Opinion ID: 3011727
Heading Depth: 3
Heading Rank: 3

Heading: Other Awards

Text: The District Court did not undertake to review the fees granted in other class action settlement cases, particularly in other large settlement cases, i.e., cases in which the common fund exceeded $100 million.19 Had it conducted _________________________________________________________________ 19. A district court in this Circuit noted that [c]ourts have generally decreased the percentage awarded as the amount recovered increases, 23 such a review, the District Court should have looked specifically at cases in which the percentage-of-recovery method, not the lodestar method, was employed to set the fee award, and it should have examined the r easoning behind the district courts' fee awards in cases of similar size. Below, we have set forth a chart of fee awar ds given in federal courts since 198520 in class actions in which the settlement fund exceeded $100 million21 and in which the percentage of recovery method was used. 22 We have _________________________________________________________________ and $100 million seems to be the informal marker of a `very large' settlement. In re Orthopedic Bone Scr ew Prod. Liab. Litig., 2000 WL 1622741, at 7 (E.D. Pa. Oct. 23, 2000). 20. In 1984, the Supreme Court observed in Blum v. Stenson that [in] the calculation of attorney's fees under the`common fund doctrine,' . . . a reasonable fee is based on a percentage of the fund bestowed on the class. 465 U.S. 886, 900 n.16 (1984). Subsequently, the Third Circuit Task Force Report in 1985 outlined the pr oblems with the lodestar method and recommended that courts use the per centage-of-recovery method instead of the lodestar method in common fund cases. After this instruction from the Supreme Court and the release of the Task Force Report, courts across the country regularly employed the percentage method to set fees in common fund cases. 21. Although we have emphasized the seven-factor analysis required in class action fee cases set forth in Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000), Gunter is not listed in this chart because the settlement in that case was less than $100 million. 22. In several cases, the class settlement exceeded $100 million but the lodestar method was used to determine attor neys' fees. See, e.g., McLendon v. Continental Group, Inc., 872 F. Supp. 142 (D.N.J. 1994) (settlement was for more than $400 million, and lodestar multiplier of 1.5 was used to award attorneys' fees); In re Shell Oil Refinery Litig., 155 F.R.D. 552 (E.D. La. 1993) ($170 million settlement and $31.8 million in fees, which represented a 3.25 lodestar multiplier and approximately 18% of the total settlement); In re W ashington Public Power Supply Sys. Sec. Litig., 779 F. Supp. 1056 (D. Ariz. 1991) ($687 million settlement, $32 million in attorneys' fees, 1.2 lodestar multiplier, and attorneys' fees were 4.7% of total settlement); In r e Baldwin-United Corp. Litig., 1986 WL 12195 (S.D.N.Y. June 27, 1986) ($183.8 million settlement, $7.5 million in attorneys' fees, lodestar multiplier of 2, and fees were 4.1% of total settlement); In re Agent Orange Pr od. Liab. Litig., 611 F. Supp. 1296 24 outlined the amount of settlement, the percentage of the settlement that made up the attorneys' fee award and the lodestar multiplier. Case Settlement Fees as % Lodestar of Recovery Multiplier In re Cendant Corp. PRIDES Litig., $341.5 million 5.7% 7-10 51 F. Supp. 2d 537 (D.N.J. 1999) ($19.3 mil.) The instant case under review here. In re Cendant Corp. Litig., $3.16 billion 8.275% 32.7 109 F.Supp.2d 285 (D.N.J. 2000) ($262 mil.) In re Auction Houses Antitrust Litig., $512 million 5.2% Inf. not 2001 WL 170792 (S.D.N.Y. Feb. 22, ($27 mil.) available 2001) In re Orthopedic Bone Screw $100 million 12% Inf. not Prod. Liab. Litig., 2000 WL 1622741 available (E.D. Pa. Oct. 23, 2000) In re Prudential, $1.8 billion 5% 2.13 106 F.Supp.2d 721 (D.N.J. 2000)23 ($90 mil.) In re Ikon Office Solutions, Inc. Sec. $111 million 30% 2.7 Litig., 194 F.R.D. 166 (E.D. Pa. 2000) Shaw v. Toshiba America Inf. Sys., $2.1 billion 7% Inf. not Inc., 91 F.Supp.2d 942 (E.D. Tex. 2000) ($147 mil.) available In re Sumitomo Copper Litig., $116 million 27.5% 2.5 74 F.Supp.2d 393 (S.D.N.Y. 1999) ($32 mil.) _________________________________________________________________ (E.D.N.Y. 1985), aff 'd in part 818 F.2d 226 (2d Cir. 1987) ($180 million settlement, $10.7 million in attorneys' fees, lodestar multiplier of 1.25 to 1.75, and fees were 6% of settlement). Additionally, it should be noted that the chart includes a substantial number of the post-1985 cases involving large settlements and fees granted as a percentage of the total settlement, but the chart is not comprehensive. We feel that the selection of cases in the chart are representative of the range of cases r elevant to the District Court's analysis of Kirby's fee application in this case. 23. The district court originally awarded attorneys' fees in this case in 1997, see In re Prudential, 962 F . Supp. 572 (D.N.J. 1997), which decision was vacated and remanded by the Thir d Circuit. See In re Prudential, 148 F.3d 283 (3d Cir . 1998). Those decisions are discussed infra. 25 Case Settlement Fees as % Lodestar of Recovery Multiplier Kurzweil v. Philip Morris Co., 1999 WL $123.8 million 30% 2.46 1076105 (S.D.N.Y. Nov. 30, 1999) ($37.1 mil.) In re Lease Oil Antitrust Litig., $190 million 25% 1.35 186 F.R.D. 403 (S.D. Tex. 1999) In re Copley Pharm., Inc., $150 million 13% 2 1 F.Supp.2d 1407 (D. Wyo. 1998) ($19.5 mil.) In re PaineWebber Ltd. P'ships Litig. , $200 million 13% 1.4 999 F. Supp. 719 (S.D.N.Y. 1998) ($25.9 mil.) Walco Investments, Inc. v. Thenen, $141 million 15% 1.8 975 F. Supp. 1468 (S.D. Fla. 1997) ($21 mil.) In re Combustion Inc., $127 million 36% 2.99 968 F. Supp. 1116 (W.D. La. 1997) Local 56, United Food & Commercial $114.5 million 2.8% 2.39 Workers Union v. Campbell Soup Co., ($3 mil.) 954 F. Supp. 1000 (D.N.J. 1997) Bowling v. Pfizer, Inc., 922 F. Supp. $102.5 million 10% Inf. not 1261 (S.D. Ohio 1996), aff 'd ($10.2 mil.) available 102 F.3d 777 (6th Cir. 1996) In re Domestic Air Transportation $305 million 5.25% Inf. not Antitrust Litig., 148 F.R.D. 297 ($14.3 mil.) available (N.D. Ga. 1993) In re MGM Grand Hotel Fire Litig., $205 million 7% 1-2.95 660 F. Supp. 522 (D. Nev. 1987) In the charted cases, the attorneys' fee awards ranged from 2.8% to 36% of the total settlement fund. Looking at the percentage of recovery in this case (5.7%), it appears that it is in line with the other cases and even at the low end of the range. However, a brief review of the facts and posture of these other cases makes clear that, when examined through the seven-factor lens of Gunter, the higher fees awarded in the other cases wer e far more justified than the high award in this case. Accordingly, the District Court should have learned from those cases that extensive time and effort exerted by the attorneys and the existence of complex legal and factual issues warranted higher fee awards than the fee award that would have been appropriate for Kirby. The district court in In re Auction Houses relied on a presettlement bidding process in awarding attorneys' fees. The 26 bidding process in that case differed from the process employed by the District Court in this case, but it raised similar problems. However, regar dless of the arguable flaws in the method by which the district court awarded fees in In re Auction Houses, that case was far more complex than the instant case and, as such, is distinguishable. Indeed, the comments of interim lead counsel, excerpted in the district court's opinion, are telling: Mr. Furth, on behalf of all of the interim lead counsel, said that he never in [his] fondest dreams . . . believed that these defendants would pay $512 million and that this settlement is the most outstanding r esult I have ever heard of in the history of the antitrust laws. Another of the interim lead counsel noted that he and his colleagues had been negotiating with defendants prior to the appointment of plaintiffs' lead counsel, that they had really good hard solid numbers from [defendants], and we didn't think we could have accomplished what Mr. Boies did. In re Auction Houses Antitrust Litig., 2001 WL 170792, at 6 (S.D.N.Y. Feb. 22, 2001). In In re Orthopedic Bone Screw, the district court described the case as nothing less than an uninterrupted, hard-fought, `antagonistic' legal battle, in which the attorneys seeking fees had conducted substantial, widespread and extensive discovery including reviewing more than 1,500,000 pages of documents, and had defended a variety of pleadings and discovery matters and `litigated a plethora of motions,'  which resulted in the court issuing nearly 2,000 Pretrial Orders. 2000 WL 1622741, at 6. In In re Ikon Office Solutions, the district court granted the 30% fee request because, inter alia, Counsel expended more than 45,000 hours on this case and paid out expenses of more than $3 million with no guarantee of recovery, the case presented the legal obstacles of establishing scienter, damages, causation, and the like, and derivative counsel fees will be taken fr om this amount. 194 F.R.D. at 194. 27 In Shaw v. Toshiba, the district court noted the protracted schedule of the case, because of which it has been necessary to prosecute this action continuously, around the clock, seven days a week, workdays and holidays alike. 91 F.Supp.2d at 969. Other factors that made litigation of Shaw difficult included the two million pages of documents reviewed by class counsel, the fact that defendant's corporate headquarters were located in Tokyo, Japan, as well as the additional burden of having to translate many documents and much of the testimony from Japanese to English. Even with these numerous procedural difficulties, the district court only awarded 7% of the settlement in attorneys' fees. The attorneys in Sumitomo spent mor e than 43,000 hours on the case and inspected 11 million pages of documents, and the case had legal and factual complexities including the existence and analysis of the relationships between and among more than thirty Comex futures contracts, more than 500 LME contracts, literally hundreds of physical contracts, and millions of tons involved in the copper futures, the copper options and the copper derivative contracts. Sumitomo, 74 F .Supp.2d at 398. In Kurzweil, the district court noted that, before the settlement, [t]here had been no lar ge settlements in tobacco litigation generally, and no successful action had yet been brought against a tobacco company based on allegations of addictiveness of nicotine. 1999 WL 1076105, at 1. In addition, the attorneys encountered several obstacles, including that the action was originally dismissed, and the attorneys reviewed millions of documents and tens of thousands of deposition and trial transcripts and conducted numerous depositions. 1999 WL 1076105, at 1. In In re Lease Oil, the district court explained: As well as being novel, this litigation was highly complex and thus required a great deal of lawyering skill. As just explained, the task of simply compiling the evidence was an unusually difficult task, r equiring the assistance of experts and the investment of many hours.24 Also, being novel, the legal issues raised in the litigation required skilled attorneys to handle them. _________________________________________________________________ 24. With respect to gathering evidence, the court asserted: Godfrey and others had to create their own databases, compiling 28 186 F.R.D. at 445. The district court in Copley, in granting the 13% fee award, observed that, [d]uring expedited discovery, class counsel reviewed and analyzed more than 125,000 pages of documents and deposed roughly one hundr ed witnesses. 1 F.Supp.2d at 1408. The case also included 42 days of trial, and class counsel spent 48,794 hours on the case. Finally, the legal questions involved in Copley wer e both novel and complex. As the court explained: not only was the certification of this class a complex question, but this was also the first and only mass tort class action to go to trial, and the case presented complex medical and scientific issues of causation. 1 F.Supp.2d at 1413. PaineWebber too had many featur es that would dictate a high fee award. Class counsel conducted extensive, coordinated discovery, including coor dinating discovery of hundreds of boxes of documents through the use of sophisticated computer databases, and deposing many key witnesses. 999 F. Supp. at 722. In mor e than two years of litigation, counsel spent approximately 70,000 hours in heretofore uncompensated legal work in pursuit of factual investigation, drafting of documents, brief writing, document analysis, depositions, trial preparation, settlement negotiation and other tasks. 999 F . Supp. at 723. Finally, the legal issues in PaineW ebber were complex, and class counsel faced significant substantive and procedural defenses. 999 F. Supp. at 724. Walco Investments was described by the district court as comprising four years of bitterly-contested litigation. 975 F. Supp. at 1470. The case involved multiple defendants, and the claims were only loosely related, making class litigation exceedingly complicated, because claims raised _________________________________________________________________ posted prices, NYMEX prices, transportation costs, grade and weight differentials and so forth simply to determine whether or not a cause of action might exist. And, in order tofirst articulate their claims, class counsel had to hire experts to r esearch their allegation that the NYMEX trading center method is a reasonable way of determining market price at the lease. In re Lease Oil, 186 F.R.D. at 445. 29 against each category of defendants presented separate issues of fact and law and involved differing theories of recovery. 975 F. Supp. at 1471. These circumstances encouraged the court to award 15% in attor neys' fees to attorneys from fourteen differ ent firms representing class plaintiffs. The action in In re Combustion was eleven years old at the time of settlement and the attorneys had spent over 50,000 hours on the case. In the litigation, ther e had been roughly 160 complaints filed, 1140 answers, 1922 motions, with almost 1000 memoranda in support of or in opposition to these motions, 285 depositions . . . , 90 hearings, at least one oral argument per month since the case was removed to federal court, and endless numbers of settlement conferences, as well as thr ee fairness hearings, the first one lasting one week, and the other two lasting approximately one day each and one Daubert hearing lasting a total of two weeks. In re Combustion, 968 F. Supp. at 1136. In Local 56, the court acknowledged the complexity of the issues in this case, the significant attendant risks of proceeding with litigation, and the tenacity and vigor with which all counsel represented their clients' interests, in this class action which lasted for four years. 954 F . Supp. at 1005. Even so, class counsel's fees amounted to only 2.8% of the total settlement, a far smaller per centage than the fee awarded to Kirby by the District Court. In Bowling, the district court averr ed that [t]he Court's choice of a percentage . . . will be heavily informed by the value of the services rendered by Counsel. 922 F. Supp. at 1280. The court observed that Counsel wer e confronted with myriad complex legal and factual questions in bringing this action and in negotiating the settlement. 922 F. Supp. at 1280. Domestic Air involved a class action against several airline companies claiming a conspiracy to fix prices. The court observed: Counsel negotiated a significant settlement for the class in light of the precarious financial position of most of the defendants and over defendants' insistence 30 that they could not provide a larger cash settlement. Were it not for the considerable skill and effort of plaintiffs' counsel, the action would never have been certified as a class action and members of the class would receive nothing in return for their claims against defendants. 148 F.R.D. 297, 351-52 (N.D. Ga. 1993). In other words, the action in Domestic Air involved fundamental procedural obstacles that could easily have resulted in no recovery at all. Accordingly, class counsel was rewar ded significantly for negotiating such a large settlement. Finally, in In re MGM Grand Hotel, the court considered the particular and unique circumstances of this case, including the fact that the attorneys had r ecovered over 6,000 objects from the fire site and had conducted over 1,400 depositions, in granting the 7% fee awar d. 660 F. Supp. at 526. Indeed, in case after case, the same factors r ecur: complex and/or novel legal issues, extensive discovery, acrimonious litigation, and tens of thousands of hours spent on the case by class counsel. Because none of these factors which increase the complexity of class litigation was present here, it makes sense that the fee awarded in this case should be far lower than those awarded in the charted cases, which fees ranged from 2.8% to 36% of the total settlement. Also relevant to the District Court's analysis in this case is our holding in In re Prudential r emanding the case to the district court. In that case, we rejected an award of 6.7% of the settlement fund in a case with a fund of $1 billion to $2 billion because the district court had failed to explain adequately why it had applied such a high per centage to the settlement figure and because the court had not explained why the 5.1 lodestar multiplier was justified. We also warned in In re Prudential against overemphasizing counsel's role in recovery, in the context of our criticism of the district court's assumption that counsel had been a catalyst for a plan authored by the Multi-State Life Insurance Task Force, which facilitated the class action settlement in that it established Prudential's liability. We 31 explained that [a]llowing private counsel to receive fees based on the benefits created by public agencies would undermine the equitable principles which underlie the concept of the common fund, and would create an incentive for plaintiffs attorneys to `minimize the costs of failure . . . by free riding on the monitoring efforts of others.'  In re Prudential, 148 F.3d at 337. Similarly, as we have consistently observed, Cendant's liability and consequent collectability had been conceded at the outset of the PRIDES controversy, and that fact should have been given major consideration by the District Court when setting Kirby's attorneys' fees. Our review of the lack of complexity of this case and of awards in other large class action settlements, all of which involved more complex issues, more time invested by the attorneys, and, with only a few exceptions, smaller total settlements, leads us to the conclusion that the District Court abused its discretion in granting a 5.7% attorneys' fee award in this case.25