Opinion
02 Cv. 8853 (SWK).
November 28, 2007
MEMORANDUM OPINION
On September 27, 2006, the Court issued an opinion approving a $100 million class action settlement (the "Settlement") reached in litigation brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA") by participants in AOL Time Warner, Inc.'s ("AOLTW") 401(k) defined contribution plans. See In re AOL Time Warner ERISA Litig., 02 Cv. 8853 (SWK), 2006 WL 2789862 (S.D.N.Y. Sept. 27, 2006) (the "Settlement Approval Opinion"). Then, on October 26, 2007, the Court issued a memorandum opinion adopting the Report and Recommendation ("R R") of Special Master David Pikus regarding attorney's fees for class counsel and granting incentive awards to each of the three named plaintiffs. See In re AOL Time Warner ERISA Litig., 02 Cv. 8853 (SWK), 2007 WL 3145111 (S.D.N.Y. Oct. 26, 2007) (the "Award Opinion"). The Court approved the Settlement and the various awards over the objection of four class members (the "Objectors"). Counsel for the Objectors ("Objectors' Counsel") now seek an award of attorney's fees from the common fund created in connection with the Settlement (the "Settlement Fund"). For the reasons that follow, the Court denies the motion.
Although Defendant AOLTW has changed its name to Time Warner, Inc., for clarity, the Court will continue to refer to the merged entity as AOLTW.
The instant motion was filed by Objectors' Counsel Stephen Tsai, Esq. and John J. Pentz, Esq. Except where specifically noted, the Court refers to the two attorneys collectively.
I. BACKGROUND
Familiarity with the factual and procedural history of this case is presumed. See Award Opinion, 2007 WL 3145111; Settlement Approval Opinion, 2006 WL 2789862; In re AOL Time Warner ERISA Litig., 02 Cv. 8853 (SWK), 2005 WL 563166 (S.D.N.Y. Mar. 10, 2005) (granting in part and denying in part defendants' motion to dismiss). The facts relevant to the instant motion are as follows: In June 2006, Objectors' Counsel filed an objection to the Settlement and the request for attorney's fees and incentive awards, in connection with the July 19, 2006 hearing on final approval of the Settlement (the "Fairness Hearing"). (See generally Objection to Class Action Settlement and Request for Attorney's Fees and Case Contribution Awards ("Objection").)
The Objectors opposed the requests for attorney's fees and incentive awards on several grounds. They characterized the requested attorney's fees as excessive because they believed "that the case involved very little discovery, no trial preparation, and little risk that it `would not settle for a substantial sum, especially after the settlement in the securities action.'" (R R 50 (quoting Objection 4-5).) The Objectors also argued that the fee percentage requested by class counsel was too high. (See R R 50.) With respect to the request for incentive awards, the Objectors argued that (1) such an award is "inherently corrupting" and induces named plaintiffs to accept suboptimal settlements to the detriment of the class; (2) the Private Securities Litigation Reform Act of 1995 ("PSLRA") limits awards for named plaintiffs to "lost wages and out of pocket expenses incurred in a case"; and (3) the requested $20,000-per named plaintiff awards were grossly out of proportion with the amount that each absent class member stands to recover under the settlement. See Award Opinion, 2007 WL at 3145111, at *3 n. 10 (citing Objection 6-7).
Both the R R and the Award Opinion addressed the Objectors' arguments. See Award Opinion, 2007 WL 3145111, at *3 n. 10; R R 49-51. The awards approved by the Court were lower than those requested by class counsel and the named plaintiffs. See Award Opinion (approving incentive awards of $1,000; $1,000; and $500 to three named plaintiffs); R R 1 (recommending attorney's fees and expenses award lower than that originally requested by class counsel).
Objectors' Counsel now seek an award of $20,558 "as compensation for the time they devoted to the representation of their objector clients in this matter, and the substantial savings to the class that resulted from those objections." (Motion for Award of Attorney's Fees ("Objectors' Mot.") 4.) The attorneys arrived at the requested figure by enhancing their lodestar of $10,279 by a multiplier of two. (Objectors' Mot. 3.) Objectors' Counsel cite their clients' status as the sole objectors to the Settlement and the Court's ultimate reduction of the requested awards as evidence of their contribution to the Court's decision. (See Objectors' Mot. 1-4.) Objectors' Counsel's motion for attorney's fees is unopposed. (Pls.' Letter, Nov. 19, 2007 (stating that class counsel "take no position" on the motion).)
II. DISCUSSION
A. Legal Standard
Because "objectors have a valuable and important role to perform in policing class action settlements," see In re Indep. Energy Holdings PLC Sec. Litig., 00 Cv. 6689 (SAS), 2003 WL 22801724, at *1 (S.D.N.Y. Nov. 24, 2003) (citing White v. Auerbach, 500 F.2d 822, 828 (2d Cir. 1974)), "they are entitled to . . . compensation for attorneys' fees and expenses where a proper showing has been made that the settlement was improved as a result of their efforts," White, 500 F.2d at 828. "Ordinarily, the trial judge has broad discretion in deciding whether, and in what amount, attorneys' fees should be awarded, since he is in the best position to determine whether the participation of objectors assisted the court and enhanced the recovery." Id. (citation omitted).
When deciding whether to award attorney's fees to counsel for objectors, courts in this circuit have not required a showing that "the objectors obtained an economic benefit for the class," or even that the objection influenced the court's prior decision.See, e.g., In re Visa Check/Mastermoney Antitrust Litig., 96 Cv. 5238 (JG), 2004 U.S. Dist. LEXIS 8737, at *14-*15 (E.D.N.Y. Apr. 2, 2004), adopted by 2004 U.S. Dist. LEXIS 8729 (E.D.N.Y. Apr. 27, 2004); In re Indep. Energy Holdings, 2003 WL 22801724, at *1 ("Although this Court would likely have reached the same result, with or without the objectors' comments, some of the viewpoints and facts highlighted by the objectors certainly assisted the Court in making an appropriate fee award. Because the overall settlement was improved by their efforts, objectors' counsel are entitled to an award of fees."); Frankenstein v. McCrory Corp., 425 F. Supp. 762, 767 (S.D.N.Y. 1977). Rather, some courts have rewarded objectors' counsel for advancing non-frivolous arguments and "transform[ing] the settlement hearing into a truly adversarial proceeding." Frankenstein, 425 F. Supp. at 767. Nevertheless, the issue remains a matter of the trial judge's discretion, and courts have refused award requests when "[o]bjectors' efforts have not been shown appreciably to have benefitted [sic] the class" and the court did not rely on the objectors' arguments in reaching its conclusion. See, e.g., In re Excess Value Ins. Coverage Litig., MDL No. 1339, M-21-84 (RMB), 2005 U.S. Dist. LEXIS 45104, at *37-*38 (S.D.N.Y. Nov. 3, 2006), aff'd by McCoy v. UPS, 222 Fed. Appx. 87 (2d Cir. 2007). Furthermore, courts have declined requests for attorney's fees when objectors' arguments "clouded rather than sharpened the issues." In re Anchor Sec. Litig., 88 Cv. 3024, 1991 WL 53651, at *2 (E.D.N.Y. Apr. 8, 1991).
B. Objectors' Counsel Are Not Entitled to an Award from the Settlement Fund
After reviewing Objectors' Counsel's participation in this case, the Court concludes that they are not entitled to a fee award from the Settlement Fund. The attorneys submitted an eight-page objection to the Settlement and the requested awards in preparation for the Fairness Hearing. (See generally Objection.) Mr. Tsai's statements at the hearing, in which he essentially summarized the contents of the Objection, span approximately one transcript page. (See Tr. 3-4, July 19, 2006.) Participation of this kind is insufficient to "transform the settlement hearing into a truly adversarial proceeding."Frankenstein, 425 F. Supp. at 767.
Next, although the Court responded to the Objectors' arguments when adopting the R R and approving the named plaintiffs' incentive awards, see Award Opinion, 2007 WL 3145111, at *3 n. 10, it would have reached the same result notwithstanding the Objectors' participation. Indeed, none of the numerous cases cited by the Court in its discussion of incentive awards were provided by Objectors' Counsel. Similarly, although the Special Master rightly addressed the Objection in the R R (see R R 49-51), it is likely that he would have reached the same conclusions based on his own, comprehensive review of the named plaintiffs' attorneys' fee request and the applicable case law.See Award Opinion, 2007 WL 3145111, at *1 n. 4 (noting Special Master's "especially thorough" evaluation).
It appears that, at one point during his review, the Special Master encouraged Objectors' Counsel to provide additional input by inviting them to a meeting with the attorneys for the named plaintiffs. Mr. Tsai, however, elected not to attend. (See R R 6.)
While some courts have approved compensation for objectors' counsel even when the objections were not particularly influential, see, e.g., In re Visa Check, 2004 U.S. Dist. LEXIS 8737, at *14-*15; In re Indep. Energy Holdings, 2003 WL 22801724, at *1; Frankenstein, 425 F. Supp. at 767, such an award is not warranted where, as here, the Objection contained arguments counterproductive to the resolution of the litigation. In this case, the Objection contained several arguments that were irrelevant or simply incorrect. First, Objectors' Counsel opened the objection to the requested incentive awards by referencing the indictment of Milberg Weiss LLP and arguing that class counsel "are in effect asking the Court to become complicit in a disclosed kickback scheme. . . ." (Objection 6.) Yet Objectors' Counsel offer no evidence whatsoever to bolster their assertions, exposing the argument as nothing more than a weak attempt to impute one unrelated firm's alleged illegalities to class counsel. Additionally, Objectors' Counsel attempted to support their arguments against the requested incentive awards with cases arising under the PSLRA, despite the fact that the statute is inapposite in ERISA cases. See Award Opinion, 2007 WL 3145111, at *3 n. 10 (citations omitted). Because these arguments "clouded rather than sharpened the issues," In re Anchor Sec. Litig., 1991 WL 53651, at *2, Objectors' Counsel are not entitled to compensation for making them. Thus, for the foregoing reasons, the Court concludes that an attorney's fees award for Objectors' Counsel derived from the Settlement Fund is not justified in this case.
As the Court concludes that Objectors' Counsel are not entitled to compensation from the Settlement Fund, it need not address the portion of the motion addressing the calculation of the requested award. Nonetheless, the Court notes that Objectors' Counsel have failed to demonstrate both that the hourly rates used in their calculation are reasonable, see In re Visa Check, 2004 U.S. Dist. LEXIS 8737, at *23 ("The burden is on the applicant to produce satisfactory evidence in addition to the attorney's own affidavits showing that the requested rates are at the prevailing market level.") (internal quotation marks and citations omitted), and that a multiplier is warranted, see In re Bolar Pharm. Co., Inc. Sec. Litig., 966 F.2d 731, 732 (2d Cir. 1992) (remanding case when district court "made no findings and gave no rationale at all as to why a . . . multiplier was used"). Given that Objectors' Counsel argued so vociferously against $20,000 awards for each of the named plaintiffs, one would expect that they would take pains to justify compensation that would result in a similar deduction from the Settlement Fund.
III. CONCLUSION
Objectors' Counsel's motion for attorney's fees is hereby denied.
SO ORDERED.