The opinion of the court was delivered by: EUGENE H. NICKERSON
NICKERSON, District Judge:
These cases arise from the alleged fraudulent and negligent conduct of defendant Eddie Antar (Antar) and his relatives and the officers, directors, auditors, underwriters, employees and vendors of the consumer retailer Crazy Eddie, Inc. (Crazy Eddie) (now in bankruptcy). The parties (except Antar) have reached and informed the class plaintiffs of a proposed settlement.
Pursuant to Rule 23 of the Federal Rules of Civil Procedure class plaintiffs move for an order approving the proposed settlement as fair, reasonable and adequate, and for an award of attorneys' fees and disbursements.
The court assumes familiarity with its previous published memoranda and orders dated December 30, 1988, Bernstein v. Crazy Eddie, Inc., 702 F. Supp. 962 (E.D.N.Y. 1988); May 15, 1989, In re Crazy Eddie Sec. Litig., Fed. Sec. L. Rep. (CCH) P 95,507; June 16, 1989, In re Crazy Eddie Sec. Litig., 714 F. Supp. 1285 (E.D.N.Y. 1989); August 30, 1989, In re Crazy Eddie Sec. Litig., 104 Bankr. 582 (E.D.N.Y. 1989); June 13, 1990, In re Crazy Eddie Sec. Litig., 131 F.R.D. 374 (E.D.N.Y. 1990); June 19, 1990, In re Crazy Eddie Sec. Litig., 740 F. Supp. 149 (E.D.N.Y. 1990); September 19, 1990, In re Crazy Eddie Sec. Litig., 747 F. Supp. 850 (E.D.N.Y. 1990); March 6, 1991, In re Crazy Eddie Sec. Litig., 135 F.R.D. 39 (E.D.N.Y. 1991); May 1, 1992, In re Crazy Eddie Sec. Litig., 792 F. Supp. 197 (E.D.N.Y. 1992); September 4, 1992, In re Crazy Eddie Sec. Litig., 802 F. Supp. 804 (E.D.N.Y. 1992); January 20, 1993, In re Crazy Eddie Sec. Litig., 812 F. Supp. 338 (E.D.N.Y. 1993); and January 27, 1993 (amended March 10, 1993), In re Crazy Eddie Sec. Litig., F. Supp. , (E.D.N.Y. 1993).
The backgrounds facts, in summary, are these.
Antar, the founder of Crazy Eddie, together with relatives and associates, engaged in a series of schemes between 1980 and 1987 designed initially to embezzle money from the company and later falsely to portray Crazy Eddie as a thriving commercial enterprise so that Antar and others could sell their shares at an inflated price. Allegedly Antar realized $ 72,245,649, his father, Sam Antar, $ 16,857,332, and other family members and associates substantial if less bountiful sums.
These schemes collapsed when, on November 6, 1987, a group of private investors gained control of the company. Thirteen days later the new management announced that Crazy Eddie had overstated its inventory by some $ 45 million (an amount later revised upward).
The first of the present actions, 87 CV 33, was filed soon thereafter. In the next five and a half years class counsel reportedly conducted 232 days of depositions, analyzed more than a million pages of documents, engaged in substantial additional discovery, and briefed and argued the many motions that this court has addressed in numerous opinions.
On April 25, 1990, the court entered a default against Antar as a discovery sanction in 87 CV 33, and deferred entry of judgment against him until the liability, if any, of the other defendants was established. Most of the remaining defendants have energetically contested liability.
On March 6, 1991, in the principal action the court certified a class consisting of purchasers of Crazy Eddie securities from September 13, 1984 (the effective date of Crazy Eddie's first public offering of common stock) through January 18, 1988 (the date when the company, under new management, announced that company inventory had been overstated by $ 65 million). The class excludes the defendants and their immediate families.
At this time, the class plaintiffs have claims in the principal action for violations of (i) section 10(b) of the Securities Exchange Act of 1934 (the Exchange Act), 15 U.S.C. §§ 78a et seq., against Antar family members and the company's former directors, officers, accountants, agents, and one underwriter, (ii) section 20 of the Exchange Act and section 15 of the Securities Act of 1933, 15 U.S.C. §§ 77a et seq., against Crazy Eddie directors and officers (as controlling persons), and (iii) the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. §§ 1961 et seq., against Antar and certain individual defendants. At this time, the court has not decided class plaintiffs' pending motion to amend the complaint to include a RICO claim against Crazy Eddie's former accountants.
The proposed settlement provides, in substance, the following.
Class counsel seek fees of $ 14.2 million and reimbursement of expenses of $ 2 million, to be paid from the settlement fund. If after paying claims, attorneys' fees, and expenses, the settlement fund is not exhausted, the surplus would revert to the settling defendants.
In exchange class members would release all settling defendants (except, under certain circumstances, Antar's former wife, Deborah Ann Rosen, and her children) from all claims that have been or could have been raised in these cases.
The class may (and class counsel report that they intend to) seek the entry of judgment against Antar. Class counsel report that some $ 60 to 70 million, much of it in banks outside the United States, has been frozen by the United States District Court for the District of New Jersey, where Antar and others face criminal prosecution.
Class counsel estimate that the class ultimately will receive $ 30 to $ 50 million from these funds. Counsel report making a material contribution to the Securities and Exchange Commission's successful efforts to locate and freeze these assets. And they urge the court to give some weight to this projected benefit in deciding whether to approve the proposed settlement and request for attorneys' fees.
Class plaintiffs move for an order pursuant to Rule 23(e) of the Federal Rules of Civil Procedure approving the proposed settlement. That rule provides that a class action "shall not be dismissed ...