In the Adelphia securities class action, a law firm that did not act as lead counsel in the case moved for a third (about $17 million) of the aggregate fee award. The law firm argued that it had provided "an independent and substantial benefit" for the class by initiating and preserving the Section 11 and Section 12 claims that ultimately were asserted against two of Adelphia's underwriters. The district court found no evidence, however, "that the use of those statutes, or their use against [the two underwriters], represents ground-breaking legal or factual analysis." The law firm was awarded the amount that had been allocated by lead counsel - $155,610, or the time the law firm had invested in the case, at its normal hourly rates, up to the appointment of lead plaintiffs and counsel. The law firm appealed the decision.
In Victor v. Argent Classic Convertible Arbitrage Fund L.P., 2010 WL 4008744 (2d Cir. Oct. 14, 2010), the Second Circuit considered whether the district court had abused its discretion in failing to increase the law firm's allocation. The court noted that securities class actions "are often an entrepreneurial exercise in which multiple attorneys file complaints" and it is "common practice for lead counsel to borrow legal principles from the complaints filed to the appointment of lead counsel." While work completed by non-lead counsel can confer substantial benefits upon the class, as it did in this case, a district court has "wide discretion" in determining whether the awarded fee is reasonable. The law firm was requesting a fee amounting to $45,000 an hour. The court found that it was "well within the District Court's discretion to determine that a fee application containing a lodestar multiplier of 110 is, prima facie, 'simply not reasonable.'"
Quote of note: "Although [lead counsel] were no doubt on the stingy side when it came to compensating their brethern, we have not been convinced that the District Court abused its discretion in approving class counsel's allocation."Posted by Lyle Roberts at October 15, 2010 10:16 PM | TrackBack