Motion for Attorneys` Fees and Expenses

Transcription

2:09-md-02042-SFC Doc # 491 Filed 05/14/14 Pg 1 of 33
Pg ID 13250
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In re: Refrigerant Compressors
Antitrust Litigation
Case No. 2:09-md-02042
This Document Relates to
ALL DIRECT PURCHASER
ACTIONS
Honorable Sean F. Cox
United States District Judge
DIRECT PURCHASER PLAINTIFFS’ MOTION
FOR ATTORNEYS FEES AND EXPENSES*
For the reasons set forth in the attached Brief in Support of this Motion,
Direct Purchaser Plaintiffs’ Counsel respectfully request that this Court award an
attorney fee of 30% of the Settlement Funds, after reductions for opt-outs and
increases for interest on escrowed funds and for unused amounts from the Embraco
Notice and Administration Fund, plus $320,807.26 in unreimbursed expenses.
Dated: May 14, 2014
Respectfully Submitted,
FINK + ASSOCIATES LAW
/s/ David H. Fink
David H. Fink (P28235)
Darryl Bressack (P67820)
100 West Long Lake Rd.; Suite 100
Bloomfield Hills, Michigan 48304
Tel: 248.971.2500
Fax: 248.972.3600
dfink@finkandassociateslaw.com
dbressack@finkandassociateslaw.com
* This Motion and accompanying brief have been corrected and are intended to replace
the previously filed Motion for Attorneys Fees and Expenses. (Dkt. No. 489).
Pg ID 13251
THE MILLER LAW FIRM, P.C.
E. Powell Miller (P39487)
Casey A. Fry (P72332)
950 W. University Drive, Suite 300
Rochester, MI 48307
(248) 841-2200
www.millerlawpc.com
epm@millerlawpc.com
Class Counsel for the Settlement Class
Pg ID 13252
SOUTHERN DIVISION
In re: Refrigerant Compressors
Antitrust Litigation
Case No. 2:09-md-02042
ALL DIRECT PURCHASER
ACTIONS
Honorable Sean F. Cox
BRIEF IN SUPPORT OF DIRECT PURCHASER PLAINTIFFS’
MOTION FOR ATTORNEYS FEES AND EXPENSES
i
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................... iii STATEMENT OF THE ISSUES PRESENTED ..................................................... vi CONTROLLING OR MOST APPROPRIATE AUTHORITIES .......................... vii I. INTRODUCTION ...............................................................................................1 II. AWARD OF ATTORNEY FEES .......................................................................4 A. DP Plaintiffs’ Counsel Should Be Awarded A
Fee From The Common Funds..............................................................4 B. The Court Should Award Attorney Fees Using
The Percentage Of The Fund Approach................................................5 C. The Requested Percentage Is Appropriate When
Compared To The Range Of Percentage-Of-Fund Awards ..................8 D. Consideration Of The Relevant Factors Justifies
An Award Of A Thirty Percent Fee In This Case ...............................10 E. 1. The Value Of The Benefit Achieved ........................................11 2. The Risks Of Litigation And The Contingent
Nature Of The Fee ..................................................................12 3. Public Policy Considerations ....................................................13 4. The Value Of Services On An Hourly Basis ............................15 5. The Complexity Of The Litigation ...........................................19 6. The Quality Of The Representation ..........................................20 DP Plaintiffs’ Counsel’s Expenses Are Reasonable And Were
Necessarily Incurred To Achieve The Benefit Obtained ....................21 III. CONCLUSION..................................................................................................23 ii
Pg ID 13254
TABLE OF AUTHORITIES
CASES Arenson v. Bd. of Trade, 372 F.Supp. 1349 (N.D. Ill. 1974)...................................20
Bd. of Trustees of City of Birmingham Employees Retirement System v.
Comerica Bank, No. 09-cv-13201 (E.D. Mich. Dec. 13, 2013).................. 6, 8, 11
Blanchard v. Bergeron, 489 U.S. 87 (1989) ..............................................................6
Blum v. Stenson, 465 U.S. 886 (1984) .......................................................................6
Boeing Co. v. Van Gemert, 444 U.S. 472 (1980) ......................................................4
Bowling v. Pfizer, 102 F.3d 777 (6th Cir. 1996)......................................................10
Brown v. Phillips Petroleum Co., 838 F.2d 451 (10th Cir. 1988) .............................8
Cardizem CD Antitrust Litigation, 99-md-1278, Order No. 49
(E.D. Mich. Nov. 26, 2002) .......................................................................... passim
F&M Distribs. Inc. Sec. Litigation, 1999 U.S. Dist. LEXIS 11090
(E.D. Mich. 1999) ...................................................................................... 7, 14, 21
Gottlieb v. Barry, 43 F.3d 474 (10th Cir. 1994) ........................................................7
Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir. 1991) ........................................8
Hensley v. Eckerhart, 461 U.S. 424 (1983) .............................................................11
Hutchinson ex rel. Julien v. Patrick, 636 F.3d 1 (1st Cir. 2011) .............................21
In re Auto. Refinishing Paint Antitrust Litig., MDL NO 1426,
2008 WL 63269 (E.D. Pa. Jan. 3, 2008) ................................................................9
In Re Caraco Pharmaceutical Laboratories, Ltd. Securities Litigation,
No. 09-cv-12830 (E.D. Mich. June 26, 2013) ....................................................6, 8
In re Citigroup Inc. Securities Litigation, 965 F.Supp.2d 369
(S.D.N.Y. August, 1, 2013) ..................................................................................17
In re Delphi Corporation Securities, Derivative & “ERISA” Litigation,
No. 05-md-1725 (E.D. Mich. Jan. 1, 2008)............................................................7
iii
Pg ID 13255
In re Elan Sec. Litig., 385 F.Supp. 2d 363 (S.D.N.Y. 2005) ...................................17
In re Ethylene Propylene Deine Monomer Antitrust Litig.,
03-MD-1542 (D. Conn. Oct. 10, 2010) ..................................................................9
In Re Federal-Mogul Corp. Securities Litigation, Case No. 00-40222
(Hon. Paul V. Gadola) (E.D. Mich. January 12, 2004) ..........................................9
In re Folding Carton Antitrust Litigation, 84 F.R.D. 245 (D.C. Ill., 1979) ....... 3, 11
In Re General Motors Corp. Securities and Derivative Litigation,
No. 06-md-1749 (E.D. Mich. Jan. 6, 2009)............................................................7
In re Iowa Ready-Mix Concrete Antitrust Litig., 2011 WL 5547159
(N.D. Iowa Nov. 9, 2011) .......................................................................................9
In re IPO Sec. Litig., 671 F.Supp.2d 467 (S.D.N.Y. 2009) .....................................15
In re Lason, Inc. Sec. Litig., No. 99-CV-76079,
Order and Final Judgment (E.D. Mich. Mar. 31, 2003) .......................................18
In re Linerboard Antitrust Litig., 2004 WL 1221350 (E.D. Pa. 2004)......................9
In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631 (E.D. Pa. 2003). ................19
In re Packaged Ice Antitrust Litigation, No. 08-MDL-01952,
2011 WL 6209188 (E.D. Mich. Dec. 13, 2011) ........................................ vii, 6, 10
In re Remeron Direct Purchaser Antitrust Litig., 2005 WL 3008808
(D.N.J. Nov. 9, 2005) .............................................................................................9
In re Southeastern Milk Antitrust Litigation, 07-CV 208
(E.D. Tenn. May 17, 2013).....................................................................................9
In re Superior Beverage/Glass Container Consolidated Pretrial,
133 F.R.D. 119 (N.D. Ill. 1990). ..........................................................................18
In re Warner Commc'ns Sec. Litig., 618 F. Supp. 735 (S.D.N.Y. 1985)
aff'd, 798 F.2d 35 (2d Cir. 1986) ..........................................................................20
In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291 (9th Cir. 1994) . 7, 12
Jane Simpson v. Citizens Bank, Case No. 12-10267
(E.D. Mich. January 31, 2014) ...............................................................................9
iv
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Kogan v. AIMCO Fox Chase, L.P., 193 F.R.D. 496 (E.D. Mich. 2000) .......... vii, 19
Lindy Bros. Builders v. American Radiator, 540 F.2d 102 (3d Cir. 1975) ...............3
Missouri v. Jenkins, 491 U.S. 274 (1989) ..................................................................8
Ramey v. Cincinnati Enquirer, Inc., 508 F.2d 1188 (6th Cir. 1974) .......................14
Rawlings v. Prudential-Bach Props., Inc., 9 F.3d 513 (6th Cir. 1993) .... 6, 7, 11, 19
Similie v. Park Chem. Co., 710 F 2d 271 (6th Cir. 1983)................................. 11, 14
Sprague v. Ticonic Nat’l Bank, 307 U.S. 161 (1939) ................................................6
Sulzer Orthopedics, Inc., 398 F.3d 778 (6th Cir. 2005) ............................................6
Synthroid Marketing Litig., 264 F 2d 712 (7th Cir. 2001) ......................................21
Trs. v. Greenough, 105 U.S. 527 (1882)....................................................................4
U.S. Football League v. National Football League,
887 F.2d 408 (2d Cir. 1989) .................................................................................21
OTHER AUTHORITIES G. Hornstein, Legal Therapeutics: The Salvage Factor in Counsel Fee Awards,
69 Harv.L.Rev. 658, 660 (1956).............................................................................3
PROSSER, WADE AND SCHWARTZ’S TORTS: CASES AND MATERIALS 543
(10TH ED. 2000) ......................................................................................................8
v
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STATEMENT OF THE ISSUES PRESENTED
Should the Court grant Direct Purchaser Plaintiffs’ Counsel their requested
fees and reimbursement of litigation expenses?
Direct Purchaser Plaintiffs Answer: Yes.
vi
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CONTROLLING OR MOST APPROPRIATE AUTHORITIES
Boeing Co. v Van Gemert, 444 U.S. 472 (1980)
Bd. of Trustees of City of Birmingham Employees Retirement System v.
Comerica Bank, No. 09-cv-13201, Docket No. (E.D. Mich. Dec. 13, 2013)
Blum v. Stenson, 465 U.S. 886 (1984)
Hensley v. Eckerhart, 461 U.S. 424 (1983)
In Re Caraco Pharmaceutical Labs,
Case No. 09-cv-12830, Docket No. 96 (E.D. Mich. June 26, 2013)
In re Cardizem CD Antitrust Litigation,
Case No. 99-md-1278, Order No. 49 (E.D. Mich. Nov. 26, 2002)
In re Delphi Corporation Securities, Derivative & “ERISA” Litigation,
No. 05-md-1725 (E.D. Mich. Jan. 1, 2008)
In Re Federal-Mogul Corp. Securities Litigation,
Case No. 00-40222 (E.D. Mich. January 12, 2004)
In Re General Motors Corp. Securities and Derivative Litigation,
No. 06-md-1749 (E.D. Mich. Jan. 6, 2009)
In re Lason, Inc. Sec. Litig.,
No. 99-CV-76079, Order and Final Judgment (E.D. Mich. Mar. 31, 2003)
In re Packaged Ice Antitrust Litigation,
Case No. 08-MDL-01952, 2011 WL 6209188 (E.D. Mich. Dec. 13, 2011)
Kogan v. AIMCO Fox Chase, L.P., 193 F.R.D. 496, 503-04 (E.D. Mich. 2000)
Missouri v. Jenkins, 491 U.S. 274 (1989)
Rawlings v. Prudential-Bach Props., Inc., 9 F.3d 513 (6th Cir. 1993)
vii
I.
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INTRODUCTION
Counsel for Direct Purchaser Plaintiffs (“DP Plaintiffs”) in this complex
antitrust class action respectfully submit this brief in support of their request for an
award of attorney fees of 30% of the Settlement Funds, plus their litigation
expenses of $320,807.26. The substantial and certain recovery obtained for the
Class – recovery of over $30 million in cash – was achieved through the effective
advocacy of DP Plaintiffs’ Counsel.1 DP Plaintiffs’ Counsel’s efforts over more
than five years have been without compensation of any kind; their fee has been
wholly contingent upon the result achieved.
The requested fee – 30% of the Fund – is at the low end of the range
awarded in antitrust class actions. The amount requested is especially warranted in
light of the substantial recovery secured for the Class, the efforts of DP Plaintiffs’
Counsel in obtaining this result, and the significant risks in bringing the litigation.
Indeed, absent this settlement, the litigation could have continued for several more
years – particularly at the appellate level – at considerable expense without the
1
As of the date of this Brief, the total amount allocated to the Settlement
Funds by Settling Defendants is $29,855,156. However, funds allocated by the
Embraco Settlement to “notice and administration,” in excess of the amount
necessary for notice and administration, revert to the Embraco Settlement Fund.
Also, interest earned on escrowed funds will be added to the common fund. For
these reasons, the final settlement funds will exceed $30,000,000.
1
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Class receiving the benefits of the settlement, thus creating the significant risk that
the Class would ultimately receive less, or even no recovery.
The prosecution and settlement of this litigation required great skill and
extensive efforts by DP Plaintiffs’ Counsel. The settlements were only achieved
after significant effort in prosecuting this action, including, but not limited to: (1)
extensive investigation in connection with the filing of the initial Complaints and
subsequent amended Complaints; (2) extensive work and investigations based
upon information provided by the initial cooperating and Settling Defendant; (3)
briefing and prevailing against Defendants’ motions to dismiss; (4) consulting with
experts on antitrust issues; and (5) tireless and creative settlement negotiations.2
Importantly, DP Plaintiffs’ Counsel also litigated this case efficiently. Indeed, DP
Plaintiffs’ Counsel was able to obtain a favorable settlement before incurring the
2
Direct Purchaser Class Plaintiffs’ Motion for Final Approval of the Class
Action Settlements Between Direct Purchaser Class Plaintiffs, The Tecumseh
Defendants, Embraco Defendants, Danfoss Flensburg, and Panasonic Defendants;
Approval of the Plan of Allocation of the Net Settlement Funds; and Incentive
Payments to the Three Class Representatives (Dkt No. 488, the “Settlement
Brief”), more fully describes the history of the litigation, the claims asserted, the
investigation undertaken, the negotiation and substance of the settlement, the risks
of the litigation, and the reasonableness of the fee request. Also submitted
herewith is the Declaration of David H. Fink, setting forth in detail the work done,
the time expended and the expenses incurred in prosecuting the litigation.
(Declaration of David H. Fink in Support of Direct Purchaser Plaintiffs’ Motion for
Final Approval of the Class Action Settlements with the Tecumseh, Embraco,
Danfoss, and Panasonic Defendants; Approval of the Plan of Allocation of the Net
Settlement Funds; and Incentive Payments to the Three Class Representatives
(“Fink Decl.”)) (Exhibit 1).
2
tremendous expense associated with unnecessary discovery.
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As courts have
widely recognized, “[o]ne thousand plodding hours may be far less productive than
one imaginative, brilliant hour.” G. Hornstein, Legal Therapeutics: The Salvage
Factor in Counsel Fee Awards, 69 Harv.L.Rev. 658, 660 (1956) (quoted in In re
Folding Carton Antitrust Litigation, 84 F.R.D. 245, 261 (D.C. Ill. 1979). See also
Lindy Bros. Builders v. American Radiator, 540 F.2d 102 (3d Cir. 1975) (lodestar
multiplier awarded based in part on class counsels’ efficient use of time, even
though counsels’ efficiency undoubtedly served to diminish the number of hours
for which compensation would be forthcoming.)
As discussed in greater detail in the Settlement Brief, continued litigation
would be fraught with risks. Defendants would continue to deny any wrongdoing
and, at trial, offer testimony and expert analysis to support their contentions. DP
Plaintiffs would face the risk that a jury would react unfavorably to the evidence
presented by them and instead believe the testimony and arguments of Defendants.
DP Plaintiffs’ Counsel firmly believe that the settlements obtained reflect an
excellent outcome for the Class and are the result of creative and diligent efforts.
In light of these factors, the percentage fee award requested is fair and reasonable.
In accordance with this Court’s Order Granting Preliminary Approval of
Class Action Settlement, Approving Form and Manner of Notice and Setting Date
for Final Approval of Settlement entered on January 9, 2014, to date an aggregate
3
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of 1006 notices have been sent to potential Class Members. See Declaration of
Jennifer M. Keough [of Garden City Group] Regarding Notice and Claims
Administration (Exhibit 2) at ¶ 6.
The Notice informed the Class that DP
Plaintiffs’ Counsel would make an application for attorney fees not to exceed 30%
of the Settlement Funds plus reimbursement of expenses not to exceed $500,000.
For the reasons set forth herein, DP Plaintiffs’ Counsel respectfully submit that the
attorney fees and expenses requested are fair and reasonable under the applicable
legal standards and in light of the contingent risk undertaken, the diligent efforts of
counsel, and the substantial monetary benefits obtained.
Thus, DP Plaintiffs’
Counsel respectfully request that the Court award such fees and expenses.
II.
A.
AWARD OF ATTORNEY FEES
DP Plaintiffs’ Counsel Should Be Awarded A Fee From The
Common Funds
For over a century, the Supreme Court has recognized the “common fund”
exception to the general rule that a litigant bears his or her own attorneys’ fees.
Trs. v. Greenough, 105 U.S. 527 (1882). The rationale for the common fund
principle was explained in Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980), as
follows:
[T]his Court has recognized consistently that a litigant or a lawyer
who recovers a common fund for the benefit of persons other than
himself or his client is entitled to a reasonable attorney’s fee from the
fund as a whole. . . . Jurisdiction over the fund involved in the
litigation allows a court to prevent . . . inequity by assessing attorney’s
4
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fees against the entire fund, thus spreading fees proportionately
among those benefited by the suit.
The common fund doctrine both prevents unjust enrichment and encourages
counsel to protect the rights of those who have relatively small claims. Federal
courts, therefore, have long recognized that fee awards in successful cases – such
as the instant one – promote private enforcement of, and compliance with,
important areas of federal and state law, including the federal antitrust laws.
In complex antitrust class actions such as this, where there are numerous
purchasers of a price-fixed product, competent counsel for plaintiffs are frequently
retained on a contingent basis. If fees awarded by the courts did not fairly and
adequately compensate counsel for the services provided, the risks undertaken, and
the delay before any compensation is received, a large segment of the public would
be denied a remedy for antitrust violations.
B.
The Court Should Award Attorney Fees Using The Percentage Of
The Fund Approach
The diligent efforts of DP Plaintiffs’ Counsel have resulted in the creation of
a net Settlement Fund of approximately $30 million.3 Courts generally favor
awarding fees from a common fund based upon the percentage-of-the-fund
3
See Footnote 1, supra, for details regarding this estimate. The net amount
is adjusted to reflect a credit to Embraco related to three class members who chose
to opt out. Since Embraco’s two largest class members opted out, the remaining
Embraco settlement payment represents a very good recovery for class members
who did not opt out.
5
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method. See Blum v. Stenson, 465 U.S. 886, 900 n.16 (1984) (stating that in
common fund cases “a reasonable fee is based on a percentage of the fund
bestowed on the class”); Sprague v. Ticonic Nat’l Bank, 307 U.S. 161, 165-66
(1939); Greenough, 105 U.S. at 532.4
In this Circuit, there has been a clear “trend towards adoption of a
percentage of the fund method in [common fund] cases.” Rawlings v. PrudentialBach Props., Inc., 9 F.3d 513, 515 (6th Cir. 1993). The Sixth Circuit trend holds
true for Courts in this District, which almost universally utilize the percentage-ofthe-benefit approach in common fund cases. See e.g. In re Cardizem CD Antitrust
Litigation, Case No. 99-md-1278, Order No. 49 (E.D. Mich. Nov. 26, 2002) (Hon.
Nancy Edmunds) (Exhibit 3); In re Packaged Ice Antitrust Litigation, Case No. 08MDL-01952, 2011 WL 6209188 (E.D. Mich. Dec. 13, 2011) (Hon. Paul D.
Borman) (Exhibit 4); Bd. of Trustees of City of Birmingham Employees Retirement
System v. Comerica Bank, Case No. 09-cv-13201, Docket No. 137 (E.D. Mich.
Dec. 13, 2013) (Hon. Stephen J. Murphy III) (Exhibit 5); In Re Caraco
Pharmaceutical Laboratories, Ltd. Securities Litigation, Case No. 09-cv-12830,
Docket No. 96 (E.D. Mich. June 26, 2013) (Hon. Arthur A. Tarnow) (Exhibit 6); In
4
In contrast to common fund cases, the Supreme Court has approved the
lodestar method in the context of statutory fee-shifting cases. The lodestar in such
cases is calculated by “multiplying the number of hours reasonably expended on
the litigation times a reasonable hourly rate.” Blanchard v. Bergeron, 489 U.S. 87,
94 (1989) (internal quotation and citation omitted).
6
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re Delphi Corporation Securities, Derivative & “ERISA” Litigation, Case No. 05md-1725, Docket No. 313 (E.D. Mich. Jan. 1, 2008) (Hon. Gerald E. Rosen)
(Exhibit 7); In Re General Motors Corp. Securities and Derivative Litigation, Case
No. 06-md-1749, Docket No. 139 (E.D. Mich. Jan. 6, 2009) (Hon. Gerald E.
Rosen) (Exhibit 8).
A percentage-of-the-fund methodology fosters judicial economy by
eliminating the detailed and time-consuming lodestar analysis. Prudential-Bache
Properties, 9 F.3d at 516-17. Courts in this District have noted that “the lodestar
method is too cumbersome and time-consuming of the resources of the Court.” In
re Cardizem CD, Order No. 49 at 17 (quoting F&M Distribs. Inc. Sec. Litigation,
1999 U.S. Dist. LEXIS 11090 at *8 (E.D. Mich. 1999) (Hon. J. Abele Cook)). The
lodestar approach burdens a court with the task of reviewing extensive time
records over the course of numerous years, reflecting thousands of hours of
attorney time. On the other hand, the percentage of the fund approach is “easy to
calculate” and it “establishes reasonable expectations on the part of plaintiffs’
attorneys as to their expected recovery.” Prudential-Bache Properties, 9 F.3d at
516. “[M]ore importantly, the ‘percentage of the fund’ approach more accurately
reflects the result achieved.” F&M Distribs. at *8.5 (Exhibit 9).
5
The vast majority of federal circuits use the percentage fee approach in
common fund cases. In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291,
1296 (9th Cir. 1994); Gottlieb v. Barry, 43 F.3d 474 (10th Cir. 1994); Brown v.
7
C.
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The Requested Percentage Is Appropriate When Compared To
The Range Of Percentage-Of-Fund Awards
The Supreme Court recognizes that an appropriate fee is intended to
approximate what counsel would receive if they were bargaining for their services
in the marketplace. Missouri v. Jenkins, 491 U.S. 274, 285 (1989). If this were a
private contingent non-class matter, the customary fee arrangement would be a
percentage in the range of 33.33% to 40% of the recovery. Blum, 465 U.S. at 902
n.19 (“In tort suits, an attorney might receive one-third of whatever amount the
plaintiff recovers. In those cases, therefore, the fee is directly proportional to the
recovery.”); see also PROSSER, WADE
AND
SCHWARTZ’S TORTS: CASES
AND
MATERIALS 543 (10th ed. 2000) (“A common contingent fee is 30 % - 40 %.”).
Here, DP Plaintiffs’ Counsel request of a 30% award is at the low end of the
customary contingent fee arrangement.
Moreover, 30% is well within the range of common fund percentage awards
made by many courts in this District. See e.g. Bd. of Trustees v. Comerica
(awarding 30 percent of $11 million fund); In Re Caraco (awarding 33 ⅓ percent
of $2.975 million fund); Jane Simpson v. Citizens Bank, Case No. 12-10267,
Phillips Petroleum Co., 838 F.2d 451, 454 (10th Cir. 1988) (footnote 16 of Blum
recognizes both “implicitly” and “explicitly” that a percentage recovery is
reasonable in common fund cases); Harman v. Lyphomed, Inc., 945 F.2d 969, 975
(7th Cir. 1991); Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000);
Camden I Condo. Ass’n v. Dunkle, 946 F.2d 768 (11th Cir. 1991) (reversing a fee
award that used a lodestar method); Report of the Third Circuit Task Force, Court
Awarded Attorney Fees, 108 F.R.D. 237, 254 (October 8, 1985).
8
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Docket No. 50 (E.D. Mich. Jan. 31, 2014) (awarding 33 ⅓ percent of $2 million
fund); In Re Federal-Mogul Corp. Securities Litigation, Case No. 00-40222,
Docket No. 74 (Hon. Paul V. Gadola) (E.D. Mich. Jan. 12, 2004) (awarding 33 ⅓
percent of $1.5 million fund) (Exhibit 10).
A 30% award is consistent with awards generally provided in antitrust class
actions. See e.g. In re Iowa Ready-Mix Concrete Antitrust Litig., No. C 10–4038–
MWB, 2011 WL 5547159 (N.D. Iowa Nov. 9, 2011) (awarding fee of 36% of
$18.5 million settlement fund); In re Southeastern Milk Antitrust Litigation, Case
No. 08-MD-1000, 2013 WL 2155379 (E.D. Tenn. May 17, 2013) (awarding 33.3%
of $158 million settlement); In re Ethylene Propylene Deine Monomer Antitrust
Litig., Case No. 03-MD-1542 (D. Conn. Oct. 10, 2010) (awarding 33 ⅓ percent of
$25 million settlement) (Exhibit 11); In re Linerboard Antitrust Litig., Case No.
MDL 1261, 2004 WL 1221350 (E.D. Pa. 2004) (awarding 30% of a $203 million
settlement); In re Remeron Direct Purchaser Antitrust Litig., Case No. CIV. 030085, 2005 WL 3008808, at *15 (D.N.J. Nov. 9, 2005) (noting that a 1/3 fee has
been “typical” in common fund litigation); In re Cardizem CD (awarding 30
percent of a $110 million fund); In re Auto. Refinishing Paint Antitrust Litig.,
MDL No. 1426, 2008 WL 63269 (E.D. PA. Jan. 3, 2008) (awarding 32% of $66
million settlement with three of five defendants, and awarding an additional 1/3 of
a $39 million settlement with the remaining two defendants).
9
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Courts in this District generally award a fee as a percentage of the gross
settlement before litigation expenses and settlement administration expenses are
deducted. In re Cardizem CD, 218 F.R.D. at 531-35; In re Delphi Corporation
Securities, Derivative and “ERISA” Litigation, 248 F.R.D. 483, 505 (E.D. Mich.
2008); In re Packaged Ice, 2011 WL 6209188 at *17. Here, the fee percentage is
especially reasonable because certain costs of notice were deducted prior to
determination of the gross settlement amount.6
D.
Consideration Of The Relevant Factors Justifies An Award Of A
Thirty Percent Fee In This Case
Courts in the Sixth Circuit evaluate the reasonableness of a request for a fee
based upon a percentage of the common fund using six factors: (1) the value of the
benefit rendered to the plaintiff class; (2) the value of the services on an hourly
basis; (3) whether the services were under taken on a contingent fee basis; (4)
society’s stake in rewarding attorneys who produce such benefits in order to
maintain an incentive to others, (5) the complexity of the litigation; and (6) the
professional skill and standing of counsel involved on both sides.” In re Cardizem
CD, 218 F.R.D. at 533 (quoting Bowling v. Pfizer, 102 F.3d 777, 780 (6th Cir.
1996)). A court is tasked with ensuring that counsel is fairly compensated for the
6
DP Plaintiffs’ Counsel is requesting a fee based on the net fund which
includes some amounts that were allocated for notice but not spent and which, as a
result, revert to the net settlement fund.
10
Pg ID 13269
work performed and the result achieved. Rawlings, 9 F.3d at 516; Bd. of Trustees
v. Comerica at 13.
As discussed below, consideration of these factors demonstrates that a 30%
fee award is fair, reasonable and justified in this case.
1.
The Value Of The Benefit Achieved
DP Plaintiffs’ Counsel have secured settlements that provide for a
substantial and certain cash payment of over $30 million for the benefit of class
members. Courts have consistently recognized that the result achieved is a major
factor to be considered in making a fee award. Hensley v. Eckerhart, 461 U.S.
424, 436 (1983) (“most critical factor is the degree of success obtained”);
Rawlings, 9 F.3d at 516 (a percentage of the fund will compensate counsel for the
result achieved); Bd. of Trustees v. Comerica, Docket at 13 (citing Bowling v.
Pfizer, Inc., 102 F.3d at 780); Similie v. Park Chem. Co., 710 F.2d 271, 275 (6th
Cir. 1983).
Here, the $30 million common fund represents an excellent result for the
class.
The settlements were achieved as a result of the prosecutorial and
investigative efforts of DP Plaintiffs’ Counsel, including the extensive motion
practice, and tireless and creative settlement negotiations detailed in the Settlement
Brief. See In re Folding Carton Antitrust Litigation, 84 F.R.D. at 261 (creative,
efficient hours more valuable than a thousand plodding hours). As a result of this
11
Pg ID 13270
settlement, the Class Members will receive compensation for a portion of their
losses and avoid the very real risk of no recovery in the absence of a settlement. In
addition, the settlement represents a significant victory for Class Members who did
not opt out. The only settlement payment reduced as a result of opt-outs was the
Embraco settlement, and, even then, the Embraco settlement payment after opt-out
reduction still represents a very good recovery for the remaining Class Members.
2.
The Risks Of Litigation And The Contingent Nature Of The
Fee
A determination of a fair fee must include consideration of the contingent
nature of the fee and the difficulties that were overcome in obtaining the
settlement.
It is an established practice in the private legal market to
reward attorneys for taking the risk of non-payment by
paying them a premium over their normal hourly rates for
winning contingency cases. See Richard Posner, Economic
Analysis of Law §21.9, at 534-35 (3d ed. 1986). Contingent
fees that may far exceed the market value of the services if
rendered on a non-contingent basis are accepted in the legal
profession as a legitimate way of assuring competent
representation for plaintiffs who could not afford to pay on
an hourly basis regardless whether they win or lose.
In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1299 (9th Cir.
1994).
DP Plaintiffs’ Counsel prosecuted this action on a wholly contingent basis.
There have been and will always be numerous contingent fee cases, such as this,
12
Pg ID 13271
where plaintiffs’ counsel – after the expenditure of thousands of hours – receive no
compensation. DP Plaintiffs’ Counsel are aware of (and have been involved in)
many hard-fought lawsuits where – for any number of reasons, including the
discovery of facts unknown when the case was commenced, changes in the law
during the pendency of the case, or a decision of a judge or jury following a trial
on the merits – diligent efforts of plaintiffs’ counsel resulted in no fee. Even
plaintiffs who succeed at trial may find their judgment overturned on appeal.
In the case at bar, DP Plaintiffs’ Counsel overcame numerous difficulties,
always assuming the risk of receiving no payment for their efforts. Given the
nature of the contingent fee arrangement and the high risk this case presented, a
30% fee is extremely reasonable.
3.
Public Policy Considerations
Except for the largest of purchasers, class members in complex antitrust
class actions are invariably represented by class counsel, who are retained on a
contingent basis, largely due to the significant commitment of time and expense
required. The typical class representative is unlikely to be able to pursue long and
protracted litigation at his or her own expense, particularly with the knowledge that
others similarly situated will be able to “free-ride” on these efforts at no cost or
risk to themselves. This is especially true where, as here, the claims are extremely
complex, requiring expert proofs, and where the amount of individual damages
13
Pg ID 13272
may be far less than the investment of time and expenses required to prosecute the
action. The significant expenses, combined with the high degree of uncertainty of
ultimate success, means that contingent fees are virtually always required for such
cases.
Compensation in an amount appropriate to encourage attorneys to assume
the risk of litigation is in the public interest.
Indeed, without adequate
compensation for plaintiffs’ counsel, victims of antitrust violations would be
prevented from pursuing their claims. Thus, an important factor is “society’s stake
in rewarding attorneys who produce such benefits in order to maintain an incentive
to others.” Ramey v. Cincinnati Enquirer, Inc., 508 F.2d 1188, 1196 (6th Cir.
1974); Bowling, 102 F.3d at 780; Similie, 710 F.2d at 275. “Society’s stake in
rewarding attorneys who can produce such benefits in complex litigation such as in
the case at bar counsel in favor of a generous fee . . .” F&M Distribs. Inc., 1999
U.S. Dist. LEXIS 11090 at *18. “Society also benefits from the prosecution and
settlement of private antitrust litigation.” In re Cardizem CD, Order No. 49.
“Encouraging qualified counsel to bring inherently difficult and risky but
beneficial class actions like this case benefits society.” Id. at 22. Without the
willingness of DP Plaintiffs’ Counsel to assume the risks inherent in this case (or
in other cases of similar magnitude and complexity), members of the Class would
not have recovered anything, let alone the substantial recovery obtained here.
14
4.
Pg ID 13273
The Value Of Services On An Hourly Basis
DP Plaintiffs’ Counsel expended considerable effort to obtain the
settlements for the benefit of the Class. Courts commonly look to the “lodestar”—
the number of hours expended in advancing the case multiplied by each biller’s
hourly rate — as a “cross-check,” to confirm the reasonableness of a percentage
award. This lodestar analysis is not a precise science, but rather a tool for rough
comparisons among cases. “Because the lodestar is being used merely as a crosscheck, it is unnecessary for the Court to delve into each hour of work that was
performed by counsel to ascertain whether the number of hours reportedly
expended was reasonable.” In re IPO Sec. Litig., 671 F.Supp.2d 467, 506
(S.D.N.Y. 2009).
Class Counsel for the Settlement Class submit that they, together and with
other DP Plaintiffs’ attorneys, spent over 12,000 hours of time directly related to
the successful recovery in this case. This results in a lodestar of $6,462,014.07.
(Fink Decl. ¶ 65) (Exhibit 1). This lodestar represents time spent not only by Class
Counsel for the Settlement Class, Fink + Associates Law and The Miller Law
Firm, P.C., and liaison counsel Wienner and Gould, P.C., but also includes time
expended by law firms that worked at the direction and under the supervision of
Class Counsel for the Settlement Class. (Fink Decl. at ¶ 65). The work performed
by these other firms included essential communications with class members and
15
Pg ID 13274
class representatives, assistance with briefing, and negotiating with the Defendants.
(Fink Decl. at ¶ 66). However, as explained in more detail below, Class Counsel
for the Settlement Class excluded from the lodestar time that, in the judgment of
Class Counsel for the Settlement Class, did not directly contribute a benefit to the
class.
Pursuant to Case Management Order No. 1 [Docket No. 152], it is the
responsibility of Interim Lead Counsel (subsequently appointed Class Counsel for
the Settlement Class (“Class Counsel”))7 to make all work assignments,
periodically collect and review time records, and allocate any fees awarded by the
Court. Class Counsel took their job of managing and monitoring time expended by
other counsel very seriously. They have acted as a gatekeeper on behalf of the
Court and the Class in making work assignments, coordinating work between
firms, and avoiding duplication of effort. As a result, Class Counsel has not
included in the aggregate lodestar time for work that was not performed at the
direction of Class Counsel or which, in Class Counsel’s opinion, did not provide a
direct benefit to the Class. (Fink Decl. at ¶ 67). For example, Class Counsel
7
On November 2, 2009, the Court appointed David H. Fink and The Miller
Law Firm as Interim Lead Counsel for the Direct Purchaser Plaintiffs. (Dkt. 114).
After David Fink left The Miller Law Firm, the Court continued the Order for
Interim Lead Counsel and included Fink + Associates Law. (Dkt. 221, Transcript
of February 24, 2011 Status Conference). Subsequently, on January 9, 2014, the
Court appointed David H. Fink, Fink + Associates Law, and The Miller Law Firm,
P.C. as Class Counsel for the Settlement Class. (Dkt. 460 at ¶ 6).
16
Pg ID 13275
disallowed the submission of time by non-Class Counsel for work performed prior
to the appointment of lead counsel, with the exception of work performed by
certain counsel to negotiate the terms of the critically-important ACPERA
agreement which occurred prior to November 2, 2009, but was necessary for the
early proffer of key information from the Justice Department’s leniency applicant.8
(Fink Decl. at ¶ 67). See, e.g., Packaged Ice Antitrust Litig., 2011 WL 6209188 at
*12 (striking from lodestar unappointed counsel’s hours prior to leadership); In re
Elan Sec. Litig., 385 F.Supp.2d 363, 374 (S.D.N.Y. 2005) (striking from lodestar
unappointed counsel’s hours).9 This alone reduced the total number of hours
included in the lodestar by more than 10,000 hours.
Class Counsel also excluded from the aggregate hours being submitted to the
Court, the time spent in the preparation of this Motion for Attorney Fees. (Fink
Decl. at ¶ 68). Class Counsel also capped rates to be consistent with those charged
by antitrust lawyers in this District. (Fink Decl. at ¶ 69). DP Plaintiffs’ Counsel
have likewise obtained an opinion Rodger Young, a prominent antitrust and
8
Of necessity, prior to this Court’s consideration of interim leadership,
counsel representing Plaintiffs in nearly all of the initial Complaints met and
agreed that a small subset of Plaintiffs’ counsel would negotiate the terms of the
ACPERA agreement, for the benefit of the entire class. That agreement proved
pivotal in obtaining the key information that allowed the filing of a detailed
Complaint which could survive a Twombly challenge.
9
However, Class Counsel has properly included work performed by Interim
Lead Counsel prior to the appointment of Interim Lead Counsel. In re Citigroup
Inc. Securities Litigation, 965 F.Supp.2d 369 (S.D.N.Y. August, 1, 2013).
17
Pg ID 13276
commercial litigator who regularly practices in this District. Mr. Young opined
that the capped rates are reasonable rates charged in this District. (Exhibit 12,
Affidavit of Rodger D. Young). Capping the rates charged reduced the aggregate
lodestar by approximately $500,000. (Fink Decl. at ¶ 69). Class Counsel believe
that the total time and rates they are submitting are reasonable and directly related
to the successful prosecution of the action. (Fink Decl. at ¶ 69).
Although courts in this Circuit generally utilize a percentage-of-the-fund
approach in cases of this type, they also recognize that, if a lodestar method were
employed, it may be appropriate to use a “multiplier,” or enhancement. The
multiplier is the ratio of the awarded fee to counsel’s lodestar. Where used,
“multipliers should compensate counsel for the risk they incurred in bringing a
case in which their compensation was contingent on their success, should
recognize any extraordinary performance by particular counsel and should
encourage the filing of meritorious class actions.” In re Superior Beverage/Glass
Container Consolidated Pretrial, 133 F.R.D. 119, 131 (N.D. Ill. 1990).
Here, a 30 percent fee is reasonable, as it reflects a lodestar multiplier of
only 1.4, which is well within the range of multipliers reviewed in cases in this
District and elsewhere. See, e.g., In re Cardizem CD, Order No. 49 (multiplier of
3.7); In re Lason, Inc. Sec. Litig., No. 99-CV-76079, Order and Final Judgment
(E.D. Mich. Mar. 31, 2003) (Tarnow, J.) (awarding fees that amounted to a 1.8
18
Pg ID 13277
multiplier) (Exhibit 13); Kogan v. AIMCO Fox Chase, L.P., 193 F.R.D. 496, 50304 (E.D. Mich. 2000) (2.49 multiplier); In re Cardinal Health Inc. Securities Litig.,
528 F.Supp.2d 752, 767-68 (S.D. Ohio 2007) (awarding multiplier of 6, and noting
“[m]ost courts agree that the typical lodestar multiplier … ranges from 1.3 to
4.5.”).
5.
The Complexity Of The Litigation
Prosecution of any complex class action presents inherently intricate and
novel issues. However, “an antitrust class action is arguably the most complex
action to prosecute. The legal and factual issues involved are always numerous
and uncertain in outcome.” In re Packaged Ice, 2011 WL 6209188 at *19; see also
In re Linerboard Antitrust Litig., 292 F.Supp.2d 631, 639 (E.D. Pa. 2003) (quoting
cases). “This antitrust litigation, like all litigation of its species, promises to be
extremely complex and time intensive and there is no question that if settlement
fails, the Defendants will mount a strong defense.” Id. at *19. The Sixth Circuit
has held that the specific characteristics of a class action case can govern the
appropriateness of a fee award. Rawlings, 9 F.3d at 516 (finding that the district
court can determine the appropriate method for calculating attorneys’ fees in the
light of the “unique characteristics of class actions”).
This factor supports
awarding the requested fee. The legal and factual issues surrounding this case
19
Pg ID 13278
were extremely complex, as set forth more fully in the Settlement Brief. This
factor strongly favors a 30% fee award.
6.
The Quality Of The Representation
DP Plaintiffs’ Counsel are known leaders in the fields of class actions,
complex litigation, and antitrust litigation. The quality of their representation here
is demonstrated by the substantial benefit achieved for the Class and the efficient,
effective prosecution and resolution of the action. The quality of opposing counsel
is also important when the court evaluates the services rendered by plaintiffs’
counsel. See, e.g., In re Warner Commc’ns Sec. Litig., 618 F.Supp. 735, 749
(S.D.N.Y. 1985) aff’d, 798 F.2d 35 (2d Cir. 1986); Arenson v. Bd. of Trade, 372
F.Supp. 1349, 1351 (N.D. Ill. 1974). Nationally known, prominent, and extremely
capable counsel represented Defendants and vigorously defended this action. The
ability of DP Plaintiffs’ Counsel to obtain a favorable result for the Class in the
face of such formidable opposition further evidences the quality of their work.
Thus, there can be no dispute that all of the factors discussed above weigh in
favor of the fee and expense award requested, and that the Court should grant DP
Plaintiffs’ Counsel’s fee and expense application in its entirety.
20
E.
Pg ID 13279
DP Plaintiffs’ Counsel’s Expenses Are Reasonable And Were
Necessarily Incurred To Achieve The Benefit Obtained
DP Plaintiffs’ Counsel also request reimbursement of expenses incurred in
connection with the prosecution of this litigation. DP Plaintiffs’ Counsel and other
counsel for plaintiffs have incurred expenses in the aggregate amount of
$320,807.26 directly related to the benefit of the Class.
“Expense awards are customary when litigants have created a common fund
for the benefit of a class.” In re Cardizem CD, Order No. 49 at 22 (quoting F&M
Distribs.) The appropriate analysis to apply in deciding which expenses are
compensable in a common fund case of this type is whether the particular costs are
of the type typically billed by attorneys to paying clients in the marketplace. Id.
(citing Synthroid Marketing Litig., 264 F.2d 712, 722 (7th Cir. 2001)); see also
U.S. Football League v. National Football League, 887 F.2d 408, 416 (2d Cir.
1989) (“[W]e have held that attorney’s fee awards include those reasonable out-ofpocket expenses incurred by attorneys and ordinarily charged to their clients.”).
Courts have determined that “reasonable expenses” can extend to a broad range of
costs, including “travel expenses, computer time, and the like.” Hutchinson ex rel.
Julien v. Patrick, 636 F.3d 1, 17 (1st Cir. 2011). The categories of expenses for
which counsel seek reimbursement here are the type of expenses routinely charged
to hourly clients and, therefore, should be reimbursed out of the common fund
because they were necessary to the prosecution of the case.
21
Pg ID 13280
Similar to reviewing time submissions, Class Counsel performed an analysis
of expenses submitted and disallowed many expenses including those related to
computerized legal research (e.g., Westlaw, Lexis), first class airfare, presentation
materials and supplies, and secretarial work. A component of DP Plaintiffs’
Counsel’s expenses is the cost of experts.
DP Plaintiffs’ Counsel retained
economic experts who were retained to review the pricing, input costs, and the
structure of the industry to learn whether those factors were consistent with the
allegations of a price-fixing conspiracy.
These experts provided significant
services on behalf of the Class and their expenses were necessarily incurred for the
successful prosecution of this litigation.
Importantly, the notice sent to class members stated that DP Plaintiffs’
Counsel would seek reimbursement of expenses not to exceed $500,000. As set
forth above, DP Plaintiffs’ Counsel are seeking reimbursement of only
$320,807.26 for expenses.
22
III.
Pg ID 13281
CONCLUSION
For all of the foregoing reasons, DP Plaintiffs’ Counsel respectfully request
that the Court approve DP Plaintiffs’ Counsel’s application for attorney fees and
reimbursement of expenses.
Dated: May 14, 2014
Respectfully Submitted,
/s/ David H. Fink
100 West Long Lake Rd.; Suite 100
Bloomfield Hills, Michigan 48304
Tel: 248.971.2500
Fax: 248.972.3600
dbressack@finkandassociateslaw.com
THE MILLER LAW FIRM, P.C.
E. Powell Miller (P39487)
Casey A. Fry (P72332)
950 W. University Drive, Suite 300
Rochester, MI 48307
(248) 841-2200
www.millerlawpc.com
epm@millerlawpc.com
Class Counsel for the Settlement Class
23
Pg ID 13282
CERTIFICATE OF SERVICE
I hereby certify that on May 14, 2014, I electronically filed the foregoing
paper with the Clerk of the court using the ECF system which will send
notification of such filing to all counsel of record registered for electronic filing.
/s/ David H. Fink
100 West Long Lake Road, Suite111
Bloomfield Hills, MI 48304
(248) 971-2500
1
2:09-md-02042-SFC Doc # 491-1 Filed 05/14/14 Pg 1 of 1
Pg ID 13283
SOUTHERN DIVISION
INDEX OF EXHIBITS
Exhibit 1
Declaration of David H. Fink
Exhibit 2
Declaration of Jennifer M. Keough [of Garden City Group] Regarding
Notice and Claims Administration
Exhibit 3
Cardizem CD Antitrust Litigation Order
Exhibit 4
In Re Packaged Ice Antitrust Litigation Opinion
Exhibit 5
Bd. of Trustees of City of Birmingham Employees Retirement System
v. Comerica Bank Final Order and Judgment
Exhibit 6
In Re Caraco Pharmaceutical Laboratories, Ltd. Securities Litigation
Exhibit 7
In re Delphi Corporation Securities, Derivative & “ERISA”
Litigation
Exhibit 8
In Re General Motors Corp. Securities and Derivative Litigation
Exhibit 9
F&M Distribs. Inc. Sec. Litigation
Exhibit 10 In Re Federal-Mogul Corp. Securities Litigation
Exhibit 11 In re Ethylene Propylene Deine Monomer Antitrust Litigation
Exhibit 12 Affidavit of Rodger D. Young
Exhibit 13 In re Lason, Inc. Sec. Litig.
Exhibit 14 Additional Unpublished Opinions
Pg ID 13284
Pg ID 13285
Pg ID 13286
Pg ID 13287
Pg ID 13288
Pg ID 13289
Pg ID 13290
Pg ID 13291
Pg ID 13292
Pg ID 13293
Pg ID 13294
Pg ID 13295
Pg ID 13296
Pg ID 13297
Pg ID 13298
Pg ID 13299
Pg ID 13300
Pg ID 13301
Pg ID 13302
Pg ID 13303
Pg ID 13304
Pg ID 13305
Pg ID 13306
Pg ID 13307
Pg ID 13308
Pg ID 13309
Pg ID 13310
Pg ID 13311
Pg ID 13312
Pg ID 13313
Pg ID 13314
Pg ID 13315
Pg ID 13316
Pg ID 13317
Pg ID 13318
Pg ID 13319
Pg ID 13320
Pg ID 13321
HONORABLE SEAN F. COX
1
2
3
4
5
6
SOUTHERN DIVISION
7
8
9 IN RE: REFRIGERANT
COMPRESSORS ANTITRUST
10 LITIGATION
MDL No. 2:09-md-02042
)
)
)
)
11
)
)
12 ALL DIRECT PURCHASER
)
ACTIONS
13
)
_______________________________ )
14
DECLARATION OF JENNIFER M.
KEOUGH REGARDING NOTICE AND
CLAIMS ADMINISTRATION
Final Approval Hearing:
June 12, 2014 at 2:00 p.m.
15
16
17
18
19
20
21
22
23
24
25
26
I, JENNIFER M. KEOUGH, declare as follows:
1.
I am the Chief Operating Officer of The Garden City Group, Inc. (“GCG”). The
following statements are based on my personal knowledge and information provided by other GCG
employees working under my supervision and, if called on to do so, I could and would testify
competently thereto. GCG has been providing comprehensive legal administration services for
over 25 years.
2.
GCG has a considerable amount of experience in class action administration and the
development of notice programs. In its over 25 years, our team has served as administrator for
27
28
-1-
DECLARATION OF JENNIFER M. KEOUGH REGARDING NOTICE AND CLAIMS
ADMINISTRATION
Pg ID 13322
over 2,500 cases. In connection with serving as administrator in those cases, we have disseminated
1
2
3
over 700 million emails, handled over 28 million phone calls, processed over 50 million claims,
and distributed over $33 billion in benefits. GCG’s legal notices have appeared in more than 40
4 languages in approximately 170 countries.
5
3.
GCG is serving as the Claims Administrator in the above-captioned litigation (the
6 “Action”) for the purpose of providing notice and claims administration. In this capacity, GCG is
charged with, among other duties: (a) creating and formatting a Claim Form; (b) creating and
7
formatting the Full Notice, Summary Notice for publication in the Wall Street Journal, the
8
Summary Notice for publication for Air Conditioning Heating & Refrigeration News magazine,
9
and the Banner Ad for the website www.ApplianceMagazine.com; (c) establishing and maintaining
10 a toll-free telephone number (1-800-961-8035) dedicated to this Settlement; (d) establishing and
11 maintaining a website (www.CompressorsSettlement.com) dedicated to this Settlement;
12 (e) creating the capability to download a Claim Form from the website; (f) processing Claim
13 Forms; (g) providing weekly reports to Counsel; and (h) providing a declaration attesting to the
completion of the notice process and the ongoing claims administration process to Counsel for
14
filing with the Court.
15
RECEIPT AND HANDLING OF DATA
16
4.
Pursuant to the Order Granting Preliminary Approval of Proposed Class Action
17
Settlement Between Direct Purchaser Class Plaintiffs and the Tecumseh, Embraco, Danfoss and
18
Panasonic Defendants, Authorizing the Dissemination of Notice and Claim Form and Scheduling
19
Final Approval Hearing (“Preliminary Approval Order”), Paragraph 11, the Defendants were
20
required to provide data regarding the names and addresses of Defendants’ customers who directly
21
purchased Compressors from the Defendants during the Settlement Class Period by January 20,
22
2014. GCG received the following data:
23
• On October 31, 2013, GCG received a data file with 302 ct. Embraco customers;
24
• On October 31, 2013, GCG received a data file with 247 ct. Danfoss customers;
25
• On November 6, 2013, GCG received a data file with 18 ct. Panasonic customers; and
26
• On January 21, 2014, GCG received a data file with 452 ct. Tecumseh customers.
27
28
-2-
ADMINISTRATION
Pg ID 13323
1 GCG downloaded and analyzed the electronic data files that contained a total of 1,019 records.
2 Then, GCG established a dedicated database for the records (“Settlement Database”). The records
3 contained the names and addresses of the putative Class Members for all four (4) Defendants.
4 Pursuant to the Preliminary Approval Order, Paragraph 4, the Settlement Class is defined as
5 follows:
All persons or entities (but excluding government entities and Defendants, their
officers, directors and employees, as well as Defendants’ parents, predecessors,
successors, subsidiaries, or affiliates) who purchased Compressors in the United
States, its territories and possessions, directly from any Defendant including Settling
Defendants, or from any of their parents, predecessors, successors, subsidiaries, or
affiliates, at any time during the period from and including February 25, 2005 up to
and including December 31, 2008. Compressors include compressors of less than
one horsepower, excluding compressors used in air conditioners.
6
7
8
9
10
11 Each record in the Settlement Database is identified with a code to designate which Defendant
12 provided the data.
5.
13
GCG then processed all addresses through the National Change of Address
1
14 (“NCOA”) database. GCG analyzed the data and removed duplicative records. There were a total
15 of 1,006 unique records in the Settlement Database.
16
NOTICE TO THE SETTLEMENT CLASS
17
Direct Mail Notice
18
19
20
21
22
23
24
6.
Pursuant to the Preliminary Approval Order, Paragraph 9, entered on January 9,
2014 (Dkt. No. 460), GCG formatted the Notice and Claim Form (“Notice Packet”) and caused
them to be printed. On February 7, 2014, (the “Notice Date”), Notice Packets were mailed, via
first-class U.S. Mail, to a total of 1,006 Class Members. A true and correct copy of the Notice
Packet is attached hereto as Exhibit A. GCG also promptly mailed a copy of the Notice Packet to
any potential Class Member who requested one.
25
1
The NCOA database is the official United States Postal Service technology product, which makes change of address
26 information available to mailers to help reduce undeliverable mailpieces before mail enters the mailstream. This
product is an effective tool to update address changes when a person has completed a change of address form with the
27 Post Office. The address information is maintained on the database for 48 months.
28
-3-
ADMINISTRATION
Pg ID 13324
1
2
Notice by Publication
3
7.
The Preliminary Approval Order, Paragraph 10, required a Summary Notice to be
4 published, on or before February 17, 2014, on one occasion in the national edition of the Wall
5 Street Journal, on one occasion in the magazine Air Conditioning, Heating and Refrigeration
6 News, and on the website www.ApplianceMagazine.com.
7
8.
From February 1, 2014 through March 1, 2014, GCG caused to be published a
8 Banner Ad on the website www.ApllianceMagazine.com which provided a link to the Settlement
9 Website (www.CompressorsSettlement.com). A true and correct copy of the Banner Ad that ran
10 on the ApplianceMagazine.com website is attached hereto as Exhibit B.
11
9.
On February 3, 2014, the Summary Notice, which provided the address of the
12 Settlement Website (www.CompressorsSettlement.com) was published in the magazine Air
13 Conditioning, Heating and Refrigeration News. A true and correct copy of the Summary Notice
14 published in the magazine Air Conditioning, Heating and Refrigeration News is attached hereto as
15 Exhibit C.
16
10.
On February 12, 2014, the Summary Notice, which provided the address of the
17 Settlement Website (www.CompressorsSettlement.com) was published in the national edition of
18 the Wall Street Journal. A true and correct copy of the Summary Notice published in the Wall
19 Street Journal is attached hereto as Exhibit D.
20
21
TOLL-FREE NUMBER
11.
Beginning on February 1, 2014, GCG set up and continues to maintain an
22 automated toll-free telephone number (1-800-961-8035), which Class Members can call and obtain
23 information about the Settlement. The interactive voice response system dedicated to this
24 settlement is accessible 24 hours a day, 7 days a week. GCG has responded to each message
25 promptly, and will continue to accommodate Class Member inquiries. As of May 11, 2014, GCG
26 had received 102 incoming calls to the Call Center.
27
28
-4-
ADMINISTRATION
WEBSITE
1
2
Pg ID 13325
12.
Beginning
on
February
1,
2014,
GCG
set
up
an
official
website,
3 www.CompressorsSettlement.com (the “Settlement Website”). The Settlement Website has been
4 continuously available to the present, and is accessible 24 hours a day, seven days a week. It lists
5 important dates associated with final approval of the Settlements, lists Class Members’ Options,
6 and provides contact information for GCG as the Claims Administrator. There is a tab that posts
7 the Full Notice, another tab where Class Members can download a Claim Form, and the website
8 also posts various court documents, including the Preliminary Approval Order, the Tecumseh
9 Settlement Agreement, the Embraco Settlement Agreement, the Danfoss Settlement Agreement,
10 and the Panasonic Settlement Agreement. Finally, there is a tab that contains Frequently Asked
11 Questions and answers thereto. As of May 11, 2014, GCG had received 634 visits and 1,672 page
12 views of the Settlement Website.
CLAIMS
13
14
13.
Pursuant to the Preliminary Approval Order, Paragraph 16, Class Members who
15 wish to participate in one or more of the Settlement must file a claim postmarked on or before June
16 9, 2014.
17
14.
GCG has been providing weekly reports to counsel concerning the number of Claim
18 Forms received, the number of visits to the website, the number of telephone calls received, the
19 number of requests for exclusion received, the number of objections received, and the number of
20 pieces of Administrative Mail received.
21
22
23
OBJECTIONS
15.
Pursuant to the Preliminary Approval Order, Paragraph 15, any Settlement Class
Member who wished to object to the Settlement was required to inform the Court and the Parties of
24 their intent on or before May 23, 2014. Information regarding how to object to the Settlement was
25 included in the Full Notice, the Summary Notices, and was listed on the Settlement Website. As of
26 May 11, 2014, GCG had not received and is not aware of any objections to the Settlement, timely
or otherwise.
27
28
-5-
ADMINISTRATION
Pg ID 13326
EXCLUSION REQUESTS
1
2
16.
Pursuant to the Preliminary Approval Order, Paragraph 12, any Settlement Class
Member who wished to be excluded from or opt-out of the Settlement was required to mail a letter
3 to GCG requesting to be excluded from the Settlement Class, postmarked by March 24, 2014.
4 Information regarding how to request to be excluded from the Settlement was included in the Full
5 Notice, Summary Notices, and was listed on the Settlement Website. As of May 11, 2014, GCG
has received four (4) timely requests for exclusion. 2 A true and correct list of the Class Members
6
that requested to be excluded from the Settlement is attached hereto as Exhibit E.
7
8
I declare under penalty of perjury that the foregoing is true and correct.
9
Executed this 13th day of May, at Seattle, Washington.
10
11
_________________________
12
Jennifer M. Keough
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2
One of those requests—from Norcold, Inc.—was based upon an apparent misunderstanding of the purpose of an
exclusion. That “request for exclusion” stated that the company did not purchase Compressors from Danfoss and
continued as follows: “Therefore, Norcold, Inc. wishes to be excluded from the Danfoss Settlement.”
-6-
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Ice Antitrust Litigation,Doc
Not Reported
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2011-2 Trade Cases P 77,727
2011 WL 6209188
Only the Westlaw citation is currently available.
United States District Court,
E.D. Michigan,
Southern Division.
In re PACKAGED ICE ANTITRUST LITIGATION.
This Order Relates To: Direct Purchasers Action.
No. 08–MDL–01952.
|
Dec. 13, 2011.
Opinion
OPINION AND ORDER (1) GRANTING DIRECT
PURCHASER PLAINTIFFS' MOTION FOR FINAL
APPROVAL OF PROPOSED SETTLEMENT
WITH ARCTIC GLACIER INCOME FUND,
ARCTIC GLACIER. INC., AND ARCTIC GLACIER
INTERNATIONAL, INC. (DKT. NO. 394); (2)
GRANTING DIRECT PURCHASER PLAINTIFFS'
MOTION FOR APPROVAL OF PROPOSED PLAN
OF DISTRIBUTION OF FUNDS RECEIVED
IN SETTLEMENTS WITH HOME CITY ICE
COMPANY. ARCTIC GLACIER INCOME FUND.
ARCTIC GLACIER, INC., AND ARCTIC GLACIER
INTERNATIONAL, INC. (DKT. NO. 395); and
(3) GRANTING IN PART DIRECT PURCHASER
PLAINTIFFS' COUNSEL'S MOTION FOR AN AWARD
OF ATTORNEYS' FEES AND REIMBURSEMENT OF
LITIGATION COSTS AND EXPENSES (DKT. NO. 396)
PAUL D. BORMAN, District Judge.
*1 This matter is before the Court on Direct Purchaser
Plaintiffs' Motion for Final Approval of Proposed Settlement
with Arctic Glacier Income Fund, Arctic Glacier, Inc., and
Arctic Glacier International, Inc. (Dkt. No. 394), Direct
Purchaser Plaintiffs' Motion for Approval of Proposed Plan
of Distribution of Funds Received in Settlements with Home
City Ice Company, Arctic Glacier Income Fund, Arctic
Glacier, Inc. and Arctic Glacier International, Inc. (Dkt. No.
395) and Direct Purchaser Plaintiffs' Counsel's Motion for an
Award of Attorneys' Fees and Reimbursement of Litigation
Costs and Expenses (Dkt. No. 396). A Final Fairness Hearing
was held on October 28, 2011. For the reasons that follow, the
Court GRANTS the motion for final approval of the Arctic
Glacier settlement, GRANTS the motion for approval of the
proposed plan of distribution of funds received in the Home
City and Arctic Glacier settlements and GRANTS IN PART
the motion for an award of attorneys' fees and expenses.
INTRODUCTION
This action is the lead case in the consolidated class
action In re Packaged Ice Antitrust Litig., No. 08–
MDL–1952 (E.D.Mich.2008). In this multidistrict litigation
involving some 68 consolidated actions, Plaintiffs are
both direct purchasers (retail stores and gas stations who
purchased directly from Defendants) and indirect purchasers
(individuals who purchased from retail stores and gas
stations) of packaged ice from Defendants in the United
States.
This Opinion and Order relates to the Direct Purchaser action,
which alleges that Defendants Reddy Ice Holdings, Inc.
and Reddy Ice Corporation (the “Reddy Ice Defendants”),
Defendants Arctic Glacier Income Fund, Arctic Glacier,
Inc. and Arctic Glacier International, Inc. (collectively the
“Arctic Glacier Defendants”) and Defendant Home City Ice
Company (“Home City”) conspired to allocate customers
and markets throughout the United States, in violation of
Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. The
Direct Purchaser Plaintiffs now move for final approval of
a settlement agreement with the Arctic Glacier Defendants,
for authorization of a plan of distribution of the settlement
funds from the settlement with Arctic Glacier and the prior
settlement with Home City and for an award of attorneys' fees
and reimbursement of expenses. 1 Direct Purchaser Plaintiffs'
litigation against Reddy Ice continues. For the reasons that
follow, the Court approves the settlement with Arctic Glacier,
approves the plan of distribution and approves in part the
requested legal fees and expenses.
I. BACKGROUND
A. The Multidistrict Packaged Ice Litigation
In 2008, the Department of Justice (“DOJ”) executed a
search warrant against Reddy Ice, thereby going public
with an investigation into the packaged ice industry in the
United States. Packaged ice is sold from freezers placed by
manufacturers in retail stores. Multiple civil antitrust actions
were subsequently filed against the Reddy Defendants, the
Arctic Glacier Defendants and Home City. On June 5, 2008,
Pursuant to 28 U.S.C. § 1407, the United States Judicial Panel
on Multidistrict Litigation (“JPML”) transferred all pending
and subsequent related civil actions to this District, and
ordered that they be assigned to this Court for coordinated or
© 2014 Thomson Reuters. No claim to original U.S. Government Works.
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consolidated pretrial proceedings. (Transfer Order, Dkt. No.
1.) A total of 68 cases have been transferred and consolidated
in accordance with the MDL Order, the majority of the
transferred cases being direct purchaser actions. (Transfer
Order, Conditional Transfer Orders 1–6, Dkt. Nos. 1, 9, 47,
70, 85, 356, 384.)
*2 On June 1, 2009, this Court appointed Kohn, Swift &
Graft, P.C. as interim lead counsel and Gurewitz & Raben,
PLLC as liaison counsel for the proposed Direct Purchaser
class. (Dkt. No. 175.) On September 15, 2009, the Direct
Purchaser Plaintiffs filed their Consolidated Amended Class
Action Complaint (“CAC”). (Dkt. No. 198.) On October
30, 2009, the Reddy Ice Defendants and the Arctic Glacier
Defendants filed motions to dismiss the CAC. (Dkt.Nos.202,
203.) On July 1, 2010, this Court issued an Opinion and Order
Denying Defendants Reddy Ice and Arctic Glacier's Motions
to Dismiss, finding that the CAC stated a plausible claim for
relief as to both Reddy Ice and Arctic Glacier under section 1
of the Sherman Antitrust Act. (Dkt. No. 260).
on the proposed AG Settlement Agreement. On July 12 and
July 19, 2011, the Court received revised proposed class
notices, which better explained to class members the potential
impact of the Most Favored Nation Clause in the Home City
Settlement Agreement on the AG Settlement Agreement.
In an Opinion and Order dated July 20, 2011, the
Court preliminarily approved the proposed AG Settlement
Agreement, appointed Kohn, Swift & Graf, P.C. and
Gurewitz & Raben, PLLC (“Class Counsel”) as Class
Counsel for the AG Settlement Class, authorized Direct
Purchaser Plaintiffs to disseminate notice, and set October
28, 2011 as the date for the Final Fairness Hearing on the
proposed AG Settlement Agreement. (Dkt. No. 285.)
B. The Terms of the Settlement Agreement with the
Arctic Glacier Defendants
*3 The principal terms of the AG Settlement Agreement are
as follows:
On November 13, 2009, Direct Purchaser Plaintiffs
filed a motion for preliminary approval of a settlement
agreement dated October 30, 2009 between Direct Purchaser
Plaintiffs and Defendant Home City (“the HC Settlement
Agreement”). On August 26, 2010, the Court held a
preliminary fairness hearing on the proposed HC Settlement
Agreement. In an Opinion and Order dated September 2,
2010, the Court preliminarily approved the proposed HC
Settlement Agreement, authorized Direct Purchaser Plaintiffs
to disseminate notice, and set February 10, 2011 as the date
for the Final Fairness Hearing on the proposed Settlement
Agreement. (Dkt. No. 285.) The Court held a Final Fairness
Hearing on February 10, 2011 and, in an Amended Opinion
and Order dated February 22, 2011, the Court granted final
approval of the HC Settlement Agreement and granted class
counsel's request to use a portion of the HC Settlement funds
for litigation expenses incurred in the continued prosecution
of the action against the remaining non-settling Defendants.
(Dkt. No. 329.)
(1) The Settlement Amount. The AG Settlement Agreement
provides that Arctic Glacier will pay $12.5 million in two
installments. (AG Settlement Agreement ¶ 19.) The first
installment of $2.5 million was paid on August 4, 2011. In the
original Settlement Agreement, the second installment was to
be paid on the later of November 1, 2011 or 30 days after this
Court entered its Final Order approving the AG Settlement
Agreement. By an Amendment dated October 26, 2011,
the Direct Purchaser Plaintiffs and Arctic Glacier agreed to
modify the date on which the second installment payment
would be due to “the later of April 2, 2012 or thirty (30) days
after entry of the final judgment order” approving the AG
Settlement. (Dkt. No. 400.) All other terms and conditions of
the AG Settlement Agreement remain the same. Interest is to
be paid on each installment, with interest accruing 30 days
following the date on which the AG Settlement Agreement
was executed. The Settlement Funds have been, and are to be,
invested in United States Government Treasury securities or
United States Treasury money market funds.
On April 7, 2011, Direct Purchaser Plaintiffs filed a
motion for preliminary approval of a settlement agreement
dated March 30, 2011 between Direct Purchaser Plaintiffs
and the Arctic Glacier Defendants (“the AG Settlement
Agreement”). The motion sought preliminary approval of the
AG Settlement Agreement and approval to disseminate notice
to the proposed AG Settlement Class. (Dkt. No. 351.) On
May 20, 2011, the Court held a preliminary fairness hearing
An issue remains regarding whether Home City will claim
a refund from the amount that it paid in the HC Settlement
Agreement, pursuant to a Most Favored Nation (“MFN”)
clause in the HC Settlement Agreement. Home City and the
Direct Purchaser Plaintiffs continue to discuss whether the
MFN clause has been triggered and, if so, how much of a
refund Home City is due. If a refund is due, this amount will
be withdrawn from the total Settlement Fund and the amount
available to the class reduced accordingly. The potential for
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this reduction in the Settlement Fund was fully disclosed to
potential class members in both the Notice and Summary
Notice of the AG Settlement.
In their efforts to analyze the reasonableness of the AG
Settlement amount, the Direct Purchaser Plaintiffs reviewed
Arctic Glacier's financial information and had discussions
with Arctic Glacier and its counsel regarding Arctic Glacier's
precarious financial condition, its significant debt load and
the extensive control of its lenders over its financial affairs.
Based on their review of Arctic Glacier's financial affairs,
Direct Purchaser Plaintiffs have concluded that the amount
that Arctic Glacier has agreed to pay in settlement represents
the limit that Arctic Glacier could pay given its financial
restraints.
(2) Rights to Reduce the Settlement Amount or Withdraw
From the Settlement. The Settlement Agreement provides that
Arctic Glacier may reduce its settlement payment based on
certain thresholds being crossed regarding the percentage of
purchases of packaged ice from Arctic Glacier during the
class period from customers that elected to be excluded from
the Settlement Class. (AG Settlement Agreement ¶ 20.) If
the dollar amount of purchases by Settlement Class members
requesting exclusion exceeds a certain percentage of either
Arctic Glacier's total sales, or the total sales of the other
Defendants, during the class period, Arctic Glacier has a right
to withdraw from the settlement altogether.
*4 Only 15 potential class members, a minimal number,
have exercised their right to be excluded from the Settlement.
These opt-outs, according to counsel for the Direct Purchaser
Plaintiffs, include a few larger entities but are predominantly
“mom and pop entities.” Three of the larger entities, the Koch
companies, also opted out of the HC Settlement. A list of
those entities who filed timely notices of their intent to optout of the AG Settlement is attached to this Order as Exhibit
A. The percentage of sales represented by those members
seeking exclusion has not triggered any of the provisions of
paragraph 20 of the Settlement Agreement.
(3) Cooperation. In addition to paying the $12.5 million,
Arctic Glacier agreed to cooperate with the Direct Purchaser
Plaintiffs' Counsel in connection with the prosecution of
claims against the remaining Defendant, Reddy Ice. Arctic
Glacier, per the terms of the AG Settlement Agreement,
has already produced to the Direct Purchaser Plaintiffs the
documents that it produced to the Department of Justice.
Arctic Glacier has also arranged a meeting between outside
counsel for Arctic Glacier and Class Counsel. Arctic Glacier
will also provide declarations and testimony as necessary to
establish the admissibility of its documents and to use its best
and good faith efforts to make present and former officers
available for interviews, depositions or trial testimony.
(4) Releases. Upon the occurrence of the Effective Date of
the AG Settlement Agreement, as defined in paragraph 17
of the Settlement Agreement, the named Plaintiffs and the
Settlement Class members (as defined in paragraph 7 of
the Settlement Agreement) release all claims (as defined in
paragraph 18 of the Settlement Agreement) against Arctic
Glacier (and additional “releasees” as defined in paragraph
6 of the Settlement Agreement). Specifically excluded from
the category of “releasees” are the non-settling Reddy
Ice Defendants. (Settlement Agreement ¶ 6.) Specifically
excluded from the claims released are any claims made
by indirect purchasers of Packaged Ice as to their indirect
purchases, or any product defect or similar claim between the
parties relating to Package Ice. (Settlement Agreement ¶ 18.)
(5) Sales by Arctic Glacier Remain in the Case Against
the Reddy Ice Defendants. The proposed AG Settlement
Agreement will not affect the non-settling Defendant's joint
and several liability for the alleged conspiracy. Arctic Glacier
sales will remain in the case as a basis for damage claims
and the non-settling Defendant remains jointly and severally
liable for damages on those sales. (Settlement Agreement ¶
34.)
(6) Stipulation to Class Certification. The parties to the
Settlement Agreement have stipulated that the requirements
of Fed.R.Civ.P. 23(a) and 23(b)(3) have been satisfied and
have stipulated to certification of the following Settlement
Class, which is identical to the class certified by the Court
for purposes of the HC Settlement, for purposes of settlement
with Arctic Glacier:
*5 All purchasers of Packaged
Ice who purchased Packaged Ice
in the United States directly from
any of the Defendants or their
subsidiaries or affiliates (including
all predecessors thereof) at any time
during the period from January 1,
2001 to March 6, 2008. Excluded
from the Settlement class are
governmental entities and Defendants,
including their parents, subsidiaries,
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predecessors or successors,
Defendants' co-conspirators.
and
C. Notice to the Class and Requests for Exclusion and/or
Objections
The Direct Purchaser Plaintiffs, in compliance with the
Notice provisions of this Court's July 20, 2011 Preliminary
Approval Order, mailed 208,862 notices on August 3, 2011
to potential class members whose addresses were provided
by Defendants. (Dkt. No. 393, Notice of Filing Affidavits
of Mailing and Publication, Ex. A.) The firm responsible
for mailing the notices, Smith–Edwards–Dunlap Printing
Company, also published a Summary Notice in the National
Edition of the Wall Street Journal. The Notice, Settlement
Agreement and a copy of the Consolidated Class Action
Complaint were also made available at www.kohnswift.com.
(Dkt. No. 393, Notice of Filing Affidavits of Mailing and
Publication.)
The Court finds that the method, form and content of the
class notice by mail and publication approved by the Court on
July 20, 2011 (Dkt. No. 285, Preliminary Approval Order),
mailed to the Class Members by Smith Edwards–Dunlap
Printing Company first class U.S. Mail on August 3, 2011
and published in the Wall Street Journal on August 11, 2011,
satisfied Rule 23(e)(1) notice requirements. “The contents of
a Rule 23(e) notice are sufficient if they inform the class
members of the nature of the pending action, the general terms
of the settlement, that complete and detailed information is
available from the court files, and that any class member may
appear and be heard at the hearing.” 3 Newberg on Class
Actions, § 8.32 (4th ed.2010). Plaintiffs obtained the names
and addresses of potential Class Members from customer lists
provided by the Defendants, and the Notice explained the
litigation and the terms of the Settlement Agreement in detail
and also provided the Class Members access to the relevant
documents, i.e. the Settlement Agreement and the Complaint,
via the Kohn Swift website. The Notice explained in detail,
and highlighted in bold print, the process for requesting
exclusion and for filing objections with the Court and also
informed Class Members of their right to attend the hearing
upon proper notice to the Court. The Notice explains that
the previously-approved HC Settlement amount of $13.5
million will be combined with the $12.5 million Arctic
Glacier Settlement amount into a single Settlement Fund.
The Notice also informed Class Members of the potential
for the Settlement Amount to decrease in the event that
the HC Settlement Agreement MFN provision is triggered.
The Notice also explained the process for submitting Claims
Forms in great detail, attaching easy-to-follow worksheets to
facilitate the submission of claims.
*6 The Court concludes that the notice was “reasonably
calculated, under all the circumstances, to apprise [the Class
Members] of the pendency of the action and afford them
an opportunity to present their objections.” UAW v. General
Motors Corp., 497 F.3d 615, 631 (6th Cir.2007) (citations
omitted). The Court finds that the Notice fully complied in
all respects with the requirements of Federal Rule of Civil
Procedure 23 and the requirements of due process.
D. The Proposed Plan of Distribution
The Direct Purchaser Plaintiffs seek approval for distribution
of the proceeds of the HC and the AG Settlement Agreements
on a pro rata basis to those members of the Settlement Class
who filed valid and timely claims. The deadline for filing
claims was November 26, 2011. (Dkt. No. 394, Mot. for Final
Approval, Ex. C, Notice and Claim Form.) In connection with
the HC Settlement, the Notice that was sent to Class Members
on November 2, 2010 did not explain the claims process,
but explained to Class Members that if they remained in the
HC Settlement Class, they would receive a second notice
setting forth the process for submitting claims. (Dkt. No. 395,
Mot. for Approval of Plan of Distribution, Ex. A, Home City
Notice.)
In connection with the AG Settlement, the August 3, 2011
Notice that was sent to 208,862 Class Members (largely the
same individuals that received the HC Settlement Agreement
Notice) explained the claims process and attached an easyto-follow claim form for listing all information that would be
necessary to process a valid claim and obtain their share of
the net settlement funds. On December 7, 2011, in response
to a request from the Court, the Direct Purchaser Plaintiffs
informed the Court that “there has been a positive and robust
response to the Notice by the class member purchasers, and
that claims have been submitted setting forth purchases of
over $1.4 billion, constituting approximately 46% of the total
packaged ice sales in the United States by Defendants during
the seven year and two month settlement period.” (Dkt. No.
404, Direct Purchaser Plaintiffs' Report Regarding the Claims
Submission Process, 1.) “Claims have been received from
purchasers across the board, from Fortune 100 companies and
national chains, to “mom and pops” with claims of less than
$100.” Id. By way of example, Direct Purchaser Plaintiffs
note that four claimants filed claims for purchases of $100
million or more; an additional 17 filed claims for purchases
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of $10 million or more, and an additional 93 filed claims
for purchases greater than $ 1 million. At the other end of
the spectrum, 166 claims are for less than $1,000 and the
remaining 2,480 claims are for purchases between $1,000
and $1 million. Id. at 2. Direct Purchaser Plaintiffs state that
collectively, the Defendants' relevant sales during the class
period total approximately $3.1 billion (Home City's sales
were $527 million, Arctic Glacier's were $563 million and
Reddy Ice's were $2 billion) so the amount represented by
the claims filed is approximately 46% of the Defendants'
sales during the class period. The Direct Purchaser Plaintiffs
further informed the Court that as of December 5, 2011, the
claims administrator had received 2,760 timely filed claims
with total claimed purchases of $1,431,127,786.40. Id. at 1–
2. All of the claims are subject to further review by the claims
administrator. Direct Purchaser Plaintiffs' counsel represents
that from his “experience, the amount of purchases in the
filed claims represents a significant percentage of the effected
[sic] market participating in the claims process and proposed
distribution.” Id. at 2.
(internal quotation marks and citations omitted). “Given that
class settlements are favored, the role of the district court is
limited to the extent necessary to reach a reasoned judgment
that the agreement is not the product of fraud or overreaching
by, or collusion between, the negotiating parties, and that the
settlement taken as a whole, is fair, reasonable and adequate
to all concerned.” IUE–CWA, 238 F.R.D. at 594 (internal
quotation marks and citations omitted); Sheick v. Automotive
Component Carrier LLC, No. 09–14429, 2010 WL 4136958,
at *14 (E.D.Mich. Oct. 18, 2010) (“In assessing a proposed
settlement, the district court judge ‘may not substitute his or
her judgment for that of the litigants and their counsel’ and
‘should approve a class settlement if, following a hearing, the
court determines that the settlement ‘is fair, reasonable, and
adequate.’ ”) (quoting IUE–CWA, 238 F.R.D. at 593, 593).
“Settlement embodies a bargained give and take between the
litigants that is presumptively valid about which the Court
should not substitute its judgment for that of the parties.”
Ford, 2006 WL 1984363, at *21 (internal quotation marks
and citation omitted).
II. ANALYSIS
*7 The Sixth Circuit and courts in this district have
recognized that the law favors the settlement of class action
lawsuits. UAW, 497 F.3d at 632 (noting “the federal policy
favoring settlement of class actions”); IUE–CWA v. General
Motors Corp., 238 F.R.D. 583, 593 (E.D.Mich.2006) (noting
“the general federal policy favoring the settlement of class
actions”). This policy applies with equal force whether the
settlement is partial, involving only some of the defendants,
or complete. See In re Beef Ind. Antitrust Litig., 607 F.2d
167, 172 (5th Cir.1979) (finding nothing in the cases or the
commentaries to suggest that approval of a pre-certification
settlement is dependent upon the settlement being complete
as to all parties); Newby v. Enron Corp., 394 F.3d 296 (5th
Cir.2004) (affirming approval of partial settlement where
class certified for settlement purposes only).
A. Final Certification of the AG Settlement Class
In its order preliminarily approving the AG Settlement Class,
the Court conditionally certified the AG Settlement Class,
as defined in the proposed AG Settlement Agreement, and
identical to the class finally approved by the Court for
purposes of the HC Settlement, as follows:
“The evaluation and approval of a class settlement is
committed to the sound discretion of the district court” and the
district court “should approve a class settlement if, following
a hearing, the court determines that the settlement ‘is fair,
reasonable, and adequate.’ “ IUE–CWA, 238 F.R.D. at 593,
594. “In exercising that discretion, the Court may limit the
fairness hearing to whatever is necessary to aid it in reaching
an informed, just and reasoned decision” and “the settlement
or fairness hearing is not to be turned into a trial or rehearsal
for trial on the merits.” Int'l Union v. Ford Motor Co., No. 05–
74730, 2006 WL 1984363, at *21 (E.D.Mich. July 13, 2006)
from the Settlement Class are
predecessors or successors, and
Certification of a class must satisfy the requirements of
Federal Rule of Civil Procedure 23(a) and one of the
subsections of Federal Rule of Civil Procedure 23(b). Ford
Motor, 2006 WL 1984363, at *18 (citing Sprague v. General
Motors Corp., 133 F.3d 388, 397 (6th Cir.1998)). The Court
discussed each of the relevant factors in its prior Opinion and
Order finally approving the HC Settlement Agreement, which
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approved the identical class for purposes of that settlement.
See In re Packaged Ice Antit. Litig., No. 08–MDL–1952,
2011 WL 717519, at *5–6 (E.D.Mich. Feb. 22, 2011). For
the reasons that follow, which are many of the same reasons
discussed with respect to approval of this same class for
purposes of the HC Settlement, the Court finds that the AG
Settlement Class likewise satisfies the Rule 23 requirements.
1. The AG Settlement Class satisfies the requirements of
Rule 23(a).
Federal Rule of Civil Procedure 23(a) provides that class
members may represent a class if the following prerequisites
are satisfied:
(1) the class is so numerous that joinder of all members is
impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class;
(4) the representative parties will fairly and adequately
protect the interests of the class.
Fed.R.Civ.P. 23(a). These four prerequisites are met here:
a. Rule 23(a)(1): The numerosity requirement of Rule 23(a)
(1) is met because the Notice was mailed to 208,862 putative
Class Members. See Ford Motor, 2006 WL 1984363, at *19
(holding that class of over 170,000 satisfied the numerosity
requirement). The Settlement Class is too large for joinder to
be practicable;
b. Rule 23(a)(2): “The requirement of commonality requires
only a common question of law or fact.” Ford Motor, 2006
WL 1984363, at *19 (citing Bittinger v. Tecumseh Prods.
Co., 123 F.3d 877, 884 (6th Cir.1997)). There exist common
questions of law and fact to satisfy Rule 23(a)(2), i.e. whether
Defendants conspired to allocate territories and customers
and whether their unlawful conduct caused packaged ice
prices to be higher than they would have been absent such
illegal behavior and whether the conduct caused injury to the
Class Members;
c. Rule 23(a)(3): The claims of the Class Representatives
are typical of the Settlement Class in satisfaction of Rule
23(a) (3). “If there is a strong similarity of legal theories,
the requirement [of typicality] is met, even if there are
factual distinctions among named and absent class members.”
Ford Motor, 2006 WL 1984363, at *19. Because all Class
Members' claims arise from the same course of conduct, i.e.
a conspiracy to allocate markets in violation of the Sherman
Act, their claims are based on the same legal theory and the
typicality requirement, which is not onerous, is met.
*9 d. Rule 23(a)(4): The named Plaintiffs will fairly
and adequately represent the interests of the Settlement
Class Members in satisfaction of Rule 23(a)(4). “The two
criteria for determining whether class representatives are
adequate are ‘(1) the representatives must have common
interests with unnamed members of the class, and (2) it
must appear that the representatives will vigorously prosecute
the interests of the class through qualified counsel.’ “ Ford
Motor, 2006 WL 1984363, at *19 (quoting Senter v. General
Motors Corp., 532 F.2d 511, 525 (6th Cir.1976)). Plaintiffs'
interests are aligned with the Class Members because they
all possess the same interests and have suffered the same
type of injury and the class is represented by competent
and experienced Class Counsel. There is no indication that
the named Plaintiffs' interests are unjustifiably advanced at
the expense of unnamed Class Members or that the named
Plaintiffs' interests conflict in any way with those of the
Class Members. Lessard v. Allen Park, 372 F.Supp.2d 1007,
1009 (E.D.Mich.2005) (“In determining fairness, a court
should consider whether the interests of counsel and the
named plaintiffs are ‘unjustifiably advanced at the expense of
unnamed class members.’ ”) (quoting Williams v. Vukovich,
720 F.2d 909, 921–923 (6th Cir.1983)). To date, there
has been no request for an incentive award for the named
Plaintiffs and any such request would be subject to further
notice and an opportunity to object by the Class Members.
Rule 23(b)(3).
Finally, the Court concludes that the Settlement Class
satisfies the requirements of Fed.R.Civ.P. 23(b)(3) because
for purposes of this Settlement Agreement “questions of law
or fact common to the members of the class predominate over
any questions affecting only individual members, and ... a
class action is superior to other available methods for the fair
and efficient adjudication of the controversy.” Fed.R.Civ.P.
23(b)(3). “ ‘Predominance is a test readily met in certain
cases alleging ... violations of the antitrust laws, because
proof of the conspiracy is a common question that is thought
to predominate over the other issues of the case.’ “ In re
Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir.2008)
(quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591,
625, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)) (finding that
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allegations of price fixing and market allocation will not vary
among the class members). The allegations of market and
customer allocation will not vary among the class members
and issues regarding the amount of damages do not destroy
predominance. In re Scrap Metal, 527 F.3d at 535–36. The
evidence that will prove a violation as to one member will be
sufficient to prove it as to all—the anticompetitive conduct
is not dependent on the separate conduct of the individual
Class Members. Meijer Inc. v. 3M, No. 04–5871, 2006
WL 2382718, at *8 (E.D.Pa. Aug.14, 2006). Class Counsel
represents that the superiority requirement is met because
no Class Members have exhibited an interest in individually
pursuing separate actions. (Pls. Mot. for Final Approval, 19.)
*10 The Court hereby certifies the proposed AG Settlement
Class. The Court further concludes that the persons and
entities identified on the schedule attached to this Opinion and
Order as Exhibit A, and no others, have timely requested to be
excluded from the AG Settlement Class and accordingly are
not included in or bound by this Opinion and Order. As the
Court noted in its Opinion and Order approving this identical
class for purposes of the HC Settlement, the ability of the nonsettling Defendant to contest certification of a litigation class
will be unimpaired by the certification of an AG Settlementonly class. In re Packaged Ice Antit. Litig., 2011 WL 717519,
at *5–6. The Court's findings in this Final Approval Order will
have no effect on the Court's ruling on any motion to certify
any class in this litigation and no party may cite or refer to the
Court's approval of the AG Settlement Class as persuasive or
binding authority with respect to any motion to certify such
a class.
B. The AG Settlement Agreement is Fair, Reasonable
and Adequate
The Sixth Circuit has identified a number of factors that
are relevant in determining whether a settlement is fair,
reasonable and adequate: “(1) the likelihood of success on the
merits weighed against the amount and form of relief in the
settlement; (2) the complexity, expense and likely duration
of the litigation; (3) the opinions of class counsel and class
representatives; (4) the amount of discovery engaged in by
the parties; (5) the reaction of absent class members; (6) the
risk of fraud or collusion; and (7) the public interest.” UAW,
497 F.3d at 631. “The Court may choose to consider only
those factors that are relevant to the settlement at hand and
may weigh particular factors according to the demands of the
case.” Ford Motor, 2006 WL 1984363, at *22.
Consideration of the factors most relevant to the instant
case leads the Court to conclude that, given the complexity
of the litigation, the multitude of factual and legal hurdles
which remain in this case which is still at an early
stage, and the financial struggles facing the Arctic Glacier
Defendants, the AG Settlement Agreement falls within the
range of reasonableness, fairness and adequacy required
under Fed.R.Civ.P. 23.
1. The likelihood of Plaintiffs' success on the merits
weighed against the amount and form of relief offered in
the settlement supports approval.
In determining whether the relief offered in a settlement
outweighs the plaintiffs' chances of ultimate success on the
merits, the Court “recognizes the uncertainties of law and
fact in any particular case and the concomitant risks and
costs inherent in taking any litigation to completion.” IUE–
CWA, 238 F.R.D. at 594. The Court “is not to decide whether
one side is right or even whether one side has a better of
these arguments.... The question rather is whether the parties
are using settlement to resolve a legitimate legal and factual
dispute.” UAW, 497 F.3d at 632.
*11 The Court concludes that the AG Settlement Agreement
seeks to resolve a legitimate legal and factual dispute. Direct
Purchaser Plaintiffs state that they remain optimistic about
their ultimate chance of success but acknowledge that there
is always a risk that Defendants could prevail with respect
certain legal or factual issues. Plaintiffs point out, and the
Court notes, that the Department of Justice has closed its
investigation of the Packaged Ice industry. See In re Pressure
Sensitive Labelstock Antit. Litig., 584 F.Supp.2d 697, 702
(M.D.Pa.2008) (“Risks of establishing liability and damages
are substantial .... the criminal investigation that likely
instigated this antitrust litigation was concluded without the
issuance of any indictments.”); Rodriguez v. West Publishing
Corp., 563 F.3d 948, 964 (9th Cir.2009) (finding that district
court did not abuse its discretion in considering that “there
were no government coattails for the class to ride”). Plaintiffs
also note that their case alleges a nationwide conspiracy,
while certain Defendants have pled guilty only to antitrust
violations in Southeastern Michigan.
Weighing against these potential weaknesses is the immediate
availability of a $12.5 million cash settlement, which
represents approximately 2.2% of Arctic Glacier's United
States sales of Packaged Ice during the proposed Settlement
Class Period. Like the HC settlement amount, the AG
Settlement Amount, as a percentage of sales allegedly
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affected by Arctic Glacier's conduct, is on par with other
antitrust class action settlements that have been approved
by other courts. See, e.g. In re Labelstock Antit. Litig.,
584 F.Supp.2d at 702 ($8.25 million settlement equal
to 1.5% of settling defendant's sales during the class
period); Meijer, 2006 WL 2382718, at *20 ($28.9 million
settlement represented 2% of settling defendant's sales to
class members); In re Linerboard Antit. Litig ., 321 F.Supp.2d
619, 627 (E.D.Pa.2004) ($34 million and $92.5 million
represented 2.0% and 1.62% of settling defendants' sales); In
re Automotive Refinishing Paint Antit. Litig., MDL No. 1426,
2004 WL 1068807 (E.D.Pa. May 11, 2004) ($48 million
settlement represented 2% of sales).
Also of significant value is the fact that the Settlement
Agreement with Arctic Glacier can serve as a further source
of cooperation against the non-settling Defendant as to the
nationwide conspiracy allegations. See In re Linerboard
Antitrust Litig., 321 F.Supp.2d at 643 (finding that the
provision of such cooperation provides “a substantial benefit
to the classes and strongly militates toward approval of
the Settlement Agreement”); In re Labelstock Antitrust
Litig., 584 F.Supp.2d at 702 (“the benefit of obtaining the
cooperation of the Settling Defendants tends to offset the fact
that they would be able to withstand a larger judgment.”).
“As is true in any case, the proposed Settlement represents
a compromise in which the highest hopes for recovery are
yielded in exchange for certainty and resolution.” Ford, 2006
WL 1984363, at *23 (internal quotation marks and citation
omitted). The Court concludes that consideration of this
factor weighs in favor of final approval of the AG Settlement
Agreement.
2. The complexity, expense and likely duration of the
litigation favor approval.
*12 “[T]he prospect of a trial necessarily involves the
risk that Plaintiffs would obtain little or no recovery.”
In Re Cardizem CD Antitrust Litig., 218 F.R.D. 508,
523 (E.D.Mich.2003). “Experience proves that, no matter
how confident trial counsel may be, they cannot predict
with 100% accuracy a jury's favorable verdict, particularly
in complex antitrust litigation.” Id. Although reluctant to
disclose their analysis of the risks of litigation because
of their pending action against the remaining non-settling
Defendant, Plaintiffs concede that an antitrust litigation of
this scope has undeniable inherent risks, such as whether
the class will be certified and upheld on appeal, whether the
conspiracy as alleged in the Complaint can be established,
whether Plaintiffs will be able to demonstrate class wide
antitrust impact and ultimately whether Plaintiffs will be able
to prove damages. These risks are wholly eliminated with
respect to a recovery from Arctic Glacier and the Settlement
Agreement provides Plaintiffs with a sum certain recovery
and cooperation against the non-settling Defendant which
could bear substantial fruits.
Plaintiffs also point to the fact that there is a significant risk of
the Settlement Class receiving little or nothing if the litigation
continues due to the financial health of all of the Arctic
Glacier entities. Class counsel represents that they have had
substantial discussions with Arctic Glacier and its counsel
regarding the financial health of the Arctic Glacier entities
and have concluded that the precarious financial future of
these entities weighs heavily in favor of settlement at this
point. Direct Purchaser Plaintiffs point out that the risk of
the settlement class receiving little or nothing if the litigation
continues against Arctic Glacier is an important consideration
favoring settlement. Arctic Glacier remains debt laden and its
share price is down to $.70 cdn as of September 27, 2011,
down from $11.69 on March 6, 2008. (Pls.' Mot. 12 n. 5.)
The Court concludes that this factor weighs in favor of
final approval, given the real possibility that Plaintiffs could
ultimately be left with nothing at all in recovery from Arctic
Glacier. Sheick, 2010 WL 4136958, at *18 (finding that the
potential that a full blown trial might leave plaintiffs with
“absolutely nothing” was a significant factor favoring final
approval).
3. The opinions of class counsel and class
representatives.
The Court appointed Kohn, Swift & Graf, P.C. as Interim
Lead counsel and Gurewitz & Raben, PLLC as interim liaison
counsel after thorough review of their credentials and abilities
which are discussed in greater detail in the Court's June 1,
2009 Opinion and Order Appointing Interim Class Counsel.
(Dkt. No. 175.) Class Counsel's judgment that settlement is in
the best interests of the class “is entitled to significant weight,
and supports the fairness of the class settlement.” Sheick,
2010 WL 4136958, at *18 (citation omitted). Class Counsel
represents to the Court that they have negotiated this deal with
Arctic Glacier at arm's length over many months, that they
have met with Arctic Glacier's top executives to discuss the
financial health of the Arctic Glacier entities and that Arctic
Glacier rejected many offers before agreeing to the terms of
the instant Settlement Agreement. Class Counsel believes that
the AG Settlement Agreement constitutes an excellent result.
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The Court concludes that this factor weighs in favor of final
approval of the AG Settlement Agreement.
4. The amount of discovery conducted to date in the
multi-district litigation.
*13 As did the HC Settlement Agreement, the Settlement
Agreement with Arctic Glacier comes at what is still a
relatively early stage of this multi-district antitrust litigation,
before class certification and before the initiation of discovery
in earnest. While the parties have proceeded with document
discovery, written discovery and depositions were stayed
by the Court pending class certification. (Dkt. No. 296,
Case Management Order No. 2.) However, as the Court
noted in its Opinion and Order preliminarily approving the
HC Settlement, “the contours of this litigation are not a
mystery and are informed by government investigations,
internal corporate investigations that have been made public,
state attorney general investigations, the related securities
and whistleblower cases and importantly Plaintiffs' counsels'
discussions with Home City's counsel in the course of their
arms length negotiations.” In re Packaged Ice Antitrust Litig.,
No. 08–MDL–1952, 2010 WL 3070161, at *6 (E.D.Mich.
Aug. 2, 2010) (quoting Newby v. Enron Corp., 394 F.3d 296,
306 (6th Cir.2004) (“[T]he absence of formal discovery is not
an obstacle [to settlement approval] so long as the parties and
the Court have adequate information in order to evaluate the
relative position of the parties.”)). See also Sheick, 2010 WL
4136958, at *19 n. 3 (noting that “courts do not require formal
discovery so long as the parties have adequate information
in order to evaluate the relative positions.”) (quoting Newby,
394 F.3d at 306 (“Formal discovery [is not] a necessary ticket
to the bargaining table”)).
Plaintiffs' Counsel has been provided information by Arctic
Glacier's attorneys, and has met with top executives at
Arctic Glacier, in the process of negotiating the AG
Settlement Agreement, which lead counsel to conclude that
this settlement is in the best interests of the settlement
class. Particularly where, as here, there is the potential for a
significant benefit to the class in the form of cooperation on
the part of the settling Defendant, the absence of extensive
discovery does not weigh against final approval of the AG
Settlement Agreement.
5. The reaction of absent Class Members.
Plaintiffs propose that the combined HC and AG Settlement
Funds will be distributed among the Settlement Class
Members pro-rata, based on the dollar amount of their
purchases of Packaged Ice during the Settlement Class
Period. The Notice and Claim Forms that were sent
to potential Class Members on August 3, 2011 request
information detailing purchases made by Class Members who
elect to file a claim for their portion of the Settlement Fund.
The reaction of the Settlement Class members weighs in favor
of final approval. Only 15 of the 208,862 AG Settlement Class
Members who were sent Notice have requested exclusion
and, as with the HC Settlement, none of the AG Settlement
Class Members has filed an objection. According to Class
Counsel, the opt-out percentage is “minuscule.” (Pls.' Mot.
14.) “[U]nanimous approval of the proposed settlement [ ]
by the class members is entitled to nearly dispositive weight
in the court's evaluation of the proposed settlement.” In re
Linerboard, 321 F.Supp.2d at 629.
*14 Further, the claims response rate, representing 46% of
Defendants' total sales of packaged ice in the United States
during the relevant class period, suggests good participation
and is a positive indication as to the favorable reaction of
absent class members. Although the number of responses
filed represents just under 1 % of the total number of Notices
mailed, this ratio is not dispositive and is frequently less
than 5%. See Touhey v. United States, No. EDCV 08–01418,
2011 WL 3179036, at *7–8 (C.D.Cal. July 25, 2011) (finding
a 2% response rate acceptable–38 responses out of 1,875
notices mailed—where there were no objections and the
overall recovery was fair and reasonable); In re Cardizem,
218 F.R.D. at 526 (finding favorable class reactions in a 6.9%
response rate (1800 proofs of claim out of 26,000 notices
sent) and a 9% response rate (37,000 proofs of claim out of
400,000+ notices sent); In re New Motor Vehicles Canadian
Export Antit. Litig., MDL No. 1532, 2011 WL 1398485, at
*3 (D.Maine April 13, 2011) (finding favorable class reaction
in a 3.9% response rate (438,169 claims out of 11.3 million
eligible claimants). As the court recognized in In re Serzone
Pdcts. Liability Action, 231 F.R.D. 221 (S.D.W.Va.2005),
many factors affect response rates and this ratio should not be
given great significance:
Objectors also assert that because the settlement class could
have potentially included millions of Class Members,
and only 6,524 have “shown their hands” to be included
in the class by filing an inventory form, the notice is
inadequate. However, many factors contribute to the claims
response rate. See, e.g, Zimmer Paper Prod., Inc. v. Berger
& Montague, P.C., 758 F.2d 86, 92–93 (3d Cir.1985)
(holding that where defendant engaged in customary and
court approved notice procedure, the response rate was
not determinative of the adequacy of the class notice.);
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3 Alba Conte & Herbert Newberg, Newberg on Class
Actions § 8.45 (4th ed. 2002) (“Claims response levels
will tend to vary with the circumstances, types of class
notices employed, and size of individual claims involved
in each case.”).... [T]he adequacy of notice is measured by
whether notice reached Class Members and gave them an
opportunity to participate, not by actual participation.
231 F.R.D. at 235–36. In this case, few class members have
elected to be excluded, no objections have been filed and
those claimants responding represent nearly 50% of the total
relevant sales. These facts speak strongly to the positive
reaction of affected class members. Consideration of this
factor weighs in favor of approval of the AG Settlement.
6. The risk of fraud or collusion.
“Courts respect the integrity of counsel and presume the
absence of fraud or collusion in negotiating the settlement,
unless evidence to the contrary is offered.” Ford, 2006 WL
1984363, at *26. There is no evidence in this case of any
collusion and Kohn Swift on the one hand and Arctic Glacier's
counsel on the other can be presumed to have acted in good
faith. This factor weighs in favor of final approval.
7. The Settlement Agreement is consistent with the
public interest.
*15 “[T]here is a strong public interest in encouraging
settlement of complex litigation and class action suits
because they are ‘notoriously difficult and unpredictable’ and
settlement conserves judicial resources.” In re Cardizem, 218
F.R.D. at 530. There do not appear to the Court to be any
countervailing public interests that would suggest that the
Court should disapprove the AG Settlement Agreement and,
significantly, no one has come forward to suggest one to the
Court. This factor weighs in favor of final approval.
In sum, having considered all of the relevant factors, each
of which weighs in favor of final approval, the Court
concludes that the proposed AG Settlement Agreement is fair,
reasonable and adequate and merits Final Approval.
C. The Proposed Plan of Distribution is Reasonable
of the combined HC and AG Settlement amounts, plus
accrued interest and less notice and claims administration
costs and any amounts approved by the Court for attorneys'
fees and reimbursement of expenses (the “Net Settlement
Fund”) on a pro rata basis, each claimants share calculated
based on the ratio that the claimants' total purchases of
Packaged Ice from any of the Defendants bears to the total
purchases of all Settlement Class Members' purchases during
the Settlement Class period, to class members who have
submitted timely and valid claim forms. “ ‘Approval of a plan
of allocation of a settlement fund in a class action is governed
by the same standards of review applicable to approval of
the settlement as a whole; the distribution plan must be fair,
reasonable and adequate.’ “ Meijer, 2006 WL 2382718, at*17
(quoting In re Ikon Office Solutions Sec. Litig., 194 F.R.D.
166, 184(E.D.Pa.2000)). “ ‘Courts generally consider plans of
allocation that reimburse class members based on the type and
extent of their injuries to be reasonable.’ “ Id. (quoting In re
Aetna, Inc., No. Civ. A. MDL 1219, 2001 WL 20928, at *12
(E.D.Pa. Jan.4, 2001)). See also In re Cardizem, 218 F.R.D.
at 531 (approving a plan as fair and reasonable that adopted
a pro rata method for calculating each class member's share
of the settlement fund).
Direct Purchaser Plaintiffs submit that a pro rata distribution
is fair and reasonable here because it is consistent with
the allegations that Defendants' anticompetitive conduct
enabled them to charge higher prices to the Direct Purchaser
Plaintiffs than they would have been able to charge absent the
agreement to allocate territories, each class member having
been charged an increased price with damages suffered in
proportion to their share of purchases. “Typically, a class
recovery in antitrust or securities suits will divide the common
fund on a pro rata basis among all who timely file eligible
claims, thus leaving no unclaimed funds.” 3 Newberg on
Class Actions, § 8:45 (4th ed.2011).
The Direct Purchaser Plaintiffs direct the Court to several
comparable antitrust cases where the pro rata distribution
has been employed. In In re Brand Name Prescription Drugs
Antit. Litig., No. 94 C 897, 1999 WL 639173 (N.D.Ill.
Aug.17, 1999) the court approved a pro rata distribution
in a case involving class member pharmacies of all sizes,
ranging from small, independent pharmacies to large chain
pharmacies, including CVS, Walgreens and Walmart:
*16 Of the distribution methods
proposed, we think the pro rata
or proportional method is the most
appropriate here. The Class Plaintiffs
alleged that they paid inflated prices
for brand name prescription drugs.
Assuming the truth of this allegation,
for purposes of distribution only,
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each class member's damages are
in direct proportion to the amount
of brand name prescription drugs
each purchased. Each class member,
therefore, is entitled to damages
measured as follows: its purchases of
brand name prescription drugs as a
percentage of all class members' brand
name prescription drug purchases for
the relevant time period. We note
that courts have utilized the pro
rata distribution method in several
prior price-fixing class actions. See,
e.g., In re Airline Ticket Commission
Antitrust Litig., 953 F.Supp. 280,
284–85 (D.Minn.1997) (proposed pro
rata distribution plan was “costeffective, simple and fundamentally
fair.”); In re Corrugated Container
1129 (S.D.Tex.1982) (approval of
class action settlement that provided
for pro rata distribution based upon
valid claims of allowable purchases),
aff'd, 687 F.2d 52 (5th Cir.1982)....
We think this method will provide the
most accurate measure of the damages
suffered by each class member and, for
this reason, we endorse the pro rata
distribution method.
1999 WL 639173, at *4. See also In re Plastic Additives Antit.
Litig., No. 03–cv–2038, MDL No. 1684 (E.D.Pa. Feb. 10,
2009) (distributing $26,368,000 from a settlement fund pro
rata among 175 approved claimants, to the extent of their
allowed purchases).
The Court also notes that at the Final Fairness hearing,
counsel for the Direct Purchaser Plaintiffs informed the Court
that those filing claims will have a further opportunity to
object to the final calculation of their share of the settlement
proceeds at the conclusion of the claims administration
process. Additionally, counsel for the Direct Purchaser
Plaintiffs indicated to the Court that before any “checks
are cut” from the Settlement Fund, Plaintiffs will file a
supplemental submission to the Court indicating the final
disposition. See Lessard, 422 F.Supp.2d at 790 (proposed
final distribution list submitted to court, in camera to protect
the privacy of the claimants, for approval prior to distribution
of settlement funds).
The Court concludes that the pro rata plan of distribution is
fair, reasonable and adequate.
D. The Request for Attorneys' Fees and Reimbursement
of Expenses is Largely Reasonable
An award of attorneys' fees in common fund cases need
only be “reasonable under the circumstances.” Rawlings
v. Prudential–Bache Properties, Inc., 9 F.3d 513,516 (6th
Cir.1993). The Court must consider and discuss the relevant
factors that determine reasonableness, which include: ‘ “(1)
the value of the benefit rendered to the plaintiff class; (2)
the value of the services on an hourly basis; (3) whether
the services were undertaken on a contingent fee basis; (4)
society's stake in rewarding attorneys who produce such
benefits in order to maintain an incentive to others; (5) the
complexity of the litigation; and (6) the professional skill and
standing of counsel involved on both sides.’ “ Moulton v.
United States Steel Corp., 581 F.3d 344, 352 (6th Cir.2009)
(holding that a district court's award of attorneys' fees in
a common fund case need only be reasonable under the
circumstances but remanding for an on-the-record discussion
of these factors) (quoting Bowling v. Pfizer, Inc., 102 F.3d
777, 780 (6th Cir.1996)).
*17 The Sixth Circuit permits calculation of attorneys' fees
under either the lodestar method (multiplying the number of
hours spent on the litigation by certain attorneys by their
hourly rate) or the percentage of the fund method (counsel
receive a set percentage of the total settlement fund). In
weighing the benefits and shortcomings of each method, the
Sixth Circuit in Rawlings concluded: “For these reasons, it is
necessary that district courts be permitted to select the more
appropriate method for calculating attorney's fees in light of
the unique characteristics of class actions in general, and of
the unique circumstances of the actual cases before them.”
9 F.3d at 516. The Sixth Circuit has observed that “[t]he
percentage of the fund method has a number of advantages; it
is easy to calculate; it establishes reasonable expectations on
the part of plaintiffs' attorneys as to their expected recovery;
and it encourages early settlement, which avoids protracted
litigation.” Rawlings, 9 F.3d at 516.
The Direct Purchaser Plaintiffs employ the percentage of
the fund method, but offer the lodestar calculation as a
check on the reasonableness of their request. They request
an award of $6.9 million, which represents between 26.5%
to 29% (depending on the resolution of the Home City MFN
dispute—the maximum amount of the refund if due will
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be $2,000,000 and the fee award will remain a set $6.9
million regardless of the resolution of the dispute—thus the
variance in the percentage of 26.5% to 29%) of the $26
million settlement fund. The fee percentage is applied to the
settlement fund before the separate award of litigation costs
and expenses are deducted from the fund. See In re Cardizem,
218 F.R.D. at 531–35 (attorneys' fees awarded based on the
gross settlement); In re Delphi Corp. Sec. Litig., 248 F.R.D.
483, 505 (E.D.Mich.2008) (awarding attorneys' fees based on
gross settlement fund).
Direct Purchaser Plaintiffs submit that this percentage, with
or without the MFN refund, is less than the 30% figure
set forth in the Notices to the Class and is also in the
range of awards made in recent similar antitrust cases.
See In re Foundry Resins Antit. Litig., No. 04–mdl–1638
(S.D.Ohio March 31, 2008) (awarding 33 #% of a $14.1
million settlement); In re Automotive Refinishing Paint Antit.
Litig., MDL No. 1426, 2008 WL 63269 (E.D.Pa. Jan.3, 2008)
(awarding 32% of a $39 million settlement). See Pls. Mot.,
Dkt. No. 396, pp. 11–13 (collecting multiple cases awarding
fees in the range of 30%).
Of the factors recognized by the Sixth Circuit as relevant to
a determination of the reasonableness of a fee request, all
fully support the requested award in the instant case. The
value of the benefit to the class members appears substantial.
Direct Purchaser Plaintiffs point out that the Settlement Fund
of $26 million amounts to 2.5% of Home City's and 2.2%
of Arctic Glacier's sales in the United States, which class
counsel considers an “excellent recovery .” As the Court
noted in its Order approving the HC Settlement, several
cases support the claim that a percentage of total sales in the
neighborhood of 2.0% is generally accepted as an excellent
result when measuring the total amount of the settlement. In
this regard, clearly class counsel has obtained a good result for
the settlement class. Additionally, it appears that nearly 50%
of the total affected sales are represented by the claims that
have been filed by class members, further indicating that the
settlement funds will reach a significant portion of affected
class members.
*18 Regarding the value of the services on an hourly basis,
the Direct Purchaser Plaintiffs assert that a lodestar crosscheck confirms that the $6.9 million fee request is reasonable.
Direct Purchaser Plaintiffs attach to their fee motion several
affidavits from the numerous attorneys that have worked
on the case. In total, counsel collectively have expended
10,083 hours since June 1, 2009. Applying the historical rates
charged by counsel (lead counsel placed a cap of $375 per
hour spent on document review and coding) to the hours
expended yields a “lodestar” figure of $4.54 million. This
does not include amounts that Lead Counsel expended before
their appointment or since August 31, 2011. The $6.9 million
fee request then represents a multiplier of 1.5% applied to the
lodestar figure. See In re Cardinal Health Inc. Sec. Litig., 528
F.Supp.2d 752, 767–68 (S.D.Ohio 2007) (“Most courts agree
that the typical lodestar multiplier” in a large class action
“ranges from 1.3 to 4.5.”); In re Cardizem, 218 F.R.D. at
533 (approving a lodestar multiplier of approximately 1.2%
as “both reasonable and well within the range of multipliers
awarded by courts in complex cases such as this”).
Although the Court agrees that the 1.5% multiplier applied to
the lodestar figure is within the range of multipliers applied by
other courts in similarly complex cases, the Court is troubled
by one particular category of attorney's fees for which Lead
Counsel seeks to recover. Although Lead Counsel state that
they have excluded from the total request those hours that
Lead Counsel expended prior to their appointment by the
Court on June 1, 2009, the award request does include
amounts for time expended by other counsel prior to the
appointment of Kohn, Swift as Lead Counsel. At the hearing
on this matter, Mr. Kohn explained to the Court that included
in the total proposed fee award are requests submitted by two
firms, Boies, Schiller & Flexner, LLP and Spector Roseman
Kodroff & Willis, P.C., both of whom competed with Kohn
Swift to be appointed as Lead Counsel, for time spent by those
firms before this Court appointed Kohn Swift lead counsel
for the Direct Purchaser Plaintiffs. These amounts were not
expended at Kohn Swift's request or direction on behalf of the
Settlement Class. The Court feels that amounts included in
the fee request for services provided by these firms, for hours
spent and expenses incurred prior to the time that the Court
appointed Kohn, Swift as lead counsel, are not appropriately
included in the fee award. This would include the request for
$260,363.50 in fees charged by Boies, Schiller (Dkt. No. 396,
Ex. A–5) and the request for $160,905.00 in fees charged by
Spector Roseman (Dkt. No. 396, Ex. A–19). Accordingly, the
Court will reduce the overall fee request of $6.9 million by
$421,268.50, which represents the total amount requested on
behalf of these two firms, and will approve a total fee award of
$6,478,731.50. This in no way reflects a diminished respect
for the excellent work that the Court feels Lead Counsel have
performed in this case and the good result that they have
achieved for the class members.
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*19 As to the risk of non-payment, it appears from the
Direct Purchaser Plaintiffs' brief that counsel has undertaken
this case on a contingency fee basis. Attorneys who take on
such a massive task with a significant risk of nonpayment
(all the more so, Lead Counsel suggests, since the DOJ
has decided not to seek further indictments in the matter)
should be compensated “both for services rendered and for
the risk of loss or nonpayment assumed by accepting and
prosecuting the case.” In re Automotive Refinishing, 2008 WL
63269, at *5 (finding that “the risk of nonpayment is even
higher when a defendant's prima facie liability has not been
established by the government in a criminal action”) (citing
In re Linerboard, 2004 WL 1221350).
There were no objections to the fee request of 30% that was
disclosed in the Notice to settlement class members and there
is no question as to the skill and efficiency of class counsel—
both the Kohn Swift and Gurewitz firms have handled matters
with extreme professionalism, expediency and competency
and the Court has no hesitation concluding that this factor
weighs in favor of approving the fee request. This antitrust
litigation, like all litigation of its species, promises to be
extremely complex and time intensive and there is no question
that if settlement fails, the Defendants will mount a strong
defense. See In re Cardizem, 292 F.Supp.2d at 639 (“An
antitrust class action is arguably the most complex action to
prosecute. The legal and factual issues involved are always
numerous and uncertain in outcome.”) As to the amount
of time expended on the case, it is significant. Counsel
represent that collectively they have spent 10,083 hours on
this litigation since the Court appointed Kohn Swift lead
counsel on June 1, 2009.
Importantly, the requested award of close to 30% appears
to be a fairly well-accepted ratio in cases of this type
and generally in complex class actions. See In re Foundry
Resins Antit. Litig., No. 04–MDL–1638 (S.D.Ohio March
31, 2008) (Order attached to Plaintiffs' Mot. for Award of
Fees, Ex. B, awarding 33#% of $14.1 million settlement);
In re Automotive Refinishing, 2008 WL 63269 (awarding
32% of a $39 million settlement); Disposaable Contact
Lens Litig., MDL No. 1030 (M.D.Fla.2001) (approving
fees of 31.5% of a $92 million settlement for a total
of $29 million in attorneys' fees) (Order attached to Pls.'
Fee Mot. Ex. E); In re Polypropylene Carpet Antit. Litig.,
MDL No. 1075 (N.D.Ga.2001) (approving award of fees of
331/3% of a $37.7 million settlement) (Order attached to
Pls.' Fee Mot. Ex. F); Thacker v. Chesapeake Appalachia,
L.L.C., 695 F.Supp.2d 521, 528 (E.D.Ky.2010) (“Using
the percentage approach, courts in this jurisdiction and
beyond have regularly determined that 30% fee awards are
reasonable.”); Alba Conte & Herbert Newberg, Newberg on
Class Actions (4th ed. 2002) (“Empirical studies show that,
regardless whether the percentage method or the lodestar
method is used, fee awards in class actions average around
one-third of the recovery.”)
*20 On October 26, 2011, as discussed above, counsel for
the Direct Purchaser Plaintiffs and Arctic Glacier executed an
amendment to paragraph 19 of the AG Settlement Agreement,
giving Arctic Glacier an extension of time, until the later
of April 2, 2012 or 30 days following this Court's final
approval of the AG Settlement, to make its second installment
payment of $10 million dollars into the Settlement Fund.
Also on October 26, 2011, consistent with this amendment,
Direct Purchaser Plaintiffs submitted a revised proposed
order on the fee request clarifying that, in the event the Court
awards fees, any disbursement of fees would be limited to
the proportionate amount of funds paid into the Settlement
Fund—Lead Counsel would be permitted to disburse from
the $16 million paid into the Settlement Fund ($13.5 from
Home City and $2.5 from Arctic Glacier) 66.6% of the fees
approved by the Court with the remainder to be disbursed only
when Arctic Glacier makes its subsequent second installment
payment under the AG Settlement Agreement on the later of
April 2, 2012 or 30 days following this Court's entry of a
final order approving the AG Settlement. Accordingly, the
Court approves at this time the payment of 66.6% of the
attorneys' fee award approved by the Court, i.e. as adjusted
by the Court from $6.9 million to $6,478,731.50, from the
$16 million that has been paid into the Settlement Fund, with
the remainder to be disbursed upon the payment by Arctic
Glacier under the Settlement Agreement as amended of the
additional settlement amount. The Court will aggregate the
amount of fees, leaving the specific allocation among the
various contributing counsel to Lead Counsel.
E. The Request for Reimbursement of Litigation
Expenses
Finally, Direct Purchaser Plaintiffs request reimbursement
of litigation expenses in the amount of $150,000 to cover
amounts expended out-of-pocket in the prosecution of the
case by the participating law firms and in the settlement
process. This amount is separate from the funds in the
amount of $750,000 that this Court approved for the
purposes of covering future litigation expenses against the
remaining Defendant(s). Direct Purchaser Plaintiffs have
twice received reimbursement from that $750,000 fund, for
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a total expenditure thus far of $240,786.52. At the Final
Fairness hearing, counsel for the Direct Purchaser Plaintiffs
explained to the Court that the request for reimbursement
of $150,000 in litigation expenses is for amounts incurred
prior to the time that the Court authorized disbursements up
to $750,000 from the HC Settlement Fund. The Court will
approve reimbursement of $150,000 in expenses, minus the
$32,091.00 in expenses submitted by the Boies Schiller firm
for work performed prior to the date on which this Court
appointed Kohn Swift lead counsel for the Direct Purchaser
Plaintiffs.
IV. CONCLUSION
The Court:
(1) GRANTS the motion for final approval of the AG
Settlement Agreement and enters Final Judgment as to Arctic
Glacier as set forth below;
*21 (2) GRANTS the motion for approval of the plan of
distribution and authorizes Lead Counsel to distribute the
proceeds of the settlements with Home City Ice Company and
Arctic Glacier on a pro rata basis to those members of the
Settlement Class who timely file a Claim Form, as described
in the Notice of Settlement with Arctic Glacier that went
to all members of the Settlement Class on August 3, 2011,
subject to submission to the Court, in camera, of the final
disbursement plan;
(3) GRANTS IN PART the motion for an award of fees
and expenses, awarding attorneys' fees in the amount of
$6,478,731.50 from the Settlement Funds obtained in the
settlements with Home City and Arctic Glacier, plus accrued
interest. The Court finds that the fee is fair and reasonable
under the percentage of the recovery method of analyzing
attorneys' fees award in common fund class actions, with the
caveat that the lodestar check compels the Court to decrease
the award by amounts incurred by outside firms before the
date on which the Court appointed Kohn Swift lead counsel.
The attorneys' fees approved herein may be disbursed on
a proportional basis from the Settlement Funds that have
been paid by Home City and Arctic Glacier. Accordingly,
Lead Counsel may disburse from the $16 million paid to the
Settlement Fund from Home City ($13.5 million) and Arctic
Glacier ($2.5 million) a total of 66 .6% of the attorneys' fees
awarded herein, with the remainder to be disbursed upon the
payment by Arctic Glacier under the Amended Settlement
Agreement of the additional AG Settlement Amount. Lead
counsel shall be responsible for allocating the attorneys' fees
awarded; and
(4) GRANTS IN PART the motion for reimbursement of
litigation costs and expenses, approving the payment of
$117,909.00 from the Settlement Fund to Plaintiffs' counsel.
Lead Counsel shall be responsible for allocating the expense
reimbursement.
IT IS SO ORDERED.
Rule 54(b) Final Order and Judgment as to
Arctic Glacier Income Fund, Arctic Glacier
Inc. and Arctic Glacier International, Inc.
The Court, having considered Plaintiffs' Motion for Final
Approval of Class Action Settlement with Defendants Arctic
Glacier Income Fund, Arctic Glacier Inc. and Arctic Glacier
International, Inc. (“Arctic Glacier”) and having held a final
Fairness Hearing on October 28, 2011, and for the reasons
stated more fully in the preceding Opinion and Order, IT IS
ORDERED THAT:
1. The Court has jurisdiction over the subject matter of this
action.
2. Terms used in this Final Order and Judgment that are
defined in the Settlement Agreement between the Plaintiffs
and the Settlement Class on the one hand and Arctic
Glacier on the other dated March 30, 2011, as amended on
October 26, 2011, unless otherwise defined herein, have the
same meanings in this Final Order and Judgment as in the
3. The Court finds, as more thoroughly discussed in the
preceding Opinion, that the Settlement Agreement was
attained following an extensive investigation of the facts
and assessment of damages. It resulted from vigorous arm'slength negotiations which were undertaken in good faith by
counsel with significant experience litigating antitrust class
actions.
*22 4. The Court finds, as more thoroughly discussed in
the preceding Opinion, that due and adequate notice was
provided pursuant to Rule 23 of the Federal Rules of Civil
Procedure to all members of the Settlement Class certified
in this Final Order and Judgment. The Notice advised the
proposed Settlement Class Members of the pendency of
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this action, the Settlement Agreement with Home City, the
proposed Settlement Agreement with Arctic Glacier, the
possibility of the triggering of the Most Favored Nation
provision of the Home City Settlement Agreement and the
claims filing process. The Notice provided was the best notice
practicable under the circumstances and included individual
notice by first class mail to all members of the Settlement
Class who could be identified through reasonable effort as
well as notice published in the national edition of the Wall
Street Journal and on the Internet. The Notice fully complied
in all respects with the requirements of Federal Rule of Civil
Procedure 23.
5. The Court finds that notice of the Settlement Agreement
was properly provided to all persons entitled to receive such
notice, including the federal and state attorneys general, in
full compliance with the Class Action Fairness Act.
6. The Court certifies the following Settlement Class (the
“Settlement Class”):
All purchasers of Packaged Ice
who purchased Packaged Ice in
the United States directly from
all predecessors thereof) at any
time during the period from
January 1, 2001 to March 6,
2008. Excluded from the Settlement
Class are governmental entities
and Defendants, including their
parents, subsidiaries, predecessors
or successors, and Defendants' coconspirators.
7. The Court finds, as discussed more thoroughly in the
preceding Opinion, that certification of the Settlement Class
is appropriate because:
a. The Settlement Class is so numerous that joinder of all
members is impracticable, satisfying the requirement of
Rule 23(a) (1);
b. There are questions of law or fact common to the
Settlement Class, satisfying the requirement of Rule
23(a)(2);
c. Alvin's Enterprises, Inc. d/b/a Party King, Suzie's
Investments, Inc. d/b/a Checker Drugs and Food,
Arkansas Garden Center West, LLC, Arkansas Garden
Center North, LLC, Chi–Mar Enterprises, Inc.,
Kingsway Enterprises, Polly's Food Service, Inc.,
Kenco, Inc. and Thomas Beverages Co., Inc. d/b/
a Thomas Liquors (“Plaintiffs”) are appointed Class
Representatives for the Settlement Class. Plaintiffs'
claims are typical of the claims of the Settlement Class,
satisfying the requirement of Rule 23(a)(3);
d. The Plaintiffs will fairly and adequately protect
the interests of the Settlement Class, satisfying the
requirements of Rule 23(a)(4);
e. For purposes of settlement only, questions of law or
fact common to the members of the Settlement Class
predominate over questions affecting only individual
members and a class action is superior to other methods
available for the fair and efficient adjudication of the
controversy, satisfying the requirements of Rule 23(b)
(3).
*23 8. The Court's certification of the Settlement Class as
provided herein is without prejudice to, or waiver of, the
rights of any Defendant other than Arctic Glacier to contest
certification of any other class proposed by Plaintiffs. The
Court's findings in this Final Order and Judgment shall have
no effect on the Court's ruling on any motion to certify any
class in this litigation and no party may cite or refer to the
Court's approval of the Settlement Class as persuasive or
class.
9. The court finds that the persons and entities on the
schedule attached hereto as Exhibit “A,” and no others, have
timely requested to be excluded from the Settlement Class
and accordingly are not included in or bound by the Final
Judgment being entered pursuant to this Order.
preceding Opinion, that the Settlement Agreement is fair,
reasonable and adequate and the Settlement Agreement with
Arctic Glacier is hereby approved pursuant to Federal Rule
of Civil Procedure 23(e).
11. All Released Claims (as defined in the Settlement
Agreement) of Plaintiffs and the Settlement Class that were
asserted against Arctic Glacier and the other Releasees (as
defined in the Settlement Agreement) in the Consolidated
Amended Class Action Complaint are dismissed with
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prejudice, and, except as provided for in the Settlement
Agreement, without costs.
12. Upon the occurrence of the Effective Date of the
Settlement Agreement, the Releasees shall be completely
released, acquitted, and forever discharged from any and
all claims, demands, actions, suits, and causes of action,
damages, liabilities of any nature, including costs, expenses,
penalties, and attorneys' fees, whether class, individual, or
otherwise in nature, that Releasors, or any one of them, ever
had, now has, or hereafter can, shall or may have directly,
representatively, derivatively or in any other capacity against
the Releasees or any of them, whether known or unknown,
suspected or unsuspected, in law or equity, on account of or
arising out of or resulting from the purchase of Packaged Ice
in the United States during the Class Period or from conduct
that occurred prior to the Effective Date of this Settlement
Agreement concerning the sale of Packaged Ice in the United
States, based in whole or in part on the facts, occurrences,
transactions, or other matters alleged in the Consolidated
Amended Class Action Complaint filed in this Action,
and which arise under any federal or state antitrust, unfair
competition, unfair practices, price discrimination, unitary
pricing, trade practice, or civil conspiracy law, including,
without limitation, the Sherman Antitrust Act, 15 U.S.C. §
1 et seq. (the “Released Claims”); provided, however, that
nothing herein shall release any claims made by indirect
purchasers of Packaged Ice as to their indirect purchases,
or any product defect or similar claim between the parties
relating to Packaged Ice.
*24 13. Each member of the Settlement Class shall not,
after the Effective Date of the Settlement Agreement, seek
to institute, maintain, prosecute or continue or prosecute any
suit or action, or collect from or proceed against the Releasees
based on the Released Claims.
14. Arctic Glacier shall have no obligation for attorneys' fees,
costs or expenses, including, but not limited to, expenses of
administering and distributing the Settlement Fund, which
expenses are to be paid out of the Settlement Fund subject to
further order of this Court.
15. This Final Order and Judgment does not settle or
compromise any claims by Plaintiffs or the Settlement Class
against any other Defendant or person or entity other than
the Releasees, and all rights against any other Defendant or
other person or entity are specifically reserved. The sales of
packaged ice to members of the Settlement Class by Arctic
Glacier shall remain in this action and shall be part of any
joint and several liability against any non-settling Defendant
or other person or entity other than the Releasees.
16. Nothing in this Final Order and Judgment or the
Settlement Agreement and no aspect of the Settlement
Agreement or negotiation thereof is or shall be deemed or
construed to be an admission or concession of any violation of
any statute or law or of any liability or wrongdoing by Arctic
Glacier or of the truth of any of the claims or allegations in
any of the complaints in the Action or any other pleading, and
evidence thereof shall not be discoverable or used, directly or
indirectly, in any way, whether in the Action or in any other
action or proceeding, other than to enforce the terms of this
Final Order and Judgment, or the Settlement Agreement.
17. The Court further finds that the escrow account described
in the Settlement Agreement is a qualified settlement fund
(“QSF”) pursuant to the Internal Revenue Code Section 468B
and the Treasury Regulations promulgated thereunder.
18. Without affecting the finality of this Final Order and
Judgment, the Court retains jurisdiction for the purposes
of, among other things, implementing and enforcing
the Settlement Agreement, entering orders regarding the
disbursement of the Settlement Fund and any other matters
that may arise in connection with the effectuation of the
19. The court expressly finds, pursuant to Federal Rule of
Civil Procedure 54(b) that there is no just reason for delay,
and expressly directs entry of Final Judgment as to Arctic
Glacier.
IT IS SO ORDERED.
EXHIBIT A
1. B.J's Service
2. Cedar–Knox Public Power District
3. Dorothy Lugibihl
4. Hi–Way Motel
5. In–n–Out Food Inc.
6. Koch Chemical Technology Group, LLC
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7. Koch Engineering
13. Rocky Point Resort
8. Koch Glitsch, Inc.
14. Taing, Inc. d/b/a Mr. T's Market
9. Mellinger's Beer Distributor, Inc.
*25 15. Vincentian Regency
10. Middletown's Supermarket
11. MMR Mobile Medical Response, Inc
Parallel Citations
12. Port Cicero Liquors
Footnotes
1
Direct Purchaser Plaintiffs Alvin's Enterprises, Inc. d/b/a Party King, Suzie's Investments, Inc. d/b/a Checker Drugs and Food,
Arkansas Garden Center West, LLC, Arkansas Garden Center North, LLC, Chi–Mar Enterprises, Inc., Kingsway Enterprises,
Polly's Food Service, Inc., Kenco, Inc. and Thomas Beverages Co., Inc. d/b/a Thomas Liquors have been appointed as the class
representatives for the Proposed Settlement Class.
End of Document
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EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
THE BOARD OF TRUSTEES OF THE
CITY OF BIRMINGHAM EMPLOYEES’
RETIREMENT SYSTEM, ET AL,
Case No. 09-cv-13201
Hon. Stephen J. Murphy, III
Plaintiffs,
v.
COMERICA BANK,
Defendant/Third-Party Plaintiff,
v.
MUNDER CAPITAL MANAGEMENT,
Third-Party Defendant.
FINAL ORDER AND JUDGMENT
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WHEREAS, the Settling Parties executed a Stipulation of Settlement
(“Stipulation”)1 on September 27, 2013, that provides for the payment of
$11,000,000 and a complete dismissal with prejudice of the claims asserted in the
above-referenced litigation against Comerica on the terms and conditions set forth
in the Stipulation, subject to the approval of this Court (the “Settlement”);
WHEREAS, by Order dated October 9, 2013 (the “Preliminary Approval
Order”), this Court (a) preliminarily certified, for settlement purposes only, the
Class; (b) preliminarily approved the Settlement; (c) ordered that Notice of the
proposed Settlement be provided to the Class Members; (d) provided Class
Members with the opportunity to exclude themselves from the proposed
Settlement; (e) provided Class Members with the opportunity to object to the
proposed Settlement; and (f) scheduled a hearing regarding final approval of the
Settlement;
WHEREAS, due and adequate notice has been given to the Class; and
WHEREAS, the Court conducted a hearing on December 19, 2013 (“Final
Approval Hearing”) to (a) determine whether the Settlement should be approved
by the Court as fair, reasonable and adequate; (b) determine whether the Judgment
should be entered pursuant to the Stipulation, inter alia, dismissing the Action
against Comerica with prejudice and extinguishing and releasing all Settled Claims
1
Capitalized terms not otherwise defined in this Order shall have the same meaning as ascribed
to them in the Stipulation.
2
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(as defined therein) against all Comerica Releasees, Munder Releasees and Class
Member Releasees (“Released Parties”); (c) determine whether the Class should be
finally certified for settlement purposes pursuant to Fed.R.Civ.P. Rules 23(a) and
(b)(3); (d) rule on Plaintiffs’ Counsel’s application for an award of attorneys’ fees
and the reimbursement of Litigation Expenses; and (e) rule on such other matters
as the Court may deem appropriate.
The Court has considered all matters submitted to it at the Final Approval
Hearing and otherwise, the pleadings on file, the applicable law, and the record.
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1.
The Court, for purposes of this Final Order and Judgment (the
“Judgment”) adopts all defined terms as set forth in the Stipulation, and
incorporates them herein by reference as if fully set forth.
2.
The Court has jurisdiction over the subject matter of the Action, and
all matters relating to the Settlement, as well as personal jurisdiction over all of the
Settling Parties and each of the Class Members.
3.
The Court finds that the prerequisites for a class action under Federal
Rules of Civil Procedure 23(a) and (b)(3) have been satisfied in that: (a) the
number of Class Members is so numerous that joinder of all Class Members is
impracticable; (b) there are questions of law and fact common to the Class; (c) the
claims of the Named Plaintiffs are typical of the claims of the Class they seek to
3
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represent; (d) the Named Plaintiffs and Plaintiffs’ Counsel have at all times fairly
and adequately represented the interests of the Class; and (e) a class action is
superior to other available methods for the fair and efficient adjudication of the
controversy, considering: (i) the interests of the Class Members in individually
controlling the prosecution of separate actions, (ii) the extent and nature of any
litigation concerning the controversy already commenced by members of the Class,
(iii) the desirability or undesirability of continuing the litigation of these claims in
this particular forum, and (iv) the difficulties likely to be encountered in the
management of the class action.
4.
Pursuant to Federal Rule of Civil Procedure 23(b)(3), the Court has
certified, for settlement purposes only, a Class that shall consist of all participants
in Comerica’s Securities Lending Program that, through one or more of the
investment vehicles offered or managed by Comerica or its affiliates, incurred
losses relating to investments in the Sigma Notes and that have not previously
released Comerica from all liability related to such losses.
5.
The Notice, the publication of the Notice on a dedicated website and
the notice methodology implemented pursuant to the Stipulation and the Court’s
orders (a) constituted the best notice practicable under the circumstances to all
Persons within the definition of the Class; (b) constituted notice that was
reasonably calculated, under the circumstances, to apprise Class Members of (i) the
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pendency of the Action, (ii) the effect of the Stipulation, including releases, (iii)
their right to object to the proposed Settlement, (iv) their right to participate in the
Settlement, (v) their right to exclude themselves from the Class, and (vi) their right
to appear at the Final Approval Hearing; (c) were reasonable and constituted due,
adequate and sufficient notice to all Persons entitled to receive notice; and (d) met
all applicable requirements of the Federal Rules of Civil Procedure, the United
States Constitution (including the Due Process Clause), the Rules of the Court and
any other applicable law.
6.
The Action and the Complaint and all claims included therein, as well
as all Settled Claims are dismissed with prejudice. In addition, all third-party
claims and counterclaims between Comerica and Munder are dismissed with
prejudice.
7.
Upon the Effective Date, Named Plaintiffs and each Class Member
(other than those entities listed on Exhibit 1 who have timely and validly requested
exclusion from the Class), on behalf of themselves and all of their Related Parties,
individually and collectively, by operation of law and this Judgment (a) shall be
deemed to have fully, finally and forever released, relinquished, waived,
discharged and dismissed all Settled Claims (including Unknown Claims) as
against each and all of the Comerica Releasees and the Munder Releasees; (b) shall
be enjoined from asserting or prosecuting any Settled Claims; and (c) shall be
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deemed to have agreed and covenanted not to sue any of the Comerica Releasees
or Munder Releasees on the basis of any Settled Claims or to assist any third-party
in commencing or maintaining any suit related to any Settled Claim.
8.
Upon the Effective Date hereof, Comerica and Munder, on behalf of
themselves and all of their respective Related Parties, individually and collectively,
by operation of law and this Judgment, (a) shall be deemed to have fully, finally,
and forever released, relinquished, waived, discharged and dismissed any and all
Settled Claims against the Class Member Releasees; (b) shall be enjoined from
asserting or prosecuting any Settled Claims; and (c) shall be deemed to have
agreed and covenanted not to sue any of the Class Member Releasees on the basis
of any Settled Claims or to assist any third-party in commencing or maintaining
any suit related to any Settled Claim.
9.
Nothing in this Judgment shall bar any action or claim by any of the
Settling Parties to enforce or effectuate the terms of the Stipulation or this
Judgment.
10.
This Judgment and the Stipulation, including the facts and terms of
the Stipulation, including exhibits, all negotiations, discussions, drafts and
proceedings in connection with the Settlement, and any act performed or document
signed in connection with the Settlement:
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(a)
shall not be admissible in any action or proceeding for any
reason, other than an action to enforce the terms of the Stipulation or the
Comerica-Munder Agreement; and
(b)
is not, and shall not be deemed, described, construed, offered or
received as evidence of any presumption, concession, or admission by any Person
of the truth of any fact alleged in the Action; the validity or invalidity of any claim
or defense that was or could have been asserted in the Action or in any litigation;
the amount of damages, if any, that would have been recoverable in the Action; or
any liability, negligence, fault, or wrongdoing of any Person.
11.
The Settling Parties may file the Stipulation and/or the Judgment in
any other litigation that may be brought against them in order to support a defense
or counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar or reduction or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim.
12.
The Plan of Allocation is approved as fair and reasonable, and
Plaintiffs’ Counsel and the Settlement Administrator are directed to administer the
Settlement in accordance with the terms and provisions of the Stipulation.
13.
The Court finds that the Settling Parties and their counsel have
complied with the requirements of Rule 11 of the Federal Rules of Civil Procedure
as to all proceedings herein, and that the Named Plaintiffs and Plaintiffs’ Counsel
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at all times acted in the best interests of the Class and had a good faith basis to
bring, maintain and prosecute this Action as to Comerica in accordance with
Federal Rule of Civil Procedure 11. The Court further finds that the Named
Plaintiffs and Plaintiffs’ Counsel adequately represented the Class Members in
entering into and implementing the Settlement.
14.
Any further orders or proceedings solely regarding the Plan of
Allocation shall in no way disturb or affect this Judgment and shall be separate and
apart from this Judgment.
15.
Without affecting the finality of this Judgment in any way, this Court
hereby retains continuing jurisdiction over: (a) implementation of this Settlement
and any award or distribution of the Gross Settlement Fund, including interest
earned thereon; (b) disposition of the Gross Settlement Fund; (c) hearing and
determining applications for attorneys’ fees and expenses, including the
reimbursement of Litigation Expenses to the Named Plaintiffs, in the Action; and
(d) the Settling Parties hereto for the purpose of construing, enforcing and
administering the Stipulation.
16.
No Person shall have any claim or cause of action, however
denominated, whatsoever against the Comerica Releasees or Munder Releasees, or
their counsel, arising from or related to any distributions made, or not made, from
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the Gross Settlement Fund, and any such claims or causes of action, however
denominated, are fully and finally released and discharged.
17.
Without further order of the Court, the Settling Parties may agree to
reasonable extensions of time to carry out any of the provisions of the Stipulation.
18.
In the event that the Settlement does not become effective in
accordance with the terms of the Stipulation or the Effective Date does not occur,
or in the event that the Gross Settlement Fund, or any portion thereof, is returned to
Comerica, then this Judgment shall be rendered null and void to the extent
provided by and in accordance with the Stipulation and shall be vacated and, in
such event, all orders entered and releases delivered in connection herewith shall
be null and void to the extent provided by and in accordance with the Stipulation.
19.
30%
The Court hereby GRANTS Plaintiffs’ Counsel attorneys’ fees of
of the amount of the Gross Settlement Fund after the deduction of
reimbursed expenses, and expenses in an amount of $127,516.02 together with the
interest earned thereon for the same time period and at the same rate as that earned
on the Gross Settlement Fund until paid. Said fees shall be allocated by Plaintiffs’
Counsel amongst counsel in a manner which, in Plaintiffs’ Counsel’s good-faith
judgment, reflects each counsel’s contribution to the institution, prosecution and
resolution of the Action or reflects Plaintiffs’ Counsel’s agreement. The Court
finds that the amount of fees awarded is fair and reasonable in light of the time and
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labor required, the novelty and difficulty of the case, the skill required to prosecute
the case, the experience and ability of the attorneys, awards in similar cases, the
contingent nature of the representation and the result obtained for the Class.
20.
The awarded attorneys’ fees and expenses, and interest earned
thereon, shall be paid to Plaintiffs’ Counsel from the Gross Settlement Fund
immediately after the date this Order is executed subject to the terms, conditions,
and obligations of the Stipulation, which terms, conditions, and obligations are
incorporated herein.
21.
There is no reason for delay in the entry of this Judgment and
immediate entry by the Clerk of the Court is expressly directed pursuant to Rule
54(b) of the Federal Rules of Civil Procedure.
SO ORDERED.
S/Stephen J. Murphy, III
Stephen J. Murphy, III
Dated: December 27, 2013
I hereby certify that a copy of the foregoing document was served upon the parties and/or
counsel of record on December 27, 2013, by electronic and/or ordinary mail.
S/Carol Cohron
Case Manager
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EXHIBIT 1
List of Entities Excluded from the Class in
The Board of Trustees of the City of Birmingham Employees’ Retirement System, et
al. v. Comerica Bank, Case No. 09-cv-13201
The following entities, and only the following entities, properly excluded
themselves from the Class by the 21st of November, 2013 deadline pursuant to the
Court’s Order dated October 9, 2013:
IN RESPONSE TO THE NOTICE OF
PENDENCY OF CLASS ACTION
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SOUTHERN DIVISION
IN RE CARACO PHARMACEUTICAL
LABORATORIES, LTD. SECURITIES
LITIGATION
Case No. 2:09-cv-12830-AJT-DAS
______________________________________________________________________________
FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE
______________________________________________________________________________
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This matter came before the Court for hearing pursuant to an Order of this Court, dated
March 13, 2013, (the “Notice Order”), on the application of the Settling Parties for approval of
the Settlement set forth in the Stipulation of Settlement dated as of February 27, 2013, together
with the Exhibits appended thereto (the “Stipulation”). Due, proper and adequate notice having
been given of the Settlement as required in said Order and pursuant to Constitutional, rule and
statutory requirements, and the Court having considered all papers filed and proceedings held
herein and otherwise being fully informed in the premises and good cause appearing therefore,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
1.
The Stipulation is incorporated by reference in this Judgment, and all capitalized
terms used herein shall have the same meanings assigned to them in the Stipulation.
2.
This Court has jurisdiction over the subject matter of the Litigation and over all
parties to the Litigation, including all Members of the Class who did not timely file a request for
exclusion from the Class by the May 28, 2013 deadline pursuant to the Notice Order.
3.
The Court restates and incorporates its prior Order of February 28, 2012,
certifying this action as a class action and finds that the prerequisites for a class action under
Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been satisfied in that: (a) the
number of Class Members is so numerous that joinder of all members thereof is impracticable;
(b) there are questions of law and fact common to the Class; (c) the claims of the Court
appointed Class Plaintiffs are typical of the claims of the Class they represent; (d) the Plaintiffs
have and will continue to fairly and adequately represent the interests of the Class; (e) the
questions of law and fact common to the members of the Class predominate over any questions
affecting only individual members of the Class; and (f) a class action is superior to other
available methods for the fair and efficient adjudication of the controversy.
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE
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4.
Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby
finally certifies this action as a class action on behalf of all persons or entities who purchased or
otherwise acquired Caraco’s securities between May 29, 2008 and June 25, 2009, inclusive, and
who were damaged thereby. Excluded from the Class are Defendants, the officers and directors
of the Company, at all relevant times, members of their immediate families, any entity in which
any Defendant has or had a legal controlling interest, and the legal representatives, heirs,
successors, or assigns of any Defendant.
5.
The distribution of the Notice and the publication of the Summary Notice, as
provided for in the Notice Order, constituted the best notice practicable under the circumstances,
including individual notice to all members of the Class who could be identified through
reasonable effort. Said notices (i) provided the best notice practicable under the circumstances of
those proceedings and of the matters set forth therein, including the proposed Settlement set forth
in the Stipulation of Settlement, to all Persons entitled to such notices; (ii) constitute due,
adequate and sufficient notice to all Persons entitled to receive notice and (iii) fully satisfy the
requirements of Federal Rule of Civil Procedure 23, Section 21D(a)(7) of the Securities
Exchange Act of 1934, the Due Process Clause(s) of the United States Constitution, the rules of
this Court and any other applicable law.
6.
Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby
approves the Settlement set forth in the Stipulation and finds that said Settlement is, in all
respects, fair, reasonable and adequate to, and is in the best interests of the Plaintiffs, the Class
and each of the Class Members. This Court further finds the Settlement set forth in the
Stipulation is the result of lengthy arm’s-length negotiations that took over six months to
conclude between experienced counsel representing the interests of the Plaintiffs, Class Members
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and the Defendants that were also held before a third party mediator approved by the Court.
Accordingly, the Settlement embodied in the Stipulation is hereby approved in all respects and
shall be consummated in accordance with its terms and provisions. The Settling Parties are
hereby directed to perform the terms of the Stipulation.
7.
The Litigation and all claims contained therein, including all of the Released
Claims, are dismissed with prejudice as to the Plaintiffs and the other Members of the Class, and
as against each and all of the Released Persons. The Settling Parties are to bear their own costs,
except as otherwise provided in the Stipulation.
8.
Upon the Effective Date, the Plaintiffs and each of the Class Members shall
conclusively be deemed to have, and by operation of this Judgment shall have, dismissed with
prejudice all claims asserted against the Defendants in the Litigation and, by operation of this
Judgment, to have: (i) fully, finally and forever released, relinquished and discharged all of the
Released Claims (including Unknown Claims) whether or not such Class Member executes and
delivers a Proof of Claim and Release form; (ii) covenanted not to sue any of the Released
Persons or otherwise to assert, directly or indirectly, any of the Released Claims against any of
the Released Persons; and (iii) agree to be forever barred and enjoined from doing so, in any
court of law or equity, or in any other forum.
9.
Upon the Effective Date hereof, each of the Released Persons shall be deemed to
have, and by operation of this Judgment shall have, fully, finally, and forever released,
relinquished and discharged the Plaintiffs, each and all of the Class Members, and Class Counsel
from all claims (including Unknown Claims), arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation or the Released
Claims.
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10.
Upon the Effective Date, in accordance with Section 21 D(f)(7)(A) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78u-4(f)(7)(A), each of the Defendants by virtue
of this Judgment is fully and finally released and discharged from all claims for contribution that
have been or may hereafter be brought by or on behalf of any Persons based upon, relating to, or
arising out of the Released Claims. Accordingly (i) any and all Persons are permanently barred,
enjoined, and restrained from commencing, prosecuting, or asserting any such claim for
contribution against any of the Defendants based upon, relating to, or arising out of the Released
Claims, and (ii) the Defendants are hereby permanently barred, enjoined, and restrained from
commencing, prosecuting, or asserting any claim for contribution against any Person based upon,
relating to, or arising out of the Released Claims.
11.
Any further orders or proceedings solely regarding the Plan of Allocation shall in
no way disturb or affect this Judgment and shall be separate and apart from this Judgment.
12.
Neither the Stipulation nor the Settlement contained therein, nor any act
performed or document executed pursuant to or in furtherance of the Stipulation or the
Settlement: (a) is or may be deemed to be or may be used as an admission of, or evidence of, the
validity of any Released Claim, or of any wrongdoing or liability of the Defendants; or (b) is or
may be deemed to be or may be used as an admission of, or evidence of, any fault or omission of
any of the Released Persons in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. The Released Persons may file the Stipulation and/or the
Judgment in any other litigation that may be brought against them in order to support a defense
or counterclaim based on principles of res judicata, collateral estoppel, release, good faith
settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion
or similar defense or counterclaim.
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13.
Notwithstanding any other provision in this Final Judgment and Order, the
Defendants hereby retain and do not release any and all rights under any policies of insurance.
14.
Without affecting the finality of this Judgment in any way, this Court hereby
retains continuing jurisdiction over: (a) implementation of this Settlement and any award or
distribution of the Settlement Fund, including interest earned thereon; (b) disposition of the
Settlement Fund; (c) hearing and determining applications for attorneys’ fees and expenses,
including the reimbursement of expenses to Plaintiffs, in the Litigation; and (d) the Settling
Parties hereto for the purpose of construing, enforcing and administering the Stipulation.
15.
No Person shall have any claim or cause of action, however denominated,
whatsoever against the Defendants, Defendants’ Counsel or any of the Released Persons arising
from or related to any distributions made, or not made, from the Settlement Fund, and any such
claims or causes of action, however denominated, are fully and finally released and discharged.
16.
The Court finds that during the course of the Litigation, the Settling Parties and
their respective counsel at all times complied with the requirements of Federal Rule of Civil
Procedure 11 and particularly with Rule 11(b) of the Federal Rules of Civil Procedure.
17.
Without further order of the Court, the Settling Parties may agree to reasonable
extensions of time to carry out any of the provisions of the Stipulation.
18.
In the event that the Settlement does not become effective in accordance with the
terms of the Stipulation or the Effective Date does not occur, or in the event that the Settlement
Fund, or any portion thereof, is returned to the Defendants, then this Judgment shall be rendered
null and void to the extent provided by and in accordance with the Stipulation and shall be
vacated and, in such event, all orders entered and releases delivered in connection herewith shall
be null and void to the extent provided by and in accordance with the Stipulation of Settlement.
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19.
The Court hereby GRANTS Class Counsel attorneys’ fees of 33% of the
Settlement Fund and expenses in an amount of $131,008.07 together with the interest earned
thereon for the same time period and at the same rate as that earned on the Settlement Fund until
paid. Said fees shall be allocated by Class Counsel among Plaintiffs’ counsel in a manner which,
in Class Counsel’s good-faith judgment, reflects each counsel’s contribution to the institution,
prosecution and resolution of the Litigation. The Court finds that the amount of fees awarded is
fair and reasonable in light of the time and labor required, the novelty and difficulty of the case,
the skill required to prosecute the case, the experience and ability of the attorneys, awards in
similar cases, the contingent nature of the representation and the result obtained for the Class.
20.
The Court hereby GRANTS Lead Plaintiff Tushar Amin reimbursement of his
reasonable costs and expenses (including lost wages) directly related to his representation of the
Class in the amount of $4,320.
21.
The Court hereby GRANTS Plaintiff Kevin Koziatek reimbursement of his
22.
The Court hereby GRANTS Plaintiff Jonathan Wilkof reimbursement of his
23.
The awarded attorneys’ fees and expenses, and interest earned thereon, shall be
paid to Class Counsel from the Settlement Fund immediately after the date this Order is executed
subject to the terms, conditions, and obligations of the Stipulation and in particular ¶ 6.2 thereof,
which terms, conditions, and obligations are incorporated herein.
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24.
The Court shall retain continuing jurisdiction until all settlement funds have been
disbursed.
DATED: June 26, 2013
s/Arthur J. Tarnow
The Honorable Arthur J. Tarnow
United States Senior District Judge
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SOUTHERN DIVISION
IN RE: DELPHI CORPORATION
SECURITIES, DERIVATIVE &
“ERISA” LITIGATION,
______________________________/
MDL No. 1725
Master Case No. 05-md-1725
Hon. Gerald E. Rosen
ALL CASES
OPINION AND ORDER REGARDING LEAD PLAINTIFFS’ MOTIONS
FOR (1) FINAL APPROVAL OF SETTLEMENTS, (2) SETTLEMENT
CLASS CERTIFICATION, (3) FINAL APPROVAL OF PLANS
OF ALLOCATION, AND (4) AWARD OF ATTORNEYS’ FEES; AND
DELPHI TRUST I INTERIM COUNSEL’S MOTION FOR ATTORNEYS’ FEES
At a session of said Court, held in
the U.S. Courthouse, Detroit, Michigan
on
January 10, 2008
PRESENT: Honorable Gerald E. Rosen
I. INTRODUCTION
On November 13, 2007, the Court conducted a hearing on Plaintiffs’ Motions for
Final Approval of Settlements, Settlement Class Certification, Final Approval of Plans of
Allocation and for the Award of Attorneys’ Fees in the above-captioned multi-district
action.1 At this hearing, the Court heard not only the oral arguments of counsel but also
the statements and objections of certain class members and interested parties, and Lead
1
The Court had previously given its preliminary approval to the proposed
securities fraud settlement and ERISA partial settlement and had provisionally certified
the securities fraud and ERISA classes on September 5, 2007. It also approved
dissemination of notice to class members on that date.
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Plaintiffs’ and Defendants’ responses thereto. The Court also heard argument on the
separate Motion of the Delphi Trust I Interim Counsel for an Award of Attorneys’ Fees
and Reimbursement of Expenses.
Following the hearing, the Court ordered supplemental briefing on the fee request
of the Delphi Trust I attorneys. The Court also conducted a second hearing, on
December 4, 2007, concerning the securities fraud settlement and the parties’ postNovember 13 agreement to modify the terms of the settlement with regard to the
consideration to be provided to the Securities Fraud Settlement Class by Delphi.2
Having reviewed and considered all of the briefs, written statements, objections,
memoranda of law and supporting documents filed with the Court, and having further
considered the oral arguments, testimony and statements made on the record on
November 13 and December 4, 2007, the Court is now prepared to rule on the Motions
for final settlement approval, final settlement class certification, and final plans of
allocation, and on the Motions and applications for attorneys’ fees and expenses. This
Opinion and Order sets forth the Court’s rulings on these matters.
2
After hearing the oral arguments of counsel and the statements on the record of
two of the four Lead Plaintiffs on December 4, the Court tentatively approved these
modifications and ordered dissemination of supplemental notice of them to the class
members. The Court has received verification of the publication of the supplemental
notice as ordered. The notice directed that any objections to the modification be filed by
January 4, 2007. As of this date, no objections have been filed.
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II. FACTUAL AND PROCEDURAL BACKGROUND
Delphi Corporation, once a completely integrated division of General Motors, was
established as an independent company in 1999. At the time of its spin-off from GM,
Delphi was the largest supplier of automotive parts in the world. The new company
enjoyed a healthy balance sheet in 1999 as a result of the stock market riding the telecom
and internet high and the economy being strong at the time. The company’s fiscal
success was also attributable to the demand for GM’s (Delphi’s primary customer’s) high
profile SUVs and because its pension plans were being largely funded by the soaring
stock market.
In 2000, however, the stock market collapse precipitated a downturn in the
economy. This, in turn, led to a decline in the production of cars by GM. The decline in
auto production widely impacted the various businesses that support domestic automobile
manufacturers, including auto parts suppliers. Nonetheless, despite the collapsing
economy, Delphi continued to report profits in its SEC Form 10-Q quarterly reports, its
annual Form 10-K’s, and in press releases to the general public.
However, in July 2004, the credibility of Delphi’s financial statements was called
into question when the SEC launched an investigation into certain transactions between
Delphi and one of its information technology suppliers, EDS. This SEC investigation
precipitated an internal investigation by Delphi’s Audit Committee which was begun in
October 2004.
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The six-month long internal investigation revealed accounting improprieties
dating back to Delphi’s birth as an independent publicly traded company. The findings
of the investigation were made public on March 3, 2005, and Delphi’s investors were
warned that the company’s financial statements for 2001 and beyond were unreliable.
Following that announcement, on March 5, 2005, Delphi’s debt rating was
downgraded to junk status. The revelation that Delphi had inflated its earnings and
operating cash flow since 1999 also sent Delphi’s stock plummeting – Delphi’s stock
price fell from $6.48 on March 3 to $5.15 on March 7 – a drop of over 20% in two
trading days. Then, on March 30, 2005, the FBI announced that it was initiating a
criminal investigation into Delphi’s accounting.
Within days of Delphi’s announcement of the findings of its internal investigation,
Delphi investors commenced litigation under the PSLRA. The first Delphi securities
fraud class action complaint was filed in Southern District of New York on March 7,
2005. Six more securities fraud complaints were filed in the Southern District of New
York on March 8, 10, 15, 29, April 1 and May 6, 2005. These complaints were
subsequently consolidated and collectively re-titled “In re Delphi Corp. Securities
Litigation.”3 Thereafter, on September 30, 2005, the Lead Plaintiffs filed a Consolidated
Class Action Securities Fraud Complaint against Delphi, certain officers and directors,
Delphi’s auditors and underwriters, and several outside parties.
3
Additional securities fraud actions were also filed in the Southern District of
Florida and the Eastern District of Michigan.
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In the meantime, while the securities fraud litigation was proceeding in the
Southern District of New York, a number of participants in Delphi’s various retirement
plans filed ERISA actions here in the Eastern District of Michigan alleging that Delphi’s
pension and retirement plans were damaged as the result of the company’s accounting
improprieties and other misconduct which caused the company’s stock to be inflated and,
consequently, a highly imprudent investment for retirement savings. (The plans’ assets
were heavily invested in Delphi stock.)
Shortly after the initiation of these securities fraud and ERISA actions, on October
8, 2005, Delphi and substantially all of its active U.S. subsidiaries, filed for Chapter 11
bankruptcy.
Thereafter, on December 12, 2005, the Judicial Panel on Multi-District Litigation
ordered that the 24 Delphi securities fraud, ERISA and shareholders’ derivative actions
filed in the Southern District of New York, the Eastern District of Michigan and the
Southern District of Florida be transferred to this Court for coordinated/consolidated
pretrial proceedings.
Following transfer to this Court, motions to dismiss both the ERISA and the
securities fraud consolidated complaints were filed and extensively briefed by the parties.
However, before any hearings on the dispositive motions were scheduled, the parties
requested leave to pursue facilitation before the Honorable Layn R. Phillips, former
United States District Judge for the Western District of Oklahoma. The Court approved
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the request and appointed Judge Phillips as Special Master for settlement purposes.
Following intensive written and face-to-face negotiations facilitated by Judge Phillips in
New York and Detroit in July and August 2007 partial settlements were reached in both
the securities fraud and ERISA actions.4
III. THE SECURITIES FRAUD SETTLEMENT AND PLAN OF ALLOCATION
The Settlement Agreement agreed upon by the Securities Fraud Lead Plaintiffs
and Settling Defendants Delphi Corporation, Delphi Trust I and Delphi Trust II; Delphi
Officers and Directors J.T. Battenberg III, John G. Blahnik, Robert H. Brust, Virgis W.
Colbert, Alan S. Dawes, David N. Farr, Paul R. Free, Bernd Gottschalk, Susan A.
McLaughlin, Oscar de Paula Bernades Neto, Cynthia A. Niekamp, John D. Opie, Roger
S. Penske, Donald L. Runkle, John D. Sheehan and Patricia C. Sueltz; and Banc of
America Securities, LLC, Barclays Capital Inc., Bear, Stearns & Co., Citigroup Global
Markets, Credit Suisse Securities (USA) LLC, Merrill, Lynch, Pierce, Fenner & Smith
Inc., Morgan Stanley & Co. Inc., UBS Securities LLC, and Wachovia Capital Markets,
LLC (collectively, the “Underwriter Defendants”) calls for a settlement of all claims
4
The partial settlement reached in the securities fraud action did not resolve the
Plaintiffs’ claims against Delphi’s former auditor, Deloitte & Touche LLP and three
entities alleged by Lead Plaintiffs to have engaged in deceptive and fraudulent
transactions with Delphi, namely, JPMorgan Chase & Co (as successor-in-interest to
Bank One Corp.), SETECH, Inc., and BBK, Ltd. The settlement reached in the ERISA
action excludes Plaintiffs’ claims against State Street Bank. The Plaintiffs continue to
litigate their claims against these Non-Settling Defendants, although the Court has been
advised that a tentative settlement has been reached between Plaintiffs and Deloitte &
Touche. If and when that settlement is finalized, the Court will address it separately.
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against these Defendants and provides for a recovery with a potential value of
$284,100,000, comprised of the following payments made by or on behalf of the Settling
Defendants:
(i) $88,600,0005 in cash paid by Delphi’s insurance carriers on behalf of the
Delphi Officer and Director Defendants;
(ii) $1,500,000 in cash paid by or on behalf of certain of the Underwriter
Defendants;
(iii) $15,000,000 in cash paid by Delphi; and
(iv) an allowed claim in Delphi’s Bankruptcy action that will be paid in
Delphi Plan Currency6 pursuant to Delphi’s Plan of Reorganization with a
potential value of $179,000,000, along with Delphi’s agreement to finance,
at no cost to the Class, the cash payment necessary to exercise some or all
of the Discount Rights until after the Effective Date of the Settlement,
thereby permitting the Class to realize some or all of the potential value of
the Discount Rights without incurring significant additional cost.7
5
This figure includes the $10,000,000 designated as a “contingent” payment that
was held in reserve for defense costs for the Director and Officer Defendants in the event
that the Justice Department decided to proceed with criminal prosecution of any of them.
Since the date of the fairness hearing, however, the Court and the parties have been
advised by the Justice Department that it is not going to proceed with prosecution of any
of the Director or Officer Defendants. Because there is one other pending investigation,
however, these funds remain contingent and the Special Master will determine when -and what percentage of the funds -- will be available for distribution to the Class.
6
Under the Delphi Plan of Reorganization, “Delphi Plan Currency” is comprised
of stock in the reorganized Delphi Corporation and the right to purchase additional stock
in the reorganized Delphi at a discount (“Discount Rights”).
7
As originally presented to the Court for final approval on November 13, 2007,
Delphi’s share of the settlement consisted solely of an allowed claim in Delphi’s
bankruptcy to be paid in Delphi Plan Currency valued at $204,000,000. It was this aspect
of the terms of the settlement that was the subject of the Settlement Modification Hearing
on December 4th. Pursuant to the modification, the $204,000,000 Delphi Plan Currency
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These cash amounts, plus interest, plus the other forms of Delphi Consideration,
comprise the “Gross Settlement Fund.” The insurance payments and the $1.5 million in
cash paid by the Underwriter Defendants have been deposited into an escrow account,
and since deposited, has been earning interest. The remaining consideration will be
contributed upon the Effective Date of Delphi’s Plan of Reorganization. After the
Bankruptcy Court’s final approval and confirmation and the occurrence of the Effective
Date of the Plan of Reorganization, the Settlement proceeds, less the costs of notice and
administration of the Settlement and the payment of attorneys’ fees and costs,8 the Net
Settlement proceeds will be distributed to class members pursuant to a “Plan of
Allocation.”
Pursuant to the Settlement Agreement, persons who purchased or acquired
publicly traded securities of Delphi, including securities issued by Delphi Trust I and
payment was reduced to $179,000,000. To make up for the $25 million shortfall, Delphi
agreed to an additional cash payment of $15,000,000 and also agreed to finance, at no
cost to the Class, the cash payment necessary for Plaintiffs to exercise some or all of the
potential value of Discount Rights until after the Effective Date of the Settlement.
As noted, the Court conducted a hearing on the proposed modification, and two of
the Lead Plaintiffs and Lead Plaintiffs’ Counsel all indicated that they believe that the
economic benefit of the additional cash and financing for Discount Rights provided by
Delphi are at least equivalent to the amount of the reduction of the allowed claim and
may, in fact, provide a greater benefit to the Class because it permits the Class to obtain
some or all of the Discount Rights Offering at no additional cost.
8
The Securities Lead Plaintiffs’ counsel have requested that they be awarded
18% of the Gross Settlement Fund to cover their fees and $1,300,000 for their costs and
expenses. Attorneys fees and costs are addressed in Section VII of this Opinion.
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Delphi Trust II, between March 7, 2000 and March 3, 2005, inclusive, and who suffered
losses, may be entitled to a pro rata share in the net settlement according to an agreedupon “Plan of Allocation.” The parties’ proposed Plan of Allocation is not a formal
damage analysis. Rather, the Plan of Allocation for the Securities Fraud Settlement
reflects the Plaintiffs’ allegations that the price of Delphi stock was artificially inflated
during the Class Period due to misrepresentations and/or omissions regarding Delphi’s
earnings. The Plaintiffs allege that corrective disclosures on July 17, 2002, June 13,
2003, March 4, 2005 and March 7, 2005 removed artificial inflation from the price of
Delphi stock. Thus, in order to be recognized for recovery in the Settlement, a Delphi
security must have been held past the date of a corrective disclosure. In other words, a
Delphi security acquired during the Class Period from March 7, 2002 through July 16,
2002, must have been held until or beyond July 17, 2002, the first trading day after the
first corrective disclosure. Similarly, a Delphi security acquired on or after July 17, 2002
must have been held until June 13, 2003, the day of the second corrective disclosure, and
Delphi securities acquired on or after June 13, 2003 must have been held until March 4,
2005, the last day of the Class Period.
The Plan of Allocation provides for the distribution of the Net Settlement Fund to
Authorized Claimants who submit to the Claims Administrator a proper Proof of Claim.
Each Authorized Claimant’s pro rata share of the Net Settlement will be based upon the
claimant’s “Recognized Claim.” The Plan calls for calculation of Recognized Claims for
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the purposes of the Settlement as follows:
Common Stock Purchases
1.
2.
3.
For shares of Delphi common stock purchased between March 7, 2000 and
July 16, 2002, inclusive and:
a.
Sold on or before the close of trading on July 16, 2002, an
authorized claimant’s Recognized Claim is “zero.”
b.
Sold at a loss between July 17, 2002, and June 12, 2003, an
authorized claimant’s Recognized Claim is the lesser of: (i)
the purchase price minus the sales price; or (ii) $0.84 per
share.
c.
Sold at a loss between June 13, 2004 and March 3, 2005, an
share.
d.
Held as of the close of business on March 3, 2005, an
the purchase price minus $5.15 or (ii) $2.73 per share.
For shares of Delphi common stock purchased between July 17 2002 and
June 12, 2003, inclusive, and:
a.
Sold on or before the close of trading on June 12, 2003, an
b.
Sold at a loss between June 13, 2003, and March 3, 2005, an
share.
c.
the purchase price minus $5.15; or (ii) $1.89 per share.
For shares of Delphi common stock purchased between June 13, 2003 and
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March 3, 2005, inclusive, and:
a.
Sold on or before the close of trading on March 3, 2005, an
b.
the purchase price minus $5.15 or (ii) $1.18 per share.
Note and Preferred Security Purchases
1.
2.
For Delphi 6.55% Unsecured Notes due June 15, 2006 ($1,000 par value)
purchased between the Offering Date and March 3, 2005, inclusive and:
a.
Sold at a loss on or before the close of trading on September
30, 2005, an authorized claimant’s Recognized Claim is: (i)
the lesser of (a) the offering price of $998.75 per $1,000 Note
and (b) the purchase price; less (ii) the sale price.
b.
Sold at a loss between October 1, 2005 and October 16, 2006,
an authorized claimant’s Recognized Claim is: (i) the lesser
of (a) the offering price of $998.75 per $1,000 Note and (b)
the purchase price; less (ii) the greater of (a) $735.00 per
$1,000 Note and (b) the sale price.
c.
Held as of the close of business on October 16, 2006, an
For Delphi 6.5% Unsecured Notes due August 15, 2013 ($1,000 par value)
purchased between the Offering Date and March 3, 2005, inclusive, and:
a.
30, 2005, an authorized claimant’s Recognized Claim is: (i)
the lesser of (a) the offering price of $988.06 per $1,000 Note
and (b) the purchase price; less (ii) the sale price.
b.
Sold at a loss between October 1, 2005 and November 6,
2006, an authorized claimant’s Recognized Claim is: (i) the
lesser of (a) the offering price of $988.06 per $1,000 Note
and (b) the purchase price; less (ii) the greater of (a) $670.00
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per $1,000 Note and (b) the sale price.
c.
3.
4.
Held as of the close of business on November 6, 2006, an
For Delphi 8.25% Trust I Preferred Securities due October 15, 2033 ($25
par value) purchased between the Offering Date and March 3, 2005,
inclusive, and:
a.
Sold at a loss on or before the close of trading on April 11,
lesser of (a) the offering price of $25 per $25 Preferred
Security and (b) the purchase price; less (ii) the sale price.
b.
Sold at a loss between April 12, 2005 and November 13,
2006, an authorized claimant’s Recognized Claim is (i) the
less of (a) the offering price of $25 per $25 Preferred Security
and (b) the purchase price; less (ii) the greater of (a) $16.85
per $25 Preferred Security and (b) the sale price.
c.
Held as of the close of business on November 13, 2006, an
For Delphi Adjustable Rate Trust II Preferred Securities due November 15,
2033 ($1,000 par value) purchased between the Offering Date and March 3,
2005, inclusive, and:
a.
30, 2005, an authorized claimant’s Recognized Claim is (i)
the lesser of (a) the offering price of $1,000 per $1,000
Preferred Security and (b) the purchase price; less (ii) the sale
price.
b.
Sold at a loss between October 1, 2005 and December 6,
lesser of (a) the offering price of $1,000 per $1,000 Preferred
Security and (b) the purchase price; less (ii) the greater of (a)
$300.00 per $1,000 Preferred Security and (b) the sale price.
c.
Held as of the close of business on December 6, 2006, an
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IV.
THE ERISA SETTLEMENT AND PLAN OF ALLOCATION
The ERISA Settlement Stipulation -- entered into between the ERISA Lead
Plaintiffs and Delphi Corporation, ASEC Manufacturing General Partnership, Delphi
Mechatronic Systems, Inc., the Delphi Corporation Board of Directors’ Executive
Committee and its members, the Investment Policy Committee and its members, and
Delphi Officer and Director Defendants J.T. Battenberg III, Robert H. Brust, Alan S.
Dawes, Susan A. McLaughlin, and John D. Opie -- calls for a settlement and release of
all claims against these Settled Defendants in exchange for $47,000,000 -- $22,500,000
to be paid in cash from available insurance policies, and an allowed interest in the face
amount of $24,500,000 in the Delphi Bankruptcy action. As with the Securities Fraud
Settlement, from this Gross Settlement amount, the costs of administration and the
payment of attorneys’ fees and costs will be deducted.9 The Net Settlement Fund
(referred to in the ERISA Settlement documents as the “Distribution Amount”) will then
9
Because of the continued pendency of Plaintiffs’ claims against State Street
Bank and the parties’ agreement to withhold distribution of the settlement until after all
of Plaintiffs’ claims are resolved, instead of seeking an award of attorneys’ fees and costs
at this time, the ERISA Lead Plaintiffs’ counsel requested that the Court simply reserve
25% from the Gross Settlement Fund for a potential award of both fees and costs which
they will seek by way of a formal motion at the conclusion of the case. However, at the
November 13, 2007 fairness hearing, the Court suggested an alternative -- that if a
reserve is to be created that it be a reserve of 20% of the Gross Settlement Fund for fees
and $750,000 (which is three times Lead Counsel’s current out-of-pocket expenditures)
for costs -- and counsel agreed that this was a reasonable alternative. As indicated,
attorneys’ fees are discussed in Section VII of this Opinion.
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be allocated to the ERISA Class Members on a pro rata basis pursuant to a Plan of
Allocation based upon each Class Member’s proportionate loss from Plan investments in
the Delphi and/or GM Stock funds.
The ERISA Plan of Allocation provides a formula for calculating each Class
Member’s share of the Distribution Amount. This formula first calls for the calculation
of each Class Member’s “Net Loss,” which is the total of the Class Member’s “Delphi
Stock Net Loss” and “GM Stock Net Loss,” as follows:
1.
“Delphi Stock Net Loss” will be, for each Class Member = A+B-C-D,
provided that if A+B-C-D is less than zero for a Class Member, such Class
Member’s Delphi Stock Net Loss will be zero.
A = the dollar amount of the Class Member’s account balance
invested in the Delphi Stock Fund at the beginning of the
Class Period.10
B = the dollar amount added to the Class Member’s Plan
account balance invested in the Delphi Stock Fund during the
Class Period.
C = the dollar amount credited to the Class Member’s Plan
account balance resulting from dispositions from the Delphi
Stock Fund during the Class Period.
D = the dollar amount of the Class Member’s account balance
in the Delphi Stock Fund immediately after the end of the
Class Period.
10
The “Class Period” is defined in the ERISA Settlement Stipulation as “the
period of time between May 28, 1999 and November 1, 2005, inclusive.” The Plan of
Allocation provides that if data is not available to determine the account balances of
Class Members at the beginning or end of the Class Period, these calculations may be
performed using data as of the nearest date prior to or after the beginning or end of the
Class Period that is available.
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“GM Stock Net Loss” will be, for each Class Member = A +B-C-D,
provided that if A+B-C-D is less than zero for a Class Member, such Class
Member’s GM Stock Net Loss will be zero.
A = the dollar amount of the Class Member’s Plan account
balance invested in the GM Stock Fund at the beginning of
the Class Period.
B = the dollar amount added to the Class Member’s Plan
account balance invested in the GM Stock Fund during the
Class Period.
C = the dollar amount credited to the Class Member’s Plan
account balance resulting from dispositions from the GM
Stock Fund during the Class Period.
D = the dollar amount of the Class Member’s account balance
in the GM Stock Fund immediately after the end of the Class
Period.
Pursuant to the Plan of Allocation, the Delphi Stock Net Losses and GM Stock
Net Losses of the Class Members as calculated above will be then separately totaled to
yield a Total Delphi Stock Net Loss and Total GM Stock Net Loss. Then, a “Preliminary
Delphi Loss Fractional Share” and “Preliminary GM Loss Fractional Share” will be
calculated for each Class Member.
A Class Member’s “Preliminary Delphi Fractional Loss Share” is calculated by
dividing each member’s Delphi Stock Net Loss by the Total Delphi Stock Net Loss.
Similarly, a Class Member’s “Preliminary GM Fractional Loss Share” is calculated by
dividing each member’s GM Stock Net Loss by the Total GM Stock Net Loss. Using
these Preliminary Fractional Loss Share figures, a “Preliminary Dollar Recovery” will
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then be calculated by (i) multiplying the Class Member’s Preliminary Delphi Loss
Fractional Share by 80% of the Distribution Amount, (ii) multiplying the Class Member’s
Preliminary GM Loss Fractional Share by 20% of the Distribution Amount, and (iii)
adding together these two sums. All Class Members whose Preliminary Dollar Recovery
is less than $10.00 will receive an allocation of “zero,” and that Preliminary Dollar
Recovery will be reallocated proportionately among the other Class Members, and this
Reallocation amount will be added to their Preliminary Dollar Recovery amounts to
arrive at each Class Members’ respective Final Dollar Recovery. These Final Dollar
Recovery sums will, in turn, be deposited into the Class Members’ respective retirement
plan accounts in accordance with the existing election options for current contributions
into the Plan then in effect.11
V.
FINAL CERTIFICATION OF THE SETTLEMENT CLASSES
Fed. R. Civ. P. 23 sets forth the requirements for class certification.12 The Court
11
For Class Members who are former Plan participants or beneficiaries thereof,
the Plan Administrator for each Plan will invest each Former Member’s Final Dollar
Recovery in a suitable short term investment vehicle. The deposited amount, plus
interest shall then, as soon as practicable, be distributed to the Former Member in the
same manner as a qualified distribution from the Plan pursuant to ERISA and the Internal
Revenue Code.
12
Fed. R. Civ. P. 23 provides, in pertinent part, as follows:
(a)
Prerequisites to a Class Action. One or more members of a class
may sue or be sued as representative parties on behalf of all on if (1) the
class is so numerous that joinder of all members is impracticable, (2) there
are questions of law or fact common to the class, (3) the claims or defenses
of the representative parties are typical of the claims or defenses of the
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class, and (4) the representative parties will fairly and adequately protect
the interests of the class.
(b)
Class Actions Maintainable. An action may be maintained as a
class action if the prerequisites of subdivision (a) are satisfied, and in
addition:
(1) the prosecution of separate actions by or against
individual members of the class would create a risk of
(A) inconsistent or varying adjudications with respect
to individual members of the class which would establish
incompatible standards of conduct for the party opposing the
class, or
(B) adjudications with respect to individual members
of the class which would as a practical matter be dispositive
of the interests of the other members not parties to the
adjudications or substantially impair or impeded their ability
to protect their interests; or
(2) the party opposing the class has acted or refused to act on
the grounds generally applicable to the class, thereby making
appropriate final injunctive relief or corresponding
declaratory relief with respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to
the members of the class predominate over any questions
affecting only individual members, and that a class action is
superior to other available methods for the fair and efficient
adjudication of the controversy. The matters pertinent to the
findings include: (A) the interest of members of the class in
individually controlling the prosecution or defense, of
separate actions; (B) the extent and nature of any litigation
concerning the controversy already commenced by or against
members of the class; (C) the desirability or undesirability of
concentrating the litigation of the claims in the particular
forum; (D) the difficulties likely to be encountered in the
management of a class action.
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has already preliminarily certified both the ERISA and Securities Settlement classes. The
Plaintiffs now seek Final Certification of the classes for purposes of settlement. The
ERISA Plaintiffs seek Final Certification under Rule 23(b)(1) and/or(2), while the
Securities Plaintiffs seek Final Certification under Rule 23(b)(3).
First, there is no question that the Rule 23(a) prerequisites of numerosity,
commonality, typicality and adequacy prerequisites as to both settlement classes.
Rule 23(a)(1) requires that members of the class be so numerous that joinder of all
would be “impracticable.” The Securities Class preliminarily certified by the Court is
comprised of purchasers of Delphi Securities. At the end of the Class Period, there were
approximately 562 million shares of Delphi common stock and $1.5 billion of Delphi
debt securities outstanding. The Claims Administrator sent Notices to more than 442,000
potential Class Members or their nominees. Given this magnitude, the Securities Fraud
Class is unquestionably sufficiently numerous to satisfy Rule 23(a)(1).
The ERISA Class is similarly sufficiently numerous to render joinder of all
members impracticable. Here, the ERISA Class is comprised of approximately 45,780
current or former participants in one or more of the Delphi-sponsored employee benefit
plans or their beneficiaries.
Rule 23(a)(2) is satisfied where there are “questions of law or fact common to the
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class.” The requirement of commonality does not require that all questions of law or fact
be common. In re Cardizem CD Antitrust Litig., 218 F.R.D. 508, 518 (E.D. Mich. 2003).
Instead, the requirement is only that there be at least one common question of law or fact.
See UAW v. Ford Motor Co., 2006 U.S.Dist. LEXIS 70471 at *53-54 (E.D. Mich. 2006),
aff’d by UAW v. GMC, 497 F.3d 615 (6th Cir. 2007).
Federal securities cases easily satisfy the commonality requirement of Rule
23(a)(2). See, e.g., In re Revco Sec. Litig., 142 F.R.D. 659, 661-62 (N.D. Ohio (1992).
Here, the Securities Plaintiffs have asserted claims against the Settling Defendants for
violations of the Exchange Act and/or the Securities Act. These claims present many
questions of law and fact common to all members of the Class, including allegations that
the Defendants violated the federal securities laws by making false and misleading
statements which artificially inflated the market price of Delphi stock and that the
Defendants acted with scienter.
Such commonality of questions of law and fact also exists with respect to the
ERISA claims. The ERISA Plaintiffs’ allegations that the Defendants breached the
fiduciary duties they owed to members of the proposed class by imprudently offering and
maintaining investment in the Delphi and/or GM Stock Fund as investment options under
the Plans, and by impruduently allowing and/or directing the Plans to purchase and hold
Delphi common stock satisfy Rule 23(a)(2).
Rule 23(a)(3) requires that “the claims or defenses of the representative parties are
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typical of the claims or defenses of the class.” A plaintiff’s claim is typical if it arises
from the same event or practice or course of conduct that gives rise to the claims of other
class members. In re. Am. Med. Sys., 75 F.3d 1069, 1082 (6th Cir. 1996). Here, the
injuries to the Lead Plaintiffs and Class Members in both the Securities Fraud and ERISA
Classes are unquestionably attributable to the same acts or omissions of the Defendants
and liability for this conduct rests on the same legal theories.
Finally, the adequacy requirements of Rule 23(a)(4) are satisfied. In measuring
the adequacy of representation of the representative parties, the court must be assured that
the representatives have common interests with unnamed members of the class and it
must appear that the representatives will vigorously prosecute the interests of the class
through qualified counsel. UA.W. v. GMC, 497 F.3d at 626. To a large extent, the
adequacy requirement tends to merge with the commonality and typicality criteria of
Rule 23(a)(2) and (3). Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 626 n. 20 (1997).
As set forth above, Lead Plaintiffs’ interests and claims are common to and typical
of the classes they represent. They do not have any interests that are antagonistic to those
of the Class and the record reflects that they have pursued this litigation and the
settlement negotiations vigorously, sharing the common goal of maximizing recovery.
Thus, there is no conflict, intra-class or otherwise, that would defeat class certification.
See Ford Motor Co., 2006 U.S.Dist. LEXIS 70741 at * 56 (recognizing that only a
conflict going to the very subject matter of the claims will defeat adequacy and there is
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no conflict with class members “simply because the Settlement may impact individuals
differently.”)
For all of the foregoing reasons, the Court finds that the Rule 23(a) prerequisites to
class certification are easily satisfied with respect to both the proposed Securities Fraud
and ERISA classes.
Turning then to the particulars of Rule 23(b), as indicated, the ERISA Lead
Plaintiffs seek class certification under Rule 23(b)(1) and/or (2) while the Securities
Fraud Lead Plaintiffs seek certification under Rule 23(b)(3).
Under Rule 23(b)(1), a class may be certified if
(1) the prosecution of separate actions by or against individual members of
the class would create a risk of
(A) inconsistent or varying adjudications with respect
to individual members of the class which would establish
incompatible standards of conduct for the party opposing the
class, or
(B) adjudications with respect to individual members
of the class which would as a practical matter be dispositive
of the interests of the other members not parties to the
adjudications or substantially impair or impeded their ability
to protect their interests.
Rule 23(b)(1)(A) “considers possible prejudice to the defendants, while
23(b)(1)(B) looks to possible prejudice to the putative class members.” In re IKON
Office Solutions Sec. Litig., 191 F.R.D. 457, 466 (E.D. Pa. 2000). Examined from either
perspective, this subsection is satisfied here. Because of ERISA’s distinctive
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“representative capacity” and remedial provisions, courts have observed that ERISA
litigation of this nature presents a paradigmatic example of a (b)(1) class action. See
Rankin v. Rots, 220 F.R.D. 511, 521-23 (E.D. Mich. 2004).
A class may be certified under Rule 23(b)(2) if, in addition to meeting the
requirements of Rule 23(a), “the party opposing the class has acted or refused to act on
grounds generally applicable to the class, thereby making appropriate final injunctive
relief or corresponding declaratory relief with respect to the class as a whole.” Here, the
ERISA Plaintiffs allege that Defendants breached their fiduciary duties by (among other
things) failing to ensure that Delphi stock was a prudent investment for the Plans, and
failing to properly monitor fiduciary appointees.
The available remedies under ERISA for such alleged misconduct include
restoration of the Plans’ losses, as well as such other equitable actions the Court finds
appropriate. ERISA §§ 502(a)(2) & (3), 29 U.S.C. §§ 1132(a)(2) & (3); ERISA § 409(a),
29 U.S. C. § 1109(a). Indeed, remedies under § 502(a)(2) are by definition plan-wide, a
classic example of equitable relief. See e.g., Smith v. Provident Bank, 170 F.3d 609, 616
(6th Cir. 1999) (“ERISA authorizes participants to sue on behalf of a plan for breach of
fiduciary duty. . . . Permitting such suits by participants is the mechanism which
Congress established to enforce the plan’s right to recover for a breach of fiduciary
duty.”) Once the Plans recover through the relief available under ERISA, any
consequential financial benefit to individual participants and beneficiaries “would flow
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directly and incidentally” from the Plans’ recovery. Bublitz v. E.I. du Pont de Nemours
& Co., 202 F.R.D. 251, 259 (S.D. Iowa 2001); see also Berger v. Xerox Corp Ret.
Income Guarantee Plan, 338 F.3d 755, 763-64 (7th Cir. 2003 (certifying (b)(2) class
where ERISA plaintiffs sought declaratory relief, and monetary relief would be the
direct, anticipated consequence of the declaration.) Because the equitable relief issues
would similarly predominate here, the Court finds that certification of the ERISA class
would be proper under Rule 23(b)(2), as well as under Rule 23(b)(1).
Rule 23(b)(3), which the Securities Plaintiffs rely upon, authorizes class
certification if “the court finds that the questions of law or fact common to the members
of the class predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for the fair and efficient adjudication of
the controversy.” Fed. R. Civ. P. 23(b)(3). “Common issues need only predominate, not
outnumber individual issues.” In re Inter-Op Hip Prosthesis Liab. Litig., 204 F.R.D.
359, 374-75 (N.D. Ohio 2001). Courts have repeatedly found that the Rule 23(b)(3)
predominance test is “readily met” in securities fraud cases. See Amchem Products, Inc.
v. Windsor, 521 U.S. 591, 625 (1997); In re Kmart Corp. Sec. Litig., 1996 U.S. Dist.
LEXIS 22609 at *30 (E.D. Mich. 1996). In determining whether common questions
predominate, the Court’s inquiry is directed toward the issue of liability. Where, as here,
a single set of operative facts establishes liability and “a single proximate cause applies to
each potential class member and defendant,” class certification under (b)(3) is
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appropriate. Inter-Op, 204 F.R.D. at 375. In sum, the Court concludes that the requisites
for Rule 23(b)(3) certification of the Securities Fraud class are met.
For all of the foregoing reasons, the Court finds that the Fed. R. Civ. P. 23
requirements for class certification are met. Therefore, the Court will GRANT the
ERISA and Securities Fraud Lead Plaintiffs’ respective Motions for Final Class
Certification.
VI.
THE SETTLEMENTS ARE FAIR, ADEQUATE AND REASONABLE
Pursuant to Fed. R. Civ. P. 23(e)(1)(A), a certified class action settlement requires
court approval. In determining whether final settlement approval should be given to a
proposed class settlement, the Court’s role is to determine whether the terms proposed are
“fair, adequate, and reasonable to those it affects” and “in the public interest.” Lessard v.
City of Allen Park, 372 F. Supp. 2d 1007, 1009 (E.D. Mich. 2005) (citing Williams v.
Vukovich, 720 F.2d 909, 921-23 (6th Cir. 1983)); Cardizem, 218 F.R.D. at 522. In
making this determination, the court considers whether the interests of the class as a
whole are better served if the litigation is settled rather than pursued. Id. As the court
observed in UAW v. Ford Motor Co., 2006 U.S. Dist. LEXIS 70471, supra,
In assessing the settlement, the Court must determine whether it falls within
the range of reasonableness, not whether it is the most favorable possible
result in the litigation. An appropriate range of reasonableness 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.
Under this standard, a just result is often no more than an arbitrary point
between competing notions of reasonableness.
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Id. at *58-61 (internal punctuation and citations omitted.)
Courts in the Sixth Circuit have found eight factors relevant in considering
whether a class action settlement is fair, adequate, reasonable and consistent with the
public interest. These factors are:
(a) the likelihood of success on the merits weighed against the amount and
form of the relief offered in the settlement; (b) the risks, expense, and delay
of further litigation; (c) the judgment of experienced counsel who have
competently evaluated the strength of their proofs; (d) the amount of
discovery completed and the character of the evidence uncovered; (e)
whether the settlement is fair to the unnamed class members; (f) objections
raised by class members; (g) whether the settlement is the product of arm’s
length negotiations as opposed to collusive bargaining; and (h) whether the
settlement is consistent with the public interest.
Cardizem, 218 F.R.D. at 522 (citing Granada Investments, Inc. v. DWG Corp, 962 F.2d
1203, 1205 (6th Cir. 1992), and Willliams v. Vukovich, 720 F.2d. 909, 922-23 (6th Cir.
1983)); Rankin v. Rots, 2006 U.S. Dist. LEXIS 45706 at *9-10 (E.D. Mich. 2006); see
also Ford Motor Co., supra, 2006 U.S. Dist. LEXIS 70471 at *62-63. “The court may
choose to consider only those factors that are relevant to the settlement at hand and may
weigh particular factors according to the demands of the case.” Id. “The district court
enjoys wide discretion in assessing the weight and applicability of these factors.”
Granada, 962 F.2d at 1205-06. As discussed below, the Court finds that each of the
Sixth Circuit’s factors weighs in favor of approval of both of the Settlements.
1.
Likelihood of Success on the Merits Weighed Against the
Amount and Form of the Relief Offered in the Settlement
In evaluating a class action settlement, the court first weighs the plaintiffs’
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likelihood of success on the merits against the amount and form of the relief offered by
the settlement. Here, Lead Plaintiffs in both the ERISA and Securities Fraud actions are
optimistic about their ultimate success on the merits. They believe strongly that the legal
arguments advanced by the Settling Defendants in their motions to dismiss would fail and
that the evidence would support their theories of liability and damages. Defendants, of
course, believe otherwise and Plaintiffs anticipate that Defendants would continue to
advance their views forcefully through trial and appeal, if necessary. Plaintiffs further
acknowledge that Defendants are represented by highly experienced and competent
counsel. Accordingly, Plaintiffs acknowledge the risk that Defendants could prevail with
respect to certain legal or factual issues, which could result in the reduction or
elimination of Plaintiffs’ potential recoveries. Indeed, Plaintiffs admit that risk is
inherent in any litigation, particularly class actions. The risk is even more acute in the
complex areas of ERISA law and the developing law under the PSLRA. As a result,
success is less than certain.
Juxtaposed against this background of uncertainty are two substantial settlements.
The proposed Settlement in the Securities Fraud action will provide Class Members with
a substantial recovery having a potential value of $284,100,000, which constitutes a large
proportion of the losses suffered by the Class. The Securities Fraud Lead Plaintiffs’
damages expert opined that this represents 22% of the maximum damages. Using
Defendants’ analyses, the Settlement represents at least 47% of the maximum damages.
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Several noteworthy class action authorities have stated that the average securities fraud
class action settles for between 3% and 15% of the damages suffered by the class. See In
re DPL Inc. Sec. Litig., 307 F. Supp. 2d 947, 951-52 (S.D. Ohio 2004) and authorities
cited therein; see also In re F&M Distrib., Inc. Sec. Litig., 1999 U.S. Dist. LEXIS 11090
at *17 (E.D. Mich. 1999) (citing authorities estimating average recoveries at 7-11%, 12%
and 25% of claimed losses).
To obtain such a solid settlement is a particularly excellent result in light of the
significant risk to any ultimate recovery for the Securities Class created by Delphi’s
Bankruptcy Proceeding. Absent the Settlement, the Securities Fraud Class’s recovery
through Delphi’s reorganization would itself be uncertain and the pendency of the Class’s
claims would delay Delphi’s ultimate emergence from bankruptcy. This would
negatively impact Delphi’s ability to pay a sizeable distribution on any allowed claim
belonging to the Class. Moreover, Lead Plaintiffs would likely be required to argue
against the trial of their claims against Delphi in Bankruptcy Court, without a jury,
through a summary estimation process which is designed to reduce liabilities of the
debtor. Regarding the Individual Defendants, Lead Plaintiffs would face the risk that
after a trial on the merits, a jury might award only a fraction of the Class’s losses as
damages and/or some of the Settling Defendants might be allocated only a small portion
of the fault for those damages. Finally, indemnification claims by the Individual
Defendants and the Underwriter Defendants asserted in Delphi’s Bankruptcy Proceeding
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would create additional issues that are resolved by the Settlement.
The ERISA Settlement is similarly fixed at a substantial amount -- approximately
$47 million, consisting of $22,500,000 in cash and an allowed interest in the Delphi
bankruptcy anticipated to have a value of approximately $24,500,000. The amount
Plaintiffs could recover if successful, discounted for risk, is clearly not certain. Indeed,
as the ERISA Lead Plaintiffs acknowledge, trials on the ERISA issues presented have
been few and far between and the few decisions on summary judgment and adjudications
on the merits in this area demonstrate the heavy burdens that Plaintiffs might ultimately
have to face if the case were not resolved by settlement.
2.
The Risks, Expense and Delay of Further Litigation
In evaluating a proposed class settlement, the court also must weigh the risks,
expense and delay the plaintiffs would face if they continued to prosecute the litigation
through trial and appeal against the amount of recovery provided to the class in the
proposed settlement. Cardizem, supra, 218 F.R.D. at 523. Courts have consistently held
that the expense and possible duration of litigation are major factors to be considered in
evaluating the reasonableness of a settlement. See e.g., In re Telectronics Pacing Sys.,
Inc. 137 F. supp. 2d 985, 1013 (S.D. Ohio 2001). For class actions in particular, courts
view settlement favorably because it “avoids the costs, delays and multitudes of other
problems associated with them.” Id. at 1013.
If not for the Settlements, both the ERISA and the Securities Fraud actions would
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have continued to be fiercely contested by all parties. The Settling Defendants, most of
whom are backed by numerous insurance policies and represented by well-respected and
highly capable counsel, have demonstrated a commitment to defend the case through and
beyond trial, if necessary. The expense of continued litigation would be substantial. The
parties would have to complete lengthy, and extensive discovery involving reviewing and
analyzing of thousands of additional documents, take depositions of dozens of witnesses
across the country, and complete expensive expert discovery. Any trial involving some
or all of the Defendants would run at least several weeks, and involve numerous
attorneys, witnesses and experts; the introduction of voluminous documentary and
deposition evidence; vigorously contested motions; and the expenditure of enormous
amounts of judicial and counsel resources. Even if successful at trial, there most
certainly would be appeals which would deny the Classes any recovery for years.
Avoiding such unnecessary expenditure of time and resources clearly benefits all parties
and the Court. See Ford Motor Co., supra, 2006 U.S. Dist. LEXIS 70741 at *70 (“The
costs and uncertainty of lengthy and complex litigation weigh in favor of settlement.”)
In sum, the proposed Settlements secure for both the ERISA and Securities Fraud
Classes an immediate benefit, after approximately two years of litigation, undiminished
by further expenses and without the delay, risk and uncertainty of continued litigation.
3.
The Judgment of Experienced Counsel and the Amount and
Character of Discovery
In deciding whether a proposed settlement warrants approval, “[t]he Court should
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also consider the judgment of counsel and the presence of good faith bargaining between
the contending parties.” Rankin v. Rots, 2006 U.S. Dist. LEXIS 45706 at *9 (E.D. Mich.
2006). Both the ERISA and the Securities Fraud Lead Plaintiffs’ Counsel have
extensive experience in handling class action cases in their respective areas of practice,
and they have thoroughly investigated and analyzed the claims alleged in these actions,
and worked with experts in evaluating damages to the respective Classes and the
financial wherewithal of Delphi. They have made informed judgments regarding the
Settlements and believe that they are fair, reasonable and adequate.
In making their assessments, counsel relied in part on their investigations of the
factual allegations, undertook substantial discovery efforts. They obtained hundreds of
documents, including documents obtained through the bankruptcy proceeding and
documents that Delphi and other Defendants produced to the SEC regarding Delphi’s
financial status and the alleged fraudulent financial transactions during the Class Period.
Additionally, the Court and the parties have had the added benefit of the insight of
a former federal judge who is one of the foremost mediators of complex actions, who
acted as Special Master in the settlement negotiations. Judge Phillips, based on his
extensive involvement in the mediation of these actions, has expressed his view that the
Settlements were reached at arm’s-length through hard-fought negotiations and that each
of the Settlements represents an excellent result given all of the facts and circumstances
at issue.
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5.
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Whether the Settlements are Fair to Unnamed Class Members
The Court next considers whether the Settlements are fair to absent class
members. This factor assesses whether the proposed settlements “appear[] to be the
result of arm’s-length negotiations between the parties and fairly resolves all claims
which were, or could have been asserted.” In re Rio Hair Naturalizer Prods. Liab. Litig.,
1996 U.S. Dist. LEXIS 20440 at *42 (E.D. Mich. 1996). As set forth above, the parties
reached the Settlement Agreements only after numerous and extensive mediation
sessions with Judge Phillips. There is no question that the Settlements resulted from
arm’s-length negotiations.
6.
Reaction of Class Members
In analyzing the Settlements, the Court also considers the Classes’ reactions.
Brotherton v. Cleveland, 141 F. Supp. 894, 906 (S.D. Ohio 2001). “A certain number of
opt-outs and objections are to be expected in a class action. If only a small number [of
opt outs or objections] are received, that fact can be viewed as indicative of the adequacy
of the settlement.” Cardizem, 218 F.R.D. at 527 (citing In re NASDAQ Market-Makers
Antitrust Litig., 187 F.R.D. 465, 478 (S.D.N.Y. 1998).
a.
Opt-Outs
The ERISA Class is a non-opt-out class. However, the Order of Preliminary
Approval and the Notice of the Securities Fraud Settlement Agreement mailed to Class
Members afforded those individuals who did not wish to participate in the settlement and
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who did not wish to be included in the class, the opportunity to opt out. The Order of
Preliminary Approval stated that each “Request for Exclusion must state. . . the person’s
purchase and sales of Delphi Securities during the Class Period, including the dates, the
number of securities purchased or sold, the price(s) paid or received per Delphi Security
for each such purchase or sale, and whether such person continues to hod such Delphi
Securities. . . .” (Order ¶ 21 (emphasis added)). The requirement to provide this
information was repeated in the Notice mailed to Class Members, which stated, in bold
face type, “[i]f you do not follow these procedures. . . you will not be excluded from the
Class and you will be bound by all of the orders and judgments entered by the Court
regarding the Settlement.” (emphasis added).
Sixty-two exclusion requests were received. However, of those 62 requests, only
eight provided the requisite information on purchase and sales of Delphi Securities.
These properly submitted opt outs represent less than 5,100 shares of the approximately
562 million outstanding shares of Delphi stock. The other 54 purported exclusion
requests omitted this information entirely. Many simply state, “I hereby wish to be
excluded from the class,” or words to that effect.
Upon the Court’s inquiry at the fairness hearing, counsel for Delphi indicated that
the company did not know, and could not find out, the number of shares held by each
such individual because most of Delphi’s securities are held in “street name,” i.e., in the
name of the broker, bank or other nominee who purchased the stock on behalf of the
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beneficial owner, and the beneficial owner’s name is not listed in the corporate books.
These beneficial owners, therefore, are not known to any of the parties in this litigation.
Furthermore, even if those who sought to opt out purchased some Delphi Securities in
their own name, Delphi has no way of knowing how many shares they themselves
purchased during the Class Period in “street name.” Thus, the Class Members electing to
exclude themselves are uniquely situated to provide such information.
This information is crucial because the Defendants need to know what they are
facing. This Settlement included a “Supplemental Agreement,” pursuant to which a
Settling Defendant is permitted to terminate the Settlement if potential Class Members
who purchased in the aggregate in excess of a certain amount of Delphi Securities during
the Class Period (the “Opt-out Threshold”) elected to opt out of the Settlement. Where,
as here, a putative Class Member requests exclusion -- but does not identify his purchases
of Delphi Securities -- the request for exclusion does not count against the Opt-out
Threshold because the amount of securities the putative Class Member purchased is
unknown. The requirement in the Court’s Preliminary Approval Order was intended to
insure that any putative Class Member who is going to excluded from the Class would
have its purchase counted against the Opt-out Threshold so that the Settling Defendants
could, if the Opt-out Threshold was reached, elect their right to terminate the Settlement.
The Court finds that the procedures for opting out from the class were plainly set
forth in the Notice of Settlement and were not difficult to follow. Because the Settling
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Defendants had the right to terminate the Settlement if a certain percentage of the class
opted out, they are entitled to know the number of the opt-outs. Accordingly, the Court
declares that only those eight class members whose names are set forth in Exhibit A of
the “Delphi Defendants’ Objection to Form of Proposed Order of Final Judgment” [Dkt.
# 294] are excluded from the Securities Settlement.
b.
Objections Raised by Class Members
As noted above, if only a small number of objections to a class action settlement
are received, that fact can be viewed as indicative of the adequacy of the settlement.
Cardizem, 218 F.R.D. at 527; see also Ford Motor Co., 2006 U.S.Dist. LEXIS 70471 at
*78 (finding that 800 objectors out of 170,000 class members -- less than one half of one
percent -- constituted a “very small level of opposition” which “is another reason to
conclude that the Settlement is fair, reasonable, and adequate.”)
In this case, as indicated above, the Claims Administrator mailed over 442,000
copies of the Notice of the Securities Fraud Settlement to potential Class Members. The
Notice contained detailed instructions for submitting objections. No Securities Fraud
Class Members filed any objections to class certification of the Action, the Settlement or
to the Plan of Allocation. One potential Securities Class member, Michael J. Rinis,
IRRA, f/b/o Michael J. Rinis (“Rinis”) who purchased only 290 shares of stock did,
however, object to Lead Counsel’s application for an award of attorneys’ fees and
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expenses.13
Mr. Rinis has filed objections as a class member in at least 15 class action
settlements and can be fairly characterized as a “serial objector.” As indicated, Rinis
purchased only 290 shares of Delphi common stock during the Class Period (which
amounts to .0005% of the 562 million shares of stock outstanding at the end of the Class
Period). He does not dispute that class counsel has spent more than 40,000 hours on this
case. Nor does he dispute that 18% -- the percentage of the Gross Settlement sought by
Securities Lead Plaintiffs for their attorneys’ fees -- is generally viewed as a reasonable
percentage for a fee award in class actions such as this one. However, Rinis states that
“when viewed in light of this type of litigation and the size of the fund,” the Court should
find 18% unreasonable and, instead, allow fees only in the “5.5 to 9% range.” He bases
this sum principally upon Alba Conte’s “Attorney Fee Awards” treatise which states that
although the normal range of fee awards in class actions is 20-30%, “[d]eviations from
the normal range of percentage fees are appropriate when. . . the fund recovered is
extraordinarily large” and in a footnote, lists cases with recoveries of over $100 million
that resulted in fee awards ranging from 5.5% to 9%. See 1 Conte § 2.9, at pp. 128 and
13
One additional purported “objection” was filed by Independent Fiduciary
Services, Inc. (“IFS”) on October 29, 2007, but this “objection” was actually a
“reservation of rights to later object” to requested attorneys fees and expenses. This
“objection” was filed before Lead Securities Plaintiffs’ Counsel filed their formal
application for fees and expenses on November 6, 2007. IFS filed its objection to reserve
its rights to object to the fee application once it was filed if it determined the fee request
to be unreasonable. However, after reviewing the formally filed fee application, on
November 12th, IFS withdrew its objection.
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130 n. 3. (The other authority relied upon by Rinis is the Moshman Moore Study of
Attorneys’ Fees and the single page provided by Rinis shows an average 15.1% fee
award in cases with recoveries greater than $100 million.) The inconsistency of these
studies/treatises shows why they should be viewed as having little, if any, relevance in
determining the reasonableness of the fee award in this case.
As the Court observed on the record at the fairness hearing, although Mr. Rinis
certainly has an interest in attempting to obtain a reduced award for the attorneys in order
to increase his own recovery, the Court cannot disregard the fact that no other
shareholders who received notice of the Securities Settlement lodged objections to the
proposed fee application or any other aspect of the Settlement. The touchstone for final
approval is the effect on the class as a whole, in light of the circumstances. Carson v.
American Brands, Inc., 450 U.S. 79, 88 n.14 (1981)
With respect to the ERISA Settlement, there were six individuals who commented
on the Settlement. Three of those individuals -- Donald Egbert, John J. Montecalvo,
James Charles Spencer, all current or former Delphi Benefit Plan participants -- explicitly
stated after discussing their concerns with counsel that they did not wish to object to the
settlement. Another Plan participant who did object, Steven Boyer, after discussions with
counsel, withdrew his objection and authorized Lead Counsel to so inform the Court.
Pamela Geller, a non-class member, also filed an objection but she, too, later withdrew
her objection and directed her attorney to so inform the Court.
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The only remaining objecting Plan participant out of the of approximately 45,780
current or former Delphi Benefit Plan participants comprising the ERISA Class is Randy
Halazon of Vassar, Michigan. Mr. Halazon stated in his objection that he believes the
settlement is “woefully underfunded.” Mr. Halazon believes that a higher settlement is
warranted in light of what he considers to be a “fraudulent” bankruptcy. Lead Counsel
stated on the record that they had spoken with Mr. Halazon and explained the risks of
proceeding to trial versus the substantial benefits of a settlement now, as well as the
ongoing nature of the litigation against State Street. Counsel stated that Mr. Halazon
appeared to understand these relative risks and the ongoing litigation, but nonetheless
adheres his belief that he is entitled to a recovery greater than what he would be entitled
to under the Settlement and wanted his opinion to remain on record.
The fact that there are no substantive objections to either the ERISA or the
Securities Settlement is strong evidence that the Settlements are fair, adequate and
reasonable and supported by the Class Members. See Cardizem, supra; see also Rankin
v. Rots, supra (finding that the fact that notice of proposed Kmart class action settlement
elicited objections from only approximately 0.002% of the class translated into
“overwhelming[] support[]” of the settlement.)
6.
The Settlements are the Product of Arm’s -Length Negotiations
Another factor the Sixth Circuit has directed courts to consider in evaluating class
action settlements is whether the settlement is the product of arm’s-length negotiations.
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Without evidence to the contrary, the court may presume that settlement negotiations
were conducted in good faith and that the resulting agreements were reached without
collusion. Telectronics, 137 F. Supp. 2d at 1018 (citing Newberg on Class Actions §
11.51 (3d ed. 1992) (“Courts respect the integrity of counsel and presume the absence of
fraud or collusion in negotiating the settlement, unless evidence to the contrary is
offered.”).) See also Ford Motor Co., 2006 U.S. Dist. LEXIS 70471 at * 74-75; Rio
Hair, 1996 U.S. Dist. LEXIS 20440 at * 43.
The Settlements in this case come after two years of litigation and extensive
settlement negotiations between Lead Plaintiffs and the Settling Defendants in an
intensive mediation process before Judge Phillips that consumed four weeks of
negotiations. Indeed, Judge Phillips confirms in his Declaration that settlement
negotiations were hard-fought, arm’s-length, and not collusive.
7.
The Public Interest Warrants Approval of the Settlements
The final factor that the Court considers in evaluating a settlement is whether the
settlement is consistent with the public interest. As this Court has previously recognized
on the record, in light of the size of this case and the complexity and importance of
Delphi’s Bankruptcy Proceeding, approval of both the Securities and the ERISA
Settlements serve the public interest.
The proposed Settlements conclude a significant portion of a high-profile, hotly
contested lawsuit involving allegations of massive fraud on the investing public and one
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that affects the retirement security of thousands of Delphi employees. No contravening
public interest justifies deviating from the strong public interest in encouraging
settlement of complex class action litigation. See In re Cardizem, supra, 218 F.R.D. at
534 (“[T]here is a strong public interest in encouraging settlement of complex litigation
and class action suits because they are notoriously difficult and unpredictable and
settlement conserves judicial resources.” Id. (citation omitted).)
In addition, the Court is confident that the approval of these settlements will assist
Delphi and its employees and shareholders in concluding its bankruptcy proceeding and
returning to a more solid financial condition without the cloud of substantial litigation
hanging over it.
In sum, having considered the complexity, expense, likely duration and risks of
litigation, the state of the proceedings to date, the negotiations leading up to, and the
ultimate terms of the Settlements, and all of the objections submitted, the Court has
concluded that the proposed Securities and ERISA Settlements are fair and reasonable.
Accordingly, the Court finds that both proposed Settlements merit FINAL APPROVAL.
VII.
THE APPLICATIONS FOR ATTORNEYS’ FEES AND COSTS
Co-Lead Counsel for the Securities Class has filed an application for attorneys’
fees and costs, seeking, as set forth in the Notice provided to the Securities class, as an
award of attorneys’ fees, 18% of the Gross Securities Settlement Fund, and an order
reimbursing them their litigation expenses up to $1,300,000. Court-appointed Special
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Master Judge Layn Phillips stated in his November 1, 2007 Declaration that he finds the
fee award requested by the Securities counsel reasonable and appropriate. All four of the
institutional Securities Lead Plaintiffs have also submitted declarations approving the fee
request.
Co-Lead Counsel for the ERISA Class have not asked for an award of fees at
present but instead have asked the Court to set aside a reserve of 25% of the Gross
ERISA Settlement Fund for a potential award of attorneys’ fees and expenses, inclusive.
At the November 13, 2007 fairness hearing, however, the Court proposed instead that it
create a reserve of 20% of Fund for fees and $750,000 for costs and ERISA Lead
Counsel agreed on the record that they would not find the Court’s proposal unreasonable.
A.
Lead Plaintiff’s Counsel Are Entitled to a Reasonable Percentage of the Common
Fund Recovered
“It is well established that ‘a lawyer who recovers a common fund for the benefit
of persons other than himself or his client is entitled to a reasonable attorney’s fee from
the fund as a whole.’” Cardizem, 218 F.R.D. at 531-32 (quoting Boeing C. v. Van
Gemert, 444 U.S. 472, 478 (1980)). In common fund cases, the Sixth Circuit has held
that “a court must make sure that counsel is fairly compensated for the amount of work
done as well as for the results achieved.” Rawlings v. Prudential-Bach Props., Inc., 9
F.3d 513, 516 (6th Cir. 1993). The standard for attorneys’ fee awards in common fund
cases is that they be “reasonable under the circumstances.” Id.; see also Cardizem, 218
F.R.D. at 531; Rio Hair, 1996 U.S. Dist. LEXIS 20440 at *50.
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Courts generally have discretion to apply either the percentage-of-the-fund or the
lodestar method in calculating fee awards. See Rawlings, 9 F.3d at 516-17; Cardizem,
218 F.R.D. at 532. However, the Sixth Circuit has observed a “trend towards adoption of
a percentage of the fund method in [common fund] cases.” Rawlings, 9 F.R.D. at 515; In
re Sulzer Orthopedics, Inc., 398 F.3d 778, 780 (6th Cir. 2005); see also § 21D(a)(6) of
the PSLRA, 15 U.S.C. § 78u-4(a)(6) (“Total attorneys’ fees and expenses award by the
court to counsel for the plaintiff class shall not exceed a reasonable percentage of the
amount of any damages and prejudgment interest actually paid to the class.”) As the court
observed in Fournier v. PVS Invs., 997 F. Supp. 828 (E.D. Mich. 1998):
The lodestar method should arguably be avoided in situations where such a
common fund exists because it does not adequately acknowledge (1) the
result achieved or (2) the special skill of the attorney(s) in obtaining that
result. courts and commentators have been skeptical of applying the
formula in common fund cases. . . . [M]any courts have strayed from using
the lodestar in common fund cases and moved towards the percentage of
the fund method which allows for a more accurate approximation of a
reasonable award for fees.
Id. at 831-32 (citations omitted).
Here, the 18% and 20% fees requests appear to be more than reasonable. Indeed,
when compared to the range of percentage fee awards generally accepted in this District,
the amounts requested are below that range. See e.g., Cardizem, 218 F.R.D. at 532
(recognizing that fees of 20-30% are generally awarded in this Circuit); F&M, 1999 U.S.
Dist. LEXIS 11090 at *19-20 (awarding 30% fee); Rio Hair, 1996 U.S. Dist. LEXIS
20440 at *56 (recognizing that the acceptable range of fee awards is 20% to 50% of the
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common fund); In re Visteon Corp. ERISA Litig., No. 05-71205 (E.D. Mich., Mar. 9,
2007) (awarding 28% of $7.6 million settlement fund).
B.
Evaluation of the Fee Request of Securities Co-Lead Counsel under the Sixth
Circuit Factors Establishes the Reasonableness of the Requested Award14
The Sixth Circuit has enumerated six factors for courts to use in evaluating the
reasonableness of attorney fee requests: (1) the value of the benefit rendered to the class;
(2) society’s stake in rewarding attorneys who produce such benefits in order to maintain
an incentive to others; (3) whether the services were undertaken on a contingent fee
basis; (4) the value of the services on an hourly basis; (5) the complexity of the litigation;
and (6) the professional skill and standing of counsel involved on both sides. Smillie v.
Park Chem. Co., 710 F.2d 271, 275 (6th Cir. 1983); Cardizem, 218 F.R.D. at 533; Rio
Hair, 1996 U.S. Dist. LEXIS 20440 at *53. Applying these factors confirms the
reasonableness of the fee award requested by the Securities Co-Lead Counsel.
The primary factor in determining a reasonable fee is the result achieved on behalf
of the class. In re DPL Inc. Sec. Litig., 307 F. Supp. 2d 947, 951 (S.D. Ohio 2004).
Here, the recovery of potentially $284.1 million in value for the Securities Class
represents a large proportion of the losses suffered by the Class. As discussed above,
using the approach to damages employed by Lead Plaintiffs’ damages expert, the
14
The Court will reserve its assessment of the reasonableness of fees of the
ERISA Lead Counsel until a formal application for fees is filed at the conclusion of the
case. Accordingly, the discussion in this Opinion is limited to the reasonableness of the
Securities Co-Lead Counsel’s fee request.
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Securities Settlement represents approximately 22% of the maximum damages. Certain
of the Settling Defendants have calculated the Settlement as representing at least 47% of
the maximum damages. This recovery surpasses the average range of recoveries
obtained in most securities fraud class actions. See DPL, supra, 307 F. Supp. 2d at 95152, and authorities cited therein (estimating average securities fraud recoveries at 7-11%,
12% and 25% of the claimed losses). The Settlement is even more impressive given the
impact of the Delphi Bankruptcy proceeding.
In evaluating the reasonableness of a fee request, the court also must consider
society’s stake in rewarding attorneys who produce a common benefit for class members
in order to maintain an incentive to others. Cardizem, 218 F.R.D. at 534 (“Encouraging
qualified counsel to bring inherently difficult and risky but beneficial class actions like
this benefits society.”); Rio Hair, 1996 U.S.Dist. LEXIS 20440 at *54 (“[A]ttorneys who
take on class action matters enabling litigants to pool their claims provide a huge service
to the judicial process.”); Telectronics, supra, 137 F. Supp. 2d at 1042-43 (“Attorneys
who take on class action matters serve a benefit to society and the judicial process by
enabling such small claimants to pool their claims and resources.”)
Whether counsel’s services were undertaken on an contingent fee basis is another
factor for the Court to consider in evaluating a fee request. Co-Lead Counsel for the
Securities Class have prosecuted this action entirely on a contingent basis, knowing that
it possibly could last for four or five years, require the expenditure of thousands of
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attorney hours and millions of dollars in expenses and ultimately result in a loss at
summary judgment or at trial. In fact, Co-Lead Counsel have incurred over $1.47 million
in out-of-pocket expenses litigating for the benefit of the Securities Class, received no
compensation during the more than two years this action has been pending, and were
never guaranteed payment of any fee. Yet, as a result of Co-Lead Counsel’s efforts, a
significant recovery for the benefit of the Securities Class was obtained. This factor, like
the first two factors, accordingly, weighs in favor of a finding of reasonableness of the
fee request.
Courts in this Circuit also consider the complexity of the litigation in determining
the reasonableness of an attorneys’ fee award. While “most class actions are inherently
complex,” Telectronics, 137 F. Supp. 1s at 1013, this one presented a number of
complicated legal, factual and procedural issues in multiple forums, including the
Bankruptcy Court.
Finally, in considering fee requests, courts consider the professional skill and
standing of counsel. Cardizem, 218 F.R.D. at 533. In this case, each of the Co-Lead
Counsel has national standing and is among the most experienced securities lawyers in
the country. Phillips Decl., ¶ 26. Co-Lead Counsel conducted extensive work with
accounting and banking experts to evaluate the accounting issues in this case, damages to
the Class, and Delphi’s financial wherewithal. See Joint Declaration of Co-Lead
Counsel, ¶¶ 78-80.
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The quality of opposing counsel also is important to evaluate. Here the Settling
Defendants and their insurers are all represented by able counsel at some of the nation’s
most prestigious law firms. Phillips Decl., ¶ 26; Joint Decl., ¶¶ 111-112. The ability of
Co-Lead Counsel to negotiate a favorable settlement in the face of formidable legal
opposition further evidences the reasonableness of the fee award requested.
The Court is able to add that it had extensive interaction, both on-the-record and in
chambers, with all Co-Lead Counsel, and has been considerably impressed, not only by
counsel’s skill, knowledge of the substantive and procedural law, and sophistication -- all
of which were consistently evident to the Court -- but also by their dedication and
commitment to their clients’ cause. In short, these lawyers have practiced at the highest
levels of professional competency, and the Court sees no reason not to award them the
commensurately reasonable fee they have requested as it readily meets the criteria
established by the Sixth Circuit.
C.
The Class’s Support for the Fee Request Further Demonstrates Its Reasonableness
The Class’s reaction to the requested fee award is also important evidence of the
fairness and reasonableness of the fee request. Cardizem, 218 F.R.D. at 534. Here, over
442,000 Notices were mailed to potential Securities Class members. The Notices
specifically stated that Co-Lead Counsel intended to apply for a fee of 18% of the
Settlement Fund and reimbursement of costs and expenses in an amount not to exceed
$1.3 million. As indicated above, only one objection was submitted on behalf of a serial
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objector who purchased only 290 shares of stock. Given the substantial number of
sophisticated institutional holders of Delphi Securities -- including the four Lead
Securities Plaintiffs who have filed declarations supporting the fee request -- the
existence of this one objection by a holder of comparatively few shares of stock is
insignificant. The Class’s overwhelming favorable response lends further support to the
conclusion that the requested fee award is fair and reasonable.
D.
Co-Lead Counsel Are Entitled to Reimbursement for Reasonable Litigation
Expenses
“Expense awards are customary when litigants have created a common settlement
fund for the benefit of a class.” F&M, 199 U.S. Dist. LEXIS 11090 at *20. “Under the
common fund doctrine, class counsel are entitled to reimbursement of all reasonable outof-pocket litigation expenses and costs in the prosecution of claims and in obtaining
settlement, including expenses incurred in connection with document production,
consulting with experts and consultants, travel and other litigation-related expenses.”
Cardizem, 218 F.R.D. at 535.
Co-Lead Counsel seek reimbursement of costs and expenses in an aggregate
amount of $1.3 million for prosecuting the settled claims on behalf of the Class.” As set
forth in the Joint Declaration and Compendium of Counsel Declarations, these expenses
were incurred on an ongoing basis for such items as accounting and damages expert and
consultant fees, management and photocopying of documents, on-line research,
messenger service, postage, express mail and overnight delivery, long distance and
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facsimile expenses, transportation, meals, travel and other incidental expenses directly
related to the prosecution of this action. Lead Plaintiffs approve Counsel’s request.
Moreover, no Class Member has objected to the request for reimbursement of expenses.
For all of the foregoing reasons, the Court will authorize an Award of Attorneys’
Fees of 18% of the Gross Settlement Fund, to be paid in the same proportion of cash and
Delphi Plan Currency received by the Class. The Court will also authorize an award of
costs and expenses in the amount of $1.3 million.
Based upon the foregoing discussion, the Court will also set aside a reserve of
20% of the Gross ERISA Settlement Fund for an award of fees to the ERISA Co-Lead
Counsel and will also reserve $750,000 for costs and expenses.
VIII. DELPHI TRUST I’S INTERIM LEAD COUNSEL’S FEE REQUEST
Attorneys who were appointed as co-lead counsel by the Southern District of
Florida court very early on in the Bernstein litigation (whose appointments the Court
vacated in December 2006), referring to themselves as “Delphi Trust I Interim Lead
Counsel” also filed, on November 2, 2007, a Motion for Fees and Costs asking that they
be awarded fees and costs in the amount of $525,923.07 from the Securities Class
Settlement Fund. Because of the untimeliness of their motion and because they have
failed to sufficiently demonstrate that their activities provided any benefit to the
Settlement Class that warrants an award of fees, their motion will be denied.
First, the PSLRA requires that any settlement class be afforded adequate notice of
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any request for attorneys’ fees from a common fund created in a securities action. The
statute provides, in pertinent part:
Any proposed notice of final settlement agreement that is published or
otherwise disseminated to the class shall include each of the following
statements, along with a cover page summarizing the information contained
in such statements. . . .
***
(C) If any of the settling parties or their counsel intend to apply to the court
for an award of attorneys’ fees or costs from any fund established as part of
the settlement, a statement indicating which parties or counsel intend to
make such an application, the amount of fees and costs that will be sought
(including the amount of such fees and costs determined on an average per
share basis), and a brief explanation supporting the fees and costs
sought. . . .
15 U.S.C. § 78u-4(a)(7)(C).
Lead Plaintiffs and Co-Lead Counsel presented the Court with a Motion for
Preliminary Approval on August 31, 2007. That Motion specifically included a request
to give the Class notice that Co-Lead Securities Counsel would seek attorneys’ fees of up
to 18% and reimbursement of expenses up to $1.3 million. A copy of the draft notice
was attached to the Stipulation of Settlement. Although they were served with copies of
Lead Plaintiffs’ Motion and Stipulation of Settlement with the attached draft notice [see
Notice of Electronic Filing of Document # 228 made at 3:38 p.m. EDT on 8/31/07], at no
time thereafter did Delphi Trust I Interim Lead Counsel seek to intervene, or inform the
Court in any way that they wished to give the Class notice that they, too, wanted the
Class to pay their attorneys’ fees or reimburse them for their costs and expenses.
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Five days later, on September 5, 2007, the Court preliminarily approved the
Settlement and ordered that Lead Plaintiffs and Co-Lead Counsel issue notice to the
Class. Still Bernstein counsel took no action. Nine days later, on September 14, 2007,
Lead Plaintiffs and Co-Lead Counsel began disseminating to the Class the Court-ordered
and PSLRA-mandated notice through mailings and publication of the “Notice of
Proposed Settlement of Class Action With Certain Defendants, Motion for Attorneys’
Fees and Reimbursement of Expenses and Fairness Hearing.” The Bernstein Delphi
Trust I Counsel still took no action to attempt to give the Class any indication of their
intent to seek fees and costs.
Indeed, the October 29, 2007 deadline for requesting exclusion from the
Settlement Class or to file an objection to the Notice, Settlement, Plan of Allocation or to
Co-Lead Counsel’s request for fees and costs came and went without any word from
Delphi Trust I Interim Counsel or their client. No objection nor any statement of any
kind was filed by or on behalf of Bernstein. Instead, Bernstein’s counsel waited until
November 2, 2007 -- after the deadline for filing objections had passed and only five
business days before the scheduled fairness hearing -- to file their Motion for Fees and
Costs. They never provided the Class Members any notice whatsoever -- much less
reasonable, timely notice by publication or otherwise of their request for attorneys’ fees.
Therefore, no Class member could have even known about such a request by the October
29, 2007 deadline, and as such, the Class members never had an opportunity to object to
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it.
Fed. R. Civ. P. 23(h)(1) expressly provides, in pertinent part: “Notice of [a]
motion [for an award of attorney fees] must be served on all parties, and for motions by
class counsel, directed to class members in a reasonable manner.” See also 15 U.S.C. §
78u-4(a)(7)(C). Delphi Trust I Interim Lead Counsel failed to even attempt to comply
with these rules. This failure deprived the Class of its right to object to the Delphi Trust I
Counsel’s fee application. See Fed. R. Civ. P. 23(h)(2) (“A class member, or a party
from whom payment is sought, may object to the motion.”)
Because Interim Lead Counsel for Delphi Trust I failed to intervene prior to the
dissemination of Notice or otherwise timely notified the Class Members or anyone else of
their intent to file a fee and expense request, the Court finds that they have waived their
right to any such request under Rule 23(h) and the PSLRA.
However, even if lack of notice to the Class did not persuade the Court to deny
Bernstein’s counsel’s fee request, the Court finds that the activities of Delphi Trust I
Interim Counsel did not create a benefit for the Class.
Bernstein’s counsel claim that they created a benefit for the Class by initiating the
action on behalf of the Delphi Trust I certificate purchasers asserting claims under
Section 11 and 15 of the Securities Act and maintain that if they had not filed their
complaint in Florida, the Delphi Trust I subclass “might have fallen through the cracks,
not been represented and not received any part of the settlement negotiated by the Lead
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Counsel.” See “Supplemental Memorandum Describing Benefits Conferred by Interim
Lead Counsel in the Bernstein Action,” p. 2. This argument, they posit, is “a position
based on a strong inference from the record facts and chronology of this litigation.” Id.
Speculation and inference, however, are not a basis for awarding attorneys’ fees.
The Court should also note that a very substantial portion of fees requested related
to time spent attempting to be appointed as co-lead counsel by this Court, and
importantly, was expended after the Florida court, which had initially appointed them
interim counsel, had stayed the Florida action pending MDL transfer. When the Court
inquired about this at the fairness hearing, and whether counsel did not assume the risk of
not being compensated for this time, particularly in view of the Florida court’s stay order,
counsel had no substantive response.
Bernstein’s counsel point to no other actions taken by them during the course of
this more than two-year litigation -- other than the original filing of the Florida
complaint -- which they claim created or conferred any benefit upon the Class.15 This
“first to file” argument is one which this Court has already rejected in vacating the
Florida court’s order appointing Bernstein’s attorneys as lead counsel. Simply stated,
merely having initiated an action under the PSLRA entitles Bernstein Interim Lead
Counsel to nothing.
15
Although they point to no other actions taken by them other than the filing of
the complaint which conferred any benefit on the Class, most of the fees the Bernstein
Interim Lead Counsel seek are for all of their various actions taken after filing their
complaint.
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CONCLUSION
For all of the foregoing reasons,
IT IS HEREBY ORDERED that the ERISA Plaintiffs’ Motion [Dkt. # 266] for
Final Approval of ERISA Class Action Settlement, for Certification of Settlement Class,
for Reserve from the Gross Settlement Fund for Potential Award of Attorneys’ Fees and
Expenses, for Case Contribution Awards to Named Plaintiffs and for a Plan of Allocation
is GRANTED. Accordingly,
IT IS FURTHER ORDERED that the ERISA Settlement Class is hereby certified
as a non-opt out class pursuant to Fed. R. Civ. P. 23(b)(1) and (2).
IT IS FURTHER ORDERED that the ERISA Class Action Settlement is
APPROVED by the Court pursuant to Fed. R. Civ. P. 23(e).
IT IS FURTHER ORDERED that 20% of the Gross Settlement Fund for a
potential award of attorneys’ fees and $750,000 for costs and expenses be reserved from
the Gross Settlement Fund pending resolution of all claims in the ERISA action and the
filing by ERISA Co-Lead Counsel of a formal application for fees and expenses.
IT IS FURTHER ORDERED that the proposed payment of Case Contribution
Awards to the six Named Plaintiffs for their active assistance in prosecuting this matter in
the amount of $5,000.00 each is hereby APPROVED by the Court.
IT IS FURTHER ORDERED that the proposed ERISA Settlement Plan of
Allocation is APPROVED.
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IT IS FURTHER ORDERED that the Securities Lead Plaintiffs’ Motion [Dkt. #
273] for (I) Certification of the Class for Settlement Purposes, (II) Final Approval of
Settlement, and (III) Final Approval of Plan of Allocation is GRANTED. Accordingly,
IT IS FURTHER ORDERED that the Securities Settlement Class is hereby
certified pursuant to Fed. R. Civ. P. 23(b)(3).
IT IS FURTHER ORDERED that only the eight individuals/entities identified in
Exhibit A to Delphi’s Objection to Form Proposed Order and Final Judgment [Dkt. #
294] are excluded from the Securities Settlement Class.
IT IS FURTHER ORDERED that the Securities Class Action Settlement is
APPROVED by the Court pursuant to Fed. R. Civ. P. 23(e).
IT IS FURTHER ORDERED that the proposed Securities Settlement Plan of
Allocation is APPROVED.
IT IS FURTHER ORDERED that Securities Co-Lead Counsel’s Motion [Dkt. #
275] for Award of Attorneys’ Fees and Reimbursement of Expenses is GRANTED.
Accordingly,
Securities Class Co-Lead Counsel are hereby awarded 18% of the Gross
Settlement Fund for attorneys’ fees and $1,300,000 for costs and litigation expenses.
IT IS FURTHER ORDERED that the Motion of Delphi Trust I Interim Counsel
for an Award of Attorneys’ Fees and Reimbursement of Expenses [Dkt. # 264] is
DENIED.
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s/Gerald E. Rosen
Gerald E. Rosen
Dated: January 10, 2008
I hereby certify that a copy of the foregoing document was served upon counsel of record
on January 10, 2008, by electronic and/or ordinary mail.
s/LaShawn R. Saulsberry
Case Manager
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SOUTHERN DIVISION
IN RE GENERAL MOTORS CORP.
SECURITIES AND DERIVATIVE
LITIGATION
MDL No. 1749
Master Case No. 06-md-1749
Hon. Gerald E. Rosen
This Document Relates to:
2:06-cv-12258-GER
2:06-cv-12259-GER
/
ORDER APPROVING ATTORNEYS’ FEES AND EXPENSES
AND AWARDING COSTS AND EXPENSES TO NAMED AND LEAD PLAINTIFFS
This matter came on for hearing on December 22, 2008 (the “Final Approval Hearing”),
and for a supplemental hearing on January 6, 2009 (the “Supplemental Fairness Hearing”) to
consider any objections received as a result of the Supplemental Notice to the Class ordered by
this Court on December 15, 2008, upon the application of the parties for approval, pursuant to
Rule 23(e) of the Federal Rules of Civil Procedure, of the Settlement set forth in the Stipulation
and Agreement of Settlement dated September 16, 2008 (the “Stipulation”) resolving the abovecaptioned action (the “GM Securities Action”), and which, along with the defined terms therein,
is incorporated herein by reference; and for approval of Co-Lead Counsels’ Motion for (I) Award
of Attorneys’ Fees and Reimbursement of Expenses (the “Fee Request”) and for (II) Awards to
Lead and Named Plaintiffs (the “Costs Awards”), and the Court having considered all papers and
arguments submitted in favor of and in opposition to the Fee Request and Costs Awards, and
otherwise being fully informed in the premises and good cause appearing therefor,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:
1.
Stipulation.
The Court, for purposes of this Order, adopts all defined terms as set forth in the
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2.
Pursuant to and in compliance with Rule 23 of the Federal Rules of Civil
Procedure, the Court hereby finds that notice of the Final Approval Hearing (the “Notice”) was
given in accordance with the Court’s Order of Preliminary Approval and for Notice and Hearing
dated September 23, 2008 (the “Preliminary Approval Order”) and its Order dated December 16,
2008 regarding the Supplemental Notice to members of the Class as certified by the Court in the
Preliminary Approval Order, advising them of Co-Lead Counsels’ intention to seek (1) the Fee
Request and (2) the Costs Awards, and of their right to object thereto, and a full and fair
opportunity was accorded to all Class Members to be heard with respect to the Fee Request and
the Costs Awards, and that said notice was the best notice practicable and was adequate and
sufficient.
3.
In response to the Notice, there were the following objections to the Fee Request
filed or asserted by apparent class members, as follows: (1) the Pennsylvania State Employees’
Retirement System (“SERS”); (2) Independent Fiduciary Services (“IFS”), which is the fiduciary
for several trusts through which GM employee benefit plans are funded; (3) Mildred Terry
Warren; (4) Gregg Geanuracos; (5) Larry Banks; (6) Hans Klar; (7) Merle and Martha Likins;
(8) Rick Jasinski; (9) Glenn Brewer and Elise Fitzgerald; (10) Masako Nakata; (11) Michael and
Babette Rinis; (12) Paul Garrett; (13) Peter Spitalieri; and (14) Norman Mintz (collectively, the
“Fee Objectors”), and of these, IFS was the only objector to complain about the Costs Awards.
4.
The Court has fully considered the submissions and arguments made in favor of
and opposition to the Fee Request and the Costs Awards.
5.
Co-Lead Counsel are hereby awarded: (i) attorneys’ fees of 15% of the Gross
Settlement Fund, plus interest earned thereon at the same rate as the Class; and (ii)
reimbursement of litigation costs and expenses in the amount of $1,524,929.02, plus interest
2
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earned thereon at the same rate as the Class. Immediately after the date this Order is entered, the
awarded attorneys’ fees and expenses shall be paid from the Gross Settlement Fund to Co-Lead
Counsel in accordance with the terms, conditions, and obligations set forth in the Stipulation.
The awarded attorneys’ fees shall be allocated to the various other plaintiffs’ counsel by Co-Lead
Counsel in amounts that in Co-Lead Counsels’ sole discretion reflect the work performed by
each non-lead counsel, as well as each non-lead counsel’s contribution to the institution,
prosecution and resolution of this case.
6.
Lead Plaintiffs Deka Investment GmbH and Deka International S.A. Luxembourg
are collectively awarded $184,205, a fair and reasonable amount under the circumstances, as
reimbursement for their active assistance in prosecuting this matter and for their costs incurred in
representing the Class. The Court directs that such award be paid from the Gross Settlement
Fund.
7.
The seven Additional Named Plaintiffs, Claudia Polvani, Costantino Forlano, J.
Bryan Dewell, Dan Cleveland, Mark and Ruth Koppelman, Max Marcus Katz on behalf of the
Max Marcus Katz Pension & Profit Sharing Plan dated 12/31/78, and Frankfurt -Trust
Investment GmbH are awarded $1,000 each as reimbursement for his, her, or its costs incurred in
connection with acting as a plaintiff and Class Representative in this case, which amounts the
Court finds to be fair and reasonable.
8.
Based upon the evidence and pleadings submitted to the Court, the records at the
Final Fairness Hearing and the Supplemental Fairness Hearing and all papers on file in this
matter, the Court believes, and hereby finds, that the attorneys’ fees and reimbursement of
expenses awarded herein are fair and reasonable under the circumstances of the GM Securities
Action. In making this award, the Court has considered the factors considered by courts in the
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Sixth Circuit to be relevant to the determination of an appropriate fee in common fund cases and
finds that:
(a)
the Settlement provides for an excellent recovery, one of the largest
securities class action settlements ever obtained within this Circuit, with a cash value of
$303,000,000, plus interest, and that numerous Class Members will benefit from the Gross
Settlement Fund created through the efforts of Co-Lead Counsel;
(b)
Over 829,000 copies of the Notice were disseminated to putative Class
Members stating that Co-Lead Counsel were moving for an award of attorneys’ fees of up to
19% of the Gross Settlement Fund, plus interest earned at the same rate as the Class, and for
reimbursement of additional costs and expenses in an amount not to exceed $1.75 million, plus
interest earned at the same rate as the Class, with the attorneys’ fees and expenses awarded
herein being less than the maximum fees or expense reimbursements requested by Co-Lead
Counsel as set forth in the Notice;
(c)
The Court has found the Settlement to be fair, reasonable and adequate;
(d)
Co-Lead Counsels’ Fee Request as a percentage of the Gross Settlement
Fund is consistent with the prevailing law of the Sixth Circuit;
(e)
The GM Securities Action involved numerous difficult issues related to
liability and damages, and there was a substantial risk of a lesser recovery or no recovery for the
Class;
(f)
Co-Lead Counsel achieved this Settlement with skill, perseverance, and
diligent advocacy for the Class;
(g)
Had Co-Lead Counsel not achieved the Settlement, there would remain a
significant risk that Lead Plaintiffs and the Class may have recovered less or nothing from
4
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Defendants, particularly from GM, which has needed a massive multi-billion dollar federal
bailout;
(h)
Co-Lead Counsel pursued this Action on a contingent basis, having
received no compensation during the litigation in which they and other plaintiffs’ counsel
invested almost 25,000 hours of time, and any fee award has always been at risk and completely
contingent on the result achieved;
(i)
The time spent working on this case was at the expense of time that could
have been spent on other cases;
(j)
The Fee Request is supported by the Court-appointed institutional Lead
(k)
A fee award under the percentage of the fund method is appropriate, and
Plaintiffs;
an award of 15% of the common fund recovered for the Class in attorneys’ fees is reasonable
and, in fact, less than awards in similarly complex cases in this jurisdiction;
(l)
Lead Counsels’ request for reimbursement of expenses is reasonable in
light of Lead Counsels’ duties to ensure full prosecution of the claims alleged in the Complaint;
and
(m)
This Settlement was negotiated at arm’s-length, and no evidence of fraud
or collusion has been presented.
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9.
There is no just reason for delay in the entry of this Order, and immediate entry of
this Order by the Clerk of the Court is expressly directed.
s/Gerald E. Rosen
Gerald E. Rosen
Chief United States District Judge
Dated: January 6, 2009
I hereby certify that a copy of the foregoing document was served upon counsel of record on
January 6, 2009, by electronic and/or ordinary mail.
s/LaShawn R. Saulsberry
Case Manager
710380 v1
[12/29/2008 11:53]
6
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As of: May 14, 2014 2:27 PM EDT
In re F&M Distribs., Inc. Sec. Litig.
United States District Court for the Eastern District of Michigan, Southern Division
June 29, 1999, Decided ; June 29, 1999, Filed
Case number 95-CV-71778-DT
Reporter: 1999 U.S. Dist. LEXIS 11090; Fed. Sec. L. Rep. (CCH) P90,621
INC. the best interests of the class members.
Therefore, the settlement was approved. As to
fees, it concluded that the percentage of the fund
Disposition: [*1] Attorneys’ motion for final
method should be applied because the lodestar
approval of settlement granted. Attorneys’
method was too cumbersome, and consumed too
request for award of attorneys fees and expenses
granted in part and denied in part. Request for many of the court’s resources. Further, the
reimbursement of $ 584,951.20 in expenses percentage approach more accurately reflected
the result achieved. After evaluating all factors,
granted.
the court awarded thirty percent of the settlement
fund as reasonable fees based on the results
Core Terms
obtained. They also awarded thirty percent of the
attorney’s fees, settlement, settlement fund, interest earned on the settlement fund.
mediate, class action, skill, thirty percent, final Additionally, the attorneys’ request for
approval, common fund, incentive award,
reimbursement was granted, and the class
calculate, excellent, lodestar, reward
representatives were granted an incentive award.
IN RE F&M DISTRIBUTORS,
SECURITIES LITIGATION,
Case Summary
Procedural Posture
Attorneys for the plaintiff class filed for final
approval of the proposed settlement, attorney
fees or a lodestar award, reimbursements, and an
incentive award for the class representatives in
an action for violations of the state’s Uniform
Securities Act, Mich. Comp. Laws § 451.810(b),
the Securities Act of 1933, 15 U.S.C.S. §§ 77K,
771(2), and 77o, the Securities Exchange Act of
1934, 15 U.S.C.S. §§ 78j(b) and 78t, and SEC
Rule 10b.
Overview
The attorneys for plaintiff class sought approval
of the proposed settlement, as well as attorney
fees, reimbursements, and an incentive award for
the class representatives. The court determined
that the proposed resolution was fair, reasonable,
adequate, and in the public interest as well as in
Outcome
The court found the settlement to be suitable,
and awarded thirty percent of the fund and
interest earned as attorney fees, granted the
reimbursement request, and awarded the class
representatives an incentive award.
LexisNexis® Headnotes
Civil Procedure > Special Proceedings > Class
Actions > Compromise & Settlement
Civil Procedure > Special Proceedings > Class
Actions > Judicial Discretion
Civil Procedure > Settlements
Agreements > General Overview
>
Settlement
HN1 Pursuant to the mandate in Fed. R. Civ. P.
23(e), the court is required to determine if a class
action settlement is fair, reasonable, adequate,
and in the public interest before giving it final
approval.
SHANNON KING
Pg ID 13476
Page 2 of 9
1999 U.S. Dist. LEXIS 11090, *1
Civil Procedure > ... > Class Actions > Derivative
Actions > General Overview
Civil Procedure > ... > Attorney Fees & Expenses >
Basis of Recovery > American Rule
Civil Procedure > ... > Costs & Attorney Fees >
Attorney Fees & Expenses > Reasonable Fees
HN2 A lawyer who recovers a common fund for
the benefit of persons other than himself or his
client is entitled to a reasonable attorney’s fee
from the fund as a whole. This approach has
been used extensively in derivative shareholder
litigation.
Civil Procedure > Remedies > Costs & Attorney Fees >
General Overview
HN3 An award of attorneys’ fees lies within the
discretion of the court, and it must not rubber
stamp applications for attorneys’ fees. Rather,
courts that are called upon to review fee requests
carry the responsibility of ensuring that such
awards are reasonable. As a consequence, trial
courts use a percentage of the fund calculation,
or a lodestar/multiplier approach. Either method
must be applied with care. The interest of class
counsel in obtaining fees is adverse to the
interest of the class because the fees come out of
the common fund set up for the benefit of the
class. In addition, there is often no one to argue
for the interests of the class. Finally, when
awarding attorneys fees, district courts must
provide a clear statement of the reasoning used
in adopting a particular methodology, as well as
the factors that were considered in arriving at the
fee.
HN5 When determining the reasonableness of
an attorney fee request, trial courts are instructed
to consider the value of the benefit rendered to
the corporation or its stockholders, society’s
stake in rewarding attorneys who produce such
benefits in order to maintain an incentive to
others, whether the services were undertaken on
a contingent fee basis, the value of the services
on an hourly basis, the complexity of the
litigation, and the professional skill and standing
of counsel involved on both sides.
Civil Procedure > ... > Costs & Attorney Fees > Costs >
General Overview
HN6 Expense awards are customary when
litigants have created a common settlement fund
for the benefit of a class.
Civil Procedure > ... > Class Actions > Class
Attorneys > General Overview
Civil Procedure > ... > Discovery > Methods of
Discovery > Inspection & Production Requests
HN7 Incentive awards for the class
representatives are common in class actions
where common funds have been created.
Counsel: For MARGARET ACREE, plaintiff:
Richard M. Goodman, Goodman, Lister, Detroit,
MI.
For MARGARET ACREE, plaintiff: Bruce E.
Gerstein, Barry S. Taus, PENDING APP., Noah
J. Silverman, PENDING APP., Garwin,
Bronzaft, New York, NY.
For MARGARET ACREE, plaintiff: Elwood S.
Simon, John P. Zuccarini, Elwood S. Simon
Civil Procedure > Remedies > Costs & Attorney Fees >
Assoc., Birmingham, MI.
General Overview
HN4 When using a percentage of the fund
approach to calculate attorneys’ fees, twenty five
percent has traditionally been the benchmark
standard, with the ordinary range for attorney’s
fees between twenty and thirty percent.
For MARGARET ACREE, plaintiff: Lionel Z.
Glancy, Los Angeles, CA.
For RANDOLPH J. AGLEY, MICHAEL T.
TIMMIS, EARL T. WEISSERT, LAURA C.
KENDALL, FRANK M. JERNEYCIC,
Civil Procedure > ... > Costs & Attorney Fees > defendants: Richard A. Wilhelm, Dickinson,
Wright, Bloomfield Hills, MI.
SHANNON KING
Pg ID 13477
Page 3 of 9
1999 U.S. Dist. LEXIS 11090, *1
WAYNE
C.
INMAN,
TALON,
INCORPORATED, defendants: Jerold S.
Solovy, J. Kevin McCall, Jenner & Block,
Chicago, IL.
WAYNE
C.
INMAN,
TALON,
INCORPORATED, defendants: K. Scott
Hamilton, Dickinson, [*2] Wright, Detroit, MI.
For EUGENE DRIKER, ARCHIE A. VAN
ELSLANDER, B. JOSEPH WHITE, defendants:
Leonard B. Shulman, Keywell & Rosenfeld,
Troy, MI.
For EUGENE DRIKER, ARCHIE A. VAN
ELSLANDER, B. JOSEPH WHITE, defendants:
David L. Schiavone, Christopher Q. King,
Sonnenschein, Nath, Chicago, IL.
For PAINEWEBBER, INCORPORATED,
MERRILL LYNCH, PIERCE, FENNER AND
SMITH, INCORPORATED, defendants: E.
Michael Bradley, Jones, Day, New York, NY.
For PAINEWEBBER, INCORPORATED,
MERRILL LYNCH, PIERCE, FENNER AND
SMITH, INCORPORATED, defendants: Dennis
K. Egan, Egan & Mazarra, Troy, MI.
OPINION AND ORDER
I.
On April 21, 1999, the attorneys for the plaintiff
class (the attorneys) filed a motion, in which
they ask the Court to give its final approval of
the parties’ proposed global settlement of the
issues in controversy.
This case involves a claim by the Plaintiffs,
Margaret Acree and Daniel Dismondy, who,
acting on behalf [*3] their class members, filed
a complaint, in which they accused the
Defendants of having falsely portrayed the
vitality of F&M’s business in the Prospectus and
Registration Statement for the offering
(″Offering″) of certain notes (″Notes″), and in
their public disclosures regarding the Offering,
in violation of Sections 11, 12(2) and 15 of the
Securities Act of 1933, 15 U.S.C. §§ 77K,
771(2), and 77o; Sections 10(b)and 20(a) of the
Securities Exchange Act of 1934, 15 U.S.C. §§
78j(b) and 78t; and Rule 10b of the Securities
and Exchange Commission. The Plaintiffs also
charged the Defendants with failing to disclose
material facts that substantially impaired the
ability of F&M to repay the purchasers of its
Notes. In addition, they contend that some of the
Defendants directly or indirectly controlled the
activities of F&M in its sale of the Notes, in
violation of Michigan’s Uniform Securities Act,
Mich. Comp. Laws § 451.810(b) (MUSA).
The proposed resolution of the dispute, which
For TIMMIS AND INMAN L. L. P., defendant: the parties seek to have approved by the Court,
Brian D. Einhorn, Morton H. Collins, Gerald A. contains a Settlement Fund in the amount of $
20.25 million. 1HN1 Pursuant to the mandate in
Pawlak, Collins, Einhorn, Southfield, MI.
Fed. R. Civ. P. 23(e), this [*4] Court is required
Judges: Honorable Julian Abele Cook, Jr., to determine if a class action settlement is fair,
United States District Court.
reasonable, adequate, and in the public interest
before giving it final approval. Bailey v. Great
Opinion by: Julian Abele Cook, Jr.
Lakes Canning, Inc., 908 F.2d 38, 42 (6th Cir.
1990). Having conducted a hearing on the
Opinion
Plaintiffs’ motion for final approval of the
CLASS ACTION
1
According to the attorneys, the Settlement Fund contained approximately $ 20.6 million, as of the date on which this motion
was filed. Their estimate was based, in part, upon the accumulation of interest and the payment of nearly $ 200,000 in taxes.
SHANNON KING
Pg ID 13478
Page 4 of 9
1999 U.S. Dist. LEXIS 11090, *4
settlement, 2 the Court determines that their
proposed resolution is fair, reasonable, adequate,
and in the public interest as well as in the best
interests of the class members. Therefore, the
motion is granted and the Court will approve the
settlement pursuant to the terms of a Final
Judgment Order that has been entered this same
day.
amount of one-third of the Settlement Fund
under the theory that ″HN2 a lawyer who
recovers [*6] a common fund for the benefit of
persons other than himself or his client is entitled
to a reasonable attorney’s fee from the fund as a
whole.″ 3Boeing Co. v. Van Gemert, 444 U.S.
472, 478, 62 L. Ed. 2d 676, 100 S. Ct. 745
(1980); see Mills v. Electric Auto-Lite Co., 396
U.S. 375, 393-97, 24 L. Ed. 2d 593, 90 S. Ct. 616
[*5] II.
(1970). This approach has been used extensively
in derivative shareholder litigation. Mills, 396
On April 30, 1999, the attorneys filed an
U.S. at 394.
application for an award of attorneys fees and
expenses. Specifically, they request a fee in the HN3 An award of attorneys’ fees lies within the
amount of one-third of the Settlement Fund. discretion of the court. Ramey v. Cincinnati
Alternatively, the attorneys ask for a lodestar Enquirer, Inc., 508 F.2d 1188, 1196 (6th Cir.
award on the basis of their customary hourly fees 1974), [*7] cert. denied, 422 U.S. 1048, 45 L.
along with a 1.35 multiplier. Under the Ed. 2d 700, 95 S. Ct. 2666 (1975). Courts are
percentage-of-the-fund and lodestar approaches, admonished not to ″rubber stamp″ applications
the attorneys have also petitioned this Court for for attorneys’ fees. Wise v. Popoff, 835 F. Supp.
a pro rata share of the interest that has 977, 979 (E.D. Mich. 1993). Rather, those courts
accumulated on the Settlement Fund. In that are called upon to review fee requests carry
addition, they ask to obtain a reimbursement for the responsibility of ensuring that such awards
$ 584,951.20 in expenses and an incentive award are ″reasonable under the circumstances.″ See
of $ 7,500 for each of the class representatives. Rawlings v. Prudential-Bache Properties, Inc., 9
F.3d 513, 516 (6th Cir. 1993); Wise, 835 F. Supp.
For the reasons that have been set forth below,
at 979. As a consequence, trial courts within the
this motion is granted in part and denied in part.
Sixth Circuit are allowed to use (1) a percentage
As specified in the Final Judgement Order, the
of the fund calculation, or (2) a lodestar/
Court grants an award of fees to the attorneys in
multiplier approach. Rawlings, 9 F.3d at 516.
the amount of thirty percent of the Settlement
Either method must be applied with care because
Fund, in addition to their requests for
attorney fee awards in securities litigation raise
reimbursement and incentive awards.
some concerns that are different from those
which exist in other fee shifting cases:
A.
As part of their application for final approval of
the proposed settlement, the attorneys have
asked for an award of attorney fees in the
the interest of class counsel in
obtaining fees is adverse to the interest
of the class in obtaining recovery
2
All of the parties in interest were advised that the hearing on the instant motion would take place in the Eastern District of
Michigan. Due to other scheduling obligations of the Court, the hearing took place in the District of South Carolina, at the United
States Courthouse in Beaufort, South Carolina. However, the courtroom in the Eastern District of Michigan was open, staffed,
and equipped with a telephone connection to the United States Courthouse in Beaufort, South Carolina for the purpose of
accommodating and responding to the concerns of any person who expressed a desire to participate in the hearing, such as to place
objections to the settlement in the record. Other than a representative who served as a counsel for the Plaintiffs’ class, no
person visited the courtroom in the Eastern District of Michigan in conjunction with this hearing.
3
The common-fund is an equitable doctrine which represents an exception to the general principle that every litigant is obliged
to bear his own attorney’s fees. Boeing Co., 444 U.S. at 478. This doctrine rests on the perception that those persons, who
obtain the benefit of a lawsuit without contributing to its cost, are unjustly enriched at the successful litigant’s expense. Id.
SHANNON KING
Pg ID 13479
Page 5 of 9
1999 U.S. Dist. LEXIS 11090, *7
because the fees come out of the
common fund set up for the benefit of
the class. In addition, there is often no
one to argue for the interests of the
class [*8] (that their recovery should
not be unfairly reduced) . . . .
Rawlings, 9 F.3d at 516. Finally, when
awarding attorneys fees, district courts
must provide a clear statement of the
reasoning that is used in adopting a
particular methodology, as well as the
factors that were considered in arriving at
the fee. Rawlings, 9 F.3d at 516; see
Hensley v. Eckerhart, 461 U.S. 424, 437, 76
L. Ed. 2d 40, 103 S. Ct. 1933 (1983) (″It
remains important . . . for the district court
to provide a concise but clear explanation
of its reasons for the fee award.″).
In deciding how to calculate a reasonable
attorney fee in the case at bar, the Court
concludes that the percentage-of-the-fund
method should be applied for two reasons. First,
the lodestar method is too cumbersome and
time-consuming of the resources of the Court.
See Rawlings, 9 F.3d at 516-17. Second, and
more importantly, the ″percentage of the fund″
approach ″more accurately reflects the result
achieved.″ Id. at 516.
HN4 When using a percentage-of-the-fund
approach to calculate attorneys’ fees,
twenty-five percent has traditionally been the
benchmark [*9] standard, ″with the ordinary
range for attorney’s fees between 20-30%.″
Fournier v. PFS Inv., Inc., 997 F. Supp. 828, 832
(E.D. Mich. 1998) (citing Paul, Johnson, Alston
& Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir.
1989)); In re Crazy Eddie Sec. Litig., 824 F.
Supp. 320, 326 (E.D.N.Y. 1993); Janet Cooper
Alexander, Do the Merits Matter? A Study of
Settlements in Securities Class Actions, 43 Stan.
L. Rev. 497, 536 & n.155, 541 (1991)
[hereinafter Do the Merits Matter?]. Awards in
this Circuit appear to be consistent with this
trend. Compare In re Michigan Nat’l Corp. Sec.
and ERISA Litig., No. 95-CV-70647 (E.D. Mich.
Dec. 7, 1998) (awarding thirty percent of
settlement fund) and Rebenstock v. Deloitte, No.
94-CV-71331 (E.D. Mich. Nov. 13, 1996)
(awarding attorney fee of one-third of settlement
amount) and Rebenstock v. Fruehauf, 1995 U.S.
Dist. LEXIS 22089, No. 92-CV-77050 (E.D.
Mich. Aug. 18, 1995) (same) with Rawlings, 9
F.3d at 517 (rejecting request for twenty-five
percent of $ 3.9 million settlement in favor of
approximately fifteen percent award) and
Fournier, 997 F. Supp. at 830 (awarding [*10]
twenty percent of $ 7.5 million settlement fund)
and In re Cincinnati Gas & Elec. Co. Sec. Litig.,
643 F. Supp. 148, 152 (S.D. Ohio 1986)
(awarding fifteen percent of $ 13,990,000
settlement fund). 4
Reviewing the specific facts of this case, the
Court is persuaded that the excellent
performance of the attorneys merits an award of
thirty percent of the settlement fund. Prior to the
initiation of this litigation, F&M filed a
voluntary Chapter 11 bankruptcy petition. This
decision by the Company seriously complicated
matters for the attorneys in two ways. First, it
meant that the issuer of the relevant securities
was no longer available to contribute to a
settlement. Thus, the attorneys’ probability of
achieving a highly successful outcome was
dramatically [*11] reduced because issuers are
generally the largest contributors towards
settlement funds. Do the Merits Matter?, 43
Stan. L. Rev. at 572 (in typical initial public
offering cases, issuers generally contribute fifty
to eighty percent or more of settlement amount).
Second, it contributed to the attorneys having to
litigate in three different forums; to wit, the state,
4
In In re Kmart Corp. Sec. Litig., Consolidated Master File No. 95-CV-75584 (E.D. Mich. Oct. 30, 1998), this Court granted
an attorney fee in the amount of twenty percent of the settlement fund to the same counsel as in the case at bar.
SHANNON KING
Pg ID 13480
Page 6 of 9
1999 U.S. Dist. LEXIS 11090, *11
federal, and bankruptcy courts. 5 Indeed, F&M,
in seeking to obtain a stay of all non-bankruptcy
matters, initiated a bankruptcy adversary
proceeding against the Plaintiffs, which resulted
in a trial.
[*12] Further, the attorneys were obliged to
manage complex discovery which involved the
necessary undertaking of a thorough
examination of substantial quantities of
documents in order to protect the interests of
their clients. Additionally, they developed the
record in this case without any governmental
assistance, such as information and/or
documentary evidence from the investigatory
efforts of the Securities and Exchange
Commission.
The attorneys’ ability to achieve a successful
outcome in this litigation was impeded by many
factors. The case was hotly contested between
very skilled counsel. For instance, the Plaintiffs’
attorneys were able to (1) survive numerous
motions to dismiss, and (2) prevail in the face of
vigorous opposition to their efforts to obtain
class certification. They were also hampered by
the inescapable fact that the securities at issue
were high yield notes, pejoratively known as
″junk bonds,″ which are universally recognized
as constituting a high-risk investment. Also
detrimental to their efforts to obtain a successful
outcome to this litigation was an awareness that
a large proportion of the buyers of the securities
were institutional investors with a high degree
[*13] of knowledge and skill in the investment
field.
The attorneys were also threatened by the
prospect of an intervening change in the law.
Two months prior to the commencement of this
action, the Supreme Court decided Gustafson v.
Alloyd Co., 513 U.S. 561, 131 L. Ed. 2d 1, 115 S.
Ct. 1061 (1995), in which it held that only initial
purchasers to a public offering have standing to
sue for claims arising under Section 12(2). If this
Court had extended the Gustafson ruling to the
facts in this case, it could have dramatically
limited the Plaintiffs’ available damages under
Sections 11 and 12(2). In turn, this would have
forced them, in order to recover substantial
damages, to prove their case under Section 10(b)
and Rule 10b-5, which require a showing of
scienter. Such a showing would have been very
difficult to make because of an absence of any
known evidence of insider trading.
Finally, the attorneys for both sides displayed a
high degree of professional skill, competency,
and innovation through the method by which
they reached the settlement. This was done by
way of an intensive mediation session that was
comprised of (1) initial meetings between the
respective parties [*14] and the mediator, (2)
two briefing rounds between the parties, as well
as a review of initial and rebuttal expert reports,
wherein the parties provided a factual and legal
analysis of their respective positions to each
other and the mediator, (3) a mini-trial before the
mediator and key decision-makers among the
Defendants, in which each side gave a
presentation of the arguments relating to the
facts and the key legal issues, complemented by
the provision of trial/exhibit books to the
participants so that they could easily follow the
evidentiary trail, and (4) several days of intense
settlement mediation. The Court is strongly
persuaded by the representations of the neutral
mediator, who has (1) twenty years of
experience, and (2) no vested interest in this
litigation or the present request for fees. In his
mediation report, he notes:
during my many years as a Mediator, I
have participated in the resolution of
numerous
complex
litigations,
including many securities, consumer,
5
Based upon information that was gleaned by the attorneys during discovery, they initiated a state court action against the
Defendants, Talon, Inc. (Talon), and Timmis & Inman, L.L.P. (T&I), under the MUSA. In their complaint, the attorneys allege
that T&I was F&M’s general counsel, while Talon was the holding and management company for F&M. The state court action was
subsequently stayed and these attorneys were successful in obtaining leave from this Court which authorized them to amend
their federal complaint to incorporate these claims against Talon and T&I.
SHANNON KING
Pg ID 13481
Page 7 of 9
1999 U.S. Dist. LEXIS 11090, *14
and mass tort class actions. Based on
my experience, I can report that the
mediation of this case was one of the
most
difficult,
strenuous,
and
contested mediations in which I have
ever participated. [*15]
....
. . . I believe that all parties in the
litigation were ably served by their
respective counsel, who participated
throughout the mediation in a highly
competent and professional manner.
In sum, of the thousands of
[mediations] in which I have
participated, this was one of the most
successful from a procedural and
substantive point of view. . . .
Counsel’s effort and skill enabled me,
as mediator, to quickly pinpoint and
focus the negotiations on the salient
issues, which ultimately led to the
settlement. I am pleased to have been
able to work with counsel and the
party representatives in this case, and I
commend them for their efforts. 6
Based on all of these factors, the Court believes
that the attorneys [*16] should receive an award
of fees which will adequately compensate them
for their outstanding work in this case. HN5
When determining the reasonableness of an
attorney fee request, trial courts are instructed to
consider:
(1) the value of the benefit rendered to
the corporation or its stockholders,
(2) society’s stake in rewarding
attorneys who produce such benefits in
order to maintain an incentive to
others,
(3) whether the services were
undertaken on a contingent fee basis,
(4) the value of the services on an
hourly basis,
(5) the complexity of the litigation,
and
(6) the professional skill and standing
of counsel involved on both sides.
Smillie v. Park Chem. Co., 710 F.2d 271,
274 (6th Cir. 1983).
As for the first factor, the parties, through their
collective efforts to reach a settlement of the
issues, have rendered an invaluable benefit to
F&M’s stockholders. In the opinion of one
expert, sixty one million dollars was the
maximum amount of damages that the Plaintiffs
could reasonably expect to obtain from the
Defendants in this litigation. On the other hand,
another expert viewed the issue of the
Defendants’ potential liability differently, in
[*17]
that he opined that five million six
hundred thousand dollars was their maximum
exposure in damages to the Plaintiffs in this case.
Even if the Court adopted the estimate of the
expert with the higher figure as being the more
accurate of the two opinions, the result which
was achieved by the Plaintiffs’ attorneys was
excellent in view of the evidentiary hurdles that
they had to surmount. See Janet Cooper
Alexander, Rethinking Damages in Securities
Class Actions, 48 Stan. L. Rev. 1487, 1500 &
n.50 (1996) (settlements average twelve percent
of claimed losses); Richard M. Philips & Gilbert
C. Miller, The Private Securities Litigation
Reform Act of 1995: Rebalancing Litigation
Risks and Rewards for Class Action Plaintiffs,
Defendants and Lawyers, 51 Bus. Law 1009,
1029 & n.131 (1996) (typical recoveries are
within range of seven to eleven percent of
claimed losses); Do the Merits Matter?, 43 Stan.
L. Rev. at 499-500, 514-19 (″securities class
actions involving [initial public offering] claims
. . . settled at an apparent ’going rate’ of
6
Affidavit of Bruce E. Gerstein in Support of Plaintiffs’ Motion for Approval of the Proposed Settlement and Plaintiffs’
Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses, Ex. K at 1, 7-8 (Mediation Report by
Professor Eric D. Green) (emphasis added).
SHANNON KING
Pg ID 13482
Page 8 of 9
1999 U.S. Dist. LEXIS 11090, *17
approximately one quarter of the potential outcome achieved in this litigation, the Court
believes that an award of thirty percent of the
damages″).
settlement fund, which represents fees at the
The second and third factors also support [*18] highest end of the normal range of awards that is
a higher than usual attorney fee. Those factors granted under the percentage-of-the-fund
consider (a) society’s stake in rewarding approach, is warranted because it recognizes the
attorneys who produce benefits in order to
[*20]
excellent results obtained by the
maintain an incentive to others, and (b) whether attorneys. This thirty percent award amounts to a
the services were undertaken on a contingent fee $ 6,075,000 attorney fee based on the $ 20.25
basis. As the preceding discussion has explained, million settlement reached between the parties.
the attorneys have achieved an excellent result in The attorneys are also granted a thirty percent
a case that was factually, legally, and logistically share of the interest that has been earned on the
difficult. Society’s stake in rewarding attorneys Settlement Fund.
who can produce such benefits in complex
litigation such as in the case at bar counsels in B.
favor of a generous fee, as does the realization
that they undertook this case on a contingent fee In addition to their request for attorney fees, the
basis, which required them to fund all of the attorneys seek reimbursement for $ 584,951.20
significant litigation costs while facing the risk in expenses. HN6 Expense awards are
of a rejection their clients’ claims on the merits. customary when litigants have created a
common settlement fund for the benefit of a
The fourth factor, which considers the value of class. See, e.g., In re Southern Ohio Correctional
the services rendered if computed on an hourly Facility, 175 F.R.D. 270, 274-75 (S.D. Ohio
basis, also supports a healthy attorney fee. 1997). The Court has reviewed the invoices
Although the Court continues to have some provided in support of this request. Considering
concerns about some of the extremely high the needs of this litigation, the Court is
hourly rates that the attorneys for the Plaintiffs persuaded that these expenses are reasonable.
claim, 7 the total amount of fees, if based on a
reasonable hourly rate for counsel of comparable C.
skill and expertise, would run into the millions
The attorneys have also motioned for an
of [*19] dollars.
incentive award in the amount of $ 7,500 for
The fifth and sixth factors, which are, each of the class representatives, Acree and
respectively, the complexity of the litigation and Dismondy. HN7 Such awards are common in
the professional skill and competence of counsel class actions where common funds have been
on both sides, likewise argue for a very generous created. In re Southern Ohio Correctional
fee. As has already been explained, this was a Facility, 175 F.R.D. at 272-75. The Court finds
complex and demanding case. The skill and these awards to be reasonable and justified due
competence of the attorneys for the Plaintiffs to the discovery and other [*21] burdens to
was evident, especially when viewed on the which Acree and Dismondy were subjected,
basis of the results that they obtained in this case, including having to give depositions and
while the excellent advocacy skills of the produce their records of securities transactions.
defense counsel in this case were equally evident
III.
to the Court as well as to the mediator.
After evaluating all of these factors and the Accordingly, for the reasons that have been
specific nature of services performed and explained above, the motion for final approval of
7
The Court discussed this concern in detail in the Kmart case. See supra note 4.
SHANNON KING
Pg ID 13483
Page 9 of 9
1999 U.S. Dist. LEXIS 11090, *21
the settlement is granted pursuant to the terms of is granted. Further, the class representatives,
a Final Judgment Order which is entered this Acree and Dismondy, are granted an incentive
same day.
award in the amount of $ 7,500 each.
The request for an award of attorneys fees and
expenses is granted in part and denied in part. IT IS SO ORDERED.
The attorneys are granted a fee in the amount of
Dated: JUN 29 1999
thirty percent of the Settlement Fund, amounting
to $ 6,075,000, rather than the 33.33% that they Detroit, Michigan
have requested. They are also awarded thirty
percent of the interest that has been earned on Honorable Julian Abele Cook, Jr.
the Settlement Fund. Additionally, their request
for reimbursement of $ 584,951.20 in expenses United States District Court
SHANNON KING
Pg ID 13484
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DISTRICT OF CONNECTICUT
__________________________________________
:
IN RE: ETHYLENE PROPYLENE
:
DIENE MONOMER (EPDM)
:
No. 3:03 MD 1542(SRU)
ANTITRUST LITIGATION
:
__________________________________________:
:
THIS DOCUMENT RELATES TO:
:
ALL CLASS ACTIONS
:
__________________________________________:
ORDER RE: MOTION FOR (1) AN AWARD OF
ATTORNEYS' FEES AND REIMBURSEMENT OF LITIGATION
COSTS WITH RESPECT TO THE PROPOSED SETTLEMENT
WITH THE DSM DEFENDANTS AND (2) COURT APPROVAL OF
INCENTIVE AWARDS FOR THE REPRESENTATIVE CLASS PLAINTIFFS
This Court, having considered the Motion for Final Approval of the Proposed Settlements
With Defendants DSM Copolymer, Inc. and DSM Elastomers Europe B.V. (collectively, the
“DSM Defendants”) dated September 20, 2010 (doc. # 567), and the Motion of Plaintiffs’ CoLead Counsel and Liaison Counsel for (1) an Award of Attorneys' Fees and Reimbursement of
Litigation Costs with Respect to the Proposed Settlement with the DSM Defendants and (2)
Court Approval of Incentive Awards for the Representative Class Plaintiffs, dated August 6,
2010 (doc. # 559) (“Motion”), the Declaration of Anthony J. Bolognese, Esquire, in Support of
Plaintiffs’ Motion for (1) an Award of Attorneys’ Fees and Reimbursement of Litigation Costs
and (2) Court Approval of Incentive Awards for the Representative Class Plaintiffs, and the
Declarations submitted therewith (docs. # 562 & # 563) (collectively, the “Declarations”), and
the Court having held a hearing on October 1, 2010; and having considered all of the
submissions and arguments with respect thereto, and the Court otherwise being fully informed
and good cause appearing therefore,
IT IS HEREBY ORDERED, ADJUDGED and DECREED as follows:
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1.
The motion for an award of attorneys’ fees is GRANTED, and Co-Lead Counsel
are hereby awarded attorneys’ fees in the amount of $8,332,500, representing 33.33% of the
DSM Defendants’ Settlement Fund of $25 million, plus interest thereon, if any, from the time the
Settlement Amount is paid by the DSM Defendants, to be paid from the DSM Defendants’
Settlement Fund,
3.
The request for reimbursement of litigation costs is GRANTED, and Co-Lead
Counsel are hereby awarded $725,573.76 for expenses that were reasonably incurred to
prosecute this litigation since March 1, 2007, as reported in the Declarations of Petitioning
Plaintiffs’ counsel submitted in support of their motion, plus interest thereon (if any) from the
time the Settlement Amount is paid by the DSM Defendants, to be paid from the DSM
Defendants’ Settlement Fund,
4.
Plaintiffs’ Co-Lead Counsel are authorized to distribute the attorneys’ fees
awarded herein from the DSM Defendants’ Settlement Fund in a manner which, in the opinion of
Co-Lead Counsel, fairly compensates participating plaintiffs’ counsel for their services as
described in the Declarations.
5.
In consideration for their services as class representatives, and the benefit they
conferred to the plaintiff Class, each of the following plaintiffs is awarded $25,000, to be paid
from the DSM Defendants’ Settlement Fund: Alco Industries, Inc.; Diamond Holdings
Corporation; Duraplas Corporation; Richard Immerman (formerly Functional Products, Inc.);
Industrial Rubber Products, Inc.; Polymerics, Inc.; Precision Associates, Inc.; Schlegel
Corporation; and Synaflex Rubber Products Co., Inc.
6.
Without affecting the finality of this Order, the Court retains continuing and
exclusive jurisdiction over all matters relating to the administration, consummation, enforcement
and interpretation of the approved Settlements, and to protect and effectuate this Order, and for
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any other necessary purpose.
It is so ordered.
Dated at Bridgeport, Connecticut, this 1st day of October 2010.
____/s/ Stefan R. Underhill__________________
Stefan R. Underhill
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In re Remeron
Direct Purchaser Antitrust
Not Reported
in F.Supp.2d
57
Pg ID 13514
2005 WL 3008808
D. New Jersey.
In re REMERON DIRECT PURCHASER
ANTITRUST LITIGATION
No. Civ.03-0085 FSH.
|
Nov. 9, 2005.
Attorneys and Law Firms
Lisa J. Rodriguez, Trujillo Rodriguez & Richards, LLP,
Haddonfield, NJ, Rebekah R. Conroy, Walder Hayden &
Brogan, Roseland, NJ, Peter S. Pearlman, Cohn, Lifland,
Pearlman, Herrmann & Knopf, LLP, Saddle Brook, NJ, for
Plaintiffs.
Kevin J. McKenna, Mara E. Zazzali, Jennifer A. Hradil,
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, PC,
Newark, NJ, for Defendants.
Opinion
OPINION
HOCHBERG, J.
*1 THIS DOCUMENT RELATES TO: ALL ACTIONS
This matter is before the Court upon a settlement
agreement between the manufacturers of the anti-depressant
drug Remeron, Organon U.S.A. and Akzo Nobel N.V.
(collectively “Defendants” or “Organon”), and the direct
purchasers of Remeron (“Plaintiffs”). The settling parties
seek (1) final approval of their class action settlement
agreement and plan of allocation and (2) award of attorneys'
fees to Plaintiffs' Counsel, reimbursement of litigation
expenses, and incentive awards to named Plaintiffs. The
Court preliminarily approved the settlement at a hearing on
August 30, 2005. The final Fairness Hearing was conducted
on November 2, 2005.
I. BACKGROUND
A. The Litigation
1. The Complaint
In 2003, direct purchasers of Remeron (“Direct Purchasers”)
filed class action complaints against Defendants. The
complaint alleges that Defendants violated Section 2 of
the Sherman Act, 15 U.S.C. § 2, by: (a) using various
illegal and deceptive means as part of an overall scheme to
improperly create and extend patent protection for the drug
mirtazapine, which Defendants sold under the brand-name
Remeron, by manipulating the Hatch-Waxman statutory
scheme; (b) committing affirmative misrepresentations and
failing to disclose material prior art in the prosecution of U.S.
Patent No. 5,977,099 (the “ '099 patent”) before the United
States Patent and Trademark Office (“PTO”); (c) making
false and misleading representations to the Food and Drug
Administration (“FDA”) to obtain the listing of the '099
patent in the FDA's Orange Book in a wrongful manner;
(d) submitting the '099 patent for listing in the Orange
Book approximately 14 months beyond the FDA-mandated
deadline for patent listing; and (e) filing and prosecuting sham
patent litigation against potential generic competitors.
The complaint alleges that Defendants' conduct delayed the
market entry of less expensive generic versions of Remeron,
thereby forcing Direct Purchasers to pay artificially inflated
prices for both Remeron and its AB-rated generic equivalents
(i.e. generic mirtazapine).
2. Extensive Discovery and Litigation Prior to Settlement
Plaintiffs' claims were the subject of extensive and
contentious discovery. During three years of hotly contested
litigation, Plaintiffs' Counsel composed and propounded four
sets of document requests which, as ordered by the Court,
were served on behalf of various coordinated direct and
indirect purchaser plaintiffs, as well as subpoenas duces
tecum directed to multiple third parties. Overall, more than
1 million pages of documents and data were produced by
Defendants and third parties. Plaintiffs' Counsel conducted
over 45 depositions of witnesses with knowledge of facts
relevant to Plaintiffs' allegations. Subsequently, Plaintiffs'
Counsel retained and worked closely with nearly a dozen
experts in the areas of (i) patent prosecution process before
the PTO and patent interpretation, (ii) the FDA regulatory
regime regarding prescription drugs, (iii) the pharmaceutical
industry, and (iv) antitrust economics and the calculation of
damages. The opinion of these experts were necessary both
to support the complex theories of liability and damages
advanced by Plaintiffs, and to rebut the numerous defenses
raised by Defendants.
*2 On September 8, 2004, the Court ruled on Defendants'
motion to dismiss the complaints filed by Plaintiffs. Based
on a prior opinion issued in the separate antitrust litigation
between Defendants and generic drug manufacturers Mylan,
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Teva and Alphapharm (the “Generics”), the Court held that
Plaintiffs were collaterally estopped from asserting claims
arising from the alleged wrongful Orange Book listing and
sham litigation. The Court also dismissed Plaintiffs' Walker
Process claim for lack of standing. Following this opinion,
every plaintiff group other than the Direct Purchasers,
including the Generics and all other direct and indirect
purchasers, chose to settle their claims.
This litigation further engendered significant dispositive
motion practice in the form of motions for summary judgment
filed by both sides. Plaintiffs filed three separate motions
for partial summary judgment, including motions seeking
findings that: (a) Defendants were estopped from relitigating
certain findings from the prior patent litigation and, therefore,
that the patent litigation was objectively baseless; (b) that
the '099 patent was not eligible for listing in the Orange
Book; and (c) that Defendants possessed monopoly power
over mirtazapine.
In opinions dated September 7, 2004 and February 18,
2005, the Court denied the first and third of these motions,
determining, respectively, that (i) Defendants would not
be estopped from litigating the objective bases for the
prior patent litigation, and (ii) that Plaintiffs could not
prove Defendants' monopoly power based solely on “direct”
evidence of Defendants' control over the price of mirtazapine.
On October 1, 2004, Defendants filed a single, omnibus
motion for summary judgement, which attacked both the legal
and factual bases for the “overarching scheme” and “late
listing” claims. Defendants' motion also questioned Plaintiffs'
ability to demonstrate the existence of monopoly power
in a properly defined relevant market. Defendants' motion
was pending at the time the Settlement was preliminarily
approved, and even a partial finding in Defendants' favor
could have severely limited, or barred entirely, the ability of
the Direct Purchasers to recover.
On October 27, 2003, Plaintiffs filed their motion for class
certification, together with a memorandum of law explaining,
inter alia, Plaintiffs' theory of class-wide antitrust injury and
proposed method of calculating Class damages, supported
by the testimony of an expert economist. In preparation for
and in furtherance of the class certification motion, Plaintiffs'
Counsel engaged in a comprehensive review of numerous
issues specific to the pharmaceutical industry, including the
economic structure, pricing, and distribution practices of
branded and generic manufacturers. Such preparations were
necessary in order to support Plaintiffs' motion and rebut
numerous defenses to class certification raised by Defendants,
including their reliance on the Eleventh Circuit's decision in
Valley Drug Co. v. Geneva Pharmaceuticals, Inc., 350 F.3d
1181 (11th Cir.2003), which came down during the pendency
of this case, and engendered significant supplemental briefing
and arguments on the issue of class certification. See id. Class
certification was granted here only after the Settlement had
been proposed, and the Defendants stipulated not to oppose
Plaintiffs' certification request.
B. Mediation and Settlement
*3 In March 2003, the parties began to explore the
possibility of settlement. This process eventually resulted in
the Settlement now before the Court, but progress toward this
agreement was slow, as each party had strong conviction in
their respective claims or defenses. Additionally, throughout
the course of this case, the parties participated in a lengthy and
complex mediation procedure utilizing both skilled mediators
and the good offices of the Court. This process encompassed
multiple hearings and mediation sessions, the first of which
was held in January 2004 before Judge Politan.
On August 24, 2005, after full discovery, significant motion
practice and a lengthy negotiation process, Plaintiffs' Counsel
entered into the Settlement with Defendants. The Settlement
will settle all claims arising out of or relating in any way to
any conduct alleged or which could have been alleged in the
Class Action relating to any alleged delay in the marketing or
selling of Remeron or its generic equivalents, in exchange for
payment of $75 million in cash.
The Court preliminarily approved the Settlement and certified
the class at a hearing on August 30, 2005. On September
19, 2005, copies of the Notice Of Proposed Class Action
Settlement and Hearing Regarding Settlement (the “Notice”)
were timely disseminated by first-class mail to all Class
members. The Notice informed Class members, among other
things, that they could object to any or all terms of the
Settlement, or opt-out of the Class entirely. The deadline
for opting out was October 19, 2005. No Class member has
objected to, or opted-out of the Settlement.
II. ANALYSIS
A. Final Approval of Class Action Settlement
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1. Settlements That Meet Certain Conditions Are
Presumed Fair
The Third Circuit affords an initial presumption of fairness
for a settlement “if the courts finds that: (1) the negotiations
occurred at arm's length; (2) there was sufficient discovery;
(3) the proponents of the settlement are experienced in similar
litigation; and (4) only a small fraction of the class objected.”
In re Remeron End-Payor Antitrust Litigation, 2005 WL
2230314, *15 (D. N.J. Sep 13, 2005) (hereinafter “End-Payor
Opinion”), quoting In re Cendant Corp. Litig., 264 F.3d 201,
233 n. 18 (3d Cir.2001).
Each of these factors weighs in favor of this presumption
in the instant case. First, settlement negotiations were
lengthy and formal, and included both formal presentations
to the Court and to skilled mediators, as well as private
mediation sessions attended by members of the Class.
Second, as discussed in Part I above, both fact and expert
discovery in this case was completed before the Settlement
was reached, and included over one million pages of
document discovery, and numerous expert reports. Third,
both Plaintiffs' Counsel and Defendants' Counsel are skilled
and experienced litigators. Fourth, not a single member of
the Class has objected to, or opted-out of, the proposed
Settlement. Thus, this Court determines that an initial
presumption of fairness attaches, although such finding is not
dispositive.
2. Standard for Court Approval of Settlement
*4 A class action may be settled under Rule 23(e) upon a
judicial finding that the settlement is “fair, reasonable, and
adequate.” Fed.R.Civ.P. 23(e)(1)(C). Under Rule 23(e), this
Court must determine whether the settlement is within a
range that responsible and experienced attorneys could accept
considering all relevant risks and factors of litigation. See
Walsh v. Great Atlantic and Pacific Tea Co., 96 F.R.D. 632,
642 (D.N.J.1983). The range “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.” Newman v. Stein, 464 F.2d 689, 693 (2d
Cir.1972).
Because a settlement represents an exercise of judgment by
the negotiating parties, cases have consistently held that the
function of a court reviewing a settlement is neither to rewrite
the settlement agreement reached by the parties nor to try the
case by resolving issues left unresolved by the settlement.
Bryan v. Pittsburgh Plate Glass Co., 494 F.2d 799, 801
(3d Cir.1974); Bullock v. Administrator of Kircher's Estate,
84 F.R.D. 1, 4 (D.N.J.1979). “The temptation to convert a
settlement hearing into a full trial on the merits must be
resisted.” Bell Atlantic Corp. v. Bolger, 2 F.3d 1304, 1315 (3d
Cir.1993).
To determine whether the settlement is fair, reasonable and
adequate under Rule 23(e), courts in the Third Circuit apply
the nine-factor test enunciated in Girsh v. Jepson, 521 F.2d
153, 157 (3d Cir.1975), and recently reaffirmed in Warfarin
Sodium, 391 F.3d at 534-35. These factors are:
(a) The complexity, expense, and likely duration of the
litigation;
(b) the reaction of the class to the settlement;
(c) the stage of the proceedings and the amount of
discovery completed;
(d) the risks of establishing liability;
(e) the risks of establishing damages;
(f) the risks of maintaining the class action through the trial;
(g) the ability of the defendants to withstand a greater
judgment;
(h) the range of reasonableness of the settlement fund in
light of the best possible recovery; and
(i) the range of reasonableness of the settlement fund to
a possible recovery in light of all the attendant risks of
litigation.
Id. (quoting Girsh, 521 F.2d at 156-57).
3. Evaluation of the Settlement Under Applicable
Standards
a. The Complexity, Expense and Likely Duration of the
Litigation
This factor requires examination of the additional cost, in
time, money and judicial resources, of continued litigation.
Courts must balance a proposed settlement against the
enormous time and expense of achieving a potentially more
favorable result through further litigation. See, e.g., In re
Sunbeam Securities Litigation, 176 F.Supp.2d 1323, 1332
(S.D.Fla.2001) (more than three years of complex litigation
before settlement reached).
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The settlement of this complex antitrust action is clearly
favored in view of the long litigation road yet to be traveled.
See, e.g., Behrens v. Wometco Enters., Inc., 118 F.R.D.
534, 543 (S.D.Fla.1988), aff'd 899 F.2d 21 (11th Cir.1990)
(“The law favors compromises in large part because they are
often a speedy and efficient resolution of long, complex and
expensive litigations.”).
*5 This case has already been long and hard-fought. Prior
to the Settlement, the parties completed significant and
voluminous fact and expert discovery, and fully litigated
Defendants' motion to dismiss. Still pending are Plaintiffs'
motion for class certification, and multiple motions for
summary judgment. As this Court observed with respect to
the end-payor settlement, “thousands of pages of materials
were filed with this Court on summary judgment issues
such as market definition, market power, and improper / late
listing in the FDA Orange Book.” End-Payor Opinion at *17.
Absent the Settlement, these motion would have required
considerable additional work on the part of the parties and the
Court to fully litigate.
Further, if the case were not concluded on summary
judgment, a lengthy and expensive trial on liability and
damages allegedly caused by Defendants' alleged violations
of Sherman Act § 2 would likely have followed. Trial
preparation on both sides would be necessary. Given
Defendants' vigorous advocacy of their contention that they
did not violate the Sherman Act, and the complex theories
advanced for liability, it would be likely to expect appeals
from any result reached on the question of liability or of
damages. Avoidance of this expenditure of time and resources
clearly benefits all parties. See In re General Motors PickUp Trust Fuel Tank Products Liab. Litig., 55 F.3d 768,
812 (3d Cir.1995) (concluding that lengthy discovery and
ardent opposition from the defendant with “a plethora of
pretrial motions” were facts favoring settlement, which offers
immediate benefits and avoids delay and expense); Rolland
v. Cellucci, 191 F.R.D. 3, 10 (D.Mass.2000) (prospect of two
week trial “would have imposed significant preparatory time
on everyone and would likely have required the court several
months to issue an opinion.”).
Finally, even if a trial resulted in a judgment for Plaintiffs,
such judgment might not equal the amount of the Settlement,
while Plaintiffs would have incurred additional expense and
delay, as well as the risk of non-recovery based on a verdict
for Defendants or reversal of a verdict for Plaintiffs on
appeal. Therefore, this factor weighs in favor of approving
the Settlement.
b. The Reaction of the Class to the Settlement
The response of the Class to the proposed Settlement
also supports approval. As described above in Part I,
the Settlement Notice included a description of: (a) the
allegations of the Class Action; (b) the Class certified by the
Court; (c) Class members' rights to opt-out or object under
Rule 23; (d) the proposed plan of allocation; (e) the attorneys'
fees, reimbursement of expenses and incentive award that
would be sought, and (f) the process for Court approval. All
Class members were sent copies of the Notice. The deadline
for serving objections to the Settlement was October 26, 2005.
No Class members have objected to, or have chosen to opt out
of, the Settlement. Moreover, as noted above, the three largest
Class members have closely monitored the Class Action,
with the assistance of their own outside counsel, by attending
meditation sessions and court hearings. These Class members
were informed of, and agreed to, the material terms of the
Settlement Agreement prior to its execution.
*6 Such acceptance of the Settlement on the part of the
Class is convincing evidence of the Settlement's fairness
and adequacy. See Stoetzner v. U.S. Steel Corp., 897 F.2d
115, 118-119 (3d Cir.1990) (“only” 29 objections in 281
member class “strongly favors settlement”); see generally In
re Prudential Ins. Co. of America Sales Practices Litigation,
148 F.3d 283, 318 (3d Cir.1998) (affirming conclusion that
class reaction was favorable where 19,000 policyholders out
of 8 million opted out and 300 objected). These factors weigh
in favor of the Settlement.
Furthermore, where, as here, a class is comprised of
sophisticated business entities that can be expected to oppose
any settlement they find unreasonable, the lack of objections
indicates the appropriateness of the Settlement. See In re
M.D.C. Holdings Securities Litigation, 1990 WL 454747, *10
(S.D.Cal. Aug 30, 1990) (lack of objections “is significant
since the class includes sophisticated financial institutions
... who have counsel available to advise and represent
them and submit objections to either the settlement or the
fees and expenses”). The absence of objections from the
sophisticated Class is particularly significant here because
many Class members here have also been members of classes
certified in other pharmaceutical antitrust actions (see, e.g.,
In re Relafen Antitrust Litigation, 231 F.R.D. 52, 2005
WL 2386119 (D.Mass. Sep.28, 2005); In re Cardizem CD
Antitrust Litig., No. 99-73259 (E.D.Mich. Nov. 25, 2002); In
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re Buspirone Patent and Antitrust Litigation, 210 F.R.D. 43
(S.D.N.Y.2002)), and are therefore well suited to evaluate a
proposed settlement in an action of this type.
c. The Stage of the Proceedings and the Amount of
Discovery Completed
The purpose of this Girsh factor is to ensure that Class
Counsel has an “adequate appreciation of the merits of the
case before negotiating” a settlement. In re Prudential, 148
F.3d at 319, quoting In re General Motors, 55 F.3d at 813. In
the present case, the Settlement comes only after the parties
had sufficient time to understand and evaluate their respective
positions.
As discussed in Part I, discovery in this case spanned
more than a year, is complete, and has been extensive.
This discovery included the entire record in the underlying
patent litigation, numerous interrogatories and document
requests, as well as third-party subpoenas to pharmaceutical
manufacturers and consultants to the pharmaceutical
industry. Direct Purchasers Plaintiffs reviewed over one
million pages of documents and data produced by Defendants
and third parties. Plaintiffs also answered extensive
interrogatories and produced voluminous records, and both
Plaintiffs' and Defendants' experts have been extensively
deposed.
Given this vast amount of discovery obtained, and the
volume of motion practice that enabled Plaintiffs' Counsel to
preview some of the defenses that Defendants would advance,
Plaintiffs' Counsel had a valid basis to negotiate a settlement.
See In re Lucent Technologies, Inc., Securities Litigation, 307
F.Supp.2d 633, 638 (D.N.J.2004). Moreover, the mediation
and negotiation process was itself rigorous and involved,
giving the parties ample opportunity to assess the strengths
of their respective claims and defenses before both learned
mediators and the Court. See In re Linerboard Antitrust Litig.,
296 F.Supp.2d 568, 578 (E.D.Pa.2003) (noting positively that
settlement talks involved “a number of face to face meetings
and telephone conferences.”).
*7 As a result of the parties' efforts, the litigation
had reached the stage where “the parties certainly [had]
a clear view of the strengths and weaknesses of their
cases.” Bonett v. Educational Debt Service, Inc., 2003
WL 21658267, *6 (E.D.Pa. May 9, 2003), quoting In re
Warner Communications Sec. Litig., 618 F.Supp. 735, 745
(S.D.N.Y.1985). Thus, the final Settlement occurred only
after the parties and the Court were able to assess its fairness
adequately.
d. The Risks of Establishing Liability
This factor surveys the possible risks of litigation in order
to balance the likelihood of success and potential damages
against benefit of settlement. In re Prudential, 148 F.3d
at 319. The history and current status of the litigation
indicate that Plaintiffs face significant risk even before
reaching trial. In an opinion dated September 8, 2004, this
Court dismissed Plaintiffs' claims arising from allegations
of fraud in connection with the prosecution of the '099
patent, wrongful listing of that patent in the Orange Book,
and subsequent sham litigation. Therefore, without this
Settlement, Plaintiffs would have to proceed on two claims:
(1) the claim relating to the Defendants' decision to list
the '099 patent 14 months after the deadline to do so
established by FDA regulations (the “late listing claim”);
and (2) Plaintiffs' claim that Defendants had engaged in
an overarching scheme to delay competition, the net effect
of which was anticompetitive, even if the individual acts
of the scheme were not actionable under Section 2 of the
Sherman Act (the “overarching scheme claim”). The risk
to those surviving claims was immediate: pending before
the Court at the time the Settlement was proposed was
Defendants' omnibus motion for summary judgment, wherein
Defendants argued that the late listing and overarching
scheme claims were barred entirely by the Court's prior
findings and Supreme Court precedent.
Finally, if Plaintiffs had succeeded in reaching trial, Plaintiffs
would have had to prove that Defendants (1) possessed
monopoly power, and (2) willfully acquired or maintained
that power as distinguished from the growth or development
of such due to a superior product, business acumen, or historic
accident. U.S. v. Grinnell Corp., 384 U.S. 563, 571, 86 S.Ct.
1698, 16 L.Ed.2d 778 (1966). Defendants raised numerous
legal and factual defenses, including, inter alia, assertions
that Direct Purchasers' claims: (1) involved no cognizable
antitrust injury or damage; (2) were barred by the NoerrPennington doctrine; (3) were barred for failure to define
properly an antitrust market; (4) described harm that was
effectively “passed-on” to third parties; and (5) were timebarred by the applicable statute of limitations. Moreover, the
Court's February 18, 2005 opinion denying Plaintiffs' motion
for partial summary judgment on the issue of monopoly
power would require Plaintiffs to prepare a complex and
detailed analysis of the “relevant market” in which Remeron
competed, in order to demonstrate the existence of antitrust
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liability. These risks of proving liability weigh in favor of
approving this settlement.
e. The Risks of Establishing Damages
*8 The fifth Girsh factor to be analyzed when considering
the fairness of a settlement is “the risk of establishing
damages.” Girsh, 521 F.2d at 157. This factor “attempts to
measure the expected value of litigating the action rather than
settling it at the current time.” In re Cendant, 264 F.3d at
239. To the extent that establishing damages is contingent
upon liability, many of the same risks discussed in the
previous section are also present here. Furthermore, there are
substantial risks in proving damages, which the parties have
avoided by virtue of the proposed settlement.
The determination of damages is a complicated and
uncertain process. In the present case, the parties offered
competing expert reports which included significantly
different estimates of overcharge damages to which Plaintiffs
would be entitled assuming liability could be proven at
trial. Plaintiffs' expert economist estimates that the maximum
antitrust damages (prior to trebling) ranged from $108 million
to $133 million, while Defendants' expert, relying on a
similar damage model but disagreeing on certain material
assumptions, estimated the same range as $23.9 million
to $29.7 million. It is by no means certain that Plaintiffs
would have succeeded in recovering the maximum measure
of damages estimated by Plaintiffs' expert. See, e.g., In
re Aetna Inc. Sec. Litig., 2001 WL 20928, *10 (E.D. Pa.
Jan 4, 2001) (“Plaintiffs' damages theories rested primarily
on the testimony and reports of expert witnesses. Such
experts would likely have been challenged on Daubert or
other grounds. Plaintiffs, therefore, risked the rejection of
its experts first by the Court pursuant to Federal Rule of
Evidence 104(a), or by the jury in assessing credibility.”); In
re Prudential Ins. Co. of America Sales Practices Litigation,
962 F.Supp. 450, 539 (D.N.J.1997) (“a jury's acceptance of
expert testimony is far from certain, regardless of the expert's
credentials”); In re Safety Components, Inc. Securities
Litigation, 166 F.Supp.2d 72, 90 (D.N.J.2001). Therefore, the
risks of proving damages weigh in favor of approving the
settlement.
f. The Risks of Maintaining the Class Action Through
Trial
“Because the prospects for obtaining certification have a great
impact on the range of recovery one can expect to reap
from the [class] action, this factor measures the likelihood
of obtaining and keeping a class certification if the action
were to proceed to trial.” End-Payor Opinion at *23, quoting
In re Warfarin Sodium Antitrust Litigation, 391 F.3d 516,
537 (3d Cir.2004) (internal quotes and citation omitted).
The Settlement here comes after Plaintiffs' motion for class
certification has been fully briefed. The briefing submitted
indicates that this is a hotly contested issue, with Defendants
raising multiple factual and legal arguments in opposition to
certification. Class certification was granted here only after
the Settlement had been proposed, and the Defendants had
stipulated not to oppose Plaintiffs' certification request. Thus,
the risks faced by Plaintiffs with regard to class certification
weigh in favor of approving the Settlement.
g. The Ability of the Defendants to Withstand a Greater
Judgment
*9 The parties do not contend that Defendants could
not withstand a larger judgment. However, as this Court
has noted, “many settlements have been approved where a
settling defendant has had the ability to pay greater amounts.”
End-Payor Opinion at *23, citing Warfarin Sodium, 391
F.3d at 538 (“[T]he fact that DuPont could afford to pay
more does not mean that it is obligated to pay any more
than what the ... class members are entitled to under the
theories of liability that existed at the time the settlement was
reached.”); Young Soon Oh v. AT & T Corp., 225 F.R.D.
142, 150-51 (D.N.J.2004); In re Linerboard Antitrust Litig.,
321 F.Supp.2d 619, 632 (E.D.Pa.2004); Erie County Retirees
Assoc. v. County of Erie, Pennsylvania, 192 F.Supp.2d
369, 376 (W.D.Pa.2002); Lazy Oil Co. v. Witco Corp., 95
F.Supp.2d 290, 318 (W.D.Pa.1997). This factor does not
favor nor disfavor the Settlement.
h. The Range of Reasonableness of the Settlement In
Light of the Best Possible Recovery
An assessment of the reasonableness of a proposed settlement
seeking monetary relief requires analysis of the present value
of the damages a plaintiff would likely recover if successful,
appropriately discounted for the risk of not prevailing. See
In re Prudential, 148 F.3d at 322. As this Court previously
noted, “[i]n order to evaluate the propriety of an antitrust
class action settlement's monetary component, a court should
compare the settlement recovery to the estimated single
damages. Although in certain circumstances a plaintiff class
may recover treble damages if it prevails at trial, that result
is far from certain.” End-Payor Opinion at *24, citing In re
Ampicillin Antitrust Litig., 82 F.R.D. 652, 654 (D.D.C.1979);
Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974).
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In the present case, Plaintiffs' expert economist estimates that
the maximum antitrust single damages ranged from $108
million for the “late listing” claim, to $133 million for the
“overarching scheme” claim. Accordingly, the Settlement
represents 56% to 69% of the maximum single damages
Plaintiffs could hope to recover, provided that liability was
proven at trial. This is above the range of settlements
routinely granted final approval. See End-Payor Opinion at
*24 (“[A]n antitrust class action settlement may be approved
even if the settlement amounts to a small percentage of
the single damages sought, if the settlement is reasonable
relative to other factors”); see also In re Cendant Corp. Litig.,
264 F.3d 201, 231 (3d Cir.2001) (approving settlement of
36% of total damages and noting that typical recoveries in
complex securities class actions range from 1.6%-14% of
estimated damages); In re Linerboard Antitrust Litig., 2004
WL 1221350, *5 (E.D.Pa. June 2, 2004) (collecting cases
in which courts have approved settlements of 5.35% to 28%
of estimated (single) damages in complex antitrust actions);
In re Aetna, 2001 WL 20928, *4 (approving settlement of
approximately 10% of total damages of $830 million); Stop
& Shop Supermarket Co. v. SmithKline Beecham Corp., 2005
WL 1213926 (E.D.Pa. May 19, 2005) (Recovery of 11.4%
of estimated single damages “compares favorably with the
settlements reached in other complex class action lawsuits.”)
*10 Moreover, in light of the highly contested nature
of liability, it is likely that any judgment entered would
have been the subject of post-trial motions and appeals,
further prolonging the litigation and reducing the value of
any recovery. See, e.g., Parks v. Portnoff Law Associates,
Ltd., 243 F.Supp.2d 244, 253 (E.D.Pa.2003). An appeal
of a damage award could seriously and adversely affect
the scope of an ultimate recovery, if not the recovery
itself. See Backman v. Polaroid Corp., 910 F.2d 10 (1st
Cir.1990) (class won a jury verdict and a motion for
judgment N.O.V. was denied, but on appeal the judgment
was reversed and the case dismissed); Berkey Photo, Inc. v.
Eastman Kodak Co., 603 F.2d 263 (2d Cir.1979) (reversal of
multimillion dollar judgment obtained after protracted trial);
Trans World Airlines, Inc. v. Hughes, 312 F.Supp. 478, 485
(S.D.N.Y.1970), modified, 449 F.2d 51 (2d Cir.1971), rev'd
409 U.S. 363, 366, 93 S.Ct. 647, 34 L.Ed.2d 577 (1973) ($145
million judgment overturned after years of litigation and
appeals). Thus, the range of reasonableness of the settlement
in light of the best possible recovery favors the Settlement.
i. The Range of Reasonableness of the Settlement to a
Possible Recovery In Light of all the Attendant Risks of
Litigation
This factor requires the Court to examine the terms of
settlement from a “slightly different vantage point[ ]” than
reasonableness in light of the best recovery. In re General
Motors, 55 F.3d at 806. As this Court noted, “a court
evaluating a proposed class action settlement should also
consider ‘whether the settlement represents a good value for
a weak case or a poor value for a strong case.” ’ End-Payor
Opinion at *23, quoting Warfarin Sodium, 391 F.3d at 538;
see also Girsh, 521 F.2d at 157 (court must examine the
range of reasonableness of the settlement fund to a possible
recovery in light of all the attendant risks of litigation).
As discussed above, this litigation involves difficult legal
and factual issues regarding a claim for damages resulting
from Defendants' alleged violation of Section 2 of the
Sherman Act. Thus, in light of the significant size of the
settlement fund relative to the potential recoverable damages,
the Settlement represents a good value for a strong case,
albeit one where numerous critical legal issues have not been
determined and are therefore uncertain. In addition, even
if Plaintiffs successfully prevailed on those issues at trial,
Defendants would likely appeal, resulting in further delaying
any recovery for the Class. The Court is satisfied that the
Settlement accounts for the risks inherent in this complex
litigation and provides appropriate relief in light of these
risks.
j. Conclusion
Given this Court's analysis, the Court concludes that the
nine-factor test utilized by the Third Circuit is satisfied. The
settlement is fair, adequate, and reasonable under Federal
Rule of Civil Procedure 23(e).
B. Approval of the Plan of Allocation
*11 “As with settlement agreements, courts consider
whether distribution plans are fair, reasonable, and adequate.”
In re Lorazepam & Clorazepate Antitrust Litig., 205 F.R.D.
369, 381 (D.D.C.2002); see also In re Vitamins Antitrust
Litig., 2000 WL 1737867, at *6 (D.D.C. Mar.31, 2000).
“[I]n evaluating the formula for apportioning the settlement
fund, the Court keeps in mind that district courts enjoy broad
supervisory powers over the administration of class action
settlements to allocate the proceeds among the claiming class
members equitably.” Hammon v. Barry, 752 F.Supp. 1087,
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1095 (D.D.C.1990) (internal quotation marks and citations
omitted); accord In re “Agent Orange” Prod. Liability Litig.,
818 F.2d 179, 181 (2d Cir.1987).
Plaintiffs propose to allocate the Settlement funds, net of
Court approved attorneys' fees, incentive award, and expenses
(“Net Settlement Fund”), in proportion to the overcharge
damages incurred by each Class member due to Defendants'
alleged conduct in restraint of trade. Such a method of
allocating the Net Settlement Fund is inherently reasonable.
See In re Lucent Technologies, Inc., Securities Litigation, 307
F.Supp.2d 633, 649 (D.N.J.2004) (“A plan of allocation that
reimburses class members based on the type and extent of
their injuries is generally reasonable.”); In re Corel Corp. Inc.
Securities Litigation, 293 F.Supp.2d 484, 493 (E.D.Pa.2003)
(Courts “generally consider plans of allocation that reimburse
class members based on the type and extent of their injuries
to be reasonable.”) quoting Aetna Inc. Sec. Litig., 2001 WL
20928, *12 (E.D.Pa. Jan.4, 2001).
The Plan of Allocation provides a method for determining
each Class member's pro-rata share of the Net Settlement
Fund. Specifically, the Plan of Allocation describes: 1)
the method of calculating each Class member's overcharge
damages and pro-rata share of the Net Settlement Fund; 2)
the contents and method of disseminating a Claims Notice
form; 3) the manner in which claims will be initially reviewed
and processed; 4) the method of notifying Class members
of the amount that each Class member will receive from the
Net Settlement Fund (“Notice of Class Member Distribution
Amount”); and 5) the process for handling and resolving
challenged claims.
The Plan of Allocation also includes the deadlines for
completing the following tasks related to distributing each
Class member's pro-rata share of the Net Settlement Fund: 1)
preparation and dissemination of the Claims Notice form; 2)
receipt by Claims Administrator of completed Claims Notice
form and supporting documentation; 3) curing deficiencies
in any Claims Notice form or supporting documentation
submitted by Class member; 4) disseminating the Notice
of Class Member Distribution Amount; and, 5) challenging
and resolving disputes over the Claims Administrator's
determination of each Class member's distribution amount.
As the Plan of Allocation appears fair based on Plaintiffs'
expert economist's calculations, and the three largest Class
members support it, and the lack of any objections to it, this
Court gives the plan final approval.
C. Plaintiffs' Motion for Award of Attorneys' Fees,
Interest, Reimbursement of Expenses and Incentive
Awards
*12 Class Counsel requests that the Court award attorneys'
fees in the amount of $25 million plus interest accrued
on that amount since it has been held in escrow. The $25
million requested fee represents 33 1/3 % of the $75 million
Settlement Fund. Class Counsel also requests recovery of
litigation expenses and incentive awards to named Plaintiffs.
1. Attorneys' Fees and Interest
This Court first finds that the percentage of fund method
is the proper method for compensating Plaintiffs' Counsel
in this common fund case. See, e.g., In re Prudential Ins.
Co. Of America Sales Practices Litig., 148 F.3d 283, 333
(3d Cir.1998) (stating “the percentage of recovery method
is generally favored in cases involving a common fund, and
is designed to award fees from the fund in a manner that
rewards counsel for success and penalizes it for failure”);
In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 734 (3d
Cir.2001) (stating “the percentage-of-recovery method has
long been used in this Circuit in common-fund cases”).
The Third Circuit set forth with specificity the factors that a
court should consider in evaluating such requested attorneys'
fees in Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195
(3d Cir.2000) (overturning a decision that reduced a requested
fee of 25% of the recovered fund to 18%). The Gunter factors
“need not be applied in a formulaic way, and their weight may
vary on a case-by-case basis.” Oh v. AT & T Corp., 225 F.R.D.
142, 146 (D.N.J.2004) (citing Gunter, 223 F.3d at 195). The
Gunter factors include (a) the size of the fund created and
number of persons benefitting from the settlement, (b) the
presence/absence of substantial objections to the fee, (c) the
skill of Plaintiffs' counsel, (d) complexity and duration of
the litigation, (e) the risk of nonpayment, (f) amount of time
devoted to the litigation, (g) awards in similar cases. See
Gunter, 223 F.3d at 195; In re Aremissoft Corp. Sec. Litig.,
210 F.R.D. 109, 129 (D.N.J.2002).
a. The Size and Nature of the Common Fund Created,
and the Number of Class Members Benefitted by the
Settlement ______
The Class here is comprised of approximately 70 business
entities, as identified from Defendants' sales records. These
entities will share in a settlement worth $75 million in cash,
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less attorneys' fees, expenses and incentive award as granted
by the Court. The magnitude of this recovery is significant
when measured against the estimates as to the potential values
of Plaintiffs' claims made by the parties' experts during the
course of this litigation. See, e.g., In re General Instrument
Securities Litig., 209 F.Supp.2d 423 (E.D.Pa.2001) (awarding
a one-third fee, and finding that a $48 million fund to
be shared by a class of thousands is “quite large” and
exceeds “twice the amount that defendants' expert claimed
plaintiffs could recover under the best circumstances.”); In
re Linerboard Antitrust Litig., 2004 WL 1221350 (E.D.Pa.
June 2, 2004) ($202 million settlement valued at 42 percent
of damages (prior to trebling) is “highly favorable” factor in
granting counsel's 30% fee request).
b. The Absence of Objections
*13 Following preliminary approval of the Settlement and
the form and manner of notice to the Class, individual
notice was mailed to Class members and posted on CoLead Counsel's websites. The notice informed potential Class
members that Class Counsel would be seeking fees of up to
33 1/3% of the Settlement Fund, reimbursement of expenses,
plus interest thereon, and incentive awards for each of the
named plaintiffs in the Class Action.
Class Counsel have received no objections from the
1
Class. The lack of objections from the Class supports the
reasonableness of the fee request. See Stoetzner v. United
States Steel Corp., 897 F.2d 115, 11-19 (3d Cir.1990) (even
when 29 members of a 281 person class (i.e. 10% of the
class) objected, the response of the class as a whole “strongly
favors [the] settlement”); In re Rite Aid, 396 F.3d at 305
(stating that the fact that only two class members objected to
the fee request supports approval of the fee); In re Rent-Way
Sec. Litig., 305 F.Supp.2d 491, 514 (W.D.Pa.2003) ( “[t]he
absence of substantial objections by other class members
to the fee application supports the reasonableness of Lead
Counsel's request”), thus indicating the strong support of the
Class for the award of fees and expenses requested.
c. The Skill and Efficiency of Plaintiffs' Counsel
Class Counsel include some of the preeminent antitrust firms
in the country with decades of experience in prosecuting and
trying complex actions. Class Counsel also include firms with
extensive patent experience, who are intimately involved in
numerous lawsuits involving antitrust violations based on
the improper use of patents. Class Counsel have significant
experience in FDA regulatory matters. The settlement entered
with Defendants is a reflection of Class Counsel's skill and
experience. See In re Warfarin Sodium Antitrust Litig., 212
F.R.D. 231, 261 (D.Del.2002) (class counsel “showed their
effectiveness through the favorable cash settlement they were
able to obtain”); see also In re Ikon Office Solutions, Inc. Sec.
Litig., 194 F.R.D. 166, 194 (E.D.Pa.2000) (awarding 30%
fee and stating “the most significant factor in this case is the
quality of representation, as measured by the quality of the
result achieved, the difficulties faced, the speed and efficiency
of the recovery, the standing, experience and expertise of
the counsel, the skill and professionalism with which counsel
prosecuted the case and the performance and quality of
opposing counsel”) (internal quotes omitted).
d. The Complexity and Duration of the Litigation
“As to the complexity of the case, ‘[a]n antitrust class action
is arguably the most complex action to prosecute.” ’ In
re Linerboard Antitrust Litig., 2004 WL 1221350 at *10,
quoting In re Motorsports Merchandise Antitrust Litig., 112
F.Supp.2d 1329, 1337 (N.D.Ga.2000). This antitrust action
is no different. As discussed above, this matter is extremely
complicated, involving the patent, regulatory and antitrust
laws, including interpretation of complex provisions of the
Hatch-Waxman Act.
*14 The discovery process was lengthy and difficult. Class
Counsel (a) reviewed over one million pages of documents,
(b) conducted over 45 depositions of fact witnesses, and
(c) spent thousands of hours researching, analyzing and
consulting with experts on the complex issues of fact and law
put at issue in this case.
Finally, as noted by this Court in the End-Payor Opinion,
“the circumstances surrounding a difficult settlement increase
the complexity of a case.” See End-Payor Opinion at *29,
citing In re Lucent Technologies, Inc. Sec. Litig., 327 F.Supp.
426, 434 (D.N.J.2004). Here, the Court is well aware of the
long and difficult road that led to the proposed Settlement, as
the Court itself frequently lent its good offices to settlement
hearings and mediation sessions. Thus, the complexity of
the issues involved in Class Counsel's prosecution of this
litigation supports the requested fee.
e. The Risk of Nonpayment
A determination of a fair fee must include consideration
of the sometimes undesirable characteristics of a contingent
antitrust actions, including the uncertain nature of the fee,
the wholly contingent outlay of large out-of-pocket sums by
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plaintiffs, and the fact that the risk of failure and nonpayment
in an antitrust case are extremely high. See, e.g., The Stop &
Shop Supermarket Company v. SmithKline Beecham Corp.,
2005 WL 1213926, *11 (E.D.Pa.2005) (risk of overcoming
Noerr-Pennington defense, among others, “favors approval
of the percentage of recovery requested as a fee in this case”);
In re Linerboard Antitrust Litig., 2004 WL 1221350 at *12
(risk posed by Defendants' vigorous legal and factual defenses
counsel in favor of 30% fee award).
Counsel fought Defendants' motion to dismiss, prepared
Plaintiffs' motion for class certification, and represented
the Class in the multiple mediation sessions and settlement
conferences necessary to reach the Settlement. See End Payor
Opinion at *29 (“Class Counsel's ‘efforts in posturing this
case for trial ... played a role in spurring the settlement [and]
produced a substantial payout to the class.” ’) quoting In re
Newbridge Networks Securities Litigation, 1998 WL 765724,
*3 (D. D.C. Oct 23, 1998).
This case is no exception to the rule. When Class Counsel
undertook the representation of the named plaintiffs and
the Class, there were no assurances that any fees would be
received. The outcome of various motion practice in this
case further increased Plaintiffs' risks. In its September 8,
2004 decision on Defendants' motion to dismiss, the Court
dismissed (a) Plaintiffs' claims arising from the alleged
Walker-Process fraud, (b) wrongful Orange Book listing
and (c) sham litigation associated with the prosecution and
enforcement of the '099 Patent. Following this opinion,
every plaintiff group other than the Direct Purchaser Class,
including the Generics and all other direct and indirect
purchasers, chose to settle their claims.
Moreover, Class Counsel will likely incur hundreds of
additional hours in connection with administering the
settlement, without prospect for further fees. See Varacallo,
226 F.R.D. at 252 (fee award will be sole compensation for
counsel “despite the continuing responsibilities [counsel] will
have in responding to Class Member inquiries, assisting the
Claim Evaluator, consulting on individual cases, and any
post-judgment proceedings and appeals.”).
Thereafter, Plaintiffs proceeded against Defendants on two
theories of liability: (1) claims arising from the late-listing
of the '099 patent in the Orange Book; and (2) Defendants'
alleged overarching scheme to delay generic competition.
The risk to those surviving claims was immediate: pending
before the Court at the time the Settlement was proposed
was Defendants' omnibus motion for summary judgment,
wherein Defendants argued that the late listing and
overarching scheme claims were barred entirely by the
Court's prior findings and Supreme Court precedent, and
refuted by documentary evidence and testimony from
Defendants' own employees. The prospect of prosecuting
such untested theories through to trial presented undeniable
risk. Accordingly, the risk of non-payment in this case weigh
heavily in favor of approving the fee requested.
f. The Time Devoted to this Case by Plaintiffs' Counsel
was Significant
*15 Class Counsel has expended over 35,000 hours and
advanced over $1.9 million in expenses on this case. Class
Counsel has analyzed over a million pages of document
discovery and has taken dozens of depositions. Class Counsel
also retained and worked closely with multiple experts
in the complex areas of patent law, FDA regulation and
the pharmaceutical industry implicated in this case. Class
g. Awards in Similar Cases
The seventh and final Gunter factor-a comparison with
attorneys' fees awarded in similar cases-also supports the fee
requested by Class Counsel in the present case.
i. The requested 33 1/3% fee is within the applicable
range of percentage-of-the-fund awards
“Courts within the Third Circuit often award fees of 25% to
33% of the recovery.” End-Payor Opinion at *30, citing In re
Linerboard Antitrust Litig., 2004 WL 1221350 (E.D.Pa. June
2, 2004) (approving 30% fee of a $202 million settlement
in an antitrust class action); Nichols v. SmithKline Beecham
Corp., 2005 WL 950616 (E.D.Pa.2005) (approving 30%
fee of the $65 million settlement in similar pharmaceutical
antitrust action). A one third fee from a common fund has
been found to be typical by several courts within this Circuit
which have undertaken surveys of awards within the Third
Circuit and others. End-Payor Opinion at *30, citing In re
Rite Aid Corp. Sec. Litig., 396 F.3d 294, 306-07 (3d Cir.2005)
(review of 289 settlements demonstrates “average attorney's
fees percentage [of] 31.71%” with a median value that “turns
out to be one-third”). See also In re General Motors Corp.
Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768,
822 (3d Cir.1995) (In common fund cases “fee awards have
ranged from nineteen percent to forty-five percent of the
settlement fund”); Cullen v. Whitman Medical Corp., 197
F.R.D. 136, 150 (E.D.Pa.2000) (“the award of one-third of
the fund for attorneys' fees is consistent with fee awards
in a number of recent decisions within this district”); In re
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Linerboard Antitrust Litig., 2004 WL 1221350 at *14 (citing
with approval “a recent Federal Judicial Center study that
found that in federal class actions generally median attorney
fee awards were in the range of 27 to 30 percent.”).
*16 Moreover, the requested fee is consistent with awards in
other complex antitrust actions involving the pharmaceutical
industry. See In re Relafen Antitrust Litig., No. 01-12239WGY (D. Mass. April 9, 2004) (awarding 33a % fee of a $175
million settlement); In re Buspirone Antitrust Litig., No. 01CV-7951 (JGK) (S.D.N.Y. April 1, 2003) (awarding a 33a %
fee of a $220 million settlement); North Shore HematologyOncology Associates, P.C. v. Bristol Myers Squibb Co.,
No. 1:04cv248 (EGS) (D.D.C. Nov. 30, 2004) (awarding
a 33a % fee of a $50 million settlement); In re Terazosin
Hydrocholride Antitrust Litig., No. 99-MDL-1317 (S.D.Fla.
Apr. 19, 2005); (awarding a 33a % fee of a $72.5 million
settlement). Cf. In re Cardizem CD Antitrust Litig., No.
99-73259 (E.D.Mich. Nov. 26, 2002) (awarding 30% of a
$110 million settlement).
ii. The requested 33 1/3% fee reflects the market rate in
other litigation of this type
The percentage-of-the-fund method of awarding attorneys'
fees in class actions should approximate the fee which would
be negotiated if the lawyer were offering his or her services
in the private marketplace. “The object ... is to give the
lawyer what he would have gotten in the way of a fee in
an arm's length negotiation.” In re Continental Illinois Sec.
Litig., 962 F.2d 566, 572 (7th Cir.1992); see also Missouri v.
Jenkins, 491 U.S. 274, 285-86, 109 S.Ct. 2463, 105 L.Ed.2d
229 (1989); In re Synthroid Marketing Litig., 264 F.3d 712,
718 (7th Cir.2001) (“when deciding on appropriate fee levels
in common-fund cases, courts must do their best to award
counsel the market price for legal services, in light of the risk
of nonpayment and the normal rate of compensation in the
market at the time”); see also Thirteen Appeals, 56 F.3d at
307; In re RJR Nabisco, Inc. Sec. Litig., 1992 WL 210138, *7
(S.D.N.Y. Aug.24, 1992).
In determining the market price for such services, evidence of
negotiated fee arrangements in comparable litigation should
be examined. See Continental Illinois Sec. Litig., 962 F.2d at
573 (the judge must try to simulate the market “by obtaining
evidence about the terms of retention in similar suits, suits
that differ only because, since they are not class actions,
the market fixes the terms”); Synthroid Marketing Litig.,
264 F.3d at 719 (court should evaluate fee contracts and
other data from similar cases where fees were privately
negotiated). Attorneys regularly contract for contingent fees
between 30% and 40% with their clients in non-class,
commercial litigation. See, e.g., In re Ikon Office Solutions,
Inc., 194 F.R.D. at 194 (“[I]n private contingency fee
cases, particularly in tort matters, plaintiffs' counsel routinely
negotiate agreements providing for between thirty and forty
percent of any recovery.”); In re Orthopedic Bone Screws
Products Liability Litig., 2000 WL 1622741, *7 (E.D.Pa.
Oct.23, 2000) (“... the court notes that plaintiffs' counsel in
private contingency fee cases regularly negotiate agreements
providing for thirty to forty percent of any recovery”); Durant
v. Traditional Investments, Ltd., 1992 WL 203870, *4 n.
7 (S.D.N.Y. Aug.12, 1992) (“contingent fee agreements up
to 40 percent have been held reasonable”); Phemister v.
Harcourt Brace Jovanovich, Inc., 1984 WL 21981, *15
(N.D.Ill. Sept.14, 1984) (“[t]he percentages agreed on [in
contingent fee arrangements in non-class action damage
lawsuits] vary, with one-third being particularly common”).
h. Lodestar Cross-Check
*17 In addition to the percentage-of-the-fund approach,
the Third Circuit has suggested that it is “sensible” for
district courts to “cross-check” the percentage fee award
against the “lodestar” method. Prudential, 148 F.3d at 333. A
lodestar cross-check is not a Gunter factor but is a “suggested
practice.” In re Cendant Corp., PRIDES Litig., 243 F.3d at
735 (3d Cir.2001). The Third Circuit has recognized that “
‘multiples ranging from one to four are frequently awarded
in common fund cases when the lodestar method is applied.”
’ Id., at 341, quoting 3 Herbert Newberg & Albert Conte,
Newberg on Class Actions, § 14.03 at 14-5 (3d ed.1992).
“The district courts may rely on summaries submitted by the
attorneys and need not review actual billing records.” In re
Rite Aid, 396 F.3d at 306-07 (footnote omitted).
The records demonstrates that Class Counsel's lodestar in this
case is $13,419,645.71, resulting in a multiplier of 1.8. An
examination of recently approved multipliers reveals that the
multiplier requested here “is on the low end of the spectrum.”
End-Payor Opinion at *33, (approving multiplier of 1.73)
citing Nichols v. SmithKline Beecham Corp., 2005 WL
950616, *24 (E.D.Pa. Apr.22, 2005) (approving multiplier of
3.15); In re Linerboard Antitrust Litig., 2004 WL 1221350, *4
(E.D.Pa. June 2, 2004) (approving a 2.66 multiplier); Weiss
v. Mercedes-Benz of N. Am., Inc., 899 F.Supp. 1297, 1304
(D.N.J.1995), aff'd, 66 F.3d 314 (3d Cir.1995) (approving
a 9.3 multiplier); In re Rite Aid Corp. Secs. Litig., 146
F.Supp.2d 706, 736 (E.D.Pa.2001) (multiple of over 6). This
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lodestar cross-check corroborates the result of the percentageof-the-fund method.
i. Conclusion
Taking into consideration the above factors, this Court awards
Plaintiffs' Counsel $25 million of the Settlement Fund, plus
33 1/3 % of the accrued interest on the Settlement Fund.
2. Reimbursement of Reasonable Expenses
In addition to their request for attorneys' fees, Plaintiffs'
Counsel seeks reimbursement of $1,925,667.53 in expenses.
“Counsel in common fund cases is entitled to reimbursement
of expenses that were adequately documented and reasonably
and appropriately incurred in the prosecution of the case.”
In re Cendant Corp., 232 F.Supp.2d 327, 343 (D.N.J.2002),
quoting In re Safety Components Int'l, Inc., 166 F.Supp.2d 72,
104 (D.N.J.2001).
Upon review of the affidavits submitted in support of
this request, the Court finds the requested amount to be
fair and reasonable. Plaintiffs' Counsel's expenses reflect
costs expended for purposes of prosecuting this litigation,
including substantial fees for experts; substantial costs
associated with creating and maintaining an electronic
document database; travel and lodging expenses; copying
costs; and the costs of court reporters and deposition
transcripts. Reimbursement of similar expenses is routinely
permitted. See End-Payor Opinion at *32, citing Oh v. AT
& T Corp., 225 F.R.D. 142, 154 (D.N.J.2004) (finding the
following expenses to be reasonable: “(1) travel and lodging,
(2) local meetings and transportation, (3) depositions,
(4) photocopies, (5) messengers and express services, (6)
telephone and fax, (7) Lexis/Westlaw legal research, (8)
filing, court and witness fees, (9) overtime and temp work,
(10) postage, (11) the cost of hiring a mediator, and (12) NJ
Client Protection Fund-pro hac vice.”).
3. Incentive Awards to Named Plaintiffs
*18 Finally, Plaintiffs' Counsel request the approval of
an incentive award in the amount of $60,000, in total, for
the two named plaintiffs, LWD and Meijer. The named
plaintiffs spent a significant amount of their own time and
expense litigating this action for the benefit of the Class. As
recognized by numerous courts, such efforts should not go
unrecognized. See End-Payor Opinion at *32, citing In re
Lorazepam & Clorazepate Antitrust Litig., 205 F.R.D. 369,
400 (D.D.C.2002) (“Incentive awards are not uncommon in
class action litigation and particularly where ... a common
fund has been created for the benefit of the entire class....
In fact, [c]ourts routinely approve incentive awards to
compensate named plaintiffs for the services they provided
and the risks they incurred during the course of the class
action litigation”) (internal quotations and citation omitted).
The Settlement Notice advised Class members that Class
Counsel would apply for such an incentive award. No Class
member objected. Moreover, the amount requested here
is similar to amounts awarded in comparable settlements.
See End-Payor Opinion at *33 (granting incentive awards
of $30,000 each to two third party payor plaintiffs); In
re Linerboard Antitrust Litig., 2004 WL 1221350 at *18
(approving $25,000 to each representative of the classes); see
also, Yap v. Sumitomo Corp. of America, 1991 WL 29112,
*9 (S.D.N.Y. Feb.22, 1991) ($30,000 incentive awards to
the named plaintiffs); Van Vranken v. Atlantic Richfield Co.,
901 F.Supp. 294, 300 (N.D.Cal.1995) ($50,000 incentive
award to named plaintiff); In re Dun & Bradstreet Credit
Services Customer Litig., 130 F.R.D. 366, 373-74 (S.D.Ohio
1990) (two incentive awards of $55,000 and three incentive
awards of $35,000); In re Revco Sec. Litig., 1992 WL 118800,
*7 (N.D.Ohio May 6, 1992) ($200,000 incentive award
to named plaintiff); Enterprise Energy Corp. v. Columbia
Gas Transmission Corp., 137 F.R.D. 240, 250-51 (S.D.Ohio
1991) ($50,000 incentive awards to each of the six named
plaintiffs); Bogosian v. Gulf Oil Corp., 621 F.Supp. 27, 32
(E.D.Pa.1985) (incentive awards of $20,000 to each of two
named plaintiffs). The requested incentive awards are both
appropriate and reasonable.
III. CONCLUSION
For the foregoing reasons, (a) Direct Purchasers Plaintiffs'
motion for final approval of the Settlement, and (b) Class
Counsel for Direct Purchasers Plaintiffs' motion for attorneys'
fees of $25 million (plus accrued interest), litigation expenses,
and incentive awards to Named Plaintiffs are granted.
Parallel Citations
Footnotes
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1
The support of the fee request by Class members here is even more significant. When a class is comprised of sophisticated business
entities that can be expected to oppose any request for attorney fees they find unreasonable, the lack of objections “indicates
the appropriateness of the [fee] request.” Cimarron Pipeline Construction, Inc. v. Nat'l Council on Compensation Ins., 1993 WL
355466, *1-2 (W.D.Ok. June 8, 1993); In re Sequoia Systems, Inc. Sec. Litig., 1993 WL 616694, *1 (D.Mass. Sept.10, 1993)
(finding “influential” the fact that no class member had objected to the fee request of one-third); In re M.D.C. Holdings, 1990 WL
45474 at *10 n. 5 (lack of objections “is significant since the class includes sophisticated financial institutions ... who have counsel
available to advise and represent them and submit objections to either the settlement or the fees and expenses”). Courts have reasoned
that favorable responses by sophisticated Class members is persuasive, since those class members are capable, independent of the
assistance of Class Counsel, of evaluating the reasonableness of all aspects of a class action settlement. See, e.g., Muehler v. Land
O'Lakes, Inc., 617 F.Supp. 1370, 1374 (D.Minn.1985) (“The turkey growers in this class are sophisticated businesspeople, who
possessed the degree of knowledge and ability sufficient to raise an objection if they believed the fee application was excessive”).
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E.D. Michigan,
Southern Division.
In re PACKAGED ICE ANTITRUST LITIGATION.
This Order Relates To: Direct Purchasers Action.
No. 08–MDL–01952.
|
Dec. 13, 2011.
Opinion
OPINION AND ORDER (1) GRANTING DIRECT
PURCHASER PLAINTIFFS' MOTION FOR FINAL
APPROVAL OF PROPOSED SETTLEMENT
WITH ARCTIC GLACIER INCOME FUND,
ARCTIC GLACIER. INC., AND ARCTIC GLACIER
INTERNATIONAL, INC. (DKT. NO. 394); (2)
GRANTING DIRECT PURCHASER PLAINTIFFS'
MOTION FOR APPROVAL OF PROPOSED PLAN
OF DISTRIBUTION OF FUNDS RECEIVED
IN SETTLEMENTS WITH HOME CITY ICE
COMPANY. ARCTIC GLACIER INCOME FUND.
ARCTIC GLACIER, INC., AND ARCTIC GLACIER
INTERNATIONAL, INC. (DKT. NO. 395); and
(3) GRANTING IN PART DIRECT PURCHASER
PLAINTIFFS' COUNSEL'S MOTION FOR AN AWARD
OF ATTORNEYS' FEES AND REIMBURSEMENT OF
LITIGATION COSTS AND EXPENSES (DKT. NO. 396)
PAUL D. BORMAN, District Judge.
*1 This matter is before the Court on Direct Purchaser
Plaintiffs' Motion for Final Approval of Proposed Settlement
with Arctic Glacier Income Fund, Arctic Glacier, Inc., and
Arctic Glacier International, Inc. (Dkt. No. 394), Direct
Purchaser Plaintiffs' Motion for Approval of Proposed Plan
of Distribution of Funds Received in Settlements with Home
City Ice Company, Arctic Glacier Income Fund, Arctic
Glacier, Inc. and Arctic Glacier International, Inc. (Dkt. No.
395) and Direct Purchaser Plaintiffs' Counsel's Motion for an
Award of Attorneys' Fees and Reimbursement of Litigation
Costs and Expenses (Dkt. No. 396). A Final Fairness Hearing
was held on October 28, 2011. For the reasons that follow, the
Court GRANTS the motion for final approval of the Arctic
Glacier settlement, GRANTS the motion for approval of the
proposed plan of distribution of funds received in the Home
City and Arctic Glacier settlements and GRANTS IN PART
the motion for an award of attorneys' fees and expenses.
INTRODUCTION
This action is the lead case in the consolidated class
action In re Packaged Ice Antitrust Litig., No. 08–
MDL–1952 (E.D.Mich.2008). In this multidistrict litigation
involving some 68 consolidated actions, Plaintiffs are
both direct purchasers (retail stores and gas stations who
purchased directly from Defendants) and indirect purchasers
(individuals who purchased from retail stores and gas
stations) of packaged ice from Defendants in the United
States.
This Opinion and Order relates to the Direct Purchaser action,
which alleges that Defendants Reddy Ice Holdings, Inc.
and Reddy Ice Corporation (the “Reddy Ice Defendants”),
Defendants Arctic Glacier Income Fund, Arctic Glacier,
Inc. and Arctic Glacier International, Inc. (collectively the
“Arctic Glacier Defendants”) and Defendant Home City Ice
Company (“Home City”) conspired to allocate customers
and markets throughout the United States, in violation of
Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. The
Direct Purchaser Plaintiffs now move for final approval of
a settlement agreement with the Arctic Glacier Defendants,
for authorization of a plan of distribution of the settlement
funds from the settlement with Arctic Glacier and the prior
settlement with Home City and for an award of attorneys' fees
and reimbursement of expenses. 1 Direct Purchaser Plaintiffs'
litigation against Reddy Ice continues. For the reasons that
follow, the Court approves the settlement with Arctic Glacier,
approves the plan of distribution and approves in part the
requested legal fees and expenses.
I. BACKGROUND
A. The Multidistrict Packaged Ice Litigation
In 2008, the Department of Justice (“DOJ”) executed a
search warrant against Reddy Ice, thereby going public
with an investigation into the packaged ice industry in the
United States. Packaged ice is sold from freezers placed by
manufacturers in retail stores. Multiple civil antitrust actions
were subsequently filed against the Reddy Defendants, the
Arctic Glacier Defendants and Home City. On June 5, 2008,
Pursuant to 28 U.S.C. § 1407, the United States Judicial Panel
on Multidistrict Litigation (“JPML”) transferred all pending
and subsequent related civil actions to this District, and
ordered that they be assigned to this Court for coordinated or
1
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consolidated pretrial proceedings. (Transfer Order, Dkt. No.
1.) A total of 68 cases have been transferred and consolidated
in accordance with the MDL Order, the majority of the
transferred cases being direct purchaser actions. (Transfer
Order, Conditional Transfer Orders 1–6, Dkt. Nos. 1, 9, 47,
70, 85, 356, 384.)
*2 On June 1, 2009, this Court appointed Kohn, Swift &
Graft, P.C. as interim lead counsel and Gurewitz & Raben,
PLLC as liaison counsel for the proposed Direct Purchaser
class. (Dkt. No. 175.) On September 15, 2009, the Direct
Purchaser Plaintiffs filed their Consolidated Amended Class
Action Complaint (“CAC”). (Dkt. No. 198.) On October
30, 2009, the Reddy Ice Defendants and the Arctic Glacier
Defendants filed motions to dismiss the CAC. (Dkt.Nos.202,
203.) On July 1, 2010, this Court issued an Opinion and Order
Denying Defendants Reddy Ice and Arctic Glacier's Motions
to Dismiss, finding that the CAC stated a plausible claim for
relief as to both Reddy Ice and Arctic Glacier under section 1
of the Sherman Antitrust Act. (Dkt. No. 260).
on the proposed AG Settlement Agreement. On July 12 and
July 19, 2011, the Court received revised proposed class
notices, which better explained to class members the potential
impact of the Most Favored Nation Clause in the Home City
Settlement Agreement on the AG Settlement Agreement.
In an Opinion and Order dated July 20, 2011, the
Court preliminarily approved the proposed AG Settlement
Agreement, appointed Kohn, Swift & Graf, P.C. and
Gurewitz & Raben, PLLC (“Class Counsel”) as Class
Counsel for the AG Settlement Class, authorized Direct
Purchaser Plaintiffs to disseminate notice, and set October
28, 2011 as the date for the Final Fairness Hearing on the
proposed AG Settlement Agreement. (Dkt. No. 285.)
B. The Terms of the Settlement Agreement with the
Arctic Glacier Defendants
*3 The principal terms of the AG Settlement Agreement are
as follows:
On November 13, 2009, Direct Purchaser Plaintiffs
filed a motion for preliminary approval of a settlement
agreement dated October 30, 2009 between Direct Purchaser
Plaintiffs and Defendant Home City (“the HC Settlement
Agreement”). On August 26, 2010, the Court held a
preliminary fairness hearing on the proposed HC Settlement
Agreement. In an Opinion and Order dated September 2,
2010, the Court preliminarily approved the proposed HC
Settlement Agreement, authorized Direct Purchaser Plaintiffs
to disseminate notice, and set February 10, 2011 as the date
for the Final Fairness Hearing on the proposed Settlement
Agreement. (Dkt. No. 285.) The Court held a Final Fairness
Hearing on February 10, 2011 and, in an Amended Opinion
and Order dated February 22, 2011, the Court granted final
approval of the HC Settlement Agreement and granted class
counsel's request to use a portion of the HC Settlement funds
for litigation expenses incurred in the continued prosecution
of the action against the remaining non-settling Defendants.
(Dkt. No. 329.)
(1) The Settlement Amount. The AG Settlement Agreement
provides that Arctic Glacier will pay $12.5 million in two
installments. (AG Settlement Agreement ¶ 19.) The first
installment of $2.5 million was paid on August 4, 2011. In the
original Settlement Agreement, the second installment was to
be paid on the later of November 1, 2011 or 30 days after this
Court entered its Final Order approving the AG Settlement
Agreement. By an Amendment dated October 26, 2011,
the Direct Purchaser Plaintiffs and Arctic Glacier agreed to
modify the date on which the second installment payment
would be due to “the later of April 2, 2012 or thirty (30) days
after entry of the final judgment order” approving the AG
Settlement. (Dkt. No. 400.) All other terms and conditions of
the AG Settlement Agreement remain the same. Interest is to
be paid on each installment, with interest accruing 30 days
following the date on which the AG Settlement Agreement
was executed. The Settlement Funds have been, and are to be,
invested in United States Government Treasury securities or
United States Treasury money market funds.
On April 7, 2011, Direct Purchaser Plaintiffs filed a
motion for preliminary approval of a settlement agreement
dated March 30, 2011 between Direct Purchaser Plaintiffs
and the Arctic Glacier Defendants (“the AG Settlement
Agreement”). The motion sought preliminary approval of the
AG Settlement Agreement and approval to disseminate notice
to the proposed AG Settlement Class. (Dkt. No. 351.) On
May 20, 2011, the Court held a preliminary fairness hearing
An issue remains regarding whether Home City will claim
a refund from the amount that it paid in the HC Settlement
Agreement, pursuant to a Most Favored Nation (“MFN”)
clause in the HC Settlement Agreement. Home City and the
Direct Purchaser Plaintiffs continue to discuss whether the
MFN clause has been triggered and, if so, how much of a
refund Home City is due. If a refund is due, this amount will
be withdrawn from the total Settlement Fund and the amount
available to the class reduced accordingly. The potential for
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this reduction in the Settlement Fund was fully disclosed to
potential class members in both the Notice and Summary
Notice of the AG Settlement.
In their efforts to analyze the reasonableness of the AG
Settlement amount, the Direct Purchaser Plaintiffs reviewed
Arctic Glacier's financial information and had discussions
with Arctic Glacier and its counsel regarding Arctic Glacier's
precarious financial condition, its significant debt load and
the extensive control of its lenders over its financial affairs.
Based on their review of Arctic Glacier's financial affairs,
Direct Purchaser Plaintiffs have concluded that the amount
that Arctic Glacier has agreed to pay in settlement represents
the limit that Arctic Glacier could pay given its financial
restraints.
(2) Rights to Reduce the Settlement Amount or Withdraw
From the Settlement. The Settlement Agreement provides that
Arctic Glacier may reduce its settlement payment based on
certain thresholds being crossed regarding the percentage of
purchases of packaged ice from Arctic Glacier during the
class period from customers that elected to be excluded from
the Settlement Class. (AG Settlement Agreement ¶ 20.) If
the dollar amount of purchases by Settlement Class members
requesting exclusion exceeds a certain percentage of either
Arctic Glacier's total sales, or the total sales of the other
Defendants, during the class period, Arctic Glacier has a right
to withdraw from the settlement altogether.
*4 Only 15 potential class members, a minimal number,
have exercised their right to be excluded from the Settlement.
These opt-outs, according to counsel for the Direct Purchaser
Plaintiffs, include a few larger entities but are predominantly
“mom and pop entities.” Three of the larger entities, the Koch
companies, also opted out of the HC Settlement. A list of
those entities who filed timely notices of their intent to optout of the AG Settlement is attached to this Order as Exhibit
A. The percentage of sales represented by those members
seeking exclusion has not triggered any of the provisions of
paragraph 20 of the Settlement Agreement.
(3) Cooperation. In addition to paying the $12.5 million,
Arctic Glacier agreed to cooperate with the Direct Purchaser
Plaintiffs' Counsel in connection with the prosecution of
claims against the remaining Defendant, Reddy Ice. Arctic
Glacier, per the terms of the AG Settlement Agreement,
has already produced to the Direct Purchaser Plaintiffs the
documents that it produced to the Department of Justice.
Arctic Glacier has also arranged a meeting between outside
counsel for Arctic Glacier and Class Counsel. Arctic Glacier
will also provide declarations and testimony as necessary to
establish the admissibility of its documents and to use its best
and good faith efforts to make present and former officers
available for interviews, depositions or trial testimony.
(4) Releases. Upon the occurrence of the Effective Date of
the AG Settlement Agreement, as defined in paragraph 17
of the Settlement Agreement, the named Plaintiffs and the
Settlement Class members (as defined in paragraph 7 of
the Settlement Agreement) release all claims (as defined in
paragraph 18 of the Settlement Agreement) against Arctic
Glacier (and additional “releasees” as defined in paragraph
6 of the Settlement Agreement). Specifically excluded from
the category of “releasees” are the non-settling Reddy
Ice Defendants. (Settlement Agreement ¶ 6.) Specifically
excluded from the claims released are any claims made
by indirect purchasers of Packaged Ice as to their indirect
purchases, or any product defect or similar claim between the
parties relating to Package Ice. (Settlement Agreement ¶ 18.)
(5) Sales by Arctic Glacier Remain in the Case Against
the Reddy Ice Defendants. The proposed AG Settlement
Agreement will not affect the non-settling Defendant's joint
and several liability for the alleged conspiracy. Arctic Glacier
sales will remain in the case as a basis for damage claims
and the non-settling Defendant remains jointly and severally
liable for damages on those sales. (Settlement Agreement ¶
34.)
(6) Stipulation to Class Certification. The parties to the
Settlement Agreement have stipulated that the requirements
of Fed.R.Civ.P. 23(a) and 23(b)(3) have been satisfied and
have stipulated to certification of the following Settlement
Class, which is identical to the class certified by the Court
for purposes of the HC Settlement, for purposes of settlement
with Arctic Glacier:
from the Settlement class are
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predecessors or successors,
and
C. Notice to the Class and Requests for Exclusion and/or
Objections
The Direct Purchaser Plaintiffs, in compliance with the
Notice provisions of this Court's July 20, 2011 Preliminary
Approval Order, mailed 208,862 notices on August 3, 2011
to potential class members whose addresses were provided
by Defendants. (Dkt. No. 393, Notice of Filing Affidavits
of Mailing and Publication, Ex. A.) The firm responsible
for mailing the notices, Smith–Edwards–Dunlap Printing
Company, also published a Summary Notice in the National
Edition of the Wall Street Journal. The Notice, Settlement
Agreement and a copy of the Consolidated Class Action
Complaint were also made available at www.kohnswift.com.
(Dkt. No. 393, Notice of Filing Affidavits of Mailing and
Publication.)
The Court finds that the method, form and content of the
class notice by mail and publication approved by the Court on
July 20, 2011 (Dkt. No. 285, Preliminary Approval Order),
mailed to the Class Members by Smith Edwards–Dunlap
Printing Company first class U.S. Mail on August 3, 2011
and published in the Wall Street Journal on August 11, 2011,
satisfied Rule 23(e)(1) notice requirements. “The contents of
a Rule 23(e) notice are sufficient if they inform the class
members of the nature of the pending action, the general terms
of the settlement, that complete and detailed information is
available from the court files, and that any class member may
appear and be heard at the hearing.” 3 Newberg on Class
Actions, § 8.32 (4th ed.2010). Plaintiffs obtained the names
and addresses of potential Class Members from customer lists
provided by the Defendants, and the Notice explained the
litigation and the terms of the Settlement Agreement in detail
and also provided the Class Members access to the relevant
documents, i.e. the Settlement Agreement and the Complaint,
via the Kohn Swift website. The Notice explained in detail,
and highlighted in bold print, the process for requesting
exclusion and for filing objections with the Court and also
informed Class Members of their right to attend the hearing
upon proper notice to the Court. The Notice explains that
the previously-approved HC Settlement amount of $13.5
million will be combined with the $12.5 million Arctic
Glacier Settlement amount into a single Settlement Fund.
The Notice also informed Class Members of the potential
for the Settlement Amount to decrease in the event that
the HC Settlement Agreement MFN provision is triggered.
The Notice also explained the process for submitting Claims
Forms in great detail, attaching easy-to-follow worksheets to
facilitate the submission of claims.
*6 The Court concludes that the notice was “reasonably
calculated, under all the circumstances, to apprise [the Class
Members] of the pendency of the action and afford them
an opportunity to present their objections.” UAW v. General
Motors Corp., 497 F.3d 615, 631 (6th Cir.2007) (citations
omitted). The Court finds that the Notice fully complied in
all respects with the requirements of Federal Rule of Civil
Procedure 23 and the requirements of due process.
D. The Proposed Plan of Distribution
of the proceeds of the HC and the AG Settlement Agreements
on a pro rata basis to those members of the Settlement Class
who filed valid and timely claims. The deadline for filing
claims was November 26, 2011. (Dkt. No. 394, Mot. for Final
Approval, Ex. C, Notice and Claim Form.) In connection with
the HC Settlement, the Notice that was sent to Class Members
on November 2, 2010 did not explain the claims process,
but explained to Class Members that if they remained in the
HC Settlement Class, they would receive a second notice
setting forth the process for submitting claims. (Dkt. No. 395,
Mot. for Approval of Plan of Distribution, Ex. A, Home City
Notice.)
In connection with the AG Settlement, the August 3, 2011
Notice that was sent to 208,862 Class Members (largely the
same individuals that received the HC Settlement Agreement
Notice) explained the claims process and attached an easyto-follow claim form for listing all information that would be
necessary to process a valid claim and obtain their share of
the net settlement funds. On December 7, 2011, in response
to a request from the Court, the Direct Purchaser Plaintiffs
informed the Court that “there has been a positive and robust
response to the Notice by the class member purchasers, and
that claims have been submitted setting forth purchases of
over $1.4 billion, constituting approximately 46% of the total
packaged ice sales in the United States by Defendants during
the seven year and two month settlement period.” (Dkt. No.
404, Direct Purchaser Plaintiffs' Report Regarding the Claims
Submission Process, 1.) “Claims have been received from
purchasers across the board, from Fortune 100 companies and
national chains, to “mom and pops” with claims of less than
$100.” Id. By way of example, Direct Purchaser Plaintiffs
note that four claimants filed claims for purchases of $100
million or more; an additional 17 filed claims for purchases
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of $10 million or more, and an additional 93 filed claims
for purchases greater than $ 1 million. At the other end of
the spectrum, 166 claims are for less than $1,000 and the
remaining 2,480 claims are for purchases between $1,000
and $1 million. Id. at 2. Direct Purchaser Plaintiffs state that
collectively, the Defendants' relevant sales during the class
period total approximately $3.1 billion (Home City's sales
were $527 million, Arctic Glacier's were $563 million and
Reddy Ice's were $2 billion) so the amount represented by
the claims filed is approximately 46% of the Defendants'
sales during the class period. The Direct Purchaser Plaintiffs
further informed the Court that as of December 5, 2011, the
claims administrator had received 2,760 timely filed claims
with total claimed purchases of $1,431,127,786.40. Id. at 1–
2. All of the claims are subject to further review by the claims
administrator. Direct Purchaser Plaintiffs' counsel represents
that from his “experience, the amount of purchases in the
filed claims represents a significant percentage of the effected
[sic] market participating in the claims process and proposed
distribution.” Id. at 2.
(internal quotation marks and citations omitted). “Given that
class settlements are favored, the role of the district court is
limited to the extent necessary to reach a reasoned judgment
that the agreement is not the product of fraud or overreaching
by, or collusion between, the negotiating parties, and that the
settlement taken as a whole, is fair, reasonable and adequate
to all concerned.” IUE–CWA, 238 F.R.D. at 594 (internal
quotation marks and citations omitted); Sheick v. Automotive
Component Carrier LLC, No. 09–14429, 2010 WL 4136958,
at *14 (E.D.Mich. Oct. 18, 2010) (“In assessing a proposed
settlement, the district court judge ‘may not substitute his or
her judgment for that of the litigants and their counsel’ and
‘should approve a class settlement if, following a hearing, the
court determines that the settlement ‘is fair, reasonable, and
adequate.’ ”) (quoting IUE–CWA, 238 F.R.D. at 593, 593).
“Settlement embodies a bargained give and take between the
litigants that is presumptively valid about which the Court
should not substitute its judgment for that of the parties.”
Ford, 2006 WL 1984363, at *21 (internal quotation marks
and citation omitted).
II. ANALYSIS
*7 The Sixth Circuit and courts in this district have
recognized that the law favors the settlement of class action
lawsuits. UAW, 497 F.3d at 632 (noting “the federal policy
favoring settlement of class actions”); IUE–CWA v. General
Motors Corp., 238 F.R.D. 583, 593 (E.D.Mich.2006) (noting
“the general federal policy favoring the settlement of class
actions”). This policy applies with equal force whether the
settlement is partial, involving only some of the defendants,
or complete. See In re Beef Ind. Antitrust Litig., 607 F.2d
167, 172 (5th Cir.1979) (finding nothing in the cases or the
commentaries to suggest that approval of a pre-certification
settlement is dependent upon the settlement being complete
as to all parties); Newby v. Enron Corp., 394 F.3d 296 (5th
Cir.2004) (affirming approval of partial settlement where
class certified for settlement purposes only).
A. Final Certification of the AG Settlement Class
In its order preliminarily approving the AG Settlement Class,
the Court conditionally certified the AG Settlement Class,
as defined in the proposed AG Settlement Agreement, and
identical to the class finally approved by the Court for
purposes of the HC Settlement, as follows:
“The evaluation and approval of a class settlement is
committed to the sound discretion of the district court” and the
district court “should approve a class settlement if, following
a hearing, the court determines that the settlement ‘is fair,
reasonable, and adequate.’ “ IUE–CWA, 238 F.R.D. at 593,
594. “In exercising that discretion, the Court may limit the
fairness hearing to whatever is necessary to aid it in reaching
an informed, just and reasoned decision” and “the settlement
or fairness hearing is not to be turned into a trial or rehearsal
for trial on the merits.” Int'l Union v. Ford Motor Co., No. 05–
74730, 2006 WL 1984363, at *21 (E.D.Mich. July 13, 2006)
from the Settlement Class are
predecessors or successors, and
Certification of a class must satisfy the requirements of
Federal Rule of Civil Procedure 23(a) and one of the
subsections of Federal Rule of Civil Procedure 23(b). Ford
Motor, 2006 WL 1984363, at *18 (citing Sprague v. General
Motors Corp., 133 F.3d 388, 397 (6th Cir.1998)). The Court
discussed each of the relevant factors in its prior Opinion and
Order finally approving the HC Settlement Agreement, which
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approved the identical class for purposes of that settlement.
See In re Packaged Ice Antit. Litig., No. 08–MDL–1952,
2011 WL 717519, at *5–6 (E.D.Mich. Feb. 22, 2011). For
the reasons that follow, which are many of the same reasons
discussed with respect to approval of this same class for
purposes of the HC Settlement, the Court finds that the AG
Settlement Class likewise satisfies the Rule 23 requirements.
Rule 23(a).
Federal Rule of Civil Procedure 23(a) provides that class
members may represent a class if the following prerequisites
are satisfied:
(1) the class is so numerous that joinder of all members is
impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class;
(4) the representative parties will fairly and adequately
protect the interests of the class.
Fed.R.Civ.P. 23(a). These four prerequisites are met here:
a. Rule 23(a)(1): The numerosity requirement of Rule 23(a)
(1) is met because the Notice was mailed to 208,862 putative
Class Members. See Ford Motor, 2006 WL 1984363, at *19
(holding that class of over 170,000 satisfied the numerosity
requirement). The Settlement Class is too large for joinder to
be practicable;
b. Rule 23(a)(2): “The requirement of commonality requires
only a common question of law or fact.” Ford Motor, 2006
WL 1984363, at *19 (citing Bittinger v. Tecumseh Prods.
Co., 123 F.3d 877, 884 (6th Cir.1997)). There exist common
questions of law and fact to satisfy Rule 23(a)(2), i.e. whether
Defendants conspired to allocate territories and customers
and whether their unlawful conduct caused packaged ice
prices to be higher than they would have been absent such
illegal behavior and whether the conduct caused injury to the
Class Members;
c. Rule 23(a)(3): The claims of the Class Representatives
are typical of the Settlement Class in satisfaction of Rule
23(a) (3). “If there is a strong similarity of legal theories,
the requirement [of typicality] is met, even if there are
factual distinctions among named and absent class members.”
Ford Motor, 2006 WL 1984363, at *19. Because all Class
Members' claims arise from the same course of conduct, i.e.
a conspiracy to allocate markets in violation of the Sherman
Act, their claims are based on the same legal theory and the
typicality requirement, which is not onerous, is met.
*9 d. Rule 23(a)(4): The named Plaintiffs will fairly
and adequately represent the interests of the Settlement
Class Members in satisfaction of Rule 23(a)(4). “The two
criteria for determining whether class representatives are
adequate are ‘(1) the representatives must have common
interests with unnamed members of the class, and (2) it
must appear that the representatives will vigorously prosecute
the interests of the class through qualified counsel.’ “ Ford
Motor, 2006 WL 1984363, at *19 (quoting Senter v. General
Motors Corp., 532 F.2d 511, 525 (6th Cir.1976)). Plaintiffs'
interests are aligned with the Class Members because they
all possess the same interests and have suffered the same
type of injury and the class is represented by competent
and experienced Class Counsel. There is no indication that
the named Plaintiffs' interests are unjustifiably advanced at
the expense of unnamed Class Members or that the named
Plaintiffs' interests conflict in any way with those of the
Class Members. Lessard v. Allen Park, 372 F.Supp.2d 1007,
1009 (E.D.Mich.2005) (“In determining fairness, a court
should consider whether the interests of counsel and the
named plaintiffs are ‘unjustifiably advanced at the expense of
unnamed class members.’ ”) (quoting Williams v. Vukovich,
720 F.2d 909, 921–923 (6th Cir.1983)). To date, there
has been no request for an incentive award for the named
Plaintiffs and any such request would be subject to further
notice and an opportunity to object by the Class Members.
Rule 23(b)(3).
Finally, the Court concludes that the Settlement Class
satisfies the requirements of Fed.R.Civ.P. 23(b)(3) because
for purposes of this Settlement Agreement “questions of law
or fact common to the members of the class predominate over
any questions affecting only individual members, and ... a
class action is superior to other available methods for the fair
and efficient adjudication of the controversy.” Fed.R.Civ.P.
23(b)(3). “ ‘Predominance is a test readily met in certain
cases alleging ... violations of the antitrust laws, because
proof of the conspiracy is a common question that is thought
to predominate over the other issues of the case.’ “ In re
Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir.2008)
(quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591,
625, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)) (finding that
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allegations of price fixing and market allocation will not vary
among the class members). The allegations of market and
customer allocation will not vary among the class members
and issues regarding the amount of damages do not destroy
predominance. In re Scrap Metal, 527 F.3d at 535–36. The
evidence that will prove a violation as to one member will be
sufficient to prove it as to all—the anticompetitive conduct
is not dependent on the separate conduct of the individual
Class Members. Meijer Inc. v. 3M, No. 04–5871, 2006
WL 2382718, at *8 (E.D.Pa. Aug.14, 2006). Class Counsel
represents that the superiority requirement is met because
no Class Members have exhibited an interest in individually
pursuing separate actions. (Pls. Mot. for Final Approval, 19.)
*10 The Court hereby certifies the proposed AG Settlement
Class. The Court further concludes that the persons and
entities identified on the schedule attached to this Opinion and
Order as Exhibit A, and no others, have timely requested to be
excluded from the AG Settlement Class and accordingly are
not included in or bound by this Opinion and Order. As the
Court noted in its Opinion and Order approving this identical
class for purposes of the HC Settlement, the ability of the nonsettling Defendant to contest certification of a litigation class
will be unimpaired by the certification of an AG Settlementonly class. In re Packaged Ice Antit. Litig., 2011 WL 717519,
at *5–6. The Court's findings in this Final Approval Order will
have no effect on the Court's ruling on any motion to certify
any class in this litigation and no party may cite or refer to the
Court's approval of the AG Settlement Class as persuasive or
a class.
B. The AG Settlement Agreement is Fair, Reasonable
and Adequate
The Sixth Circuit has identified a number of factors that
are relevant in determining whether a settlement is fair,
reasonable and adequate: “(1) the likelihood of success on the
merits weighed against the amount and form of relief in the
settlement; (2) the complexity, expense and likely duration
of the litigation; (3) the opinions of class counsel and class
representatives; (4) the amount of discovery engaged in by
the parties; (5) the reaction of absent class members; (6) the
risk of fraud or collusion; and (7) the public interest.” UAW,
497 F.3d at 631. “The Court may choose to consider only
those factors that are relevant to the settlement at hand and
may weigh particular factors according to the demands of the
case.” Ford Motor, 2006 WL 1984363, at *22.
Consideration of the factors most relevant to the instant
case leads the Court to conclude that, given the complexity
of the litigation, the multitude of factual and legal hurdles
which remain in this case which is still at an early
stage, and the financial struggles facing the Arctic Glacier
Defendants, the AG Settlement Agreement falls within the
range of reasonableness, fairness and adequacy required
under Fed.R.Civ.P. 23.
1. The likelihood of Plaintiffs' success on the merits
weighed against the amount and form of relief offered in
the settlement supports approval.
In determining whether the relief offered in a settlement
outweighs the plaintiffs' chances of ultimate success on the
merits, the Court “recognizes the uncertainties of law and
fact in any particular case and the concomitant risks and
costs inherent in taking any litigation to completion.” IUE–
CWA, 238 F.R.D. at 594. The Court “is not to decide whether
one side is right or even whether one side has a better of
these arguments.... The question rather is whether the parties
are using settlement to resolve a legitimate legal and factual
dispute.” UAW, 497 F.3d at 632.
*11 The Court concludes that the AG Settlement Agreement
seeks to resolve a legitimate legal and factual dispute. Direct
Purchaser Plaintiffs state that they remain optimistic about
their ultimate chance of success but acknowledge that there
is always a risk that Defendants could prevail with respect
certain legal or factual issues. Plaintiffs point out, and the
Court notes, that the Department of Justice has closed its
investigation of the Packaged Ice industry. See In re Pressure
Sensitive Labelstock Antit. Litig., 584 F.Supp.2d 697, 702
(M.D.Pa.2008) (“Risks of establishing liability and damages
are substantial .... the criminal investigation that likely
instigated this antitrust litigation was concluded without the
issuance of any indictments.”); Rodriguez v. West Publishing
Corp., 563 F.3d 948, 964 (9th Cir.2009) (finding that district
court did not abuse its discretion in considering that “there
were no government coattails for the class to ride”). Plaintiffs
also note that their case alleges a nationwide conspiracy,
while certain Defendants have pled guilty only to antitrust
violations in Southeastern Michigan.
Weighing against these potential weaknesses is the immediate
availability of a $12.5 million cash settlement, which
represents approximately 2.2% of Arctic Glacier's United
States sales of Packaged Ice during the proposed Settlement
Class Period. Like the HC settlement amount, the AG
Settlement Amount, as a percentage of sales allegedly
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affected by Arctic Glacier's conduct, is on par with other
antitrust class action settlements that have been approved
by other courts. See, e.g. In re Labelstock Antit. Litig.,
584 F.Supp.2d at 702 ($8.25 million settlement equal
to 1.5% of settling defendant's sales during the class
period); Meijer, 2006 WL 2382718, at *20 ($28.9 million
settlement represented 2% of settling defendant's sales to
class members); In re Linerboard Antit. Litig ., 321 F.Supp.2d
619, 627 (E.D.Pa.2004) ($34 million and $92.5 million
represented 2.0% and 1.62% of settling defendants' sales); In
re Automotive Refinishing Paint Antit. Litig., MDL No. 1426,
2004 WL 1068807 (E.D.Pa. May 11, 2004) ($48 million
settlement represented 2% of sales).
Also of significant value is the fact that the Settlement
Agreement with Arctic Glacier can serve as a further source
of cooperation against the non-settling Defendant as to the
nationwide conspiracy allegations. See In re Linerboard
Antitrust Litig., 321 F.Supp.2d at 643 (finding that the
provision of such cooperation provides “a substantial benefit
to the classes and strongly militates toward approval of
the Settlement Agreement”); In re Labelstock Antitrust
Litig., 584 F.Supp.2d at 702 (“the benefit of obtaining the
cooperation of the Settling Defendants tends to offset the fact
that they would be able to withstand a larger judgment.”).
“As is true in any case, the proposed Settlement represents
a compromise in which the highest hopes for recovery are
yielded in exchange for certainty and resolution.” Ford, 2006
WL 1984363, at *23 (internal quotation marks and citation
omitted). The Court concludes that consideration of this
factor weighs in favor of final approval of the AG Settlement
Agreement.
2. The complexity, expense and likely duration of the
litigation favor approval.
*12 “[T]he prospect of a trial necessarily involves the
risk that Plaintiffs would obtain little or no recovery.”
In Re Cardizem CD Antitrust Litig., 218 F.R.D. 508,
523 (E.D.Mich.2003). “Experience proves that, no matter
how confident trial counsel may be, they cannot predict
with 100% accuracy a jury's favorable verdict, particularly
in complex antitrust litigation.” Id. Although reluctant to
disclose their analysis of the risks of litigation because
of their pending action against the remaining non-settling
Defendant, Plaintiffs concede that an antitrust litigation of
this scope has undeniable inherent risks, such as whether
the class will be certified and upheld on appeal, whether the
conspiracy as alleged in the Complaint can be established,
whether Plaintiffs will be able to demonstrate class wide
antitrust impact and ultimately whether Plaintiffs will be able
to prove damages. These risks are wholly eliminated with
respect to a recovery from Arctic Glacier and the Settlement
Agreement provides Plaintiffs with a sum certain recovery
and cooperation against the non-settling Defendant which
could bear substantial fruits.
Plaintiffs also point to the fact that there is a significant risk of
the Settlement Class receiving little or nothing if the litigation
continues due to the financial health of all of the Arctic
Glacier entities. Class counsel represents that they have had
substantial discussions with Arctic Glacier and its counsel
regarding the financial health of the Arctic Glacier entities
and have concluded that the precarious financial future of
these entities weighs heavily in favor of settlement at this
point. Direct Purchaser Plaintiffs point out that the risk of
the settlement class receiving little or nothing if the litigation
continues against Arctic Glacier is an important consideration
favoring settlement. Arctic Glacier remains debt laden and its
share price is down to $.70 cdn as of September 27, 2011,
down from $11.69 on March 6, 2008. (Pls.' Mot. 12 n. 5.)
The Court concludes that this factor weighs in favor of
final approval, given the real possibility that Plaintiffs could
ultimately be left with nothing at all in recovery from Arctic
Glacier. Sheick, 2010 WL 4136958, at *18 (finding that the
potential that a full blown trial might leave plaintiffs with
“absolutely nothing” was a significant factor favoring final
approval).
3. The opinions of class counsel and class
representatives.
The Court appointed Kohn, Swift & Graf, P.C. as Interim
Lead counsel and Gurewitz & Raben, PLLC as interim liaison
counsel after thorough review of their credentials and abilities
which are discussed in greater detail in the Court's June 1,
2009 Opinion and Order Appointing Interim Class Counsel.
(Dkt. No. 175.) Class Counsel's judgment that settlement is in
the best interests of the class “is entitled to significant weight,
and supports the fairness of the class settlement.” Sheick,
2010 WL 4136958, at *18 (citation omitted). Class Counsel
represents to the Court that they have negotiated this deal with
Arctic Glacier at arm's length over many months, that they
have met with Arctic Glacier's top executives to discuss the
financial health of the Arctic Glacier entities and that Arctic
Glacier rejected many offers before agreeing to the terms of
the instant Settlement Agreement. Class Counsel believes that
the AG Settlement Agreement constitutes an excellent result.
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The Court concludes that this factor weighs in favor of final
approval of the AG Settlement Agreement.
4. The amount of discovery conducted to date in the
multi-district litigation.
*13 As did the HC Settlement Agreement, the Settlement
Agreement with Arctic Glacier comes at what is still a
relatively early stage of this multi-district antitrust litigation,
before class certification and before the initiation of discovery
in earnest. While the parties have proceeded with document
discovery, written discovery and depositions were stayed
by the Court pending class certification. (Dkt. No. 296,
Case Management Order No. 2.) However, as the Court
noted in its Opinion and Order preliminarily approving the
HC Settlement, “the contours of this litigation are not a
mystery and are informed by government investigations,
internal corporate investigations that have been made public,
state attorney general investigations, the related securities
and whistleblower cases and importantly Plaintiffs' counsels'
discussions with Home City's counsel in the course of their
arms length negotiations.” In re Packaged Ice Antitrust Litig.,
No. 08–MDL–1952, 2010 WL 3070161, at *6 (E.D.Mich.
Aug. 2, 2010) (quoting Newby v. Enron Corp., 394 F.3d 296,
306 (6th Cir.2004) (“[T]he absence of formal discovery is not
an obstacle [to settlement approval] so long as the parties and
the Court have adequate information in order to evaluate the
relative position of the parties.”)). See also Sheick, 2010 WL
4136958, at *19 n. 3 (noting that “courts do not require formal
discovery so long as the parties have adequate information
in order to evaluate the relative positions.”) (quoting Newby,
394 F.3d at 306 (“Formal discovery [is not] a necessary ticket
to the bargaining table”)).
Plaintiffs' Counsel has been provided information by Arctic
Glacier's attorneys, and has met with top executives at
Arctic Glacier, in the process of negotiating the AG
Settlement Agreement, which lead counsel to conclude that
this settlement is in the best interests of the settlement
class. Particularly where, as here, there is the potential for a
significant benefit to the class in the form of cooperation on
the part of the settling Defendant, the absence of extensive
discovery does not weigh against final approval of the AG
5. The reaction of absent Class Members.
Plaintiffs propose that the combined HC and AG Settlement
Funds will be distributed among the Settlement Class
Members pro-rata, based on the dollar amount of their
purchases of Packaged Ice during the Settlement Class
Period. The Notice and Claim Forms that were sent
to potential Class Members on August 3, 2011 request
information detailing purchases made by Class Members who
elect to file a claim for their portion of the Settlement Fund.
The reaction of the Settlement Class members weighs in favor
of final approval. Only 15 of the 208,862 AG Settlement Class
Members who were sent Notice have requested exclusion
and, as with the HC Settlement, none of the AG Settlement
Class Members has filed an objection. According to Class
Counsel, the opt-out percentage is “minuscule.” (Pls.' Mot.
14.) “[U]nanimous approval of the proposed settlement [ ]
by the class members is entitled to nearly dispositive weight
in the court's evaluation of the proposed settlement.” In re
Linerboard, 321 F.Supp.2d at 629.
*14 Further, the claims response rate, representing 46% of
Defendants' total sales of packaged ice in the United States
during the relevant class period, suggests good participation
and is a positive indication as to the favorable reaction of
absent class members. Although the number of responses
filed represents just under 1 % of the total number of Notices
mailed, this ratio is not dispositive and is frequently less
than 5%. See Touhey v. United States, No. EDCV 08–01418,
2011 WL 3179036, at *7–8 (C.D.Cal. July 25, 2011) (finding
a 2% response rate acceptable–38 responses out of 1,875
notices mailed—where there were no objections and the
overall recovery was fair and reasonable); In re Cardizem,
218 F.R.D. at 526 (finding favorable class reactions in a 6.9%
response rate (1800 proofs of claim out of 26,000 notices
sent) and a 9% response rate (37,000 proofs of claim out of
400,000+ notices sent); In re New Motor Vehicles Canadian
Export Antit. Litig., MDL No. 1532, 2011 WL 1398485, at
*3 (D.Maine April 13, 2011) (finding favorable class reaction
in a 3.9% response rate (438,169 claims out of 11.3 million
eligible claimants). As the court recognized in In re Serzone
Pdcts. Liability Action, 231 F.R.D. 221 (S.D.W.Va.2005),
many factors affect response rates and this ratio should not be
given great significance:
Objectors also assert that because the settlement class could
have potentially included millions of Class Members,
and only 6,524 have “shown their hands” to be included
in the class by filing an inventory form, the notice is
inadequate. However, many factors contribute to the claims
response rate. See, e.g, Zimmer Paper Prod., Inc. v. Berger
& Montague, P.C., 758 F.2d 86, 92–93 (3d Cir.1985)
(holding that where defendant engaged in customary and
court approved notice procedure, the response rate was
not determinative of the adequacy of the class notice.);
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3 Alba Conte & Herbert Newberg, Newberg on Class
Actions § 8.45 (4th ed. 2002) (“Claims response levels
will tend to vary with the circumstances, types of class
notices employed, and size of individual claims involved
in each case.”).... [T]he adequacy of notice is measured by
whether notice reached Class Members and gave them an
opportunity to participate, not by actual participation.
231 F.R.D. at 235–36. In this case, few class members have
elected to be excluded, no objections have been filed and
those claimants responding represent nearly 50% of the total
relevant sales. These facts speak strongly to the positive
reaction of affected class members. Consideration of this
factor weighs in favor of approval of the AG Settlement.
6. The risk of fraud or collusion.
“Courts respect the integrity of counsel and presume the
absence of fraud or collusion in negotiating the settlement,
unless evidence to the contrary is offered.” Ford, 2006 WL
1984363, at *26. There is no evidence in this case of any
collusion and Kohn Swift on the one hand and Arctic Glacier's
counsel on the other can be presumed to have acted in good
faith. This factor weighs in favor of final approval.
7. The Settlement Agreement is consistent with the
public interest.
*15 “[T]here is a strong public interest in encouraging
settlement of complex litigation and class action suits
because they are ‘notoriously difficult and unpredictable’ and
settlement conserves judicial resources.” In re Cardizem, 218
F.R.D. at 530. There do not appear to the Court to be any
countervailing public interests that would suggest that the
Court should disapprove the AG Settlement Agreement and,
significantly, no one has come forward to suggest one to the
Court. This factor weighs in favor of final approval.
In sum, having considered all of the relevant factors, each
of which weighs in favor of final approval, the Court
concludes that the proposed AG Settlement Agreement is fair,
reasonable and adequate and merits Final Approval.
C. The Proposed Plan of Distribution is Reasonable
of the combined HC and AG Settlement amounts, plus
accrued interest and less notice and claims administration
costs and any amounts approved by the Court for attorneys'
fees and reimbursement of expenses (the “Net Settlement
Fund”) on a pro rata basis, each claimants share calculated
based on the ratio that the claimants' total purchases of
Packaged Ice from any of the Defendants bears to the total
purchases of all Settlement Class Members' purchases during
the Settlement Class period, to class members who have
submitted timely and valid claim forms. “ ‘Approval of a plan
of allocation of a settlement fund in a class action is governed
by the same standards of review applicable to approval of
the settlement as a whole; the distribution plan must be fair,
reasonable and adequate.’ “ Meijer, 2006 WL 2382718, at*17
(quoting In re Ikon Office Solutions Sec. Litig., 194 F.R.D.
166, 184(E.D.Pa.2000)). “ ‘Courts generally consider plans of
allocation that reimburse class members based on the type and
extent of their injuries to be reasonable.’ “ Id. (quoting In re
Aetna, Inc., No. Civ. A. MDL 1219, 2001 WL 20928, at *12
(E.D.Pa. Jan.4, 2001)). See also In re Cardizem, 218 F.R.D.
at 531 (approving a plan as fair and reasonable that adopted
a pro rata method for calculating each class member's share
of the settlement fund).
Direct Purchaser Plaintiffs submit that a pro rata distribution
is fair and reasonable here because it is consistent with
the allegations that Defendants' anticompetitive conduct
enabled them to charge higher prices to the Direct Purchaser
Plaintiffs than they would have been able to charge absent the
agreement to allocate territories, each class member having
been charged an increased price with damages suffered in
proportion to their share of purchases. “Typically, a class
recovery in antitrust or securities suits will divide the common
fund on a pro rata basis among all who timely file eligible
claims, thus leaving no unclaimed funds.” 3 Newberg on
Class Actions, § 8:45 (4th ed.2011).
The Direct Purchaser Plaintiffs direct the Court to several
comparable antitrust cases where the pro rata distribution
has been employed. In In re Brand Name Prescription Drugs
Antit. Litig., No. 94 C 897, 1999 WL 639173 (N.D.Ill.
Aug.17, 1999) the court approved a pro rata distribution
in a case involving class member pharmacies of all sizes,
ranging from small, independent pharmacies to large chain
pharmacies, including CVS, Walgreens and Walmart:
*16 Of the distribution methods
proposed, we think the pro rata
or proportional method is the most
appropriate here. The Class Plaintiffs
alleged that they paid inflated prices
for brand name prescription drugs.
Assuming the truth of this allegation,
for purposes of distribution only,
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each class member's damages are
in direct proportion to the amount
of brand name prescription drugs
each purchased. Each class member,
therefore, is entitled to damages
measured as follows: its purchases of
brand name prescription drugs as a
percentage of all class members' brand
name prescription drug purchases for
the relevant time period. We note
that courts have utilized the pro
rata distribution method in several
prior price-fixing class actions. See,
e.g., In re Airline Ticket Commission
284–85 (D.Minn.1997) (proposed pro
rata distribution plan was “costeffective, simple and fundamentally
fair.”); In re Corrugated Container
1129 (S.D.Tex.1982) (approval of
class action settlement that provided
for pro rata distribution based upon
valid claims of allowable purchases),
aff'd, 687 F.2d 52 (5th Cir.1982)....
We think this method will provide the
most accurate measure of the damages
suffered by each class member and, for
this reason, we endorse the pro rata
distribution method.
1999 WL 639173, at *4. See also In re Plastic Additives Antit.
Litig., No. 03–cv–2038, MDL No. 1684 (E.D.Pa. Feb. 10,
2009) (distributing $26,368,000 from a settlement fund pro
rata among 175 approved claimants, to the extent of their
allowed purchases).
The Court also notes that at the Final Fairness hearing,
counsel for the Direct Purchaser Plaintiffs informed the Court
that those filing claims will have a further opportunity to
object to the final calculation of their share of the settlement
proceeds at the conclusion of the claims administration
process. Additionally, counsel for the Direct Purchaser
Plaintiffs indicated to the Court that before any “checks
are cut” from the Settlement Fund, Plaintiffs will file a
supplemental submission to the Court indicating the final
disposition. See Lessard, 422 F.Supp.2d at 790 (proposed
final distribution list submitted to court, in camera to protect
the privacy of the claimants, for approval prior to distribution
of settlement funds).
The Court concludes that the pro rata plan of distribution is
fair, reasonable and adequate.
D. The Request for Attorneys' Fees and Reimbursement
of Expenses is Largely Reasonable
An award of attorneys' fees in common fund cases need
only be “reasonable under the circumstances.” Rawlings
v. Prudential–Bache Properties, Inc., 9 F.3d 513,516 (6th
Cir.1993). The Court must consider and discuss the relevant
factors that determine reasonableness, which include: ‘ “(1)
the value of the benefit rendered to the plaintiff class; (2)
the value of the services on an hourly basis; (3) whether
the services were undertaken on a contingent fee basis; (4)
society's stake in rewarding attorneys who produce such
benefits in order to maintain an incentive to others; (5) the
complexity of the litigation; and (6) the professional skill and
standing of counsel involved on both sides.’ “ Moulton v.
United States Steel Corp., 581 F.3d 344, 352 (6th Cir.2009)
(holding that a district court's award of attorneys' fees in
a common fund case need only be reasonable under the
circumstances but remanding for an on-the-record discussion
of these factors) (quoting Bowling v. Pfizer, Inc., 102 F.3d
777, 780 (6th Cir.1996)).
*17 The Sixth Circuit permits calculation of attorneys' fees
under either the lodestar method (multiplying the number of
hours spent on the litigation by certain attorneys by their
hourly rate) or the percentage of the fund method (counsel
receive a set percentage of the total settlement fund). In
weighing the benefits and shortcomings of each method, the
Sixth Circuit in Rawlings concluded: “For these reasons, it is
necessary that district courts be permitted to select the more
appropriate method for calculating attorney's fees in light of
the unique characteristics of class actions in general, and of
the unique circumstances of the actual cases before them.”
9 F.3d at 516. The Sixth Circuit has observed that “[t]he
percentage of the fund method has a number of advantages; it
is easy to calculate; it establishes reasonable expectations on
the part of plaintiffs' attorneys as to their expected recovery;
and it encourages early settlement, which avoids protracted
litigation.” Rawlings, 9 F.3d at 516.
The Direct Purchaser Plaintiffs employ the percentage of
the fund method, but offer the lodestar calculation as a
check on the reasonableness of their request. They request
an award of $6.9 million, which represents between 26.5%
to 29% (depending on the resolution of the Home City MFN
dispute—the maximum amount of the refund if due will
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be $2,000,000 and the fee award will remain a set $6.9
million regardless of the resolution of the dispute—thus the
variance in the percentage of 26.5% to 29%) of the $26
million settlement fund. The fee percentage is applied to the
settlement fund before the separate award of litigation costs
and expenses are deducted from the fund. See In re Cardizem,
218 F.R.D. at 531–35 (attorneys' fees awarded based on the
gross settlement); In re Delphi Corp. Sec. Litig., 248 F.R.D.
483, 505 (E.D.Mich.2008) (awarding attorneys' fees based on
gross settlement fund).
Direct Purchaser Plaintiffs submit that this percentage, with
or without the MFN refund, is less than the 30% figure
set forth in the Notices to the Class and is also in the
range of awards made in recent similar antitrust cases.
See In re Foundry Resins Antit. Litig., No. 04–mdl–1638
(S.D.Ohio March 31, 2008) (awarding 33 #% of a $14.1
million settlement); In re Automotive Refinishing Paint Antit.
Litig., MDL No. 1426, 2008 WL 63269 (E.D.Pa. Jan.3, 2008)
(awarding 32% of a $39 million settlement). See Pls. Mot.,
Dkt. No. 396, pp. 11–13 (collecting multiple cases awarding
fees in the range of 30%).
Of the factors recognized by the Sixth Circuit as relevant to
a determination of the reasonableness of a fee request, all
fully support the requested award in the instant case. The
value of the benefit to the class members appears substantial.
Direct Purchaser Plaintiffs point out that the Settlement Fund
of $26 million amounts to 2.5% of Home City's and 2.2%
of Arctic Glacier's sales in the United States, which class
counsel considers an “excellent recovery .” As the Court
noted in its Order approving the HC Settlement, several
cases support the claim that a percentage of total sales in the
neighborhood of 2.0% is generally accepted as an excellent
result when measuring the total amount of the settlement. In
this regard, clearly class counsel has obtained a good result for
the settlement class. Additionally, it appears that nearly 50%
of the total affected sales are represented by the claims that
have been filed by class members, further indicating that the
settlement funds will reach a significant portion of affected
class members.
*18 Regarding the value of the services on an hourly basis,
the Direct Purchaser Plaintiffs assert that a lodestar crosscheck confirms that the $6.9 million fee request is reasonable.
Direct Purchaser Plaintiffs attach to their fee motion several
affidavits from the numerous attorneys that have worked
on the case. In total, counsel collectively have expended
10,083 hours since June 1, 2009. Applying the historical rates
charged by counsel (lead counsel placed a cap of $375 per
hour spent on document review and coding) to the hours
expended yields a “lodestar” figure of $4.54 million. This
does not include amounts that Lead Counsel expended before
their appointment or since August 31, 2011. The $6.9 million
fee request then represents a multiplier of 1.5% applied to the
lodestar figure. See In re Cardinal Health Inc. Sec. Litig., 528
F.Supp.2d 752, 767–68 (S.D.Ohio 2007) (“Most courts agree
that the typical lodestar multiplier” in a large class action
“ranges from 1.3 to 4.5.”); In re Cardizem, 218 F.R.D. at
533 (approving a lodestar multiplier of approximately 1.2%
as “both reasonable and well within the range of multipliers
awarded by courts in complex cases such as this”).
Although the Court agrees that the 1.5% multiplier applied to
the lodestar figure is within the range of multipliers applied by
other courts in similarly complex cases, the Court is troubled
by one particular category of attorney's fees for which Lead
Counsel seeks to recover. Although Lead Counsel state that
they have excluded from the total request those hours that
Lead Counsel expended prior to their appointment by the
Court on June 1, 2009, the award request does include
amounts for time expended by other counsel prior to the
appointment of Kohn, Swift as Lead Counsel. At the hearing
on this matter, Mr. Kohn explained to the Court that included
in the total proposed fee award are requests submitted by two
firms, Boies, Schiller & Flexner, LLP and Spector Roseman
Kodroff & Willis, P.C., both of whom competed with Kohn
Swift to be appointed as Lead Counsel, for time spent by those
firms before this Court appointed Kohn Swift lead counsel
for the Direct Purchaser Plaintiffs. These amounts were not
expended at Kohn Swift's request or direction on behalf of the
Settlement Class. The Court feels that amounts included in
the fee request for services provided by these firms, for hours
spent and expenses incurred prior to the time that the Court
appointed Kohn, Swift as lead counsel, are not appropriately
included in the fee award. This would include the request for
$260,363.50 in fees charged by Boies, Schiller (Dkt. No. 396,
Ex. A–5) and the request for $160,905.00 in fees charged by
Spector Roseman (Dkt. No. 396, Ex. A–19). Accordingly, the
Court will reduce the overall fee request of $6.9 million by
$421,268.50, which represents the total amount requested on
behalf of these two firms, and will approve a total fee award of
$6,478,731.50. This in no way reflects a diminished respect
for the excellent work that the Court feels Lead Counsel have
performed in this case and the good result that they have
achieved for the class members.
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*19 As to the risk of non-payment, it appears from the
Direct Purchaser Plaintiffs' brief that counsel has undertaken
this case on a contingency fee basis. Attorneys who take on
such a massive task with a significant risk of nonpayment
(all the more so, Lead Counsel suggests, since the DOJ
has decided not to seek further indictments in the matter)
should be compensated “both for services rendered and for
the risk of loss or nonpayment assumed by accepting and
prosecuting the case.” In re Automotive Refinishing, 2008 WL
63269, at *5 (finding that “the risk of nonpayment is even
higher when a defendant's prima facie liability has not been
established by the government in a criminal action”) (citing
In re Linerboard, 2004 WL 1221350).
There were no objections to the fee request of 30% that was
disclosed in the Notice to settlement class members and there
is no question as to the skill and efficiency of class counsel—
both the Kohn Swift and Gurewitz firms have handled matters
with extreme professionalism, expediency and competency
and the Court has no hesitation concluding that this factor
weighs in favor of approving the fee request. This antitrust
litigation, like all litigation of its species, promises to be
extremely complex and time intensive and there is no question
that if settlement fails, the Defendants will mount a strong
defense. See In re Cardizem, 292 F.Supp.2d at 639 (“An
antitrust class action is arguably the most complex action to
prosecute. The legal and factual issues involved are always
numerous and uncertain in outcome.”) As to the amount
of time expended on the case, it is significant. Counsel
represent that collectively they have spent 10,083 hours on
this litigation since the Court appointed Kohn Swift lead
counsel on June 1, 2009.
Importantly, the requested award of close to 30% appears
to be a fairly well-accepted ratio in cases of this type
and generally in complex class actions. See In re Foundry
Resins Antit. Litig., No. 04–MDL–1638 (S.D.Ohio March
31, 2008) (Order attached to Plaintiffs' Mot. for Award of
Fees, Ex. B, awarding 33#% of $14.1 million settlement);
In re Automotive Refinishing, 2008 WL 63269 (awarding
32% of a $39 million settlement); Disposaable Contact
Lens Litig., MDL No. 1030 (M.D.Fla.2001) (approving
fees of 31.5% of a $92 million settlement for a total
of $29 million in attorneys' fees) (Order attached to Pls.'
Fee Mot. Ex. E); In re Polypropylene Carpet Antit. Litig.,
MDL No. 1075 (N.D.Ga.2001) (approving award of fees of
331/3% of a $37.7 million settlement) (Order attached to
Pls.' Fee Mot. Ex. F); Thacker v. Chesapeake Appalachia,
L.L.C., 695 F.Supp.2d 521, 528 (E.D.Ky.2010) (“Using
the percentage approach, courts in this jurisdiction and
beyond have regularly determined that 30% fee awards are
reasonable.”); Alba Conte & Herbert Newberg, Newberg on
Class Actions (4th ed. 2002) (“Empirical studies show that,
regardless whether the percentage method or the lodestar
method is used, fee awards in class actions average around
one-third of the recovery.”)
*20 On October 26, 2011, as discussed above, counsel for
the Direct Purchaser Plaintiffs and Arctic Glacier executed an
amendment to paragraph 19 of the AG Settlement Agreement,
giving Arctic Glacier an extension of time, until the later
of April 2, 2012 or 30 days following this Court's final
approval of the AG Settlement, to make its second installment
payment of $10 million dollars into the Settlement Fund.
Also on October 26, 2011, consistent with this amendment,
Direct Purchaser Plaintiffs submitted a revised proposed
order on the fee request clarifying that, in the event the Court
awards fees, any disbursement of fees would be limited to
the proportionate amount of funds paid into the Settlement
Fund—Lead Counsel would be permitted to disburse from
the $16 million paid into the Settlement Fund ($13.5 from
Home City and $2.5 from Arctic Glacier) 66.6% of the fees
approved by the Court with the remainder to be disbursed only
when Arctic Glacier makes its subsequent second installment
payment under the AG Settlement Agreement on the later of
April 2, 2012 or 30 days following this Court's entry of a
final order approving the AG Settlement. Accordingly, the
Court approves at this time the payment of 66.6% of the
attorneys' fee award approved by the Court, i.e. as adjusted
by the Court from $6.9 million to $6,478,731.50, from the
$16 million that has been paid into the Settlement Fund, with
the remainder to be disbursed upon the payment by Arctic
Glacier under the Settlement Agreement as amended of the
additional settlement amount. The Court will aggregate the
amount of fees, leaving the specific allocation among the
various contributing counsel to Lead Counsel.
E. The Request for Reimbursement of Litigation
Expenses
Finally, Direct Purchaser Plaintiffs request reimbursement
of litigation expenses in the amount of $150,000 to cover
amounts expended out-of-pocket in the prosecution of the
case by the participating law firms and in the settlement
process. This amount is separate from the funds in the
amount of $750,000 that this Court approved for the
purposes of covering future litigation expenses against the
remaining Defendant(s). Direct Purchaser Plaintiffs have
twice received reimbursement from that $750,000 fund, for
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a total expenditure thus far of $240,786.52. At the Final
Fairness hearing, counsel for the Direct Purchaser Plaintiffs
explained to the Court that the request for reimbursement
of $150,000 in litigation expenses is for amounts incurred
prior to the time that the Court authorized disbursements up
to $750,000 from the HC Settlement Fund. The Court will
approve reimbursement of $150,000 in expenses, minus the
$32,091.00 in expenses submitted by the Boies Schiller firm
for work performed prior to the date on which this Court
appointed Kohn Swift lead counsel for the Direct Purchaser
Plaintiffs.
IV. CONCLUSION
The Court:
(1) GRANTS the motion for final approval of the AG
Settlement Agreement and enters Final Judgment as to Arctic
Glacier as set forth below;
*21 (2) GRANTS the motion for approval of the plan of
distribution and authorizes Lead Counsel to distribute the
proceeds of the settlements with Home City Ice Company and
Arctic Glacier on a pro rata basis to those members of the
Settlement Class who timely file a Claim Form, as described
in the Notice of Settlement with Arctic Glacier that went
to all members of the Settlement Class on August 3, 2011,
subject to submission to the Court, in camera, of the final
disbursement plan;
(3) GRANTS IN PART the motion for an award of fees
and expenses, awarding attorneys' fees in the amount of
$6,478,731.50 from the Settlement Funds obtained in the
settlements with Home City and Arctic Glacier, plus accrued
interest. The Court finds that the fee is fair and reasonable
under the percentage of the recovery method of analyzing
attorneys' fees award in common fund class actions, with the
caveat that the lodestar check compels the Court to decrease
the award by amounts incurred by outside firms before the
date on which the Court appointed Kohn Swift lead counsel.
The attorneys' fees approved herein may be disbursed on
a proportional basis from the Settlement Funds that have
been paid by Home City and Arctic Glacier. Accordingly,
Lead Counsel may disburse from the $16 million paid to the
Settlement Fund from Home City ($13.5 million) and Arctic
Glacier ($2.5 million) a total of 66 .6% of the attorneys' fees
awarded herein, with the remainder to be disbursed upon the
payment by Arctic Glacier under the Amended Settlement
Agreement of the additional AG Settlement Amount. Lead
counsel shall be responsible for allocating the attorneys' fees
awarded; and
(4) GRANTS IN PART the motion for reimbursement of
litigation costs and expenses, approving the payment of
$117,909.00 from the Settlement Fund to Plaintiffs' counsel.
Lead Counsel shall be responsible for allocating the expense
reimbursement.
IT IS SO ORDERED.
Rule 54(b) Final Order and Judgment as to
Arctic Glacier Income Fund, Arctic Glacier
Inc. and Arctic Glacier International, Inc.
The Court, having considered Plaintiffs' Motion for Final
Approval of Class Action Settlement with Defendants Arctic
Glacier Income Fund, Arctic Glacier Inc. and Arctic Glacier
International, Inc. (“Arctic Glacier”) and having held a final
Fairness Hearing on October 28, 2011, and for the reasons
stated more fully in the preceding Opinion and Order, IT IS
ORDERED THAT:
1. The Court has jurisdiction over the subject matter of this
action.
2. Terms used in this Final Order and Judgment that are
defined in the Settlement Agreement between the Plaintiffs
and the Settlement Class on the one hand and Arctic
Glacier on the other dated March 30, 2011, as amended on
October 26, 2011, unless otherwise defined herein, have the
same meanings in this Final Order and Judgment as in the
preceding Opinion, that the Settlement Agreement was
attained following an extensive investigation of the facts
and assessment of damages. It resulted from vigorous arm'slength negotiations which were undertaken in good faith by
counsel with significant experience litigating antitrust class
actions.
*22 4. The Court finds, as more thoroughly discussed in
the preceding Opinion, that due and adequate notice was
provided pursuant to Rule 23 of the Federal Rules of Civil
Procedure to all members of the Settlement Class certified
in this Final Order and Judgment. The Notice advised the
proposed Settlement Class Members of the pendency of
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this action, the Settlement Agreement with Home City, the
proposed Settlement Agreement with Arctic Glacier, the
possibility of the triggering of the Most Favored Nation
provision of the Home City Settlement Agreement and the
claims filing process. The Notice provided was the best notice
practicable under the circumstances and included individual
notice by first class mail to all members of the Settlement
Class who could be identified through reasonable effort as
well as notice published in the national edition of the Wall
Street Journal and on the Internet. The Notice fully complied
in all respects with the requirements of Federal Rule of Civil
Procedure 23.
5. The Court finds that notice of the Settlement Agreement
was properly provided to all persons entitled to receive such
notice, including the federal and state attorneys general, in
full compliance with the Class Action Fairness Act.
6. The Court certifies the following Settlement Class (the
“Settlement Class”):
All purchasers of Packaged Ice
who purchased Packaged Ice in
the United States directly from
all predecessors thereof) at any
time during the period from
January 1, 2001 to March 6,
2008. Excluded from the Settlement
Class are governmental entities
and Defendants, including their
parents, subsidiaries, predecessors
or successors, and Defendants' coconspirators.
7. The Court finds, as discussed more thoroughly in the
preceding Opinion, that certification of the Settlement Class
is appropriate because:
a. The Settlement Class is so numerous that joinder of all
members is impracticable, satisfying the requirement of
Rule 23(a) (1);
b. There are questions of law or fact common to the
Settlement Class, satisfying the requirement of Rule
23(a)(2);
c. Alvin's Enterprises, Inc. d/b/a Party King, Suzie's
Investments, Inc. d/b/a Checker Drugs and Food,
Arkansas Garden Center West, LLC, Arkansas Garden
Center North, LLC, Chi–Mar Enterprises, Inc.,
Kingsway Enterprises, Polly's Food Service, Inc.,
Kenco, Inc. and Thomas Beverages Co., Inc. d/b/
a Thomas Liquors (“Plaintiffs”) are appointed Class
Representatives for the Settlement Class. Plaintiffs'
claims are typical of the claims of the Settlement Class,
satisfying the requirement of Rule 23(a)(3);
d. The Plaintiffs will fairly and adequately protect
the interests of the Settlement Class, satisfying the
requirements of Rule 23(a)(4);
e. For purposes of settlement only, questions of law or
fact common to the members of the Settlement Class
predominate over questions affecting only individual
members and a class action is superior to other methods
available for the fair and efficient adjudication of the
controversy, satisfying the requirements of Rule 23(b)
(3).
*23 8. The Court's certification of the Settlement Class as
provided herein is without prejudice to, or waiver of, the
rights of any Defendant other than Arctic Glacier to contest
certification of any other class proposed by Plaintiffs. The
Court's findings in this Final Order and Judgment shall have
no effect on the Court's ruling on any motion to certify any
class in this litigation and no party may cite or refer to the
Court's approval of the Settlement Class as persuasive or
class.
9. The court finds that the persons and entities on the
schedule attached hereto as Exhibit “A,” and no others, have
timely requested to be excluded from the Settlement Class
and accordingly are not included in or bound by the Final
Judgment being entered pursuant to this Order.
preceding Opinion, that the Settlement Agreement is fair,
reasonable and adequate and the Settlement Agreement with
Arctic Glacier is hereby approved pursuant to Federal Rule
of Civil Procedure 23(e).
11. All Released Claims (as defined in the Settlement
Agreement) of Plaintiffs and the Settlement Class that were
asserted against Arctic Glacier and the other Releasees (as
defined in the Settlement Agreement) in the Consolidated
Amended Class Action Complaint are dismissed with
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prejudice, and, except as provided for in the Settlement
Agreement, without costs.
12. Upon the occurrence of the Effective Date of the
Settlement Agreement, the Releasees shall be completely
released, acquitted, and forever discharged from any and
all claims, demands, actions, suits, and causes of action,
damages, liabilities of any nature, including costs, expenses,
penalties, and attorneys' fees, whether class, individual, or
otherwise in nature, that Releasors, or any one of them, ever
had, now has, or hereafter can, shall or may have directly,
representatively, derivatively or in any other capacity against
the Releasees or any of them, whether known or unknown,
suspected or unsuspected, in law or equity, on account of or
arising out of or resulting from the purchase of Packaged Ice
in the United States during the Class Period or from conduct
that occurred prior to the Effective Date of this Settlement
Agreement concerning the sale of Packaged Ice in the United
States, based in whole or in part on the facts, occurrences,
transactions, or other matters alleged in the Consolidated
Amended Class Action Complaint filed in this Action,
and which arise under any federal or state antitrust, unfair
competition, unfair practices, price discrimination, unitary
pricing, trade practice, or civil conspiracy law, including,
without limitation, the Sherman Antitrust Act, 15 U.S.C. §
1 et seq. (the “Released Claims”); provided, however, that
nothing herein shall release any claims made by indirect
purchasers of Packaged Ice as to their indirect purchases,
or any product defect or similar claim between the parties
relating to Packaged Ice.
*24 13. Each member of the Settlement Class shall not,
after the Effective Date of the Settlement Agreement, seek
to institute, maintain, prosecute or continue or prosecute any
suit or action, or collect from or proceed against the Releasees
based on the Released Claims.
14. Arctic Glacier shall have no obligation for attorneys' fees,
costs or expenses, including, but not limited to, expenses of
administering and distributing the Settlement Fund, which
expenses are to be paid out of the Settlement Fund subject to
further order of this Court.
15. This Final Order and Judgment does not settle or
compromise any claims by Plaintiffs or the Settlement Class
against any other Defendant or person or entity other than
the Releasees, and all rights against any other Defendant or
other person or entity are specifically reserved. The sales of
packaged ice to members of the Settlement Class by Arctic
Glacier shall remain in this action and shall be part of any
joint and several liability against any non-settling Defendant
or other person or entity other than the Releasees.
16. Nothing in this Final Order and Judgment or the
Settlement Agreement and no aspect of the Settlement
Agreement or negotiation thereof is or shall be deemed or
construed to be an admission or concession of any violation of
any statute or law or of any liability or wrongdoing by Arctic
Glacier or of the truth of any of the claims or allegations in
any of the complaints in the Action or any other pleading, and
evidence thereof shall not be discoverable or used, directly or
indirectly, in any way, whether in the Action or in any other
action or proceeding, other than to enforce the terms of this
Final Order and Judgment, or the Settlement Agreement.
17. The Court further finds that the escrow account described
in the Settlement Agreement is a qualified settlement fund
(“QSF”) pursuant to the Internal Revenue Code Section 468B
and the Treasury Regulations promulgated thereunder.
18. Without affecting the finality of this Final Order and
Judgment, the Court retains jurisdiction for the purposes
of, among other things, implementing and enforcing
the Settlement Agreement, entering orders regarding the
disbursement of the Settlement Fund and any other matters
that may arise in connection with the effectuation of the
19. The court expressly finds, pursuant to Federal Rule of
Civil Procedure 54(b) that there is no just reason for delay,
and expressly directs entry of Final Judgment as to Arctic
Glacier.
IT IS SO ORDERED.
EXHIBIT A
1. B.J's Service
2. Cedar–Knox Public Power District
3. Dorothy Lugibihl
4. Hi–Way Motel
5. In–n–Out Food Inc.
6. Koch Chemical Technology Group, LLC
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7. Koch Engineering
13. Rocky Point Resort
8. Koch Glitsch, Inc.
14. Taing, Inc. d/b/a Mr. T's Market
9. Mellinger's Beer Distributor, Inc.
*25 15. Vincentian Regency
10. Middletown's Supermarket
11. MMR Mobile Medical Response, Inc
Parallel Citations
12. Port Cicero Liquors
Footnotes
1
Direct Purchaser Plaintiffs Alvin's Enterprises, Inc. d/b/a Party King, Suzie's Investments, Inc. d/b/a Checker Drugs and Food,
Arkansas Garden Center West, LLC, Arkansas Garden Center North, LLC, Chi–Mar Enterprises, Inc., Kingsway Enterprises,
Polly's Food Service, Inc., Kenco, Inc. and Thomas Beverages Co., Inc. d/b/a Thomas Liquors have been appointed as the class
representatives for the Proposed Settlement Class.
End of Document
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2004 WL 1221350
E.D. Pennsylvania.
In re LINERBOARD ANTITRUST LITIGATION
No. MDL 1261, Civ.A. 98–5055, Civ.A. 99–
1000, Civ.A. 99–1341. | June 2, 2004.
Attorneys and Law Firms
R. Mark McCareins, Dane A. Drobny, Michael J. Mayer,
Andrew D. Shapiro, Winston & Strawn, Chicago, IL, for
Jefferson-Smurfit Corp., Stone Container Corp., SmurfitStone Container Corp.
Edward M. Posner, Paul H. Saint-Antoine, Drinker, Biddle &
Reath, Thomas F. Slater, Jr., Hunton & Williams, Richmond,
VA, for Georgia-Pacific Corp.
Opinion
Howard I. Langer, Golomb Honik & Langer, Philadelphia,
PA, for Box plaintiffs and Liaison counsel for all plaintiffs.
MEMORANDUM
DUBOIS, J.
Eugene A. Spector, Jeffrey J. Corrigan, Spector Roseman
& Kodroff, Philadelphia, PA, Michael J. Freed, Steven A.
Kanner, William London, Much Shelist Freed Denenberg
Ament & Rubenstein, P.C., Chicago, IL, for General
Refractories Co. and Co-Lead counsel for Corrugated Sheet
plaintiffs.
Robert J. LaRocca, Kohn, Swift & Graf, P.C., Philadelphia,
PA, H. Laddie Montague, Martin I. Twersky, Berger &
Montague, P.C., Philadelphia, PA, Roberta D. Liebenberg,
Donald L. Perelman, Fine Kaplan & Black, Philadelphia,
PA, W. Joseph Bruckner, Lockridge Grindal Nauen PLLP,
Minneapolis, MN, for Box plaintiffs, Oak Valley Farms, Inc.,
Garrett Paper Inc., Local Baking Products, Inc.
Mark Reinhardt, Mark Wendorf, Reinhardt & Anderson, St.
Paul, MN, for Alber I Halper Corrugated Box Co.
James J. Rodgers, Dilworth Paxson, LLP, Philadelphia,
PA, Richard J. Leveridge, Elaine Metlin, Sarbina Nelson,
Dickstein Shapiro Morin & Oshinsky, LLP, Washington, DC,
for Tag-a-long plaintiffs.
Sherry Swirsky, Schnaeder, Harrison, Segal & Lewis, LLP,
Philadelphia, PA, for defendants.
Douglas J. Kurdenbach, Kirkland & Ellis, Chicago, IL, for
Tenneco, Inc., Tenneco Packaging and Packaging Corp. of
America.
Steven J. Harper, Steven C. Seeger, Kirkland & Ellis,
Chicago, IL, Daniel B. Huyett, Matthew W. Rappleye,
Stevens & Lee, Reading, PA, for International Paper Co.,
Union Camp Corp.
James H. Schink, Kirkland & Ellis, Chicago, IL, for
Weyerhaeuser Corp.
*1 THIS DOCUMENT RELATES TO: All Actions (Civil
Action Numbers 98–5055 and 99–1341)
I. INTRODUCTION
Presently before the Court is Class Counsels' Revised
Memorandum of Law in Support of Petition for Award of
Attorneys' Fees and Reimbursement of Expenses (Document
No. 320, filed March 18, 2003) (“Fee Petition”), 1
Declarations in Support of Class Settlements with the Stone
and PCA Defendants and in Support of Class Counsels'
Petition for Attorneys' Fees and Costs (docket no. 302, filed
February 2, 2004), Declaration of Stephen A. Saltzburg in
Support of Plaintiffs' Petition for an Award of Attorneys
Fees (docket no. 304, filed February 2, 2004), Appendix of
Declarations by Counsel for the Class in Support of Petition
for Counsel Fees and Reimbursement of Cost Disbursements
(docket no. 305, filed February 2, 2004) and Supplemental
Affidavit of David. J. White, CPA, Regarding Attorneys'
Time and Expense Summaries for and Through December
2003, and Litigation Fund Expenses From February 1, 2004
through March 17, 2004 (docket no. 321, filed March 18,
2004). In the Fee Petition, petitioners requests a fee of 30
percent of $202,572,489, the total of the settlements with all
defendants in the class action (the “Settlement Fund”) and
reimbursement of costs totaling $1,391,203.36. A hearing
on the Fee Petition was held on March 26, 2004. For the
reasons that follow, the Court grants the Fee Petition, and
awards petitioners 30 percent of the Settlement Fund and
reimbursement of costs in the amount requested.
The Court also writes at this time in ruling on class counsel's
unopposed Petition for Payment of Incentive Fees to the Five
Class Representatives (Docket No. 301, filed February 2,
2004) (“Incentive Fee Petition”). 2 Petitioners have requested
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$25,000 for each of the five representatives of the classes and
the Court concludes that amount is appropriate.
II. BACKGROUND
The Court sets forth only an abbreviated factual and
procedural history as pertinent to the Fee Petition. The factual
background of the case is described at length in this Court's
Memorandum dated October 4, 2000 denying defendants'
Motion to Dismiss, its Memorandum dated September 4,
2001 certifying classes of direct purchasers of corrugated
boxes and corrugated sheets, and the Opinion of the Court
of Appeals for the Third Circuit affirming the September 4,
2001 Memorandum and Order. See In re Linerboard Antitrust
Litig., MDL No. 1261, 2000 WL 1475559, at *1–3 (E.D.Pa.
Oct.4, 2000) (“Linerboard I” ); In re Linerboard Antitrust
Litig., 203 F.R.D. 197, 201–04 (E.D.Pa.2001) (“Linerboard
II” ); In re Linerboard Antitrust Litig., 305 F.3d 145, 147–49
(3d Cir.2002) (“Linerboard III” ).
This is an antitrust action involving allegations that a
number of U.S. manufacturers of linerboard 3 engaged in
a continuing combination and conspiracy in unreasonable
restraint of trade and commerce in violation of Section 1
of the Sherman Act, 15 U.S.C. § 1. The seven lawsuits
transferred to this Court for all pretrial proceedings by
the Judicial Panel on Multidistrict Litigation on February
12, 1999 were instituted after an administrative complaint
filed by the Federal Trade Commission (“FTC”) against
Stone Container Corporation (“Stone”) was resolved by
a consent decree. Linerboard I, 2000 WL 1475559,
at *1 (setting forth allegations in FTC complaint and
details of consent decree). Class plaintiffs named the
following defendants in their Complaints—Stone Container
Corporation, Jefferson Smurfit Corporation, Smurfit–Stone
Container Corp., International Paper Company, Georgia–
Pacific Corporation, Temple–Inland, Inc., Gaylord Container
Corporation, Tenneco, Inc., Tenneco Packaging, Inc., Union
Camp Corporation, Packing Corporation of America and
Weyerhaeuser Paper Company—and alleged that they
conspired to raise the price of corrugated containers and
corrugated sheets throughout the United States by restricting
production and/or curtailing inventories in violation of federal
antitrust laws.
*2 By Memorandum and Order dated September 4, 2001,
this Court certified the following two plaintiff classes:
Class 1—Sheet Class
All individuals and entities which purchased corrugated
sheets in the United States directly from any of
the defendants during the class period from October
1, 1993 through November 30, 1995, excluding the
defendants, their co-conspirators, and their respective
parents, subsidiaries and affiliates, as well as any
government entities, and excluding those individuals and
entities which purchased corrugated sheets pursuant to
contracts in which the purchase price was not tied to the
price of linerboard.
Class 2—Box Class
All individuals and entities which purchased corrugated
containers in the United States directly from any of
the defendants during the class period from October
1, 1993 through November 30, 1995, excluding the
defendants, their co-conspirators, and their respective
parents, subsidiaries and affiliates, as well as any
government entities, and excluding those individuals and
entities which purchased corrugated containers pursuant to
contracts in which the purchase price was not tied to the
price of linerboard or containerboard.
Linerboard II, 203 F.R.D. at 224. On September 25, 2001,
defendants filed a Petition for Leave to Appeal pursuant
to Federal Rule of Civil Procedure 23(f) 4 in the Court of
Appeals. By Order dated December 18, 2001, the Court
of Appeals granted that petition. Thereafter, on September
5, 2002, the Court of Appeals affirmed the ruling of this
Court. By Order dated October 16, 2002, the Court of
Appeals denied defendants' petition for en banc review. On
January 14, 2003, defendants filed a Petition for Writ of
Certiorari to the United States Supreme Court. The petition
was denied on April 21, 2003. See Gaylord Container
Corp. v. Garrett Paper, Inc.,—U.S.—, 538 U.S. 977, 123
S.Ct. 1786, 155 L.Ed.2d 666 (2003) (No. 02–1070).
By Order dated August 26, 2003, this Court approved a partial
settlement in the amount of $8 million between plaintiff
classes and Temple–Inland, Inc. and Gaylord Container Corp.
The $8 million settlement was reduced to$7.2 million in
accordance with the terms of the settlement agreement based
on the number of parties that subsequently opted-out of
the classes. This first partial settlement was described by
petitioners as an “ice-breaker-a settlement that would lead
to further settlements. Within a month of Court approval
of the ice-breaker settlement, on September 22, 2003, the
plaintiff classes and defendants International Paper Company
and Union Camp Corporation, Georgia Pacific Corporation,
and Weyerhauser Company announced they had reached a
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settlement agreement in the total amount of $68 million. The
Court granted final approval of that settlement on December
8, 2003. Prior to that date, in October and November 2003, the
parties announced the two additional partial settlements with
defendants Packaging Corporation of America, Tenneco,
Inc., and Tenneco Packaging, Inc. (The “PCA settlement”)
in the amount of $43 million and with defendants Stone
Container Corporation, Jefferson Smurfit Corporation, and
Smurfit Stone Container Corporation (the “Stone settlement”)
in the amount of $92.5 million. As a result of a “most favored
nation's clause” in the PCA settlement agreement, the terms
of the Stone settlement triggered a reduction in the amount
owed by PCA from $43 million to $34 million. The Court
granted final approval of both the PCA settlement and the
Stone settlement in a Memorandum and Order dated March
21, 2004. With the Court's approval of these last two partial
settlements, all claims in the class action were resolved for a
total of $202,572,489.
explained in In re Cendant Corp. Prides Litig., 243 F.3d 722
(3d Cir.2001), there are two primary methods for calculating
attorneys' fees: the percentage-of-recovery method and the
lodestar method. 5 “The percentage-of-recovery method is
generally favored in cases involving a common fund, 6 and
is designed to allow courts to award fees from the fund ‘in
a manner that rewards counsel for success and penalizes it
for failure” ’ by aligning counsel's interests with those of the
class. 7 Id. at 732; see also, Gunter v. Ridgewood Energy
Corp., 223 F.3d 190, 195 n. 1 (3d Cir.2000); Brytus v. Spang
& Co., 203 F.3d 238, 243 (3d Cir.2000); In re Prudential, 148
F.3d 283, 333–34 (3d Cir.1998); In re GM Trucks, 55 F.3d
at 821. “The lodestar method is more commonly applied in
statutory fee-shifting cases, and is designed to reward counsel
for undertaking socially beneficial litigation in cases where
the expected relief has a small enough monetary value that
a percentage-ofrecovery method would provide inadequate
compensation.” 8 Cendant Prides, 243 F.3d at 732.
*3 Petitioners submitted the Fee Petition on February 2,
2004, and a revised Fee Petition, that made only minor clerical
changes on March 18, 2004. Petitioners also submitted a
series of declarations from experts on class actions, a volume
of declarations from all plaintiff counsel detailing their
work, and two affidavits from an accountant that managed
petitioners' time and expense records. A hearing was held on
the Fee Petition on March 26, 2004 (the same hearing at which
the PCA and Stone settlements were considered). There were
no objections to the Fee Petition.
In the Memorandum the Court will refer to the attorneys
involved in three ways: “petitioners” (all counsel representing
members of the class), “designated counsel” (lead counsel,
liaison counsel and the executive committees appointed by
Third Case Management Order dated November 9, 2000) and
“liaison counsel” (Howard Langer Esq.).
II. LEGAL STANDARD
A. METHODS OF DETERMINING
REASONABLENESS OF FEE PETITIONS IN CLASS
ACTIONS: LODESTAR AND PERCENTAGE OF
RECOVERY
“Ordinarily, a court making or approving a fee award should
determine what sort of action the court is adjudicating and
then primarily rely on the corresponding method of awarding
fees (though there is, as we have noted, an advantage to using
the alternative method to double check the fee).” In re GM
Trucks, 55 F.3d 768, 821 (3d Cir.1995). As the Third Circuit
B. REASONABLENESS OF FEE AWARD:
PERCENTAGE OF RECOVERY METHOD
This is a common fund case. Therefore, the percentage of
recovery method is the proper one to calculate attorneys' fees.
The Supreme Court has held that the standard for evaluating
fee awards is reasonableness. Hensley v. Eckerhart, 461
U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). In
determining whether a particular percentage of recovery is
reasonable, the Court first calculates the percentage of the
total recovery that the requested fee represents. The Court
then evaluates that figure in light of the circumstances of the
case. In re Cendant Corporation Litigation, 264 F.3d at 256.
In making that decision, the Third Circuit has directed district
courts to consider seven (7) factors as follows:
*4 (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 the
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;
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(6) the amount of time devoted to the case by plaintiffs'
counsel; and
(7) the awards in similar cases.
Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.
1 (3d Cir.2000) (the “Gunter” factors). The Third Circuit
also recommended in Cendant that district courts employ
a lodestar cross-check in common fund cases using the
percentage of recovery method.
III. DISCUSSION
In the Fee Petition, petitioners have requested a fee of 30
percent of the Settlement Fund, or approximately $60 million.
In determining the reasonableness of that request, the Court
addresses each of the Gunter factors. The Court will also
utilize the lodestar cross-check.
A. Counsel's Requested 30 Percent Fee is Reasonable
Under the Gunter Factors
1. The Size of the Fund Created and the Number of
Persons Benefitted.
a. Size of the Fund
The settlements are highly favorable to the class when
analyzed as a percentage of total damages. Plaintiff classes'
expert, Dr. John C. Beyer, constructed an econometric model
and determined that over the class period prices for boxes and
sheets were 2.7 percent higher than they would have been
absent the alleged conspiracy. See Affidavit of John C. Beyer,
Ph.D. in Support of Settlement Agreement [with defendants
International Paper and Union Camp Corp., Georgia Pacific
and Weyerhauser Co.] (docket no. 273, filed November 18,
2003) (“Beyer Aff.”) ¶ 46. When this figure was multiplied
by all defendants' sales, the result was total damages in the
amount of $478 million over the full class period. Id. at ¶
50. The settlements represent approximately 55 percent of the
claimed damages, as calculated by plaintiffs' expert for the
statute of limitations period, and approximately 42 percent of
the damages for the full period. Fee Petition at 20.
The fact that numerous courts have approved settlements
where the percent of damages was substantially lower than in
this case provides objective evidence that the settlements are
highly favorable. Lazy Oil Co. v. Witco, 95 F.Supp.2d 290,
339 (W.D.Pa.1997) (court approved settlement amounting
to 5.35 percent of damages for the entire class period
and 25.5 percent of the of the damages falling within the
limitations period); In re Anthracite Coal Antitrust Litigation,
79 F.R.D. 707, 714 (M.D.Pa.1978) (approving settlement
of 28 percent of estimated damages for four years); In re
Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 325
(N.D.Ga.1993) (court approved a combined settlement of
approximately 12.7 to 15.3 percent of the estimated $2 billion
minimum possible trebled recovery); Erie Forge and Steel,
Inc. v. Cyprus Minerals Co., Civil No. 94–404 (W.D.Pa.
Dec.23, 1996) (approving settlement of $3.6 million where
plaintiffs' expert estimated damages of $44.4 million); Fox
v. Integra Financial Corp ., Civil Action No. 90–1504
(W.D.Pa. July 9, 1996) (settlement of $6.5 million approved
where plaintiffs' best estimate of provable damages was $33
million); In re Four Seasons Sec. Litig., 58 F.R.D. 19, 36–37
(W.D.Okla.1972) ($8 million settlement approved although
claims exceeded $100 million); Cagan v. Anchor Sav. Bank
FSB, [1990 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶
95,324 at 96,559, 1990 WL 73423 at *12–13 (E.D.N.Y. May
22, 1990) (approving $2.3 million settlement over objections
that “best possible recovery would be approximately $121
million”); Behrens v. Wotemco Enterprises, Inc., 118 F.R.D.
534, 542 (S.D.Fla.1988) (“The mere fact that the proposed
settlement of $0.20 a share is a small fraction of the desired
recovery of $3.50 a share is not indicative of an inadequate
compromise”), aff'd 899 F.2d 21 (11th Cir.1990).
*5 In absolute terms, all claims in the class action have been
resolved for a total of $202.5 million. According to a recent
survey of all class actions between 1972 and 2003, the total
settlements in the Linerboard litigation make this the sixth
largest reported antitrust settlement. 24 Class Action Rep.
157, 169–170 (2003). The settlements are remarkable given
the fact that there was no prior government action to establish
liability and the case covered a relatively short conspiracy
period of 26 months. Dec. in Support of Class Settlements
with Stone and PCA Def. and in Support of Class Counsel's
Pet. For Attorney's Fees and Costs, Exhibit 1 (Dec. of Howard
Langer) at 4. Further, the settlements are to be paid entirely
in cash. Id.
b. Number of Persons Benefitted
The number of persons benefitted is large, and includes
all entities that purchased corrugated containers and sheets
during the class period. Fee Petition at 20. The size of that
population is best estimated by the number of entities that
were sent the notice describing the final partial settlementsapproximately 80,000 companies. Id.
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Based on the foregoing, the Court concludes that
consideration of the first Gunter factor-the size of the fund
created and the number of persons benefitted-counsels in
favor of granting the Fee Petition.
2. The Presence or Absence of Substantial Objections by
Members of the Class to the Settlement Terms and/or
the Fees Requested by Counsel.
Class members were advised that petitioners would apply for
a fee award of up to 30 percent of the Settlement Fund and
that class members had a right to object. Fee Petition at 21–
22. No objections were filed. Id. The absence of objections
supports approval of the Fee Petition. See, e.g., In re Cell
Pathways, Inc. Sec. Litig., II, 2002 U.S. Dist. LEXIS 18359
at *24 (E. D.Pa. September 23, 2003) (existence of only one
objection shows that class does not object to thirty percent
requested by attorneys and supports approval of fee petition);
In re Aetna Inc., Sec. Litig., 2001 U .S. Dist. LEXIS 68, at
*48 (E. D.Pa. Jan. 4, 2001) (“the Class Members's view of the
attorneys' performance, inferred from the lack of objections to
the fee petition, supports the fee award”). While in some cases
a lack of objections may reflect the absence of counsel or
unfamiliarity with the legal system, in this case class members
are represented by counsel. Further, the classes in this cases
include many of the largest corporations in America-entities
that are hardly unfamiliar with civil litigation.
consideration of the second Gunter factor-the presence or
absence of substantial objections by members of the class to
the settlements and/or the fees requested by counsel-supports
granting the Fee Petition.
3. The Skill and Efficiency of the Attorneys Involved.
The result achieved is the clearest reflection of petitioners'
skill and expertise. See In re Warfarin Sodium Antitrust
Litig. ., 212 F.R.D. 231, 261 (D.Del.2002) (Class Counsel
“showed their effectiveness through the favorable cash
settlement they were able to obtain”); see also, Ikon, 194
F.R.D. at 194. The size of the settlements in absolute terms
and expressed as a percentage of total damages evidences a
high level of skill by petitioners.
*6 The Court's Memorandum of September 5, 2003
describes in detail designated counsel's work before the
largest settlements-the PCA and Stone settlements-were
reached. In re Linerboard Antitrust Litigation, 292 F.Supp.2d
644 (E.D.Pa.2003). The Court incorporates that section of the
September 5, 2003 Memorandum by reference. The Court has
repeatedly stated that the lawyering in the case at every stage
was superb, and does so again.
Petitioners' skill and efficiency in managing this litigation was
revealed in several discrete stages: pre-filing investigation;
proceedings before the Judicial Panel on Multidistrict
Litigation (“JPML”); investigation leading up to the filing
of the Amended Complaint and the joining of additional
defendants; class certification and the discovery leading
thereto; Rule 23(f) proceedings before the Third Circuit;
deposition and other discovery following the Third Circuit's
affirmance of this Court's class certification decision; and
settlement negotiations between February and October 2003
with all defendants. Dec. in Support of Class Settlements with
Stone and PCA Def. and in Support of Class Counsel's Pet.
For Attorney's Fees and Costs, Exhibit 1 (Dec. of Howard
Langer) at 3.
In the first phase-pre-filing investigation-liaison counsel
participated in a working group of attorneys investigating the
possibility of private civil actions against Stone Container
Corporation following the FTC's publication for public
comment of a consent decree with Stone. Id. at 4. That
group ultimately disbanded without taking action. In June
and July 1998, three suits were filed as class actions in the
Northern District of Illinois on behalf of a limited group of
purchasers of corrugated sheets from Stone. Id. According
to liaison counsel, these suits were limited to purchasers of
sheets because counsel filing those cases was concerned with
the indirect purchaser issues raised by Illinois Brick Co. v.
Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).
Id. That same summer, liaison counsel was approached by
an attorney representing a purchaser of boxes from Stone
who asked if liaison counsel would research the possibility
of bringing an action on behalf of purchasers of corrugated
boxes from Stone. Id. at 5. That lawyer, John Peoples, had
approached other antitrust lawyers with his client's claim but
they all had declined to pursue the matter. Id. Liaison counsel
concluded that In re Sugar Industry Antitrust Litigation, 570
F.2d 13, 19 (3d Cir.1978) provided a viable, if unused (in the
class action context), exception to Illinois Brick under which
suit could be instituted against Stone. Id.
In the second phase-early proceedings against Stone
and proceedings before the JPML-the attorneys that
would ultimately become the group of designated counsel
filed suit against Stone on September 23, 1998, Winoff
Industries v. Stone Container Corp., in the Eastern District
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of Pennsylvania. Id. at 7. Petitioners in Philadelphia
immediately undertook to coordinate their activities with
petitioners in Chicago. Id. at 8. On October 13, 1998, Stone
moved before the JPML for transfer and consolidation of
all suits to the Northern District of Illinois. Petitioners in
Philadelphia opposed the motion to transfer to Chicago and
cross-moved for transfer to, and consolidation before, this
Court. Id. Argument was held before the JPML on January 29,
1999 in Fort Myers, Florida. Id. at 9. On February 12, 1999,
the JPML issued its order transferring all actions to this Court
for all pretrial proceedings. Id.
*7 In the third phase-investigation leading up to the filing
of the Amended Complaint and the naming of additional
defendants-petitioners, prior to the transfer order issued
by the JPML, organized themselves into committees and
undertook different assignments related to the preparation of
the Amended Complaint. Id. at 9. Attorneys were assigned
to review Stone's FTC documents, research public sources,
pursue third party discovery, review prior proceedings against
the corrugated industry and to work with expert economists.
Id.
Petitioners' handling of subpoenas at this stage serves as
a simple example of the efficiency with which petitioners
managed this litigation. Subpoenas were served on Stone
and eleven other companies, each of which objected to the
subpoena. Id. Petitioners took advantage of the geographic
dispersal of counsel in moving to enforce the subpoenas. To
the extent counsel in the case was located in the jurisdiction
in which a subpoena was issued, that firm was assigned
enforcement of the subpoena. Id.
As to other possible defendants, petitioners prepared matrices
based on such facts as whether Stone documents and
independent research established that a specific company had
been contacted by Stone as described generally by the FTC;
whether they had taken downtime; the nature of the downtime
and whether the companies announced price increases at
the times they were allegedly colluding. Id. As a result
of that research and analysis, petitioners determined that a
number of other companies should be named as defendants:
Jefferson Smurfit, International Paper, Union Camp, Gaylord
Container Corp., Temple Inland, Weyerhauser, Packaging
Corp. of America, Tenneco, Inc., and Tenneco Packaging (as
a single entity) Georgia Pacific and Simpson Tacoma Kraft
Co. Id. at 10–11.
In the fourth phase-class certification and class-related
discovery-petitioners established a document depository to
organize and facilitate the review of the more than one million
documents produced to plaintiffs. Id. at 16. According to
liaison counsel, the goal of the document review was to
identify from the initial production those documents that
would prove most useful in establishing the criteria for class
certification. Id. at 17. After several briefing sessions with
selected petitioners to apprise them of the facts and theories
of the case, lawyers from among petitioners were assigned
to review designated categories of documents. Id. Telephone
conferences and meetings were held among the petitioners
reviewing the documents to assure that there was appropriate
cross-communication regarding their respective research.
Id. Summary memoranda were prepared and circulated.
Id. Separate and apart from the review itself, Donald
Perelman was assigned to incorporate all of the relevant
information provided in a detailed annotated chronology
that was supplemented through the course of the litigation
as documents were produced. Id. This detailed chronology
allowed petitioners to correlate all the information obtained
from defendants in a single document so that patterns could be
observed, correspondence among different defendants could
be analyzed, and an overview of each defendant's role in
the conspiracy could be established. Id. Prior to the class
certification hearing, petitioners received and reviewed tens
of thousands of documents for the purpose of adducing
evidence in support of class certification. Id. at 18. There
was also significant deposition discovery related to class
certification. Id.
*8 The filings related to class certification were extensive,
involving hundreds of pages of briefs and many hundreds of
pages of exhibits. Id. at 19. Argument on plaintiff classes'
certification motion took place on August 8, 2001. Id. at 20.
It extended over six hours and the transcript was 221 pages
in length. Id. The Court in its Memorandum of September
4, 2001, approving class certification, cited many of the
documents petitioners found in defendant's files, confirming
the importance of petitioners' intense early document review.
Id.
In the fifth phase-Rule 23(f) proceedings before the Third
Circuit-petitioners extensively briefed the issue of class
certification and ultimately secured the Third Circuit's
imprimatur on plaintiff classes' theories of liability and of
class-wide impact and damages. Id. at 24.
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Prior to the Third Circuit's decision in this case no class
certification had been affirmed by the Third Circuit on Rule
23(f) appeal. Id. The defendants retained Kenneth Starr, a
former Solicitor General of the United States and a former
Judge of the United States Court of Appeals for the D.C.
Circuit to oversee and argue the appeal. This fact is significant
because the quality and vigor of opposing counsel is relevant
in evaluating the quality of plaintiffs' counsel. See, e.g., Ikon,
194 F.R.D. at 194; In re Warner Communications Sec. Litig.,
618 F.Supp. 735, 749 (S.D.N.Y.1985); Arenson v. Board of
Trade, 372 F.Supp. 1349, 1354 (N.D.Ill.1974). On September
5, 2003, the Third Circuit issued its decision affirming this
Court's class certification ruling. Id.
In the sixth phase-deposition discovery after the Third
Circuit's affirmance-petitioners deposed 70 employees and
former employees of defendants and third parties. Id. at 30.
A small group of 18 senior lawyers from among petitioners
was chosen to take the depositions. Id. All these attorneys
were required to attend a day long seminar presented by
Martin Twersky, Esquire. Id. The seminar utilized films
produced by defendants and obtained from third parties
to provide the attendees with a virtual tour of box plants
and mills. Id. Procedures were put into place to assure
that information gained at one deposition was shared with
all those petitioners taking depositions. Id. This was done
by circulating memoranda and having regular conference
calls among petitioners. Efforts were also made to take
less important depositions first in order to allow counsel to
develop expertise in deposing defendants' witnesses. Id. In
addition, this procedure provided an added benefit-by the
time key senior officials' depositions were taken a record
existed against which their testimony could be tested. Id.
Counsel also took the depositions of less important witnesses
by video conference and telephone to reduce the cost of
litigation. Id. at 31.
In the seventh phase of the litigation-settlement negotiations
between February and October 2003–petitioners reached a
series of partial settlements with groups of defendants that
ultimately resolved all claims in the class case. Efforts
at settlement began at the outset of the case but were
unsuccessful. Id. at 49. During the period between the Court's
decision certifying the classes and the Third Circuit's order
granted interlocutory review, petitioners established a target
for global settlement. Id.
Petitioners believed that Temple Inland/Gaylord was a natural
partner for an initial “ice breaker” settlement that would
include a commitment from the settling defendant(s) to
cooperate with plaintiff classes as they prosecuted their case
against the other defendants. Id. at 51. Temple Inland/Gaylord
was independently represented by Philadelphia counsel. Id.
It was viewed as a second tier producer. Further, there was
considerable ambiguity regarding its potential liability. Id.
Temple Inland had acquired Gaylord during the course of
the litigation and the evidence against Gaylord was stronger
than against Temple Inland but its market share was much
smaller. According to petitioners, their strategy was to offer
a settlement low enough to entice Temple Inland/Gaylord to
break ranks with the other defendants but high enough to
represent a genuine threat to the other defendants. Id. at 53.
Ultimately the parties agreed on $8 million and the Court
approved the Temple Inland/Gaylord settlement on August
26, 2003. Id.
After notice of the class certification and the Temple Inland/
Gaylord settlement was sent to potential class members,
entities representing approximately 25 percent of the sales
to the classes opted-out. Id. at 54. As the Court noted in its
Memorandum of September 5, 2003, the large number of optouts at such a late stage was unusual. Id. None of the major
corporations included in the classes opted out at or near the
outset of the case. Id. at 54–55. Petitioners argue that this
was due to the high risk of nonpayment in the early stages of
the litigation that was significantly ameliorated by petitioners'
stewardship of the case through the Third Circuit's decision
affirming this Court's class certification order. Id. at 55.
After a mediation session before the Honorable Lowell A.
Reed on June 17, 2003, counsel for International Paper
and Union Camp asked petitioners about further settlement
discussions. Id. They proposed that the class negotiate
with them and two other defendants, Georgia Pacific and
Weyerhauser. Id. Counsel for these companies believed their
clients formed a natural group because the liability case
against them developed through discovery was materially
weaker than that against the remaining defendants. Id. After
several fruitless rounds of negotiations in which defendants
pursued a settlement that was only slightly larger than the
Temple Inland/Gaylord settlement, petitioners and counsel
for International Paper, Union Camp, Georgia Pacific and
Weyerhauser reached a settlement of $68 million that was
approved by the Court on December 8, 2003.
*9 Following the Third Circuit decision, liaison counsel
recommenced discussions with Temple Inland/Gaylord.
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Two groups of defendants remained in the case at
that stage of the litigation, Packaging Corporation of
America, Tenneco, Inc., and Tenneco Packaging, Inc.
(“PCA defendants”) and Stone Container Corporation,
Jefferson Smurfit Corporation, and Smurfit Stone Container
Corporation (“Stone defendants”). Id. at 57. The sales of
these defendants represented 44 percent of the total sales of
all defendants in the case. Id. Stone and Jefferson Smurfit
merged in 1998 so any settlement with them would have to
include both companies-a fact that complicated petitioners'
task because the liability case against Stone and Jefferson
Smurfit was not of equal strength. Id. Settlement negotiations
with the PCA defendants began shortly after the settlements
with International Paper, Union Camp, Georgia Pacific
and Weyerhauser became public. Id. at 58. While these
negotiations were proceeding, special settlement counsel for
the Stone defendants contacted petitioners. Settlements with
both groups of defendants, the PCA defendants and the Stone
defendants, were reached on October 28 and 29 respectively.
Id. The Court approved those settlements on March 21, 2004.
*10 Throughout every phase of the litigation petitioners
managed a major discovery effort, managed on a day-today basis by Martin Twersky and Robert LaRocca. Id.
at 25. In terms of document discovery alone, defendants
produced more than 430 boxes of documents containing
more than one (1) million pages of records. Id. This effort
required the single largest expenditure of petitioners' time
and resources and provides further evidence of their skill
in managing this litigation. Id. As an example of what was
accomplished, on November 15, 2002, a day long meeting
of senior counsel for all parties occurred where the parties
agreed on a basic framework for document discovery such
as: (1) the discovery period; (2) production by defendants of
electronic records of transactions at their mills and box plants,
instead of hard copy invoices and purchase/sales records; (3)
defendants agreement to search headquarters, regional offices
and elsewhere for documents; (4) defendants agreement not to
rely on categories of discovery they declined to produce; and
(5) issues related to interrogatories and document requests.
Id. at 27. According to liaison counsel, following this meeting
discovery began in earnest. Id.
Petitioners management of discovery disputes provides
further evidence of their skill and efficiency in managing this
litigation. Throughout the litigation, the Court urged counsel
to seek informal resolution of discovery disputes whenever
possible and petitioners expended a great deal of time and
effort to this end. Id. at 44. For example, more than 750
letters and e-mails were exchanged between petitioners and
defense counsel seeking to resolve discovery issues. Id. Most
of these informal efforts at resolution have proved successful
and the Court's involvement has only been required on a few
occasions. Id.
consideration of the third Gunter factor-the skill and
efficiency of the attorneys involved -counsels in favor of
4. The Complexity and Duration of the Litigation.
As to the complexity of the case, “[a]n antitrust class action
is arguably the most complex action to prosecute.” In re
Motorsports Merchandise Antitrust Litig., 112 F.Supp.2d
1329, 1337 (N.D.Ga.2000); see also In re Shopping Carts
Antitrust Litig., MDL No. 451, 1983 WL 1950, at *7
(S.D.N.Y. Nov.18, 1983) (noting that “... antitrust price fixing
actions are generally complex, expensive and lengthy” (citing
Grinnell, 495 F.2d at 467–68)). “The legal and factual issues
involved are always numerous and uncertain in outcome.” In
re Motorsports, 112 F.Supp.2d at 1337. This litigation was
no exception.
As to the duration of the litigation, the case is now in its
sixth year and were it to go to trial it could continue for any
number of years. The Court notes that there is authority for
approving a 30 percent fee in litigation that concluded much
earlier in the proceeding. E.g., In re Ikon Office Solutions
Inc. Securities Litigation, 194 F.R.D. 166, 194 (E.D.Pa.2000)
(awarded attorneys 30 percent of $111 million settlement
after one and a half years of litigation).
*11 Based on the foregoing, the Court concludes that
consideration of the fourth Gunter factor-the complexity and
duration of the litigation-counsels in favor of granting the Fee
Petition.
5. The Risk of Nonpayment.
Petitioners faced significant risks of nonpayment. First, the
FTC investigation into Stone had been, according to Professor
Lawrence Sullivan, an antitrust expert whose declaration
petitioners offered in support of the Fee Petition, “at the
cutting edge of single firm antitrust liability.” Dec. in Support
of Class Settlements with the Stone and PCA Defendants and
in Support of Class Counsels' Petition for Attorneys' Fees and
Costs, Certification of Professor Lawrence Sullivan ¶ 5. As
Professor Sullivan explains
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To my knowledge there has never
been a successfully litigated antitrust
claim of a single firm attempt to
conspire to raise prices or reduce output based solely, or even primarily,
on market conduct by the defendant
firm. Indeed, except for FTC's ... Stone
Container Corporation investigation
(In the Matter of Stone Container
Corp., Docket No. C–3806 (FTC,
May 1998) there never appears to
have been an allegation of an attempt
so to conspire based solely on
market conduct evidence ... In Stone
Container, the dissenting statement
of Commissioner Swindle serves to
emphasize that the Commission's
market conduct allegations were far
afield from conventional antitrust
theories of liability.
Id.
Second, petitioners did not benefit from the fruits of a prior
government investigation or prosecution. The Second Circuit
has held that to assess risk in antitrust class actions: “[T]he
only truly objective measurement of the strength of plaintiffs'
case is found by asking: ‘Was defendants' liability prima
facie established by the government's successful action?” ’
Grinnell, 495 F.2d at 455. In this case the answer to that
question is no. The FTC did not file an action against, or even
identify, any market participant other than Stone. Further,
the FTC investigation went no further than Stone's alleged
invitation to conspire. Id. at ¶ 6.
Third, prior to this case no court had ever certified a class
based entirely on the exception to Illinois Brick v. Illinois, 431
U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) announced by
the Third Circuit in In re Sugar Industry Antitrust Litigation,
579 F.2d 13 (3d Cir.19778). This Court addressed this
issue at length in its Memorandum of September 4, 2001
certifying the classes. In Illinois Brick, the Supreme Court
ruled that only a direct purchaser, and not others in chain
of manufacturing or distribution, is a party “injured in his
business or property” within meaning of the Clayton Act.
431 U.S. at 736. The Third Circuit, in Sugar ruled that if
plaintiffs purchased items which incorporated a price-fixed
item obtained directly from the producer, suit was not barred
by the Illinois Brick decision. Sugar, 579 F.2d at 17. Sugar,
however, addressed only the issue of individual standing,
and not class standing, under Illinois Brick. Playing off that
distinction, defendants argued that the tracing of damages
from one level to another complicated proof of impact and
damages such that class proceedings were impracticable.
Defendants arguments were rejected both by this Court and
the Third Circuit.
*12 Fourth, defendants stated their intention to exploit
at trial several perceived weaknesses in plaintiff classes'
evidence of liability. There is no direct evidence of any
meeting at which defendants agreed to take downtime
or to raise prices and there was no direct evidence of
conversations in which one conspirator agreed with another to
take reciprocal downtime. In addition, as the Court discussed
in its Memorandum of December 8, 2003, the reduction in
production caused by the alleged conspiratorial downtime
accounted for a small quantity of linerboard. During the
class period, October 1, 1993 through November 30, 1995
linerboard production by all defendants totaled 20,000,000
tons per year. Therefore, the alleged conspiratorial downtime
during that period produced a decease in production of
385,000 to 435,000 tons, or approximately 1 percent of
production.
Moreover, in the period of alleged conspirational activity, the
cost of pulp and old corrugated containers-the primary input
costs of containerboard-rose at unprecedented rates. Demand
also rose during the period in question and defendants'
production was unable to meet this increase. The latter fact
is explained in part by low prices in the 1980s and early
1990s that led to low returns on investment in additional
capacity and thus reduced investment in additional capacity.
Defendants could have argued that it was this lack of capacity,
not collusion, that prevented defendants from meeting this
increased demand. In sum, defendants would have been able
to argue that these two economic forces-sharply rising costs
and increased demand-led to the steep price increases not the
allegedly collusive downtime in 1993.
consideration of the fifth Gunter factor-the risk of
nonpayment-counsels in favor of granting the Fee Petition.
6. The Amount of Time Devoted to the Case by
Plaintiff's Counsel
Petitioners expended 51,268 hours on this litigation. See,
Langer Summary Declaration, at ¶¶ 6–11 and Declaration
of David White, CPA. They reported that more than 200
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lawyers worked on the case over the six years of litigation.
This group can be subdivided according to number of hours
spent: (1) thirty-six lawyers reported between 100 and 500
hours: (2) seventeen lawyers reported between 500 and
1,000 hours; (3) six lawyers reported between 1,000 and
2,000 hours-this included members of the core team of
lawyers that managed the litigation; (4) Liaison counsel and
Robert LaRocca expended over 2,500 hours-they are the only
lawyers on the case who reported more than 2,000 hours of
recorded time.
The Court makes several observations about this distribution
of attorneys' time expended in the case. First, the number of
lawyers with less than 1,000 hours reflects the fact that the
defendants were assigned to teams of junior lawyers to review
documents and senior lawyers to take depositions. Second,
the small group of lawyers with the most hours are the lawyers
who managed the litigation.
*13 While the total number reported–51,268 hoursis obviously substantial, through effective management
petitioners held down the number of hours and other resources
required to effectively prosecute the case. Fee Petition at 22.
Fewer hours of attorney time were expended in this case
than in comparable litigation. For instance, In re Flat Glass
involved fewer defendants and more firms and the fee petition
covered 83,067 hours. In re Commercial Tissue Antitrust
Litigation involved a comparable number of defendants,
a similar industry, a conspiracy covering a similar time
period and was resolved at a comparable stage but the fee
petition covered 87,849 hours excluding time expended by
the Attorney General of Florida in a separate action which
was consolidated with the class action. Id. This development
should be rewarded when it reflects, as in this case, the
efficiency of counsel in maximizing total recovery to the class
by minimizing attorneys' fees expenses.
consideration of the sixth Gunter factor-the amount of time
devoted to the case by petitioners-counsels in favor of
7. The Awards in Similar Cases
The 30 percent fee is comparable to fees approved in the
four most recent horizontal price fixing cases. In re Busiprone
Patent Antitrust Litigation, 01–MD–1410 (S.D.N.Y. April
11, 2003) in which the court awarded class counsel in an
early settlement one-third of a class action settlement of
$200 million; In re Vitamins Antitrust Litigation, 2001 WL
34312839 (D.D.C. July 16, 2001) in which the court awarded
counsel 34.6 percent of $365 million in an early settlement of
a case in which there had been a prior government criminal
investigation and prosecution; In re Cardizem CD Antitrust
Litigation, MDL 1278 (E.D.Mi. November 26, 2002) in
which the court awarded 30 percent of a settlement fund of
$110 million; and In re Lease Oil Antitrust Litigation, 186
F.R.D. 403 (S.D.Tex.1999) in which the court awarded 25
percent of $190 million settlement.
The Third Circuit in Cendant Prides, a securities case,
looked to cases of similar size, not necessarily similar
subject matter, when it analyzed the “awards in similar
cases” prong of the Gunter analysis. 243 F.3d at 737.
Many of the decisions cited by the Third Circuit involved
settlements similar in size to the settlement in this litigation
and the courts awarded fees in those cases comparable
to the 30 percent fee requested by petitioners. In re Ikon
Office Solutions Inc. Securities Litigation, 194 F.R.D. 166
(E.D.Pa.2000) (30 percent of $111 million); In re Rite
Aid Corporation Securities Litigation, 146 F.Supp.2d 706
(E.D.Pa.2001) and 269 F.Supp.2d 603 (E.D.Pa.2003) (25
percent of $193 million); In re Prison Realty Securities
Litigation, C/A No. 3:99–0458 (M.D.Tenn. February 9, 2001)
(30 percent of $111 million); In re Prudential Securities, Inc.
Ltd. Partnership Litigation, 912 F.Supp. 97 (S.D.N.Y.1996)
(27 percent of $110 million); Kurzwell v. Philip Morris, Co.,
1999 WL 1076105 (S.D.N.Y.1999) (30 percent of $123.8
million); In re Sumitomo Copper Litigation, 74 F.Supp.2d
393 (S.D.N.Y.1999) (27 .5 percent of $116 million); In
re Combustion, Inc., 968 F.Supp. 1116 (W.D.La.1997) (36
percent of $127 million); see generally, 24 Class Action Rep.
169–170 (2003) (survey of all class action fee awards from
1973–2003).
*14 The above figures are in accord with a recent Federal
Judicial Center study that found that in federal class actions
generally median attorney fee awards were in the range
of 27 to 30 percent. See Dec. of Prof. Stephen Saltzburg
at ¶ 26 (quoting Dunbar, et al ., Recent Trends IV: What
Explains Filings and Settlements in Shareholder and Class
Actions (NERA, 1996) at 12–13). More specifically, recent
empirical data analyzing fee awards in securities cases
indicates that “regardless of size, fees average 32 percent of
the settlement. See Dec. of Prof. Stephen Saltzburg at ¶ 26
(quoting Dunbar, et al., Recent Trends IV: What Explains
Filings and Settlements in Shareholder and Class Actions
(NERA, 1996) at 12–13).
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In Cendant Prides, the Third Circuit, after engaging in a
review of common fund cases that produced a range of
fee awards from 2.8 to 36 percent of the total settlement,
noted the following common factors in those cases: “complex
and/or novel legal issues, extensive discovery, acrimonious
litigation, and tens of thousands of hours spent on the case
by class counsel.” 243 F.3d at 741. There are two recent
cases that exhibit these characteristics and many of the same
characteristics of the present litigation, and produced fee
awards at the high end of this range-Lease Oil and Ikon Office
Solutions. In Lease Oil, where the district court awarded a 25
percent fee, the 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, requiring
the assistance of experts and the
investment of many hours. Also, being
novel, the legal issues raised in the
litigation required skilled attorneys to
handle them.
Cendant Prides, 243 F.3d at 738 (citing Lease Oil, 186
F.R.D. at 445). In In re Ikon Office Solutions, the district
court granted a 30 percent fee request because, inter alia,
“[c]ounsel 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 like” and
“derivative counsel fees will be taken from this amount.”
Cendant Prides, 243 F.3d at 738 (citing In re Ikon Office
Solutions, 194 F.R.D. at 194). Notwithstanding those legal
obstacles, Ikon Office Solutions lacked a number of the risks
present in this case. For example, in Ikon Office Solutions,
the parties stipulated to class certification. 194 F.R.D. at 171.
Moreover, the result in Ikon Office Solutions was not nearly
as favorable as the result in this case-the settlement in that
case represented between 5.2 percent and 8.7 percent of the
out of pocket damages. In comparison, as discussed above,
the settlements in this case represent 55 percent of the claimed
damages, as calculated by plaintiffs' expert for the statute
of limitations period, and approximately 42 percent of the
damages for the full class period. Fee Petition at 20. Lastly,
by the time of final approval of the settlement, the case in Ikon
Office Solutions had only been pending for one and half years.
*15 Petitioners' requested fee is similar to fees awarded for
cases like Linerboard in the private market. The three expert
declarations, that of Professor Saltzburg, who undertook a
study of these mattes as co-chair of the Third Circuit Task
Force on the Selection of Class Counsel; that of Jerome J.
Shestack, a former president of the American Bar Association
who has specialized in representing clients in major litigation;
and that of Richard Amold, the co-liaison counsel for the
direct action plaintiffs in this litigation, who has specialized
in representing large corporations in major antitrust litigation,
all confirm that the 30 percent sought is at or below the market
rate. Fee Petition at 55. These declarations are consistent with
the conclusion reached by the special master appointed by
Judge Dalzell in U.S Bioscience to determine the market rate
for fees in a complex litigation posing less risk of nonpayment
than the current case:
After reviewing all the materials
outlined above, it is the considered
view of the Special Master that in
light of the contingency fee practices
in the district, the type of class
action litigation at issue here; the
nature of this case, including the facts
known at the outset of the litigation
(that is, at the point when advance
“negotiating” might have occurred);
and the outstanding performance of
plaintiffs' counsel, a contingency fee
of 30 percent of the settlement fund,
plus all expenses, should be awarded.
In re U.S. Bioscience Securities Litig., 1994 WL 485935, at
*15 (E.D.Pa.1994).
What the market would pay is significant because, as the
Seventh Circuit has explained, the goal of the fee setting
process it to “determine what the lawyer would receive if
he were selling his services in the market rather than being
paid by Court Order.” In re Continental Ill. Sec. Litig., 962
F.2d 566, 568 (7th Cir.1992); see also, In re RJR Nabisco
Sec. Litig., MDL No. 818, 1992 U.S. Dist. LEXIS 12702
at *20 (S.D.N.Y. Aug.24, 1992) (“What should govern such
[fee] awards is not the essentially whimsical view of a judge,
or even a panel of judges, as to how much is enough in a
particular case, but what the market pays in similar cases).
consideration of the seventh Gunter factor-the awards in
similar cases-counsels in favor of granting the Fee Petition.
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B. THE REQUESTED FEE IS REASONABLE UNDER
A LODESTAR CROSS–CHECK
While the Court adopts the percentage of recovery method,
the Court will also subject petitioners' proposed fee to a crosscheck using the lodestar method. Cendant Prides, 243 F.3d
at 742 (“we have suggested that district courts cross-check
the percentage award at which they arrive against the lodestar
method”); 2002 Task Force Report at Fn. 313. The Court
emphasizes that this is only a cross-check and not a full
lodestar analysis. see, e.g., DiGiacomo v. Plains All American
Pipeline, Civ. No. H–99–4137, at 23 (S.D.Tex.2001) (Court
conducts a lodestar cross-check but notes that it “will not
conduct a detailed analysis of charged hours and hourly
rates” because to do so “would undermine the utility of the
percentage method”).
*16 To apply the lodestar method, the Court must examine
the number of hours petitioners worked and the rate for these
lawyers' services, and multiply the number of hours worked
by the hourly rate. The Court may also multiply the hourly
rate by a factor (a lodestar “multiplier”) to reflect the risks
of nonpayment facing counsel, to serve as an incentive for
counsel to undertake socially beneficial litigation, or as a
reward to counsel for an extraordinary result. In re Prudential,
148 F.3d at 340–341.
Petitioners have reported to the Court spending 51,268 hours
on the litigation. Fee Petition at 62. Petitioners have also
reported an average mixed hourly rate of senior counsel of
$440.00. Based on these two figures, the lodestar under the
formula adopted by the Third Circuit in In In re Cendant
Corporation Prides Litigation, 243 F.3d 722 (3d Cir.2001)taking the hourly rates of the most senior lawyers in the case
and multiplying them by the total hours incurred by attorneys
9
who worked the case-would be $22,557,920. Given the fee
petitioners have requested, the multiplier under the Cendant
Prides formula is 2.66.
In Cendant Prides, the Third Circuit ruled that a multiplier of
3 was the appropriate ceiling using the average rate of senior
counsel method based. 243 F.3d at 742. In Prudential, the
Third Circuit noted, based on a similar review of common
fund cases, “[m]ultipliers ranging from one to four are
frequently awarded in common fund cases when the lodestar
method is applied. In re Prudential, 148 F.3d 283, 341
(3d Cir.1998) (quoting 3 Herbert Newberg & Alba Conte,
Newberg on Class Actions, S 14.03 at 14–5 (3d ed.1992).
Clearly, 2.66 falls below the ceiling set by the Court in
Cendant Prides and falls within the range the Court identified
in In re Prudential. The Court also notes that during 2001–
2003, the average multiplier approved in common fund class
actions was 4.35 and during 30 year period from 1973–2003,
average multiplier approved in common fund class actions
was 3.89. Stuart J. Logan, et al., Attorney Fee Awards in
Common Fund Class Actions, 24 Class Action Reports 167
(2003).
For all of the foregoing reasons, the Court concludes that the
requested fee of 30 percent is reasonable when measured by
the lodestar cross-check
C. THE COURT DOES NOT DEEM IT
APPROPRIATE TO REDUCE THE 30 PERCENT
FEE REQUEST BY UTILIZING A SLIDING SCALE
FORMULA
Some courts have applied a “sliding scale” approach to
fee awards, granting smaller fee awards as the size of the
common fund increases. The Third Circuit in In re Prudential
presented one argument for such an approach: “[t]he basis for
this inverse relationship is the belief that [i]n many instances
the increase [in recovery] is merely a factor of the size of the
class and has no direct relationship to the efforts of counsel.”
148 F.3d at 339.
One might argue that a fee award of 30 percent of settlements
in excess of $200 is excessive given the absolute figure,
approximately $60 million, that such an award produces. The
Court rejects that thinking in this case because the highly
favorable settlement was attributable to the petitioners' skill
and it is inappropriate to penalize them for their success.
*17 Moreover, the sliding scale approach is economically
unsound. This Court agrees with Judge Easterbrook's
conclusion in Synthroid Marketing Litig., a case in which the
Seventh Circuit overruled a district court's application of a
declining fee structure, that reducing fees for large awards is
economically irrational:
The district judge defined megafunds
as settlements of $75 million and up.
Fees in “megafund” cases should be
capped at 10% of the recovery, the
judge held, although she recognized
that fees of 30% are more common and
proper in smaller cases. This means
that counsel for the consumer class
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could have received $22 million in fees
had they settled for $74 million but
were limited to $8.2 million because
they obtained an extra $14 million for
their clients (the consumer fund, recall,
is $88 million). Why there should be
such a notch is a mystery. Markets
would not tolerate that effect.
Id. The Court also agrees with the Ikon Office Solutions court
that:
It is difficult to discern any consistent
principle in reducing large awards
other than an inchoate feeling that
it is simply inappropriate to award
attorneys' fees above some unspecified
dollar amount, even if all the other
facts ordinarily considered relevant
in determining the percentage would
support a higher percentage. Such an
approach also fails to appreciate the
immense risks undertaken by attorneys
in prosecuting complex cases in which
there is a great risk of no recovery. Nor
does it give sufficient weight to the
fact that large attorneys fees serve to
motivate capable counsel to undertake
these actions.
194 F.R.D. at 197 (cited with approval in In re Cendant Corp.
Sec. Litig., 109 F.Supp.2d at 294–295).
The latter point quoted from Ikon Office Solutions-providing
sufficient incentive to attorneys to undertake class actionsis particularly important in antitrust cases. As the Second
Circuit has explained, the incentive for “the private attorney
general” is particularly important in the area of antitrust
enforcement because public policy relies so heavily on such
private action for enforcement of the antitrust laws. Alpine
Pharmacy, Inc. v. Chas. Pfizer & Co., Inc., 481 F.2d 1045,
1050 (2d Cir.) cert denied sub nom., Patlogan v. Dickstein,
Shapiro and Galligan, 414 U.S. 1092, 94 S.Ct. 722, 38
L.Ed.2d 549 (1973) (citations omitted).
D. THE COURT APPROVES THE AGGREGATE
FEE AMOUNT WITH ALLOCATIONS TO SPECIFIC
FIRMS TO BE DETERMINED BY LIAISON
COUNSEL
The Court approves the joint fee petition for all petitioners
with specific allocations to firms to be determined by liaison
counsel. The Court notes that all petitioners have been
advised of and have agreed to this procedure. Since the
procedure was first utilized in In re Magic Market Securities
Litigation, 1979 U.S. Dist. LEXIS 9777 (E.D.Pa.1979),
submission of a combined fee application with actual
allocation to be made by lead counsel has generally been
adopted by the courts. See, e.g., In re Diet Drugs Products
Liability Litig., 2002 U.S. Dist. LEXIS 19396, at *10 (E.D.Pa.
Oct. 3, 2002); see also, In re Flat Glass Antitrust Litig., MDL
No. 1200 (W.D.Pa. May 28, 2002).
*18 Liaison counsel has led the case from its inception and
is the attorney “better able to describe the weight and merit
of each [counsel's] contribution, In re Diet Drug Litig., 2002
U.S. Dist. LEXIS 19396 (E.D.Pa. Oct. 3, 2002). Likewise,
from the standpoint of judicial economy, leaving allocation to
such counsel makes sense because it relieves the Court of the
“difficult task of assessing counsel's relative contributions.”
In re Prudential, 148 F.3d at 329 n. 96. 10
E. PETITIONERS ARE ENTITLED TO
REIMBURSEMENT OF LITIGATION AND
SETTLEMENT EXPENSES FROM THE
SETTLEMENT FUND
The Court has reviewed the expenses advanced by counsel
and concludes they were reasonable and necessary to the
prosecution of the case. Therefore, the Court will order
that petitioners be reimbursed for these expenses from the
Settlement Fund. See, e.g., Danny Kresky Enter. v. Magid,
716 F.2d 215, 219–220 (3d Cir.1983); In re Chambers Dev.
Secs. Litig., 912 F.Supp. 852, 863 (W.D.Pa.1995) (“Plaintiffs'
counsel also are entitled to be reimbursed for all reasonable
expenses necessary for the successful prosecution of this
litigation).
F. PETITION FOR PAYMENT OF INCENTIVE FEES
TO THE FIVE CLASS REPRESENTATIVES
The Court also writes at this time in ruling on class counsel's
Class Representatives (Docket No. 301, filed February 2,
2004) (“Incentive Fee Petition”). 11 Petitioner have requested
$25,000 for each of the five representatives of the classes and
the Court concludes that such an award is appropriate.
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The Court finds ample authority in this district and in other
circuits for such an incentive award. Tenuto v. Transworld
Systems, Inc., No. Civ. A 99–4228. 2002 WL 188569
(E.D.Pa. Jan.31, 2002); In re Residential Doors Antitrust
Litigation, Nos. 93–3744, Civ. A. 96–2125, 1998 WL
151804, *8 (E.D.Pa. April 2, 1998); Cook v. Niedert, 142
F.3d 1004, 1016 (7 th Cir.1999); In re Lease Oil Antitrust
Litigation, 186 F.R.D. 402, 229 (S.D.Tex.1999); In re
Domestic Air Transp. Antitrust Litigation, 148 F.R.D. 297,
357 (N.D.Ga.1993).
Like the attorneys in this case, the class representatives
have conferred benefits on all other class members and
they deserve to be compensated accordingly. In re Plastic
Tableware Antitrust Litigation, No. 94–CV–3564, 2002
WL 188569 (E.D.Pa. Dec. 4, 1998) (“Payments to class
representatives may be considered a form of restitutionary
relief within the discretion of the trial court ... They may
also be treated as a reward for public service and for the
conferring of a benefit on the entire class”). Such awards
are particularly appropriate in this case because there was
no preceding governmental action alleging a conspiracy and
taking a high-profile role threatened to jeopardize class
representatives relationships with their suppliers. Cullen v.
Whiteman Medical Corp., 197 F.R.D. 1236 (E.D.Pa.2000)
(“[c]ourts routinely approve incentive awards for the services
they provide and the risks they incurred during the course of
the class action litigation”).
*19 The five class representatives performed considerable
work advancing the litigation. Each of the class
representatives provided verified answers to interrogatories
and produced documents in response to document requests.
Incentive Fee Petition 5. Each of them also expended time in
preparing for depositions and gave testimony at depositions.
Id. Finally, Judge Reed required that representatives of each
class be present at the initial mediation sessions. Id.
Lastly, the Court notes that the amount requested, $25,000,
is comparable to incentive awards granted by courts in
this district and in other circuits. See, e.g., In re Graphite
Electrodes Antitrust Litigation, MDL No. 1244 (E.D.Pa.
Order of September 8, 2003) ($80,000); Bogosian v. Gulf
Oil Corp., 621 F.Supp. 27 (E.D.Pa.1985) ($20,000); In
First Jersey Securities, Inc., MDL No. 681 (E.D.Pa.1989)
($24,000); In re Revco Securities Litigation, Nos. 851
& 89 CV 593, 1992 WL 118800 (N.D.Ohio May 6,
1992) ($90,000); In re Busiprone Antitrust Litigation, MDL
No. 1413 (S.D.N.Y. Order of April 7, 2003) ($25,000);
Brotherton v. Cleavland, 141 F.Supp.2d 907 (S.D.Ohio 2001)
($50,000); In re Cardizem CD Antitrust Litigation, MDL No.
1278 (S.D. Mich., Order of Nov. 26, 2002) ($20,000).
IV. CONCLUSION
For the foregoing reasons, the Court concludes that
consideration of the seven Gunter factors counsels in favor
of awarding petitioners their requested fee. Accordingly,
the Court grants Plaintiff Counsel's Petition for Award
of Attorneys' Fees and Reimbursement of Expenses and
awards petitioners 30 percent of the Settlement Fund and
reimbursement of expenses totaling $1,391,203.36.
In addition, the Court concludes that petitioners' request
for payment of $25,000 to each of five named plaintiffs is
appropriate. Accordingly, the Court grants class counsel's
Class Representatives.
An appropriate Order follows.
Parallel Citations
Footnotes
1
2
3
Class counsel did not file a separate fee petition but began the Revised Memorandum of Law with the statement, “[c]lass counsel
move for an award of attorneys' fees and for reimbursement of costs.” Accordingly, the Court will treat the Revised Memorandum
of Law in Support of Petition for Award of Attorneys' Fees and Reimbursement of Expenses as a fee petition.
The three Class Representatives on behalf of the Box Class are Garrett Paper, Inc., Local Baking Products, Inc., and Oak Valley
Farms, Inc. General Refractories Co. And I. Halper Corrugated Box Company are the representatives for the sheet class. Two other
plaintiffs, one a box purchaser, Winoff Industries, and on a sheet purchaser, Crest Meat Co. dismissed their complaints.
Linerboard includes any grade of paperboard suitable for use in the production of corrugated sheets, which are in turn used in the
manufacture of corrugated boxes and for a variety of industrial and commercial applications. Corrugated sheets are made by gluing
a fluted sheet which is not made of linerboard, known as the corrugating medium, between facing sheets of linerboard; corrugated
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4
5
6
7
8
9
10
11
sheets are also referred to as containerboard. The defendants named in the lawsuits are major integrated manufacturers and sellers
of linerboard, corrugated sheets and corrugated boxes.
Appellate review of an order of a district court granting or denying class action certification requires the permission of the Court
of Appeals. Federal Rule of Civil Procedure 23(f) provides, in relevant part, as follows: “A court of appeals may in its discretion
permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made
to it within ten days after entry of the order.”
The advantages and disadvantages of the two methods are described by the Third Circuit in In re Cendant Corporation Litigation,
264 F.3d 201, 255–56 (3d Cir.2001), and in the reports of two task forces convened by the Third Circuit to study the issue of counsel
fees, Report of the Third Circuit Task Force, Court Awarded Attorneys Fee, 108 F.R.D. 237, 247–248 (1985) (“1985 Task Force
Report”) and Report of Third Circuit Task Force on the Selection of Class Counsel (Final Report January 2002) (“Second Task Force
Report”); see also, 1 Alba Conte, Attorney Fee Awards, § 2.02, at 31–32 (2d ed.1993).
“[T]he common-fund doctrine ... allows a person who maintains a lawsuit that results in the creation, preservation, or increase of
a fund in which others have a common interest, to be reimbursed from that fund for litigation expenses incurred.” Court Awarded
Attorney Fees, Report of the Third Circuit Task Force, 108 F.R.D. 237, 241 (1985).
“The percentage of recovery method resembles a contingent fee in that it awards counsel a variable percentage of the amount recovered
for the class.” In re GM Trucks, 55 F.3d 768, 819 n. 38 (3d Cir.1995).
“A court determines an attorney's lodestar 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). After the lodestar is calculated, “[t]he lodestar
then could be increased or decreased based upon the contingent nature or risk involved and the quality of the attorney's work. An
increase or decrease of the lodestar amount is referred to as a ‘multiplier.” ’ Cendant Prides, 243 F.3d at 732 n. 14 (quoting Task
Force Report, 108 F.R.D. 237, 243).
In addition to the Cendant Prides formula, courts use a “historic lodestar method”, by which hours expended by each attorney
are grouped into historical time periods and multiplied by that attorney's hourly rate for that time period, and the “current lodestar
method”, by which total hours expended by each attorney are multiplied by that attorney's hourly rate at the conclusion of the case.
See, e.g. Missouri v. Jenkins, 491 U.S. 274, 283–84, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1980); New York State Ass'n for Retarded
Children, Inc. v. Carey, 711 F.2d 1136, 1153 (2d Cir.1983). Petitioner's requested fee produces a multiplier of 4.08 using the historic
rate calculation and 3.67 using the current rate calculation. Fee Petition at 63.
The Court notes that a Pennsylvania state court action has been filed against designated counsel and removed to this Court, Richard
Golomb, Ruben Honik and Golomb & Honik, P.C. v. Howard Langer and Langer & Grogan, P.C., No. 04–2321, filed May 27, 2004.
The parties in that litigation have raised no objections to the issuance of this Memorandum at this time.
The three Class Representatives on behalf of the Box Class are Garrett Paper, Inc., Local Baking Products, Inc., and Oak Valley
Farms, Inc. General Refractories Co. and Albert I. Halper Corrugated Box Company are the representatives for the sheet class. Two
other plaintiffs, a box purchaser, Winoff Industries, and a sheet purchaser, Crest Meat Co., voluntarily dismissed their complaints.
End of Document
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Ready-Mix Concrete Antitrust
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2011 WL 5547159
N.D. Iowa,
Western Division.
In re IOWA READY–MIX CONCRETE
ANTITRUST LITIGATION.
No. C 10–4038–MWB.
|
Nov. 9, 2011.
Opinion
MEMORANDUM OPINION AND ORDER
REGARDING PLAINTIFFS' UNOPPOSED
MOTION FOR AN AWARD OF ATTORNEYS'
FEES, THE REIMBURSEMENT OF
EXPENSES, AND INCENTIVE AWARDS
FOR CLASS REPRESENTATIVES
MARK W. BENNETT, District Judge.
*1 At first blush, a plaintiffs' attorneys' fee motion seeking
more than $6 million-in thirteen consolidated class action
antitrust lawsuits that have been on file for only slightly more
than a year (and where the plaintiffs soundly lost the only
major motion filed, a Twom–Bal 1 motion to dismiss)—might
read more like a ubiquitous Nigerian e-mail scam than the
highly meritorious motion it has turned out to be.
This consolidated class action case, arising from pricefixing conspiracies in the concrete industry, has come to
a close more rapidly than I could have ever anticipated.
The parties have reached three settlement agreements,
which I approved after a fairness hearing on November
1, 2011 (docket nos. 303, 304, 305). The defendants
agreed to pay a total settlement sum of $18.5 million,
comprised of three settlement funds of $10,730,335.00,
$5,121,412.00, and $2,648,253.00. Before me now is the
plaintiffs' unopposed Motion For An Award Of Attorneys'
Fees, The Reimbursement Of Expenses, And Incentive
Awards For Class Representatives (docket no. 286), in
which Class Counsel request payment of $6,166,666.67 2
as attorneys' fees; $911,445.92 to reimburse expenses; and
$10,000.00 to each named plaintiff as a class representative
incentive payment.
I. ATTORNEYS' FEES
District courts have broad discretion in determining
appropriate attorneys' fees following a class action settlement.
See In re U.S. Bancorp Litig., 291 F.3d 1035, 1038 (8th
Cir.2002). The United States Supreme Court has held that
lawyers who recover a “common fund” are entitled to
reasonable attorneys' fees from the fund they created. Boeing
Co. v. Van Gemert, 444 U.S. 472, 478 (1980) (“[T]his Court
has recognized consistently that a litigant or a lawyer who
recovers a common fund for the benefit of persons other than
himself or his client is entitled to a reasonable attorney's fee
from the fund as a whole.”). As to the appropriate method for
determining fees after a class action settlement, “[i]t is well
established in [the Eighth] Circuit that a district court may use
the ‘percentage of the fund’ methodology to evaluate attorney
fees in a common-fund settlement.” Petrovic v. Amoco Oil
Co., 200 F.3d 1140, 1157 (8th Cir.1999); accord In re U.S.
Bancorp Litig., 291 F.3d at 1038 (“We have approved the
percentage-of-recovery methodology to evaluate attorneys'
fees in a common-fund settlement such as this....”). The
Eighth Circuit Court of Appeals “has not established a
‘benchmark’ percentage that the court should presume to be
reasonable in a common fund case.” In re Xcel Energy, Inc.,
Sec., Derivative & “ERISA” Litig., 364 F.Supp.2d 980, 992
n. 7 (D.Minn.2005). However, “courts in this circuit ... have
frequently awarded attorney fees between twenty-five and
thirty-six percent of a common fund in other class actions.”
See id. at 998 (citing cases); see also In re U.S. Bancorp
Litigation, 291 F.3d at 1038 (affirming district court's award
of 36% of the common settlement fund as attorneys' fees).
*2 Although the Eighth Circuit Court of Appeals “has
not formally established fee-evaluation factors, ... it has
approved consideration of the twelve factors set forth in
Johnson v. Georgia Highway Express, 488 F.2d 714, 719–
20 (5th Cir.1974).” See Zilhaver v. UnitedHealth Grp., Inc.,
646 F.Supp.2d 1075, 1082 (D.Minn.2009) (citing Easley v.
Anheuser–Busch, Inc., 758 F.2d 251, 265 (8th Cir.1985);
Allen v. Amalgamated Transit Union, 554 F.2d 876, 884
(8th Cir.1977)); see also Allen v. Tobacco Superstore, Inc.,
475 F.3d 931, 944 (8th Cir.2007) (affirming district court's
application of the Johnson factors); In re Texas Prison Litig.,
191 F.R.D. 164, 177 (W.D.Mo.1999) (applying Johnson
factors to evaluate a percentage-of-the-fund fee award). The
Johnson factors for evaluating attorneys' fees include:
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the United States Department of Justice's estimate of the total
volume of commerce affected by the conspiracy.
(1) the time and labor required; (2)
the novelty and difficulty of the
questions; (3) the skill requisite to
perform the legal service properly;
(4) the attorney's preclusion of other
employment due to acceptance of
the case; (5) the customary fee; (6)
whether the fee is fixed or contingent;
(7) the time limitations imposed
by the client or the circumstances;
(8) the amount involved and the
results obtained; (9) the experience,
reputation, and ability of the attorneys;
(10) the “undesirability” of the case;
(11) the nature and length of the
professional relationship with the
client; and (12) awards in similar
cases.
*3 Moreover, Class Counsel achieved these fabulous results
with incredible efficiency. This case was filed only last
year, and it presented particular complexities in proving
the scope of the price fixing conspiracies and damages to
class members. As defense counsel Mr. Pakalka noted, “This
settlement is remarkable.... And it was not destined to be
by any means.” Nevertheless, through their extremely skilled
and efficient efforts, Class Counsel marshaled sufficient
evidence and achieved settlements that were highly favorable
to the class members—all within a year and a half of the
original case filing.
Allen, 475 F.3d at 944 n. 3 (citing Johnson, 488 F.2d at 717–
19).
I have considered the plaintiffs' Motion For Fees and the
materials submitted in support, including their brief; the
Declaration of Irwin Levin, co-lead Class Counsel; a report
of hours from Class Counsel and supporting firms and
their lodestar; and the presentations by the parties during
the fairness hearing on November 1, 2011. Applying the
Johnson factors, I find that the attorneys' fees request of
one-third of the common fund, or $6,166,666.67, is actually
quite modest, given the exceptional results in this case. The
combined settlement fund of $18.5 million is sufficient to
repay completely each class member's actual overcharge
damages, as calculated by the plaintiffs' expert, even after
fees and costs. To appreciate this feat, one need look no
further than defense counsel William Pakalka, a veteran and
highly regarded antitrust litigator from a premier national law
firm, Fulbright & Jaworski, who remarked during the fairness
hearing that it is “very unusual” in an antitrust class action
for plaintiffs to receive “a hundred percent of the value” of
their calculated damages. The $18.5 million sum is especially
remarkable, given that the United States Department of
Justice estimated that the total volume of commerce affected
by the price fixing conspiracies was only $5,666,348.61.
Class Counsel thus recovered overcharge damages for the
class members in a sum more than three times greater than
Defendant(s)
Despite their truly remarkable results, it is clear from Class
Counsel's billing report that their lodestar of $4,933,057.25
was quite modest. I also am mindful that Class Counsel
accepted this case on contingency (and thus cast their fate
with the class members). Having considered the Johnson
factors—particularly the exceptional results and efficiency of
Class Counsel—I have determined that reasonable attorneys'
fees here are $6,666,666.67, 3 which increases the lodestar
by a multiplier of 1.35. $6,666,666.67 represents 36.04%
of the common fund of $18.5 million, which is reasonable
compared to other awards in this circuit in class action
cases. See, e.g., In re U.S. Bancorp Litig ., 291 F.3d at
1038 (affirming district court's award of 36% of the common
settlement fund as attorneys' fees, where “class counsel ...
obtained significant monetary relief on behalf of the class”).
I find that $6,666,666.67 is reasonable to compensate the
attorneys for their outstanding work in this case. I leave the
distribution of the requested sum of $6,166,666.67 to the
sound discretion of co-lead Class Counsel Greg Hansel and
Irwin Levin. Regarding the remaining $500,000.00, I direct
that $200,000.00 be paid to Mr. Hansel's firm, Preti Flaherty;
$200,000.00 to Mr. Levin's firm, Cohen & Malad; $33,333.33
to Shuttleworth & Ingersoll; $33,333.33 to the Goosmann
Law Firm; and $33,333.34 to the Heidman Law Firm.
Nevertheless, while I laud Class Counsel for obtaining an
excellent result with world-class efficiency, these settlements
would not have been remotely possible without the highly
experienced, skilled, and extraordinarily professional defense
counsel in this case. Therefore, I am taking the unusual step
of listing them here in the body of this opinion:
Law Firm
Lawyers
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GCC Alliance Concrete
Fulbright & Jaworski, L.L.P.,
in Houston, Texas
William Pakalka Sumera
Khan Anne Rodgers Don
DeGabrielle
Fulbright & Jaworski, L.L.P.,
in Minneapolis, Minnesota
Barbara D'Aquila
Whitaker Hagenow GBMG in
Des Moines, Iowa
Matthew Whitaker
Stinson, Morrison & Hecker,
L.L.P., in Kansas City,
Missouri
David Everson Mark Foster
Misty Cooper Watt
Stinson, Morrison, Hecker,
L.L.P., in Omaha, Nebraska
Bryan Hatch
Nyemaster Goode Voigts
West Hansell & O'Brien,
P .C., in Des Moines, Iowa
Hayward Draper Thomas
Walton
Crary Huff Inkster Sheehan
Ringenberg Hartnett and
Storm in Sioux City, Iowa
Daniel Hartnett
Great Lakes Concrete and
Kent Stewart
Fraser Stryker, P.C. L.L.O.,
in Omaha, Nebraska
David Stubstad David Mullin
Kelsey McChane Mark
Laughlin
Tri–State Ready–Mix and
Chad Van Zee
Spencer, Fane, Britt &
Browne, L.L.P., in Kansas
City, Missouri
Mark Thornhill Emily Taylor
Spencer, Fane, Britt &
Browne, L.L.P., in Omaha,
Nebraska
Joshua Dickinson
Baron, Sar, Goodwin, Gill &
Lohr in Sioux City, Iowa
Francis Goodwin
Krieg DeVault, L.L.P., in
Indianapolis, Indiana
Bryan Strawbridge C. Joseph
Russell Thomas Costakis
Siouxland Concrete
Company
VS Holding Company
Steven VandeBrake
*4 These exceptionally knowledgeable and sophisticated
defense antitrust counsel provided their clients—from rural
northwest Iowa small businessmen to an international
conglomerate—with invaluable and insightful guidance and
representation, sparing their clients likely treble damages,
years upon years of litigation stress, and millions of dollars of
litigation costs in the trial court and the Eighth Circuit Court
of Appeals. They negotiated their way through numerous and
seemingly insuperable hurdles. They are, to a lawyer, every
bit as deserving as Class Counsel of this court's praise for their
professionalism, candor, and zealous and knowledgeable
advocacy.
II. REIMBURSEMENT OF COSTS
Class Counsel also request reimbursement of $911,445.92 in
litigation expenses. “Reasonable costs and expenses incurred
by an attorney who creates or preserves a common fund
are reimbursed proportionately by those class members who
benefit by the settlement .” Yarrington v. Solvay Pharm.,
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Inc., 697 F.Supp.2d 1057, 1067 (D.Minn.2010) (citation and
internal quotation marks omitted); see also Zilhaver, 646
F.Supp.2d at 1084 (“The common fund doctrine provides
that a private plaintiff, or plaintiff's attorney, whose efforts
create, discover, increase or preserve a fund to which others
also have a claim, is entitled to recover from the fund the
cost of his litigation.” (citation and internal quotation marks
omitted)). Class Counsel and supporting firms report that
they have incurred $911,445.92 in unreimbursed litigationrelated expenses through July 31, 2011, including expert fees,
computerized research fees, document and data management
costs, travel and lodging expenses, copying costs, the cost of
court reporters and deposition transcripts, and filing fees. I
find that the requested reimbursement of litigation expenses
is reasonable, and that the expenses were necessary to achieve
the settlement benefits now available to the class members.
Thus, I order reimbursement of $911,445.92 in litigation
expenses.
answers to interrogatories, has reviewed their current and
archived records, has produced documents responsive to
requests, and has allowed Class Counsel's consultants to
access their computer systems and servers and download data
for production; that some of the plaintiffs have conferred by
phone with the plaintiffs' expert; and that at least two named
plaintiffs appeared personally during the mediation process.
I find that each named plaintiff has provided invaluable
assistance and demonstrated an ongoing commitment to
protecting the interests of class members. The requested
incentive award for each named plaintiff recognizes this
commitment and the benefits secured for other class
members, and is thus reasonable under the circumstances of
this case. I therefore award a class representative incentive
fee of $10,000.00 each to named plaintiffs Randy Waterman,
Frank Audino Construction, Inc., Sioux City Engineering
Co., the City of Le Mars, Iowa, Holtze Construction
Company, and Brown Commercial Construction, Inc.
III. CLASS REPRESENTATIVE INCENTIVE AWARDS
IV. CONCLUSION
Lastly, Class Counsel request that each of the named
class representatives be awarded the sum of $10,000.00 as
an incentive fee. “Courts routinely recognize and approve
incentive awards for class representatives....” Wineland v.
Casey's General Stores, Inc., 267 F.R.D. 669, 677 (S.D.Iowa
2009); see also In re U.S. Bancorp Litig., 291 F.3d at
1038 (“[R]elevant factors in deciding whether [an] incentive
award to [a] named plaintiff is warranted include actions
[the] plaintiff took to protect class's interests, [the] degree to
which [the] class has benefitted from those actions, and [the]
amount of time and effort [the] plaintiff expended in pursuing
litigation.” (citing Cook v. Niedert, 142 F.3d 1004, 1016
(7th Cir.1998)); Zilhaver, 646 F.Supp.2d at 1085 (approving
incentive awards of $15,000.00 to named plaintiffs who “bore
the risks of counterclaim or collateral attack, and consulted
with class counsel throughout the suit”).
*5 The named plaintiffs in this case, Randy Waterman,
Frank Audino Construction, Inc., Sioux City Engineering
Co., the City of Le Mars, Iowa, Holtze Construction
Company, and Brown Commercial Construction, Inc.,
have each made substantial contributions on behalf of
settlement class members. Class Counsel report that each
named plaintiff, through one or more representatives,
has participated in multiple in-person and/or telephone
conferences, including extensive meetings to prepare
discovery responses; that each named plaintiff has provided
This case is a model for the nation that class actions can,
indeed, work exactly as Congress and the federal courts
intended—though they so rarely do. And while I would like
to take some credit, even a scintilla of it, for the über-efficient
way that this case proceeded from filing to settlement, that
would be a fraud. Against all conventional wisdom that
federal trial court judges must be very aggressive, hands-on
case managers, I—after a modest nudge at our first conference
—simply got out of the way of these superb lawyers and let
them practice their craft, precisely the way it is intended. They
placed their clients' best interests light years ahead of their
own, which is exactly the way the practice of law is supposed
to work, but, as we all know, so seldom does, especially in
class actions.
In more than thirty-six years of lawyering and judging, I have
never been prouder to be a lawyer/judge than when I observed
the lawyers in this case plying their chosen craft. This case
has been to me what it was like when I stood before da Vinci's
Mona Lisa and Michelangelo's David, observing the great
masters' works. I was overcome with a rare and gargantuan
sense of awe that will likely last a lifetime.
THEREFORE, the plaintiffs' unopposed Motion For An
Award Of Attorneys' Fees, The Reimbursement Of Expenses,
And Incentive Awards For Class Representatives (docket
4
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no. 286) is granted. I order payment of fees, expenses, and
incentive awards, as follows:
*6 1. Class Counsel and supporting lawyers and firms are
awarded $6,666,666.67 in attorneys' fees for their efforts
in this case, to be paid from the three settlement funds in
amounts proportionate to each settlement fund's relationship
to the combined total of $18.5 million. The award of attorneys'
fees shall be paid to Class Counsel from each settlement fund
after the effective date for the settlement creating such fund.
To the extent that any payments into the settlement funds are
to be made by the defendants in installments after the effective
date, the attorneys' fees attributable to such installments shall
be made to Class Counsel after any such installment is paid.
I direct co-lead Class Counsel Greg Hansel and Irwin Levin
to distribute the requested sum of $6,166,666.67. Regarding
the remaining $500,000.00, I order that $200,000.00 be paid
to Mr. Hansel's firm, Preti Flaherty; $200,000.00 to Mr.
Levin's firm, Cohen & Malad; $33,333.33 to Shuttleworth
& Ingersoll; $33,333.33 to the Goosmann Law Firm; and
$33,333.34 to the Heidman Law Firm.
2. Class Counsel and supporting lawyers and firms
are awarded $911,445.92 as reimbursement for litigation
expenses, to be paid from the three settlement funds in
amounts proportionate to each settlement fund's relationship
to the combined total of $18.5 million. The award of litigation
expenses shall be paid to Class Counsel from each settlement
fund after the effective date for the settlement creating such
fund.
3. The named plaintiffs Randy Waterman, Frank Audino
Construction, Inc., Sioux City Engineering Co., the City
of Le Mars, Iowa, Holtze Construction Company, and
Brown Commercial Construction, Inc. are each awarded an
individual class representative incentive fee of $10,000.00.
Each incentive award shall be paid, and split in equal amounts
as necessary, from the settlement fund or funds for which the
named plaintiff has been designated a class representative,
after the effective date for the settlement creating such fund.
I reserve exclusive, general, and continuing jurisdiction over
the settlement classes and Class Counsel, as needed or
appropriate, in order to resolve any disputes that may arise
over the distribution of attorneys' fees.
IT IS SO ORDERED.
Parallel Citations
Footnotes
1
2
3
See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009).
Class Counsel request attorneys' fees of $6,166,667.00 in their Motion For Fees (docket no. 286). However, in their proposed Order
emailed to me, they request $6,166,666.67. Because $6,166,666.67 more precisely approximates one-third of the common settlement
fund of $18.5 million, I treat their requested fees as $6,166,666.67.
This sum is an increase of $500,000.00 from the requested attorneys' fees of $6,166,666.67. Thus, I hope that Class Counsel can
forgive me for shortchanging them thirty-three cents earlier in the opinion (when I treated their fee request as $6,166,666.67, rather
than $6,166,667.00, as explained in footnote 2). Of course, I can understand if they begrudge me a little ... the attorneys, if they are
betting men and women, might remember from my September 2010 letter that they could have taken that thirty-three cents straight
to Vegas to win big on the Easter Bunny's touchdown pass.
End of Document
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E.D. Pennsylvania.
In re AUTOMOTIVE REFINISHING
PAINT ANTITRUST LITIGATION.
MDL Docket No. 1426.
|
Jan. 3, 2008.
Opinion
MEMORANDUM & ORDER
SURRICK, District Judge.
*1 Presently before the Court is Class Counsel's Joint
Petition for Award of Counsel Fees, Payment of Costs and
Expenses, and Award of Incentive Payments to the Class
Representatives. 1 (Doc. No. 220 .) In October of 2004, we
awarded petitioners interim attorneys' fees in the amount
of $21,538,000, approximately 32% of the $66,750,000
Settlement Fund created by settlements with three of the
five Defendants in this class action. Petitioners are now
requesting attorneys' fees of one-third of the $39,000,000
Settlement Fund added by settlements with the remaining
two Defendants, PPG and Sherwin-Williams. Petitioners also
request reimbursement of costs totaling $1,204,720.63 for
litigation expenses incurred in the prosecution of this case
since May 31, 2004, approval of incentive awards of $15,000
for each of the four Class Representatives, and authority
for Co-Lead Counsel to determine the specific allocations
of attorneys' fees to the attorneys who have assisted in
representation of the Class. On August 9, 2007, a hearing was
held on the Fee Petition. (See Hr'g Tr., Aug. 9, 2007). CoLead Counsel argued in support of the Petition. There were
no objections. For the reasons that follow, the Joint Petition
will be granted.
I. BACKGROUND
The factual background of this case is described at length in
our Memorandum denying Defendants' Motions to Dismiss,
In re Auto. Refinishing Paint Antitrust Litig., MDL No. 1426,
2002 U.S. Dist. LEXIS 15099, at *2-13, 2002 WL 31261330
(E.D.Pa. July 31, 2002), and in the Third Circuit's opinion
In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288,
290-92 (3d Cir.2004). We set forth here the factual and
procedural history pertinent to the Fee Petition.
Pg ID 13564
This antitrust action involved allegations that a number of
manufacturers of automotive refinishing paint engaged in
a conspiracy to fix prices in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1. Plaintiffs sought damages and
injunctive relief under Sections 4 and 16 of the Clayton
Act, 15 U.S.C. §§ 15, 26. The Defendant manufacturers are
PPG Industries, Inc.; E.I. DuPont de Nemours and Company,
and DuPont Performance Coatings, Inc. (“DuPont”);
Sherwin-Williams, Co., and Sherwin-Williams Automotive
Finishes Corporation (“Sherwin-Williams”); Akzo Nobel Car
Refinishers B.V., and Akzo Nobel Coatings, Inc. (“Akzo”);
and BASF Aktiengesellschaft, BASF Coatings AG, and
BASF Corporation (“BASF”). Sixty-three lawsuits filed in
five different states were transferred to the Eastern District of
Pennsylvania by the Judicial Panel on Multidistrict Litigation
on November 19, 2001. (Doc. No. 1 .) An Initial Conference
was held on January 8, 2001. (Doc. No. 11.) At the conclusion
of that conference, and by an Order dated January 10, 2004,
the law firms of Barrack, Rodos & Bacine; Bernard M.
Gross, P.C.; and Kohn, Swift & Graft, P.C. were appointed as
Co-Lead Counsel. (Doc. No. 12.) An Executive Committee
composed of the law firms of Berger & Montague P.C.;
Fine, Kaplan & Black; Kaplan Fox & Kilsheimer LLP;
and Milberg Weiss Bershad Hynes & Lerach LLP was also
appointed. (Id.) On February 11, 2002, Plaintiffs filed a
Consolidated and Amended Class Action Complaint. (Doc.
No. 13.) All Defendants filed motions to dismiss. (Doc.
Nos.21, 22, 23). These motions were denied. (Doc. Nos.38,
66.) On April 12, 2002, a Motion by Plaintiffs for Class
Certification was filed. (Doc. No. 26.) Thereafter, four of
the five Defendants entered into a Stipulation with CoLead Counsel agreeing to certification of a national class
consisting of all direct purchasers of automotive refinishing
paint from Defendants in the United States. (Doc. No. 74.)
The Stipulation also provided that Defendants would give
Plaintiffs copies of all documents that had been submitted
by Defendants to the United States Attorney for the Eastern
District of Pennsylvania in the grand jury investigation then
being conducted and that formal discovery would be stayed
pending grand jury action. (Doc. No. 68.) Defendant BASF
did not join in the stipulations. Rather, BASF requested
that we certify to the Third Circuit Court of Appeals our
Orders of July 31, 2002, denying their Motion to Dismiss for
Lack of Personal Jurisdiction and denying their Motion for
Protective Order related to jurisdictional discovery. (Doc. No.
71.) On October 9, 2002, we certified the issues raised in those
Motions to the Third Circuit. (Doc. No. 75.)
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*2 On February 26, 2003, Plaintiffs filed a Motion
seeking preliminary approval of a partial settlement that had
been negotiated with Akzo. (Doc. Nos.81, 82.) Preliminary
approval was granted after hearing. (Doc. No. 84.) By
Memorandum and Order dated September 5, 2003, we
granted final approval of the patrial settlement with Akzo
in the amount of $18,750,000. (Doc. Nos.108, 109.) This
settlement was reached prior to the announcement by the
Department of Justice in March 2003 that it was terminating
its grand jury investigation, and that no indictments would be
filed against any of these Defendants in connection with the
alleged conspiracy. (Doc. No. 90.)
After the grand jury had completed its work, discovery
continued. In April 2004, counsel advised that they had
successfully negotiated a partial settlement with Defendants
BASF and DuPont. (Doc. No. 119.) On May 10, 2004, these
settlements were preliminarily approved after hearing. (Doc.
No. 122.) By Order dated September 27, 2004, we granted
final approval of the settlement between the Class and BASF
in the amount of $12,000,000, and the settlement between the
Class and DuPont in the amount of $36,000,000. (Doc. No.
135.) As a result of those partial settlements, a Settlement
Fund of $66,750,000 was created.
On June 30, 2004, at the same time that the Plaintiff Class
filed the motion seeking final approval of the settlements
with BASF and DuPont, Petitioners submitted a Joint Petition
for the award of interim attorneys' fees. (Doc. No. 125.)
Petitioners also requested reimbursement of costs totaling
$711,94.60, the creation of a fund to pay future expenses,
approval of incentive awards of $15,000 for each of the four
Class Representatives, and authority for Co-Lead Counsel
to determine the specific allocations of attorneys' fees. By
Memorandum and Order dated October 13, 2004, we granted
the Joint Petition. (Doc. No. 136.) An amount of $1,000,000
was set aside for expenses incurred in the continuing
prosecution of the litigation, as well as expenses related to the
administration of the Settlement Fund. (Id.)
Class Counsel have since negotiated settlements with the
remaining two Defendants, PPG and Sherwin-Williams.
The settlements, $23,000,000 and $16,000,000, respectively,
were preliminarily approved by the Court on December 28,
2006, In re Auto. Refinishing Paint Antitrust Litig., MDL
No. 1426, 2006 U.S. Dist. LEXIS 93936, at *7 (E.D.Pa.
Dec. 28, 2006), and notice to the Class was authorized by
Order dated January 31, 2007. (See Doc. No. 218.) The
notice approved by the Court advised the Class that Class
Pg ID 13565
Counsel intended to petition for an award of attorneys' fees
in an amount no greater than one-third of the Settlement
Fund, reimbursement of litigation expenses, and payment of
incentive awards. Co-Lead Counsel advise that over 60,000
notices were provided to potential Class Members via mail
and publication in the Wall Street Journal and in an industry
trade publication. (Hr'g Tr. at 6-7.) The deadline for filing
objections was June 29, 2007. (Doc. No. 220 at 9 n. 6.) There
were no objections to final approval of the settlement. While
two objections had been filed concerning the distribution plan
of the Settlement Fund, they have since been withdrawn.
(Hr'g Tr. at 13.) Petitioners submitted declarations from Class
Counsel detailing the work that had been done and expenses
incurred in the litigation of this case along with the instant
Petition for the award of counsel fees. (Doc. No. 220). A
fairness hearing was held on August 9, 2007 where arguments
for approval of the proposed settlement and award of counsel
fees were heard. (Hr'g Tr. Aug. 9, 2007). By Memorandum
and Order dated December 28, 2007, final approval of the
settlements with PPG and Sherwin-Williams was granted.
II. PETITION FOR COUNSEL FEES
*3 Petitioners request counsel fees of $13,000,000,
representing one-third of the $39,000,000 added to the
Settlement Fund by the settlements with PPG and SherwinWilliams, and reimbursement of out-of-pocket expenses in
the amount of $1,204,720.63. (Doc. No. 220.) We must
determine whether Petitioners' request for this amount is
fair and reasonable. In re Corel Corp., Inc. Sec. Litig., 293
F.Supp.2d 484, 495 (E.D.Pa.2003) (citing Boeing Co. v. Van
Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676
(1980)). We addressed this same issue when we awarded
attorneys' fees in relation to the settlements made with the
other Defendants in this case. See In re Auto. Refinishing
Paint Antitrust Litig., MDL No. 1426, 2004 U.S. Dist. LEXIS
29162, at *7 (E.D.Pa. Oct. 13, 2004).
There are two primary methods for calculating attorneys' fees:
the percentage of recovery method and the lodestar method.
The percentage of recovery method awards counsel a percent
of the amount recovered for the class. In re Cendant Corp.
PRIDESLitig., 243 F.3d 722, 732 n. 10 (3d Cir.2001). The
lodestar method provides counsel with an amount equal to
the number of hours spent working on the case multiplied 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).
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In this Circuit, the percentage of recovery method is
“generally favored” in cases involving a common settlement
fund because it allows “courts to award fees from the fund ‘in
a manner that rewards counsel for success and penalizes it for
failure.’ “ In re Cendant Corp., 243 F.3d at 732 (quoting In re
Prudential Ins. Co. ofAm. Sales Practice Litig., 148 F.3d 283,
333 (3d Cir.1998)). The Third Circuit has also recommended
that district courts conclude this evaluation by employing the
lodestar method as a “cross-check” to ensure that the result
under the percentage of recovery method is reasonable. Id. at
742.
A. Percentage ofRecovery Method
Since a common fund has been created through settlements
with PPG and Sherwin-Williams, we are satisfied that the
percentage of recovery method should be used to calculate
the counsels' fees to be awarded. The standard for evaluating
a fee award is reasonableness. In re Corel Corp. Inc.,
493 F.Supp.2d at 495. To determine whether a particular
percentage of recovery is reasonable, the Third Circuit
has directed district courts to consider the following 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 plaintiff's
counsel; and
*4 (7) the awards in similar cases.
Gunter, 223 F.3d at 195 n. 1 (citing In re Prudential, 148
F.3d at 336-40; see also MOORE'S FEDERAL PRACTICE,
MANUAL FOR COMPLEX LITIGATION (FOURTH) §
14.121 (2004).
Petitioners have requested a fee of 33.33% of the Settlement
Fund created by the settlements with PPG and SherwinWilliams. We will address each of the seven Gunter factors
in determining the reasonableness of that request.
Pg ID 13566
1. The Size of the Fund Created and the Number
ofPersons Benefitted.
The settlements with the remaining defendants adds
$39,000,000 to the Settlement Fund. 2 These new settlement
figures represent approximately 1.5% of PPG's and SherwinWilliams' combined sales of automotive refinishing paint in
the United States in the four years during the Class Period
in which they registered their highest sales total. (Doc. No.
213 at 8.) We have previously found that a large number of
people will benefit from the Settlement Fund. In re Auto.
Refinishing Paint, 2004 U.S. Dist. LEXIS 29162 at *11. We
noted that approximately 2,000 Class members, purchasing
at least 75% of the automotive refinishing paint sold in the
United States, had filed claims. (Id.) Based upon the size of
the Settlement Fund, the many people benefitting, and the
volume of commerce that they represent, the first Gunter
factor supports granting the Fee Petition.
2. The Presence or Absence of Substantial Objections by
Members of the Class to the Settlement Terms and/or the
Fees Requested by Counsel
The Notice sent to Class members advised that Petitioners
would apply for a fee award of up to one-third of the added
Settlement and that Class members had a right to object to
the fee petition. There are no current objections to the fee
request. 3 A lack of objections demonstrates that the Class
views the settlement as a success and finds the request for
counsel fees to be reasonable. See In re Cell Pathways, Inc.
Sec. Litig. II, Civ. A. No. 01-1189, 2002 U.S. Dist. LEXIS
18359, at *24, 2002 WL 31528573 (E.D.Pa. Sept. 23, 2002)
(noting that one objection out of 34,277 notices shows the
Class's satisfaction with the settlement and reasonableness of
a 30% attorneys' fee). Therefore, this factor weighs in favor
of approving the Fee Petition.
3. The Skill and Efficiency of Class Counsel
This Court has previously recognized the outstanding efforts
of both Plaintiffs' counsel and Defendants' counsel in
this litigation. In re Auto. Refinishing Paint, 2004 U.S.
Dist. LEXIS 29162 at *21 n. 3. The manner in which
Petitioners conducted all aspects of this litigation, including
the very successful settlement negotiations, demonstrates
the significant skill and expertise of counsel. The total
Settlement Fund of $105,750,000 speaks volumes with regard
to Petitioners contribution to this litigation. As the Court
observed in the Linerboard Antitrust Litigation, “[t]he result
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achieved is the clearest reflection of petitioners' skill and
expertise.” In re Linerboard Antitrust Litig., MDL No. 1261,
2004 U.S. Dist. LEXIS 10532, at *19, 2004 WL 1221350
(E.D.Pa June 2, 2004). Based on the successes achieved by
Petitioners and the skill with which they have conducted their
work, we conclude that the third Gunter factor also counsels
in favor of granting the Fee Petition.
4. The Complexity and Duration of the Litigation
*5 This litigation, like most antitrust cases, has been
exceedingly complex, expensive, and lengthy. See In
re Linerboard Antitrust Litig., 296 F.Supp.2d 568, 577
(E.D.Pa.2003) (quoting In re Motorsports Merchandise
Antitrust Litig., 112 F.Supp.2d 1329, 1337 (N.D.Ga.2000))
(“An antitrust class action is arguably the most complex
action to prosecute”); In re Shopping Carts Antitrust Litig.,
MDL No. 451, 1983 U.S. Dist. LEXIS at *17, 1983 WL 1950
(S.D.N .Y. Nov. 18, 1983) (noting that “antitrust price fixing
actions are generally complex, expensive, and lengthy”)).
Petitioners have reviewed and analyzed millions of pages of
documents, and their work on this litigation has persisted over
six years. The significant amount of time that Class Counsel
has dedicated to this very complex case supports approval of
the Fee Petition.
5. The Risk ofNonpayment
Class Counsel undertook this case on a purely contingent
basis at significant risk. See O'Keefe v. Mercedes-Benz U.S.,
LLC, 214 F.R.D. 266, 309 (E.D.Pa.2003) (“Any contingency
fee includes a risk of non-payment”); In re Quantum Health
Res., Inc., 962 F.Supp. 1254, 1257 (C.D.Cal.1997) (“Because
payment is contingent upon receiving a favorable result for
the class, an attorney should be compensated both for services
rendered and for the risk of loss or nonpayment assumed by
accepting and prosecuting the case.”)
It is also important to note that Petitioners proceeded to
prosecute this case even after the Department of Justice
decided not to seek indictments against any of the Defendants.
The risk of nonpayment is even higher when a defendants'
prima facie liability has not been established by the
government in a criminal action. In re Linerboard, 2004
U.S. Dist. LEXIS 10532, at *36, 2004 WL 1221350. Thus,
the higher risk of nonpayment that Petitioners assumed
in undertaking this litigation warrants approval of the Fee
Petition.
Pg ID 13567
6. The Amount of Time Devoted to the Case by Plaintif's
Counsel
Petitioner's exhibits demonstrate that Class Counsel have
expended 48,251.85 hours on this litigation since May 31,
2004. (Doc. No. 220.) Moreover, counsel have incurred
$1,204,720.63 in litigation costs and expenses since May 31,
2004. (Id.) As we observed with regard to the settlements with
other Defendants in this litigation, this amount of time and
expense demonstrates a significant commitment of resources
to this litigation by counsel and weighs in favor of approving
the Joint Petition.
7. Awards in Similar Cases
Petitioners seek an award that is equal to one-third of the
amount added to the Settlement Fund. We have previously
noted that is not unusual in antitrust class actions for the
attorneys to receive awards for fees in the 30% range. In
re Auto. Refinishing Paint, 2004 U.S. Dist. LEXIS 29162,
at *29. Moreover, courts have awarded an almost identical
percentage of the settlement funds as they are requesting. See
Bradburn Parent Teacher Store, Inc. v. 3M, 513 F.Supp.2d
322, 342 (E.D.Pa.2007) (approving a percentage of recovery
of 35%, plus reimbursement of expenses); In re FAO Inc. Sec.
Litig., Civ. A. No. 03-6596, 2005 U.S. Dist. LEXIS 16577,
at *5-6 (E.D.Pa. May 20, 2005) (finding a fee of 33%, plus
expenses, to be reasonable); In re Corel Corp., 293 F.Supp.2d
484, 497-98 (awarding counsel one-third of the settlement
fund in addition to the reimbursement of litigation expenses);
In re Gen. Instrument Sec. Litig., 209 F.Supp.2d 423, 433-34
(E.D.Pa.2001) (approving a fee request of one-third of the
settlement fund plus nearly $1,800,000 in expenses).
*6 We awarded interim counsel fees in the amount of 32%
of the Settlement Fund as a result of the work of counsel
in obtaining settlements with the other Defendants in this
litigation. In re Auto. Refinishing Paint, 2004 U.S. Dist.
LEXIS 29162 at *40. Although we recognized that the award
was at the upper end of the range of percentage fees awarded,
the facts and circumstances of the case supported the higher
fee. Id. at *32. In particular, we highlighted the fact that
the case involved novel legal issues that were taken to the
Third Circuit. Id. Motions and discovery were contentious
and voluminous. Id. Counsel devoted significant time and
monetary resources, and they pursued the case at a significant
risk of nonpayment. Id. Many of these same considerations
apply to the settlements with the remaining two Defendants.
We cannot say that an award of 33.33% of the settlement fund
created by these attorneys is unreasonable. Therefore, we find
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that the seventh Gunter factor weighs in favor of granting the
Joint Petition.
B. The Lodestar Cross-Check
While the percentage of recovery method is the appropriate
method to use for calculating attorneys' fees in cases where
there is a common fund, the Third Circuit has “suggested that
district courts cross-check the percentage award at which they
arrive against the lodestar method ....“ In re Cendant Corp.,
243 F.3d at 742. To apply the lodestar method, the court must
multiply the hours worked by counsel by their hourly rates. In
re Linerboard, 2004 U.S. Dist. 10532, at *48-49. In addition,
the court may also multiply that number by a factor, called the
lodestar multiplier, “to reflect the risks of nonpayment facing
counsel, to serve as an incentive for counsel to undertake
socially beneficial litigation, or as a reward to counsel for an
extraordinary result.” Id. at *49.
Plaintiff's counsel have spent 48,251.85 hours prosecuting
this case since May 31, 2004. Multiplying the total of each
attorney's hours by each attorney's historic hourly rate for
that period generates a figure of $16,035,799.50. (Doc. No.
220, Ex. A.) When we divide counsel's requested fee of
$13,000,000 by the lodestar figure, the resulting multiplier
is .81. Since the multiplier is less than 1 (a “negative
lodestar”) and the requested fee is less than the amount that
would be awarded using the lodestar method, we are satisfied
that a lodestar cross-check confirms that the requested fee
percent is fair and reasonable. See In re NTL, Inc. Sec. Litig.,
Civ. A. No. 02-3013, 2007 U.S. Dist. LEXIS 13661 at *30-31,
2007 WL 623808 (S.D.N.Y. March 1, 2007) (noting that fee
awards based on negative lodestars are fair and reasonable).
III. PETITION FOR REIMBURSEMENT OF COSTS
AND EXPENSES
In the Joint Motion, Class Counsel also seek reimbursement
of litigation costs and expenses in the amount of
$1,204,720.63. (Doc. No. 125.) We have stated that “there
is no reason to reject the request for reimbursement of
[expenses] that counsel have spent out of their own pockets
in litigating this case .... “ In re Auto. Refinishing Paint, 2004
U.S. Dist. LEXIS 29162, at *35-36. Moreover, “[a]ttorneys
who create a common fund for the benefit of a class are
entitled to reimbursement of reasonable litigation expenses
from the fund.” In re Aetna Inc. Sec. Litig., MDL No. 1219,
2001 U.S. Dist. LEXIS 68, at *40, 2001 WL 20928 (E.D.Pa.
Jan. 4, 2001). The $1,204,720.63 that Petitioners request for
litigation costs and expenses incurred since May 31, 2004 is
Pg ID 13568
in excess of the $1,000,000 set aside from prior settlements. 4
Certainly, the fact that no members of the Settlement Class
have objected to the requested payment of expenses supports
the decision to award reimbursement of Petitioner's litigation
costs and expenses.
IV. ALLOCATION OF FEES
*7 Class Counsel also seeks to allow Co-Lead Counsel to
distribute all fees awarded to counsel who worked on this case
on behalf of the Class. All Class Counsel worked jointly under
the supervision of Co-Lead Counsel and have cooperated to
prosecute this litigation efficiently and effectively. Courts
generally approve joint fee applications which request a
single aggregate fee award with allocations to specific firms
to be determined by Co-Lead Counsel, who are most familiar
with the work done by each firm and each firm's overall
contribution to the litigation. As we previously noted, CoLead Counsel have directed this case from its inception
and are best able to assess the weight and merit of each
counsel's contribution. In re Auto. Refinishing Paint, 2004
U.S. Dist. LEXIS 2912, at *36 (citing In re Linerboard,
2004 U.S. Dist. LEXIS 10532, at *54, 2004 WL 1221350).
In addition, allowing Counsel to allocate fees conserves the
time and resources of the courts. In re Linerboard, 2004 U.S.
Dist. LEXIS 10532 at *54, 2004 WL 1221350. In retaining
jurisdiction over the implementation of the Agreement, we
provide adequate protection against any potential abuse. In re
Auto. Refinishing Paint, 2004 U.S Dist. LEXIS 29162, at *36.
V. INCENTIVE AWARDS
Finally, Petitioners request payment of incentive awards to
the four Class Representatives in the amount of $15,000. The
four Class Representatives are: Crawford's Auto Center, Inc.;
70-30 Corporation t/a Maaco Auto Painting & Body Works;
Howard J. Walters d/b/a Randolph Auto Supply Co.; and
David R. Bosak d/b/a Supreme Bodywerks, Inc. Incentive
awards are typically awarded to class representatives for
their often extensive involvement with a lawsuit and courts
in this Circuit have traditionally granted requests for these
awards. See Bradburn Parent Teacher Store, Inc., 2007 U.S.
Dist. LEXIS 35899, at *57 (“It is particularly appropriate
to compensate named representative plaintiffs with incentive
awards when they have actively assisted plaintiffs' counsel
in their prosecution of the litigation for the benefit of the
class”); Cullen v. Whitman Med. Corp., 197 F.R.D. 136,
145 (E.D.Pa.2000) (“Incentive awards are ‘not uncommon
in class action litigation and particularly where, as here, a
common fund has been created for the benefit of the entire
5
2:09-md-02042-SFC
Doc # Litigation,
491-15 Not
Filed
05/14/14
Pg 57(2008)
of 57
In re Automotive
Reported
in F.Supp.2d
class.’ “ (quoting In re S. Ohio Corr. Facility, 175 F.R.D.
270, 272 (S.D.Ohio 1997))). In this case, we have recognized
that “the Class representatives spent significant time assisting
and educating counsel.” Automotive Refinishing Paint, 2004
U.S. Dist. LEXIS 29162, at *40. Petitioners assert that the
four Class Representatives continued to assist Class Counsel
in litigating against the remaining Defendants. The Class
Representatives not only conferred benefits on all of the
Class members, but also risked jeopardizing their existing
relationships with their suppliers of automotive refinishing
paint products. See Cullen, 197 F.R.D. at 145 (“ ‘[C]ourts
routinely approve incentive awards for the services they
provide and the risks they incurred during the course of the
class action litigation.’ “ (quoting In re S. Ohio Corr. Facility,
175 F.R.D. at 272)). For these reasons, we approve the award
of $15,000 to each of the Class Representatives for their
service to the Class. Although Class Representatives have
previously been awarded $15,000, the total award of $30,000
to each Representative is not unreasonable considering the
complexity and duration of the litigation. See, e .g., In
re Remeron Direct Purchase Antitrust Litig., Civ. A. No.
03-0085, 2005 U.S. Dist. LEXIS 27013, at *50-51, 2005 WL
3008808 (D.N.J. Nov. 9, 2005) ($30,000 incentive award to
each named plaintiff is fair and reasonable).
IV. CONCLUSION
*8 Accordingly, the Joint Petition for Award of Counsel
Fees, Payment of Costs and Expenses, and Award
of Incentive Payments to the Class Representatives is
APPROVED.
An appropriate Order follows.
Pg ID 13569
ORDER
AND NOW, this 3rd day of January, 2008, upon
consideration of Class Counsel's Joint Petition for Award of
Counsel's Fees, Payment of Costs and Expenses, and Award
of Incentive Payments to the Class Representatives (Doc. No.
220), and all submissions filed in support thereof, and after
a fairness hearing on August 9, 2007, it is ORDERED as
follows:
1. Class Counsel are awarded counsel fees in the amount
of $13,000,000, with accrued interest.
2. Class Counsel are awarded reimbursement of costs and
expenses in the amount of $1,204,720.63, with accrued
interest.
3. Co-Lead Counsel are responsible for allocating and
distributing counsel fees and expenses to be paid to Class
Counsel.
4. Incentive awards in the amount of $15,000 each are
awarded to the four Class Representatives, Crawford's
Auto Center, Inc., 70-30 Corporation t/a Maaco Auto
Painting & Body Works, Howard J. Walters d/b/a
Randolph Auto Supply Co., and David R. Bosak d/b/a
Supreme Bodywerks, Inc.
5. The Court retains jurisdiction over the Settlement
Agreements to include resolution of any matters which
may arise related to the allocation and distribution of
counsel's fees and expenses to Class Counsel.
IT IS SO ORDERED.
Footnotes
1
2
3
4
In this Memorandum, “Petitioners” refers to Co-Lead Counsel for the Class, “Class Counsel” refers to all attorneys who have
participated in the representation of the Class, and the “Class” refers to “[a]ll individuals or entities (excluding governmental entities,
Defendants, their parents, predecessors, subsidiaries, affiliates, and their co-conspirators) who purchased automotive refinishing paint
in the United States directly from any of the Defendants or any predecessor, subsidiary or affiliate thereof at any time during the
period of January 1, 1993 to December 31, 2000.”
The prior settlements approved by this Court totaled $66,750,000, bringing the final amount of the Settlement Fund to $105,750,000.
Class Counsel indicated at the hearing that two objections had initially been filed, but had subsequently been withdrawn.
Petitioners note that as of April 29, 2007, $25,870.45 remained from the $1,000,000 set aside for litigation expenses. (Doc. No. 225.)
Petitioners explain that certain expenses will continue until the conclusion of the litigation, at which time any remaining amount
would be transferred to the settlement fund and distributed as part of the final distribution to the Class.
End of Document
6

Motion for Attorneys` Fees and Expenses

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