United States District Court, S.D. New York
March 10, 2004.
IN RE EMEX CORP. SECURITIES LITIGATION THIS DOCUMENT RELATES TO: All Actions
The opinion of the court was delivered by: SHIRLEY KRAM, Senior District Judge
ORDER & OPINION
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
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
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
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
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
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.
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
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
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.