DISALLOWANCE OF INTEREST ON FEE AWARDS
On the eve of trial of the so-called Pacific Lumber Class and Shareholder Trading actions, six in number, brought by former shareholders of Pacific and consolidated in the above-captioned multi-district litigation, a Settlement was reached on May 17, 1994, providing for a settlement fund of up to $ 52 million less reserves for taxes and administration. Those six actions were consolidated in the above-captioned multi-district litigation (MDL 732) and certified by the Court to proceed on behalf of plaintiff class (Class VI).
In addition to that settlement, two prior settlements with other settling defendants referred to as the "Drexel Settlement" with the Drexel defendants and the "Milken Settlement" with Michael Milken and certain of his associates, yielded recoveries on behalf of the former stockholders of Pacific Lumber. In addition, the Pacific Lumber stockholders received distributions from disgorgement funds established by the SEC in settlements with Drexel and Michael Milken. The total distribution from these settlements and the disgorgement funds came to about $ 92 million before taxes and administration costs.
The plaintiffs' attorneys in the Class VI actions applied to the Court for an award of attorneys' fees and expenses in the Class VI suits, and also applied to the Court for attorneys' fees on the additional recoveries of the Pacific Lumber stockholders from allocations that the Court had approved from the Drexel and Milken Settlements and the two disgorgement Funds, respectively, the Subclass B Fund and the Schedule 8 Fund. The interest of Pacific Lumber in these Funds was to be evaluated by an Executive Committee for Subclass B and by a Steering Committee for Schedule 8.
The Executive Committee for Subclass B determined the amount to be allocated to each claimant from the Subclass B Fund, including the Pacific Lumber stockholders. A designated representative was assigned to represent the Pacific Lumber stockholder claimants in proceedings before the Executive Committee. Lowell Sachnoff, Esq. of the Chicago law firm of Sachnoff & Weaver was appointed by the Court to serve as designated representative for the Pacific Lumber stockholder claim. A disinterested member of the Executive Committee was assigned to review that claim, negotiate with the designated representative for the claimants, and to recommend a value for the claim to the Executive Committee.
The valuation of the Pacific Lumber stockholder claim in Drexel Subclass B Fund was presumed to apply equally to the Milken Schedule 8 Fund allocations because of the similarity of the underlying charges in the claims. The Schedule 8 Steering Committee, with the concurrence of the SEC representative thereon, concluded that there was no basis for revisiting the Drexel Subclass B valuation for the Pacific Lumber claim.
After the allocation proceedings, the Pacific Lumber stockholder claims against the Subclass B Fund and the Drexel Civil Disgorgement Fund yielded a recovery estimated at about $ 46 million before taxes and administration costs; the recovery to the Pacific Lumber stockholders from the Schedule 8 Settlement Fund and the Milken Civil Disgorgement Fund was similarly estimated at $ 46 million before taxes and administration costs. No private counsel played any significant role in the disgorgements which the SEC obtained from Drexel and Milken; those funds having been created solely through the efforts of the SEC. Accordingly, no compensation was to be paid on account of the creation of those funds. However, it was ruled that compensation was due for counsels' services in obtaining from both the settlement and disgorgement funds the distributions for the Pacific Lumber stockholders in the Subclass B allocation proceedings and the Schedule 8 allocation proceedings.
At a hearing held on March 16, 1995, the Court found the Joint Declaration of counsel for the award of attorneys' fees and reimbursement of expenses, which had been filed on March 1, 1995, was unacceptable for the award of fees or the reimbursement of expenses and a refiling was required.
After a refiling and on realistic appraisal and required modification of the claimed lodestars submitted by counsel, and upon consideration of an appropriate premium enhancement thereof, the Court, in its discretion, made the following intended allowances to counsel for the moving parties herein:
Gold & Bennett
for shareholder actions: $ 4,000,000
for Drexel/Milken allocations: $ 1,650,000
Total allowance: $ 5,650,000
for Shareholder actions: $ 6,000,000
for Drexel/Milken allocations: $ 2,500,000
Total allowance: $ 8,500,000
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