Court Opinion

ID: 4409909
Source: CourtListenerOpinion
Date Created: 2019-06-25 17:00:17.93036+00
Date Added: 2024-06-11T14:51:44.307993
License: Public Domain

PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                _____________

                     No. 18-2558
                    _____________

In re: S.S. BODY ARMOR I., INC., f/k/a Point Blank
Solutions Inc. f/k/a DHB Industries, Inc., et al., Debtors

                            v.

 CARTER LEDYARD & MILBURN LLP, Appellant
            ______________

APPEAL FROM THE UNITED STATES DISTRICT
                    COURT
    FOR THE DISTRICT OF DELAWARE
     (D.C. Civ. Action No. 1-18-cv-00634)
     District Judge: Hon. Gregory M. Sleet
                ______________

                       Argued
                    April 16, 2019
                   ______________

Before: AMBRO, GREENAWAY, JR., and SCIRICA,
                Circuit Judges.

            (Opinion Filed: June 25, 2019)
Laura D. Jones
James E. O’Neill
Pachulski Stang Ziehl & Jones
919 North Market Street
P.O. Box 8705, 17th Floor
Wilmington, DE 19801

Alan J. Kornfeld [ARGUED]
Pachulski Stang Ziehl & Jones
10100 Santa Monica Boulevard
13th Floor
Los Angeles, CA 90067

      Counsel for Debtor-Appellee SS Body Armor I, Inc.

Michael Busenkell
Gellert Scali Busenkell & Brown
1201 North Orange Street
Suite 300
Wilmington, DE 19801

Gary D. Sesser [ARGUED]
Carter Ledyard & Milburn
2 Wall Street
New York, NY 10005

      Counsel for Plaintiff-Appellant Carter Ledyard &
      Milburn

Scott J. Leonhardt
The Rosner Law Group
824 North Market Street
Suite 810

                            2
Wilmington, DE 19801

James H. Hulme
Arent Fox
1717 K Street, N.W.
Washington, DC 20036

Frederick B. Rosner
Messana Rosner & Stern
1000 North West Street
Suite 810
Wilmington, DE 19801

       Counsel for Defendant-Appellee Recovery Trustee

                        ______________

                           OPINION
                        ______________

GREENAWAY, JR., Circuit Judge.

        This procedurally-complex case stems from financial
crimes at a public company, which led to a peculiar confluence
of events: criminal convictions of the company’s top
executive, the executive’s unforeseen death while in custody,
several class action and derivative lawsuits, a number of
proposed settlement agreements, ongoing bankruptcy
proceedings, and numerous disputes spanning across three
levels of the federal judiciary in three separate jurisdictions. At
this point, however, we are faced with a single appeal that
raises two specific issues—a jurisdictional issue and a merits
issue. Here, upon assuring ourselves of our appellate

                                3
jurisdiction, we will affirm the underlying order for the reasons
set forth below.

                     I. BACKGROUND

       In the mid-2000s, David Brooks (“Brooks”), Chairman
and Chief Executive Officer (“CEO”) of SS Body Armor I, Inc.
(“Debtor”), was charged with a panoply of financial crimes. In
response to a slew of class action and derivative lawsuits
consolidated in the United States District Court for the Eastern
District of New York (“EDNY”), Debtor proposed a global
settlement agreement (“First Settlement Agreement”) worth
approximately $48 million and that, among other things,
indemnified Brooks for liability under section 304 of the
Sarbanes Oxley Act of 2002 (“SOX 304”), 15 U.S.C. § 7243. 1

       D. David Cohen (“Cohen”), former General Counsel
and a shareholder of Debtor, objected to the First Settlement
Agreement on the ground that the SOX 304 indemnification
provision was unlawful. After the EDNY district court
overruled his objection and approved the settlement
agreement, Cohen pursued an appeal to the United States Court
of Appeals for the Second Circuit (“Second Circuit”),
represented by Carter Ledyard & Milburn LLP (“CLM”). The
Second Circuit agreed with Cohen, holding that the settlement

       1
         In pertinent part, SOX 304 authorizes the Securities
and Exchange Commission (“SEC”) to claw back, or recoup,
performance-based compensation paid to CEOs where
financial statements must be restated as a result of misconduct.
Id. The SEC pursued this liability, allegedly valued at around
$186 million, in the United States District Court for the
Southern District of Florida (“SDFL”).

                               4
agreement’s indemnification of Brooks violated SOX 304 and
thus required vacatur of the EDNY district court’s order
approving of the agreement. In so doing, the Second Circuit
noted that the EDNY district court would ultimately have to
determine the appropriate attorneys’ fees to award CLM.

        Around the time the Second Circuit upended the First
Settlement Agreement, Debtor initiated Chapter 11 bankruptcy
proceedings in the United States Bankruptcy Court for the
District of Delaware (“Bankruptcy Court”). With that, the
Bankruptcy Court effectively took control over the EDNY
litigation, as any settlement would need to be approved by the
Bankruptcy Court.         Eventually, the Bankruptcy Court
confirmed Debtor’s liquidation plan that, among other things,
established a recovery trustee (“Recovery Trustee”) to pursue
Debtor’s interest in further recouping its losses from the
ongoing EDNY and SDFL actions.

        While the bankruptcy proceedings continued, Brooks
died in prison. Because his criminal appeal had not yet
concluded, some of his convictions and the concomitant
restitution obligations imposed during the prosecution were
abated. In light of this shift in the landscape, various
stakeholders negotiated another global settlement agreement
(“Second Settlement Agreement”) to resolve all outstanding
claims. Under that agreement, approximately $142 million of
Brooks’ restrained assets were agreed to be distributed to
various victims of his financial crimes. Of that $142 million,
roughly $70 million has recently been remitted to Debtor.

        Meanwhile, still seeking its attorneys’ fees for
preserving the SOX 304 claim nearly a decade prior, CLM
initiated a series of filings. First, it filed a fee application in
the Bankruptcy Court. In that application, CLM indicated that

                                5
it billed 1,502.2 hours and incurred fees totaling $549,472.61
in connection with the SOX 304 claim. Using a lodestar
multiplier of 3.38, CLM thus sought an attorneys’ fees award
of $1.86 million, representing 1% of the potential SOX 304
liability it had preserved. In ruling on the fee application, the
Bankruptcy Court purported to award CLM attorneys’ fees but
did not quantify the exact amount of the award. Instead, the
Bankruptcy Court ruled that the amount of the award would be
determined in the future, if and when Debtor actually received
any funds on account of the SOX 304 claim. The Bankruptcy
Court’s ruling made clear, however, that CLM would not be
entitled to any award if Debtor were to never receive any funds
on account of the SOX 304 claim. Concerned of the potential
to receive nothing, CLM appealed the fee application order
(“Fee Application Appeal”) to the United States District Court
for the District of Delaware (“District Court”). Fully briefed,
the Fee Application Appeal remains pending at the District
Court.

        CLM next filed a motion with the Bankruptcy Court
requesting that a $25 million reserve be set aside from which
its attorneys’ fees could be paid. Without determining the
exact amount of attorneys’ fees owed to CLM, the Bankruptcy
Court granted the motion in part, ordering Debtor to set aside
$5 million from any settlement funds until resolution of CLM’s
fee application. Believing $5 million to be insufficient, CLM
appealed the Bankruptcy Court’s fee reserve order (“Fee
Reserve Appeal”) to the District Court. Fully briefed, the Fee
Reserve Appeal also remains pending at the District Court.

      In the Bankruptcy Court, CLM then moved for a stay of
any distributions from the Second Settlement Agreement
pending its Fee Reserve Appeal. The Bankruptcy Court denied
the motion. CLM subsequently appealed—in a new appeal,

                               6
not the pending Fee Reserve Appeal—the Bankruptcy Court’s
stay denial order (“Stay Denial Appeal”) to the District Court.
In its Stay Denial Appeal, CLM filed an emergency motion
(“Emergency Stay Motion”) requesting the District Court to
stay distributions from the Second Settlement Agreement
pending resolution of the Fee Reserve Appeal, in which it was
now requesting a $15 million fee reserve. Debtor and the
Recovery Trustee (collectively “Appellees”) opposed the
motion, which the District Court eventually denied. From that
denial, CLM now appeals to us.

       This case thus presents us with two questions. First, do
we have jurisdiction to hear this appeal? Second, if we have
jurisdiction, did the District Court correctly deny CLM’s
Emergency Stay Motion? For the reasons set forth below, we
answer each question in the affirmative.

               II. JURISDICTIONAL ISSUE

       CLM argues that we have appellate jurisdiction because
the District Court’s denial of the Emergency Stay Motion
qualifies as a final order under 28 U.S.C. § 158(d)(1) or,
alternatively, as an injunctive order under 28 U.S.C.
§ 1292(a)(1). We agree on the first ground for jurisdiction and
thus do not reach the second ground.

        Under 28 U.S.C. § 158(d)(1), we have jurisdiction over
appeals of “all final decisions, judgments, orders, and decrees”
entered by a district court reviewing a bankruptcy court’s order
in an appellate capacity. For us to have jurisdiction under the
statute, however, both relevant district court and bankruptcy
court orders must be final. See In re White Beauty View, Inc.,
841 F.2d 524, 525–26 (3d Cir. 1988); In re Klaas, 858 F.3d
7
820, 825 (3d Cir. 2017). We address the finality of each order
in turn.

            A. Finality of District Court’s Order

        Since we have no direct precedent on the finality of the
relevant District Court order, we look chiefly to In re Revel AC,
Inc., 802 F.3d 558 (3d Cir. 2015) (Ambro, J.), our most
factually analogous case. 2 There, the bankruptcy court entered
an order authorizing a debtor to sell its casino property free and
clear of any tenancies. See Revel, 802 F.3d at 564. An
aggrieved tenant appealed the sale authorization order to the
district court and moved to stay the sale pending the appeal.
See id. After the district court denied a stay, but while the
underlying appeal was still pending in the district court, the
tenant appealed the stay denial to us. See id. at 566.
Importantly, the sale was scheduled to close imminently and,
once it did, the tenant’s possessory interest in the property
would be lost forever given a statute under which reversing a
sale authorization order does not affect the validity of the sale
itself. See id. at 564–65, 567. Noting that “the upshot of
declining the [tenant’s] stay request [was] to prevent it from
obtaining a full airing of its issues on appeal and a decision on
the merits,” we ruled that the district court’s order was final.
Id. at 567. More specifically, we held that “where it is all but
assured that a statute will render an appeal moot absent a stay,

       2
         Our decision in In re Trans World Airlines, Inc., 18
F.3d 208 (3d Cir. 1994), is inapposite because that case, unlike
this case, involved a district court’s grant of a stay request. Id.
at 216.

                                8
a stay denial is appealable under [28 U.S.C.] § 158(d)(1).”
Revel, 802 F.3d at 567.

        Here, a statute would not render CLM’s Fee Reserve
Appeal moot absent a stay. Accordingly, the instant appeal
does not fit within the express terms of Revel’s precise holding.
But this appeal does fit within Revel’s dicta, to which we give
teeth today.

        Indeed, denying CLM’s request for a stay of seemingly
imminent distributions effectively—even though not
necessarily by statute—moots its pending Fee Reserve Appeal.
If Debtor is allowed to freely distribute the proceeds from the
Second Settlement Agreement, the District Court will be
unable to grant any relief even if it were to ultimately decide
that the $5 million fee reserve should have been larger. That is
because any funds received by Debtor will be distributed under
the liquidation plan as quickly as possible to thousands of
creditors, making it nearly impossible for CLM to claw back
any funds to which it may later be deemed entitled. See App.
184–85 (the Bankruptcy Court’s recognizing that “whatever
[assets] come[] into [Debtor’s] estate will be distributed . . . as
quickly as possible” and “all the assets [not subject to a
reserve] will be disbursed [leaving CLM] with no ability to
receive a [greater] fee because there[ will] be no money left to
chase”).

       At oral argument, Debtor’s counsel informed us that
Debtor has recently received settlement proceeds of $70
million. This only heightens our concern that distributions
from the Second Settlement Agreement may be made
imminently. If these settlement proceeds are distributed before
resolution of CLM’s Fee Reserve Appeal, that appeal is “all
but assured” to become moot. Revel, 802 F.3d at 567.

                                9
       Thus, because “the upshot of declining [CLM’s] stay
request is to prevent it from obtaining a full airing of its issues
on appeal and a decision on the merits,” we deem the District
Court’s stay denial order final under 28 U.S.C. § 158(d)(1).
Revel, 802 F.3d at 567. Especially in this bankruptcy
context—where we have adopted a relaxed, pragmatic, and
functional view of finality in lieu of the traditional, technical
view, see In re Comer, 716 F.2d 168, 171 (3d Cir. 1983) 3—we
do not hesitate in reaching this decision, a mere logical
application of Revel.

           B. Finality of Bankruptcy Court’s Order

        We take this same pragmatic approach in assessing the
finality of the relevant Bankruptcy Court order. As noted
previously, the present appeal involves the District Court’s
ruling on CLM’s Emergency Stay Motion, which was filed in
the first instance in the District Court. As a technical matter,
therefore, there is no underlying Bankruptcy Court order for us
to review for finality, seemingly precluding jurisdiction. See
United States v. Nicolet, Inc., 857 F.2d 202, 204 (3d Cir. 1988)
(“[S]ection 158(d) is not an available predicate for

       3
         “We interpret finality pragmatically in bankruptcy
cases because these proceedings often are protracted and
involve numerous parties with different claims. To delay
resolution of discrete claims until after final approval of a
reorganization plan, for example, would waste time and
resources, particularly if the appeal resulted in reversal of a
bankruptcy court order necessitating re-appraisal of the entire
plan.” White Beauty View, 841 F.2d at 526 (citations omitted).

                                10
jurisdiction” where “the original order appealed from was
entered by the district court.” (citation omitted)).

        But the Emergency Stay Motion was filed within the
broader context of CLM’s Stay Denial Appeal, which formally
appealed the Bankruptcy Court’s stay denial order. In ruling
on the Emergency Stay Motion, the District Court was hence
functionally reviewing the Bankruptcy Court’s stay denial
order. The District Court’s own stay denial order evinces that
it viewed itself as sitting in an appellate capacity. See App. 27
(the District Court’s stating that one of the determinations in
the Bankruptcy Court’s stay denial order did not constitute “an
abuse of discretion”); see also Appellees’ Br. 38 (seemingly
conceding that the District Court sat in an appellate capacity
by referencing its “correctly review[ing]” a finding of the
Bankruptcy Court’s stay denial order). CLM’s filing of the
Emergency Stay Motion thus did no more than hurry the
District Court’s resolution of the broader Stay Denial Appeal.
That the District Court technically ruled on that motion instead
of the appeal in which it was filed does not give us pause
where, as here, we are to take a relaxed, pragmatic view of
finality. See Comer, 716 F.2d at 171. 4

      Satisfied that the District Court was effectively
reviewing an order of the Bankruptcy Court, we now evaluate
whether the underlying Bankruptcy Court order was final.
Like the District Court’s stay denial order, the Bankruptcy
Court’s stay denial order “all but assured” that CLM’s Fee

       4
         Nicolet is inapplicable to this analysis because that
case involved an order issued by a district court exercising its
original jurisdiction, not—as in this case—in an appellate role
reviewing a bankruptcy court’s ruling. 857 F.2d at 203–04.

                               11
Reserve Appeal would become moot since it opened the door
to immediate settlement distributions, which would preclude
CLM “from obtaining a full airing of its issues on appeal.”
Revel, 802 F.3d at 567. Thus, for the same reasons that the
District Court’s order was final, so too was the Bankruptcy
Court’s order.

                              ***

       In light of the foregoing analysis, we hold that we have
jurisdiction to hear this appeal under 28 U.S.C. § 158(d)(1).
Therefore, we need not—and do not—assess whether we also
have jurisdiction under 28 U.S.C. § 1292(a)(1). Having
assured ourselves of our appellate jurisdiction, we next turn to
the merits issue in this case.

                     III. MERITS ISSUE

        On the merits, CLM asserts that the District Court
blundered in denying its Emergency Stay Motion, which
sought to stay distributions from the Second Settlement
Agreement pending resolution of the Fee Reserve Appeal. On
this issue, we first review the law relevant to stay motions, then
clarify the applicable standard of review, and finally apply the
law to the facts using the appropriate standard. In so doing, we
determine that the District Court properly denied the
Emergency Stay Motion.

                       A. Relevant Law

       The Federal Rules of Bankruptcy Procedure allow a
party to move to stay the effect of a bankruptcy court order
pending a resolution on appeal. See Fed. R. Bankr. P. 8007. In
ruling on such motions, courts assess four factors, similar to

                               12
those considered in ruling on applications for preliminary
injunctions:

       (1) whether the stay applicant has made a strong
       showing that [it] is likely to succeed on the
       merits; (2) whether the applicant will be
       irreparably injured absent a stay; (3) whether
       issuance of the stay will substantially injure the
       other parties interested in the proceeding; and (4)
       where the public interest lies.

Hilton v. Braunskill, 481 U.S. 770, 776 (1987) (citations
omitted). “In order not to ignore the many gray shadings stay
requests present, courts ‘balance[] them all’ and ‘consider the
relative strength of the four factors.’” Revel, 802 F.3d at 568
(citations omitted).

        The Supreme Court has indicated that the first two
factors are “the most critical,” Nken v. Holder, 556 U.S. 418,
434 (2009): whether the stay movant has demonstrated (1) a
strong showing of the likelihood of success and (2) that it will
suffer irreparable harm, or “harm that cannot be prevented or
fully rectified by a successful appeal,” Revel, 802 F.3d at 568
(internal quotation marks and citation omitted). We have noted
that, among these two factors, “the former is arguably the more
important piece of the stay analysis.” Id.

       As to the first factor, a strong showing of the likelihood
of success exists if there is “a reasonable chance, or probability,
of winning.” Singer Mgmt. Consultants, Inc. v. Milgram, 650
F.3d 223, 229 (3d Cir. 2011) (en banc). “While it is not enough
that the chance of success on the merits be better than
negligible, . . . the likelihood of winning on appeal need not be

                                13
more likely than not.” Revel, 802 F.3d at 569 (internal
quotation marks and citations omitted).

        To satisfy the second factor, the movant must
demonstrate that irreparable injury is “likely [not merely
possible]” in the absence of a stay. Id. (alteration in original)
(citation omitted). We understand “likely” to mean “more apt
to occur than not.” Id. (citation omitted).

        Upon satisfaction of the first two factors, courts assess
the harm to the opposing parties and weigh the public interest.
Nken, 556 U.S. at 435. In particular, courts balance the harms
by weighing the likely harm to the movant absent a stay, the
second factor, against the likely harm to stay opponents if the
stay is granted, the third factor. Revel, 802 F.3d at 569. Courts
also evaluate where the public interest lies, the fourth factor,
which calls for gauging “consequences beyond the immediate
parties.” Id. (citation omitted).

        In Revel, we embraced a “sliding-scale” approach to
determining how strong a case a stay movant must show. Id.
(citations omitted). Under this sliding scale, in essence, “[t]he
more likely the [movant] is to win, the less heavily need the
balance of harms weigh in [its] favor; the less likely [it] is to
win, the more [heavily] need [the balance of harms] weigh in
[its] favor.” Id. (first, third, fourth, and seventh alterations in
original) (citation omitted).

       Overall, then, all four stay factors are interconnected
and the analysis proceeds as follows:

       Did the applicant make a sufficient showing that
       [(1)] it can win on the merits[—]significantly
       better than negligible but not greater than

                                14
       50%[—]and [(2)] will suffer irreparable harm
       absent a stay? If it has, we “balance the relative
       harms considering all four factors using a
       ‘sliding[-]scale’ approach. However, if the
       movant does not make the requisite showings on
       either of these [first] two factors, the[] inquiry
       into the balance of harms [and the public interest]
       is unnecessary, and the stay should be denied
       without further analysis.”

Id. at 571 (last three alterations in original) (citation omitted).

                    B. Standard of Review

       We typically review appeals from the denial of a stay
for abuse of discretion, giving proper regard to the district
court’s feel of the case. Id. at 567. But, since the first factor
involves a purely legal determination, we review a district
court’s decision on the likelihood of success de novo. Id.

                           C. Analysis

        Here, CLM falters at the very first stay factor.
Reviewing the factor de novo, we determine that CLM has a
fatally low likelihood of succeeding in its Fee Reserve Appeal.
This compels us to affirm the District Court’s underlying order,
even without considering any of the remaining stay factors.

       The first stay factor requires us to evaluate whether
CLM has shown that it has a “significantly better than
negligible” chance of succeeding on the merits of its pending
Fee Reserve Appeal. Id. at 571. At its core, that appeal asks
whether $5 million is an adequate amount to cover the
attorneys’ fees CLM accrued in connection with its

                                15
preservation of the SOX 304 claim.          Answering that
overarching question calls for us to consider—though not
conclusively decide—a subsidiary question: what is the
appropriate amount of attorneys’ fees that CLM should be
awarded? We ruminate on that analysis here.

       First, we must assess the appropriate method for
calculating attorneys’ fees at this procedural juncture. There
are two such methods used by federal courts—the lodestar
approach and the percentage-of-recovery approach. See In re
Cendant Corp. PRIDES Litig., 243 F.3d 722, 732 (3d Cir.
2001). Generally, the lodestar method is used in statutory fee-
shifting cases while the percentage-of-recovery method is
favored in cases involving a common fund. See id.

        The lodestar method is the simpler of the two. Under
that approach, “court[s] determine[] an attorney’s lodestar
award by multiplying the number of hours he or she reasonably
worked on a client’s case by a reasonable hourly billing rate
for such services given the geographical area, the nature of the
services provided, and the experience of the lawyer.” Gunter
v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir.
2000) (citations omitted). Although the lodestar method
“yields a fee that is presumptively sufficient,” courts may, in
“rare and exceptional circumstances,” use a multiplier to adjust
the fee award upward or downward. Perdue v. Kenny A. ex rel.
Winn, 559 U.S. 542, 552 (2010) (internal quotation marks and
citations omitted); see Gunter, 223 F.3d at 195 n.1.

       The percentage-of-recovery method is more complex.
Generally used in common fund cases—where a litigant
creates, discovers, increases, or preserves a fund for the benefit
of a group, see Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 392
(1970)—this method “is designed to allow courts to award fees

                               16
from the fund in a manner that rewards counsel for success and
penalizes it for failure.” Cendant, 243 F.3d at 732 (internal
quotation marks and citation omitted). When analyzing a fee
award under this method, courts may consider, among others,
seven factors:

       (1) the size of the fund created and the number of
       persons benefitted; (2) the presence or absence
       of substantial objections by members of the class
       to the settlement terms and/or fees requested by
       counsel; (3) the skill and efficiency of the
       attorneys involved; (4) the complexity and
       duration of the litigation; (5) the risk of
       nonpayment; (6) the amount of time devoted to
       the case by counsel; and (7) the awards in similar
       cases.

 In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 301 (3d Cir.
2005) (Scirica, J.) (citations omitted); see In re AT & T Corp.,
455 F.3d 160, 166 (3d Cir. 2006) (Scirica, J.) (“In reviewing
an attorneys’ fees award in a class action settlement, a district
court should consider the Gunter factors, the [In re Prudential
Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283
(3d Cir. 1998) (Scirica, J.)] factors, and any other factors that
are useful and relevant with respect to the particular facts of
the case.”). Upon doing so, a cross-check using the lodestar
method is appropriate. See Rite Aid, 396 F.3d at 305. This
lodestar cross-check calculation, however, “need entail neither
mathematical precision nor bean-counting.” Id. at 306.

       Although the percentage-of-recovery method is often
used in common fund cases, courts may apply the lodestar
method where “the nature of the settlement evades the precise
evaluation needed for the percentage[-]of[-]recovery method.”

                               17
In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab.
Litig., 55 F.3d 768, 821 (3d Cir. 1995); see also id. at 821
(stating that a court “may select the lodestar method in some
non-statutory fee cases where it can calculate the relevant
parameters (hours expended and hourly rate) more easily than
it can determine a suitable percentage to award”); Rite Aid, 396
F.3d at 300 (explaining that the lodestar method is typically
applied “where the nature of the recovery does not allow the
determination of the settlement’s value required for application
of the percentage-of-recovery method” (citation omitted)).

        Such is this case. At this particular procedural moment,
where the record is unclear as to what portion of the settlement
proceeds is attributable to the preserved SOX 304 claim, we
opt to employ the lodestar method. 5 At this stay stage, we need
only decide whether CLM has demonstrated a sufficient
likelihood of success on the merits. The lodestar method
allows us to determine this more straightforwardly. 6

       5
        We leave it to the discretion of the Bankruptcy Court
or District Court whether to apply the lodestar method or
percentage-of-recovery method in later stages of this litigation,
such as in eventually quantifying CLM’s fee application or
ruling on its Fee Application Appeal or Fee Reserve Appeal.
       6
          If the Bankruptcy Court or District Court chooses to
later employ the percentage-of-recovery method, we also leave
it to it to decide in the first instance several lingering issues
related to that method, such as whether the settlement proceeds
constitute a common fund from which CLM is entitled to
attorneys’ fees, what quantity of proceeds to consider, and how

                               18
       Second, we must now apply our chosen lodestar
method. But, to be clear, we do not need to determine at this
point the exact amount of attorneys’ fees CLM is due. Rather,
we must simply decide whether, as both the Bankruptcy Court
and District Court concluded, $5 million is an adequate amount
to cover the attorneys’ fees CLM incurred in preserving the
SOX 304 claim. See App. 401 (the Bankruptcy Court’s stating
that “there[ is] a very low likelihood of [CLM’s] receiving a
fee award in excess of $5 million”); id. at 27 (the District
Court’s stating that it “cannot find that . . . a [$5 million]
reserve constitutes an abuse of discretion”).

        Here, we conclude that the $5 million reserve is
sufficient. A $5 million attorneys’ fees award for 1,502.2
hours of legal work totaling $549,472.61 of documented fees
would yield an hourly rate of $3,328.45 and a lodestar
multiplier of over nine. But we have previously noted that, in
common fund cases where attorneys’ fees are calculated using
the lodestar method, “[m]ultiples ranging from one to four” are
the norm. Prudential, 148 F.3d at 341 (alteration in original)
(citation omitted); see also Cendant, 243 F.3d at 737–42 &
n.22 (collecting a cornucopia of complex and lengthy cases in
which highly skilled attorneys spent significant time and effort
to establish large common funds, only one of which awarded
attorneys’ fees using a lodestar multiplier higher than three).
At this stage, we see no reason to stray from that range.

      To be sure, CLM showed tremendous skill and
expended substantial time in preserving a highly valuable
claim. But its attempts to argue that it is somehow due

much of the proceeds are on account of CLM’s preservation of
the SOX 304 claim.

                              19
attorneys’ fees more than $5 million are belied by its initial fee
application in the Bankruptcy Court. There, CLM sought
attorneys’ fees totaling $1.86 million using a lodestar
multiplier of 3.38, which it stated was “entirely reasonable in
light of . . . the value of the asset preserved and benefits
conferred, the risks undertaken by counsel[,] and the public
policies that were vindicated” by preserving the SOX 304
claim. CLM’s Fee Appl. 35, ECF No. 3300 in In re S.S. Body
Armor I, Inc., Case No. 10-11255 (Bankr. D. Del. filed Sep.
25, 2015); see id. (citing with approval Prudential and Cendant
for the proposition that multipliers up to four are normally
awarded in common fund cases). We see no reason why
CLM’s prior analysis should not hold now, especially given the
current record.7

       7
         Although CLM earlier sought a $25 million reserve at
the Bankruptcy Court, it now suggests that it is entitled to
attorneys’ fees ranging between $10 million and $40 million.
Although these figures have some purported, arithmetical
justification, they are untethered from reality. See Appellant’s
Br. 47 (calculating $40 million in attorneys’ fees by arguing
that, since the Second Settlement Agreement—which includes
the SOX 304 claim—is worth $142 million and the First
Settlement Agreement—which did not include the SOX 304
claim—was worth $48 million, CLM conferred a benefit equal
to 295% of the First Settlement Agreement and thus should
receive attorneys’ fees equal to 295% of the $13.5 million
already awarded to class counsel). These mathematical
machinations are unavailing here, where CLM has itself
conceded that attorneys’ fees well below $5 million are
“entirely reasonable.” CLM’s Fee Appl. 35, ECF No. 3300 in

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        Because exceeding a $5 million reserve would demand
a lodestar multiplier greater than nine—more than double the
top end of the typical range for multipliers in cases like this
one—we are confident that a $5 million reserve is sufficient to
award CLM the attorneys’ fees it is due for preserving the SOX
304 claim. Put another way, at this stage of this litigation,
CLM has not carried its burden of demonstrating that it has a
“significantly better than negligible” chance of succeeding on
the merits of its pending Fee Reserve Appeal. Revel, 802 F.3d
at 571.

       Deciding this first stay factor against CLM is, on its
own, fatal to the instant appeal. See id. (“[I]f the movant does
not make the requisite showings on either of these [first] two
factors, . . . the stay should be denied without further analysis.”
(second alteration in original) (emphasis added) (citation
omitted)). Accordingly, we need not—and do not—assess any
of the remaining factors. In sum, the District Court correctly
denied CLM’s Emergency Stay Motion.

                      IV. CONCLUSION

       For the foregoing reasons, we are assured of our
appellate jurisdiction and will affirm the District Court’s order
denying CLM’s Emergency Stay Motion.

In re S.S. Body Armor I, Inc., Case No. 10-11255 (Bankr. D.
Del. filed Sep. 25, 2015).

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