In re Merrill Lynch Co., Inc. Res. Rpt. Sec. Litig.

Full title: In re MERRILL LYNCH CO., INC. RESEARCH REPORTS SECURITIES LITIGATION This…

Court: United States District Court, S.D. New York

Date published: Jan 31, 2007

02 MDL 1484 (JFK), 02 Civ. 3176 (JFK), 02 Civ. 7854 (JFK), 02 Civ. 10021 (JFK) (S.D.N.Y. Jan. 31, 2007)

Opinion

02 MDL 1484 (JFK), 02 Civ. 3176 (JFK), 02 Civ. 7854 (JFK), 02 Civ. 10021 (JFK).

January 31, 2007

For Class Plaintiffs: ABBEY, SPANIER, RODD, ABRAMS PARADIS, LLP, New York, New York, Of Counsel: Arthur N. Abbey, Esq., Jill Abrams, Esq., WOLF, HALDENSTEIN, ADLER, FREEMAN HERZ, LLP, New York, New York, Of Counsel: Daniel W. Krasner, Esq., Jeffrey G. Smith, Esq., George Peters, Esq., Aya Bouchedid, Esq.

For Defendants: CLIFFORD CHANCE, LLP, New York, New York, Of Counsel: Mark Holland, Esq., Mary K. Dulka, Esq., SKADDEN, ARPS, SLATE, MEAGHER FLOM, LLP, New York, New York, Of Counsel: Jay B. Kasner, Scott D. Musoff, BRESSLER, AMERY ROSS, P.C., New York, New York, Of Counsel: Christopher G. Massey, Esq.

For Objector April Scalisi: GARWIN, GERSTEIN FISHER, LLP, New York, New York, Of Counsel: Scott W. Fisher, Esq., WECHSLER HARWOOD, LLP, New York, New York, Of Counsel: Daniella Quitt, Esq.

For Objector Frank Quinn: Frank Quinn, objector pro se, Riverside, CT.

OPINION AND ORDER

JOHN KEENAN, Senior District JudgePage 3

This Opinion considers the petition of the lead plaintiffs for class certification and final approval of a proposed settlement and plan of allocation in these putative securities class actions brought on behalf of investors in three different Merrill Lynch mutual funds. The Court also considers lead counsel's application for an award of attorneys' fees and expenses, and an award as reimbursement for one of the lead plaintiffs. For the reasons that follow, the Court (1) grants class certification to the settling plaintiffs, (2) approves the settlement and plan of allocation, (3) awards attorneys' fees in the amount of 22.5% of the settlement fund, (4) awards reimbursement of litigation expenses to counsel, and (5) denies lead plaintiff's request for an award.

BACKGROUND

These three securities class actions (collectively, the "Actions") were among numerous securities class actions brought against Merrill Lynch in the wake of the New York Attorney General ("NYAG")'s investigation into an alleged scheme by Merrill Lynch's research division to publish false or misleading analysis of internet stocks in an effort to generate investment banking business. The cases were consolidated before the late Honorable Milton J. Pollack for pre-trial purposes, in In re Merrill Lynch Co., Inc. Research Reports Sec. Litig., 02 MDL 1484 and reassigned to me upon Judge Pollack's death. Although most of the cases before Judge Pollack were brought on behalf of classes of direct purchasers of stock in companies that were the subject of allegedly misleading research reports, the plaintiffs in these Actions are shareholders in three different Merrill Lynch mutual funds (collectively, the "Funds"): the Merrill Lynch Internet Strategies Fund, Inc. (the "ISF"); the Merrill Lynch Global Technology Fund (the "Global Fund"); and the Merrill Lynch Focus Twenty Fund (the "Focus Twenty Fund"). Defendants are the Funds, their directors, their investment advisors and affiliates, and the advisors' corporate parent, Merrill Lynch Co., Inc., and broker-dealer affiliate, Merrill Lynch, Pierce, Fenner Smith Incorporated ("MLPF S").¹ Plaintiffs alleged, inter alia, (1) that the Funds' prospectuses and registration statements failed to disclose a conflict of interest between Merrill Lynch's brokerage and underwriting operations, namely that the Funds invested in the securities of companies with which MLPF S had or sought investment banking business; (2) that MLPF S issued falsely optimistic research reports on many of the securities held in the Funds' portfolios; and (3) that the Funds invested in companies at market prices inflated by the misleading research reports in order to improve MLPF S' ability to obtain investment banking business from those companies, without regard to whether they were good investments for investors in the Fund. The factual background of the Actions and the plaintiffs' claims are set forth in previous decisions and orders of Judge Pollack, including In re Merrill Lynch Co. Research Reports Sec. Litig., 272 F. Supp. 2d 243 (S.D.N.Y. 2003) and In re Merrill Lynch Co. Research Reports Sec. Litig., 289 F. Supp. 2d 429 (S.D.N.Y. 2003), and in Judge Pollack's decision and order in a related class action case, In re Merrill Lynch Co. Research Reports Sec. Litig., 273 F. Supp. 2d 351 (S.D.N.Y. 2003). Familiarity with those decisions is assumed.

1 The defendants, as defined in the Stipulation of Settlement, are Merrill Lynch Co., Inc., MLPF S, Merrill Lynch Focus Twenty Fund, Inc., Fund Asset Management, L.P., Princeton Funds Distributors, Inc., Princeton Services, Inc., FAM Distributors, Inc., Merrill Lynch Global Technology Fund, Inc., Merrill Lynch Asset Management, L.P., Merrill Lynch Investment Managers, L.P., Terry K. Glenn, Donald C. Burke, Donald Cecil, Roland M. Machold, Edward H. Meyer, Charles C. Reilly, Richard D. West, Arthur Zeikel, Edward D. Zinbarg, Roscoe S. Suddarth, Ronald W. Forbes, Cynthia A. Montgomery, Kevin A. Ryan, Merrill Lynch Internet Strategies Fund, Inc., Paul G. Meeks, and Master Internet Strategies Trust.

Procedural History

The first of these Actions commenced on April 24, 2002, with the filing of the first of nine securities class action suits against the ISF. Those cases were subsequently consolidated as the ISF Action. A class action complaint was filed on October 1, 2002 against the Global Fund and was eventually consolidated as the Global Action. The first class complaint against the Focus Twenty Fund was filed on December 23, 2002 and was consolidated with other subsequent complaints as the Focus Twenty Action. The Actions were subsequently transferred to Judge Pollack, pursuant to an order of the Judicial Panel on Multidistrict Litigation which consolidated before Judge Pollack numerous claims against Merrill Lynch and other defendants, alleging securities fraud in analysts' research reports

On February 5, 2003, Judge Pollack appointed Ruth Manton as lead plaintiff and Abbey, Spanier, Rodd, Abrams Paradis, LLP ("Abbey Spanier")² as lead counsel in the ISF action and Michal N. Merritt as lead plaintiff and Wolf Haldenstein Adler Freeman Herz LLP ("Wolf Haldenstein") as lead counsel in the Global Action.³ On July 22, 2003, Judge Pollack appointed Archie Lofberg as lead plaintiff and Wolf Haldenstein as appointed lead counsel in the Focus Twenty Action.⁴ Lead plaintiff in each of the three Actions subsequently filed a consolidated amended class complaint ("Complaint," and collectively, the "Complaints").

2 At the time Pre-Trial Order No. 3 was issued, Abbey Spanier's name was Abbey Gardy, LLP.

3 Abbey Spanier and Wolf Haldenstein will be referred to, collectively, in this Opinion as "counsel" or "lead counsel."

4 Unappointed counsel that participated on the plaintiffs' behalf in the Actions are: BrowerPiven, P.C.; Lockridge, Grindal, Nauen P.L.L.P.; Stull, Stull Brody; Weiss Lurie; Law Offices of Mark S. Henzel; and Wolf Popper, LLP.

In May 2003 the defendants filed motions to dismiss the Complaint in the Global Action. In July and September 2003, the defendants filed motions to dismiss the Complaints in the ISF and Focus Twenty Actions. By an order dated July 2, 2003, the Court dismissed the Global Action Complaint with prejudice on the grounds, inter alia, that defendants had no duty to disclose the information that was allegedly omitted from the prospectuses and registration statements; that the claims were time-barred; and that the plaintiffs had failed to plead loss causation. See In re Merrill Lynch Co. Research Reports Sec. Litig., 272 F. Supp. 2d at 243. On September 17, 2003, lead plaintiff in the Global Action filed a notice of appeal to the Second Circuit. At the time settlement was reached, the appeal was fully briefed by the parties and awaiting oral argument.

On October 29, 2003, the Court dismissed with prejudice the Complaint in the ISF Action on substantially the same grounds as were set forth in the opinion and order in which the Global Action was dismissed. See In re Merrill Lynch Co. Research Reports Sec. Litig., 289 F. Supp. 2d at 429. On November 24, 2003, lead plaintiff in the ISF Action filed an appeal to the Second Circuit. The appeal in the ISF Action was fully briefed and awaiting oral argument at the time the parties reached the settlement agreement.

On October 22, 2003, the Court dismissed the Complaint in the Focus Twenty Action, striking various allegations as irrelevant, but granted leave to replead. Lead plaintiff subsequently filed an amended Complaint, and Defendants filed a motion to dismiss the amended Complaint. Lead plaintiff also filed a motion for the disqualification of Judge Pollack, which the Court denied in February 2004. The motion to dismiss the amended Complaint in the Focus Twenty Action was fully briefed and awaiting oral argument in this Court at the time settlement was reached.

On October 6, 2004, following Judge Pollack's death, the Judicial Panel for Multidistrict Litigation reassigned the cases consolidated in In re Merrill Lynch Co., Inc. Research Reports Sec. Litig., 02 MDL 1484, including these Actions, to this Court.

On January 20, 2005, while the parties awaited the scheduling of oral argument in the Second Circuit of the appeals from the dismissals in the ISF and Global Actions, and oral argument in this Court regarding the motion to dismiss the amended Complaint in the Focus Twenty Action, the Second Circuit issued its decision in a related securities class action that was among the cases consolidated for pre-trial proceedings before Judge Pollack, Lentell v. Merrill Lynch, 396 F.3d 161 (2d Cir. 2005), cert. denied, 126 S. Ct. 421 (2005). In Lentell, direct purchasers of two internet stocks, 24/7 Real Media, Inc. and Interliant, Inc., sued Merrill Lynch and related defendants, alleging the "publication by Merrill Lynch's Internet Group of false and misleading research and investment recommendations aimed at fraudulently driving up the market prices of [those] companies . . . and motivated by the desire to obtain and maintain investment banking business for Merrill Lynch." Lentell, 396 F.3d at 165 (citation and internal quotations omitted). Judge Pollack dismissed the complaints with prejudice on the ground,inter alia, that plaintiffs had failed to plead loss causation. The Circuit affirmed Judge Pollack's dismissal on the ground of loss causation. Id. at 178.

Settlement

In 2005, following the Second Circuit's decision in Lentell, the parties began to conduct settlement negotiations. During negotiations, the parties requested that the Second Circuit and this Court stay action, respectively, on the fully briefed appeals in the Global and ISF Actions and the motion to dismiss in the Focus Twenty Action. On February 16, 2006, the parties executed a Memorandum of Understanding, which contained key terms of a settlement agreement. On September 22, 2006, after seven months of negotiations, counsel informed the Court that the parties had reached an agreement regarding the settlement of the Actions and submitted to the Court an executed Stipulation of Settlement ("Stipulation"), to which were attached as exhibits a Notice of Pendency of Class Action ("Notice") and Proposed Settlement ("Settlement"), and a Proposed Preliminary Order in Connection with Settlement Proceedings.

On October 20, 2006, the Second Circuit issued a mandate, pursuant to the parties' stipulation, withdrawing the appeals in the ISF and Global Actions without prejudice and returning those Actions to this Court for review of the Settlement.

Settlement Terms

The Stipulation provides for the cash payment of $39 million plus an additional payment in lieu of interest⁵ (the "Settlement Fund"). The Stipulation defines the classes in each of the Actions as follows: the ISF Class consists of all persons who purchased shares of the ISF from March 16, 2000 through October 12, 2001; the Global Class consists of all persons who purchased shares of the Global Fund from October 2, 1999 through October 1, 2002; and the Focus Twenty Class consists of all persons who purchased shares of the Global Fund from March 3, 2000 through December 23, 2002 (collectively, the "Class Members").

5 The additional amount is calculated as if simple interest was earned on the $39 million base amount, from March 30, 2006 until five days after entry of the final order of this Court approving the settlement, at the LIBOR 30-day rate listed in The Wall Street Journal on March 30, 2006. As of September 22, 2006, the additional amount that had accrued was $1,328,017.

Pursuant to the Stipulation, the Settlement Fund will be used to pay taxes and tax expenses; administrative costs of the Actions, including the costs of providing notice; and attorneys' fees and expenses. The remaining amount of the Settlement Fund ("Net Settlement Fund") then will be distributed to valid claimants pursuant to the Plan of Allocation. The Stipulation also contains a release and waiver, barring any participating Class Members from bringing against any defendant in these Actions any future claims, known or unknown, that arise out of or relate to the Actions.

Plaintiffs moved for preliminary approval of the Settlement on September 22, 2006. On September 26, 2006, the Court issued a Preliminary Order in Connection with Settlement Proceeding ("Preliminary Order"). The Preliminary Order granted preliminary class certification to the Actions for settlement purposes and certified the lead plaintiffs in the Actions as class representatives. The Preliminary Order also approved the form of the proposed Notice of Pendency of Class Action and Proposed Settlement (the "Notice"), the Proof of Claim and Release Form (the "Proof of Claim"), the Notice of Recognized Loss and Release Form (the "Notice of Recognized Loss"), and the Summary Notice of Pendency and Proposed Settlement of Class Action (the "Publication Notice"), and scheduled a Fairness Hearing for November 28, 2006. The Preliminary Order directed counsel to send the Notice, Proof of Claim, or Notice of Recognized Loss via first class mail, no later than October 11, 2006, to all identifiable class members and further directed counsel to publish the Publication Notice in The Wall Street Journal, The New York Times, and on the PR Newswire within two weeks after mailing of the Notice. The Preliminary Order required any class member who wished to be excluded from the settlement to mail notice of the request for exclusion by November 13, 2006. The Preliminary Order further required any objection to the settlement to be filed with the Court and served on the parties no later than November 13, 2006. The Order also stated that the deadline for submission of claims was December 31, 2006.⁶ Notice to Class

6 The deadline for post-marked claims subsequently was extended to January 3, 2007 because post offices were closed from December 31, 20.06 through January 2, 2007, as December 31, 2006 fell on a Sunday, January 1, 2007 was New Years Day, and post offices were closed on January 2, 2007 due to President Ford's death.

On October 11, 2006, pursuant to the Preliminary Order, counsel, through the Court-approved claims administrator, the Garden City Group, Inc. ("GCG"), began the process of mailing claim packets to identifiable class members. Each claim packet contained the Notice and the Proof of Claim. The GCG ultimately sent 399,179 claim packets to potential Class Members via first class mail. On October 23, 2006, the GCG published the Publication Notice in the national editions of The Wall Street Journal and The New York Times, and on the PR Newswire. The GCC also posted downloadable copies of the Notice and Proof of Claim on the GCG's website.

The Notice provided a background of the Actions, described the circumstances leading up to the Settlement, supplied the details of the Settlement, gave notice of the November 28, 2006 Fairness Hearing, and provided instructions for class members regarding submissions of claims, exclusion from the Settlement, objection to the terms of Settlement and/or the application for attorneys' fees and reimbursement of expenses, and attendance at the Fairness Hearing. The Notice also stated that lead counsel would apply for attorneys' fees not to exceed 30% of the Settlement Fund, reimbursement of attorneys' costs and expenses incurred in connection with the litigation of the Actions not to exceed $350,000, and reimbursement of reasonable costs and expenses incurred by the lead plaintiffs not to exceed $15,000.

Plan of Allocation

The proposed Plan of Allocation was appended to the Notice and included in each claim packet. The Plan of Allocation explains that the Net Settlement Fund will be distributed to the Class Members on the basis of a recognized loss formula that will be applied to shares of each of the three mutual funds that were purchased, sold, or held by the Class Members during the class periods. The recognized loss formula is based on the difference between the price paid and price received for shares of mutual funds that were purchased and sold during the applicable class period. The formula also applies to shares held but not sold as of the expiration of each class period, and is calculated as the difference between the price paid for each share and the price at which each share was trading on a specific date stated in the Plan of Allocation.⁷ Plaintiffs' damages expert has concluded that approximately 616 million shares will be eligible to claim a recognized loss. Based on the proposed settlement sum of $39 million, counsel calculate that the settlement will yield an average recovery per eligible share of $.063, or $.0649, when the additional payment in lieu of interest is included.

7 For ISF shares held on October 21, 2001, the last day of the ISF class period, the recognized loss is the difference between the price paid per share and $1.74, the price at which ISF shares were trading on October 12, 2001. For Global Fund shares held on October 1, 2002, the last day of the Global Fund class period, the recognized loss is the difference between the price paid per share and $4.25, the price at which Global Fund shares were trading on October 1, 2002. For Focus Twenty Fund shares held on December 23, 2002, the last day of the Focus Twenty Fund class period, the recognized loss is the difference between the price paid per share and $1.19, the price at which Focus Twenty Fund shares were trading on October 1, 2002.

Reaction of Class to the Notice of Proposed Settlement

The response of the classes to the proposed settlement has been highly positive. Only 34 investors opted to be excluded from the settlement, out of nearly 400,000 potential class members. As of the November 13, 2006, deadline for filing objections, only three persons, Frank Quinn, Daniel Harris, and April Scalisi, have submitted objections.⁸ As discussed below, those objections are either overruled or have been rendered moot since they were submitted.

8 Frank Quinn, acting pro se, filed his objection with the Court on October 26, 2006 but failed to serve the objection on counsel, as required by the Notice. April Scalisi, through counsel, served her objection on counsel but failed to file timely the objection with the Court, as required by the Notice. Despite the deficiencies in the submissions of Mr. Quinn's and Ms. Scalisi's objections, the Court accepted the objections and permitted Mr. Quinn, pro se, and Ms. Scalisi, through counsel, to be heard at the Fairness Hearing.

Fairness Hearing

On November 28, 2006, the Court held the Fairness Hearing. Lead counsel and counsel for the Fund adviser defendants spoke in favor of the settlement. Lead counsel spoke in support of the application for an award of attorneys' fees of 28%, reimbursement of litigation expenses, and an award of $8,000 for ISF lead plaintiff Ruth Manton. Counsel for defendants took no position on lead counsel's application for attorneys' fees and reimbursement of expenses but opposed the application for the award for Ruth Manton. Objector Frank Quinn attended and stated his objection to the proposed settlement. Objector April Scalisi's counsel attended and stated Ms. Scalisi's objection to the settlement. Objector Daniel Harris did not attend.

DISCUSSION

A. Certification of the Settlement Class

The Stipulation contemplates certification of the settlement class. "Before certification is proper for any purpose-settlement, litigation, or otherwise-a court must ensure that the requirements of Rule 23(a) and (b) have been met." Denny v. Deutsche Bank, A.G., 443 F.3d 253, 270 (2d Cir. 2006). Rule 23(a) imposes four threshold requirements on putative class actions: numerosity, commonality, typicality, and adequacy of representation. Id. at 267. In addition, Rule 23(b)(3) imposes the following two additional requirements: "Common questions must `predominate over any questions affecting only individual members'; and class resolution must be `superior to other available methods for the fair and efficient adjudication of the controversy.'" Id. (quoting Fed.R.Civ.P. 23(b)(3)). The Court considers each requirement in turn.

Numerosity

Rule 23(a)(1) requires that the putative class be "so numerous that joinder of all class members is impracticable." Fed.R.Civ.P. 23(a)(1). While no minimum number of plaintiffs is required for a suit to be maintained as a class action, "[g]enerally, courts will find a class sufficiently numerous when it comprises 40 or more members." DeMarco v. Nat'l Collector's Mint, Inc., 229 F.R.D. 73, 80 (S.D.N.Y. 2005) (citation and internal quotations omitted). Here, the GCG identified nearly 400,000 potential Class Members. Lead counsel have notified the Court that, as of January 3, 2007, the GCG received 34,629 claims. The settlement class clearly is so large that individual actions by all potential plaintiffs would not be possible. The numerosity requirement therefore is satisfied.

Commonality

Under Rule 23(a)(2), class certification is appropriate where "there are questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). The commonality requirement of Rule 23(a)(2) is satisfied if "all class members are in a substantially identical factual situation and the questions of law raised by the plaintiff [s] are applicable to each class member." In re Playmobil Antitrust Litig., 35 F. Supp. 2d 231, 240 (E.D.N.Y. 1998). The rule does not require that every question of law or fact be common to each class member. Id. "The commonality requirement has been applied permissively in the context of securities fraud litigation." In re Veeco Instruments, Inc., Sec. Litig., 235 F.R.D. 220, 238 (S.D.N.Y. 2006). Here, the Actions raise questions of law and fact that are common to each class member. Plaintiffs are suing under the same federal securities laws, alleging the same misrepresentations and/or omissions of material statements in the Funds' prospectuses and registration statements, and "the success of each plaintiff's claim turns on establishing the existence, nature and significance of the same alleged misrepresentations and omissions." Id. Thus, the commonality requirement is satisfied.

Typicality

Rule 23(a)(3) is satisfied if "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). The "typicality" requirement is met where "the claims of the named plaintiffs arise from the same practice or course of conduct that gives rise to the claims of the proposed class members." Schwab v. Philip Morris USA, Inc., 449 F. Supp. 2d 992, 1104 (E.D.N.Y. 2006) (internal quotations and citation omitted). Here, there is no indication that the claims of the lead plaintiffs differ in any respect from the claims of the rest of the putative Class Members. Thus, the typicality requirement is satisfied.

Adequacy of Representation

Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a)(4). This necessitates a two-part inquiry: (1) whether the lead plaintiffs' interests are antagonistic to the interests of other members of the class, and (2) whether plaintiffs' attorneys are qualified, experienced and able to conduct the litigation. Baffa v. Donaldson, Lufkin Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000). Regarding the first prong, there is no indication that lead plaintiffs' claims conflict in any way with the claims of other Class Members. As stated above, the claims of the named plaintiffs appear to be typical of the claims of the remainder of the class. The second prong also is satisfied. As the resumes submitted by lead counsel and unappointed counsel amply demonstrate, plaintiffs' counsel have wide experience in the field of securities class litigation. In appointing Wolf Haldenstein as lead counsel in the Global and Focus Twenty Actions, and Abbey Spanier as lead counsel in the ISF Action, the Court already has recognized counsel's experience in the field of securities litigation and counsel's ability to provide the Class Members with adequate representation. Thus, the final requirement of Rule 23(a) has been met.

Rule 23(b)(3): Predomination and Superiority

Rule 23(b)(3) requires "[1] that common questions of law or fact predominate over individual questions and [2] that a class action is superior to other methods of adjudication." In re Veeco Instruments, Inc., 235 F.R.D. at 240. "In determining whether common questions of fact predominate, a court's inquiry is directed primarily toward whether the issue of liability is common to members of the class." In re Blech Sec. Litig., 187 F.R.D. 97, 107 (S.D.N.Y. 1999). Common questions also predominate where "even if each Class member were to bring an individual action, each would be required to prove the existence of the alleged activities of the defendants in order to prove liability." Id. In these Actions, defendants' liability will be identical as to each class member; only the amount of damages will differ from one class member to another, depending upon the number of mutual fund shares owned by a given class member and when those shares were purchased and/or sold. Further, as discussed above, the Class Members' claims involve the same questions of fact and law. Thus, even if each Class Member were to bring suit individually, each plaintiff would have to allege and prove virtually identical facts. Therefore, common questions predominate.

Rule 23(b)(3) sets forth the following factors to be considered in making a determination of superiority: "(A) The interest of members of the class in individually controlling the prosecution . . . of separate actions; (B) The extent and nature of any litigation concerning the controversy already commenced by . . . members of the class; (C) The desirability . . . of concentrating the litigation of the claims in the particular forum; and (D) The difficulties likely to be encountered in the management of a class action." Fed.R.Civ.P. 23(b)(3). As the court observed in In re Blech Sec. Litig.,

In general, securities suits . . . easily satisfy the superiority requirement of Rule 23. Most violations of the federal securities laws . . . inflict economic injury on large numbers of geographically dispersed persons such that the cost of pursuing individual litigation to seek recovery is often not feasible. Multiple lawsuits would be costly and inefficient, and the exclusion of class members who cannot afford separate representation would neither be `fair' nor an adjudication of their claims. Moreover, although a large number of individuals may have been injured, no one person may have been damaged to a degree which would induce him to institute litigation solely on his own behalf.

187 F.R.D. at 107.

The reasoning of the court in Blech applies with force in this case, where there are potentially hundreds of thousands of Class Members and the expected recovery per share amounts to a few pennies. Because of the large number of potential claimants and the relatively small damage suffered by potential individual claimants, it is unlikely that individual plaintiffs would endure the expense of litigation in order to bring their claims. There is no indication that counsel are likely to encounter any difficulties in administering the settlement of the actions. Therefore, because class action treatment is superior to any other method for the fair and efficient adjudication of these Actions, the requirements of Rule 23(b)(3) are satisfied.

Because the factors for class certification set forth in Rule 23(a) and Rule 23(b)(3) have been met, the application to certify the classes for settlement is granted.

B. Approval of Final Settlement

Federal Rule 23(e) governs the settlement of class actions and requires court approval before a settlement is executed. Adequate notice of the proposed settlement must be provided and the proposed settlement must be the subject of a fairness hearing. Fed.R.Civ.P. 23(e)(1). In addition, a court may approve a settlement that is binding on the class only if it determines that the settlement is "fair, adequate, and reasonable" and not a "product of collusion." Joel A. v. Giuliani, 218 F.3d 132, 138 (2d Cir. 2000). This evaluation requires the court to consider both "the settlement's terms and the negotiating process leading to settlement." Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005). The determination of the fairness of a settlement is a matter addressed to the Court's discretion. Joel A., 218 F.3d at 139.

Adequacy of Notice

While there are no rigid rules to determine the adequacy of notice in a class action, the standard is generally that of reasonableness. Wal-Mart, 396 F.3d at 113-14. Notice need not be perfect, but need be only the best notice practicable under the circumstances, and each and every class member need not receive actual notice, so long as class counsel acted reasonably in choosing the means likely to inform potential class members.Weigner v. City of New York, 852 F.2d 646, 649 (2d Cir. 1988). Notice is generally deemed reasonable if the average person understands the terms of the proposed settlement and the options provided to class members thereunder. Wal-Mart, 396 F.3d at 114.

In these Actions, counsel provided potential Class Members with adequate notice of the Settlement. Counsel, through a Court-approved claims administrator, disseminated the Notice to nearly 400,000 potential claimants. In plain language that is readily comprehensible to the average person, the Notice set forth essential information, including the background of the Actions, the terms of the Settlement, and the various rights of Class Members under the settlement (including the right to opt out and the right to file objections). Appended to each Notice was a form for Proof of Claim and Release, which contained detailed instructions for filing claims under the Settlement, including a "Reminder Checklist," that summarized the steps that a putative Class Member needed to take in order to submit a claim. Counsel also complied with the publication requirement, causing the Publication Notice to be published in appropriate publications. The Publication Notice contained the required information regarding the Settlement terms and process and provided clear instructions on how potential claimants could obtain a copy of the Notice and Proof of Claim.

The Court finds that Notice of the proposed settlement of the Actions was reasonable.

Procedural Fairness

"A `presumption of fairness, adequacy, and reasonableness may attach to a class settlement reached in arm's-length negotiations between experienced, capable counsel after meaningful discovery.'" Wal-Mart, 396 F.3d at 116 (quoting Manual for Complex Litigation, Third, § 30.42 (1995)). "`The experience of counsel, the vigor with which the case was prosecuted, and the coercion or collusion that may have marred the negotiations themselves' shed light on the fairness of the negotiating process." Hicks v. Morgan Stanley Co., No. 01 Civ. 10071, 2005 U.S. Dist. LEXIS 24890, at *13 (S.D.N.Y. Oct. 24, 2005) (quoting Malchman v. Davis, 706 F.2d 426, 433 (2d Cir. 1983)).

The record of this case demonstrates the procedural fairness of the settlement. The parties first met to discuss the potential for settlement in 2005. After agreeing on key settlement terms in February 2006, the parties spent seven months conducting negotiations before executing the Stipulation, in September 2006. In sum, counsel with wide experience and demonstrated skill in the field of class action securities litigation represented both sides in reaching the Stipulation after the protracted negotiations. The Court thus finds that the process by which the parties negotiated the proposed settlement was fair and reasonable.

Substantive Fairness

Courts of the Second Circuit examine the well-established "Grinnell factors" to determine whether a settlement is substantively fair and reasonable as required by Rule 23(e). The factors that a district court considers are:

(1) the complexity, expense and likely duration of the litigation, (2) the reaction of the class to the settlement, (3) the stage of the proceedings and the amount of discovery completed, (4) the risks of establishing liability, (5) the risks of establishing damages, (6) the risks of maintaining the class action through the trial, (7) the ability of the defendants to withstand a greater judgment, (8) the range of reasonableness of the settlement fund in light of the best possible recovery, (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation[.]

D'Amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir. 2001) (citingCity of Detroit v. Grinnell Corp., 495 F.2d 448, 463, abrogated on other grounds by Goldberger v. Integrated Reserves, Inc., 209 F.3d 43 (2d Cir. 2000)). A court need not find that every factor militates in favor of a finding of fairness; rather, a court "consider[s] the totality of these factors in light of the particular circumstances." In re Global Crossing Sec. ERISA Litig., 225 F.R.D. 436, 456 (S.D.N.Y. 2004).

Based on an evaluation of the relevant Grinnell factors, the Court finds that the substantive terms of the Settlement are fair, adequate, and reasonable. Given the dire procedural posture of this case, "[t]here is little question that the settlement agreements . . . are fair and adequate to the class because they would provide what further litigation could not-any recovery for class members." In re Stock Exchs. Options Trading Antitrust Litig., No. 99 Civ. 0962, 2006 U.S. Dist. LEXIS 87825, at *26 (S.D.N.Y. Dec. 4, 2006) (internal quotations and citation omitted)). The proposed settlement in this case provides Class Members with the immediate and certain benefit of a cash settlement. If plaintiffs continued to litigate these Actions, they faced a high likelihood of complete non-recovery. As discussed above, Judge Pollack dismissed the Complaints in the Global and ISF Actions with prejudice. Appeals from those dismissals were fully briefed and awaiting the scheduling of oral argument when the parties executed the Stipulation. Given the Circuit's decision in Lentell, in which the Second Circuit affirmed Judge Pollack's dismissal of the complaints in the related 24/7 Real Media and Interliant case on loss causation grounds, it was extremely likely that the dismissals of the Complaints in the Global and ISF Actions also would have been upheld. As Judge Pollack noted in dismissing the Complaint in the Global Action on the ground of failure to plead loss causation, "Plaintiff here has done no more to plead loss causation than the Plaintiffs in [the 24/7 Real Media and Interliant] case." In re Merrill Lynch Co. Research Reports Sec. Litig., 272 F. Supp. 2d at 262. In dismissing the Complaint in the ISF Action, Judge Pollack stated that the plaintiffs' failure to plead loss causation in that action warranted dismissal "[f]or the same reason" as the reason given in the decision and order dismissing the Global Action. In re Merrill Lynch Co., Research Reports Sec. Litig., 289 F. Supp. 2d at 437. Thus, it is highly likely that the Focus Twenty Action would have suffered the same fate as the Global and ISF Actions: that is, dismissal with prejudice in this Court on the ground, inter alia, of failure to plead loss causation, followed by affirmance of that dismissal in the Second Circuit. In light of the high likelihood of non-recovery faced by the plaintiffs at the time the Stipulation was executed, the Settlement represents a fair recovery for the plaintiffs.

The size of the Settlement Fund is particularly significant in light of plaintiffs' position at the time of settlement, and it also weighs heavily in favor of approval. Plaintiffs sought $645 million in damages, based on the calculations of their damages expert. The Settlement Fund is approximately $40.3 million. The settlement thus represents a recovery of approximately 6.25% of estimated damages. This is at the higher end of the range of reasonableness of recovery in class actions securities litigations. See Hicks, 2005 U.S. Dist. LEXIS 24890, at *19 (finding a settlement representing 3.8% of plaintiffs' estimated damages to be within range of reasonableness); see also Ellen M. Ryan Laura E. Simmons, Cornerstone Research, Post-Reform Act Securities Settlements: 2005 Review and Analysis, at 5, available at http://www.businessforum.com/Cornerstone_04.html (stating that, in 2005, the median settlement as a percentage of estimated damages was 3.1% in securities class actions where plaintiffs estimated damages between $501 million and $1 billion)).

The overwhelmingly positive reaction of the class also weighs heavily in favor of approval of the settlement. After nearly 400,000 Notices were mailed to potential Class Members, only three objections were submitted, and only 34 persons requested exclusion from the settlement. "If only a small number of objections are received, that fact can be viewed as indicative of the adequacy of the settlement." Wal-Mart, 396 F.3d at 118. Here, the minimal number of objections and requests for exclusion militates in favor of approving the settlement as be fair, adequate, and reasonable. See, e.g., D'Amato, 236 F.3d at 86 (approving settlement where 18 objections were filed after notice was sent to 27,883 class members); McBean v. City of New York, 233 F.R.D. 377,386 (S.D.N.Y. 2006) (approving settlement where, after notice was sent to 40,352 class members, only four objected and 36 opted out of settlement); Hicks, 2005 U.S. Dist. LEXIS 24890, at *16 (finding that reaction of class supported approval, where 123 class members out of approximately 100,000 requested exclusion and only three filed objections).

After consideration of the relevant Grinnell factors, the Court at the Settlement is substantively fair and reasonable.

Objections to Settlement

The three objections do not weigh against approval of the settlement. The first objection, filed by Mr. Quinn pro se, was filed under the mistaken belief that he would not be deemed to be a member of the Focus Twenty Fund class because he purchased shares in the Fund on February 29, 2000, three days before the March 3, 2000 commencement of the Focus Twenty Fund class period. However, lead counsel advised Mr. Quinn by letter, dated November 10, 2006, that February 29 was the "trade date" of the transaction, that the settlement of the purchase did not occur until March 3, and that Mr. Quinn is therefore included in the Focus Twenty Class. The letter also assured Mr. Quinn that counsel would forward his share purchase statement to the claims administrator. At the Fairness Hearing, counsel advised the Court that the claims administrator had been instructed to use either the trade date or settlement date of purchases of the Focus Twenty Fund shares to determine whether a claimant will be included in the class and that Mr. Quinn "is part of the class. He will be included and anybody else who has an issue will also be included." (Tr. Fairness Hearing, at 8.) In response to Mr. Quinn's concern, which he expressed at the Fairness Hearing, that the Proof of Claim form stated that class membership was to be determined by the trade date, rather than the settlement date, counsel has subsequently informed Mr. Quinn, and notified the Court, that Mr. Quinn's Proof of Claim will be honored and that the GCG has processed the claim. Thus, Mr. Quinn's objection has been rendered moot.

The second objection, filed by Ms. Scalisi through counsel, also has been rendered moot. Ms. Scalisi objected to the proposed settlement "in so far as it purports to release claims in a stockholders derivative action captioned Scalisi v. Grills, 04 CIV. 5513 (TCP)," a case pending in the Eastern District. (Objection of April Scalisi, at 1.) In response to Ms. Scalisi's objection, counsel for the Fund advisor defendants in these Actions confirmed in a letter, dated November 27, 2006, that "the release in the proposed settlement of [the Actions] is not intended to, and shall not be deemed to, release any claims asserted in Scalisi v. Fund Asset Management, L.P., et al., 04-cv-05513-TCP/WDW (E.D.N.Y.)." (Letter of David J. Libowsky, at 1.). Similarly, counsel for defendant Fund Asset Management, L.P., which is also a defendant in the Eastern District case in which Ms. Scalisi is a plaintiff, assured Ms. Scalisi by letter, dated November 21, 2006, that the release of claims in the proposed settlement of these Actions will not release any of Ms. Scalisi's claims in the Eastern District case. On the basis of the representations made by defendants' counsel, therefore, the Court overrules Ms. Scalisi's objection to the proposed settlement.

The third objection was filed by Daniel Harris, pro se. Mr. Harris did not appear at the Fairness Hearing. Nevertheless, his objection was properly served on the parties and timely filed with the Court. Mr. Harris's three-sentence submission objects to the proposed settlement on the grounds that (1) "the notice does not clearly tell all class members that they have a right to object"; (2) "the claim form makes it appear that class members who submit claims have no right to object"; and (3) "the attorneys' fees requested seem excessive for a case that was settled on appeal after a successful motion to dismiss." The first two grounds for objection are without merit. The Notice clearly states that any person who does not seek exclusion from the class has the right to object to the proposed settlement as long as objection is served on the parties and filed with the Court in a timely manner.⁹ The fact that Mr. Harris complied with the Notice's instructions and properly served and filed his objection is itself evidence of the Notice's sufficiency. The second ground is equally without merit. The Court has carefully examined the Proof of Claim form and cannot discern how, as Mr. Harris contends, the form "makes it appear" that claimants who do not request exclusion are barred from objecting to the terms of the proposed settlement. The merits of Mr. Harris's final ground for objection, that of excessive attorneys' fees, will be discussed below.

9 The Notice states as follows: "Any Class Member who does not exclude him, her or itself from the Class(es) of which that Class Member is a part may appear at the Settlement Hearing and be heard on any of the foregoing matters, provided, however, that no such person shall be heard unless his, her or its objection is made in writing" and is filed with the Court and served on counsel. (Notice, at 7.)

Plan of Allocation

"In approving an allocation plan, the Court must ensure that the distribution of funds is fair and reasonable." Hicks, 2005 U.S. Dist. LEXIS 24890, at *19-20 (citations omitted). A plan of allocation that is devised by competent and experienced class counsel "need have only a reasonable, rational basis." Id. (internal quotations and citation omitted).

The Plan of Allocation calls for the Net Settlement Fund to be distributed to Class Members who submit valid claim forms and do not exclude themselves from the settlement, on the basis of each claimant's pro rata "recognized loss" of value in the shares of each of the three mutual funds for the relevant class periods. The recognized loss formula was developed by lead counsel with the assistance of the GCG and plaintiffs' expert in damages and is based upon the loss in value of each Class Member's shares during the relevant class period. A plan of allocation that calls for the pro rata distribution of settlement proceeds on the basis of investment loss is reasonable. See Hicks, 2005 U.S. Dist. LEXIS 24890, at *21 (citing In re Global Crossing, 225 F.R.D. at 462). Further, the Court notes that the Plan of Allocation was described in detail in the Notice that was sent to each potential class member, and there have been no objections to the Plan. Thus, the Court approves the Plan of Allocation as fair and reasonable.

C. Attorneys' Fees and Reimbursements

Plaintiffs' counsel request a fee award of 28% of the Settlement Fund of $40,328,017.¹⁰ This amounts to the sum of $11,291,845. Counsel also request reimbursement of litigation expenses in the amount of $301,642.62.

10 This reflects the amount of the Settlement Fund as of September 22, 2006.

"[W]here an attorney succeeds in creating a common fund from which members of a class are compensated for a common injury inflicted on the class . . . the attorneys whose efforts created the fund are entitled to a reasonable fee-set by the court-to be taken from the fund." Goldberger, 209 F.3d at 47. A district court has broad discretion to award attorneys' fees, and an award of fees will be overturned only for abuse of that discretion. Id. In the Second Circuit, a district court may calculate attorneys' fees in one of two ways. Under the "lodestar" method, "an attorney fee award is derived by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate." A.R. v. N.Y. City Dep't of Educ., 407 F.3d 65, 79 (2d Cir. 2005) (internal quotations and citations omitted). The court then may apply a multiplier to the lodestar figure to account for other factors, such as the risk of the litigation, the performance of counsel, or the success achieved. See In re Twinlab corp. Sec. Litig., 187 F. Supp. 2d 80, 84-85 (E.D.N.Y. 2003). The percentage of the fund method is a simpler calculation where the award is based on "some percentage of the fund created for the benefit of the class." Savoie v. Merchants Bank, 166 F.3d 456, 460 (2d Cir. 1999) (citing Blum v. Stenson, 465 U.S. 886, 900 n. 16 (1984)).

Both the lodestar and percentage methods are permissible methods of calculating reasonable attorneys' fees. Goldberger, 209 F.3d at 50. The trend in the Second Circuit, however, has been to express attorneys' fees as a percentage of the total settlement, rather than to use the lodestar method to arrive at a reasonable fee. Wal-Mart, 396 at 121; In re Elan Sec. Litig., 385 F. Supp. 2d 363, 373 (S.D.N.Y. 2005). The Second Circuit disfavors application of the lodestar method because the "lodestar create[s] an unanticipated disincentive to early settlements, tempt[s] lawyers to run up their hours, and compel[s] district courts to engage in a gimlet-eyed review of line-item fee audits." Wal-Mart, 396 F.3d at 122 (internal quotations and citation omitted); see also In re AOL Time Warner, Inc. Sec. "ERISA" Litig., No. 02 Civ. 5575, 2006 U.S. Dist. LEXIS 78101, at *24 (S.D.N.Y. Sept. 28, 2006), report and recommendation adopted by 2006 U.S. Dist. LEXIS 77926 (S.D.N.Y. Oct. 25, 2006) (noting that "every significant Southern District opinion facing the issue since Goldberger has embraced the percentage approach"). The percentage method usually is deemed to be preferable "because it reduces the incentive for counsel to drag the case out to increase the number of hours billed; also, fewer judicial resources will be spent in evaluating the fairness of the fee petition." Hicks, 2005 U.S. Dist. LEXIS 24890, at *23 (citation omitted). Use of the percentage method also comports with the statutory language of the Private Securities Litigation Reform Act of 1995 ("PSLRA") which specifies that "total attorneys' fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class. . . ." 15 U.S.C. § 78u-4(a)(6) (emphasis added); Maley v. Del Global Tech., 186 F. Supp. 2d 358, 370 (S.D.N.Y. 2002) (noting that in amending the PSLRA, Congress "indicated a preference for the use of the percentage method").

Whether the fee is calculated using the lodestar or percentage method, courts consider the following Goldberger factors in determining a reasonable award of fees: "(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of litigation . . .; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy." Goldberger, 209 F.3d at 50. "Even when the percentage method is used, however, the Second Circuit `encourages the practice of requiring documentation of hours as a `cross-check' on the reasonableness of the requested percentage.'" In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503, 520-21 (E.D.N.Y. 2003), aff'd Wal-Mart, 396 F.3d at 96 (2d Cir. 2005) (quoting Goldberger, 209 F.3d at 50). In evaluating the lodestar value for "cross-check" purposes, the hours submitted by the attorneys are reviewed but not exhaustively scrutinized. Goldberger, 209 F.3d at 50. In determining a reasonable award of attorneys' fees, the Court seeks to balance the "overarching concern for moderation with the concern for avoiding disincentives to early settlements." In re Elan Sec. Litig., 385 F. Supp. 2d at 376 (citations and internal quotations omitted). A fee award "should be assessed based on scrutiny of the unique circumstances of each case, and `a jealous regard to the rights of those who are interested in the fund.'"Goldberger, 209 F.3d at 53 (quoting Grinnell, 495 F.2d at 469).

The Court will determine attorneys' fees in this case using the percentage method. Each of the Goldberger factors will be considered, and the Court then will evaluate the lodestar figure as a "cross-check" on the reasonableness of the percentage requested.

(1) Time and Labor Expended

Counsel has submitted contemporaneous time records showing that considerable time and effort were expended in this case. (See Joint Declaration of Jeffrey G. Smith and Jill S. Abrams ("Joint Decl.") and Exhibits attached thereto.) Lead counsel and unappointed counsel acting under their direction expended approximately 9,462 hours, over four years, in litigating these Actions. (Memorandum of Law in Support of Joint Petition for Award of Attorneys' Fees ("Mem. Fees") 16.) These hours, at the hourly rates of the various attorneys and paraprofessionals involved, represent a lodestar of approximately $4,651,891 in billable time. (Id.)¹¹ Counsel characterize these Actions, in the aggregate, as "a hard fought case with enormous legal and factual issues in dispute." (Id. at 17.) As set forth in the Joint Declaration, the work performed by counsel falls into three broad categories: (1) pre-complaint investigation and preparation of the complaints, (2) motion practice, and (3) settlement.

11 Wolf Haldenstein performed 6,863 hours of work, for an aggregate lodestar of $3,348,841.75. (Joint Decl. ¶¶ 60, 66.) Abbey Spanier performed 2,249 hours of work for an aggregate lodestar of $1,152,635. (Id.) Unappointed counsel performed 349.75 hours of work for an aggregate lodestar of $150,414. (Id. ¶ 74.)

Prior to the filing of the complaints, counsel conducted extensive fact investigation of the stocks held by the three Merrill Lynch mutual funds. Investigation included review of analysts' reports on the individual stocks, review of SEC filings for those stocks, research of news articles relating to the NYAG's investigation of Merrill Lynch, interviews with former Merrill Lynch brokers, and legal and fact research relating to other possibly similar mutual fund situations. Subsequently, counsel prepared and filed the complaints and consolidated amended complaints in the three Actions.

Counsel also point to extensive motion practice. Specifically, counsel prepared memoranda for: the application to be appointed lead counsel; the motion for consolidation of claims before the Judicial Panel on Multi-District Litigation; motions in opposition to the defendants' motions to dismiss in all three Actions; a motion for reconsideration in the Global Fund Action; a motion for Judge Pollack's disqualification in the Focus Fund Action; and appellate briefs in the Global Fund and ISF Actions.

Counsel also cite to extensive labor expended in connection with the settlement, including document discovery relating to the alleged damages suffered by the class members. Counsel have obtained and analyzed tens of thousands of pages of documents from a variety of sources, including Merrill Lynch's entire document production in a related Merrill Lynch securities class action litigation. Counsel also point to the extensive, and ultimately successful, settlement negotiations that the parties began to conduct in 2005 and concluded in September 2006. Counsel characterize the settlement negotiations as "protracted and difficult, given defendants' continued denial of liability and the procedural posture of the Actions." (Mem. Fees 11.). Once the Stipulation was executed, counsel worked with the GCG in establishing procedures for disseminating the Notice and analyzing claims, responding to inquiries from potential claimants, and drafting memoranda in support of approval of the settlement.

The Court notes that, although counsel expended considerable time and effort in prosecuting the Actions, no formal discovery was conducted in this case, and the Stipulation was achieved without requiring depositions. In addition, as discussed below, the fact investigation undertaken in these Actions largely involved review of publically available documents and was not particularly difficult. Thus, although counsel should be compensated properly for their extensive work, the expenditure of time and labor in this case is not a particularly significant factor in the Goldberger analysis and does not mandate an award of fees substantially in excess of the lodestar.

(2) Magnitude and Complexity

Federal courts have long recognized that securities class litigation "`is notably difficult and notoriously uncertain.'" In re Sumitomo Copper Litig., 189 F.R.D. 274,281 (S.D.N.Y. 1999) (quoting In re Michael Milken and Assoc. Sec. Litig., 150 F.R.D. 46, 53 (S.D.N.Y. 1993)). Counsel contend that the instant Actions were "all highly complex, as plaintiffs accused Merrill Lynch and three of its mutual funds of not disclosing in the Fund prospectuses the significant risks related to false analyst reports, IPO laddering schemes, and over-investment in Merrill Lynch covered securities." (Mem. Fees 17-18.) Counsel argue that the factual complexity of the issues at stake is demonstrated by the fact that "there is even debate as to whether any consequences stem from the alleged conflicts of interest." (Id. 17-18.) Counsel further insist that the complexity of the Actions was magnified by the defendants' mounting of "a serious defense that they had no duty to disclose the allegedly omitted information [from prospectuses and registration statements] regarding banking relationships and that even if these allegations were true, the claims were time barred." (Mem. Fees 18.) The difficulty of proving the defendants' liability and the corresponding strength of the defenses asserted in these Actions are born out by the dismissals that the Complaints ultimately suffered in this Court. The Court agrees, therefore, that "this Case is complex with difficult liability issues." Levitt v. Bear Stearns Co. (In re Sterling Foster Co. Sec. Litig.), MDL No. 1208, 2006 U.S. Dist. LEXIS 80861, at *25 (E.D.N.Y. Oct. 31, 2006).

Counsel also contend that the Actions were particularly complex "because the relevant law is unsettled." (Mem. Fees 18.) Counsel are correct in that the law regarding the requirements for pleading loss causation was not entirely settled as of the commencement of the Actions. As the Southern District recently observed in a securities class litigation which commenced at approximately the same time as these Actions, "the legal requirements for recovery under the securities laws present considerable challenges, particularly with respect to loss causation and the calculation of damages. These challenges are exacerbated . . . where a number of controlling decisions have recently shed new light on the standard for loss causation." In re AOL Time Warner, Inc. Sec. ERISA Litig., No. 02 Civ. 5535, 2006 U.S. Dist. LEXIS 17588, at *33 (S.D.N.Y. Apr. 6, 2006) (citing Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), and Lentell, 396 F.3d 161). At the time these Actions commenced, the legal principles of loss causation in securities actions "were unsettled in certain respects" and, despite the decisions in Dura Pharmaceuticals andLentell, in which the Supreme Court and the Second Circuit, respectively, clarified the requirements for adequate pleading of loss causation, those principles "are still evolving." In re AOL Time Warner, Inc. Sec. "ERISA" Litig., 2006 U.S. Dist. LEXIS 78101, at *46.

The magnitude and complexity of a case, however, also should be evaluated in comparison with other securities class litigations.See In re Bristol-Myers Squibb Secs. Litig., 361 F. Supp. 2d 229, 234 (S.D.N.Y. 2005) (evaluating the complexity of the class action relative to other securities actions); accord FTR Consulting Group, Inc v. Advantage Fund II Ltd., No. 02 Civ. 8608, 2005 U.S. Dist. LEXIS 20013, at *15 (S.D.N.Y. Sept. 14, 2005). The magnitude and complexity of these Actions are not remarkable, when compared with other actions within the realm of securities litigation. Compare In re Visa Check/Mastermoney Litig., 297 F. Supp. 2d at 523 (finding magnitude and complexities of case "enormous" where the "case involved almost every U.S. bank and more than five million U.S. merchants"); In re Sumitomo Copper Litigation, 74 F. Supp. 2d 393, 395 (S.D.N.Y. 1999) (case involved "almost overwhelming magnitude and complexity"); In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465,474, 488 (S.D.N.Y. 1998) (finding that "liability in this case requires proof of an unusually complex conspiracy involving 37 Defendants and a `checkerboard' of fact situations and disparate periods for each of 1,659 different securities" and that "the issues were novel and difficult requiring a challenge to a long-standing industry practice and the exercise of skill and imagination"). Although the plaintiffs faced a steep uphill, and ultimately losing, battle in prosecuting their claims, the magnitude of these Actions and the complexity of the factual issues involved in this case were not so enormous as to warrant a determination that this factor weighs significantly in favor of the award of generous attorneys' fees.

Other factors denoting complexity also are absent from this case. Counsel were not required to master a particularly difficult or novel area of law in order to prosecute plaintiffs' claims. See, e.g., Denney v. Jenkens Gilchrist, 230 F.R.D. 317, 352 (S.D.N.Y. 2005), aff'd in part, vacat'd in part on other grounds by Denney v. Deutsche Bank, A.G., 443 F.3d 253 (2d Cir. 2006) (finding complexity to be a significant factor where "Class Counsel had to expend significant time learning the complicated tax shelter business in order to prosecute plaintiffs' claims"); Ling v. Cantley Sedacca, L.L.P., No. 04 Civ. 4566, 2006 U.S. Dist. LEXIS 4711, at *4-5 (S.D.N.Y. Feb. 8, 2006) (finding that work performed by class counsel, though extensive, did not include "the use of any particularly novel or complex skill"). In addition, the fact investigation and discovery undertaken by counsel in these Actions were not particularly complex. Here, fact investigation was limited largely to review of public documents readily available to counsel, such as "SEC filings, newspaper articles, internet websites, and previous and current litigations." (Joint Decl. ¶ 19.) Similarly, no formal discovery took place in this case and no witnesses were deposed. Although the confirmatory discovery undertaken by counsel, in the context of settlement negotiations, involved the review of "tens of thousands of documents" (Mem. Fees 10), "discovery did not involve intricate disputes over privilege or other difficult legal issues nor did plaintiffs have to undertake special means to procure evidence that was hard to obtain" In Re Keyspan Corp. Sec. Litig., No. 2001-5852, 2005 U.S. Dist. LEXIS 29068, at *30 (E.D.N.Y. Aug. 25, 2005).

Thus, although the Court finds that the difficulty of proving defendants' liability rendered the litigation complicated, the fact that the Actions were not particularly factually complex and not of unusual magnitude cautions against an award of attorneys' fees substantially in excess of counsel's lodestar.

(3) Risk of Litigation

Courts of this Circuit have recognized the risk of litigation to be "perhaps the foremost factor to be considered in determining" the award of appropriate attorneys' fees. In re Elan Sec. Litig., 385 F. Supp. 2d at 374 (internal quotations and citation omitted); accord In re Bristol-Myers Squibb Secs. Litig., 361 F. Supp. 2d at 233-34. There is generally only a very small risk of non-recovery in securities class litigation. See In re Dreyfus Aggressive Growth Mutual Fund Litig., No. 98 Civ. 4318, 2001 U.S. Dist. LEXIS 8418, at *16 (S.D.N.Y. June 22, 2001) ("What empirical data does exist indicates that all but a small percentage of class actions settle, thereby guaranteeing counsel payment of fees and minimizing the risks associated with contingency fee litigation."). Courts of this Circuit recognize that, where "claims were precipitated by public events," the risk undertaken by class counsel is especially slight. In re Bristol-Myers Squibb Secs. Litig., 361 F. Supp. 2d at 234. See, e.g., Goldberger, 209 F.3d at 54 (2d Cir. 2000) (finding contingency risk to be low where case arose from notorious fraud prosecution);Karpus v. Borelli (In re Interpublic Secs. Litig.), No. 03 Civ. 1194, 2004 U.S. Dist. LEXIS 21429, at *35 (S.D.N.Y. Oct. 26, 2004) ("This was not a case in which there was a government investigation that had resulted in disclosure of misconduct and was also driving a settlement."); In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d at 523 (determining litigation to be risky where "Lead Counsel did not benefit from any previous or simultaneous government litigation"); Rogers v. Sterling Foster Co. (in Re Sterling Foster Co.), 238 F. Supp. 2d 480, 488 (S.D.N.Y. 2002) (finding contingency risk to be low in light of previous government investigations of defendants); In re Dreyfus Aggressive Growth Mut. Fund Litig., 2001 U.S. Dist. LEXIS 8418, at *20-21 (finding risk to be low "where there was substantial overlap between the government's investigations and the plaintiffs' claims"); In re Bausch Lomb, Inc. Sec. Litig., 183 F.R.D. 78, 87 (W.D.N.Y. 1998) (SEC investigation begun after commencement of securities action "clearly overlapped" and "put additional pressure on [defendant] to settle the case, and would also have given plaintiffs' counsel greater reason to believe that they could prevail").

Here, the prospect of recovery was promising from the outset. These Actions stemmed from the highly publicized NYAG's investigation into the alleged undisclosed conflict of interest between Merrill Lynch's underwriting and brokerage arms. As Judge Pollack observed, the class actions brought against Merrill Lynch, including the instant Actions, were filed in the context of an "overwhelming and widely dispersed collection of press articles and public speeches by top securities regulatory officials exposing the flaws in the business practices complained of." In re Merrill Lynch Co. Research Reports Sec. Litig., 289 F. Supp. 2d at 419. Specifically, the present Actions were commenced after the NYAG had announced to great public fanfare its ongoing investigation into Merrill Lynch's investment banking practices and, shortly thereafter, the unprecedented settlement reached between the NYAG and Merrill Lynch, in which the latter agreed to pay a $100 million civil penalty and reform its investment counseling practices. See NYAG Press Release, Merrill Lynch Stock Rating System Found Biased by Undisclosed Conflicts of Interest, Apr. 8, 2002, available at http://www.oag.state.ny.us/press/2002/apr/apr08b_02.html; NYAG Press Release, Spitzer, Merrill Lynch Reach Unprecedented Agreement to Reform Investment Practices, May 21, 2002, available at http://www.oag.state.ny.us/press/2002/may/may21a_02.html. As a result of the settlement and the enormous public attention it garnered, as the Second Circuit noted in Lentell, "[w]ithin weeks, some 140 class-action complaints were filed" against Merrill Lynch and related defendants. Lentell, 396 F.3d at 164. Clearly, class counsel undertook these Actions with the expectation of a promising resolution, given the publicity generated by the NYAG's investigation and settlement, and the pressure brought to bear upon the defendants as a result of those events.

At the Fairness Hearing, lead counsel insisted that the NYAG's investigation assisted counsel only "to a very minimal amount." (Tr. Fairness Hearing, at 16.) Counsel attempted to distinguish the instant Actions from the other consolidated class actions pending against the defendants by pointing out that these Actions "don't involve directly the purchase of those securities that the Attorney General was talking about." (Id. at 16-17.) It is true that the plaintiffs here are purchasers of mutual funds that contain securities that were the target of the NYAG's investigation, rather than direct purchasers of the securities themselves. However, the fact remains that the Actions and the NYAG's investigation both were based on allegations of similar misconduct, namely the undisclosed "conflict of interest between brokerage firms, investment bankers and research analysts." In re Merrill Lynch Co. Research Reports Sec. Litig., 272 F. Supp. 2d at 245. The fact that plaintiffs in these Actions purchased mutual fund shares rather than shares of securities contained in the funds did not create a greater risk of non-recovery in the overall climate of public pressure, generated by the NYAG's investigation and settlement, in which plaintiffs' counsel undertook this litigation.

The lack of risk faced by counsel at the outset of the case is born out by the fact that the defendants settled these Actions after Judge Pollack's with-prejudice dismissal of the complaints in the Global and ISF Actions and after the Circuit's decision inLentell. For the defendants, little was left to do apart from oral argument before the Circuit. Defendants thus faced imminent victory without having to expend significant resources and the plaintiffs were on the verge of being shut out of court. That the Settlement was reached while the case was in such a posture clearly owes much to the pressure placed on the defendants by the government investigation and is indicative of the low level of risk that counsel faced in undertaking this litigation.

Counsel also argue that the prospect of substantial recovery in these Actions was uncertain, "given the dismissal of the Actions by the District Court," (Mem. Fees, at 21.), and that the risk of complete non-recovery was "especially high . . . after the dismissal of the Actions by the District Court since the Second Circuit had already upheld Judge Pollack's dismissal of the complaint in Lentell." (Id. at 23.) The increased risk of non-recovery that the plaintiffs faced as a result of events that unfolded after the Actions commenced, however, is not relevant to the Court's evaluation of this Goldberger factor. "[I]t is well-established that litigation risk must be measured as of when the case is filed." Goldberger, 209 F.3d at 55 (emphasis added);see also See In re Bristol-Myers Squibb, 361 F. Supp. 2d at 234;In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. at 488 ("Risk, of course, must be judged as it appeared to counsel at the outset of the case, when they committed their capital (human and otherwise)."). Thus, the heightening of risk that resulted from the plaintiffs' defeats in this Court and the unfavorable precedent established by the Second Circuit in Lentell is not relevant to the evaluation of the risk undertaken by plaintiffs' counsel in bringing these Actions.

Counsel further argue that the "unsettled state of the law" regarding the defendants' duty to disclose the alleged conflict of interest between Merrill Lynch's investment banking and brokerage operations resulted in greater risk to the plaintiffs. (Id. at 22.) The risk that plaintiffs were proceeding under uncertain legal principles certainly was born out by Judge Pollack's dismissal of the Global and ISF Actions on the ground that plaintiffs had failed to allege adequately that defendants had a duty under federal securities law to disclose the purported conflict of interest. However, the risk of non-recovery due to the difficulties of pleading loss causation must be balanced against the context of highly publicized governmental activity in which counsel undertook to litigate these Actions.

The Court also notes that this is not a case where the risk of non-recovery was high due to the defendants' precarious financial condition or status as a foreign corporation. Compare with Denney, 230 F.R.D. at 352 (absent class settlement, vast majority of class members would have recovered nothing in light of significant issues regarding defendants' insurance coverage); In re Indep. Energy Holdings PLC, Inc., No. 00 Civ. 6689, 2003 U.S. Dist. LEXIS 17090, at *26 (S.D.N.Y. Sept. 26, 2003) (finding serious contingency risk where defendant was a foreign company in receivership at outset of litigation); Berlinsky v. Alcatel Alsthom Compaqnie Generale D'Electricite, 970 F. Supp. 348, 352 (S.D.N.Y. 1997) (risk deemed high where defendant was foreign corporation).

In sum, the Court finds that the risk of non-recovery in these Actions was low and does not militate in favor of an award of attorneys' fees substantially in excess of the work counsel actually performed.

(4) Quality of Representation

To evaluate the "quality of the representation," courts review the recovery obtained and the backgrounds of the lawyers involved in the lawsuit. See In re Global Crossing Sec. ERISA Litig., 225 F.R.D. at 467. "The quality of opposing counsel is also important in evaluating the quality of Class Counsels' work." In re KeySpan Corp. Sec. Litig., 2005 U.S. Dist. LEXIS 29068, at *35 (citing Warner Communications Sec. Litig., 618 F. Supp. 735, 749 (S.D.N.Y. 1985)).

Here, as noted above, counsel obtained a recovery for the Class Members of 6.25% of claimed damages, a favorable recovery when compared to other securities class actions in which similarly sized damages were alleged. Given the procedural posture of these Actions and the high likelihood of non-recovery in the event that the litigation continued, the settlement obtained constitutes an excellent result for the Class Members. Nevertheless, the Court notes that the favorable outcome for the plaintiffs in this case appears to owe as much to the pressures exerted upon the defendants by the triggering governmental activity as to the quality of counsels' representation. Nevertheless, it is beyond dispute that plaintiffs' counsel conducted this litigation with great skill and tenacity.

The high quality of representation provided by lead counsel is evident from both the record of this case and the resumes that lead counsel have submitted to the Court. Wolf Haldenstein and Abbey Spanier have tremendous experience in the field of complex securities class litigation. The Court agrees with counsels' statement that "Plaintiffs' counsel have brought their significant experience to bear in achieving this Settlement." (Mem. Fees 23.) Similarly, counsel for the defendants were represented by law firms of national repute, and defense counsel provided skilled and zealous representation. Accordingly, the Court finds that the quality of representation does not militate against an award of a generous fee.

(5) Requested Fee in Relation to the Settlement

Counsel request 28% of the Settlement Fund, or $11,291,845, as of September 22, 2006. Counsel contend that the percentage requested "is within the range of percentages courts in this Circuit have awarded in similar securities class action settlements" and that Southern District courts have "repeatedly recognized" that the fee requested is "well within the range of fees awarded in similar cases." (Mem. Fees 23, 24.)

The Court notes, as an initial matter, that "reference to awards in other cases is of limited usefulness." In re KeySpan Corp. Sec. Litig., 2005 U.S. Dist. LEXIS 29068, at *40 (citingGoldberger, 209 F.3d at 53). This is because "fee awards should be assessed based on the unique circumstances of each case." In re Bristol-Myers Squibb Secs. Litig., 361 F. Supp. 2d at 236 (citing Goldberger, 209 F.3d at 52). Further, the cases cited by counsel are distinguishable. For example, Kurzweil v. Phillip Morris Cos., Inc., No. 94 Civ. 2373, 1999 U.S. Dist. LEXIS 18378 (S.D.N.Y. Nov. 24, 1999), a pre-Goldberger securities class action brought against a tobacco company, involved litigation risk that was significantly higher than that confronted by counsel in this case, due to the unprecedented nature of plaintiffs' claims. The court in Kurzweil awarded a high-percentage fee in large part because "[t]here had been no large settlements in tobacco litigation generally, and no successful action had yet been brought against a tobacco company based on allegations of addictiveness of nicotine." Id. at *3. Further, counsel's efforts in Kurzweil involved the undertaking of discovery more extensive than that undertaken in these Actions, including "review [of] documents numbering in the millions and deposition and trial transcripts numbering in the tens of thousands." Id. at *4. Similarly, in In re Lloyd's Am. Trust Fund Litig., No. 96 Civ. 1262, 2002 U.S. Dist. LEXIS 22663 (S.D.N.Y. Nov. 26, 2002), the court's award of a 28% fee appeared to be based on the conclusion that counsel faced considerable risk in undertaking the litigation, in noted contrast with Goldberger, in which counsel were assisted by governmental investigations and the case presented no risk. Here, as discussed above, risk of non-recovery was very slight.

The other cases cited by counsel also are inapposite. Warner Communications Sec. Litig., 618 F. Supp. at 749, which is cited for the proposition that "courts in this Circuit and elsewhere have awarded fees in the 20%-50% range in class actions," was decided 15 years prior to Goldberger and thus "pre-date[s] theGoldberger court's admonition that use of a benchmark is not warranted, and that there must be a return to approaching fee awards with an eye toward moderation." In re Arakis Energy Corp. Sec. Liitg., No. 95 Civ. 3431, 2001 U.S. Dist. LEXIS 19873, at *30 (E.D.N.Y. Aug. 17, 2001), report and rec. adopted by 2001 U.S. Dist. LEXIS 19868 (E.D.N.Y. Oct. 31, 2001). In In re Ashanti Goldfields Sec. Litig., No. 00 Civ. 717, 2005 U.S. Dist. LEXIS 28431 (E.D.N.Y. Nov. 15, 2005), the court's award of 28% was a reduction from the 33 1/3% requested, because the court found, after applying the Goldberger factors, that counsel was not entitled to an award greater than the lodestar, and a 28% fee equaled the lodestar amount. In this case, by contrast, counsel request a percentage that equates to a multiplier of 2.43 of counsel's lodestar, as discussed below. In the other cases cited, counsel obtained high-percentage fees on the basis of factors that are not present in the instant Actions. See Hicks, 2005 U.S. Dist. LEXIS 24890 (30% fee justified by extensive discovery and fact that requested fee represented modest multiplier of less than twice counsels' lodestar); Maley v. Del Global Technologies, Corp., 186 F. Supp. 2d at 358 (S.D.N.Y. 2002) (fee justified by very high risk of non-recovery); Steiner v. Williams, No. 99 Civ. 10186, 2001 U.S. Dist. LEXIS 7097, *19 (S.D.N.Y. May 31, 2001) (awarding high percentage fee after finding that "counsel took a tremendous risk that, in the end, nothing would be recovered").

Counter to counsel's argument that a fee of 28% of the Settlement Fund comports with fee percentages routinely awarded in class action securities settlements, "[s]inceGoldberger, courts in the Second Circuit have tended to award attorneys' fees in amounts considerably less than 30% of common funds in securities actions, even where there is a substantial contingency risk." In re KeySpan Corp. Sec. Litig., 2005 U.S. Dist. LEXIS 29068, at *36-38 (internal quotations and citation (omitted) (emphasis added). See, e.g., id. at *68 (recommending an award of 20% instead of 33 1/3%); In re Indep. Energy Holdings, 2003 U.S. Dist. LEXIS 17090, at *22 (reducing fees award from 25% to 20% for an award of $9,302,340); In re Arakis Energy, 2001 U.S. Dist. LEXIS 19873, at *58 (recommending reduction of fees from 33 1/3% to 25% for award of $6,000,000);In re Dreyfus, 2001 U.S. Dist. LEXIS 8418, at *31 (awarding 15% of $18,500,000 and noting that the award "is a reasonable fee [that] tracks the emerging trend within the Circuit of awarding attorneys considerably less than 30% of common funds in securities class actions, even where there is considerable contingency risk"); In re Health Mgmt. Sys. Sec. Litig., 113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000) (awarding 20% of $4,500,000)).

Courts frequently have awarded reduced fees, often well under 25%, especially where, as here, the parties settled relatively early in the litigation, prior to the undertaking of discovery or trial. See, e.g., In re Twinlab Corp. Sec. Litig., 187 F. Supp. 2d at 88 (rejecting 33% request and awarding 12% of $26,500,000 where parties did not engage in extensive discovery and action settled shortly-after motions to dismiss were decided); In re Am. Bank Note Holographics, Inc., 127 F. Supp. 2d 418, 433 (S.D.N.Y. 2001) (rejecting a 30% claim and awarding 25% where counsel worked 9500 hours and case was settled in early stage of discovery); In re Fine Host Corp. Sec. Litig., No. MDL 1241, 2000 U.S. Dist. LEXIS 19367, at *21-22 (D. Conn. Nov. 8, 2000) (rejecting 33 1/3% request in favor of 17.5% of $17,750,000 where settlement occurred before ruling on summary judgment motions); Varljen v. H.J. Meyers Co., Inc., No. 97 Civ. 6742, 2000 U.S. Dist. LEXIS 16205, at *15 (S.D.N.Y. Nov. 8, 2000) (rejecting 30% request and awarding 20% where discovery was not complete).

Thus, mindful of Goldberger's exhortation towards moderation, and considering the prevalent trend within this Circuit, the Court finds that the requested fee of 28% of the Settlement Fund is higher than is warranted by the particular circumstances of this case.

(6) Public Policy

Public policy concerns favor the award of reasonable attorneys' fees in class action securities litigation. See In re WorldCom, Inc. Sec. Litig., 388 F. Supp. 2d 319, 359 (S.D.N.Y. 2005) ("In order to attract well-qualified plaintiffs' counsel who are able to take a case to trial, and who defendants understand are able and willing to do so, it is necessary to provide appropriate financial incentives."). As Judge Holwell explained in Hicks, 2005 U.S. Dist. LEXIS 24890,

Private actions to redress real injuries further the objectives of the federal securities laws by protecting investors and consumers against fraud and other deceptive practices. Such actions could not be sustained if plaintiffs' counsel were not to receive remuneration from the settlement fund for their efforts on behalf of the class. Due to the dispersed, and relatively small, losses among a large pool of investors, the class action mechanism and its associated percentage-of-recovery fee award solve the collective action problem otherwise encountered by which it would not be worthwhile for individual investors to take the time and effort to initiate the action. To make certain that the public is represented by talented and experienced trial counsel, the remuneration should be both fair and rewarding. The concept of a private attorney acting as a private attorney general is vital to the continued enforcement and effectiveness of the Securities Acts.

Id. at *26-27 (citation and internal quotations omitted).

Counsel characterize the Class Members in these actions as "generally small, conservative investors who relied on the advice of their Merrill Lynch brokers in making their investment decisions." (Joint Decl. ¶ 11.) Public policy supports an award sufficient to encourage counsel to act on behalf of such investors. See In re Bristol-Myers Squib, 361 F. Supp. 2d at 236;In re VisaCheck/Mastermoney, 297 F. Supp. 2d at 524 ("The fees awarded must be reasonable, but they must also serve as an inducement for lawyers to make similar efforts in the future."). An award of fees in excess of that required to encourage class litigation, however, does not necessarily serve public policy. As discussed below, an award of 28% of the Settlement Fund would compensate counsel at an exorbitant hourly rate for the legal and paraprofessional work expended on these actions. The Court does not believe that an exceedingly high rate of compensation is required to encourage plaintiffs' counsel to bring securities class actions. Accordingly, the Court finds that public policy does not strongly militate in favor of the award that counsel requests.

Lodestar "Cross-Check"

Even in cases where the court applies the percentage method of fee calculation, documentation of hours remains a useful "cross-check" on the reasonableness of the requested percentage.Goldberger, 209 F.3d at 50. Nevertheless, "where used as a mere cross-check, the hours documented by counsel need not be exhaustively scrutinized by the district court. Instead, the reasonableness of the claimed lodestar can be tested by the court's familiarity with the case. . . . Id. Under the lodestar method of fee computation, a multiplier is typically applied to the lodestar. In re Global Crossing Sec. ERISA Litig., 225 F.R.D. at 467-68. The multiplier represents the risk of the litigation, the complexity of the issues, the contingent nature of the engagement, the skill of the attorneys, and other factors.Id.

Counsel have provided an account of the hours worked by the partners, associates, and paraprofessionals from the firms of Lead Counsel and outside counsel. Counsel worked approximately 9,462 hours for an aggregate lodestar of $4,651,891. The requested 28% fee equates to the sum of $11,291,845 and represents a multiplier of 2.43 of the lodestar.

The time-sheets provided by counsel reveal that the majority of hours expended in these actions were worked by senior attorneys. Specifically, over 59% of the hours expended were worked by partners or senior associates who billed at $500 or more per hour. For Wolf Haldenstein, for example, the greatest number of hours was worked by Jeff Smith, a partner, who billed 1826.2 hours at an hourly rate of $665. The second highest number of hours worked was by Robert Weintraub, presumably a senior associate, who worked 1183.5 hours at an hourly rate of $515. At Abbey Spanier, the greatest number of hours was worked by partner Jill Abrams, who worked 929.25 hours, at an hourly rate of $650. Partner Arthur Abbey worked the third greatest number of hours, 181.25, at the very high rate of $850 per hour.

The rates charged by counsel, though high, are not inordinate for top-caliber New York law firms. See Williamsburg Fair Hous. Comm. v. N.Y. City Hous. Auth., No. 76 Civ. 2125, 2005 U.S. Dist. LEXIS 5200, at *35 (S.D.N.Y. Mar. 31, 2005) (observing that "a recent billing survey made by the National Law Journal shows that senior partners in New York City charge as much as $750 per hour and junior partners charge as much as $490 per hour") (citing In Focus: Billing; A Firm-by-Firm Sampling of Billing Rates Nationwide, Nat'l Law Journal, December 6, 2004, at 22)). Though the hours worked by top-compensated personnel comprise a high percentage of the aggregate hours expended in these Actions, there is no indication that counsel failed to delegate work to junior associates or paraprofessionals where appropriate. Compare FTR Consulting Group, Inc. v. Advantage Fund II, Ltd., 2005 U.S. Dist. LEXIS 20013, at *17-18 ("It would appear that a substantial amount of this work could have been performed by associates or paralegals at significantly lower rates"); Klein ex rel. SICOR Inc. v. Salvi, No. 02 Civ. 1862, 2004 U.S. Dist. LEXIS 4844, at *30 (S.D.N.Y. Mar. 26, 2004) (lowering counsel's lodestar because of, inter alia, "inadequate delegation of work to younger lawyers of tasks commonly performed by younger lawyers at lower rates, and too much work being performed at relatively higher hourly rates than should have been the case" where "senior lawyers . . . performed the great bulk of the work . . . at $550 and $525 per hour respectively"). It is also evident, from more detailed time records submitted by counsel at the Court's direction, that the majority of the work in this case involved drafting pleadings and memoranda of law on frequently complicated issues and conducting settlement negotiations. These tasks called for the heavy participation of senior personnel. The Court therefore credits counsel's representation that "the litigation of the Actions, by their nature, required the substantial involvement of high level attorneys and did not allow for extensive reliance on the work of junior associates and paralegals." (Mem. Fees 29.)

Nevertheless, an award that equates to a multiplier of 2.43 of the lodestar is excessive. Counsel characterize this multiplier as "modest," (Mem. Fees 30), and cite to several cases from the Second Circuit in which the percentage fee awarded represented multipliers in the range of 2.09 to 4.65. Counsel also cite to this Court's 1985 decision, in Warner Communications Sec. Litig., 618 F. Supp. at 749, decided 15 years before Goldberger, for the proposition that multipliers in the range of 3.0 to 4.5 are common. Counsel is correct that courts in the Southern District have approved percentage fee awards that represented multipliers of greater than 2. See, e.g., In re Global Crossing Sec. ERISA Litig., 225 F.R.D. at 436 (approving percentage fee request that equated to a "modest" 2.16 multiplier of lodestar and finding that 2.16 multiplier "falls comfortably within the range of lodestar multipliers and implied lodestar multipliers used for cross-check purposes in common fund cases in the Southern District of New York"). However, contrary to counsels' assertion that "[t]he range of multipliers has not changed since . . . Warner Communications," (Mem. Fees 31), as a rule, "post-Goldberger courts . . . have generally refused multipliers as high as 2.03." In re Twinlab Corp. Sec. Litig., 187 F. Supp. 2d at 87. See also In re Arakis Energy, 2001 U.S. Dist. LEXIS 19873, at *51 (stating that an award that was equivalent to a 1.2 multiplier would not "deviate materially from post-Goldberger decisions of courts within the Second Circuit as to whether or not to apply a multiplier to a given lodestar").

In cross-checking the requested percentage against the lodestar, the Court must "confirm that the percentage amount does not award counsel an exorbitant hourly rate." In re Bristol-Meyers Squibb Sec. Litig., 361 F. Supp. 2d at 233 (citingIn re NASDAO Market-Makers Antitrust Litig., 187 F.R.D. 465,486,489 n. 24 (S.D.N.Y. 1998) (internal citations omitted)). In this case, if the Court awards counsel the requested 28% fee, the effective rate for the work performed by both lawyers and paraprofessionals in these Actions will be $1,193.51 per hour. This is, quite simply, an exorbitant rate of pay. The Court does not believe that plaintiffs, at the outset of these Actions, would have been prepared to pay counsel such a rate. Nor does the Court find that, in light of the low risk of non-recovery counsel faced at the outset of these Actions, such a rate is necessary to induce counsel to provide adequate representation. See In re KeySpan Corp. Sec. Litig., 2005 U.S. Dist. LEXIS 29068, at *57 (finding that a multiplier of almost one and a half times counsels' lodestar "`would provide far more than sufficient encouragement to plaintiffs' counsel, indeed, would provide a windfall, where there appears, at the commencement of the litigation, no more than the usual risk of non-recovery'") (quoting In re Bristol-Myers Squibb, 361 F. Supp. 2d at 236). Accordingly, after cross-checking the lodestar against the requested fee of 28%, the Court finds that a reduction of the fee is warranted.

Objection to Requested Attorneys' Fees

Daniel Harris filed the sole objection to counsels' request for fees. Mr. Harris' objection to fees was contained in the following single sentence: "Also, the attorney's fee requested seem excessive for a case that was settled on appeal after a successful motion to dismiss." (Objection of Daniel Harris, at 1.) The Court finds this objection to be without merit. Mr. Harris does not state any reasons why the procedural posture of the case renders the requested fee excessive. The Court has applied the relevant factors in determining a reasonable attorneys' fee in this case, and has weighed the procedural posture of the Actions appropriately in its assessment. In any event, the Court's reduction of the percentage requested by counsel renders moot Mr. Harris' objection to the fee request. Accordingly, the objection to fees is overruled.

Reasonable Fee Award

After applying the Goldberger factors and considering counsels' lodestar, the Court finds that an award of 22.5% of the Settlement Fund constitutes a reasonable fee. This award will result in a fee of approximately $9,073,804, which equates to a reasonable lodestar multiplier of approximately 1.95. This amount also represents a fee of approximately $959 per hour, a princely rate of pay by any standard.

Reimbursement of Counsels' Expenses

Counsel request reimbursement of $301,642.62 in litigation costs and expenses. Counsel is entitled to reimbursement from the common fund for reasonable litigation expenses. Miltland Raleigh-Durham v. Myers, 840 F. Supp. 235, 239 (S.D.N.Y. 1993) (quoting Reichman v. Bonsignore, Brignati Mazzotta, P.C., 818 F.2d 278, 283 (2d Cir. 1987)). Expenses incurred in litigating these Actions, were for "computer research, reproduction/duplication, secretarial overtime, phone/fax/postage, messenger/overnight delivery, local transportation/meals, filing fees and attorney services." (Mem. Fees 32.) Such expenses are reasonable, are less than the maximum amount that counsel stated they would seek in the Notice, and should be reimbursed in full.

D. Reimbursement for Lead Plaintiff Ruth Manton

Counsel seek an award of $8,000 as reimbursement for Ruth Manton ("Manton"), lead plaintiff in the ISF Action. Counsel argue that such an award is warranted because, as lead plaintiff, Manton "kept abreast of the litigation via discussion with counsel, provided counsel with relevant documents and reviewed draft and final court documents and discussed them with Abbey Spanier." (Mem. Fees 32-33.) In support of the application, Manton has submitted two affirmations. In the first affirmation, Manton claims to have spent 16 hours in connection with her duties as lead plaintiff, which included review of various pleadings and legal memoranda filed in the ISF Action, as well as review of her own personal records and relevant investment history, and discussion of these matters with counsel. Manton asserts that, as CEO of a products licensing company in Manhattan, "my time is conservatively valued at $500 per hour." (November 13, 2006, Aff. of Ruth Manton ¶ 2.) In her second affirmation, Manton states that she spent the 16 hours in connection with her duties as lead plaintiff "during my regular business day," and that those hours comprised time she was "unable to spend in my capacity as" CEO of her company. (November 17, 2006 Aff. of Ruth Manton ¶ 2.)

The fund adviser defendants oppose Manton's application. Defendants argue that Manton's request does not comport with the PSLRA, which permits a plaintiff in a securities class action to receive an award beyond her pro rata share of the class recovery only as "an award of reasonable costs and expenses (including lost wages) directly relating to representation of the class." 15 U.S.C.A. §§ 77z-l(a)(4), 78u-4(a)(4). The defendants point out that Manton's affirmations fail "to identify any out-of-pocket expenses, lost wages, lost work time, lost commissions or lost business opportunities she incurred." (Fund Advisor Defs. Reply Mem. in Response to Manton's Request for a Separate Award 2.)

The Court agrees with the defendants. To recover an award under the PLRSA a lead plaintiff must show some actual expense or loss incurred as a result of acting as a class representative. In In re KeySpan Corp. Sec. Litig., 2005 U.S. Dist. LEXIS 29068, at *67, for example, the court recommended denying an award to the lead plaintiff because the plaintiff could not show how the expenditure of time "resulted in actual losses, whether in the form of diminishment in wages, lost sales commissions, missed business opportunities, use of leave or vacation time or actual expenses incurred." Similarly, in In re AMF Bowling, 334 F. Supp. 2d 462 (S.D.N.Y. 2004), the court refused to award the lead plaintiffs any payment under the PLRSA beyond their pro rata share of the class recovery because neither lead plaintiff "claim[ed] any out-of-pocket expense. There is no assertion that either lost time at work or gave up employer-granted vacation time. Neither cites to lost sales commissions nor missed business opportunities." See also Swack v. Credit Suisse First Boston, LLC, No. 02 Civ. 11943, 2006 U.S. Dist. LEXIS 75470, at *13 (D. Mass. Oct. 4, 2006) (finding that the refusals to award reimbursement to lead plaintiffs in KeySpan and AMF Bowling "are compelling because the decisions are rooted in the statutory language and are consistent with the purpose of the PSLRA".)

Although Manton claims to have spent time during her work day performing her duties as lead plaintiff, she nevertheless fails to claim any actual expenses incurred, or wages or business opportunities she lost, as a result of acting as lead plaintiff. Under the PLRSA, it is simply not enough for Manton to assert that she took time out of her workday and that her time is conservatively valued at $500 per hour. Accordingly, the Court declines to award reimbursement to Manton.

CONCLUSION

For the foregoing reasons, the Court grants certification to the settlement class and approves the Settlement and Plan of Allocation as fair and reasonable. Plaintiffs' remaining claims are dismissed with prejudice. Counsel are awarded attorneys' fees in the amount of 22.5% of the Settlement Fund and reimbursement of reasonable expenses in the amount of $301,642.62. Finally, the Court denies ISF lead plaintiff Ruth Manton's application for an award of $8,000. The Court will enter an Order and Final Judgment, to be submitted by counsel, confirming and finalizing its approval of the Settlement and its award of fees and expenses consistent with all of the proceedings in this case and this Opinion and Order. Attorneys' fees and expenses are to be administered pursuant to the terms of the Order and Final Judgment.

SO ORDERED.