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.”

Third Circuit Squashes Ungrateful Objectors

It takes a lot of nerve, let me tell you. Sorry, I’m getting ahead of myself again. You see, Plaintiffs’ counsel in the AT&T securities class action reviewed more than 4 1/2 million pages of documents, took eighty depos, and even went to trial for eight days (back in October 2004) before securing a $100 million settlement. And after all that (and that’s just scratching the surface I’m sure), some objectors come in at the end complaining that counsel’s fee request of 21.25% was too high. Too high? Are these people serious? In a country where most contingent attorneys routinely charge 1/3 (and in some jurisdictions 40% if the case goes to trial), 21.25% is certainly reasonable. And when you factor in four years of intense work with no guarantee of any payment, well, all-right I’ll stop.

So anyway, after being rejected by the District Court, the objectors appealed, “contending the award of attorneys’ fees and expenses is unfair and unreasonable because (1) it is excessive, (2) it employs a sliding scale that provides for the fee percentage to increase rather than decrease as the settlement amount increases, and (3) it provides for payment of the full amount of attorneys’ fees before class members will receive payment. Objectors ask that fees be reduced to 15% of the settlement fund, in addition to requested costs and expenses, and that the pay-out be staged, with the final installment withheld until class members have been paid.”

Well, the Third Circuit rejected the objectors on every point, with perhaps the most interesting part saying that “the District Court did not abuse its discretion in concluding the sliding scale was fair and reasonable in light of the size of the settlement fund, the difficulty and length of the litigation, and the fact that all benefits accruing to class members are properly credited to the efforts of class counsel.”

You can enjoy In re AT&T, issued July 20, 2006, right here. I sure did.

Nugget: “The lodestar cross-check, while useful, should not displace a district court’s primary reliance on the percentage-of-recovery method.”

Potential Minefield Awaits When Similar Securities Class Actions Settle

What’s a lead plaintiff to do when two potentially overlapping securities class actions are pending at the same time, and the other one settles? Who knows, but in the Citigroup/Global Crossing litigation we can see how one plaintiff’s choice turned out. In the action that settled, Plaintiffs alleged “that the Citigroup defendants participated in defrauding them by, among other things, issuing analytic reports on Global Crossing and Asia Global Crossing that misrepresented the defendants’ true views of the prospects of those companies.” In the other action, investors who had accounts with Salomon (n/k/a Citigroup) allege they received similar recommendations that were tainted by conflicts of interest that were undisclosed.

So when Citigroup settled with plaintiffs in the first action, the lead plaintiff in the other action objected, arguing that the release could be construed to apply to his claims against some of the same defendants. Well, that wasn’t good enough for Judge Gerard E. Lynch (S.D.N.Y.), who denied the objection, holding that if the objector “seeks, in the separate action, damages attributable to trading losses in Global Crossing securities, such damages result directly from the same alleged misconduct at issue in this case.” “The losses were incurred as a result of the same investment decision, as a result of the same alleged misconduct, resulting in the same loss to the same plaintiff. If [the objectors] have a different legal theory of liability based on these facts, which they believe is stronger, and therefore more likely to yield a larger recovery or a better settlement, than the theories being advanced by Lead Plaintiffs, they were free to opt out of the present class and pursue recovery based on that theory.” The objectors “are not free, however, to remain a part of the instant class, partake of an award of damages under the present settlement, and then pursue further damages in a separate action based on the same losses arising from the same investment decision as a result of the same misconduct. Any such result would be substantively unfair, as well as frustrating to class action settlements.”

You can read the decision, issued July 12, 2005, at 2005 U.S. Dist. LEXIS 14245.

Nugget: “A defendant can hardly be expected to settle an action based on claims of a particular wrong, pay damages to plaintiffs under that settlement, and then have to continue to defend claims by some of the same plaintiffs for further compensation based on the same harm.”

Nugget: “That is a question that can only be resolved as the facts and legal theories in his lawsuit are developed and litigated.”

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.”