Opinion ID: 789039
Heading Depth: 3
Heading Rank: 5

Heading: Ability of Defendants to Withstand a Greater Judgment

Text: 99 The compensatory relief provided in the Settlement constitutes the largest settlement ever approved by a federal court. Id. (quoting plaintiffs' expert Professor John C. Coffee, Jr. of Columbia University Law School). Additionally, the injunctive relief — valued at approximately $25 to $87 billion or more, id. at 511-12 — adds great value to the Settlement. Yet, Pasta Bella insists that a settlement requiring payment from the banks could have been substantially higher. We cannot agree with this argument. It is hardly surprising that the district court did not make explicit findings with respect to the ability of the member banks to withstand a significantly greater damages award, since the banks are not defendants in this case. Even if such a finding were helpful, our concern about financial resources of member banks would be assuaged by the district court's finding that virtually all of the relief in the Settlement already comes from the banks. Id. at 514. 100 6. Range of Reasonableness of Settlement Fund in Light of Best Possible Recovery and Attendant Risks of Litigation 101 [T]here is a range of reasonableness with respect to a settlement — a range which recognizes the uncertainties of law and fact in any particular case and the concomitant risks and costs necessarily inherent in taking any litigation to completion — and the judge will not be reversed if the appellate court concludes that the settlement lies within that range. 102 Newman v. Stein, 464 F.2d 689, 693 (2d Cir.1972). Here, the statistics concerning the Settlement are staggering: the compensatory relief by itself constitutes the largest settlement ever approved by a federal court; the injunctive relief will save the class $25 to $87 billion or more. Since the district court found that experienced and able counsel fought this litigation aggressively and negotiated feverishly, Visa Check III, 297 F.Supp.2d at 510, and that virtually all of the relief comes from the banks, id. at 514, there is little reason to believe that additional money would have been put into the settlement pot had the banks been named as parties. The banks' participation in the settlement speaks volumes of their stake in the litigation. Moreover, given that the Reyn's and Membership Rules plaintiffs are substantially similar to the instant plaintiffs, it cannot be said that the settlement fund was unreasonably small or particularly unfair to a subset of plaintiffs. 103 Indeed, the favorable reaction of the overwhelming majority of class members to the Settlement is perhaps the most significant factor in our Grinnell inquiry. Having considered this factor along with the others, we conclude that the district court did not err in finding the Settlement substantively fair. 25 C. NuCity is Not Entitled to Discovery 104 NuCity appeals the district court's denial of its motion for limited discovery to examine whether the Settlement included consideration for claims asserted in Membership Rules, the value attributed to claims foregone, and the justification for such valuation. Generally, such a discovery request depends on whether or not the District Court had before it sufficient facts intelligently to approve the settlement offer. If it did, then there is no reason to hold an additional hearing on the settlement or to give appellants authority to renew discovery. Grinnell, 495 F.2d at 462-63. 105 As noted by the Grinnell analysis described above, the district court possessed an abundance of facts to make a fairness determination. Plaintiffs were not required to bargain separately for relief in exchange for the Membership Rules claims. No part of the consideration on either side is keyed to any specific part of the consideration of the other. Each side gives up a number of things. This is the way settlements usually work. General American, 357 F.3d at 805. Thus, the district court did not abuse its discretion in denying NuCity's discovery motion. 106 D. The Parties are Not Judicially Estopped from Including the Reyn's Claims in the Settlement 107 Northern District of California Local Rule 3-13 provides that: 108 Whenever a party knows or learns that an action filed or removed to this district involves all or a material part of the same subject matter and all or substantially all of the same parties as another action which is pending in any other federal ... court, the party must file with the Court in the action pending before this Court ... a Notice of Pendency of Other Action.... 109 N.D. Cal. Civil L.R. 3-13(a). Instead of filing the required notice in the Northern District of California, Visa and MasterCard settled the instant action and then sought to dismiss Reyn's on the ground that the claims in that case were barred by the Settlement. Pasta Bella argues that Visa and MasterCard knowingly violated Northern District of California Local Rule 3-13 to escape liability for the conduct alleged in Reyn's. According to Pasta Bella, if the actions are related, then compliance with Rule 3-13 would have caused Reyn's to have been transferred to the Eastern District of New York and consolidated with the instant action. See N.D. Cal. Civil L.R. 3-13(b)(3)(B); cf. 28 U.S.C. § 1407 (providing a mechanism for the transfer of civil actions involving one or more common questions of fact pending in different districts for coordinated or consolidated pretrial proceedings). Pasta Bella contends that if Reyn's had been consolidated with this action, the class recovery would have been higher. Thus, Pasta Bella urges us to estop Visa and MasterCard from benefitting from their failure to comply with the Northern District of California's local rules. 110 We have previously held that judicial estoppel applies only when a tribunal in a prior separate proceeding has relied on a party's inconsistent factual representations and rendered a favorable decision. Adler v. Pataki, 185 F.3d 35, 41 n. 3 (2d Cir.1999) (emphasis omitted); see also Rodal v. Anesthesia Group of Onondaga, P.C., 369 F.3d 113, 118 (2d Cir.2004). We need not determine whether defendants' alleged failure to file a notice of pendency constituted inconsistent factual representations, for there is no evidence that the Northern District of California relied on that failure and rendered a favorable decision. Estoppel is therefore inappropriate here. PART IV THE DISTRICT COURT'S FEE AWARD IS REASONABLE 111 At the district court, lead counsel for the plaintiffs sought a fee of $609,012,000 — approximately 18% of the present value of the Settlement's compensatory relief, 2.14% of the present value of the Settlement (inclusive of injunctive relief), and 9.68 times the lodestar figure of $62,940,045.84. 26 Visa Check III, 297 F.Supp.2d at 522. Seventeen merchants objected to counsel's fee petition. Id. at 509 n. 6, 522 n. 27. The court found the fee petition excessive despite the excellence of plaintiffs' representation, id. at 522, 524. Assessing the fee petition with a careful eye for the interests of all class members, the court awarded fees in the amount of $220,290,160.44 plus an additional $18,716,511.44 in costs and expenses. Id. at 507, 524-26. Leonardo's argues that the district court's fee award was too high, while Constantine & Partners (C&P), plaintiffs' lead counsel, contends that the fee award was too low. 112 A. Percentage of the Fund is an Appropriate Method 113 The district court utilized the percentage of the fund method to calculate attorneys' fees. Visa Check III, 297 F.Supp.2d at 524. Courts may award attorneys' fees in common fund cases under either the lodestar method or the percentage of the fund method. See Goldberger, 209 F.3d at 50. The lodestar method multiplies hours reasonably expended against a reasonable hourly rate. Id. at 47. Courts in their discretion may increase the lodestar by applying a multiplier based on factors such as the riskiness of the litigation and the quality of the attorneys. Id. The trend in this Circuit is toward the percentage method, Visa Check III, 297 F.Supp.2d at 520, which directly aligns the interests of the class and its counsel and provides a powerful incentive for the efficient prosecution and early resolution of litigation, In re Lloyd's Am. Trust Fund Litig., 2002 WL 31663577, at . In contrast, the lodestar create[s] an unanticipated disincentive to early settlements, tempt[s] lawyers to run up their hours, and compel[s] district courts to engage in a gimlet-eyed review of line-item fee audits. Baffa v. Donaldson Lufkin & Jenrette Secs. Corp., 2002 WL 1315603, at  (S.D.N.Y. June 17, 2002) (internal quotation marks omitted). 114 B. The Goldberger Factors Confirm the Reasonableness of the Fee Award 115 Irrespective of which method is used, the  Goldberger factors ultimately determine the reasonableness of a common fund fee. They include: 116
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122 Goldberger, 209 F.3d at 50 (citation omitted); see, e.g., Baffa, 2002 WL 1315603, at  (district courts should continue to be guided by the [ Goldberger factors]). Recognizing that economies of scale could cause windfalls in common fund cases, courts have traditionally awarded fees for common fund cases in the lower range of what is reasonable. Goldberger, 209 F.3d at 52; see also In re Indep. Energy Holdings PLC, 2003 WL 22244676, at  (S.D.N.Y. Sept. 29, 2003) ([T]he percentage used in calculating any given fee award must follow a sliding-scale and must bear an inverse relationship to the amount of the settlement. Otherwise, those law firms who obtain huge settlements, whether by happenstance or skill, will be over-compensated to the detriment of the class members they represent.). 123 The district court concluded that the Goldberger factors compel an extraordinary fee under these circumstances: lead counsel devoted tremendous time and labor to this case for seven years; antitrust cases, by their nature, are highly complex; this case was especially large and complicated, involving almost every U.S. bank and more than five million U.S. merchants; the risk of the litigation was very high; lead counsel devoted 52% of its legal staff to work on a case that spanned seven years without any guarantee of recovery; plaintiffs' counsel achieved extraordinary results; plaintiffs' counsel did not have the benefit of piggybacking off of a previous case — instead, the Government piggybacked off of plaintiffs' counsel's work by using it in Government's Membership Rules; even a very large fee award would be a small percentage of the settlement fund; and the Settlement produced significant and lasting benefits for America's merchants and consumers. Visa Check III, 297 F.Supp.2d at 523-24. Asserting its jealous regard for absent class members, the court sought to compensate plaintiffs' counsel handsomely and at the same time limit the percentage of the award so that plaintiffs' counsel would not receive a windfall detrimental to the class: 124 Were the Fund not so large, dwarfing the funds in all of the cases Lead Counsel have cited, a larger percentage might be appropriate. But given the circumstances as they are, my award is appropriate. Only in comparison to the amount sought can it be considered anything but generous. 125 Id. at 525 (footnote omitted). C&P argues that the district court's fee award was insufficient because (a) the fee award provides a meager percentage of the settlement fund and (b) the fee award reduces the incentive to class lawyers to seek maximum relief. 126 1. The Fee Award is Based on a Reasonable Percentage of the Fund 127 C&P cites In re Linerboard Antitrust Litigation, 2004 WL 1221350 (E.D.Pa. June 2, 2004) ( Linerboard ), in support of its argument against a declining percentage approach to large fee awards. In that case, the court found that the sliding scale approach is economically unsound. Id. at  17. The Linerboard court explained that it is especially important to provide appropriate incentives to attorneys pursuing antitrust actions because public policy relies on private sector enforcement of the antitrust laws. Id. C&P contends that not only was the court's percentage award low, but also the court did not adequately compensate counsel for the substantial injunctive relief it obtained for the class. Thus, C&P argues that the district court's fee award severely inhibits the strong public policy articulated in Linerboard that favors providing incentives to attorneys to pursue maximum relief for their clients. 128 We need not dispute whether the sliding scale approach is economically rational in the context of ensuring competent and committed counsel. Public policy concerns oftentimes redefine the focus of the court. In this case, the district court's decision in favor of protecting the instant class from an excessive fee award militates against awarding attorneys' fees based purely on economic incentives. Satisfied that its ruling would not deter plaintiffs' attorneys from pursuing similar claims, the district court remarked, If [this fee award] amounts to punishment, I am confident there will be many attempts to self-inflict similar punishment in future cases. Visa Check III, 297 F.Supp.2d. at 525. We agree. 129 While courts in megafund cases often award higher percentages of class funds as fees than the district court awarded in this instance, see id. at 525 n. 33, the sheer size of the instant fund makes a smaller percentage appropriate. As a cross-check to a percentage award, courts in this Circuit use the lodestar method. Goldberger, 209 F.3d at 50. Here, the lodestar yields a multiplier of 3.5, which has been deemed reasonable under analogous circumstances. 27 See In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 742 (3d Cir.2001) (finding lodestar multiplier of 1.35 to 2.99 common in megafunds over $100 million); NASDAQ Market-Makers, 187 F.R.D. at 489 (multipliers of between 3 and 4.5 have become common) (internal quotation marks omitted). Thus, the district court did not abuse its discretion in awarding plaintiffs' counsel a generous fee based on a somewhat low percentage of the fund. 130 2. The District Court Was Not Required to Adhere to the Fee Agreement Between Plaintiffs' Counsel and Lead Plaintiffs 131 Plaintiffs' counsel argues that the district court was aware that class counsel had negotiated a fee arrangement with five of the nation's largest merchants that exceeded the 18% fee class counsel requested from the court and far exceeded the fee the court awarded. 28 Thus, class counsel argues that the district court ignored the Goldberger proviso that market rates, where available, are the ideal proxy for [class counsel's] compensation. Goldberger, 209 F.3d at 52. As further proof of class satisfaction with counsel's fee request, counsel argues that none of the large and sophisticated merchants in this class action objected to its fee petition. But see Goldberger, 209 F.3d at 53 ([Class members] have no real incentive to mount a challenge that would result in only a minuscule pro rata gain from a fee reduction.) (internal quotation marks omitted). For the reasons discussed in the prior subsection, we cannot say that the district court abused its discretion merely because it chose not to heed the terms of an agreement purportedly reached between lead plaintiffs and their counsel when settlement payments to approximately five million absent class members are at stake. 29 132 A final word is in order here. Measuring the difficulties of a large antitrust action and the degree of success by counsel in forging a settlement is not an easy task. In our view, the district court carried out its responsibility with admirable care and thoroughness, and with an eye to a just result. There is no doubt this case dominated the lives of all involved for many years. In approving the district court's fee award, we recognize the sacrifice and commitment plaintiffs' counsel made to its clients while preserving as much as possible for those who were harmed.