[C-07-05182 WHA] NOTICE OF MOTION AND UNOPPOSED MOTION FOR AN AWARD OF FEES AND
EXPENSES AND MEMO IN SUPPORT THEREOF
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BERMAN DEVALERIO
Joseph J. Tabacco, Jr. (SBN 75484)
Christopher T. Heffelfinger (SBN 118058)
Anthony D. Phillips (SBN 259688)
One California Street, Suite 900
San Francisco, CA 94111
Telephone: (415) 433-3200
Facsimile: (415) 433-6382
Email: jtabacco@bermandevalerio.com
cheffelfinger@bermandevalerio.com
aphillips@bermandevalerio.com
Liaison Counsel for the Class
COHEN MILSTEIN SELLERS
& TOLL PLLC
Herbert E. Milstein
Joshua S. Devore
Matthew B. Kaplan
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, DC 20005-3964
Telephone: (202) 408-4600
Facsimile: (202) 408-4699
Email: hmilstein@cohenmilstein.com
jdevore@cohenmilstein.com
mkaplan@cohenmilstein.com
Lead Counsel for the Class
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
In re LDK SOLAR SECURITIES
LITIGATION
____________________________________
This Document Relates To:
ALL ACTIONS.
MASTER FILE NO. C-07-05182-WHA (BZ)
CLASS ACTION
LEAD PLAINTIFF’S NOTICE OF MOTION
AND MOTION FOR AN AWARD OF FEES
AND EXPENSES AND MEMORANDUM OF
POINTS AND AUTHORITIES IN SUPPORT
THEREOF
Judge: Hon. William Alsup
Date: June 17, 2010
Time: 8:00 a.m.
Courtroom: 9, 19th Floor
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TABLE OF CONTENTS
NOTICE OF MOTION AND MOTION ....................................................................................... 1
STATEMENT OF ISSUES TO BE DECIDED ............................................................................ 1
MEMORANDUM OF POINTS AND AUTHORITIES ............................................................... 1
I. INTRODUCTION ............................................................................................................. 1
II. BACKGROUND ............................................................................................................... 3
A. Lead Counsel and Lead Plaintiff............................................................................ 3
B. Factual Basis For This Litigation........................................................................... 4
C. Motion Practice, Discovery And Mediation .......................................................... 6
III. ARGUMENT..................................................................................................................... 8
A. Plaintiff’s Counsel Are Entitled to a Fee From the Common Fund
They Created.......................................................................................................... 8
B. Plaintiff’s Counsel Should Be Awarded 13.75% Of The Common
Fund ....................................................................................................................... 9
1. The Result Achieved Support’s The Fee Request ................................... 11
2. The Difficulty Of This Case And The Contingent Nature
Of The Fee Supports The Fee Request .................................................... 12
3. The Quality Of Representation Supports The Fee Request ..................... 16
C. Plaintiff’s Counsel Has Proposed A Reasonable Division Of Fees..................... 18
D. Plaintiff’s Counsel’s Expenses Are Reasonable And Were
Necessary To Achieve the Benefit Obtained For The Class................................ 19
E. Lead Plaintiff Should Be Reimbursed For His Time And Expenses................... 22
IV. CONCLUSION................................................................................................................ 25
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TABLE OF AUTHORITIES
Page(s)
CASES
Abrams v. Lightolier Inc.,
50 F.3d 1204 (3d Cir. 1995).....................................................................................................19
Adderley v. National Football League Players Ass’n,
No. C 07-00943 WHA, 2009 WL 4250792 (N.D. Cal. Nov. 23, 2009) ..................................24
Anixter v. Home-Stake Prod. Co.,
77 F.3d 1215 (10th Cir. 1996) .................................................................................................13
Backman v. Polaroid Corp.,
910 F.2d 10 (1st Cir. 1990)......................................................................................................13
Bateman Eichler, Hill Richards, Inc. v. Berner,
472 U.S. 299 (1985)...................................................................................................................9
Berkey Photo, Inc. v. Eastman Kodak Co.,
603 F.2d 263 (2d Cir. 1979).....................................................................................................13
Boeing Co. v. Van Gemert,
444 U.S. 472 (1980)...................................................................................................................8
Cunha v. Hansen Natural Corp.,
2009 WL 2029797 (C.D. Cal. July 13, 2009)..........................................................................23
Harris v. Marhoefer,
24 F.3d 16 (9th Cir. 1994) .......................................................................................................19
Headlands Reserve, LLC v. Center For Natural Lands Mgmt,
523 F. Supp. 2d 1113 (C.D. Cal. 2007) ...................................................................................17
Hensley v. Eckerhart,
461 U.S. 424 (1983).................................................................................................................11
In re Apollo Group, Inc. Sec. Litig.,
No. CV 04-2147, 2008 U.S. Dist. LEXIS 61995 (D. Ariz. Aug. 4, 2008) ..............................13
In re Apple Computer Sec. Litig.,
No. C-84-20148, 1991 U.S. Dist. LEXIS 15608 (N.D. Cal. Sept. 6, 1991) ............................14
In re Cont’l Ill. Sec. Litig.,
962 F.2d 566 (7th Cir. 1992) ...................................................................................................10
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In re Critical Path, Inc., Sec. Litig.,
No. C 01-00551, 2002 WL 32627559 (N.D. Cal. June 18, 2002) (Alsup, J.) ...................10, 18
In re Heritage Bond Litig.,
No. 02-ML-1475, 2005 U.S. Dist. LEXIS 13627 (C.D. Cal. June 10, 2005)..........................16
In re JDS Uniphase Corp. Sec. Litig.,
No. C 02-148............................................................................................................................13
In re King Res. Co. Sec. Litig.,
420 F. Supp. 610 (D. Colo. 1976)......................................................................................11, 13
In re MetLife Demutualization Litig.,
No. 00 CV 2258, 2010 WL 517389 (E.D.N.Y. Feb. 12, 2010) ...............................................24
In re MicroStrategy Inc. Sec. Litig.,
110 F. Supp. 2d 427 (E.D. Va. 2000) ......................................................................................24
In re The Mills Corp. Sec. Litig.,
No. 06-cv-0007, 2009 WL 5091931 (E.D. Va. Dec. 23, 2009)...............................................17
In re Omnivision Techs., Inc.,
559 F. Supp. 2d 1036 (N.D. Cal. 2007) .......................................................................10, 11, 12
In re Prudential-Bache Energy Income P’ships Sec. Litig.,
No. 888, 1994 WL 202394 (E.D. La. May 18, 1994)..............................................................13
In re Quintus Sec. Litig.,
No. C-00-4263, 2006 WL 3507936 (N.D. Cal. Dec. 5, 2006).................................................24
In re Wash. Pub. Power Supply Sys. Sec. Litig.,
19 F.3d 1291 (9th Cir. 1994) .........................................................................................9, 10, 12
J. N. Futia Co. v. Phelps Dodge Indus., Inc.,
No. 78 Civ. 4547, 1982 U.S. Dist. LEXIS 15261 (S.D.N.Y. Sept. 17, 1982) .........................16
Kakani v. Oracle Corp.,
No. C 06-06493, 2007 WL 4570190 (N.D. Cal. Dec. 21, 2007) (Alsup, J.) ...........................12
Mashburn v. Nat’1 Healthcare, Inc.,
684 F. Supp. 679 (M.D. Ala. 1988) ...........................................................................................9
Miltland Raleigh-Durham v. Myers,
840 F. Supp. 235 (S.D.N.Y. 1993)...........................................................................................19
Paul, Johnson, Alston & Hunt v. Graulty,
886 F.2d 268 (9th Cir. 1989) ...................................................................................................10
Ressler v. Jacobson,
149 F.R.D. 651 (M.D. Fla. 1992)...............................................................................................9
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Robbins v. Koger Props. Inc.,
116 F.3d 1441 (11th Cir. 1997) ...............................................................................................14
Sutton v. Bernard,
504 F.3d 688 (7th Cir. 2007) ...................................................................................................13
TBK Partners, Ltd. v. Warshow,
No. 77 Civ. 972, 1977 U.S. Dist. LEXIS 13597 (S.D.N.Y. Oct. 6, 1977) ..............................19
Trustees v. Greenough,
105 U.S. 527 (1882)...................................................................................................................8
Ward v. Succession of Freeman,
854 F.2d 780 (5th Cir. 1988) ...................................................................................................14
STATUTES
15 U.S.C. § 78u-4 ..........................................................................................................................23
OTHER AUTHORITIES
Arthur Anyuan Yuan, Enforcing and Collecting Money Judgments in China from a U.S.
Judgment Creditor’s Perspective, 36 Geo. Wash. Int’l L. Rev. 757, 758 (2004) ...................15
Donald C. Clarke, The Enforcement of United States Court Judgments in China: A
Research Note (May 27, 2004) ................................................................................................14
Federal Travel Regulations §301-10.125.......................................................................................22
H.R. Conf. Rep. No. 104-369, 1995 U.S.C.C.A.N. ......................................................................25
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NOTICE OF MOTION AND MOTION
PLEASE TAKE NOTICE that on June 17, 2010 at 8:00 a.m., in Courtroom No. 9, 19th
Floor, the Honorable William H. Alsup, United States District Judge presiding, located at 450
Golden Gate Avenue, San Francisco, California, Lead Plaintiff Shahpour Javidzad will move this
Court for an order awarding Lead Plaintiff and Plaintiff’s Counsel fees and expenses arising
from this litigation. Defendants take no position on this motion.
STATEMENT OF ISSUES TO BE DECIDED
1. Whether Plaintiff’s Counsel’s request for an award of attorneys’ fees should be
approved.
2. Whether Plaintiff’s Counsel’s request for reimbursement of litigation expenses should
be approved.
3. Whether the proposed allocation of fees between Lead and Li$2,699,725.56ison
Counsel should be approved.
4. Whether Lead Plaintiff’s request for reimbursement for his time and out-of-pocket
expenses should be approved.
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
Lead and Liaison Counsel (collectively “Plaintiff’s Counsel”) respectfully submit this
memorandum of points and authorities in support of their request for an award of attorneys’ fees
of 13.75% of the settlement fund plus their litigation expenses of $2,699,725.56 plus interest at
the same rate and for the same period of time as that earned by the settlement fund until paid.1
The substantial and certain recovery obtained for the Class after some two and a half years of
intense litigation—an all cash recovery of $16,000,000.00 plus accruing interest—was achieved
through the skill, effort, tenacity, and effective advocacy of Plaintiff’s Counsel.
1 Submitted simultaneously with this brief is Lead Plaintiffs’ Notice of Motion and Motion in
Support of Final Approval of Proposed Settlement and Memorandum of Points and Authorities
in Support Thereof (the “Settlement Brief’).
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Plaintiff’s Counsel’s efforts to date have been without compensation of any kind and
their fee has been wholly contingent upon the result achieved. Plaintiff’s Counsel devoted an
enormous amount of time and money to this case, which settled less than two months before
trial. At the time the parties agreed to the Settlement, discovery—during which Plaintiff’s
Counsel reviewed millions of pages of documents and took 25 lengthy depositions, most of them
in a foreign language and outside the continental United States—had been completed and
multiple motions for summary judgment and to strike expert testimony by had been fully briefed.
The requested fee—$2.2 million plus accruing interests—is consistent with the
agreement entered into between Lead Plaintiff and Lead Counsel at the beginning of this
litigation and is substantially less than both the Ninth Circuit’s 25% “benchmark” fee in similar
actions and the fee that Plaintiff’s Counsel would be entitled to if they charged for their time at
their reasonable and customary rates. The amount requested is supported by the extensive efforts
of Plaintiff’s Counsel in prosecuting this litigation for more than two years in the face of
substantial obstacles, the contingent nature of counsel’s representation, the substantial risk that
counsel would receive little or no fee or reimbursement of its expenses and the favorable result
obtained for the Class. In total, Plaintiff’s Counsel spent 17,952.5 hours in the prosecution of
this litigation, time which, if this were not a contingent fee case, they would have billed for in the
total amount of $7,598,381 at their reasonable and customary rates (an amount generally referred
to as counsel’s “lodestar”). The requested fee, therefore, represents a substantial discount to
counsel’s lodestar. In order that Lead Counsel and Liaison Counsel are appropriately
compensated for their work, Lead Counsel, with the agreement of Liaison Counsel, proposes to
allocate 88% of any fees awarded to Lead Counsel and 12% to Liaison Counsel, reflecting
counsel’s joint assessment of their contributions to this case and their relative risk of loss in the
event that this case ended without any recovery for the class.
The $2,699,725.56 in litigation expenses incurred by Plaintiff’s Counsel are also
reasonable and Plaintiff’s Counsel should be reimbursed for them. While substantial, these
expenses were necessary to successfully prosecute this case. Similarly, Lead Plaintiff, whose
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substantial work on behalf of the Class materially enhanced the recovery of each Class member,
should be reimbursed for his expenses and for at least some of the time he spent on this case.
Lead Plaintiff supports Plaintiff’s Counsel’s fee and expense requests.
II. Background
A. Lead Counsel and Lead Plaintiff
The Court appointed Shahpour (“Shawn”) Javidzad as lead Plaintiff in this case on
January 4, 2008. (Dkt. No. 57.) In its January 4 Order, and at the January 3, 2008 hearing on the
pending lead plaintiff motions, the Court emphasized that it expected Mr. Javidzad to play an
active role in this litigation. Among other things, it instructed Mr. Javidzad to conduct a
competition between law firms to determine who should be appointed lead counsel. (See Order
at 5 (Mr. Javidzad “should immediately proceed to … to interview appropriate candidates” to
serve as lead counsel); Hr’g Tr. 70:11-14, Jan. 3, 2008 (“I want the lead plaintiff to go through
the proper drill of analyzing and do this sincerely. I’d say [he should consider] some three or
four candidate law firms”).) In accordance with the Court’s instructions Mr. Javidzad sent a
request for proposal to four prominent class action securities law firms. All four firms initially
expressed interest in serving as Lead Counsel, but only two responded with formal proposals.
(Javidzad Decl. at 1-2, Dkt. No. 62-3 (“Javidzad Decl. I”), Feb. 4, 2008). Mr. Javidzad
recommended that one of those firms, Cohen Milstein Sellers & Toll LLP, serve as lead counsel
because of its proposed fee agreement and the qualifications of the firm’s attorneys. (Id. at 2.)
Cohen Milstein agreed to take the case in return for Mr. Javidzad’s agreement to
recommend to the Court that, upon its successful conclusion, Cohen Milstein should be
reimbursed for its reasonable expenses and receive, as a fee, “a fixed rate of 12.5% of the
recovery no matter how long the case would take, regardless of settling the case or going to
trial.” (Id.) Mr. Javidzad also advised the Court that “in order to convince [Cohen Milstein] to
agree on this rate” he agreed to ask the Court to award Cohen Milstein up to an additional 2.5%
of any total recovery, for a total of 15%, if he believed that Cohen Milstein’s performance made
such a higher percentage appropriate. (Id.) Mr. Javidzad now recommends that counsel receive
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a fee of 13.75% of the $16 million settlement, $2.2 million.2 (See accompanying Decl. of
Shahpour Javidzad In Supp. Of Proposed Settlement and Proposed Award of Fees and Expenses
(“Javidzad Decl. II ”), ¶ 16.) Mr. Javidzad explains that “although I believe that the Plaintiff’s
Counsel deserves to be awarded the additional 2.5%,” the maximum additional amount
authorized by the fee agreement, he is recommending only an additional 1.75% because he
believes that such a recommendation is in the best interests of the class, which will receive the
remainder of the fund after allocation of all fees and expenses. (Id.)
The Court approved the choice of Cohen Milstein on February 8, 2008 (Dkt. No. 64.) It
noted that Cohen Milstein’s fee proposal would be given “due weight in the process of approving
any fee request later in the case,” but that, in making any fee award, the Court would also
consider other factors, “including the risk [associated with the litigation]” and other fee proposals
that had been “submitted by other counsel” to Lead Plaintiff. (Order at 1-2, Dkt. No. 64, Feb. 8,
2008.)
B. Factual Basis For This Litigation
Defendants in this securities class action are LDK Solar Co. Ltd. (“LDK”) and several of
its officers, directors and subsidiaries. The allegations which formed the basis of the initial
complaints filed in this consolidated matter were largely based on statements sent to the SEC and
others by Mr. Charley Situ, LDK’s former financial controller. Mr. Situ alleged a number of
inventory accounting irregularities, including, most notably, that 284 metric tons of raw material
inventory on LDK’s books was missing. (Consolidated Compl. ¶ 37, Dkt. No. 65, Mar. 10,
2008.) Mr. Situ, however, refused to cooperate with Plaintiff’s Counsel and Plaintiff’s Counsel
2 The only other firm to fully respond to Mr. Javidzad’s request for proposal proposed the
following fee structure:
25% of any recovery up to $10,000,000.
20% of any additional recovery from $10,000,000 to $20,000,000.
15% of any additional recovery from $20,000,000 to $40,000,000.
10% of any additional recovery from $40,000,000 to $60,000,000.
6% of any additional recovery over $60,000,000.
Under that fee schedule the amount that Mr. Javidzad might have recommended to the Court
would have totaled $3.7 million, over 50% more than the $2.2 million now sought by Plaintiff’s
Counsel.
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did not have sufficient evidence to prove that the materials that Situ said were missing were
actually missing. (See accompanying Decl. of Herbert E. Milstein (“Milstein Decl.”) ¶ 10.)
Nevertheless, Plaintiff’s Counsel developed a theory of the case based not on missing
inventory, but on what Plaintiff’s Counsel argued was Defendants improper conduct in
intentionally or recklessly understating the value of the raw material that LDK used in
production, artificially and substantially decreasing LDK’s reported cost of goods sold and
increasing its reported profits. (Milstein Decl. ¶ 12.) Plaintiff’s Counsel advanced this theory
during mediation sessions with Defendants, in response to Defendants’ summary judgment
motions and expected to rely on this theory at trial. (Id.) As a result of careful review of the
millions of pages of mostly Chinese language documents Defendants produced in discovery and
by using the information in these documents to painstakingly reconstruct LDK’s true accounting
and inventory records, Plaintiff’s Counsel developed substantial evidence to support this theory.
(Id.) Lead Plaintiff’s case was, however, almost entirely based on documents and was dependant
on being able to convince a jury of abstract accounting concepts. (Id.) Moreover, Defendants
would likely have testified at trial that any accounting errors were not the result of reckless or
intentional conduct.
Defendants deny that LDK made any accounting errors and assert that an investigation by
an independent law firm found that they did nothing wrong. (See, e.g., Defs.’ Summ. J. Mot. at
7, Dkt. No. 338, Jan. 7, 2010.) LDK has never restated any of its financial statements and the
SEC closed a preliminary inquiry into the company’s accounting after SEC staff received a
briefing from the independent law firm that conducted the investigation at LDK. (Milstein Decl.
¶ 7; Defs.’ Summ. J. Mot. at 3.) Moreover, LDK has substantially all of its assets in China,
beyond the jurisdiction of U.S. courts. LDK, Prospectus (Form F-1) (“LDK Propsectus”) at 29,
(May 11, 2007.)
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C. Motion Practice, Discovery And Mediation
There has been extensive motion practice in this vigorously contested case.3 For
example, on March 10, 2008, after considerable investigation, Lead Plaintiff filed a 46 page
Complaint setting out in detail the basis for his case. (Dkt. No. 65.) On April 4, 2008 four of the
Defendants moved to dismiss the Complaint. (Dkt. No. 68.) On May 29, 2008, after briefing
and a hearing, the Court denied this motion in its entirety. (Dkt. No. 85.) On June 13, 2008
Defendants filed a motion asking the Court to reconsider this decision or to certify it for appeal.
(Dkt. No. 93.) On July 14, 2008, after briefing, the Court denied that motion in its entirety.
(Dkt. No. 107.) On May 6, 2008 Lead Plaintiff moved the Court for permission to serve through
LDK’s California office certain Defendants who were officers or directors of LDK, but who
Defendants’ counsel asserted were beyond the Court’s reach because they resided in China.
(Dkt. No. 76.) After briefing the Court granted this motion on June 12, 2008. (Dkt. No. 92.) On
July 21, 2008, after these additional China-based Defendants were served, Defense counsel
moved to dismiss the Complaint on behalf of these newly served Defendants. (Dkt. No. 108.)
After briefing and oral argument the Court denied this motion in its entirety on September 24,
2008. (Dkt. No. 132.) On July 21, 2008 Defendants moved to stay discovery. (Dkt. No. 109.)
The motion was fully briefed but the Court dismissed it as moot when it dismissed Defendants’
final motion to dismiss. (Dkt. No. 132.) On August 21, 2008 Defendants filed a motion for a
protective order which sought a determination that certain documents were privileged and not
discoverable. (Dkt. No. 113.) In his opposition to this motion Lead Plaintiff argued that the
record actually established that the documents were discoverable and urged the Court to
affirmatively rule that they were not privileged. (Dkt. No. 124, Sept. 4, 2008.) Defendants
responded by withdrawing their motion. (Dkt. No. 127, Sept. 9, 2008.)
Lead Plaintiff moved to certify a class on August 28, 2008. (Dkt. No. 119.) On
September 30, 2008 Defendants moved in limine to exclude evidence given by Lead Plaintiff’s
expert in support of class certification. (Dkt. No. 143.) On January 28, 2009, after expert
3 A chart listing the hearings and the principal substantive motions filed during the course of this
litigation is at Milstein Decl. Ex. E.
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discovery by Plaintiff and Defendants, the deposition of Lead Plaintiff, full briefing of both
motions and a hearing, the Court granted Lead Plaintiff’s motion and certified a class and denied
Defendants motion in limine.4 (Dkt. No. 177.)
On February 12, 2009 Defendants filed a petition with the Ninth Circuit seeking
permission to file an interlocutory appeal of the Court’s decision to certify a class. (Petition for
Permission to Appeal, Dkt. No. 1, 09-80039 (9th Cir. Feb. 12, 2009).) After briefing by both
parties the Ninth Circuit denied permission in May. (Order, Dkt. No. 14, No. 09-80039 (9th Cir.
May 1, 2009). Shortly after the Ninth Circuit’s ruling a Court-approved notice was sent to class
members advising them of the class certification decision. (Decl. of Eric Schachter (“Schachter
Decl.”) ¶¶ 6,9.)
During 2009 the parties engaged in extensive discovery. Defendants produced over 2
million pages of documents and additional documents were produced by non-parties in response
to Plaintiff’s subpoenas. (Milstein Decl. ¶ 3.) The parties took a total of 31 depositions, 25 of
them by Plaintiff’s Counsel.5 (Id. ¶ 3 & Ex. B.) Fourteen of these twenty-five depositions took
place in Hong Kong during a three week period and five were taken in Hawaii (chosen because it
is roughly halfway between China and the continental United States). (Id.) Seventeen of these
depositions took place in Chinese (with translation into English) and one was in Italian. (Id. Ex.
A.) Largely because of the need for translation and the technical issues involved most
depositions took nearly a full seven hours and several took more time to complete. (Id.) Lead
Plaintiff also hired four experts—each of whom was deposed by Defendants—to assist in
discovery, to calculate damages and to testify at trial. Discovery concluded in late December
2009. (Id. ¶ 3.) Lead Plaintiff also took the deposition of four experts Defendants had hired to
provide trial Testimony. (Id.) There was further time consuming motion practice during
discovery—Defendants’ aggressive stance on discovery issues required Plaintiff to repeatedly
4 The Court had delayed issuing its class certification ruling at the request of the parties to
facilitate an ultimately unsuccessful attempt to negotiate a settlement in late 2008. (See Notice
Re Motion For Class Certification, Dkt. No. 201 (Mar. 10, 2009).)
5 A chart listing all depositions taken in this matter and indicating the place and language of each
deposition can be found at Milstein Decl. Ex. B.
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seek the Court’s intervention. (Id. ¶ 6; see also Dkt. Nos. 184, 193, 203, 205, 211, 226, 228,
235, 276, 278, 288, 289, 321.)
On January 7, 2010 Defendants filed a motion for summary judgment and three motions
to exclude expert testimony from Lead Plaintiff’s technical, damages, and accounting experts.
(Dkt. Nos. 338, 341, 375, 382.) Lead Plaintiff also filed his own motion for partial summary
judgment. (Dkt. No. 335.) Briefing of these motions was completed on January 28, 2010 (Dkt.
Nos. 469, 471, 475, 477, 479), but because of the proposed Settlement no ruling has been issued
in connection with these motions.
During the course of the litigation, the parties participated in extensive mediation efforts.
(Milstein Decl. ¶ 9.) On December 22, 2008, the parties attended a formal mediation conducted
by the Hon. Daniel Weinstein (Ret.). (Id.) The parties participated in subsequent mediations
conducted by Judge Weinstein on August 18, 2009, and on February 1, 2010. (Id.) Lead
Plaintiff, on behalf of the Class, and Defendant Jack Lai, on behalf of all Defendants, personally
attended each of these sessions. (Id.) At various times throughout the period from December
2008 through January 2010 the parties discussed a possible resolution of this case with Judge
Weinstein. (Id.) At the conclusion of the February 1, 2010 mediation, and with the participation
of Judge Weinstein, the parties agreed that this case should be settled for a payment of $16
million for the benefit of the class by Defendants and their insurer. (Id.)
III. ARGUMENT
A. Plaintiff’s Counsel Are Entitled to a Fee From the Common Fund They
Created
For over a century, the Supreme Court has accepted the “common fund” exception to the
general rule that litigants bear their own attorneys’ fees. Trustees v. Greenough, 105 U.S. 527
(1882). As Boeing Co. v. Van Gemert, 444 U.S. 472 (1980), explains, the Court “has recognized
consistently that a litigant or a lawyer who recovers a common fund for the benefit of persons
other than himself or his client is entitled to a reasonable attorney’s fee from the fund as a
whole.” Id. at 478 (citations omitted). In other words, one purpose of the common fund doctrine
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is to avoid unjust enrichment so that “those who benefit from the creation of the fund should
share the wealth with the lawyers whose skill and effort helped create it.” In re Wash. Pub.
Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1300 (9th Cir. 1994) (“WPPSS”).
The doctrine also encourages counsel to protect the rights of those with small claims.
Private actions provide “‘a most effective weapon in the enforcement’ of the securities laws and
are ‘a necessary supplement to [Securities and Exchange] Commission action.’” Bateman
Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 310 (1985) (quoting J. I. Case Co. v. Borak,
377 U.S. 426, 432 (1964)). Fee awards in successful cases, such as the instant one, encourage
the prosecution of other actions on behalf of individuals with small but valid claims, thereby
promoting private enforcement of, and compliance with the federal securities laws. See, e.g.,
Mashburn v. Nat’1 Healthcare, Inc., 684 F. Supp. 679, 687 (M.D. Ala. 1988) (“[C]ourts also
have acknowledged the economic reality that in order to encourage … class actions brought to
enforce the securities laws on behalf of persons with small individual losses, a financial incentive
is necessary to entice capable attorneys, who otherwise could be paid regularly by hourly-rate
clients, to devote their time to complex, time-consuming cases for which they may never be
paid.”).6 As a practical matter, a large segment of the public would be denied a remedy for
violations of the securities laws if fees awarded by the courts did not fairly and adequately
compensate counsel for the services provided, the serious risks undertaken, and the delay before
any compensation is received.
B. Plaintiff’s Counsel Should Be Awarded 13.75% Of The Common Fund
Plaintiff’s Counsel, with the support of Lead Plaintiff, request an award of attorneys’ fees
of 13.75% of the settlement fund that was created by counsel’s work—$2.2 million plus accruing
interest. The Court should award the requested fee.
6 See also Ressler v. Jacobson, 149 F.R.D. 651, 657 (M.D. Fla. 1992) (citing In re Warner
Comm’ns Sec. Litig., 618 F. Supp. 735, 750-51 (S.D.N.Y. 1985)) (“Attorneys who bring class
actions are acting as ‘private attorneys general’ and are vital to the enforcement of the securities
laws. Accordingly, public policy favors the granting of counsel fees sufficient to reward counsel
for bringing these actions and to encourage them to bring additional such actions.”).
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In awarding attorneys fees in a securities class action a court “may use either the lodestar
or the percentage approach to derive a reasonable fee.” In re Critical Path, Inc., Sec. Litig., No.
C 01-00551, 2002 WL 32627559, at *8 (N.D. Cal. June 18, 2002) (Alsup, J.) (citing Powers v.
Eichen, 229 F.3d 1249, 1256 (9th Cir. 2000) and Serrano v. Priest, 569 P.2d 1303 (1977)).
While the percentage approach awards a portion of the total recovery as a fee, the lodestar
method “calculates the fee award by multiplying the number of hours reasonably spent by a
reasonable hourly rate and then enhancing that figure, if necessary, to account for the risks
associated with the representation.” Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272
(9th Cir. 1989). Whatever method is used, the purpose of any fee award is “to reasonably
compensate counsel for their efforts in creating the common fund.”7 In re Omnivision Techs.,
Inc., 559 F. Supp. 2d 1036, 1046 (N.D. Cal. 2007); see also WPPSS, 19 F.3d at 1296 (“the
fundamental principle [is] that fee awards out of common funds be ‘reasonable under the
circumstances’” (emphasis in original) (citation omitted)).
In this case the percentage of the fund method is most appropriate, in part because such
an award would be consistent with the agreement between Lead Plaintiff and Lead Counsel,
which provides that Plaintiff’s Counsel will receive a fee up to 15% of any recovery. The Court
is not, of course, bound by this agreement, but there is no good reason for the Court to deviate
from the percentage of the fund method contemplated in the agreement, especially since, in this
case, the lodestar method would not be in the interest of the Class—Plaintiff’s Counsel’s lodestar
is some $7.6 million even without any enhancement, far more than the $2.2 million award (plus
accruing interest) Plaintiff’s Counsel is seeking. In this case numerous factors, including the
7 Courts are encouraged to look to the private marketplace in setting a percentage fee:
The judicial task might be simplified if the judge and the lawyers
bent their efforts on finding out what the market in fact pays not
for the individual hours but for the ensemble of services rendered
in a case of this character. This was a contingent fee suit that
yielded a recovery for the “clients” (the class members). . . . The
class counsel are entitled to the fee they would have received had
they handled a similar suit on a contingent fee basis, with a similar
outcome, for a paying client.
In re Cont’l Ill. Sec. Litig., 962 F.2d 566, 572 (7th Cir. 1992).
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results achieved, the contingent nature of the fee, the risks of the litigation and the quality of
representation weigh in favor of awarding the 13.75% requested.
1. The Result Achieved Support’s The Fee Request
Courts have consistently recognized that the result achieved is a major factor to be
considered in making a fee award. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 436 (1983); In
re King Res. Co. Sec. Litig., 420 F. Supp. 610, 630 (D. Colo. 1976). Here, a certain and
substantial recovery of $16,000,000.00 in cash plus accruing interest has been obtained through
the efforts of Plaintiff’s Counsel. The settlement is a very good result, particularly when
considered in view of the substantial risks and obstacles to recovery presented in this case if
litigation were to continue.8 As a result of the settlement, class member will be compensated for
a meaningful part of their losses and will avoid the substantial expense and uncertainty of
continued litigation.
Although the recovery is only approximately 5.3% of what Lead Plaintiff would have
argued were total damages, the settlement is nevertheless a good one for the Class—there is
substantial uncertainty about Lead Plaintiff’s ability to prove his case and, even if Lead Plaintiff
proves his case, there is substantial uncertainty about his ability to prove damages anywhere near
the $300 million he claims. Moreover, given Defendants’ limited remaining insurance coverage
and LDK’s precarious financial condition, there is substantial uncertainty as to whether there
would be funds available to pay significantly more than the $16 million agreed to as the
settlement amount. And perhaps most importantly, regardless of Plaintiff’s success before the
U.S. courts it would be impossible to enforce a judgment in China, where virtually all
Defendants’ assets are located.
In Omnivision, the court described a recovery of 9% of possible damages as “a
substantial achievement on behalf of the class,” noting that the average recovery in securities
8 These risks and difficulties are discussed more fully below and in the accompanying Settlement
Brief.
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class actions was less than 3% of possible damages.9 559 F. Supp. 2d at 1046. In substantial
part because of the size of the recovery in that case, the court approved a fee of 28% of the
settlement fund. Id. at 1046-49. In contrast to the situation in this case, there is no indication in
the Omnivision decision that the plaintiffs in that case faced any uncertainty about the
collectability of any judgment.
2. The Difficulty Of This Case And The Contingent Nature Of The Fee
Supports The Fee Request
Lead Counsel voluntarily undertook this litigation on a contingent fee basis, knowing
from the beginning that there was a substantial possibility that the case might yield no recovery,
leaving it not only uncompensated for substantial work by its attorneys, but also potentially out-
of-pocket for millions of dollars in litigation expenses. Unlike counsel for defendants, who are
normally paid an hourly rate and reimbursed for their expenses, Plaintiff’s Counsel have not
been compensated for their time or expenses since this case began in late 2007.
Courts have consistently recognized that the risk of receiving little or no recovery is a
major factor in considering an award of attorneys’ fees. For example, the Ninth Circuit has
explained that
[i]t is an established practice in the private legal market to reward
attorneys for taking the risk of non-payment by paying them a
premium over their normal hourly rates for winning contingency
cases. Contingent fees that may far exceed the market value of the
services if rendered on a non-contingent basis are accepted in the
legal profession as a legitimate way of assuring competent
representation for plaintiffs who could not afford to pay on an
hourly basis regardless whether they win or lose. . . . [I]f this
‘bonus’ methodology did not exist, very few lawyers could take on
the representation of a class client given the investment of
substantial time, effort, and money, especially in light of the risks
of recovering nothing.
WPPSS, 19 F.3d at 1299 -1300 (citations and internal quotations omitted); see also Kakani v.
Oracle Corp., No. C 06-06493, 2007 WL 4570190, at *4 (N.D. Cal. Dec. 21, 2007) (Alsup, J.)
9 According to the Omnivision court, in shareholder class actions the “median amount [of
maximum potential damages] recovered in settlement was 2.7% in 2002, 2.8% in 2003, 2.3% in
2004, 3% in 2005, and 2.2% in 2006.” 559 F. Supp. 2d at 1042 (citing In re Heritage Bond
Litig., No. 02-ML-1475, 2005 U.S. Dist. LEXIS 13627, at *27-28 (C.D. Cal. June 10, 2005)).
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(“Attorneys should be properly incentivized to take on worthwhile cases where the probability of
payment is low or uncertain.”).10
Class action securities litigation is inherently uncertain. There are numerous cases where
plaintiffs’ counsel in contingent cases such as this, after the expenditure of thousands of hours
and substantial amounts in litigation costs, have received no compensation. Plaintiff’s Counsel
are aware of many hard-fought lawsuits where, because of the discovery of facts unknown when
the case was commenced, or changes in the law during the pendency of the case, or a decision of
a judge or jury following a trial on the merits, excellent professional efforts of members of the
plaintiffs’ bar produced no fee for counsel. (Milstein Decl. ¶ 28.) Two recent examples
highlight this point. In a case against JDS Uniphase Corporation, after a lengthy trial involving
securities claims, the jury reached a verdict in defendants’ favor. See In re JDS Uniphase Corp.
Sec. Litig., No. C 02-148, Verdict Questions Form (N.D. Cal. Nov. 27, 2007). Similarly, in In re
Apollo Group, Inc. Sec. Litig., No. CV 04-2147, 2008 U.S. Dist. LEXIS 61995 (D. Ariz. Aug. 4,
2008), the court overturned a jury verdict of $277 million on a motion for judgment as a matter
of law because insufficient evidence had been presented at trial to establish loss causation. There
are many other appellate decisions affirming summary judgment and directed verdicts for
defendants or overturning jury verdicts in securities class actions.11
10 Courts around the country have expressed similar views. In In re Prudential-Bache Energy
Income P’ships Sec. Litig., No. 888, 1994 WL 202394 (E.D. La. May 18, 1994), the court
explained that
[c]ounsel’s contingent fee risk is an important factor in
determining the fee award. Success is never guaranteed and
counsel faced serious risks since both trial and judicial review are
unpredictable. Counsel advanced all of the costs of litigation, a not
insubstantial amount, and bore the additional risk of unsuccessful
prosecution.
Id. at at *6; see also Sutton v. Bernard, 504 F.3d 688, 694 (7th Cir. 2007) (“[b]ecause the district
court failed to provide for the risk of loss, the possibility exists that Counsel, whose only source
of a fee was a contingent one, was undercompensated,” reversing fee award); King Res., 420 F.
Supp. at 632, 636-37 (“appropriate consideration must be given to the risks assumed by
plaintiffs’ counsel in undertaking the litigation.”).
11 See, e.g., Anixter v. Home-Stake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) (overturning
securities fraud class action jury verdict for plaintiffs in case filed in 1973 and tried in 1988 on
the basis of 1994 Supreme Court opinion); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir.
1990) (reversing substantial jury verdict and dismissing case—after 11 years of litigation);
Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979) (reversing multimillion
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In this case, however, it was obvious from the outset that this would be an especially
difficult and costly matter to litigate. The substantial risk of no recovery, and the likely costs
involved, may be one reason why only two individuals appeared at the January 3, 2008 hearing
seeking to be appointed lead plaintiff and why only two of the four firms that Lead Plaintiff
Javidzad contacted made a formal proposal to represent the proposed class. (See Javidzad Decl.
I at 1-2.)
Unlike corporate defendants in many securities cases, LDK never restated the financial
statements that Plaintiff alleges were false and misleading. Defendants denied (and continue to
deny) that they did anything wrong, insisting that an investigation by an independent law firm
working for LDK’s audit committee determined that the allegations against LDK were false.
Moreover, Defendants have consistently argued that the accounting practices that Plaintiff
alleges were improper were approved by KPMG’s Chinese affiliate, LDK’s outside auditor.
It has also always been clear that the fact that LDK was a Cayman Islands corporation,
with substantially all of its assets and personnel in China, would make obtaining a verdict against
Defendants more complicated and would create substantial difficulties in collecting on any
judgment. LDK itself disclosed in its May 2007 prospectus that it was unlikely that Cayman
Island courts would “recognize or enforce judgments of courts of the United States obtained
against us or our directors or officers predicated upon the civil liability provisions of securities
laws of the United States.” LDK Prospectus at 29. The company further warned that “the laws
of the Cayman Islands and of China may render you unable to enforce a judgment against our
assets or the assets of our directors and officers.” Id. Plaintiff’s research has confirmed that it
would, in fact, be virtually impossible to enforce any judgment in China. See, e.g., Donald C.
Clarke, The Enforcement of United States Court Judgments in China: A Research Note (May 27,
2004) (unpublished research paper, George Washington Univ. Law Sch., available at
dollar judgment after lengthy trial); In re Apple Computer Sec. Litig., No. C-84-20148, 1991
U.S. Dist. LEXIS 15608 (N.D. Cal. Sept. 6, 1991) (verdict against two individual defendants, but
vacating judgment on motion for judgment notwithstanding the verdict); Robbins v. Koger
Props. Inc., 116 F.3d 1441 (11th Cir. 1997) (reversing jury verdict of $81 million on loss
causation grounds after 19-day trial); Ward v. Succession of Freeman, 854 F.2d 780 (5th Cir.
1988) (reversing plaintiffs’ jury verdict for securities fraud).
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http://ssrn.com/abstract=943922) (the question of whether a U.S. judgment can be enforced in
China “can be answered with a fair degree of confidence both as to formal law and as to actual
practice: almost certainly no, at least where a defendant is present and objecting”); Arthur
Anyuan Yuan, Enforcing and Collecting Money Judgments in China from a U.S. Judgment
Creditor’s Perspective, 36 Geo. Wash. Int’l L. Rev. 757, 758 (2004) (“The enforcement of
foreign judgments in China has been notoriously difficult in recent years.”).
Moreover, because of LDK’s location in China it was apparent from the beginning of this
case that it might be impossible for Plaintiff to compel production of documents and testimony
from nonparties which might be of critical importance. In fact, even though one of the
Defendants’ defenses is that they relied on advice from KPMG’s Chinese affiliate, Plaintiff has
been unable to compel production of audit work papers and similar materials from that affiliate,
which insists that producing these documents would violate Chinese criminal law. (Milstein
Decl. ¶ 4.) Moreover, because most LDK employees are effectively beyond the reach of the
criminal jurisdiction of the United States, they faced little prospect of any sanction for untruthful
testimony during depositions, most of which were conducted in Hong Kong.
It was also evident from the beginning of this case that most documents and testimony
produced in discovery would be in Chinese. As Lead Counsel was well aware from its role as
lead counsel in the Parmalat case (involving European Defendants), translation of documents
and interpretation of testimony is difficult and extremely expensive.12 (Milstein Decl. ¶ 23.)
Moreover, the ambiguities and difficulties inherent in the interpretation and translation processes
greatly complicate presenting a case to a jury.
This case did, in fact, turn out to be expensive to litigate. At the time the settlement was
reached Plaintiff’s Counsel had incurred some $2.7 million in out-of-pocket expenses. Plaintiff’s
Counsel’s out-of-pocket costs (and the financial risk to Plaintiff’s Counsel) would have been far
lower if this case, like many securities cases, was settled before substantial discovery was
12 Costs incurred by Plaintiff’s Counsel directly attributable to interpretation of depositions and
translation of documents total approximately $490,100. (Milstein Decl. ¶ 23.)
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completed, but Lead Plaintiff did not agree to such a settlement because that would not have
been in the best interests of the class. (Milstein Decl. ¶ 22.)
Even though a successful result was far from certain, Plaintiff’s Counsel expended
enormous effort and millions of dollars of their own money to vigorously litigate this case for
more than two years. Few law firms could have devoted this kind of time and financial resources
to such a case without any certainty of recovery or reimbursement. In determining whether
Plaintiff’s Counsel’s fee request is reasonable the Court should consider the substantial risk that
Lead Counsel took in taking this case and vigorously litigating it.
3. The Quality Of Representation Supports The Fee Request
The “‘prosecution and management of a complex national class action requires unique
legal skills and abilities.’” In re Heritage Bond Litig. v. U.S. Trust Co. of Tex., N.A., No. 02-ML-
1475, 2005 U.S. Dist. LEXIS 13627, at *39 (C.D. Cal. June 10, 2005) (citation omitted). Lead
and Liaison Counsel are nationally known leaders in securities class action litigation. (See
Resume of Cohen Milstein, Milstein Decl. Ex. A; Resume of Berman DeValerio, Heffelfinger
Decl. Ex. C.) From the outset of this case Plaintiff’s Counsel engaged in a concerted effort to
obtain the maximum recovery for the class. Plaintiff’s Counsel devoted a substantial amount of
its own money and marshaled considerable resources to the prosecution of this matter. Because
of Plaintiff’s Counsel’s diligent efforts on behalf of the class and their skill and reputations, Lead
Counsel was able to negotiate a favorable settlement under difficult and challenging
circumstances. Such quality, efficiency, and dedication should be rewarded. See, e.g., J. N.
Futia Co. v. Phelps Dodge Indus., Inc., No. 78 Civ. 4547, 1982 U.S. Dist. LEXIS 15261
(S.D.N.Y. Sept. 17, 1982).
The quality of the representation provided by Plaintiff’s Counsel is reflected in their
success in arguing key motions before the Court. For example, after briefing and oral argument,
the Court roundly rejected all aspects of both of Defendants’ motions to dismiss, despite the high
pleading standard established by the Private Securities Litigation Reform Act (PSLRA) in
securities cases. And in a June 12, 2008 Order (Dkt. No. 92) the Court adopted Lead Plaintiff’s
innovative argument that he could properly serve certain individual Defendants, who claimed
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that they were beyond the Court’s reach because they lived in China, through LDK’s California
office.
In evaluating the quality of Plaintiff’s Counsel’s work it is also appropriate to consider
the quality of opposing counsel and the resources opposing counsel devoted to this case. See In
re The Mills Corp. Sec. Litig., No. 06-cv-0007, 2009 WL 5091931, at*17 (E.D. Va. Dec. 23,
2009) (citing In Re Warner Commc’ns Sec. Litig., 618 F. Supp. 735, 749 (S.D.N.Y.1985)
(“quality of opposing counsel is a factor to be considered in evaluating Lead Counsel’s
performance”). Defendants in this case were represented by a large team of attorneys from
Latham & Watkins, one of the country’s most respected law firms. See Headlands Reserve, LLC
v. Center For Natural Lands Mgmt, 523 F. Supp. 2d 1113, 1130 (C.D. Cal. 2007) (“Latham &
Watkins [is] a prestigious law firm with offices all over the world.”).
Defendants’ counsel zealously litigated all aspects of this case. For example, as noted
above, in addition to their initial motion to dismiss, which the Court rejected on May 2008 (Dkt.
No. 85, May 29, 2008), Defendants filed a motion to reconsider that decision in June 2008 (Dkt.
No. 93, June 13, 2008), which was also rejected by the court, after briefing by the parties (Dkt.
No. 107, July 14, 2008), and a second motion to dismiss (for certain Defendants resident in
China) in July 2008 (Dkt. No. 108, July 21, 2008) (which was denied in September 2008 (Dkt.
No. 132, Sept. 24, 2008)). And Defendants’ aggressive stance on discovery issues created
considerable difficulties for Plaintiff’s Counsel. (Milstein Decl. ¶ 6.) Moreover, in addition to
litigating against Latham & Watkins, Plaintiff’s Counsel had to negotiate and litigate with
another respected law firm, Simpson Thacher & Bartlett LLP, which represented LDK’s audit
committee, to obtain access to important documents purportedly protected by privileges asserted
by the audit committee. (Milstein Decl. ¶ 5.)
Although the fees and expenses incurred by Defendants are not public, Plaintiff
understands that approximately fourteen million dollars in insurance coverage was utilized prior
to the settlement, presumably in funding Defendants’ litigation costs. (Milstein Decl. ¶ 20.) The
quality, vigorousness and cost of opposing counsel’s defense of their clients supports the
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reasonableness of Plaintiffs’ Counsel’s request for $2.2 million in fees and approximately $2.7
million in expenses (plus accruing interest).
C. Plaintiff’s Counsel Has Proposed A Reasonable Division Of Fees
Lead Counsel, proposes to award 12% of any fee to Liaison Counsel, a percentage that
both Lead and Liaison Counsel believe will appropriately compensate Liaison Counsel for its
role as Liaison Counsel and the risks it assumed and for its overall substantial assistance in the
litigation of this matter.13 (Milstein Decl. ¶ 19; Heffelfinger Decl. ¶ 12.) Acting at the direction
of Lead Counsel—which needed the help, especially given the tight deadlines imposed by the
Court—Liaison Counsel did significant substantive work on this case, including by taking
several depositions in Hong Kong and Hawaii. One of Liaison Counsel’s attorneys was a native
Chinese speaker, a fact that considerably facilitated Plaintiff’s Counsel’s efforts. (Milstein Decl.
¶ 17.) Liaison Counsel’s work did not duplicate Lead Counsel’s work. (Milstein Decl. ¶ 16.)
Lead and Liaison Counsel did not have any agreement between them on allocation of fees in this
case prior to the settlement. (Milstein Decl. ¶ 18.)
Lead Counsel also proposes to pay, from its share of any fee award $5,000 to Danesh &
Dadmehr, LLP, a Los Angeles law firm, which Lead Plaintiff Javidzad contracted for on a fixed
fee basis prior to the appointment of Lead Counsel to provide him with independent legal advice
on his responsibilities at lead plaintiff.14 (See accompanying Decl. of Nazila Danesh (“Danesh
Decl.”) ¶ 3.) Lead and Liaison counsel had no role in Mr. Javidzad’s selection of the Danesh &
Dadmehr firm and have no connection to or fee agreement with that firm. (Milstein Decl. ¶ 15;
Danesh Decl. ¶ 5.)
13 Lead Counsel’s total lodestar is $6,544,450.75 and Liaison Counsel’s total lodestar is
$1,053,930.25, for a total lodestar of $7,598,381.00. (Milstein Decl. Ex. F; Heffelfinger Decl.
¶ 7.) In In re Critical Path, Inc., Sec. Litig., No. C 01-00551, 2002 WL 32627559 (N.D. Cal.
2002) (Alsup, J.), the Court criticized the proposal by a lead counsel in securities case that it be
given discretion to allocate a fee award among firms that had assisted in the case, explaining that
“the better practice, for future cases, is to disclose the exact allocation proposed between the
firms” in lead counsel’s fee request. Id. at 8. Consequently, Plaintiff seeks the Court’s approval
for this proposed allocation of any fees awarded.
14 The work performed by Danesh & Dadmehr for the benefit of the Class is described in the
accompanying declaration of Nazila Danesh. See also Javidzad Decl. II ¶ 18 (explaining Danesh
& Dadmehr’s role).
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D. Plaintiff’s Counsel’s Expenses Are Reasonable And Were Necessary To
Achieve the Benefit Obtained For The Class
Plaintiff’s Counsel also request reimbursement of expenses incurred by Counsel in
connection with the prosecution of this litigation. They have submitted detailed declarations
with supporting attachments attesting to the accuracy of their expenses. (Milstein Decl. ¶ 26 &
Ex. H; Heffelfinger Decl. ¶ 8 & Ex. B.) Lead Counsel have incurred expenses totaling
$2,699,725.56 in prosecuting this lawsuit. (Id.) This was an unusually costly case to litigate, in
part because of the quantity of documents and other data produced during discovery, the fact that
most documents and depositions were in Chinese, the necessity of taking almost all fact
depositions outside the continental United States, the need make extensive use of experts and the
advanced stage that the litigation had reached at the time of the settlement.
The standard for determining whether expenses are compensable in a common fund case
of this type is whether the expenses are of the type typically billed by attorneys to paying clients
in the marketplace. Harris v. Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994) (“Harris may recover as
part of the award of attorney’s fees those out-of-pocket expenses that ‘would normally be
charged to a fee paying client.’”) (citation omitted); see also Abrams v. Lightolier Inc., 50 F.3d
1204, 1225 (3d Cir. 1995) (expenses recoverable if customary to bill clients for them); Miltland
Raleigh-Durham v. Myers, 840 F. Supp. 235, 239 (S.D.N.Y. 1993) (“Attorneys may be
compensated for reasonable out-of-pocket expenses incurred and customarily charged to their
clients, as long as they ‘were incidental and necessary to the representation’ of those clients.”)
(citation omitted); TBK Partners, Ltd. v. Warshow, No. 77 Civ. 972, 1977 U.S. Dist. LEXIS
13597, at *8 (S.D.N.Y. Oct. 6, 1977) (noting in securities case that “of course, [plaintiffs’
counsel] are also entitled to reimbursement for their expenses”). The expenses for which
Plaintiff’s Counsel seeks payment for are the type of expenses routinely charged to hourly clients
and, therefore, should be paid out of the common fund. These expenses incurred were
necessary—without these expenditures Lead Plaintiff’s case would have been substantially
weaker and any settlement reached would have almost certainly been less favorable to the class.
(Milstein Decl. ¶ 26.)
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The quantity of documents produced by Defendants was enormous—over two million
pages—and additional documents were produced by non-parties and dealing with these
documents was very costly. (Accompanying Decl. of Matthew B. Kaplan In Support of
Proposed Award of Fees and Expenses (“Kaplan Decl.”) ¶ 2.) Each of these documents needed
to be reviewed for relevant information. (Id.) Many of the most important documents were large
data compilations, sometimes numbering thousands of pages, which, despite Lead Plaintiff’s
requests, were not produced in easy to use formats. (Id. ¶ 3.) Review and manipulation of these
data compilations was especially difficult and time consuming. (Id.) In some cases spreadsheets
produced in printed form had to be typed into a database so that this data could be made usable.
(Id.)
The majority of the documents produced by Defendants were in Chinese and almost all of
the witnesses (other than experts) testified in a language other than English, considerably
increasing Lead Plaintiff’s expenses. (Id. ¶ 4.) Important foreign language documents identified
by the document reviewers needed to be translated into English so that they could be analyzed by
Plaintiff’s Counsel and Lead Plaintiff’s experts. (Id.) Given the volume of documents involved
and the time pressure—translations of key documents were needed prior to the depositions of
relevant witnesses—Lead Plaintiff often had to pay a premium to translators to have documents
quickly translated. (Id.) Moreover, Lead Plaintiff had considerable difficulty in obtaining
qualified interpreters to interpret during the deposition. (Id. ¶ 5.) For example, in Hawaii Lead
Plaintiff sought to save money by using purportedly qualified interpreters resident in that state.
(Id.) But the work of these interpreters was inadequate and Lead Plaintiff had to fly in a more
qualified interpreter from New York. (Id.) And because Lead Plaintiff was unable to locate an
English to Italian interpreter in Hong Kong or in any nearby country it was necessary to fly such
an interpreter in from Los Angeles. (Id.)
Fourteen of the twenty fact depositions in this case took place in Hong Kong, and five of
the fact depositions took place in Hawaii, further increasing Lead Plaintiff’s costs. (Id. ¶ 6.)
Defendants would not agree to permit many LDK employees to travel to the U.S. for depositions,
even though Plaintiff offered to pay part of the costs of such travel to reduce deposition costs.
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(Id.) Consequently, pursuant to Court order, fourteen fact depositions took place in Hong Kong,
five in Hawaii and one in New York. (Id.) The accompanying Declaration of Laura Armstrong
In Support of Proposed Award of Fees and Expenses describes Lead Counsel’s efforts to
minimize costs incurred in Hong Kong and Hawaii.
When the final stipulation was signed by the parties discovery was complete and this case
was less then two months from the scheduled start of trial. Consequently, the expenses
reasonably incurred by Lead Plaintiff were higher than the norm in many class actions, which
often settle at an earlier stage in the proceedings. Indeed, many class actions are settled before
any substantial discovery has occurred. (Milstein Decl. ¶27.)
Roughly one half of Lead Plaintiffs’ total expenses were for fees incurred by experts.
(Milstein Decl. Ex. I.) Lead Plaintiff’s principal experts were in the areas of damages,
accounting, silicon wafer manufacturing and the silicon wafer industry. Without highly qualified
experts who a jury would find credible Lead Plaintiff would not have had a case. (Id. ¶ 24.) A
declaration by each expert who did substantial work on this matter outlining the scope of his or
her work and discussing the reasonableness of the fees and expenses that they billed
accompanies this brief. See accompanying Declarations in Support of Proposed Settlement and
Proposed Award of Fees and Expenses of Jane D. Nettesheim, Robert E. Lorenzini, Stuart
Harden, Harris. L Devor, and Thomas J. Todaro. To the extent practicable, Plaintiff’s Counsel
took steps to minimize or eliminate any duplication of work by Lead Plaintiff’s experts. (Kaplan
Decl. ¶ 7.)
Other expenses that were necessarily incurred in the prosecution of this litigation include
expenses for private investigators, fees for a document hosting system (provided by LLM, Inc.)
which allowed Plaintiff’s Counsel and Lead Plaintiff’s experts to access and review documents
produced in discovery, legal research services (such as LEXIS and Westlaw), photocopying,
mediator fees, travel, filing fees, postage and overnight delivery, and telephone expenses.
(Milstein Decl. Ex. H & I.) Throughout this case Plaintiff’s Counsel has taken particular care to
minimize travel expenses and is requesting reimbursement only for counsel’s use of coach class
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air travel within the United States, for lodging at available reasonably priced hotels and for
reimbursement of reasonable meal expenses.15 (Milstein Decl. ¶ 24.)
E. Lead Plaintiff Should Be Reimbursed For His Time And Expenses
As more fully detailed in the accompanying Javidzad Declaration, Lead Plaintiff Shawn
Javidzad has devoted substantial time and money to furthering the interests of the Class. He
does not seek a per-share recovery that is greater than what other class members are entitled to or
an “incentive” payment to reward him for volunteering to act as lead plaintiff and a fiduciary for
the class. But he does ask the Court to approve reasonable compensation for his time and out-of-
pocket expenses. To date Mr. Javidzad has received no reimbursement or compensation for his
participation in this case. (Javidzad Decl. II ¶ 14.)
Mr. Javidzad has been personally involved in this case to a far greater extent than is
normally the case by a representative plaintiff in a class action—and indeed, far beyond what a
typical plaintiff in an individual action would be required to undertake. (Milstein Decl. ¶ 14 (“In
my 40 years of involvement in securities class action litigation I have never encountered an
individual class representative who has been as actively involved in a case as Mr. Javidzad has
been in this case.”) In addition to selecting proposed Lead Counsel after negotiating with several
law firms, and closely monitoring the case, Mr. Javidzad, who lives in Los Angeles, travelled
seven times to San Francisco and twice to New York at his own expense to consult with counsel
and to attend mediation sessions and court hearings.16 (Javidzad Decl. II ¶ 7.) The Class has
benefited from his involvement. Among other things, Mr. Javidzad negotiated a fee agreement
with Lead Counsel that caps counsel’s fee at 15% of the total recovery, a lower percentage than
15 Plaintiff’s Counsel does seek reimbursement for business class travel to and from Hong Kong,
which they believe was reasonable given the distance and time involved. See Federal Travel
Regulations §301-10.125 (available at http://www.gsa.gov/Portal/gsa/ep/channelView.do?pf=
y&specialContentType=FTR&channelId=-24568&pageTypeId=17113&file=FTR/
Chapter301p010.html (authorizing business class travel for federal government employees when
scheduled flight time is more than 14 hours).
16 This includes Mr. Javidzad’s planned travel to the June 17, 2009 hearing on final approval of
the Settlement.
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the norm in securities fraud class actions, an he has recommended to the Court that Plaintiff’s
Counsel only actually receive 13.75% of the total recovery..
In addition to actual out-of-pocket expenses of $6,000.68,17 Mr. Javidzad seeks
compensation for 230 hours of work on behalf of the class in this case at $100 per hour, a rate
substantially less than the average amount of income he believes each hour of the time he spent
on this case would otherwise have generated.18 (Javidzad Decl. II ¶¶ 9, 11.) Consequently, Mr.
Javidzad’s total request for compensation for time devoted to this case will be $23,000, for a
total requested reimbursement of $29,003.68. The notice to the class advised class members that
Mr. Javidzad would request reimbursement of “no more than $8,250 for his out-of-pocket
expenses and no more than $23,000 for his time.” (Notice at 10, Schachter Decl. Ex. D.)
Concerned about “professional” plaintiffs, in enacting the PSLRA Congress indicated
that persons who suffered a loss on a security should not receive any special incentive for
agreeing to act as class representative. See Cunha v. Hansen Natural Corp., 2009 WL 2029797,
*4 (C.D. Cal. July 13, 2009) (“The PSLRA seeks to restrict the use of ‘professional plaintiffs’
who have only a nominal interest in the litigation and who act as lead plaintiff primarily to
accommodate counsel.”). Congress mandated that any recovery by a lead plaintiff “shall be
equal, on a per share basis, to the portion of the final judgment or settlement awarded to all other
members of the class.” 15 U.S.C. § 78u-4. But it also seems clear that Congress did not mean to
create burdensome disincentives for class members to serve as a lead plaintiff. The PSLRA also
provides that a lead plaintiff may receive an “award” for reasonable “costs and expenses
(including lost wages).” Id. (emphasis added).
17 In its February 17, 2010 letter to the Court discussing Mr. Javidzad’s expenses (Dkt. No. 504)
counsel made a mistake in calculating Mr. Javidzad’s expenses. Mr. Javidzad’s total claimed
out-of-pocket expenses have been reduced by $1,383.94 from what was set forth in that letter to
compensate for that error. In addition, $500 has been added to Mr. Javidzad’s expenses to cover
his anticipated travel to the final fairness hearing.
18 Mr. Javidzad has actually devoted more than 230 hours to this case, but, cognizant of his
duties as a fiduciary, he has limited both the number of hours for which he seeks compensation
and his hourly rate. (Javidzad Decl. ¶ 11.)
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While the PSLRA does not explicitly discuss whether self employed individuals, such as
Mr. Javidzad, may recover income lost as a result of their work on behalf of the class, given the
statute’s objective of encouraging sophisticated investors to serve as lead plaintiffs, it seems
unlikely that Congress intended to allow those paid on an hourly basis to be compensated for
their time, while simultaneously prohibiting such compensation for self employed individuals
who lose business opportunities and, consequently, income because of their work on behalf of a
class. See In re MicroStrategy Inc. Sec. Litig., 110 F. Supp. 2d 427, 434 (E.D. Va. 2000)
(Congress intended lead plaintiffs to be “reasonably sophisticated” investors). Recognizing this
logic, numerous courts have found that lead plaintiffs who cannot document the loss of a specific
amount in hourly wages may nevertheless receive a payment for the time they spend working on
behalf of a class. For example, in In re MetLife Demutualization Litig., No. 00 CV 2258, 2010
WL 517389 (E.D.N.Y. Feb. 12, 2010), a securities class action, the court approved an award to
lead plaintiffs for their services “rendered on behalf of the class” beyond actual out-of-pocket
expenses. Id. at 65-67; see also In re Quintus Sec. Litig., No. C-00-4263, 2006 WL 3507936,
*4-*5 (N.D. Cal. Dec. 5, 2006) (approving award to lead plaintiff of $12,000 as “reimbursement
for 80 hours of his time at a rate of $150/hour”).
In Adderley v. National Football League Players Ass’n, No. C 07-00943 WHA, 2009 WL
4250792 (N.D. Cal. Nov. 23, 2009), a non-securities class action, this Court noted that
“incentive” awards to named plaintiffs are generally inappropriate, but agreed to a payment of
$10,000 to the class representative in that case, explaining that “[t]his is not an ‘incentive’ fee.
Rather, it is compensation for the many hours Mr. Adderley spent representing the class.” Id. at
*8. Mr. Javidzad should also be fairly compensated for his time. In enacting the PSLRA
Congress sought to have lead plaintiffs play a leading role in securities class actions, a sharp
break with the traditional practice, in which a class representatives’ involvement in a case was
often only nominal. MicroStrategy, 110 F. Supp. 2d at 434. And in appointing Mr. Javidzad as
Lead Plaintiff the Court emphasized his extensive fiduciary responsibilities to the class. (See,
e.g., Order at 5, Dkt. No. 57, Jan. 4, 2008; Hr’g Tr. 70:11-14, Jan. 3, 2008.)
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Consequently, it is entirely reasonable that the request for compensation that Mr.
Javidzad is now submitting is greater than what would be expected in a more typical class action.
Mr. Javidzad understands that he cannot receive proportionally more for reimbursement of his
losses than other class members, but failure to award conscientious lead plaintiffs reasonable
compensation would create a strong disincentive for lead plaintiffs to do what Congress intended
them to do—carefully monitor securities class actions and ensure that class counsel is, in fact,
acting in the best interests of the class.19
While travelling on behalf of the class Mr. Javidzad purchased economy class tickets and
stayed at reasonably priced business class hotels. (Javidzad Decl. II ¶ 10.) A summary of Mr.
Javidzad’s out-of-pocket expenses is attached to his declaration (Javidzad Decl. II Ex. A) and
and receipts for these expenses are available should the Court wish to review them.
Mr. Javidzad’s support for the settlement and for Plaintiff’s Counsel’s request for an
award of fees and for reimbursement of expenses are not contingent on the Court’s approval of
any reimbursement to him for his time and expenses. (Javidzad Decl. II ¶¶ 15, 18.)
IV. CONCLUSION
For all of the foregoing reasons, Plaintiff’s Counsel respectfully submit that the requested
attorneys’ fees and expenses (with interest) are fair and reasonable and, accordingly, should be
awarded by the Court, that the proposed allocation of fees between Lead and Liaison Counsel
should be approved and that Mr. Javidzad’s request that he be reimbursed for his time and
expenses should also be approved..
19 Congress’ intent in passing the PSLRA was that “[i]ndividuals who are motivated by the
payment of a bounty or bonus should not be permitted to serve as lead plaintiffs. These
individuals do not adequately represent other shareholders—in many cases the ‘lead plaintiff’
has not even read the complaint.” H.R. Conf. Rep. No. 104-369, 1995 U.S.C.C.A.N. at 731-32.
Mr. Javidzad was not motivated by the prospect of receiving a “bounty” or “bonus” and is not
now seeking a bounty or bonus. He is the polar opposite of the disengaged, lawyer controlled
plaintiff that Congress sought to avoid.
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April 16, 2010 By: ____/s/ Herbert E. Milstein_______
COHEN MILSTEIN SELLERS & TOLL
PLLC
Herbert E. Milstein
Joshua S. Devore
Matthew B. Kaplan
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, D.C. 20005
Telephone: (202) 408-4600
Facsimile: (202) 408-4699
Email: hmilstein@cohenmilstein.com
jdevore@cohenmilstein.com
mkaplan@cohenmilstein.com
Lead Counsel for the Class
By: ____/s/ Christopher T. Heffelfinger_____
BERMAN DEVALERIO
Joseph J. Tabacco, Jr. (SBN 75484)
Christopher T. Heffelfinger (SBN 118058)
Anthony D. Phillips (SBN 259688)
One California Street, Suite 900
San Francisco, CA 94111
Telephone: (415) 433-3200
Facsimile: (415) 433-6382
Email: jtabacco@bermandevalerio.com
cheffelfinger@bermandevalerio.com
aphillips@bermandevalerio.com
Liaison Counsel for the Class
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CERTIFICATE OF SERVICE
I hereby certify that on this date, I caused to be electronically filed the foregoing with the
Clerk of the Court using the CM/ECF system which will send notification of such filing to the e-
mail addresses of the parties of record.
/s/ Matthew B. Kaplan
Matthew B. Kaplan
April 16, 2010
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