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awarding 33.34% on a $1,534,321 settlement fund
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Civil Action No. 99-3097 Section "T" (3)
May 15, 2001
Before this Court are two motions filed in the above-captioned action: (1) Motion for Final Approval of Settlement Agreement, filed by the Named Plaintiff; Patricia Faircloth, individually and on behalf of the Plaintiff Class; and (2) Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs Expended, filed on behalf of Class Counsel. These Motions came for hearing on May 9, 2001, with oral argument. The Court, having heard the arguments of the parties and having studied the legal memoranda and exhibits, the record, and the applicable law, is fully advised on the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
Certified Finance, Inc. ("Certified Finance") is a finance company that engages in the practice of extending loans to persons with pending personal injury litigation. If an attorney representing a consumer made a referral to Certified Finance, that attorney was often required to execute a guaranty in favor of Certified Finance, thereby ensuring payment to Certified Finance in the event that the underlying personal injury litigation did not result in a favorable outcome for the consumer.
On October 12, 1999, the Plaintiff; Patricia Faircloth, filed suit against Certified Finance, Inc., and two of its officers, Robert S. Cunard, Jr. and Tommy L. Easterling, alleging that certain loans for which she is indebted to the Defendant, Certified Finance, Inc., are unenforceable. Specifically, the Plaintiff alleged that the Defendant engaged in "loan flipping" that resulted in the imposition of interest charges substantially greater than the maximum interest rate allowed under both federal and state law. Accordingly, Faircloth claimed that the aforementioned loans are "unlawful debt" as defined in both 18 U.S.C. § 1961 (6) and La. R.S. 9:3501 et seq. The plaintiff sought money damages and other relief with respect to the interest computations of Certified Finance, but did not dispute the principal amounts due under the terms of the notes.
On October 4, 2000, this Court entered an Order certifying this litigation as a class action pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure. This Court defined the Class as all persons or entities who are obligated on a consumer loan or pre-computed consumer credit transaction, as that term is defined by La. R.S. 9:35 16 (14) and 9:35 16 (25), respectively, from Certified Finance, Inc., and which loan transaction calls for a payment within ten years from the date of the filing of the Complaint. The Defendants appealed this Court's Order of Class Certification to the Fifth Circuit Court of Appeals, which denied the Defendants permission to appeal.
Certified Finance, Easterling, and Cunard have denied and continue to deny any wrongdoing and/or liability in connection with all persons and entities that executed loan obligations in favor of Certified Finance. Certified Finance filed a counterclaim against the Named Plaintiff, seeking to recover sums allegedly owed to Certified Finance in connect with Faircloth's loan transactions with Certified Finance, along with interest, attorneys' fees, and costs. Additionally, Certified Finance, Easterling, and Cunard filed a third party demand against National Fire Insurance Company of Hartford ("Hartford"), seeking indemnity and defense costs in connection with its Commercial General Liability insurance policy. Hartford agreed to undertake a defense of Certified Finance, Easterling, and Cunard, but it has reserved its rights to contest coverage under the policy with respect to the Plaintiffs' claims.
After lengthy negotiations and with the aid and guidance of Magistrate Lance M. Affrick, the Named Plaintiff; on behalf of herself and the Plaintiff Class, and the Defendants reached a settlement agreement in the above-captioned matter. On April 11, 2001, the Plaintiffs filed with this Court a true and correct copy of the Settlement Agreement, as well as a Motion for Preliminary Approval of the Settlement Agreement. This Court, after thoroughly reviewing the Proposed Settlement Agreement, preliminarily approved said agreement on April 12, 2001. This Court directed that Notice of the Proposed Settlement of Class Action be sent to the Plaintiff Class. On that same date, Class Counsel mailed Notice to the class plaintiffs. The Notice of the Proposed Settlement of Class Action instructed class members to submit any objections to the proposed settlement to this Court no later than May 1, 2001. Additionally, this Court scheduled a Settlement Hearing for May 9, 2001, at which time this Court would consider the fairness, reasonableness, and adequacy of the proposed settlement agreement.
II. LAW AND ANALYSIS:
A. Plaintiffs' Motion for Final Approval of Settlement Agreement:
After lengthy negotiations, aided by the guidance of Magistrate Lance M. Affrick, the Plaintiffs and Defendants have reached a settlement agreement in the above-captioned matter. While the Defendants have denied, and continue to deny, any liability with respect to the Plaintiffs' claims, they do not oppose final approval of the settlement agreement. In fact, the Defendants have joined in the motion seeking final approval of said settlement agreement.
Pursuant to Rule 23 of the Federal Rules of Civil Procedure, "[a] class action may not be dismissed or compromised without the approval of the court." Fed.R.Civ.P. 23(e). Three conditions must be satisfied before a court can approve a proposed settlement. First, notice of the settlement must be sent to all members of the class in accordance with the manner directed by the court. See Fed.R.Civ.P. 23(e); Roper v. Consurve, Inc., 578 F.2d 1106, 1110 (5th Cir. 1978). Second, the court must determine that "the settlement is fair, adequate and reasonable and is not the product of collusion between the parties." In re Beef Industry Antitrust Litigation, 607 F.2d 167, 179 (5th Cir. 1979) (citing Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977)). Third, the Court must "make an independent and thorough inquiry into the reasonableness of the attorneys' fees proposed in the settlement agreement." Bryant v. Universal Services, Inc., No. Civ. A. 99-2944, 2000 WL 680258, at * I (E.D.La. May 24, 2000) (Vance, J.) (citing Strong v. BellSouth Telecomms, Inc., 137 F.3d 844, 849-50 (5th Cir. 1998)).
1. The Notice Requirement :
Rule 23(e) of the Federal Rules of Civil Procedure requires that prior notice of a class settlement be given to all class members. See Fed.R.Civ.P. 23(e). This notice must provide the class members with information sufficient to consider the terms of the proposed settlement and determine whether or not to object to the proposed settlement. See In re Shell Oil Refinery. 155 F.RD. 552, 557 (E.D.La. 1993) (citing Newberg on Class Actions, § 11.30 (3rd ed. 1992)). In the present case, this Court directed that Notice of Proposed Settlement of Class Action be sent to all class members in an Order dated April 12, 2001. Notice was sent via first class mail to the most current known address of each class member on April 12, 2001. The Notice informed the class members of the terms of the proposed settlement agreement, the date and location of the fairness hearing, the pendency of Class Counsel's motion for an award of attorneys' fees and reimbursement of costs, and the procedure for objecting to any of the terms contained in the agreement. In addition to mailing notice to the individual class members, on April 15, 2001, a Summary Notice appeared in the Times Picayune and the Baton Rouge Advocate, two newspapers of general circulation in the New Orleans and Baton Rouge areas.
This Court finds that such a manner of notifying the class members of the proposed settlement comports with this Court's Order, due process, and Rule 23 of the Federal Rules of Civil Procedure. See In re Beef Industry Antitrust Litigation, 607 F.2d at 179. The Notice sent to the class members and published in the two newspapers contained the information necessary for the class members to evaluate the proposed settlement, as well as the proper procedure for objecting to the proposed settlement. Accordingly, the Notice requirement of Rule 23(e) has been satisfied in the present case. See Fed.R.Civ.P. 23(e); See also In re Shell Oil Refinery. 155 F.R.D. at 558.
2. The Fairness. Adequacy. and Reasonableness of the Proposed Settlement:
In order to approve a settlement agreement in a class action lawsuit, the court must find that "the settlement is fair, adequate and reasonable and is not the product of collusion between the parties." In re Beef Industry Antitrust Litigation, 607 F.2d at 179 (citing Cotton, 559 F.2d at 1330). With regard to the inquiry into the fairness of the proposed settlement agreement, the court's goal is to "`ensure that the settlement is in the interest of the class, does not unfairly impinge on the rights and interest of dissenters, and does not merely mantle oppression.'" Reed v. General Motors Corp., 703 F.2d 170, 172 (5th Cir. 1983) (quoting Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1214 (5th Cir. 1978)). The Fifth Circuit has established six factors for courts to consider in assessing the fairness, adequacy, and reasonableness of a proposed settlement agreement. Those factors are:
(1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of plaintiffs' success on the merits; (5) the range of possible recovery; and (6) the opinions of the class counsel, class representatives, and absent class members.Reed, 703 F.2d at 172 (citing Parker v. Anderson, 667 F.2d 1204, 1209 (5th Cir. 1982)); See also In re Corrugated Container Antitrust Litigation, 643 F.2d 195, 217 (5th Cir. 1981).
"The hallmark of Rule 23 is the flexibility it affords to the courts to utilize the class device in a particular case to best serve the ends of justice for the affected parties and to promote judicial efficiencies."In re Beef Industry Antitrust Litigation, 607 F.2d at 177 (citing 3 Newberg, Class Actions § 5570c at 476). Therefore, in weighing the aforementioned factors, it is important note that there is a strong presumption in favor of finding a settlement fair. See Neff v. VIA Metropolitan Transit Auth., 179 F.R.D. 185, 208 (W.D. Tex. 1998) (citingAhearn v. Fibreboard Corp., 162 F.R.D. 505, 527 (E.D. Tex. 1995)); See also, Cotton, 559 F.2d at 1331.
a. Existence of Fraud and Collusion
First, the Court must determine whether or not the proposed settlement is the result of fraud or collusion between the parties. See Reed, 703 F.2d at 172. However, there is typically an initial presumption that a proposed settlement is fair and reasonable when it is the result of arms length negotiations. See 2 Newberg on Class Actions, § 11.40 at 451 (2th ed. 1985). In the present case, counsel for all parties represented to this Court at the fairness hearing that the proposed settlement agreement is the result of lengthy and contentious negotiations. All of the attorneys involved in the case remained zealous advocates, vigorously representing their clients' interests throughout the entire litigation process, including the settlement negotiations. The settlement negotiations were closely monitored by Magistrate Judge Lance M. Affrick, who notified this court that negotiations remained at arms length throughout the entire settlement process. Accordingly, this Court finds that there is no indication that the settlement agreement is the product of fraud or collusion.
b. Complexity, Expense, and Likely Duration of the Litigation:
There is no dispute that the present case is an extraordinarily complex RICO class action involving multiple defendants. Not only are the RICO statutes extremely intricate and technical, but the underlying loan transactions in this case involve complex interest calculations and sophisticated financial theories. In fact, the law and underlying financial transactions involved are so complex that trial in the above-captioned matter was estimated to last at least two weeks. Furthermore, this case has been punctuated with a contentious motion practice on behalf of virtually all parties involved and has spawned thousands of pages of pleadings and document production. This matter has gone on for nearly two years and would undoubtedly continue on a protracted litigation path absent approval of the proposed settlement agreement.
Given the already active motion practice spawned by this litigation and the fact that the parties have already appealed a ruling of this Court to the Fifth Circuit Court of Appeals, it is likely that the parties would continue on a lengthy path of litigation whereby a great amount of judicial resources would be expended. This Court finds that should this complex litigation continue on towards trial, it is most likely that the case would last several more years and cost this Court and the parties involved an enormous amount of money. Such a determination weighs in favor of approving the proposed settlement.
c. Stage of the Proceedings and the Amount of Discovery Completed :
At the time that the parties reached the settlement agreement, the above-captioned matter was in its second year of litigation. As stated above, a lengthy motions practice preceded the proposed settlement, in which the parties challenged every aspect of each others' claims and defenses. While not completed at the time of settlement, the parties had already engaged in detailed discovery, including taking lengthy depositions. The motions filed on behalf of both the Plaintiffs and the Defendants indicate that all parties involved had developed an in-depth understanding of the case at hand. The Court is satisfied that the parties have premised their decision to settle this case on substantial research conducted regarding their respective positions. The Court finds that this factor weighs in favor of approving the settlement.
d Probability of the Plaitiffs' Success on the Merits and the Range of Possible Recovery :
In evaluating the likelihood of success on the merits, the court "must not try the case in the settlement hearings because `[t]he very purpose of the compromise is to avoid the delay and expense of such a trial.'"Reed, 703 F.2d at 172 (quoting Young v. Katz, 447 F.2d 431, 433 (5th Cir. 1971)). Instead, the court must simply compare the terms of the settlement "with the likely rewards the class would have received following a successful trial of the case." Reed, 703 F.2d at 172 (citingCotton, 559 F.2d at 1330). In the present case, Counsel for the Plaintiff Class is highly confident that the class would prevail on the merits against Certified Finance and its directors. However, the Defendants are equally as confident that they would prevail on their defenses. Furthermore, Hartford, the Defendants' insurer, appears equally confident of prevailing on its coverage defense. The Plaintiffs argue that given such a situation, "even assuming the Plaintiff Class prevailed at trial on all theories, the likelihood of collection on a large judgment against Certified Finance might be called into question without its insurance coverage." Memorandum in Support of Plaintiffs' Motion for Final Approval of Settlement Agreement, page 16. The Plaintiffs argue that the proposed settlement provides the class with immediate, tangible benefits without further delay or uncertainty as to their ability to actually recover from the Defendants.
While the Plaintiff Class could arguably receive a greater award of damages at trial should it succeed on the merits, the litigation risks in the area of insurance coverage, not to mention the added costs of litigation and the increased possibility of being unable to collect from the Defendants on a judgment after lengthy and expensive litigation, all weigh in favor of settlement. Counsel for the Defendants represented to this Court at the fairness hearing that the amount of damages awarded pursuant to the settlement agreement is greater than what the Defendants believe the Plaintiffs would receive at trial. Defense counsel explained that while the Defendants continue to deny liability, they found the significant risk involved in going forward to trial in this matter warranted settling the case at this time rather than incurring further litigation expenses.
After comparing the significance of immediate recovery by way of settlement with the mere possibility of success on the merits and relief in the future following lengthy and expensive litigation, this Court is of the opinion that the settlement agreement should be approved. Under the settlement agreement, the class members will receive immediate cash benefits, as well as credits to their outstanding loan balances in some cases, without future delay. While it can be argued that the class members would receive greater benefits at trial, "`[i]t has been held proper to take the bird in the hand instead of a prospective flock in the bush.'" In re Shell Oil Refinery, 155 F.R.D. at 560 ((quoting Oppenlander v. Standard Oil Co., 64 F.R.D. 597, 624 (D.Colo. 1974)) (quoting State of West Virginia v. Chas. Pfizer Co., 314 F. Supp. 710, 743 (S.D.N Y 1970)).
e. Opinions of Class Counsel, Class Representative, Absent Class Members :
In the present case, the settling parties believe that the settlement is an appropriate and fair end to contentious, time consuming litigation. Counsel for all parties represented at the fairness hearing that they are all of the opinion that the proposed settlement is fair, adequate, and reasonable under the circumstances. The Court agrees, for the class members will receive actual benefits pursuant to the settlement agreement in exchange for a dismissal of all claims with prejudice. Furthermore, the Court finds it significant that out of a class of 560 plaintiffs, no class member challenged the adequacy or reasonableness of the proposed settlement at the fairness hearing. The Court finds that this factor also weighs in favor of approval of the proposed settlement. Therefore, for the foregoing reasons, this Court finds that the proposed settlement is fair, adequate, and reasonable. Accordingly, Plaintiffs' Motion for Final Approval of Settlement Agreement shall be GRANTED.
C. Class Counsel's Motion for An Award of a Reasonable Attorneys' Fee and Reimbursement for Costs Expended:
The second motion before this Court is Class Counsel's Motion for an Award of Reasonable Attorneys' Fees and Reimbursement for Costs Expended. This Motion requires the court to "make an independent and thorough inquiry into the reasonableness of the attorneys' fees proposed in the settlement agreement." Bryant, 2000 WL 680258, at *1 (citingStrong, 137 F.3d at 849-50). In the present motion, Class Counsel seeks an award of attorneys fees in the amount of 35% of the common settlement fund, or approximately $560,000.00, plus 35% of any interest accrued thereon, plus reimbursement for actual costs expended to date in the amount of $11,469.74.
In the present case, a member of the Plaintiff Class submitted a letter to the court objecting to Class Counsel's proposed award of attorney fees on the grounds that the cases cited by Class Counsel reveal no award of attorney fees greater than 26% of the common fund. His objection is primarily based on a "cost to return" theory, noting that Class Counsel spent approximately $11,000, but seek a return of greater than $500,000 in fees. While said objection was not submitted in proper form as directed by the Notice of Fairness Hearing sent to class members, this Court will implicitly address this objection through its independent calculation of reasonable attorneys' fees whereby it will consider the percentages awarded to counsel in past class action lawsuits in evaluating the propriety and reasonableness of Class Counsel's requested fee in this case.
With regard to determining the reasonableness of the amount of attorneys fees, a "`district court is not bound by the agreement of the parties.'" Strong, 137 F.3d at 849 (quoting Piambino v. Bailey, 610 F.2d 1306, 1328 (5th Cir. 1980); Foster v. Boise-Cascade, Inc., 577 F.2d 335, 336 (5th Cir. 1978)). "The court must scrutinize the agreed-to fees under the standards set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974), and not merely `ratify a prearranged compact.'" Strong, 137 F.3d at 849 (quoting Piambino, 610 F.2d at 1328). "Even when the district court finds the settlement agreement to be untainted by collusion, fraud, and other irregularities, the court must thoroughly review the attorneys' fees agreed to by the parties in the proposed settlement agreement." Strong, 137 F.3d at 850.
1. Calculating Attorneys Fees in the Fifth Circuit :
Typically, courts have applied two different methods for calculating attorney fees in class action lawsuits: the percentage fee method and the lodestar method. In the Fifth Circuit, the lodestar method is used to calculate reasonable attorneys fees, but that method has been somewhat "blended" with the percentage fee method and the twelve factors set forth in Johnson. See In re Harrah's Entertainment Inc. Securities Litigation, No. Civ. A. 95-3925, 1998 WL 832574, at * 3 (E.D.La. Nov. 25, 1998) (citing In re Combustion, Inc., 968 F. Supp. 1116, 1135 (W.D.La. 1997)). Moreover, numerous district courts in this circuit have simply applied the percentage fee method in common fund cases. See Harrah's, 1998 WL 832574, at *2 (citing in re Catfish Antitrust Litigation, 939 F. Supp. 493, 500 (N.D.Miss. 1996); In re Prudential-Bach Energy Income Partnerships Securities Litigation, 1994 WL 150742, at *4 (E.D.La. March 7, 1994)).
While the lodestar method is still the proper method for calculating attorneys fees in this jurisdiction, the Fifth Circuit has recognized the propriety of the percentage fee method in situations in which each member of a class has an "undisputed and mathematically ascertainable claim to part of [a] judgment." Strong, 137 F.3d at 852 (quoting Boeing Co. v. Van Gemert, 444 U.S.472, 479, 100 S.Ct.745, 748, 62 L.Ed.2d 676 (1980)). Therefore, "[i]t seems that a district court in the Fifth Circuit may exercise discretion in determining whether to apply the percentage fee or lodestar method, as long as under either method the award is supported by the twelve Johnson factors. Harrah's, 1998 WL 832574, at * 3 (citingCombustion, 968 F. Supp. at 1135). As Judge Clement stated in Harrah's, "[d]espite the apparent advantages of the percentage fee method over the lodestar method in common fund cases, the law in the Fifth Circuit concerning which method should be applied is "at best unclear."' Id. (quoting Combustion, 968 F. Supp. at 1134). Therefore, out of an abundance of caution, this Court will apply both methods to the facts at hand and compare the results before rendering its decision as to amount of attorneys' fees that would be fair, just, and reasonable.
Under the percentage fee method, the district court simply awards a percentage of the total settlement fund to class counsel. See Prudential-Bach, 1994 WL 150742, at * 3. However, under the lodestar method, "the district court must first determine the reasonable number of hours expended on litigation and the reasonable hourly rates for the participating attorneys." Strong, 137 F.3d at 850 (citing Forbush, 98 F.3d at 821). "The lodestar is computed by multiplying the number of hours reasonably expended by the reasonable hourly rate." Id. After reviewing the twelve Johnson factors, "the court may then apply a multiplier to the lodestar, adjusting the lodestar either upward or downward." Id. "However, "[t]he lodestar maybe adjusted according to a Johnson factor only if that factor is not already taken into account by the lodestar."'Id. (quoting Transamerican Natural Gas Corp. v. Zapata Partnership. Ltd., (In re Fender), 12 F.3d 480, 487 (5th Cir. 1994)).
"[M]ultipliers ranging from one to four frequently are awarded in common fund cases when the lodestar method is applied." Id. (citingCombustion, 968 F. Supp. at 1133 (citations omitted)). Such multipliers are "necessary to reflect the possibility of no recovery." Id. The Third Circuit Task Force on Court-awarded Attorneys' Fees set forth four factors that enhance a multiplier. Those factors are: (I) the risk of losing; (2) the result obtained; (3) the delay in obtaining attorneys' fees; and (4) the petitioning attorneys' contribution to a prompt or delayed resolution of the action. See 108 F.R.D. 237, 264 (Oct. 8, 1985).
In determining whether or not to apply a multiplier to the lodestar, the district court must also consider the following twelve factors set forth in Johnson:
(1) the time and labor required, (2) the novelty and difficulty of the issues, (3) the skill required to perform the legal services properly, (4) the preclusion of other employment, (5) the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount involved and the results obtained, (9) the experience, reputation, and ability of the attorneys, (10) the undesirability of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in similar cases.Johnson, 488 F.2d at 7 17-19. Wile the Fifth Circuit requires that the award of attorneys fees be supported by the Johnson factors, rarely are all of the Johnson factors applicable to a particular case. See Harrah's, 1998 WL 832574, at * 3-4 (citations omitted). Therefore, this Court will only address those Johnson factors that it deems applicable in this particular case.
2. Class Counsel's Requested Award of Attorney Fees :
In the present case, Class Counsel has submitted a Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs Expended in which he requests an attorneys fee of thirty five percent (35%) of the common settlement fund. Class Counsel asserts that such a method of computing attorneys fees is appropriate in a common fund case such as the above captioned matter because "each member of the plaintiff class has an undisputed and mathematically ascertainable claim to the common settlement fund." Memorandum in Support of Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs Expended, page 8. Furthermore, Class Counsel argues that such a percentage of the common fund comports with fees awarded in similar common fund cases. See id. at 9. Accordingly, Class Counsel seeks attorney fees of $560,000.00, 35% of the estimated $1,600,000 settlement fund. Furthermore, Class Counsel seeks 35% of any interest accrued on the cash portion of the settlement fund deposited with Hibernia National Bank. See id. at 10.
In support of such an award of attorneys fees, Class Counsel calculated an award of attorneys fees using the lodestar method and compared that figure with the 35% of the fund figure requested above. In calculating attorneys fees using the lodestar method, Class Counsel applied theJohnson factors to the case at hand, most of which he claims support the application of an enhanced multiplier in the calculation of the award of attorney fees. See id. at 17-18. Class Counsel asserts that these factors support the application of an enhanced multiplier of 3.5 in this case. If that multiplier is applied to a suggested lodestar fee of $204,455.00, it yields a suggested fee of $715,000.00, a sum well above the requested fee of $560,000.00. Therefore, Class Counsel argues that the requested fee of $560,000.00 is surely reasonable under the circumstances.
3. The Court's Evaluation of the Requested Award of Attorneys Fees :
In the present case, Class Counsel requests attorneys fees in the amount of 35% of the settlement fund, which results in an award of $560,000.00 in attorneys fees. However, that figure is based on an estimated value of the settlement fund. The actual value of the settlement fund in this case is $1,534,321.06; therefore, 35% of the settlement fund is actually $537,012.37, not $560,000.00. This Court will use the actual value of the settlement fund in determining the reasonableness of attorneys fees in the present case, rather than the estimated value of the fund. Accordingly, this Court views Class Counsel's request for 35% of the settlement fund to be a request for $537,012.37 in attorneys' fees.
a. The Percentage of the Common Fund Analysis:
In evaluating the reasonableness of the attorneys fees calculated using the percentage method, the Court must first determine the reasonableness range of fees in similar cases. After a lengthy discussion of the various bases for calculating attorneys fees in common fund class action lawsuits, the United States District Court for the Eastern District of Texas recently concluded that "based on the opinions of other courts and the available studies of class action attorneys' fee awards (such as the NERA study), this Court concludes that attorneys' fees in the range from twenty-five percent (25%) to thirty-three and thirty-four one-hundredths percent (33.34%) have been routinely awarded in class actions." Shaw v. Toshiba America Information Systems, Inc., 91 F. Supp.2d 942, 972 (E.D.Tex. 2000). That court further stated that "[e]mpirical studies show that, regardless whether the percentage method or the lodestar method is used, fee awards in class actions average around one-third of the recovery." Id.
In the present case, the actual value of the settlement fund is $1,534,321.06. Given the guiding principles described above, this Court determines that 33.34% is an appropriate and reasonable percentage for application of the percentage method in this case. Therefore, under the percentage method theory of calculating attorneys fees, the fair, just, and reasonable amount of attorneys fees would be $511,542.64 in the present case if a percentage of 33.34% were used to calculate the award.
While the majority of attorneys' fees awarded pursuant to the percentage method range between twenty-five and thirty-three and one-third percent of the common fund, Class Counsel argues that the fee percentage should be higher than 33.34% in this case. See Memorandum in Support of the Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs, page 10. Class Counsel argues that "where the recovery is more modest, the fee percentage tends to be higher on a proportionate basis because of the larger ratio of hours to the amount of recovery." Id. (citing In re Shell Oil Refinery, 155 F.R.D. at 573 (citing Newberg on Class Actions, § 14.03.)) Accordingly, Class Counsel argues in favor of awarding attorneys' fees in the amount of 35% of the settlement value, or $537,012.37.
b. The Lodestar Method of Calculating Attorney Fees:
In calculating the lodestar method, this Court must first multiply the number of hours reasonably expended by Class Counsel by a reasonable hourly rate. Class Counsel submits that a total of 817.82 hours were expended in the prosecution of the above-captioned matter. Specifically, Mr. Herman spent a total of 684.82 hours in the prosecution of this matter, Mr. Castaing spent 44.5 hours in the prosecution of this matter, and Mr. Lilly spent 88.5 hours in the prosecution of this matter. See Memorandum in Support of the Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs, page 12 and Exhibits A-1 through A-3. Class Counsel submits that the prevailing hourly rate for contingency legal work in this jurisdiction ranges from $225.00 to $300.00. See id. at 13. After reviewing decisions of other courts in this jurisdiction, this Court is of the opinion that $225.00 is a reasonable hourly rate for contingency work in the Eastern District of Louisiana. When that rate is multiplied by the number of hours expended by Class Counsel in prosecuting the instant matter, it yields a lodestar of $184,009.50, prior to the imposition of a multiplier. Should the Court accept as reasonable Class Counsel's requested award of attorneys' fees in the amount of $537,012.37, that would require the application of a multiplier of approximately three under the lodestar method.
The hourly rate applied to the hours reasonably expended must reflect the prevailing market rate in this legal community for similar services provided by attorneys of comparable skill, experience, and reputation. See In re Shell Oil Refinery, 155 F.R.D. at 570 (citing Blum v. Stenson, 465 U.S. 886, 895-96 n. 11, 104 S.Ct. 1541, 1547 n. 11, 79 L.Ed.2d 891 (!984)). While the Court may review testimony regarding the prevailing rate in the pertinent legal market, the Court may also ""consider its own knowledge and expertise concerning reasonable and proper fees and may form an independent judgment."' Id. (quoting Norman v. Housing Authority of City of Montgomery, 836 F.2d 1292, 1303 (11th Cir. 1988)).
1. The Application of the Johnson Factors :
With regard to the applicability of a multiplier, this Court finds that the Johnson factors weigh in favor of applying a multiplier to the lodestar in the present case. First, as discussed above, this case required a substantial amount of time and labor to prosecute. The time records of Class Counsel reveal a reasonable number of hours expended for the benefit of the Class. This Court finds that the number of hours billed is neither excessive or duplicative. However, this Court finds it unnecessary and unwarranted to focus too narrowly on the number of hours billed or the hourly rate in contingency fee cases. As explained by the court in Harrah's "[b]ecause counsel prosecuted this action on a contingent fee basis, the Court would rather focus on results obtained.Harrah's, 1998 WL 832574, at * 5. "To overly emphasize the amounts of hours spent on a contingency fee case would penalize counsel for obtaining an early settlement and would distort the value of the attorneys' services." Id. Nevertheless, this Court finds that the time and labor required of Class Counsel in this complicated RICO action weigh in favor of applying an enhanced multiplier.
While this Court performed the lodestar calculation in which it multiplied the number of hours expended prosecuting the above-captioned action by a reasonable rate for legal services by lawyers of comparable skill, experience, and reputation, this Court will refrain from conducting a detailed analysis of charged hours and hourly rates because "[t]o do so would undermine the utility of the percentage fee method" advanced by Class Counsel. See Harrah's, 1998 WL 832574, at *5.
Second, as mentioned above, there is no dispute that the present case is an extraordinarily complex RICO class action involving multiple defendants. Not only are the RICO statutes extremely intricate and technical, but the underlying loan transactions in this case involve complex interest calculations and sophisticated financial theories. Furthermore, a RICO cause of action super-imposed upon the procedural hurdles of Rule 23 of the Federal Rules of Civil Procedure unquestionably presents formidable challenges to any litigant. Therefore, this Court finds that the novel and difficult issues present in this RICO case warrant the application of an enhanced multiplier.
Third, this Court finds that the skill required to perform the legal services in this action also weigh in favor of applying a multiplier to the lodestar in this case. The complexities of the RICO issues alone required substantial skill and expertise on the part of Class Counsel, but this case also involved sophisticated financial theories and complex interest calculations. Class Counsel was required to gain a firm understanding of these theories and calculations in order to adequately prosecute the above-captioned action. Class Counsel represented to this Court that "Mr. Herman undertook significant effort to mathematically reconstruct Ms. Faircloth's loan transaction, in order to articulate and demonstrate liability." Memorandum in Support of the Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs, page 15. This Court finds that such considerations weigh in favor of the application of a multiplier.
Fourth, the Court finds persuasive Class Counsel's representation that prosecuting this action precluded lead counsel from handling other matters on behalf of other clients. See Memorandum in Support of the Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs, page 15. Given that Mr. Herman alone spent almost 700 hours over the past two years in the prosecution of this action, the Court finds that this factor warrants an enhancement of the multiplier in this case.
Fifth, this Court finds significant the amount involved in the current action and the results obtained through settlement. The United States Supreme Court and the Fifth Circuit have consistently maintained that this eighth Johnson factor is "the most critical factor in determining the reasonableness of a fee award." Shaw, 91 F. Supp.2d at 971 (citations omitted). As discussed above, the settlement agreement reached on behalf of the class plaintiffs provides the class members with tangible benefits. The class members will receive actual cash in proportion to the amount of interest paid above the legal rate, as well as credits to their loan balances in some instances. After considering the formidable defenses mounted to the claims of the class members and the actual benefits conferred upon the class members through the settlement, this Court finds that this eighth Johnson factor warrants the application of an enhanced multiplier.
Sixth, this Court finds that the experience, reputation, and ability of Class Counsel also warrant an enhancement of the multiplier in this case. The attorneys involved are all highly accomplished lawyers with significant experience prosecuting complex commercial actions such as the present case. Furthermore, Class Counsel possessed substantial experience in the prosecution of RICO actions, as well as other class action lawsuits.
Seventh, this Court finds that the undesirability of the case warrants an enhancement of the multiplier in this case. The dispute regarding insurance coverage between Certified Finance and Hartford made the possibility of recovery speculative. If Hartford was successful at trial in demonstrating a lack of insurance coverage, then the possibility of the plaintiff class recovering a judgment from Certified Finance alone would be remote. The risk of being unable to collect from Certified Finance made this case somewhat undesirable and warrants the application of a multiplier in this case.
Finally, after considering the pertinent Johnson factors in the present case, this Court is of the opinion that the majority of those factors weigh in favor of applying a multiplier in the present case. Furthermore, after considering the factors set forth by the Third Circuit Task Force, this Court is of the opinion that an enhanced multiplier is warranted. Specifically, this Court finds significant Class Counsel's ability to obtain a favorable settlement on behalf of the plaintiff class within two years of filing this complex lawsuit. Therefore, this Court is of the opinion that a multiplier of three is warranted in the present case.
III. CONCLUSION:
As sated above, this Court determined that $225.00 is a reasonable hourly rate for contingency work in this jurisdiction. When that rate is multiplied by the number of hours expended by Class Counsel in prosecuting the instant matter, it yields a lodestar of $184,009.50, prior to the imposition of a multiplier. If a multiplier of three is applied to the lodestar figure, it yields attorneys' fees of $552,028.50. Class Counsel has requested an award of attorneys' fees in the amount of 35% of the settlement value, or $537,012.37. That figure is within the range of fees independently calculated by this Court under both the percentage fund method and the lodestar method. Therefore, this Court finds that Class Counsel's request for attorneys' fees in the amount of 35% of the settlement value is fair, adequate, and reasonable. ".4
Additionally, Class Counsel requests reimbursement for costs expended in the prosecution of this action. Class Counsel submitted records reflecting actual costs of $11,469.74 in connection with the prosecution of this case. Furthermore, Class Counsel has certified to this Court that those costs are true and accurate. Therefore, this Court shall award Class Counsel $11,469.74 for the reimbursement of costs.
Accordingly,
IT IS ORDERED that Plaintiffs' Motion for Final Approval of Settlement Agreement be, and the same is hereby, GRANTED.
IT IS FURTHER ORDERED that Class Counsel's Motion for an Award of a Reasonable Attorneys' Fee and Reimbursement for Costs Expended be, and the same is hereby, GRANTED.
IT IS FURTHER ORDERED that Class Counsel be awarded attorneys' fees in the amount of $537,012.37, 35% of the actual settlement value.
IT IS FURTHER ORDERED that Class Counsel be awarded 35% of any interest accrued on the cash portion of the settlement on deposit with Hibernia National Bank.
IT IS FURTHER ORDERED that Class Counsel be awarded $11,469.74 for the reimbursement of costs expended in the prosecution of this action.