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In Re Imax Securities Litigation

August 1, 2012

IN RE IMAX SECURITIES LITIGATION


The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge

MEMORANDUM AND ORDER

I. Introduction

On June 20, 2012, we approved an amended settlement of this long-running securities class action but reserved decision on the requested attorneys' fees and expenses pending further briefing on these issues from lead plaintiff's counsel Abbey Spanier Rodd & Abrams, L.L.P. ("Abbey Spanier"). See In re IMAX Sec. Litig., --- F. Supp. 2d ----, Master File No. 06 Civ. 6128, 2012 WL 2359653, at *14 (S.D.N.Y. June 20, 2012). In the interim, we have received supplemental submissions bearing on attorneys' fees and expenses from Abbey Spanier and also former lead plaintiff's counsel Robbins Geller Rudman & Dowd L.L.P. ("Robbins Geller"). In its supplemented application brought on behalf of itself and Robbins Geller as well as Berger & Montague, P.C. ("Berger & Montague") and Cohen Milstein Sellers & Toll P.L.L.C. ("Cohen Milstein")--two firms which allegedly assisted in prosecuting this case--Abbey Spanier seeks an award of attorneys' fees of $3,000,000.00 and a reimbursement of expenses of $1,719,351.32. This is a total request of $4,719,351.32 or over 39% of the amount of $12,000,000.00 available to be paid to the settling shareholders of IMAX Corporation ("IMAX"). For the reasons stated below as well as those articulated at the hearing on the amended settlement in this case on June 14, 2012 (the "fairness hearing"), we grant 33% of the settlement amount or $3,960,000.00 (plus the interest that is currently accruing on the settlement amount held in escrow) to be divided among counsel and to be apportioned between an award of attorneys' fees and the reimbursement of expenses in such manner as lead plaintiff's counsel determines pursuant to its good-faith judgment.

II. Background*fn1

The facts underlying this case are sufficiently summarized in our recent Memorandum and Order approving the amended settlement that we need not set them out again here. See In re IMAX, 2012 WL 2359653, at *1-5. However, there is certain information bearing on counsel's prosecution of this case that we must detail here for the first time. In particular, we track the entities that have served in succession as lead plaintiffs and lead plaintiffs' counsel over the preceding years and then focus on the services that counsel have rendered and the expenses that counsel have incurred during this time period.

A. The Once and Future Lead Plaintiff's Counsel

On January 17, 2007, we consolidated eight pending actions and appointed Westchester Capital Management, Inc. ("Westchester") as lead plaintiff in the consolidated action. See Kaplan v. Gelfond, 240 F.R.D. 88, 96 (S.D.N.Y. 2007). On that same date, we appointed Abbey Spanier as lead plaintiff's counsel. See id. On February 8, 2007, we empowered Abbey Spanier as lead plaintiff's counsel, inter alia, to "delegate work responsibilities to selected counsel as may be required in such a manner as to lead to the orderly and efficient prosecution of this litigation and to avoid duplicative or unproductive effort." In re IMAX Sec. Litig., Master File No. 06 Civ. 6128, Order at 1-2 (S.D.N.Y. Feb. 7, 2007) (ECF #42). Pursuant to this authority, Abbey Spanier apparently gave certain limited responsibilities to Berger & Montague and to a much lesser extent to Cohen Milstein. See First Abbey Decl. Ex. F ¶ 4, Ex. G ¶ 2. After filing a consolidated class action complaint on October 2, 2007, Westchester and Abbey Spanier successfully opposed a motion to dismiss. See In re IMAX Sec. Litig., 587 F. Supp. 2d 471 (S.D.N.Y. 2008).

While Westchester and Abbey Spanier's ensuing motion for class certification was pending, on December 3, 2008, the Second Circuit decided W.R. Huff Asset Management v. Deloitte & Touche L.L.P., 549 F.3d 100 (2d Cir. 2008), which made it patent that Westchester lacked standing under Article III of the Constitution when we appointed it lead plaintiff because it was only suing on behalf of certain of its clients. See In re IMAX Sec. Litig., Master File No. 06 Civ. 6128 (NRB), 2009 WL 1905033, at *1-3 (S.D.N.Y. June 29, 2009) (discussing Huff and its impact on this case). Faced with renewed competition for the role of lead plaintiff's counsel in the wake of this decision, Westchester acknowledged that it originally lacked standing to serve as lead plaintiff but argued that its clients' subsequent assignment of their claims to it cured this issue. See id. at *3. However, on June 29, 2009, we held that irrespective of whether these assignments resolved the question of standing, it was indisputable that Westchester now faced unique legal issues, which fatally undermined its typicality and adequacy as a lead plaintiff vis-a-vis the other members of the proposed class of shareholders. See id. Accordingly, we removed Westchester and Abbey Spanier as lead plaintiff and lead plaintiff's counsel, respectively, and appointed Snow Capital Investment Partners, L.P. ("Snow Capital") and Robbins Geller as their replacements. See id. at *3-4.

For the approximately eighteen months between June 29, 2009 and December 20, 2010, Snow Capital served as lead plaintiff and Robbins Geller served as lead plaintiff's counsel. However, on December 20, 2010, we denied Snow Capital's motion for class certification because we found that it was an inadequate class representative on both the grounds of typicality and adequacy. See In re IMAX Sec. Litig., 272 F.R.D. 138, 155 (S.D.N.Y. 2010) (holding on typicality and continuing to find that adequacy provided "an independent ground to deny class representative status"). In finding that Snow Capital was inadequate to serve as a class representative, we stressed the relationship between Snow Capital and Alfred G. Yates, Jr., Esq. ("Yates"), observing that when we appointed Snow Capital as lead plaintiff and Robbins Geller as lead plaintiff's counsel "[l]ittle did we know, because it was never disclosed to this Court, that Snow Capital was also represented by another attorney, [Yates]," who "has not filed a notice of appearance, despite hav[ing] a retainer agreement with [Snow Capital]." Id. at 156. We have previously detailed the particular nature of this professional and personal relationship between Snow Capital and Yates as well as the fact that Snow Capital's retention of both Robbins Geller and Yates in this case was memorialized in an engagement letter appearing on Yates' letterhead, which Yates alone signed. See id. Possessing "substantial concerns" about the ability of Snow Capital to adequately represent other shareholders in light of its relationship with Yates, we also expressed our "concern about the appearance of impropriety" and further conveyed that we were troubled by the failure of Snow Capital and Robbins Geller to disclose the role of Yates in this litigation. Id. at 156-57.

Having solicited renewed applications to serve as lead plaintiff and lead plaintiffs' counsel, on April 14, 2011, we appointed The Merger Fund ("TMF"), one of Westchester's clients that in the interim had been reassigned its claim, as lead plaintiff and reappointed Abbey Spanier as lead plaintiff's counsel, thus bringing this securities class litigation procedurally, if not substantively, full circle back to the exact position in which it stood roughly thirty-one months before when we denied the motion to dismiss the consolidated class action complaint. See In re IMAX Sec. Litig., Master File No. 06 Civ. 6128, 2011 WL 1487090, at *6, *9 (S.D.N.Y. Apr. 14, 2011). In selecting TMF and Abbey Spanier, we rejected the competing application of Ironworkers St. Louis District Counsel Pension Fund and Robbins Geller. See id. at *1. After determining that TMF alone would serve as lead plaintiff, we further rejected Robbins Geller's suggestion that it should still serve as lead plaintiff's counsel or, at a minimum, co-lead plaintiff's counsel, despite TMF's selection of Abbey Spanier, and we noted in explaining our rationale for this decision that we had recently criticized Robbins Geller vis-avis its failure to disclose the involvement of Yates. See id. at *8-9.

On November 2, 2011, the date on which TMF entered into a memorandum of understanding to settle this case, a third motion for class certification was fully briefed and under consideration by this Court. See First Abbey Decl. ¶¶ 51, 54, 57, 67-68.

B. Fees and Expenses

In the almost six years that have passed since this case commenced, counsel have invested a remarkable amount of their own time in its litigation and frankly incurred enormous expenses relative to the settlement amount.

Abbey Spanier, which served as lead plaintiff's counsel from January 2007 to June 2009 and again from April 2011 to the present following the interregnum of Robbins Geller, reports that eighteen of its partners, associates, and paralegals have thus far expended 5,266.30 hours in prosecuting this case. See First Abbey Decl. Ex. D. At a weighted average billing rate per hour of over $588.00, Abbey Spanier states that its lodestar fee amount is $3,099,356.25. See id. As lead plaintiff's counsel for over three years, Abbey Spanier has been involved in all aspects of this case, engaging in discovery, drafting the consolidated class action complaint, briefing two motions for class certification, two (successful) motions to be appointed lead plaintiff, and one motion to dismiss, negotiating settlement, and actively monitoring and through third parties participating in the parallel class action that remains pending in Canada (the "Canadian Action"). See First Abbey Decl. ¶¶ 12, 14-34, 38, 47-77. In addition to its lodestar fee amount, Abbey Spanier states that it has incurred expenses of $1,074,088.65 of which it has paid $909,233.40. See Second Abbey Decl. ¶¶ 3-4.*fn2

These expenses can be divided into six categories, which we list here with the percentage of the overall request for reimbursement of expenses that ...


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