settled with the SEC, they could have taken the position that they had done as much as they were required to do and that the settlement with the SEC provided any investor who thought he or she was entitled to recover with an efficient and inexpensive means of obtaining such recovery. Not only did counsel for plaintiffs take that risk, they advanced their own funds and financed the Constituent Actions and the consolidated action for over three years. Because of the magnitude of the action, the volume of documents produced and the sophisticated document management systems which had to be put in place, and the complexity, factual and legal, of the issues faced, counsel for plaintiffs were required to expend substantial amounts of professional time and money in order to prosecute the action, with no certainty of recovery thereof from any source, thereby magnifying the already substantial risks.
Attorneys who achieve a benefit for class members are entitled to be compensated for their services.
This Court has held that the calculation of the fees to be awarded in an equitable fund case must be made in accordance with the Second Circuit's decision in City of Detroit v. Grinnell Corporation ("Grinnell I"), 495 F.2d 448 (2d Cir. 1974) which mandates the use of the lodestar method.
However, this Court has found it appropriate to test the reasonableness of fee awards by reference to the percentage-of-recovery method.
The Court has also recognized that the lodestar analysis is subject to discretionary upward adjustments and provides a useful guide for determining a fair and reasonable fee in common fund recovery cases.
The fee requested by Petitioners is appropriately to be considered under the lodestar/multiplier approach. Under this approach, the District Court must first quantify the attorney's services in terms of the time he has expended on the case.
Secondly, the court must value those hours. Next, the court must multiply the number of hours that each lawyer worked on the case by the hourly amount to which attorneys of like skill in the area would typically be entitled for a given type of work on the basis of an hourly rate of compensation.
The resulting number is the attorney's lodestar. Class Counsel's lodestar here is claimed to amount to $ 20,333,296.25.
Calculation of the lodestar is simply the beginning of the analysis.
The Court has broad discretion which should be appropriately exercised to adjust the lodestar to take into account such factors as: (i) the contingent nature of the expected compensation for their services; (ii) the consequent risk of non-payment viewed as of the time of filing the suit; (iii) the quality of representation; (iv) the results achieved. In high risk common fund cases such as these, courts normally apply a multiplier to the lodestar to adjust for the foregoing considerations in arriving at the total fee to be awarded.
Numerous courts have recognized that the attorney's contingent fee risk is an important factor in determining the fee award.
From the outset, there was considerable doubt as to whether a favorable result was achievable and whether despite thousands of hours of effort and hundreds of thousands of dollars in expenses, plaintiffs' counsel would be compensated. Petitioners have had considerable experience in complex class action litigation in this Court and in federal and state courts throughout the country.
The record demonstrates that Petitioners had the experience and resources to prosecute this case through trial and beyond, which contributed to the outstanding result. In the end, the quality of Petitioners' work is best reflected by the extraordinary Settlement obtained for the benefit of the Class.
The Settlement is among the largest resolutions of a class action ever achieved.
In recent years the award of attorneys' fees based on a percentage-of-the-fund recovered for the class has found increased favor again with some courts,
although the lodestar method remains the basic required method in the Second Circuit.
The requested fee represents 30% of the common fund, after deduction of litigation expenses. Many courts have approved and awarded fees in class actions of one-third of the settlement fund in recognition of the substantial services performed by counsel and the risks undertaken.
One untimely and improperly filed letter purporting to object to the Settlement and Fee request surfaced shortly before the fairness hearing. This isolated expression of opinion is to be viewed in the context of thousands of class members who have not expressed themselves similarly.
However, it is the Court's duty to avoid any sense of vicarious generosity and to enhance the lodestar determined by the Court with a fair step up. After mature reflection, it is the Court's considered opinion that the fair and reasonable measure for compensation of the herculean effort exhibited in this case and the result achieved and the delay in payment and the services required due to administrative requirements in distributing the recovery to the Class should be compensated by an award of fees in the amount of $ 29,700,000. The award shall cover all services rendered and to be rendered until completion of this partial settlement including final distribution of the class fund represented by the partial settlement.
The allowed amount (as adjusted) of counsel's costs and expenses of $ 1,895,311.16 shall be reimbursed currently out of the class recovery. An advance against fees payable shall be paid to counsel out of the Fund on deposit within 30 days hereof in the amount of 75% of the fee award. An amount representing 25% of the fee award shall be reserved for payment to be made contemporaneously with distribution of the class fund to the class members and the termination of the class fund applicable to the partial settlement herein. Said reserved amount is to be segregated under a sub-account of the Fund. It is fair and equitable that the interest earned on the deposited fund should be payable to the Class as compensation to it for that necessary delay and as some reimbursement for uncompensated losses of the class members. On the other hand the enhancement of the lodestar awarded to counsel has included consideration for the necessary further services and delay in completely satisfying their contingency interest until that has ripened into an actual distribution to the class.
The fees awarded to counsel are in satisfaction of all services previously rendered as well as those additional administrative services contemplated to be performed in connection with the distribution of the Fund from the partial settlement. In the event that unusual or extraordinary administration services are required, the attorneys for the Class may apply to the Court for further consideration of such circumstances.
The award shall be allocated among the attorneys who participated in the prosecution of the class proceedings through to the partial settlement, to be made under guidance of Melvyn I. Weiss and Lawrence A. Sucharow, Liaison Counsel for plaintiffs' Executive Committee and evidenced by agreements reached by all participants and approved by the Court.
An order and final judgment awarding attorneys' fees and expenses, accordingly, including a Rule 54(b) determination, should be submitted for the Court's consideration.
Dated: New York, NY
January 24, 1996
Senior U.S. District Judge