1981 Tender Offer, the deceptive statement about the $2.70 buyout and the entire subsequent course of events were part of an integrated scheme by defendants to force out Morse Corp. public shareholders through the mechanism of a later Tender Offer, in March 1983 (the "1983 Tender Offer") at what plaintiffs allege was the unfair price of $1.50 per share and leaving non-tendering shareholders subject to a merger or other corporate combination at an unfairly low price dictated by the Mathes controlled Morse Corp. Board of Directors.
5. Defendants have answered the complaint in this action and have denied all charges asserted against them and raised defenses to the claims set forth therein.
6.On April 20, 1984, the Court ordered that this action be maintained as a class action for purposes of settlement only, pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of the following class:
"All persons other than the defendants herein, members of the immediate family of each individual defendant, subsidiaries or affiliates of any defendant and any entity in which any defendant has a controlling interest, who were holders of common stock ("Common Stock") and/or warrants to purchase common stock ("Warrants") of Morse Electro Products Corp. ("Morse Corp.") from December 16, 1981 to an including March 19, 1984 and who did not sell that common stock or any common stock acquired upon the exercise of Warrants to any of the defendants (the "Class' or "Class Members")."
This class was divided into the following Sub-classes:
"(a) A Sub-Class consisting of all persons who sold Common Stock between December 16, 1981 and March 19, 1984 in the open market ("Open Market Seller Sub-Class").
(b) A Sub-Class consisting of all persons who tendered Common Stock pursuant to the March 1983 Tender Offer ("Tender Seller Sub-Class"); and
(c) A Sub-Class consisting of all persons who owned Common Stock and/or Warrants as of the close of business on March 19, 1984 ("Current Shareholder Sub-Class")."
Presently before the Court is the application by the parties for an Order pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, approving the proposed settlement of this action in accordance with the terms of a stipulation of settlement dated April 16, 1984 (the "Stipulation of Settlement"). Pursuant to the Stipulation of Settlement and in full settlement of all individual and class claims, all defendants have agreed to pay the aggregate sum of $908,377.60 to be distributed to members of the class after deduction of Court awarded fees and expenses for plaintiffs' counsel.
For the reasons stated the proposed settlement is approved as fair, reasonable and adequate. The Court hereby certifies a permanent class and sub-classes as described in paragraph 6 above. This action is dismissed with prejudice.
7. Plaintiffs Edgert and May Milstein are residents of Queens, New York. They purchased 500 common shares of Morse Corp. stock on April 21, 1978 which stock they tendered to Morse Corp. in the 1983 Tender Offer. In addition, plaintiffs purchased 500 other shares of Morse Corp. stock on February 16, 1982 and sold such stock on December 30, 1982. [Complaint P6].
8. The defendant Mathes Company is a Delaware corporation. Through its subsidiaries -- the other defendants Curtis Mathes Manufacturing Company and Curtis Mathes Corporation -- Mathes maunfactures, sells and distributes TV sets under the name "Curtis Mathes". [Complaint P7, 8].
9. Defendants Curtis Mathes,2a Burke Mathes and Jay S. Meyer were during the Class Period directors of all Mathes Companies. Defendant Thomas R. Maher was a director of Curtis Mathes Manufacturing Company. [Complaint P10, 11].
10. Defendant Morse Corp. is a New York corporation with its principal place of business in Brooklyn, New York. Morse Corp. produces and sells moderately priced sterophonic consoles and audio systems under the names "Pilot", "Morse", "Electrophonic" and "Philharmonic". [Complaint P12].
11. Defendants Philip S. Morse and Gerald Zarin were, during the Class Period, respectively, Chief Executive Officer and President of Morse Corp.
12. Defendants Robert S. Jones, Ludwig A. Huck and Peter A. T. Sartin were directors of Morse Corp. after January, 1982. In addition, they were either officers, employees or directors of Mathes. [Complaint P14].
13. On or about November 16, 1981 Morse Corp. had nearly 3.1 million shares of common stock outstanding with approximately 2,000 shareholders. Philip S. Morse was the largest shareholder of Morse Corp. owning 838,408 shares of the company's common stock or 29% of the common shares of stock outstanding.3c [Complaint P13].
14. On November 16, 1981 Mathes entered into an agreement with Philip S. Morse which provided Mathes with an option to purchase Mr. Morse's 838,408 shares of Morse Corp.'s common stock at $6.00 per share before December 31, 1981. At this time, Morse Corp's common stock was trading at $1 1/8 on the over-the-counter market. [Complaint P20].
15. Mathes filed a Schedule 13D statement dated November 27, 1981 with the Securities and Exchange Commission. In the 13D Mathes stated that its ...