UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
March 28, 2006
IN RE WORLDCOM, INC. SECURITIES LITIGATION
THIS DOCUMENT RELATES TO:
The opinion of the court was delivered by: Denise Cote, District Judge
MEMORANDUM OPINION AND ORDER
Attorneys for James J. Savage and John Marshall Lusk, Jr. ("Savage", "Lusk", and "Objectors") have moved for attorneys' fees and reimbursement of expenses in connection with their objections to the $2.575 billion settlement between the Citigroup Defendants and the class in the WorldCom Securities Litigation.*fn1
The settlement was approved. See In re WorldCom, Inc. Sec. Litig., 2004 WL 2591402 (S.D.N.Y. Nov. 12, 2004)("Opinion"). For the following reasons, the application on behalf of Savage is denied. Lusk will be given an opportunity to supplement his application.
The Objectors were among six persons who filed timely objections to the settlement. Id. at *9. Lusk and Savage each submitted written objections which they signed personally and which identified them as appearing "pro se".*fn2 At the November 5, 2004 fairness hearing held to review the terms of the settlement, however, two attorneys appeared on behalf of Savage and Lusk.*fn3
Counsel for Lusk spoke at some length; counsel for Savage spoke very briefly, adopting one of the arguments already made on behalf of Lusk and resting on Savage's written objection. In making their objections and in pressing this application for attorney's fees, neither Savage nor Lusk has provided proof of membership in the class. Id. at *9 n.28.*fn4
In their written submissions the Objectors first argued against approval of the settlement. Each of their objections to the settlement was rejected. Id. at *11-12. Savage objected that the settlement could not be approved because adequate steps had not been taken to provide notice to all class members,*fn5 and the notice of the settlement that was sent to class members did not adequately disclose the benefit to be received by each shareholder or bondholder, or sufficiently explain the allocation of the settlement between bondholders and stockholders. Reflecting significant confusion about the settlement, Savage also contended inaccurately that $335 million of the settlement fund was unallocated. Id. at *12 n.32. Savage requested that a revised notice of settlement be sent to all class members and that the settlement proceedings be stayed. Lusk joined in some of Savage's challenges and also asserted unsuccessfully that class members should not be required to document their trading losses or to sign the proof of claim form under penalty of perjury. Id. at *12.
The Objectors also moved to intervene in the class action. As explained in the Opinion, a class member does not have to intervene in order to have an objection addressed. Id. at *9 n.26.
Both Objectors also made objections regarding an award of attorneys' fees. Savage objected that the class notice should have given information about "the amount of work product produced" by class counsel so that class members could judge whether the attorneys' fees requested were excessive. Lusk objected to any award of attorneys' fees to class counsel until the "uncertainties" about the allocation of the settlement fund were resolved, and until the amount of time and effort that class counsel would need to expend to prosecute the remainder of the litigation could "be projected with some certainty." Lusk also complained about class counsel's request to establish a $5 million litigation expense fund to finance the continued prosecution of the class action against the non-settling defendants. Id. at *17.
Only the last of these objections was considered to be "well-founded". Id. at *22. Specifically, Lusk complained that the $5 million fund would principally assist those with Securities Act claims and not shareholders, and therefore, should not be drawn from any funds allocated to the benefit of shareholders. The Court agreed. Id. As it turned out, and for reasons that had nothing to do with the merits of the objection, no such fund was ever established.
The two attorneys for the Objectors contend that they worked over 300 hours, amounting to a lodestar fee of $265,188, and incurred expenses of almost $3,000 on this matter. They assert that they studied all of the pleadings, conducted hours of research, and filed "comprehensive" briefs.*fn6 They seek a fee of 10% of the "Settlement Amount", which they calculate as $250,000.*fn7 They argue that their objection regarding the $5 million fund resulted in a savings of $2.5 million for shareholders. Counsel for Lusk seeks an award of $104,796 in attorney's fees. He represents that he worked for 142 hours on this project and that his hourly rate is $300. He seeks an award based on a multiplier of 2.46.
An award of attorney's fees to counsel for an individual class member may be appropriate where the attorney conferred a benefit on the class. See, e.g., In re WorldCom, Inc. ERISA Litigation, 02 Civ. 3288 (DLC), 2004 WL 2338151, *11 (S.D.N.Y. Oct. 18, 2004). Only one objection of the several made by each of the Objectors was found to have any merit, and it was an issue raised by Lusk alone. Therefore, Savage has not shown that his counsel is entitled to any award of attorney's fees.
The single meritorious objection made by Lusk was contained in the written objection which he submitted pro se. Lusk's attorney did raise that issue again, however, at the fairness hearing, along with several other arguments which did not have merit. In order to decide whether an award of attorney's fees is appropriate, and the amount of any award, Lusk's counsel will be given an opportunity to submit his contemporaneous time records and confirmation of Lusk's membership in the class. See Cruz v. Local Union No. 3 of Intern. Broth. of Elec. Workers, 34 F.3d 1148, 1160 (2d Cir. 1994).
The motion for an award of attorney's fees by counsel for objector Savage is denied. Counsel for objector Lusk may submit his time records and Lusk's proof of claim by May 12, 2006.
DENISE COTE United States District Judge