Opinion ID: 755571
Heading Depth: 2
Heading Rank: 2

Heading: Fee Opinion

Text: On March 20, 1997 the court issued its opinion and order with respect to attorneys' fees. As urged by Lead Counsel in its fee petition, the district court found this case analogous to the common fund paradigm, and elected to apply the percentage-of-recovery method to calculate the attorneys' fee award. 99 Fee Opinion, 962 F.Supp. at 579. Despite accepting the percentage-of-recovery method, the district court rejected both the fee petition and the fee examiner's Recommendation and Report, and in its place constructed a bifurcated fee award designed to provide no less than $45 million and no more than $90 million to class counsel. 100 The district court found that any fee awarded to class counsel in this case should be based upon the entire value of the settlement, including any portion which would have been provided to the class under the Task Force Plan. Fee Opinion, 962 F.Supp. at 581 (emphasis omitted). The court reasoned the Task Force Plan resulted in substantial measure from the efforts of class counsel in this litigation, noting that Prudential began to urge the formation of the Task Force only after the consolidated lawsuits were filed. Fee Opinion, 962 F.Supp. at 581-82. Considering both the causal connection as well as the additional enhancements created by the Proposed Settlement, the court concluded class counsel could reasonably be credited with all of the benefits provided under the settlement. Turning to the value of the settlement, the district court found the only specific, comprehensive valuation of the settlement that is of record was submitted by class counsels' expert, Robert Hoyer. 101 Relying on Hoyer's figures, the fee examiner's report calculated the value of the proposed settlement between $1.2 and $2 billion, depending on the number of class members who ultimately have claims remediated through the ADR process. Fee Examiner's Report at 56. But the district court question[ed] the reasonableness of any valuation that may differ by as much as $800 million, and expressed concern that a range of possible values might not satisfy the requirement that a district court determine the actual value of the settlement when calculating the award of attorneys' fees. Fee Opinion, 962 F.Supp. at 583. Consequently, the court found the nature of the Settlement Agreement simply [did] not lend itself to a reasonable valuation and rejected the fee examiner's report. Id. The court also found it imprudent to apply the lodestar method as its primary tool in calculating attorneys' fees. 102 First, the court noted there was no need in this instance to ensure the procurement of competent counsel, one of the underlying purposes of the lodestar method. Additionally, the court found the involvement of over 25 law firms and 250 attorneys and paralegals would make a lodestar calculation time-consuming and burdensome. 103 Finally, the court reasoned that application of the lodestar method was unnecessary because a modified version of the percentage-of-recovery method could be applied. Id. at 27-28. The district court decided to calculate the fee award in two parts; first, an award based on a percentage of recovery on the known value of the settlement--Prudential's guaranteed minimum payout of $410 million (the Minimum Fund), Fee Opinion, 962 F.Supp. at 584; and second, an award based on a separate percentage of recovery with respect to the future, additional value of benefits to be paid to class members who come forward under the Settlement Agreement (the Future Fund). Id. Examining several factors in order to calculate an appropriate percentage under this two tier analysis, the court noted that, although percentages from 20 to 30% have been deemed appropriate, the exceptional size of the class recovery in this instance counseled in favor of a lower percentage of recovery. The district court examined the fee awards in other cases involving substantial recoveries, and found a range of 4.1% to 17.92% in cases where the recovery exceeded $100 million. The district court also considered the quality of class counsel's representation, the innovative terms of the settlement, the enhancements over the Task Force Plan, and the overall fairness of the settlement. Id. at 585-87. The court concluded the results achieved by plaintiffs' counsel in this case in the face of significant legal, factual and logistical obstacles and formidable opposing counsel, are nothing short of remarkable. Id. at 585-86. Finally, the court considered the fee percentage private parties would likely have negotiated. The fee examiner's report examined the fee awarded in the settlement between Penzoil and Texaco and concluded that class counsel would have received a contingent fee of at least 10-15%. Fee Examiner's Report at 61. While the court ultimately rejected the fee report, it nonetheless agreed that given the obvious risks and burdens required for its prosecution, lawyers of plaintiffs' counsels' standing would have negotiated a fee of at least 10 to 15% of the recovery. 104 Fee Opinion, 962 F.Supp. at 587 (quoting Fee Examiner's Report at 61). Turning to the first part of its bifurcated fee award, the district court found that 11% was a fair and reasonable recovery with respect to the $410 million Minimum Fund. Accordingly, the court ordered Prudential to pay class counsel $45 million, plus expenses, within five days. The court then conditioned the second half of the fee award on the number of claims ultimately handled through the ADR process. In the event 330,000 claims were filed by June 1, 1997, Prudential would pay class counsel an additional $45 million. Assuming the full $90 million were awarded, the fee would equal approximately 6.7% of the minimum recovery guaranteed by Prudential under the settlement. 105 The court found this figure to be fair and reasonable. In the event the 330,000 threshold were not met, class counsel would not be entitled to an automatic fee award, but would receive a 5% contingent fee based on the value of the Future Fund--the total value of the settlement less the Minimum Fund--to be determined annually on the anniversary date of the Fee Opinion. 106 Fee Opinion, 962 F.Supp. at 588-89. The court then applied the lodestar method as a cross-check of its initial calculation. According to an analysis provided by Lead Counsel, the lodestar as of January 31, 1997 was $17.7 million, plus expenses of just over $3 million. Id. at 591. Using these figures, the court found the maximum fee award of $90 million would be equivalent to a multiplier of 5.1 and an average hourly rate of $1,148.70. The court found that, when the lodestar was updated, the resulting multiplier and hourly rate would be lower. Nonetheless, the district court found these higher, unadjusted figures were substantially less than the multiplier and average hourly rate applied by the district court and affirmed by this court in Weiss v. Mercedes-Benz of N. Am., Inc., 66 F.3d 314 (3d Cir.1995), aff'g 899 F.Supp. 1297, 1304 (D.N.J.). Consequently, the district court concluded the cross-check under the lodestar supported the fairness and reasonableness of the fee award. Fee Opinion, 962 F.Supp. at 592-93. 107 The district court summarized its reasons why this fee arrangement was both appropriate and beneficial. Id. at 589-91. First, the court found the award obviate[d] the need to guesstimate the value of the settlement and ensures an award of attorneys' fees that is rationally related to the success of the settlement. Id. at 589. Second, the fee award used the percentage-of-recovery method preferred in common fund cases and avoided the difficulties in applying the lodestar method. Third, the court found the bifurcated award worked as a safeguard in the event the settlement was unsuccessful by only providing a portion of the award up front, and making the second part of the award dependent on the actual remediation rate. Fourth, the court noted the fee award generally upheld the agreement of the parties. Fifth, the court reasoned the bifurcated award would provide class counsel an incentive to pursue diligently remediation for class members. Finally, the court found the fee arrangement answer[ed] the few class members, including Krell, who objected to the parties' fee agreement as a 'lay down' by Prudential. Id. at 591.