and Wechsler Firm bid formulations (see Bank One, 96 F.Supp.2d at

786 n.7), this litigation would have to generate a recovery of
more than $44 million before the class could fare better
financially under the Wechsler Firm’s bid than under the Wolf
Firm’s across-the-board proposal,

Finally, the third bidder is another experienced firm with
first-rate credentials as evidenced by the same type of submission
as the other two firms. Like the Wechsler Firm, Spector Roseman &
Kadroff (the “Spector Firm”) have tied a descending percentage-of-
recovery formula with a cap, and it works out to be somewhat more
favorable to the plaintiff class than the Wechsler Firm’s
submission: 17% of the first $5 million, 12% of the next $10
million and 7% of the next $10 million, with the cap of $2.75
million also coming into play on any recovery in excess of $25
million. In terms of the crossover point, this litigation would
have to generate a recovery of more than $36.667 million before
the class would come out better financially under the Spector
Firm’s bid than under the Wolf Firm's proposal.

As can be seen, selection among the three bids poses a
material element of uncertainty that is inherent in having to
anticipate at this threshold stage of the game what the ultimate
dollar outcome of the litigation is likely to be if plaintiffs are
successful. But in this instance the Prospects of net class

benefit under the three bids at different levels of likely

19


or its own in the kind of comprehensive and studied beauty contest
required to search out a cadre of law firms ready, willing and
able to act as class counsel and to ascertain which of those firms
is prepared to do so on the terms most favorable to the entire
class. Yet fundamental economic analysis teaches that to be the
only way in which there is any real assurance of maximizing the
class’ ultimate welfare. And to that end a neutrally conducted
and confidential competitive bidding process under the auspices of
the court affords the best means--in fact, it would seem the only
means--to derive that necessary information, so that the class
gets the best available combination of highly competent
representation at the least cost.

Instead, those who would seek to denigrate or even forbid the
use of competitive bidding for class representation place their
reliance on whatever arrangements for legal representation have
been made by the private discussions between the class
representative and its preferred counsel (subject to a post-hoc
judicial determination whether those arrangements have produced a
reasonable fee, a subject that has been and is hereafter discussed
at greater length elsewhere in this opinion). If the client has
made less than the best possible deal for itself, so be it--it
pays its own way, and that too is in the best free market
tradition. But to impose the individual client's bargain (or lack

of bargain) on all other class members--those to whom every lead

13


the other 11 higher-numbered cases (the -casé numbers are also
listed in the caption, and the respective plaintiffs and case
numbers are also set out in Ex. A to this memorandum order) :

1. For convenience, a separate case number and the
general caption “In re Comdisco Securities Litigation” will
be employed in all future orders and opinions in these
actions. That new case number is being stamped on the file
original of this memorandum order. In any situation in
which fewer than all of the actions are implicated in any
future order or opinion, the caption will also state
“Entered only in Case No(s]. --.”

2. Under 15 U.Ss.c, §78u-4 (a) (3) (A) ,? the Plaintiff in
Case No. 01 C 874 is obligated to have published a notice
looking to the appointment of a lead plaintiff to represent
the putative class. [It is possible (though Subsection
(a) (3) (A) (ii) specifies that it is not necessary) that one
or more of the plaintiffs in the other listed cases may have
published similar notices. Counsel in each action in which
such a notice has been published are ordered to file in this
Court’s chambers, on or before April 5, 2001, a statement as
to their compliance with that requirement (including as an

exhibit a copy of the notice).

» All future references to subparts of 15 U.S.C. §78u-4
will omit that portion of the statutory designation, reading
simply “Subsection--.”


3
Sec. Litig., 3 F.Supp.2d 286, 295 (E.D. N.Y. 1998), that reject
the kind of artificial “loss” that is manufactured by PASERS’
attempted FIFO construct in favor of a calculation that properly
nets out purchases and sales during the class period and
determines gains or losses in those terms. That is all of a piece
with the concept of “actual damages” recovery that is uniformly

embraced by such cases as Astor Chauffeured Limousine Co. v.

Runnfeldt Inv. Corp., 910 F.2d 1540, 1551-52 (7** Cir. 1990).
Hence PASERS, despite (or in a sense because of) its large-volume
trading in Comdisco stock during the Class Period, is totally out
of the running for designation as lead plaintiff.‘

Among the other candidates that have sought appointment as
lead plaintiff, Moser himself is the leader (in the relevant sense
of out-of-pocket loss) by a substantial margin. Application of
the appropriate Olsten approach to his transactions dguring the

Class Period (transactions that also included both ins and outs)

* Moser’s submission also points out that PASERS’ counsel
had written this Court on April 9, 2001 that their client was
unwilling to serve as lead plaintiff unless this Court were to
approve the appointment of that counsel to represent the class.
That position was then essentially reaffirmed by PASERS’ in-house
general counsel, and PASERS’ outside counsel has not chosen to
participate in the bidding procedure at all. Moser’s counsel
therefore suggests that PASERS may have withdrawn from
consideration as lead plaintiff--but that question need not be
explored, because PASERS is knocked out of the box on the merits
in any event.


recovery are sufficiently close that this Court is comfortable in
approving presumptive lead plaintiff Moser’s going to the dance
with the law firm that brung him--in approving the Wolf Firm as
class counsel in direct conjunction with this Court's confirmation
that Moser’s status as presumptive lead plaintiff is converted to
a firm designation of that status.

Conclusion

For the reasons that have been stated in this memorandum
opinion and order, (1) Peter Moser is designated as the most
adequate plaintiff (lead plaintiff) to represent the previously-
defined class in this action and (2) Moser’s own counsel, the law
firm of Wolf Haldenstein Adler Freeman & Herz LLC, is approved as
class counsel on the terms stated in that firm’s bid for

representation.TM4 In further implementation of these rulings,

“In each of the other two already-cited major class
actions in which this Court has employed the competitive bidding
process, this Court has reserved the possibility of a fee award in
excess of the cap on fees that was voluntarily specified by the
successful bidder--an appropriate consideration that seeks to
minimize the possibility of any undue incentive for class counsel
to agree upon a less-than-optimal settlement if their services

to outstrip what had initially been anticipated by the successful
bidder. In the present instance, as indicated earlier, each of
the unsuccessful law firm bidders has also included a cap on fees
in its proposal, but under all the circumstances that factor has
not led to either such bid being preferred by this Court over that
of the Wolf Firm. Suffice it to say that if the ultimate outcome
in this action were to generate a recovery in excess of the
crossover points referred to earlier in the text, this Court would
anticipate that its ultimate reasonableness determination would
involve the same type of approach suggested in those earlier
cases,

20


“

statement describing the nature and content of such
discussions.

(c) It is recognized that certain law firms are
reflected as co-counsel in more than one of the cases
in this group. In order to preserve the integrity of a
bidding procedure if one were to be adopted, while at
the same time avoiding conflict of interest situations
for such law firms, until further order of this Court
the members of those firms are ordered not to discuss
the subject of any prospective fee arrangements in any

of the cases in which they are acting as co-counsel.

Ch bho Tcl

Milton I. Shadur
Senior United States District Judge

Date: March 26, 2001


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OP ILLIN {
EASTERN DIVISION C
MICHAEL BLITZER, individually and
on behalf of all others similarly

No. 01 C 874
(also entered in Case Nos.

)
)
situated, ) 01 Cc 974
) 01 ¢ 998 JUDGE SHAL
Plaintiffs, ) 01 ¢ 999
) 01 ¢ 1017 MAG :
v. ) 01 ¢ 1060 “ISTRATE JUDGE ASHMAY
) 01 ¢C 1111
COMDISCO, INC., NICHOLAS K. ) 02 ¢ 1148
PONTICKES and JOHN J. VOSICky, ) 0101177
) 01 ¢C 1479
Defendants. ) 01 C 1542
) o1c

1586)
MEMORANDUM ORDER

This Court’s calendar now includes the above-captioned
lowest -numbered putative securities class action in this District
Court (01 C 874) as well as two other such actions (01 C 974 and
01 C 998), each stemming from the Plaintiffs’ purchase of shares
of common stock in Comdisco, Inc. during the period from
January 25, 2000 through October 3, 2000. Because nine other
identical lawsuits then followed in short order--a series of
actions brought by different putative class representatives (for
the identically-identified class) against the same defendants --
this Court grants the motion heretofore filed in the Blitzer
action for reassignment of those other nine actions to this
Court’s calendar on relatedness grounds under the provisions of
this District Court’s LR 40.4. This early procedural order is

being entered not only in the lowest-numbered case (entitled as

reflected in the caption of this Memorandum order) but also in


It is thus somewhat of an understatement to say that this
Court’s reexamination of the propriety of the use of bidding to
award legal representation in securities class actions has
confirmed a strongly affirmative answer to that question for the
case now at issue. To turn then to how that plays out in this
action, this opinion has already said that the bidding proved to
be much more sparse here than in other situations with which this
Court has dealt, or that it has seen described in other reported
opinions.” Although only three firms submitted bids in this
case, the credentials and experience of those firms themselves, as
well as the nature of their bids, demonstrates that the necessary
high quality--far more important than quantity--is amply present.

To begin with Moser’s own firm, Wolf Haldenstein Adler
Freeman & Herz LLC (the “Wolf Firm”), it has submitted an across-
the-board 7.5% of the class recovery as its proposed bid. It has
coupled that proposal with a ballpark estimate of $150 million in
potential damages in the litigation as a whole. Even apart from
the obvious fact that Comdisco’s ensuing dramatic continuation of
its financial difficulties--a downward spiral, as already

mentioned--may well pose problems that could render any earlier

approach, but his calendar appears to have continued to present
the most frequent opportunities for its application.

17


i
individual clients that are unable to pay for services on a pay-
as-you-go basis and must therefore enter into a contingency
arrangement with counsel. If in either such situation the skilled
and experienced lawyer knows that he or she is competing against
others who are likewise skilled and experienced, that lawyer
perforce bases his or her proposal on the best possible informed
evaluation of the potential risks and rewards of handling the case
as known at the outset--an evaluation that deals with the
uncertainties of recovery or nonrecovery, as well as with an
estimated up-front quantification of the potential recovery if
successful. That is the true essence of the free market of
properly structured competitive bidding.

Fast forward, then, to the time when the same litigation has
reached a successful outcome, whether via settlement (the most
frequent fate of the “successful” securities or other commercial
class action) or by traveling the entire litigation path through
trial--and perhaps on appeal as well.® If counsel has obtained
that desired favorable result for the class clients with the
expenditure of (say) two-thirds of the number of hours that

counsel had initially anticipated in formulating the original bid,

° Only the handling of a successful case needs to be
discussed, for the unsuccessful class action or contingent private
action moots the topic of fees for plaintiffs’ counsel. But it
should not be forgotten that at the going-in stage any sensible
lawyer will have pegged his or her proposal high enough to take
into account the possibility of ending up with no recovery for the
client or client class, and hence with no fee,

9


counsel or as co-class counsel in this entire class action
litigation except for Case No. 01 ¢ 1177 (if co-class counsel
were to be appointed, each such bid must represent the total fees
that would be contemplated to be paid to all co-counsel including
the bidder) .? Each such bid shall be accompanied by a
comprehensive curriculum vitae regarding the bidding lawyers or
law firm or firms, including appropriate information as to their
prior class action experience.

Although this memorandum order has thus established a
bidding procedure, it should be understood that this Court has
not reached a firm conclusion as to whether the class counsel
will be selected on the basis of such bidding. Accordingly, as
was provided in this Court’s In re Amino Acid lysi titrust
Litigation opinion (reported at 918 F.Supp. 1190, 1192 (N.D. Ill.
1996)), any bidder or any interested paxty not submitting a bid
may include or make a written submission on or before May 4, 2001
as to the asserted desirability or undesirability of employing
the bidding procedure rather than some other approach to the
appointment and compensation of class counsel. In that regard

this Court is well aware of, and will take into account, the In

? In part the procedure established here is intended to
anticipate the possibility that the lowest responsible bidder
among the lawyers or law firms electing to bid may prove to be
other than the lawyers or law firm or firms who or that already
represent the person or group of persons that would otherwise
appear to qualify as the “most adequate plaintiff” within the
meaning of Subsection (a) (3) (B)).

2


aw

i
should be so,* it seems very likely that one major factor in this
case is Comdisco’s continuing financial decline: Last week’s
financial sections carried a story that its credit rating has been
downgraded by Moody’s Investors Service for the third time in
three months, signaling a strong likelihood that it may soon face
a default situation--and unsurprisingly, Comdisco’s common stock
has spiraled downward to the point where its current market
quotations are in the range of $1 per share. Surely the prospect
of taking on the handling of a major class action that may end
up--even if “successful”--as the equivalent of tapping an empty
barrel holds out less attractiveness for experienced law firms
that can better spend their time on other matters that hold out
greater promise of being productive financially for other
plaintiff classes and for the law firms themselves.

There is however an added factor that has emerged here as the

6 Ina different context, speaking of the difficulty of

quantifying damages that stem from trademark or service mark
infringement, this Court once said (Instrumentalist Co. v. Marine
Corps League, 509 F.Supp. 323, 333 (N.D. Ill. 1981)):

[T]here is no effective way to measure the loss of
sales or potential growth--to ascertain the people who
don’t knock on the door or to identify the specific
persons who do not reorder because of the existence of
the infringer.

That truism, later quoted by our Court of Appeals in a similar
case (Hyatt Corp. v. Hyatt Legal Servs., 736 F.2d 1153, 1158 (7
Cir. 1984)), appears equally applicable. to the present difficulty
of determining the number and identity of any law firms that may
have been or were in fact deterred from bidding by the adverse
factors next described in the text.

6


w

4
discloses that he sustained a net loss of over $140,000.5
Accordingly the answer to the first question posed by the
statutory structure is that Moser is presumptively the “most
adequate plaintiff.”

To turn then to the related subject of class counsel, whom
Subsection (a) (3) (B) (v) specifies is to be selected and retained
by the most adequate plaintiff “subject to the approval of the
court,” it is unfortunate that the quantity of bids received from
well-qualified and experienced class counsel this time around has
been meaningfully smaller than this Court has previously obtained

in the Amino Acid Lysine and Bank One actions and that this Court

knows, from its active ongoing monitoring of other opinions
dealing with the subject, to be typical of other major class

actions. Although it is not possible to be precise as to why that

* Another application for appointment as lead plaintiffs has
come from Joseph Lyng and Gregory Davidovich, who report losses
during the Class Period that aggregate just under $143,000--just a
tad more than Moser’s individually-sustained loss. Although
Subsection 4 (a) (3) (B) (i) does permit the appointment of a group as
well as a single class member as the “most adequate plaintiff,”
the caselaw has generally disapproved aggregation just for the
sake of aggregation. In this instance nothing is said in their
joint application to link Messrs. Lyng and Davidovich, other than
the obvious fact that each of them was a purchaser of Comdisco
shares. But so was Moser, and he individually suffered
substantially more harm than either of them. That, coupled with
the added factor that the Lyng-Davidovich counsel have not chosen
to participate in the bidding process, further confirms the
appropriateness of designating Moser as the class representative.

5


estimate suspect, everyone with experience in the field recognizes
that the estimate of potential damages is not often realized--a
subject addressed a bit later. In the meantime, it should be
added that the credentials of the Wolf Firm, well evidenced by its
written proposal and by the accompanying CV information, are
impeccable.

Another bidder, Wechsler Harwood Halebian & Feffer LLP (the
“Wechsler Firm”), has just completed yeoman service as the

successful bidder and hence the class counsel in the Bank One

litigation, producing a highly favorable settlement that this
Court has already approved in its extensive June 1, 2001 oral
ruling as fair, reasonable and adequate--the conventional skeletal
formulation that really does not do full justice to both the
result and the quality of the Wechsler Firm’s services. That
firm’s credentials have already been evaluated and described in

this Court’s earlier opinions in Bank One, and within a matter of

days this Court will be issuing a supplemental opinion dealing
with the subject of the approved fee award in that case. Just as

it did in Bank One, for purposes of thig case the Wechsler Firm

coupled a percentage-of-recovery formula with a voluntarily-

established cap on its fees: 20% of the first $4 million, 15% of
the next $8 million and 10% of the next $13 million, with the cap
of $3.3 million coming in to play on any recovery in excess of $25

million. In terms of the “crossover point” between the Wolf Firm

18


all-too-prevalent notion that the “normal” range of such awards is
in the area of 25% to 35% of the class recovery).” Instead the
problem identified by the nonbidding law firm in this action, and
a concern shared by this Court, lies in the added notion that the
lodestar figure and its possible multiplier should regularly play
a major role in cross-checking the result that is arrived at by
applying the successful competitive bid formulation to the
recovery ultimately obtained by the successful bidder.

It is worth repeating a bit of what this Court has said in
other forums (including invited testimony before the Third
Circuit’s recently-created Task Force studying the subject) in
addressing this issue.* Think of the posture of a law firm that
is contemplating taking on a major piece of class action
litigation (necessarily on a contingency basis), just as law firms

sometimes take on the handling of major commercial litigation for

7 It is true that Cendant PRIDES limited its compilation to
class actions in which the recovery exceeded $100 million. But
this Court’s prior experience as well as the bidding results in
the present case confirm that the cited mythic norm is grossly
excessive even where substantially smaller amounts are at stake.

8 Tt should however be emphasized that what has been said
here, and what is said hereafter, does not fairly apply with equal
force to the typical consumer class action (with its most likely
small per-class-member award), and also that any attempt to
utilize class actions in the field of mass torts also brings other
factors into play. In this Court’s view it is a mistake to adopt
any Gertrude Stein type of one-size-fits-all stance in approaching
the subject of awarding lawyers’ class representation or of
awarding their fees for such services, as though:

Class action is a class action is a class action.

8


3. In light of the identity of subject matter of all
12 actions involved here, this Court contemplates the sua
sponte entry of an order at the next status hearing date
(scheduled for 9:30 a.m. April 6, 2001) consolidating all of
the actions both for pretrial purposes and for trial (see
Subsection (a) (3) (B) (ii)) unless any of the parties in any
case were to provide a reasonable showing as to why that
action should not be taken. If the short time interval
remaining between the entry of this memorandum order and
that April 6 hearing date prevents any party from proffering
a written statement making such a showing, this Court will
of course entertain any oral submission in that respect at
the time of the April 6 status hearing.

4. Because Subsection (a) (3) (B) (i) calls for this
Court to determine the member or members of the Putative
Plaintiff class who is or are “most capable of adequately
representing the interests of class members” (referred to,
as the statute does, as the “most adequate plaintiff”), and
because there is a rebuttable and not conclusive statutory
presumption that the most adequate plaintiff is a person or
group having the largest financial interest in the relief
sought by the class (Subsection (a) (3) (B) (iii)), this
Court's view is that maximizing the recovery that will inure

to the class members (whether via settlement or litigation)


‘ome

EN

Minute Order Ferm (06/97)

United States District Court, Northern District of Iinois

x
Nam Magierate Jue Milton I. Shadur Sth gnc Judge

CASE NUMBER 01 C2110 DATE 6/2/2001

CASE In Re: Comdisco Securities Litigation

TITLE _|

[In the following box (a) indicate the party filing the motion, ¢-8., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
qd) Oo Filed motion of [ use listing in “Motion” box above.) .
(2) o Brief in support of motion due_- +
@) oO Answer brief to motion due___. Reply to answer brief due__.
(4) Oo Ruling/Hearing on set for at
(5) ao Status hearing{held/continued to} [set for/re-set for] on set for at
(6) o Pretrial conference[held/continued to] [set for/re-set for] on set for _ at
(7) Oo Trial[set for/re-set for] on at
(8) oO [Bench/Jury trial] [Hearing] held/continued to at
()) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) 1 General Rule 21 CFRCP4aj(1) O FRCP41(a)(2).

(10) i | [Other docket entry] Enter Memorandum Opinion and Order. For the reasons stated, (1) Peter Moser is designated

of Wolf Haldenstein Adler Freeman
Case No. 01 C 874 is dismissed without prejudice,

appointment as lead plaintiff are denied. (0-1, 27-1, 28-1) in 0102110 and (17-1, 19-1)in 01 C9

C4,

(at) i

{For further detail see order attached to the original minute order.]

as the most adequate plaintiff to represent the previously-defined class in this action and (2) Moser’s own counsel, the law firm|
& Herz LLC, is approved as class counsel. In further implementation of these rulings,
‘with the Amended Complaint in that case being treated as having been filed
under this Case No., and the Amended Complaint is further amended by deleting all name plaintiffs other thayPeter Moser as;
class representatives and by deleting the names of all plaintiffs’ counsel other than the Wolf firm. All other motions for

74, A status is set for 7/17/01

No notices required, advised in open court.

‘No notices required.

number of notices

Notices mailed by judge’s staff.

Notified counsel by telephone.
Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.

G1 JUN 26 PH I: hy

courtroom
deputy’s
initials

SN

Date/time received in

nailing deputy initials

central Clerk’s Office


Again to view the matter through the lens of free market
principles, any such ex post reevaluation (with or without a
multiplier) is truly unjustified as a matter of logical
analysis--and certainly so if it is only a one-way street."
This Court is of course well aware of the view held by some
judges that bidding is inappropriate in the securities class

action context (see, e.g., In re Razorfish, Inc. Sec. Litig., No.

00 CV 9474JSR, 2001 WL 476504, at *5 (S.D. N.Y. May 4)), or even
more broadly that bidding is not a proper procedure to be employed
in the selection of counsel in any class action situation. As to
the former view, it ignores the fact that Congress has
specifically provided that the selection of class counsel by the
“most adequate plaintiff” is made “subject to the approval of the
court” (Subsection (a) (3)(v)). That requirement of court approval
is expressly served by the court’s taking into account the fee
arrangement that the proposed class counsel wishes to impose on

all other class members as part of the same court’s determination

of 2.5 is reasonable, while a multiplier (say) of 3.5 or 4 is not,
too often makes it possible to paper over a result-driven
conclusion with a purported semblance of precision.

4 Once again, this conclusion is quite apart from the added
prospect that the referenced portion of the Cendant PRIDES opinion
may be read by prospective bidders as signaling a message that
seriously discourages their willingness to participate in the
bidding competition. No plaintiff class is better served by any
factor that tends to chill healthy competition for its
representation--competition that if left unchilled is quite likely
to produce a better deal for the class.

11


it seems entirely unfair to penalize that successful counsel for
having done so--that is, to measure the reasonableness of a bid-
generated percentage-of-recovery fee against a lodestar benchmark
that has been calculated in hindsight in terms of those actually
expended hours. After all, if the litigation had instead taken
the path under which counsel had to slug the matter out to get
that same result, spending (say) 150% or 200% of the originally
anticipated hours, counsel would not be allowed to restructure its
percentage bid in comparable hindsight terms to get a bigger share
of the recovery. Nor is the problem truly alleviated by the
possibility of applying a multiplier to the raw lodestar figure,
because that does nothing more than to introduce a purely
arbitrary factor (untested by market principles) into the mix as a

sort of rationalization to support the announced conclusion.*®

20 ~6It is worth spending a few moments on the subject of
lodestar multipliers, which to this Court seem most often to
represent an effort to provide some non-existent garb for the
proverbial emperor who has no clothes. To be sure, when a fee
award is enormously disproportionate to the lawyers’ expenditure
of time (as this Court understands to be the case in the larger
branch of the Cendant litigation, which has not yet been addressed
on appeal by the Third Circuit), it may be useful for a court to
express the disapproval of that disparity in terms of pointing to
a correspondingly staggering lodestar multiplier--a sort of
Jacobellis v. Ohio (“I know it when I see it”) demonstration. But
when the issue comes down to whether a multiplier of 2 or 5 or 7
(or what have you) is or is not “reasonable,” so as to serve as
some sort of check on the reasonableness of a percentage-of-~-
recovery fee award, candor compels recognition of the fact that
the process has become wholly subjective rather than meeting the
objective goal implicit in the notion of reasonableness (what
standard, after all, determines the reasonableness of the numeric
multiplier?). Unfortunately, any ruling that a multiplier (say)

10


re Ceridant Corp. PRIDES Litig., No. 99-5555, 2001 WL 276677
x

opinion issued on March 21, 2001 by the Court of Appeals for the
Third Circuit {the same court that now has a Task Force study
under way to address that subject). In all other respects the
bidding Procedure will follow the Principles set forth in the
Gysine opinion and in the March 26 Order.

As it has done in the Bank One Securities Litigation, this
Court contemplates the Possible utilization of the bidding
Procedure as an adjunct to its determination of the “most

adequate Plaintift.” That latter determination will be made as

of the Plaintifé class is awarded on the basis of bids. I£ the

award is not made on that basis, each bid will be returned to the

Milton T, Shadur
Senior United States District Judge

Date: April 6, 2001

AS was true in this Court’s handling of the In re Bank
One Securities Litigation, 00 ¢ 880, this Court will not
entertain any Proposal by a Prospective class Plaintiff for a
right.to match the most favorable attorneys’ fee bid if this
Court elects to employ a bidding Procedure,

3



unfortunate fallout of a portion of the Third Circuit’s recent In

re Cendant Corp. PRIDES Litig., 243 F.3d 722, 742-43 (3d Cir.

2001) opinion. One of the substantial active players in the
plaintiffs’ class action bar--a firm with fine credentials and
experience that has handled other major class actions and that has
been a responsible bidder in other cases before both this Court
and other courts--has written this Court that it would not bid
here because it perceived Cendant PRIDES as having placed bidders
in a no-win situation, in which if they prove successful in
becoming lead counsel the terms of their successful bids would set
a ceiling on fees, while on the downside they would be subject to
ex post second guessing by the court’s utilization of a lodestar
comparison as a benchmark.

It need scarcely be emphasized that this Court is in total
accord with the basic teaching of the Third Circuit in Cendant
PRIDES and other cases that the determination of a reasonable fee
in the class action context must ultimately be for the court (in
the field of private securities actions, see Subsection (a) (6)).
Nor does this Court part company with the bulk of the thoughtful

discussion and analysis in Cendant PRIDES on the subject of

lawyers’ fees that may properly be awarded in the private
securities class action context (including the valuable
compilation of federal court fee awards during the last 15 years

set out at 243 F.3d at 737-38, a table that undercuts severely the


at

’

Case No. 01 C 874 is dismissed without prejudice, with the Amended
Complaint in that case being treated as having been filed under
this Case No. 01 ¢ 2110, and the Amended Complaint is further
amended by deleting all name plaintiffs other than Peter Moser as
class representatives and by deleting the names of all plaintiffs’
counsel other than the Wolf Firm as counsel for the class.
Finally, all other motions for appointment as lead plaintiff
and for approval of lead counsel are denied.’® This includes but
is not limited to Dkt. Nos. 17-1 and 19-1 in Case No. 01 ¢C 874 and
Dkt. Nos. 0-1, 27-1 and 28-1 in Case No. 01 C 2110. This action

is set for a next status hearing at 9 a.m. July 17, 2001.36

TC Mh. S Crain,

Milton I. Shadur
Date: June 25, 2001 Senior United States District Judge

*% Miller Faucher & Cafferty LLP has written to this Court
confirming that it has not submitted a bid but would be pleased to
serve as liaison counsel if class counsel were to request such
service. That firm was in fact selected by the Wechsler Firm to
act in that capacity in the Bank One litigation. This Court has
always left to class counsel precisely what structure the
successful bidder wishes to establish for anyone else’s
participation in the rendition of legal services under its
supervision and control (of course any such arrangement would have
to come within the framework of the bid amount). This Court does
so here as well.

*© Because of the length and comprehensiveness of the
excellent submissions from each of the three highly qualified
bidders, they will not be reproduced here. Instead they are
simply being placed in the court file.

21


“

aaaanananaanna

No.

874
974
998
999
1017
1060
1111
1148
1177
1479
1542
1586

Exhibit A

Plaintiff

Michael Blitzer

Sidney Weinstein

John Hinsley

I & M Associates, Inc.
Gail Fialkov

Andrew Kandel

Joseph Falzone
Christopher Manolakes
Michael Ceasar as Trustee
Robert Waring

Michael Mattie

John Kuzia


ae

3
not always what they seem.” It turns out that when the Class
Period of January 25 through October 3, 2000 (which is the proper
referent) is focused upon, PASERS’ claim that it suffered some
$2.4 million in losses in connection with its investment in
Comdisco common stock is only a mirage created by PASERS’ adoption
of a FIFO (first-in-first-out) approach to its dealings in the
stock. In fact PASERS was an active trader during the Class
Period, with 15 separate sales that more than matched its
purchases during that time frame: Its Class Period purchases of
Comdisco common stock aggregated 213,800 shares, while its sales
during the same period totaled 218,400 shares. And when those
transactions are properly matched, rather than by the
impermissible application of a FIFO methodology (which by
definition brings into play PASERS’ pre-Class-Period holdings as
the purported measure of its claimed loss), PASERS’ Class Period
sales at inflated prices’? caused it to derive unwitting benefits
rather than true losses from the alleged securities fraud--so much
so that Moser demonstrates that PACERS derived a net gain of
almost $300,000 (rather than any net loss at all) from its
purchases and sales during the Class Period.

There are a host of cases, exemplified by In re Olsten Corp.

3 This discussion presumes, as it must for present purposes,
the accuracy of the Complaint’s allegations that Comdisco’s stock
was being traded at inflated prices until the stock fell out of
bed because of a public disclosure at the end of the Class Period.

3


plaintiff owes fiduciary responsibilities and for whom the court
must act as surrogate--is extraordinarily problematic.

Lest this view be perceived as purely theoretical (if not
indeed heretical), we need look no farther than this month’s In re

Rite Aid Corp. Sec. Litig., Nos. MDL 1360, 99-CV-1349 CIV.A. 99-

2493, 2001 WL 632941 (E.D. Pa. June 8) opinion by District Judge
Stuart Dalzell. There the approved settlement generated a present
value of $177 million for the class, and it is certainly
appropriate to accept Judge Dalzell’s evaluation of the settlement
as highly favorable and his characterization of the class
counsel’s services there as having produced outstanding results
(id. at *21). But what calls for sharper scrutiny for present
purposes is Judge Dalzell’s description of the affidavit by
Professor John Coffee that was submitted by class counsel in
support of the requested fee award (id. at *22):

At Table 5 of Professor Coffee’s affidavit, §21 at 14,
he compiles 289 settlements ranging from under $1
million to $50 million. The average attorney’s fees
percentage is shown as 31.71%, and the median turns out
to be one-third. This Table alone demonstrates the
reasonableness of the 25% sought here.

We are fortified in this conclusion by Professor
Coffee’s survey of “mega” class action settlements over
the last decade, set forth in 29 of his Declaration.
While it is true that two $1 billion settlements
awarded fee percentages of 15% and 14%, respectively,
settlements of $52 million and over ranged in fee
percentages from 18% to as high as 37%. The average
percentage of settlements between $100 million and $200
million is 28.1%. Id.

14


Both the caselaw and treatises that speak of such a “norm”
have regrettably perpetuated a pattern that short-changes the
plaintiff classes. It may perhaps be that at some future point
the increased use of bidding for legal representation will itself
have generated enough evidence of the propriety of a new set of
“norms” at much lower percentages, so that some further
examination of the continued utility of the bidding process may
then be called for. But unless and until that were to occur, this
Court remains of the Opinion that to be faithful to the duty owed
by courts to their constituencies--all of the members of plaintiff
classes--our federal courts should continue to structure and to
call for counsel’s compliance with soundly conceived bidding
procedures.

This is not to say, of course, that a look at the scope and
extent of the services expended by counsel to obtain their
successful results should not be a factor in the courts’ discharge
of their own duty, at the end of the day, to impose a
reasonableness requirement on any proposed awards that are subject
to judicial approval. Perhaps the best way to summarize the
matter is to say that any fee that has been calculated as the
product of an initially adopted well-conceived competitive bidding
procedure should carry with it a strong presumption of
reasonableness, just as the result of any true free market bargain

of any kind is presumptively reasonable.

16


a

y

another private securities class action (see In_re Bank One

in_re Bank ne

Shareholders Class Actions, 96 F.Supp.2d 780 (N.D. I11. 2000).

Shortly thereafter Opinion 2 (copy also attached) invited such
bids.

With the competitive bids for legal representation now in
hand, as well as a further submission having been received from
counsel for Peter Moser (“Moser”) (discussed hereafter) that
relates directly to the “most adequate plaintiff” issue, this
Court is now in a position to act on both of those related
subjects. This opinion will first deal with the identification of
the most adequate plaintiff (alternatively referred to, as the
statute does, as “lead plaintiff”) and then with the subject of
approving class counsel.

Opinion 3 began by stating this tentative view as to the
identity of the presumptive lead plaintiff:

Based on the movants’ respective representations, it

would appear that the Commonwealth of Pennsylvania

State Employees’ Retirement Systems (“PASERS,” treated

as a singular noun here) is the presumptive lead
plaintiff by a wide margin: Its Ex. B Sch. A to its

supporting Memorandum of Law shows that it purchased
about 250,000 shares of Comdisco, Inc. common stock
during the proposed Class Period described in the
Complaint and that it claims losses of some $2.4

million.
But a later submission on behalf of Moser, who has also sought
appointment as lead plaintiff, has once again demonstrated the

wisdom of Phaedrus’ two-millenium-old aphorism that ‘Things are


is an obvious critical element in determining the adequacy
of the lead plaintiff to be selected. That in turn makes
the portion of any recovery to be paid to class counsel (and
hence that will not be retained by the class members
themselves) an important factor in the evaluation. For that
reason this Court expects to consider, although it should be
stressed that this Court has not yet decided either way on
the matter, the possibility of inviting sealed competitive

bids from counsel who seek to represent the class (see In re

Bank One Shareholders Class Actions, 96 F.Supp.2d 780 (N.D.
Ill. 2000) and In re Amino Acid Lysine Antitrust Litigation,
918 F.Supp. 1190 (N.D. Ill. 1996)). In light of that
possibility:

(a) Until further order of this Court, counsel in
the 12 different cases are ordered not to discuss
between themselves any aspects of the fee arrangements
on which they would respectively be prepared to act as
class counsel.

{b) At or before the April 6 status hearing, each
counsel in each of the 12 cases is ordered to submit a
statement that no such discussion with counsel in any
of the other cases has taken place before the entry of
this memorandum order or, if any such prior discussion

has taken place, is ordered to submit under seal a


IN THE UNITED STATES DISTRICT COURT H/)
FOR THE NORTHERN DISTRICT OF ILLINOIS ng
EASTERN DIVISION wy 7)

In re )
) No. 01 C 2110
COMDISCO SECURITIES LITIGATION ) (also entered in
) Case No. 01 C 874)

MEMORANDUM OPINION AND ORDER*

This Court's Opinion 1 (copy attached) explained the
predicate, in conjunction with the necessary determination under
15 U.S.C. §78u-4 (a) (3) (B)? of the “most adequate plaintiff” to
represent the class in this putative securities class action, for
considering the possibility of inviting sealed competitive bids
from counsel who seek to act as class counsel (a subject
previously addressed by this Court in two earlier actions, one

involving antitrust claims (see In re Amino Acid Lysine Antitrust

Litig., 918 F.Supp. 1190 (N.D. Ill. 1996)) and the other being

* As this opinion reflects, a full understanding of its
treatment of the issues dealt with here calls for familiarity with
three earlier opinions issued in this action. Because two of
those opinions have not been published, while this one will be,
copies of those unpublished opinions of March 26 (“Opinion 1”) and
April 6, 2001 (“Opinion 2”) are being attached. As for the third
of those opinions (“Opinion 3,” issued April 10, 2001), it is now
awaiting publication and will of course be in print before this
one. Accordingly it is not being attached here but will instead
be referred to in terms of its Westlaw case number 2001 WL 421918
(for some unknown reason, the internal page references are shown
by Westlaw as “not available”), which will be supplanted by its
F.Supp.2d citation when this opinion also reaches the print stage.

2 As before, each future reference to any subpart of 15
U.S.C. §78u-4 will omit that portion of the statutory designation,

reading simply “Subsection “ou”


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

In re
No. 01 C 2110
COMDISCO SECURITIES LITIGATION

)
)
)
)
)
MICHAEL BLITZER, etc., et al., )
Plaintiffs, }
ve No. O1 C 874
COMDISCO, INC.; et al.,
Defendants. }
MEI UM_ORDER
In further implementation of this Court’s March 26, 2001
memorandum order (“March 26 Order”), and in conjunction with this
Court’s anticipated determination of the “most adequate
_ Plaintiff’ (see 15 U.S.C. §78u-4 (a) (3) (B)') to represent the
putative plaintiff class in these actions, all attorneys of
record in these actions, and any other attorneys ,who have timely
filed motions under Subsection (a) (3) (B) for any member of the
putative class to serve as lead plaintiff, are authorized to file
in this Court’s chambers, on or before May 4, 2001, sealed bids
as to the fee arrangements under which they will be prepared to

represent the plaintiff class in all actions other than Case No.

01 C1177 if they are hereafter appointed to serve as class

+ Each future reference to any subpart of 15 U.S.C. §78u-4
will omit that portion of the statutory designation, reading
simply “Subsection--.”


whether the presumptive “most adequate plaintiff” is in fact the
most adequate. Are we judges merely to serve instead as rubber
stamps, thus failing to enforce the fiduciary responsibilities
owed by the lead plaintiff and by the lead plaintiff’s counsel to
the class? On that score this Court has already made the point
plain in Bank One, 96 F.Supp.2d at 784 and has again quoted that
Bank One language in Opinion 3, and it need not be repeated once
again here.

In that regard, when the lead plaintiff has negotiated a fee
arrangement with its counsel (if “negotiated” is indeed the right
term), what does the court know as to the means if any by which
the client has sought to make an informed judgment as to the
market for legal services? This Court has yet to see an opinion
that reflects a serious judicial exploration of what a putative
lead plaintiff has done to assure itself that the economics of the
fee arrangement that it has agreed upon with its counsel are the
best that can be obtained from first-rate lawyers with high-
quality credentials and significant experience in the successful
prosecution of class actions.

Indeed, if a court were to contemplate essaying such an
inquiry into the efforts made by a party that was hopeful of
designation as lead plaintiff, what could it anticipate finding?
It is hardly reasonable to expect any plaintiff, on the

speculative prospect of acting for a class, to engage on his, her

12


The 25% is, therefore, eminently reasonable, and we
therefore approve it.

It is not of course for this Court to pass judgment on a case
not before it. But it is surely startling to observe that in the
two cases in which this Court has employed the bidding process,
each of which generated a settlement in the $50 million range
worked out by extremely able and experienced plaintiffs’ class
action counsel, the bid-generated fee award came to only 6% of the
recovery. And what that meant in each case was that the plaintiff
class members ended up with fully $10 million or more in their
pockets than if this Court had followed the primrose path marked
out by the average or median cases addressed in the Coffee
affidavit.*? And as will be seen, that same comparison--one that
is highly unfavorable to the gestalt approach that unfortunately
marks the mine run of such litigation--favors the use of bidding
even in the less active bidding climate that has emerged in this

case for reasons unique to it.

% There is yet another benefit to the use of a bidding
procedure, one that plays a significant role in the type of
disparity in fee awards just remarked in the text. By definition,
the award to a single bidder that is then responsible for
performing and monitoring all of the work (enlisting any
assistance that the bidder finds necessary) eliminates the
phenomenon that this Court has sometimes described as multiple
lawyers feeding at the trough (labeled as lead counsel, liaison
counsel, plaintiffs’ steering committee and what have you--see
sample case-management order 41.30 in the Manual for Complex
Litigation (3d ed. 1995)), a situation that inevitably ups the
ante in terms of the total fee applications tendered to the court
for approval.

15