Opinion
MDL No. 1261.
June 2, 2004
MEMORANDUM
I. INTRODUCTION
Presently before the Court is Class Counsels' Revised Memorandum of Law in Support of Petition for Award of Attorneys' Fees and Reimbursement of Expenses (Document No. 320, filed March 18, 2003) ("Fee Petition"), Declarations in Support of Class Settlements with the Stone and PCA Defendants and in Support of Class Counsels' Petition for Attorneys' Fees and Costs (docket no. 302, filed February 2, 2004), Declaration of Stephen A. Saltzburg in Support of Plaintiffs' Petition for an Award of Attorneys Fees (docket no. 304, filed February 2, 2004), Appendix of Declarations by Counsel for the Class in Support of Petition for Counsel Fees and Reimbursement of Cost Disbursements (docket no. 305, filed February 2, 2004) and Supplemental Affidavit of David. J. White, CPA, Regarding Attorneys' Time and Expense Summaries for and Through December 2003, and Litigation Fund Expenses From February 1, 2004 through March 17, 2004 (docket no. 321, filed March 18, 2004). In the Fee Petition, petitioners requests a fee of 30 percent of $202,572,489, the total of the settlements with all defendants in the class action (the "Settlement Fund") and reimbursement of costs totaling $1,391,203.36. A hearing on the Fee Petition was held on March 26, 2004. For the reasons that follow, the Court grants the Fee Petition, and awards petitioners 30 percent of the Settlement Fund and reimbursement of costs in the amount requested.
Class counsel did not file a separate fee petition but began the Revised Memorandum of Law with the statement, "[c]lass counsel move for an award of attorneys' fees and for reimbursement of costs." Accordingly, the Court will treat the Revised Memorandum of Law in Support of Petition for Award of Attorneys' Fees and Reimbursement of Expenses as a fee petition.
The Court also writes at this time in ruling on class counsel's unopposed Petition for Payment of Incentive Fees to the Five Class Representatives (Docket No. 301, filed February 2, 2004) ("Incentive Fee Petition"). Petitioners have requested $25,000 for each of the five representatives of the classes and the Court concludes that amount is appropriate.
The three Class Representatives on behalf of the Box Class are Garrett Paper, Inc., Local Baking Products, Inc., and Oak Valley Farms, Inc. General Refractories Co. And I. Halper Corrugated Box Company are the representatives for the sheet class. Two other plaintiffs, one a box purchaser, Winoff Industries, and on a sheet purchaser, Crest Meat Co. dismissed their complaints.
II. BACKGROUND
The Court sets forth only an abbreviated factual and procedural history as pertinent to the Fee Petition. The factual background of the case is described at length in this Court's Memorandum dated October 4, 2000 denying defendants' Motion to Dismiss, its Memorandum dated September 4, 2001 certifying classes of direct purchasers of corrugated boxes and corrugated sheets, and the Opinion of the Court of Appeals for the Third Circuit affirming the September 4, 2001 Memorandum and Order. See In re Linerboard Antitrust Litig., MDL No. 1261, 2000 WL 1475559, at *1-3 (E.D. Pa. Oct. 4, 2000) ("Linerboard I"); In re Linerboard Antitrust Litig., 203 F.R.D. 197, 201-04 (E.D. Pa. 2001) ("Linerboard II"); In re Linerboard Antitrust Litig., 305 F.3d 145, 147-49 (3d Cir. 2002) ("Linerboard III").
This is an antitrust action involving allegations that a number of U.S. manufacturers of linerboard engaged in a continuing combination and conspiracy in unreasonable restraint of trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The seven lawsuits transferred to this Court for all pretrial proceedings by the Judicial Panel on Multidistrict Litigation on February 12, 1999 were instituted after an administrative complaint filed by the Federal Trade Commission ("FTC") against Stone Container Corporation ("Stone") was resolved by a consent decree. Linerboard I, 2000 WL 1475559, at *1 (setting forth allegations in FTC complaint and details of consent decree). Class plaintiffs named the following defendants in their Complaints — Stone Container Corporation, Jefferson Smurfit Corporation, Smurfit-Stone Container Corp., International Paper Company, Georgia-Pacific Corporation, Temple-Inland, Inc., Gaylord Container Corporation, Tenneco, Inc., Tenneco Packaging, Inc., Union Camp Corporation, Packing Corporation of America and Weyerhaeuser Paper Company — and alleged that they conspired to raise the price of corrugated containers and corrugated sheets throughout the United States by restricting production and/or curtailing inventories in violation of federal antitrust laws.
Linerboard includes any grade of paperboard suitable for use in the production of corrugated sheets, which are in turn used in the manufacture of corrugated boxes and for a variety of industrial and commercial applications. Corrugated sheets are made by gluing a fluted sheet which is not made of linerboard, known as the corrugating medium, between facing sheets of linerboard; corrugated sheets are also referred to as containerboard. The defendants named in the lawsuits are major integrated manufacturers and sellers of linerboard, corrugated sheets and corrugated boxes.
By Memorandum and Order dated September 4, 2001, this Court certified the following two plaintiff classes:
Class 1 — Sheet Class
Class 2 — Box Class
All individuals and entities which purchased corrugated sheets in the United States directly from any of the defendants during the class period from October 1, 1993 through November 30, 1995, excluding the defendants, their coconspirators, and their respective parents, subsidiaries and affiliates, as well as any government entities, and excluding those individuals and entities which purchased corrugated sheets pursuant to contracts in which the purchase price was not tied to the price of linerboard.
All individuals and entities which purchased corrugated containers in the United States directly from any of the defendants during the class period from October 1, 1993 through November 30, 1995, excluding the defendants, their co-conspirators, and their respective parents, subsidiaries and affiliates, as well as any government entities, and excluding those individuals and entities which purchased corrugated containers pursuant to contracts in which the purchase price was not tied to the price of linerboard or containerboard.Linerboard II, 203 F.R.D. at 22423 en banc See Gaylord Container Corp. v. Garrett Paper, Inc., 123 S.Ct. 1786
Appellate review of an order of a district court granting or denying class action certification requires the permission of the Court of Appeals. Federal Rule of Civil Procedure 23(f) provides, in relevant part, as follows: "A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order."
By Order dated August 26, 2003, this Court approved a partial settlement in the amount of $8 million between plaintiff classes and Temple-Inland, Inc. and Gaylord Container Corp. The $8 million settlement was reduced to $7.2 million in accordance with the terms of the settlement agreement based on the number of parties that subsequently opted-out of the classes. This first partial settlement was described by petitioners as an "ice-breaker — a settlement that would lead to further settlements. Within a month of Court approval of the ice-breaker settlement, on September 22, 2003, the plaintiff classes and defendants International Paper Company and Union Camp Corporation, Georgia Pacific Corporation, and Weyerhauser Company announced they had reached a settlement agreement in the total amount of $68 million. The Court granted final approval of that settlement on December 8, 2003. Prior to that date, in October and November 2003, the parties announced the two additional partial settlements with defendants Packaging Corporation of America, Tenneco, Inc., and Tenneco Packaging, Inc. (The "PCA settlement") in the amount of $43 million and with defendants Stone Container Corporation, Jefferson Smurfit Corporation, and Smurfit Stone Container Corporation (the "Stone settlement") in the amount of $92.5 million. As a result of a "most favored nation's clause" in the PCA settlement agreement, the terms of the Stone settlement triggered a reduction in the amount owed by PCA from $43 million to $34 million. The Court granted final approval of both the PCA settlement and the Stone settlement in a Memorandum and Order dated March 21, 2004. With the Court's approval of these last two partial settlements, all claims in the class action were resolved for a total of $202,572,489.
Petitioners submitted the Fee Petition on February 2, 2004, and a revised Fee Petition, that made only minor clerical changes on March 18, 2004. Petitioners also submitted a series of declarations from experts on class actions, a volume of declarations from all plaintiff counsel detailing their work, and two affidavits from an accountant that managed petitioners' time and expense records. A hearing was held on the Fee Petition on March 26, 2004 (the same hearing at which the PCA and Stone settlements were considered). There were no objections to the Fee Petition.
In the Memorandum the Court will refer to the attorneys involved in three ways: "petitioners" (all counsel representing members of the class), "designated counsel" (lead counsel, liaison counsel and the executive committees appointed by Third Case Management Order dated November 9, 2000) and "liaison counsel" (Howard Langer Esq.).
II. LEGAL STANDARD
A. METHODS OF DETERMINING REASONABLENESS OF FEE PETITIONS IN CLASS ACTIONS: LODESTAR AND PERCENTAGE OF RECOVERY
"Ordinarily, a court making or approving a fee award should determine what sort of action the court is adjudicating and then primarily rely on the corresponding method of awarding fees (though there is, as we have noted, an advantage to using the alternative method to double check the fee)." In re GM Trucks, 55 F.3d 768, 821 (3d Cir. 1995). As the Third Circuit explained in In re Cendant Corp. Prides Litig., 243 F.3d 722 (3d Cir. 2001), there are two primary methods for calculating attorneys' fees: the percentage-of-recovery method and the lodestar method. "The percentage-of-recovery method is generally favored in cases involving a common fund, and is designed to allow courts to award fees from the fund `in a manner that rewards counsel for success and penalizes it for failure'" by aligning counsel's interests with those of the class. Id. at 732; see also, Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000); Brytus v. Spang Co., 203 F.3d 238, 243 (3d Cir. 2000); In re Prudential, 148 F.3d 283, 333-34 (3d Cir. 1998);In re GM Trucks, 55 F.3d at 821. "The lodestar method is more commonly applied in statutory fee-shifting cases, and is designed to reward counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that a percentage-of-recovery method would provide inadequate compensation." Cendant Prides, 243 F.3d at 732.
The advantages and disadvantages of the two methods are described by the Third Circuit in In re Cendant Corporation Litigation, 264 F.3d 201, 255-56 (3d Cir. 2001), and in the reports of two task forces convened by the Third Circuit to study the issue of counsel fees, Report of the Third Circuit Task Force, Court Awarded Attorneys Fee, 108 F.R.D. 237, 247-248 (1985) ("1985 Task Force Report") and Report of Third Circuit Task Force on the Selection of Class Counsel (Final Report January 2002) ("Second Task Force Report"); see also, 1 Alba Conte, Attorney Fee Awards, § 2.02, at 31-32 (2d ed. 1993).
"[T]he common-fund doctrine . . . allows a person who maintains a lawsuit that results in the creation, preservation, or increase of a fund in which others have a common interest, to be reimbursed from that fund for litigation expenses incurred." Court Awarded Attorney Fees, Report of the Third Circuit Task Force, 108 F.R.D. 237, 241 (1985).
"The percentage of recovery method resembles a contingent fee in that it awards counsel a variable percentage of the amount recovered for the class." In re GM Trucks, 55 F.3d 768, 819 n. 38 (3d Cir. 1995).
"A court determines an attorney's lodestar by multiplying the number of hours he or she reasonably worked on a client's case by a reasonable hourly billing rate for such services given the geographical area, the nature of the services provided, and the experience of the lawyer." Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000). After the lodestar is calculated, "[t]he lodestar then could be increased or decreased based upon the contingent nature or risk involved and the quality of the attorney's work. An increase or decrease of the lodestar amount is referred to as a `multiplier.'" Cendant Prides, 243 F.3d at 732 n. 14 (quoting Task Force Report, 108 F.R.D. 237, 243).
B. REASONABLENESS OF FEE AWARD: PERCENTAGE OF RECOVERY METHOD
This is a common fund case. Therefore, the percentage of recovery method is the proper one to calculate attorneys' fees.
The Supreme Court has held that the standard for evaluating fee awards is reasonableness. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In determining whether a particular percentage of recovery is reasonable, the Court first csalculates the percentage of the total recovery that the requested fee represents. The Court then evaluates that figure in light of the circumstances of the case. In re Cendant Corporation Litigation, 264 F.3d at 256. In making that decision, the Third Circuit has directed district courts to consider seven (7) factors as follows:
(1) the size of the fund created and the number of persons benefitted;
(2) the presence or absence of substantial objections by members of the class to the settlement terms and/or the fees requested by counsel;
(3) the skill and efficiency of the attorneys involved;
(4) the complexity and duration of the litigation;
(5) the risk of nonpayment;
(6) the amount of time devoted to the case by plaintiffs' counsel; and
(7) the awards in similar cases.
Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000) (the "Gunter" factors). The Third Circuit also recommended in Cendant that district courts employ a lodestar crosscheck in common fund cases using the percentage of recovery method.
III. DISCUSSION
In the Fee Petition, petitioners have requested a fee of 30 percent of the Settlent Fund, or approximately $60 million. In determining the reasonableness of that request, the Court addresses each of the Gunter factors. The Court will also utilize the lodestar cross-check.
A. Counsel's Requested 30 Percent Fee is Reasonable Under the Gunter Factors
1. The Size of the Fund Created and the Number of Persons Benefitted.
a. Size of the Fund
The settlements are highly favorable to the class when analyzed as a percentage of total damages. Plaintiff classes' expert, Dr. John C. Beyer, constructed an econometric model and determined that over the class period prices for boxes and sheets were 2.7 percent higher than they would have been absent the alleged conspiracy. See Affidavit of John C. Beyer, Ph.D. in Support of Settlement Agreement [with defendants International Paper and Union Camp Corp., Georgia Pacific and Weyerhauser Co.] (docket no. 273, filed November 18, 2003) ("Beyer Aff.") ¶ 46. When this figure was multiplied by all defendants' sales, the result was total damages in the amount of $478 million over the full class period. Id. at ¶ 50. The settlements represent approximately 55 percent of the claimed damages, as calculated by plaintiffs' expert for the statute of limitations period, and approximately 42 percent of the damages for the full period. Fee Petition at 20.
The fact that numerous courts have approved settlements where the percent of damages was substantially lower than in this case provides objective evidence that the settlements are highly favorable. Lazy Oil Co v. Witco, 95 F. Supp.2d 290, 339 (W.D. Pa. 1997) (court approved settlement amounting to 5.35 percent of damages for the entire class period and 25.5 percent of the of the damages falling within the limitations period); In re Anthracite Coal Antitrust Litigation, 79 F.R.D. 707, 714 (M.D. Pa. 1978) (approving settlement of 28 percent of estimated damages for four years); In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 325 (N.D. 10 Ga. 1993) (court approved a combined settlement of approximately 12.7 to 15.3 percent of the estimated $2 billion minimum possible trebled recovery); Erie Forge and Steel, Inc. v. Cyprus Minerals Co., Civil No. 94-404 (W.D.Pa. Dec. 23, 1996) (approving settlement of $3.6 million where plaintiffs' expert estimated damages of $44.4 million); Fox v. Integra Financial Corp., Civil Action No. 90-1504 (W.D. Pa. July 9, 1996) (settlement of $6.5 million approved where plaintiffs' best estimate of provable damages was $33 million); In re Four Seasons Sec. Litig., 58 F.R.D. 19, 36-37 (W.D. Okla. 1972) ($8 million settlement approved although claims exceeded $100 million); Cagan v. Anchor Sav. Bank FSB, [1990 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 95,324 at 96,559, 1990 WL 73423 at *12-13 (E.D.N.Y. May 22, 1990) (approving $2.3 million settlement over objections that "best possible recovery would be approximately $121 million"); Behrens v. Wotemco Enterprises, Inc., 118 F.R.D. 534, 542 (S.D. Fla. 1988) ("The mere fact that the proposed settlement of $0.20 a share is a small fraction of the desired recovery of $3.50 a share is not indicative of an inadequate compromise"), aff'd 899 F.2d 21 (11th Cir. 1990).
In absolute terms, all claims in the class action have been resolved for a total of $202.5 million. According to a recent survey of all class actions between 1972 and 2003, the total settlements in the Linerboard litigation make this the sixth largest reported antitrust settlement. 24 Class Action Rep. 157, 169-170 (2003). The settlements are remarkable given the fact that there was no prior government action to establish liability and the case covered a relatively short conspiracy period of 26 months. Dec. in Support of Class Settlements with Stone and PCA Def. and in Support of Class Counsel's Pet. For Attorney's Fees and Costs, Exhibit 1 (Dec. of Howard Langer) at 4. Further, the settlements are to be paid entirely in cash. Id.
b. Number of Persons Benefitted
The number of persons benefitted is large, and includes all entities that purchased corrugated containers and sheets during the class period. Fee Petition at 20. The size of that population is best estimated by the number of entities that were sent the notice describing the final partial settlements — approximately 80,000 companies. Id.
Based on the foregoing, the Court concludes that consideration of the first Gunter factor — the size of the fund created and the number of persons benefitted — counsels in favor of granting the Fee Petition.
2. The Presence or Absence of Substantial Objections by Members of the Class to the Settlement Terms and/or the Fees Requested by Counsel.
Class members were advised that petitioners would apply for a fee award of up to 30 percent of the Settlement Fund and that class members had a right to object. Fee Petition at 21-22. No objections were filed. Id. The absence of objections supports approval of the Fee Petition. See, e.g., In re Cell Pathways, Inc. Sec. Litig., II, 2002 U.S. Dist. LEXIS 18359 at *24 (E.D. Pa. September 23, 2003) (existence of only one objection shows that class does not object to thirty percent requested by attorneys and supports approval of fee petition); In re Aetna Inc., Sec. Litig., 2001 U.S. Dist. LEXIS 68, at *48 (E.D. Pa. Jan. 4, 2001) ("the Class Members's view of the attorneys' performance, inferred from the lack of objections to the fee petition, supports the fee award"). While in some cases a lack of objections may reflect the absence of counsel or unfamiliarity with the legal system, in this case class members are represented by counsel. Further, the classes in this cases include many of the largest corporations in America — entities that are hardly unfamiliar with civil litigation.
Based on the foregoing, the Court concludes that consideration of the second Gunter factor — the presence or absence of substantial objections by members of the class to the settlements and/or the fees requested by counsel — supports granting the Fee Petition.
3. The Skill and Efficiency of the Attorneys Involved.
The result achieved is the clearest reflection of petitioners' skill and expertise. See In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 261 (D. Del. 2002) (Class Counsel "showed their effectiveness through the favorable cash settlement they were able to obtain"); see also, Ikon, 194 F.R.D. at 194. The size of the settlements in absolute terms and expressed as a percentage of total damages evidences a high level of skill by petitioners.
The Court's Memorandum of September 5, 2003 describes in detail designated counsel's work before the largest settlements — the PCA and Stone settlements — were reached. In re Linerboard Antitrust Litigation, 292 F. Supp.2d 644 (E.D. Pa. 2003). The Court incorporates that section of the September 5, 2003 Memorandum by reference. The Court has repeatedly stated that the lawyering in the case at every stage was superb, and does so again.
Petitioners' skill and efficiency in managing this litigation was revealed in several discrete stages: pre-filing investigation; proceedings before the Judicial Panel on Multidistrict Litigation ("JPML"); investigation leading up to the filing of the Amended Complaint and the joining of additional defendants; class certification and the discovery leading thereto; Rule 23(f) proceedings before the Third Circuit; deposition and other discovery following the Third Circuit's affirmance of this Court's class certification decision; and settlement negotiations between February and October 2003 with all defendants. Dec. in Support of Class Settlements with Stone and PCA Def. and in Support of Class Counsel's Pet. For Attorney's Fees and Costs, Exhibit 1 (Dec. of Howard Langer) at 3.
In the first phase — pre-filing investigation — liaison counsel participated in a working group of attorneys investigating the possibility of private civil actions against Stone Container Corporation following the FTC's publication for public comment of a consent decree with Stone. Id. at 4. That group ultimately disbanded without taking action. In June and July 1998, three suits were filed as class actions in the Northern District of Illinois on behalf of a limited group of purchasers of corrugated sheets from Stone. Id. According to liaison counsel, these suits were limited to purchasers of sheets because counsel filing those cases was concerned with the indirect purchaser issues raised by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).Id. That same summer, liaison counsel was approached by an attorney representing a purchaser of boxes from Stone who asked if liaison counsel would research the possibility of bringing an action on behalf of purchasers of corrugated boxes from Stone.Id. at 5. That lawyer, John Peoples, had approached other antitrust lawyers with his client's claim but they all had declined to pursue the matter. Id. Liaison counsel concluded that In re Sugar Industry Antitrust Litigation, 570 F.2d 13, 19 (3d Cir. 1978) provided a viable, if unused (in the class action context), exception to Illinois Brick under which suit could be instituted against Stone. Id.
In the second phase — early proceedings against Stone and proceedings before the JPML — the attorneys that would ultimately become the group of designated counsel filed suit against Stone on September 23, 1998, Winoff Industries v. Stone Container Corp., in the Eastern District of Pennsylvania. Id. at 7. Petitioners in Philadelphia immediately undertook to coordinate their activities with petitioners in Chicago. Id. at 8. On October 13, 1998, Stone moved before the JPML for transfer and consolidation of all suits to the Northern District of Illinois. Petitioners in Philadelphia opposed the motion to transfer to Chicago and cross-moved for transfer to, and consolidation before, this Court. Id. Argument was held before the JPML on January 29, 1999 in Fort Myers, Florida. Id. at 9. On February 12, 1999, the JPML issued its order transferring all actions to this Court for all pretrial proceedings. Id.
In the third phase — investigation leading up to the filing of the Amended Complaint and the naming of additional defendants — petitioners, prior to the transfer order issued by the JPML, organized themselves into committees and undertook different assignments related to the preparation of the Amended Complaint.Id. at 9. Attorneys were assigned to review Stone's FTC documents, research public sources, pursue third party discovery, review prior proceedings against the corrugated industry and to work with expert economists. Id.
Petitioners' handling of subpoenas at this stage serves as a simple example of the efficiency with which petitioners managed this litigation. Subpoenas were served on Stone and eleven other companies, each of which objected to the subpoena. Id. Petitioners took advantage of the geographic dispersal of counsel in moving to enforce the subpoenas. To the extent counsel in the case was located in the jurisdiction in which a subpoena was issued, that firm was assigned enforcement of the subpoena. Id.
As to other possible defendants, petitioners prepared matrices based on such facts as whether Stone documents and independent research established that a specific company had been contacted by Stone as described generally by the FTC; whether they had taken downtime; the nature of the downtime and whether the companies announced price increases at the times they were allegedly colluding. Id. As a result of that research and analysis, petitioners determined that a number of other companies should be named as defendants: Jefferson Smurfit, International Paper, Union Camp, Gaylord Container Corp., Temple Inland, Weyerhauser, Packaging Corp. of America, Tenneco, Inc., and Tenneco Packaging (as a single entity) Georgia Pacific and Simpson Tacoma Kraft Co. Id. at 10-11.
In the fourth phase — class certification and class-related discovery — petitioners established a document depository to organize and facilitate the review of the more than one million documents produced to plaintiffs. Id. at 16. According to liaison counsel, the goal of the document review was to identify from the initial production those documents that would prove most useful in establishing the criteria for class certification.Id. at 17. After several briefing sessions with selected petitioners to apprise them of the facts and theories of the case, lawyers from among petitioners were assigned to review designated categories of documents. Id. Telephone conferences and meetings were held among the petitioners reviewing the documents to assure that there was appropriate cross-communication regarding their respective research. Id. Summary memoranda were prepared and circulated. Id. Separate and apart from the review itself, Donald Perelman was assigned to incorporate all of the relevant information provided in a detailed annotated chronology that was supplemented through the course of the litigation as documents were produced. Id. This detailed chronology allowed petitioners to correlate all the information obtained from defendants in a single document so that patterns could be observed, correspondence among different defendants could be analyzed, and an overview of each defendant's role in the conspiracy could be established. Id. Prior to the class certification hearing, petitioners received and reviewed tens of thousands of documents for the purpose of adducing evidence in support of class certification. Id. at 18. There was also significant deposition discovery related to class certification. Id.
The filings related to class certification were extensive, involving hundreds of pages of briefs and many hundreds of pages of exhibits. Id. at 19. Argument on plaintiff classes' certification motion took place on August 8, 2001. Id. at 20. It extended over six hours and the transcript was 221 pages in length. Id. The Court in its Memorandum of September 4, 2001, approving class certification, cited many of the documents petitioners found in defendant's files, confirming the importance of petitioners' intense early document review. Id.
In the fifth phase — Rule 23(f) proceedings before the Third Circuit — petitioners extensively briefed the issue of class certification and ultimately secured the Third Circuit's imprimatur on plaintiff classes' theories of liability and of class-wide impact and damages. Id. at 24.
Prior to the Third Circuit's decision in this case no class certification had been affirmed by the Third Circuit on Rule 23(f) appeal. Id. The defendants retained Kenneth Starr, a former Solicitor General of the United States and a former Judge of the United States Court of Appeals for the D.C. Circuit to oversee and argue the appeal. This fact is significant because the quality and vigor of opposing counsel is relevant in evaluating the quality of plaintiffs' counsel. See, e.g., Ikon, 194 F.R.D. at 194; In re Warner Communications Sec. Litig., 618 F. Supp. 735, 749 (S.D.N.Y. 1985); Arenson v. Board of Trade, 372 F. Supp. 1349, 1354 (N.D. Ill. 1974). On September 5, 2003, the Third Circuit issued its decision affirming this Court's class certification ruling. Id.
In the sixth phase — deposition discovery after the Third Circuit's affirmance — petitioners deposed 70 employees and former employees of defendants and third parties. Id. at 30. A small group of 18 senior lawyers from among petitioners was chosen to take the depositions. Id. All these attorneys were required to attend a day long seminar presented by Martin Twersky, Esquire. Id. The seminar utilized films produced by defendants and obtained from third parties to provide the attendees with a virtual tour of box plants and mills. Id. Procedures were put into place to assure that information gained at one deposition was shared with all those petitioners taking depositions. Id. This was done by circulating memoranda and having regular conference calls among petitioners. Efforts were also made to take less important depositions first in order to allow counsel to develop expertise in deposing defendants' witnesses. Id. In addition, this procedure provided an added benefit — by the time key senior officials' depositions were taken a record existed against which their testimony could be tested. Id. Counsel also took the depositions of less important witnesses by video conference and telephone to reduce the cost of litigation. Id. at 31.
In the seventh phase of the litigation — settlement negotiations between February and October 2003 — petitioners reached a series of partial settlements with groups of defendants that ultimately resolved all claims in the class case. Efforts at settlement began at the outset of the case but were unsuccessful.Id. at 49. During the period between the Court's decision certifying the classes and the Third Circuit's order granted interlocutory review, petitioners established a target for global settlement. Id.
Following the Third Circuit decision, liaison counsel recommenced discussions with Temple Inland/Gaylord. Petitioners believed that Temple Inland/Gaylord was a natural partner for an initial "ice breaker" settlement that would include a commitment from the settling defendant(s) to cooperate with plaintiff classes as they prosecuted their case against the other defendants. Id. at 51. Temple Inland/Gaylord was independently represented by Philadelphia counsel. Id. It was viewed as a second tier producer. Further, there was considerable ambiguity regarding its potential liability. Id. Temple Inland had acquired Gaylord during the course of the litigation and the evidence against Gaylord was stronger than against Temple Inland but its market share was much smaller. According to petitioners, their strategy was to offer a settlement low enough to entice Temple Inland/Gaylord to break ranks with the other defendants but high enough to represent a genuine threat to the other defendants. Id. at 53. Ultimately the parties agreed on $8 million and the Court approved the Temple Inland/Gaylord settlement on August 26, 2003. Id.
After notice of the class certification and the Temple Inland/Gaylord settlement was sent to potential class members, entities representing approximately 25 percent of the sales to the classes opted-out. Id. at 54. As the Court noted in its Memorandum of September 5, 2003, the large number of opt-outs at such a late stage was unusual. Id. None of the major corporations included in the classes opted out at or near the outset of the case. Id. at 54-55. Petitioners argue that this was due to the high risk of nonpayment in the early stages of the litigation that was significantly ameliorated by petitioners' stewardship of the case through the Third Circuit's decision affirming this Court's class certification order. Id. at 55.
After a mediation session before the Honorable Lowell A. Reed on June 17, 2003, counsel for International Paper and Union Camp asked petitioners about further settlement discussions. Id. They proposed that the class negotiate with them and two other defendants, Georgia Pacific and Weyerhauser. Id. Counsel for these companies believed their clients formed a natural group because the liability case against them developed through discovery was materially weaker than that against the remaining defendants. Id. After several fruitless rounds of negotiations in which defendants pursued a settlement that was only slightly larger than the Temple Inland/Gaylord settlement, petitioners and counsel for International Paper, Union Camp, Georgia Pacific and Weyerhauser reached a settlement of $68 million that was approved by the Court on December 8, 2003.
Two groups of defendants remained in the case at that stage of the litigation, Packaging Corporation of America, Tenneco, Inc., and Tenneco Packaging, Inc. ("PCA defendants") and Stone Container Corporation, Jefferson Smurfit Corporation, and Smurfit Stone Container Corporation ("Stone defendants"). Id. at 57. The sales of these defendants represented 44 percent of the total sales of all defendants in the case. Id. Stone and Jefferson Smurfit merged in 1998 so any settlement with them would have to include both companies — a fact that complicated petitioners' task because the liability case against Stone and Jefferson Smurfit was not of equal strength. Id. Settlement negotiations with the PCA defendants began shortly after the settlements with International Paper, Union Camp, Georgia Pacific and Weyerhauser became public. Id. at 58. While these negotiations were proceeding, special settlement counsel for the Stone defendants contacted petitioners. Settlements with both groups of defendants, the PCA defendants and the Stone defendants, were reached on October 28 and 29 respectively. Id. The Court approved those settlements on March 21, 2004.
Throughout every phase of the litigation petitioners managed a major discovery effort, managed on a day-to-day basis by Martin Twersky and Robert LaRocca. Id. at 25. In terms of document discovery alone, defendants produced more than 430 boxes of documents containing more than one (1) million pages of records.Id. This effort required the single largest expenditure of petitioners' time and resources and provides further evidence of their skill in managing this litigation. Id. As an example of what was accomplished, on November 15, 2002, a day long meeting of senior counsel for all parties occurred where the parties agreed on a basic framework for document discovery such as: (1) the discovery period; (2) production by defendants of electronic records of transactions at their mills and box plants, instead of hard copy invoices and purchase/sales records; (3) defendants agreement to search headquarters, regional offices and elsewhere for documents; (4) defendants agreement not to rely on categories of discovery they declined to produce; and (5) issues related to interrogatories and document requests. Id. at 27. According to liaison counsel, following this meeting discovery began in earnest. Id.
Petitioners management of discovery disputes provides further evidence of their skill and efficiency in managing this litigation. Throughout the litigation, the Court urged counsel to seek informal resolution of discovery disputes whenever possible and petitioners expended a great deal of time and effort to this end. Id. at 44. For example, more than 750 letters and e-mails were exchanged between petitioners and defense counsel seeking to resolve discovery issues. Id. Most of these informal efforts at resolution have proved successful and the Court's involvement has only been required on a few occasions. Id.
Based on the foregoing, the Court concludes that consideration of the third Gunter factor — the skill and efficiency of the attorneys involved — counsels in favor of granting the Fee Petition.
4. The Complexity and Duration of the Litigation.
As to the complexity of the case, "[a]n antitrust class action is arguably the most complex action to prosecute." In re Motorsports Merchandise Antitrust Litig., 112 F. Supp.2d 1329, 1337 (N.D. Ga. 2000); see also In re Shopping Carts Antitrust Litig., MDL No. 451, 1983 WL 1950, at *7 (S.D.N.Y. Nov. 18, 1983) (noting that ". . . antitrust price fixing actions are generally complex, expensive and lengthy" (citing Grinnell, 495 F.2d at 467-68)). "The legal and factual issues involved are always numerous and uncertain in outcome." In re Motorsports, 112 F. Supp.2d at 1337. This litigation was no exception.
As to the duration of the litigation, the case is now in its sixth year and were it to go to trial it could continue for any number of years. The Court notes that there is authority for approving a 30 percent fee in litigation that concluded much earlier in the proceeding. E.g., In re Ikon Office Solutions Inc. Securities Litigation, 194 F.R.D. 166, 194 (E.D.Pa. 2000) (awarded attorneys 30 percent of $111 million settlement after one and a half years of litigation).
Based on the foregoing, the Court concludes that consideration of the fourth Gunter factor — the complexity and duration of the litigation — counsels in favor of granting the Fee Petition.
5. The Risk of Nonpayment.
Petitioners faced significant risks of nonpayment. First, the FTC investigation into Stone had been, according to Professor Lawrence Sullivan, an antitrust expert whose declaration petitioners offered in support of the Fee Petition, "at the cutting edge of single firm antitrust liability." Dec. in Support of Class Settlements with the Stone and PCA Defendants and in Support of Class Counsels' Petition for Attorneys' Fees and Costs, Certification of Professor Lawrence Sullivan ¶ 5. As Professor Sullivan explains
To my knowledge there has never been a successfully litigated antitrust claim of a single firm attempt to conspire to raise prices or reduce out-put based solely, or even primarily, on market conduct by the defendant firm. Indeed, except for FTC's . . . Stone Container Corporation investigation (In the Matter of Stone Container Corp., Docket No. C-3806 (FTC, May 1998) there never appears to have been an allegation of an attempt so to conspire based solely on market conduct evidence . . . In Stone Container, the dissenting statement of Commissioner Swindle serves to emphasize that the Commission's market conduct allegations were far afield from conventional antitrust theories of liability.Id.
Second, petitioners did not benefit from the fruits of a prior government investigation or prosecution. The Second Circuit has held that to assess risk in antitrust class actions: "[T]he only truly objective measurement of the strength of plaintiffs' case is found by asking: `Was defendants' liability prima facie established by the government's successful action?'" Grinnell, 495 F.2d at 455. In this case the answer to that question is no. The FTC did not file an action against, or even identify, any market participant other than Stone. Further, the FTC investigation went no further than Stone's alleged invitation to conspire. Id. at ¶ 6.
Third, prior to this case no court had ever certified a class based entirely on the exception to Illinois Brick v. Illinois, 431 U.S. 720 (1977) announced by the Third Circuit in In re Sugar Industry Antitrust Litigation, 579 F.2d 13 (3d Cir. 19778). This Court addressed this issue at length in its Memorandum of September 4, 2001 certifying the classes. InIllinois Brick, the Supreme Court ruled that only a direct purchaser, and not others in chain of manufacturing or distribution, is a party "injured in his business or property" within meaning of the Clayton Act. 431 U.S. at 736. The Third Circuit, in Sugar ruled that if plaintiffs purchased items which incorporated a price-fixed item obtained directly from the producer, suit was not barred by the Illinois Brick decision.Sugar, 579 F.2d at 17. Sugar, however, addressed only the issue of individual standing, and not class standing, underIllinois Brick. Playing off that distinction, defendants argued that the tracing of damages from one level to another complicated proof of impact and damages such that class proceedings were impracticable. Defendants arguments were rejected both by this Court and the Third Circuit.
Fourth, defendants stated their intention to exploit at trial several perceived weaknesses in plaintiff classes' evidence of liability. There is no direct evidence of any meeting at which defendants agreed to take downtime or to raise prices and there was no direct evidence of conversations in which one conspirator agreed with another to take reciprocal downtime. In addition, as the Court discussed in its Memorandum of December 8, 2003, the reduction in production caused by the alleged conspiratorial downtime accounted for a small quantity of linerboard. During the class period, October 1, 1993 through November 30, 1995 linerboard production by all defendants totaled 20,000,000 tons per year. Therefore, the alleged conspiratorial downtime during that period produced a decease in production of 385,000 to 435,000 tons, or approximately 1 percent of production.
Moreover, in the period of alleged conspirational activity, the cost of pulp and old corrugated containers — the primary input costs of containerboard — rose at unprecedented rates. Demand also rose during the period in question and defendants' production was unable to meet this increase. The latter fact is explained in part by low prices in the 1980s and early 1990s that led to low returns on investment in additional capacity and thus reduced investment in additional capacity. Defendants could have argued that it was this lack of capacity, not collusion, that prevented defendants from meeting this increased demand In sum, defendants would have been able to argue that these two economic forces — sharply rising costs and increased demand — led to the steep price increases not the allegedly collusive downtime in 1993.
Based on the foregoing, the Court concludes that consideration of the fifth Gunter factor — the risk of nonpayment — counsels in favor of granting the Fee Petition.
6. The Amount of Time Devoted to the Case by Plaintiff's Counsel
Petitioners expended 51,268 hours on this litigation. See, Langer Summary Declaration, at ¶¶ 6-11 and Declaration of David White, CPA. They reported that more than 200 lawyers worked on the case over the six years of litigation. This group can be subdivided according to number of hours spent: (1) thirty-six lawyers reported between 100 and 500 hours: (2) seventeen lawyers reported between 500 and 1,000 hours; (3) six lawyers reported between 1,000 and 2,000 hours — this included members of the core team of lawyers that managed the litigation; (4) Liaison counsel and Robert LaRocca expended over 2,500 hours — they are the only lawyers on the case who reported more than 2,000 hours of recorded time.
The Court makes several observations about this distribution of attorneys' time expended in the case. First, the number of lawyers with less than 1,000 hours reflects the fact that the defendants were assigned to teams of junior lawyers to review documents and senior lawyers to take depositions. Second, the small group of lawyers with the most hours are the lawyers who managed the litigation.
While the total number reported — 51,268 hours — is obviously substantial, through effective management petitioners held down the number of hours and other resources required to effectively prosecute the case. Fee Petition at 22. Fewer hours of attorney time were expended in this case than in comparable litigation. For instance, In re Flat Glass involved fewer defendants and more firms and the fee petition covered 83,067 hours. In re Commercial Tissue Antitrust Litigation involved a comparable number of defendants, a similar industry, a conspiracy covering a similar time period and was resolved at a comparable stage but the fee petition covered 87,849 hours excluding time expended by the Attorney General of Florida in a separate action which was consolidated with the class action. Id. This development should be rewarded when it reflects, as in this case, the efficiency of counsel in maximizing total recovery to the class by minimizing attorneys' fees expenses.
Based on the foregoing, the Court concludes that consideration of the sixth Gunter factor — the amount of time devoted to the case by petitioners — counsels in favor of granting the Fee Petition.
7. The Awards in Similar Cases
The 30 percent fee is comparable to fees approved in the four most recent horizontal price fixing cases. In re Busiprone Patent Antitrust Litigation, 01-MD-1410 (S.D.N.Y. April 11, 2003) in which the court awarded class counsel in an early settlement one-third of a class action settlement of $200 million; In re Vitamins Antitrust Litigation, 2001 WL 34312839 (D.D.C. July 16, 2001) in which the court awarded counsel 34.6 percent of $365 million in an early settlement of a case in which there had been a prior government criminal investigation and prosecution; In re Cardizem CD Antitrust Litigation, MDL 1278 (E.D. Mi. November 26, 2002) in which the court awarded 30 percent of a settlement fund of $110 million; and In re Lease Oil Antitrust Litigation, 186 F.R.D. 403 (S.D. Tex. 1999) in which the court awarded 25 percent of $190 million settlement.
The Third Circuit in Cendant Prides, a securities case, looked to cases of similar size, not necessarily similar subject matter, when it analyzed the "awards in similar cases" prong of the Gunter analysis. 243 F.3d at 737. Many of the decisions cited by the Third Circuit involved settlements similar in size to the settlement in this litigation and the courts awarded fees in those cases comparable to the 30 percent fee requested by petitioners.In re Ikon Office Solutions Inc. Securities Litigation, 194 F.R.D. 166 (E.D.Pa. 2000) (30 percent of $111 million); In re Rite Aid Corporation Securities Litigation, 146 F. Supp.2d 706 (E.D. Pa. 2001) and 269 F. Supp.2d 603 (E.D. Pa. 2003) (25 percent of $193 million); In re Prison Realty Securities Litigation, C/A No. 3:99-0458 (M.D. Tenn. February 9, 2001) (30 percent of $111 million); In re Prudential Securities, Inc. Ltd. Partnership Litigation, 912 F. Supp. 97 (S.D.N.Y. 1996) (27 percent of $110 million); Kurzwell v. Philip Morris, Co., 1999 WL 1076105 (S.D.N.Y. 1999) (30 percent of $123.8 million); In re Sumitomo Copper Litigation, 74 F. Supp.2d 393 (S.D.N.Y. 1999) (27.5 percent of $116 million); In re Combustion, Inc., 968 F. Supp. 1116 (W.D.La. 1997) (36 percent of $127 million); see generally, 24 Class Action Rep. 169-170 (2003) (survey of all class action fee awards from 1973-2003).
The above figures are in accord with a recent Federal Judicial Center study that found that in federal class actions generally median attorney fee awards were in the range of 27 to 30 percent. See Dec. of Prof. Stephen Saltzburg at ¶ 26 (quoting Dunbar, et al., Recent Trends IV: What Explains Filings and Settlements in Shareholder and Class Actions (NERA, 1996) at 12-13). More specifically, recent empirical data analyzing fee awards in securities cases indicates that "regardless of size, fees average 32 percent of the settlement. See Dec. of Prof. Stephen Saltzburg at ¶ 26 (quoting Dunbar, et al., Recent Trends IV: What Explains Filings and Settlements in Shareholder and Class Actions (NERA, 1996) at 12-13).
In Cendant Prides, the Third Circuit, after engaging in a review of common fund cases that produced a range of fee awards from 2.8 to 36 percent of the total settlement, noted the following common factors in those cases: "complex and/or novel legal issues, extensive discovery, acrimonious litigation, and tens of thousands of hours spent on the case by class counsel." 243 F.3d at 741. There are two recent cases that exhibit these characteristics and many of the same characteristics of the present litigation, and produced fee awards at the high end of this range — Lease Oil and Ikon Office Solutions. In Lease Oil, where the district court awarded a 25 percent fee, the court explained:
As well as being novel, this litigation was highly complex and thus required a great deal of lawyering skill. As just explained, the task of simply compiling the evidence was an unusually difficult task, requiring the assistance of experts and the investment of many hours. Also, being novel, the legal issues raised in the litigation required skilled attorneys to handle them.Cendant Prides, 243 F.3d at 738 (citing Lease Oil, 186 F.R.D. at 445). In In re Ikon Office Solutions, the district court granted a 30 percent fee request because, inter alia, "[c]ounsel expended more than 45,000 hours on this case and paid out expenses of more than $3 million with no guarantee of recovery," the case presented "the legal obstacles of establishing scienter, damages, causation and like" and "derivative counsel fees will be taken from this amount."Cendant Prides, 243 F.3d at 738 (citing In re Ikon Office Solutions, 194 F.R.D. at 194). Notwithstanding those legal obstacles, Ikon Office Solutions lacked a number of the risks present in this case. For example, in Ikon Office Solutions, the parties stipulated to class certification. 194 F.R.D. at 171. Moreover, the result in Ikon Office Solutions was not nearly as favorable as the result in this case — the settlement in that case represented between 5.2 percent and 8.7 percent of the out of pocket damages. In comparison, as discussed above, the settlements in this case represent 55 percent of the claimed damages, as calculated by plaintiffs' expert for the statute of limitations period, and approximately 42 percent of the damages for the full class period. Fee Petition at 20. Lastly, by the time of final approval of the settlement, the case in Ikon Office Solutions had only been pending for one and half years.
Petitioners' requested fee is similar to fees awarded for cases like Linerboard in the private market. The three expert declarations, that of Professor Saltzburg, who undertook a study of these mattes as co-chair of the Third Circuit Task Force on the Selection of Class Counsel; that of Jerome J. Shestack, a former president of the American Bar Association who has specialized in representing clients in major litigation; and that of Richard Arnold, the co-liaison counsel for the direct action plaintiffs in this litigation, who has specialized in representing large corporations in major antitrust litigation, all confirm that the 30 percent sought is at or below the market rate. Fee Petition at 55. These declarations are consistent with the conclusion reached by the special master appointed by Judge Dalzell in U.S Bioscience to determine the market rate for fees in a complex litigation posing less risk of nonpayment than the current case:
After reviewing all the materials outlined above, it is the considered view of the Special Master that in light of the contingency fee practices in the district, the type of class action litigation at issue here; the nature of this case, including the facts known at the outset of the litigation (that is, at the point when advance "negotiating" might have occurred); and the outstanding performance of plaintiffs' counsel, a contingency fee of 30 percent of the settlement fund, plus all expenses, should be awarded.In re U.S. Bioscience Securities Litig., 1994 WL 485935, at *15 (E.D. Pa. 1994).
What the market would pay is significant because, as the Seventh Circuit has explained, the goal of the fee setting process it to "determine what the lawyer would receive if he were selling his services in the market rather than being paid by Court Order." In re Continental Ill. Sec. Litig., 962 F.2d 566, 568 (7th Cir. 1992); see also, In re RJR Nabisco Sec. Litig., MDL No. 818, 1992 U.S. Dist. LEXIS 12702 at *20 (S.D.N.Y. Aug. 24, 1992) ("What should govern such [fee] awards is not the essentially whimsical view of a judge, or even a panel of judges, as to how much is enough in a particular case, but what the market pays in similar cases).
Based on the foregoing, the Court concludes that consideration of the seventh Gunter factor — the awards in similar cases — counsels in favor of granting the Fee Petition.
B. THE REQUESTED FEE IS REASONABLE UNDER A LODESTAR CROSS-CHECK
While the Court adopts the percentage of recovery method, the Court will also subject petitioners' proposed fee to a cross-check using the lodestar method. Cendant Prides, 243 F.3d at 742 ("we have suggested that district courts cross-check the percentage award at which they arrive against the lodestar method"); 2002 Task Force Report at Fn. 313. The Court emphasizes that this is only a cross-check and not a full lodestar analysis.see, e.g., DiGiacomo v. Plains All American Pipeline, Civ. No. H-99-4137, at 23 (S.D. Tex. 2001) (Court conducts a lodestar crosscheck but notes that it "will not conduct a detailed analysis of charged hours and hourly rates" because to do so "would undermine the utility of the percentage method").
To apply the lodestar method, the Court must examine the number of hours petitioners worked and the rate for these lawyers' services, and multiply the number of hours worked by the hourly rate. The Court may also multiply the hourly rate by a factor (a lodestar "multiplier") to reflect the risks of nonpayment facing counsel, to serve as an incentive for counsel to undertake socially beneficial litigation, or as a reward to counsel for an extraordinary result. In re Prudential, 148 F.3d at 340-341.
Petitioners have reported to the Court spending 51,268 hours on the litigation. Fee Petition at 62. Petitioners have also reported an average mixed hourly rate of senior counsel of $440.00. Based on these two figures, the lodestar under the formula adopted by the Third Circuit in In In re Cendant Corporation Prides Litigation, 243 F.3d 722 (3d Cir. 2001) — taking the hourly rates of the most senior lawyers in the case and multiplying them by the total hours incurred by attorneys who worked the case — would be $22,557,920. Given the fee petitioners have requested, the multiplier under the Cendant Prides formula is 2.66.
In addition to the Cendant Prides formula, courts use a "historic lodestar method", by which hours expended by each attorney are grouped into historical time periods and multiplied by that attorney's hourly rate for that time period, and the "current lodestar method", by which total hours expended by each attorney are multiplied by that attorney's hourly rate at the conclusion of the case. See, e.g. Missouri v. Jenkins, 491 U.S. 274, 283-84 (1980); New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1153 (2d Cir. 1983). Petitioner's requested fee produces a multiplier of 4.08 using the historic rate calculation and 3.67 using the current rate calculation. Fee Petition at 63.
In Cendant Prides, the Third Circuit ruled that a multiplier of 3 was the appropriate ceiling using the average rate of senior counsel method based. 243 F.3d at 742. In Prudential, the Third Circuit noted, based on a similar review of common fund cases, "[m]ultipliers ranging from one to four are frequently awarded in common fund cases when the lodestar method is applied. In re Prudential, 148 F.3d 283, 341 (3d Cir. 1998) (quoting 3 Herbert Newberg Alba Conte, Newberg on Class Actions, S 14.03 at 14-5 (3d ed. 1992). Clearly, 2.66 falls below the ceiling set by the Court in Cendant Prides and falls within the range the Court identified in In re Prudential. The Court also notes that during 2001-2003, the average multiplier approved in common fund class actions was 4.35 and during 30 year period from 1973-2003, average multiplier approved in common fund class actions was 3.89. Stuart J. Logan, et al., Attorney Fee Awards in Common Fund Class Actions, 24 Class Action Reports 167 (2003).
For all of the foregoing reasons, the Court concludes that the requested fee of 30 percent is reasonable when measured by the lodestar cross-check
C. THE COURT DOES NOT DEEM IT APPROPRIATE TO REDUCE THE 30 PERCENT FEE REQUEST BY UTILIZING A SLIDING SCALE FORMULA
Some courts have applied a "sliding scale" approach to fee awards, granting smaller fee awards as the size of the common fund increases. The Third Circuit in In re Prudential presented one argument for such an approach: "[t]he basis for this inverse relationship is the belief that [i]n many instances the increase [in recovery] is merely a factor of the size of the class and has no direct relationship to the efforts of counsel." 148 F.3d at 339.
One might argue that a fee award of 30 percent of settlements in excess of $200 is excessive given the absolute figure, approximately $60 million, that such an award produces. The Court rejects that thinking in this case because the highly favorable settlement was attributable to the petitioners' skill and it is inappropriate to penalize them for their success.
Moreover, the sliding scale approach is economically unsound. This Court agrees with Judge Easterbrook's conclusion inSynthroid Marketing Litig., a case in which the Seventh Circuit overruled a district court's application of a declining fee structure, that reducing fees for large awards is economically irrational:
The district judge defined megafunds as settlements of $75 million and up. Fees in "megafund" cases should be capped at 10% of the recovery, the judge held, although she recognized that fees of 30% are more common and proper in smaller cases. This means that counsel for the consumer class could have received $22 million in fees had they settled for $74 million but were limited to $8.2 million because they obtained an extra $14 million for their clients (the consumer fund, recall, is $88 million). Why there should be such a notch is a mystery. Markets would not tolerate that effect.Id. The Court also agrees with the Ikon Office Solutions court that:
It is difficult to discern any consistent principle in reducing large awards other than an inchoate feeling that it is simply inappropriate to award attorneys' fees above some unspecified dollar amount, even if all the other facts ordinarily considered relevant in determining the percentage would support a higher percentage. Such an approach also fails to appreciate the immense risks undertaken by attorneys in prosecuting complex cases in which there is a great risk of no recovery. Nor does it give sufficient weight to the fact that large attorneys fees serve to motivate capable counsel to undertake these actions.194 F.R.D. at 197 (cited with approval in In re Cendant Corp. Sec. Litig., 109 F. Supp.2d at 294-295).
The latter point quoted from Ikon Office Solutions — providing sufficient incentive to attorneys to undertake class actions — is particularly important in antitrust cases. As the Second Circuit has explained, the incentive for "the private attorney general" is particularly important in the area of antitrust enforcement because public policy relies so heavily on such private action for enforcement of the antitrust laws.Alpine Pharmacy, Inc. v. Chas. Pfizer Co., Inc., 481 F.2d 1045, 1050 (2d Cir.) cert denied sub nom., Patlogan v. Dickstein, Shapiro and Galligan, 414 U.S. 1092 (1973) (citations omitted).
D. THE COURT APPROVES THE AGGREGATE FEE AMOUNT WITH ALLOCATIONS TO SPECIFIC FIRMS TO BE DETERMINED BY LIAISON COUNSEL
The Court approves the joint fee petition for all petitioners with specific allocations to firms to be determined by liaison counsel. The Court notes that all petitioners have been advised of and have agreed to this procedure. Since the procedure was first utilized in In re Magic Market Securities Litigation, 1979 U.S. Dist. LEXIS 9777 (E.D. Pa. 1979), submission of a combined fee application with actual allocation to be made by lead counsel has generally been adopted by the courts. See, e.g., In re Diet Drugs Products Liability Litig., 2002 U.S. Dist. LEXIS 19396, at *10 (E.D. Pa. Oct. 3, 2002); see also, In re Flat Glass Antitrust Litig., MDL No. 1200 (W.D. Pa. May 28, 2002).
Liaison counsel has led the case from its inception and is the attorney "better able to describe the weight and merit of each [counsel's] contribution, In re Diet Drug Litig., 2002 U.S. Dist. LEXIS 19396 (E.D.Pa. Oct. 3, 2002). Likewise, from the standpoint of judicial economy, leaving allocation to such counsel makes sense because it relieves the Court of the "difficult task of assessing counsel's relative contributions."In re Prudential, 148 F.3d at 329 n. 96.
The Court notes that a Pennsylvania state court action has been filed against designated counsel and removed to this Court,Richard Golomb, Ruben Honik and Golomb Honik, P.C. v. Howard Langer and Langer Grogan, P.C., No. 04-2321, filed May 27, 2004. The parties in that litigation have raised no objections to the issuance of this Memorandum at this time.
E. PETITIONERS ARE ENTITLED TO REIMBURSEMENT OF LITIGATION AND SETTLEMENT EXPENSES FROM THE SETTLEMENT FUND
The Court has reviewed the expenses advanced by counsel and concludes they were reasonable and necessary to the prosecution of the case. Therefore, the Court will order that petitioners be reimbursed for these expenses from the Settlement Fund. See, e.g., Danny Kresky Enter. v. Magid, 716 F.2d 215, 219-220 (3d Cir. 1983); In re Chambers Dev. Secs. Litig., 912 F. Supp. 852, 863 (W.D. Pa. 1995) ("Plaintiffs' counsel also are entitled to be reimbursed for all reasonable expenses necessary for the successful prosecution of this litigation).
F. PETITION FOR PAYMENT OF INCENTIVE FEES TO THE FIVE CLASS REPRESENTATIVES
The Court also writes at this time in ruling on class counsel's unopposed Petition for Payment of Incentive Fees to the Five Class Representatives (Docket No. 301, filed February 2, 2004) ("Incentive Fee Petition"). Petitioner have requested $25,000 for each of the five representatives of the classes and the Court concludes that such an award is appropriate.
The three Class Representatives on behalf of the Box Class are Garrett Paper, Inc., Local Baking Products, Inc., and Oak Valley Farms, Inc. General Refractories Co. and Albert I. Halper Corrugated Box Company are the representatives for the sheet class. Two other plaintiffs, a box purchaser, Winoff Industries, and a sheet purchaser, Crest Meat Co., voluntarily dismissed their complaints.
The Court finds ample authority in this district and in other circuits for such an incentive award. Tenuto v. Transworld Systems, Inc., No. Civ. A 99-4228. 2002 WL 188569 (E.D. Pa. Jan. 31, 2002); In re Residential Doors Antitrust Litigation, Nos. 93-3744, Civ. A. 96-2125, 1998 WL 151804, *8 (E.D. Pa. April 2, 1998); Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1999); In re Lease Oil Antitrust Litigation, 186 F.R.D. 402, 229 (S.D. Tex. 1999); In re Domestic Air Transp. Antitrust Litigation, 148 F.R.D. 297, 357 (N.D. Ga. 1993).
Like the attorneys in this case, the class representatives have conferred benefits on all other class members and they deserve to be compensated accordingly. In re Plastic Tableware Antitrust Litigation, No. 94-CV-3564, 2002 WL 188569 (E.D.Pa. Dec. 4, 1998) ("Payments to class representatives may be considered a form of restitutionary relief within the discretion of the trial court . . . They may also be treated as a reward for public service and for the conferring of a benefit on the entire class"). Such awards are particularly appropriate in this case because there was no preceding governmental action alleging a conspiracy and taking a high-profile role threatened to jeopardize class representatives relationships with their suppliers. Cullen v. Whiteman Medical Corp., 197 F.R.D. 1236 (E.D. Pa. 2000) ("[c]ourts routinely approve incentive awards for the services they provide and the risks they incurred during the course of the class action litigation").
The five class representatives performed considerable work advancing the litigation. Each of the class representatives provided verified answers to interrogatories and produced documents in response to document requests. Incentive Fee Petition 5. Each of them also expended time in preparing for depositions and gave testimony at depositions. Id. Finally, Judge Reed required that representatives of each class be present at the initial mediation sessions. Id.
Lastly, the Court notes that the amount requested, $25,000, is comparable to incentive awards granted by courts in this district and in other circuits. See, e.g., In re Graphite Electrodes Antitrust Litigation, MDL No. 1244 (E.D.Pa. Order of September 8, 2003) ($80,000); Bogosian v. Gulf Oil Corp., 621 F. Supp. 27 (E.D. Pa. 1985) ($20,000); In First Jersey Securities, Inc., MDL No. 681 (E.D. Pa. 1989) ($24,000); In re Revco Securities Litigation, Nos. 851 89 CV 593, 1992 WL 118800 (N.D. Ohio May 6, 1992) ($90,000); In re Busiprone Antitrust Litigation, MDL No. 1413 (S.D.N.Y. Order of April 7, 2003) ($25,000); Brotherton v. Cleavland, 141 F. Supp.2d 907 (S.D. Ohio 2001) ($50,000); In re Cardizem CD Antitrust Litigation, MDL No. 1278 (S.D. Mich., Order of Nov. 26, 2002) ($20,000).
IV. CONCLUSION
For the foregoing reasons, the Court concludes that consideration of the seven Gunter factors counsels in favor of awarding petitioners their requested fee. Accordingly, the Court grants Plaintiff Counsel's Petition for Award of Attorneys' Fees and Reimbursement of Expenses and awards petitioners 30 percent of the Settlement Fund and reimbursement of expenses totaling $1,391,203.36.
In addition, the Court concludes that petitioners' request for payment of $25,000 to each of five named plaintiffs is appropriate. Accordingly, the Court grants class counsel's unopposed Petition for Payment of Incentive Fees to the Five Class Representatives.
An appropriate Order follows.
ORDER
AND NOW, this 2nd day of June, 2004, upon consideration of Class Counsels' Revised Memorandum of Law in Support of Petition for Award of Attorneys' Fees and Reimbursement of Expenses (Document No. 320, filed March 18, 2003) ("Fee Petition"), Declarations in Support of Class Settlements with the Stone and PCA Defendants and in Support of Class Counsels' Petition for Attorneys' Fees and Costs (docket no. 302, filed February 2, 2004), Declaration of Stephen A. Saltzburg in Support of Plaintiffs' Petition for an Award of Attorneys Fees (docket no. 304, filed February 2, 2004), Appendix of Declarations by Counsel for the Class in Support of Petition for Counsel Fees and Reimbursement of Cost Disbursements (docket no. 305, filed February 2, 2004) and Supplemental Affidavit of David. J. White, CPA, Regarding Attorneys' Time and Expense Summaries for and Through December 2003, and Litigation Fund Expenses From February 1, 2004 through March 17, 2004 (docket no. 321, filed March 18, 2004) and following a hearing on March 26, 2004, IT IS ORDERED that class counsel's Fee Petition is GRANTED and the Court AWARDS a counsel fee of 30 percent of the total settlements of $202,572,489 ("Settlement Fund") to all counsel with allocations to specific firms to be made by liaison counsel, Howard Langer, Esquire, and reimbursement of expenses in the total amount of $1,391,203.36.IT IS FURTHER ORDERED that class counsel's unopposed Petition for Payment of Incentive Fees to the Five Class Representatives (Docket No. 301, filed February 2, 2004) is GRANTED and the Court AWARDS $25,000 payable from the Settlement Fund to each of the five class representatives: Garrett Paper, Inc., Local Baking Products, Inc., Oak Valley Farms, Inc., General Refractories Co. and Albert I. Halper Corrugated Box Company.