Objectors Rebuffed

So after “four years of vigorous litigation and two weeks of jury trial, the parties in” the AT&T securities class action settled the case for $ 100 million.” Sounds pretty darn good, right? Not to certain objectors. But it looks like they pushed Judge Garrett E. Brown, Jr. (D. N.J.) to the end of his rope, as he found that “Objectors’ Counsel fail to show that they improved the Class’s recovery in any way,” and that “the objections and the subsequent appeal were without merit and failed to improve the Class’s recovery in any manner.”

In fact, he said that “the Objectors’ actions appear to have impeded the Class’s recovery — their objections and subsequent appeal resulted in wasteful litigation and delayed the distribution of funds to the Class. To date, those funds have not yet been distributed.“

Looks like that’s that. Finally.

You can read In re AT&T, issued September 25, 2006, at 2006 U.S. Dist. LEXIS 69086.

Nugget: “As a preliminary matter, the Court notes that Defendants suggest, in their opposition brief, that Objectors’ Counsel should be made to pay expenses and attorneys’ fees pursuant to 28 U.S.C. § 1927. (Defs.’ Br. at 12-14.) Defendants have not, however, filed a motion seeking such relief, and the Court will therefore consider only the application for fees filed by counsel for Objectors’ Counsel.”

Judge Ponders PayDay

OK, the Nugget has been AWOL for a bit, but that’s nothing compared to how long the Cabletron securities class action has been pending. You see, as Judge William E. Smith (D. R.I.) explains, “the case, approaching its tenth year in the judicial system, has traveled from New Hampshire to Rhode Island, through various district judges’ chambers, to the Court of Appeals and back, finally landing with this writer in late 2002.”

And it looks like – it’s finally over, and if you’re looking for an extensive, academic, and real-world analysis of attorney fee awards in securities class actions, this is your opinion. Want a taste? How about, “the Court is persuaded, based on… the emerging trend in district courts nationwide, that the better approach to awarding attorneys’ fees is the Percentage of Fund method.” That’s because “a lodestar cross-check may also be useful; however, it is unclear to this Court where the precise lines of “reasonableness” would be drawn if the lodestar cross-check was mandatory (Is .5 too low? Is 2.5 too high?).” “This Court is not required to decide whether the cross-check is an ethical imperative, nor to define the parameters of lodestar reasonableness; rather, it is sufficient to conclude that when the lodestar cross-check is applied to the fee award in this case, it raises no reasonableness concerns.”

Check out the opinion for more fee talk. You’ll likely be surprised at the conclusion.

You can read In re Cabletron, issued October 12, 2006, at 2006 U.S. Dist. LEXIS 76278.

Nugget: “The Court challenged numerous expenses contained in Plaintiffs’ original submission. As a result, Plaintiffs modified their reimbursement request to reflect the removal of various questionable items such as multiple filing fees and premiums on administrative expenses. The amount described in this Order is the amended request.”

Mo’ Money, Mo’ Money, Mo’ Money

The securities law blogospheres may have lit up last December after the Nugget reported Judge Kent A. Jordan’s (D. Del.) comment that “it is time to decide which of the plaintiffs’ law firms will win the money race,” but it turns out Judge James L. Robart (W.D. Wash.) had already beat everyone to the punch — by nearly five months (the opinion popped up online yesterday).

You see, in deciding the lead plaintiff issue in the Watchguard Technologies securities class action, Judge Robart (who refers to proposed lead plaintiffs as “contestants”) said that “three contestants” “are vying for the lead plaintiff position,” so “the court now turns to the rules that govern this competition.” “As the leading Ninth Circuit authority observes, ‘this is not a beauty contest.’” Instead, as Judge Robart put it, “it is a contest over money, and which contestant stands to gain more of it.” Well, OK then.

The Nugget HATES generalizations about judges based on their appointments alone, as it is a simplistic, naïve, and downright foolish practice. But some (not the Nugget of course) might point out that both Judges are recent Bush appointees. Whether or not that means anything at all, well, you can decide. After all, Judge Michael M. Baylson (E.D. Pa.) is a Bush appointee too, and look what he’s saying. So is Judge Diane S. Sykes (7th Cir.), and she was hardly hostile in her latest opinion.

You can read In re Watchguard, issued July 13, 2005, at 2005 U.S. Dist. LEXIS 40923.

Nugget: “The PSLRA contemplates a quick selection of a lead plaintiff near the outset of a case, without opportunity for discovery on likely damages or losses.”

Eagle Eye on Expenses

The $31.5 million settlement’s done and the 25% fee has been awarded. Now we’ll just be needin’ our out-of-pockets reimbursed and we’ll be on our way. Yep, we’ll make like a tree — and get outta here. You won’t find us hangin’ around, no sir. Well, it’s not going to be that easy my friend, not if you are in Senior Judge William T. Hart‘s (N.D. Ill.) courtroom in the Van Kampen action. You see, Judge Hart observed “two problems with the reimbursement request for expert fees.”

“The first is that some of the fees that Lead Counsel has labeled as expert fees are actually payments for work more properly characterized as work that should be charged as attorney fees.” For example, “Lead Counsel seek reimbursement for fees paid to Joel Seligman, the then-dean of the Washington University School of Law whom Lead Counsel describe as ‘among the nation’s foremost experts on securities law.’ An expert on the law is an attorney. Had this case gone to trial, the court would have instructed the jury as to securities law and no witness, expert or otherwise, would have been permitted to testify as to the state of applicable securities law. The advice received from Seligman, as helpful as it may have been to counsel, is properly characterized as legal fee work. Lead Counsel will not be separately reimbursed for fees charged by Seligman.”

“A second issue is the rates charged by the experts. Allen charged $ 375.00 per hour for most work and $ 625.00 per hour for deposition testimony. Michael Barclay, Ph.D., a professor of finance at the Simon School of Business Administration at the University of Rochester, charged $ 450.00 per hour. He was plaintiffs’ damages expert.” “Lead Counsel have not established that the requested reimbursements are based on customary and reasonable hourly rates. The reimbursements will be based on $ 350.00 per hour for all work of Allen and Barclay, including deposition testimony.”

Oh, and here’s the best one (all-right, all-right, the Nugget below is better): “$350.00 for pro hac vice fees will not be reimbursed. It is the attorney’s choice as to where to seek admission and where to practice. For $100.00, the attorney could be permanently admitted to this court instead of paying $ 50.00 per case. A client should not be charged for the cost of the attorney being admitted to practice.”

You can read Abrams v. Van Kampen Funds, issued February 21, 2006, at 2006 U.S. Dist. LEXIS 6778.

Nugget: “It is noted, though, that charges for accessing this court’s electronic filing system (CM/ECF) might properly be categorized as unreimbursable firm overhead. However, the charge will be allowed because it is only $16.29.”

Judge Wrestles Brontosauraus

Sometimes Judges lambast Defendants, and sometimes they lambast Plaintiffs, so say what you will, but the Nugget prides itself in being an equal-opportunity-reporter-of-lambasting. So pull up a seat, get comfy, and check out Judge Lewis A. Kaplan’s (S.D.N.Y.) conclusion in the Parmalat securites class action after partially granting/denying BoA‘s motion to dismiss.

“The Court wishes to comment on the extraordinary burden that plaintiffs have placed on the Court and all of the parties to this case. The SAC (second amended complaint) is 389 pages and 1,323 paragraphs long – certainly the very antithesis of the “short and plain statement of the claim” that the authors of the Federal Rules of Civil Procedure had in mind. Naturally, the Court is well aware of the fact that the PSLRA and Rule 9(b) require particularity in pleading some aspects of plaintiffs’ claims, thus requiring a more expansive complaint than the one- and two-page form complaints appended to the Federal Rules. It is quite aware also that this is a particularly complicated case.”

“Nevertheless, having struggled through this brontosaurus of a pleading, the Court doubts that a complaint even approaching this length was needed. Indeed, it is concerned that the complexity and length of the pleading may not serve the interests of the alleged class. It already has delayed, and may continue to delay, resolution of the action. It may well multiply the extent and cost of discovery. It has required, and may continue to require, attention to claims against defendants who may be unlikely ever to make any meaningful contribution to settlement or payment of any judgment. And if this case ever were tried to a jury, the potential for confusion and the difficulties of comprehension would be epic in proportions. If indeed the grievous and extensive fraud alleged by plaintiffs actually occurred, there doubtless are ways to focus more on the forest and less on every single tree.”

Sort of reminds you of this recent Nugget article, doesn’t it? Plus, this isn’t the first time Judge Kaplan has criticized the length of the Parmalat complaint. Oh, and by the way, bet you didn’t know that there never was such a thing as a Brontosaurus, did you? It’s true, see here and here. Unless you count the one filed in SDNY that is….

You can read In re Parmalat, issued February 9, 2006, at 2006 U.S. Dist. LEXIS 5419.

Nugget: “Should there ever be a fee application in this case, the efficiency and dispatch with which counsel have handled the case are likely to be prominent considerations.”

The Money Race

Well, looks like “it is time to decide which of the plaintiffs’ law firms will win the money race.” That’s the way Judge Kent A. Jordan (D. Del.) put it in the lead plaintiff battle between Milberg and Lerach clients in the Molson Coors (don’t you love their stock symbol: TAP) securities class action. Judge Jordan immediately explained his comment by saying “by this observation, I mean no disrespect to these firms or others engaged in the representation of plaintiffs in securities litigation. I mean simply to be honest about what appears to be at stake. It is the lead counsel who stands to gain, not the lead plaintiff, as both the tone of the arguments and the logic of the incentives suggest here. The ‘pick me’ urgency seems far more likely to come from the lawyers than the parties because, in the real world, people are not so eager to undertake work that someone else will do for them.”

Want more? Well, OK. He continued “if another plaintiff is willing to shoulder the burden of supervising the litigation, one would think other class members would be pleased to step back. That, at least, is what one would could conclude is rational when, as is the case here, there is no persuasive suggestion that one group of plaintiffs will be any more competent at or dedicated to the job than the other. The incentives giving rise to the classic ‘free rider’ phenomenon, i.e., the inclination of people to take advantage of a benefit without bearing a commensurate portion of the associated burden, do not evaporate simply because securities are involved. They get overridden because securities lawyers are involved, lawyers who are vying for the chance to take the laboring oar in litigation and the monetary rewards that go with it.”

Still want more? All-right, but this is it. He concluded that “after going over the parties’ submissions and counter-submissions, which, including appendices, run to hundreds of pages in length, it strikes me that this exercise is simply a business investment for the lawyers. They invest their time and consume judicial resources in the hope of scoring a significant financial return. That is perfectly rational from an economic perspective, but, from a public policy perspective, one might question whether the right incentives are yet in place. It is for others to determine the degree, to which the Congressional goal of making class action securities cases more client-driven and less lawyer-driven has been realized. At this stage of this case, however, it appears that the lawyers are still very much in the driver’s seat.”

Result: Milberg’s client won the lead this time.

You can read In re Molson Coors, issued December 2, 2005, at 2005 U.S. Dist. LEXIS 30569.

Nugget: “These firms have a familial relationship. Milberg Weiss used to be known as Milberg Weiss Bershad Hynes & Lerach, the name change apparently reflecting Mr. Lerach’s decision to launch the competing law firm that bears his name and is the rival to Milberg Weiss for lead counsel in this action.”

Seventh Circuit Shoots Down Professional Objector

The American Lawyer recently called him a “holdup artist,” “the outlaw of class action litigation,” and a “notorious class action objector.” You see, for those of you not yet lucky enough to meet John Pentz, he is the lawyer who calls his firm the “Class Action Fairness Group” (guess the old title of the “Objector’s Group” was a little too obvious, but it still seems a bit odd to refer to yourself as a “Group”). O.K., O.K., but you be the judge if he was being resourceful or just plain shameless for filing an objection on behalf of his late grandmother in an AT&T/Lucent settlement a couple years ago in Madison County, Illinois. “That’s my Johnny, such a good boy.”

Anyway, seems Mr. Pentz, who started his objecting organization back in 2000 after several years as an associate at Berman DeValerio, is still stirring things up today. This time around its about 300 clicks north at the headquarters of the Chicago School of Economics, the Seventh Circuit. Seems Mr. Pentz’ client, Hannah Feldman, wasn’t too keen on the $7.25 million settlement in the Aon securities class action. Never mind the fact that “an SEC investigation essentially cleared Aon of any perceived wrongdoing,” or the fact that the District Court held that it “was not an easy case,” or that “counsel was taking on a significant degree of risk of nonpayment with the case.” No, the Class Action Fairness Group was here with Ms. Feldman (the only objector by the way) to save the day by trying to torpedo lead counsel’s 30% fee. Can’t we all just get along?

But alas, seems Circuit Judges Kanne, Bauer, and Ripple didn’t see it Pentz’ way. First they held that he failed to articulate an “argument regarding fee-setting methodology to the court below,” and thus “waived the argument.” Then, the court proceeded to the less stringent abuse of discretion standard, but again rejected the objector’s arguments, pointing out “thirteen cases in the Northern District of Illinois where counsel was awarded fees amounting to 30-39% of the settlement fund,” and that “attorneys’ fees from analogous class action settlements are indicative of a rational relationship between the record in this similar case and the fees awarded by the district court.” As for the “objector’s quarrel” with the $111,000 expense award, the Seventh Circuit noted that it “barely warants comment.”

So 30% it is.

You can read the decision, issued July 5, 2005, at 2005 U.S. App. LEXIS 13310.

Nugget: “District courts are far better suited than appellate courts to assess a reasonable fee in light of the case’s history.”