Brown v. Papa Murphy's Holdings Incorporated

• Court: District Court, W.D. Washington
• Decided: May 2, 2022
• Docket: 3:19-cv-05514
• Status: Unknown

Opinion

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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 EVAN BROWN, CASE NO. C19-5514 BHS 8 Plaintiff, ORDER GRANTING PLAINTIFF’S 9 v. MOTION FOR ATTORNEYS’ FEES AND EXPENSES AND 10 PAPA MURPHY’S HOLDINGS SERVICE AWARD INCORPORATED, et al., 11 Defendants. 12

13 This matter comes before the Court on Lead Plaintiff Evan Brown’s motion for 14 attorneys’ fees and expenses and service award. Dkt. 79. The Court has considered the 15 briefing filed in support of and in opposition to the motion and the remainder of the file 16 and hereby grants the motion for the reasons stated herein. 17 I. FACTUAL & PROCEDURAL BACKGROUND 18 Brown, a former Papa Murphy’s shareholder, initiated this putative class action in 19 June 2019. Dkt. 1. Brown alleged in his Second Amended Complaint (“SAC”) that 20 Defendants Papa Murphy’s Holdings, Inc. and Weldon Spangler violated Sections 14(e) 21 and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78n(e), 78t(a), by making 22 1 materially false and misleading statements contained in a Recommendation Statement 2 made in connection with a tender offer to acquire shares of Papa Murphy’s. Dkt. 36, 3 ¶¶ 1–3, 40.

4 Defendants moved to dismiss the SAC, Dkt. 41, and the Honorable J. Richard 5 Creatura, United States Magistrate Judge, issued a Report and Recommendation 6 (“R&R”), recommending that the Court deny Defendants’ motion to dismiss, Dkt. 47. 7 Defendants objected, Dkt. 51, and on April 22, 2021 the Court adopted the January R&R 8 in full, Dkt. 57. Defendants argued in both their motion to dismiss and in their objections

9 to the January R&R that there is no private right of action for Section 14(e) claims 10 predicated on negligence. See Dkt. 41 at 36; Dkt. 51 at 16. Both Judge Creatura and this 11 Court rejected that argument, declining to disturb existing Ninth Circuit precedent. See 12 Dkt. 47 at 18–19; Dkt. 57 at 9–10. 13 Defendants then filed a motion to certify this Court’s April 22 Order for

14 interlocutory appeal and to stay proceedings during pendency of appeal. Dkt. 58. Judge 15 Creatura issued a R&R, recommending that the Court grant the motion and stay the 16 proceedings pending appellate review. Dkt. 62. Brown objected, Dkt. 63, and the Court 17 adopted the R&R, staying the case, Dkt. 65. 18 The Ninth Circuit granted Defendants’ 28 U.S.C. § 1292(b) petition for permission

19 to appeal on October 12, 2021. Dkt. 67. Brown asserts that the parties reached a 20 settlement less than an hour before the Ninth Circuit’s order. Dkt. 79 at 9; see also Dkt. 21 68. The Ninth Circuit remanded the case to this Court, Dkt. 70, and Brown filed a motion 22 for preliminary approval of settlement on December 1, 2021, Dkt. 71. 1 Pursuant to the Settlement, Papa Murphy’s agreed to the Settlement Amount of 2 $2.4 million for the Settlement Class of former public shareholders. See Dkt. 72, Ex. 1. 3 Papa Murphy’s Directors, and certain Supporting Stockholders affiliated with them are

4 excluded from the Settlement. Dkt. 71 at 7. Assuming 100% of the 8,160,595 shares in 5 the Settlement Class submit a valid and timely Proof of Claim and Release, the average 6 distribution will be $0.29 per share owned. Dkt. 78 at 16. 7 The Court preliminarily approved the Settlement and preliminarily certified the 8 Settlement Class on January 11, 2022. Dkt. 75. Notice was sent to the Settlement Class

9 Members in accordance with the approved notice methods, and no objections were filed 10 and only one Settlement Class Member opted out. See Dkt. 81. Brown accordingly 11 moved for final approval of the Settlement, Dkt. 78, and for attorneys’ fees, expenses, 12 and service award, Dkt. 79. 13 The Court held the final approval hearing on May 2, 2022, approved the

14 Settlement, certified the Settlement Class, and preliminarily approved Brown’s motion 15 for fees, expenses, and awards. Dkts. 84, 85. The Court now issues its ruling on the 16 motion for fees, expenses, and awards. 17 II. DISCUSSION 18 Brown’s counsel seeks a fee award of one-third the Settlement Amount—

19 $800,000—plus reimbursement of their litigation expenses in the amount of $9.081.40. 20 Dkt. 79 at 6. Brown additionally seeks an award of $5,000 for his time and efforts in 21 representing the Settlement Class. Id. 22 1 A. Attorneys’ Fees 2 Federal Rule of Civil Procedure 23(h) permits a court to award “reasonable 3 attorney’s fees and nontaxable costs” in a certified class action. “While attorneys’ fees

4 and costs may be awarded in a certified class action . . . courts have an independent 5 obligation to ensure that the award, like the settlement itself, is reasonable, even if the 6 parties have already agreed to an amount.” In re Bluetooth Headset Prods. Liab. Litig., 7 654 F.3d 935, 941 (9th Cir. 2011). In the Ninth Circuit, district courts may award fees in 8 common fund cases like this one under either the lodestar method or the percentage-of-

9 recovery method. Id. at 942. Brown seeks attorneys’ fees under the percentage-of- 10 recovery method, Dkt. 79 at 6, and the Court agrees this method should be used. 11 Under the percentage-of-recovery method, courts in the Ninth Circuit “typically 12 calculate 25% of the fund as the ‘benchmark’ for a reasonable fee award[.]” Bluetooth, 13 654 F.3d at 941. “The 25% benchmark rate, although a starting point for analysis, may be

14 inappropriate in some cases.” Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1048 (9th Cir. 15 2002). “Selection of the benchmark or any other rate must be supported by findings that 16 take into account all of the circumstances of the case.” Id. Factors that may be relevant to 17 this determination include: “(1) the results achieved; (2) the risk of litigation; (3) the skill 18 required and the quality of work; (4) the contingent nature of the fee and the financial

19 burden carried by the plaintiffs; and (5) awards made in similar cases.” In re Omnivision 20 Techs., Inc., 559 F. Supp. 2d 1036, 1046 (N.D. Cal. 2008). Ultimately, the fee award 21 must be “reasonable under the circumstances.” In re Wash. Pub. Power Supply Sys. Sec. 22 Litig., 19 F.3d 1291, 1296 (9th Cir. 1994) (internal quotation omitted). 1 Here, the requested attorneys’ fees represent 33% of the settlement fund. Brown 2 argues that in securities class actions, awards typically exceed the benchmark and that 3 one-third the Settlement Amount is fair and appropriate. It is true that “in most common

4 fund cases, the award exceeds that benchmark [of 25%],” Omnivision, 559 F. Supp. 2d at 5 1047–48, and that “nearly all common fund awards range around 30%,” In re Activision 6 Sec. Litig., 723 F. Supp. 1373, 1377 (N.D. Cal. 1989). Brown provides extensive 7 authority in support of his argument that securities class actions typically exceed the 25% 8 benchmark—both through case law and his counsel’s personal experience. See Dkt. 79 at

9 14; see also, e.g., Campbell v. Tansgenomic, Inc., No. 4:17-CV-3021, 2020 WL 2946989 10 (D. Neb. June 3, 2020). The Court agrees that 30% should be the benchmark here. 11 The requested fee amount deviates slightly above the benchmark. Brown argues 12 that 33% is appropriate in part because the Settlement Amount represents approximately 13 6.75–17.25% of the potential recoverable damages at trial. Dkt. 79 at 9. He asserts that

14 the 2021 median recovery in securities cases was 1.8%. See Dkt. 80, Ex. 1. This result is 15 sizeable, and continued litigation was a risk considering that the Ninth Circuit granted 16 Defendants’ interlocutory appeal. Further, Brown’s counsel undertook the class action on 17 a purely contingent basis and demonstrated great skill and quality of work through 18 attaining the Settlement.

19 These factors support the requested fee, but the Ninth Circuit has encouraged 20 district courts to cross-check attorney’s fees calculations against a second method. See 21 Bluetooth, 654 F.3d at 944. Under the lodestar method, a “lodestar figure is calculated by 22 multiplying the number of hours the prevailing party reasonably expended on the 1 litigation (as supported by adequate documentation) by a reasonable hourly rate for the 2 region and for the experience of the lawyer.” Id. at 941 (citing Staton v. Boeing Co., 327 3 F.3d 938, 965 (9th Cir. 2003)). “[T]he established standard when determining a

4 reasonable hourly rate is the rate prevailing in the community for similar work performed 5 by attorneys of comparable skill, experience, and reputation.” Camacho v. Bridgeport 6 Fin., Inc., 523 F.3d 973, 979 (9th Cir. 2008) (quotations omitted). Generally, “the 7 relevant community is the forum in which the district court sits.” Id. (citing Barjon v. 8 Dalton, 132 F.3d 496, 500 (9th Cir. 1997)).

9 Counsel’s aggregate lodestar reflects 1,211.93 hours leading to $892,072.90 in 10 fees, which would be a negative multiplier of 0.89. See Dkt. 80, ¶¶ 22, 25, 27, & Ex. 4. 11 But the lodestar figure’s hourly rate reflects market rates charged for securities class 12 action litigation in the New York metropolitan area. Id. ¶ 24. While the New York 13 metropolitan area is where Brown’s Lead Counsel is located, the relevant community

14 determining the reasonable hourly rate should be the forum in which the Court sits: the 15 Seattle-Tacoma area. Based on a review of securities class actions1 in this District, the 16 Court believes that Lead Counsel’s hourly rate should be adjusted as follows: 17 Professional Hours Rate Lodestar Juan Monteverde (Managing Partner) 476.1 $ 600.00 $ 285,660.00 18 Miles Schreiner (Senior Associate) 344.5 $ 500.00 $ 172,250.00 John Baylet (Associate) 207.4 $ 450.00 $ 93,330.00 19 Rossella Scarpa (Associate) 158.9 $ 350.00 $ 55,615.00 Total 1186.9 $ 606,855.00 20 1 Brown cites to approved hourly rates in the Western District of Washington that exceed 21 $900, but the hourly rates were for social security cases, not securities class action. See, e.g., Brazile v. Comm’r of Social Sec., No. 18-5914 JLR, 2022 WL 503779, at *3–4 (W.D. Wash. 22 Feb. 18, 2022). 1 Adjusting Lead Counsel’s rate leads to an aggregate lodestar of $620,620.40, inclusive of 2 Local Counsel’s hours and rate. 3 The Court believes that Brown’s counsel has attained a very favorable result for

4 the Settlement Class and is deserving of a percentage above the benchmark. In cross- 5 checking the requested percentage with the lodestar, the Court concludes that 31.5% is a 6 more reasonable and fairer fee amount. The adjusted lodestar results in a 1.21 positive 7 multiplier in awarding 31.5% of the Settlement Amount; although the Court concludes 8 that 33% is not an appropriate award of attorneys’ fees in cross-checking against the

9 lodestar, it believes this positive multiplier is fair and reasonable given the excellent 10 result attained. In consideration of all the factors, the Court awards class counsel 11 $756,000 in attorneys’ fees. 12 B. Expenses 13 “The Ninth Circuit allows recovery of pre-settlement litigation costs in the context

14 of class action settlement.” Pelletz v. Weyerhaeuser Co., 592 F. Supp. 2d 1322, 1329 15 (W.D. Wash. 2009) (citing Staton, 327 F.3d at 974). The Court has reviewed class 16 counsel’s expenses, which total $9,081.40. See Dkt. 80, ¶ 26. After reviewing these 17 records, the Court concludes the requested expenses are reasonable and relevant to the 18 litigation. See Pelletz, 592 F. Supp. 2d at 1329.

19 C. Service Award 20 Finally, Brown seeks a service award for serving as class representative pursuant 21 to 15 U.S.C. § 78u-4(a)(4). Dkt. 79 at 16–17. A court may award “reasonable costs and 22 expenses (including lost wages) directly relating to the representation of the class to any 1 representative party serving on behalf of a class.” 15 U.S.C. § 78u-4(a)(4). Brown seeks 2 $5,000 for the 40 hours dedicated to this action, which is presumptively reasonable. See, 3 e.g., Wong v. Arlo Techs., Inc., No. 5:19-cv-00372-BLF, 2021 WL 1531171, at *12 (N.D.

4 Cal. Apr. 19, 2021) (noting that “[s]ervice awards as high as $5,000 are presumptively 5 reasonable” in the Ninth Circuit and collecting cases holding the same); In re Infospace, 6 Inc. Sec. Litig., 330 F. Supp. 2d 1203, 1216 (W.D. Wash. 2004) (approving a $5,000 and 7 $6,000 service award). Further, the Notice mailed to the Settlement Class indicated that 8 Brown would receive a $5,000 award, and there have been no objections and only one

9 opt out. The Court thus concludes that the requested $5,000 service award is reasonable 10 and appropriate in this case. 11 III. ORDER 12 Therefore, it is hereby ORDERED that Lead Plaintiff Evan Brown’s motion for 13 attorneys’ fees and expenses and service award, Dkt. 79, is GRANTED. The Court

14 awards class counsel $756,000 in attorneys’ fees and $9,081.40 in expenses. The Court 15 also awards Brown a $5,000 service award. These amounts shall be distributed subject to 16 the terms, conditions, and obligations of the Settlement Agreement. 17 Dated this 2nd day of May, 2022. A 18 19 BENJAMIN H. SETTLE 20 United States District Judge

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