The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge
In this class action, plaintiffs allege that the defendants violated the Racketeer Influence and Corrupt Organizations Act ("RICO") and are liable for damages that result from civil conspiracy, breach of fiduciary duty, fraud, breach of contract, breach of duty of good faith and fair dealing, negligent misrepresentation, professional malpractice, the declaratory judgment, unjust enrichment, and unethical, excessive and illegal fees. The Court certified the class for settlement purposes and preliminarily approved the settlement in an Order issued August 22, 2005.
In the Final Judgment and Order dismissing the claims against defendants, the Court approved the class settlement but reserved judgment on the award of attorneys' fees and expenses. For the reasons stated below, I conclude that the attorneys' fees request is excessive and award Class Counsel $781,830.00 in fees and $77,782.50 in expenses.
Commencing in 2000, the defendants advised taxpayers on a tax shelter strategy that the IRS has now challenged. Approximately 180 Class Members contend that substantially the same tax strategy advice was given to them by the defendants. Plaintiffs allege that the defendants marketed the tax strategies as legitimate, but with knowledge that the scheme would be deemed invalid by the IRS.
The final settlement created a Settlement Fund of $4.599 million to resolve the damage claims of the class against the defendants. Class Counsel seek $997,582.50, 21.69% of the fund, in attorneys' fees and expenses.
Attorneys' fees must be reasonable under the circumstances. Goldberger v. Integrated Res. Inc., 209 F.3d 43, 47 (2d Cir. 2000). To determine reasonableness, courts consider: "(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation . . .; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations." Id. at 50. It is in the district court's discretion to determine the reasonableness of the award. Id. at 47.
Class Counsel argue that an award of 21.69% of the Settlement Fund is fair, adequate and reasonable. For the reasons set forth below, I disagree.
1. Time, Labor and Complexity
Neither the first nor second Goldberger factor, time and labor expended by counsel or complexity, justify an award to Class Counsel over the lodestar amount.
Class Counsel state they spent 1,941.15 hours on this matter. Canada Decl. at ¶ 7, 10; Cory Decl. at ¶ 3; Lathram Decl. at ¶ 3. According to Counsel's declarations, this time was spent 1) interviewing Class Members and their current tax advisors, 2) reviewing and analyzing Class Member documents, 3) conducting legal research, 4) consulting with experts, 5) identifying and analyzing potential defendants' liability and damages for Class Members' claims, 6) drafting motions and briefings, 7) participating in oral arguments, 8) engaging in extensive settlement negotiations, 9) engaging in extensive conferences with Class Members and co-counsel, 10) preparing informal document requests for defendants, 11) analyzing over 2,156 pages of documents produced in discovery, 12) attending hearings in ...