The opinion of the court was delivered by: ROBERT W. SWEET
This class action (the "Maywalt Action") arises out of a transaction (the "Transaction") by which oil and gas limited partnerships were consolidated into a new entity pursuant to an exchange agreement. Former limited partners of these partnerships (the "Plaintiffs" or "Class Members") bring this action against the general partner, the new company created through the exchange agreement, various individual officers and directors of the general partner, and the investment banking firm which rendered a fairness opinion regarding the Transaction. The Plaintiffs allege various federal securities and common law claims.
The Plaintiffs and the Defendants Parker & Parsley Petroleum Company ("Parker & Parsley"), Scott D. Sheffield, Herbert C. Williamson, Timothy M. Dunn, James D. Moring, Robert J. Castor, and A. Frank Kubica (collectively, the "Parker & Parsley Defendants") have moved for an Order granting final approval of the proposed stipulation of settlement among the parties (the "Proposed Settlement") filed with this Court on April 12, 1994. A number of objections to the Proposed Settlement have been received, most notably, by certain of the Class Representatives.
Also before the Court are two fee applications -- one from the law firms that represented the plaintiff class ("Class Counsel") and another from Thomas Olick ("Olick"), a Class Member who claims to have incurred consulting fees and expenses on behalf of the class.
Olick has also moved for an extension or re-opening of the deadline for the filing of Notices of Claims.
For the reasons set forth below, the settlement is fair, reasonable, and adequate and the motion to approve the Proposed Settlement is granted. The fee application of Class Counsel is granted without the requested application of a multiplier. Olick's fee application is denied, except as noted below, as is his motion to extend or re-open the Notice of Claim deadline.
Defendants Barrie M. Damson, William T. Ouzts, Robert F. Carr, III, J. William Pierce, Robert S. Rose, Jerol M. Sonosky, and Garth M. Ramsay were officers and directors of DOC ("DOC Defendants").
Parker & Parsley is the company formed by the consolidation of the Damson Limited Partnerships with certain other partnerships ("Parsley & Parker Partnerships"), and it is this transaction, culminating in the creation of Parker & Parsley, that gave rise to the claims in this action. Officers and directors of Parker & Parsley named as individual defendants are Scott D. Sheffield, Herbert C. Williamson, III, Timothy M. Dunn, James D. Moring, Robert J. Castor, and A. Frank Kubica.
Prior Proceedings and Facts
The prior proceedings in this action are set forth in the previous opinions of this Court, familiarity with which is presumed. See Maywalt v. Parker & Parsley Petroleum Co., 808 F. Supp. 1037 (S.D.N.Y. 1992) (dismissing all claims against Defendant investment bankers Smith Barney Harris Upham ("Smith Barney") and disposing of various other motions) ("Maywalt I"); Maywalt v. Parker & Parsley Petroleum Co., 147 F.R.D. 51 (S.D.N.Y. 1993) (certifying class pursuant to Rule 23(a)(4), Fed. R. Civ. P.) ("Maywalt II"); Maywalt v. Parker & Parsley Petroleum Co., 155 F.R.D. 494 (S.D.N.Y. 1994) (denying Class Representatives' motion to discharge Class Counsel) ("Maywalt III").
The first settlement hearing in the Maywalt Action took place on June 22, 1994, the same day this Court issued Maywalt III, denying the Class Representatives' motion to discharge Class Counsel. An eleventh hour notice appealing that denial was filed by the Class Representatives late in the afternoon of Friday, July 15, 1994.
At the continuation of the settlement hearing, on Tuesday, July 19, 1994, the Court ruled that an order denying a motion to discharge Class Counsel was not immediately appealable pursuant to 29 U.S.C. § 1291 (1985). See Hearing Trans. of July 19, 1994 at 28-30 (making reference to Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990), cert. denied, 498 U.S. 1025, 112 L. Ed. 2d 667, 111 S. Ct. 675 (1991)); Richardson-Merrell Inc. v. Koller, 472 U.S. 424, 430-32, 86 L. Ed. 2d 340, 105 S. Ct. 2757 (1985) (O'Connor, J.) (clarifying Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 66 L. Ed. 2d 571, 101 S. Ct. 669 (1981) (holding orders denying motions to disqualify counsel in civil cases not appealable as final decisions under § 1291 or under the "collateral order" doctrine as set forth in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949))).
Only those facts relevant to the Settlement process are presented below.
Settlement negotiations concerning the New York State Supreme Court companion action, Lindenauer v. Damson, Index No. 5582/91 (the "Lindenauer Action"), commenced prior to the actual filing of the Maywalt Action. The Lindenauer Action was filed before the closing of the Transaction and was the only action by Damson investors pending for some time. Apparently at the numerous phone and in-person settlement conferences
various settlement proposals were discussed, including the notion of issuing warrants for Parker & Parsley common stock to putative Class Members. Notwithstanding these lengthy negotiations, no agreement for the Lindenauer Action was reached.
In February of 1992, Class Counsel filed the Maywalt Action in this Court. According to the DOC Defendants, during the pending settlement negotiations in the Lindenauer Action between LeClair and Jacobs, the Parker & Parsley Defendants are said to have offered $ 3,000,000 to the Lindenauer plaintiffs. In the ensuing months, Parker & Parsley upwardly revised their settlement proposal to an amount between $ 5,000,000 and $ 6,000,000, but only if such a settlement would fully release the Defendants from all claims in both the Lindenauer and Maywalt Actions.
From the summer of 1992 and into 1993, the settlement negotiations continued to no avail. At this point, David Markham and Michael LaBazzo of Sullivan, Hill, Lewis & Markham entered the settlement fray, as putative Class Counsel for the Maywalt Plaintiffs. In early 1993, this Court then suggested that the settlement process be supervised, and, as a result, Magistrate Judge Leonard Bernikow was designated to oversee the ensuing settlement negotiations. The first settlement conference before Magistrate Judge Bernikow occurred in June of 1993. Ultimately the parties participated in five in-person and 17 telephone settlement conferences as well as conducted numerous other negotiations outside the presence of Magistrate Judge Bernikow. Throughout this period rigorous discovery was conducted. Numerous depositions were taken and hundreds of documents produced.
I. The Proposed Settlement
The Proposed Settlement provides the following benefits to the Class: first, the Defendants will make a total of $ 8,250,000 in cash payments, which sum has been earning interest since March 10, 1994; second, the Defendants will pay the costs of notifying the Class of this Proposed Settlement, estimated to be approximately $ 60,000; and third, the Defendants will pay the costs of administering the Proposed Settlement, which could be as much as $ 350,000 plus the out of pocket disbursements of the Claims Administrator.
The Class Counsel's attorneys fees are to come out of the cash payment to the Plaintiff Class.
Notice of Settlement regarding the Proposed Settlement was sent out to the approximately 89,000 members of the Class by first class mail on May 17, 1994, in accordance with this Court's Order of May 4, 1994. Two hearings were conducted in this matter. The first was held on June 22, 1994 and the second, on July 19, 1994. As of July 19, 1994, proof of claims were filed by 21,500 Class Members and nearly 2,700 objections to the Proposed Settlement were received. Only twenty of these objections appear to have been authored by the Class Members who submitted them, the remainder having been solicited by Olick and submitted on forms drafted and distributed by him. Olick's opposition to the Proposed Settlement is discussed below.
"There are weighty justifications . . . for the general policy favoring the settlement of litigation." Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir. 1982) (Friendly, J.) (citing 3 Neuberg, Class Actions § 5570c at 479-80 (1977)), cert. denied, 464 U.S. 818, 78 L. Ed. 2d 89, 104 S. Ct. 77 (1983); see Chatelain v. Prudential-Bache Sec., Inc., 805 F. Supp. 209, 212 (S.D.N.Y. 1992); In re Gulf Oil/Cities Serv. Tender Offer Litig., 142 F.R.D. 588, 590 (S.D.N.Y. 1992).
It is well established that courts' principal responsibility in approving class action settlements is to ensure that such settlements are fair, adequate and reasonable. See, e.g., Weinberger, 698 F.2d at 73 ("The central question raised by the proposed settlement of a class action is whether the compromise is fair, reasonable, and adequate."); Parker v. Anderson, 667 F.2d 1204, 1209 (5th Cir. Unit A 1982) (noting that courts will not approve a class action settlement unless it is found fair, adequate and reasonable), cert. denied, 459 U.S. 828, 74 L. Ed. 2d 65, 103 S. Ct. 63 (1982).
The Second Circuit has held that nine factors are generally considered in determining the fairness of a proposed settlement:
(1) the complexity, expense and likely duration of the litigation, (2) the reaction of the class 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 the trial, (7) the ability of the defendants to withstand a greater judgment, (8) the range of reasonableness of the settlement fund in light of the best possible recovery, (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1323-24 (2d Cir. 1990) (citing Robertson v. National Basketball Ass'n, 556 F.2d 682, 684 n.1 (2d Cir. 1977) (quoting City of Detroit v. ...