AppendixCal. Super. - 6th Dist.March 9, 2015\OOONONU‘I-AUJNH NNNNNNNNNHt-IHh-Hh-dwp-Ap-Ap- OONONMhUJN-‘OKOOONONMAUJNr-‘O JAMES L PAGANO, ESQ. (Cal State Bar N0 098185) El" H -- u, IAN A KASS, ESQ (Cal State Bar N0 184480) W r‘ PAGANO & KASS, APC 96 North Thlrd Street, Sulte 525 San Jose, Callforma 951 12 Telephone (408) 999-5678 Fac51mile (408) 999-5684 Attorneys for Defendant, Paéano & Kass, PC IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA DAVID MARKEVITCH, an 1nd1v1dual, Case N0 1-15-CV-277789 Plalntlff, V PAGANO & KASS, PC, a Professmnal Corporatlon, and DOES 1 through 50, Date October 28, 2016 Incluswe, Tlme' 9:00 a m Dept 4 Defendants Judge Hon Derek Woodhouse COMES NOW, Defendant, PAGANO & KASS, PC (“P&K”), and, 1t hereby requests that thls Court con51der, and take Jud101al notlce of, the followmg non-Callfomla legal authorlty, copies 0f wh1ch are attached hereto and, by thls reference, fully Incorporated herem, when 1t considers Its “Motion for a Judgment N0tw1thstand1ng the Verdlct ” IN AND FOR THE COUNTY OF SANTA CLARA APPENDIX OF NON-CALIFORNIA LEGAL AUTHORITY IN SUPPORT OF MOTION FOR A JUDGMENT NOTWITHSTANDING THE VERDICT / Exh App-l Federal Rules of C1v11 Procedure, Rule 23. Exh App-2 In re FPI/Agretech Securitzes thigatzon‘(9‘h C1r‘ 1997) 105 ‘F 3d 469 Exh App-3 In re TFT-LCD (Flat Panel) Antztrust thigatzon (N D Cal. 2013) 2013 WL 1365900 Exh App-4 SJ Amoroso Const. C0., Inc. v. Executive Risk Indem, Inc. (N D Cal 2009) 2009 WL 4907736. WHEREFORE, P&K hereby respectfully requests that thls Court conhider and take jud1C1al notlce of the referenced legal authorlty attached hereto when 1t c0n51ders 1ts Motion for a Judgment APPENDIX OF NON-CALIFORNIA LEGAL AUTHORITY IN SUPPORT OF MOTION FOR A JUDGMENT NOTWITHSTANDING THE VERDICT a m 1Qumwm. > \OOOQQLIIAWNv-A NNNNNNNNNHHt-It-In-Aw-AHHp-AH OONONUl-waflooooflQmAWNHO i Notwithstanding the Verdict. Dated: September 29, 2016 PAGANO & KASS, APC flé’? 55% Am ":IAMES L. PAGANO, Esq., Attorneys for Defendant, Pagano & Kass, PC APPENDIX OF NON-CALIFORNIA LEGAL AUTHORITY IN SUPPORT OF MOTION FOR A JUDGMENT NOTWITHSTANDING THE VERDICT 2 EXHIBIT “App-l” Rule 23. Class Actions, FRCP Rule m United States Code Annotated Federal Rules of Civil Procedure for the United States District Courts (Refs & Annos) Title IV. Parties Federal Rules of Civil Procedure Rule 23 Rule 23. Class Actions Currentness (a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. (b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if: (1) prosecuting separate actions by or against individual class members would create a risk of: (A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or (B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests; (2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or WES’FWW © 2016 Thomson Reuters. No Claim to original UVS, Government Works, Rule 23. Class Actions, FRCP Rule 2o (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include: (A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action. (c) Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses. (1) Certification Order. (A) Time to Issue. At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action. (B) Defining the Class; Appointing Class Counsel. An order that certifies a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g). (C) Altering or Amending the Order. An order that grants or denies class certification may be altered or amended before final judgment. (2) Notice. (A) For (b) {1) or (b) (2) Classes. For any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class. (B) For (b) (3) Classes. For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must clearly and concisely state in plain, easily understood language: (i) the nature of the action; (ii) the definition of the class certified; WEWMW © 2016 Thomson Reuters, No Claim to original UvSl Government Werks, 2’ Rule 23. Class Actions, FRCP Rule _ (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests exclusion; (vi) the time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 23(c)(3). (3) Judgment. Whether or not favorable to the class, the judgment in a class action must: (A) for any class certified under Rule 23(b)(1) or (b)(2), include and describe those whom the court finds to be class members; and (B) for any class certified under Rule 23(b)(3), include and specify or describe those to whom the Rule 23(c)(2) notice was directed, who have not requested exclusion, and whom the court finds to be class members. (4) Particular Issues. When appropriate, an action may be brought or maintained as a class action with respect to particular issues. (5) Subclasses. When appropriate, a class may be divided into subclasses that are each treated as a class under this rule. (d) Conducting the Action. (1) In General. In conducting an action under this rule, the court may issue orders that: (A) determine the course of proceedings or prescribe measures to prevent undue repetition or complication in presenting evidence or argument; (B) require--to protect class members and fairly conduct the action--giving appropriate notice to some 0r all class members of: (i) any step in the action; (ii) the proposed extent of the judgment; or WE$TLAW © 2016 Thomson Reuters. No claim to original U.S. Government Works, 53 Rule 23. Class Actions, FRCP Rule 'w (iii) the members‘ opportunity to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or to otherwise come into the action; (C) impose conditions on the representative parties or on intervenors; (D) require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly; or (E) deal with similar procedural matters. (2) Combining and Amending Orders. An order under Rule 23(d)(1) may be altered or amended from time to time and may be combined with an order under Rule 16. (e) Settlement, Voluntary Dismissal, or Compromise. The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed. or compromised only with the court's approval. The following procedures apply to a proposed settlement, voluntary dismissal, or compromise: (1) The court must direct notice in a reasonable manner to all class members who would be bound by the proposal. (2) If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate. (3) The parties seeking approval must file a statement identifying any agreement made in connection with the proposal. (4) If the class action was previously certified under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so. (5) Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's approval. (f) Appeals. A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within l4 days after the order is entered. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders. (g) Class Counsel. (1) Appointing Class Counsel. Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court: 1::WES‘HQW © 2016 Thomson Reuters. No claim to original U.S. Government Works, Rule 23. Class Actions, FRCP Rule 2.5 (A) must consider: (i) the work counsel has done in identifying or investigating potential claims in the action; (ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (iii) counsel's knowledge of the applicable law; and (iv) the resources that counsel will commit to representing the class; (B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class; (C) may order potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney's fees and nontaxable costs; (D) may include in the appointing order provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and (E) may make further orders in connection with the appointment. (2) Standardfar Appointing Class Counsel. When one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4). If more than one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the class. (3) Interim Counsel. The court may designate interim counsel to act on behalf of a putative class before determining whether to certify the action as a class action. (4) Duty ofClass Counsel. Class counsel must fairly and adequately represent the interests of the class. (h) Attorney's Fees and Nontaxable Costs. In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties‘ agreement. The following procedures apply: (1) A claim for an award must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision (h), at a time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner. m f WEfiTMW © 2016 Thomson Routers. No claim to original U.S. Government Works, Rule 23. Class Actions, FRCP Rule 2a (2) A class member, or a party from whom payment is sought, may object to the motion. (3) The court may hold a hearing and must find the facts and state its legal conclusions under Rule 52(a). (4) The court may refer issues related to the amount of the award to a special master or a magistrate judge, as provided in Rule 54(d)(2)(D). CREDIT(S) (Amended February 28, 1966, effective July l, 1966; March 2, 1987, effective August l, 1987; April 24, 1998, effective December l, 1998; March 27, 2003, effective December 1, 2003; April 30, 2007, effective December l, 2007; March 26, 2009, effective December 1, 2009.) ADVISORY COMMITTEE NOTES 1937 Adoption Note to Subdivision (a). This is a substantial restatement of [former] Equity Rule 38 (Representatives of Class) as that rule has been construed. It applies to all actions, whether formerly denominated legal or equitable. For a general analysis of class actions, effect ofjudgment, and requisites ofjurisdiction see Moore, Federal Rules of Civil Procedure: Some Problems Raised by tlze Preliminary Draft, 25 Georgetown L.J. 551, 570 et seq. (1937); Moore and Cohn, Federal Class Actions, 32 Ill.L.Rev. 307 (1937); Moore and Cohn, Federal Class Actions--Jurisdiction and Effect of Judgment, 32 Ill.L.Rev. 555-567 (1938); Lesar, Class Suits and the Federal Rules, 22 Minn.L.Rev. 34 (1937); cf. Arnold and James, Cases on Trials, Judgments and Appeals (1936) 175; and see Blume, Jurisdictional Amount in Representative Suits, 15 Minn.L.Rev. 501 (1931). The general test of [former] Equity Rule 38 (Representatives of Class) that the question should be “one of common or general interest to many persons constituting a class so numerous as to make it impracticable to bring them all before the court.” is a common test. For states which require the two elements of a common or general interest and numerous persons, as provided for in [former] Equity Rule 38. see DeLCh. Rule 113; Fla.Comp.Gen.Laws Ann. (Supp., 1936) § 4918(7); Georgia Code (1933) § 37-1002, and see English Rules Under the Judicature Act (The Annual Practice, 1937) O. l6, r. 9. For statutory provisions providing for class actions when the question is one of common or general interest or when the parties are numerous, see Ala.Code Ann. (Michie, 1928) § 5701; 2 Ind.Stat.Ann. (Burns, 1933) § 2-220; N.Y.C.P.A. (1937) 195; Wis.Stat. (1935) § 260.12. These statutes have, however, been uniformly construed as though phrased in the conjunctive. See Garfein v. Sriglitz, 260 Ky. 430, 86 S.W.2d 155 (1935). The rule adopts the test of [former] Equity Rule 38, but defines what constitutes a “common or general interest”. Compare with code provisions which make the action dependent upon the propriety ofjoinder of the parties. See Blume, The “Common Questions” Principle in the Code Provisionfor Representative Suits, 30 Mich.L.Rev. 878 (1932). For discussion of what constitutes “numerous persons” see Wheaton, Representative Suits Involving Numerous Litigants, 19 Corn.L.Q. 399 (1934); Note, 36 Harv.L.Rev. 89 (1922). Clause (l), Joint, Common, or Secondary Right. This clause is illustrated in actions brought by or against representatives of an unincorporated association. See Oster v. Brotherhood ofLocomotive Firemen and Enginemen. 271 Pa. 419, 114 Atl. 377 (1921); Pickett v. Walsh, 192 Mass. 572, 78 N.E. 753, 6 L.R.A., N.S., 1067 (1906); Colt v. Hicks, 97 Ind.App. 177, 179 N.E. 335 ( 1932). Compare Rule 17(b) as to when an unincorporated association has capacity to sue or be sued in its common name; United Mine Workers afAmerica v. Coronado Coal C0., 42 S.Ct. 570, 259 U.S. 344, 66 L.Ed. 975, 27 A.L.R. 762 (1922) (an unincorporated association was sued as an entity for the purpose of enforcing against it a federal substantive right); Moore, Federal Rules of Civil Procedure: Some Problems Raised by the Preliminary Draft, 25 WQS’E’L W): © 2016 Thomson Reuters. No claim to eriginal US. Government Works, «’"3 Rule 23. Class Actions, FRCP Rule 23 Georgetown L.J. 551, 566 (for discussion ofjurisdictional requisites when an unincorporated association sues or is sued in its common name and jurisdiction is founded upon diversity of citizenship). For an action brought by representatives of one group against representatives of another group for distribution of a fund held by an unincorporated association, see Smith v. Swormstedt, 16 How. 288, 14 L.Ed. 942 (U.S. 1853). Compare Christopher, et al. v. Brusselback, 1938, 58 S.Ct. 350, 302 U.S. 500. 82 L.Ed. 388. For an action to enforce rights held in common by policyholders against the corporate issuer of the policies, see Supreme Tribe ofBen Hur v. Cauble, 255 U.S. 356, 41 S.Ct. 338, 65 L.Ed. 673 (1921). See also Terry v. Little, 101 U.S. 216, 25 L.Ed. 864 (1880); John A. Roebling's Sons Co. v. Kinnicutt, 248 Fed. 596 (D.C.N.Y., 1917) dealing with the right held in common by creditors to enforce the statutory liability of stockholders. Typical of a secondary action is a suit by stockholders to enforce a corporate right. For discussion of the general nature of these actions see Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 56 S.Ct. 466, 80 L.Ed. 688 (1936); Glenn, The Stockholder's Suit-- Corporate and Individual Grievances, 33 Yale L.J. 580 ( l 924); McLaughlin, Capacity ofPlaimiff- Stockholder to Terminate a Slockholder's Suit, 46 Yale L.J. 421 ( 1937). See also Subdivision (b) of this rule which deals with Shareholder‘s Action; Note, 15 Minn.L.Rev. 453 (1931). Clause (2). A creditor's action for liquidation or reorganization of a corporation is illustrative of this clause. An action by a stockholder against certain named defendants as representatives of numerous claimants presents a situation converse to the creditor‘s action. Clause (3). See Everglades Drainage League v. Napoleon Broward Drainage Dist., 253 Fed. 246 (D.C.Fla., 19 1 8); Gramling v. Maxwell, 52 F.2d 256 (D.C.N.C., 1931), approved in 30 Mich.L.Rev. 624 (1932); Skinner v. Mitchell, 108 Kan. 861, 197 Pac. 569 ( 1921); Duke of Bedford v. Ellis (1901) A.C. 1, for class actions when there were numerous persons and there was only a question of law or fact common to them; and see Blume, The “Common Questions" Principle in the Code Provisionfor Representative Suits, 30 Mich.L.Rev. 878 (1932). Note to Subdivision (b). This is [former] Equity Rule 27 (Stockholder's Bill) with verbal changes. See also Hawes v. Oakland. 104 U.S. 450, 26 L.Ed. 827 (1882) and former Equity Rule 94, promulgated January 23. 1882, 104 U.S. IX. Note to Subdivision (c). See McLaughlin, Capacity of Plaintiff-Stockholder to Terminate a Stockholder‘s Suit, 46 Yale L.J. 421 (1937). Supplementary Note Note. Subdivision (b), relating to secondary actions by shareholders, provides among other things, that in such an action the complainant “shall aver (l) that the plaintiff was a shareholder at the time of the transaction of which he complains or that his share thereafter devolved on him by operation of law "‘ * *”. As a result of the decision in Erie R Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817 (decided April 25, 1938, after this rule was promulgated by the Supreme Court, though before it took effect) a question has arisen as to whether the provision above quoted deals with a matter of substantive right or is a matter ofprocedure. If it is a matter of substantive law or right, then under Erie R. C0. v. Tompkins clause (1) may not be validly applied in cases pending in states whose local law permits a shareholder to maintain such actions, although not a shareholder at the time of the transactions complained of. The Advisory Committee, believing the question should be settled in the courts, proposes no change in Rule 23 but thinks rather that the situation should be explained in an appropriate note. The rule has a long history. In Hawes v. Oakland, 1882, 104 U.S. 450, the Court held that a shareholder could not maintain such an action unless he owned shares at the time of the transactions complained of, or unless they devolved WfiST‘ifiW © 2016 Thomson Reuters, No Claim to original U.S. Government Works, “f Rule 23. Class Actions, FRCP Rule 2o on him by operation of law. At that time the decision in Swift v. Tyson, 1842, 16 Peters 1, was the law, and the federal courts considered themselves free to establish their own principles of equity jurisprudence, so the Court was not in 1882 and has not been, until Erie R. Co. v. Tompkins in 1938, concerned with the question whether Hawes v. Oakland dealt with substantive right or procedure. Following the decision in Hawes v. Oakland, and at the same term, the Court, to implement its decision, adopted [former] Equity Rule 94. which contained the same provision above quoted from Rule 23 F.R.C.P. The provision in [former] Equity Rule 94 was later embodied in [former] Equity Rule 27, of which the present Rule 23 is substantially a copy. In City of Quincy v. Steel, 1887, 120 U.S. 241, 245, 7 S.Ct. 520, the Court referring to Hawes v. Oakland said: “In order to give effect to the principles there laid down, this Court at that term adopted Rule 94 of the rules of practice for courts of equity of the United States.” Some other cases dealing with [former] Equity Rules 94 or 27 prior to the decision in Erie R. Co. v. Tompkins are Dimpfel v. Ohio & Miss. RR, 1884, 3 S.Ct. 573. 110 U.S. 209, 28 L.Ed. 121; Illinois Central R. C0. v. Adams, 1901, 21 S.Ct. 251, 180 U.S. 28, 34, 45L.Ed. 410; Venner v. Great Northern Ry., 1908, 28 S.Ct. 328, 209 U.S. 24, 30, 52 L.Ed. 666; Jacobson v. General Motors Corp. , S.D.N.Y.1938, 22 F.Supp. 255, 257. These cases generally treat Hawes v. Oakland as establishing a “principle” of equity, or as dealing not with jurisdiction but with the “right” to maintain an action, or have said that the defense under the equity rule is analogous to the defense that the plaintiff has no “title” and results in a dismissal “for want of equity.” Those state decisions which held that a shareholder acquiring stock after the event may maintain a derivative action are founded on the view that it is a right belonging to the shareholder at the time of the transaction and which passes as a right to the subsequent purchaser. See Pollitz v. Gould, 191 1, 202 N.Y. 1 l, 94 N.E. 1088. The first case arising after the decision in Erie R Co. v. Tompkins, in which this problem was involved, was Summers v. Hearst, S.D.N.Y. 1938, 23 F.Supp. 986. It concerned [former] Equity Rule 27, as Federal Rule 23 was not then in effect. In a well considered opinion Judge Leibell reviewed the decisions and said: “The federal cases that discuss this section of [former] Rule 27 support the view that it states a principle of substantive law.” He quoted Pollitz v. Gould, 191 l, 202 N.Y. 11, 94 N.E. 1088, as saying that the United States Supreme Court “seems to have been more concerned with establishing this rule as one of practice than of substantive law” but that “whether it be regarded as establishing a principle of law or a rule of practice, this authority has been subsequently followed in the United States courts.” He then concluded that, although the federal decisions treat the equity rule as “stating a principle of substantive law”, if “[former] Equity Rule 27 is to be modified or revoked in view of Erie R. Co. v. Tompkins, it is not the province of this Court to suggest it, much less impliedly to follow that course by disregarding the mandatory provisions of the Rule.” In Piccard v. Sperry Corporation, S.D.N.Y.1941, 36 F.Supp. 1006, 1009-10, affirmed without opinion, C.C.A.2d 1941, 120 F.2d 328, a shareholder, not such at the time of the transactions complained of, sought to intervene. The court held an intervenor was as much subject to Rule 23 as an original plaintiff; and that the requirement of Rule 23(b) was “a matter of practice,” not substance, and applied in New York where the state law was otherwise, despite Erie R. C0. v. Tompkins. In New York v. Guaranty Trust Co. ofNew York, C.C.A.2, 1944, 143 F.2d 503, rev'd on other grounds, 1945, 65 S.Ct. 1464, the court said: “Restrictions on the bringing of stockholders‘ actions, such as those imposed by F.R.C.P. 23(b) or other state statutes are procedural,” citing the Piccard and other cases. Some other federal decisions since 1938 touch the question. ‘JL‘EE‘YLAW © 2016 Thomson Reuters. No claim to original U,S. Government Works. 8 Rule 23. Class Actions, FRCP Rule z. In Gallup v. Caldwell, C.C.A.3, 1941 , 120 F.2d 90, 95 arising in New Jersey, the point was raised but not decided, the court saying that it was not satisfied that the then New Jersey rule differed from Rule 23(b), and that “under the circumstances the proper course was to follow Rule 23(b).” In Mullins v. DeSoto Securities Co., W.D.La.l942, 45 F.Supp. 871, 878, the point was not decided, because the court found the Louisiana rule to be the same as that stated in Rule 23(b). In Toebelman v. Missouri-Kansas Pipe Line Co., D.Del. 1941, 41 F.Supp. 334, 340, the court dealt only with another part of Rule 23(b), relating to prior demands on the stockholders and did not discuss Erie R C0. v. Tompkins, or its effect on the rule. In Perrott v. United States Banking Corp, D.Del.l944, 53 F.Supp. 953, it appeared that the Delaware law does not require the plaintiff to have owned shares at the time of the transaction complained of. The court sustained Rule 23(b), after discussion of the authorities, saying: “It seems to me the rule does not go beyond procedure. * * * Simply because a particular plaintiff cannot qualify as a proper party to maintain such an action does not destroy or even Whittle at the cause of action. The cause of action exists until a qualified plaintiff can get it started in a federal court.” In Bankers Nat. Corp. v. Barr, S.D.N.Y.1945, 9 Fed.Ru1es Serv. 23b.1 1, Case 1, the court held Rule 23(b) to be one of procedure, but that whether the plaintiff was a stockholder was a substantive question to be settled by state law. The New York rule, as stated in Pollit: v. Gould, supra, has been altered by an act of the New York Legislature, Chapter 667, Laws of 1944, effective April 9, 1944, General Corporation Law, § 61, which provides that “in any action brought by a shareholder in the right of a * * * corporation, it must appear that the plaintiff was a stockholder at the time of the transaction of which he complains, or that his stock thereafter devolved upon him by operation of law.” At the same time a further and separate provision was enacted, requiring under certain circumstances the giving of security for reasonable expenses and attorney's fees, to which security the corporation in whose right the action is brought and the defendants therein may have recourse. (Chapter 668, Laws of 1944, effective April 9, 1944, General Corporation Law, § 61-b.) These provisions are aimed at so-called “strike” stockholders' suits and their attendant abuses. Shielcrawt v. Moflétt. Ct.App.1945. 294 N.Y. 180, 61 N.E.2d 435, rev'g 51 N.Y.S.2d 188, afi‘g 49 N.Y.S.2d 64; Noel Associates, Inc. v. Merrill, Sup.Ct.1944, 184 Misc. 646, 63 N.Y.S.2d 143. Insofar as § 61 is concerned, it has been held that the section is procedural in nature. Klum v. Clinton Trust Co., Sup.Ct.l944, 183 Misc. 340, 48 N.Y.S.2d 267; Noel Associates, Inc. v. Merrill, supra. In the latter case the court pointed out that “The 1944 amendment to Section 61 rejected the rule laid down in the Pollitz case and substituted, in place thereof, in its precise language, the rule which has long prevailed in the Federal Courts and which is now Rule 23(b) * * *”. There is, nevertheless, a difference of opinion regarding the application of the statute to pending actions. See Klum v. Clinton Trust Co., supra (applicable); Noel Associates, Inc. v. Merrill, supra (inapplicable). With respect to § 6l-b, which may be regarded as a separate problem, Noel Associates, Inc. v. Merrill, supra, it has been held that even though the statute is procedural in nature--a matter not definitely decided--the Legislature evinced no intent that the provisions should apply to actions pending when it became effective. Slzielcrawt v. Moffett, supra. As to actions instituted after the effective date of the legislation, the constitutionality of § 61-b is in dispute. See Wolf v. Atkinson, Sup.Ct.1944, 182 Misc. 675, 49 N.Y.S.2d 703 (constitutional); Citron v. Mange] Stores C0rp., Sup.Ct.1944, 50 N.Y.S.2d 416 (unconstitutional); Zlinkoff, The American Investor and the Constitutionality of§ 6l-b of the New York General Corporation Law, 1945, 54 Yale L.J. 352. WfiS’rLMN © 2016 Thomson Reuters. No Ciaim to original U.S. Government Works. f1 Rule 23. Class Actions, FRCP Rule 2.. New Jersey also enacted a statute, similar to Chapters 667 and 668 of the New York law. See P.L.1945, Ch. 131, R.S.Cum.Supp. 14:3-1 5. The New Jersey provision similar to Chapter 668, § 61-b, differs, however, in that it specifically applies retroactively. It has been held that this provision is procedural and hence will not govern a pending action brought against a New Jersey corporation in the New York courts. Slzz'elcrawt v. Moffett, Sup.Ct.N.Y.l945, 184 Misc. 1074, 56 N.Y.S.2d 134. See, also generally. 2 Moore's Federal Practice. 1938, 2250-2253. and Cum.Supplement § 23.05. The decisions here discussed show that the question is a debatable one, and that there is respectable authority for either view, with a recent trend towards the view that Rule 23(b)(l) is procedural. There is reason to say that the question is one which should not be decided by the Supreme Court ex parte, but left to await a judicial decision in a litigated case, and that in the light of the material in this note, the only inference to be drawn from a failure to amend Rule 23(b) would be that the question is postponed to await a litigated case. The Advisory Committee is unanimously of the opinion that this course should be followed. If, however, the final conclusion is that the rule deals with a matter of substantive right, then the rule should be amended by adding a provision that Rule 23(b)(l) does not apply in jurisdictions where state law permits a shareholder to maintain a secondary action, although he was not a shareholder at the time of the transactions of which he complains. 1966 Amendment Difficulties with the original rule. The categories of class actions in the original rule were defined in tenns of the abstract nature ofthe rights involved: the so-called “true” category was defined as involving “joint, common, or secondary rights”; the “hybrid” category, as involving “several” rights related to “specific property”; the “spurious” category, as involving “several” rights affected by a common question and related to common relief. It was thought that the definitions accurately described the situations amenable to the class-suit device, and also would indicate the proper extent of the judgment in each category, which would in turn help to determine the res judicata effect of the judgment if questioned in a later action. Thus the judgments in “true” and “hybrid” class actions would extend to the class (although in somewhat different ways); the judgment in a “spurious” class action would extend only to the parties including intervenors. See Moore, Federal Rules 0f Civil Procedure: Some Problems Raised by the Preliminary Draft, 25 Geo.L.J. 55 l, 570-76 (1937). In practice the terms “joint,” “common,” etc., which were used as the basis of the Rule 23 classification proved obscure and uncertain. See Chafee, Some Problems oquuity 245-46, 256-57 (1950); Kalven & Rosenfield, lee Contemporary Function of the Class Suit, 8 U. of Chi.L.Rev. 684, 707 & n. 73 (1941); Keeffe, Levy & Donovan, Lee Defeats Ben Hur, 33 Corn.L.Q. 327, 329-36 (1948); Developments in the Law: Multiparty Litigation in the Federal Courts, 71 Harv. L.Rev. 874, 931 (1958); Advisory Committee's Note to Rule l9, as amended. The courts had considerable difficulty with these terms. See, e.g., Gullo v. Veterans' Coop. H. Assn, l3 F.R.D. ll (D.D.C.1952); Shiplcy v. Pittsburgh & L.ER Co., 70 F.Supp. 870 (W.D.Pa.1947); Deckert v. Independence Shares Corp, 27 F.Supp. 763 (E.D.Pa.l939), rev'd 108 F.2d 51 (3d Cir. 1939), rev'd, 311 U.S. 282 (1940), on remand, 39 F.Supp. 592 (E.D.Pa.l94l), rev‘d sub nom. Pennsylvania C0. for Ins. 0n Lives v. Deckert. 123 F.2d 979 (3d Cir.1941) (see Chafee, supra. at 264-65). Nor did the rule provide an adequate guide to the proper extent of the judgments in class actions. First, we find instances of the courts classifying actions as “true” or intimating that the judgments would be decisive for the class where these results seemed appropriate but were reached by dint of depriving the word “several” of coherent meaning. See, e.g., System Federation N0. 91 v. Reed, 180 F.2d 991 (6th Cir.l950); Wilson v. City ofPaducah, 100 F.Supp. 116 (W.D.Ky.l951); Citizens Banking C0. v. Monticello State Bank, 143 F.2d 261 (8th Cir.l944); Redmond v. Commerce Trust Ca, 144 F.2d 140 (8th Cir.l944), cert. denied, 323 U.S. 776 (1944); United States v. American Optical C0., 97 F.Supp. 66 (N.D.Ill.l951); National Hairdressers' & C. Assn. v. Philad C0., 34 F.Supp. 264 (D.Del.l940); 41 F.Supp. 701 "fu’theTM‘ta’ © 2036 Thomson Reuters, No claim to angina! U.S. Government Works. H Rule 23. Class Actions, FRCP Rule .- (D.Del.1940), aff‘d mem., 129 F.2d 1020 (3d Cir.1942). Second, we find cases classified by the courts as “spurious” in which, on a realistic view, it would seem fitting for the judgments to extend to the class. See, e.g., Knapp v. Bankers Sec. Corp, l7 F.R.D. 245 (E.D.Pa.l954), aff‘d 230 F.2d 717 (3d Cir.l956); Giesecke v. Denver Tramway Corp, 81 F.Supp. 957 (D.De1. 1949); York v. Guaranty Trust Co., 143 F.2d 503 (2d Cir.1944), rev'd on grounds not here relevant, 326 U.S. 99 (1945) (see Chafee, supra, at 208); cf. Webster Eisenlohr, Inc. v. Kalodner, 145 F.2d 316, 320 (3d Cir. 1944), cert. denied, 325 U.S. 867 (1945). But cf. the early decisions, Duke ofBedford v. Ellis, [1901] A.C. l; Sheffield Waterworks v. Yeomans, L.R. 2 Ch.App. 8 (1866); Brown v. Vermuden, 1 Ch.Cas. 272, 22 Eng.Rep. 796 (1676). The “spurious” action envisaged by original Rule 23 was in any event an anomaly because. although denominated a “class” action and pleaded as such, it was supposed not to adjudicate the rights or liabilities of any person not a party. It was believed to be an advantage of the “spurious” category that it would invite decisions that a member of the “class” could, like a member of the class in a “true” or “hybrid” action, intervene on an ancillary basis without being required to show an independent basis of Federal jurisdiction, and have the benefit of the date of the commencement of the action for purposes of the statute of limitations. See 3 Moore's Federal Practice, pars. 23. 10[l], 23. 12 (2d ed. l 963). These results were attained in some instances but not in others. On the statute of limitations, see Um‘on Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir.196l), pet. cert. dism., 371 U.S. 801 (1963); but cf. P. W. Husserl, Inc. v. Newman, 25 F.R.D. 264 (S.D.N.Y.l960); Alhas v. Day, 161 F.Supp. 916 (D.Colo.1958). On ancillary intervention, see Amen v. Black, 234 F.2d 12 (10th Cir.1956), cert. granted, 352 U.S. 888 (1956), dism. on stip., 355 U.S. 600 (1958); but cf. Wagner v. Kemper, 13 F.R.D. 128 (W.D.Mo.1952). The results, however, can hardly depend upon the mere appearance of a “spurious” category in the rule; they should turn on more basic considerations. See discussion of subdivision (c)(l) below. Finally, the original rule did not squarely address itself to the question of the measures that might be taken during the course of the action to assure procedural fairness, particularly giving notice to members of the class, which may in turn be related in some instances to the extension of the judgment to the class. See Chafee, supra, at 230-31; Keeffe, Levy & Donovan, supra; Developments in the law, supra. 71 Harv.L.Rev. at 937-38; Note, Binding Effect of Class Actions, 67 Harv.L.Rev. 1059, 1062-65 (1954); Note, Federal Class Actions: A Suggested Revision ofRule 23, 46 Colum.L.Rev. 818, 833-36 (1946); Mich.Gen.Court R. 208.4 (effective Jan. l, 1963); Idaho R.Civ.P. 23(d); Minn.R.Civ.P. 23.04; N.Dak.R.Civ.P. 23(d). The amended rule describes in more practical terms the occasions for maintaining class actions; provides that all class actions maintained to the end as such will result in judgments including those whom the court finds to be members of the class, whether or not the judgment is favorable to the class; and refers to the measures which can be taken to assure the fair conduct of these actions. Subdivision (a) states the prerequisites for maintaining any class action in terms of the numerousness of the class making joinder of the members impracticable, the existence of questions common to the class, and the desired qualifications of the representative parties. See Weinstein, Revision ofProcedure: Some Problems in Class Actions, 9 Buffalo L.Rev. 433, 458-59 (1960); 2 Barron & Holtzoff, Federal Practice & Procedure § 562, at 265, § S72, at 35 1-52 (Wright ed. 1961). These are necessary but not sufficient conditions for a class action. See, e.g., Giordano v. Radio Corp. ofAm., 183 F.2d 558, 560 (3d Cir.1950); Zachman v. Erwin, 186 F.Supp. 681 (S.D.Tex.1959); Baim & Blank, Inc. v. Warren-Conne/h Ca, Ina, 19 F.R.D. 108 (S.D.N.Y. 1956). Subdivision (b) describes the additional elements which in varying situations justify the use of a class action. Subdivision (b)(l). The difficulties which would be likely to arise if resort were had to separate actions by or against the individual members of the class here furnish the reasons for, and the principal key to, the propriety and value of utilizing the class-action device. The considerations stated under clauses (A) and (B) are comparable to certain of the elements which define the persons whose joinder in an action is desirable as stated in Rule 19(a), as amended. See amended Rule 19(a)(2)(i) and (ii), and the Advisory Committee's Note thereto; Hazard, Indispensable Party: The Historical Origin ofa Procedural Phantom, 61 Colum.L.Rev. 1254, 1259-60 (1961); cf. 3 Moore, supra, par. 23.08, at 3435. WESTLA‘fi.‘ <0 20m Themson Reuters, No claim to original v.8. Government Works, "’ ’4 Rule 23. Class Actions, FRCP Rule _ Clause (A): One person may have rights against, or be under duties toward, numerous persons constituting a class, and be so positioned that conflicting or varying adjudications in lawsuits with individual members ofthe class might establish incompatible standards to govern his conduct. The class action device can be used effectively to obviate the actual or virtual dilemma which would thus confront the party opposing the class. The matter has been stated thus: “The felt necessity for a class action is greatest when the courts are called upon to order or sanction the alteration of the status quo in circumstances such that a large number of persons are in a position to call on a single person to alter the status quo, or to complain if it is altered, and the possibility exists that [the] actor might be called upon to act in inconsistent ways.” Louisell & Hazard, Pleading and Procedure: State and Federal 719 (1962); see Supreme Tribe ofBen-Hur v. Cauble, 255 U.S. 356, 366-67 (1921). To illustrate: Separate actions by individuals against a municipality to declare a bond issue invalid or condition or limit it, to prevent or limit the making of a particular appropriation or to compel or invalidate an assessment, might create a risk of inconsistent or varying determinations. In the same way, individual litigations of the rights and duties of riparian owners, or of landowners' rights and duties respecting a claimed nuisance, could create a possibility of incompatible adjudications. Actions by or against a class provide a ready and fair means of achieving unitary adjudication. See Maricopa County Mun. Water Con. Dist. v. Looney, 219 F.2d 529 (9th Cir. 1955); Rank v. Krug, 142 F.Supp. 1, 154-59 (S.D.Ca1if.l956), on app., State of California v. Rank, 293 F.2d 340, 348 (9th Cir.1961); Gart v. Cole, 263 F.2d 244 (2d Cir.1959), cert. denied 359 U.S. 978 (1959); cf. Martinez v. Maverick Cty. Water Con. & Imp. Dist.. 219 F.2d 666 (5th Cir.1955); 3 Moore, supra, par. 23.1 1[2], at 3458-59. Clause (B): This clause takes in situations where the judgment in a nonclass action by or against an individual member of the class, while not technically concluding the other members, might do so as a practical matter. The vice of an individual action would lie in the fact that the other members of the class, thus practically concluded, would have had no representation in the lawsuit. In an action by policy holders against a fraternal benefit association attacking a financial reorganization of the society, it would hardly have been practical, if indeed it would have been possible, to confine the effects of a validation of the reorganization to the individual plaintiffs. Consequently a class action was called for with adequate representation of all members of the class. See Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356 (1921); Waybrighl v. Columbia}: Mut. Life Ins. Co., 3O F.Supp. 885 (W.D.Tenn.1939); cf. Smith v. Swormstedt, 16 How. (57 U.S.) 288 (1853). For much the same reason actions by shareholders to compel the declaration of a dividend[,] the proper recognition and handling of redemption or pre-emption rights, or the like (or actions by the corporation for corresponding declarations of rights), should ordinarily be conducted as class actions, although the matter has been much obscured by the insistence that each shareholder has an individual claim. See Knapp v. Bankers Securities Corp, l7 F.R.D. 245 (E.D.Pa.1954), aff‘d, 230 F.2d 717 (3d Cir.1956); Giesecke v. Denver Tramway Corp, 81 F.Supp. 957 (D.Del.1949); Zalm v. Transamerica Corp, 162 F.2d 36 (3d Cir.1947); Speed v. Transamerica Corp, 100 F.Supp. 461 (D.Del. 195 1); Sobel v. Whittier Corp., 95 F.Supp. 643 (E.D.Mich.l951), app. dism., 195 F.2d 361 (6th Cir.1952); Goldberg v. Whittier Com, 111 F.Supp. 382 (E.D.Mich.l953); Drum v. Studebaker-Packard C0rp., 288 F.2d 201 (6th Cir.l96l); Edgerton v. Armour & Ca, 94 F.Supp. 549 (S.D.Calif.l950); Ames v. Mengel Ca, 190 F.2d 344 (2d Cir.l951). (These shareholders’ actions are to be distinguished from derivative actions by shareholders dealt with in new Rule 23.1). The same reasoning applies to an action which charges a breach of trust by an indenture trustee or other fiduciary similarly affecting the members of a large class of security holders or other beneficiaries, and which requires an accounting or like measures to restore the subject of the trust. See Boesenberg v. Chicago T. & T. C0., 128 F.2d 245 (7th Cir.l942); Citizens Banking Co. v. Monticello State Bank, 143 F.2d 261 (8th Cir.l944); Redmond v. Commerce Trust C0., 144 F.2d 140 (8th Cir.l944), cert. denied, 323 U.S. 776 (1944); cf. York v. Guaranty Trust Ca, 143 F.2d 503 (2d Cir.l944), rev'd on grounds not here relevant, 326 U.S. 99 (1945). In van'ous situations an adjudication as to one or more members of the class will necessarily or probably have an adverse practical effect on the interests of other members who should therefore be represented in the lawsuit. This is plainly the case when claims are made by numerous persons against a fund insufficient to satisfy all claims. A class action by or against representative members to settle the validity of the claims as a whole, or in groups, followed by separate proof of the amount of each valid claim and proportionate distribution of the fund, meets the problem. Cf. Dirkimon WES'E‘LMW C) 2016 Thomson Rotators, No Chaim to original Ufa Governmorsi Worm, Rule 23. Class Actions, FRCP Rule , v. Burnham, 197 F.2d 973 (2d Cir.1952), cert. denied, 344 U.S. 875 (1952); 3 Moore, supra, at par. 23.09. The same reasoning applies to an action by a creditor to set aside a fraudulent conveyance by the debtor and to appropriate the property to his claim, when the debtor's assets are insufficient to pay all creditors‘ claims. See Hcffcman v. Bennett & Armour, 110 Cal.App.2d 564, 243 P.2d 846 (1952); cf. City & County OfSan Francisco v. Market Street Ry., 95 Cal.App.2d 648, 213 P.2d 780 (1950). Similar problems, however, can arise in the absence of a fund either present or potential. A negative or mandatory injunction secured by one of a numerous class may disable the opposing party from performing claimed duties toward the other members of the class or materially affect his ability to do so. An adjudication as to movie “clearances and runs” nominally affecting only one exhibitor would often have practical effects on all the exhibitors in the same territorial area. Cf. United States v. Paramount Pictures, Ina, 66 F.Supp. 323. 341-46 (S.D.N.Y.l946); 334 U.S. 131, 144-48 (1948). Assuming a sufficiently numerous class of exhibitors, a class action would be advisable. (Here representation of subclasses of exhibitors could become necessary; see subdivision (c)(3)(B).) Subdivision (b)(2). This subdivision is intended to reach situations where a party has taken action or refused to take action with respect to a class, and final relief of an injunctive nature or of a corresponding declaratory nature, settling the legality of the behavior with respect to the class as a whole, is appropriate. Declaratory relief “corresponds” to injunctive relief when as a practical matter it affords injunctive relief or serves as a basis for later injunctive relief. The subdivision does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages. Action or inaction is directed to a class within the meaning of this subdivision even if it has taken effect or is threatened only as to one or a few members of the class, provided it is based on grounds which have general application to the class. Illustrative are various actions in the civil-rights field where a party is charged with discriminating unlawfully against a class, usually one whose members are incapable of specific enumeration. See Potts v. Flax. 313 F.2d 284 (5th Cir. 1963); Bailey v. Patterson. 323 F.2d 201 (5th Cir. 1963), cert. denied, 376 U.S. 910, (1964); Brum‘on v. Board 0f Trustees OfSc/wol District N0. 1, Clarendon Cty., SC, 311 F.2d 107 (4th Cir. 1962), cert. denied, 373 U.S. 933 (1963); Green v. School Bd. 0f Roanoke, Va., 304 F.2d 118 (4th Cir. 1962); Orleans Parish School Bd. v. Bush, 242 F.2d 156 (5th Cir. 1957), cert. denied. 354 U.S. 921 (1957); Mannings v. Board ofPublic Inst. oinllsborough County, Fla, 277 F.2d 370 (5th Cir. 1960); Northcross v. Board ofEd. of City ofMemphis, 302 F.2d 818 (6th Cir. 1962), cert. denied, 370 U.S. 944 (1962); Frasier v. BoardofTrustees ofUm'v. ofN. C., 134 F.Supp. 589 (M.D.N.C.1955, 3-judge court), aff'd 350 U.S. 979 (1956). Subdivision (b)(2) is not limited to civil-rights cases. Thus an action looking to specific or declaratory relief could be brought by a numerous class of purchasers, say retailers of a given description, against a seller alleged to have undertaken to sell to that class at prices higher than those set for other purchasers, say retailers of another description, when the applicable law forbids such a pricing differential. So also a patentee of a machine, charged with selling or licensing the machine on condition that purchasers or licensees also purchase or obtain licenses to use an ancillary unpatented machine. could be sued on a class basis by a numerous group of purchasers or licensees, or by a numerous group of competing sellers or licensors of the unpatented machine, to test the legality of the “tying” condition. Subdivision (b)(3). In the situations to which this subdivision relates, class-action treatment is not as clearly called for as in those described above, but it may nevertheless be convenient and desirable depending upon the particular facts. Subdivision (b)(3) encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. Cf. Chafee, supra. at 201. The court is required to find, as a condition of holding that a class action may be maintained under this subdivision, that the questions common to the class predominate over the questions affecting individual members. It is only where this predominance exists that economies can be achieved by means of the class-action device. In this view, a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action, and it may remain so despite the need, if liability is found, for separate determination of the damages suffered by individuals within the class. On the other hand, although having some common core, a fraud case may be unsuited for treatment as a class action if there was material variation in the representations made or in the kinds or degrees of reliance by WFS‘ITLM’V ’i) 2016 Thomson Reuters, N0 claim to original US, Govammorit Works, ”r8 Rule 23. Class Actions, FRCP Rule , the persons to whom they were addressed. See Oppenheimer v. F. J. Young & Ca, Ina, 144 F.2d 387 (2d Cir. 1944); Miller v. National City Bank 0fN. Y., 166 F.2d 723 (2d Cir. 1948); and for like problems in other contexts, see Hughex v. Encyclopaedia Britannica, 199 F.2d 295 (7th Cir. 1952); Sturgeon v. Great Lakes Steel Corp, 143 F.2d 8 19 (6th Cir. 1944). A “mass accident” resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses of liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried. See Pennsylvania RR. v. United States, 111 F.Supp. 80 (D.N.J.1953); cf. Weinstein, supra, 9 Buffalo L.Rev. at 469. Private damage claims by numerous individuals arising out of concerted antitrust violations may or may not involve predominating common questions. See Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir. 1961), pet. cert. dism., 371 U.S. 801 (1963); cf. Weeks v. Bareco Oil Co., 125 F.2d 84 (7th Cir. 1941); Kainz v. Anheuser-Busclz, Ina, 194 F.2d 737 (7th Cir. 1952); Hess v. Anderson, Clayton & Co., 20 F.R.D. 466 (S.D.Calif.1957). That common questions predominate is not itself sufficient to justify a class action under subdivision (b)(3), for another method of handling the litigious situation may be available which has greater practical advantages. Thus one or more actions agreed to by the parties as test or model actions may be preferable to a class action; or it may prove feasible and preferable to consolidate actions. Cf. Weinstein, supra, 9 Buffalo L.Rev. at 438-54. Even when a number of separate actions are proceeding simultaneously, experience shows that the burdens on the parties and the courts can sometimes be reduced by arrangements for avoiding repetitious discovery or the like. Currently the Coordinating Committee on Multiple Litigation in the United States District Courts (a subcommittee of the Committee on Trial Practice and Technique of the Judicial Conference of the United States) is charged with developing methods for expediting such massive litigation. To reinforce the point that the court with the aid of the parties ought to assess the relative advantages of alternative procedures for handling the total controversy, subdivision (b)(3) requires, as a further condition of maintaining the class action, that the court shall find that that procedure is “superior” to the others in the particular circumstances. Factors (A)-(D) are listed, non-exhaustively, as pertinent to the findings. The court is to consider the interests of individual members of the class in controlling their own litigations and carrying them on as they see fit. See Weeks v. Bareco Oil Ca, 125 F.2d 84, 88-90, 93-94 (7th Cir. 1941) (anti-trust action); see also Pentland v. Dravo Corp, 152 F.2d 851 (3d Cir. 1945), and Chafee, supra, at 273-75, regarding policy of Fair Labor Standards Act of 1938,§ 16(b), 29 U.S.C. § 216(b), prior to amendment by Portal-to-Portal Act of 1947. § 5(a). [The present provisions of 29 U.S.C. § 216(b) are not intended to be affected by Rule 23, as amended] In this connection the court should inform itself of any litigation actually pending by or against the individuals. The interests of individuals in conducting separate lawsuits may be so strong as to call for denial of a class action. On the other hand, these interests may be theoretic rather than practical; the class may have a high degree ofcohesion and prosecution of the action through representatives would be quite unobjectionable, or the amounts at stake for individuals may be so small that separate suits would be impracticable. The burden that separate suits would impose on the party opposing the class, or upon the court calendars, may also fairly be considered. (See the discussion, under subdivision (c)(2) below, of the right of members to be excluded from the class upon their request.) Also pertinent is the question of the desirability of concentrating the trial of the claims in the particular forum by means of a class action, in contrast to allowing the claims to be litigated separately in forums to which they would ordinarily be brought. Finally, the court should consider the problems of management which are likely to arise in the conduct of a class action. Subdivision (c)(l). In order to give clear definition to the action, this provision requires the court to determine, as early in the proceedings as may be practicable, whether an action brought as a class action is to be so maintained. WKS'I‘LAW © 2016 Thomson Reuters, No claim to original US, Government Wetks, '14 Rule 23. Class Actions, FRCP Rule. __ The determination depends in each case on satisfaction of the terms of subdivision (a) and the relevant provisions of subdivision (b). An order embodying a determination can be conditional; the court may rule, for example, that a class action may be maintained only if the representation is improved through intervention of additional parties of a stated type. A determination once made can be altered or amended before the decision on the merits if, upon fuller development of the facts, the original determination appears unsound. A negative determination means that the action should be stripped of its character as a class action. See subdivision (d)(4). Although an action thus becomes a nonclass action, the court may still be receptive to interventions before the decision on the merits so that the litigation may cover as many interests as can be conveniently handled; the questions whether the intervenors in the nonclass action shall be permitted to claim “ancillary” jurisdiction or the benefit of the date of the commencement of the action for purposes of the statute of limitations are to be decided by reference to the laws governing jurisdiction and limitations as they apply in particular contexts. Whether the court should require notice to be given to members of the class of its intention to make a determination, or of the order embodying it, is left to the court's discretion under subdivision (d)(2). Subdivision (c)(2) makes special provision for class actions maintained under subdivision (b)(3). As noted in the discussion of the latter subdivision, the interests of the individuals in pursing their own litigations may be so strong here as to warrant denial ofa class action altogether. Even when a class action is maintained under subdivision (b)(3). this individual interest is respected. Thus the court is required to direct notice to the members of the class of the right of each member to be excluded from the class upon his request. A member who does not request exclusion may, if he wishes, enter an appearance in the action through his counsel; whether or not he does so, the judgment in the action will embrace him. The notice[,] setting forth the alternatives open to the members of the class, is to be the best practicable under the circumstances, and shall include individual notice to the members who can be identified through reasonable effort. (For further discussion of this notice, see the statement under subdivision (d)(2) below.) Subdivision (c)(3). The judgment in a class action maintained as such to the end will embrace the class. that is, in a class action under subdivision (b)(l) or (b)(2), those found by the court to be class members; in a class action under subdivision (b)(3), those to whom the notice prescribed by subdivision (c)(2) was directed, excepting those who requested exclusion or who are ultimately found by the court not to be members of the class. The judgment has this scope whether it is favorable or unfavorable to the class. In a (b)(l) or (b)(2) action the judgment “describes” the members of the class, but need not specify the individual members; in a (b)(3) action the judgment “specifies” the individual members who have been identified and described the others. Compare subdivision (c)(4) as to actions conducted as class actions only with respect to particular issues. Where the class-action character of the lawsuit is based solely on the existence of a “limited fund,” the judgment, while extending to all claims of class members against the fund, has ordinarily left unaffected the personal claims of nonappearing members against the debtor. See 3 Moore. supra, par. 23. l 1[4]. Hitherto, in a few actions conducted as “spurious” class actions and thus nominally designed to extend only to parties and others intervening before the determination of liability, courts have held or intimated that class members might be permitted to intervene after a decision on the merits favorable to their interests, in order to secure the benefits of the decision for themselves, although they would presumably be unaffected by an unfavorable decision. See, as to the propriety of this so-called “one-way” intervention in “spurious” actions, the conflicting views expressed in Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir. 1961), pet. cert. dism., 371 U.S. 801 (1963); York v. Guaranty Trust Ca, 143 F.2d 503, 529 (2d Cir. 1944), rev'd on grounds not here relevant, 326 U.S. 99 (1945); Pem/(md v. Dravo Corp, 152 F.2d 851, 856 (3d Cir. 1945); Speed v. Transamerica Corp, 100 F.Supp. 461, 463 (D.Del.1951); State Wholesale Grocers c -3 JR‘e‘fitfi‘f‘tfli‘w © 20m Thomson Routers. No claim to original U.Si Government Works, Rule 23. Class Actions. FRCP RuL , v. Great At]. & Pac. Tea Co., 24 F.R.D. 510 (N.D.Ill.1959); Alabama Ind. Serv. Stat. Assn. v. Shell Pet. Corp, 28 F.Supp. 386, 390 (N.D.Ala.1939); Tolliver v. Cudahy Packing C0., 39 F.Supp. 337, 339 (E.D.Tenn.l94l); Kalven & Rosenfield, supra, 8 U. of Chi.L.Rev. 684 (1941); Comment, 53 Nw.U.L.Rev. 627, 632-33 (1958); Developments in the Law, supra, 71 Harv.L.Rev. at 935; 2 Barron & Holtzoff, supra, § 568; but cf. Lockwood v. Hercules Powder Co., 7 F.R.D. 24, 28-29 (W.D.Mo.1947); Abram v. San Joaquin Cotton Oil Co., 46 F.Supp. 969, 976-77 (S.D.Calif.1942); Chafee, supra, at 280, 285; 3 Moore, supra, par. 23. 12, at 3476. Under proposed subdivision (c)(3), one-way intervention is excluded; the action will have been early determined to be a class or nonclass action, and in the former case the judgment, whether or not favorable, will include the class, as above stated. Although thus declaring that the judgment in a class action includes the class, as defined, subdivision (c)(3) does not disturb the recognized principle that the court conducting the action cannot predetermine the resjudicata effect of the judgment; this can be tested only in a subsequent action. See Restatement, Judgments § 86, comment (h), § 116 (1942). The court, however, in framing the judgment in any suit brought as a class action, must decide what its extent or coverage shall be, and if the matter is carefully considered, questions of resjudicata are less likely to be raised at a later time and if raised will be more satisfactorily answered. See Chafee, supra, at 294; Weinstein, supra, 9 Buffalo L.Rev. at 460. Subdivision (c)(4). This provision recognizes that an action may be maintained as a class action as to particular issues only. For example, in a fraud or similar case the action may retain its “class” character only through the adjudication of liability to the class; the members of the class may thereafter be required to come in individually and prove the amounts of their respective claims. Two or more classes may be represented in a single action. Where a class is found to include subclasses divergent in interest, the class may be divided correspondingly, and each subclass treated as a class. Subdivision (d) is concerned with the fair and efficient conduct of the action and lists some types of orders which may be appropriate. The court should consider how the proceedings are to be arranged in sequence, and what measures should be taken to simplify the proof and argument. See subdivision (d)(l). The orders resulting from this consideration, like the others referred to in subdivision (d), may be combined with a pretrial order under Rule 16, and are subject to modification as the case proceeds. Subdivision (d)(2) sets out a non-exhaustive list of possible occasions for orders requiring notice to the class. Such notice is not a novel conception. For example, in “limited fund” cases, members of the class have been notified to present individual claims after the basic class decision. Notice has gone to members of a class so that they might express any opposition to the representation, see United States v. American Optical Ca, 97 F.Supp. 66 (N.D.Ill.1951), and 1950-51 CCH Trade Cases 64573-74 (par. 62869); cf. Weeks v. Bareco Oil Co., 125 F.2d 84, 94 (7th Cir. 1941), and notice may encourage interventions to improve the representation of the class. Cf. Oppenheimer v. F. J. Young & Co., 144 F.2d 387 (2d Cir. 1944). Notice has been used to poll members on a proposed modification of a consent decree. See record in Sam Fox Publishing Co. v. United States, 366 U.S. 683 (1961). Subdivision (d)(2) does not require notice at any stage, but rather calls attention to its availability and invokes the court's discretion. In the degree that there is cohesiveness or unity in the class and the representation is effective, the need for notice to the class will tend toward a minimum. These indicators suggest that notice under subdivision (d)(2) may be particularly useful and advisable in certain class actions maintained under subdivision (b)(3), for example, to permit members of the class to object to the representation. Indeed, under subdivision (c)(2), notice must be ordered, and is not merely discretionary, to give the members in a subdivision (b)(3) class action an opportunity to secure exclusion from the class. This mandatory notice pursuant to subdivision (c)(2), together with any discretionary notice which the court may find it advisable to give under subdivision (d)(2), is designed to fulfill requirements of due process to which the class WISSTI AW © 2016 Thomson Reuters, No claim t0 original US, Government Works, ”'t} Rule 23. Class Actions, FRCP Rulu 1’ action procedure is ofcourse subject. See Hansberry v. Lee, 311 U.S. 32 (1940); Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950); cf. Dickinson v. Burnham, 197 F.2d 973, 979 (2d Cir. 1952), and studies cited at 979 in 4; see also All American Airways, Inc. v. Elderd, 209 F.2d 247, 249 (2d Cir. 1954); Gar! v. Cole, 263 F.2d 244, 248-49 (2d Cir. 1959), cert. denied, 359 U.S. 978 (1959). Notice to members of the class, whenever employed under amended Rule 23, should be accommodated to the particular purpose but need not comply with the formalities for service of process. See Chafee, supra, at 230-31; Brendle v. Smith, 7 F.R.D. 119 (S.D.N.Y. 1946). The fact that notice is given at one stage of the action does not mean that it must be given at subsequent stages. Notice is available fundamentally “for the protection of the members of the class or otherwise for the fair conduct of the action” and should not be used merely as a device for the undesirable solicitation of claims. See the discussion in Clzerner v. Transitron Electronic Corp., 201 F.Supp. 934 (D.Mass.1962); Hormel v. United States, 17 F.R.D. 303 (S.D.N.Y.1955). In appropriate cases the court should notify interested government agencies of the pendency of the action or of particular steps therein. Subdivision (d)(3) reflects the possibility of conditioning the maintenance of a class action, e.g., on the strengthening of the representation, see subdivision (c)(l) above; and recognizes that the imposition of conditions 0n intervenors may be required for the proper and efficient conduct of the action. As to orders under subdivision (d)(4), see subdivision (c)(l) above. Subdivision (e) requires approval of the court, after notice, for the dismissal or compromise of any class action. 1987 Amendment The amendments are technical. No substantive change is intended. 1998 Amendment Subdivision (f). This permissive interlocutory appeal provision is adopted under the power conferred by 28 U.S.C. § 1292(e). Appeal from an order granting or denying class certification is permitted in the sole discretion of the court of appeals. No other type of Rule 23 order is covered by this provision. The court of appeals is given unfettered discretion whether to permit the appeal, akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari. This discretion suggests an analogy to the provision in 28 U.S.C. § 1292(b) for permissive appeal on certification by a district court. Subdivision (f), however, departs from the§ 1291(b) model in two significant ways. It does not require that the district court certify the certification ruling for appeal, although the district court often can assist the parties and court of appeals by offering advice on the desirability of appeal. And it does not include the potentially limiting requirements of § 1292(b) that the district court order “involve a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation. The courts of appeals will develop standards for granting review that reflect the changing areas of uncertainty in class litigation. The Federal Judicial Center study supports the view that many suits with class-action allegations present familiar and almost routine issues that are no more worthy of immediate appeal than many other interlocutory rulings. Yet several concerns justify expansion of present opportunities to appeal. An order denying certification may confront the plaintiff with a situation in which the only sure path to appellate review is by proceeding to final judgment on the merits of an individual claim that, standing alone, is far smaller than the costs of litigation. An order granting certification, on the other hand, may force a defendant to settle rather than incur the costs of defending a class action wESt’z,M“.‘ © 2010 Thomson Reuters, N0 Claim to original US, Government Works 17 Rule 23. Class Actions, FRCP Run -3 and run the risk of potentially ruinous liability. These concerns can be met at low cost by establishing in the court of appeals a discretionary power to grant interlocutory review in cases that show appeal-worthy certification issues. Permission to appeal may be granted or denied on the basis of any consideration that the court of appeals finds persuasive. Permission is most likely t0 be granted when the certification decision turns on a novel or unsettled question of law, or when, as a practical matter, the decision on certification is likely dispositive of the litigation. The district court, having worked through the certification decision, often will be able to provide cogent advice on the factors that bear on the decision whether to permit appeal. This advice can be particularly valuable if the certification decision is tentative. Even as to a firm certification decision, a statement of reasons bearing on the probably benefits and costs of immediate appeal can help focus the court of appeals decision. and may persuade the disappointed party that an attempt to appeal would be fruitless. The 10-day period for seeking permission to appeal is designed to reduce the risk that attempted appeals will disrupt continuing proceedings. It is expected that the courts of appeals will act quickly in making the preliminary determination whether to permit appeal. Permission to appeal does not stay trial court proceedings. A stay should be sought first from the trial court. If the trial court refuses a stay, its action and any explanation of its views should weigh heavily with the court of appeals. Appellate Rule 5 has been modified to establish the procedure for petitioning for leave to appeal under subdivision (l). 2003 Amendment Subdivision (c). Subdivision (c) is amended in several respects. The requirement that the court determine whether to certify a class “as soon as practicable after commencement of an action” is replaced by requiring determination “at an early practicable time.” The notice provisions are substantially revised. Paragraph (1). Subdivision (c)(1)(A) is changed to require that the determination whether to certify a class be made “at an early practicable time.” The “as soon as practicable” exaction neither reflects prevailing practice nor captures the many valid reasons that may justify deferring the initial certification decision. See Willging, Hooper & Niemic, Empirical Study 0f Class Actions in Four Federal District Courts: Final Report to the Advisory Committee on Civil Rules 26-36 (Federal Judicial Center 1996). Time may be needed to gather information necessary to make the certification decision. Although an evaluation of the probable outcome on the merits is not properly part of the certification decision, discovery in aid of the certification decision often includes information required to identify the nature of the issues that actually will be presented at trial. In this sense it is appropriate to conduct controlled discovery into the “merits,” limited to those aspects relevant to making the certification decision on an informed basis. Active judicial supervision may be required to achieve the most effective balance that expedites an informed certification determination without forcing an artificial and ultimately wasteful division between “certification discovery” and “merits discovery.” A critical need is to determine how the case will be tried. An increasing number of courts require a party requesting class certification to present a “trial plan” that describes the issues likely to be presented at trial and tests whether they are susceptible of class-wide proof. See Manual For Complex Litigation Third, § 21 .213, p. 44; § 30.1 l, p. 214; § 30.12, p. 215. Other considerations may affect the timing of the certification decision. The party opposing the class may prefer to win dismissal or summary judgment as t0 the individual plaintiffs without certification and without binding the class that might have been certified. Time may be needed to explore designation ofclass counsel under Rule 23(g), recognizing that in many cases the need to progress toward the certification determination may require designation of interim counsel under Rule 23(g)(2)(A). WESTIAW C)» 201G Thomsan Reuters, N0 claim to original USA Government Works, Ht 3o: Rule 23. Class Actions, FRCP Rule :3 Although many circumstances may justify deferring the certification decision, active management may be necessary to ensure that the certification decision is not unjustifiably delayed. Subdivision (c)( l)(C) reflects two amendments. The provision that a class certification “may be conditional” is deleted. A court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until they have been met. The provision that permits alteration or amendment of an order granting or denying class certification is amended to set the cut-offpoint at final judgment rather than “the decision on the merits.” This change avoids the possible ambiguity in referring to “the decision on the merits.” Following a determination of liability, for example, proceedings to define the remedy may demonstrate the need to amend the class definition or subdivide the class. In this setting the final judgment concept is pragmatic. It is not the same as the concept used for appeal purposes, but it should be flexible, particularly in protracted litigation. The authority to amend an order under Rule 23(c)(1) before final judgment does not restore the practice of “one-way intervention” that was rejected by the 1966 revision of Rule 23. A determination of liability after certification, however, may show a need to amend the class definition. Decertification may be warranted after further proceedings. If the definition of a class certified under Rule 23(b)(3) is altered to include members who have not been afforded notice and an opportunity to request exclusion, notice--including an opportunity to request exclusion--must be directed to the new class members under Rule 23(c)(2)(B). Paragraph (2). The first change made in Rule 23(c)(2) is to call attention to the court's authority--already established in part by Rule 23(d)(2)--to direct notice of certification to a Rule 23(b)(1) or (b)(2) class. The present rule expressly requires notice only in actions certified under Rule 23(b)(3). Members of classes certified under Rules 23(b)(l) or (b)(2) have interests that may deserve protection by notice. The authority to direct notice to class members in a (b)( 1) or (b)(2) class action should be exercised with care. For several reasons, there may be less need for notice than in a (b)(3) class action. There is no right to request exclusion from a (b) (1) or (b)(2) class. The characteristics of the class may reduce the need for formal notice. The cost of providing notice, moreover, could easily cripple actions that do not seek damages. The court may decide not to direct notice after balancing the risk that notice costs may deter the pursuit of class relief against the benefits of notice. When the court does direct certification notice in a (b)(l) or (b)(2) class action, the discretion and flexibility established by subdivision (c)(2)(A) extend to the method of giving notice. Notice facilitates the opportunity to participate. Notice calculated to reach a significant number of class members often will protect the interests of all. Informal methods may prove effective. A simple posting in a place visited by many class members, directing attention to a source ofmore detailed information, may suffice. The court should consider the costs of notice in relation to the probable reach of inexpensive methods. If a Rule 23(b)(3) class is certified in conjunction with a (b)(2) class, the (c)(2)(B) notice requirements must be satisfied as to the (b)(3) class. The direction that class-certification notice be couched in plain, easily understood language is a reminder of the need to work unremittingly at the difficult task of communicating with class members. It is difficult to provide information about most class actions that is both accurate and easily understood by class members who are not themselves lawyers. Factual uncertainty, legal complexity, and the complication of class-action procedure raise the barriers high. The Federal Judicial Center has created illustrative clear-notice forms that provide a helpful starting point for actions similar to those described in the forms. yfiq’E‘fiTLM‘.‘ © 2016 Thomson Reuters, NO Claim to original US. Government Warm “é Rule 23. Class Actions, FRCP Rule -5 Subdivision (e). Subdivision (e) is amended to strengthen the process of reviewing proposed class-action settlements. Settlement may be a desirable means of resolving a class action. But court review and approval are essential to assure adequate representation of class members who have not participated in shaping the settlement. Paragraph (l). Subdivision (e)(l)(A) expressly recognizes the power of a class representative to settle class claims, issues, or defenses. Rule 23(e)(1)(A) resolves the ambiguity in former Rule 23(e)'s reference to dismissal or compromise of “a class action.” That language could be--and at times was--read to require court approval of settlements with putative class representatives that resolved only individual claims. See Manual for Complex Litigation Third, § 30.41. The new rule requires approval only ifthe claims, issues, or defenses ofa certified class are resolved by a settlement, voluntary dismissal. or compromise. Subdivision (e)(l)(B) carries forward the notice requirement of present Rule 23(e) when the settlement binds the class through claim or issue preclusion; notice is not required when the settlement binds only the individual class representatives. Notice of a settlement binding on the class is required either when the settlement follows class certification or when the decisions on certification and settlement proceed simultaneously. Reasonable settlement notice may require individual notice in the manner required by Rule 23(c)(2)(B) for certification notice to a Rule 23(b)(3) class. Individual notice is appropriate, for example, if class members are required to take action-- such as filing claims--to participate in the judgment, or if the court orders a settlement opt-out opportunity under Rule 23(e)(3). Subdivision (e)(l)(C) confirms and mandates the already common practice of holding hearings as part of the process of approving settlement, voluntary dismissal, or compromise that would bind members of a class. Subdivision (e)(l)(C) states the standard for approving a proposed settlement that would bind class members. The settlement must be fair, reasonable, and adequate. A helpful review of many factors that may deserve consideration is provided by In re: Prudential Ins. Co. America Sales Practice Litigation Agent Actions, 148 F.3d 283, 316-324 (3d Cir. 1998). Further guidance can be found in the Manual for Complex Litigation. The court must make findings that support the conclusion that the settlement is fair, reasonable, and adequate. The findings must be set out in sufficient detail to explain to class members and the appellate court the factors that bear on applying the standard. Settlement review also may provide an occasion to review the cogency of the initial class definition. The terms of the settlement themselves, or objections, may reveal divergent interests of class members and demonstrate the need to redefine the class or to designate subclasses. Redefinition of a class certified under Rule 23(b)(3) may require notice to new class members under Rule 23(c)(2)(B). See Rule 23(c)(1)(C). Paragraph (2). Subdivision (e)(2) requires parties seeking approval of a settlement, voluntary dismissal, or compromise under Rule 23(e)(1) to file a statement identifying any agreement made in connection with the settlement. This provision does not change the basic requirement that the parties disclose all terms of the settlement or compromise that the court must approve under Rule 23(e)(1). It aims instead at related undertakings that, although seemingly separate, may have influenced the terms of the settlement by trading away possible advantages for the class in return for advantages for others. Doubts should be resolved in favor of identification. Further inquiry into the agreements identified by the parties should not become the occasion for discovery by the parties or objectors. The court may direct the parties to provide to the court or other parties a summary or copy of the full WESTLAW © 2016 Thomson Reuters, No claim to original US Government Works, ?*{i Rule 23. Class Actions, FRCP Rule ‘3 terms of any agreement identified by the parties. The court also may direct the parties to provide a summary or copy of any agreement not identified by the parties that the court considers relevant to its review of a proposed settlement. In exercising discretion under this rule, the court may act in steps, calling first for a summary of any agreement that may have affected the settlement and then for a complete version if the summary does not provide an adequate basis for review. A direction to disclose a summary or copy of an agreement may raise concerns of confidentiality. Some agreements may include information that merits protection against general disclosure. And the court must provide an opportunity to claim work-product or other protections. Paragraph (3). Subdivision (e)(3) authorizes the court to refuse to approve a settlement unless the settlement affords class members a new opportunity to request exclusion from a class certified under Rule 23(b)(3) after settlement terms are known. An agreement by the parties themselves to permit class members to elect exclusion at this point by the settlement agreement may be one factor supporting approval of the settlement. Often there is an opportunity to opt out at this point because the class is certified and settlement is reached in circumstances that lead to simultaneous notice of certification and notice of settlement. In these cases, the basic opportunity to elect exclusion applies without further complication. In some cases, particularly if settlement appears imminent at the time of certification, it may be possible to achieve equivalent protection by deferring notice and the opportunity to elect exclusion until actual settlement terms are known. This approach avoids the cost and potential confusion of providing two notices and makes the single notice more meaningful. But notice should not be delayed unduly after certification in the hope of settlement. Rule 23(e)(3) authorizes the court to refuse to approve a settlement unless the settlement affords a new opportunity to elect exclusion in a case that settles after a certification decision if the earlier opportunity to elect exclusion provided with the certification notice has expired by the time of the settlement notice. A decision to remain in the class is likely to be more carefully considered and is better informed when settlement terms are known. The opportunity to request exclusion from a proposed settlement is limited to members of a (b)(3) class. Exclusion may be requested only by individual class members; no class member may purport to opt out other class members by way of another class action. The decision whether to approve a settlement that does not allow a new opportunity to elect exclusion is confided to the court's discretion. The court may make this decision before directing notice to the class under Rule 23(e)(1)(B) or after the Rule 23(e)(1)(C) hearing. Many factors may influence the court's decision. Among these are changes in the information available to class members since expiration of the first opportunity to request exclusion, and the nature of the individual class members' claims. The terms set for permitting a new opportunity to elect exclusion from the proposed settlement of a Rule 23(b)(3) class action may address concerns of potential misuse. The court might direct, for example, that class members who elect exclusion are bound by rulings on the merits made before the settlement was proposed for approval. Still other terms or conditions may be appropriate. Paragraph (4). Subdivision (e)(4) confirms the right of class members to object to a proposed settlement. voluntary dismissal, or compromise. The right is defined in relation t0 a disposition that, because it would bind the class, requires court approval under subdivision (e)(1)(C). Subdivision (e)(4)(B) requires court approval for withdrawal of objections made under subdivision (e)(4)(A). Review follows automatically if the objections are withdrawn on terms that lead to modification of the settlement with the class. Review also is required if the objector formally withdraws the objections. If the objector simply abandons pursuit of the objection, the court may inquire into the circumstances. WEWMW © 2016 Thomson Reuters. N0 Claim to original U.S. Government Works. 7 x Rule 23. Class Actions, FRCP Rul‘ ,1.» Approval under paragraph (4)(B) may be given or denied with little need for further inquiry if the objection and the disposition go only to a protest that the individual treatment afforded the objector under the proposed settlement is unfair because of factors that distinguish the objector from other class members. Different considerations may apply if the objector has protested that the proposed settlement is not fair, reasonable, or adequate on grounds that apply generally to a class or subclass. Such objections, which purport to represent class-wide interests, may augment the opportunity for obstruction or delay. If such objections are surrendered on terms that do not affect the class settlement or the objector's participation in the class settlement. the court often can approve withdrawal of the objections without elaborate inquiry. Once an objector appeals, control of the proceeding lies in the court of appeals. The court of appeals may undertake review and approval of a settlement with the objector, perhaps as part of appeal settlement procedures, or may remand to the district court to take advantage of the district court's familiarity with the action and settlement. Subdivision (g). Subdivision (g) is new. It responds to the reality that the selection and activity of class counsel are often critically important to the successful handling of a class action. Until now, courts have scrutinized proposed class counsel as well as the class representative under Rule 23(a)(4). This experience has recognized the importance of judicial evaluation of the proposed lawyer for the class, and this new subdivision builds on that experience rather than introducing an entirely new element into the class certification process. Rule 23(a)(4) will continue to call for scrutiny of the proposed class representative, while this subdivision will guide the court in assessing proposed class counsel as part of the certification decision. This subdivision recognizes the importance of class counsel, states the obligation to represent the interests of the class, and provides a framework for selection ofclass counsel. The procedure and standards for appointment vary depending on whether there are multiple applicants to be class counsel. The new subdivision also provides a method by which the court may make directions from the outset about the potential fee award to class counsel in the event the action is successful. Paragraph (1) sets out the basic requirement that class counsel be appointed if a class is certified and articulates the obligation of class counsel to represent the interests of the class, as opposed to the potentially conflicting interests of individual class members. It also sets out the factors the court should consider in assessing proposed class counsel. Paragraph (1)(A) requires that the court appoint class counsel to represent the class. Class counsel must be appointed for all classes, including each subclass that the court certifies to represent divergent interests. Paragraph (1)(A) does not apply if “a statute provides otherwise.” This recognizes that provisions of the Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737 (1995) (codified in various sections of 15 U.S.C.), contain directives that bear on selection of a lead plaintiff and the retention of counsel. This subdivision does not purport to supersede or to affect the interpretation of those provisions, or any similar provisions of other legislation. Paragraph I(B) recognizes that the primary responsibility of class counsel, resulting from appointment as class counsel, is to represent the best interests of the class. The rule thus establishes the obligation of class counsel, an obligation that may be different from the customary obligations of counsel to individual clients. Appointment as class counsel means that the primary obligation of counsel is to the class rather than to any individual members of it. The class representatives do not have an unfettered right to “fire” class counsel. In the same vein, the class representatives cannot command class counsel to accept or reject a settlement proposal. To the contrary, class counsel must determine whether seeking the court's approval of a settlement would be in the best interests of the class as a whole. Paragraph (1)(C) articulates the basic responsibility of the court to appoint class counsel who will provide the adequate representation called for by paragraph (1)(B). It identifies criteria that must be considered and invites the court to consider any other pertinent matters. Although couched in terms of the court's duty, the listing also informs counsel seeking appointment about the topics that should be addressed in an application for appointment or in the motion for class certification. WWW AW 9 2016 Thomson Reuters, No claim tr: original UVS. Government Works i3? Rule 23. Class Actions, FRCP Run fl.) The court may direct potential class counsel to provide additional information about the topics mentioned in paragraph (1)(C) or about any other relevant topic. For example, the court may direct applicants to inform the court concerning any agreements about a prospective award of attorney fees or nontaxable costs, as such agreements may sometimes be significant in the selection of class counsel. The court might also direct that potential class counsel indicate how parallel litigation might be coordinated or consolidated with the action before the court. The court may also direct counsel to propose terms for a potential award of attorney fees and nontaxable costs. Attorney fee awards are an important feature of class action practice, and attention to this subject from the outset may often be a productive technique. Paragraph (2)(C) therefore authorizes the court to provide directions about attorney fees and costs when appointing class counsel. Because there will be numerous class actions in which this information is not likely to be useful, the court need not consider it in all class actions. Some information relevant to class counsel appointment may involve matters that include adversary preparation in a way that should be shielded from disclosure to other parties. An appropriate protective order may be necessary to preserve confidentiality. In evaluating prospective class counsel, the court should weigh all pertinent factors. No single factor should necessarily be determinative in a given case. For example. the resources counsel will commit to the case must be appropriate to its needs. but the court should be careful not to limit consideration to lawyers with the greatest resources. If, after review of all applicants, the court concludes that none would be satisfactory class counsel, it may deny class certification, reject all applications, recommend that an application be modified, invite new applications, or make any other appropriate order regarding selection and appointment of class counsel. Paragraph (2). This paragraph sets out the procedure that should be followed in appointing class counsel. Although it affords substantial flexibility, it provides the framework for appointment of class counsel in all class actions. For counsel who filed the action, the materials submitted in support of the motion for class certification may suffice t0 justify appointment so long as the information described in paragraph (g)(l)(C) is included. If there are other applicants, they ordinarily would file a formal application detailing their suitability for the position. In a plaintiff class action the court usually would appoint as class counsel only an attorney or attorneys who have sought appointment. Different considerations may apply in defendant class actions. The rule states that the court should appoint “class counsel.” In many instances, the applicant will be an individual attorney. In other cases, however, an entire firm, or perhaps numerous attorneys who are not otherwise affiliated but are collaborating on the action will apply. No rule of thumb exists to determine when such arrangements are appropriate; the court should be alert to the need for adequate staffing of the case, but also to the risk of overstaffing or an ungainly counsel structure. Paragraph (2)(A) authorizes the court to designate interim counsel during the pre-certification period if necessary to protect the interests of the putative class. Rule 23(c)(1)(B) directs that the order certifying the class include appointment of class counsel. Before class certification, however, it will usually be important for an attorney to take action to prepare for the certification decision. The amendment to Rule 23(c)(1) recognizes that some discovery is often necessary for that determination. It also may be important to make or respond to motions before certification. Settlement may be discussed before certification. Ordinarily, such work is handled by the lawyer who filed the action. In some cases, however, there may be rivalry or uncertainty that makes formal designation of interim counsel appropriate. Rule 23(g)(2)(A) authorizes the court to designate interim counsel to act on behalf of the putative class before the certification decision is made. Failure to make the formal designation does not prevent the attorney who filed the action from proceeding in it. Whether WEETLAW © 2016 Thomson Reuters, No claim to original US. Government Works ‘23 Rule 23. Class Actions, FRCP RuIL _.s or not formally designated interim counsel, an attorney who acts on behalf of the class before certification must act in the best interests of the class as a whole. For example, an attorney who negotiates a pre-certification settlement must seek a settlement that is fair, reasonable, and adequate for the class. Rule 23(c)( 1) provides that the court should decide whether to certify the class “at an early practicable time,” and directs that class counsel should be appointed in the order certifying the class. In some cases, it may be appropriate for the court to allow a reasonable period after commencement of the action for filing applications to serve as class counsel. The primary ground for deferring appointment would be that there is reason to anticipate competing applications to serve as class counsel. Examples might include instances in which more than one class action has been filed, or in which other attorneys have filed individual actions on behalf of putative class members. The purpose of facilitating competing applications in such a case is to afford the best possible representation for the class. Another possible reason for deferring appointment would be that the initial applicant was found inadequate, but it seems appropriate to permit additional applications rather than deny class certification. Paragraph (2)(B) states the basic standard the court should use in deciding whether to certify the class and appoint class counsel in the single applicant situation--that the applicant be able t0 provide the representation called for by paragraph (1)(B) in light of the factors identified in paragraph (1)(C). If there are multiple adequate applicants, paragraph (2)(B) directs the court to select the class counsel best able to represent the interests of the class. This decision should also be made using the factors outlined in paragraph (1)(C), but in the multiple applicant situation the court is to go beyond scrutinizing the adequacy of counsel and make a comparison of the strengths of the various applicants. As with the decision whether to appoint the sole applicant for the position, no single factor should be dispositive in selecting class counsel in cases in which there are multiple applicants. The fact that a given attorney filed the instant action, for example, might not weigh heavily in the decision if that lawyer had not done significant work identifying or investigating claims. Depending on the nature of the case, one important consideration might be the applicant's existing attorney-client relationship with the proposed class representative. Paragraph (2)(C) builds on the appointment process by authorizing the court to include provisions regarding attorney fees in the order appointing class counsel. Courts may find it desirable to adopt guidelines for fees or nontaxable costs, or to direct class counsel to report to the court at regular intervals on the efforts undertaken in the action, to facilitate the court's later determination of a reasonable attorney fee. Subdivision (h). Subdivision (h) is new. Fee awards are a powerful influence on the way attorneys initiate, develop, and conclude class actions. Class action attorney fee awards have heretofore been handled, along with all other attorney fee awards, under Rule 54(d)(2), but that rule is not addressed to the particular concerns of class actions. This subdivision is designed to work in tandem with new subdivision (g) on appointment 0f class counsel, which may afford an opportunity for the court to provide an early framework for an eventual fee award, or for monitoring the work of class counsel during the pendency of the action. Subdivision (h) applies to “an action certified as a class action.” This includes cases in which there is a simultaneous proposal for class certification and settlement even though technically the class may not be certified unless the court approves the settlement pursuant to review under Rule 23(e). When a settlement is proposed for Rule 23(e) approval, either after certification or with a request for certification, notice to class members about class counsel's fee motion would ordinarily accompany the notice to the class about the settlement proposal itself. This subdivision does not undertake to create new grounds for an award of attorney fees or nontaxable costs. Instead, it applies when such awards are authorized by law or by agreement of the parties. Against that background, it provides a format for all awards of attorney fees and nontaxable costs in connection with a class action, not only the award to class counsel. In some situations, there may be a basis for making an award to other counsel whose work produced a WEWLAW © 2016 Thomson Reuters, No claim t0 original U S. Government Works, ‘4 Rule 23. Class Actions, FRCP Rule L beneficial result for the class, such as attorneys who acted for the class before certification but were not appointed class counsel, or attorneys who represented objectors to a proposed settlement under Rule 23(e) or to the fee motion of class counsel. Other situations in which fee awards are authorized by law or by agreement of the parties may exist. This subdivision authorizes an award of “reasonable” attorney fees and nontaxable costs. This is the customary term for measurement of fee awards in cases in which counsel may obtain an award of fees under the “common fund” theory that applies in many class actions. and is used in many fee-shifting statutes. Depending on the circumstances. courts have approached the determination of what is reasonable in different ways. In particular, there is some variation among courts about whether in “common fund” cases the court should use the lodestar or a percentage method of determining what fee is reasonable. The rule does not attempt to resolve the question whether the lodestar or percentage approach should be viewed as preferable. Active judicial involvement in measuring fee awards is singularly important to the proper operation of the class-action process. Continued reliance on caselaw development of fee-award measures does not diminish the court's responsibility. In a class action, the district court must ensure that the amount and mode of payment of attorney fees are fair and proper whether the fees come from a common fund or are otherwise paid. Even in the absence 0f objections, the court bears this responsibility. Courts discharging this responsibility have looked to a variety of factors. One fundamental focus is the result actually achieved for class members, a basic consideration in any case in which fees are sought on the basis of a benefit achieved for class members. The Private Securities Litigation Reform Act of 1995 explicitly makes this factor a cap for a fee award in actions to which it applies. See 15 U.S.C. §§ 77z-1(a)(6); 78u-4(a)(6) (fee award should not exceed a “reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class”). For a percentage approach to fee measurement, results achieved is the basic starting point. In many instances, the court may need to proceed with care in assessing the value conferred on class members. Settlement regimes that provide for future payments, for example, may not result in significant actual payments to class members. In this connection, the court may need to scrutinize the manner and operation of any applicable claims procedure. In some cases, it may be appropriate to defer some portion of the fee award until actual payouts to class members are known. Settlements involving nonmonetary provisions for class members also deserve careful scrutiny to ensure that these provisions have actual value to the class. On occasion the court's Rule 23(e) review will provide a solid basis for this sort of evaluation, but in any event it is also important to assessing the fee award for the class. At the same time, it is important to recognize that in some class actions the monetary relief obtained is not the sole determinant of an appropriate attorney fees award. Cf. Blanchard v. Bergeron, 489 U.S. 87, 95 (1989) (cautioning in an individual case against an “undesirable emphasis” on “the importance of the recovery of damages in civil rights litigation” that might “shortchange efforts to seek effective injunctive or declaratory relief”). Any directions or orders made by the court in connection with appointing class counsel under Rule 23(g) should weigh heavily in making a fee award under this subdivision. Courts have also given weight to agreements among the parties regarding the fee motion, and to agreements between class counsel and others about the fees claimed by the motion. Rule 54(d)(2)(B) provides: “If directed by the court, the motion shall also disclose the terms of any agreement with respect to fees to be paid for the services for which claim is made.” The agreement by a settling party not to oppose a fee application up to a certain amount, for example, is worthy of consideration, but the court remains responsible to determine a reasonable fee. “Side agreements” regarding fees provide at least perspective pertinent to an appropriate fee award. ‘fdtf‘fi‘mta‘a‘ © 2016 Thomson Wentors, No claim to original US. Government Works, 2’1 Rule 23. Class Actions, FRCP RuL - In addition, courts may take account of the fees charged by class counsel or other attorneys for representing individual claimants or objectors in the case. In determining a fee for class counsel, the court's objective is to ensure an overall fee that is fair for counsel and equitable within the class. In some circumstances individual fee agreements between class counsel and class members might have provisions inconsistent with those goals, and the court might determine that adjustments in the class fee award were necessary as a result. Finally, it is important to scrutinize separately the application for an award covering nontaxable costs. If costs were addressed in the order appointing class counsel. those directives should be a presumptive starting point in determining what is an appropriate award. Paragraph (1). Any claim for an award of attorney fees must be sought by motion under Rule 54(d)(2), which invokes the provisions for timing of appeal in Rule 58 and Appellate Rule 4. Owing to the distinctive features of class action fee motions, however, the provisions of this subdivision control disposition of fee motions in class actions, while Rule 54(d) (2) applies to matters not addressed in this subdivision. The court should direct when the fee motion must be filed. For motions by class counsel in cases subject to court review of a proposed settlement under Rule 23(e), it would be important to require the filing of at least the initial motion in time for inclusion of information about the motion in the notice to the class about the proposed settlement that is required by Rule 23(e). In cases litigated to judgment, the court might also order class counsel's motion to be filed promptly so that notice to the class under this subdivision (h) can be given. Besides service of the motion on all parties, notice of class counsel's motion for attorney fees must be “directed to the class in a reasonable manner.” Because members of the class have an interest in the arrangements for payment of class counsel whether that payment comes from the class fund or is made directly by another party, notice is required in all instances. In cases in which settlement approval is contemplated under Rule 23(e), notice of class counsel's fee motion should be combined with notice of the proposed settlement, and the provision regarding notice to the class is parallel to the requirements for notice under Rule 23(e). In adjudicated class actions, the court may calibrate the notice to avoid undue expense. Paragraph (2). A class member and any party from whom payment is sought may object to the fee motion. Other parties-- for example, nonsettling defendants--may not object because they lack a sufficient interest in the amount the court awards. The rule does not specify a time limit for making an objection. In setting the date objections are due, the court should provide sufficient time after the full fee motion is on file to enable potential objectors to examine the motion. The court may allow an objector discovery relevant to the objections. In determining whether to allow discovery, the court should weigh the need for the information against the cost and delay that would attend discovery. See Rule 26(b) (2). One factor in determining whether to authorize discovery is the completeness of the material submitted in support of the fee motion, which depends in part on the fee measurement standard applicable to the case. If the motion provides thorough information, the burden should be on the objector to justify discovery to obtain further information. Paragraph (3). Whether or not there are formal objections, the court must determine whether a fee award is justified and. if so, set a reasonable fee. The rule does not require a formal hearing in all cases. The form and extent of a hearing depend on the circumstances of the case. The rule does require findings and conclusions under Rule 52(a). Paragraph (4). By incorporating Rule 54(d)(2), this provision gives the court broad authority to obtain assistance in determining the appropriate amount to award. In deciding whether to direct submission of such questions to a special master or magistrate judge, the court should give appropriate consideration to the cost and delay that such a process might entail. M’E‘fiYU‘a‘v‘.‘ © 2016 "Thomson Routers, Ho Ciaim to original US. Government ‘fifwks, 1/3 Rule 23. Class Actions, FRCP RuL 2007 Amendment The language of Rule 23 has been amended as part of the general restyling of the Civil Rules to make them more easily understood and to make style and terminology consistent throughout the rules. These changes are intended to be stylistic only. Amended Rule 23(d)(2) carries forward the provisions of former Rule 23(d) that recognize two separate propositions. First, a Rule 23(d) order may be combined with a pretrial order under Rule 16. Second. the standard for amending the Rule 23(d) order continues to be the more open-ended standard for amending Rule 23(d) orders, not the more exacting standard for amending Rule 16 orders. As part of the general restyling, intensifiers that provide emphasis but add no meaning are consistently deleted. Amended Rule 23(0 omits as redundant the explicit reference to court of appeals discretion in deciding whether to permit an interlocutory appeal. The omission does not in any way limit the unfettered discretion established by the original rule. 2009 Amendment The time set in the former rule at 10 days has been revised to l4 days. See the Note to Rule 6. Notes of Decisions (410) Fed. Rules Civ. Proc. Rule 23, 28 U.S.C.A., FRCP Rule 23 Including Amendments Received Through 8-1-16 End uf Document ‘0 2016'l‘homsnn Reuters. Nu claim Io nnginul US Government Works. ‘¢‘£F$T1,,.WJ (L) 2016 Thomson Reuters. No Chaim to original US Government Works, 1’7 EXHIBIT “App-z” In re FPl/Agretech Securities Litiga,, -n, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 [2] 105 F.3d 469 United States Court of Appeals, Ninth Circuit. In re FPI/AGRETECH SECURITIES LITIGATION. Thomas W. HAYES, Agretech Trustee, Plaintiff, v. Karl HAUSI-IALTER; Ernest & Young, Defendants. LIEFF, CABRASER & HEIMANN, Applicant-Appellee, v. Jamie CHUCK; Chuck, Jones & MacLaren, Applicants-Appellants. [3] No. 95-15134. | Argued and Submitted June 13, 1996. l Decided Jan. 17, 1997. l4] In consolidated class action, cocounsel applied for attorney fees. The United States District Court for the District ofHawai‘i, Manuel L. Real, ChiefJudge, declined to allocate attorney fees to attorney who was not involved in relevant portion of litigation. Attorney appealed. The Court of Appeals, Sneed, Circuit Judge, held that district court did not abuse its discretion by declining to allocate attorney fees to attorney and finding that previous, interim award sufficiently compensated attorney. Affirmed. '5' Kozinski, Circuit Judge, dissented and filed opinion. West Headnotes ( 1 3) [l] Federal Civil Procedure w Class actions;settlements Federal Courts £7» Costs and attorney fees In class actions, district court has broad [6] authority over awards of attorney fees, so that appellate review is for abuse of discretion. 10 Cases that cite this headnote Federal Courts fr-a Costs and attorney fees Appellate court's deference to district court on class action attorney fees extends to court's choice of method-lodestar or percentage recovery-for calculating award. 4 Cases that cite this headnote Federal Civil Procedure P Class actions;sett1ements District court abuses its discretion in attorney fee award for class action lawsuit if its decision is based on erroneous conclusion of law or if record contains no evidence on which it rationally could have based its decision. 5 Cases that cite this headnote Federal Courts SF» Costs and attorney fees So long as district court provides concise but clear explanation of its reasons for allocating attorney fees among class action counsel, and those reasons are supported by the record, reviewing court should accept its decision. 2 Cases that cite this headnote Attorney and Client (a Contracts for division, and apportionment District court could reject proposed attorney fee allocation agreement among cocounsel because it did not reflect relative work performed by cocounsel; agreement would have given attorney 18.5% of attorney fee award for portion ofproceedings when she did almost no work. 3 Cases that cite this headnote Attorney and Client Cs» Contracts for division. and apportionment District court may decline to approve fee allocation agreed by cocounsel based on WESJYLAV‘J © 2016 Thomson Reuters, No claim to original U.S. Government Works, In re FPIIAgretech Securities Litig- .1, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 [8] [9] [10] relative efforts of cocounsel and relative benefits conferred on class by them, not only if fee allocation is contrary to class interests or violates rules of professional conduct. 6 Cases that cite this headnote Attorney and Client r3; Contracts for division, and apportionment Cocounsel's fee allocation proposal in class action was not enforceable contract, and was subject to review by district court; parties made proposal “on the courthouse steps” and submitted it orally. 3 Cases that cite this headnote Federal Civil Procedure 0° Class actions;settlements Attorney fees in class action derive from principles of equity, not contract. Cases that cite this headnote Attorney and Client i)» Allowance and payment from funds in court When awarding attorney fees, courts must give primary consideration to fundamental principle that fee awards out of common funds must be reasonable under circumstances. 2 Cases that cite this headnote Attorney and Client x2: Contracts for division, and apportionment District judge's cements at two attorney fee hearings that he felt that previous attorney fee award compensated cocounsel for all work that she had done in the past justified allocating all of later attorney fee award to other cocounsel, which performed almost all of later work, though cocounsel's original work had effect on later award, and district judge did not explain reasoning in written opinion. l Cases that cite this headnote [11] Attorney and Client 6m Contracts for division, and apportionment In rejecting attorney fee allocation proposal agreed upon by all cocounsel, district judge did not prejudice attorney or improperly encourage other cocounsel to ask for allocation ofentire award by commenting that fee proposal was overly generous to attorney. l Cases that cite this headnote [12] Federal Civil Procedure % Judge's remarks and conduct Judges are not prohibited from commenting on merits of arguments and proposals before them. Cases that cite this headnote [13] Attorney and Client 6;» Contracts for division, and apportionment When considering how to allocate attorney fee award among cocounsel, it was proper for judge to ask other judge, who oversaw settlement negotiations, for his assessment of attomeys' roles in settling class action. Cases that cite this headnote Attorneys and Law Firms *470 Mark D. Bernstein, Honolulu, HI, for applicants- appellants. Richard M. Heimann, Morris A. Ratner, Lieff, Cabraser & Heimann, San Francisco, CA, for applicant-appellee. Appeal from the United States District Court for the District of Hawaii, Manuel L. Real, Chief District Judge, Presiding. D.C. No. MDL-00763. WESTMW © 2016 Thomson Reuters, No claim to original UWS. Government Works, 9 In re FPIIAgretech Securities Litlgl n, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 Before SNEED, PREGERSON, and KOZINSKI, Circuit Judges. Opinion SNEED, Circuit Judge: In this attomeys' fee dispute, we are asked to assess the propriety of the district court's refusal, first, to approve an attomeys' fee allocation proposal between class co-counsel; and second, to award fees at all to one counsel, applicant-appellant Jamie Chuck. Because we find the district court's decision to be reasonable under the circumstances, we affirm the judgment. BA CKGROUND 0F THE FEE DISPUTE A syndication of partnerships established to cultivate and sell tropical plants in Hawaii collapsed financially in 1987. As a result, several thousand investors who had purchased limited partnership interests in the venture lost, collectively, over $50 million. Naturally, litigation followed. Several class actions charging securities fraud were filed against FP Investments, Inc. (“FPI”); its several subsidiaries; the company which was supposed to cultivate the plants, Agricultural Research and Technology Group, Inc. (“Agretech”); and several accounting and law firms that had facilitated the sales of interests to investors. Chuck, representing four named plaintiffs and a proposed class of several thousand investors, filed the first of the actions in federal district court for the district of Hawaii in September 1987. The other actions were ultimately transferred to the District of Hawaii under 28 U.S.C. § 1407, consolidated as MDL 763, and assigned to Judge Real. Judge Real appointed Chuck and Lieff Cabraser & Heimann (“LCH”) co-lead and co-liaison class counsel. 1 The legal team for the consolidated plaintiff class was, however, effectively expanded beyond LCH and Chuck as a result of early efforts by LCH. LCH had filed declaratory judgment actions in bankruptcy court in Hawaii against the FPI and Agretech bankruptcy estates, seeking a determination of whether the investor class or the bankruptcy *471 estates would have standing to pursue claims against third parties such as accountants and attorneys. These actions led to a Sharing Agreement between the class and the bankruptcy trustees, which was approved by the bankruptcy court over Chuck's objections. Under this Agreement, which enabled the class and the trustees to litigate cooperatively instead offighting amongst each other, any funds recovered by the class or the trustees from their claims against the defendants would be pooled and allocated two-thirds to the investor class, two-ninths to the Agretech trustee and one-ninth to the FPI trustee. Thus, the team ofattorneys included the Agretech trustee's attorney, Paul, Johnston, Alston & Hunt (“PJAH”) and the FPI trustee, attorney Steven Guttman. The attorneys agreed, in November 1988, on a division of responsibilities under which LCH would assume primary responsibility for developing the case against the law firms of Cades Schutte Fleming & Wright (“Cades”) and Wyman Bautzer Kuchel & Silbert (“Wyman Bautzer”) (collectively, the attorney defendants), and Chuck would assume primary responsibility for developing the case against defendants associated with Arthur Young & Co. (“Arthur Young”) and Coopers & Lybrand (“C & L”) (collectively, the accountant defendants). (The responsibilities assigned to PJAH and Guttman are not important to an understanding ofthe issues in this appeal.) Four months later. LCH and Chuck switched responsibilities. In a “Joint Prosecution Agreement” signed in March 1989, Chuck agreed to take over the case against the attorney defendants, while LCH agreed to pursue the accountants. 2 Discovery proceeded on parallel tracks, each attorney collecting documents and witnesses for their respective cases. The record indicates that Chuck successfully gathered, catalogued, and analyzed thousands of documents that enabled her to effectively depose several key witnesses and oppose two summaryjudgment motions by the attorney defendants. Therefore, she clearly helped to set the stage for a favorable settlement. However, when settlement negotiations began with the Cades and Wyman Bautzer defendants, it was LCH that took the lead. Ultimately, Chuck appears to have played little role in the negotiations, which were supervised by Judge Tevrizian and led to the attorney defendants settling for an aggregate of nearly $12 million. 3 WE$YLAW © 2016 Thomson Reuters, N0 claim to original US. Government Works, 3 In re FPIIAgretech Securities Litigation, 105 F.3d 469 (1997) 65 USLW 2473. 97 Cal. Daily Op. Serv. 416. 97 Daily Journal D.A.R. 681 After the district court approved these settlements in October 1990, it made an interim award of attomeys‘ fees according to the attomeys‘ stipulation. The stipulation allocated fees among the attorneys according to their respective lodestars (the number of hours spent multiplied by a reasonable hourly rate). and was made “[s]ubject to any future court order concerning fees” and “solely as an advance against the final total award of fees to the applicants.” The court order, however, omitted the above- quoted language, simply awarding 25% of the settlement fund in attorneys' fees and allocating the fees according to the attorneys' stipulation-$1,293,987 to LCH; $815,727 to Chuck; $663,388 to PJAH; and $131,016 to Guttman. It is undisputed that at this point in the case, Chuck's work ended. LCH continued to develop the case against Arthur Young (C *472 & L having settled by an earlier agreement not at issue in this appeal), took the case to trial, and won a jury verdict against the accounting firm in August 1990. Although Chuck apparently offered to help with this part of the case, she ultimately did not. Nonetheless, when the district court awarded an aggregate attorneys' fee 0f 35% of the Arthur Young judgment in December 1990, Chuck filed an application for an allocation of fees from that award. The record indicates that LCH hotly disputed Chuck's right to a portion of the fees from a judgment which she had done nothing to help obtain. However, at a January 28, 1991, hearing on the matter, LCH asked Judge Real to place the fee dispute at the end of his calendar while the attorneys worked out a compromise “on the courthouse steps.” The compromise they reached, which Elizabeth Cabraser ofLCH presented to Judge Real for his consideration, would have allocated 57.5% of the award to LCH, 23% to PJAH, 18.5% to Chuck, and 1% to Guttman. lt is this agreement which Chuck here argues Judge Real should have accepted. Rather than accepting the proposal, however, the district judge reacted negatively to it, apparently for three reasons. First, the court was concerned that “we may be jumping the gun on this” because it remained to be seen who would do what work on the Arthur Young appeal. Second, the court felt that the agreement was “overly generous to Ms. Chuck.” Finally, the court decided that the Sharing Agreement between the class and the trustees required it to send the estates' one-third share of the fund to the bankruptcy court and to let the bankruptcy judge award attorneys' fees to the trustees' attorneys from that share. The court ordered the matter taken off calendar until the appeal was resolved, retaining jurisdiction to award fees and costs at that time. The Arthur Young appeal, in which Chuck concededly did not participate. took four years to resolve. Ultimately, LCH negotiated a $17 million settlement with that defendant. Chuck then filed, in November 1994, a second application for an allocation of attorneys' fees from that fund, and LCH applied for an allocation of the entire award to itself. At a December 8, 1994, hearing, Judge Real reiterated his feeling that Chuck was not entitled to share in the fees generated by litigation to which she had not contributed. Therefore, the court granted LCH's application for the entire fee award of 35% of the class' two-thirds share of the judgment, and denied Chuck's application. Chuck timely appealed. We have jurisdiction over the appeal under 28 U.S.C. § 1291. II. STANDARD 0F REVIEW [1] [2] [3] authority over awards of attomeys' fees; therefore, our review is for an abuse of discretion. Class Plaintiffs v. Jafle & Schlesinger, P.A., 19 F.3d 1306, 1308 (9th Cir.1994). This deference extends to the court's choice of method --lodestar or percentage recovery-for calculating the award.4 In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1296 (9th Cir.1994). The “district court abuses its discretion if its decision is based on an erroneous conclusion of law or if the record contains no evidence on which it rationally could have based its decision.” Paul, Johnson, Alston & Hunt v. Graulty. 886 F.2d 268, 270 (9th Cir.1989). III. DISCUSSION A. The Rejection of the Fee Allocation Proposal Chuck's first argument on appeal is that the district court abused its discretion by *473 rejecting the fee allocation WESYMW © 2016 Thomson Reuters, No claim to original US. Government kas, gs In class actions, the district court has broad In re FPI/Agretech Securities Litithn, 105 F.3d 469 (1997) 65 USLW 2473. 97 Cal. Daily Op. Serv. 416. 97 Daily Journal D.A.R. 681 proposal presented by the attorneys at the January 1991 hearing. She contends, first, that the only proper bases for rejecting a fee agreement are where the agreement is contrary to the interests of the class or inconsistent with standards of professional conduct; and second, that the agreement should have been treated as an enforceable contract. We disagree. 1. Basesfor Rejecting a Fee Allocation Agreement. [4] There is very little case law concerning the allocation of attorneys' fees among co-counsel. That which does exist indicates that district courts may refuse to accept a fee allocation agreement whenever there is good cause to do so. For example, in Smiley v. Sincofl, 958 F.2d 498, 501 (2d Cir. 1992), the Second Circuit affirmed the district court's rejection of a fee agreement between two attorneys. The court explained: A district court's exercise of this broad discretion to review and modify a fee agreement is not limited to situations in which it finds windfall, adverse class impact, or other irregularity. Whenever a court finds good reason to do so, it may reject an agreement as to attorneys' fees just as it may reject an agreement as to the substantive claim. Id. (internal quotations omitted). So long as the district court provides a “concise but clear explanation” of its reasons, and those reasons are supported by the record, the reviewing court should accept its decision. Id. at 502. The cases relied upon by Chuck are not to the contrary. In In re ”Agent Orange" Prod. Liab. Litig., 818 F.2d 216, 222 (2d Cir.), cert. denied by Newton B. Schwartz, P.C. v. Dean, 484 U.S. 926, 108 S.Ct. 289. 98 L.Ed.2d 249 (1987). the Second Circuit refused to honor a fee sharing agreement among class counsel on the ground that the agreement was inconsistent with the interests of the class because it might encourage premature settlement. The court rejected authority that “allows counsel to divide the award among themselves in any manner they deem satisfactory under a private fee sharing agreement. Such a division overlooks the district court's role as protector of class interests and its role of assuring reasonableness in the awarding of fees in equitable fund cases.” 151.: see also Jafi’e, 19 F.3d at 1308 (“It is well established that an award of attorneys' fees from a common fund depends on whether the attorneys' specific services benefited the fund-whether they tended to create, increase, protect or preserve the fund.”) (internal quotation omitted). Thus, this case supports the proposition that a court may reject a fee allocation agreement where it finds that the agreement rewards an attorney in disproportion to the benefits that attorney conferred upon the class-even if the allocation in fact has no impact on the class. In Prandim‘ v. National Tea Ca, 557 F.2d 1015, 1019 (3d Cir.1977), overruled on other grounds, Ashley v. Atlantic Richfield Co., 794 F.2d 128 (3d Cir.1986), the Third Circuit affirmed the district court's refusal to approve an agreement to pay a percentage of the fee to referring counsel: “[A] division of fees based on a percentage without regard to work performed or responsibility assumed is not in compliance with the ABA standard.” Ia'. at 1019. Like In re Agent Orange, this case supports the proposition that district courts have the authority to reject a fee allocation that does not accurately reflect the amount of work performed by the various attorneys. [5] The record before us indicates that the district court rejected the proposal because it did not reflect the relative work performed by Chuck and LCH. Most illuminating are the district judge's comments at the January 1991 fee hearing: I don‘t know how much work is going to yet be done by people in the Arthur Young case, and by whom it's going to be done... I'll give it to you right now-I think it's overly generous to Ms. Chuck, this spread... I don't want it to redound to the detriment of the law firm that, at least that I think, is probably entitled [to] a lion's share of the fee, simply because that case was tried. And that's the law firm that, in effect, won that case without an awful lot of help from anybody else.... I don't want anybody- anybody, again, *474 also, very frankly-I don't want anybody just sitting back and profiting from what's going to happen on appeal. WESTLAW © 2016 Thomson Reuters. No c1aim to original UVS. Government Works, 5 In re FPIIAgretech Securities Litig‘ Jn, 105 F.3d 469 (1997) 65 USLW 2473. 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 Because what you're doing is, you're increasing-you’re increasing the thing... And what you earned for the class is something that ought to be considered by the Court in hard terms, and not just on some ephemeral kinds of settlements.... I don't think that [Chuck] made that much of a contribution to this- the Arthur Young matter at all. I don't think there was a hell of a contribution to either Wyman Bautzer or Cades, since it was Judge Tevrizian who settled that case. Not Ms. Chuck. It was Judge Tevrizian who settled that case. And he gave me the details of it. [6] We reject Chuck's proposed rule that a district court may decline to approve a fee allocation only if it is contrary to the interests of the class or in violation of rules of professional conduct. Instead, we hold that the relative efforts of, and benefits conferred upon the class by, co-counsel are proper bases for refusing to approve a fee allocation proposal. See Jaffe, 19 F.3d at 1308; In re Agent Orange, 818 F.2d at 223. 2. The Fee Allocation Proposal as Contract. [7] [8| have treated the fee allocation proposal as an enforceable contract. However, the cases on which Chuck relies are inapposite. See Stissi v. Interstate & Ocean Transport C0. 0f Philadelphia, 814 F.2d 848 (2d Cir.1987); Joye v. Heuer, 813 F.Supp. 1171 (D.S.C.1993), aff'd, 66 F.3d 316 (4th Cir.1995). Neither case involved attorneys' fees in a class action, and such fees derive from principles of equity, not contract. See Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676 (1980) (attorneys' fees in common fund cases are allowed by virtue of an equitable exception to the American rule that prevailing parties are not awarded attorneys' fees). More importantly, both cases involved formal fee agreements, whereas here the parties merely submitted orally a fee allocation proposal, arrived at, figuratively speaking, “on the courthouse steps,” for the court's approval. We decline to curb the district courts' broad discretion in exercising their equitable power to award attorneys' fees in Chuck next argues that the district court should common fund class actions by requiring that fee allocation proposals be treated as enforceable contracts. B. The Use ofDifferem Methods in Calculating the Two Awards Chuck argues next that the district court abused its discretion by using the lodestar method to award interim attorneys' fees from the settlement fund in 1990, and the percentage recovery method to award attorneys' fees from the Arthur Young judgment in 1994. This argument lacks support in both the facts and the law. As a factual matter, both fee awards were effectively (if not explicitly) made on a percentage recovery basis. In its 1990 order, the court awarded 25% of the settlement fund in attorneys' fees. The attorneys, in a stipulation submitted to the court, agreed among themselves on an allocation of that 25%. calculated on a pro rata basis according to their respective lodestars. 5 The court accepted the allocation without comment. In its 1994 order, the court awarded in attorneys' fees 35% of the class' two-thirds of the judgment against Arthur Young. The attorneys agreed among themselves on an allocation *475 of that 35%, but this time the district court refused to accept it. [9] Thus, the court in both instances awarded attorneys' fees according to the percentage recovery method, a decision that was well within its discretion. See In re Washington, 19 F.3d at 1295-96 (district court has discretion to use either lodestar or percentage recovery method in common fund cases); Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir.1990) (same). When awarding attorneys‘ fees, courts must give primary consideration to “the fundamental principle that fee awards out of common funds be reasonable under the circumstances.” In re Washington, 19 F.3d at 1296 (internal quotation omitted). Neither party argues that either the 1990 or 1994 award (of 25% and 35% respectively) was unreasonable. Therefore, the only question is whether the district court was unreasonable in refusing to allocate any attorneys' fees to Chuck in 1994. C. The District Court's Refusal to Award Fees to Chuck [10] As a preliminary matter, Chuck argues that the district court abused its discretion by failing to articulate reasons for refusing to grant her fee application. See Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983) (district court is required to WES'E’LAW © 2010 Thomson Reuters, No claim to original LLS, Government Works, v3 In re FPIIAgretech Securities Litighdn, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 “provide a concise but clear explanation of its reasons” for a fee award); Smiley, 958 F.2d at 502 (same); Graulty, 886 F.2d at 270 (district court abuses its discretion if the record contains no evidence on which it rationally could have based its decision). That argument is unpersuasive here, where the district court held fee hearings in 1991 and 1994. and clearly articulated its concerns at both hearings. The district judge's comments at the two hearings indicate that he felt the first attorneys' fee award in 1990 compensated Chuck for the discovery and motions work she had done to prepare the case against the Cades and Wyman Bautzer defendants, as well as for any other work she had done in the case. 6 That award also compensated LCH for its work preparing for, participating in, and successfully completing the settlement with the Cades and Wyman Bautzer defendants, as well as for its discovery work in preparing the case against the accountants, and for its function throughout the litigation as the liaison with class members. The second attorneys' fee award in 1994 compensated LCH for its multi-year prosecution of the case against Arthur Young, including jury trial, appeal, and ultimate settlement. 7 Chuck does not argue that she was involved in this stage of the case. Rather, she argues that “[LCH] was permitted to share in the common fund generated by reason of the settlements achieved in the portion of the case for which [Chuck was] primarily responsible, while [Chuck was] excluded from a share in the common fund generated by reason of the settlement achieved in that portion of the case for which [LCH] was primarily responsible.” This argument is without merit because it ignores the record evidence that, regardless of primary responsibility, LCH was far more involved than Chuck in the actual settlement of the case against the attorney defendants, while Chuck was not at all involved in litigating the case against Arthur Young. Because of that evidence, it is both just and reasonable that LCH shared in the fees from the first settlement fund, while Chuck did not share in those from the second. See Jafle, 19 F.3d at 1308 (district court should award attorneys' fees from a common fund according to whether attorneys' services benefited the fund). *476 Although it would have been preferable for the district court to explain its reasons for its decision in its written order, we find no abuse of discretion because the court explicitly expressed its reasons during two hearings on the issue. The record, moreover, fully supports the conclusion that Chuck was adequately compensated for her role in the case by the 1990 award, and that she was not entitled to share the fees generated by the Arthur Young litigation. Therefore, we hold that the district court's denial of Chuck's fee application was a proper exercise of its discretion. D. The District Judge's Comments [11] [12] Chuck argues lastly that several of the district judge's comments at the January 1991 hearing amounted to an abuse of discretion. She alleges that Judge Real, by commenting that the fee proposal was overly generous to Chuck, encouraged LCH to ask for an allocation of the entire award, thus prejudicing Chuck. We disagree. Repeatedly, district judges must steer between the rocks of saying too little and those of saying too much. In this instance the passage was successful. Judges are not prohibited from commenting on the merits of the arguments and proposals before them. [13] Chuck also alleges that the district judge's comment concerning his discussion with Judge Tevrizian-“It was Judge Tevrizian who settled that case. And he gave me the details of it.”-demonstrates an improper reliance on off- the-record evidence in reaching his decision, and therefore constitutes clear error. We disagree. Judge Tevrizian was asked to supervise the settlement negotiations with the Cades and Wyman Bautzer defendants. See Manual for Complex Litigation (3d) 11 23.11 at 167 (transferee judge may bn'ng in another judge or other neutral person to supervise settlement negotiations). Since it was Judge Real's responsibility to award appropriate attorneys' fees, it was quite proper for him to ask the settlement judge for his assessment of the attorneys' roles. The cases on which Chuck relies for her argument are inapposite. Most disapprove instances where the district judge privately interviewed witnesses or experts. See People v. Arclzerd, 3 Cal.3d 615, 91 Cal.Rptr. 397, 477 P.2d 421 (1970); People v. Murray, 11 Ca1.App.3d 880, 90 Cal.Rptr. 84 (1970). In Jorsz‘acl v. IDS Realty Trust, 643 F.2d 1305, 1311 (8th Cir.1981), the Eighth Circuit found an abuse ofdiscretion where the districtjudge, in awarding attorneys' fees in a class action, relied principally on his own knowledge of the nature of the work involved, the experience of class counsel, and attorneys' hourly rates in WES‘TLAW © 2016 Thomson Reuters, No claim to original U.S. Government Works, 7 In re FPl/Agretech Securities Litigtfljn, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416. 97 Daily Journal D.A.R. 681 the area. Here, by contrast, the district judge relied on a conversation with a judge who had been assigned to help settle parts of the case. That reliance was not clear error; indeed, it reflected the type of management and coordination envisioned by the rules governing complex litigation. Moreover, the record contains other evidence that Chuck did not ultimately play a big role in the Cades and Wyman Bautzer settlements, even though she had been quite involved with the discovery process. See supra Parts III.A, C. Therefore, the district judge's decision is supportable even excluding his reliance on the settlement judge's assessment. IV. CONCLUSION It may well be that one attorney or another bears the blame for the conflicts that developed between co-lead counsel in this litigation, and for the diminution of Chuck's role therein. However, we are not called upon to peer more deeply into that question. Whatever the reasons for the ultimately unequal division of work between LCH and Chuck, the record before us amply supports the district court's conclusion that Chuck was not entitled to a share of the fees from the Arthur Young judgment. The order awarding attorneys' fees is therefore AFFIRMED. KOZINSKI, Circuit Judge, dissenting. Agreements between lawyers allocating fees for services rendered to joint clients are contracts. See Freeman v. Mayer, 95 F.3d 569, 572-74 (7th Cir.1996); Stissi v. Interstate *477 & Ocean Tramp. Co., 814 F.2d 848, 851- 852 (2d Cir.l987); Joye v. Heuer, 813 F.Supp. 1171, 1173 (D.S.C.1993), aff‘d, 66 F.3d 316 (4th Cir.1995). As such they require no judicial imprimatur to make them legal. There are only two situations where judicial intervention is appropriate. First, where the division of fees is grossly disproportionate to the services actually provided, the a11ocation may represent an illegal payment for something other than services rendered to the client, such as a referral. See, e.g., Prandini v. National Tea Co., 557 F.2d 1015, 1019 (3d Cir.l977), overruled 0n other grounds, Ashley v. Atlantic Riclzfield Co., 794 F.2d 128 (3d Cir.l986). We can dispose of this possibility easily. At the time the parties reached their agreement, they were in an adversarial position. Each had made claims to a larger share of the class fee, yet they compromised for the usual reasons: to avoid the uncertainty, cost and delay of having the issue adjudicated. This situation is far different from that contemplated by the rules of professional responsibility, which prohibit cozy agreements between one lawyer who does all the work and another who merely makes a referral. See Model Code of Professional Responsibility DR 2-107(A)(2). Judicial supervision is also warranted when the agreement sets the total amount of a fee award. This reason for judicial intervention defines its own outer boundaries: An application for attorney's fees from a common fund has no natural enemies, so judicial oversight is necessary to protect the interests of the class. To the extent an allocation between lawyers would increase the fees taken from the class, or in some other way prejudice class interests, judicial intervention is entirely appropriate. See 7B Charles A. Wright et al., Federal Practice and Procedure § 1797, at 340-41 (1986) (“The purpose of [Fed.R.Civ.P. 23(e) ] is to protect the nonparty members of the class from unjust or unfair settlements....”); In re ”Agent Orange” Prod. Liab. Litig., 818 F.2d 216, 222 (2d Cir.) (“The ultimate inquiry in examining fee agreements and setting fee awards under the equitable fund doctrine and [Rule] 23(e), is the effect an agreement could have on the rights ofa class”), cert. denied, 484 U.S. 926. 108 S.Ct. 289, 98 L.Ed.2d 249 (1987). But there is no justification for rewriting a bona fide fee allocation agreement where the contract will have no impact on the interests of the class. I recognize the Second Circuit allows such judicial meddling, see Smiley v. Sincojf 958 F.2d 498, 501 (2d Cir.l992); Agent Orange, 818 F.2d at 223, but nothing in our own caselaw requires us to follow this unwise course. The only Ninth Circuit case cited by the majority, Class Plaintifi’s v. Jaffe & Schlesinger, P.A., 19 F.3d 1306 (9th Cir.l994), concerned an individual lawyer's application for fees from a common fund, not a contract dividing a pre-set award. Id. at 1308 (“It is well established that an award of attorneys' fees from a common fund depends on whether the attorneys' ‘specific services benefitted the fund ....’ ” (quoting Lindy WESTLAW © 2016 Thomson Reuters, No claim to original U.S. Government Works 8 In re FPl/Agretech Securities Litig, .n, 105 F.3d 469 (1997) 55 USLW 2473. 97 Cal. Daily Op. Serv. 416. 97 Daily Journal D.A.R. 681 Bros. Builders, Inc. v. American Radiator & Standard Sanitary C0rp., 540 F.2d 102, 112 (3d Cir.1976))). Jafle therefore provides no authority for the majority's rule, which allows district courts to substitute their judgment for that of the contracting parties. Lawyers, no less than any others, are entitled to arrange their affairs by private contract. This policy is particularly strong where the contract in question memorializes the settlement of a dispute. We generally encourage parties to resolve their differences amicably, as they did here, so there must be very cogent reasons for upsetting an amicable resolution. That the agreement was entered into, as the majority figuratively puts it, “on the courthouse steps,” maj. op. at 474, does not strike me as a compelling reason: Many binding agreements are reached on those steps or even in the courthouse lobby. Proximity to the bench seems to me like a good reason for enforcing these contracts, because it is more likely that parties to such agreements will understand the gravity and consequences of their actions. Nor is Judge Real's perception that Chuck did little or no work in the case a sufficient reason for denying enforcement of the contract. The parties to the agreement Footnotes were well aware of the legal and factual basis for their respective positions, and chose to settle *478 by giving Chuck almost a fifth of the award. It is inconceivable that experienced lawyers like those of Lieff, Cabraser would give up such a large chunk of their fee unless they thought Chuck might persuade the judge to give her even more. Of course, she reasonably believed the opposite-which is what ensures that the agreement fairly approximates the work actually done by the various lawyers. This is not an agreement entered into under duress; it is not a contract ofadhesion; there was no showing of fraud; the parties were not minors or morons. All were well aware of the facts and law underlying their respective claims; they acted on the advice of counsel. There is no reason for failing to hold the parties to the deal they made. As we have said before, “Wise or not, a deal is a deal.” United Food & Commercial Workers Union v. Lucky Stores, Ina, 806 F.2d 1385, 1386 (9th Cir.1986). All Citations 105 F.3d 469, 65 USLW 2473, 97 Cal. Daily Op. Serv. 41 6, 97 Daily Journal D.A.R. 681 1 Chuck was initially appointed as part of a team with attorney Godfrey L. Munter. Munter was later removed from the case for reasons that are not important here. but Chuck remained. She later secured the help of Alexander T. MacLaren of Chuck Jones & MacLaren. also an appellant here. 2 The reasons for this switch are unclear. LCH asserts that Munter and Chuck were unwilling to spend funds on expert witnesses and that the Agretech trustee, with whom LCH had a longstanding working relationship, was dissatisfied with Chuck's work in developing what he considered to be the most important part of the case. Chuck asserts that she was told that her performance had nothing to do with it, and claims that LCH was simply unwilling to undertake what everyone agreed was the far more difficult case against the attorney defendants. In either event. what matters for our purposes is only that LCH and Chuck did switch roles in March 1989, and that each claims to have derived little or no benefit from the other's discovery efforts prior to that time. 3 Why Chuck was not more involved in these negotiations is. as with many aspects of this case. murky. While Chuck accuses LCH of making a “naked power play" in taking control of the settlement discussions with Wyman Bautzer, LCH retorts that Chuck abandoned her duties. With regard to Cades, Chuck claims that she participated in the two settlement meetings that she knew about, and was deliberately excluded from the others. 4 Under the lodestar method, the court first multiplies the number of hours an attorney reasonably spent on the case by a reasonable hourly rate; that figure is then adjusted according to the circumstances of the case to reach a reasonable fee. Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir.1989). Under the percentage recovery method, the court awards the attorneys a percentage of the fund recovered by the successful litigation sufficient to give them a reasonable fee. In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1294 n. 2 (9th Cir.1994). 5 The settlement fund was created as follows: Cades Defendants FPl Insider Defendants Wyman Bautzer Defendants $ 5,700,000 $ 650.000 $ 4,850,000 ti‘tiES‘aTLAW © 2016 Thomson Routers. No claim to original U.S. Government Works. 9 In re FPIIAgretech Securities Litig. .n, 105 F.3d 469 (1997) 65 USLW 2473, 97 Cal. Daily Op. Serv. 416, 97 Daily Journal D.A.R. 681 Interest Earned through 9/14/90 5 416,471 Total Settlement Fund $1 1 .616,471 25% of Total Settlement Fund $ 2,904.1 18 The attorneys agreed on an allocation of the 25% as follows: Pro Rata Lodestar Percent Allocation LCH $1,897,728 44.56% $1,293,987 Chuck $1 ,196,324 28.09% $ 815.727 PJAH $ 972.909 22.84% $ 663,388 Guttman § 192,144 4.51 % $ 131,016 $4,259,105 100.00% $2,904,1 1 8 Stipulation For Order Awarding Interim Attorneys' Fees. 6 Judge Real stated at the December 8. 1994, hearing: “Well. she got eighteen [sic] hundred and fifteen thousand dollars for that.... That was the consideration[ ] that went into that work for all that everybody gave rne at the time." 7 Judge Real stated at the January 28, 1991 hearing: “I don't want it to redound to the detriment of the law firm that. at least that | think, is probably entitled [to] a lion's share of the fee, simply because that case was tried. And that's the law firm that, in effect. won that case without an awful lot of help from anybody else. At least from my observation of it." End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works. «aWESTLAW © 2016 Thomson Reuters, No claim 10 original US. Government Works, 1 EXHIBIT “App-3” In re TFT-LCD (Flat Panel) Antitrust .gation, Not Reported ln F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78.318 x KeyCite Yellow Flag - Negative Treatment Distinguished by In re: Cathode Ray Tube (Crt) Antitrust Litigation, N.D.Cal.. July 7, 2016 2013 WL 1365900 Only the Westlaw citation is currently available. United States District Court, N.D. California. In re TFF-LCD (FLAT PANEL) ANTITRUST LITIGATION. This Order Relates to: A11 Indirect- Purchaser Plaintiff Class Actions. No. M 07-1827 Sl. l MDL. No. 1827. | April 3, 2013. SECOND AMENDED ORDER GRANTING FINAL APPROVAL 0F COMBINED CLASS, PARENS PATRIAE, AND GOVERNMENTAL ENTITY SETTLEMENTS WITH AUO, LG DISPLAY, AND TOSHIBA DEFENDANTS; ORDERING FINAL JUDGMENT OF DISMISSAL WITH PREJUDICE; AWARD OF A'I'I‘ORNEYS' FEES, EXPENSES, AND INCENTIVE AWARDS SUSAN ILLSTON, District Judge. *1 This matter has come before the Court to determine whether there is any cause why this Court should not approve the combined class, parens patriae, and governmental entity settlements between, on the one hand, the Indirect Purchaser Plaintiffs (“IPPs”) and the States of Arkansas, California, Florida, Michigan, Missouri, New York, West Virginia, and Wisconsin (“Settling States”) (collectively, the “Settling Plaintiffs”), and, on the other hand, the AUO, LG, and Toshiba Defendants-as identified in each of the Proposed Settlements, and inclusive of named related entities (collectively the “Settling Defendants”), set forth in the Settlement Agreements (“Agreements”) filed with this Court relating to the above-captioned litigation. On November 29, 2012, the Court conducted a fairness hearing addressing whether the Settlements were fair, adequate, and reasonable, and on January 31, 2013, the Court conducted a hearing to address attorneys' fees, expenses, and incentive awards. The Court, after carefully considering all papers filed and proceedings held herein and otherwise being fully informed in the premises, has determined (1) that the Settlements should be approved; (2) that attomeys' fees, expenses, and incentive awards should be awarded and allocated as directed by this Order, and (3) that there is no just reason for delay of the entry of this final judgment approving the Agreements. For the following reasons, the Court GRANTS final approval to the Settlements. The Court also awards attomeys' fees, expenses, and awards as detailed below. BACKGROUND This antitrust class action stems from allegations of a global price-fixing conspiracy in the market for thin-film transistor liquid-crystal display panels (“TFT-LCD”). TFT-LCD panels are used in a number of products, such as computer monitors, notebook computers, and televisions. See generally Order Granting Indirect Purchaser Plaintiffs‘ Motion for Class Certification (March 28, 2010), Docket No. 1642, at 1-3; Indirect Purchaser Plaintiffs‘ Third Consolidated Amended Complaint, Docket No. 2694, 1111 16-54. Defendants manufacture the panels, which are then sold and assembled into finished products. The panels have no independent utility, and are not available to the average consumer. Instead, they are incorporated into finished products as discrete, physical objects within the product. I. Indirect Purchaser Plaintiffs Plaintiffs are a class of retail purchasers who purchased products containing TFT-LCD panels in the United States. The indirect purchaser plaintiffs filed this multidistrict antitrust class action on behalf of all persons and entities who indirectly purchased TFT-LCD panels (contained in TFT-LCD products) manufactured, marketed, sold and/or distributed by one or more of the defendants, for the indirect purchasers' end use and not for resale. Third Consol. Amend. Compl. at 1i 16. Plaintiffs bought TFTLCD products containing TFT- LCD panels either from (1) TFT-LCD panel direct purchasers, such as Dell, Hewlett-Packard, and Apple, which incorporate TFT~LCD panels into final, branded TFT-LCD products and sell directly to the public, or (2) retailers, such as Best Buy, Wal-Mart, or Target, which WEEiTLA‘d‘.‘ © 2016 Thomson Reuters, No Claim t0 original UHS. Government Works. In re TFT-LCD (Flat Panel) Antitrus. .lgation, Not Reported In F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78.318 acquire the TFT-LCD products from TFT-LCD panel direct purchasers or distributors. *2 Plaintiffs alleged a “long-running conspiracy extending from at least January 1, 1999 through at least December 3 l , 2006, at a minimum, among defendants and their co-conspirators, the purpose and effect of which was to fix, raise, stabilize, and maintain prices for LCD panels sold indirectly to Plaintiffs and the members of the other indirect-purchaser classes....” Id. at 11 1. Plaintiffs sought equitable relief under Section 16 of the Clayton Act, 15 U.S.C. § 26, based on alleged violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, as well as restitution, disgorgement, and damages under the antitrust, consumer protection, and unfair competition laws of 23 states. 1 On March 28, 2010, the Court granted indirect purchaser plaintiffs' motion for class certification, certifying a nationwide class and twenty-three statewide classes. See Order Granting Indirect Purchaser Plaintiffs' Motion for Class Certification, Docket No. 1642, at 35. Additionally, in July 2011, the Court certified a Missouri monetary- relief class. Docket No. 3198. II. Settling States The Settling States filed complaints in various federal and state courts beginning in mid-2010. The actions assert claims and seek various forms of relief against the defendants arising from indirect purchases made by governmental entities, and/or by consumers of TVs, notebook computers, and monitors containing LCD Panels under each Settling State's parenspatriae authority, proprietary claims, and enforcement authority pursuant to both federal and state law. The Settling States have previously summarized some of the key events of their investigation and litigation, including motion practice and discovery work that preceded the previously-approved settlements. See Docket No. 4424 (motion for preliminary approval of previous settlements); Docket No. 5600 (motion for final approval of previous settlements); Docket No. 6860 (corrected motion for attomeys' fees and additional costs). III. Settlement Approval Process On January 26, 2012, the Court granted preliminary approval to settlements totaling $538.6 million with the Chimei, Chunghwa, Epson, HannStar, Hitachi, Samsung, and Sharp Defendants (“Round 1 Settlements”). Docket No. 4688.2 The Court granted final approval to these settlements on July ll, 2012. See Docket No. 6130. With respect to the remaining defendants (AUO, LG, and Toshiba), the IPPs and Settling States engaged in arm's- length negotiations with Settling Defendants, resulting in each Proposed Settlement (“Round 2 Settlements”). The Court granted preliminary approval to these Settlements on July 3 l, 2012. See Docket No. 631 l. Subsequent to that Order, IPPs filed a Motion for Final Approval, see Docket No. 7158, as well motions for attorneys' fees, expenses, and incentive awards, see Docket No. 5157, 6662, and 6664. Settling States also filed motions for attorneys' fees and expenses, see Docket No.5157 and 6860, and counsel for three separate objectors filed motions for attorneys fees, see Docket Nos. 6830/7195, 7200, and 721 1. *3 On August 9, 2012, the Court issued an order appointing Martin Quinn as Special Master, see Docket No. 6580,3 and referred to him the task of assisting the Court by issuing reports and recommendations on the subjects of: “(1) the reimbursement of the parties' expenses, and (2) the appropriate amount of attomeys' fees to be awarded to the parties. See Fed.R.Civ.P. 53(e).” The Court granted the Special Master authority to communicate ex parte with counsel “in order to facilitate the fair and effective performance of his duties regarding attomeys' fees and expenses ...” IV. Terms of the Settlement Most of the key terms of these Round 2 Settlements are substantially similar to the terms in the Round 1 Settlements, with the exception of the payment amounts and cooperation provisions. Notably, the releases largely mirror the releases in the previously approved settlements. The key terms are described below. A. Consideration Settling Defendants will pay a total of $571 million: $27.5 million has been paid to Settling States in resolution of their civil penalties claims, and $543.5 million represents consumer redress under the Proposed Settlements. The breakdown of total settlement payments by Defendant is as follows: AUO-$170,000,000; LG Display-$380,000,000; Toshiba-$21,000,000. WESTLIXW © 2016 Thomson Reuters, N0 claim to Original US. Government Works, Q In re TFT-LCD (Flat Panel) Antitrus. .Igatlon, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 2013-1 Trade Cases P 78,318 In addition to the cash payments, AUO and LG Display agree, for a period of up to 5 years, not to engage in price-fixing, market allocation, bid rigging, or other conduct that constitutes a per se violation of Section 1 of the Sherman Act, with respect to the sale of any LCD panels, or TVs, notebook computers, or monitors containing LCD panels likely, through the reasonably anticipated stream of commerce, to be sold to end- user purchasers in the U.S. Additionally, each settling defendant continuing to manufacture LCD panels agrees to establish an antitrust compliance program for officers and employees responsible for pricing or production capacity of LCD panels. Each defendant will certify that it is complying with this obligation in an annual written report for the next 5 years (3 years for Toshiba). Lastly, AUO and LG Display are obligated to provide cooperation to the IPPs and Settling States in the event that one or more of the settlements is not approved. B. Release For the class period of January 1, 1999-December 23, 2006, the IPPs release all claims for monetary relief held by indirect-purchaser end-user consumers in the certified statewide monetary relief classes (and the proposed settlement-only classes). They also release, for the time period January 1, 1999-February 13, 2012, all claims for injunctive relief held by indirect-purchaser end user consumers in the previously certified nationwide Sherman Act injunctive relief cases. Settling States release all claims that were asserted and all claims that could have been asserted in each Settling State's respective action, arising in any way from the sale of LCD Panels and based on any form of alleged anticompetitive conduct occurring on or before December 31, 2006, including claims based on governmental entity purchases and applicable parens patriae claims, based on the facts alleged. C. Plan of Distribution *4 The IPPs and the Settling States propose to compensate members of the IPP monetary relief classes according to a plan of distribution which provides that qualifying claimants will be eligible to claim an amount of money from the Settlement Fund based on the number of LCD TVs, notebook computers, and monitors each class member purchased during the class period. The deadline to file a claim was December 6, 2012. Based on a summary of claims provided by IPP counsel to the Court on January 29, 2013, 10,429,923 LCD products were claimed by 235,808 claimants.4 See Docket No. 7572. At that time, IPP counsel estimated that if the Court approved the Settlements as written and approved the amount of attorneys' fees, expenses, and incentive awards requested, claimants (including both timely and late-filed claims) would likely receive around $64 per monitor or laptop computer purchase and $128 per TV purchase. Additionally, a maximum payment amount of three times the estimated money damages per claimant will apply. Any residue of the Settlement Fund will be subject to further distribution as ordered by the Court. None of the Settlement Fund will revert to any Settling Defendant. Members of the nationwide injunctive relief class, who are not also members of any statewide monetary relief class, will not receive monetary compensation (but neither will they release monetary claims under the Proposed Settlements). IPP counsel have indicated that the Court's approval for the minimum payment will be requested when the data from the actual claim experience is available. DISCUSSION I. Final Approval of Class Action Settlements Final approval of a proposed class action settlement will be granted upon a finding that the proposed settlement is “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e) (2); See Hanlon v. Chrysler Corp, 150 F.3d 1011, 1026 (9th Cir.l998) (recognizing that “[i]t is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness....”). To determine whether a settlement agreement meets this standard, a district court must consider a number of factors, including: the strength of the plaintiff‘s case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental WE‘S‘TMW © 2016 Thomson Routers, No claim to original US. Government Works, 3 In re TFT-LCD (Flat Panel) Antitrusfigatlon, Not Reported in F.Supp.2d (2013) 5‘61 3 WL 1365900, 201 3-1 Trade Cases P 78.318 participant; and the reaction of the class members to the proposed settlement. Hanlon, 150 F.3d at 1026. The Court has read, heard, and considered all the pleadings and documents submitted, and the presentations made in connection with the motions which came on for hearing on November 29, 2012, and January 31, 2013. The Court considers the terms of the Settlement as well as objections received to the fairness of the Settlement below. 5 A. Objections to Plan of Distribution *5 The Court received seven objections to the fairness of the Proposed Settlements, from a total of 11 objectors. Primarily, objectors asserted objections on cy pres grounds to a provision in the Settlement Agreements allowing the Court to determine the disposition of any remaining residual in the settlement disbursement account after the cash distribution, complaining that potential cy pres recipients are not identified in the Settlement. Objectors cite to the Ninth Circuit's opinion in Dennis v. Kellogg Comp, 697 F.3d 858 (9th Cir.2012) (Kellogg II), 6 which set aside a settlement which had cy pres components which neither identified the ultimate recipients of the cy pres awards nor set forth any limiting restriction on those recipients. Id. at 861. The Court overrules these objections. There is no cy pres component in the Proposed Settlements or in the proposed plan of distribution. The plan aims to compensate only individual qualifying claimants with settlements on a pro ram basis, and none of the funds revert to the settling defendants. Motion for Final Approval, Docket No. 7158, at 12; Docket No. 7304 at 37. The only provision in the plan that would permit payment to persons other than a class member claimant is a provision that any residual funds remaining at the close of the claims process would be subject to further distribution in the Court's discretion. Id. Therefore, Dennis v. Kellogg is inapposite. The Court also received other objections that requested more time to find out about the case or requested a claim form. To the extent these are considered proper objections, they are overruled. WESTL AW B. Objections to Release Provisions Illinois and Washington raise the same objections to final approval of the Round 2 IPP Settlements as they did in opposition to preliminary approval of the Round l Settlements. See Docket No. 4493. South Carolina, in an amicus brief, joins Illinois and Washington's Objection. See Docket No. 7250. The crux of the Illinois, Washington, and South Carolina objections is that the IPPs are risking the class members‘ recovery by pursuing injunctive but not monetary relief, due to potential claim preclusion and the settlements‘ covenants not to sue. They also argue that the IPPs do not have authority to release state-law injunctive relief claims. The States request, as they did in the Round l settlement process, that their consumers be removed from the class definition or, at the very least, the Court only approve the settlements after receiving the parties' assurances that their settlements will not preclude the States' class members' monetary recovery. With respect to these States' request that their consumers be removed from the class definition, the Court denies this request. The Court previously rejected identical requests by Illinois and Washington in connection with Round 1 Settlements, see Order Denying States of Illinois and Washington's Motion to Modify the IPP's Class for Injunctive Relief (“Modify Order”). See Docket No. 4715. The Court concluded that the IPP injunctive- relief class will not preclude future claims by Illinois and Washington residents and that modification of the class is therefore not warranted. Id. The Court based its reasoning on the general rule that a class action suit seeking only declaratory and injunctive relief does not bar subsequent individual suits for damages, see Hiser v. Franklin, 94 F.3d 1287, 1291 (9th Cir.l996), as evidenced by the individualized factual showing necessary to establish monetary relief, but not required to establish injunctive relief, and the limited procedural protections offered by Rule 23(b)(2). 7 For the same reasons, the States' objection to the final approval based on its request that the IPP class be modified to exclude their citizens will be overruled. *6 The parties dispute what language should be included in the final approval order to characterize the release provisions in the Settlement Agreements. and each suggests language to be included. See Docket Nos. 717l- l and 7321. At the Fairness hearing, held on November 29, 2012, the parties discussed the release provisions, © 2016 Thomson Routers, No claim to original US. Government Worm, 4 In re TFT-LCD (Flat Panel) Antitru; -Itlgation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78,318 and Settling Defendants made certain representations with respect to the release provisions of Settling States. Defendants represented that the release of the injunctive class claims would not affect damages actions by states which are not within one of the defined IPP damages classes, even if they are included in the nationwide injunctive relief class. See Docket No. 7304 at 19. Defendants further clarified that this included the parens patriae claims by such states not part of an IPP damage class. Id. at 21. With respect to non-Settling States which are within a defined damages class,8 the issue is vigorously disputed. IPP Counsel and Settling States urge the Court to use the same language from the final approval order of the Round 1 Settlements, while Settling Defendants distinguish themselves from the Round 1 Defendants in that AUO, LG, and Toshiba, unlike the Round l Defendants, have not stipulated that their Settlement Agreements would have no preclusive effect on any claims brought by a non-Settling State. See Docket No. 7398, n. 3. 9 Although the parties agreed to discuss the matter and present the Court with a stipulation suggesting language agreed upon by the parties, the Court has not received any such stipulation or proposed language. The Court concludes that assurances made at the November 29, 2012 hearing resolve the issues that Illinois, Washington, and South Carolina raise in their objection, and their objections are thus overruled. The Court also finds that the language Settling Defendants propose is sufficient in light of the plain language of the Settlement Agreements. The Court makes this determination with reference to the assurances Defendants made at the November 29, 2012, hearing that monetary claims, including parens patriae claims, of the non-Settling States who were not part of a defined damages class would not be released. With respect to non-Settling States who are part of a defined damages class, as identified in this Court‘s class certification Order, the Court expects that the Settlement Agreements exclude from release parens patriae claims. To the extent Defendants take a different view, they can resolve that dispute in the courts of those states. Accordingly, the Court's characterization of release provision will reflect the language used in the Settlement Agreement, with reference to the assurances made in the November 29, 2012, hearing. C. Conclusion re Fairness of Settlement Having considered both the parties‘ and the objectors' arguments as well as the Hanlon factors, with a view to the complex and voluminous nature of this MDL litigation (see discussion of factors below), as well as the excellent result, the Court concludes that the settlement is fair, reasonable and adequate, and that IPPs have satisfied the standards for final approval of a class action settlement under federal law. II. Attorneys' Fees *7 The Court next addresses the motions and objections relating to an award of attorneys' fees, expenses and incentive awards. As indicated above, the Court appointed a Special Master to aid in determining the proper awards. In the Court's Amended Order Appointing Martin Quinn as Special Master, see Docket No. 6580, the Court stated it would review “findings of fact made or recommended by the Special Master for clear error” and review "de nova any conclusions of law made or recommended by the Special Master ...” pursuant to Fed.R.Civ.P. 53(f)(3). In addition, “[t]he Court will set aside the Special Master‘s ruling on a procedural matter only for an abuse of discretion.” Id. The Court notified parties of its intent to file an amended order appointing Martin Quinn as Special Master, and ordered all parties who objected to the Proposed Order appointing him to file objections with the Court. See Docket No. 6500. This Proposed Order included the same standard for legal review standard as identified in the original order appointing a special master. No objections were received. A. IPP Class Counsel Fees 1. Total Fee Awarded-Objections IPP class counsel seek an award of 28.5% of the settlement fund. The Special Master concluded, after an exhaustive analysis of factors to be considered in determining fee awards, that an amount of $308,225,250, representing 28.5% of the Settlement Fund, was fair and reasonable. The Court received several objections to the amount of the fee award from class members who asserted various arguments, some of which are discussed below. The Ninth Circuit has held that in a class action, “the district court must exercise its inherent authority to assure that the amount and mode of payment of attorneys' fees are fair and proper.” Zucker v. Occidental Petroleum Corp, 192 F.3d 1323, 1328-29 (9th Cir.l999). The judge /‘ifiESTLAW © 201G Thomson Routers, N0 Ciaim to original UVS. Govemment Works, Chi In re TFT-LCD (Flat Panel) Antitrut -itlgatlon, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78,318 is obligated to ensure that any fee award is fair and reasonable. Staton v. Boeing Co., 327 F.3d 938, 963- 64 (9th Cir.2003). In common fund cases in the Ninth Circuit, the “benchmark” award is 25 percent of the recovery obtained, with 20-30% as the usual range. See, e.g., Vizcaino v. Microsoft Corp, 290 F.3d 1043, 1047 (9th Cir.2002). As the Vizcaino court noted, the 25% benchmark rate is a starting point for the analysis, and the selection of the benchmark or any other rate must be supported by findings that take into account all of the circumstances of the case, including the result achieved, the risk involved in the litigation, the skill required and quality of work by counsel, the contingent nature of the fee, awards made in similar cases, and the lodestar crosscheck. Id. at 1048-50. In this case, the Court recognizes that the ultimate result achieved by IPP counsel, a settlement of approximately $1.08 billion in cash, is exceptional. This represents approximately 50% of the potential recovery, according to IPP's damages experts. No amount will revert to defendants, and there is a low probability of any unclaimed funds remaining. Cy pres distribution is not an issue. Moreover, the amount that individual claimants will receive is excellent. As discussed above, from current estimates, which will change based on the ultimate case administration costs and investigation of further claims, claimants may receive payment in the range of $64 per monitor or laptop, or $128 per TV.” The Court also recognizes the not-insignificant risk involved in litigating the claims at issue. Although some risk was lessened on account of parallel criminal price-fixing charges and guilty pleas, other factors complicated the IPP's case. Assessment of damages involved a difficult analysis, which required taking into account the impact of and relationship between federal and state rules concerning damage analysis, as well as constitutional limitations on duplicative damages, if any. Additionally, this case implicated provisions of the FTAIA in relatively unprecedented ways. In grappling with these complicated issues, IPP counsel prosecuted this action for six years, advancing large amounts of money to fund the many and expensive costs of litigation, with no guarantee of payout at the end. The Court considers all of these factors in making its assessment ofwhether to adjust the benchmark award. *8 Courts often compare an attorney's lodestar with a fee request made under the percentage of the fund method as a “cross-check” on the reasonableness of the requested fee. See, e.g., Vizcaino, 290 F.3d at 1050 (“[T]he lodestar calculation can be helpful in suggesting a higher percentage when litigation has been protracted [and] may provide a useful perspective on the reasonableness of a given percentage award”). The Special Master calculated a lodestar cross-check and determined that the lodestar (total hours reduced by 20% for possible inefficiencies, adjusted to reflect reasonable blended billing rates, and subject to multipliers ranging from negative to positive based on quality of work, and averaging between 2.4- 2.6) was within 1% of the requested 28.5% of the fee award. The Court agrees with the Special Master that this independent lodestar analysis corroborates the appropriateness of a 28.5% fee award. Accordingly, considering the factors noted above, the Court concludes that an award of 28.6% of the Settlement Fund should be awarded as it represents a reasonable and fair amount H The Court's decision takes into account all of the objections received to the fee award. The primary objection all objectors raised was that 28.5% of the settlement fund for attomeys' fees is excessive. Many objectors argued that the percentage should stay under the 25% benchmark identified in Vizcaino, with some objectors arguing that the Court must reduce the award or use a sliding scale model due to the size of the Settlement Fund and to avoid a windfall for the attorneys. The Court has specifically considered the size of the fund and whether its recommended award would inappropriately provide a windfall for attorneys. See Transcript of Fee Hearing, Docket No. 7614 at 39-40. Having reviewed other cases involving large Settlement Funds, the Court finds that its award is proper and fair in light of the amount and quality of the work done by the attorneys in this case. See Allapattalz Services v. Exxon Corp. 454 F.Supp.2d 1185 (S.D. Fla 2006) (awarding 31.5% of a settlement fund of $1.06 billion and citing fourteen cases involving settlement funds between $40-696 billion with fee awards between 25-35% of the fund); see also Craft v. County of San Bernadino, 624 F.Supp. 1113, 1125 (CD. Cal 2008) (noting that the fee award of 25% of the fund is substantially below the average class fund fee nationally). Although the different mega-fund cases involve varying degrees of complexity and risk, the Court is convinced that the complexity of this case merits the 28.6% fee award. Some objectors challenge the Special Master's finding regarding the complexity of the case as well as the degree of risk assumed by counsel, given that defendants' WESTLAW © 2018 Thomson Reuters, No claim to original US. Government Works, 6; In re TFT-LCD (Flat Panel) Antitru .utlgatlon, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78.318 liability had effectively been established. However, as discussed above, these cases presented issues beyond liability which were significant, complex and numerous, and the risk assumed was substantial enough to justify an upward adjustment of the 25% benchmark. Moreover, the excellent result obtained through the Settlements warrants an award of 28.6% of the Settlement Fund. See In re Bluetooth Headset Prod. Liab. Litigation, 654 F.3d 935, 942 (9th Cir.2011) ( “[floremost among these considerations, however, is the benefit obtained for the class.”). Additionally, objectors challenged the Special Master's methodology in calculating the fee award. As discussed above, the Court finds that the Special Master's use of the percentage of the fund method, with a lodestar cross-check, was proper. Accordingly, the Court overrules all of the objections received, including those mentioned above and other various challenges. 2. Allocation of Fees Among IPP Class Counsel *9 In addition to determining the amount of the total fee award, the Special Master was tasked with determining the allocation of the fee award among the 116 law firms that contributed to this litigation. On November 9, 2012, the Special Master issued a Report and Recommendation allocating the total fee award. See Docket No. 7127. To determine the amount of the fee award allocated to each firm, the Special Master employed the following methodology. First, he used the lodestar analysis for each firm reduced by 20% to eliminate inefficiencies. 12 Second, he examined the reasonableness of each firm's “lodestar-20%” by reviewing its declaration and the spreadsheet from each firm which broke down the total hours spent by each lawyer by year and among 13 different tasks. He considered whether the firm‘s blended and individual billing rates were excessive, whether the hours spent were reasonable for the tasks described in the declaration, whether the number oflawyers and paralegals for each firm was efficient, and whether each kind of task was performed by lawyers at appropriate billing rates. He capped individual billing rates at $1,000/hr and applied a maximum of about $350/hr for document review, 13 with some leeway. He then adjusted each firm's reported lodestar to correct for any excessive billing. Third, he applied multipliers to the adjusted lodestar figures based on certain factors. Factors meriting an upward adjustment include: contribution to the joint IPP effort, as opposed to work performed solely for an individual client; performing higher-skill tasks (e.g., taking depositions); paying expense assessments timely and in full; demonstrating efficiency; high quality of work as reported to the Special Master by lead and liaison counsel. Factors meriting a downward adjustment include: excessive recorded hours; failure to submit a declaration; performing largely document review; failure to act professionally and collaboratively to prosecute the joint IPP effort; billing for inconsequential tasks (e.g., reading ECF filing entries); paying assessments late or not at all; performing unimportant or poor quality work as reported by lead and liaison counsel. The Special Master noted that he seriously considered the confidential recommendations he received from co-lead and liaison counsel, as well as the input from other counsel and mediators. Fifteen law firms objected to this report. The Special Master considered these objections and issued a Supplemental Report on December 18, 2012, see Docket No. 7375, revising his proposed allocation based on new information and perspectives gained by interviews with each ofthe objecting firms and consideration ofadditional declarations, documents, and analyses. In the Report, the Special Master declined to award a higher total fee to class counsel, he affirmed his use of lodestar and multipliers to determine allocations, and he made adjustments to his original allocation. Specifically, he noted that he (1) did not give sufficient weight in the original allocation to the amount and timing of each law firm's contribution to the litigation fund, and made appropriate adjustments, (2) he did not “adequately appreciate” that varying levels of document review that took place, and thus made adjustments based on the type of document review performed, and (3) realized it was inappropriate to reduce every firm's lodestar by 20%. On this last point, he made the following adjustments: for firms with lodestars under $100,000, he used their full lodestar and multipliers in the 1.2 to 1.3 range; for firms that performed virtually only document review, he applied multipliers in the 1.4-1.6 range, depending on the complexity of document review; for firms that performed more complex work, he applied multipliers in the 1.7-1 .9 range; for core firms driving the IPP case, he applied multipliers in the 2.0-2.75 range; and for lead and liaison counsel, he applied multipliers in the 3.24-4.24 range. *10 Seven firms objected to the Special Master's Supplemental Report. Some arguments common to the objecting firms include challenges to the Special Master's v’a’ESTLM‘.‘ © 2016 Thomson Routers. No claim to original U.S. Government Works, 7 In re TFT-LCD (Flat Panel) Antitru- Atlgation, Not Reported In F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78,318 methodology in determining the allocation, including his use of the lodestar method as well as multipliers; assertions that specific factual findings were in error; and claims that the Special Master arbitrarily decided fee awards. Additionally, the Court received requests from a few other firms to be heard in the event the Court decided to reduce their fee awards from what the Special Master had recommended. The Court first discusses these general objections and then addresses specific issues involving certain objecting firms. a. General objections to methodology, factualfindings The Court reviews the Special Master's overall methodology for an abuse of discretion. See Docket No. 6580, 1] l8; Cook v. Niedert, 142 F.3d 1004, 1010 (7th Cir.1998) (discussing district court's rejection of Special Master's method in calculating attorneys' fees and stating that the choice between the lodestar and percentage- of-fund methods is “neither a question of law nor of fact”). The Court concludes that the Special Master's overall methodology in determining the allocation of the fee awards was correct. His use of the lodestar method, including the use of multipliers, to determine the allocation of fees among the law firms involved was entirely proper in view of the circumstances of this case. See In re Washington Public Power Supply System Securities Litigation, 19 F.3d 1291. 1295-97 (9th Cir.1994) (noting that a district judge has discretion to use the lodestar or the percentage of fund method, depending on the particular circumstances of the case); Hanlon, 150 F.3d at 1029 (citations omitted) (courts have discretion to use the lodestar method in awarding attorney's fees). The Ninth Circuit has long accepted the use of the lodestar method to allocate fees in class actions. Rodriguez v. West Publ‘g C0rp., 563 F.3d 948, 967 (9th Cir.2009); Fischel v. Equitable Life Assur. Soc 'y 0f United States, 307 F.3d 997, 1006-07 (9th Cir.2002). The fact that the percentage of the fund method may be used in other cases does not mean it is the best method available to use here. Additionally, the Court overrules general objections to the Special Master's factual findings. Reviewing each of these findings for clear error, including claims by many of the objecting firms, the Court concludes that the Special Master's findings were accurate and supported by the record, including the time records submitted. l4 The Court also overrules objections that the Special Master arbitrarily awarded fees. To the contrary, his analysis and his reasoning in allocating the fees were meticulous and purposeful. The Court recognizes that fee awards were adjusted, after review, in his Supplemental Report. After reviewing the Supplemental Report and the reasons why certain distributions were changed, the Court finds that fees were awarded rationally and fairly, and not arbitrarily. b. Allocation to Zelle Hoffman *11 The Special Master's Supplemental Report recommends a fee award of $75 million to Zelle, Hoffman, Voelbel & Mason. This is the single largest fee recommendation, almost twice as much as the next highest recommendation, and reflects the single largest multiplier. For all the reasons set out by the Special Master in his original and supplemental reports, this Court concurs that Zelle, Hoffman contributed significantly, continuously and consistently to the prosecution and ultimately to the success of this litigation, and the Court concurs in the fee recommendation. Zelle Hoffman objects to the Supplemental Report, which reduced the original recommendation from $ 80 million to $75 million, based on the Special Master's evaluation of relative contributions ofand appropriate multipliers for all the 1 l6 IPP firms. However, this Court has reviewed and concurs with the Special Master's analysis, and therefore overrules Zelle Hoffman's objection. b. Allocation to Aliotn The Special Master's Supplemental Report recommends a fee award of $47 million to The Alioto Law Firm. This is the second largest fee recommendation. A number of issues have been raised with respect to Alioto’s recommended fee award, and the Court addresses the following issues: (l) Fee Sharing Agreement alleged by Alioto, (2) Alioto's claim that the Special Master relied on impermissible hearsay, and (3) two liens asserted against Alioto. Fee Sharing Agreement: Alioto and Francis Scarpulla of the Zelle Hoffman firm dispute the existence of a fee-splitting agreement, by which their firms would split all attorneys' fees 50/50. After reviewing their submitted pre-hearing briefs and conducting a hearing, the Special Master concluded that Alioto had not carried his burden of demonstrating that the parties had a meeting of the minds on a definitive agreement. See Docket No. 7375 at ‘e’tESTLnW © 2016 Thomson Reuters, No claim to original UVS. Government Works, 8 In re TFT-LCD (Flat Panel) Antitrua Jlgation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 2013-1 Trade Cases P 78,318 20. He also concluded that even if a definitive agreement had existed, it would likely be unenforceable. Alioto objects to the Special Master's findings and contends that there is written documentation confirming the existence of a formal agreement to split the fees 50/50. Having reviewed the evidence, the Court finds that Alioto has failed to demonstrate the existence of such an agreement. At most, Alioto, through the evidence submitted, has demonstrated that an agreement to split the fees and labor was contemplated, but ultimately, any such agreement was to have been a fee split subject to the firms doing an equal amount of work and an equal contribution to the litigation. See Moore Decl., Exh. A. at 4. Moreover, there is a dispute as to the terms of the agreement even within the evidence Alioto cites in his Objection. See Docket No. 7556-2, p. l7 (“Joez I just read your last sentence; as I have told you at least 10 times before, including several emails, there was no such agreement as you have stated it and I cannot and wilk [sic] not confirm anything of the sort.”). In any event, even if an agreement, as defined by Alioto, existed, it would likely be unenforceable. Both federal law and California law require that any fee-allocation agreement among attorneys that are not members of the same firm be in writing and signed by the clients, and be made in proportion to the services perfonned and responsibilities assumed. Agent Orange, 8 1 8 F.2d at 220 (citing ABA Code of Professional Responsibility, DR 2-1-7(A)); Mark v. Spencer, 166 Cal.App.4th 219 (2008); Chambers v. Kay, 29 Cal.4th 142 (2002); Cal. Civil Code § 1624 (Cal. Statute of Frauds, requiring that contracts not to be performed within one year be in writing and signed by the party to be charged). Alioto notes that in a class action, it would be impractical to have all class members consent to the agreement, but here no plaintiff was even informed of any fee-splitting agreement. *12 The Court finds that Alioto failed to satisfy his burden of establishing that an agreement was formed with sufficient particularity to be enforceable, let alone that the an agreement was formed to divide fees 50/50 unconditionally. Impermissible Hearsay: The Court rejects Alioto's claim that the Special Master relied on impermissible hearsay in violation of FRE § 807. The Special Master conferred with Alioto and other IPP class counsel in determining the best and fairest procedure to collect and analyze fee information from the 116 law firms, in order to allocate the fees. Alioto does not indicate that he objected to the Special Master's procedure at that time or that he had concerns with particular issues of hearsay. Moreover, the Court's Amended Order appointing Martin Quinn as Special Master specifically provided for the use of ex parte communications to facilitate the Special Master's duty in allocating the funds. Alioto made no objection to the Order at that time nor did he indicate any potential concerns with issues of hearsay or to the Special Master's reliance on ex parte communications with mediators. Accordingly, the Court overrules Alioto's hearsay objections. Lien by Alexandra Brudy: Alexandra Brudy filed a Notice of Lien on November 29, 2012, asserting a lien against Mr. Alioto for $345,164.69, plus $59.92 per diem interest, arising from an original August 28, 1991 judgment (“Original Judgment”) for failure to compensate Daniel Mulligan for legal work he had performed. Mulligan assigned the rights from the Original Judgment to Brudy as part of their dissolution proceedings in December of 2005. The Original Judgment was twice renewed, once by Mulligan on August 27, 2001, and a second time by Brudy on May 18, 201 1. Alioto filed an opposition to the Notice of Lien on December 31, 2012, challenging the lien on three grounds: (1) that Brudy failed to prosecute the action; (2) that the statute of limitations has expired; and (3) that the Notice of Lien was not filed by the original Judgment Creditor (Mr. Mulligan). Alioto also filed a Motion to Strike the lien on January 29, 2013, which was denied in a separate order. The Court retains jurisdiction to enforce this money judgment under Fed.R.Civ.P. § 69(a) and concludes that the lien is valid. Alioto's arguments to the contrary are not persuasive. First, because Ms. Brudy holds a final judgment against Alioto, his assertion regarding her failure to prosecute is inapplicable. California Code of Civil Procedure section 583.130, cited by Ms. Brudy in her Reply, addresses dismissal for failure to proceed with reasonable diligence only in the context of pending actions, not actions for which a final judgment has been issued. Second, Alioto's contention that the statute of limitations has invalidated Ms. Brudy's judgment fails because the Original Judgment, valid for 10 years following the date of entry (August 28, 1991), has been timely renewed twice, once on August 27, 2001 and again on May 18, 2011. See Cal.Code Civ. Proc. § 683.020 WESTLWL} © 2016 Thomson Routers. No claim to original U.S. Government Works, 9 In re TFT-LCD (Flat Panel) Antitrus .dgation, Not Reported In F.Supp.2d (2013) 2013 WL 1365900, 2013-1 Trade Cases P 78,318 (a money judgment is enforceable for a 10-year period following the date ofentry); Cal.Code Civ. Proc. § 683.120 (a judgment creditor may renew the judgment by filing an application for renewal prior to the end of the 10- year period); see also OCM Principal Opportunities Fund v. CIBC World Markets C0rp., 168 Cal.App.4th 185, 191 (Cal.App.2008) (the renewal does not create a new judgment or modify the present judgment, but merely extends the enforceability of the judgment). Therefore, Ms. Brudy is not barred from enforcing the On'ginal Judgment against Mr. Alioto by any statute of limitations. Lastly, that the Notice of Lien was not filed by the originaljudgment creditor, Mr. Mulligan, is irrelevant. “A judgment creditor may assign the right represented by a judgment to a third person.” Cal. Civ.Code § 954; Great Western Bank v. Kong, 90 Cal.App.4th 28 (2001); Fjaeran v. San Bernadine Cty. Bd. ofSupervisors, 210 Cal.App.3d 434, 440-41 (1989) (upon execution and delivery to the assignee of a written assignment of the rights represented by the judgment, the judgment is perfected and becomes enforceable against third persons). Having assigned the judgment against Alioto to Ms. Brudy through dissolution proceedings, Ms. Brudy may properly enforce the August 1991 judgment against Alioto. *13 Accordingly, the Court directs the Settlement Funds Administrator to distribute from Alioto's fee allocation to Alexandra Brudy at c/o Craig P. Bronstein, Esq., LANAK & HANNA, P.C.. 625 The City Drive South, Ste. 190, Orange, California 92868, the amount of $345,164.69, which represents the Original Judgment amount of $100,000 plus fees, costs, and interest at 7% per annum through November 28, 2012. Lien by LFG Capital: LFG National Capital, LLC (“LFG”) claims it holds a perfected first lien security interest in all assets of Alioto's firm, including any fees, costs or other amounts due to Alioto as a result of this litigation. See Docket No. 7568. This security interest arises out of a loan agreement between LFG and Alioto, upon which LFG asserts Alioto has defaulted numerous times. Id. LFG has filed a motion requesting that the Court enter an order directing that the Settlement Fund Administrator pay to LFG “all sums representing fees and costs of the Alioto Law Firm and/or Joseph M. Alioto up to the amount presently due and owing under the Term Loan and Security Agreement between LFG and the Alioto Law Firm.” See Docket No. 7671. LFG estimates this amount to be $28,264,324.93. Alioto denies that he is indebted to LFG for $28.2 million, disputes factual statements and legal claims made by LFG's counsel, and argues that the loan between LFG and his firm, and associated security interests associated with the loan, are not properly before this Court. See Docket Nos. 7589 and 7606. The Court concludes that, even assuming this Court is the proper forum to adjudicate this dispute, a finding it is not ready to make, the Court is not prepared to issue a decision without further briefing and a heating. Accordingly, in order to avoid delaying the final approval of the IPP Settlements, the Court will issue a separate Order addressing the dispute between LFG and Alioto. d. Allocation to Gray, Plant, Mooty, Mooty & Bennett The Special Master originally awarded Gray, Plant, Mooty, Mooty & Bennett $14 million, but subsequently reduced this amount to $12.5 million by reversing the 20% lodestar discount for the firm and applying a lower multiplier of 3.73 (as opposed to the original 5.22). The Special Master reasoned that the 5.22 multiplier was “substantially in excess of any other firm” and could not be justified. See Docket No. 7375, at 23. The Court is mindful of the Special Master's diligence in allocating the fee awards, but disagrees with the finding that the higher multiplier was not justified. The Court is aware of the significant contribution that the Gray Plant firm has made to this litigation and notes that its contributions were all substantive. Accordingly, the Court awards the Gray Plant firm the original fee allocation identified by the Special Master in the amount of $14 million. e. Allocation to Winters Lingel Winters asserts that he and Thomas Girardi of the Girardi & Keese firm entered into a feesplitting agreement by which they would split fees 50/50. The Special Master concluded that Winters and Girardi did, in fact, have an agreement, signed by their client, to split fees. However, the Special Master concluded that the agreement was not enforceable because the parties had not disclosed it to the court, at the latest, when the parties petitioned for fees. The Special Master cited In re “Agent Orange” Product Liability Litigation, 818 F.2d 216, 226 (2d. Cir.1987), and Wanninger v. SPNVHoldz'ngs, Inc, No. 85-C-2081, 1994 WL 285071 at *2 (N.D. Ill, June 24, 1994), for WESTMW © 2016 Thomson Reuters. No clalm to original U.S. Government Works, 10 In re TFT-LCD (Flat Panel) Antitrus‘ .zigation, Not Reported In F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78,318 the proposition that lawyers who enter into fee-splitting agreements in class actions must inform the class action court of the terms of the agreement at the first opportunity after it is made, or at least at the time offiling a petition for approval of the settlement. Docket No. 7375, 17:22-l8z2. In his objection, Winters asserts that the Special Master erred in finding that Winters had not disclosed the fee- splitting agreement to the Court. *14 The Court concludes finds that, as the Special Master concluded, Winters and Girardi did, indeed, enter into a written contract, signed by their client, to split fees. See Docket No. 6635-6. However, it does appear that Winters did disclose the agreement to the Court at the time a petition for fees was filed. In the IPP Counsel Compendium of Declarations filed with the IPP Attorney Fee motion, Winters included a copy of the fee-splitting agreement. See Docket No. 6635-6. Accordingly, the fee- splitting agreement is enforceable in this Court, and the Court awards Winters. who was awarded $1 million, and the Girardi Keese firm, which was awarded $3.5 million, each $2.25 million. f. Allocations t0 Other Firms With respect to the remaining objections received, the Court has considered them and concludes that the Special Master was correct in his allocations for these firms. B. Settling States Fee Settling States seek an award of approximately $11.054 million as attorneys' fees. This represents just over 1% of the Settlement amount. In his Report and Recommendation, the Special Master concluded that this amount was fair and reasonable, and the Court has not received any objections to this amount. The hours spent by the Settling States were reasonable and necessary. See Docket No. 7127. In consideration of the Settling States' contribution to the Settlement and their excellent work, the Court awards Settling States their requested amount of attorneys' fees in the amount of $11,054.191.01. The Settling States provided detailed summaries of their hours worked, and their billing rate are entirely reasonable; based on these findings, the fee request is proper and will be awarded as requested. WESTLAW C. Fees for Objectors' Counsel Three attorneys representing separate objectors or groups of objectors seek awards of attorneys' fees for their contributions to improvement of the Settlements. Geri Maxwell, Andrea Kane/Pridham, and the Bradley objectors each filed a motion for attomeys' fees in varying amounts. The Special Master reviewed and denied each motion, concluding that none of these attorneys had substantially benefitted class members. See Vizcaino, at 1051 (to be eligible to receive attomeys' fees, counsel for objectors must “increase the fund or otherwise substantially benefit the class members”). Maxwell, Kane/Pridham, and the Bradley objectors each objected to the Special Master's findings. The Court reviews these objections individually. 1. Maxwell George G. Cochran, a lawyer from Louisville, Kentucky representing Geri Maxwell, 15 seeks provisional approval of attomeys' fees on grounds that Maxwell is directly responsible for the addition of a provision making trebled damages distribution mandatory in the Round 2 Settlements. Cochran claims that the Maxwell objectors filed an objection to any cy pres distribution of excess funds without trebling damages to successful claimants, that he communicated the idea to Mr. Alioto, and Mr. Alioto brought it to the attention of class counsel to be included in the Round 2 Settlement. The Special Master denied the motion and found that (l) plaintiffs already intended to distribute 100% of the Settlement fund, something on which Mr. Alioto claims he had always insisted, and (2) plaintiffs' intent was clearly expressed in court papers. *15 In his objection Cochran asserts that the Special Master misinterpreted the record and applied the wrong legal standard. He also argues that the Special Master downplayed the distinction between an explicit versus implicit treble damages clause and that this was a substantial benefit to the class, as was potentially eliminating a cy pres issue. Aside from determining whether or not including the treble damage award provision provided a substantial benefit to the class, the Court, having reviewed the record, is not persuaded that Maxwell was responsible for making explicit the treble damage clause in the Round 2 settlements. Although Cochran claims his © 2016 Thomson Routers, No claim to original US. Govemment Works, 1': ln re TFT-LCD (Flat Panel) Antitru; .clgation, Not Reported in F.Supp.2d (2013) 0 2013 WL 1365900, 201 3-1 Trade Cases P 78,318 conversation with Mr. Alioto propelled IPP counsel to insert the clause, he has failed to provide any evidence that this was what transpired, and, to the contrary, the evidence provided suggests that Mr. Alioto had pushed for an all cash settlement, with no cy pres distributions, from the start. The Court finds that the Special Master's recommendation was correct, overrules Maxwell's objection, and denies this motion for provisional approval of fees. 2. Pridham-Kane Attorney Grenville Pridham, counsel for objector Andrea Pridham-Kane, seeks attorneys' fees for enhancements to the class on the ground that her objections are responsible for (1) ensuring the settlement would explicitly state that there would be no meaningful cy pres distributions, (2) correcting an improper notice provision regarding the attomeys' fees motion, and (3) requiring class counsel to document their expenses. Pridham-Kane also asserts that she has benefitted the class by preserving her objections to the Court's jurisdiction. The Special Master concluded that her first reason fails for the same reason as identified in his discussion of the Maxwell objection. With respect to the other two assertions, the Special Master concluded that even if Pridham-Kane were responsible for these changes, which he said was “far from clear,” they were minor procedural changes that did not increase the settlement amount or provide a substantial benefit to the class. Pridham-Kane objects that the Special Master underestimated her contributions and asserts that it cannot be assumed that she was not responsible for the changes. She thus requests an evidentiary hearing to the extent there is a question about whether she benefitted the class. The Court finds no clear error in the Special Master's determination that Pridham-Kane was not responsible for propelling IPP counsel to explicitly state there would be no substantial cy pres distributions. As the Special Master noted in his report regarding the Maxwell fee motion, Mr. Alioto was firm in believing that there would be no cy pres component from the start and insisted on an all cash settlement. Even at the November 29, 2012 fairness hearing, IPP counsel confirmed that there would be no meaningful cy pres distribution and that this had never been a cy pres settlement. See Docket No. 7304 at 37-38. As for the other matters that Pridham- Kane asserts she is responsible, the Court finds she has not met her burden in establishing that she conferred a substantial benefit to the class. Vizcaino, at 1051 (denying objectors fee motion based objectors' argument that they caused the court to require class counsel to submit time records and that they brought about minor procedural changes in the settlement agreement). Accordingly, the Court denies Pridham-Kane's request for an evidentiary hearing, overrules her objection, and denies her motion for fees. 3. Bradley Objectors *16 The Bradley objectors seek fees for their arguments advanced in opposition to the Special Master's Report awarding attomeys' fees. They claim that they made several non-duplicative, novel arguments to benefit the class. The Special Master noted that their motion is based on the possibility that the Court will sustain their objection, and, in any event, found that no objection they raised was novel or unique. The Court agrees with the Special Master's conclusion. In reviewing the Bradley objections to the Special Master's Report, the Court is not persuaded that the objectors raised any novel factual or legal argument. To the contrary, the Bradley objections raised a number of similar arguments as raised in the Maxwell and other objections. That some of those objections were filed after the Bradley's objections does not detract from the fact that they were not novel. In any event, because the Court overrules the objections raised by Bradley (and others), as discussed supra, Bradley objectors did not benefit the class, and are not entitled to attomeys' fees. HI. Expenses and Incentive Awards A. IPP Counsel IPP counsel seek $8,743,449.42 in expenses. In his original Report, the Special Master discounted IPP counsel's requested expenses by $329,385.01 due to high charges for overlapping experts as well as AT & T charges for certain conference calls. Upon reconsideration of additional evidence regarding the need for a second expert, however, the Special Master concluded that a second expert was, in fact, necessary and beneficial to the interests of the class, and approved the $324,385.01 in expert expenses, see Special Master's Supplemental Report, Docket No. 7298. He declined to award the $5,000 in charges for AT WESTLAW © 2016 Thomson Reuters, N0 Claim to original U.S. Government Works, 1’? In re TFT-LCD (Flat Panel) Antitrua .clgation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78.318 & T conference calls. Subsequently, the Special Master issued another Supplemental Report on February 13, 2013, Docket No. 7608, to correct an error made in his initial Supplemental Report, Docket No. 7298. He had inadvertently awarded $2,317.99 in charges that IPP Counsel had requested be reduced due to reductions in the charges that had occurred after IPP Counsel had submitted their motion for expenses. This last report corrected that error and awarded IPP Counsel a total of $8,736,131.43, representing the total amount IPP counsel requested, less $5,000 for AT & T conference call charges and $2,317.99 in deposition transcript charges that IPP counsel confirmed had been reduced. The Court received two objections to the Special Master's original Report that reiterated arguments raised by the same objectors to the award of attorneys' fees. They assert that the Special Master erred by treating fees separate from expenses as this will increase the percentage of money awarded over 28.5%, and when the Ninth Circuit calculates a 25% benchmark, it combines total fees and expenses. See Docket No. 7178. The Court overrules the objections and concludes that the Special Master was correct in awarding $8,736,131.43 in expenses to IPP counsel. See Vizcaino, 290 F.3d 1043 (calculating the 25% benchmark for attorneys' fees only). B. Settling States *17 Settling States seek a total of $1,206,479.48 in expenses. 16 The Special Master concluded this amount was reasonable, and no objections were received to this amount. The Court concludes the Settling States' requested amount of $ 1 206,479.48 for expenses is reasonable and will award this amount to Settling States. C. Incentive Awards IPP Counsel request a total amount of $660,000 for incentive awards. Specifically, they seek an award of $15,000 for each of the 40 court-appointed class representatives and $7,500 for each 0f the eight additional named plaintiffs. The Special Master concluded that the total amount of $660,000 was reasonable for incentive awards, and no objections were received to this amount. Additionally, counsel for some objectors request incentive awards for their clients who appeared for depositions. The Court approves incentive awards of $15,000 to each ofthe 40 court-appointed class representatives, and $7,500 for each of eight additional named plaintiffs. The Court recognizes the contribution these class representatives and named plaintiffs made to this litigation and finds the amounts requested are reasonable in light of these contributions. The Court declines to grant incentive awards for objectors who appeared for depositions. CONCLUSION Accordingly, the Court directs entry of Judgment which shall constitute a final adjudication of this case on the merits as to the parties to the Agreements. Good cause appearing therefore, it is: ORDERED, ADJUDGED, AND DECREED THAT: 1. The capitalized terms used in this Order have the meaning ascribed to them in the Agreements. 2. The Court has jurisdiction over the subject matter of this litigation, and all actions within this litigation and over the parties to the Agreement, including all members of the IPP Classes, the Settling Plaintiffs, and the Settling Defendants, and any person or entity claiming by, for, or through the Settling Parties as regards the Released Claims. 3. The definitions of terms set forth in the Agreements are incorporated herein as though fully set forth in this Judgment. 4. The Court hereby finally approves and confirms the settlements set forth in the Agreements and finds that said settlements are, in all respects, fair, reasonable, and adequate to the IPP Classes pursuant to Rule 23 0f the Federal Rules of Civil Procedure and all applicable state laws. 5. The following class is certified for settlement purposes only, pursuant to Rule 23 of the Federal Rules of Civil Procedure: All persons and entities in Arkansas who, from January 1, 1999 to December 31, 2006, as residents of Arkansas, purchased TFT-LCD WWTLAW © 2016 Thomson Reuters, No claim to original U,S, Government Works. 33 In re TFT-LCD (Flat Panel) Antitru; .dgation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78.318 Panels incorporated in televisions, monitors, and/or laptop computers in Arkansas indirectly from one or more of the named Defendants or Quanta Display, Inc., for their own use and not for resale. Specifically excluded from the Class are defendants; the officers, directors, or employees of any defendant in the Actions; the parent companies and subsidiaries of any defendant; the legal representatives and heirs or assigns of any defendant; and their named affiliates and coconspirators. Also excluded are any federal, state or local governmental entities, any judicial officer presiding over this action and the members of his/ her immediate family and judicial staff. and any juror assigned to this Action. *18 6. The following class is certified for settlement purposes only, pursuant to Rule 23 of the Federal Rules of Civil Procedure: All persons and entities in Missouri or Rhode Island who, from Januaryl, 1999 to December 31, 2006, as residents of Missouri or Rhode Island, respectively, purchased TFT~LCD Panels incorporated in televisions, monitors, and/or laptop computers in Missouri or Rhode Island, respectively, indirectly from one or more of the named Defendants or Quanta Display, Inc., primarily for business use (and not for personal, family. or household use) and not for resale. Specifically excluded from the Class are defendants; the officers, directors, or employees of any defendant; the parent companies and subsidiaries of any defendant; the legal representatives and heirs or assigns of any defendant; and the named affiliates and co-conspirators. Also excluded are any federal, state or local governmental entities, any judicial officer presiding over this action and the members of his/her immediate family and judicial staff, and any juror assigned to this Action. 7. The following class is certified for settlement purposes only, pursuant to Rule 23 of the Federal Rules of Civil Procedure: All persons and entities in Arizona, Arkansas, California, District of Columbia, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Mexico, New York, North Carolina, North Dakota, Rhode Island, South Dakota, Tennessee, Vermont, West Virginia, or Wisconsin who, from January 1, 1999 to December 31, 2006, as residents of the respective state, purchased TFT- LCD Panels incorporated in televisions, monitors, and/or laptop computers in the respective state, indirectly from one or more of the named Defendants or Quanta Display, Inc., for their own use and not for resale, and whose purchases bring them within the definition of the certified direct purchaser product class in this Multidistrict Litigation No. 1827 and who did not opt-out of that class. Specifically excluded from the Class are defendants; the officers, directors, or employees of any defendant; the parent companies and subsidiaries of any defendant; the legal representatives and heirs or assigns of any defendant; and the named affiliates and co- conspirators. Also excluded are any federal, state or local governmental entities, anyjudicial officer presiding over this action and the members of his/her immediate family and WESYLMN © 2016 Thomson Reuters, No claim to original USA Government Works, “M In re TFT-LCD (Flat Panel) Antitrua .tigatlon, Not Reported In F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78,318 judicial staff, and any juror assigned to this Action. 8. Pursuant to Federal Rule of Civil Procedure 23(g), Class Counsel, previously appointed by the Court (Zelle Hofmann Voelbel & Mason LLP and Alioto Law Firm), are appointed as Counsel for the IPP Classes. These firms have, and will, fairly and competently represent the interests of the IPP Classes. 9. The Indirect-Purchaser Plaintiffs' and Settling States' Notice of Exclusions (Docket No. 7070, filed October 29, 20 l 2) states that no persons/entities have validly requested exclusion from any of the above-referenced settlement- only classes. *19 10. The Court hereby dismisses on the merits and with prejudice the individual, parens patriae, governmental entity, and class claims asserted by the Settling Plaintiffs against the Settling Defendants, with Settling Plaintiffs and Settling Defendants to bear their own costs and attorneys' fees except as provided for in the Agreements. The foregoing language does not apply to the related action entitled People of the State of California et a1. v. AU Optronics ez al., San Francisco Superior Court Case No. CGC-lO-504651 (“the California State Court Action”). The California State Court Action is to be dismissed with prejudice in due course as to the Settling Defendants in compliance with the Agreements, and this Court will if necessary confer with the Honorable Richard A. Kramer to coordinate such dismissals. ll. As to each Agreement, all persons and entities who are defined as Releasors, and any person or entity acting or purporting to act on behalf of one or more Releasors, are hereby barred and enjoined from commencing, prosecuting, or continuing, either directly or indirectly, against the persons or entities who are defined as Releasees, in this or any jurisdiction, any and all claims, causes of action or lawsuits, which they had, have, or in the future may have, arising out of or related in any way to any of the Released Claims as defined in the Agreement. This permanent bar and injunction is necessary to protect and effectuate the Agreements, this Final Judgment, and this Court's authority to effectuate the Agreements, and is ordered in aid of this Court's jurisdiction and to protect its judgments. 12. As to each Agreement, the Releasees are hereby and forever released and discharged with respect to any and all claims or causes of action which the Releasors had or have arising out of or related in any way to any of the Released Claims as defined in the Agreement. 13. The Court approves the releases set forth in the Agreements. Those Agreements define the scope of such releases. Without limitation on the foregoing, the Court notes that (i) the IPP nationwide injunctive class released claims do not include any claims for monetary relief; and (ii) nothing in the Agreements shall release any enforcement, proprietary, or injunctive claims of any state which is not a Settling State. 14. The Court finds that the notice given to the IPP Classes of the settlements set forth in the Agreements and the other matters set forth herein was the best notice practicable under the circumstances. The Court further finds that said notice provided due, adequate, and sufficient notice of these proceedings and of the matters set forth herein, including the proposed settlements set forth in the Agreements, and that said notice fully satisfied the requirements of due process, the Federal Rules of Civil Procedure, and all applicable state laws. 15. The Court finds that the Settling Defendants have served upon the appropriate State, federal and other officials a notice ofproposed settlement that complies with the requirements of the Class Action Fairness Act, 28 U.S.C. §§ 171 1-15. *20 16. The Court grants final approval to the Plan of Distribution set forth in the IPPs' and Settling States' motion for final approval. 17. Attorneys' Fees, Expenses and Incentive Awards: A. IPP Class Counsel Fees and Expenses The Court awards a total amount of IPP Class Counsel attomeys' fees of $309,725,250, which represents 28.6% of the Settlement Fund. The Court also awards $8,736,131.43 for expenses incurred by IPP Counsel. Except as otherwise stated, all objections to the fee allocations are overruled. The attorneys' fees are to be distributed among 116 law firms as identified in the Special Master's Supplemental Report and Recommendation, see Docket No. 7375, with the following exceptions: WESYLfiiW © 2016 Thomson Reuters, No claim to original US, Government Works, 1 u} In re TFT-LCD (Flat Panel) Antitruz. cigation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900, 201 3-1 Trade Cases P 78,318 1) The Gray, Plant, Mooty, Mooty & Bennett firm shall be awarded $14 million as opposed to the $12.5 million recommended by the Special Master. 2) The fee sharing agreement between Lingel Winters and the Girardi firm will be given effect, and therefore, the Court will award Lingel Winters and the Girardi Keese firm each $2.25 million. 3) With respect to the liens asserted against Joseph M. Alioto, the amount of $345,164.69, which represents a judgment amount of $100,000 plus fees, costs, and interest at 7% annum as of November 28, 2012, will be paid out of Alioto's $47 million fee award and will be directed to Alexandra Brudy at c/o Craig P. Bronstein, Esq., LANAK & HANNA, P.C., 625 The City Drive South, Ste. 190, Orange, California 92868. Additionally, $28.2 million of Alioto's fee award shall be set aside in a separate escrow account pending a determination of the validity and enforceability of the lien asserted by LFG National Capital, LLC. The Court will address this lien in a separate order. B. Settling States Fees and Expenses The Court awards Settling States $1 1,054,191.01 in fees and $1,206,479.48 in expenses. C. Incentive Awards The Court awards $15,000 for each of the 40 court- appointed class representatives and $7,500 for each of the eight additional named plaintiffs. 18. The Court received objections to the Proposed Settlements from approximately 25 objectors. The Court has carefully reviewed and considered each objection, and concludes that none of the objections raises any grounds to deny final approval to the Proposed Settlements, and accordingly the Court hereby overrules each of the objections. 19. Without affecting the finality of this Judgment in any way, this Court hereby retains continuing and exclusive jurisdiction over: (a) implementation of these settlements Footnotes and any distribution to class members pursuant to further orders of this Court; (b) disposition of the Settlement Funds as defined in each Agreement; (c) hearing and determining applications by the Indirect Purchaser Plaintiffs (i.e., class representatives) for representative plaintiff incentive awards, attomeys' fees, costs, expenses, including expert fees and costs, and interest; (d) hearing and determining applications by the States Attorneys General for attorneys fees, costs, expenses, including expert fees and costs, and interest; (e) Settling Defendants until the Final Judgment contemplated hereby has become effective and each and every act agreed to be performed by the parties has been performed pursuant to the Agreements; (f) hearing and ruling on any matters relating to the plan of allocation of settlement proceeds; and (g) all parties and Releasors for the purpose of enforcing and administering the Agreements and Exhibits thereto and the mutual releases and other documents contemplated by, or executed in connection with, the Agreements. *21 20. In the event that a settlement does not become effective in accordance with the terms of the relevant Agreement, then the judgment shall be rendered null and void and shall be vacated as to that Agreement, and in such event, all orders entered and releases delivered in connection herewith shall be null and void and the parties to that Agreement shall be returned to their respective positions ex ante. 21. The Court finds, pursuant to Rules 54(a) and (b) 0f the Federal Rules of Civil Procedure. that Final Judgment should be entered and further finds that there is no just reason for delay in the entry of Final Judgment, as a Final Judgment, as to the parties to the Agreements. Accordingly, the Clerk is hereby directed to enter the Judgment of dismissal with prejudice as to Settling Defendants. IT IS S0 ORDERED. All Citations Not Reported in F.Supp.2d, 2013 WL 1365900, 2013-1 Trade Cases P 78,318 WE‘fiTtm ‘ © 201G Thomson Reuters. No claim t0 original US. Government Works, ’18 In re TFT-LCD (Flat Panel) Antitru; dgatlon. Not Reported In F.Supp.2d (201 3) 2013 WL 1365900. 2013-1 Trade Cases P 78.318 1 mflmm 10 11 12 13 14 The “indirect purchaser states” are Arizona, California, the District of Columbia, Florida. Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan. Minnesota, Mississippi, Nevada, New Mexico. New York. North Carolina, North Dakota. Rhode Island, South Dakota, Tennessee, Vermont, West Virginia, and Wisconsin. On the same date, the Court also prospectively modified the class definitions in advance of the trial against the then- remaining defendants. See Docket No. 4684 (order altering statewide classes to exclude overlapping members of the direct-purchaser class action, and redefining Missouri and Rhode Island statewide classes to exclude purchases not made for personal, family, or household use). To preserve uniformity with the previously-approved settlements. the Proposed Settlements cover the persons and entities which were excluded by operation of the January 26. 201 2 order prospectively modifying the classes against AUO, LG Display, and Toshiba, resulting in the proposed settlement-only classes described below. Martin Quinn was initially appointed Special Master, for various other pretrial purposes, on April 12, 2010, see Docket No. 1679. He hae provided the Court and counsel with invaluable assistance during his tenure as Special Master forthis challenging MDL proceeding. During the course of his work on the cases he has had an opportunity personally to deal with, observe and evaluate the work of many of the IPP counsel who now seek attomeys' fees and costs. These numbers include both timely and late-filed claims. IPP counsel recommend that Iateflled claims be included in distribution payments. and this Court agrees. Additionally, the Court notes that these numbers do not include claims which the claims administrator has identified as being highly suspicious and likely erroneous or fraudulent. The claims administrator will be investigating these claims. Objections to attorney fee awards, expenses, and incentive awards are discussed below, in Section ll. Many of the objectors incorrectly rely on Dennis v. Kellogg Company, 687 F.3d 1149 (9th Cir.2012) (“Kellogg I” ), which was withdrawn and superseded by Kellogg ll, discussed above. The Court observed that Rule 23(b)(2) classes are mandatory and do not require that class members be given notice or the ability to opt out. The following states are non-Settling States which are part of an IPP damages class: Arizona, District of Columbia. Hawaii, Iowa, Kansas, Maine. Massachusetts. Mississippi, Minnesota, Nevada, New Mexico, North Carolina, North Dakota, Rhode Island, South Dakota, Tennessee, and Vermont. In the Round 1 Settlements, the parties clarified. at the January 20. 2012 hearing, what state claims would and would not be released. For example, lPP Counsel clarified that “no claims of any kind for any nonsettling state, including Oregon, Washington. and Illinois. are being released for proprietary state claims or for injunctive relief claims or for parens patriae or damage claims," but class members were “releasing their individual claims for injunctive relief under state law." Docket No. 4659 at 9-10. The estimates provided were based on assumed amounts of attomeys' fees and expenses which differ somewhat from the awards actually made in this Order. A calculation based on the amounts actually awarded in this Order, however, does not materially change the amount of the expected distribution payments. The Special Master ultimately recommended $308,225,250, or 28.5% of the Settlement Fund. See Docket No. 7375. Because the Court concludes that the Special Master erred in reducing the Gray Plantfirm's allocation by $1 .5 million, this amount will be added to the total attorney fee award. This results in an overall award of $309,725,250, which represents 28.6% of the Settlement Fund. lPP counsel requested an overall 20% reduction to eliminate inefficiencies for the entire group, but the Special Master did not agree that every firm's billings warranted a 20% cut. Defendants in this action were Korean, Taiwanese and Japanese companies. Most ofthe original documents and records in the case were in languages which required translation for use in this court. Similarly, many of the witnesses provided testimony in languages which required interpreters for use in this court. Language alone posed a significantand expensive burden on prosecution of these cases. The Court notes that it does not condone the practice of charging for merely attending related trials for weeks on end. While it may be useful for counsel in one case to attend a related trial for limited periods of time or to observe key witness testimony. this does not justify merely sitting in on a trial day after day, absent specific client request. This Court observed many counsel in court, merely observing. during the lengthy criminal trial against AUO. Some observing counsel represented various of the co-defendants in these cases; some were IPP class counsel. The Special Master did not reduce any hours on this basis in determining fee allocations, and neither does this Court, in light of the fact that the fee allocations were based on a rational and complex balancing of relative contribution to the outcome. However, the practice appears to the Court to be more costly than useful. WESTWW © 2016 Thomson Reuters, N0 claim to original U.S, Government Works, “i7 In re TFT-LCD (Flat Panel) Antitru:_ -Itigation, Not Reported in F.Supp.2d (2013) 2013 WL 1365900. 2013-1 Trade Cases P 78.318 15 Three of the four original Maxwell objectors have withdrawn their objections. Thus, only Geri Maxwell remains as an objector. See Docket No. 71 12. 16 The Settling States requested this total amount in two separate motions. See Docket Nos. 5157 and 6860. End of Document © 2016 Thomson Reuters. No claim to original U.S, Government Works‘ WESYWW © 2016 Thomson Reuters. No claim to original U.S. Government Works, 1R EXHIBIT “App-4” S.J. Amoroso Const. Co., Inc. v. E). ,tive Risk lndem., Inc., Not Reported in F.Supp.._.1... 2009 WL 4907736 2009 WL 4907736 Only the Westlaw citation is currently available. United States District Court, N.D. California, Oakland Division. S.J. AMOROSO CONSTRUCTION COMPANY, INC., a California corporation, Plaintiff, v. EXECUTIVE RISK INDEMNITY, INC., a Delaware Corporau'on, Defendant. No. C 06-2572 SBA. I Docket Nos. 105, 111. Dec. 14, 2009. West KeySummary 1 Insurance (F Contractual liabilities A directors' and officers' liability insurer had a duty to defend an insured contractor in an underlying state court construction defect lawsuit. Correspondence between the insured and another contractor which formed a new company with the insured did not amount to a contract or agreement for the insured to guarantee the other contractor's performance, for purposes of the policy's exclusion of coverage for any actual or alleged liability under a contract. 2 Cases that cite this headnote Attorneys and Law Firms John Howard Banister, Bell Rosenberg & Hughes LLP, Oakland, CA, Randall Owen Parent, Attorney at Law, Oakland, CA, for Plaintiff. Gilbert D. Jensen, Jennifer M. Kokes, Musick Peeler & Garrett, Los Angeles, CA, for Defendant. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF AND DEFENDANT'S CROSS-MOTIONS FOR SUMMARY JUDGMENT SAUNDRA BROWN ARMSTRONG, District Judge. *1 The instant insurance coverage arises from Defendant Executive Risk Indemnity, Inc.'s (“Executive Risk”) refusal to defend or indemnify its insured, Plaintiff S.J. Amoroso Construction Company, Inc. (“Amoroso”), in an underlying state court construction defect lawsuit. The Court previously granted summary judgment for Executive Risk, which the Ninth Circuit Court of Appeals reversed in part, affirmed in part, and remanded for further proceedings. The parties are presently before the Court on the parties' cross-motions for summary judgment pertaining to the limited issues set forth in the Ninth Circuit's mandate. (Docket 93, 94.) Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby GRANTS IN PART and DENIES IN PART both motions, for the reasons set forth below. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b). I. BACKGROUND A. THE UNDERLYING DISPUTE 1. The Mauna Kea Construction Project On June 20, 2000, Mauna Kea Properties, Inc. (“Mauna Kea”), a real estate developer, entered into a contract with Andrew L. Youngquist Construction Company (“ALY”) to build condominiums in Hawaii as part of a development known as The Uplands at Mauna Kea (“the Project”). (Def.'s Request for Jud. Notice (“RJN”) Ex. B.) The contract, which was to be performed in phases, included a provision that: “If Contractor wishes to assign the construction contract, it must obtain prior written consent from the Owner [Mauna Kea].” (Id.) After commencing construction, ALY and Amoroso, jointly formed a new construction company known as DAP Construction LLC (“DAP”). In February 2001, ALY and DAP sought permission from Mauna Kea to WES’E’LQW © 2016 Thomscn Reuters, No claim to original US. Government Works. ’ S.J. Amoroso Const. Co., Inc. v. Ex Jtive Risk Indem., Inc., Not Reported in F.Sup,.._d... 2009 WL 4907736 assign the performance of Phase III of the Project from ALY to DAP. (Pl.'s RJN, Ex. 54-77 at 65.) In response, on March 9, 2001, Mauna Kea sent ALY a letter requesting additional information regarding the reasons ALY and DAP were requesting permission for the assignment. (Id at 65-66.) The letter stated, in pertinent part: Dear Andy: You have requested that Mauna Kea Properties, Inc., the developer of The Uplands at Mauna Kea, consent to the assignment of the construction contracts from Andrew L. Youngquist Construction, Inc., to DAP Construction LLC. This is a response to your request. Please provide us with the following information to help us understand your request for assignment: 1. The Unanimous Written Consent of the Directors of Andrew L. Youngquist Construction, Inc., provides as following in WHEREAS clause number three: “WHEREAS, the Corporation believes that it is in the best interest for administrative cost segregation and liability protection.” What does the phrase “administrative cost segregation” mean? What does the phrase “liability protection" mean? 2. Is the purpose of the proposed assignment to insulate or protect Andrew L. Youngquist Construction, Inc. and the principals of that corporation from potential liability? *2 3. What assets does DAP Construction, LLC have? 4. Will Andrew L. Youngquist, Inc. continue as an ongoing entity? 5. Is it the intent that DAP Construction, LLC be used for any purpose other than to complete construction ofthe projects at The Uplands at Mauna Kea? 6. Does DAP Construction, LLC have the same financial wherewithal and capability as Andrew L. Youngquist to protect the interests of Mauna Kea Properties, Inc.? (Id. (emphasis added).) On March 27, 2001, Paul Mason (“Mason”), then President of Amoroso, responded in writing to Mauna Kea's inquiry. (Id at 67.) In a one-page letter, Mason responded as follows: Dear Bill: This is in response to your questions regarding your assignment of the construction contracts to D.A.P. 1.) What does the phrase “administrative cost segregation” mean? What does the phrase “liability protection” mean? D.A.P. is a separate entity. Separate cost controls are being kept apart from A.L.Y. and S.J.A.-not individuals 2.) The purpose of D.A.P. is to have financial strength from both A.L.Y. and S.J.A. Together our financial statements are much stronger than A.L.Y. alone. 3.) D.A.P. Construction is owned 50% by A.L.Y. and 50% by A.J. Amoroso. Our combined assets are in excess of $10 million. 4.) Yes, A.L.Y. will continue as an on-going entity. 5.) D.A.P. Construction's intent is to complete the Mauna Kea projects and then potentially continue to look for additional work in the future. 6.) D.A.P. Construction has a joint financial statement of A.L.Y. and S.J.A. Please remember that the Mauna Kea project is a bonded project secured by A.J. Amoroso's bonding capacity. Since D.A.P and is owned by A.L.Y. and S.J.A., it is a much more financially strong entity than ever before. If you have any questions, please give me a call at Sincerely, S.J. AMOROSO CONSTRUCTION. INC. Paul Mason President ad.) 1 W$SYI aw © 2016 Thomson Reuters, No claim to original U6. Government Works, In) S.J. Amoroso Const. Co., Inc. v. Ex Jtlve Risk Indem., lnc., Not Reported In F.Supp._d... 2009 WL 4907736 On May 24, 2001, Mauna Kea sent a letter addressed to both ALY and Amoroso approving the request for assignment. Mauna Kea stated: Dear Andy and Paul: This is in response to your request to assign the construction contracts for the construction of single family dwellings and condominiums at The Uplands at Mauna Kea from Andrew L. Youngquist Construction Company, Inc. to DAP Construction, LLC. Based on your representations made in the February l, 2001(sic) from Steve Kemnitzer to Mauna Kea Properties; the Uniform Written Consent of the Directors of the Andrew L. Youngquist Construction Company, Inc.; the Written Consent of the Managers of DAP Construction, LLC; the Rider to the Performance and Payment Bonds issued by American International Companies; the Performance and Payment Bonds; the Certificate of Insurance with Additional Insured Attachment naming Mauna Kea Properties, Inc. (agent for Mauna Kea Development Corporation) as an additional insured; and the representations made by Mr. Mason in his letter to me dated March 27, 2001, your request is hereby approved. *3 It is our understanding that DAP Construction, LLC will be backed by the combined strength of both Andrew L. Youngquist Construction Company, Inc. and S.J. Amoroso Construction C0,, Inc. and the performance and payment bonds will remain in full force. We look forward to the completion of The Uplands at Mauna Kea project with the combined efforts of both of you, Andy and Paul and Dana McManus. (Id. at 68 (emphasis added).) Mauna Kea's letter made no mention of any offer by Amoroso to guarantee DAP's liability under the construction contract to complete the Project. 2. The Mauna Kea Lawsuit On April 7, 2004, Mauna Kea filed suit in Hawaii state court against ALY, DAP and various subcontractors for alleged defects in the construction of the Project. (Pl.'s RJN, Ex. 48.)2 Though not yet named as a party-defendant, Amoroso, anticipating its involvement in the action, tendered the Mauna Kea complaint to Executive Risk, pursuant to its Power Source Policy, No. 8169-575 (“the Policy”). (Id., Ex. 53-3.) Executive Risk acknowledged the tender, but responded that “coverage for this matter has not been triggered under the Policy” because no “Claim” had yet been made against Amoroso. (Id, Ex. 53-7 at l, 5.) On November 3. 2005, Amoroso notified Executive Risk that Mauna Kea had filed a motion for leave to amend its complaint, and that the proposed amended complaint joined Amoroso as a party-defendant. Leave to amend was granted and Mauna Kea filed its First Amended Complaint in which Amoroso was named as a defendant in the causes of action for: (1) Breach of Contract (Count One); (2) Good Faith and Fair Dealing (Count Two); (3) Negligence (Count Three); (4) Breach ofWarranty (Count Four); (5) Negligent or Intentional Misrepresentation (Count Five); (6) Gross Negligence, Willful Misconduct (Count Six); (7) Indemnity and Defense (Count Seven); (8) Vicarious Liability-Alter Ego Theory (Count Ten); and (9) Promissory Estoppel (Count Eleven).3 (Id., Ex. 63.) The fifth count for misrepresentation alleged that ALY and Amoroso misrepresented that DAP would be responsible for completing the project, that Mauna Kea would benefit from the assignment “since any liability arising from the Project would be assigned to both ALY and [Amoroso],” and that Mauna Kea relied on such representations to its detriment. (Id. 1m 85-87.) On November 10, 2005, Executive Risk confirmed the tender of the First Amended Complaint and requested documents and information from Amoroso to begin its investigation and evaluate whether the claim was covered. (Pollack Decl. Ex. K.) Executive Risk subsequently notified Amoroso in writing that it was denying coverage by letter, dated November 23, 2005. (Id. Ex. N.) The letter explained, inter alia, that “[t]he First Amended Complaint does appear to constitute a Claim for a Wrongful Act against an Insured Organization, as these terms appear in the [Directors & Officers Liability Coverage Section of the] Policy (Id. at 7 (emphasis in original).) However, Executive Risk asserted that Mauna Kea's claims were subject to Exclusion III(A) (4), which excluded coverage for claims for damage to tangible property. (Id. at 9.) Also cited was Exclusion III(C)(2), which excludes coverage for “any actual or alleged liability of an Insured Organization under any written or oral contract or agreement ....“ (Id. (emphasis in original).) WESTLM‘.‘ © 2016 Thomson Reuters, N0 claim to original US. Government Works. :s S.J. Amoroso Const. Co., Inc. v. E.. utive Risk Indem., lnc., Not Reported in F.Supr...d... 2009 WL 4907736 *4 In the meantime, Amoroso tendered the Mauna Kea action to another insurer, St. Paul Travelers Fire & Marine Insurance Company (“St.Paul”), under its comprehensive general liability policy. (Kokes Decl. II Ex. 1.) Unlike Executive Risk, St. Paul agreed to defend and indemnify Amoroso, subject to a reservation of rights. (Barrister Decl. Ex. A.) St. Paul construed its policy as providing coverage for Mauna Kea's “property damage” claims, and disclaimed “any liability for indemnity for damages” for non-property damage claims, including the claim based on Mason's alleged misrepresentations. (Id. at 10.) The Mauna Kea litigation eventually resolved in December 2006, with Amoroso agreeing to pay Mauna Kea $8 l 0,000 to settle Mauna Kea's claims insofar as they were based on the misrepresentations made by Mason in his March 27, 2001 letter to Mauna Kea. (McManus Decl. 1m“ B. PROCEDURAL HISTORY 1. Overview of Amoroso's Claims On March 7, 2006, Amoroso filed the present action against Executive Risk in San Mateo Superior Court. The Complaint alleges three causes of action for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) declaratory relief. In their breach of contract claim, Amoroso avers that Executive Risk “breached [its] obligation to Plaintiff under the Policy by inadequately investigating the allegations against Amoroso and failing to pay Loss on behalf of Amoroso in Mauna Kea Properties v. Dap et al., thereby denying Plaintiff of benefits to which it was entitled under the Policy.” (Complfl 32.) Amoroso's second claim for “bad faith” alleges that Executive Risk unreasonably denied benefits under the Policy. (Id. 11 36.) Finally, in its claim for declaratory relief, Amoroso seeks a determination Executive Risk is obligated under the Policy to pay Amoroso for the Loss and other compensatory damages incurred as a result of the Mauna Kea action. (Id. 1m 40-42.) On April 14, 2006, Executive Risk removed the action to this Court on the basis of diversity jurisdiction. 2. The Court‘s Surrunary Judgment Ruling On October 30, 2007, the Court granted Executive Risk's Motion for Summary Judgment. (Docket 45.) First, the Court found there was no coverage as t0 Mauna Kea's claims for misrepresentation, negligence/ willful misconduct or promissory estoppel, which were based on Mason's misrepresentation in his March 27, 200] letter to Mauna Kea, which he ostensibly sent on behalf of Amoroso. Finding that Mason made those statements in his personal capacity, the Court concluded that Insuring Clause I(C) was not triggered because the claim was not made against an “Insured Organization.” (Docket 80 at 5- 6.) Second, the Court found that the other claims alleged by Mauna Kea arose from the construction contract and therefore were subject to Exclusion III(C)(2) which excluded coverage for claims “based on, arising from, or in consequence ofany actual or alleged liability ofan Insured Organization under any written or oral contract.” (Id. at 6-10.) 5 Finally, the Court granted summary judgment in favor of Executive Risk on Amoroso‘s claim for breach of the implied covenant of good faith and fair dealing on the ground that there could be no bad faith as a matter of law because there was no coverage under the Policy, and that the record otherwise showed that Executive Risk performed “more than a cursory evaluation of the complaint and the policy.” (Id. at 11.) Amoroso appealed the Court's ruling. 3. The Ninth Circuit's Decision *5 On April 9, 2009, the Ninth Circuit Court of Appeals affirmed in part and reversed in part. (Docket 93.) Specifically, the court held that “[t]he district court erred by ruling that Amoroso was not entitled to coverage under the D & O Policy for claims stemming from Paul Mason's alleged misrepresentations because he acted in his individual capacity, and not on behalf of the insured organization... Based on the record before us, we cannot conclude that Mason's acts were so ‘unusual or startling’ that they should be classified as actions taken in his individual capacity.” Slip Op. at 2. Thus, the panel concluded that Mason‘s conduct was sufficient to trigger Insuring Clause I(C). Id. at 3. Next, the Ninth Circuit considered this Court's analysis of the Policy Exclusions. The court explained: “Though Mason's alleged misrepresentations fall within the scope of Insuring Clause I(c), we must consider whether the D & O Policy's exclusion of coverage for claims arising from contract 0r agreement applies.” Id. The court then found that the contract between Mauna Kea and DAP “cannot form the basis for a complete exclusion of coverage under Exclusion III(C)(2),” since Amoroso was not a party to that contract and therefore “did not have any liability WE‘ETLM‘.‘ © 2016 Thomson Reuters. No Claim to originai UVS. Government Works, 4 S.J. Amoroso Const. Co., Inc. v. E. .utive Risk Indem., lnc., Not Reported in F.Supr._d... 2009 WL 4907736 under the contract (when Mauna Kea allegedly thought that Amoroso would).” Id. However, the court noted that Exclusion III(C)(2) could apply to the extent that the exchange of correspondence between Mason and Mauna Kea constituted a contract or agreement by Amoroso to guarantee DAP's performance of the construction contract in the event the assiglment were approved. The court stated: There remains a triable issue of fact, however, about whether the correspondence between Mason and Mauna Kea Properties concerning the potential assignment of the construction contract created a separate contract or agreement under which any potential liability on the part of Amoroso would be excluded from coverage. 0n remand, the district court should consider whether, under California law, zlze letter correspondence amounted to a contract or agreement by Amoroso to, in effect, guarantee DAP's performance of the construction contract. If it did, Executive Risk permissibly denied co verage pursuant t0 Exclusion III(C) (2) to the extent that Amoroso's liability arose under the letter correspondence. Id. at 4 (emphasis added). Finally, the Ninth Circuit affirmed the grant of summary judgment on Amoroso's bad faith claim, holding that “the district court did not err in granting summary judgment to Executive Risk on Amoroso's claim of bad faith due to Executive Risk's denial of coverage.” Id. However, the court indicated that this Court should consider whether Amoroso had stated a viable claim for bad faith based on Executive Risk's denial of its duty to defend. In that regard, the court stated that “[wje leave it to the district court to determine in thefirst instance whether Amoroso has stated a claim ofbadfaith based on a breach of the duty to defend, and ifso. whether Amoroso should prevail 0n such a claim. " Id. at 4-5 (emphasis added). 4. The Cross-Motions for Summary Judgment *6 Following remand by the Ninth Circuit, this Court conducted a Case Management Conference, at which the parties indicated their desire to file cross-motions for summary judgment as to the issues specified in the court of appeal's mandate. Thus, the motions before the Court address: (1) whether the correspondence between Mason and Mauna Kea concerning the potential assignment of the construction contract amounted to a contract or agreement by Amoroso to, in effect, guarantee DAP's performance of the construction contract; and (2) whether Amoroso has presented a viable claim for bad faith based on Executive Risk's failure to defend Amoroso in the Mauna Kea action. 6 II. LEGAL STANDARD Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Ina, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the initial burden of demonstrating the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file that establish the absence of a triable issue of material fact. Celotex Corp. v. Catrerz, 477 U.S. 317, 323. 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets this initial burden, the burden then shifts to the non- moving party to present specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 324; Matsushita Elec. Indus. C0. v. Zenith Radio Corp, 475 U.S. 574. 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). An issue of fact is “material” if, under the substantive law of the case, resolution of the factual dispute might affect the outcome of the claim. See Anderson, 477 U.S. at 248. Factual disputes are genuine if they “properly can be resolved in favor of either party.” Id. at 250. Accordingly, a genuine issue for trial exists if the non- movant presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. 1d. “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249-50 (internal citations omitted). Only admissible evidence may be considered in ruling on a WESTLA‘VK‘ © 2016 Thomson Reuters, No claim to originai U.S. Government Worm, a S.J. Amoroso Const. Co., Inc. v. E.. 2009 WL 4907736 motion for motion for summary judgment. Fed.R.Civ.P. 56(e); Orr v. Bank ofAm., 285 F.3d 764, 773 (9th Cir.2002). IH. DISCUSSION A. BREACH OF CONTRACT Amoroso's first cause of action alleges that Executive Risk breached the Policy at issue by failing to provide coverage for the claims alleged against Amoroso in the Mauna Kea action. “The first step in any insurance coverage dispute is to determine whether the insuring provisions of the policy afforded coverage for the alleged losses.” Davis v. Farmers Ins. Group, 134 Cal.App.4th 100, 105, 35 Cal.Rptr.3d 738 (2005). If an insuring clause is triggered, the question then becomes whether there are applicable exclusions precluding coverage. Id. at 106. 35 Cal.Rptr.3d 738. Exclusions are construed narrowly. See Delgado v. Interinsurance Exch. of Auto. Club 0f S. Cal., 47 Cal.4th 302. 3 l 3, 97 Cal.Rptr.3d 298. 211 P.3d 1083 (2009). Where an insurer seeks summary judgment on the basis of on a policy exclusion, the insurer “must show by undisputed evidence” that the exclusion applies. State v. Allstate Ins. Ca, 45 Cal.4th 1008, 1022, 90 Ca1.Rptr.3d 1, 201 P.3d 1147 (2009). *7 As noted, the Ninth Circuit's mandate recognized that “though Mason's alleged misrepresentations fall within the scope of the Insuring Clause I(C), we must consider whether the D & O Policy's exclusion of coverage for claims arising from a contract or agreement applies.” Slip. Op. at 3. Thus, the threshold question presented by the parties‘ respective summary judgment motions is “whether, under California law, the letter correspondence [between Mason and Mauna Kea concerning the potential assignment of the construction contract] amounted to a contract or agreement by Amoroso to, in effect, guarantee DAP's performance of the construction contract.” Slip. Op. at 4. If so, under the Ninth Circuit's ruling, Executive Risk properly denied coverage based on the Exclusion C(III)(2); and if not, the Exclusion is inapplicable and Amoroso is entitled to coverage. 7 Id. 1. “Agreement” to Guarantee DAP's Performance Under California law, the essential elements of a contract are as follows: “l. Parties capable of contracting; [1|] 2. Their consent; HI] 3. A lawful object; and, [1l] 4. A sufficient cause or consideration.” Ca1.Civ.Code§ 1550; U.S. ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir.1999) ,ative Risk lndem., lnc., Not Reported in F.Supwéd... (citing Civil Code § 1550). Absent conflicting extrinsic evidence, the issue of whether a contract was formed presents a question of law. See Lopez v. Charles Schwah & C0,, Ina, 118 Cal.App.4th 1224, 1229. 13 Ca1.Rptr.3d 544 (2004). The parties’ dispute focuses on the element of mutual consent. “The consent of the parties to a contract must be: [fl] l. Free; [1l] 2. Mutual; and, [fl] 3. Communicated by each to the other.” Cal.Civ.Code § 1565; Weddington Prods., Inc. v. Flick, 60 Cal.App.4th 793, 810-811, 71 Ca1.Rptr.2d 265 ( 1998). “Consent is not mutual, unless the parties all agree upon the same thing in the same sense.” Cal.Civ.Code§ 1580. “Califomia law is clear that there is no contract until there has been a meeting of the minds 0n a11 material points.” Banner Entm't v. Superior Court, 62 Cal.App.4th 348, 358, 72 Cal.Rptr.2d 598 (1998). The failure to reach a meeting of the minds on all material points prevents the formation of a contract even if the parties have orally agreed upon some of the terms, or have taken some action related to the contract. See Grove v. Grove Valve & Reg. C0., 4 Ca1.App.3d 299, 311-12, 84 Cal.Rptr. 300 ( 1 970). In the instant case, Executive Risk contends that the element of mutual consent is demonstrated by the sequence of letters exchanged between Mauna Kea, ALY and Mason concerning ALY and DAP's request to assign its Project performance obligations to DAP. (Def.'s Mot. at 14-16.) Specifically, Executive Risk argues that Mason's March 27 letter to Mauna Kea constitutes an “offer” by Amoroso to provide a financial guarantee “for the liabilities of DAP,” and that Mauna Kea “accepted” Amoroso's alleged “offer” in its follow up letter ofMay 24, 2001. (Def.'s Reply at 2~4.) According to Executive Risk, Mauna Kea's letter “evidences [its] understanding that [Amoroso] was offering to provide a guarantee relating to DAP's performance under the construction contract and that Mauna Kea accepted that offer.” (1d. at 4, 84 Cal.Rptr. 300.) *8 “ ‘In order for acceptance of a proposal to result in the formation of a contract, the proposal must be sufficiently definite, or must call for such definite terms in the acceptance, that the performance promised is reasonably certain.” “ Perfumebay.c0m Inc. v. EBA Y. Ina, 506 F.3d 1165, 1178 (9th Cir.2007) (quoting Weddington Prod, Inc. v. Flick, 60 Cal.App.4th 793, 811, 71 Ca1.Rptr.2d 265 (1998)); see also Cal. Civ.Code § 3390(5). Terms ‘ettii'fiTLflsW © 2016 Thomson Reuters, No claim to original U.S. Government Works. (a S.J. Amoroso Const. Co., Inc. v. En ,utive Risk lndem., Inc., Not Reported in F.Supp.¢d... 2009 WL 4907736 of a proposal are considered reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. Weddington Prod, 60 Cal.App.4th at 81 l, 71 Cal.Rptr.2d 265. In contrast, if the putative contract “does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, there is no contract.” Id. No contract is formed unless “the precise act which is to be done is clearly ascertainable.” Id. (internal quotations and citation omitted). Applying the foregoing principles to the facts presented, the Court finds that Mason's March 27 letter does not constitute an offer. It is clear from the sequence and contents of the various letters that Mason did nothing more than respond to Mauna Kea's March 9, 2001 letter of inquiry. Mauna Kea's March 9 letter-which was addressed to ALY, not Amoroso-was Mauna Kea's initial response to DAP and ALY's request that Mauna Kea “consent to the assignment of the construction contracts from [ALY] to [DAP].” (P1.'s RJN Ex. 54-7 at 65.) Specifically, Mauna Kea asked ALY to provide information “to help us [Mauna Kea] understand your request for assignment[.]” (Id.) In particular, Mauna Kea asked ALY, inter alia: (1) what was meant by the reference to “administrative segregation cost”; (2) whether the reason for the assignment was to insulate ALY and its principals from liability; (3) what assets DAP had; (4) whether ALY would continue as an ongoing entity; (5) whether ALY's intent was to use DAP from work other than completing the Project; and (6) whether DAP had the same “financial wherewithal” as ALY to protect the interest of Mauna Kea. (Id. at 65-66, 71 Cal.Rptr.2d 265.) At no point in its letter did Mauna Kea request or demand that ALY or any other entity provide a guarantee of DAP's performance obligations in the event Mauna Kea provided its consent to the assignment. On March 21, 2001, Mason, ostensibly on behalf of Amoroso, responded to Mauna Kea's request for information by answering each of Mauna Kea's questions. Among other things, Mason responded that “DAP's liability is assigned to both ALY and [Amoroso],” that ALY and Amoroso had combined assets in excess of $10 million, that the Project was secured by Amoroso's bonding capacity and that ALY and Amoroso's joint ownership of DAP made it a “financially strong entity.” (Id. at 67, 71 Cal.Rptr.2d 265.) Executive Risk asserts that these representations “can only be characterized as an objective manifestation of [Amoroso]'s willingness to be responsible for the liabilities of DAP and are akin to a surety or guaranty contract.” (Def.'s Reply at 3.) The Court disagrees. California law defines both a guarantor and a surety as “one who promises to answer for the debt, default or miscarriage of another or who hypothecates property as security therefor.” Cal.Civ.Code § 2787. Amoroso's letter evinces no such promises. Nor does Mason's letter recite “the precise act” Amoroso supposedly was offering to perform or “call for definite terms in the acceptance.” See Weddingron Prod, 60 Cal.App.4th at 81 1, 71 Cal.Rptr.2d 265. While Mason's responses appear to be an effort to persuade Mauna Kea that DAP was a financially viable entity so that it ultimately would consent to the proposed assignment, his representations cannot be reasonably construed as a “sufficiently definite” offer by Amoroso to assume liability for DAP's performance under construction contract. See id. 8 *9 Equally without merit is Executive Risk‘s ancillary contention that Mauna Kea's May 24 letter, which was addressed to both ALY and Amoroso, constitutes an “acceptance” of Amoroso's purported offer.9 Executive Risk seizes upon statements in Mauna Kea's letter that it was consenting to the assignment based, in part, on the representations in Mason's March 27, 2001 letter. Executive Risk also points to Mauna Kea's statement of its “understanding that [DAP] will be backed by the combined strength of both [ALY] and [Amoroso] and the performance and payment bonds will remain in full force.” (Id. at 68, 71 Cal.Rptr.2d 265 (emphasis added).) Despite Executive Risk's assertions to the contrary, such statements cannot reasonably or objectively be construed to constitute an “acceptance” by Mauna Kea of an “offer” by Amoroso. Mauna Kea makes no reference to any “offer” or “guarantee” by Amoroso-nor is there anything in its letter even remotely suggesting that Mauna Kea was “accepting” such an offer. See Panagotacos v. Bank ofAm., 60 Cal.App.4th 851, 855-56, 7O Cal.Rptr.2d 595 (1998) (“merms proposed in an offer must be met exactly, precisely and unequivocally for its acceptance to result in the formation of a binding contract”) (internal quotations and citations omitted). Indeed, Mason's letter is simply mentioned along with a number of other documents as the reason that Mauna Kea purportedly was comfortable in agreeing to approve ALY and DAP's request for approval of the proposed assignment. ‘e”\fE’S”fLa1‘W © 2016 Thomson Reuters. No Claim to original U.S. Government Works. “I S.J. Amoroso Const. Co., Inc. v. E. .Itive Risk lndem., lnc., Not Reported ln F.Sup,7-d... 2009 WL 4907736 2. “Agreement” to Approve the Assignment Executive Risk next argues that even if the correspondence between Amoroso and Mauna Kea did not amount a contract or agreement to guarantee DAP's performance, such correspondence should be interpreted as an agreement to assign the construction contract from ALY to DAP. (Def.'s Opp'n at 14-15.) As a threshold matter, Executive Risk's argument impermissibly exceeds the scope of the Ninth Circuit's mandate. On remand, a district court has a duty to follow the appellate court's instructions as to how the case is to proceed. See Vizcaino v. U.S. Dist. Courtfor W. Dist. 0f Wash, 173 F.3d 713, 719 (9th Cir.l999). The Court “must implement both the letter and the spirit of the mandate, taking into account the appellate court's opinion and the circumstances it embraces.” United States v. Montgomery, 462 F.3d 1067, 1072 (9th Cir.2006) (internal quotations and citation omitted). Here, Executive Risk contends that the Ninth Circuit's remand permits the consideration of whether the correspondence between Amoroso and Mauna Kea created any type of contract-and is not limited to the issue to whether the contract was one to guarantee DAP's performance. (Def.'s Opp'n at 7.) This ignores the “letter” of the mandate, which unequivocally states that “[o]n remand, the district court should consider whether the letter correspondence amounted to a contract or agreement to Amoroso to, in effect, guarantee DAP's performance of the construction contract.” Slip Op. at 4. As such, Executive Risk's argument is not properly before the Court. *10 The above notwithstanding, Executive Risk's contention that the correspondence between Amoroso and Mauna Kea evidences a mutual assent to assign the construction contract from ALY to DAP is meritless. (Def.'s Opp'n at 14-15.) As noted, the construction contract between ALY and Mauna Kea expressly provided that AL Ycould assign its obligations under their agreement, provided that Mauna Kea gave its consent to the assignment. (Def.'s RJN Ex. 1.) It is undisputed that Amoroso was not a party to that agreement-a fact which the Ninth Circuit acknowledged in its opinion. Slip Op. at 3. As such, whether Amoroso “agreed” to the assignment is irrelevant, since it was Mauna Kea's decision to confer or deny its consent to the proposed assignment. 3. Summary Based on the record presented, which is controverted by neither party, it is clear that the correspondence between Amoroso and Mauna Kea did not amount “to a contract or agreement by Amoroso to, in effect, guarantee DAP's performance of the construction contract.” Slip. Op. at 4. Because Amoroso's alleged liability for Mason's misrepresentations did not arise from an oral 0r written agreement, Executive Risk cannot rely upon Exclusion III(C)(2) as a basis for denying coverage. Id Accordingly, the Court grants Amoroso's and denies Executive Risk's respective motions for summary judgment as to Amoroso's first claim for breach of contract. B. BAD FAITH DENIAL OF DUTY TO DEFEND The remaining aspect of the parties' cross-motions for summary judgment pertains to Amoroso's second claim for breach of the implied covenant of good faith and fair dealing (i.e., “bad faith”). As noted, the Ninth Circuit held that the Court properly granted summary judgment for Executive Risk to the extent that Amoroso's bad faith claim is predicated on the denial of coverage. However, the court remanded the bad faith claim based on Executive Risk's refusal to defend Amoroso in the Mauna Kea litigation. The mandate states: “Where there is an issue of liability, the insurer, as a matter of law, could not have acted in bad faith in denying coverage... The district court, therefore, did not err in granting summary judgment to Executive Risk on Amoroso's claim of bad faith due to Executive Risk's denial of coverage. We leave it to the district court to determine in the first instance whether Amoroso has stared a claim of badfaitlz based on a breach 0f t/ze duty to defend, and ifso. whether Amoroso shouldprevail on such a claim. " Slip Op. at 4-5 (emphasis added). As will be set forth below, the answer to both questions is “no.” It has long been the rule in California that every insurance policy contains an implied covenant of good faith and fair dealing that neither party will do anything to injure the other party's right to receive the benefits of the agreement. Comunale v. Traders & General Ins. C0., 50 Cal.2d 654, 658, 328 P.2d 198 (1958). An insurer has a duty to defend an insured if the insurer becomes aware of, or if the third party lawsuit pleads, facts giving rise to the potential for coverage under an insuring agreement. Waller v. Truck Ins. Exch., Ina, ll Cal.4th 1, 19, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). “[I]f an insurer unreasonably ‘i‘tg‘E‘S‘fmw © 2016 Thomson Reuters. No claim to original US. Government Works 5% S.J. Amoroso Const. Co., Inc. v. E,» 4tive Risk Indem., Inc., Not Reported in F.Supk J... 2009 WL 4907736 fails to defend, it has breached the implied covenant of good faith and fair dealing.” Campbell v. Superior Court, 44 Cal.App.4th 1308, 1319, 52 Cal.Rptr.2d 385 (1996). Conversely, “if there is no potential for coverage, and hence, no duty to defend under the terms of the policy, there can be no action for breach of the implied covenant of good faith and fair dealing because the covenant is based on the contractual relationship between the insured and the insurer.” Waller, 11 Ca1.4th at 36, 44 Cal.Rptr.2d 370, 900 P.2d 619 (emphasis in original). *11 Executive Risk correctly points out that Amororo's bad faith claim fails as a matter of law because Amoroso cannot show that it incurred any damages as a result of Executive Risk's refusal to defend because Amoroso's other carrier, St. Paul, paid all of its defense costs. In Emerald Bay Cmty. Ass'n v. Golden Eagle Ins. Corp, 130 Cal.App.4th 1078, 31 Cal.Rptr.3d 43 (2005), the insured, a homeowner's association, was sued by two homeowners. The association tendered the defense of the lawsuit to Golden Eagle Insurance Company (“Golden Eagle”) and Federal Insurance Company (“Federal”), both of which had issued insurance policies to the insured. Federal accepted the tender and provided a defense, while Golden Eagle did not. 10 On appeal, the court of appeal held that “where one insurer fully protects the insured by providing a defense and full coverage for a claim, a second insurer's refusal to defend generally cannot support a tort action for breach of the covenant of good faith and fair dealing because the latter's conduct will not enhance the insured‘s cost of defending itself or its exposure to liability.” Id. at 1094, 31 Cal.Rptr.3d 43. In this case, Amoroso has admitted in its discovery responses that “[it] does not contend that [Executive Risk] is responsible for any defense costs incurred in the defense of Amoroso in the Mauna Kea Lawsuit,” as the cost of defending the Mauna Kea lawsuit was borne by another insurance company. (See Kokes Decl. Ex. P at 32; Pl.'s Opp'n at 20.) Nonetheless, Amoroso argues that Emerald Bay is distinguishable because St. Paul, Amoroso's other insurer, accepted the tender of defense subject to a reservation of rights and disclaimed coverage for Mauna Kea's fifth cause of action for misrepresentation. (Pl.'s Opp'n at 20.) Such a distinction is inapposite. Under California law, an insurer has a duty to defend its insured against all claims alleged against its insured, provided that there is a potential for coverage with respect to at least one ofthe claims. State Farm General Ins. Co. v. Mintarsi/z, 175 Cal.App.4th 274, 283, 95 Cal.Rptr.3d 845 (2009) (citing Buss v. Superior Court, 16 Cal.4th 35, 49, 65 Ca1.Rptr.2d 366, 939 P.2d 766 (1997)). Here, there is no dispute that St. Paul provided Amoroso with a complete defense as to all claims. As such, it is of no consequence that St. Paul reserved its rights with respect to one of Mauna Kea's claims. Moreover. Amoroso has made no showing that it suffered any damages as a result of St. Paul‘s reservation of rights. Amoroso argues that even if it did not incur any costs in defending itselfin the Mauna Kea litigation, it nonetheless sustained damage as a result of having paid $810,000 as part of the global settlement of the Mauna Kea litigation. (Pl.'s Opp'n at 20.) Amoroso claims that Executive Risk‘s denial of coverage left it “standing naked against $30,000,000 in potential liability for misrepresentation,” leaving it little choice but to settle with Mauna Kea. (Id) The flaw in this argument is that it conflates an insurer's duty to defend with the duty to indemnify. “The general measure of damages for a breach of the duty to defend an insured, even if it is ultimately determined there is no coverage under the policy, are the costs and attorney fees expended by the insured defending the underlying action.” Emerald Bay, 130 Cal.App.4th at 1088, 31 Cal.Rptr.3d 43. As discussed above, Amoroso did not incur any fees or costs in connection with the Mauna Kea action as a result of Executive Risk's failure to provide a defense. Because the Ninth Circuit has already determined that Executive Risk cannot be held liable for a bad faith breach of its duty to indemnify, the fact that Amoroso paid $810,000 (or some other amount) to settle the underlying action is irrelevant. *12 The sole case cited by Amoroso, Pruyn v. Agricultural Ins. Co., 36 Cal.App.4th 500, 42 Cal.Rptr.2d 295 (1995), has no application here. In Pruyn, a homeowner sued a homeowner's association for property damage. The association tendered the defense of the action to its various insurers, all of which denied coverage and refused to provide a defense. As a result, the association entered into a stipulated judgment which it assigned to the homeowner in exchange for a covenant not to execute on the judgment. The homeowner (now standing in the shoes of the association) brought an action against the insurers to enforce the judgment. The trial court sustained the insurer's demurrers and motions for judgment on the pleadings, without leave to amend. WWTLAW © 2016 Thomson Reuters. No claim to original 1.1.8. Government Works, $3 S.J. Amoroso Const. Co., Inc. v. E.“ Jtive Risk Indem., lnc.. Not Reported in F.Sup,.-d... 2009 WL 4907736 The California Court of Appeal reversed and held that the homeowner had alleged “sufficient facts which, if proven, would establish a basis for coverage under at least some of the several primary policies and that those insurers' refusal to provide a defense was wrongful.” Id. at 514, 42 Cal.Rptr.2d 295. The court explained that “[i]f an insurer, with notice of the pendency of the underlying action, wrongfully denied coverage or improperly refuses to provide its insured with a defense, then the insured is entitled to make a reasonable settlement of the claim in good faith and then maintain an action against the insurer to recover the amount of the settlement.” Id. at 515, 42 Cal.Rptr.2d 295 (internal quotations, alterations and citation omitted). Quoting the foregoing passage, Amoroso argues that like the insured in Pruyn, it too was deprived of a defense by its insurer and thus should be entitled to recover the settlement paid to Mauna Kea. Amoroso's reliance on Pruyn is misplaced. The Pruyn court made it clear that its analysis was predicated on the procedural posture of the case, i.e., that it was accepting all of the facts alleged in the complaint as true. Notably, the court qualified its discussion by noting as follows: “We necessarily acknowledge that plaintiff‘s ultimate recovery against the insurers will depend upon it being established that there was coverage and that the insurers, or at least some ofthem, were obligated to indemnify [the association] under their respective policies. Absent such an obligation, (my recovery by plaintiff, based solely on a wrongfidfaz'lure to defend [the association], may be limited t0 the costs of defense. Id at 514, 42 Cal.Rptr.2d 295 (emphasis added). If Amoroso's bad faith claim were based on the wrongful denial of coverage, Amoroso arguably would be entitled under Pruyn to recover the amount it paid to settle the Mauna Kea action. However, the Ninth Circuit affirmed summary judgment on that aspect of Amoroso's bad faith claim, thus limiting Amororo's bad faith claim to the failure to defend.“ As a result, Amoroso's remedy for its wrongful failure to defend claim is limited to the recovery of its defense costs. Since St. Paul paid for Amoroso's defense, Amoroso cannot show that it suffered any damages as a result of Executive Risk‘s failure to provide a defense-even if such decision were unreasonable. Moreover, unlike the association in Pruyn, Amoroso was, in fact, provided with a defense, albeit by another insurer. Because Amoroso is unable to demonstrate any damages resulting from Executive Risk's wrongful failure to defend, summary judgment shall be granted in favor of Executive Risk on Amoroso's bad faith claim. IV. CONCLUSION *13 For the reasons stated above, the Court finds that Amoroso is entitled to coverage under the Policy, and that Executive Risk is liable for breach of contract for failing to provide coverage to Amoroso in connection with the Mauna Kea litigation. However, Amoroso cannot prevail on its bad faith claim based on its failure to demonstrate damages. Accordingly, IT IS HEREBY ORDERED THAT: 1. Amoroso's motion for summary judgment is GRANTED and Executive Risk's motion for summary judgment is DENIED with respect to Amoroso's claim for breach of contract. 2. Executive Risk's motion for summary judgment is GRANTED and Amoroso's motion for summary judgment is DENIED with respect to Amoroso's claim for breach of the implied covenant of good faith and fair dealing. 3. Judgment shall be entered consistent with this Order. The Clerk shall close the file and terminate any pending matters. IT IS SO ORDERED. All Citations Not Reported in F.Supp.2d, 2009 WL 4907736 Footnotes 1 The parties and court of appeal interchangeably refer to the March 27, 2001 letter, as “Mason's letter" and “Amoroso's letter." For sake of clarity, the Court notes that they refer to the same letter. 2 Mauna Kea Properties, Inc. v. Andrew L. Youngquist Construction, et a/., State of Hawaii, Circuit Court, Case No. 04- 1-0104K. WE'ST’MW © 2016 Thomson Reuters, No claim to original U.St Government Works, 10 V S.J. Amoroso Const. Co., Inc. v. E‘tive Risk lndem., lnc., Not Reported In F.Sun‘... 2009 WL 4907736 3 4 10 11 Amoroso was not named as a defendant in the eighth and ninth causes of action for negligence per se and negligence. The $810,000 figure is stated in the declaration of Dana McManus, President and Chief Operating Officer of Amoroso, and is supported by a photocopy of a check in that amount made payable to the Mauna Kea Development Corporation. (McManus Decl. 1] 1-2 and Ex. A.) Executive Risk objects to McManus‘ declaration, claiming that the best evidence of the amount paid in settlement is the actual settlement agreement. which purports to show that Amoroso, ALY and DAP's jointly paid $3,745,000 as part of the global settlement. (Parrent Decl. Ex. B at 25, Docket 142.) For purposes of the instant motions, the actual amount paid by Amoroso is immaterial. Therefore. Executive Risk's objection (Docket 144) to the McManus Declaration is overruled as moot. Exclusion |I|(C)(2), which is set forth in the Directors & Officers Liability Coverage Section of the Power Source Policy (“D & O Policy"). provides that: “No coverage will be available under Insuring Clause (C) for any Insured Organization Claim: [1|] (2) based upon, arising from, or in consequence of any actual or alleged liability of an Insured Organization under any oral or written agreement. provided that this Exclusion (C)(2) shall not apply to the extent that an Insured Organization would have been liable in the absence ofthe contract or agreement." (Compl. Ex. A (emphasis in original).) Executive Risk filed evidentiary objections to certain of the declarations submitted by Amoroso in connection with the instant motions. (Docket 132. 144.) Because none of the evidence to which Executive Risk objects is material to the instant disposition, the Court overrules the objections as moot. The Court notes that the Ninth Circuit's “indicates that there is a triable issue of fact about whetherthe correspondence between Mason and Mauna Kea Properties concerning the potential assignment of the construction contract created a separate contract or agreement under which any potential liability on the part of Amoroso would be excluded from coverage.” Slip. Op. at 4. However, because the facts presented by the parties and germane to the resolution of that issue are undisputed, the Court adjudicates this issue by way of the parties' cross-motions for summaryjudgment. Indeed, that is precisely what Mauna Kea had alleged in its First Amended Complaint; to wit, that ALY and Amoroso misrepresented to Mauna Kea the benefits of approving the assignment of the construction contract to DAP. (See Def.'s RJN Ex. A 1] 86.) To the extent that Mauna Kea was accepting an offer by Amoroso to guarantee DAP's performance, it would not have addressed its "acceptance“ letter to both entities. Golden Eagle made a single payment to the insured's defense counsel. but later declined to provide the insured with a defense or indemnification. Id. at 1083. The settlement amount paid by Amoroso is recoverable as an element of its claim for breach of contract. End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works. WWTWW © 2016 Thomson Reuters, N0 claim to original U.S. Government Works, i'?