09-0544-cv Shapiro v. Milberg LLP
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO SUM M ARY ORDERS FILED A FTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY THIS COURT’S LOCAL RULE 32.1 AND FEDERAL RULE OF APPELLATE PROCEDURE 32.1. IN A BRIEF OR OTHER PAPER IN WHICH A LITIGANT CITES A SUM M ARY ORDER, IN EACH PARAGRAPH IN WHICH A CITATION APPEARS, AT LEAST ONE CITATION M UST EITHER BE TO THE FEDERAL APPENDIX OR BE ACCOM PANIED BY THE NOTATION: “(SUM M ARY ORDER).” A PARTY CITING A SUM M ARY O RDER M UST SERVE A COPY OF THAT SUM M ARY ORDER TOGETHER W ITH THE PAPER IN W HICH THE SUM M ARY ORDER IS CITED ON ANY PARTY NOT REPRESENTED BY COUNSEL UNLESS THE SUM M ARY ORDER IS AVAILABLE IN AN ELECTRO NIC D ATABASE W HICH IS PUBLICLY ACCESSIBLE W ITHOUT PAYM ENT OF FEE (SUCH AS THE DATABASE AVAILABLE AT HTTP://W W W .CA2.USCOURTS.GOV/). IF NO COPY IS SERVED BY REASON OF THE AVAILABILITY OF THE ORDER ON SUCH A DATABA SE, TH E C ITATION M UST INCLUDE REFERENCE TO THAT DATABASE AND THE DOCKET NUM BER OF THE CASE IN W HICH THE ORDER W AS ENTERED.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 9 th day of December, two thousand nine.
PRESENT: JOHN M. WALKER, JR., JOSEPH M. McLAUGHLIN, REENA RAGGI, Circuit Judges.
------------------------------------------------------------------------------------- RUSSELL CARLSON, PAUL DANTZIG, and THOMAS ZAMBITO, Plaintiffs,
ROSLYN FEDER, JOSEPH GLADKE, SYLVIA COHEN, SUSAN FLEISCHMAN, HERMAN KRANGEL, LILLIAN KRANGEL, NOAH MINKIN, ROBERT CORWIN, JAMES FRANCIS, DAVID SNYDER, KENNETH MADY, ROELF IEST, DEBBIE ANDERSON, MARGOLIS PARTNERSHIP, GEORGE T. DEMAREST, GARTH NICHOLLS, WAZIR SAJAN, MICHAEL EANNAZZO, 1993 GF PARTNERSHIP LP, MATTHEW GRAY REVOCABLE TRUST, DAVID A. DELCORSO, FLORIDA STATE BOARD OF ADMINISTRATION, TEACHERS’ RETIREMENT SYS. OF LA, FRANKLIN MUTUAL ADVISERS, LLC, and PPM AMERICA, INC., Consolidated-Plaintiffs,
JOEL SHAPIRO, CHARLES REINER, and PETER CARFAGNA, Consolidated-Plaintiffs- Appellants,
v. No. 09-0544-cv
XEROX CORPORATION, KPMG LLP, PAUL ALLAIRE, G. RICHARD THOMAN, ANNE MULCAHY, and BARRY ROMERIL, Defendants,
GREGORY TAYLER, and PHILIP FISHBACH, Consolidated-Defendants,
MILBERG LLP, BERMAN DeVALERIO, and JOHNSON & PERKINSON, Respondents-Intervenors- Appellees. -------------------------------------------------------------------------------------
APPEARING FOR APPELLANTS: EDWARD F. SIEGEL, Cleveland, Ohio.
APPEARING FOR APPELLEES: BRAD N. FRIEDMAN, Milberg LLP, New York, New York (Ted Swiecichowski, Milberg LLP, New York, New York, Glen DeValerio, Bryan A. W ood, Berman DeValerio, Boston, Massachusetts, Dennis J. Johnson, Johnson & Perkinson, South Burlington, Vermont, on the brief).
Appeal from the United States District Court for the District of Connecticut (Alvin
W. Thompson, Judge).
2 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on January 15, 2009, is AFFIRMED.
Appellants, three members of a class that settled a securities fraud action for $750
million, object to the district court’s award of attorneys’ fees to appellees in the amount of
16% of the common fund’s recovery and $3,314,399.90 in expenses. We review the form
and content of the notice given to class members, see Masters v. Wilhelmina Model Agency,
Inc., 473 F.3d 423, 438 (2d Cir. 2007), and the reasonableness of the fee award, see
Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47-48 (2d Cir. 2000), for abuse of
discretion, deferring to the “district court, which is intimately familiar with the nuances of
the case,” In re Bolar Pharm. Co. Sec. Litig., 966 F.2d 731, 732 (2d Cir. 1992). In doing so,
we assume the parties’ familiarity with the facts and the record of prior proceedings, which
we reference only as necessary to explain our decision to affirm.
1. Notice to the Class
Appellants submit that notice of the proposed fee award was not “directed to class
members in a reasonable manner,” Fed. R. Civ. P. 23(h)(1), because the notice did not
include the date of appellees’ motion for attorneys’ fees or indicate how class members could
access the motion document. This argument reduces to a challenge to the form and content
of the notice, which we review for abuse of discretion, see Masters v. Wilhelmina Model
Agency, Inc., 473 F.3d at 438, and we detect none here.
3 The notice clearly states that “Plaintiffs’ Counsel are moving the Court to award
attorneys’ fees not to exceed twenty percent (20%) of the Gross Settlement Fund, and for
reimbursement of expenses incurred in connection with the prosecution of this Action in the
approximate amount of five million dollars ($5,000,000).” 1 Notice of Pendency of Class
Action and Proposed Settlement, Motion for Attorneys’ Fees and Settlement Fairness
Hearing at 3. The notice also informed class members as follows: “[Y]ou can object to . . .
the application by Plaintiffs’ Co-Lead Counsel for an award of fees and expenses. You may
write the Court setting out your objection.” Id. at 14. The notice provided the addresses of
the court and all counsel, so that class members could appropriately serve their objections,
and it informed class members of the fairness hearing, at which they could appear to express
their disapproval. That many class members – not just the three appellants – submitted
objections to the court confirms that the notice was reasonably directed to class members as
required by Rule 23.
1 Appellants assert that “[t]he phrase ‘not to exceed [twenty percent (20%)],’ in isolation, is meaningless, and does not permit any class member to make an informed evaluation of the fee request or to draft an effective opposition to it.” Appellants’ Br. at 9. We do not decide whether this proposition is true in the abstract because the notice in this case did place the 20% figure in context by (1) calculating the proposed fee on a per-share basis, (2) explaining the work attorneys performed, and (3) clarifying the customary practice in similar class actions. In this regard, appellees’ actual motion for fees was less detailed than the notice to class members, because it sought an award of 20% of the settlement and reimbursement for expenses without any additional explanation.
4 2. Reasonableness of Fee
a. Contract Attorney Time
Appellants submit that the fee award of $3,314,399.90 was unreasonable because the
district court should not have included contract attorney time in its “lodestar” calculation.2
In fact, the district court did not employ the lodestar method. Rather, it used the percentage
method, which considers “less objective” factors to determine a fair fee as a percentage of
the common fund’s recovery. See Goldberger v. Integrated Res., Inc., 209 F.3d at 47. We
identify no abuse of discretion in the district court’s thorough application of these factors.
See Carlson v. Xerox Corp., 596 F. Supp. 2d 400
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09-0544-cv Shapiro v. Milberg LLP
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO SUM M ARY ORDERS FILED A FTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY THIS COURT’S LOCAL RULE 32.1 AND FEDERAL RULE OF APPELLATE PROCEDURE 32.1. IN A BRIEF OR OTHER PAPER IN WHICH A LITIGANT CITES A SUM M ARY ORDER, IN EACH PARAGRAPH IN WHICH A CITATION APPEARS, AT LEAST ONE CITATION M UST EITHER BE TO THE FEDERAL APPENDIX OR BE ACCOM PANIED BY THE NOTATION: “(SUM M ARY ORDER).” A PARTY CITING A SUM M ARY O RDER M UST SERVE A COPY OF THAT SUM M ARY ORDER TOGETHER W ITH THE PAPER IN W HICH THE SUM M ARY ORDER IS CITED ON ANY PARTY NOT REPRESENTED BY COUNSEL UNLESS THE SUM M ARY ORDER IS AVAILABLE IN AN ELECTRO NIC D ATABASE W HICH IS PUBLICLY ACCESSIBLE W ITHOUT PAYM ENT OF FEE (SUCH AS THE DATABASE AVAILABLE AT HTTP://W W W .CA2.USCOURTS.GOV/). IF NO COPY IS SERVED BY REASON OF THE AVAILABILITY OF THE ORDER ON SUCH A DATABA SE, TH E C ITATION M UST INCLUDE REFERENCE TO THAT DATABASE AND THE DOCKET NUM BER OF THE CASE IN W HICH THE ORDER W AS ENTERED.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 9 th day of December, two thousand nine.
PRESENT: JOHN M. WALKER, JR., JOSEPH M. McLAUGHLIN, REENA RAGGI, Circuit Judges.
------------------------------------------------------------------------------------- RUSSELL CARLSON, PAUL DANTZIG, and THOMAS ZAMBITO, Plaintiffs,
ROSLYN FEDER, JOSEPH GLADKE, SYLVIA COHEN, SUSAN FLEISCHMAN, HERMAN KRANGEL, LILLIAN KRANGEL, NOAH MINKIN, ROBERT CORWIN, JAMES FRANCIS, DAVID SNYDER, KENNETH MADY, ROELF IEST, DEBBIE ANDERSON, MARGOLIS PARTNERSHIP, GEORGE T. DEMAREST, GARTH NICHOLLS, WAZIR SAJAN, MICHAEL EANNAZZO, 1993 GF PARTNERSHIP LP, MATTHEW GRAY REVOCABLE TRUST, DAVID A. DELCORSO, FLORIDA STATE BOARD OF ADMINISTRATION, TEACHERS’ RETIREMENT SYS. OF LA, FRANKLIN MUTUAL ADVISERS, LLC, and PPM AMERICA, INC., Consolidated-Plaintiffs,
JOEL SHAPIRO, CHARLES REINER, and PETER CARFAGNA, Consolidated-Plaintiffs- Appellants,
v. No. 09-0544-cv
XEROX CORPORATION, KPMG LLP, PAUL ALLAIRE, G. RICHARD THOMAN, ANNE MULCAHY, and BARRY ROMERIL, Defendants,
GREGORY TAYLER, and PHILIP FISHBACH, Consolidated-Defendants,
MILBERG LLP, BERMAN DeVALERIO, and JOHNSON & PERKINSON, Respondents-Intervenors- Appellees. -------------------------------------------------------------------------------------
APPEARING FOR APPELLANTS: EDWARD F. SIEGEL, Cleveland, Ohio.
APPEARING FOR APPELLEES: BRAD N. FRIEDMAN, Milberg LLP, New York, New York (Ted Swiecichowski, Milberg LLP, New York, New York, Glen DeValerio, Bryan A. W ood, Berman DeValerio, Boston, Massachusetts, Dennis J. Johnson, Johnson & Perkinson, South Burlington, Vermont, on the brief).
Appeal from the United States District Court for the District of Connecticut (Alvin
W. Thompson, Judge).
2 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on January 15, 2009, is AFFIRMED.
Appellants, three members of a class that settled a securities fraud action for $750
million, object to the district court’s award of attorneys’ fees to appellees in the amount of
16% of the common fund’s recovery and $3,314,399.90 in expenses. We review the form
and content of the notice given to class members, see Masters v. Wilhelmina Model Agency,
Inc., 473 F.3d 423, 438 (2d Cir. 2007), and the reasonableness of the fee award, see
Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47-48 (2d Cir. 2000), for abuse of
discretion, deferring to the “district court, which is intimately familiar with the nuances of
the case,” In re Bolar Pharm. Co. Sec. Litig., 966 F.2d 731, 732 (2d Cir. 1992). In doing so,
we assume the parties’ familiarity with the facts and the record of prior proceedings, which
we reference only as necessary to explain our decision to affirm.
1. Notice to the Class
Appellants submit that notice of the proposed fee award was not “directed to class
members in a reasonable manner,” Fed. R. Civ. P. 23(h)(1), because the notice did not
include the date of appellees’ motion for attorneys’ fees or indicate how class members could
access the motion document. This argument reduces to a challenge to the form and content
of the notice, which we review for abuse of discretion, see Masters v. Wilhelmina Model
Agency, Inc., 473 F.3d at 438, and we detect none here.
3 The notice clearly states that “Plaintiffs’ Counsel are moving the Court to award
attorneys’ fees not to exceed twenty percent (20%) of the Gross Settlement Fund, and for
reimbursement of expenses incurred in connection with the prosecution of this Action in the
approximate amount of five million dollars ($5,000,000).” 1 Notice of Pendency of Class
Action and Proposed Settlement, Motion for Attorneys’ Fees and Settlement Fairness
Hearing at 3. The notice also informed class members as follows: “[Y]ou can object to . . .
the application by Plaintiffs’ Co-Lead Counsel for an award of fees and expenses. You may
write the Court setting out your objection.” Id. at 14. The notice provided the addresses of
the court and all counsel, so that class members could appropriately serve their objections,
and it informed class members of the fairness hearing, at which they could appear to express
their disapproval. That many class members – not just the three appellants – submitted
objections to the court confirms that the notice was reasonably directed to class members as
required by Rule 23.
1 Appellants assert that “[t]he phrase ‘not to exceed [twenty percent (20%)],’ in isolation, is meaningless, and does not permit any class member to make an informed evaluation of the fee request or to draft an effective opposition to it.” Appellants’ Br. at 9. We do not decide whether this proposition is true in the abstract because the notice in this case did place the 20% figure in context by (1) calculating the proposed fee on a per-share basis, (2) explaining the work attorneys performed, and (3) clarifying the customary practice in similar class actions. In this regard, appellees’ actual motion for fees was less detailed than the notice to class members, because it sought an award of 20% of the settlement and reimbursement for expenses without any additional explanation.
4 2. Reasonableness of Fee
a. Contract Attorney Time
Appellants submit that the fee award of $3,314,399.90 was unreasonable because the
district court should not have included contract attorney time in its “lodestar” calculation.2
In fact, the district court did not employ the lodestar method. Rather, it used the percentage
method, which considers “less objective” factors to determine a fair fee as a percentage of
the common fund’s recovery. See Goldberger v. Integrated Res., Inc., 209 F.3d at 47. We
identify no abuse of discretion in the district court’s thorough application of these factors.
See Carlson v. Xerox Corp., 596 F. Supp. 2d 400 (D. Conn. 2009).
Thus, appellants challenge only the district court’s lodestar cross check of its
percentage fee determination. See, e.g., Goldberger v. Integrated Res., Inc., 209 F.3d at 50
(“[W]e encourage the practice of requiring documentation of hours as a ‘cross check’ on the
reasonableness of the requested percentage.”). Here, the district court reduced the percentage
fee award from the requested 20% to 16% based on its Goldberger analysis. In undertaking
the lodestar cross check, the court concluded that “[t]he only argument against [the 1.25
2 The lodestar method calculates fees as “the product of the attorney’s usual hourly rate and the number of hours worked.” Arbor Hill Concerned Citizens Neighborhood Ass’n v. County of Albany, 522 F.3d 182, 186 (2d Cir. 2008). We have cautioned that “[t]he meaning of the term ‘lodestar’ has shifted over time, and its value as a metaphor has deteriorated to the point of unhelpfulness,” because even courts that choose to employ the lodestar method must still weigh various equitable factors to arrive at a “presumptively reasonable fee.” Id. at 190.
5 multiplier imposed by the court, as opposed to the 1.56 multiplier counsel requested] is that
it is simply too low.” Carlson v. Xerox Corp., 596 F. Supp. 2d at 413. The district court
noted that, had it made a 90% reduction in contract attorney time in its lodestar calculation,
the resulting multiplier would be 3.59, still below the 3.6 average and in line with the 3.1
median for similar cases. Thus, even if we were to accept appellants’ argument that contract
attorney time should be counted as an expense rather than as part of the lodestar calculation
– a theory open to debate, see In re Enron Corp. Sec. Deriv. & “ERISA” Litig., 586 F. Supp.
2d 732, 782-83 (S.D. Tex. 2008); In re Tyco Int’l, Ltd. Multidistrict Litig., 535 F. Supp. 2d
249, 272 (D.N.H. 2007) – we could not conclude that the fee awarded in this case is
unreasonable.
b. Reasonable Paying Client
Appellants also urge us to set aside the fee because it exceeds the amount a reasonable
client would be willing to pay. Cf. Arbor Hill Concerned Citizens Neighborhood Ass’n v.
County of Albany, 522 F.3d 182, 190 (2d Cir. 2008). We are not persuaded. Unlike in the
context of fee-shifting statutes, which we examined in Arbor Hill, attorneys’ fees are
awarded in common fund cases in order to “prevent[] unjust enrichment of those benefitting
from a lawsuit without contributing to its cost.” Goldberger v. Integrated Res., Inc., 209 F.3d
at 47. Thus, we have said that attorneys who create a fund are “entitled to a reasonable fee
– set by the court – to be taken from the fund.” Id.; see also In re Agent Orange Prod. Liab.
6 Litig., 818 F.2d 216, 222 (2d Cir. 1987) (“[A]n attorney who creates a fund for the benefit
of a class should receive compensation from the fund for his efforts.”). This fee does not
necessarily approximate what a client would pay; rather, it must reflect “the actual effort
made by the attorney to benefit the class.” Central States Se. and Sw. Areas Health &
Welfare Fund v. Merck-Medco Managed Care, LLC, 504 F.3d 229, 249 (2d Cir. 2007)
(internal quotation marks omitted). Because the district court properly considered the
relevant factors, see Goldberger v. Integrated Res., Inc., 209 F.3d at 50, and reached a
reasonable conclusion within its discretion, we will not disturb its judgment.
We have considered appellants’ other arguments and conclude that they lack merit.
Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT: CATHERINE O’HAGAN WOLFE, Clerk of Court
By: ___________________________________