The opinion of the court was delivered by: TENNEY
TENNEY, District Judge: This is a stockholder's derivative action brought on behalf of the Tonopah Mining Company of Nevada ("Tonopah") by J. Ralph Saylor ("Saylor"). ,359 Pursuant to Federal Rule of Civil Procedure ("Rule") 23.1 the parties now seek court approval of a settlement agreement. In addition, plaintiffs' attorneys seek an award of attorney's fees not to exceed the amount of $177,000. For the reasons stated below the Court approves the settlement agreement and awards fees and costs in the above amount.
The background facts and tortured procedural history of this very old action have been outlined in detail in the prior opinions of this and other courts, see, e.g., 100 F.R.D. 44, 46-48 (S.D.N.Y. 1983), and will not be repeated here. The salient facts for the purposes of this motion are as follows.
In 1965, Saylor filed a complaint on behalf of himself and all other similarly situated stockholders of Tonopah. The complaint charged that the defendants, several of Tonopah's directors and certain of its corporate affiliates, (1) had caused the company to sell its subsidiary, Tonopah Nicaragua Company, which owned the Rosita mine, to Mines, Inc. (an affiliate of Tonopah) for grossly inadequate consideration, and (2) had arranged subsequently for the transfer of the Rosita mine to La Luz Mines, Ltd. ("La Luz"), another Tonopah affiliate. La Luz apparently owned the only hydroelectric power source in the vincinity of the mine.
In 1970, plaintiffs' attorney -- the late Abraham I. Markowitz ("Markowitz") -- negotiated a settlement on plaintiffs' behalf ("the old settlement"). That settlement provided that defendants would pay Tonopah's stockholders $250,000, less approximately $84,000 in legal fees and expenses which would be paid to Markowitz. Thirteen years later, after the case had been twice to the court of appeals, the settlement was once again submitted to this Court for approval.
After examining all the factors that must be considered before a proposed settlement in a derivative action can be approved, see 100 F.R.D. at 49-58, the Court disapproved the old settlement.
The Court found that plaintiffs had a reasonable probability of success on the issue of whether defendants had failed to disclose to the SEC their intent to transfer the Rosita mine to La Luz, see 100 F.R.D. at 55-57, and that, in light of the circumstances, "the actual advantage that La Luz . . . derive[d] from its ownership of the hydroelectric power source may well be the most appropriate measure of damages." Id. at 57. Based on the annual reports, the Court estimated that this figure was approximately $800,000. Id. Accordingly, the old settlement, which provided for a settlement fund of only $250,000, was determined to be inadequate, and the settlement was disapproved. Subsequent to the disapproval, the parties were told to prepare for trial.
Faced with the prospect of litigating this action, the parties immediately proceeded to negotiate a new stipulation of settlement ("the new settlement"), which was submitted to the Court in the spring of 1984. See Stipulation and Order of Settlement, 65 Civ. 516 (CHT) (April 5, 1984) ("Stipulation of Settlement"). The new settlement provides for a $1,000,000 settlement fund for plaintiffs. It also stipulates that the fund will be used to pay such expenses and fees as the Court may approve. Plaintiffs' lead counsel has agreed that the costs and legal fees requested will not exceed a total of $177,000.
On May 31, 1984, after the appropriate notice had been sent to all shareholders of record, a hearing was held before the Court to determine whether the new settlement outlined in the Stipulation of Settlement should be approved as fair, reasonable and adequate. Only one objector, Michael J. McLaughlin ("McLaughlin"), made an appearance at the hearing in order to speak against the settlement and the request for attorney's fees.
McLaughlin's objections to the proposed settlement, however, are conclusory and meritless, without support in either the law or the facts before the Court. For example, in his affidavit, McLaughlin merely asserts that "[t]he proposed settlement is not fair, reasonable or adequate for the principal reason that the defense to the action is entirely spurious. Furthermore, there has been at least one major violation ,360 of Security and Exchange Laws and/or Regulations on behalf of the defendants or some of them." Objections to Settlement, 65 Civ. 516 (CHT) (May 24, 1984) ("Objections"), at 1; see also Transcript of Hearing before this Court on May 31, 1984, at 9-12. Thus, nothing that McLaughlin has presented to the Court would even suggest that the settlement does not meet the applicable standard of review, namely "whether the settlement "is so unfair on its face as to preclude judicial approval." Blatt v. Dean Witter Reynolds InterCapital, Inc., 732 F.2d 304, 307 n.1 (2d Cir. 1984) ("Dean Witter") (quoting Glicken v. Bradford, 35 F.R.D. 144, 151 (S.D.N.Y. 1964) and citing 7A C. Wright & A. Miller, Federal Practice and Procedure § 1839 (1972)).
Indeed, the terms of the new settlement appear eminently fair under the circumstances. In its preview opinion on the old settlement the Court discussed all the factors that must be considered before a settlement can be approved in this case. See 100 F.R.D. at 49-48. This review included an examination of the claims and defenses in the action, the plaintiffs' probability of success on the merits, and the possible amount of recovery, if the plaintiffs were to prevail at trial. Id. Since no new facts have been disclosed and since no change has occurred in the law, there is no need to reiterate the entire analysis. The major substantive difference between the new settlement and the old is that the new one provides for a settlement fund of $1,000,000 -- while the old provided for only $250,000 -- and that a smaller percentage of the fund is allocated to attorney's fees and costs under the new than under the old. The new settlement limits the amount of the settlement fund which may be used for plaintiffs' attorney's fees and costs to less than 18%; the old settlement would have given more than 30% of the fund to Markowitz.
In light of all the factors that the Court previously considered in rejecting the old settlement, id., and in light of the increased amount of money that the defendants have agreed to pay plaintiffs, the Court finds that the new settlement is entirely fair and reasonable. The settlement fund exceeds the Court's previous estimate of the amount of damages that plaintiffs could hope to recover if successful at trial. To be sure, the amount is slightly less than the $1,300,000 which is the maximum amount that the plaintiffs' attorney now asserts the shareholders could recover if they prevailed at trial. The difference, however, between that amount and the amount in the proposed settlement is insignificant when considered in light of the fact that the wrongs alleged in this action occurred in the 1950's, and that the trial of this action would therefore involve considerable difficulties. As this Court previously noted, "Clearly there are substantial risks in proceeding with a trial so long after the event complained of. . . [A] trial of plaintiffs' claims is likely to be quite long and complex." 100 F.R.D. at 57 (footnote omitted). By any measure, the $1,000,000 settlement is fair and reasonable to the stockholders of Tonopah. Furthermore, the Court finds that the maximum figure of $177,000 for attorney's fees and costs is well within the range of fees that have been awarded in complex litigation like the instant case. See Dean Witter, 566 F. Supp. 1294, 1296-07 (S.D.N.Y. 1984), aff'd, 732 F.2d 304 (2d Cir. 1984).
Thus, for all the foregoing reasons, it is time for this ancient case to creak to a close. Accordingly, the ...