United States District Court, Southern District of New York
July 31, 2003
IN RE: PAINEWEBBER LIMITED PARTNERSHIPS LITIGATION
The opinion of the court was delivered by: Sidney Stein, District Judge
Presently before the Court is the Joint Petition for the Interim Award of Attorneys' Fees and Reimbursement of Litigation Expenses (the "Joint Petition"), submitted by counsel for the plaintiff class ("Class Counsel") in the above-captioned consolidated class action. Class counsel seeks $2,565,672.20 in attorneys' fees; $120,547.34 in attorneys' expenses; $632,415.77 in experts' fees and expenses; and authorization to establish reserves of (a) $316,125 for future experts' fees and expenses and (b) $250,000 for future attorneys' fees and expenses. With one exception, the time period for which Class Counsel seeks recovery of these fees and expenses relates to the settlement allocation phase of this action, extending from June 1, 1997 through either March 31, 2003 or April 30, 2003.*fn1
For the reasons set forth below, Class Counsel shall be awarded $217,956 in attorneys' fees and $12,938 for reimbursed expenses. In addition, the Court awards $632,415.77 in experts' fees and expenses. Finally, Class Counsel is authorized to establish reserves for future expert and attorneys' fees in accordance with the directives set forth in the Order accompanying this Opinion.
I. EFFORTS OF CLASS COUNSEL SINCE JUNE 1997
The history of this litigation and the details of the Settlement Agreement are set forth in full in this Court's Opinion and Order dated March 20, 1997. In re PaineWebber Ltd. Partnerships Litig., 171 F.R.D. 104 (S.D.N.Y. 1997), aff'd 117 F.3d 721 (2d Cir. 1997). In addition, the first award of attorneys' fees and expenses, which compensated the attorneys for work related to the litigation aspect of this case, was issued in this Court's Opinion and Order of March 27, 1998. In re PaineWebber Ltd. Partnerships Litig., 999 F. Supp. 719 (S.D.N.Y. 1998) (the "1998 Fee Opinion"). Therefor, only those facts relevant to the disposition of the pending petition are presented here. Those facts primarily relate to the settlement allocation phase of the action and the efforts of Class Counsel since June 1997.
In July 1996, PaineWebber agreed to the payment of $125 million to a class Settlement Fund plus Additional Benefits to resolve this action. After the settlement became final in March 1997, the initial distribution of the Settlement Fund took place in April and May of 1998. However, over the next several months — in mid-1998 — it was discovered that investors in several partnerships had received approximately $4.6 million in overpayments because of errors in the claims administration process. (See Oct. 29, 2001 Status Report by Class Counsel, attached as Exhibit A to Status Report of Class Counsel dated May 30, 2003.) Later still, after Class Counsel had retained Complete Claim Solutions ("CCS") to audit the Claims Administrator's work relating to the first distribution, CCS identified an additional $4.4 million that was paid to 1,100 Guaranteed Future Fund claimants who should have received no payment at all. (See May 30, 2003 Status Report.)
Although Class Counsel has made efforts to recover the $9 million in overpayments, there remain $2,436,512 unrecovered from the mismanagement of the claims distribution process. (See May 30, 2003 Status Report, ¶ 13.)
Since June 1997, in addition to addressing the settlement implementation problems, Class Counsel has also, among other matters, prepared the LookBack Settlement Fund for distribution and resolved certain outstanding disputes with PaineWebber.
The legal standards governing the Court's determination of appropriate attorneys' fees were discussed at length in the 1998 Fee Opinion. In re PaineWebber, 999 F. Supp. at 723-725. The Court will not restate those standards here, but the Court has applied them to its analysis of the Joint Petition. Several general matters concerning the fee awards will now be discussed, followed by an explanation for the fees awarded to each individual firm comprising Class Counsel.
A. No Multiplier Will Be Applied
Class Counsel requests a total of $2,565,672.20 in attorneys' fees, a figure Class Counsel reached by applying a multiplier of 1.4 to the total lodestar of $1,832,623. In its 1998 Fee Opinion, the Court concluded that, "subject to the approval of the Court," Class Counsel's future fees would be based on a multiplier of 1.4 applied to Class Counsel's lodestar figures. In re PaineWebber, 999 F. Supp. at 725.
Although a multiplier of 1.4 was applied to the fees awarded pursuant to the 1998 Fee Opinion, this Court is mindful of the fact that a multiplier "should not be applied indiscriminately to all aspects of the case." City of New York v. Darling-Delaware, 440 F. Supp. 1132, 1136 (S.D.N.Y. 1977); see also Roberts v. Solomon, 1981 WL 227, at *8 (D.D.C. Apr. 7, 1981). After carefully considering whether or not to apply the multiplier of 1.4 to the fees now requested in the Joint Petition, the Court concludes that applying any multiplier at all would be inappropriate.
First, courts in this and other districts have declined to award any multiple to hours spent on claims administration, "since there is no longer any risk involved at this stage in the proceedings." See Darling-Delaware, 440 F. Supp. at 1136; see also In re Equity Funding Corp. of America Securities Litig,, 438 F. Supp. 1303 n. 53 (D.C.Cal. 1977).
Second, applying a multiplier is unwarranted here in light of the significant mismanagement of the claims administration process. Although not the fault of Class Counsel alone, the claims administration errors nevertheless occurred on Class Counsel's watch and have led to lengthy delays and not insignificant errors in the settlement distribution process and the final resolution of this action.
While Class Counsel maintains that "no fees are sought with respect to the significant amount of time expended by Class Counsel in connection with and addressing the claims administration errors" (Joint Petition, ¶ 48), Class Counsel's own motion proves that statement to be too generous to itself. While Class Counsel may not be seeking fees for certain efforts to recover monies overpaid to class members, it still seeks compensation for work on the many matters that were affected by the claims administration errors. For instance, Class Counsel has included in its fee petition all time expended to prepare the LookBack Settlement Fund for distribution, including activities that involved the correction of the Net Cash Settlement Amount database due to claims administration errors and all other work related to the determination of recognized loss and modification of the Plan of Allocation for the LookBack Settlement Fund. (Chimicles Aff., ¶ 7.)
In short, the settlement mismanagement problems have infected many aspects of this phase of the action. Although Class Counsel should be compensated for a percentage of the work relating to those problems, it would be inappropriate to compensate counsel at a rate enhanced by a multiplier.
Accordingly, no multiplier will be applied to the fee awards in this phase of the action.
B. Hourly Rates
The lodestar calculations submitted by Class Counsel in the Joint Petition are based on the respective firms' current billing rates (except for individuals no longer working at the firms, for whom historic billing rates were generally used). The U.S. Court of Appeals for the Second Circuit has considered the question of whether a prevailing party should recover its attorneys' fees at current rates or historic rates. See New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136 (2d Cir. 1983) ("NYSARC"). The court wrote that "[n]either historic nor current rates are ideal" and noted that "historic rates did not reflect inflation or the cost of forgone interest, and, therefor, undercompensate prevailing parties." Id. at 1152. On the other hand, while current rates incorporate inflation into the fee award, "the incorporation is imprecise and can overcompensate prevailing parties." Id.
The Second Circuit concluded that historic rates should be used in multi-year cases so as to avoid windfall awards id. at 1153, but added that where "the services were rendered over two or three years, relevant figures for the current year will normally still be appropriate." Id. Thus, to ascertain attorneys' fees where, as here, the services were rendered for a period of more than two or three years, the Second Circuit advises a district court "to divide the litigation into just two phases and use one rate for the early phase and a current rate for the later phase." Id.; see also Grant v. Martinez, 973 F.2d 96, 100 (2d Cir. 1992).
Using Class Counsel's current rates for the entire six-year period covered by the Joint Petition would lead to windfall awards and is therefor inappropriate.*fn2 Accordingly, to reflect the six-year span covered by the Joint Petition, the Court will divide that period into two. The years 1997-2000 inclusive will be treated as the early period, and the years 2001 through 2003 will be treated as the later period.*fn3 Historic billing rates will apply to work performed in the early period and current rates will apply to work performed in the later period.
In order to determine the historic billing rates, the Court has compared Class Counsel's current billing rates to the rates submitted in 1997, in connection with Class Counsel's first petition for attorneys' fees. The historic billing rates were, on average, one-third less than the current rates. Therefor, fees for work performed by Class Counsel in the early period will be reduced by one-third. Work performed by Class Counsel in the later period will be compensated at Class Counsel's current billing rates.
Finally, the Court concludes that the historic and current rates are both reasonable and consistent with the rates charged by other experienced lawyers in financial class action cases.
C. Vague and Unrecoverable Fees
In evaluating time sheets and expense records, the Court looks to "its own experience generally as well as to the evidentiary submissions and arguments of the parties." Clarke v. Frank, 960 F.2d 1146, 1153 (2d Cir. 1992). The Second Circuit has determined that the district court is not required to "set forth item-by-item findings concerning what may be countless objections to individual billing items." Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994) (per curiam).
Counsel seeking fees must keep "accurate and current records of work done and time spent." NYSARC, 711 F.2d at 1147 (internal quotation marks and citation omitted). The time records must be contemporaneous and detailed, "specify[ing] for each attorney the date, the hours expended, and the nature of the work done." Id. at 1147-48. "Time records should enable the court to determine the nature of the tasks performed and the amount of time reasonably required to perform those tasks." Mr. X. v. New York State Educ. Dep't., 20 F. Supp.2d 561, 564 (S.D.N.Y. 1998). Where documentation of hours is vague or incomplete, the court may reduce the award. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). Because "it is unrealistic to expect a trial judge to evaluate and rule on every entry in an application," courts apply across-the-board percentage cuts "as a practical means of trimming fat from a fee application." NYSARC, 711 F.2d at 1146. Therefor, where appropriate, and as set forth in detail below, the Court has applied percentage cuts to the submissions of firms whose entries lack the requisite specificity.
III. ATTORNEYS' FEES and EXPENSES
A. Chimicles & Tikellis LLP
Chimicles & Tikellis, LLP ("Chimicles" requests a lodestar of $1,482,708.75 for 4,195 hours of work performed between June 1, 1997 and April 30, 2003.
Chimicles has failed to submit any contemporaneous time records. Instead, in support of its fee application, Chimicles merely provides the Court with a single-paged spreadsheet summarizing the amount of time spent by various attorneys and staff members on each of eight, broadly-defined matters pertaining to this action.
Because "contemporaneous time records are a prerequisite for attorney's fees" in the Second Circuit, NYSARC, 711 F.2d at 1147, the Court will not award Chimicles attorneys' fees and expenses until Chimicles submits to the Court the requisite contemporaneous time records. It is directed to do so within 30 days.
B. Finkelstein Thompson & Loughran
Finkelstein, Thompson & Loughran ("Finkelstein") requests a lodestar of $83,000.75 for 160.70 hours of work performed between June 1, 1997 and March 31, 2003.
Finkelstein's attorneys billed travel time at their full hourly rates, for a total of $6,045 in attorneys' fees for travel time to and from a shareholder meeting and to and from Philadelphia on three occasions for meetings related to this litigation. However, when determining attorneys' fees, courts in the Southern District of New York generally do not credit travel time at the attorney's full hourly rate and customarily reduce the amount awarded for travel to at least 50% of that rate. See e.g., Broome v. Biondi, 17 F. Supp.2d 211, 234-35 (S.D.N.Y. 1997); Wilder v. Bernstein, 975 F. Supp. 276, 283-84 (S.D.N.Y. 1997); Lilly v. County of Orange, 910 F. Supp. 945, 951 (S.D.N.Y. 1996). Travel time is widely recognized as less productive than regular time. Pascuiti v. New York Yankees, 108 F. Supp.2d 258, 271 (S.D.N.Y. 2000). Accordingly, the Court will only award attorneys' fees for travel time at 50% of counsel's hourly rates, reducing Finkelstein's total lodestar by $3,022.50 (i.e. half of $6045).
In support of its fee petition, Finkelstein has submitted contemporaneous attorney time records. Although many of the time records contain descriptions sufficient to enable the Court to determine the nature and subject matter of the tasks performed, a significant number of entries do not. A few of the latter entries are as follows: "Meeting with DGT; Telecon with Fred Isquith," "Telecon with Laird Stanton, R. Palitz," "Review memos," "Telecon with Amann; Paulitz," "Review letter to defense counsel," "Telecon with Nick Chimicles," "Telecons with Goldberg (2)."
Such entries are too vague for this Court to determine whether or not the amount of time spent on a particular task was reasonable. A 15% reduction of Finkelstein's lodestar (already adjusted for travel time, as described above) is warranted.
In addition, because approximately 42% of the 160.70 hours expended by Finkelstein fall into the early period of the six-year span covered by the Joint Petition, the Court will reduce 42% of the firm's lodestar by one-third to reflect the historic billing rates applicable to the early period.
Finkelstein is therefor awarded a total of $58,464 in attorneys' fees.
Finally, because Finkelstein's expenses are reasonable and sufficiently described, the Court awards Finkelstein $1,504 for expenses.
C. Goodkind Labaton Rudoff & Sucharow
Goodkind Labaton Rudoff & Sucharow LLP ("Goodkind") requests a lodestar of $14,486 for 27.40 hours of work performed between June 1, 1997 and March 31, 2003.
Goodkind has submitted contemporaneous time records that sufficiently enable the Court to determine the nature of the tasks performed and the amount of time expended on those tasks. Each entry lists the name of the attorney along with the date, time, and nature of the work performed. A separate table provides the hourly rate for each attorney who worked on the case.
Because approximately 25% of the hours expended by Goodkind fall into the early period, 25% of Goodkind's total lodestar will be reduced by one-third to reflect the historic billing rates applicable to that period. Accordingly, Goodkind will be awarded $13,278 in attorneys' fees. In addition, because Goodkind's expenses are reasonable and sufficiently described, the Court awards Goodkind $496 for expenses.
D. Milberg Weiss Bershad Hynes & Lerach LLP
Milberg Weiss requests a lodestar of $43,341.25 for 90 hours of work performed between June 1, 1997 and March 31, 2003.
Milberg Weiss has submitted contemporaneous time records that sufficiently enable the Court to determine the nature of the tasks performed and the amount of time expended on those tasks. Each entry lists the attorney, date, time, value, and nature of the work performed. A separate exhibit provides the hourly rate for each of the attorneys or staff members who worked on the case.
Approximately 77% of the hours expended by Milberg Weiss fall into the early period of the six-year span covered by the Joint Petition. Accordingly, the Court will reduce 77% of Milberg Weiss' total lodestar by one-third to reflect the historic billing rates applicable to the "early period."
Milberg Weiss is therefor awarded $32,217 in attorneys' fees.
Finally, because Milberg Weiss' expenses are reasonable and adequately described, the Court also awards Milberg Weiss $2,832 for expenses.
E. Morris & Morris CCL Counselors at Law
Morris & Morris requests a lodestar of $58,706.25 for 118.75 hours of work performed between June 1, 1997 and March 31, 2003.
Morris & Morris has submitted contemporaneous time records that sufficiently enable the Court to determine the nature of the tasks performed and the amount of time expended on those tasks. Each entry lists the attorney, date, time, rate, value, and nature of the work performed.
However, because approximately 94% of the 118.75 hours expended by Morris & Morris fall into the early period, 94% of the total lodestar requested by Morris & Morris will be reduced by one-third to reflect the historic billing rates applicable to that period.
Accordingly, Morris & Morris will be awarded $40,311 in attorneys' fees.
In addition, because Morris & Morris' expenses are reasonable and sufficiently described, the Court awards it $2,517 for expenses.
F. Wolf Haldenstein Adler Freeman & Herz LLP
Wolf Haldenstein requests a lodestar of $126,863 for 289.6 hours of work performed between June 1, 1997 and March 31, 2003.
In support of its fee petition, Wolf Haldenstein submitted attorney time records. It also submitted a separate summary of the hourly billing rates and total time expended by each attorney who worked on the case. Although many of the time records contain descriptions sufficient to enable the Court to determine the nature and subject of the tasks performed, a significant number of the records lack sufficient detail.
For instance, many of the entries for the named partner designated in the time records as "Timekeeper #9" are insufficiently detailed. The entries dated 8/13/97 — 10/20/97, 4/20/98 — 11/13/98, and 3/27/00 — 10/03/00 for that partner are particularly vague, with numerous entries that simply state as follows: "Telephone call Chimicles," "Telephone call Sandler," "Correspondence," "Conference with DWK." It is important to note that he expended more hours on this case (indeed, nearly twice more) than any other attorney at Wolf Haldenstein.
There were vague time entries for other attorneys as well. For instance, the named attorney designated as "Timekeeper 15" has numerous entries that simply describe work as "Conversation with LPK," "Call to M. Rudolph; reviewed notes," "Conversation with K. Chimicles."
It is impossible for the Court to ascertain the subject matter on which those hours were spent and the time entries are too vague for the Court to determine whether or not the amount of time spent on a particular task was reasonable. Accordingly, a 15% reduction of Wolf Haldenstein's total requested lodestar of $126,863 is warranted.
In addition, because 95% of the 289.60 hours expended by Wolf Haldenstein fall into the early period, the Court will additionally reduce 95% of the firm's lodestar by one-third to reflect the historic billing rates applicable to the early period.
Wolf Haldenstein is therefor awarded a total of $73,686 in attorneys' fees.
The firm also requests $20,855.39 for expenses, $15,265.43 of which are for "Computer Research." However, the Second Circuit has written that "computer research is merely a substitute for an attorney's time that is compensable under an application for attorneys' fees and is not a separately taxable cost." U.S. for Use and Benefit of Evergreen Pipeline Const. Co., Inc. v. Merritt Meridian Const. Corp., 95 F.3d 153, 173 (2d Cir. 1996). Moreover, daily entries provided by Wolf Haldenstein provide virtually no elaboration on the subject matter of the research. Because of this inadequate documentation, it is impossible for the Court to translate — in even an approximate manner — these computer research costs into Wolf Haldenstein's attorneys' time.
Therefor, the firm will not be compensated for its computer research costs and will be awarded a total of $5,589 for expenses.
G. Lieff, Cabraser, Heimann & Bernstein, LLP
Lieff Cabraser requests a lodestar of $23,517 for 84.30 hours of work performed in this case. Only 24 minutes relate to work performed between 2001-2003. The remainder of Lieff Cabraser's fees relate to the period extending from December 1994 through August 1996, the time in which Lieff Cabraser worked on the litigation phase of this action. However, attorneys' fees for the litigation phase of this action were determined by this Court in March 1998. See In re PaineWebber Ltd. Partnerships Securities Litig., 999 F. Supp. 719 (S.D.N.Y. 1998). As discussed previously, the present round of attorneys' fees relates to the post-litigation phase of this action. Not only is it troubling that Lieff Cabraser only now seeks its attorneys' fees, but it is, at a minimum, puzzling that the firm seeks to recover those aged fees at its current billing rates.
Fed.R.Civ.P. 54(d)(2)(B) requires expedition in seeking attorneys' fees. This Court's Order and Final Judgment Approving the Settlement Agreement and Plan of Allocation was issued on March 31, 1997. The Court issued no order extending the time for Lieff Cabraser. Accordingly, Lieff Cabraser's May 30, 2003 petition for attorneys' fees — which relates almost entirely to the litigation phase of this action — is untimely.
Lieff Cabraser's application for costs and expenses is similarly untimely. See Local Rule 54.1 of the Southern and Eastern Districts of New York.
The Court may, "upon request," extend the time period prescribed in the Rules for filing a petition for fees and costs, provided the request was made before the time period expired, or, upon a motion made after that time if the failure to act was the result of excusable neglect. See Fed.R.Civ.P. 6(b). However, Lieff Cabraser has made no such request or motion. Indeed, the affidavit in support of Lieff Cabraser's fee petition makes no attempt to explain the firm's six-year delay in seeking compensation for its work. The only acknowledgment of this delay appears in Class Counsel's Joint Petition, which states that "the time of the firm of Lieff Cabraser . . . inadvertently was omitted from the initial fee petition." (See Joint Petition, ¶ 37.)
Even if the Court were to construe that portion of the petition as a request for an extension of time on behalf of Lieff Cabraser, there is neither a showing of excusable neglect nor any other explanation proffered for Lieff Cabraser's delay in submitting its request for fees or bringing the so-called inadvertent omission of that request to this Court's attention.
Lieff Cabraser's petition for attorneys' fees and expenses is therefor denied in its entirety as untimely.
IV. EXPERTS' FEES AND EXPENSES
The experts in this action have incurred a total of$632,415.77 in fees and expenses that have not been paid by either Class Counsel or PaineWebber from July 1, 1997 through April 30, 2003. The Court has reviewed the invoices submitted by the experts and deems the fees and expenses to be reasonable and appropriately documented. Accordingly, the Court awards $632,415.77 for experts' fees and expenses to be paid out of the CRIS Account maintained by the Clerk of this Court for this action pursuant to the schedule set forth in the accompanying Order.
Because it is expected that Class Counsel and various experts will be required to expend additional resources over time implementing the distribution of the LookBack Settlement Fund and on other matters, Class Counsel are authorized to establish reserves for future attorneys' fees and expenses and for future expert fees and expenses, pursuant to the accompanying Order.
Accordingly, Class Counsel's request for attorneys' fees and reimbursement of expenses is granted to the extent that Class Counsel is awarded $217,956 in attorneys' fees and $12,938 for expenses, as set forth above and in the schedules contained in the Order accompanying this Opinion. Furthermore, experts' fees and expenses are awarded in the amount of $632,415.77, and reserves are to be established as detailed in the Order accompanying this Opinion.