Opinion ID: 796443
Heading Depth: 2
Heading Rank: 3

Heading: Opinion and Order Approving Settlement and Directing Distribution

Text: 26 With respect to the terms of settlement, the Court reviewed the provisions of the Settlement Agreement providing for the creation of a $21,855,000 Settlement Fund and injunctive and equitable relief. The Court observed that [t]he non-monetary portion of the Agreement may prove more valuable to the models than the monetary settlement and should not be overlooked in any analysis of the success of this lawsuit. Id. at  1. In approving the settlement as reasonable, the Court found as follows: 27 This case involves an alleged price-fixing scheme in the modeling industry by some of the industr[y's] most powerful agencies. The issues were thoroughly investigated and aggressively litigated. Plaintiffs' success was never assured and, if the case had continued, plaintiffs would have had to prove a complex conspiracy to artificially fix the commission structure in the modeling industry. See, e.g., In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d 503, 511 (E.D.N.Y.2003) (The complexity of federal antitrust law is well known). Settlement negotiations were conducted over months, at arm's length, and between experienced and skilled attorneys with frequent pretrial conferences and motion practice. 28 Based on all these findings, the Agreement is reasonable. 29 Id. at . 30 Included in the settlement approval were incentive awards in the sum of $25,000 for each of the two named plaintiffs who were deposed and $15,000 for each of the two trial witnesses and eight class representatives. Id. The Court noted that incentive awards were related to the individual's personal risk and additional efforts to benefit the lawsuit. Id. The District Court conditioned its overall settlement approval upon the maintenance of a database by the Claims Administrator. Id. at . The Court noted that the Claims Administrator had incurred $25,000 in expenses to the date of the Opinion and Order and had estimated an additional $50,000 to $75,000 in reimbursable fees and expenses related to the distribution of funds, tracking the issuance and deposits of checks to class members, and preparation of interim and final reports. Id. at . 31 In its decision, the District Court noted that defendant Elite had filed a Chapter 11 Petition in the Bankruptcy Court for the Southern District of New York on February 11, 2004; that pursuant to the Bankruptcy Organization Plan, the model representative would be deemed to have an unsecured claim of $2,575,000; and that, based upon an estimated distribution, it was anticipated that the model representative would receive a cash distribution on the allowed model claims of between $847,000 and $1,673,750. Id. at  n. 3. The total Settlement Fund of $21,855,000 would be increased by the bankruptcy settlement, which provided that the settlement proceeds be held in escrow pending the entry of an allocation order by the District Court. Id. The Bankruptcy Court Order approved the proposed settlement with Elite as fair, reasonable and in the best interest of the Debtor's estate and creditors. Id. That Order included the following provision: 32 To the extent the Allocation Order directs that all or a portion of the Model Distribution be distributed (a) to charity or (b) to holders of any Class 4 Claim other than claim No. 50 filed on behalf of the class of plaintiffs in the Fears Action (the Individual Model Claims), that portion of the Model Distribution (the  Excess Distribution ) shall be redistributed to the Plan Administrator for a pro rata distribution to the holders of Individual Model Claims to the extent they are Allowed Class 4 Claims in the Bankruptcy Case.... Upon payment in full of all Allowed Individual Model Claims, any remaining Excess Distribution shall be distributed on a pro rata basis to certain other creditors and in accordance with the distribution priorities set forth in the Plan approved by the Bankruptcy Court. 33 Accordingly, the District Court concluded that while it was required to allocate the proceeds of the Elite settlement among the plaintiffs in this action, review of the substantive fairness of the settlement between plaintiffs and [Elite] is unnecessary in view of the Bankruptcy Court Settlement Order. Fears, 2005 WL 1041134, at  n. 3. The District Court observed that it was empowered by the Elite Reorganization Plan to approve and direct the allocation of the proceeds of that Settlement in this action, designated the Fears action. Id. 34 Turning to the question of attorneys' fees, the District Court recognized the claim of plaintiffs' counsel to a fee award of 33.33% of the fund of $21,855,000 ($7,285,000) plus unreimbursed expenses ($1,590,164.65) for a total of $8,875,164.65. Id. at . The District Court also recognized that the lodestar calculation (number of hours reasonably expended times reasonable hourly rate), involving approximately 28,000 professional hours, plus the expenses claimed, totaled $10,702,324.65. Id. at , . The Court observed that the percentage fee award plus expenses requested was 40% of the total fund and that the lodestar amount alone was substantially more than the amount of the claims filed to the date of the District Court's opinion — $9,338,958.29. Id. at . Evaluating the factors to be considered in fixing a reasonable common-fund fee, the District Court first addressed the time and labor expended by counsel. 35 In determining a reasonable attorneys' fee, the District Court considered several factors, including (1) the time and labor expended by counsel; (2) the magnitude of the litigation; (3) the risk of litigation; and (4) the quality of representation. In examining the time and labor factor, the District Court reviewed the hours spent and rates charged by each of the law firms representing the plaintiffs in computing their lodestar claims. Because, as will be seen, the District Court ultimately resolved the fee issue by awarding fees on the basis of a percentage of claims made, the District Court determined that the lodestar calculation is primarily for cross-check purposes. Id. at . 36 As to the magnitude of the litigation, the District Court took note of plaintiffs' allegations that they were confronted with the need to establish a wide-ranging price-fixing conspiracy that existed over a period of thirty years and involved as defendants some of the most venerable names in the modeling industry. Id. at . As to the risk of litigation factor, the District Court referred to the numerous motions to dismiss and for summary judgment, the extensive discovery conducted, the contingent nature of the litigation, and the advancement of tens of thousands of dollars in disbursements by Class Counsel. See id. The District Court thereupon concluded that the manner in which this case unfolded demonstrates the significant possibility that Class Counsel could have failed to achieve any recovery at all and, consequently, no compensation. Id. at . 37 Finally, the District Court found that the quality of representation by Class Counsel in this case appears to be satisfactory. Id. The court further remarked that in having brought this lawsuit, the plaintiffs' lawyers performed a valuable public service for which they are to be commended. Id. The court, however, tempered this praise by referring to the conduct of the plaintiffs' counsel during the discovery process and by imposing sanctions as a result of that conduct. Id. The court opined that attorneys' conduct throughout the litigation must be factored into the quality of representation analysis and, accordingly, reduced the sought-for-fee award to include and emphasize [its] concern on this score. Id. at . 38 The District Court ultimately conclude[d] that a fair and appropriate fee is 40% of the [claims made against the Settlement Fund], including [a separate] mediated settlement [in another action against IMG Models, among other defendants]. Id. at  16. If translated into a percentage of the entire Fund this would equal 17.2%, or $3,759,583.16. Id. The court determined that all claimed expenses would be allowed, bringing the fees and expenses total to $5,349,747.81. Id. It also found that the estimated cost of Fund administration — $75,000-$100,000 — was within acceptable limits and noted that the Fund might be increased by any contribution to be made by Elite. Id. at  16 & n. 17. 39 In deciding to award fees on the basis of funds claimed rather than on the basis of the Settlement Fund created, the District Court recognized a split in authority, with the Supreme Court yet to weigh in on the issue. In declining to award fees on the basis of the total Fund available, the court noted that court authorization of what can be analogized as a windfall to the attorneys would violate ... the Second Circuit's clear intention to avoid such awards. Id. at . The District Court also found support for its position in the Private Securities Litigation Reform Act of 1995, Pub.L. No. 104-67, 109 Stat. 737 (Dec. 22, 1995) (PSLRA) and in the Class Action Fairness Act of 2005, Pub.L. No. 109-2, 199 Stat. 4 (Feb. 18, 2005) (CAFA). See id. (examining Congressional intent). 40 Turning to the question of distribution of the residual or unclaimed funds, the District Court noted that the Settlement Agreement conferred discretion upon the Court with regard to the disposition of such funds after hearing the views of the parties hereto as to such disposition. Id. at . According to the Court, 41 [m]ost Defendants ... voiced concerns about the models being awarded any more than the amount of money arrived at by the agreed upon formula for their claim and some sought to have money returned to their clients, they then went on to suggest preferred charitable contributions. 42 Id. 43 The Court determined to distribute the Excess Funds under the Cy Pres Doctrine. Id. at 17 -. The Court met with representatives of various organizations designated by the parties and others to identify charities that would directly or indirectly benefit members of the class with the least administrative costs. The District Court chose the following organizations to receive the residual funds and provided a brief description of their purposes and goals and the manner of allocation of the funds to be distributed: Beth Israel Medical Center's Continuum Women's Cardiac Care Network; Columbia Presbyterian Medical Center's Eating Disorders Program; Columbia Presbyterian Medical Center's Division on Substance Abuse; Columbia Presbyterian Medical Center's Ovarian Cancer Repository; New York University Medical Center; Civil Division of the Legal Aid Society; and The Heart Truth. See id. at -. 44