A court in the W.D. of Wash. has dramatically cut the requested attorneys' fees in the InfoSpace securities class action settlement. The case settled prior to a decision on the motion to dismiss for $34,300,000. Plaintiffs' counsel sought attorneys' fees of 25% of the settlement fund (i.e., approximately $8.5 million). Interestingly, objections to the fee request were filed by three public pension funds.
In its decision (In re InfoSpace, Inc. Sec. Litig., 2004 WL 1879013 (W.D. Wash. Aug. 5, 2004)), the court noted that the Ninth Circuit has established 25% of a settlement fund as a "benchmark" award for attorneys' fees in common fund cases. Nevertheless, the court found that a "25 percent benchmark does not promote the objectives of the PSLRA."
In the InfoSpace case, there was "a modest risk to recovery" and if the requested fees were awarded the damaged investors would only receive about 14 cents per share. Under these circumstances, the court decided to apply a lodestar method (take the reasonable hours expended times a reasonable hourly rate and enhance with a multiplier) to determine the fee award. After various rate adjustments, and applying a multiplier of 3.5, the court awarded attorneys' fees of approximately $4 million.
Quote of note: "In contrast to the 14 cents per share (or 0.10 percent recovery) to the class member investors, the 25 percent fee requested by plaintiffs' counsel, $8,456,353, results in an almost seven-fold increase for plaintiffs' counsel based on the number of hours spent on this case and the very high billable hourly rates reported by the attorneys. Such a result is unfair and does not provide a sound basis for an award of attorneys' fees in this case. Such an award would also constitute a substantial windfall to the attorneys to the detriment of the class members who would only recover pennies on the dollar. The Court concludes that the lodestar method provides a more accurate basis for fees to be awarded in this case."Posted by Lyle Roberts at August 30, 2004 7:52 PM | TrackBack