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In re NTL

February 8, 2007

IN RE NTL, INC. SECURITIES LITIGATION


The opinion of the court was delivered by: Andrew J. Peck, United States Magistrate Judge

OPINION AND ORDER

Presently before the Court is the motion (02 Civ. 3013, Dkt. No. 117) of counsel for the Gordon plaintiffs -- who are not part of the class action -- for a share of the attorneys' fees to be awarded to counsel for the class plaintiffs in connection with the $9 Million settlement of the class action. (Class counsel's separate motion for attorneys' fees of 20% of the settlement amount is separately pending before the Court and will be decided in a separate decision.)

For the reasons discussed below, the Gordon plaintiffs' counsel's motion for attorneys' fees from the class action settlement is DENIED.

ANALYSIS

The Gordon plaintiffs' counsel, Robert Hermann of the firm of Thacher Proffitt & Wood, seeks one third of the fees to be awarded to class counsel*fn1 -- apparently on the basis that two firms represented the class plaintiffs, so those two firms and the Gordon plaintiffs' lawyer should split the fees in thirds -- or in the alternative, $567,450, "the time charges and disbursements actually paid and incurred by" the Gordon plaintiffs. (See, e.g., Dkt. No. 118: Thacher Proffitt & Wood Br. at 3; Dkt. No. 117: Hermann Aff. ¶¶ 4, 12-14; Dkt. No. 126: Hermann Reply Aff. ¶ 15.)

Mr. Hermann claims that "[t]he 'equitable fund' doctrine holds that when a fund is created through settlement of a class action, an attorney or firm whose work benefitted the class may claim reasonable compensation for his or her efforts." (Thacher Proffitt & Wood Br. at 1.) Mr. Hermann relies on three cases for his fee request. (Id. at 1-2.) None of those cases are persuasive on the facts of this case. In Dubin v. E. F. Hutton Group, Inc., 845 F. Supp. 1004, 1013 (S.D.N.Y. 1994), the Court described the "common fund" or "equitable fund" theory for awarding fees to class counsel from the settlement of a class action:

Under this [equitable fund] doctrine, "an attorney whose actions have conferred a benefit upon a given group or class of litigants may file a claim for reasonable compensation for his [or her] efforts." The underlying principle of the equitable fund doctrine is that the members of a group or class should pay reasonable compensation to the attorneys representing their interests.

Dubin v. E. F. Hutton Group, Inc., 845 F. Supp. at 1013 (emphasis added & citations omitted). While the Dubin court awarded fees to counsel in related class actions, it did so because the three class actions were overlapping, and the attorneys in the class actions "represented . . . 80% of the" plaintiffs in the settling class action. Id. at 1024.*fn2

In County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295 (2d Cir. 1990), the second case cited by Mr. Hermann, Suffolk County opted out of a class action, but only after a two month trial, and the rest of the class settled with LILCO. Id. at 1299. The Second Circuit held that under the equitable fund doctrine, Suffolk County could be awarded attorneys' fees, because "it is clear that the efforts of Suffolk's attorneys substantially benefitted the class," including conducting "virtually all of the pre-trial discovery and motion practice," conducting a two month trial that LILCO admitted influenced it to settle with the class, and "actively participated in the class settlement negotiations." Id. at 1326-27. Here, in contrast, the Gordon plaintiffs opted out of the class before certification, did not participate in the class settlement negotiations, and even Mr. Hermann agrees that his firm and the class plaintiffs' two law firms divided the work.

Alpine Pharmacy, Inc. v. Chas. Pfizer & Co., 481 F.2d 1045 (2d Cir. 1973), the last of the three cases cited by Mr. Hermann, as in Dubin, involved overlapping class actions. Alpine was a multidistrict antitrust case involving three classes of claimants: government entities, retailers and consumers. 481 F.2d at 1048. Counsel for the government entities sought to obtain part of the fees from the retailer settlement, which he undisputedly was responsible for negotiating as part of the global settlement involving all three classes. Id. at 1056-57. It was in that context that the Second Circuit stated that "the fact that the firm did not sue on behalf of that class presents no bar to an allowance out of the fund," id. at 1057, which is the language Mr. Hermann cites from that case. (Thacher Proffitt & Wood Br. at 2.)

Not only are the three cases factually distinguishable, but all were decided before passage of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which significantly altered the landscape of attorneys' fee awards in securities class actions. See, e.g., In re Cendant Corp. Sec. Litig., 404 F.3d 173, 180 (3d Cir. 2005).

The PSLRA contains the following provisions concerning attorneys' fees for "counsel for the plaintiff class":

(6) Restrictions on payment of attorneys' fees and expenses

Total attorneys' fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and ...


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