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United States District Court, S.D. New York

March 10, 2004.


The opinion of the court was delivered by: SHIRLEY KRAM, Senior District Judge


On February 18, 2004, the Court received the Special Master's Report and Recommendation regarding the request of plaintiffs' counsel for fees in this matter. Pursuant to Federal Rule of Civil Procedure 53(g)(2), the parties were permitted to file objections to the findings of the Report. Plaintiffs filed formal objections to the Report, while the defense took no position on the Special Master's Report and Recommendation.

I. The Court Adopts the Report of the Special Master

  As part of the Proposed Order and Final Judgment in this case, plaintiffs' counsel requested 30% of the $1,300,000 Settlement Fund ($390,000), plus interest, and $23,179.94 in expenses. After receiving the Proposed Order and Final Judgment, the Court appointed Special Master Douglas Land, Esq. to review the attorneys' fee application. While it is not necessary to discuss the Special Master's Report in great detail, in order to adequately respond to plaintiffs' objections to the Report, the Court will Page 2 briefly summarize the findings of the Special Master.*fn1 After a thorough review of both the plaintiffs' fee application and relevant Second Circuit precedent, the Special Master found that a fee award of 25% of the Settlement Fund, as opposed to the 30% requested by plaintiffs' counsel, was appropriate. In reaching this conclusion, the Special Master focused on six factors: 1) time and labor expended by counsel; 2) the magnitude and complexity of the litigation; 3) the risk of the litigation; 4) the quality of the representation; 5) the requested fee in relation to the settlement; and 6) public policy considerations. The Special Master noted that, when compared with comparable securities plaintiffs attorneys, the rates of the attorneys in this matter were high. Further, the Special Master discovered several time entries that were either non-corresponding or inadequately descriptive. Finally, the Special Master concluded that the amount of risk associated with this litigation was considerably lower than the plaintiffs contended.

  In response to the Special Master's Report, plaintiffs raise numerous objections. For the reasons set forth below, the Court finds that none of plaintiffs' objections provide any basis upon which to depart from the findings of the Special Master with Page 3 respect to the fee submission of plaintiffs' counsel.

  First, plaintiffs argue that the Report fails to take into account the fact that eligible claimants stand to recover more than their recognized losses in this case. Response of Plaintiffs' Counsel to Special Master's Report and Recommendation, dated March 1, 2004 ("Pl. Resp.") at 2. There is, however, no indication that the Special Master was not aware of this fact. Further, the fact that the claimants will fully recover does not address the substantive grounds for fee reduction in the Report; namely, that this litigation involved relatively minimal risk and that there were problematic billing and time entries.

  Second, plaintiffs' counsel argues that even if it is awarded the 30% fee ($390,000), such fee pales in comparison to the $450,000 defense counsel received for its work on this case. Pl. Resp. at 2-3. Again, however, the fee of opposing counsel, in addition to not being a factor in the Second Circuit's attorneys fees jurisprudence, bears no relation to the grounds for fee reduction in the Special Master's Report.

  Third, plaintiffs' counsel contends that a significant amount of time and skill were necessary to reach a final settlement in this case. Pl. Resp. at 3. However, the Report explicitly acknowledges the commendable work of the attorneys and firms involved in this case; as such, the time and skill involved in procuring a settlement do not provide a basis upon which to depart Page 4 from the Report of the Special Master.

  Fourth, plaintiffs' counsel claims that the Special Master's finding that some time entries were deficient is unwarranted because "most of the challenged entries were for.5 hours or less." Id. Plaintiffs' counsel further characterizes the Special Master's Report as "nit-picking." Id. The Court disagrees. In finding that there were inadequate time and billing entries, the Special Master was doing exactly what the Court requested of him, as well as protecting the interests of the plaintiffs; accordingly, the objection on this ground is without merit.

  Fifth, plaintiffs' counsel contends that the Special Master's challenge to the billing rates of both plaintiffs' firms is unwarranted because the institutional investors that retained the plaintiffs' firms have not challenged the rates. Pl. Resp. at 3-4. In addition, plaintiffs' counsel argues that The 2003 Survey of Law Firm Economics, relied upon by the Special Master, is imperfect because it includes counsel involved in securities offerings and other work that does not necessarily command the same premium as litigation. Pl. Resp. at 4. Both of these objections are unpersuasive. The lack of an objection to the attorneys' fees by the institutional investors is unrelated to the grounds for reduction delineated by the Special Master. Further, The 2003 Survey of Law Firm Economics is a perfectly appropriate resource for the Special Master to have used. Page 5

  Having found that the objections to the Report of the Special Master are without merit, the Court hereby adopts the Report in its entirety.

 II. The Special Master's Fees Will Come From the Settlement Fund

  In an order dated December 3, 2003, and pursuant to Federal Rule of Civil Procedure 53(h)(2)(A), the Court ordered that the expense of the Special Master be shared equally by the parties. Both parties objected to this allocation and requested that the Court order the payment of the Special Master's fees from the Settlement Fund. After considering the objections of both parties, the Court hereby modifies its December 3, 2003 to reflect that the expenses of the Special Master will come from the Settlement Fund, and not the parties. The Court has the authority to allocate the Special Master's compensation from the Settlement Fund pursuant to Fed.R.Civ.P. 53(h)(2)(B).

  In this case, Special Master Land has submitted fees totaling $36,050.00. In addition, the Special Master has submitted expenses totaling $153.49. After carefully reviewing both submissions, the Court finds that both the fees and expenses are reasonable. Accordingly, the parties shall arrange payment from the Settlement Fund to Special Master Land in the amount of $36,203.49.*fn2 Payment shall be made as soon as practicable. Page 6

 III. The Court Approves The Order and Final Judgment

  Attached to this Order is the Proposed Order and Final Judgment submitted to the Court by the parties, which the Court hereby accepts.*fn3 In conclusion, by this Order and Opinion, the Court: 1) adopts the Report of the Special Master; 2) orders that the compensation of the Special Master be paid from the Settlement Fund; and 3) approves the attached Order and Final Judgment.


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