reasonable and is approved. The Plan of Allocation is also
approved. Lead plaintiffs' motion for a compensatory award [206
is denied. Lead counsel's application for fees and reimbursement
of expenses [198] is granted in part and denied in part.
Plaintiffs' cause of action is dismissed with prejudice. The
Claims Administrator shall distribute from the Settlement Fund
reimbursement of expenses up to $1, 459,619.30 plus proportionate
interest. From the Settlement Fund, the Class Administrator
shall pay to Class Counsel attorney fees representing 25% of the
Class's net recovery, that is 25% of the Settlement Fund plus
interest, less taxes and expenses, The Clerk of the Court is
directed to enter judgment dismissing plaintiffs' cause of action
with prejudice. This court retains jurisdiction to enforce the
terms of the settlement, to resolve any disputes regarding
distribution of the settlement proceeds, and to determine the
distribution of any unclaimed settlement proceeds. A status
hearing is set for May 24, 2006 at 11:00 a.m.

ENTER:

Wye, 7 bert—

UNITED STATES DISTRICT JUDGE

DATED: JANUARY lg , 2006

- 20 -


reimbursement of expenses shall include a proportional share of
interest. The fees that are awarded based on the percentage
method will also include a proportional share of the interest
that has and continues to accumulate in the escrow account.

The fee award in this case will be based on the
percentage method. Class counsel request that the percentage be
based on the gross recovery, before any reduction for taxes or
expenses. The actual recovery to the class, however, is the net
amount after expenses. Therefore, it is more appropriate to base
attorney fees on the class's net recovery. This bench has
applied that methodology in the past and it has been upheld by
the Seventh Circuit as being within the court's discretion. See

Montgomery v. Aetna Plywood, Inc., 1999 WL 172313 (N.D. Ill.

March 18, 1999) ("Montgomery I"), aff'd in part, rev'd in part on

other grounds, Montgomery II, 231 F.3d at 408. Additionally,
applying the percentage to the net recovery is consistent

with the emphasis in the PSLRA that fees be based on damages

and interest actually recovered by the class. ee 15 U.S.C.
§ 77z-1(a) (6) ("Total attorneys' fees and expenses awarded by

the court to counsel for the plaintiff class shall not exceed
a reasonable percentage of the amount of any damages and

prejudgment interest actually paid to the class.").? The fee

2the Ninth Circuit has construed the identical provision
found at 15 U.S.C. § 78u-4(a) (6) as not requiring that attorney
fees in a PSLRA case be based on a percentage of net recovery,


plaintiffs' proposed pricing methodology, defendants' experts
calculated a maximum loss of $44,600,000. If successful in
proving liability, plaintiffs may have obtained more than that
amount or possibly less. Taking into consideration that, by
going to trial, plaintiffs did not have a 100% chance of proving
liability and may even had had a less than 50% chance of proving
liability, the gross settlement amount of $31,500,000 appears to
be fair.

It is also considered that the parties engaged in
substantial attempts at settlement before finally agreeing to the
terms of the Settlement Agreement. Initially, the parties
attempted private mediation before a retired judge. That attempt
at settlement was unsuccessful. After this court ruled on the
motions in limine, the case was referred to a magistrate judge to
supervise settlement discussions. The dollar figure that was
ultimately agreed upon was the amount recommended by the
magistrate judge, a number that neither side had previously
indicated a willingness to accept. Since the parties had
previously indicated a reluctance to settle and the amount
settled upon was based on the recommendation of a neutral third
party, the circumstances of the settlement support that there was
no collusion between the parties.

It is also taken into consideration that the settlement

is being recommended by experienced plaintiff securities


motions to dismiss and discovery disputes. Here the parties
completed the final pretrial order before a settlement was
finally reached. The case did not actually go to trial. This
case does not involve an excessive amount of attorney time that
would justify a higher award. A comparison to the estimated
lodestar supports that conclusion.

Class counsel apparently do not disagree with the
conclusion that this case does not justify an above-average fee
award. They point to the quality of services, risk involved, and
amount of work performed as supporting a fee based on 30% of the
gross recovery (instead of 25% of the net recovery), but that is
because they view 30-33% as the norm, instead of 25%,

In this case a 25% fee would be approximately
$7,510,095.18.* Class counsel contend the lodestar for this case
is $6,596,385.50. It is highly doubtful that detailed scrutiny
of that lodestar would not result in a substantial reduction.
Class counsel has provided a list of each attorney's and
paralegal's total hours and the rates charged, which is
sufficient for present purposes of a rough estimate. As

previously stated, court appearances were often overstaffed,

‘This number is 25% of $31,500,000 less $1,459,629.30 of
expenses. It does not take into account any interest earned on
the Settlement Fund. To the extent class counsel successfully
proves additional expenses or there are additional expenses of
the Claims Administrator, the fee recovery would decrease, but
not substantially.



which involved sending a total of approximately 743,000 notices.
It also includes expenses for processing responses, including
claim forms, maintaining a telephone service for questions from
class members, and administrating the distribution of the
Settlement Fund proceeds. As of October 12, 2005, CCS had
accrued and invoiced $801,412.36 in expenses, of which $82,551.55
had been paid by defendants, for a remaining amount of
$718,860.81. CCS estimates remaining expenses to process claims
will be $650,000 to $725,000. Class counsel have used the upper
end to estimate remaining expenses of the Claims Administrator.
At this time, the lower end of the estimate will be allowed
provided documentation for such expense is provided to class
counsel. To the extent greater actual expenses are incurred
prior to a final disbursement of funds, class counsel may move
for a modification of the amount of expense reimbursement. The
court approves expenses for the Claims Administrator of up to
$1,368,860.81. To the extent actual expenses for the Claims
Administrator turn out to be less than this amount, the excess is
to remain part of the Net Settlement Fund to be disbursed in
accordance with the terms of the Plan of Allocation and the
Settlement Agreement, including § 5.4(g) of the Settlement

Agreement.


Kopstein represents that he previously complained about this to
Van Kampen and that he settled this claim by agreeing to the full
return of the amount invested. The present lawsuit does not
involve this type of claim. The present lawsuit only concerns
overvaluation of the Fund's NAV, not any alleged fraudulent
representations as to investment returns that were made when
marketing investments in the Fund. Any dividends that were
received during the class period are unrelated to the damages
that could be recovered in this lawsuit. Moreover, Kopstein has
already received a full return of the amount he invested and
indicates he already signed a release for the claims he raises in
his objections. Kopstein's objections regarding the 10% return
are not relevant to the fairness of the Settlement Agreement in
this case. Kopstein also generally objects that the attorney fee
and expense request is too high. Fees and expenses are
separately discussed below.

David Waddell's objection pertains only to attorney fees.
He proposes a method of determining attorney compensation that is
inconsistent with controlling case law. By analogizing to
compensation under certain federal contracts, he contends that
attorney compensation in this case should be determined by the
number of attorneys working on the case. ‘The annual compensation
for each attorney should not exceed the annual compensation for a

federal district judge. After determining the total of such


litigators. Additionally, class counsel represent that they have
taken into consideration a trial that they conducted before a
panel of 30 mock jurors. While counsel has not disclosed the
results of the mock trial nor the comments of any of the jurors,
this is further indication that counsel's decision to recommend
the settlement was based on a thorough consideration of the risks
of litigation.

Although the number of class members is large (more than
250,000) and likely involves a number of sophisticated investors,
class members have presented only a few objections to the
Settlement Agreement. Only four objections were received, two of
which were essentially identical objections from apparently
related persons. Michael Laffey and Sharla Laffey (as the
apparent representative of her mother's estate) conclusorily
object that they would settle for no less than $10,000.00. They
do not present any basis for this calculation. As class counsel
points out, the Laffeys' total investments during the class
period were less than $2,000.00 so their damages are unlikely to
be a total of $20,000.00.

Isadore Kopstein objects that he and others should
receive damages representing a 10% annual return on their Fund
investments for the time held. He alleges that a Van Kampen
representative who promoted the investment had represented to him

and others that the return on the investment would be 108.


which may mean other work was also overstaffed. There would
likely be a significant, if not substantial, reduction in the
number of hours properly charged. The hourly rates upon which
the lodestar is based are high. Rates for partners and outside
counsel range from $425.00 to $600.00 per hour. Rates for
associates range from $220.00 to $450.00 per hour. Rates for
paralegals range from $130.00 to $220.00 per hour. Not only are
these rates high, but approximately two-thirds of the time billed
was by partners and the one associate who billed at $450.00 per
hour. Such top-heavy staffing is not appropriate. A more
reasonable lodestar is estimated to be $4,000,000.00 or less.
Assuming a lodestar of $4,000,000.00, a fee award of
$7,510,095.18 would represent a multiplier of 1.88. As a rough
comparison, that would be within the high end of the reasonable
range for a multiplier.

Class counsel will be awarded fees in the amount of 25%
of the class's net recovery.

Class counsel has submitted to chambers, but has not
filed in the court record, a list of those who opted out of the
class. Within 7 days, class counsel shall file with the Clerk of
the Court a list of the opt-outs. The requests to opt out are
approved.

IT IS THEREFORE ORDERED that the settlement reached with

the defendants in this case is found to be fair, adequate, and

- 19 -


PSLRA provides that: "The share of any final judgment or of any
settlement that is awarded to a representative party serving on
behalf of a class shall be equal, on a per share basis, to the
portion of the final judgment or settlement awarded to all other
members of the class." 15 U.S.C. § 77z-1(a) (4). That statute
also provides: "Nothing in this paragraph shall be construed to
limit the award of reasonable costs and expenses (including lost
wages) directly relating to the representation of the class to
any representative party serving on behalf of a class." Id.
Lead plaintiffs do not contend that any portion of the requested
amount represents any actual expenses that either has incurred.
They do not claim that they missed any work or other earning
opportunity in order to participate in the litigation. Under the
PSLRA, lead plaintiffs cannot be awarded additional compensation.
The request for a compensatory award will be denied.

Consistent with the notice sent to the class, class
counsel have requested a fee award equal to 30% of the Settlement
Fund. They also request reimbursement for $2,371,683.79 in
expenses, which is less than the maximum amount stated in the
notice to the class. Expenses will be considered first.

$1,443,860.80 of the expenses represents expenses of
Complete Claim Solutions, Inc, ("CCS"), the Claims Administrator.
These expenses relate to sending out notices of the pendency of

the class action as well as notice of the proposed settlement,


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

TRENE ABRAMS, on behalf of
herself and all others
similarly situated,

Plaintiffs,

Vv. No. 01 C 7538
VAN KAMPEN FUNDS, INC.,

VAN KAMPEN INVESTMENT ADVISORY
CORPORATION, VAN KAMPEN PRIME
RATE INCOME TRUST, RICHARD F.
POWERS, III, STEPHEN L. BOYD, and
DENNIS J. McDONNELL,

Defendants.

MEMORANDUM OPINION AND ORDER

This is a consolidated class action alleging federal
securities violations involving defendant Van Kampen Prime Rate
Income Trust's (the "Fund") valuation of senior loans and is
subject to the Private Securities Litigation Reform Act of 1995
("PSLRA"), 15 U.S.C. § 77z-1. A class has been certified
consisting of all persons who purchased shares in the Fund
between September 30, 1998 and March 26, 2001, inclusive, with
defendants and certain related parties excluded from the class.

See Abrams v. Van Kampen Funds, Inc., 2002 WL 1989401 (N.D. Ill.

Aug. 27, 2002) ("Abrams II"). Named as defendants are the Fund;


2005 WL 563098 *3 (N.D. Ill. March 3, 2005). In-house
photocopying will not be reimbursed at a higher rate than an
outside copying service would charge, usually not more than five

to ten cents per page. See Sisto v. Ameritech Sickness &

Accident Disability Benefit Plan, 2004 WL 816774 *4 (N.D. Ill.

March 15, 2004); Petit v. City of Chicago, 2003 WL 22339277 *5

(N.D. Til. Oct. 10, 2003).

No reimbursement will be allowed for investigators and
trial consultants without some description of the nature of the
work performed, the hours worked, and the hourly rate.

More than $130,000 for travel, transportation, and meals
will not be allowed without some information about this expense.
It needs to be shown that these expenses were reasonable. Also,
during this litigation, multiple attorneys were often
unnecessarily sent to court hearings. Absent special
circumstances, the court will not allow travel expenses for
sending more than two plaintiff attorneys to any court hearing.
At this time none of the travel expenses will be reimbursed.

It will be accepted that the mediation services
($16,185.02), court reporting services ($38,207.03),
mailing/delivery ($14,522.22), phone/fax ($20,584.22), and class
member search ($1,110.00) expenses were all for this case and

reasonable. Reimbursement of those expenses will be permitted.

-~12-



The remaining expenses that are requested are categorized

as follows:

Expert Fees $428,773.02
Photocopying 152,362.88
Investigators/Trial Consultants 102,074.10
Travel/Transportation/Meals 130,106.86
Mediation Services 16,185.02
Court Reporting Services 38,207.03
Mailing/Delivery Expenses 14,522.22
Phone/Fax 20,584.22
Legal/Factual Research 14,925.07
Court Costs/Service Fees 8,972.57
Class Member Search Fees to Brokers 1,110.00

Total $927,822.99

Other than also breaking down these expenses as incurred
by each law firm involved in this case, no details are provided
regarding these expenses. No actual invoices are provided, only
an affidavit from a person at each law firm stating the total for
each category. That will not suffice for most of the stated
expenses.

The court will not approve $428,773.02 in expert expenses
without invoices or statements from the experts showing the
amounts were paid, the types of services, the number of hours
worked, and the hourly rates charged.

The court will not approve the photocopying expenses,
which apparently includes much in-house photocopying, without
seeing the cost per page charged for in-house photocopying,
sufficient billing records to establish the expenses were only
for this case, and any invoices from outside copying services for

larger jobs. Cf. Doing Steel, Inc. v. Castle Construction Corp.,

-1l1-


compensation, 15% should be added for a profit margin. The
suggestion is declined. Existing case law will be followed.

The Plan of Allocation allocates the settlement proceeds
among the class members.

1. For shares of the Fund that were

purchased during the Class Period and still held

as of the end of the Class Period, the Recognized

Loss per share is equal to the alleged

overpricing if any, on the day of purchase.

2. For shares of the Fund that were

purchased during the Class Period and sold before

the end of the Class Period, the Recognized Loss

per share is equal to the alleged overpricing, if

any, om the day of purchase less the alleged

overpricing, if any, on the day of sale.

Each class member who submits a claim will share in the available
proceeds (the settlement proceeds less fees and expenses, plus
any accumulated interest) based on the proportion of the
individual member's Recognized Loss to the Recognized Loss of all
class members who submit a claim. This is a fair and equitable
manner of distributing the proceeds. It is approved.

Since the Settlement Agreement, including the monetary
proceeds, appears to be fair, reasonable, and adequate, and does
not appear to be the result of any collusion, the Settlement
Agreement will be approved.

Each of the two lead plaintiffs requests a compensatory

award of $9,375.00 representing approximately 75 hours of time

spent on the case compensated at $125.00 per hour. However, the


Aug. 11, 2005); American Civil Liberties Union of Ill. v. United

States General Services Administration, 235 F. Supp. 2d 816, 818

(N.D. Ill. 2002); Great Neck Capital Appreciation Investment

Partnership, L.P. v. PricewaterhouseCoopers, L.L.P., 212 F.R.D.

400, 409 (E.D. Wis. 2002).

Previously the parties provided extensive briefs and
factual presentations on summary judgment. The motions in limine
also involved the consideration of extensive factual contentions,
particularly regarding damages and potential expert testimony.
Thus, this court has substantial knowledge of the potential
factual issues in this case. While the court made no final
determination as to the merits of the case, the court is well
aware that each side faced risks if the case went to trial.
Plaintiffs did not have a clear case supporting liability, but
still had a significant chance of success. Even if successful
in obtaining a jury finding of liability, issues remained
regarding damages. Plaintiffs were unlikely to have succeeded
in obtaining the amount of damages that was asserted. While
one of plaintiffs' experts has opined that damages were between
$220,207,492 and $271,370,812, plaintiffs were unlikely to have
been successful in obtaining such damages at trial, which are
based on no adjustments for other possible factors affecting the
net asset value ("NAV") of the Fund. Defendants! experts opined

that numerous other factors affected the NAV. Even taking


award will be based on a percentage of the class's net recovery
after the payment of expenses and any taxes.

Class counsel request a fee award based on 30% of the
settlement. "[W]hen deciding on appropriate fee levels in
common-fund cases, courts must do their best to award counsel the
market price for legal services, in light of the risk of

nonpayment and the normal rate of compensation in the market at

the time." Taubenfeld v. Aon Corp., 415 F.3d 597, 599 (7th Cir.

2005) (quoting In re Synthroid Marketing Litigation, 264 F.3d

712, 718 (7th Cir. 2001)). In making such a determination, the
court can consider fees awarded in other cases, the quality of
legal services rendered, and the risk of nonrecovery when the
case is taken on a contingent basis. Taubenfeld, 415 F.3d
at 600. In determining the appropriateness of a percentage, a
comparison may be made to the estimated lodestar recovery.
Montgomery I, 1999 WL 172313 at *4y

For purposes of comparison, class counsel only cite cases
in which the percentage fee award was 30% or more. They make no
attempt to show that these cases are representative and do not
give any consideration to the size of the recoveries upon which

these percentages were applied. Newberg states that the normal

but permitting fees to be based on any method (including
percentage of net or gross recovery) "so long as the net result
is reasonable." Powers v. Bichen, 229 F.3d 1249, 1258 (9th Cir.
2000).



will be somewhat less than 1% of the value of their investments.?
The size of the settlement does not represent an exceptional
recovery justifying a higher percentage.

There was some risk in this case that there would be no
recovery. The case certainly was not a slam dunk in plaintiffs'
favor. However, neither was it a slam dunk in defendants' favor.
Given defendants' risk of incurring substantially greater damages
had plaintiff proven liability, it is not surprising that
defendants agreed to settle this case. Thus, although success at
trial was not assured, this was not a case in which recovery
through a settlement was unexpected. The exact degree of risk
cannot be estimated, but this does not seem to be a case in which
the risk of no recovery was greater than in the average
securities case. The fee percentage will not be increased based
on this case involving greater risk than the ordinary case.

The amount of attorney time expended on a case may be
taken into consideration, with those cases settling earlier in
the litigation process entitled to a lower recovery than those
cases that settle late in the process. Montgomery I, 1999 WL
172313 at *4. It is common that securities litigation does not
settle until after the completion of discovery and rulings on

summary judgment motions and that the case also involves briefing

[The net recovery will be approximately $.09 per share
for shares that were valued around $10.00 during the pertinent
time period.


should be approved. Also pending are a motion to provide a
compensatory award to the lead plaintiffs and a petition for the
award of attorney fees and the reimbursement of expenses.

Before the Settlement Agreement can be approved, this
"court must determine that [the] class action settlement is fair,
adequate, and reasonable, and not a product of collusion."

Reynolds v. Beneficial National Bank, 288 F.3d 277, 279 (7th Cir.

2002) (quoting Joel A. v. Guiliani, 218 F.3d 132, 138 (2d Cir.
2000)). This court must act in a fiduciary-like capacity for the
class, carefully scrutinizing the Settlement Agreement to make
sure that class counsel have properly exercised the fiduciary

duties they owe to the class. Mirfasihi v. Fleet Mortgage Corp.,

356 F.3d 781, 785 (7th Cir. 2004); Reynolds, 288 F.3d at 279-80.
Factors that may be considered in determining whether a class
settlement is fair, adequate, and reasonable include: (a) the
strength of plaintiffs' case compared to the amount of the
settlement; (b) defendants' ability to pay; (c) the likely
complexity, length, and expense of further litigation;

(d) opposition to the settlement from members of the class;

(e) any indications of collusion; (f) the opinions of counsel;
(g) the stage of the proceeding and the amount of discovery
completed at the time of settlement; and (h) the public
interest. See Isby v. Bayh, 75 F.3d 1191, 1199 (7th Cir. 1996);

Mirfasihi v. Fleet Mortgage Corp., 2005 WL 1950386 *4 (N.D. Ill.


Van Kampen Funds, Inc., the Fund's administrator; Van Kampen
Investment Advisory Corp., (the “Adviser"), the Fund's investment
adviser; and four individuals who were officers and trustees of
the Fund. Claims that remain pending are for violations of § 11
of the Securities Act, 15 U.S.C. § 77k, and for control person
liability under § 15 of the Securities Act, 15 U.S.C. § 770,
based on the alleged § 11 violations. Other claims and
defendants have previously been dismissed. ee Order dated

Dec. 8, 2004 (Docket Entry [161]); Abrams v. Van Kampen Funds,

Inc., 2004 WL 1433620 *1 n.1, *9 n.3 (N.D. Ill. June 25, 2004)
("Abrams ITI").

After the case was ready for trial, the parties entered
into a Stipulation of Settlement (the "Settlement Agreement")
resolving all claims. The Settlement Agreement was preliminarily
approved, notice was provided to members of the class, an
opportunity was provided to submit written and oral objections,
and a fairness hearing was held on November 16, 2005. See Order

dated June 3, 2005 (Docket Entries [193], (194]).? The case is

ripe for a ruling on whether the parties' proposed settlement

tAlthough 28 U.S.C. § 1715 is not applicable to this
case, the court followed a practice suggested by that statute,
providing the Securities and Exchange Commission ("SEC") with the
opportunity to comment on the Settlement Agreement. See Order
dated Nov. 2, 2005 (Docket Entry [202]}. The SEC informed
plaintiffs' counsel that it typically does not comment on
settlements of private litigation. See Nov. 4, 2005 Letter from
SEC Midwest Regional Director (Docket Entry {208]). No comments
from the SEC have been submitted.


Presumably, the category labeled as "Legal/Factual
Research" primarily (or exclusively) refers to computer-assisted
legal research such as Westlaw and Lexis. That is not considered
to be a cost or expense, but instead is considered part of
attorney fees and is not separately awarded when the percentage-
of-recovery method is used for calculating legal fees.

Montgomery v. Aetna Plywood Inc., 231 F.3d 399, 409-10 (7th Cir.

2000) ("Montgomery TI"), cert. denied, 532 U.S. 1038 (2001).

None of these expenses will be reimbursed unless class counsel
shows that they represent expenses other than computer-assisted
legal research.

$8,972.57 for court costs and service fees appears high.
Without further explanation, none of these expenses will be
reimbursed other than the $150.00 filing fee that apparently was
paid by counsel.

At this time, reimbursement of expenses in the amount of
$1,459,619.30 will be permitted. To the extent class counsel
desires to submit additional documentation or otherwise seek
reconsideration of the denial of certain expenses, they must so
move within ten court days of the entry of today's order or the
court will not consider such a request.

Under the terms of the Settlement Agreement, defendants
have already paid the Settlement Fund which is being held in

escrow and is accumulating interest. Class counsel's

-13-


range of fees in common-fund securities and antitrust litigation

is 20 to 33 percent. 4 Newberg on Class Actions § 14:6 (4th ed.

updated Nov. 2005). This bench has previously found that 25% is
the median fee award in cases involving recoveries of $5-15
million. Montgomery I, 1999 WL 172313. The present case is ina
somewhat higher category, with the gross recovery being
$31,500,000. However, this court is basing the award on the net
recovery, not the gross recovery. Since class counsel provides
no compelling data to the contrary, 25% of the net recovery will
be considered the median fee award in the present type of case.
The court will award fees based on that percentage unless the
specific circumstances of this case call for a higher or lower
award.

There is no doubt that the attorneys representing the
class are competent and well-qualified attorneys. The court has
already found that the dollar amount of the settlement is fair
and reasonable. The court, however, does not find that the
amount of the recovery is so high that it should be considered an
exceptional award that justifies a higher fee percentage. As
previously discussed, there were various damages estimates in
this case. None support that the amount actually received in

settlement was exceptional. The actual recovery to the class