The opinion of the court was delivered by: Denise Cote, District Judge
This document relates to all actions.
Lead Counsel in this class action has moved for an award of attorney's fees. The claims against all but two defendants in this class action were dismissed, and the remaining claims have been settled for $2,075,000. For the following reasons, fees in the amount of $310,000, and expenses in the amount of $55,331.87 are awarded.
Class action lawsuits were filed against executives of Ramp Corporation ("Ramp") and the company's auditor BDO Seidman LLP ("BDO") in the summer of 2005, following Ramp's filing for bankruptcy. The class actions were consolidated, lead plaintiff was appointed, and Murray, Frank & Sailer LLP ("Murray Frank") was approved as Lead Counsel for the class. Murray Frank filed a consolidated complaint bringing two claims under the Securities Exchange Act of 1934 for violation of Sections 10(b) and 20(a). The claims were pleaded against five individual officers and directors of Ramp and BDO. A motion to dismiss the second consolidated amended complaint ("Complaint") was addressed in an Opinion of July 21, 2006; familiarity with the Opinion is assumed. In re Ramp Corp. Sec. Litig., No. 05 Civ. 6521 (DLC), 2006 WL 2037913 (S.D.N.Y. July 21, 2006) ("2006 Opinion").
The Complaint described in considerable detail the private investment, public equity transactions known as PIPEs, through which Ramp raised money, and asserted that some of these transactions were illegal and that Ramp failed to make appropriate disclosures regarding the PIPEs in its SEC filings. In addition, the Complaint described improprieties in connection with Ramp's purchase of the technology company Serca in 2003, its change in auditors in 2003, an SEC inquiry in 2003, misleading statements made to the company drugstore.com in 2003, efforts by a private investor in Ramp in early 2004 to control the composition of Ramp's Board of Directors, and false statements made in late 2004 concerning Ramp's purchase of Berdy Medical Systems. Finally, the Complaint described a May 16, 2005 disclosure by defendant Andrew Brown ("Brown") that he had received an unsolicited gift of cash from an advisor to several Ramp investors in December 2003, at a time when he was president of the company. This disclosure led to BDO resigning as the Ramp auditor, Brown's resignation from the company, Ramp's failure to file its quarterly report on schedule, and the company's default on over $6 million it had received in private placements. Ramp filed for reorganization under Chapter 11 on June 2, 2005.
The 2006 Opinion dismissed all claims against BDO and three of the five individual defendants. The 2006 Opinion found that the only alleged misconduct that was connected to the loss alleged in the Complaint was the concealment of the bribe paid to Brown. Id. at *12. There was no allegation of scienter concerning the bribe and its concealment as to any defendant except Brown. As a result, the Section 10(b) fraud claim survived as to Brown alone. The control person Section 20(a) claim, which is governed by the pleading standards of Federal Rule of Civil Procedure 8, survived as to one other individual defendant. Id. at *13. As recently described in an opinion addressing the Federal Rule of Civil Procedure 11 findings, required by the Private Securities Litigation Reform Act ("PSLRA"), the Complaint's allegations against BDO were particularly flawed and barely complied with that Rule's forgiving standards. In re Ramp Corp. Sec. Litig., No. 05 Civ. 6521 (DLC), 2007 WL 2962351, at *4 (S.D.N.Y. Oct. 10, 2007). The 2006 Opinion also dismissed all claims based on any statement made before April 14, 2004, which was the date Ramp filed its 2003 Form 10-K signed by Brown, and left open the possibility that the class period could be shortened further.
Settlement negotiations followed shortly after the issuance of the 2006 Opinion, and resulted in an agreement in principle in November 2006. The settlement payment of $2,075,000 was approved at a Fairness Hearing held on June 29, 2007 and through an Opinion of July 3. In re Ramp Corp. Sec. Litig., No. 05 Civ. 6521 (DLC), 2007 WL 1964153 (S.D.N.Y. July 3, 2007).
The class had been given notice of the litigation and settlement through a notice of March 23, 2007 ("Notice"). There were four drafts that preceded the final Notice, beginning with a submission by Lead Counsel of a proposed notice on February 9, 2007. The first draft was so flawed that Lead Counsel was instructed to begin anew. Lead Counsel's second draft was reviewed in detail at a March 1 conference. At that conference the parties were advised that the Court would not approve the settlement based on the overbroad release of claims that Lead Counsel had negotiated with the defendants. Under their agreement there was essentially no limitation for the release of "unknown claims." In addition, the draft did not include a meaningful description of the plan of allocation. In response, the settlement agreement was revised to limit the release of unknown claims and Lead Counsel made substantial revisions to its proposed plan of allocation and the description of that plan in the Notice.*fn1
Lead Counsel seeks an award of attorney's fees of twenty-five percent of the amount paid in settlement, that is, $518,750. It also seeks $55,540.18 in reimbursement of expenses.
When attorneys create a common fund from which members of a class are compensated for a common injury, they are entitled to "a reasonable fee -- set by the court -- to be taken from the fund." Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000) (citation omitted); see also 15 U.S.C. § 78u-4(a)(6) (in Exchange Act cases governed by the PSLRA, "[t]otal 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 prejudgment interest actually paid to the class."). Determination of "reasonableness" is within the discretion of the district court. Goldberger, 209 F.3d at 47.
There are two methods by which the court may calculate reasonable attorneys' fees in a class action, the lodestar method and the percentage method.*fn2 Applying either method, the court should consider the following factors, known as the Goldberger factors: (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. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 121 (2d Cir. 2005) (citing Goldberger, 209 F.3d at 50).
Lead Counsel originally calculated its "lodestar"*fn3 at over $1.013 million, representing over 2,200 hours of work spread over nearly two years. Lead Counsel's requested fee award of $518,750 represents a negative multiplier of 0.51 of that lodestar. Almost 129 hours, or roughly $60,000 of this amount, was attributed to work on the Notice. Lead Counsel no longer seeks any compensation based on its work on the Notice. At the Fairness Hearing, the Court requested that Lead Counsel prepare a revised lodestar figure by removing ...