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July 31, 2003


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.


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 ...

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