1

15-3011(L) 

In Re: Tremont Securities Law, State Law and Insurance Litigation

UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER 

FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF 

APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY 

ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX 

OR AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY 

ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 

1 At a stated term of the United States Court of Appeals for 

2 the Second Circuit, held at the Thurgood Marshall United States 

3 Courthouse, 40 Foley Square, in the City of New York, on the 

26th 4 day of June, two thousand seventeen. 

5 

6 PRESENT: DENNIS JACOBS, 

7 CHRISTOPHER F. DRONEY, 

8 Circuit Judges, 

TIMOTHY C. STANCEU, 9 

10 Chief Judge, U.S. Court of Int’l Trade. 

11 

12 - - - - - - - - - - - - - - - - - - - -X 

13 

14 IN RE: TREMONT SECURITIES LAW, STATE 15-3011 (L) 

15 LAW AND INSURANCE LITIGATION 15-3241 (Con) 

16 15-3251 (Con) 

17 - - - - - - - - - - - - - - - - - - - -X 

18 

19 FOR APPELLANTS GEORGE VINCENT T. GRESHAM, Law 

20 TURNER, BINDLER LIVING Office of Vincent T. Gresham,

21 TRUST, MADELYN HAINES, Atlanta, GA.

22 JOHN JOHNSON, WILLIAM J. 

23 MILLARD TRUST, STELLA 

 



 Judge Timothy C. Stanceu, Chief Judge of the United States 

Court of International Trade, sitting by designation. 
2

1 RUGGIANO TRUST, WEST 

2 TRUST, PAUL ZAMROWSKI: 

3 

4 FOR APPELLANT MARY JOSHUA FRUCHTER, Wohl & 

5 CATHERINE MARTIN, as the Fruchter LLP, New York, NY. 

6 personal representative of 

7 the estate of Michael S. Gary S. Graifman, Kantrowitz,

8 Martin: Goldhamer & Graifman, P.C., 

9 Chestnut Ridge, NY. 

10 

11 FOR APPELLANT RICHARD G. HADDAD, Otterbourg 

12 PHILADELPHIA FINANCIAL P.C., New York, NY. 

13 LIFE ASSURANCE COMPANY: 

14 

15 FOR APPELLEES ARTHUR E. ANDREW J. ENTWISTLE (Arthur 

16 LANGE REVOCABLE TRUST, V. Nealon, Robert N. 

17 ARTHUR C. LANGE, NEAL Cappucci, on the brief),

18 J. POLAN, EASTHAM Entwistle & Cappucci LLP, New

19 CAPITAL APPRECIATION York, NY. 

20 FUND LP, NPV POSITIVE 

21 CORP., and all others Reed R. Kathrein, Lee M.

22 similarly situated: Gordon, Hagens Berman Sobol 

23 Shapiro LLP, Berkeley, CA. 

24 

25 FOR APPELLEES ARTHUR M. Jeffrey M. Haber, Stephanie

26 BRAINSON, YVETTE M. Beige, Bernstein Liebhard

27 FINKELSTEIN, GROUP DEFINED LLP, New York, NY. 

28 PENSION PLAN & TRUST, and 

29 all others similarly 

30 situated:

31 

32 FOR APPELLEES DOLOS X IRWIN WARREN (Adam J. 

33 LLC, DOLOS XI LLC, DOLOS Bookman, Matthew S. Connors,

34 XII LLC: on the brief), Weil, Gotshal 

35 & Manges LLP, New York, NY. 

36 

37 FOR APPELLEE SPCP GROUP, Walter Rieman, Paul, Weiss,

38 LLC: Rifkind, Wharton & Garrison 

39 LLP, New York, NY. 

40 

41 FOR APPELLEE HSBC BANK Thomas J. Moloney, Joaquin P.

42 PLC: Terceño, Cleary Gottlieb 
3

1 Steen & Hamilton LLP, New 

2 York, NY. 

3 

4 FOR APPELLEE THE ROYAL Michael S. Feldberg, Allen &

5 BANK OF SCOTLAND N.V.: Overy LLP, New York, NY. 

6 

7 FOR APPELLEES NEW YORK JOHN M. VASSOS (Mary C. 

8 LIFE INSURANCE AND ANNUITY Pennisi, on the brief),

9 CORPORATION, METROPOLITAN Morgan, Lewis & Bockius LLP,

10 LIFE INSURANCE COMPANY, New York, NY. 

11 GENERAL AMERICAN LIFE 

12 INSURANCE COMPANY, NEW 

13 ENGLAND LIFE INSURANCE 

14 COMPANY, JOHN HANCOCK LIFE 

15 INSURANCE COMPANY (U.S.A.), 

16 PACIFIC LIFE INSURANCE 

17 COMPANY, SECURITY LIFE OF 

18 DENVER, DELAWARE LIFE 

19 INSURANCE COMPANY, PRUCO 

20 LIFE INSURANCE COMPANY, 

21 NATIONWIDE LIFE INSURANCE 

22 COMPANY: 

23 

24 Appeal from a judgment of the United States District Court 

25 for the Southern District of New York (Griesa, J.). 

26 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND 

27 DECREED that the judgment of the district court be AFFIRMED IN 

28 PART AND VACATED AND REMANDED IN PART. 

29 Appellants, investors in various hedge funds managed by 

30 Tremont Group Holdings, Inc. and its affiliates, appeal from 

31 a judgment of the United States District Court for the Southern 

32 District of New York (Griesa, J.), approving a post-settlement 

33 plan to allocate the liquidated assets of certain funds (the 

34 “Plan of Allocation,” or “POA”) and awarding attorneys’ fees. 

35 For the reasons stated below, we affirm the district court’s 

36 approval of the POA, but vacate and remand for a reduction of 

37 the fee award consistent with this order. 
4

1 We assume the parties’ familiarity with the underlying 

2 facts, the procedural history, and the issues presented for 

3 review. 

4 Tremont Group Holdings and its affiliates managed two 

5 groups of hedge funds. The first, known as the “Rye Funds,” 

6 invested all of their assets either with Bernard L. Madoff 

7 Investment Securities (“BLMIS”) or, in the case of Rye Select 

8 Broad Market XL Fund, L.P. (“Rye XL”), in synthetic derivatives 

9 intended to mirror the returns of BLMIS. The Rye Funds include 

10 Rye Select Broad Market Fund, L.P. (“Rye Onshore”), Rye Select 

11 Broad Market Portfolio Limited (“Rye Offshore”), Rye Select 

12 Broad Market Insurance Fund, L.P. (“Rye Insurance”), Rye Select 

13 Broad Market Prime Fund, L.P. (“Rye Prime”), and Rye XL. Three 

14 of these (Rye Onshore, Rye Offshore, and Rye Insurance) invested 

15 directly with BLMIS and were “net losers,” meaning they invested 

16 more money with BLMIS than they withdrew. 

17 The second group of hedge funds, the “Tremont Funds,” were 

18 “funds of funds,” investing a portion of their assets in the 

19 Rye Funds (and therefore indirectly with BLMIS) and the rest 

20 in investments unrelated to BLMIS. Appellants largely 

21 invested in Tremont Funds. 

22 When BLMIS collapsed in December 2008, investors in the Rye 

23 and Tremont Funds filed several putative class actions and 

24 derivative complaints against various entities and individuals 

25 responsible for the investment of fund assets with BLMIS. 

26 These actions were consolidated in 2009, with counsel (referred 

27 to herein as “Lead Counsel”) appointed to represent all settling 

28 investors. 

29 The parties to these consolidated actions settled in 

30 February 2011. That “Investor Settlement” created two 

31 separate escrow accounts: (1) the Net Settlement Fund (“NSF”), 

32 containing $100 million paid by the defendants in exchange for 

the release of all claims against them1 33 ; and (2) the Fund 

34 Distribution Account (“FDA”), containing all the assets that 

35 remained in the liquidated Rye Funds after claims by and against 

 

1

 The NSF has already been distributed and is not at issue in 

this appeal. 
5

1 the trustee of the BLMIS bankruptcy estate (the “Trustee”) were 

2 resolved in separate litigation (the “Trustee Litigation”). 

3 In the Trustee Litigation, the three net-loser Rye Funds 

4 filed approximately $2.2 billion in claims against the Trustee 

5 under the Securities Investor Protection Act (“SIPA”). The 

6 Trustee, in turn, sought to claw back approximately $2.1 billion 

7 in avoidable transfers made to the Rye and Tremont Funds. In 

8 July 2011, a settlement (the “Trustee Settlement”) was reached: 

9 the Rye and Tremont Funds collectively paid the Trustee $1 

10 billion in cash; in exchange, the Trustee withdrew its avoidance 

11 claims against each of them and granted the net-loser Rye Funds 

12 roughly $2.2 billion in claims plus a claim for the return of 

13 eighty percent ($800 million) of the $1 billion payment pursuant 

14 to section 502(h) of the Bankruptcy Code. Thus, after the funds 

15 paid the Trustee $1 billion to settle the clawback claims 

against them,2 16 the net-loser Rye Funds received claims totaling 

17 roughly $3 billion. 

18 The FDA is composed almost entirely of those $3 billion in 

19 claims. It also includes $32.4 million in cash remaining in 

20 Rye XL (a Rye Fund that did not have to contribute to the $1 

21 billion Trustee Settlement). It is expected that a total of 

22 around $1.45 billion will eventually flow into the FDA from the 

Trustee.3 23 

24 The allocation of the FDA was not part of the Investor 

25 Settlement. Nevertheless, the parties agreed that a “plan of 

26 allocation [would] be approved by the [District] Court,” J.A. 

 

2

 The $1 billion payment by the funds to the Trustee was 

collected as follows: the three net-loser Rye Funds contributed 

a combined $212 million of their own money plus $650 million 

they borrowed from Fortress Investment Group, LLC (“Fortress”); 

the Tremont Funds and one of the net-winner Rye Funds (Rye Prime) 

contributed the remaining $138 million. 

3

 As of September 2015, approximately $650 million had already 

poured into the FDA. Another $650 million was recovered from 

the Trustee and never reached the FDA because it was used to 

repay the Fortress loan. 
6

1 285, and the court explicitly retained jurisdiction over the 

2 FDA’s allocation. 

3 In its 2011 final judgment approving the Investor 

4 Settlement, the district court tasked Lead Counsel with 

5 responsibility for proposing a plan of allocation. In April 

6 2014, Lead Counsel solicited proposed plans from interested 

7 parties and notified them of mediation to resolve the allocation 

8 issue. After more than a year of mediation among numerous 

9 parties (including multiple appellants), a consensus plan of 

10 allocation (the “POA”) emerged. 

11 Under the POA -- which is supported by investors holding 

12 approximately ninety-seven percent of the net equity in the 

13 funds -- FDA assets are distributed as follows. 

14 First, the $32.4 million that Rye XL contributed to the FDA 

15 is returned to Rye XL investors. 

16 Next, the funds are awarded equal priority to the balance 

17 of the FDA using a simple formula: (1) each net-loser Rye Fund 

18 has a claim (referred to as a “SIPC Claim”) equal to its portion 

19 of the $3 billion Trustee Settlement; (2) each Tremont and 

20 net-winner Rye Fund that contributed cash to the Trustee 

21 Settlement has a “Virtual SIPC Claim” equal to eighty percent 

22 of its Trustee Settlement contribution. 

23 Finally, once the money is allocated to the appropriate 

24 funds using the formula described above, each fund’s investors 

25 will receive a pro rata share of the fund’s allocation according 

26 to the investor’s net equity (i.e., amount lost) in that fund. 

27 In other words, only investors who lost money in a given fund 

28 due to that fund’s investment in BLMIS are entitled to recover 

29 anything from the fund. Thus, net-loser investors in any fund 

30 will recover a share of that fund’s SIPC or Virtual SIPC Claim; 

31 and net-loser investors in any net-loser fund will recover a 

32 share of that fund’s cross-investment in each Rye Fund in which 

33 it was invested. 

34 In September 2015, after a three-hour hearing regarding 

35 allocation of the FDA, the district court issued a written 

36 opinion approving the POA, rejecting an alternative plan 

37 proposed by appellant Michael S. Martin, granting Lead 
7

1 Counsel’s motion for attorneys’ fees, and overruling all 

2 objections. Appellants appeal the court’s approval of the POA 

3 and award of attorneys’ fees. 

4 We review a district court’s allocation of settlement funds 

5 and award of attorneys’ fees for abuse of discretion. See In 

6 re “Agent Orange” Prod. Liab. Litig., 818 F.2d 179, 181 (2d Cir. 

7 1987) (settlement funds); Goldberger v. Integrated Res., Inc., 

8 209 F.3d 43, 47 (2d Cir. 2000) (attorneys’ fees). 

9 1. There are unusual features to this appeal. We are 

10 reviewing an allocation of assets that were obtained in 

11 unrelated litigation and that are being held in an account 

12 created for the purpose of allocation by a settlement that is 

13 not being challenged. Further complicating matters, those 

14 assets represent the liquidated remains of a group of hedge 

15 funds (the Rye Funds) that imploded after Madoff’s Ponzi scheme 

16 was revealed. Unlike a typical settlement fund distribution 

17 plan, the POA is separate from the underlying settlement, 

18 involves assets that are already earmarked for the potential 

19 recipients (the investors in the liquidated hedge funds), and 

20 is the product of mediation between those recipients. These 

21 circumstances, however, do not disturb the traditional 

22 deference we owe to the district court’s equitable allocation 

of settlement-related funds.4 23 

24 The district court did not abuse its discretion in 

25 approving the POA. The POA is fair and reasonable, as was the 

26 mediation process that produced it. See In re PaineWebber Ltd. 

27 P’ships Litig., 171 F.R.D. 104, 133 (S.D.N.Y. 1997), aff’d, 117 

28 F.3d 721 (2d Cir. 1997) (per curiam) (“As a general rule, the 

29 adequacy of an allocation plan turns on whether counsel has 

30 properly apprised itself of the merits of all claims, and 

 

4

 Nor does this peculiar procedural posture deprive the district 

court of jurisdiction over the FDA’s allocation. Although the 

Investor Settlement did not include a plan of allocation, it 

authorized the court to adopt such a plan, and the court 

explicitly retained jurisdiction over “all matters relating to” 

the Investor Litigation, including allocation of the FDA. J.A. 

642. 
8

1 whether the proposed apportionment is fair and reasonable in 

2 light of that information.”). 

3 First, the POA reflects the net-loser Rye Funds’ superior 

4 claim to the proceeds of the Trustee Settlement. See In re 

5 Corrugated Container Antitrust Litig., 643 F.2d 195, 220 (5th 

6 Cir. 1981) (“It is self-evident that if the settlement’s 

7 adequacy rests on the value of one set of claims, distribution 

8 of the settlement should be weighed heavily in favor of 

9 plaintiffs whose claims comprise that set.”). That settlement 

10 granted roughly $3 billion in claims exclusively to these three 

11 funds because only they were net-loser BLMIS customers. See 

12 In re Bernard L. Madoff Inv. Secs. LLC, 654 F.3d 229, 238 (2d 

13 Cir. 2011) (limiting SIPA recovery to net-loser BLMIS 

14 customers). To be sure, the Tremont and net-winner Rye Funds 

15 contributed $138 million to the Trustee Settlement, and that 

16 contribution helped enable the net-loser Rye Funds to receive 

17 their $800 million section 502(h) claim. But the Tremont and 

18 net-winner Rye Funds’ $138 million contribution was not 

19 selfless: the payment settled the clawback claims against them. 

20 And, in any event, that contribution is recognized by the 

21 allowance of Virtual SIPC Claims, which are calculated on the 

22 same eighty-percent basis as the net-loser Rye Funds’ section 

23 502(h) claim. 

24 Second, the POA reflects the net-loser Rye Funds’ greater 

25 victimization by BLMIS. Unlike the other funds, they invested 

26 their entire portfolio with BLMIS and incurred enormous losses. 

27 Third, the Tremont Funds were exposed to Madoff’s fraud 

28 only through their cross-investments in Rye Funds. Under the 

29 POA, Tremont Funds, like all Rye Fund investors, are compensated 

30 for their Madoff losses. 

31 Fourth, the POA adopts the net equity principle of 

32 allocation that this Court has previously endorsed with respect 

33 to Madoff’s Ponzi scheme. This principle holds that, because 

34 net winners were given money stolen from net losers, only net 

35 losers have an equitable right to recovery. See id. at 235, 

36 238. 

37 Fifth, the POA respects the separate legal status of the 

38 funds. Rather than pool all of the Trustee Settlement proceeds 
9

1 into one pot for distribution directly to the individual 

2 investors -- as the rejected plan proposed by Martin would do 

3 -- the POA first allocates the proceeds according to the claims 

4 held by the funds. This is appropriate given that the FDA 

5 arises from the derivative claims brought on behalf of the funds 

6 in the Investor Litigation. 

7 Finally, the POA provides for the priority distribution of 

8 $32.4 million to Rye XL’s investors in recognition of Rye XL’s 

9 direct cash contribution to the FDA in that amount. 

10 Thus, in sum, the POA is based on fair and equitable 

11 principles. It is the product of protracted, contentious 

12 mediation in which numerous Rye and Tremont Fund investors with 

diverse interests participated through counsel.5 13 Attorneys 

14 for two of the appellants (Martin and Philadelphia Financial 

15 Life Assurance Company) took part in the mediation and advocated 

16 on their clients’ behalf. The retired federal judge who served 

17 as the mediator attested to the inclusive and hard-fought nature 

18 of the negotiations, the numerous compromises made, the 

19 opportunity for all parties to advance their positions, and the 

20 fairness of the POA. And the district court provided ample 

21 opportunity for appellants and other interested parties to 

22 voice their concerns and submit competing proposals before it 

23 decided to allocate the FDA according to the POA. 

24 Given these facts, and the fair terms of the POA (including 

25 significant concessions to Tremont and net-winner Rye Fund 

26 investors in the form of Virtual SIPC Claims), the district 

27 court did not abuse its discretion in concluding that 

28 appellants’ interests were adequately represented and 

protected.6 29 See In re Literary Works in Elec. Databases 

 

5

 The Tremont Funds’ interests were represented at mediation not 

only by the several Tremont Fund investors who attended, but 

also by: (1) Rye Fund investors, who, like the Tremont Funds, 

were exposed to Madoff’s fraud through their investments in the 

Rye Funds; and (2) investors in Rye Prime, which, like the 

Tremont Funds, contributed cash to the Trustee Settlement 

without receiving a claim in return. 

6

 Accordingly, the district court’s denial of Martin’s 2015 

motion to certify a subclass of Tremont Fund investors pursuant 
10

1 Copyright Litig., 654 F.3d 242, 252 (2d Cir. 2011) (“The Supreme 

2 Court’s decision in Amchem . . . allows courts, in assessing 

3 the adequacy of representation, to examine a settlement’s 

4 substance for evidence of prejudice to the interests of a subset 

5 of plaintiffs.”). 

6 2. The POA allows a recovery only to investors who 

7 suffered a net loss in the Madoff Ponzi scheme. Appellants 

8 argue that this conflicts with the Investor Settlement, which 

9 they claim entitles every investor to recover. Appellants’ 

10 argument rests on ¶ 1.18 of the Investor Settlement, which 

11 defines “Fund Distribution Claimant” as “any limited partner 

12 or shareholder in any of the Settling Funds . . . , each of which 

13 shall be entitled to receive a disbursement from the [FDA].” 

14 J.A. 263-64 (emphasis added). 

15 Paragraph 1.18 of the Investor Settlement does not impugn 

16 the POA. The Investor Settlement explicitly stated that 

17 allocation of the FDA would be decided separately. It is 

18 implausible that the parties intended to drastically limit the 

19 terms of that allocation through a vague reference to 

20 entitlement buried in the definitional section of the 

21 settlement. 

22 Viewed in context, ¶ 1.18 is more naturally read as a 

23 statement of eligibility, rather than a guarantee of recovery. 

24 See Huertas v. East River Hous. Corp., 992 F.2d 1263, 1267 (2d 

25 Cir. 1993) (“[A] court may look to certain aids, such as the 

26 circumstances surrounding a settlement agreement’s formation, 

27 when construing it for enforcement purposes.”). 

28 3. Philadelphia Financial contends that the POA should be 

29 rejected because it conflicts with the funds’ governing 

30 documents. Many of the funds are limited partnerships whose 

31 partnership agreements dictate the allocation of assets, 

32 including upon liquidation. The partnership agreements 

33 generally require that assets of the fund be distributed 

 

to Federal Rule of Civil Procedure 23 was not an abuse of 

discretion. Moreover, because the POA was a mechanism to 

resolve the derivative (rather than class action) claims in this 

litigation, Rule 23 is arguably inapplicable. 
11

1 proportionally according to the value of each investor’s 

2 capital account, whereas the POA distributes FDA assets based 

3 on an investor’s net equity in a given fund. 

4 However, the Investor Settlement rendered the funds’ 

5 governing documents irrelevant for purposes of allocation. 

6 When the funds and their investors signed the Investor 

7 Settlement, all assets flowing into the FDA became subject to 

8 equitable distribution by the district court. See J.A. 285, 

9 ¶ 2.23 (explaining that the FDA will be disbursed to the funds’ 

10 limited partners and shareholders pursuant to a plan of 

11 allocation approved by the district court). In other words, 

12 because the POA determines how the FDA is distributed to 

13 investors, the funds’ partnership agreements do not control. 

14 And because the partnership agreements would not allocate 

15 assets more fairly than the POA (and would risk giving effect 

16 to Madoff’s fictitious account statements), the district court 

17 did not abuse its discretion in ignoring them. 

18 4. Martin claims that the mediation was tainted by secret, 

19 collusive side-deals, and that the district court erred in 

20 denying his motion for disclosure of all agreements reached 

21 during the mediation process. Martin relies on Federal Rule 

22 of Civil Procedure (“Rule”) 23(e)(3), which requires that 

23 parties seeking approval of a proposed class action settlement 

24 “file a statement identifying any agreement made in connection 

25 with the proposal.” Fed. R. Civ. P. 23(e)(3). 

26 As an initial matter, Rule 23, which governs class actions, 

27 is arguably not controlling here. The FDA, unlike the NSF, 

28 resolves the non-class derivative claims in this litigation. 

29 In any event, all mediation attendees signed a 

30 confidentiality agreement which covered “all statements of the 

31 parties, counsel, and mediators, as well as the materials 

32 generated solely for purposes of the mediation.” J.A. 1691. 

33 Attendees also orally agreed “that the entire mediation process 

34 and all communications, negotiations and agreements pursuant 

35 thereto were covered with a complete cloak of confidentiality 

36 and must remain confidential, including in particular, being 

37 off limits from discovery, court papers, arguments or other 
12

1 Court proceedings, absent further agreement by the parties.” 

2 J.A. 2178. 

3 Rule 23 does not require disclosure of all agreements made 

4 during confidential mediation. As we have observed: 

5 A party seeking disclosure of confidential mediation 

6 communications must demonstrate (1) a special need for 

7 the confidential material, (2) resulting unfairness 

8 from a lack of discovery, and (3) that the need for 

9 the evidence outweighs the interest in maintaining 

10 confidentiality. All three factors are necessary to 

11 warrant disclosure of otherwise non-discoverable 

12 documents. 

13 Savage & Assocs. P.C. v. K&L Gates LLP (In re Teligent, Inc.), 

14 640 F.3d 53, 58 (2d Cir. 2011) (citations omitted). 

15 The district court found that there was no reason to believe 

16 that any agreements reached during mediation were collusive, 

17 and that the need for confidentiality outweighed the need for 

18 disclosure. Given the importance of encouraging mediation in 

19 this tangled matter, the mediator’s testimony regarding the 

20 fairness of the negotiations and the evident fairness of the 

21 POA, the district court did not err in denying Martin’s motion 

22 to revoke confidentiality. See id. at 59-60 (“Were courts to 

23 cavalierly set aside confidentiality restrictions on 

24 disclosure of communications made in the context of mediation, 

25 parties might be less frank and forthcoming during the mediation 

26 process or might even limit their use of mediation 

27 altogether.”). 

28 5. Appellants (with the exception of Martin) argue that 

29 the district court erred in awarding Lead Counsel a fee equal 

to three percent of the FDA,7 30 capped at two-and-a-half times the 

“lodestar” of counsel’s hourly rate multiplied by hours worked.8 31 

32 If, as the parties anticipate, the Trustee pays approximately 

 

7

 The three percent is not applied against Rye XL’s $32.4 million 

priority distribution. 

8

 The district court also awarded Lead Counsel nearly $1 million 

in expenses. 
13

1 $1.45 billion into the FDA, this cap will likely be triggered 

2 and Lead Counsel will receive in excess of $40 million. 

3 “We review a district court’s award of attorney’s fees for 

4 abuse of discretion, which occurs when (1) the court’s decision 

5 rests on an error of law (such as application of the wrong legal 

6 principle) or clearly erroneous factual finding, or (2) its 

7 decision -- though not necessarily the product of a legal error 

8 or a clearly erroneous factual finding -- cannot be located 

9 within the range of permissible decisions.” McDaniel v. Cty. 

10 of Schenectady, 595 F.3d 411, 416 (2d Cir. 2010) (internal 

11 citation, quotation marks, and brackets omitted). 

12 In absolute terms, an award of three percent of a common 

fund is not excessive, as numerous opinions confirm.9 13 However, 

14 the calculation is guided by several (non-exclusive) factors: 

15 “(1) the time and labor expended by counsel; (2) the magnitude 

16 and complexities of the litigation; (3) the risk of the 

17 litigation; (4) the quality of representation; (5) the 

18 requested fee in relation to the settlement; and (6) public 

19 policy considerations.” Goldberger, 209 F.3d at 50 

20 (alterations and quotation marks omitted). Further, fee 

21 awards should be approached “with an eye to moderation,” and 

22 “should be assessed based on scrutiny of the unique 

23 circumstances of each case, and a jealous regard to the rights 

24 of those who are interested in the fund.” Id. at 53 (internal 

25 quotation marks omitted). 

 

9

 See, e.g., In re Nortel Networks Corp. Secs. Litig., 539 F.3d 

129, 134 (2d Cir. 2008) (affirming fee award equal to 3% of $438 

million fund and acknowledging that fee was “toward the lower 

end of reasonable fee awards”); Wal-Mart Stores, Inc. v. Visa 

U.S.A. Inc., 396 F.3d 96, 123 (2d Cir. 2005) (affirming fee award 

equal to 6.5% of $3.38 billion common fund); Goldberger, 209 

F.3d at 52 (observing that “empirical analyses demonstrate that 

in cases like this one, with recoveries of between $50 and $75 

million, courts have traditionally accounted for these 

economies of scale by awarding fees in the lower range of about 

11% to 19%”); Carlson v. Xerox Corp., 596 F. Supp. 2d 400, 414 

(D. Conn. 2009), aff’d, 355 F. App’x 523 (2d Cir. 2009) (summary 

order) (awarding fee equal to 16% of $750 million common fund). 
14

1 The district court concluded that the Goldberger factors 

2 supported Lead Counsel’s requested fee, stating in relevant 

3 part: 

4 In its work on the FDA, [Lead] Counsel has 

5 unquestionably put forth great labor. Furthermore, 

6 the litigation has been highly complex, involving a 

7 great deal of unsettled law, many parties, and a 

8 voluminous case history. [Lead] Counsel has 

9 displayed great skill in managing these challenges. 

10 Objectors uncharitably characterize [Lead] Counsel as 

11 mere “administrators” of the FDA. In fact, [Lead] 

12 Counsel’s driving role in structuring the FDA as part 

13 of the [Investor] Settlement, and thereafter working 

14 to mediate conflicts and effect a fair and expedient 

15 distribution of the funds, has gone well beyond rote 

16 administration. In short, the allocation and 

17 distribution of the FDA is a complex matter of great 

18 importance to many parties, and [Lead] Counsel has 

19 performed admirably. . . . [T]his litigation 

20 involved unique practical and legal challenges. The 

21 outcome of [Lead] Counsel’s labor was never certain. 

22 In re Tremont Sec. Law, State Law & Ins. Litig., No. 08-CV-11117, 

23 2015 WL 5333494, at *10, 2015 U.S. Dist. LEXIS 122204, at *36-38 

24 (S.D.N.Y. Sept. 14, 2015). 

25 We do not question the district court’s characterization 

26 of Lead Counsel’s performance or the complexity or importance 

27 of this matter. However, we think the court gave insufficient 

28 consideration to the lack of contingency risk, and that factor 

29 is generally the most important in determining whether to award 

30 a lodestar multiplier. Goldberger, 209 F.3d at 54 (“We have 

31 historically labeled the risk of success as perhaps the foremost 

32 factor to be considered in determining whether to award an 

33 enhancement.” (internal quotation marks omitted)). 

34 The district court identified two risks Lead Counsel 

35 supposedly faced. Neither supports Lead Counsel’s requested 

36 2.5 lodestar multiplier. 

37 The first identified risk was “in bringing the derivative 

38 claims that gave rise to the inclusion of the FDA as part of 
15

1 the [Investor] Settlement.” In re Tremont, 2015 WL 5333494, 

2 at *9, 2015 U.S. Dist. LEXIS 122204, at *34. This is not a 

3 proper consideration in relation to this particular fee award. 

4 First, Lead Counsel was already compensated for the risk in 

5 bringing the derivative (i.e., state law) claims in the fee 

6 award for the August 2011 Investor Settlement. See J.A. 617 

7 (stating that the 2011 fee award compensated Lead Counsel for 

8 “their respective contributions in the prosecution of the State 

9 Law Actions and the Securities Actions”); J.A. 619 (finding that 

10 had Lead Counsel “not achieved the Settlement, a significant 

11 risk would remain that State Law and Securities Plaintiffs and 

12 the State Law and Securities Subclasses may have recovered less 

13 or nothing”). 

14 Second, Lead Counsel is requesting fees for work completed 

15 only after the district court approved the Investor Settlement 

in August 2011.10 16 It does not do to multiply the fee award here 

17 -- which is based on hours worked after the Investor Settlement 

18 -- in order to compensate a risk that dissipated when the court 

19 approved that settlement. 

20 Third, the hundreds of millions of dollars that have been 

21 flowing into the FDA were essentially guaranteed by the July 

22 2011 settlement in the Trustee Litigation, a separate case led 

23 by separate counsel (who already took their cut) involving money 

24 obtained by the Trustee (who is also being compensated). There 

25 is no reason to award Lead Counsel a lodestar multiple based 

on the size of a recovery they did not secure.11 26 Nor was there 

27 ever a real possibility that the FDA would be so insignificant 

 

10 More specifically, Lead Counsel is seeking fees for work 

completed from May 2011 through August 2015. The district 

court approved the Investor Settlement and the initial fee award 

in August 2011. However, Lead Counsel submitted the initial 

fee request in May 2011, which explains why they are now seeking 

fees from May 2011 to August 2011 in addition to fees for work 

involving the FDA POA after approval of the settlement. 

11 Although Lead Counsel was responsible for securing the $100 

million NSF, they were paid a thirty-percent fee for that. 
16

1 that Lead Counsel might be deprived of rich compensation for 

2 their work relating to it. 

3 The second risk identified by the district court was the 

4 “risk[] in defending the Plan of Allocation against objectors.” 

5 In re Tremont, 2015 WL 5333494, at *9, 2015 U.S. Dist. LEXIS 

6 122204, at *35. However, Lead Counsel’s fee award is not tied 

7 to any particular plan of allocation; rather, it is dependent 

8 on the size of the FDA (which is a product of the Trustee’s 

9 efforts) and the lodestar -- which only increased as the number 

10 of objections to the POA (and thus Lead Counsel’s hours spent 

11 defending it) grew. Accordingly, there appears to have been 

12 little (if any) risk in defending the POA against objectors, 

13 except for the remote possibility that the district court would 

14 refuse to approve any plan of allocation submitted by Lead 

15 Counsel. 

16 Given the lack of contingency risk, a lodestar multiplier 

17 cap of 2.5 “cannot be located within the range of permissible 

18 decisions.” McDaniel, 595 F.3d at 416; see also City of Detroit 

19 v. Grinnell Corp., 495 F.2d 448, 471 (2d Cir. 1974), abrogated 

20 on unrelated grounds by Goldberger, 209 F.3d at 49-50 (“The 

21 greater the probability of success, of either ultimate victory 

22 on the merits or of settlement, the less this consideration 

23 should serve to amplify the basic hourly fee.”). A lodestar 

24 multiplier of 2.5 would be considered high for a standard common 

fund case in this Circuit.12 25 At the same time, virtually all 

26 the cases that feature a multiplier are those in which, unlike 

 

12 See, e.g., In re Citigroup Inc. Secs. Litig., 965 F. Supp. 

2d 369, 401 (S.D.N.Y. 2013) (citing data regarding lodestar 

multipliers in securities class action settlements and 

observing that a multiplier of 2.8 is “high”); In re Merrill 

Lynch & Co. Research Reports Secs. Litig., No. 02 MD 1484, 2007 

WL 313474, at *23, 2007 U.S. Dist. LEXIS 9450, at *75 (S.D.N.Y. 

Feb. 1, 2007) (ruling that “an award that equates to a multiplier 

of 2.43 of the lodestar is excessive”); In re Twinlab Corp. Secs. 

Litig., 187 F. Supp. 2d 80, 87 (E.D.N.Y. 2002) (describing 

counsel’s requested multiplier of 3.58 as “inconsistent with 

post-Goldberger courts which have generally refused 

multipliers as high as 2.03”). 
17

1 here, the fund was collected by the efforts of counsel with an 

2 inherent risk that the litigation would yield less or none. 

3 We therefore remand so that the district court can revise 

the cap to reflect counsel’s limited risk.13 4 The specific 

5 recalculation, of course, remains subject to the district 

6 court’s sound discretion. Although a cap of 2.5 times the 

7 lodestar is excessive, one equal to the lodestar is not 

8 necessarily required. 

 

 

13 Appellants George Turner, Bindler Living Trust, Madelyn 

Haines, John Johnson, William J. Millard Trust, Stella Ruggiano 

Trust, West Trust, and Paul Zamrowski challenge the lodestar 

multiplier cap on the additional grounds that the district court 

relied on time summaries (rather than contemporaneous time 

records) and Lead Counsel’s hourly rates. With respect to time 

records, although they are ordinarily required, see Scott v. 

City of New York, 626 F.3d 130, 133-34 (2d Cir. 2010) (per 

curiam), the district court may rely on summaries that are based 

on voluminous contemporaneous records. See Cruz v. Local Union 

No. 3 of Int’l Bhd. of Elec. Workers, 34 F.3d 1148, 1160 (2d 

Cir. 1994) (“A review of the submissions made by [counsel] shows 

that they made contemporaneous entries as the work was 

completed, and that their billing [summary] was based on these 

contemporaneous records. We believe this falls sufficiently 

within the meaning of ‘contemporaneous’ . . . .”). However, 

the sparse summaries provided by Lead Counsel are of doubtful 

adequacy. Therefore, on remand, the district court should 

require the submission of more detailed summaries that, at the 

very least, break down the hours worked by year and task. With 

respect to the district court’s use of counsel’s hourly rates 

to calculate the lodestar, we find no abuse of discretion. 

Given the skill and experience required in this complex 

securities litigation, we cannot conclude that those rates were 

unreasonable. 
18

1 Accordingly, and finding no merit in appellants’ other 

2 arguments, we hereby AFFIRM the judgment of the district court 

3 with respect to the plan of allocation and VACATE AND REMAND 

4 with respect to the fee award. 

5 FOR THE COURT: 

6 CATHERINE O’HAGAN WOLFE, CLERK