Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03514/USCOURTS-cand-3_04-cv-03514-24/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE TABLEWARE ANTITRUST

LITIGATION

 /

THIS DOCUMENT RELATES TO

ALL ACTIONS

 /

No C-04-3514 VRW

ORDER

As described in this court’s preliminary approval order

of April 12, 2007 (Doc #306), plaintiffs in these consolidated

cases reached a settlement with one of the defendants, Lenox, Inc. 

In that order, the court preliminarily approved the proposed

settlement, certified the settlement class pursuant to FRCP 23 and

approved notice by publication. Notice having been published to

the class under the terms of the court’s order, see Doc #396, the

parties now move for final approval of the proposed settlement (Doc

#399 Ex A), and plaintiffs move for final approval of an award of

costs and expenses (Doc #394).

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The court held a final settlement approval hearing on

August 9, 2007. For the reasons that follow, the court GRANTS

final approval of the proposed settlement and GRANTS an award of

expenses. The court will discuss each of the above issues in turn. 

Because the court’s previous order addressed many of the issues

presented here for final approval, the court assumes familiarity

with the April 12, 2007, order and the definition of terms therein.

I

On November 12, 2004, plaintiffs filed a consolidated

amended complaint alleging that Lenox, Inc (“Lenox”) and Waterford

Wedgwood, USA (“Waterford”), which produce fine tableware sold in

the United States, and May Department Stores Co (“May”) and

Federated Department Stores, Inc (“Federated”), which operate

department stores throughout the United States, conspired with one

another to boycott Bed, Bath & Beyond, a competitor of May and

Federated. Plaintiffs alleged that after Lenox and Waterford had

each decided to sell their products through Bed, Bath & Beyond,

Federated and May conspired to pressure Lenox and Waterford into

abandoning Bed, Bath & Beyond by threatening to take Lenox and

Waterford products off their own shelves. Doc #286 at 2–8. 

Plaintiffs claimed a per se violation of § 1 of the Sherman Act,

asserting that the temporarily successful alleged conspiracy

impaired competition in the market for luxury tableware.

In 2006, plaintiffs and Lenox began settlement

negotiations, culminating in a settlement agreement on February 22,

2007. Doc #395. The agreement provided for a cash settlement of

$500,000, with up to $200,000 set aside for the costs of

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administering notice. Doc #300. The remainder, after courtapproved attorneys’ fees and expenses, was to be distributed either

to the settlement class members or to eligible charitable

organizations. Doc #300. The court granted preliminary approval

of the settlement on April 12, 2007. Doc #306.

Meanwhile, the other defendants elected not to settle. 

On November 17, 2006, Federated (joined by May) and Waterford moved

for summary judgment. Doc ##116, 128. On March 13, 2007, after

the plaintiffs had settled with Lenox, the court granted

Waterford’s motion but denied the motion of Federated and May. Doc

#286. The claims against Federated and May proceeded to trial, and

on July 2, 2007, the jury returned a verdict in favor of Federated

and May. Doc ##389, 390.

On July 19, 2007, the parties moved for final approval of

the Lenox settlement. Doc #394. In addition, plaintiffs request

that the entire settlement amount be allocated towards litigation

costs, specifically expert witness fees, which plaintiffs claim

exceed the amount of the settlement fund.

II

The court first addresses the fairness of the settlement,

which consists of $500,000 in cash. In making its assessment, the

court must adopt the point of view of the class members, who can no

longer depend on their attorneys’ rigorous adherence to their

fiduciary duties. See Court Awarded Attorney Fees, Report of the

Third Circuit Task Force, Oct 8, 1985, 108 FRD 237, 255 (1985)

(“[T]he court now must monitor the disbursement of the fund and act

as a fiduciary for those who are supposed to benefit from it, since

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typically no one else is available to perform that function — the

defendant has no interest in how the fund is distributed and the

plaintiff class members rarely become involved.”). This action was

brought under the antitrust laws, which provide for an award of

fees to a successful plaintiff, but this settlement is not subject

to a statutory fee shift; instead, the settlement creates a common

fund. As such, the court’s obligations are greater as there is an

inherent conflict between counsel and their clients who are absent

and unrepresented. In a statutory fee shift situation, by

contrast, the party from whom fees are extracted is before the

court and is able to contest the fee application. Accordingly, the

principles of the 1985 Third Circuit Task Force are pertinent here,

and the court looks to them for guidance.

In assessing whether a settlement is “fair, reasonable

and adequate” under FRCP 23(e)(1)(C), the court is to consider

several factors:

(1) the strength of the 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 [presumably in comparison to

comparable cases]; (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 class members to the

proposed settlement.

Churchill Village v General Electric, 361 F3d 566, 575 (9th Cir

2004), citing Hanlon v Chrysler Corp, 150 F3d 1011, 1026 (9th Cir

1998). To these factors, the court adds (9) the procedure by which

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the settlements were arrived at, see Manual for Complex Litigation

(Fourth) § 21.6 (2004).

Factor (1) only slightly favors settlement, at least in

hindsight: plaintiffs’ claim does not appear to be very strong,

considering that the other manufacturer defendant won summary

judgment and the two retailer defendants prevailed at trial. 

Especially in an antitrust case, where an agreement must be proven,

the success of the other defendants suggests a victory against

Lenox would have been unlikely. Although a $500,000 settlement in

an antitrust case is not large, the single damages claim in this

case is not large, either – only about $12.5 million. Of this, the

sale of Lenox products constitutes only about 27 percent, Waterford

products constituting the balance. See Doc #183 Ex 69. If,

however, plaintiffs had proved their case against Lenox and only

Lenox, that defendant would be liable for the full amount of the

claimed damages due to joint and several liability under the

Sherman Act. Furthermore, the $500,000 settlement probably was

less than the expense to Lenox of taking the case to trial. Hence,

the settlement is small, Lenox’s exposure slight and the settlement

amount probably reasonable under the circumstances.

Factor (2) favors settlement because further litigation

would entail substantial risk to the class of recovering nothing. 

In order to win a substantially different result from that obtained

against Waterford – which may require counsel to overcome

collateral estoppel – any further litigation would likely be

complex and expensive and a favorable outcome improbable.

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Factor (3) does not weigh in favor of settlement because

class treatment is generally appropriate in such litigation, and

therefore any risk in maintaining the class is low.

The amount of settlement consideration, addressed in

factor (4), favors the settlement. The court will not rescribe

lead plaintiff’s argument on this point, see Doc #394 at 4–7, but

does note that in light of the court’s order granting summary

judgment for a similarly situated defendant, a recovery of half a

million dollars appears fair, reasonable and adequate. Moreover,

the funds are in cash rather than in vouchers or coupons. On the

other hand, as stated, “plaintiffs had estimated single damages in

this case at over $12 million, with the majority of those damages

being attributable to Waterford products and not Lenox products.” 

Doc #394 at 5. The settlement amount thus appears appropriate.

Within the confines of this litigation, factor (5) also

supports settlement. By the time the settlement was reached, the

litigation had proceeded to a point in which both plaintiff and

defendants “ha[d] a clear view of the strengths and weaknesses of

their cases.” In re Warner Communications Sec Litig, 618 F Supp

735, 745 (SDNY 1985), aff’d 798 F2d 35 (2d Cir 1986). At the time

of settlement, discovery had already concluded, the other

defendants including Waterford had already moved for summary

judgment and plaintiffs had already filed their opposition to

summary judgment. As a result, the true value of the class’s

claims was well-known. 

The views of counsel, factor (6), support settlement. 

While some courts have indicated that such views are entitled to

deference, see, for example, Williams v Vukovich, 720 F2d 909,

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922–23 (6th Cir 1983), the court is reluctant to put much stock in

counsel’s pronouncements, given their pecuniary interest in seeing

the settlement approved.

Factor (7) does not support settlement, inasmuch as there

is no government participant present.

Factor (8) supports settlement because, as of yet, there

have been no objectors to the settlement. The response to the

notice published in USA Today and online at TheKnot.com and

www.TablewareLitigation.com since April 26, 2007, has been

positive. The claims administrator has not received any objections

or requests for exclusion. See Doc #396.

Finally, the court has previously discussed how factor

(9) supports the settlement here. See Doc #306. The extended

negotiations that culminated in the settlement indicate that the

agreement here was reached in a procedurally sound manner.

For the reasons discussed above and in its April 12

order, the court finds that, on balance, the settlement is fair,

reasonable and adequate to the class within the meaning of FRCP

23(e)(1)(C). Accordingly, the court GRANTS the motion for final

approval of the settlement.

III

The settlement amount having been found to be fair, the

court turns to class counsel’s request for expenses. After the

costs of notice have been deducted, $427,072.35 remains in the

settlement fund. Doc #416. Plaintiffs have requested that the

entirety of that amount be allocated to litigation costs, which

plaintiffs assert are $929,337.21. Doc #406. Given plaintiffs’

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1 These expert fees have been paid and there are no outstanding

balances, see Doc #406, thereby avoiding the ethical dilemma of

compensating expert witnesses on a contingency fee basis. See Cal R

Prof Conduct 5-310(B); ABA Model Rule 3.4(b) comment; Von Kesler v

Baker, 131 Cal App 654, 658 (1933), cited in Medical Legal Consulting

Servs, Inc v Covarrubias, 234 Cal App 3d 80, 92 (1991).

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request that none of the settlement amount be distributed to any

class members or in a cy pres distribution, the court must examine

the fee application with greater scrutiny. The expert fees alone

($630,223.70) surpass the value of the settlement fund.1

 Doc #406

at ¶7.

The court perceives at the outset two questions that must

be addressed: (1) Is the amount of plaintiff’s expense request

reasonable? and (2) Should counsel obtain the full amount of the

settlement – and the class nothing? The answers are, of course,

interrelated and may lead to other questions. If, for example, the

expense request is inflated by an amount large enough to leave some

residue, then should that residue be paid to the class or to class

counsel for their efforts? As it turns out, the court believes

only the two numbered questions need be answered to dispose of the

matter at hand.

A

Plaintiffs state that $630,223.70 of the total expenses

is attributable to its two expert economists — Professor Roger G

Noll and Dr Paul C Liu of The Brattle Group — for their analyses of

the tableware market. Doc #406 at ¶7. The two economists each

prepared expert reports in 2006, and each gave trial testimony on

June 28, 2007. In light of plaintiffs’ large expense request, the

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court reviews the contributions of the two expert economists in

light of their cost. 

Professor Noll drafted a 9-page declaration on April 14,

2006. Doc #102. The declaration offered preliminary findings and

stated that he required additional sales data in order to complete

his report. Doc #102. Professor Noll was assisted by Dr Liu and

was compensated at $650 per hour. Doc #102 at 4.

Professor Noll submitted his 39-page expert report on

September 8, 2006. In preparation, he reviewed 71 documents, 15

depositions and legal filings, 7 books and articles, 6 websites, 1

SEC filing and 1 retail industry report. Doc #183 Ex 67, App B

(Noll report). Professor Noll was assisted by Dr Liu and Avraham

Stoler of The Brattle Group, and he was compensated at $650 per

hour. See Noll report at 3.

Paul Liu submitted his own 17-page expert report, also on

September 8, 2006. In preparation, he reviewed 419 documents, 30

depositions and legal documents, 16 CDs and DVDs, 2 websites, 1

article and 1 letter. Doc #183 Ex 68, App B (Liu report). He also

participated in a number of calls with Federated, May and Bed, Bath

and Beyond in April and May 2006. Liu report at 3. Dr Liu was

assisted by associates at The Brattle Group, and he was compensated

at $365 per hour. Liu report at 2–3.

Dr Liu later submitted a 22-page rebuttal expert report

on November 6, 2006, in response to the expert report of Daniel L

Rubinfeld. In preparation, he reviewed 7 additional reports and

authorities. Doc #183 Ex 69.

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If the expert economists performed any written analysis

not reflected above, the court is unaware of it. In addition, at

least Professor Noll was deposed. Doc #160 Ex 11.

Each expert report treats Lenox and Waterford products

with roughly equal consideration, not paying materially greater

attention to one defendant or the other. In addition, the

conclusions in the reports are just as applicable to Federated and

May as they are to Lenox and Waterford. Plaintiffs relied on the

Noll report in their opposition to summary judgment (see Doc #161

at 15, 19, 24, 37), and both experts testified in the trial against

Federated and May (Doc #380). 

Without diminishing the work of the distinguished

Professor Noll and Dr Liu, a payment of over $630,000 for 87 pages

of analysis plus testimony seems, at first blush, on the high side

– quite high, as a matter of fact. 

Although the expert fees appear rich, they are near

counsel’s ex ante estimates. Early in this action, on May 2, 2005,

class counsel submitted to the court an advance estimate of fees

and expenses. Doc #70. There, counsel estimated that expert

witness and consultant fees would total $200,000 for discovery and

class certification and $300,000 thereafter (including trial), for

a total expert fee of $500,000. Doc #70 at 5. For miscellaneous

litigation costs, counsel estimated $176,500 for discovery and

class certification and $66,000 thereafter, for a total of

$242,500. Doc #70 at 5. 

Although the final expert bill of $630,000 is twenty-six

percent higher than the estimate of $500,000, this underestimate is

essentially immaterial here because the estimated amount of expert

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fees alone consumes the entirety of the Lenox settlement. A

lengthy inquiry into the reasonableness of the Noll report and his

charges is simply unnecessary. The problem before the court would

be no different if the Noll and Liu charges came only to $500,000. 

(Moreover, and although the court does not know his total charges,

the hourly rate of defendants’ expert was also quite handsome,

indeed). So a definitive answer to whether the experts’ charges

are reasonable being not necessary, it suffices to say that they

are, in light of the ex ante estimate and the settlement fund,

reasonable enough. And the court can move on to the second, and

somewhat more difficult, question.

B

The second question boils down to this: When a class

action recovery is less than the expenses incurred by class counsel

in bringing and maintaining the action, should counsel be permitted

to retain the entirety of the recovery, or should they be required

to distribute at least some of it to the class?

One way to begin a search for the answer is to reframe

the inquiry: What kind of fee and expenses arrangement would the

class have struck with class counsel ex ante? See, for example, In

re Wells Fargo Sec Litig, 156 FRD 223, 225–26 (ND Cal 1994). Such

an approach admittedly has its difficulties in a class action

“because no member of the class has a sufficient stake to drive a

hard — or any — bargain with the lawyer.” Matter of Continental

Ill Sec Litig, 962 F2d 566, 572 (7th Cir 1992); see also Goldberger

v Integrated Resources, Inc, 209 F3d 43, 53 (2d Cir 2000). The

class here was not consulted in advance, and there is nothing to

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indicate that the representative plaintiffs gave a moment’s thought

to the possibility of the present situation. The representative

plaintiffs testified at trial and seemed like very nice people, but

astute bargainers with lawyers? No. They were retail tableware

buyers. Nevertheless, and absent any real help from the

representatives, “some guides are available,” including “data from

large common-pool cases where fees were privately negotiated; and

information on class-counsel auctions, where judges have

entertained bids from different attorneys seeking the right to

represent a class.” In re Synthroid Marketing Litig, 264 F3d 712,

719 (7th Cir 2001). 

The results of class counsel competitions are

particularly relevant in this regard. The court thus looks to its

own cases in which it has adopted that method, as well as the

Federal Judicial Center’s 2001 study of competitive bidding

procedures. See Laural L. Hooper & Marie Leary, Auctioning the

Role of Class Counsel in Class Action Cases: A Descriptive Study

(Aug 29, 2001) [hereinafter “FJC study”], available at

http://www.fjc.gov/public/pdf.nsf/lookup/auctioning.pdf/$file/aucti

oning.pdf (last visited Nov 26, 2007). 

The FJC study discloses a number of provisions relating

to expenses and costs that are common to successful bids. The

study compared ten completed auctions whose terms were unsealed and

found that seven out of the ten winning bids contained either an

explicit cap on expenses or a provision stating that expenses would

be included in the attorneys’ fee. See FJC study at 55-58. Such

results are consistent with the court’s own practice, and the court

has expressed its approval of fee proposals that include expenses. 

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See, for example, Wenderhold v Cylink Corp, 189 FRD 570, 573 (ND

Cal 1999). Perhaps most relevant for this case, no winning bid in

the FJC study stated that expenses might exceed the amount of

recovery payable to the class members. In fact, one case suggested

the exact opposite: If the recovery amount were under a specific

threshold, then the class members would be entitled to one hundred

percent of the funds. See In re Auction Houses Antitrust Litig,

197 FRD 71 (SDNY 2000) (Kaplan, J). The FJC study termed that

threshold amount the “X-factor.” FJC study at 40.

The situation here is one more reason that Judge Kaplan’s

approach in Auction Houses makes a lot of sense. First, that

approach encourages class counsel to economize on expenses in that

class counsel must bear all those expenses if the amount recovered

fails to achieve the “X-factor;” that risk helps to align class

counsel’s incentive with that of the class. Second, of course,

class counsel still retains an incentive to achieve the greatest

recovery possible as they obtain a portion of any recovery greater

than the “X-factor.”

Although Auction Houses might appear to close the book on

the expenses request at issue here, the matter is not so simple. 

First, it bears repeating that only one out of ten winning bids in

the FJC study used an X-factor approach, which demonstrates that it

is not a “default” or “favored” method of dealing with expenses. 

Second, as Judge Kaplan explained in his very thoughtful opinion,

the purpose behind the X-factor was to “create a disincentive to

cheap, premature settlement.” In re Auction Houses, 197 FRD at 83. 

The Lenox settlement was not premature and, given the probability

of a recovery knowing what is now known, not cheap. Finally,

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despite its attractive features the court did not use the “Xfactor” approach nor have occasion to do so here, due to the lack

of competition to represent the class. Class counsel did not,

therefore, weigh the implications of an “X-factor” approach, and to

adopt it at the end, rather than the beginning, of the litigation

would be unfair. So the court resorts to a more conventional

approach: an effort to replicate what it believes would have

obtained in a negotiation between a fully informed and interested

class representative and class counsel. And that scenario

resembles what would have likely resulted in an individual as

opposed to class action.

The situation at bar is not all that uncommon in

individual contingent fee litigation: some recovery is obtained but

less than the expenses of suit. Under ethical principles, the

contingent fee plaintiff remains responsible for the expenses of

suit whether he recovers anything or not. See Cal R Prof Conduct

4-210(A)(3); ABA Model Rule 1.5(c); see also ABA Division for

Public Education, Legal Fees and Expenses: What are contingent

fees?, at http://www.abanet.org/publiced/practical/lawyerfees_

contingent.html (last visited Nov 26, 2007). The purpose of the

rule is to prevent attorneys from holding an unregulated security

interest in the litigation, which is usually prohibited under ABA

Model Rule 1.8. On the other hand, financial investment by

attorneys – who are officers of the court and are subject to broad

regulation and supervision – may be preferable to the cottage

industry of private funding companies that advance litigants costs

and expenses in exchange for a percentage of the recovery. See

Richard S Binko, Association of Trial Lawyers of America, Practical

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Accounting in a Solo or Small Law Office, ATLA Annual Convention

Reference Materials Vol 2 (July 2006). 

As a practical matter, however, the lawyers’ obligation

to limit their financial involvement in contingency practice to

attorney services is mostly honored in the breach, and contingent

fee lawyers generally absorb the expenses incurred in a totally

unsuccessful suit. See Gerson H Smoger, Association of Trial

Lawyers of America, Funding Contingent Fee Cases: Ethical

Considerations, ATLA Annual Convention Reference Materials Vol 2

(July 2004) (“Ultimately, the reality of most modern practices is

that there is no expectation of repayment if the case is

unsuccessfully prosecuted”). In a partially successful suit, the

lawyer may recoup from the recovery the expenses he has advanced to

the client; the attorney has acquired a lien on the judgment and

can recover the funds advanced for expenses before the client takes

his share. See 7 Cal Jur 3d Attys at Law § 220; Cal St Bar Comm on

Prof’l Resp & Cond, Formal Op 2006-170.

This result may or may not (probably not) be sound as a

policy matter as it encourages (or, more accurately, fails to

discourage) wasteful litigation. The court is not, however,

writing on a clean slate. The lawyers at bar operate in the world

as it is, not as a better world might be, and so must the court. 

If this were an individual action, not a class action, with the

result here, most likely counsel’s retention agreement, or a court

applying California law in the absence of an agreement, would award

counsel the entirety of the Lenox settlement.

This same result here is not unfair simply because this

is a class action. After all, the class hardly is losing anything

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it thought it was entitled to, and there would have been no

recovery at all but for the efforts of class counsel. 

One could certainly make the argument that class counsel,

having burned more candle than generated light, should receive

nothing or that counsel should have to share with the class part of

this settlement. But one could also argue that notwithstanding the

lack of a recovery greater than the expenses of suit, class counsel

conferred a benefit on the class in the form of a possibility of a

recovery; failure of that possibility to materialize does not

negate the existence of this benefit and class counsel’s

entitlement to recover their expenses. One could go on – there may

be still other possible ways to look at this situation. Suffice it

at this point to observe that making a distribution to the class or

a cy pres award would generate additional expenses. This is

already a case in which the transactions (and thus social) costs

appear to have exceeded the social gain, if any, from the

litigation. To force the expenditure of additional costs simply to

make what most likely would be a token payment to the class (most

of whom would doubtlessly be surprised to receive this manna) or to

confer some wholly gratuitous benefit on a cy pres recipient seems

pointless. There comes a point at which efforts to achieve equity

must stop. In the court’s view, we have reached that point.

Counsel’s miscellaneous costs of litigation totaling

$299,113.51 (for transcripts, travel and the like), see Doc #406,

need not be considered because the expert fees subsume the entire

settlement fund. For the same reasons, the court need not consider

a reasonable attorneys fee.

Case 3:04-cv-03514-VRW Document 417 Filed 11/28/07 Page 16 of 17
United States District Court

For the Northern District of California

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The court concludes by noting that there is no

significant unfairness here in giving the entire remaining recovery

to class counsel. Counsel did not bring a frivolous or dubious

lawsuit; the New York Attorney General’s investigation more or less

invited the suit, and private follow-on litigation is a long

accepted practice in antitrust enforcement. Counsel acted

responsibly and professionally throughout the litigation. Even

accounting for the remaining settlement funds, counsel suffered a

substantial loss financially. Although they assumed that risk, it

is unlikely that had the class negotiated for the contingency at

the outset, a different bargain would have been struck.

V

The court GRANTS the motion for final approval of the

settlement and GRANTS an award of expenses in the amount of

$427,072.35, plus any interest accrued thereon. Doc ##394, 416.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:04-cv-03514-VRW Document 417 Filed 11/28/07 Page 17 of 17