Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_01-cv-01257/USCOURTS-casd-3_01-cv-01257-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 1 - 01cv1237-J (WMc)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

In re: 

IMMUNE RESPONSE SECURITIES

LITIGATION

CASE NO. 01CV1237 J (WMc)

ORDER:

1) APPROVING CLASS ACTION

SETTLEMENT;

2) APPROVING PLAN OF

ALLOCATION; AND

3) APPROVING ATTORNEYS’

FEES AWARD AND

REIMBURSEMENT OF

EXPENSES.

On October 3, 2006, the Parties entered into a Stipulation of Settlement. [Doc. No.

147.] Subsequently, the proposed settlement was submitted to the Court for preliminary

approval. By order dated March 14, 2007, this Court certified the Class, preliminarily

approved the class action settlement, and approved the notice to Class Members. [Doc. No.

148.] The Parties now move for final approval of the proposed class action settlement. 

[Doc. No. 149.] On May 21, 2007, this matter came before the Court for a fairness hearing

regarding judicial approval of the Parties’ proposed settlement in this class action. 

Pursuant to the Court’s Order, the Parties filed supplemental briefing regarding the

requested reimbursements. [Doc. Nos. 152-56.] 

 

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 1 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 - 01cv1237-J (WMc)

Background

Immune Response Corporation (“IRC”) is a biopharmaceutical company that

develops immune-based therapies for the treatment of HIV. (Compl. ¶ 1.) IRC’s stock is

traded on NASDAQ. Defendant Dennis J. Carlo, Ph.D. (“Carlo”), is a co-founder of IRC

and was its Chief Executive Officer during the Class Period. Defendant Dr. Ronald B.

Moss (“Moss”) was Director of Medical and Scientific Affairs until January 2000, and then

was named Vice President of Medical and Scientific Affairs. To fund studies, IRC

collaborated with Agouron Pharmaceuticals, Inc., a wholly owned subsidiary of Pfizer, Inc. 

Between July 10, 2001, and August 17, 2001, ten securities class action complaints

were filed in the United States District Court for the Southern District of California on

behalf of all persons who purchased Defendant IRC’s publicly-traded securities between

May 17, 1999, and July 6, 2001 (the “Class Period”). On April 4, 2002, this Court

consolidated the ten class action complaints. [Doc. No 18.] Plaintiffs allege that IRC and

its representatives made false and misleading statements about the efficacy of REMUNE –

a drug IRC developed for the treatment of human immunodeficiency virus (“HIV”). 

Specifically, Plaintiffs allege securities fraud under the 1933 Securities Exchange Act §§

11, 12(a)(2), and 15, as well as, Securities Exchange Commission (“SEC”) Rule 10b-5 and

§§ 10(b), 20(a) of the 1934 Act.

On June 7, 2005, the Court denied Defendants’ Motions to Dismiss. On February 7,

2006, the Parties engaged in mediation before the Honorable Howard B. Wiener (Ret.), and

Lead Plaintiffs and all Defendants except Agouron reached an “agreement-in-principle” to

settle their claims in the litigation. Shortly thereafter, on February 28, 2006, Lead Plaintiffs

and Agouron reached an agreement-in-principle to settle their claims in the litigation. 

On March 14, 2007, this Court preliminarily approved the class action settlement

and approved the notice to Class Members. (See generally Order of Prelim. Approval.) 

The Class upon whose behalf this settlement is made was certified as:

All persons who purchased Immune Response Corporation publicly traded

securities at any time during the period between May 17, 1999, and July 6, 2001,

inclusive. Excluded from the Class are the Defendants, members of the

immediate families of the Individual Defendants, any entity in which any

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 2 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 - 01cv1237-J (WMc)

Defendant has or had a controlling interest, directors and officers of Immune

Response Corporation and Agouron Pharmaceuticals, Inc., and the legal

representatives, heirs, administrators, successors, or assigns of any such

excluded person. Also excluded from the Class are those persons who timely

and validly request exclusion from the Class pursuant to the Notice of Pendency

of and Proposed Settlement of Class Action.

(Id. at 11.) The Parties are now before the Court to obtain final judicial approval of the

class action settlement.

Legal Standard

Rule 23(e) of the Federal Rules of Civil Procedure requires judicial approval of any

dismissal or settlement in a class action lawsuit and provides that notice of the proposed

dismissal or settlement must be given to all class members. Fed. R. Civ. P. 23(e). The

primary purpose of Rule 23(e) is to protect class members, including the named plaintiffs,

whose rights may not have been given due regard by the negotiating parties. Officers for

Justice v. Civil Service Comm’n, 688 F.2d 615, 624 (9th Cir. 1982). Consequently, courts

must conduct a fairness hearing to determine whether to approve the class action

settlement. See, e.g., In re Mego Financial Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir.

2000); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998).

“Although Rule 23(e) is silent respecting the standard by which a proposed

settlement is to be evaluated, the universally applied standard is whether the settlement is

fundamentally fair, adequate and reasonable.” Officers for Justice, 688 F.2d at 625; see

also Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993). When

determining whether approval of a settlement is warranted, courts consider

several factors which may include, among others, some or all of the following:

[1] the strength of plaintiffs’ case; [2] the risk, expense, complexity, and likely

duration of further litigation; [3] the risk of maintaining class action status

throughout the trial; [4] the amount offered in settlement; [5] the extent of

discovery completed, and the stage of the proceedings; [6] the experience and

views of counsel; [7] the presence of a governmental participant; and [8] the

reaction of the class members to the proposed settlement.

Torrisi, 8 F.3d at 1375; see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.

1998). Further, “[t]o survive appellate review, the district court must show it has explored

comprehensively all [fairness] factors.” Hanlon, 150 F.3d at 1026 (citing Protective

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 3 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 - 01cv1237-J (WMc)

Comm. For Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S.

414, 434 (1968)). Finally, “the settlement may not be the product of collusion among the

negotiating parties.” Mego, 213 F.3d at 458 (citing Class Plaintiffs v. City of Seattle, 955

F.2d 1268, 1290 (9th Cir. 1992)). 

Discussion

I. Notice to Class Members

The first issue the Court must address is notice to the Class. The Ninth Circuit has

summarized the Court’s procedural obligation as follows:

The class must be notified of a proposed settlement in a manner that does not

systematically leave any group without notice; the notice must indicate that a

dissident can object to the settlement and to the definition of the class; each

objection must be made a part of the record; those members raising substantial

objections must be afforded an opportunity to be heard with the assistance of

privately retained counsel if so desired, and a reasoned response by the court on

the record; and objections without substance and which are frivolous require

only a statement on the record of the reasons for so considering the objection.

Officers for Justice, 688 F.2d at 624 (footnote and citations omitted).

Pursuant to the Order issued on March 14, 2007, the Notice of Pendency of Class

Action and Proposed Settlement (“Notice”) and the Proof of Claim and Release Form were

mailed to 41,173 Class Members beginning on or before March 24, 2007. (See Mot. Final

Approval of Settlement at 1; Sylvester Decl. at 1-2.) The Notice provides a description of

the nature of the action and the issues involved in the litigation. (See Sylvester Decl., Ex.

A at 1-4.) The Notice also contains a concise and clear statement of the definition of the

Class that has been certified. (See id. at 3.) The Notice provides the procedure by which

an individual may request an appearance at the Settlement Hearing, as well as how an

individual may exclude herself from the Class. (See id. at 5-6.) The Notice also discusses

the binding effect of the class judgment on Class Members. (See id. at 5-7.) The Notice

called for all objections to be postmarked and mailed no later than May 7, 2007. To date,

no objections to the settlement have been filed. (See Mot. Final Approval of Settlement at

2.) Three Class Members, Steven A. Schuster, Kenneth D. Mulzer Sr., and Shizuko O.

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 4 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1

 Although Defendants object to the propriety of Mr. Schuster and Mr. Mulzer, Sr.’s notices

indicating that they desire to opt-out, the Court includes them only as a matter of record. The Court

at this time is not making a finding that such opt-outs are adequate or valid. 

- 5 - 01cv1237-J (WMc)

Mihata, have indicated their desire to opt out of the Class.1 (See Ex. 1; Prop. Order for

Final Judgment). The Summary Notice was also posted on the internet and published in the

national edition of Investor’s Business Daily. (See Sylvester Decl. at 2.) 

The Court FINDS that the notice afforded to Class Members is adequate and

sufficient to inform Class Members of their rights.

II. Fairness Factors

As an initial matter, “the fact that the settlement agreement was reached in arm’s

length negotiations after relevant discovery [has] taken place create[s] a presumption that

the agreement is fair.” Linney v. Cellular Alaska P’ship, 1997 WL 450064, at *5 (N.D.

Cal. July 18, 1997), aff’d, 151 F.3d 1234 (9th Cir. 1998) (citing Ellis v. Naval Air Rework

Facility, 87 F.R.D. 15, 18 (N.D. Cal. 1980), aff’d, 661 F.2d 939 (9th Cir. 1981)). Here, the

Parties voluntarily engaged in mediation before the Honorable Howard B. Wiener (Ret.)

through which Lead Plaintiffs and all Defendants except for Agouron reached an

agreement-in-principle to settle the claims in the litigation. (See Mot. for Prelim. Approval

at 2.) Subsequently, Lead Plaintiffs and Agouron also reached an agreement-in-principle to

settle. (See id.) Accordingly, such negotiations are highly indicative of fairness. 

The inquiry now before the Court is whether the proposed settlement is

fundamentally fair, adequate, and reasonable such that the Court may approve the class

action settlement. The Court will address each of the several factors set forth above.

A. The Strength of Plaintiffs’ Case

Plaintiffs’ case involves federal securities claims asserted against Defendants under 

Section 10(b) of the Securities Exchange Act of 1934 and Section 11 of the Securities Act

of 1933. (See Mot. Final Approval of Settlement at 6.) In order to prevail on a Section

10(b) claim, Plaintiffs would have the burden of establishing: “(1) a misrepresentation or

omission of a material fact, (2) reliance, (3) scienter, and (4) resulting damages.” Paracor

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 5 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 - 01cv1237-J (WMc)

Finance, Inc. v. General Elec. Capital Corp., 96 F.3d 1151, 1157 (9th Cir. 1996) (citing

Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1281 (9th Cir. 1982)). Accordingly,

Plaintiffs contend that they “would have to prove Defendants participated in the public

dissemination of misleading information, that the information was material to investors in

determining whether to purchase Immune Response securities, that the information

materially affected the price of Immune Response securities, and that Defendants withheld

information either with actual intent to deceive, manipulate, or defraud, or that Defendants

recklessly disregarded these facts and their consequences.” (See Mot. Final Approval of

Settlement at 6.) 

To prevail on the Section 11 claim, Plaintiffs would have to prove “(1) that the

registration statement contained an omission or misrepresentation, and (2) that the omission

or misrepresentation was material, that is, it would have misled a reasonable investor about

the nature of his or her investment.” In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403-04

(9th Cir. 1996) (quoting Kaplan v. Rose, 49 F.3d 1363, 1371 (9th Cir. 1994)). However,

“[n]o scienter is required for liability under § 11; defendants will be liable for innocent or

negligent material misstatements or omissions.” Id. (citing Herman & MacLean v.

Huddleston, 459 U.S. 375, 382 (1983)). 

Plaintiffs believe that their claims are meritorious and fully supported by the

evidence obtained. (See Mot. Final Approval of Settlement at 7.) Plaintiffs claim that their

“investigation included identifying and contacting former Immune Response employees,

and the scientists who performed the REMUNE study, and retention and consultation with

experts in the drug at issue, the FDA approval process, materiality, loss causation and

damages.” (Id. at 5.) Additionally, Plaintiffs survived Defendants’ Motion to Dismiss and

Defendants’ subsequent challenges to this Court’s order. However, Plaintiffs contend that

“Defendants were prepared to mount a vigorous defense to Lead Plaintiffs’ claims.” (Id. at

7.) According to Plaintiffs, “Immune Response Defendants have maintained that Lead

Plaintiffs’ Class Period is improperly long and that Lead Plaintiffs sued prematurely.” (Id.) 

Also, Plaintiffs assert that the “Immune Response Defendants also would continue to claim

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 6 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 - 01cv1237-J (WMc)

that the market was fully aware of risks that REMUNE would not be deemed to be

efficacious and that it would not necessarily complete clinical trials and be approved for

marketing.” (Id.) Additionally, Plaintiffs assert that Defendant “Agouron pressed credible

arguments that none of the statements attributed to it were false or misleading.” (Id.) The

Court also recognizes that the issues of scienter and causation are complex and difficult to

establish at trial. 

At this time, it is not appropriate for the Court to attempt to settle these questions of

law and fact: 

[T]he settlement or fairness hearing is not to be turned into a trial or rehearsal

for trial on the merits. Neither the trial court nor [the appellate court] is to reach

any ultimate conclusions on the contested issues of fact and law which underlie

the merits of the dispute, for it is the very uncertainty of outcome in litigation

and avoidance of wasteful and expensive litigation that induce consensual

settlements.

Officers for Justice, 688 F.2d at 625. Rather, recognizing the apparent complexity of the

case, the Court CONCLUDES that settlement is a prudent course.

B. The Risk, Expense, Complexity and Duration of Further Litigation

As discussed above, this case involves complex legal and factual issues which have

already been the subject of drawn out litigation. Additionally, Plaintiffs assert that they

“faced significant collectability issues with respect to the Immune Response Defendants. 

The Company admittedly had no money to fund a judgment or settlement—the only

available source of funds was wasting insurance policies. The longer litigation went on,

less and less money was available to satisfy a judgment or settlement, because defense

costs were depleting the policies.” (See Mot. Final Approval of Settlement at 10.) 

Litigation would likely require costly discovery and the continued assistance of experts. 

The trial would have lasted several weeks, and the non-prevailing party would likely have

appealed the judgment. (See id. at 11.) Both Parties would thus have to expend a

significant amount of resources if this litigation were to proceed. Accordingly, the Court

FINDS that this factor supports settlement.

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 7 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 - 01cv1237-J (WMc)

C. The Risk of Maintaining Class Action Status

As indicated above, Immune Response Defendants have maintained that the Class

Period is improperly long, and thus, Defendants may desire to move for recertification of

the class definition at trial based upon evidence produced during discovery. This threat

makes settlement more attractive to Plaintiffs.

D. Settlement Amount

Pursuant to the proposed settlement, IRC Defendants will pay or cause to be paid

$9,600,000.00 in settlement proceeds, and Defendant Agouron will pay or cause to be paid

$400,000.00 in settlement proceeds. (See Stip. of Settlement at 8.) In addition, any amount

remaining on the first $2,250,000.00 of the IRC Defendant’s third-level insurer’s policy

after all defense costs in the litigation and derivative litigation have been satisfied, will be

deposited in the escrow account for distribution to the Class. (See id.) The settlement

terms are outlined in the Stipulation of Settlement. (See generally id.) The appropriateness

of the requested attorneys’ fees is reserved for discussion below.

There is no evidence to suggest that the settlement amount is not fair and reasonable. 

Plaintiffs contend that the Parties engaged in lengthy settlement discussions before two

retired judges. Accordingly, the settlement is presumed to be fair. Additionally, Plaintiffs

assert that they are unaware of any objections by Class Members to the settlement

agreement. 

The Parties have drafted a plan of allocation that they contend is fair, reasonable,

and adequate. The Parties contend that this plan is fair to the Class as a whole by taking

into consideration the strength of claims based on available evidence. “Lead counsel

discussed [the] theories of liability and damages with [a] damages consultant, who used this

information along with available economic evidence to develop the plan currently before

the Court for approval.” (See Mot. Final Approval of Settlement at 14; Corrected Dietrich

Decl. at 21.) Plaintiffs contend that the plan of allocation “reflects the reaction of the

market to new information about Immune Response during the Class Period.” (Id.) The

plan provides a different formula based on three purchase periods; each reflecting the

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 8 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 - 01cv1237-J (WMc)

market’s reaction to each new piece of information. (Id.) Case law suggests that it is fair

to allocate settlement proceeds according to the relative strengths and weaknesses of the

various claims. In re Equity Funding Corp. of America Sec. Litig., 603 F.2d 1353, 1365

(9th Cir. 1979); see also In re Warner Commc’ns Sec. Litig., 618 F. Supp. 735, 745

(S.D.N.Y. 1985). Accordingly, “lead counsel maintain that the plan of allocation will

equitably apportion the net settlement proceeds among all eligible Class Members . . . .” 

(See Mot. Final Approval of Settlement at 14.) Finding no indication of unfairness in the

settlement, the Court APPROVES the plan of allocation as reasonable and appropriate.

Lastly, Lead Plaintiff Scott Carroll seeks reimbursement for his time and expenses

in the amount of $40,000.00. Mr. Carroll contends that this amount represents his lost

wages for 200 hours at an hourly rate of $200, which represents his compensation as a

CEO. (See Carroll Decl. at 2.) Mr. Carroll states that he zealously performed his role as a

Lead Plaintiff by engaging in periodic conferences, participating in the litigation, providing

input into the case, keeping fully informed of the case, reviewing pleadings and motions,

and participating in the settlement negotiations. (See id. at 1.) The Private Securities

Litigation Reform Act of 1995 (“PSLRA”) provides that while “[t]he share of any . . .

settlement that is awarded to a representative party serving on behalf of a class shall be

equal, on a per share basis, to the portion of the . . . settlement awarded to all other

members of the class[,] [n]othing in this paragraph shall be construed to limit the award of

reasonable costs and expenses (including lost wages) directly relating to the representation

of the class to any representative party serving on behalf of a class.” 15 U.S.C. §

78u-4(a)(4). 

On its face, the reimbursement to Mr. Carroll is reasonable. In the supplemental

information provided to the Court, Mr. Carroll states that he bases his hourly rate on

income derived from the fifty-five residential apartment units, shopping center, fireworks

business, and large department store that he owns and operates. (See Supp. Decl. Scott

Carroll at 1.) Additionally, lead counsel indicated to the Court that the other Lead Plaintiff,

Michael Baghdoian, is not requesting a similar reimbursement because he was not as

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 9 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 - 01cv1237-J (WMc)

actively involved as Mr. Carroll. According to lead counsel, Mr. Carroll is also the

shareholder with the most losses. Finding Mr. Carroll’s requested reimbursement to be fair

and reasonable, the Court APPROVES Mr. Carroll’s reimbursement. 

E. Discovery Completed Prior to Settlement

Plaintiffs indicate that lead counsel has conducted “significant informal discovery

and investigation on the matters alleged, even though formal discovery was stayed pursuant

to the [PSLRA] while the Parties litigated Defendants’ motions to dismiss.” (See Mot.

Final Approval of Settlement at 5.) Accordingly, the Court FINDS that the Parties have a

clear view of the strengths and weaknesses of their cases.

F. Counsel’s Experience and Views

Both Parties are represented by experienced counsel and their mutual desire to adopt

the terms of the proposed settlement, while not conclusive, is entitled to great deal of

weight. Williams v. Vukovich, 720 F.2d 909, 922-23 (6th Cir. 1983); Cotton v. Hinton, 559

F.2d 1326, 1330 (5th Cir. 1977). Both Parties’ negotiation and adoption of the settlement

terms, based on their familiarity with the law in this practice area and the strengths and

weaknesses of their respective positions, suggests the reasonableness of the settlement. 

This factor clearly favors settlement.

G. Involvement of a Government Entity

There are no government participants in this case. Thus, this factor is inapplicable. 

H. Class Members’ Reaction to the Proposed Settlement

Pursuant to the Court’s Order, Notice of Pendency of Class Action was sent to over

41,000 Class Members, published in Investor’s Business Daily, and posted on the internet. 

The Notice called for all objections to be postmarked and mailed no later than May 7, 2007. 

To date, no objections to the settlement have been filed. (See Mot. Final Approval of

Settlement at 2.) 

I. The Settlement Did Not Involve Collusion or Fraud

 Here, Plaintiffs contend that the settlement is the product of arm’s length

negotiations and hard-fought litigation by experienced counsel on both sides of the case. 

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 10 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 - 01cv1237-J (WMc)

Additionally, settlement mediation sessions took place before the Honorable Daniel L.

Weinstein (Ret.) and the Honorable Howard B. Wiener (Ret.). There is nothing to suggest

that the settlement involved collusion or fraud.

Accordingly, the Court APPROVES the settlement agreement and the plan of

allocation. Additionally, the Court APPROVES of Mr. Carroll’s requested

reimbursement.

III. Attorneys’ Fees

Class counsel has requested that the Court approve a fee of 25% of the settlement

award, i.e., $2,500,000, plus a reimbursement of “out-of-pocket” expenses of $261,971,79. 

(See Mot. for Approval of Fees at 1.) Counsel argues that the fee is appropriate based on

the complexity of litigation, the favorable result achieved, the normal fees for similar

complex cases, the contingency fee nature of the representation, and the lack of objection to

the proposed fees. While the Parties appear to have agreed to the attorneys’ fee award, “the

district court [has] the authority and duty to pass upon the fairness of the attorneys’ fees

settlement independently of whether there [is] objection.” Zucker v. Occidental Petroleum

Corp., 192 F.3d 1323, 1329 (9th Cir. 1999). For the reasons discussed below, the Court

APPROVES of the proposed attorneys’ fee arrangement. 

A. A Percentage of the Award Is an Appropriate Form of Attorneys’ Fees

Class counsel argues that “[i]n recent years, the percentage method of awarding fees

has become an accepted, if not the prevailing, method for awarding fees in common fund

cases in this Circuit and throughout the United States.” (Mot. for Approval of Fees at 1.) 

Pursuant to the common fund doctrine, “a litigant or a lawyer who recovers a common fund

for the benefit of persons other than himself or his client is entitled to a reasonable

attorney’s fee from the fund as a whole.” Staton v. Boeing Co., 327 F.3d 938, 967 (9th Cir.

2003) (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)). However, “in

common fund cases, no presumption in favor of either the percentage or the lodestar

method encumbers the district court’s discretion to choose one or the other.” In re Wash.

Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1296 (9th Cir. 1994). “As always, when

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 11 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 - 01cv1237-J (WMc)

determining attorneys’ fees, the district court should be guided by the fundamental

principle that fee awards out of common funds be “reasonable under the circumstances.” 

Id. (citing State of Fla. v. Dunne, 915 F.2d 542, 545 (9th Cir. 1990)).

The Court of Appeals for the Ninth Circuit has “established a 25 percent

‘benchmark’ in percentage-of-the-fund cases that can be ‘adjusted upward or downward to

account for any unusual circumstances involved in [the] case.’ ” Fischel v. Equitable Life

Assur. Society of U.S., 307 F.3d 997, 1006 (9th Cir. 2002) (quoting Paul, Johnson, Alston

& Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir. 1989)). The Ninth Circuit has repeatedly

affirmed the district court’s employment of the percentage method. See, e.g., Vizcaino v.

Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002); Six (6) Mexican Workers v. Arizona

Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990). Accordingly, the Court FINDS that

attorneys’ fees in the form of a percentage of the total award is reasonable. The Court now

turns to whether 25% is reasonable under the circumstances of this case.

B. Circumstances of This Case Favors a 25% Benchmark Rate

“The 25% benchmark rate, although a starting point for analysis, may be

inappropriate in some cases.” Vizcaino, 290 F.3d at 1048. The determination of the

reasonableness of an award must be “supported by findings that take into account all of the

circumstances of the case.” See id. For the reasons discussed below, the Court FINDS that

an attorneys’ fee award of 25% of the settlement fund is appropriate in this case.

First, the Class counsel has achieved a favorable recovery for Class Members. 

Favorable results are a relevant circumstance. See Six (6) Mexican Workers v. Arizona

Citrus Growers, 904 F.2d at 1311 (noting that counsel “obtained substantial success”). 

Although Class counsel admits that a $10 million award only represents approximately

12% of the maximum provable damages assuming complete success, the Court notes that

counsel has achieved this result in the face of a vigorous defense mounted by Defendants. 

As indicated above, Plaintiffs survived Defendants’ Motion to Dismiss and Defendants’

subsequent challenges to this Court’s order. 

Second, this case presented substantial risks for Class counsel. Risk is also a

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 12 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 - 01cv1237-J (WMc)

relevant factor in addressing the proposed fee award. See In re Pacific Enter. Sec. Litig., 

47 F.3d 373, 379 (9th Cir. 1995) (noting that a 33% award “for attorneys’ fees is justified

because of the complexity of the issues and the risks”). As discussed above, this case

involved complex issues of both fact and law, which were highly disputed by Parties. 

Additionally, Plaintiffs claim that prolonging a resolution of the case would increase the

risk that the funds available for a judgment would be depleted due to litigation expenses. 

Third, the Court notes that counsels’ representation of the Class on a contingency

fee basis over approximately six years places a heavy burden on counsel and involves

significant risk. Counsel has incurred thousands of hours of attorney time and put forth

hundreds of thousands of dollars in expenses on an “at-risk” basis. (See Corrected Dietrich

Decl. at 27.) In complex cases, such as this, the risk of no recovery is substantial and must

be balanced against an expectation of a sizeable award. Class counsel claims they have

litigated numerous actions on a contingency basis and many of them have resulted in no fee

awards. (See Mot. for Approval of Fees at 12.)

Fourth, counsel’s fee request of 25% is consistent with the fees recovered in

comparable cases. Counsel provides numerous examples of cases in which a fee award of

30% was approved in settlements ranging from $1.7 million to $111 million. (See Stewart

Decl. at 13, Exs. 3-4; see also Mot. for Approval of Fees, App. A.) Reviewing the data

compiled from the mid-1970’s to 2002 in Stuart J. Logan, Jack Moshman & Beverly C.

Moore, Attorney Fee Awards in Common Fund Class Actions, 24 Class Action Rep 167

(2003), the Northern District of California found that for securities class action cases in the

gross recovery range of $10 to $20 million, the range of the percentage of the award

devoted to attorneys’ fees was 7.6% to 55.6% with a mean of 29.5%. See In Re HPL

Techs., Inc. Sec. Litig., 366 F. Supp. 2d 912, 918 (N.D. Cal. 2005). Thus, a proposed fee of

25% is consistent, if not below, the average award in similar complex actions. 

Fifth, the proposed fee is reasonable in light of the lodestar amount. “Calculation of

the lodestar, which measures the lawyers’ investment of time in the litigation, provides a

check on the reasonableness of the percentage award.” Vizcaino, 290 F.3d at 1050. 

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 13 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2

 Pursuant to 28 U.S.C. § 1920:

a judge or clerk of any court of the United States may tax as cost the following:

- 14 - 01cv1237-J (WMc)

Although counsel have not provided a detailed cataloging of hours spent, the Court FINDS

the information provided to be sufficient for purposes of lodestar cross-check. See In re

Rite Aid Corp. Securities Litigation, 396 F.3d 294, 306-07 (3d Cir. 2005) (“The lodestar

cross-check calculation need entail neither mathematical precision nor bean-counting.”) 

Here, counsel have provided sworn declarations from attorneys attesting to the

experience and qualifications of the attorneys who worked on the case, the hourly rates, and

the hours expended. (See generally Stewart Decl.; Zysman Decl.) The declarations

indicate a total lodestar amount of $1,700,727.50 representing hourly fees for both attorney

and paralegal time. (See Stewart Decl. at 1; Zysman Decl. at 2.) A settlement award of

$2,500,000.00 and a lodestar amount of $1,700,727.50 results in a multiplier of 1.47. Such

a multiplier is reasonable in light of the duration of the litigation and the risk assumed by

counsel in accepting this case on a contingency basis. See In re Prudential Ins. Co., 148

F.3d 283, 341 (3d Cir. 1998) (recognizing that “[m]ultiples ranging from one to four are

frequently awarded in common fund cases when the lodestar method is applied” (quoting 3

Newberg § 14.03 at 14-5)). 

Sixth, the lack of objection from any Class Member supports the attorneys’ fees

award. As indicated above, counsel provided notice and instructions on how to object to all

potential Class Members. To date, counsel indicates that they are unaware of any

objections. Additionally, Defendants do not object to an attorneys’ fee award of 25%. 

Accordingly, the Court FINDS that an attorneys’ fee award of 25% of the settlement

fund is appropriate in this case.

C. Reimbursement for Expenses

Class counsel also requests reimbursement in the amount of $261,971.79 for

expenses incurred in prosecution of this action. (See Mot. for Approval of Fees at 16.) 

Reimbursement of taxable costs is governed by 28 U.S.C. § 19202

 and Federal Rule of

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 14 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(1) Fees of the clerk and marshall;

(2) Fees of the court reporter for all or any part of stenographic transcript necessarily

obtained for use in the case;

(3) Fees and disbursement for printing and witnesses;

(4) Fees for exemplification and copies of papers necessarily obtained for use in the

case;

(5) Compensation of court appointed experts, compensation of interpreters, and

salaries, fees, expenses . . . .

28 U.S.C. § 1920.

3

 Rule 54 provides that “[e]xcept when express provision therefor is made either in a statute

of the United States or in these rules, costs other than attorneys’ fees shall be allowed as of course to

the prevailing party unless the court otherwise directs . . . .” Fed. R. Civ. P. 54.

- 15 - 01cv1237-J (WMc)

Civil Procedure 543. In assessing the reasonableness of the reimbursement request, the

Court is “reminded that it is generally not the practice of an attorney to bill a client for

every expense incurred in connection with the litigation in question,” and “[t]he attorney is

expected to absorb some of the cost of doing business as an attorney . . . .” In re Media

Vision Tech. Sec. Litig., 913 F. Supp. 1362, 1366 (N.D. Cal. 1996). Such an award of

expenses should be limited to typical out-of-pocket expenses that are charged to a fee

paying client and should be reasonable and necessary. See id.; Harris v. Marhoefer, 24

F.3d 16, 19 (9th Cir. 1994). 

Here, counsel requests reimbursements for 1) meals, hotels, and transportation; 2)

photocopies; 3) postage, telephone, and fax; 4) filing fees; 5) messenger and overnight

delivery; 6) online legal research; 7) class action notices; 8) experts, consultants, and

investigators; and 9) mediation fees. (See Stewart Decl. at 2; Zysman Decl. at 2.) Pursuant

to the Court’s Order, counsel provided supplemental declarations as to the expenses. [Doc.

Nos. 152-53, 156.] Additionally, Defendants have indicated that they do not object to

Plaintiffs’ supplemental declarations regarding the reimbursement request. (See Defs.’

Joint Statement of Non-Opp’n at 2.)

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 15 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 16 - 01cv1237-J (WMc)

For the reasons discussed below, the Court FINDS the expenses listed above to be

reasonable and necessary. “The reimbursement for travel expenses, both under 28 U.S.C. §

1920 and [Rule] 54(d), is within the broad discretion of the Court.” In re Media Vision

Tech. Sec. Litig., 913 F. Supp. at 1369. Here, lead counsel have provided the Court with a

description of the reasons for the travel expenses. Postage, telephone, fax, and notice

expenses are also generally recoverable. See Greenspan v. Automobile Club, 536 F. Supp.

411, 417 (E.D. Mich. 1982); In re Media Vision Tech. Sec. Litig., 913 F. Supp. at 1368-69. 

Filing fees and photocopies are also a necessary expense of litigation, in particular in

complex securities class action litigation. The Ninth Circuit has also approved of

reimbursement for messenger services as costs. Harris, 24 F.3d at 19. Additionally, the

Court also finds that computerized legal research “is an essential tool of a modern efficient

law office” and given the complexity of this case, the costs of online legal research services

are also reasonable. Robinson v. Ariyoshi, 703 F. Supp. 1412, 1436 (D.Haw. 1989) (citing

United Nuclear Corp. v. Cannon, 564 F.Supp. 581 (D.R.I. 1983)), rev’d on other grounds,

933 F.2d 781 (9th Cir. 1991); see also Sure Safe Indus. Inc. v. C & R Pier Mfg., 152

F.R.D. 625, 626 (S.D. Cal. 1993). 

In order for the Court to award reimbursement for expert witness fees, the Court

“must find that the expert testimony submitted was ‘crucial or indispensable’ to the

litigation at hand.” In re Media Vision Tech. Sec. Litig., 913 F. Supp. at 1366 (quoting

United States v. City of Twin Falls, Idaho, 806 F.2d 862, 864 (9th Cir. 1986)). Here,

Plaintiffs assert that the investigation of this case required the “retention and consultation

with experts in the drug at issue, the FDA approval process, materiality, loss causation and

damages.” (See Mot. Final Approval of Settlement at 5.) Given the complex factual nature

of this case, the Court FINDS that reimbursement for experts and consultants is reasonable

in this case. 

Lead counsel also request reimbursement for the expenses associated with the

mediation sessions before the Honorable Daniel L. Weinstein (Ret.) and the Honorable

Howard B. Wiener (Ret.). In support of this request, lead counsel cited several examples of

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 16 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 17 - 01cv1237-J (WMc)

common fund cases in which mediation fees have been reimbursed. See Lenahan v. Sears,

Roebuck and Co., 2006 WL 2085282, *22 (D.N.J. 2006); Yong Soon Oh v. AT&T Corp.,

225 F.R.D. 142, 154 (D.N.J. 2004); Carrabba v. Randalls Food Markets, Inc., 191 F. Supp.

2d 815, 834 (N.D.Tex. 2002). While none of these cases are controlling authority, the

Court FINDS that mediation expenses in this case are both reasonable and necessary. This

case involved protracted litigation, which would not have come to an end prior to trial

without the assistance of a mediator. 

Accordingly, the Court APPROVES of lead counsel’s requested reimbursements in

the amount of $261,971.79. 

Conclusion

1) The Court FINDS that the notice afforded to Class Members is adequate and

sufficient to inform Class Members of their rights.

2) Finding that the fairness factors favor settlement, the Court APPROVES the

settlement agreement and the proposed plan of allocation. 

3) The Court APPROVES of Mr. Carroll’s requested reimbursement in the amount

of $40,000.00.

4) The Court APPROVES the requested attorneys’ fees award and GRANTS

counsels’ Motion for Approval of Attorneys’ Fees in the amount of 25% of the settlement

fund. 

5) The Court APPROVES of lead counsel’s requested reimbursements in the

amount of $261,971.79.

IT IS SO ORDERED.

DATED: May 31, 2007

HON. NAPOLEON A. JONES, JR.

United States District Judge

cc: Magistrate Judge McCurine

All Counsel of Record

Case 3:01-cv-01257-J-WMC Document 17 Filed 05/31/07 Page 17 of 17